<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
----------------------
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission File Number 1-7796
TIPPERARY CORPORATION
(Exact name of small business issuer as specified in its charter)
Texas 75-1236955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
633 Seventeenth Street, Suite 1550
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(303) 293-9379
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding May 15, 2000
- ---------------------------- ------------------------
Common Stock, $.02 par value 24,163,587 shares
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Index to Form 10-QSB
Page No.
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Consolidated Balance Sheet
March 31, 2000 and September 30, 1999 1
Consolidated Statement of Operations
Three months and six months ended March 31,
2000 and 1999 2
Consolidated Statement of Cash Flows
Six months ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,478 $ 430
Receivables 1,760 1,525
Inventory - 209
Other current assets 1,123 899
Properties held for sale (Note 3) 8,122 -
------------- -------------
Total current assets 14,483 3,063
------------- -------------
Property, plant and equipment, at cost:
Oil and gas properties, full cost
method 36,073 136,562
Other property and equipment 994 2,402
------------- -------------
37,067 138,964
Less accumulated depreciation, depletion
and amortization (1,819) (95,642)
------------- -------------
Property, plant and equipment, net 35,248 43,322
------------- -------------
Properties held for sale (Note 3) 6,965 -
Noncurrent portion of deferred income
taxes, net 1,573 1,573
Other noncurrent assets 47 47
------------- -------------
$ 58,316 $ 48,005
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable -
related party $ 131 $ 174
Accounts payable and accrued
liabilities 1,907 2,418
Royalties payable 288 201
------------- -------------
Total current liabilities 2,326 2,793
------------- -------------
Long-term debt 6,965 11,800
Long-term note payable - related party 11,001 9,465
Commitments and contingencies (Note 5)
Minority interest 362 495
Stockholders' equity
Common stock; par value $.02;
50,000,000 shares authorized;
24,173,185 issued and 24,163,587
outstanding at March 31, 2000;
15,161,755 issued and 15,152,157
outstanding at September 30, 1999 483 303
Capital in excess of par value 121,947 107,977
Accumulated deficit (84,743) (84,803)
Treasury stock, at cost; 9,598 shares (25) (25)
------------- -------------
Total stockholders' equity 37,662 23,452
------------- -------------
$ 58,316 $ 48,005
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 3,016 $ 1,608 $ 5,935 $ 3,357
Costs and expenses:
Operating 1,414 1,115 2,743 2,260
General and administrative 867 566 1,536 1,238
Depreciation, depletion and
amortization 193 720 630 1,880
Write-down of oil and gas
properties - - - 5,727
-------- -------- -------- --------
Total costs and
expenses 2,474 2,401 4,909 11,105
-------- -------- -------- --------
Operating income (loss) 542 (793) 1,026 (7,748)
Other income (expense):
Interest income 23 4 29 8
Interest expense (458) (350) (1,002) (764)
Foreign currency exchange gain
(loss) (45) (4) (46) 22
-------- -------- -------- --------
Total other expense (480) (350) (1,019) (734)
-------- -------- -------- --------
Income (loss) before
income taxes 62 (1,143) 7 (8,482)
Current income tax expense - - - -
-------- -------- -------- --------
Net income (loss) before minority
interest 62 (1,143) 7 (8,482)
Minority interest in loss of
subsidiary 78 35 132 38
-------- -------- -------- --------
Net income (loss) $ 140 $ (1,108) $ 139 $ (8,444)
======== ======== ======== ========
Net income (loss) per share
- basic and diluted $ - $ (.07) $ - $ (.59)
======== ======== ======== ========
Weighted average shares outstanding:
Basic 20,778 15,134 18,092 14,233
======== ======== ======== ========
Diluted 21,339 15,134 18,170 14,233
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
March 31,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 139 $ (8,444)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation, depletion and amortization 630 1,880
Write-down of oil and gas properties - 5,727
Minority interest in loss of subsidiary (132) (38)
Change in assets and liabilities:
(Increase) decrease in receivables (235) 204
Decrease in inventory - 1
Increase in other current assets (224) (51)
Increase (decrease) in accounts payable and
accrued liabilities (590) 124
Increase in royalties payable 87 40
--------- ---------
Net cash used in operating activities (325) (557)
--------- ---------
Cash flows from investing activities:
Net proceeds from asset sales 672 705
Capital expenditures (6,211) (2,077)
--------- ---------
Net cash used in investing activities (5,539) (1,372)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowing 1,585 3,800
Principal repayments (4,928) (4,700)
Proceeds from issuance of stock 10,513 2,239
Proceeds from sale of stock in subsidiary - 610
Proceeds from issuance of warrants 1,776 310
Payments for debt financing (34) (4)
--------- ---------
Net cash provided by financing activities 8,912 2,255
--------- ---------
Net increase in cash and cash equivalents 3,048 326
Cash and cash equivalents at beginning of period 430 633
--------- ---------
Cash and cash equivalents at end of period $ 3,478 $ 959
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 677 $ 652
Income taxes $ - $ -
Noncash investing and financing activities:
Issuance of stock to acquire assets $ 1,861 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments, consisting only of normal recurring adjustments, which
are necessary for a fair presentation of the consolidated financial position of
Tipperary Corporation and its subsidiaries (the "Company") at March 31, 2000,
and the results of its operations for the three-month and six-month periods
ended March 31, 2000 and 1999. The consolidated financial statements include
the accounts of Tipperary Corporation and its wholly-owned subsidiaries
Tipperary Oil and Gas Corporation and Burro Pipeline Corporation, and its 90%-
owned subsidiary, Tipperary Oil and Gas (Australia) Pty Ltd, and its share of
assets, liabilities, revenues and expenses of unincorporated joint ventures and
partnerships. All intercompany balances have been eliminated. The accounting
policies followed by the Company are included in Note 1 to the Consolidated
Financial Statements in the Annual Report on Form 10-K for the year ended
September 30, 1999. These financial statements should be read in conjunction
with the Form 10-K.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). This statement, as amended by SFAS 137, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000, and will be adopted by
the Company effective October 1, 2000. SFAS 133 requires companies to report
the fair market value of derivatives on the balance sheet and record in income
or other comprehensive income, as appropriate, any changes in the fair value of
the derivative. The Company does not believe that adoption of SFAS 133 will
have a material impact on its financial statements.
NOTE 2 - RELATED PARTY TRANSACTIONS
On December 23, 1999, the Company closed a financing transaction with its
largest shareholder, Slough Estates USA Inc. ("Slough"), whereby Slough
purchased 6,329,114 shares of the Company's 1999 Series A Convertible
Cumulative Preferred Stock for $10,000,000, or $1.58 per share. At closing
Slough converted 2,900,000 shares of the convertible preferred stock into
2,900,000 shares of restricted common stock. Also, at the closing, the Company
issued Slough warrants for 1,200,000 shares of common stock at an exercise price
of $2.00 per share. The warrants may be exercised during an eight-year period
beginning December 23, 2001 and ending December 23, 2009. The Company used
$4,000,000 of proceeds from this financing to reduce bank debt from $11,800,000
to $7,800,000. The remaining proceeds have been used for general corporate
purposes.
Effective February 29, 2000, Slough converted the remaining shares of preferred
stock into 3,429,114 shares of restricted common stock, bringing the Company's
total common stock outstanding to 24,163,587 shares. With this second and final
conversion, Slough owns approximately 55% of the Company's outstanding common
stock. Subsequent to March 31, 2000, the Company paid a cash dividend of
approximately $79,000 to Slough for the period the preferred shares were
outstanding.
NOTE 3 - OIL & GAS PROPERTIES HELD FOR SALE
Property held for resale at March 31, 2000, consists of the Company's U.S. oil
and gas properties and equipment inventory, which are being divested in
connection with the Company's redirection of focus towards increasing reserves
and production of natural gas from coalbed methane properties. During the six
months ended March 31, 2000, the Company received approximately $828,000 from
the sale of U.S. oil and gas assets and incurred costs related to the
divestiture of assets of $156,000. Subsequent to March 31, 2000, the Company
sold additional domestic oil and gas assets for approximately $11.6 million and
incurred expenses associated with the sales of approximately $430,000. During
the second quarter ended March 31, 2000, the Company used net sales proceeds and
cash on hand to reduce bank debt by $835,000. Subsequent to March 31, 2000, the
Company used net proceeds from property sales to pay off the entire remaining
balance of bank debt.
4
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121") requires that such assets be reported at the lower of carrying
amount or fair value less cost to sell. The Company's domestic oil and gas
properties had a total carrying value of $15,087,000 at March 31, 2000. The
carrying value of the properties held for sale is adjusted as required until the
properties are sold to exclude costs associated with properties that the Company
may ultimately choose not to sell and to include costs incurred to sell the
properties. Assets to be disposed of and covered by SFAS 121 are not subject to
depreciation, depletion or amortization ("DD&A") once there is a commitment or
plan to dispose of the assets. Included in DD&A expense for the period ended
March 31, 2000 is $244,000 associated with U.S. oil and gas properties for the
period prior to the date the Company decided to sell the assets.
NOTE 4 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
(loss) per share (in thousands except per share data):
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
------------------ ------------------
2000 1999 2000 1999
------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 140 $ (1,108) $ 139 $ (8,444)
Less: preferred stock dividends (79) - (79) -
------- -------- -------- --------
Net income (loss) available for
common stockholders $ 61 $ (1,108) $ 60 $ (8,444)
======== ======== ======== ========
Denominator:
Weighted average shares
outstanding 20,778 15,134 18,092 14,233
Effect of dilutive securities:
Assumed conversion of
dilutive options 561 - 78 -
-------- -------- -------- --------
Weighted average shares and
dilutive potential common
shares 21,339 15,134 18,170 14,233
======== ======== ======== ========
Basic earnings (loss) per share $ - $ (0.07) $ - $ (0.59)
======== ======== ======== ========
Diluted earnings (loss) per share $ - $ (0.07) $ - $ (0.59)
======== ========= ======== ========
</TABLE>
Potentially dilutive common stock shares from the exercise of options and
warrants were excluded from the calculation of diluted earnings (loss) per share
for the three and six months ended March 31, 1999, as their effect was
antidilutive.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company is plaintiff in a lawsuit filed on August 6, 1998, styled TIPPERARY
CORPORATION AND TIPPERARY OIL & GAS (AUSTRALIA) PTY LTD V. TRI-STAR PETROLEUM
COMPANY, Cause No. CV42,265, in the District Court of Midland County, Texas
involving the Comet Ridge coalbed methane project in Queensland, Australia. By
amended petition filed May 1, 2000, Tipperary Oil & Gas Corporation joined the
action as a plaintiff, along with the already-named plaintiffs and two
unaffiliated non-operating working interest owners who previously intervened in
the action as plaintiffs. James H. Butler, Sr., and James H. Butler, Jr.,
owners of defendant Tri-Star Petroleum Company, were also named as defendants in
the amended petition. The Company and the other plaintiffs allege, among other
matters, that Tri-Star and/or the individual defendants have failed to operate
the properties in a good and workmanlike manner and have committed various other
breaches of a joint operating contract, have breached a previous mediation
agreement between the parties, have committed certain breaches of fiduciary and
other duties owed to the plaintiffs, and have committed fraud in connection with
the project. Tri-Star has answered the original petition, and has denied the
allegations and asserted counterclaims against the Company for breach of a joint
operating agreement, breach of the mediation agreement, and interference with
prospective contracts and business relations. No specific sum has been pleaded
as damages. The defendants have not yet answered the amended petition filed May
1, 2000. Discovery is in progress.
5
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
On March 14, 1997, the Company filed a complaint along with several other
plaintiffs in BTA OIL PRODUCERS, ET AL. V. MDU RESOURCES GROUP, INC., ET AL. in
Stark County Court in the Southwest Judicial District of North Dakota. The
plaintiffs are suing the defendants for breach of gas sales contracts, unjust
enrichment, implied trust and related business torts. The case concerns the
sale by plaintiffs and certain predecessors of natural gas processed at the
McKenzie Gas Processing Plant in North Dakota to Koch Hydrocarbons Company. It
also concerns the contracts for resale of that gas to MDU Resources Group, Inc.
and Williston Basin Interstate Pipeline Company. The defendants have answered
the complaint denying the claims, and discovery is in process.
NOTE 6 - ACQUISITION OF ADDITIONAL INTERESTS IN COMET RIDGE PROJECT
In February 2000, the Company acquired additional interests in the Comet Ridge
coalbed methane project in Queensland, Australia. The total interest acquired
was 5.5% in capital bearing interest bringing the Company's total interest to
61.25% The total purchase price was approximately $5,161,000 and included cash
of $3,300,000 and stock valued at $1,861,000. The cash portion of the purchase
price was paid using cash on hand of $900,000 and $2,400,000 of proceeds from
the sale of 1,518,988 shares of common stock at $1.58 per share to two
individual investors. The remaining purchase price of approximately $1,861,000
was paid to the sellers with the issuance of 1,163,328 shares of the Company's
common stock at $1.60 per share.
NOTE 7 - SUBSEQUENT EVENTS
Subsequent to March 31, 2000, the Company entered into a credit facility of up
to $17 million with a third party lender. This facility is to be used to fund
additional development of the Comet Ridge coalbed methane project in Queensland,
Australia, and to repay the project financing loan of approximately $4.6 million
due Slough. Upon satisfying certain conditions to funding, the Company will be
able to begin borrowing under the facility.
NOTE 8 - OPERATIONS BY GEOGRAPHIC AREA
The Company has one operating and reporting segment--oil and gas exploration,
development and production--in the United States and Australia. Information
about the Company's operations for the six months ended March 31, 2000, by
geographic area is shown below (in thousands):
<TABLE>
<CAPTION>
United
States Australia Total
--------- --------- ---------
<S> <C> <C> <C>
Six months ended March 31, 2000
Revenues $ 4,998 $ 937 $ 5,935
Identifiable assets 22,492 35,824 58,316
Six months ended March 31, 1999
Revenues $ 2,894 $ 463 $ 3,357
Identifiable assets 20,029 24,587 44,616
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Information herein contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that are based on management's
beliefs, assumptions, current expectations, estimates and projections about the
oil and gas industry, the economy and about the Company itself. Words such as
"may," "will," "expect," "anticipate," "estimate" or "continue," or comparable
words are intended to identify such statements. In addition, all statements
other than statements of historical facts that address activities that the
Company expects or anticipates will or may occur in the future are forward-
looking statements. Readers are encouraged to read the SEC reports of the
Company, particularly its Form 10-K for the fiscal year ended September 30,
1999, for meaningful cautionary language disclosing why actual results may vary
materially from those anticipated by management.
OVERVIEW
The Company is principally engaged in the exploration for and development and
production of crude oil and natural gas. As of March 31, 2000, the Company's
major areas of operations were in Queensland, Australia, where it is involved in
a coalbed methane project, and the Permian Basin, Rocky Mountain and Mid-
Continent areas of the United States. On November 22, 1999, the Company
announced its plan to sell its domestic oil and gas properties in connection
with a redirection of focus toward increasing reserves and production of natural
gas from coalbed methane properties. The Company will seek to increase its
coalbed methane gas reserves through exploration and development projects and
possibly through the acquisition of producing properties. In December 1999, the
Company acquired an interest in a coalbed methane exploration prospect covering
approximately 38,000 acres in the Hanna Basin of Wyoming. The Company acquired
a 49% nonoperating working interest in the prospect for $847,000 and has
budgeted approximately $1 million for its share of costs to drill and evaluate
several wells in a pilot program during calendar 2000.
The Company's international exploration and development efforts, and the
majority of its capital investment over the past few fiscal years, have been
focused on the Comet Ridge coalbed methane project in Queensland, Australia. As
of March 31, 2000, the Company's 90%-owned Australian subsidiary, Tipperary Oil
& Gas (Australia) Pty Ltd ("TOGA"), owned a 61.25% non-operating capital
interest in the project. The Company has also acquired two Authorities to
Prospect ("ATP") covering approximately 370,000 acres (ATP 655) and 850,000
acres (ATP 675) near the Comet Ridge project's ATP 526.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and temporary investments of $3,478,000 as of March 31,
2000, compared to $430,000 as of September 30, 1999. At March 31, 2000, the
Company had working capital of $12,157,000 compared to working capital of
$270,000 as of September 30, 1999. Working capital as of March 31, 2000,
includes $8,122,000 of assets held for sale. During the six months ended March
31, 2000, cash flows were provided by debt and equity financing and by sales of
oil and gas assets. These proceeds were used to reduce bank debt and fund
capital expenditures and operating activities.
Net cash used by operating activities was $325,000 during the first six months
of fiscal 2000 compared to $557,000 during the corresponding prior year period.
The decrease in net cash used by operations was attributable primarily to
significantly higher U.S. oil and gas prices in the six months ended March 31,
2000, as compared to the prior fiscal year period.
During the six months ended March 31, 2000, net cash provided by financing
activities was $8,912,000. Total borrowings of $1,585,000 were received from
Slough in connection with the December 1998 Comet Ridge financing arrangement.
Proceeds from equity financing of $10,000,000 were provided by Slough in
connection with the transaction that closed on December 23, 1999, and included
$1,776,000 of value assigned to warrants Slough received to acquire 1,200,000
shares of common stock at $2.00 per share. See Note 2 to the Consolidated
Financial Statements herein. The Company incurred financing costs of $111,000
related to this transaction and used $4,000,000 of the proceeds to reduce bank
debt. The Company anticipates using the remaining proceeds for capital
expenditures and working capital. Additional funds of $2,400,000 were received
from the sale of stock and issuance of warrants in connection with financing
arrangements with two individual investors. These proceeds were used to
partially fund the acquisition of additional interests in the Comet Ridge
project. See Note 6 to the Consolidated Financial Statements herein. In the
prior corresponding fiscal year's period, proceeds of $7,800,000 received from
Slough included loans
7
<PAGE>
totaling $3,800,000 and $4,000,000 from the sale of 2,000,000 shares of the
Company's common stock. Of the $4,000,000 in proceeds, $2,375,000 was for the
issuance of common stock and the premium paid of $1,625,000 was recorded as
follows: $705,000 for the contractual payment right to revenue from Comet Ridge
production, $610,000 for a minority interest in the Australian subsidiary, and
$310,000 for warrants received by Slough to acquire restricted shares of the
Company's common stock. The Company used $4,700,000 of the total proceeds to
reduce bank debt and used $3,100,000 for working capital and capital
expenditures.
During the six months ended March 31, 2000, net cash flows used by investing
activities were $5,539,000. Proceeds from sales of domestic assets totaled
$672,000 net of costs incurred associated with the divestiture. Capital
expenditures were $8,072,000 and included $1,861,000 of assets acquired using
common stock of the Company. Domestic expenditures of $1,134,000 included
approximately $847,000 for the purchase of a non-operating interest in the Hanna
Draw prospect discussed above. The remaining $287,000 of expenditures related
to assets held for sale, exploration activities and other corporate assets.
Capital expenditures of $6,938,000 related to the Company's Australia operations
included the acquisition of additional interests in the Comet Ridge project for
approximately $3,300,000 in cash and stock valued at $1,861,000. See Note 6 to
the Consolidated Financial Statements herein. Other costs for the Comet Ridge
project included approximately $1,265,000 expended for the drilling of the
Fairview 21 through 28 wells. Remaining costs of $512,000 related to ongoing
capital expenditures in Australia and included disputed billings of
approximately $265,000 paid to the 238th Judicial District Court of Midland
County, Texas, in the litigation with Tri-Star Petroleum Company. See Note 5
to the consolidated Financial Statements herein.
During the six months ended March 31, 1999, the Company incurred capital
expenditures of $2,077,000 and received proceeds of $705,000 in connection with
the transfer to Slough of the contractual payment right to revenue from the
Comet Ridge project discussed above. A total of approximately $1,777,000 was
expended for the Comet Ridge project and capital expenditures of approximately
$300,000 were for domestic operations. Comet Ridge expenditures included
approximately $400,000 for the Company's share of costs to drill and case two
wells. Of the remaining expenditures in the Comet Ridge area, approximately
$300,000 of costs were charges related to seismic gathering data activities,
approximately $210,000 was invested in well equipment inventory and in the gas
gathering facility and $557,000 was expended for other capital items. Capital
expenditures related to disputed billings totaling approximately $310,000 were
paid to the previously named court in connection with the above referenced
litigation.
In order to provide a minimum weighted average sales price and mitigate the
effects of price volatility, the Company has hedged a portion of its crude oil
production through swap agreements. Under swap agreements, the Company usually
receives a floor price, but retains 50% of price increases above the floor.
During the first six months of fiscal 2000, the Company hedged 45,000 barrels
(approximately 29%) of its oil production. Net (payments) receipts pursuant to
the Company's hedging activity for the six months ended March 31, 2000, and
March 31, 1999, were ($285,000) and $23,000, respectively. Of the total
payments made in the first six months of fiscal 2000, $93,000 was paid during
the first quarter and $192,000 during the second quarter. The $23,000 received
during fiscal 1999 was received during the first quarter with no production
hedged during the second quarter. None of the Company's production was hedged
subsequent to March 31, 2000, and the Company does not intend to enter into any
further hedges of oil or gas production in fiscal 2000 due to the planned sale
of the Company's domestic oil and gas properties.
The outstanding bank debt at March 31, 2000, and September 30, 1999, was
$6,965,000 and $11,800,000, respectively. In December 1999, $4,000,000 of
proceeds from the Slough financing was used to reduce bank debt from $11,800,000
to $7,800,000. In the second quarter of fiscal 2000, the Company used property
sale proceeds to make additional principal payments of $835,000, bringing the
loan balance to $6,965,000. As disclosed in Note 3 to the Consolidated
Financial Statements herein, the Company used additional sales proceeds to pay
off the entire remaining balance of bank debt subsequent to March 31, 2000.
Outstanding loans due Slough at March 31, 2000, include a corporate loan in the
amount of $6,500,000 and a loan for $4,632,000 for the development of the
Company's Comet Ridge project. Interest is due quarterly on the $6.5 million
note at the 90-day London Interbank Offered Rate plus 3.5%. The weighted-
average interest rate was 9.78% at March 31, 2000. The unpaid principal balance
of this note is due and payable March 11, 2002. The Company may pay part or all
of the $6.5 million corporate note balance with proceeds from domestic asset
sales. The unpaid principal balance of the Comet Ridge project financing bears
interest at a rate of 10% per annum. Principal and interest payments are due
quarterly and must equal 75% of the cash flow, as defined in the note, from the
Comet Ridge properties. The Company also agreed to pay a finance charge of 7%
of gross proceeds received from sales from the Fairview #1 through
8
<PAGE>
#20 wells until the loan is repaid in full and an additional payment of 7% of
gross proceeds received from sales from the eight new wells (Fairview #21
through #28) for the life of those wells. The unpaid principal balance on the
loan, together with accrued and unpaid interest and finance charges, is due and
payable five years from the date all proceeds are received. As disclosed in
Note 7 to the Consolidated Financial Statements herein, the Company intends to
use funds expected to be obtained from a recently acquired credit facility to
repay this loan and repurchase the 7% contractual payment rights.
With the sales of the Company's domestic producing properties, operating cash
flow will decrease and cash on hand and proceeds from additional property sales
will provide cash for debt reduction and capital expenditures, and will be used
to fund general and administrative expenses. It is uncertain whether the
Company will be able to replace the cash flow from the domestic properties with
new coalbed methane properties in the United States in the near term, but the
Company believes it can increase cash flow from the Comet Ridge project
substantially over the next several years through additional drilling. In
addition, the Company believes that the operating expenses, capital expenditures
and other costs charged by the operator of the project should be reduced and is
involved in litigation with the operator concerning this and other matters. See
Note 5 to the Consolidated Financial Statements herein. In addition to further
drilling programs on the Comet Ridge project, the Company plans to initiate
exploratory drilling on its recently acquired acreage near the Comet Ridge
project, which, if successful, could also increase operating cash flow from
Australia. Should cash flows not increase sufficiently to cover general and
administrative expenses, cash on hand may be utilized and/or general and
administrative costs may ultimately have to be reduced.
RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000, AND
1999
The Company reported net income of $140,000 for the three months ended March 31,
2000, compared to a net loss of $1,108,000 for the three months ended March 31,
1999. Operating income increased $1,335,000 to $542,000 in the fiscal 2000
quarter from an operating loss of $793,000 in the corresponding quarter of
fiscal 1999. The increase in operating income was primarily due to
significantly higher oil and gas prices received during the three months ended
March 31, 2000, as compared to the prior year quarter and to a reduction in DD&A
expense attributable to the pending sale of domestic assets for which no DD&A
was recorded in the current quarter. See Note 3 to the Consolidated Financial
Statements herein. Detailed comparisons of the components of the respective
periods follow.
Operating revenues for the three months ended March 31, 2000, increased
$1,408,000, or 88%, to $3,016,000 from $1,608,000 in the corresponding fiscal
1999 quarter. Oil volumes produced during the second fiscal 2000 quarter
decreased 12,000 barrels, or 14%, to 72,000 barrels versus 84,000 barrels in the
prior year quarter, decreasing revenue by $124,000. Gas volumes sold from the
Company's U.S. properties decreased 77,000 Mcf, or 23%, to 259,000 Mcf in the
current quarter compared to 336,000 Mcf in the three months ended March 31,
1999, resulting in a $110,000 decrease in revenue. The oil and gas volume
decreases resulted from producing property sales as well as natural production
declines that occur over the lives of wells. Average oil prices increased 139%
to $24.63 per barrel for the three months ended March 31, 2000, from $10.32 per
barrel for the corresponding prior year quarter, resulting in a $1,030,000
increase in revenue. Domestic gas prices increased 92% to $2.75 per Mcf in the
current year quarter versus $1.43 in the prior year quarter, resulting in a
$342,000 revenue increase. Sales revenues from the Company's Comet Ridge
coalbed methane project in Queensland, Australia for the quarter ended March 31,
2000, were $515,000 as compared to $240,000 in the second quarter of fiscal
1999. Sales volumes in Australia increased 206,000 Mcf, or 111%, to 391,000 Mcf
from 185,000 Mcf in the corresponding prior year's quarter, contributing
$266,000 to increases in revenue. The U.S. dollar equivalent of gas prices
received remained relatively flat, increasing 2% to $1.32 per Mcf in the quarter
ended March 31, 2000, from $1.30 per Mcf in the quarter ended March 31, 1999,
resulting in an increase of $9,000 in Australia revenues. Saltwater disposal
and other income decreased $5,000 from the corresponding quarter in the prior
fiscal year.
Operating expenses increased $299,000, or 27%, to $1,414,000 from $1,115,000
reported in the corresponding quarter in fiscal 1999. The Company's average
domestic lifting cost per BOE increased 35% to $8.89 in the three months ended
March 31, 2000, from $6.59 in the prior year's three month period. These
increases were primarily attributable to severance tax increases resulting from
higher oil and gas prices and to volume decreases from natural production
declines. Comet Ridge operating expenses increased $202,000 to $380,000 in the
current fiscal quarter as compared to $178,000 in the three months ended March
31, 1999. The Company's average lifting cost for the Comet Ridge project was
$0.97 per Mcf in the current fiscal quarter as compared to $0.96 per Mcf in the
prior year quarter. Monthly operating and capital expenditures billed for the
Comet Ridge project have generally exceeded revenues from
9
<PAGE>
the project. The Company has disputed certain charges, as discussed above, and
believes that operating expenses on a per-well basis can be reduced and is
involved in litigation with the operator concerning this and other matters. See
Note 5 to the Consolidated Financial Statements herein.
General and administrative expenses increased by $301,000, or 53%, to $867,000
during the three months ended March 31, 2000, compared to $566,000 for the
prior year period. The increase was due to litigation costs associated with the
Comet Ridge coalbed methane project.
Depreciation, depletion and amortization ("DD&A") expense for the three months
ended March 31, 2000, decreased $527,000, or 73%, to $193,000 from $720,000
reported for the comparable fiscal 1999 period. The decrease is attributable to
the pending sale of domestic assets for which no DD&A has been recorded from the
time the decision was made to divest the assets.
Interest expense for the three months ended March 31, 2000, increased $108,000,
or 31%, to $458,000 from $350,000 for the three months ended March 31, 1999.
The increase was primarily due to increased interest rates and increased debt
due Slough for Comet Ridge financing.
RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTHS ENDED MARCH 31, 2000, AND
1999
The Company reported net income of $139,000 for the six months ended March 31,
2000, compared to a net loss of $8,444,000 for the six months ended March 31,
1999. The loss for the first six months of fiscal 1999 included a non-cash
write-down of U.S. oil and gas properties totaling $5,727,000 due to low oil and
gas prices. Operating income increased $8,774,000 to $1,026,000 in the first
six months of fiscal 2000 from a loss of $7,748,000 in the prior year period.
This improvement was attributable primarily to the aforementioned write-down of
domestic oil and gas assets as well as to higher oil and gas prices during the
first six months of fiscal 2000 as compared to the first half of fiscal 1999.
Detailed comparisons of the components of the respective periods follow.
Operating revenues for the six months ended March 31, 2000, increased
$2,578,000, or 77%, to $5,935,000 from $3,357,000 in the corresponding fiscal
1999 period. Oil volumes sold decreased 27,000 barrels, or 15%, to 155,000
barrels versus 182,000 barrels in the prior year period, decreasing revenue by
$277,000. Domestic gas volumes sold decreased 124,000 Mcf, or 19%, to 539,000
Mcf in the current year period compared to 663,000 Mcf in the six months ended
March 31, 1999, resulting in a $180,000 decrease in revenues. Oil and gas
volume decreases resulted from natural production declines and sales of
producing properties. Average oil prices increased 124% to $22.96 per barrel
for the six months ended March 31, 2000, from $10.26 per barrel for the
corresponding prior year period, resulting in a $1,969,000 increase in revenue.
Prices received by the Company for domestic gas sales increased 76% to $2.55 per
Mcf in the current year period versus $1.45 in the prior year period, resulting
in a $593,000 revenue increase. A 341,000 Mcf, or 93%, increase in gas volumes
sold in the current fiscal period from the Comet Ridge coalbed methane project
in Queensland, Australia, from 366,000 Mcf to 707,000 Mcf, accounted for a
$430,000 revenue increase. The average U.S. dollar equivalent gas price
received from those sales increased to $1.33 per Mcf in the current fiscal
period from $1.26 per Mcf in the prior fiscal year period and contributed
$49,000 to revenue increases. Saltwater disposal and other income decreased
$6,000 from the corresponding fiscal 1999 period.
Operating expenses during the six month period ended March 31, 2000, increased
$483,000, or 21%, to $2,743,000 from $2,260,000 in the prior year period.
Operating expenses related to the Company's domestic properties increased
$138,000, or 7%, to $2,024,000 from $1,886,000 reported in the fiscal 1999
period. The Company's average lifting cost per equivalent barrel of domestic
production increased 27% to $8.34 in the first six months of fiscal 2000 from
$6.59 in the prior year period. The increase was attributable to increased
production taxes resulting from higher oil and gas prices in the current fiscal
period and to volume decreases from natural production declines. The six months
ended March 31, 2000, included $719,000 of operating expenses attributable to
the Comet Ridge project in Australia, an increase of $345,000, or 92%, from
$374,000 in the prior year period. The increase is attributable primarily to
additional expenses associated with new producing wells, and increased interests
acquired by the Company in the Comet Ridge project. In addition, as discussed
above under results for the quarter, the Company is seeking to reduce operating
and capital expenditures billed by the operator. Due to the increase in sales
volumes, the Company's average lifting cost for the Comet Ridge project of $1.02
per Mcf remained unchanged during the six months ended March 31, 2000, as
compared to the prior year period.
10
<PAGE>
General and administrative expenses increased $298,000, or 24%, to $1,536,000
during the six months ended March 31, 2000, compared to $1,238,000 for the prior
year period due primarily to an increase in legal fees attributable to the Comet
Ridge litigation. See Note 5 to the Consolidated Financial Statements herein.
DD&A expense for the six months ended March 31, 2000, decreased $1,250,000, or
66%, to $630,000 from $1,880,000 reported for the comparable fiscal 1999 period.
The decrease is attributable to the pending asset sales discussed in results for
the quarter.
Interest expense for the six months ended March 31, 2000, increased $238,000, or
31%, to $1,002,000 from $764,000 for the six months ended March 31, 1999. The
increase is attributable to higher interest rates and an increase in long-term
debt.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 5 to the Consolidated Financial Statements under Part I -
Item 1.
Item 2. Changes in Securities and Use of Proceeds
In February 2000, the Company issued a total of 2,682,316 shares of
common stock to five individuals in connection with the acquisition of
additional interests in the Comet Ridge coalbed methane project in
Queensland, Australia. The offer and sale of the shares were not
registered under the Securities Act of 1933 (the "Securities Act"),
but rather was made privately by the Company pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act.
The total purchase price of the additional interests acquired was
approximately $5,161,000 and included cash of $3,300,000 and stock
valued at $1,861,000. The cash portion of the purchase price was paid
using cash on hand of $900,000 and $2,400,000 of proceeds from the
sale of 1,518,988 shares of common stock at $1.58 per share to two
individual investors. The remaining purchase price of approximately
$1,861,000 was paid to the sellers with the issuance of 1,163,328
shares of the Company's common stock at $1.60 per share.
The purchasers of the common stock had full information concerning the
business and affairs of the Company and acquired the shares for
investment purposes. The certificates representing the securities
issued bear a restrictive legend and stop transfer instructions have
been entered prohibiting transfer of the securities except in
compliance with applicable securities laws.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on January 25,
2000, and proxies for such meeting were solicited pursuant to
Regulation 14A adopted under the Securities Exchange Act of 1934.
There was no solicitation in opposition to management's nominees for
directors as listed in the proxy statement and all such nominees were
elected. The table below summarizes voting results:
<TABLE>
<CAPTION>
Votes For Votes Withheld
---------- --------------
<S> <C> <C>
Kenneth L. Ancell 13,718,502 495,744
David L. Bradshaw 13,711,630 502,616
Eugene I. Davis 13,717,339 496,907
Douglas Kramer 13,696,491 517,755
Marshall D. Lees 13,713,496 500,750
</TABLE>
In addition, the shareholders ratified the following proposals:
A proposal to ratify the reappointment of PricewaterhouseCoopers LLP
as the Company's independent accountants for the fiscal year ending
September 30, 2000;
<TABLE>
<CAPTION>
For Against Abstain
<C> <C> <C>
14,160,770 46,190 7,286
</TABLE>
A proposal to increase the shares of common stock reserved for
issuance under the Company's 1997 Long-Term Incentive Plan from
250,000 to 500,000;
<TABLE>
<CAPTION>
For Against Abstain
<C> <C> <C>
13,082,260 1,094,945 37,041
</TABLE>
A proposal to amend the Articles of Incorporation to increase the
Company's authorized shares of common stock from 20,000,000 shares to
50,000,000 shares;
<TABLE>
<CAPTION>
For Against Abstain
<C> <C> <C>
12,934,858 1,269,036 10,352
</TABLE>
12
<PAGE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
--------
Filed in Part I
11. Computation of per share earnings, filed herewith as
Note 4 to the Consolidated Financial Statements.
Filed in Part II
10.62 Purchase and Sale Agreement dated January 14, 2000,
between Ray W. Williams as Seller and Tipperary
Corporation as Buyer, filed herewith.
10.63 Purchase and Sale Agreement dated January 14, 2000,
between William I. Isaac as Seller and Tipperary
Corporation as Buyer, filed herewith.
10.64 Purchase and Sale Agreement dated February 11, 2000,
between William D. Kennedy as Seller and Tipperary
Corporation as Buyer, filed herewith.
10.65 Registration Rights Agreement between Tipperary
Corporation and Ray W. Williams, dated February 10,
2000, filed herewith.
10.66 Registration Rights Agreement between Tipperary
Corporation and William I. Isaac, dated February 10,
2000, filed herewith.
10.67 Registration Rights Agreement between Tipperary
Corporation and William D. Kennedy, dated February 11,
2000, filed herewith.
10.68 Registration Rights Agreement between Tipperary
Corporation and James H. Marshall, dated February 9,
2000, filed herewith.
10.69 Registration Rights Agreement between Tipperary
Corporation and James F. Knott, dated February 9,
2000, filed herewith.
10.70 Warrant to Purchase the Registrant's common stock dated
February 9, 2000, issued to James H. Marshall, filed
herewith.
10.71 Warrant to Purchase the Registrant's common stock dated
February 9, 2000, issued to James F. Knott, filed
herewith.
The other material contracts of the Company are incorporated
herein by reference from the exhibit list in the Company's
Annual Report on Form 10-K for the Year Ended September 30,
1999.
(b) Reports on Form 8-K:
-------------------
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tipperary Corporation
-----------------------------------------------
Registrant
Date: May 15, 2000 By: /s/ David L. Bradshaw
-------------------------------------------
David L. Bradshaw, President, Chief
Executive Officer and Chairman of the Board
of Directors
Date: May 15, 2000 By: /s/ Lisa S. Wilson
-------------------------------------------
Lisa S. Wilson, Chief Financial Officer and
Principal Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOUND ON PAGES 1 AND 2 OF
THE COMPANY'S FORM 10-Q FOR THE SIX MONTHS ENDED MARCH 31, 2000, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 3,478
<SECURITIES> 0
<RECEIVABLES> 1,760
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,448
<PP&E> 37,067
<DEPRECIATION> 1,819
<TOTAL-ASSETS> 58,316
<CURRENT-LIABILITIES> 2,326
<BONDS> 17,966
0
0
<COMMON> 483
<OTHER-SE> 37,179
<TOTAL-LIABILITY-AND-EQUITY> 58,316
<SALES> 5,935
<TOTAL-REVENUES> 5,935
<CGS> 2,743
<TOTAL-COSTS> 4,909
<OTHER-EXPENSES> 17
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,002
<INCOME-PRETAX> 139
<INCOME-TAX> 0
<INCOME-CONTINUING> 139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, effective as of the 1st day of January 2000, is made and
entered into by and between RAY W. WILLIAMS as Seller ("SELLER"), and TIPPERARY
CORPORATION as Buyer ("BUYER").
1. BASIS OF AGREEMENT. SELLER and BUYER's wholly-owned subsidiary,
Tipperary Oil & Gas Corporation, and others, are non-operators under that
certain Joint Operating Agreement dated May 15, 1992 between non-operators and
Tri-Star Petroleum Company, as Operator (the "Operating Agreement"), relative to
the development of the coalbed methane gas project known as the Comet Ridge
Project, located in the State of Queensland, Australia. The Operating Agreement
is attached hereto respectively as Exhibit "A." SELLER desires to sell all of
his interest in the contractual and other rights, title and interest, of any
nature whatsoever, arising under or created by the Operating Agreement,
including, without limitation, all contract rights and all undivided interest in
any real or personal property which SELLER owns or has the right to acquire
under the terms of the Operating Agreement presently or in the future, and BUYER
desires to purchase all of SELLER's contractual and other rights, title and
interest of any nature whatsoever arising under or created by the Operating
Agreement, including, without limitation, all contract or other rights of any
nature and any undivided interest in any real or personal property which SELLER
owns or has the right to acquire under the Operating Agreement presently or in
the future, all in accordance with the terms and conditions of this Purchase and
Sale Agreement (the "Agreement").
2. ASSETS TO BE PURCHASED AND SOLD. Subject to the terms set forth in
this Agreement, and the terms and conditions of the Operating Agreement, SELLER
agrees to sell to BUYER and BUYER agrees to buy from SELLER the following
undivided percentage of interest in the assets and properties hereinafter
described, as follows:
A. B. C.
In Leasehold In Acquisition
In Ownership & Lease Drilling, Development,
Production Operating Expenses Workover & Capital Costs
(%) (%) (%)
Before Project Payout 1.898437500 2.109375000 2.0
After Project Payout 2.115000 2.35 2.35
(a) SELLER's undivided interest, if any, in and to, and/or SELLER's
right to acquire an undivided interest in and to the Authority to
Prospect 526 attached as Exhibit "B" hereto, and the ATP attached as
Exhibit "B"
<PAGE>
to the Operating Agreement, and any extension, renewal or replacement
of any ATP, howsoever denominated (the "ATP");
(b) SELLER's rights, if any, to reacquire any acreage which had
comprised a part of the ATP but was relinquished by the Operator as a
part of, or in connection with, a scheduled contraction of the ATP,
and/or any other acreage which was at any time a part of the ATP but
lapsed or was relinquished for any reason;
(c) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to the petroleum leases
and applications for petroleum leases listed and described on Exhibit
"C" attached hereto (the "Leases") and applications for petroleum
leases;
(d) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to Pipeline License No.
27 described on Exhibit "D" and attached hereto and any connecting
pipeline and/or gas gathering systems;
(e) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to all permits,
licenses, leases, servitudes, rights-of-way, easements, pipeline
licenses and any other tenements or similar rights associated with the
ATP and Leases and the operation of the ATP and Leases, whether
specifically enumerated herein and whether presently existing, applied
for, pending, created, issued or accrued, or applied for, created,
issued or accrued in the future;
(f) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to the wells listed and
described on Exhibit "E" (the "Wells") and attached hereto, including
all formations and depths within or below the wellbore, whether or not
presently productive;
(g) SELLER's right, if any, to acquire an interest in any wells to be
drilled in the future on the acreage described by the ATP or any
extension, renewal or replacement of the ATP, howsoever denominated;
(h) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to, all personal and
mixed property located on the lands covered by the ATP and Leases and
used in operations conducted on same, whether located on or off the
wellsites, the Leases or the acreage described by the ATP;
(i) SELLER's undivided interest in and to, and the right to acquire
an undivided interest in and to, any and all gas purchase and sale
agreements,
2
<PAGE>
crude purchase and sale agreements, gas pipeline agreements,
volumetric or other production payments of any nature, leases of
equipment or facilities and any and all other agreements and rights
which are (i) appurtenant to the ATP, Leases or Wells, or (ii) used or
held for use in connection with the ownership or operation of the
Wells or with the production, treatment, sale or disposal of water,
hydrocarbons, or associated substances produced, used or disposed of
in connection with the Wells, ATP or the Leases;
(j) To the extent that such may be lawfully transferred, all of
SELLER's tax benefits or tax deductions under the laws of Australia,
the State of Queensland or any municipality thereof, whether or not
presently accrued, owned by or vested in SELLER, including, without
limitation, any tax benefits or deductions which may be lawfully
transferred to BUYER under Australia's Income Tax Assessment Act 1997,
or any applicable predecessor to such Act. This shall be a continuing
obligation;
(k) All of SELLER's right or rights to enforce its contract rights,
title, interests of any nature, covenants, representations, warranties
or other rights of any nature, if any, which SELLER is or may in the
future be entitled to enforce against SELLER's predecessors-in-title;
(l) All of SELLER's right, title and interest, if any, under any Deed
or Deeds of Confirmation of Producing License executed by Tri-Star
Petroleum Company in favor of SELLER, as Drilling Participant;
(m) All of SELLER's right, title and interest, if any, under any Deed
or Deeds of Charge executed by Tri-Star Petroleum Company in favor of
SELLER, as Chargeholder;
(n) All of SELLER's contract rights or other rights under the
Operating Agreement of any nature whatsoever, whether express or
implied, whether presently existing or vested in SELLER or arising in
the future, whether specifically enumerated above, including, but not
limited to, all choses-in-action.
The rights and interests described in paragraphs (a) through (n) above are
collectively referred to in this Agreement as the "Assets."
3. THE EFFECTIVE DATE. The effective date of the purchase and sale, for
all purposes, shall be the 1st day of January, 2000, at 12:01 a.m., Greenwich
Mean Time plus ten, local time, Brisbane, Australia ("Effective Date").
3
<PAGE>
4. PURCHASE PRICE AND CLOSING DATE. The purchase price for the Assets
shall be two million seventy three thousand two hundred eighty one and no cents
($2,073,281.00). The purchase price shall be payable, at BUYER's option,
entirely in cash at closing; or by a combination of cash and BUYER's common
stock, as follows: one million three hundred and fifty nine thousand thirty six
dollars and no cents ($1,359,036.00) in cash at closing and four hundred forty
six thousand four hundred three (446,403) shares of BUYER's common stock valued
at $1.60 per share. PROVIDED HOWEVER, notwithstanding the foregoing, all of
BUYER's obligations under this Agreement are contingent upon the approval of the
issuance of additional shares of BUYER's common stock at its annual
shareholder's meeting to be held on January 25, 2000. Should such authorization
not be received, BUYER, at its option, may elect to pay the entire purchase
price in cash at closing. The sale shall be completed at the offices of the
attorneys for BUYER or a place to be mutually agreed upon by BUYER and SELLER,
on or before thirty (30) days from the date of the execution of this agreement
by both BUYER and SELLER (the "Closing Date"). At the closing, SELLER shall
deliver to BUYER a fully executed assignment and conveyance in the form attached
hereto as Exhibit "F." The purchase price, or cash portion of the purchase
price, as the case may be, shall be paid to SELLER by cashier's check or wire
transfer, at BUYER's option, as of the Closing Date.
5. REGISTRATION RIGHTS AGREEMENT. If any of the purchase price as set
forth above is paid in shares of common stock of BUYER, SELLER shall, as of the
Closing Date, enter into a Registration Rights Agreement in the form attached
hereto as Exhibit "G."
6. POST-CLOSING ADJUSTMENTS. On or before sixty (60) days after the
Closing Date, BUYER AND SELLER shall undertake to agree with respect to the
adjustments or payments that were not fully and finally determined as of the
Closing Date, and the amount due from BUYER to SELLER, or SELLER to BUYER, as
the case may be. SELLER shall provide BUYER access to such of SELLER's records
as may be reasonably necessary to a determination of post-closing adjustments.
Payment by BUYER or SELLER shall be made in immediately available funds within
thirty (30) business days of agreement. If the post-closing adjustment has not
been agreed upon within the time period set forth herein, either party may seek
to enforce any rights it claims hereunder.
7. MUTUAL REPRESENTATIONS AND WARRANTIES. BUYER and SELLER each
represents and warrants to the other that:
(a) The person executing this Agreement and the transactions
contemplated hereby has all authority necessary to enter into this
Agreement and to perform all of the obligations hereunder;
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not:
4
<PAGE>
(i) violate or conflict with any provision of any Certificate of
Incorporation, Corporate By-Laws, partnership agreement or
limited partnership agreement or other governing document of any
nature;
(ii) result in the breach of any term or condition of, or
constitute a default or cause the acceleration of any obligation
under any agreement or instrument to which it is a party or by
which it is bound;
(iii) violate or conflict with any applicable judgment,
decree, order, permit, law, rule or regulation, state or federal,
of the United States of America.
(c) This Agreement has been duly executed and delivered on its
behalf, and at the closing all documents and instruments required
hereunder will have been duly executed and delivered. This Agreement,
and all such documents and instruments shall constitute legal, valid
and binding obligations enforceable in accordance with their
respective terms, except to the extent enforceability may be impacted
by bankruptcy, reorganization, insolvency or similar laws affecting
creditors rights generally;
(d) No legal or administrative proceeding in or of the United States
of America is pending or threatened that would prohibit it from
entering into or consummating this Agreement; and
(e) Each of the representations made by BUYER and SELLER herein shall
be true as of the Effective Date with the same force and effect as if
made on said date.
8. SELLER'S REPRESENTATIONS AND WARRANTIES. SELLER hereby
represents and warrants to BUYER and agrees that:
(a) SELLER will convey, assign and transfer to BUYER its contract,
property and other rights in the Assets;
(b) There is no action, suit, proceeding, claim or investigation by
any persons, entities, administrative agency or governmental body
pending or threatened against SELLER that may adversely affect
SELLER's title, and the ability to transfer the Assets to BUYER;
(c) SELLER will, for himself, his successors and assigns, warrant
and defend the title of BUYER, its successors and assigns to the
Assets,
5
<PAGE>
interests and properties against every person whomsoever claiming the
same or any party thereof by, through and under SELLER, but not
otherwise; however
WITH RESPECT TO THE WELLS, EQUIPMENT AND OTHER ITEMS OF PERSONALTY
WHICH MAY BE COVERED HEREBY, THE SAME ARE USED AND ARE SOLD ON AN "AS
IS" AND "WHERE IS" BASIS WITH ALL FAULTS, IF ANY. SELLER SHALL HAVE
NO LIABILITY TO BUYER FOR ANY CLAIMS, LOSS, OR DAMAGE CAUSED OR
ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY, INCIDENTALLY OR
CONSEQUENTIALLY BY SAID WELLS, EQUIPMENT OR PERSONAL PROPERTY, BY ANY
INADEQUACY THEREOF OR THEREWITH, ARISING IN STRICT LIABILITY OR
OTHERWISE, OR IN ANY WAY RELATED TO OR ARISING OUT OF THIS AGREEMENT.
SELLER MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING
THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO SAID WELLS, EQUIPMENT AND PERSONAL PROPERTY AND EXPRESSLY
DISCLAIMS ANY WARRANTIES WITH RESPECT THERETO; and
(d) The interests which BUYER shall receive shall include production
or the right to proceeds of production from each well located on the
ATP and the Leases in an amount which is not less than the percentage
net revenue interest set forth in Paragraph 2 above. In addition,
SELLER represents that the interest to be conveyed, assigned and
transferred to BUYER shall not require BUYER to bear a greater
percentage of costs and expenses than the percentage interest set
forth in paragraph 2, above. This representation of warranty is by,
through and under SELLER, but not otherwise; and
(e) To the extent of the interest described in paragraph 2, above,
SELLER has full and complete ownership of the Assets conveyed,
assigned and transferred hereunder, and that the Assets to be
purchased by BUYER are free and clear of all liens, judgments,
mortgages and other burdens or encumbrances created by SELLER.
(f) SELLER's contract rights and/or title to undivided interest in
the Assets has not been forfeited under the terms of the Operating
Agreement covering the interests and SELLER has not been notified of
any forfeiture or impending forfeiture of any interest under the
Operating Agreement;
(g) Any credit to the joint operating agreement, resulting from any
audit of that account or from any judicial action or determination,
shall
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<PAGE>
accrue to the benefit of BUYER without regard to whether the credit
relates to periods of time before or after the Effective Date; and
(h) Upon request by BUYER, SELLER will execute and return to Buyer a
Notice under the Income Tax Assessment Act of 1997 as amended, section
330-235, formerly a 124AB Notice under Australia's Income Assessment
Act.
(i) SELLER has paid and discharged all invoices and joint interest
billings from Operator, and SELLER is not in arrears on any amounts or
charges of any nature related to the Assets.
(j) SELLER acknowledges that as of January 1999, the requisite
percentage of interest in ownership under the Operating Agreement and
the requisite number of non-operators voted to remove Tri-Star
Petroleum Company as operator and to appoint Tipperary Oil & Gas
(Australia) Pty Ltd as successor operator under the Operating
Agreement.
9. ADDITIONAL WARRANTIES AND REPRESENTATIONS OF SELLER. Should any of
the purchase price, as described above, be paid in common shares of stock of
BUYER, SELLER makes the following additional warranties, representations and
agreements:
(a) SELLER is an "Accredited Investor" as that term is defined in
Rule 501(a) of Regulation D promulgated by the Securities Exchange
Commission. A copy of Rule 501 of Regulation D has been provided to
SELLER.
(b) SELLER has been supplied with information and materials
concerning BUYER and its business, operations, structuring and
financing, including its Annual Report on Form 10-K for the Fiscal
Year Ended September 30, 1999, and its definitive proxy statement
relating to its Annual Meeting of Shareholders to be held January 25,
2000. BUYER has provided SELLER with the opportunity to discuss with
and ask questions of BUYER's representatives concerning BUYER. SELLER
understands that BUYER faces several risks in its business as well as
risks faced by the oil and gas business and risks described in the
Form 10-K or incorporated therein by reference. All information
requested by SELLER from BUYER or its representatives concerning BUYER
and the terms and conditions of the Agreement has been furnished to
SELLER's satisfaction. SELLER has had the opportunity to ask
questions of and receive answers from management of BUYER concerning
BUYER and the terms and conditions of this Agreement, and to obtain
from BUYER any additional information which BUYER possesses or can
acquire without unreasonable effort or expense that is necessary to
verify the accuracy of the information provided to SELLER.
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<PAGE>
(c) Any shares of BUYER acquired by SELLER hereunder are for SELLER'S
own account and not for or on behalf of any other person or entity.
(d) If any shares of BUYER are acquired hereunder, those shares will
not will not be acquired with a view towards the distribution or
redistribution with the intent to divide SELLER's participation with
others.
(e) SELLER will only resell any shares acquired under this agreement
pursuant to registration under the Securities Act of 1933 (the "Act")
and the laws of any applicable states or pursuant to an exemption from
registration. The only registration rights to which SELLER has with
respect to any shares acquired hereunder are as set forth in the
Registration Rights Agreement attached hereto as Exhibit "G."
(f) The stock certificates representing the shares of BUYER will bear
a legend substantially as follows:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold or
otherwise transferred except pursuant to an effective
registration statement under the Act or pursuant to an exemption
from registration under the Act, the availability of which is to
be established to the satisfaction of the Company.
(g) If SELLER receives any common shares of BUYER hereunder, prior to
any proposed sale, assignment, transfer or pledge of the shares (other
than transfers not involving a change in beneficial ownership), unless
there is in effect a registration statement under the Act covering the
proposed transfer, SELLER shall give written notice to BUYER of its
intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail,
and shall be accompanied, at SELLER's expense, by an unqualified
written opinion of legal counsel who shall, and whose legal opinion
shall, be reasonably satisfactory to BUYER and addressed to BUYER, to
the effect that the proposed transfer of the shares may be effected
without registration under the Act, whereupon the holder of such
shares shall be entitled to transfer them in accordance with the terms
of the notice delivered by the holder to BUYER. Each such notice
shall also be accompanied by a written
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agreement of the proposed transferee to conform to the requirements
hereof. Each certificate evidencing the securities transferred as
above provided shall bear, except if such transfer is made pursuant to
Rule 144, the appropriate restrictive legend set forth above, except
that such certificate shall not bear such restrictive legend if in the
opinion of counsel for such holder and BUYER such legend is not
required to order to establish compliance with any provision of the
Act.
(h) SELLER will execute and deliver to BUYER any document, or do any
other act or thing, which BUYER many reasonably request in connection
with any acquisition of shares under this agreement.
(i) SELLER has not distributed any written materials furnished by
BUYER to anyone other than SELLER's professional advisors.
(j) SELLER represents that the statements made and other information
provided in this Agreement, and all other information with respect to
the financial position and business experience of SELLER which has
been previously supplied by SELLER to BUYER are complete and accurate
as of the date this Agreement is executed by SELLER, and, if there
should be any material change in such information prior to the
acceptance or rejection of this Agreement, SELLER will immediately
provide revised information to BUYER.
(k) SELLER further represents that SELLER is familiar with the type
of investment which the shares received in compensation hereunder
constitute. SELLER believes that any shares received hereunder are
shares of the kind SELLER wishes to acquire and that the nature of the
shares received and the amount of the purchase price received in
shares is consistent with the overall investment program and financial
position of SELLER. SELLER's overall commitment to investments which
are not readily marketable is not disproportionate to SELLER's net
worth; its investment in BUYER will not cause such overall commitment
to become excessive; and SELLER can afford to bear the loss of
SELLER's entire investment in BUYER. SELLER has adequate means of
providing for SELLER's current needs and personal contingencies and
has no need for liquidity in its investment in BUYER.
(l) SELLER has such knowledge and experience in financial and
business matters in general to evaluate the merits and risks of the
prospective investment and to make an informed investment decision.
(m) SELLER understands that no federal or state agency has made any
finding or determination regarding the fairness of the shares or any
recommendation or endorsement concerning an investment in BUYER.
9
<PAGE>
(n) SELLER represents and warrants that there is no finder's fee or
commission payable SELLER with respect to its receipt of shares
hereunder.
(o) SELLER understands that no securities administrator of any
governmental agency has made any finding or determination relating to
the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or
endorse, the offering of any securities received hereunder.
(p) The execution, delivery, and performance by SELLER of this
Agreement are within the powers of SELLER, have been duly authorized
and will not constitute or result in a breach or default under, or
conflict with, any order, ruling or regulation of any court or other
tribunal or of any governmental commission or agency, or any agreement
or other undertaking, to which SELLER is a party or by which SELLER is
bound. The signature of SELLER on this Agreement is genuine, and
SELLER has legal competence and capacity to execute the same.
10. ALLOCATION OF LIABILITY AND INDEMNIFICATIONS.
(a) DEFINITIONS.
The term "BUYER's Assumed Liabilities" shall mean and include:
(i) All costs, expenses, liabilities and obligations or
otherwise agreed to be paid by BUYER pursuant to the terms of
this Agreement; and
(ii) All costs, expenses, liabilities, claims and obligations
arising out of, in connection with, or resulting directly or
indirectly from the ownership or operation of the Assets
(excluding SELLER's Retained Liabilities), insofar as such
claims relate to periods of time subsequent to the Effective
Date.
The term "SELLER's Retained Liabilities" shall mean and
include:
(i) All costs, expenses, liabilities and obligations or
otherwise agreed to be paid by SELLER pursuant to the terms of
this Agreement; and
(ii) All costs, expenses, liabilities, claims and obligations
arising out of, in connection with, or resulting directly or
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<PAGE>
indirectly from the ownership or operation of the Assets,
insofar as such claims relate to periods of time prior to the
Effective Date, and insofar as SELLER knew, or should have
known of the such cost, expense, liability, claim and/or
obligation.
(iii) All legal fees charged to the joint account and
attributable to the interests purchased and sold hereunder
prior to the Effective Date;
(b) LIABILITIES. BUYER agrees to assume, pay, perform, fulfill,
discharge and be liable for all of BUYER's Assumed Liabilities, and
SELLER agrees to retain, perform, fulfill, discharge and be and
remain liable for all of SELLER's Retained Liabilities.
(c) SELLER'S INDEMNITY. SUBJECT TO THE PROVISIONS OF THE SECTION
8(a), ABOVE, SELLER AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BUYER, ITS OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES, OR ANY OF
THEM, FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, SUITS,
CONTROVERSIES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS, REASONABLE EXPENSES OF LITIGATION AND
REASONABLE ATTORNEY'S FEES) ARISING DIRECTLY OUT OF SELLERS'
OWNERSHIP OR USE OF THE INTEREST IN THE ASSETS TO BE PURCHASED
HEREUNDER; PROVIDED, HOWEVER, THAT THIS INDEMNITY SHALL BE LIMITED
TO THOSE CLAIMS, RIGHTS, DEMANDS AND CAUSES OF ACTION ARISING FROM
ACTIVITY OCCURRING PRIOR TO THE EFFECTIVE DATE OF THE SALE.
(d) BUYER'S INDEMNITY. BUYYER AGREES TO DEFEND, INDEMNIFY AND
HOLD HARMLESS SELLER, ITS OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES,
OR ANY OF THEM, FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, SUITS,
CONTROVERSIES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS, REASONABLE EXPENSES OF LITIGATION AND
REASONABLE ATTORNEY'S FEES) ARISING DIRECTLY OUT OF BUYER'S
OWNERSHIP OR USE OF THE INTEREST IN THE ASSETS TO BE PURCHASED
HEREUNDER; PROVIDED, HOWEVER, THAT THIS INDEMNITY SHALL BE LIMITED
TO THOSE CLAIMS, RIGHTS, DEMANDS AND CAUSES OF ACTION ARISING FROM
ACTIVITY OCCURRING AFTER THE EFFECTIVE DATE OF THE SALE.
11. REVIEW AND INSPECTION OF THE ASSETS. Prior to the Closing, BUYER
shall have the right to perform due diligence review and inspection of the
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Assets. Immediately after Closing, SELLER shall transmit to BUYER all
paperwork, information and data relating to the Assets in the possession of
SELLER (and to which SELLER has the right to possession) including, but not
limited to the following: (a) financial and accounting records; (b) production,
engineering, geological and geophysical data and reports for the Leases; (c)
copies of engineering, geological and geophysical studies, subject to any
license and non-disclosure requirements; (d) copies of seismic data across any
of the Leases (subject to any license restriction and non-disclosure
requirements); (e) title records, including, but not limited to, copies of the
Leases; (f) correspondence and material and relevant information concerning
pending litigation; (g) regulatory compliance records; (h) contracts between
SELLER and third parties with regard to the Assets; and (i) all correspondence
of any nature relating to the assets, including, without limitation,
correspondence between SELLER and Operator and entities related to Operator,
copies of correspondence between Operator and third-parties and correspondence
of any nature between SELLER and any third party relating to the assets; (j) all
permits and licenses pertaining to the Assets. Nothing contained in this
paragraph shall obligate SELLER to take any action or expend any money to
acquire anything for BUYER which SELLER does not already have in its possession.
SELLER does not warrant the accuracy of any such material.
12. WAIVER. SELLER and BUYER certify that they are not "Consumers"
within the meaning of the Texas Deceptive Trade Practices - Consumer Protection
Act, Subchapter E of the Chapter 17, Sections 17.41 et seq., of the Texas
Business and Commerce Code, as amended (the "DTPA"). The parties covenant, for
themselves and on behalf of any successors and assignees, that if the DTPA is
applicable (a) the parties are "business consumers" thereunder, (b) each party
hereby waives and releases all of its rights and remedies thereunder (other than
Section 17.555, Texas Business and Commerce Code) as applicable to the other
party and its successors, and (c) each party shall defend and indemnify the
other from and against any and all claims, demands, or causes of action of or by
that party or any successor or any of its affiliates based in whole or in part
on the DTPA, arising out of or in connection with the transaction set forth in
this Agreement.
WAIVER OF CONSUMER RIGHTS
PURCHASER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES -
CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.
AFTER CONSULTATION WITH AN ATTORNEY OF PURCHASER'S OWN SELECTION,
PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER.
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<PAGE>
13. NOTICES. All communications required or permitted under this
Agreement shall be in writing and communications or delivery hereunder shall be
deemed to have been fully made in actually delivered, or if mailed by registered
or certified mail, postage prepaid, return receipt requested, to the address as
set forth below:
SELLER:
RAY W. WILLIAMS
1067 Los Jardines Circle
El Paso, Texas
79912
Telephone: 915-581-4337
Facsimile: 915-581-3565
BUYER:
TIPPERARY COPORATION
633 Seventeenth St., Suite 1550
Denver, Colorado 80202
Attention: Mr. David L. Bradshaw, President
Telephone: (303) 293-9379
Telecopier: (303) 292-3428
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING, HOWEVER, ANY
PROVISION OF THE TEXAS LAW THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF A
DIFFERENT JURISDICTION.
15. FURTHER ASSURANCES. Incidental and subsequent to Closing, each of the
parties shall execute, acknowledge, and deliver to the other such further
instruments (including any stamp duty or other form necessary for, or incident
to, the notation, sanction, approval, transfer or assignment to BUYER of any
title or interest in either the Assets or the Operating Agreement), and to take
such other actions as may be reasonably necessary to carry out the provisions of
this Agreement.
16. GOVERNMENT APPROVALS. SELLER will cooperate with BUYER, in a timely
manner (both before and after closing), in obtaining any necessary or desired
consents or approvals of the Government of Australia or any state thereof,
including, without limitation, the execution of any documents necessary (in the
opinion of BUYER and its counsel) to obtain any consent or approval of interests
arising under the Operating Agreement, or to perfect the title of BUYER or
SELLER in the Assets and/or to obtain any necessary governmental sanction of the
Operating Agreement.
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17. EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay its own fees and
expenses incident to the negotiation, preparation and execution of this
Agreement, including attorney's and accountant's fees.
18. EXISTING RELATIONSHIP. SELLER and BUYER are co-signatories to the
JOA and co-owners in the various rights, interests, contracts and agreements
which, as to SELLER's interests, constitute the Assets. As such, BUYER AND
SELLER have equal rights to information relating to and concerning the assets
and operations. To the extent SELLER may have been provided with information
that has not been provided to BUYER, however, he will provide such information
to BUYER prior to the Closing Date. SELLER acknowledges that he is experienced
and knowledgeable in the oil and gas industry, and has relied solely on his own
legal, tax and other professional counsel concerning this Agreement.
19. EXHIBITS. All exhibits to this Agreement are incorporated herein by
reference.
20. SUCCESSORS AND ASSIGNS. The terms, covenants and conditions hereof
bind and inure to the benefit of BUYER and SELLER and their respective
successors and assigns. This Agreement shall be freely and fully assignable by
BUYER.
21. CONFLICTS. In the event of a conflict between this Agreement and
the terms and conditions of the Operating Agreement, the provisions of the
Operating Agreement shall prevail. In all other respects, this Agreement shall
supersede all prior agreements between the parties hereto regarding the subject
matter hereof, whether written or oral.
22. SURVIVAL. The covenants, obligations, indemnities, representations and
warranties included in this Agreement shall survive the Closing and remain
actionable thereafter.
23. PRODUCT OF NEGOTIATION. This Agreement is the product of negotiation
between BUYER and SELLER. No fiduciary duty, if any, owed by BUYER and SELLER
in any prior agreement shall apply to the process of negotiation of this
Agreement.
24. EXECUTION, COUNTERPARTS AND EXHIBITS. BUYER and SELLER acknowledge
and agree that this Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument, and that a facsimile copy of this Agreement, and of a signature
to this Agreement, shall be valid and binding as an original. BUYER and SELLER
also acknowledge and agree that they are each in possession of the Exhibits
referred to herein as "A" - "E," and each party shall be responsible for
attaching copies of such exhibits to
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<PAGE>
executed copies of this Agreement. Exhibits "F" and "G" have been provided to
SELLER by BUYER, and shall be attached to this Agreement at the time of
execution.
IN WITNESS WHEREOF, this Agreement has been executed by the parties before
the undersigned competent witnesses on the dates indicated below.
SELLER: BUYER:
RAY W. WILLIAMS TIPPERARY CORPORATION
By: /s/ Ray W. Williams By: /s/ David L. Bradshaw
--------------------------- -------------------------------------
Ray W. Williams David L. Bradshaw
President and Chairman of the Board
ATTEST:
By: /s/ Elaine R. Treece
-------------------------------------
Elaine R. Treece, Corporate Secretary
ATTEST: ATTEST:
By: /s/ Michelle Rane By: /s/ Pam Surabian
---------------------------- -------------------------------------
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STATE OF CALIFORNIA s
s
COUNTY OF Riverside s
The foregoing instrument was acknowledged before me on this the 14th day
January, 2000 by Ray W. Williams, as Seller.
Witness my hand and official seal.
/s/ Pam Surabian
------------------------------------------
Notary Public
THE STATE OF CALIFORNIA
My Commission Expires:
5-11-03
STATE OF COLORADO s
s
COUNTY OF DENVER s
The foregoing instrument was acknowledged before me on this the 14th day of
January, 2000 by David L. Bradshaw, President of Tipperary Corporation, on
behalf of said corporation, as Buyer.
Witness my hand and official seal.
/s/ Phyllis Kajiwara
--------------------------------------------
Notary Public
THE STATE OF COLORADO
My Commission Expires:
7/31/2002
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<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, effective as of the 1st day of January 2000, is made and
entered into by and between WILLIAM I. ISAAC, as Seller ("SELLER"), and
TIPPERARY CORPORATION as Buyer ("BUYER").
1. BASIS OF AGREEMENT. SELLER and BUYER's wholly-owned subsidiary,
Tipperary Oil & Gas Corporation, and others, are non-operators under that
certain Joint Operating Agreement dated May 15, 1992 between non-operators and
Tri-Star Petroleum Company, as Operator (the "Operating Agreement"), relative to
the development of the coalbed methane gas project known as the Comet Ridge
Project, located in the State of Queensland, Australia. The Operating Agreement
is attached hereto respectively as Exhibit "A." SELLER desires to sell all of
his interest in the contractual and other rights, title and interest, of any
nature whatsoever, arising under or created by the Operating Agreement,
including, without limitation, all contract rights and all undivided interest in
any real or personal property which SELLER owns or has the right to acquire
under the terms of the Operating Agreement presently or in the future, and BUYER
desires to purchase all of SELLER's contractual and other rights, title and
interest of any nature whatsoever arising under or created by the Operating
Agreement, including, without limitation, all contract or other rights of any
nature and any undivided interest in any real or personal property which SELLER
owns or has the right to acquire under the Operating Agreement presently or in
the future, all in accordance with the terms and conditions of this Purchase and
Sale Agreement (the "Agreement").
2. ASSETS TO BE PURCHASED AND SOLD. Subject to the terms set forth in
this Agreement, and the terms and conditions of the Operating Agreement, SELLER
agrees to sell to BUYER and BUYER agrees to buy from SELLER the following
undivided percentage of interest in the assets and properties hereinafter
described, as follows:
A. B. C.
In Leasehold In Acquisition
In Ownership & Lease Drilling, Development,
Production Operating Expenses Workover & Capital Costs
(%) (%) (%)
Before Project Payout 1.4343750000 1.593750000 1.5
After Project Payout 1.620000 1.80000 1.80000
(a) SELLER's undivided interest, if any, in and to, and/or SELLER's
right to acquire an undivided interest in and to the Authority to
Prospect 526 attached as Exhibit "B" hereto, and the ATP attached
as Exhibit "B"
<PAGE>
to the Operating Agreement, and any extension, renewal or
replacement of any ATP, howsoever denominated (the "ATP");
(b) SELLER's rights, if any, to reacquire any acreage which had
comprised a part of the ATP but was relinquished by the Operator
as a part of, or in connection with, a scheduled contraction of
the ATP, and/or any other acreage which was at any time a part of
the ATP but lapsed or was relinquished for any reason;
(c) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to the petroleum
leases and applications for petroleum leases listed and described
on Exhibit "C" attached hereto (the "Leases") and applications
for petroleum leases;
(d) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to Pipeline License
No. 27 described on Exhibit "D" and attached hereto and any
connecting pipeline and/or gas gathering systems;
(e) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to all permits,
licenses, leases, servitudes, rights-of-way, easements, pipeline
licenses and any other tenements or similar rights associated
with the ATP and Leases and the operation of the ATP and Leases,
whether specifically enumerated herein and whether presently
existing, applied for, pending, created, issued or accrued, or
applied for, created, issued or accrued in the future;
(f) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to the wells listed
and described on Exhibit "E" (the "Wells") and attached hereto,
including all formations and depths within or below the wellbore,
whether or not presently productive;
(g) SELLER's right, if any, to acquire an interest in any wells to be
drilled in the future on the acreage described by the ATP or any
extension, renewal or replacement of the ATP, howsoever
denominated;
(h) SELLER's undivided interest, if any, in and to, and SELLER's
right to acquire an undivided interest in and to, all personal
and mixed property located on the lands covered by the ATP and
Leases and used in operations conducted on same, whether located
on or off the wellsites, the Leases or the acreage described by
the ATP;
(i) SELLER's undivided interest in and to, and the right to acquire
an undivided interest in and to, any and all gas purchase and
sale agreements,
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<PAGE>
crude purchase and sale agreements, gas pipeline agreements,
volumetric or other production payments of any nature, leases of
equipment or facilities and any and all other agreements and
rights which are (i) appurtenant to the ATP, Leases or Wells, or
(ii) used or held for use in connection with the ownership or
operation of the Wells or with the production, treatment, sale or
disposal of water, hydrocarbons, or associated substances
produced, used or disposed of in connection with the Wells, ATP
or the Leases;
(j) To the extent that such may be lawfully transferred, all of
SELLER's tax benefits or tax deductions under the laws of
Australia, the State of Queensland or any municipality thereof,
whether or not presently accrued, owned by or vested in SELLER,
including, without limitation, any tax benefits or deductions
which may be lawfully transferred to BUYER under Australia's
Income Tax Assessment Act 1997, or any applicable predecessor to
such Act. This shall be a continuing obligation;
(k) All of SELLER's right or rights to enforce its contract rights,
title, interests of any nature, covenants, representations,
warranties or other rights of any nature, if any, which SELLER is
or may in the future be entitled to enforce against SELLER's
predecessors-in-title;
(l) All of SELLER's right, title and interest, if any, under any Deed
or Deeds of Confirmation of Producing License executed by Tri-
Star Petroleum Company in favor of SELLER, as Drilling
Participant;
(m) All of SELLER's right, title and interest, if any, under any Deed
or Deeds of Charge executed by Tri-Star Petroleum Company in
favor of SELLER, as Chargeholder;
(n) All of SELLER's contract rights or other rights under the
Operating Agreement of any nature whatsoever, whether express or
implied, whether presently existing or vested in SELLER or
arising in the future, whether specifically enumerated above,
including, but not limited to, all choses-in-action.
The rights and interests described in paragraphs (a) through (n) above are
collectively referred to in this Agreement as the "Assets."
3. THE EFFECTIVE DATE. The effective date of the purchase and sale, for
all purposes, shall be the 1st day of January, 2000 at 12:01 a.m., Greenwich
Mean Time plus ten, local time, Brisbane, Australia ("Effective Date").
3
<PAGE>
4. PURCHASE PRICE AND CLOSING DATE. The purchase price for the Assets
shall be one million five hundred eighty eight thousand forty four dollars and
no cents ($1,588,044.00). The purchase price shall be payable, at BUYER's
option, entirely in cash at closing; or by a combination of cash and BUYER's
common stock, as follows: one million forty thousand nine hundred sixty four
dollars and no cents ($1,040,964.00) in cash at closing and three hundred forty
one thousand nine hundred twenty five (341,925) shares of BUYER's common stock
valued at $1.60 per share. PROVIDED HOWEVER, notwithstanding the foregoing, all
of BUYER's obligations under this Agreement are contingent upon the approval of
the issuance of additional shares of BUYER's common stock at its annual
shareholder's meeting to be held on January 25, 2000. Should such authorization
not be received, BUYER, at its option, may elect to pay the entire purchase
price in cash at closing. The sale shall be completed at the offices of the
attorneys for BUYER or a place to be mutually agreed upon by BUYER and SELLER,
on or before thirty (30) days from the date of the execution of this agreement
by both BUYER and SELLER (the "Closing Date"). At the closing, SELLER shall
deliver to BUYER a fully executed assignment and conveyance in the form attached
hereto as Exhibit "F." The purchase price, or cash portion of the purchase
price, as the case may be, shall be paid to SELLER by cashier's check or wire
transfer, at BUYER's option, as of the Closing Date.
5. REGISTRATION RIGHTS AGREEMENT. If any of the purchase price as set
forth above is paid in shares of common stock of BUYER, SELLER shall, as of the
Closing Date, enter into a Registration Rights Agreement in the form attached
hereto as Exhibit "G."
6. POST-CLOSING ADJUSTMENTS. On or before sixty (60) days after the
Closing Date, BUYER and SELLER shall undertake to agree with respect to the
adjustments or payments that were not fully and finally determined as of the
Closing Date, and the amount due from BUYER to SELLER, or SELLER to BUYER, as
the case may be. SELLER shall provide BUYER access to such of SELLER's records
as may be reasonably necessary to a determination of post-closing adjustments.
Payment by BUYER or SELLER shall be made in immediately available funds within
thirty (30) business days of agreement. If the post-closing adjustment has not
been agreed upon within the time period set forth herein, either party may seek
to enforce any rights it claims hereunder.
7. MUTUAL REPRESENTATIONS AND WARRANTIES. BUYER and SELLER each
represents and warrants to the other that:
(a) The person executing this Agreement and the transactions
contemplated hereby has all authority necessary to enter into this
Agreement and to perform all of the obligations hereunder;
(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not:
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(i) violate or conflict with any provision of any Certificate of
Incorporation, Corporate By-Laws, partnership agreement or
limited partnership agreement or other governing document of any
nature;
(ii) result in the breach of any term or condition of, or
constitute a default or cause the acceleration of any obligation
under any agreement or instrument to which it is a party or by
which it is bound;
(iii) violate or conflict with any applicable judgment,
decree, order, permit, law, rule or regulation, state or federal,
of the United States of America.
(c) This Agreement has been duly executed and delivered on its
behalf, and at the closing all documents and instruments required
hereunder will have been duly executed and delivered. This Agreement,
and all such documents and instruments shall constitute legal, valid
and binding obligations enforceable in accordance with their
respective terms, except to the extent enforceability may be impacted
by bankruptcy, reorganization, insolvency or similar laws affecting
creditors rights generally;
(d) No legal or administrative proceeding in or of the United States
of America is pending or threatened that would prohibit it from
entering into or consummating this Agreement; and
(e) Each of the representations made by BUYER and SELLER herein shall
be true as of the Effective Date with the same force and effect as if
made on said date.
8. SELLERS REPRESENTATIONS AND WARRANTIES. SELLER hereby represents
and warrants to BUYER and agrees that:
(a) SELLER will convey, assign and transfer to BUYER its contract,
property and other rights in the Assets;
(b) There is no action, suit, proceeding, claim or investigation by
any persons, entities, administrative agency or governmental body
pending or threatened against SELLER that may adversely affect
SELLER's title, and the ability to transfer the Assets to BUYER;
(c) SELLER will, for himself, his successors and assigns, warrant
and defend the title of BUYER, its successors and assigns to the
Assets,
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interests and properties against every person whomsoever claiming the
same or any party thereof by, through and under SELLER, but not
otherwise; however
WITH RESPECT TO THE WELLS, EQUIPMENT AND OTHER ITEMS OF PERSONALTY
WHICH MAY BE COVERED HEREBY, THE SAME ARE USED AND ARE SOLD ON AN "AS
IS" AND "WHERE IS" BASIS WITH ALL FAULTS, IF ANY. SELLER SHALL HAVE
NO LIABILITY TO BUYER FOR ANY CLAIMS, LOSS, OR DAMAGE CAUSED OR
ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY, INCIDENTALLY OR
CONSEQUENTIALLY BY SAID WELLS, EQUIPMENT OR PERSONAL PROPERTY, BY ANY
INADEQUACY THEREOF OR THEREWITH, ARISING IN STRICT LIABILITY OR
OTHERWISE, OR IN ANY WAY RELATED TO OR ARISING OUT OF THIS AGREEMENT.
SELLER MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING
THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO SAID WELLS, EQUIPMENT AND PERSONAL PROPERTY AND EXPRESSLY
DISCLAIMS ANY WARRANTIES WITH RESPECT THERETO; and
(d) The interests which BUYER shall receive shall include production
or the right to proceeds of production from each well located on the
ATP and the Leases in an amount which is not less than the percentage
net revenue interest set forth in Paragraph 2 above. In addition,
SELLER represents that the interest to be conveyed, assigned and
transferred to BUYER shall not require BUYER to bear a greater
percentage of costs and expenses than the percentage interest set
forth in paragraph 2, above. This representation of warranty is by,
through and under SELLER, but not otherwise; and
(e) To the extent of the interest described in paragraph 2, above,
SELLER has full and complete ownership of the Assets conveyed,
assigned and transferred hereunder, and that the Assets to be
purchased by BUYER are free and clear of all liens, judgments,
mortgages and other burdens or encumbrances created by SELLER.
(f) SELLER's contract rights and/or title to undivided interest in
the Assets has not been forfeited under the terms of the Operating
Agreement covering the interests and SELLER has not been notified of
any forfeiture or impending forfeiture of any interest under the
Operating Agreement;
(g) Any credit to the joint operating agreement, resulting from any
audit of that account or from any judicial action or determination,
shall
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<PAGE>
accrue to the benefit of BUYER without regard to whether the credit
relates to periods of time before or after the Effective Date; and
(h) Upon request by BUYER, SELLER will execute and return to Buyer a
Notice under the Income Tax Assessment Act of 1997 as amended, section
330-235, formerly a 124AB Notice under Australia's Income Assessment
Act.
(i) SELLER has paid and discharged all invoices and joint interest
billings from Operator, and SELLER is not in arrears on any amounts or
charges of any nature related to the Assets.
(j) SELLER acknowledges that as of January 1999, the requisite
percentage of interest in ownership under the Operating Agreement and
the requisite number of non-operators voted to remove Tri-Star
Petroleum Company as operator and to appoint Tipperary Oil & Gas
(Australia) Pty Ltd as successor operator under the Operating
Agreement.
9. ADDITIONAL WARRANTIES AND REPRESENTATIONS OF SELLER. Should any of
the purchase price, as described above, be paid in common shares of stock of
BUYER, SELLER makes the following additional warranties, representations and
agreements:
(a) SELLER is an "Accredited Investor" as that term is defined in Rule
501(a) of Regulation D promulgated by the Securities Exchange Commission.
A copy of Rule 501 of Regulation D has been provided to SELLER.
(b) SELLER has been supplied with information and materials
concerning BUYER and its business, operations, structuring and
financing, including its Annual Report on Form 10-K for the Fiscal
Year Ended September 30, 1999, and its definitive proxy statement
relating to its Annual Meeting of Shareholders to be held January 25,
2000. BUYER has provided SELLER with the opportunity to discuss with
and ask questions of BUYER's representatives concerning BUYER. SELLER
understands that BUYER faces several risks in its business as well as
risks faced by the oil and gas business and risks described in the
Form 10-K or incorporated therein by reference. All information
requested by SELLER from BUYER or its representatives concerning BUYER
and the terms and conditions of this Agreement has been furnished to
SELLER's satisfaction. SELLER has had the opportunity to ask
questions of and receive answers from management of BUYER concerning
BUYER and the terms and conditions of this Agreement, and to obtain
from BUYER any additional information which BUYER possesses or can
acquire without unreasonable effort or expense that is necessary to
verify the accuracy of the information provided to SELLER.
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(c) Any shares of BUYER acquired by SELLER hereunder are for SELLER'S
own account and not for or on behalf of any other person or entity.
(d) If any shares of BUYER are acquired hereunder, no shares will be
acquired with a view towards the distribution or redistribution with
the intent to divide SELLER's participation with others.
(d) SELLER will only resell any shares acquired under this agreement
pursuant to registration under the Act and the laws of any applicable
states or pursuant to an exemption from registration. The only
registration rights to which SELLER has with respect to any shares
acquired hereunder are as set forth in the Registration Rights
Agreement attached hereto as Exhibit "G."
(f) The stock certificates representing the shares of BUYER will bear
a legend substantially as follows:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold or
otherwise transferred except pursuant to an effective
registration statement under the Act or pursuant to an exemption
from registration under the Act, the availability which is to be
established to the satisfaction of the Company.
(g) If SELLER receives any common shares of BUYER hereunder, prior to
any proposed sale, assignment, transfer or pledge of the shares (other
than transfers not involving a change in beneficial ownership), unless
there is in effect a registration statement under the Act covering the
proposed transfer, SELLER shall give written notice to BUYER of its
intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the
proposed transfer, sale, assignment or pledge in sufficient detail,
and shall be accompanied, at SELLER's expense, by an unqualified
written opinion of legal counsel who shall, and whose legal opinion
shall, be reasonably satisfactory to BUYER and addressed to BUYER, to
the effect that the proposed transfer of the shares may be effected
without registration under the Act, whereupon the holder of such
shares shall be entitled to transfer them in accordance with the terms
of the notice delivered by the holder to BUYER. Each such notice
shall also be accompanied by a written agreement of the proposed
transferee to conform to the requirements
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<PAGE>
hereof. Each certificate evidencing the securities transferred as
above provided shall bear, except if such transfer is made pursuant to
Rule 144, the appropriate restrictive legend set forth above, except
that such certificate shall not bear such restrictive legend if in the
opinion of counsel for such holder and BUYER such legend is not
required to order to establish compliance with any provision of the
Act.
(h) SELLER will execute and deliver to BUYER any document, or do any
other act or thing, which BUYER many reasonably request in connection
with any acquisition of shares under this agreement.
(i) SELLER has not distributed any written materials furnished by
BUYER to anyone other than SELLER's professional advisors.
(j) SELLER represents that the statements made and other information
provided in this Agreement, and all other information with respect to
the financial position and business experience of SELLER which has
been previously supplied by SELLER to BUYER are complete and accurate
as of the date this Agreement is executed by SELLER, and, if there
should be any material change in such information prior to the
acceptance or rejection of this Agreement, SELLER will immediately
provide revised information to BUYER.
(k) SELLER further represents that SELLER is familiar with the type
of investment which the shares received in compensation hereunder
constitute. SELLER believes that any shares received hereunder are
shares of the kind SELLER wishes to acquire and that the nature of the
shares received and the amount of the purchase price received in
shares is consistent with the overall investment program and financial
position of SELLER. SELLER's overall commitment to investments which
are not readily marketable is not disproportionate to SELLER's net
worth; its investment in BUYER will not cause such overall commitment
to become excessive; and SELLER can afford to bear the loss of
SELLER's entire investment in BUYER. SELLER has adequate means of
providing for SELLER's current needs and personal contingencies and
has no need for liquidity in its investment in BUYER.
(l) SELLER has such knowledge and experience in financial and
business matters in general to evaluate the merits and risks of the
prospective investment and to make an informed investment decision.
(m) SELLER understands that no federal or state agency has made any
finding or determination regarding the fairness of the shares or any
recommendation or endorsement concerning an investment in BUYER.
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<PAGE>
(n) SELLER represents and warrants that there is no finder's fee or
commission payable SELLER with respect to its receipt of shares
hereunder.
(o) SELLER understands that no securities administrator of any
governmental agency has made any finding or determination relating to
the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or
endorse, the offering of any securities received hereunder.
(p) The execution, delivery, and performance by SELLER of this
Agreement are within the powers of SELLER, have been duly authorized
and will not constitute or result in a breach or default under, or
conflict with, any order, ruling or regulation of any court or other
tribunal or of any governmental commission or agency, or any agreement
or other undertaking, to which SELLER is a party or by which SELLER is
bound. The signature of SELLER on this Agreement is genuine, and
SELLER has legal competence and capacity to execute the same.
10. ALLOCATION OF LIABILITY AND INDEMNIFICATIONS.
(a) DEFINITIONS.
The term "BUYER's Assumed Liabilities" shall mean and include:
(i) All costs, expenses, liabilities and obligations or
otherwise agreed to be paid by BUYER pursuant to the terms of
this Agreement; and
(ii) All costs, expenses, liabilities, claims and obligations
arising out of, in connection with, or resulting directly or
indirectly from the ownership or operation of the Assets
(excluding SELLER's Retained Liabilities), insofar as such
claims relate to periods of time subsequent to the Effective
Date.
The term "SELLER's Retained Liabilities shall mean and include:
(i) All costs, expenses, liabilities and obligations or
otherwise agreed to be paid by SELLER pursuant to the terms of
this Agreement; and
(ii) All costs, expenses, liabilities, claims and obligations
arising out of, in connection with, or resulting directly or
indirectly from the ownership or operation of the Assets,
insofar
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<PAGE>
as such claims relate to periods of time prior to the Effective
Date, insofar as SELLER knew, or should have known, of the cost
expense, liability claim and/or obligation.
(iii) All legal fees charged to the joint account and
attributable to the interests purchased and sold hereunder
prior to the Effective Date;
(b) LIABILITIES. BUYER agrees to assume, pay, perform, fulfill,
discharge and be liable for all of BUYER's Assumed Liabilities, and
SELLER agrees to retain, perform, fulfill, discharge and be and
remain liable for all of SELLER's Retained Liabilities.
(c) SELLER'S INDEMNITY. SUBJECT TO THE PROVISIONS OF THE SECTION
8(a), ABOVE, SELLER AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BUYER, ITS OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES, OR ANY OF
THEM, FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, SUITS,
CONTROVERSIES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS, REASONABLE EXPENSES OF LITIGATION AND
REASONABLE ATTORNEY'S FEES) ARISING DIRECTLY OUT OF SELLERS'
OWNERSHIP OR USE OF THE INTEREST IN THE ASSETS TO BE PURCHASED
HEREUNDER; PROVIDED, HOWEVER, THAT THIS INDEMNITY SHALL BE LIMITED
TO THOSE CLAIMS, RIGHTS, DEMANDS AND CAUSES OF ACTION ARISING FROM
ACTIVITY OCCURRING PRIOR TO THE EFFECTIVE DATE OF THE SALE.
(d) BUYER'S INDEMNITY. BUYYER AGREES TO DEFEND, INDEMNIFY AND HOLD
HARMLESS SELLER, ITS OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES, OR
ANY OF THEM, FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, SUITS,
CONTROVERSIES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS, REASONABLE EXPENSES OF LITIGATION AND
REASONABLE ATTORNEY'S FEES) ARISING DIRECTLY OUT OF BUYER'S
OWNERSHIP OR USE OF THE INTEREST IN THE ASSETS TO BE PURCHASED
HEREUNDER; PROVIDED, HOWEVER, THAT THIS INDEMNITY SHALL BE LIMITED
TO THOSE CLAIMS, RIGHTS, DEMANDS AND CAUSES OF ACTION ARISING FROM
ACTIVITY OCCURRING AFTER THE EFFECTIVE DATE OF THE SALE.
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11. REVIEW AND INSPECTION OF THE ASSETS. Prior to the Closing,
BUYER shall have the right to perform due diligence review and inspection of the
Assets. Immediately after Closing, SELLER shall transmit to BUYER all
paperwork, information and data relating to the Assets in the possession of
SELLER (and to which SELLER has the right to possession) including, but not
limited to, the following: (a) financial and accounting records; (b)
production, engineering, geological and geophysical data and reports for the
Leases; (c) copies of engineering, geological and geophysical studies, subject
to any license and non-disclosure requirements; (d) copies of seismic data
across any of the Leases (subject to any license restriction and non-disclosure
requirements); (e) title records, including, but not limited to, copies of the
Leases; (f) correspondence and material and relevant information concerning
pending litigation; (g) regulatory compliance records; (h) contracts between
SELLER and third parties with regard to the Assets; and (i) all correspondence
of any nature relating to the assets, including, without limitation,
correspondence between SELLER and Operator and entities related to Operator,
copies of correspondence between Operator and third-parties and correspondence
of any nature between SELLER and any third party relating to the assets; (j) all
permits and licenses pertaining to the Assets. Nothing contained in this
paragraph shall obligate SELLER to take any action or expend any money to
acquire anything for BUYER which SELLER does not already have in its possession.
SELLER does not warrant the accuracy of any such material.
12. WAIVER. SELLER and BUYER certify that they are not "Consumers"
within the meaning of the Texas Deceptive Trade Practices - Consumer Protection
Act, Subchapter E of the Chapter 17, Sections 17.41 et seq., of the Texas
Business and Commerce Code, as amended (the "DTPA"). The parties covenant, for
themselves and on behalf of any successors and assignees, that if the DTPA is
applicable (a) the parties are "business consumers" thereunder, (b) each party
hereby waives and releases all of its rights and remedies thereunder (other than
Section 17.555, Texas Business and Commerce Code) as applicable to the other
party and its successors, and (c) each party shall defend and indemnify the
other from and against any and all claims, demands, or causes of action of or by
that party or any successor or any of its affiliates based in whole or in part
on the DTPA, arising out of or in connection with the transaction set forth in
this Agreement.
WAIVER OF CONSUMER RIGHTS
PURCHASER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES -
CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.
AFTER CONSULTATION WITH AN ATTORNEY OF PURCHASER'S OWN SELECTION,
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<PAGE>
PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER.
13. NOTICES. All communications required or permitted under this
Agreement shall be in writing and communications or delivery hereunder shall be
deemed to have been fully made in actually delivered, or if mailed by registered
or certified mail, postage prepaid, return receipt requested, to the address as
set forth below:
SELLER:
WILLIAM I. ISAAC
5840 Kingsfield Drive
El Paso, Texas
79912
Telephone: 915-566-2941
Facsimile: 915-566-3360
BUYER:
TIPPERARY CORPORATION
633 Seventeenth St., Suite 1550
Denver, Colorado 80202
Attention: Mr. David L. Bradshaw, President
Telephone: (303) 293-9379
Telecopier: (303) 292-3428
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING, HOWEVER, ANY
PROVISION OF THE TEXAS LAW THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF A
DIFFERENT JURISDICTION.
15. FURTHER ASSURANCES. Incidental and subsequent to Closing, each of the
parties shall execute, acknowledge, and deliver to the other such further
instruments (including any stamp duty or other form necessary for, or incident
to, the notation, sanction, approval, transfer or assignment to BUYER of any
title or interest in either the Assets or the Operating Agreement), and to take
such other actions as may be reasonably necessary to carry out the provisions of
this Agreement.
16. GOVERNMENT APPROVALS. SELLER will cooperate with BUYER, in a timely
manner (both before and after closing), in obtaining any necessary or desired
consents or approvals of the Government of Australia or any state thereof,
including, without limitation, the execution of any documents necessary (in the
opinion of BUYER and its counsel) to obtain any consent or approval of interests
arising under the
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<PAGE>
Operating Agreement, or to perfect the title of BUYER or SELLER in the Assets
and/or to obtain any necessary governmental sanction of the Operating Agreement.
17. EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay its own fees and
expenses incident to the negotiation, preparation and execution of this
Agreement, including attorney's and accountant's fees.
18. EXISTING RELATIONSHIP. SELLER and BUYER are co-signatories to
the JOA and co-owners in the various rights, interests, contracts and agreements
which, as to SELLER's interests, constitute the Assets. As such, BUYER AND
SELLER have equal rights to information relating to and concerning the assets
and operations. To the extent SELLER may have been provided with information
that has not been provided to BUYER, however, he will provide such information
to BUYER prior to the Closing Date. SELLER acknowledges that he is experienced
and knowledgeable in the oil and gas industry, and has relied solely on his own
legal, tax and other professional counsel concerning this Agreement.
19. EXHIBITS. All exhibits to this Agreement are incorporated herein by
reference.
20. SUCCESSORS AND ASSIGNS. The terms, covenants and conditions hereof
bind and inure to the benefit of BUYER and SELLER and their respective
successors and assigns. This Agreement shall be freely and fully assignable by
BUYER.
21. CONFLICTS. In the event of a conflict between this Agreement and
the terms and conditions of the Operating Agreement, the provisions of the
Operating Agreement shall prevail. In all other respects, this Agreement shall
supersede all prior agreements between the parties hereto regarding the subject
matter hereof, whether written or oral.
22. SURVIVAL. The covenants, obligations, indemnities, representations and
warranties included in this Agreement shall survive the Closing and remain
actionable thereafter.
23. PRODUCT OF NEGOTIATION. This Agreement is the product of negotiation
between BUYER and SELLER. No fiduciary duty, if any, owed by BUYER and SELLER
in any prior agreement shall apply to the process of negotiation of this
Agreement.
24. EXECUTION, COUNTERPARTS AND EXHIBITS. BUYER and SELLER acknowledge
and agree that this Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument, and that a facsimile copy of this Agreement, and of a signature
to this Agreement, shall be valid and binding as an original. BUYER and SELLER
also
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<PAGE>
acknowledge and agree that they are each in possession of the Exhibits referred
to herein as "A" - "E," and each party shall be responsible for attaching copies
of such exhibits to executed copies of this Agreement. Exhibits "F" and "G" have
been provided to SELLER by BUYER, and shall be attached to this Agreement at the
time of execution.
IN WITNESS WHEREOF, this Agreement has been executed by the parties before the
undersigned competent witnesses on the dates indicated below.
SELLER: BUYER:
WILLIAM I. ISAAC TIPPERARY CORPORATION
By: /s/ William L. Isaac By: /s/ David L. Bradshaw
--------------------------- -----------------------------------
William I. Isaac David L. Bradshaw
President and Chairman of the Board
ATTEST: ATTEST:
By: /s/ Mitchell Esper By: /s/ Elaine R. Treece
--------------------------- ----------------------------------
Elaine R. Treece
Corporate Secretary
15
<Page
STATE OF TEXAS s
s
COUNTY OF EL PASO s
The foregoing instrument was acknowledged before me on this the 14th day
January, 2000 by William I. Isaac, as Seller.
Witness my hand and official seal.
/s/ Rose Marie Reyes
-----------------------------------------
Notary Public
THE STATE OF TEXAS
My Commission Expires:
March 3, 2001
- ---------------------
STATE OF COLORADO s
s
COUNTY OF DENVER s
The foregoing instrument was acknowledged before me on this the 14th day of
January, 2000 by David L. Bradshaw, President of Tipperary Corporation, on
behalf of said corporation, as Buyer.
Witness my hand and official seal.
/s/ Phyllis Kajiwara
-------------------------------------------
Notary Public
THE STATE OF COLORADO
My Commission Expires:
7-31-2002
- ---------------------
16
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, effective as of the 1st day of January 2000, is made and
entered into by and between WILLIAM D. KENNEDY as Seller ("SELLER"), and
TIPPERARY CORPORATION as Buyer ("BUYER").
1. BASIS OF AGREEMENT. SELLER and BUYER's wholly-owned subsidiary,
Tipperary Oil & Gas Corporation, and others, are non-operators under that
certain Joint Operating Agreement dated May 15, 1992 between non-operators and
Tri-Star Petroleum Company, as Operator (the "Operating Agreement"), relative to
the development of the coalbed methane gas project known as the Comet Ridge
Project, located in the State of Queensland, Australia. The Operating Agreement
is attached hereto as Exhibit "A." SELLER desires to sell a portion of his
interest in the contractual and other rights, title and interest, of any nature
whatsoever, arising under or created by the Operating Agreement, including,
without limitation, contract rights and SELLER's undivided interest in any real
or personal property which SELLER owns or has the right to acquire under the
terms of the Operating Agreement presently or in the future, and BUYER desires
to purchase a portion of SELLER's contractual and other rights, title and
interest of any nature whatsoever arising under or created by the Operating
Agreement, including, without limitation, all contract or other rights of any
nature and any undivided interest in any real or personal property which SELLER
owns or has the right to acquire under the Operating Agreement presently or in
the future, all in accordance with the terms and conditions of this Purchase and
Sale Agreement (the "Agreement").
2. ASSETS TO BE PURCHASED AND SOLD. Subject to the terms set forth in
this Agreement, and the terms and conditions of the Operating Agreement, SELLER
agrees to sell to BUYER and BUYER agrees to buy from SELLER the following
undivided percentage of interest, subject to the Mediation Agreement dated
October 20, 1996 attached hereto as Exhibit "B," and any existing gas contracts,
in the assets and properties hereinafter described
A. B. C.
In Leasehold In Acquisition
In Ownership & Lease Drilling, Development,
Production Operating Expenses Workover & Capital Costs
(%) (%) (%)
Before Project Payout 1.800 2.00 2.00
After Project Payout 1.800 2.00 2.00
and referred to herein as SELLER's "Undivided Interest":
<PAGE>
(a) SELLER's Undivided Interest, if any, in and to, and/or SELLER's
right to acquire an Undivided Interest in and to the Authority to
Prospect 526 attached as Exhibit "C" hereto, and the ATP attached as
Exhibit "B" to the Operating Agreement, and any extension, renewal or
replacement of any ATP, howsoever denominated (the "ATP");
(b) SELLER's Undivided Interest, if any, in the right to reacquire
any acreage which had comprised a part of the ATP but was relinquished
by the Operator as a part of, or in connection with, a scheduled
contraction of the ATP, and/or any other acreage which was at any time
a part of the ATP but lapsed or was relinquished for any reason;
(c) SELLER's Undivided Interest, if any, in and to, and SELLER's
right to acquire an Undivided Interest in and to the petroleum leases
and applications for petroleum leases listed and described on Exhibit
"D" attached hereto (the "Leases") and applications for petroleum
leases;
(d) SELLER's Undivided Interest, if any, in and to, and SELLER's
right to acquire an Undivided Interest in and to Pipeline License No.
27 described on Exhibit "E" and attached hereto and any connecting
pipeline and/or gas gathering systems;
(e) SELLER's Undivided Interest, if any, in and to, and SELLER's
right to acquire an Undivided Interest in and to all permits,
licenses, leases, servitudes, rights-of-way, easements, pipeline
licenses and any other tenements or similar rights associated with the
ATP and Leases and the operation of the ATP and Leases, whether
specifically enumerated herein and whether presently existing, applied
for, pending, created, issued or accrued, or applied for, created,
issued or accrued in the future;
(f) SELLER's Undivided Interest, if any, in and to, and SELLER's
right to acquire an Undivided Interest in and to the wells listed and
described on Exhibit "F" (the "Wells") and attached hereto, including
all formations and depths within or below the wellbore, whether or not
presently productive;
(g) SELLER's Undivided Interest, if any, and the right to acquire an
Undivided Interest in any wells to be drilled in the future on the
acreage described by the ATP or any extension, renewal or replacement
of the ATP, howsoever denominated;
(h) SELLER's Undivided Interest, if any, in and to, and SELLER's
right to acquire an Undivided Interest in and to, all personal and
mixed property located on the lands covered by the ATP and Leases and
used in
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<PAGE>
operations conducted on same, whether located on or off the wellsites,
the Leases or the acreage described by the ATP;
(i) SELLER's Undivided Interest in and to, and the right to acquire
an Undivided Interest in and to, any and all gas purchase and sale
agreements, crude purchase and sale agreements, gas pipeline
agreements, volumetric or other production payments of any nature,
leases of equipment or facilities and any and all other agreements and
rights which are (i) appurtenant to the ATP, Leases or Wells, or (ii)
used or held for use in connection with the ownership or operation of
the Wells or with the production, treatment, sale or disposal of
water, hydrocarbons, or associated substances produced, used or
disposed of in connection with the Wells, ATP or the Leases;
(j) To the extent that such may be lawfully transferred, SELLER's
Undivided Interest in any and all tax benefits or tax deductions under
the laws of Australia, the State of Queensland or any municipality
thereof, whether or not presently accrued, owned by or vested in
SELLER, including, without limitation, any tax benefits or deductions
which may be lawfully transferred to BUYER under Australia's Income
Tax Assessment Act 1997, or any applicable predecessor to such Act.
This shall be a continuing obligation;
(k) SELLER's Undivided Interest in the right or rights to enforce
contract rights, title, interests of any nature, covenants,
representations, warranties or other rights of any nature, if any,
which SELLER is or may in the future be entitled to enforce against
SELLER's predecessors-in-title;
(l) SELLER's Undivided Interest in all right, title and interest, if
any, under any Deed or Deeds of Confirmation of Producing License
executed by Tri-Star Petroleum Company in favor of SELLER, as Drilling
Participant;
(m) SELLER's Undivided Interest in all right, title and interest, if
any, under any Deed or Deeds of Charge executed by Tri-Star Petroleum
Company in favor of SELLER, as Chargeholder;
(n) SELLER's Undivided Interest in all contract rights or other
rights under the Operating Agreement of any nature whatsoever, whether
express or implied, whether presently existing or vested in SELLER or
arising in the future, whether specifically enumerated above,
including, but not limited to, all choses-in-action.
The rights and interests described in paragraphs (a) through (n) above are
collectively referred to in this Agreement as the "Assets." BUYER and SELLER
acknowledge and
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agree that SELLER owns and is retaining a fractional undivided interest in the
Assets that is not subject to, or a part of, this Agreement.
3. THE EFFECTIVE DATE. The effective date of the purchase and sale, for
all purposes, shall be the 1st day of January, 2000, at 12:01 a.m., Greenwich
Mean Time plus ten, local time, Brisbane, Australia ("Effective Date").
4. PURCHASE PRICE AND CLOSING DATE. The purchase price for the Assets
shall be one million five hundred thousand dollars and no cents
($1,500,000.00). The purchase price shall be payable, at BUYER's option:
entirely in cash at closing; or by a combination of cash and BUYER's common
stock, as follows: nine hundred thousand dollars and no cents ($900,00.00) in
cash at closing and three hundred seventy-five thousand (375,000) shares of
BUYER's common stock valued at $1.60 per share. The sale shall be completed at
the offices of the attorneys for BUYER or a place to be mutually agreed upon by
BUYER and SELLER, on or before thirty (30) days from the date of the execution
of this agreement by both BUYER and SELLER (the "Closing Date"). At the
closing, SELLER shall deliver to BUYER a fully executed assignment and
conveyance in the form attached hereto as Exhibit "G." The purchase price, or
cash portion of the purchase price, as the case may be, shall be paid to SELLER
by cashier's check or wire transfer, at BUYER's option, as of the Closing Date.
5. REGISTRATION RIGHTS AGREEMENT. If any of the purchase price as set
forth above is paid in shares of common stock of BUYER, SELLER and BUYER shall,
as of the Closing Date, enter into a Registration Rights Agreement in the form
attached hereto as Exhibit "H."
6. POST-CLOSING ADJUSTMENTS. On or before sixty (60) days after the
Closing Date, BUYER AND SELLER shall undertake to agree with respect to the
adjustments or payments that were not fully and finally determined as of the
Closing Date, and the amount due from BUYER to SELLER, or SELLER to BUYER, as
the case may be. SELLER shall provide BUYER access to such of SELLER's records
as may be reasonably necessary to a determination of post-closing adjustments.
Payment by BUYER or SELLER shall be made in immediately available funds within
thirty (30) business days of agreement. If the post-closing adjustment has not
been agreed upon within the time period set forth herein, either party may seek
to enforce any rights it claims hereunder.
7. MUTUAL REPRESENTATIONS AND WARRANTIES. BUYER and SELLER each
represents and warrants to the other that:
(a) The person executing this Agreement and the transactions
contemplated hereby has all authority necessary to enter into this
Agreement and to perform all of the obligations hereunder;
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(b) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not:
(i) violate or conflict with any provision of any Certificate of
Incorporation, Corporate By-Laws, partnership agreement or
limited partnership agreement or other governing document of any
nature;
(ii) result in the breach of any term or condition of, or
constitute a default or cause the acceleration of any obligation
under any agreement or instrument to which it is a party or by
which it is bound;
(iii) violate or conflict with any applicable judgment, decree,
order, permit, law, rule or regulation, state or federal, of the
United States of America.
(c) This Agreement has been duly executed and delivered on its
behalf, and at the closing all documents and instruments required
hereunder will have been duly executed and delivered. This Agreement,
and all such documents and instruments shall constitute legal, valid
and binding obligations enforceable in accordance with their
respective terms, except to the extent enforceability may be impacted
by bankruptcy, reorganization, insolvency or similar laws affecting
creditors rights generally;
(d) No legal or administrative proceeding in or of the United States
of America is pending or threatened that would prohibit it from
entering into or consummating this Agreement; and
(e) Each of the representations made by BUYER and SELLER herein shall
be true as of the Effective Date with the same force and effect as if
made on said date.
8. SELLER'S REPRESENTATIONS AND WARRANTIES. SELLER hereby represents and
warrants to BUYER and agrees that:
(a) SELLER will convey, assign and transfer to BUYER its contract,
property and other rights in the Assets;
(b) There is no action, suit, proceeding, claim or investigation by
any persons, entities, administrative agency or governmental body
pending or threatened against SELLER that may adversely affect
SELLER's title, and the ability to transfer the Assets to BUYER other
than Cause No. 42,265, styled as Tipperary Corporation et al v. Tri-
Star Petroleum Company,
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Inc.; In the District Court of Midland County, Texas, 238th Judicial
District;
(c) SELLER will, for himself, his successors and assigns, warrant
and defend the title of BUYER, its successors and assigns to the
Assets, interests and properties against every person whomsoever
claiming the same or any party thereof by, through and under SELLER,
but not otherwise; however
WITH RESPECT TO THE WELLS, EQUIPMENT AND OTHER ITEMS OF PERSONALTY
WHICH MAY BE COVERED HEREBY, THE SAME ARE USED AND ARE SOLD ON AN "AS
IS" AND "WHERE IS" BASIS WITH ALL FAULTS, IF ANY. SELLER SHALL HAVE
NO LIABILITY TO BUYER FOR ANY CLAIMS, LOSS, OR DAMAGE CAUSED OR
ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY, INCIDENTALLY OR
CONSEQUENTIALLY BY SAID WELLS, EQUIPMENT OR PERSONAL PROPERTY, BY ANY
INADEQUACY THEREOF OR THEREWITH, ARISING IN STRICT LIABILITY OR
OTHERWISE, OR IN ANY WAY RELATED TO OR ARISING OUT OF THIS AGREEMENT.
SELLER MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, INCLUDING
THOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO SAID WELLS, EQUIPMENT AND PERSONAL PROPERTY AND EXPRESSLY
DISCLAIMS ANY WARRANTIES WITH RESPECT THERETO; and
(d) The interests which BUYER shall receive shall include production
or the right to proceeds of production from each well located on the
ATP and the Leases in an amount which is not less than the percentage
net revenue interest set forth in Paragraph 2 above. In addition,
SELLER represents that the interest to be conveyed, assigned and
transferred to BUYER shall not require BUYER to bear a greater
percentage of costs and expenses than the percentage interest set
forth in paragraph 2, above. This representation of warranty is by,
through and under SELLER, but not otherwise; and
(e) To the extent of the interest described in paragraph 2, above,
SELLER has full and complete ownership of the Assets conveyed,
assigned and transferred hereunder, and that the Assets to be
purchased by BUYER are free and clear of all liens, judgments,
mortgages and other burdens or encumbrances created by SELLER.
(f) SELLER's contract rights and/or title to undivided interest in
the Assets has not been forfeited under the terms of the Operating
Agreement
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<PAGE>
covering the interests and SELLER has not been notified of any
forfeiture or impending forfeiture of any interest under the Operating
Agreement;
(g) Any credit to the joint operating account attributable to the
Assets resulting from any audit of that account or from any judicial
action or determination, shall accrue to the benefit of SELLER insofar
as the credit relates to periods of prior to the Effective Date; and
(h) Upon request by BUYER, SELLER will execute and return to Buyer a
Notice under the Income Tax Assessment Act of 1997 as amended, section
330-235, formerly a 124AB Notice under Australia's Income Assessment
Act.
(i) SELLER has paid and discharged all invoices and joint interest
billings from Operator, and SELLER is not in arrears on any amounts or
charges of any nature related to the Assets.
(j) SELLER acknowledges that as of January 1999, the requisite
percentage of interest in ownership under the Operating Agreement and
the requisite number of non-operators voted to remove Tri-Star
Petroleum Company as operator and to appoint Tipperary Oil & Gas
(Australia) Pty Ltd as successor operator under the Operating
Agreement.
9. ADDITIONAL WARRANTIES AND REPRESENTATIONS OF SELLER. Should any of
the purchase price, as described above, be paid in common shares of stock of
BUYER, SELLER makes the following additional warranties, representations and
agreements:
(a) SELLER is an "Accredited Investor" as that term is defined in
Rule 501(a) of Regulation D promulgated by the Securities Exchange
Commission. A copy of Rule 501 of Regulation D has been provided to
SELLER.
(b) SELLER has been supplied with information and materials
concerning BUYER and its business, operations, structuring and
financing, including its Annual Report on Form 10-K for the Fiscal
Year Ended September 30, 1999, and its definitive proxy statement
relating to its Annual Meeting of Shareholders to be held January 25,
2000. BUYER has provided SELLER with the opportunity to discuss with
and ask questions of BUYER's representatives concerning BUYER. SELLER
understands that BUYER faces several risks in its business as well as
risks faced by the oil and gas business and risks described in the
Form 10-K or incorporated therein by reference. All information
requested by SELLER from BUYER or its representatives concerning BUYER
and the terms and conditions of the Agreement has been furnished to
SELLER's satisfaction. SELLER has had the opportunity to
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<PAGE>
ask questions of and receive answers from management of BUYER
concerning BUYER and the terms and conditions of this Agreement, and
to obtain from BUYER any additional information which BUYER possesses
or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the information provided to
SELLER.
(c) Any shares of BUYER acquired by SELLER hereunder are for SELLER'S
own account and not for or on behalf of any other person or entity.
(d) If any shares of BUYER are acquired hereunder, those shares will
not be acquired with a view towards the distribution or redistribution
with the intent to divide SELLER's participation with others.
(e) SELLER will only resell any shares acquired under this agreement
pursuant to registration under the Securities Act of 1933 (the "Act")
and the laws of any applicable states or pursuant to an exemption from
registration. The only registration rights to which SELLER has with
respect to any shares acquired hereunder are as set forth in the
Registration Rights Agreement attached hereto as Exhibit "G."
(f) The stock certificates representing the shares of BUYER will bear
a legend substantially as follows:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold or
otherwise transferred except pursuant to an effective
registration statement under the Act or pursuant to an exemption
from registration under the Act, the availability of which is to
be established to the satisfaction of the Company.
(g) If SELLER receives any common shares of BUYER hereunder, prior to
any proposed sale, assignment, transfer or pledge of the shares (other
than transfers or pledges not involving a change in beneficial
ownership as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder), unless there is in effect a registration
statement under the Act covering the proposed transfer, SELLER shall
give written notice to BUYER of its intention to effect such transfer,
sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or
pledge in sufficient detail, and shall be accompanied, at SELLER's
expense, by an unqualified written opinion of legal counsel who shall,
and whose legal opinion shall, be
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<PAGE>
reasonably satisfactory to BUYER and addressed to BUYER, to the effect
that the proposed transfer of the shares may be effected without
registration under the Act, whereupon the holder of such shares shall
be entitled to transfer them in accordance with the terms of the
notice delivered by the holder to BUYER. Each such notice shall also
be accompanied by a written agreement of the proposed transferee to
conform to the requirements hereof, unless such transfer is made
pursuant to Rule 144 promulgated under the Act. Each certificate
evidencing the securities transferred as above provided shall bear,
except if such transfer is made pursuant to Rule 144, the appropriate
restrictive legend set forth above, except that such certificate shall
not bear such restrictive legend if in the opinion of counsel for such
holder and BUYER such legend is not required to order to establish
compliance with any provision of the Act.
(h) SELLER has not distributed any written materials furnished by
BUYER to anyone other than SELLER's professional advisors.
(i) SELLER further represents that SELLER is familiar with the type
of investment which the shares received in compensation hereunder
constitute. SELLER's overall commitment to investments which are not
readily marketable is not disproportionate to SELLER's net worth; its
investment in BUYER will not cause such overall commitment to become
excessive; and SELLER can afford to bear the loss of SELLER's entire
investment in BUYER. SELLER has adequate means of providing for
SELLER's current needs and personal contingencies and has no need for
liquidity in its investment in BUYER.
(j) SELLER has such knowledge and experience in financial and
business matters in general to evaluate the merits and risks of the
prospective investment and to make an informed investment decision.
(k) SELLER understands that no federal or state agency has made any
finding or determination regarding the fairness of the shares or any
recommendation or endorsement concerning an investment in BUYER.
(l) SELLER represents and warrants that there is no finder's fee or
commission payable SELLER with respect to its receipt of shares
hereunder.
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10. ALLOCATION OF LIABILITY AND INDEMNIFICATIONS.
(a) DEFINITIONS.
The term "BUYER's Assumed Liabilities" shall mean and
include:
(i) All costs, expenses, liabilities and obligations or
otherwise agreed to be paid by BUYER pursuant to the terms
of this Agreement; and
(ii) All costs, expenses, liabilities, claims and
obligations arising out of, in connection with, or resulting
directly or indirectly from the ownership or operation of
the Assets (excluding SELLER's Retained Liabilities),
insofar as such claims relate to periods of time subsequent
to the Effective Date, and SELLER shall receive credit for
prepayments prior to the Effective Date if such prepayments
relate to ownership or operation of the Assets after the
Effective Date.
The term "SELLER's Retained Liabilities" shall mean and
include:
(i) All costs, expenses, liabilities and obligations or
otherwise agreed to be paid by SELLER pursuant to the terms
of this Agreement; and
(ii) All costs, expenses, liabilities, claims and
obligations arising out of, in connection with, or resulting
directly or indirectly from the ownership or operation of
the Assets, insofar as such claims relate to periods of time
prior to the Effective Date,
(iii) All legal fees charged to the joint account and
attributable to the interests purchased and sold hereunder
prior to the Effective Date;
(b) LIABILITIES. BUYER agrees to assume, pay, perform, fulfill,
discharge and be liable for all of BUYER's Assumed Liabilities,
and SELLER agrees to retain, perform, fulfill, discharge and be
and remain liable for all of SELLER's Retained Liabilities.
(c) SELLER'S INDEMNITY. SUBJECT TO THE PROVISIONS OF THE
SECTION 8(a), ABOVE, SELLER AGREES TO DEFEND, INDEMNIFY AND HOLD
HARMLESS BUYER, ITS OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES, OR
ANY OF THEM, FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, SUITS,
10
<PAGE>
CONTROVERSIES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS, REASONABLE EXPENSES OF LITIGATION AND
REASONABLE ATTORNEY'S FEES) ARISING DIRECTLY OUT OF SELLERS'
OWNERSHIP OR USE OF THE INTEREST IN THE ASSETS TO BE PURCHASED
HEREUNDER; PROVIDED, HOWEVER, THAT THIS INDEMNITY SHALL BE
LIMITED TO THOSE CLAIMS, RIGHTS, DEMANDS AND CAUSES OF ACTION
ARISING FROM ACTIVITY OCCURRING PRIOR TO THE EFFECTIVE DATE OF
THE SALE.
(d) BUYER'S INDEMNITY. BUYER AGREES TO DEFEND, INDEMNIFY AND
HOLD HARMLESS SELLER, ITS OFFICERS, DIRECTORS, AGENTS AND
EMPLOYEES, OR ANY OF THEM, FROM AND AGAINST ANY AND ALL LOSSES,
CLAIMS, SUITS, CONTROVERSIES, LIABILITIES AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, COURT COSTS, REASONABLE EXPENSES
OF LITIGATION AND REASONABLE ATTORNEY'S FEES) ARISING DIRECTLY
OUT OF BUYER'S OWNERSHIP OR USE OF THE INTEREST IN THE ASSETS TO
BE PURCHASED HEREUNDER; PROVIDED, HOWEVER, THAT THIS INDEMNITY
SHALL BE LIMITED TO THOSE CLAIMS, RIGHTS, DEMANDS AND CAUSES OF
ACTION ARISING FROM ACTIVITY OCCURRING AFTER THE EFFECTIVE DATE
OF THE SALE.
11. REVIEW AND INSPECTION OF THE ASSETS. Prior to the Closing, BUYER
shall have the right to perform due diligence review and inspection of the
Assets. Immediately after Closing, SELLER shall transmit to BUYER all
paperwork, information and data relating to the Assets in the possession of
SELLER (and to which SELLER has the right to possession) including, but not
limited to the following: (a) financial and accounting records; (b) production,
engineering, geological and geophysical data and reports for the Leases; (c)
copies of engineering, geological and geophysical studies, subject to any
license and non-disclosure requirements; (d) copies of seismic data across any
of the Leases (subject to any license restriction and non-disclosure
requirements); (e) title records, including, but not limited to, copies of the
Leases; (f) correspondence and material and relevant information concerning
pending litigation; (g) regulatory compliance records; (h) contracts between
SELLER and third parties with regard to the Assets; and (i) all correspondence
of any nature relating to the assets, including, without limitation,
correspondence between SELLER and Operator and entities related to Operator,
copies of correspondence between Operator and third-parties and correspondence
of any nature between SELLER and any third party relating to the assets; (j) all
permits and licenses pertaining to the Assets. Nothing contained in this
paragraph shall obligate SELLER to take any action or expend any money to
acquire anything for BUYER which SELLER does not already have in its possession.
SELLER does not warrant the accuracy of any such material.
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<PAGE>
12. WAIVER. SELLER and BUYER certify that they are not "Consumers"
within the meaning of the Texas Deceptive Trade Practices - Consumer Protection
Act, Subchapter E of the Chapter 17, Sections 17.41 et seq., of the Texas
Business and Commerce Code, as amended (the "DTPA"). The parties covenant, for
themselves and on behalf of any successors and assignees, that if the DTPA is
applicable (a) the parties are "business consumers" thereunder, (b) each party
hereby waives and releases all of its rights and remedies thereunder (other than
Section 17.555, Texas Business and Commerce Code) as applicable to the other
party and its successors, and (c) each party shall defend and indemnify the
other from and against any and all claims, demands, or causes of action of or by
that party or any successor or any of its affiliates based in whole or in part
on the DTPA, arising out of or in connection with the transaction set forth in
this Agreement.
WAIVER OF CONSUMER RIGHTS
PURCHASER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES -
CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.
AFTER CONSULTATION WITH AN ATTORNEY OF PURCHASER'S OWN SELECTION,
PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER.
13. NOTICES. All communications required or permitted under this
Agreement shall be in writing and communications or delivery hereunder shall be
deemed to have been fully made in actually delivered, or if mailed by registered
or certified mail, postage prepaid, return receipt requested, to the address as
set forth below:
SELLER:
W. D. KENNEDY
550 West Texas Avenue, Suite 1225
Midland, Texas
79701
Telephone: 915-686-0204
Facsimile: 915-686-0206
BUYER:
TIPPERARY COPORATION
633 Seventeenth St., Suite 1550
Denver, Colorado 80202
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Attention: Mr. David L. Bradshaw, President
Telephone: (303) 293-9379
Telecopier: (303) 292-3428
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING, HOWEVER, ANY
PROVISION OF THE TEXAS LAW THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF A
DIFFERENT JURISDICTION.
15. FURTHER ASSURANCES. Incidental and subsequent to Closing, each of the
parties shall execute, acknowledge, and deliver to the other such further
instruments (including any stamp duty or other form necessary for, or incident
to, the notation, sanction, approval, transfer or assignment to BUYER of any
title or interest in either the Assets or the Operating Agreement), and to take
such other actions as may be reasonably necessary to carry out the provisions of
this Agreement.
16. GOVERNMENT APPROVALS. SELLER will cooperate with BUYER, in a timely
manner (both before and after closing), in obtaining any necessary or desired
consents or approvals of the Government of Australia or any state thereof,
including, without limitation, the execution of any documents necessary (in the
opinion of BUYER and its counsel) to obtain any consent or approval of interests
arising under the Operating Agreement, or to perfect the title of BUYER or
SELLER in the Assets and/or to obtain any necessary governmental sanction of the
Operating Agreement.
17. EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay its own fees and
expenses incident to the negotiation, preparation and execution of this
Agreement, including attorney's and accountant's fees.
18. EXISTING RELATIONSHIP. SELLER and BUYER are co-signatories to the
JOA and co-owners in the various rights, interests, contracts and agreements
which, as to SELLER's interests, constitute the Assets. As such, BUYER AND
SELLER have equal rights to information relating to and concerning the assets
and operations. To the extent SELLER may have been provided with information
that has not been provided to BUYER, however, he will provide such information
to BUYER prior to the Closing Date. SELLER acknowledges that he is experienced
and knowledgeable in the oil and gas industry, and has relied solely on his own
legal, tax and other professional counsel concerning this Agreement.
19. EXHIBITS. All exhibits to this Agreement are incorporated herein by
reference.
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20. SUCCESSORS AND ASSIGNS. The terms, covenants and conditions hereof
bind and inure to the benefit of BUYER and SELLER and their respective
successors and assigns. This Agreement shall be freely and fully assignable by
BUYER.
21. CONFLICTS. In the event of a conflict between this Agreement and
the terms and conditions of the Operating Agreement, the provisions of the
Operating Agreement shall prevail. In all other respects, this Agreement shall
supersede all prior agreements between the parties hereto regarding the subject
matter hereof, whether written or oral.
22. SURVIVAL. The covenants, obligations, indemnities, representations and
warranties included in this Agreement shall survive the Closing and remain
actionable thereafter.
23. PRODUCT OF NEGOTIATION. This Agreement is the product of negotiation
between BUYER and SELLER. No fiduciary duty, if any, owed by BUYER and SELLER
in any prior agreement shall apply to the process of negotiation of this
Agreement.
24. EXECUTION, COUNTERPARTS AND EXHIBITS. BUYER and SELLER acknowledge
and agree that this Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument, and that a facsimile copy of this Agreement, and of a signature
to this Agreement, shall be valid and binding as an original. BUYER and SELLER
also acknowledge and agree that they are each in possession of the Exhibits
referred to herein as "A" - "F," and each party shall be responsible for
attaching copies of such exhibits to executed copies of this Agreement. Exhibits
"G" and "H" have been provided to SELLER by BUYER, and shall be attached to this
Agreement at the time of execution.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties before
the undersigned competent witnesses on the dates indicated below.
SELLER: BUYER:
WILLIAM D. KENNEDY TIPPERARY CORPORATION
By: /s/ William D. Kennedy By: /s/ David L. Bradshaw
---------------------------- ----------------------------------
William D. Kennedy David L. Bradshaw
President and Chairman of the Board
ATTEST: ATTEST:
By: By: /s/ Lisa S. Wilson
---------------------------- ---------------------------------
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STATE OF TEXAS s
s
COUNTY OF MIDLAND s
The foregoing instrument was acknowledged before me on this the 14th day
February, 2000 by William D. Kennedy, as Seller.
Witness my hand and official seal.
/s/ Keila Dunton
-----------------------------------------
Notary Public
THE STATE OF TEXAS
My Commission Expires:
6/21/2001
STATE OF COLORADO s
s
COUNTY OF DENVER s
The foregoing instrument was acknowledged before me on this the 11th day of
February, 2000 by David L. Bradshaw, President of Tipperary Corporation, on
behalf of said corporation, as Buyer.
Witness my hand and official seal.
/s/ Phyllis Kajiwara
-----------------------------------------
Notary Public
THE STATE OF COLORADO
My Commission Expires:
July 31, 2002
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as of
10th day of February, 2000, by and between Tipperary Corporation, its successors
and assigns (the "Company"), and Ray W. Williams (the "Holder").
WHEREAS, this Agreement is made in connection with the sale by the Company
to Holder of 446,403 shares of the common stock of the Company (the "Shares")
pursuant to that certain Purchase and Sale Agreement effective as of January 1,
2000 (the "Purchase and Sale Agreement"), the terms of which require the Company
to provide Holder certain registration rights with respect to the Shares.
NOW THEREFORE, THE COMPANY AND THE HOLDER AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01. CERTAIN DEFINITIONS. In addition to the other terms
defined elsewhere in this Agreement, as used in this Agreement, the following
terms shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency administering the Securities Act.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the relevant times hereunder.
(c) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations thereunder, all as the
same shall be in effect at the relevant times hereunder.
(d) "REGISTRABLE SECURITIES" means any of the following shares which have
not been sold to the public or which have not lost their registration rights as
provided herein: (i) the Shares and (ii) any shares of Common Stock of the
Company, and any securities of the Company or any other corporation, issued as a
dividend or other distribution with respect to or in replacement of or exchange
for the Shares.
(e) The terms "REGISTER," "REGISTERED" AND "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
<PAGE>
(f) "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Article I hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any audits incident to or required by any such registration, but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company and excluding the fees and expenses of legal
counsel for the Holder.
(g) "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of the Registrable Securities and all fees
and expenses of legal counsel for the Holder.
Section 1.02. Registration of Registrable Securities.
(a) REGISTRATION. The Company will file a registration statement with the
Commission with respect to the Registrable Securities if the Company receives a
written request from the Holder at any time up to three years after the date of
this Agreement, provided that initial request shall be for a minimum of 150,000
Shares. The Company will, as soon as practicable, use its diligent efforts to
effect such registration as would permit the sale of all or such portion of such
Registrable Securities as are specified in such request. No additional request
may be made within six months of the expiration date of effectiveness of the
registration statement relating to the initial registration request.
The Company will not be obligated to take any action pursuant to this
Section 1.02:
(A) After the Company has effected two such registrations pursuant to this
Section 1.02 and such registrations have been declared or ordered
effective; and
(B) During the period starting with the date 60 days prior to the
Company's good faith estimate of the date of filing of, and ending on
a date 180 days after the effective date of, a registration for a
registered public offering involving an underwriting; provided the
Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Holder; provided, however, that if (i) in the good faith judgment of the
Board of Directors of the Company, such registration would be seriously
detrimental to the Company and the Board of Directors concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and (ii) the Company shall furnish to the Holder a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board of
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<PAGE>
Directors of the Company, it would be seriously detrimental to the Company for
such registration to be filed in the near future and that it is, therefore,
essential to deter the filing of such registration statement, then the Company
shall have the right to defer such filing for the period during which such
disclosure would be seriously detrimental; provided, that the Company may not
defer the filing for a period of more than 180 days after receipt of the request
of the Holder, and , further provided, the Company shall not defer its
obligation in this matter more than once in any 12 month period.
The registration statement filed pursuant to the request of the Holder may,
subject to the provisions hereof, include other securities of the Company and
may include securities of the Company being sold for the account of the Company
or others.
(b) REGISTRATION STATEMENT FORM. The Company may, if permitted by law,
effect the registration pursuant to this Section 1.02 by filing a registration
statement on Form S-3 or any successor or similar short form registration
statement (or Form S-1 if Form S-3 is not available). The Company may effect
the registration by filing a self registration statement with the Commission
pursuant to Rule 415 under the Securities Act covering the Registrable
Securities.
Section 1.03. EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 1.02 shall be borne by the Company. Unless otherwise
stated, all other expenses and all Selling Expenses relating to securities
registered by the Holder shall be borne by the Holder.
Section 1.04. REGISTRATION PROCEDURES. The Company will:
(a) use its best efforts to cause the registration statement filed
pursuant to Section 1.02 to become and remain effective for the lesser of (i)
one year, (ii) the period of time after which restrictions on sales of
securities by persons other than affiliates pursuant to Commission Rule 144(k)
(or any successor provision) terminate, or (iii) until the Holder no longer owns
any of the Registrable Securities;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for the periods
set forth in Section 1.04(a);
(c) furnish to the Holder such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as the Holder may reasonably request to facilitate the public offering
of the Registrable Securities;
(d) use its diligent good faith efforts to register or qualify the
Registrable Securities covered by such registration statement under such state
securities or Blue Sky laws of such jurisdictions as the Holder may reasonably
request, provided the Company
Page 3 of 9
<PAGE>
shall be obligated to take any action to effect any such registration or
qualification pursuant to this Section 1.04(d) in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration or qualification unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(e) notify counsel for the Holder. promptly after it shall receive notice
thereof, of the time when such registration statement has become effective under
the Securities Act or a supplement to any prospectus forming a part of such
registration statement has been filed;
(f) notify counsel for the Holder promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the request of the
Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Holder (and concurred by
counsel for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of the Registrable
Securities;
(h) prepare and promptly file with the Commission and promptly notify
counsel for the Holder of the filing of such amendment or supplement to any such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
(i) advise counsel for the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement under the Securities
Act or the initiation or threatening of any proceeding for such purpose, and
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued, with it being
provided further that the effective requirements for the registration statement
referred to in Section 1.04(a) will be extended for any such time as there shall
exist any stop order in respect of the registration statement; and
(j) not file any amendment or supplement to such registration statement or
prospectus if, in the opinion of counsel for the Holder, such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having been
furnished with a copy substantially in the form thereof at least two business
days before the filing thereof; provided, however,
Page 4 of 9
<PAGE>
that if in the opinion of counsel for the Company the filing of such amendment
or supplement is reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such filing will not
violate applicable law, the Company many make such filings.
Section 1.05. INDEMNIFICATION.
(a) The Company will indemnify, hold harmless and defend the Holder, its
officers, directors, partners, legal counsel and accountants, each underwriter
of the Registrable Securities and each person who controls a Holder or any such
underwriter within the meaning of Section 15 of the Securities Act, against any
and all expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration or qualification
of the Registrable Securities, or which arise out of or are based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any other rule or regulation promulgated under the Securities Act or
any state securities laws applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified party for
any legal and any other expenses reasonably incurred by them in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable, in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Holder or and such underwriter.
(b) The Holder will, if Registrable Securities held by the Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, and each of its officers,
directors, legal counsel and accountants, and each person who controls the
Company with the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or action in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such indemnified
person for any legal or any other damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Holder.
Page 5 of 9
<PAGE>
(c) Each person to be indemnified pursuant to this Section 1.05 (the
"Indemnified Party") will, promptly after its receipt of written notice of the
commencement of any action against such Indemnified Party in respect of which
indemnity may be sought from an indemnifying person this Section 1.05 (the
"Indemnifying Party") notify the Indemnifying Party in writing of the
commencement thereof; provided, however, that the failure of any person to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice. If any such action
shall be brought against any Indemnified Party and it shall notify an
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate therein and, to the extent it may desire, jointly with
any other Indemnifying Party similarly notified, to assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified party under this
Section 1.05 for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation unless (i) the Indemnified Party shall have employed
counsel in an action in which the Indemnified Party and Indemnifying Party are
both defendants and there is a conflict of interest between such parties that
would prevent counsel from adequately representing both parties, (ii) the
Indemnifying Party shall not have employed counsel satisfactory within the
exercise of reasonable judgment of the Indemnified Party to represent the
Indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the Indemnifying Party has authorized the employment of
counsel for the Indemnified Party at the expense of the Indemnifying Party. The
undertaking contained in this Section 1.05 shall be in addition to any
liabilities which the Indemnifying Party may have pursuant to law.
(d) If the indemnification provided for in this Section 1.05 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements, actions or omission which resulted in such loss, liability,
claim, damage or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Section 1.06. LOCKUP AGREEMENT. In consideration for the Company
agreeing to its obligations under this Article I, the Holder agrees in
connection with any firmly underwritten public offering of the Company's Common
Stock, upon request of the
Page 6 of 9
<PAGE>
Company or the underwriters managing such offering, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of an
Registrable Securities without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time from the effective
date of such registration as the Company or the underwriters may specify;
provided, however, that the Holder shall have no obligation to enter into the
agreement described herein unless executive officers and directors of the
Company and all other holders of more than 5% of the Company's outstanding
Common Stock enter into similar agreements.
Section 1.07 INFORMATION BY HOLDER. The Holder shall furnish to the
Company such information regarding the Holder and the distribution of proceeds
by the Holder as the Company may request in writing and as shall be required in
connection with an registration, qualification or compliance referred to in
Section 1.02 of this Agreement.
Section 1.08 RULE 144 REPORTING. With a view to making available to the
Holder the benefits of certain rules and regulations of the Commission which at
any time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) file with the commission in a timely manner all reports and other
documents required of the Company under the Securities Act and Exchange Act; and
(c) so long as any Holder owns any unregistered Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 and of the
Securities Act and Exchange Act, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents of the Company as the
Holder may reasonably request in availing Holder of any rule or regulation of
the Commission allowing the sale of any such securities without registration.
Section 1.09. TRANSFER OF REGISTRATION RIGHTS. The rights of the Holder
to have the Company register the Registrable Securities granted to the Holder by
the Company under this Agreement may be assigned by the Holder to not more than
five transferees or assignees of any of the Holder's Registrable Securities,
provided that the Company is given written notice by the Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, provided that no such assignment
shall increase the number of registrations that the Company may be required to
effect under this Agreement. Any person who, in accordance with the provisions
of this Section 1.09, becomes a transferee or assignee of any of the Registrable
Securities shall, upon agreeing in writing to be bound by the terms
Page 7 of 9
<PAGE>
of this Agreement, be included in the terms "Holder" and "Holder" so long as
such person holds such Registrable Securities and shall be entitled to take
benefits of this Agreement.
ARTICLE II
MISCELLANEOUS
Section 201. AMENDMENT. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by the Holder and the Company.
Section 2.02. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Texas without regard to its conflicts of
law principles.
Section 2.03. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04. NOTICES. All notices, requests, demands, consents, and
other communications hereunder shall be transmitted in writing and shall be
deemed to have been duly given when hand-delivered or sent by certified mail,
postage prepaid, with return receipt requested, addressed to the parties as
follows: to Tipperary at First Interstate Tower North, 633 Seventeenth Street,
Suite 1550, Denver, Colorado 80202; and to Holder as follows: Ray W. Williams
1067 Los Jardines Circle, El Paso, Texas 19912. Any party may change its
address for purposes of this Section by giving written notice as provided
herein.
Section 2.05. SEVERABILITY. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired.
Section 2.06. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Page 8 of 9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective representatives thereunto duly authorized as of the date
first above written.
TIPPERARY CORPORATION
By: /s/ David L. Bradshaw
----------------------------------
David L. Bradshaw President and
Chairman of the Board
HOLDER
/s/ Ray W. Williams
-------------------------------------
Ray W. Williams
Page 9 of 9
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as of
the 10th day of February, 2000, by and between Tipperary Corporation, its
successors and assigns (the "Company"), and William I. Issac (the "Holder").
WHEREAS, this Agreement is made in connection with the sale by the Company
to Holder of 341,925 shares of the common stock of the Company (the "Shares")
pursuant to that certain Purchase and Sale Agreement effective as of January 1,
2000 (the "Purchase and Sale Agreement"), the terms of which require the Company
to provide Holder certain registration rights with respect to the Shares.
NOW THEREFORE, THE COMPANY AND THE HOLDER AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01. CERTAIN DEFINITIONS. In addition to the other terms defined
elsewhere in this Agreement, as used in this Agreement, the following terms
shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency administering the Securities Act.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the relevant times hereunder.
(c) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations thereunder, all as the
same shall be in effect at the relevant times hereunder.
(d) "REGISTRABLE SECURITIES" means any of the following shares which have
not been sold to the public or which have not lost their registration rights as
provided herein: (i) the Shares and (ii) any shares of Common Stock of the
Company, and any securities of the Company or any other corporation, issued as a
dividend or other distribution with respect to or in replacement of or exchange
for the Shares.
(e) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
<PAGE>
(f) "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Article I hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses and the
expense of any audits incident to or required by any such registration, but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company and excluding the fees and expenses of legal
counsel for the Holder.
(g) "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of the Registrable Securities and all fees
and expenses of legal counsel for the Holder.
Section 1.02. REGISTRATION OF REGISTRABLE SECURITIES.
(a) REGISTRATION. The Company will file a registration statement with the
Commission with respect to the Registrable Securities if the Company receives a
written request from the Holder at any time up to three years after the date of
this Agreement, provided that initial request shall be for a minimum of 150,000
Shares. The Company will, as soon as practicable, use its diligent efforts to
effect such registration as would permit the sale of all or such portion of such
Registrable Securities as are specified in such request. No additional request
may be made within six months of the expiration date of effectiveness of the
registration statement relating to the initial registration request.
The Company will not be obligated to take any action pursuant to this
Section 1.02:
(A) After the Company has effected two such registrations pursuant to this
Section 1.02 and such registrations have been declared or ordered
effective; and
(B) During the period starting with the date 60 days prior to the
Company's good faith estimate of the date of filing of, and ending on
a date 180 days after the effective date of, a registration for a
registered public offering involving an underwriting; provided the
Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Holder; provided, however, that if (i) in the good faith judgment of the
Board of Directors of the Company, such registration would be seriously
detrimental to the Company and the Board of Directors concludes, as a result,
that it is essential to defer the filing of such registration statement at such
time, and (ii) the Company shall furnish to the Holder a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board of
Page 2 of 9
<PAGE>
Directors of the Company, it would be seriously detrimental to the Company for
such registration to be filed in the near future and that it is, therefore,
essential to deter the filing of such registration statement, then the Company
shall have the right to defer such filing for the period during which such
disclosure would be seriously detrimental; provided, that the Company may not
defer the filing for a period of more than 180 days after receipt of the request
of the Holder, and , further provided, the Company shall not defer its
obligation in this matter more than once in any 12 month period.
The registration statement filed pursuant to the request of the Holder may,
subject to the provisions hereof, include other securities of the Company and
may include securities of the Company being sold for the account of the Company
or others.
(b) REGISTRATION STATEMENT FORM. The Company may, if permitted by law,
effect the registration pursuant to this Section 1.02 by filing a registration
statement on Form S-3 or any successor or similar short form registration
statement (or Form S-1 if Form S-3 is not available). The Company may effect
the registration by filing a self registration statement with the Commission
pursuant to Rule 415 under the Securities Act covering the Registrable
Securities.
Section 1.03. EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 1.02 shall be borne by the Company. Unless otherwise
stated, all other expenses and all Selling Expenses relating to securities
registered by the Holder shall be borne by the Holder.
Section 1.04. REGISTRATION PROCEDURES. The Company will:
(a) use its best efforts to cause the registration statement filed
pursuant to Section 1.02 to become and remain effective for the lesser of (i)
one year, (ii) the period of time after which restrictions on sales of
securities by persons other than affiliates pursuant to Commission Rule 144(k)
(or any successor provision) terminate, or (iii) until the Holder no longer owns
any of the Registrable Securities;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for the periods
set forth in Section 1.04(a);
(c) furnish to the Holder such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as the Holder may reasonably request to facilitate the public offering
of the Registrable Securities;
(d) use its diligent good faith efforts to register or qualify the
Registrable Securities covered by such registration statement under such state
securities or Blue Sky laws of such jurisdictions as the Holder may reasonably
request, provided the Company
Page 3 of 9
<PAGE>
shall be obligated to take any action to effect any such registration or
qualification pursuant to this Section 1.04(d) in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration or qualification unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(e) notify counsel for the Holder. promptly after it shall receive notice
thereof, of the time when such registration statement has become effective under
the Securities Act or a supplement to any prospectus forming a part of such
registration statement has been filed;
(f) notify counsel for the Holder promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the request of the
Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Holder (and concurred by
counsel for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of the Registrable
Securities;
(h) prepare and promptly file with the Commission and promptly notify
counsel for the Holder of the filing of such amendment or supplement to any such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
(i) advise counsel for the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement under the Securities
Act or the initiation or threatening of any proceeding for such purpose, and
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued, with it being
provided further that the effective requirements for the registration statement
referred to in Section 1.04(a) will be extended for any such time as there shall
exist any stop order in respect of the registration statement; and
(j) not file any amendment or supplement to such registration statement or
prospectus if, in the opinion of counsel for the Holder, such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having been
furnished with a copy substantially in the form thereof at least two business
days before the filing thereof; provided, however,
Page 4 of 9
<PAGE>
that if in the opinion of counsel for the Company the filing of such amendment
or supplement is reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such filing will not
violate applicable law, the Company many make such filings.
Section 1.05. INDEMNIFICATION.
(a) The Company will indemnify, hold harmless and defend the Holder, its
officers, directors, partners, legal counsel and accountants, each underwriter
of the Registrable Securities and each person who controls a Holder or any such
underwriter within the meaning of Section 15 of the Securities Act, against any
and all expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration or qualification
of the Registrable Securities, or which arise out of or are based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any other rule or regulation promulgated under the Securities Act or
any state securities laws applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified party for
any legal and any other expenses reasonably incurred by them in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable, in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Holder or and such underwriter.
(b) The Holder will, if Registrable Securities held by the Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, and each of its officers,
directors, legal counsel and accountants, and each person who controls the
Company with the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or action in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such indemnified
person for any legal or any other damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Holder.
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<PAGE>
(c) Each person to be indemnified pursuant to this Section 1.05 (the
"Indemnified Party") will, promptly after its receipt of written notice of the
commencement of any action against such Indemnified Party in respect of which
indemnity may be sought from an indemnifying person this Section 1.05 (the
"Indemnifying Party") notify the Indemnifying Party in writing of the
commencement thereof; provided, however, that the failure of any person to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice. If any such action
shall be brought against any Indemnified Party and it shall notify an
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate therein and, to the extent it may desire, jointly with
any other Indemnifying Party similarly notified, to assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified party under this
Section 1.05 for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation unless (i) the Indemnified Party shall have employed
counsel in an action in which the Indemnified Party and Indemnifying Party are
both defendants and there is a conflict of interest between such parties that
would prevent counsel from adequately representing both parties, (ii) the
Indemnifying Party shall not have employed counsel satisfactory within the
exercise of reasonable judgment of the Indemnified Party to represent the
Indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the Indemnifying Party has authorized the employment of
counsel for the Indemnified Party at the expense of the Indemnifying Party. The
undertaking contained in this Section 1.05 shall be in addition to any
liabilities which the Indemnifying Party may have pursuant to law.
(d) If the indemnification provided for in this Section 1.05 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements, actions or omission which resulted in such loss, liability,
claim, damage or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Section 1.06. LOCKUP AGREEMENT. In consideration for the Company
agreeing to its obligations under this Article I, the Holder agrees in
connection with any firmly underwritten public offering of the Company's Common
Stock, upon request of the
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<PAGE>
Company or the underwriters managing such offering, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of an
Registrable Securities without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time from the effective
date of such registration as the Company or the underwriters may specify;
provided, however, that the Holder shall have no obligation to enter into the
agreement described herein unless executive officers and directors of the
Company and all other holders of more than 5% of the Company's outstanding
Common Stock enter into similar agreements.
Section 1.07 INFORMATION BY HOLDER. The Holder shall furnish to the
Company such information regarding the Holder and the distribution of proceeds
by the Holder as the Company may request in writing and as shall be required in
connection with an registration, qualification or compliance referred to in
Section 1.02 of this Agreement.
Section 1.08 RULE 144 REPORTING. With a view to making available to the
Holder the benefits of certain rules and regulations of the Commission which at
any time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) file with the commission in a timely manner all reports and other
documents required of the Company under the Securities Act and Exchange Act; and
(c) so long as any Holder owns any unregistered Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 and of the
Securities Act and Exchange Act, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents of the Company as the
Holder may reasonably request in availing Holder of any rule or regulation of
the Commission allowing the sale of any such securities without registration.
Section 1.09. TRANSFER OF REGISTRATION RIGHTS. The rights of the Holder
to have the Company register the Registrable Securities granted to the Holder by
the Company under this Agreement may be assigned by the Holder to not more than
five transferees or assignees of any of the Holder's Registrable Securities,
provided that the Company is given written notice by the Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, provided that no such assignment
shall increase the number of registrations that the Company may be required to
effect under this Agreement. Any person who, in accordance with the provisions
of this Section 1.09, becomes a transferee or assignee of any of the Registrable
Securities shall, upon agreeing in writing to be bound by the terms
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<PAGE>
of this Agreement, be included in the terms "Holder" and "Holder" so long as
such person holds such Registrable Securities and shall be entitled to take
benefits of this Agreement.
ARTICLE II
MISCELLANEOUS
Section 201. AMENDMENT. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by the Holder and the Company.
Section 2.02. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Texas without regard to its conflicts of
law principles.
Section 2.03. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04. NOTICES. All notices, requests, demands, consents, and
other communications hereunder shall be transmitted in writing and shall be
deemed to have been duly given when hand-delivered or sent by certified mail,
postage prepaid, with return receipt requested, addressed to the parties as
follows: to Tipperary at First Interstate Tower North, 633 Seventeenth Street,
Suite 1550, Denver, Colorado 80202; and to Holder as follows: William I
Isaac, 5840 Kingsfield Drive, El Paso, Texas 19912. Any party may change its
address for purposes of this Section by giving written notice as provided
herein.
Section 2.05. SEVERABILITY. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired.
Section 2.06. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective representatives thereunto duly authorized as of the date
first above written.
TIPPERARY CORPORATION
By: /s/ David L. Bradshaw
-------------------------------
David L. Bradshaw President and
Chairman of the Board
HOLDER
/s/ William I. Isaac
----------------------------------
William I. Isaac
Page 9 of 9
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into as of
February 11, 2000, by and between Tipperary Corporation, its successors and
assigns (the "Company"), and W. D. Kennedy (the "Holder").
WHEREAS, this Agreement is made in connection with the sale to Holder of
three hundred seventy five thousand (375,000) shares of the common stock of the
Company (the "Shares") pursuant to that certain Purchase and Sale Agreement
effective as of January 1, 2000 (the "Purchase and Sale Agreement"), the terms
of which require the Company to provide Holder certain registration rights with
respect to the Shares.
NOW THEREFORE, THE COMPANY AND THE HOLDER AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01. CERTAIN DEFINITIONS. In addition to the other terms
defined elsewhere in this Agreement, as used in this Agreement, the following
terms shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency administering the Securities Act.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the relevant times hereunder.
(c) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations thereunder, all as the
same shall be in effect at the relevant times hereunder.
(d) "REGISTRABLE SECURITIES" means any of the following shares which have
not been sold to the public or which have not lost their registration rights as
provided herein: (i) the Shares and (ii) any shares of Common Stock of the
Company, and any securities of the Company or any other corporation, issued as a
dividend or other distribution with respect to or in replacement of or exchange
for the Shares.
(e) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
<PAGE>
(f) "REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Article I hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expenses related to listing the Registrable Shares for trading on the same
market as the Company's common stock, and the expense of any audits incident to
or required by any such registration, but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company and
excluding the fees and expenses of legal counsel for the Holder.
(g) "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of the Registrable Securities and all fees
and expenses of legal counsel for the Holder.
Section 1.02. REGISTRATION OF REGISTRABLE SECURITIES.
(a) DEMAND REGISTRATION. The Company will file a registration
statement with the Commission with respect to the Registrable Securities if the
Company receives a written request from the Holder, or if rights hereunder are
transferred pursuant to Section 1.09 hereof, the Holders of a majority of the
Registrable Securities, at any time up to three years after the date of this
Agreement, provided that initial request shall be for a minimum of 150,000
Shares. The Company will, as soon as practicable, use its diligent efforts to
effect such registration as would permit the sale of all or such portion of such
Registrable Securities as are specified in such request. No additional request
may be made within six months of the expiration date of effectiveness of the
registration statement relating to the initial registration request.
The Company will not be obligated to take any action pursuant to this
Section 1.02:
(A) After the Company has effected two such registrations pursuant to this
Section 1.02 and such registrations have been declared or ordered
effective; and
(B) During the period starting with the date 60 days prior to the
Company's good faith estimate of the date of filing of, and ending on
a date 180 days after the effective date of, a registration for a
registered public offering of the Company's common stock by the
Company involving an underwriting; provided the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, but no later than 45 days after receipt of
the request or requests of the Holder; provided, however, that if (i) in the
good faith judgment of the Board of Directors of the Company, such registration
would be seriously detrimental to the Company and the
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<PAGE>
Board of Directors concludes, as a result, that it is essential to defer the
filing of such registration statement at such time, and (ii) the Company shall
furnish to the Holder a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company for such registration
to be filed in the near future and that it is, therefore, essential to deter the
filing of such registration statement, then the Company shall have the right to
defer such filing for the period during which such disclosure would be seriously
detrimental; provided, that the Company may not defer the filing for a period of
more than 100 days after receipt of the request of the Holder, and , further
provided, the Company shall not defer its obligation in this matter more than
once in any 12 month period.
If the Holder chooses to sell the Registrable Securities in an underwritten
offering, the Holder shall select the underwriter. The registration statement
filed pursuant to the request of the Holder may include other securities of the
Company and may include securities of the Company being sold for the account of
the Company or others only to the extent the underwriter determines, in its
reasonable judgment, that the addition of such securities would not adversely
effect the offering.
(b) PIGGYBACK REGISTRATION RIGHTS.
(i) If the Company at any time proposes to register any of its Common
Stock under the Securities Act (other than registrations on Forms
S-4 or S-8 or any successor forms thereto or registrations of
securities in connection with a Rule 145 transaction), whether of
its own accord or at the request of an holder or holders of its
securities it shall each such time promptly give written notice
to all Holders of its intention to do so.
(ii) Upon the written request of a Holder delivered to the Company
within 10 business days after receipt of any such notice, the
Company shall use its best efforts (subject to the provisions of
this Section 1.02(b)) to cause all Registrable Securities, the
Holders of which shall have so requested registration thereof, to
be registered under the Securities Act, all to the extent
requisite to permit the sale or other disposition by the Holder
of such Registrable Securities; provided however, the Company may
elect not to file a registration statement pursuant to this
Section 1.02(b) at any time prior to the effective date thereof.
(iii) If the lead managing underwriter for the respective offering
advises that marketing factors require the exclusion from such
registration of some or all of the Registrable Securities sought
to be registered by the Holder or that the total number of
securities to be registered by the Holder should be limited due
to marketing factors, the number of
Page 3 of 10
<PAGE>
Registrable Securities sought to be registered by such Holder and
such other selling shareholders shall be reduced pro rata.
(c) REGISTRATION STATEMENT FORM. The Company may, if permitted by law,
effect the registration pursuant to this Section 1.02 by filing a registration
statement on Form S-3 or any successor or similar short form registration
statement (or Form S-1 if Form S-3 is not available). The Company may effect
the registration by filing a self registration statement with the Commission
pursuant to Rule 415 under the Securities Act covering the Registrable
Securities.
Section 1.03. EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 1.02 shall be borne by the Company. Unless otherwise
stated, all Selling Expenses relating to securities registered on behalf of the
Holder shall be borne by the Holder.
Section 1.04. REGISTRATION PROCEDURES. The Company will:
(a) use its best efforts to cause the registration statement filed
pursuant to Section 1.02 to become and remain effective for the lesser of (i)
one year, (ii) the period of time after which restrictions on sales of
securities by persons other than affiliates pursuant to Commission Rule 144(k)
(or any successor provision) terminate, or (iii) until the Holder no longer owns
any of the Registrable Securities;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for the periods
set forth in Section 1.04(a);
(c) furnish to the Holder such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as the Holder may reasonably request to facilitate the public offering
of the Registrable Securities;
(d) use its diligent good faith efforts to register or qualify the
Registrable Securities covered by such registration statement under such state
securities or Blue Sky laws of such jurisdictions as the Holder may reasonably
request, provided the Company shall be obligated to take any action to effect
any such registration or qualification pursuant to this Section 1.04(d) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration or
qualification unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(e) notify counsel for the Holder. promptly after it shall receive notice
thereof, of the time when such registration statement has become effective under
the Securities Act or a supplement to any prospectus forming a part of such
registration statement has been filed;
Page 4 of 10
<PAGE>
(f) notify counsel for the Holder promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the request of the
Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Holder (and reasonably
concurred by counsel for the Company), is required under the Securities Act or
the rules and regulations thereunder in connection with the distribution of the
Registrable Securities;
(h) prepare and promptly file with the Commission and promptly notify
counsel for the Holder of the filing of such amendment or supplement to any such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
(i) advise counsel for the Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement under the Securities
Act or the initiation or threatening of any proceeding for such purpose, and
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued, with it being
provided further that the effective requirements for the registration statement
referred to in Section 1.04(a) will be extended for any such time as there shall
exist any stop order in respect of the registration statement; and
(j) not file any amendment or supplement to such registration statement or
prospectus if, in the opinion of counsel for the Holder, such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having been
furnished with a copy substantially in the form thereof at least two business
days before the filing thereof; provided, however, that if in the opinion of
counsel for the Company the filing of such amendment or supplement is reasonably
necessary to protect the Company from any liabilities under any applicable
federal or state law and such filing will not violate applicable law, the
Company may make such filings.
Section 1.05. INDEMNIFICATION.
(a) The Company will indemnify, hold harmless and defend the Holder, its
officers, directors, partners, legal counsel and accountants, each underwriter
of the Registrable Securities and each person who controls a Holder or any such
underwriter
Page 5 of 10
<PAGE>
within the meaning of Section 15 of the Securities Act, against any and all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration or qualification
of the Registrable Securities, or which arise out of or are based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any other rule or regulation promulgated under the Securities Act or
any state securities laws applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified party for
any legal and any other expenses reasonably incurred by them in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable, in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by the Holder or
such underwriter, as the case may be, for the specific purpose of including such
information in such registration statement, prospectus or other document.
(b) The Holder will, if Registrable Securities held by the Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, and each of its officers,
directors, legal counsel and accountants, and each person who controls the
Company with the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or action in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such indemnified
person for any legal or any other expenses reasonably incurred by them in
connection with investigating, preparing or defending any such claims, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged omission) was contained in written
information furnished to the Company by the Holder for the specific purpose of
including such information in such registration statement, prospectus or other
document.
(c) Each person to be indemnified pursuant to this Section 1.05 (the
"Indemnified Party") will, promptly after its receipt of written notice of the
commencement of any action against such Indemnified Party in respect of which
indemnity may be sought from an indemnifying person this Section 1.05 (the
"Indemnifying Party") notify the Indemnifying Party in writing of the
commencement thereof; provided, however, that the failure of any person to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement
Page 6 of 10
<PAGE>
except to the extent that such Indemnifying Party is actually prejudiced by such
failure to give notice. If any such action shall be brought against any
Indemnified Party and it shall notify an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled to participate therein and, to
the extent it may desire, jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, the Indemnifying Party will not be
liable to such Indemnified party under this Section 1.05 for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation unless (i) the
Indemnified Party shall have employed counsel in an action in which the
Indemnified Party and Indemnifying Party are both defendants and there is a
conflict of interest between such parties that would prevent counsel from
adequately representing both parties, (ii) the Indemnifying Party shall not have
employed counsel satisfactory within the exercise of reasonable judgment of the
Indemnified Party to represent the Indemnified party within a reasonable time
after the notice of the commencement of the action or (iii) the Indemnifying
Party has authorized the employment of counsel for the Indemnified Party at the
expense of the Indemnifying Party. The undertaking contained in this Section
1.05 shall be in addition to any liabilities which the Indemnifying Party may
have pursuant to law.
(d) If the indemnification provided for in this Section 1.05 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
thereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements, actions or omission which resulted in such loss, liability,
claim, damage or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall
be determined reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Section 1.06. LOCKUP AGREEMENT. In consideration for the Company
agreeing to its obligations under this Article I, the Holder agrees in
connection with any firmly underwritten public offering of the Company's Common
Stock, upon request of the underwriters managing such offering, not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of an Registrable Securities without the prior written consent of such
underwriters for such period of time from the effective date of such
registration the underwriters may specify, but not to exceed 180 days; provided,
however, that the Holder shall have no obligation to enter into the agreement
described herein unless executive officers and directors of the Company and all
other holders of more than 5% of the Company's outstanding Common Stock enter
into similar
Page 7 of 10
<PAGE>
agreements. Notwithstanding any provision in this Agreement to the contrary,
Holder shall not be required to agree to any of the foregoing lockup provisions
of this Section 1.06 after two years from the date hereof.
Section 1.07 INFORMATION BY HOLDER. The Holder shall furnish to the
Company such information regarding the Holder and the distribution of proceeds
by the Holder as the Company may request in writing and as shall be required in
connection with an registration, qualification or compliance referred to in
Section 1.02 of this Agreement.
Section 1.08 RULE 144 REPORTING. With a view to making available to the
Holder the benefits of certain rules and regulations of the Commission which at
any time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) file with the commission in a timely manner all reports and other
documents required of the Company under the Securities Act and Exchange Act; and
(c) so long as any Holder owns any unregistered Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 and of the
Securities Act and Exchange Act, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents of the Company as the
Holder may reasonably request in availing Holder of any rule or regulation of
the Commission allowing the sale of any such securities without registration.
Section 1.09. TRANSFER OF REGISTRATION RIGHTS. The rights of the Holder
to have the Company register the Registrable Securities granted to the Holder by
the Company under this Agreement may be assigned by the Holder to not more than
five transferees or assignees of any of the Holder's Registrable Securities,
provided that the Company is given written notice by the Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, provided that no such assignment
shall increase the number of registrations that the Company may be required to
effect under this Agreement. Any person who, in accordance with the provisions
of this Section 1.09, becomes a transferee or assignee of any of the Registrable
Securities shall, upon agreeing in writing to be bound by the terms of this
Agreement, be included in the terms "Holder" and "Holder" so long as such person
holds such Registrable Securities and shall be entitled to take benefits of this
Agreement; provided, however, that any action by the "Holder" hereunder shall
require the consent of such persons holding a majority of the Registrable
Securities.
Page 8 of 10
<PAGE>
ARTICLE II
MISCELLANEOUS
Section 201. AMENDMENT. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by the Holder and the Company.
Section 2.02. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Texas without regard to its conflicts of
law principles.
Section 2.03. SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04. NOTICES. All notices, requests, demands, consents, and
other communications hereunder shall be transmitted in writing and shall be
deemed to have been duly given when hand-delivered or sent by certified mail,
postage prepaid, with return receipt requested, addressed to the parties as
follows: to Tipperary at First Interstate Tower North, 633 Seventeenth Street,
Suite 1550, Denver, Colorado 80202; and to Holder as follows: W. D. Kennedy,
550 West Texas Avenue, Suite 1225, Midland, Texas 79701. Any party may change
its address for purposes of this Section by giving written notice as provided
herein.
Section 2.05. SEVERABILITY. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired.
Section 2.06. ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Page 9 of 10
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective representatives thereunto duly authorized as of the date
first above written.
TIPPERARY CORPORATION
By: /s/ David L. Bradshaw
---------------------------------
David L. Bradshaw President and
Chairman of the Board
HOLDER
/s/ W. D. Kennedy
------------------------------------
W. D. Kennedy
Page 10 of 10
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made this 9th day
of February, 2000, by and between Tipperary Corporation, a Texas corporation
(the "Company"), whose principal place of business is 633 Seventeenth Street,
Suite 1550, Denver, Colorado 80202, and James H. Marshall, an individual (the
"Holder"), located at 27261 Lakeway Court, Bonita Springs, FL 34134.
WHEREAS, the parties have entered into a Subscription Agreement of even
date herewith (the "Subscription Agreement") under which the Holder is
purchasing from the Company 759,494 shares of the Company's Common Stock, $.02
par value (the "Stock"); and
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and in the Subscription Agreement, the parties hereto agree as
follows:
1. REGISTRATION RIGHTS OF SUBSEQUENT HOLDERS. This Agreement shall be
deemed to be assigned by the Holder or any subsequent holder to each transferee
of shares of the Stock; provided, however, that no such assignment shall be
deemed to have occurred unless and until the transfer of the shares of such
Stock is registered on the books of the Company. Each Holder shall provide a
copy of this Agreement to each transferee of any shares of the Stock.
2. DEMAND REGISTRATION RIGHTS.
(a) The Holders who, in the aggregate, own a majority of the total number
of shares of Stock set forth above may request that the Company prepare and file
a registration statement under the Securities Act to permit the public offering
and sale of the Stock on one occasion. Such registration requested pursuant to
this Section 2 shall be referred to as the "Demand Registration." The Company
shall within 10 days thereafter give written notice to all Holders which do not
request the Demand Registration, and each such Holder shall, within 30 days
thereafter, provide a written request to the Company as to those shares which it
desires to include in such registration. The Company shall use its best efforts
to cause all of the shares of Stock held by the Holder to be registered under
the Securities Act, all to the extent requisite to permit the sale or other
disposition (in accordance with the intended methods thereof as aforesaid) by
the Holders of such shares; provided, however, that no such request need be
honored by the Company if all Holders making the request for the Demand
Registration hold less that 100,000 shares.
(b) The Demand Registration shall not be deemed to have been effected if
(i) such registration statement, after it has become effective, is the subject
of any stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason not solely attributable to the
selling Holders, (ii) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration statement are not satisfied, other than by reason of a failure on
the part of the selling Holders, or (iii) the Holders are not able to register
and sell all of the shares requested to be included in such registration.
(c) With respect to the Demand Registration, an investment banker or
investment bankers that may be chosen to manage the offering will be selected by
the Holders of at least a majority of the shares included in such offering;
provided that the selection of any such investment banker or investment bankers
is subject to consent by the Company, which consent shall not be unreasonably
withheld.
<PAGE>
(d) Any securities to be included in the Demand Registration shall be
reduced to the extent determined necessary by the managing underwriter of such
offering if such managing underwriter shall have advised the selling Holders in
writing (with a copy to the Company) that, in their opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold within a price range acceptable to the selling Holders of a
majority of the shares requested to be included in such registration. If no
such notice or letter is provided, the Company may include Common Stock for its
own account or for the account of other shareholders of the Company, if and to
the extent consented to by the Holders of at least a majority of the shares
included in such offering.
(e) The Company, if requested by at least a majority of the shares to be
included in the Demand Registration, (i) shall agree not to, and shall cause its
executive officers and directors not to, effect any public sale or distribution
of its Common Stock or similar securities or securities convertible into, or
exchangeable or exercisable for, Common Stock during the 180-day period
following the effective date of a registration statement relating to a public
offering of shares if the managing underwriter or underwriters determine such
public sale or distribution would have a material adverse effect on such
offering and (ii) shall (x) cause each securityholder of the Company's privately
placed equity securities issued in connection with a financing transaction
involving at least 5% of the Company's then outstanding equity securities at any
time after the date hereof and (y) use its reasonable best efforts to cause each
other securityholder of the Company owning at least 10% of the Company's then
outstanding equity securities (other than a securityholder permitted to file a
Schedule 13G under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) to agree not to effect a public sale or distribution of the
Common Stock during the 180-day period following the effective date of a
registration statement relating to a public offering of the shares if the
managing underwriter or underwriters determine such public sale or distribution
would have a material adverse effect on such offering.
3. PIGGYBACK REGISTRATION RIGHTS. If the Company at any time proposes to
register any issuance of its securities under the Securities Act (other than a
registration on Form S-8 in connection with an employee stock purchase or option
plan or on Form S-4 in connection with mergers, acquisitions or exchange
offerings), the Company will at such time give prompt written notice to the
Holders of its intention to do so. Upon the written request of a Holder, given
within 30 days after receipt of any such notice (which request shall state the
intended method of disposition of the shares to be transferred by the Holder),
the Company shall use its best efforts to cause all of the shares of Stock held
by the Holder to be registered under the Securities Act, all to the extent
requisite to permit the sale or other disposition (in accordance with the
intended method thereof as aforesaid) by the Holder of such shares; provided,
however, that no such request need be honored by the Company if all Holders
making such a request hold less that 100,000 shares. The rights granted
pursuant to this Section 3 shall not be effective with respect to the Holder in
the case of an underwritten public offering of securities of the Company by the
Company unless the Holder agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such shares. The Company shall have the right to
reduce the number of shares of the Holder to be included in a registration
statement pursuant to the exercise of the rights granted by this Section 3 if,
and to the extent that, the managing underwriter of such offering is of the good
faith opinion, supported by written reasons therefor that the inclusion of such
shares would materially adversely affect the marketing of the securities of the
Company to be offered.
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<PAGE>
4. REGISTRATION PROCEDURE. If and whenever the Company is required by
the provisions of the Section 2 or 3 to use its best efforts to effect the
registration of any transfer of shares of Stock under the Securities Act, the
Company will, as expeditiously as possible,
(a) prepare and file with the Commission a registration statement with
respect to such transfer and use its best efforts to cause such registration
statement to become and remain effective, but not for any period longer than
nine months;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective, and to comply
with the provisions of the Securities Act with respect to the transfer of all
securities covered by such registration statement, including, without
limitation, taking all necessary actions whenever the Holder, with respect to
such shares covered by such registration statement, shall desire to dispose of
the same;
(c) furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as the Holders may reasonably request
in order to facilitate the disposition of the shares owned by the Holders and
covered by such registration statement;
(d) use its best efforts to register or qualify the securities covered by
such registration statement under such other securities or blue sky laws of such
jurisdictions as the Holders shall request, and use its best efforts to do any
and all other acts and things which may be reasonably necessary to enable the
Holders to consummate the disposition in such jurisdiction of the shares owned
by the Holders and covered by such registration statement; provided that,
notwithstanding the foregoing, the Company shall not be required to register in
any jurisdiction as a broker or dealer of securities or to grant its consent to
service of process in any such jurisdiction solely on account of such intended
disposition by the Holders;
(e) furnish to the Holders a signed copy of an opinion of counsel for the
Company, in form and substance acceptable to the Holders, to the effect that:
(A) a registration statement covering such dispositions of shares has been filed
with the Commission under the Securities Act and has been made effective by
order of the Commission, (B) such registration statement and the prospectus
contained therein and any amendments or supplements thereto comply as to form in
all material respects with the requirements of the Securities Act, and nothing
has come to such counsel's attention which would cause him to believe that the
registration statement or such prospectus, amendment or supplement, at the time
such registration statement or amendment became effective or such supplement was
filed with the Commission, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of such prospectus, amendment or
supplement, in the light of the circumstances under which they were made) not
misleading (provided that such counsel need not render any opinion with respect
to the financial statements and other financial, engineering and statistical
data included therein), and (C) to the best of such counsel's knowledge, no stop
order has been issued by the Commission suspending the effectiveness of such
registration statement and no proceedings for the issuance of such a stop order
are threatened or contemplated;
(f) furnish to the Holders a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing
-3-
<PAGE>
and describing the application provisions of the securities or blue sky laws of
each state or jurisdiction in which the Company shall be required, pursuant to
Section 4(d), to register or quality such intended dispositions of such shares,
or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, the Holders;
(g) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission under the Securities Act and the Exchange Act,
insofar as they relate to such registration and such registration statement;
(g) use its best efforts to list such shares on any securities exchange on
which any securities of the Company are then listed or to admit such shares for
trading in any national market system in which any securities of the Company are
then admitted for trading, if the listing or admission of such securities is
then permitted under the rules of such exchange or system; and
(h) notify each Holder, at any time when a prospectus relating to the
shares is required to be delivered under the Securities Act, of the happening of
any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
any such Holder, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not misleading.
5. EXPENSES OF REGISTRATION. With respect to the registration by the
Company of transfers of shares of Stock under the Securities Act pursuant this
Agreement, the Company shall pay all expenses incurred by it (including, without
limitation, all registration and filing fees, printing expenses, blue sky fees
and expenses, costs and expenses of audits, and reasonable fees and
disbursements of counsel for the Company and one special counsel designated by
the Holders of a majority of the Shares to be registered, but specifically
excluding any underwriting discounts and allowances that are allocable to the
shares being sold by, and which shall be paid by, the Holders.
6. INFORMATION ON HOLDERS. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2, 3 or 4 that
the Holders shall furnish to the Company such written information regarding the
securities held by the Holders as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company.
7. INDEMNIFICATION.
(a) In the event of any registration of any transfer of shares of Stock
under the Securities Act pursuant to Section 2 or 3, the Company will indemnify
and hold harmless the Holder, each of its officers, directors and partners, and
each other person, if any, who controls the Holder within the meaning of the
Securities Act, and each underwriter, if any, who participates in the offering
of such securities, against any losses, claims, damages or liabilities, or
actions in respect thereof, joint or several, to which the Holder and each
officer, director or partner, controlling person or underwriter may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities, or actions in respect thereof arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained, on the
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<PAGE>
effective date thereof, in any registration statement under which such transfer
of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act, and will reimburse the Holder and each of its officers,
directors and partners, and each such controlling person or underwriter, for any
legal or any other expenses reasonably incurred by the Holder or its officers,
directors and partners or controlling persons or by each such underwriter, in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, preliminary
prospectus or prospectus or such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by the Holder specifically for use in the preparation
thereof. In the event of any registration by the Company or any transfer of
securities under the Securities Act pursuant to Section 2 or 3, the Holder will
indemnify and hold harmless the Company, each other person, if any, who controls
the Company within the meaning of the Securities Act and each officer and
director of the Company to the same extent that the Company agrees to indemnity
it, but only with respect to the written information relating to the Holder
furnished to the Company by the Holder specifically for use in such registration
statement; provided that the obligation to indemnify shall be individual, not
joint and several, for each Holder and shall be limited to the net amount of
proceeds received by such Holder from the sale of shares pursuant to such
registration statement.
(b) Each indemnified party shall, as promptly as practicable upon receipt
of notice of the commencement of any action against such indemnified party or
its officers, directors or partners, or any controlling person of such
indemnified party, in respect of which indemnity may be sought from an
indemnifying party on account of the indemnity agreement contained in Section
7(a), notify the indemnifying party in writing of the commencement thereof. The
omission of such indemnified party to so notify the indemnifying party of any
such action shall not relieve the indemnifying party from any liability which it
may have on account of the indemnity agreement contained in Section 7(a) to the
extent that the failure to receive such notice within a reasonable period of
time shall not have caused harm, loss or damage to the indemnifying party,
provided that, conversely, if such failure to receive notice shall have caused
any harm, loss or damage to the indemnifying party, such failure shall
constitute a defense to any liability which such indemnifying party may have on
account of such agreement to the extent of the harm, loss or damage so caused.
In case any such action shall be brought against any indemnified party, its
officers, directors and partners, or any such controlling person, and such
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in (and, to the
extent that the indemnifying party shall wish, to direct) the defense thereof at
the indemnifying party's own expense, in which event the defense shall be
conducted by recognized counsel chosen by the indemnifying party and approved by
the indemnified party (whose approval shall not unreasonably be withheld) and
the indemnified party may participate in such defense at its own expense (unless
it is advised by counsel that actual or potential differing interests or
defenses exist or may exist, in which case such expenses shall be paid by the
indemnifying party, provided that the indemnifying party shall not be required
to pay the expenses for more than one counsel for all such indemnified parties).
-5-
<PAGE>
8. MISCELLANEOUS.
8.1 GOVERNING LAW. The provisions hereof will be construed in accordance
with the laws of the State of Texas. The Company and the Holder hereby submit
to the jurisdiction of the state and federal courts located in Denver, Colorado
or Chicago, Illinois.
8.2 INDEMNIFICATION. The Holder agrees to indemnify and hold harmless the
Company and its officers, directors and persons who control the Company, from
and against all damages, losses, costs and expenses (including reasonable
attorneys' fees) which they may incur by reason of the failure of the Holder to
fulfill any of the terms or conditions of this Agreement. The Company agrees to
indemnify and hold harmless the Holder and its officers, directors and persons
who control the Holder, from and against all damages, losses, costs and expenses
(including reasonable attorneys' fees) which they may incur by reason of the
failure of the Company to fulfill any of the terms or conditions of this
Agreement.
8.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
understanding of the parties hereto and supersedes all prior agreements or
understandings with respect to the subject matter hereof. This Agreement may
not be amended or modified except by an instrument in writing signed by the
party against whom enforcement is sought.
8.4 SEVERABILITY. The invalidity or unenforceability of any particular
provisions of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
8.5 HEADINGS. The section headings contained herein are for convenience
only and are not intended to define or limit the contents of such sections.
8.6 NEUTRAL INTERPRETATION. This Agreement constitutes the product of the
negotiation of the parties hereto, and the enforcement hereof shall be
interpreted in a neutral manner, and not more strongly for or against any party
based upon the source of the draftsmanship hereof.
8.7 COUNTERPARTS. This Agreement may be executed in counterparts, which
shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
TIPPERARY CORPORATION HOLDER
By: /s/ David L. Bradshaw By: /s/ James H. Marshall
-------------------------------- ----------------------------------
David L. Bradshaw, President and James H. Marshall
Chief Executive Officer
-6-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made this 9th day
of February, 2000, by and between Tipperary Corporation, a Texas corporation
(the "Company"), whose principal place of business is 633 Seventeenth Street,
Suite 1550, Denver, Colorado 80202, and James F. Knott, an individual (the
"Holder"), located at 4405 Brynwood Drive, Quail West, Naples FL 33999.
WHEREAS, the parties have entered into a Subscription Agreement of even
date herewith (the "Subscription Agreement") under which the Holder is
purchasing from the Company 759,494 shares of the Company's Common Stock, $.02
par value (the "Stock"); and
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and in the Subscription Agreement, the parties hereto agree as
follows:
1. REGISTRATION RIGHTS OF SUBSEQUENT HOLDERS. This Agreement shall be
deemed to be assigned by the Holder or any subsequent holder to each transferee
of shares of the Stock; provided, however, that no such assignment shall be
deemed to have occurred unless and until the transfer of the shares of such
Stock is registered on the books of the Company. Each Holder and any subsequent
Holder shall provide a copy of this Agreement to each transferee of any shares
of the Stock.
2. DEMAND REGISTRATION RIGHTS.
(a) The Holders who, in the aggregate, own a majority of the total number
of shares of Stock set forth above may request that the Company prepare and file
a registration statement under the Securities Act of 1933 (the "Securities Act")
to permit the public offering and sale of the Stock on one occasion. Such
registration requested pursuant to this Section 2 shall be referred to as the
"Demand Registration." The Company shall within 10 days after the receipt of
such request, give written notice to all Holders that do not request the Demand
Registration, and each such Holder shall, within 30 days after giving such
notice, provide a written request to the Company as to those shares which it
desires to include in such registration. The Company shall use its best efforts
to cause all of the shares of Stock held by the Holder to be registered under
the Securities Act, all to the extent requisite to permit the sale or other
disposition (in accordance with the intended methods thereof as aforesaid) by
the Holders of such shares; provided, however, that no such request need be
honored by the Company if all Holders making the request for the Demand
Registration hold less that 100,000 shares.
(b) The Demand Registration shall not be deemed to have been effected if
(i) such registration statement, after it has become effective, is the subject
of any stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason not solely attributable to the
selling Holders, (ii) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration statement are not satisfied, other than by reason of a failure on
the part of the selling Holders, or (iii) the Holders are not able to register
and sell all of the shares requested to be included in such registration.
(c) With respect to the Demand Registration, an investment banker or
investment bankers that may be chosen to manage the offering will be selected by
the Holders of at least a majority of the shares included in such offering;
provided that the selection of any such investment banker or investment bankers
is subject to consent by the Company, which consent shall not be unreasonably
withheld.
<PAGE>
(d) Any securities to be included in the Demand Registration shall be
reduced to the extent determined necessary by the managing underwriter of such
offering if such managing underwriter shall have advised the selling Holders in
writing (with a copy to the Company) that, in their opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold within a price range acceptable to the selling Holders of a
majority of the shares requested to be included in such registration. If no
such notice or letter is provided, the Company may include Common Stock for its
own account or for the account of other shareholders of the Company, if and to
the extent consented to by the Holders of at least a majority of the shares
included in such offering.
(e) The Company, if requested by at least a majority of the shares to be
included in the Demand Registration, (i) shall agree not to, and shall use its
best efforts to cause its executive officers and directors not to, effect any
public sale or distribution of its Common Stock or similar securities or
securities convertible into, or exchangeable or exercisable for, Common Stock
during the 180-day period following the effective date of a registration
statement relating to a public offering of shares if the managing underwriter or
underwriters determine such public sale or distribution would have a material
adverse effect on such offering, and (ii) shall (x) cause each securityholder of
the Company's privately placed equity securities issued in connection with a
financing transaction involving at least 5% of the Company's then outstanding
equity securities at any time after the date hereof, and (y) use its reasonable
best efforts to cause each other securityholder of the Company owning at least
10% of the Company's then outstanding equity securities (other than a
securityholder permitted to file a Schedule 13G under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) to agree not to effect a public
sale or distribution of the Common Stock during the 180-day period following the
effective date of a registration statement relating to a public offering of the
shares if the managing underwriter or underwriters determine such public sale or
distribution would have a material adverse effect on such offering.
3. PIGGYBACK REGISTRATION RIGHTS. If the Company at any time proposes to
register any issuance of its securities under the Securities Act (other than a
registration on Form S-8 in connection with an employee stock purchase or option
plan or on Form S-4 in connection with mergers, acquisitions or exchange
offerings), the Company will at such time give prompt written notice to the
Holders of its intention to do so. Upon the written request of a Holder, given
within 30 days after receipt of any such notice (which request shall state the
intended method of disposition of the shares to be transferred by the Holder),
the Company shall use its best efforts to cause all of the shares of Stock held
by the Holder to be registered under the Securities Act, all to the extent
requisite to permit the sale or other disposition (in accordance with the
intended method thereof as aforesaid) by the Holder of such shares; provided,
however, that no such request need be honored by the Company if all Holders
making such a request hold less that 100,000 shares. The rights granted
pursuant to this Section 3 shall not be effective with respect to the Holder in
the case of an underwritten public offering of securities of the Company by the
Company unless the Holder agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such shares. The Company shall have the right to
reduce the number of shares of the Holder to be included in a registration
statement pursuant to the exercise of the rights granted by this Section 3 if,
and to the extent that, the managing underwriter of such offering is of the good
faith opinion, supported by written reasons therefor that the inclusion of such
shares would materially adversely affect the marketing of the securities of the
Company to be offered.
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<PAGE>
4. REGISTRATION PROCEDURE. If and whenever the Company is required by
the provisions of the Section 2 or 3 to use its best efforts to effect the
registration of any transfer of shares of Stock under the Securities Act, the
Company will, as expeditiously as possible,
(a) prepare and file with the Securities and Exchange Commission
("Commission") a registration statement with respect to such transfer and use
its best efforts to cause such registration statement to become and remain
effective, but not for any period longer than nine months;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective, and to comply
with the provisions of the Securities Act with respect to the transfer of all
securities covered by such registration statement, including, without
limitation, taking all necessary actions whenever the Holder, with respect to
such shares covered by such registration statement, shall desire to dispose of
the same;
(c) furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as the Holders may reasonably request
in order to facilitate the disposition of the shares owned by the Holders and
covered by such registration statement;
(d) use its best efforts to register or qualify the securities covered by
such registration statement under such other securities or blue sky laws of such
jurisdictions as the Holders shall request, and use its best efforts to do any
and all other acts and things which may be reasonably necessary to enable the
Holders to consummate the disposition in such jurisdiction of the shares owned
by the Holders and covered by such registration statement; provided that,
notwithstanding the foregoing, the Company shall not be required to register in
any jurisdiction as a broker or dealer of securities or to grant its consent to
service of process in any such jurisdiction solely on account of such intended
disposition by the Holders;
(e) furnish to the Holders a signed copy of an opinion of counsel for the
Company, in form and substance acceptable to the Holders, to the effect that:
(A) a registration statement covering such dispositions of shares has been filed
with the Commission under the Securities Act and has been made effective by
order of the Commission, (B) such registration statement and the prospectus
contained therein and any amendments or supplements thereto comply as to form in
all material respects with the requirements of the Securities Act, and nothing
has come to such counsel's attention which would cause him to believe that the
registration statement or such prospectus, amendment or supplement, at the time
such registration statement or amendment became effective or such supplement was
filed with the Commission, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of such prospectus, amendment or
supplement, in the light of the circumstances under which they were made) not
misleading (provided that such counsel need not render any opinion with respect
to the financial statements and other financial, engineering and statistical
data included therein), and (C) to the best of such counsel's knowledge, no stop
order has been issued by the Commission suspending the effectiveness of such
registration statement and no proceedings for the issuance of such a stop order
are threatened or contemplated;
(f) furnish to the Holders a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing
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<PAGE>
and describing the application provisions of the securities or blue sky laws of
each state or jurisdiction in which the Company shall be required, pursuant to
Section 4(d) hereof, to register or quality such intended dispositions of such
shares, or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, the Holders;
(g) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission under the Securities Act and the Exchange Act,
insofar as they relate to such registration and such registration statement;
(h) use its best efforts to list such shares on any securities exchange on
which any securities of the Company are then listed or to admit such shares for
trading in any national market system in which any securities of the Company are
then admitted for trading, if the listing or admission of such securities is
then permitted under the rules of such exchange or system; and
(i) notify each Holder, at any time when a prospectus relating to the
shares is required to be delivered under the Securities Act, of the happening of
any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
any such Holder, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not misleading.
5. EXPENSES OF REGISTRATION. With respect to the registration by the
Company of transfers of shares of Stock under the Securities Act pursuant this
Agreement, the Company shall pay all expenses incurred by it, including, without
limitation, all registration and filing fees, printing expenses, blue sky fees
and expenses, costs and expenses of audits, and reasonable fees and
disbursements of counsel for the Company and one special counsel designated by
the Holders of a majority of the Shares to be registered, but specifically
excluding any underwriting discounts and allowances that are allocable to the
shares being sold by, and which shall be paid by, the Holders.
6. INFORMATION ON HOLDERS. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2, 3 or 4
hereof, that the Holders shall furnish to the Company such written information
regarding the securities held by the Holders as the Company shall reasonably
request and as shall be required in connection with the action to be taken by
the Company.
7. INDEMNIFICATION.
(a) In the event of any registration of any transfer of shares of Stock
under the Securities Act pursuant to Section 2 or 3 hereof, the Company will
indemnify and hold harmless the Holder, each of its officers, directors and
partners, and each other person, if any, who controls the Holder within the
meaning of the Securities Act, and each underwriter, if any, who participates in
the offering of such securities, against any losses, claims, damages or
liabilities, or actions in respect thereof, joint or several, to which the
Holder and each officer, director or partner, controlling person or underwriter
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities, or actions in respect thereof arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact
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<PAGE>
contained, on the effective date thereof, in any registration statement under
which such transfer of securities was registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act, and will reimburse the Holder and each of its
officers, directors and partners, and each such controlling person or
underwriter, for any legal or any other expenses reasonably incurred by the
Holder or its officers, directors and partners or controlling persons or by each
such underwriter, in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
preliminary prospectus or prospectus or such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by the Holder specifically for use in the
preparation thereof. In the event of any registration by the Company or any
transfer of securities under the Securities Act pursuant to Section 2 or 3, the
Holder will indemnify and hold harmless the Company, each other person, if any,
who controls the Company within the meaning of the Securities Act and each
officer and director of the Company to the same extent that the Company agrees
to indemnity it, but only with respect to the written information relating to
the Holder furnished to the Company by the Holder specifically for use in such
registration statement; provided that the obligation to indemnify shall be
individual, not joint and several, for each Holder and shall be limited to the
net amount of proceeds received by such Holder from the sale of shares pursuant
to such registration statement.
(b) Each indemnified party shall, as promptly as practicable upon receipt
of notice of the commencement of any action against such indemnified party or
its officers, directors or partners, or any controlling person of such
indemnified party, in respect of which indemnity may be sought from an
indemnifying party on account of the indemnity agreement contained in Section
7(a), notify the indemnifying party in writing of the commencement thereof. The
omission of such indemnified party to so notify the indemnifying party of any
such action shall not relieve the indemnifying party from any liability which it
may have on account of the indemnity agreement contained in Section 7(a) to the
extent that the failure to receive such notice within a reasonable period of
time shall not have caused harm, loss or damage to the indemnifying party,
provided that, conversely, if such failure to receive notice shall have caused
any harm, loss or damage to the indemnifying party, such failure shall
constitute a defense to any liability which such indemnifying party may have on
account of such agreement to the extent of the harm, loss or damage so caused.
In case any such action shall be brought against any indemnified party, its
officers, directors and partners, or any such controlling person, and such
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in (and, to the
extent that the indemnifying party shall wish, to direct) the defense thereof at
the indemnifying party's own expense, in which event the defense shall be
conducted by recognized counsel chosen by the indemnifying party and approved by
the indemnified party (whose approval shall not unreasonably be withheld) and
the indemnified party may participate in such defense at its own expense (unless
it is advised by counsel that actual or potential differing interests or
defenses exist or may exist, in which case such expenses shall be paid by the
indemnifying party, provided that the indemnifying party shall not be required
to pay the expenses for more than one counsel for all such indemnified parties).
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<PAGE>
8. MISCELLANEOUS.
8.1 GOVERNING LAW. The provisions hereof will be construed in accordance
with the laws of the State of Texas. The Company and the Holder hereby submit
to the jurisdiction of the state and federal courts located in Denver, Colorado
or Chicago, Illinois.
8.2 INDEMNIFICATION. The Holder agrees to indemnify and hold harmless the
Company and its officers, directors and persons who control the Company, from
and against all damages, losses, costs and expenses (including reasonable
attorneys' fees) which they may incur by reason of the failure of the Holder to
fulfill any of the terms or conditions of this Agreement. The Company agrees to
indemnify and hold harmless the Holder and its officers, directors and persons
who control the Holder, from and against all damages, losses, costs and expenses
(including reasonable attorneys' fees) which they may incur by reason of the
failure of the Company to fulfill any of the terms or conditions of this
Agreement.
8.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
understanding of the parties hereto and supersedes all prior agreements or
understandings with respect to the subject matter hereof. This Agreement may
not be amended or modified except by an instrument in writing signed by the
party against whom enforcement is sought.
8.4 SEVERABILITY. The invalidity or unenforceability of any particular
provisions of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
8.5 HEADINGS. The section headings contained herein are for convenience
only and are not intended to define or limit the contents of such sections.
8.6 NEUTRAL INTERPRETATION. This Agreement constitutes the product of the
negotiation of the parties hereto, and the enforcement hereof shall be
interpreted in a neutral manner, and not more strongly for or against any party
based upon the source of the draftsmanship hereof.
8.7 COUNTERPARTS. This Agreement may be executed in counterparts, which
shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
TIPPERARY CORPORATION HOLDER
By: /s/ David L. Bradshaw By: /s/ James F. Knott
---------------------------------- ----------------------------------
David L. Bradshaw, President and James F. Knott
Chief Executive Officer
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<PAGE>
This Warrant and the rights represented hereby shall not be transferable at any
time unless (i) a registration statement under the Securities Act of 1933, as
amended, shall be in effect with respect to this Warrant or the Shares issuable
hereunder at such time, or (ii) the transfer is made in compliance with the
provisions of Section 5.
Number: * * 144,000 Shares
of Common Stock
WARRANT
TO PURCHASE SHARES
OF
TIPPERARY CORPORATION
This certifies that, for value received, JAMES H. MARSHALL, or his
registered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texas
corporation (the "Company"), One Hundred Forty Four Thousand (144,000) Shares,
as defined below, at the price of Two Dollars and no/100 ($2.00) per Share (as
defined in Section 3) at any time, or in part from time to time on or after
December 31, 2001. This Warrant shall expire, if not exercised prior thereto,
on December 31, 2009. The provisions as to adjustment of the initial exercise
price set forth above and the number of Shares to be issued upon the occurrence
of certain events (the Provisions as to Adjustment) are more fully set forth in
Annex I hereto, all of which is incorporated herein by reference. (Hereinafter,
the initial exercise price set forth above in this paragraph for the purchase of
Shares upon the exercise of this Warrant, as adjusted pursuant to the Provisions
as to Adjustment, is referred to as the "Exercise Price"). This Warrant is
subject to the following provisions, terms and conditions:
1. EXERCISE OF WARRANT.
(a) The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, (but not as to a fractional Share), by the
surrender of this Warrant at the Company's principal office located in Denver,
Colorado (or such other office or agency of the Company as the Company may
designate by notice in writing to the holder at the address of the holder
appearing on the books of the Company at anytime within the period above named)
and delivery of a completed subscription form in the form attached to this
Warrant as Exhibit A, and upon payment to the Company of the Exercise Price for
such Shares; provided, however, that any partial exercise of this Warrant shall
be for at least 10,000 Shares, except that the final, partial exercise of this
Warrant may be for less than 10,000 Shares.
(b) Payment of the Exercise Price shall be made in same day funds or by
wire transfer to such account as the Company may designate.
(c) The Company agrees that any Shares so purchased by the exercise of
this Warrant shall be deemed to be issued to the holder hereof or his nominee as
the record owner of such Shares as of the close of business on the date on which
this Warrant shall have been surrendered, the completed subscription form
delivered, and payment made for such Shares as aforesaid.
(d) Stock certificates evidencing Shares so purchased shall be delivered
to the holder hereof or his nominee as promptly as practicable, after the rights
represented by this Warrant shall have been so exercised. If this Warrant shall
have been exercised only in part, and unless this Warrant has expired, a new
Warrant representing the number of Shares with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder within
such time. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any stock certificate evidencing Shares upon exercise of
this Warrant except in accordance with the provisions, and subject to the
limitations, of Section 5. The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of stock
certificates and any new Warrants. If a fractional Share would be issuable upon
the exercise of the rights represented by this Warrant, the Company shall,
within five business days after the date of the exercise of this Warrant or any
portion hereof, deliver to the holder a check payable to such holder in lieu of
such
<PAGE>
fractional share in an amount equal to the difference between the Market Price
of such fractional share as of the date of exercise and the Exercise Price of
such fractional share.
2. CERTAIN COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:
(a) All Shares which may be issued upon the exercise of the rights
represented by this Warrant (all such Shares, whether previously issued or
subject to issuance upon the exercise of this Warrant, are from time to time
referred to herein as "Warrant Shares") will, upon issuance, be duly authorized
and issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof.
(b) During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved
free of preemptive or other rights for the exclusive purpose of issuance upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of Shares to provide for the exercise of rights represented by this Warrant.
(c) The Company will not, by amendment or restatement of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, issuance or sale of securities or otherwise, avoid or take any action
which would have the effect of avoiding the performance of any of the terms to
be performed hereunder by the Company, but will at all times in good faith carry
out all of the provisions of this Warrant and take all such action as may be
necessary or appropriate to protect the rights of the holder hereof against such
impairment and, in particular, will not permit the par value of any Share to be
or become greater than the then effective Exercise Price.
3. DEFINITION OF SHARES. As used herein, the term "Shares" shall mean
and include shares of the Common Stock, par value $.02 per share, of the Company
as are constituted and exist on the date hereof, and shall also include any
other class of the capital stock of the Company hereafter authorized which shall
neither be limited to a fixed sum or percentage of par value in respect to the
rights of the holders thereof to receive dividends and to participate in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, nor be subject at any time to
redemption by the Company; provided that the Shares receivable upon exercise of
this Warrant shall include only Shares of the type as are constituted and exist
on the date hereof or Shares resulting from any reclassification of the Shares
as provided for in paragraph (C) of the Provisions as to Adjustment.
4. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof as such to any rights whatsoever, including, without
limitation, voting rights, as a holder of Shares of the Company. No provisions
hereof, in the absence of affirmative action by the holder hereof to purchase
Shares, and no mere enumeration herein of the rights or privileges of such
holder, shall give rise to any liability of such holder as a holder of Shares of
the Company, regardless of who may assert such liability.
5. RESTRICTIONS ON TRANSFER.
(a) This Warrant shall not be exercisable by a transferee hereof and/or
transferable and the Warrant Shares shall not be transferable except upon the
conditions specified in this Section 5, which conditions are intended, among
other things, to ensure compliance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder (collectively the "Securities Act"), in
respect of the exercise and/or transfer of this Warrant and/or transfer of such
Warrant Shares.
(b) This Warrant and the Warrant Shares shall not be transferable (except
for a transfer of this Warrant or the Warrant Shares in an offering registered
under the Securities Act, including, without limitation, a transfer in a
registered offering effected pursuant to Section 6, and any subsequent transfer)
unless, prior to any transfer, the holder hereof shall have received from his
transferee reasonable assurances that such person is aware that this Warrant and
the Warrant Shares have not been registered under the Securities Act and that
such person is acquiring this Warrant or the Warrant Shares for investment
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<PAGE>
only and not with the view to the disposition or public offering thereof (unless
in an offering registered under the Securities Act or exempt therefrom), and
that such person is aware that the stock certificates evidencing the Warrant
Shares shall bear a legend restricting transfer and disposition thereof in
accordance with the Securities Act unless, in the opinion of counsel to the
Company, such legend may be omitted. In the event of any transfer of this
Warrant (other than a transfer in an offering registered under the Securities
Act, including, without limitation a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the holder hereof shall
provide an opinion of counsel, who shall be reasonably satisfactory to the
Company, that an exemption from the registration requirements of the Securities
Act is available.
(c) Any subsequent holder of this Warrant shall be subject to all the
terms and conditions herein, and shall acknowledge, in writing, upon receipt of
this Warrant, his or her acceptance of the terms and conditions herein.
(d) To facilitate sales by a holder of this Warrant or Warrant Shares in
transactions qualifying under Rule 144 promulgated by the Commission under the
Securities Act, if available, the Company agrees to satisfy the current public
information requirements of said Rule 144, for as long as the Shares remain
registered under the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder (collectively the "Exchange Act"),
and to provide said holder upon request with such other information as such
holder may require for compliance with the provisions of said Rule 144.
6. REGISTRATION UNDER THE SECURITIES ACT.
(a) If the Company at any time proposes to register any issuance of its
securities under the Securities Act (other than a registration on Form S-8 in
connection with an employee stock purchase or option plan or on Form S-4 in
connection with mergers, acquisitions or exchange offerings), the Company will
at such time give prompt written notice to the holder hereof and to the holders
of all other Warrant Shares issuable from any outstanding Warrants (such holders
are hereinafter referred to as the "Prospective Sellers") of its intention to do
so. Upon the written request of a Prospective Seller, given within 30 days
after receipt of any such notice (which request shall state the intended method
of disposition of the Warrant Shares to be transferred by such Prospective
Seller), the Company shall use its best efforts to cause all Warrant Shares, the
holders of which (or of the Warrants to which the same are related), shall have
so requested registration of the transfer thereof, to be registered under the
Securities Act, all to the extent requisite to permit the sale or other
disposition (in accordance with the intended method thereof as aforesaid) by the
Prospective Sellers of such Warrant Shares. The rights granted pursuant to this
Section 6(a) shall not be effective with respect to the Prospective Seller in
the case of an underwritten public offering of securities of the Company by the
Company unless each Prospective Seller agrees to the terms and conditions,
including underwriting discounts and allowances, specified by the managing
underwriter of such offering with respect to such Warrant Shares. The Company
shall have the right to reduce the number of Warrant Shares of the Prospective
Sellers to be included in a registration statement pursuant to the exercise of
the rights granted by this Section 6(a) if, and to the extent, that the managing
underwriter of such offering is of the good faith opinion, supported by written
reasons therefor that the inclusion of such Warrant Shares would materially,
adversely affect the marketing of the securities of the Company to be offered;
provided, that any such reduction of the number of Warrant Shares the transfer
of which is to be registered on behalf of the Prospective Sellers shall be made
on the basis of a pro rata reduction of all Warrant Shares of all Prospective
Sellers.
(b) If and whenever the Company is required by the provisions of this
Section 6 to use its best efforts to effect the registration of any transfer of
Warrant Shares under the Securities Act, the Company will, as expeditiously as
possible,
(i) prepare and file with the Commission a registration statement
with respect to such transfer and use its best efforts to cause
such registration statement to become and remain effective, but
not for any period longer than nine months;
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<PAGE>
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective, and to comply with the
provisions of the Securities Act with respect to the transfer of
all securities covered by such registration statement, including,
without limitation, taking all necessary actions whenever the
Prospective Sellers of the Warrant Shares covered by such
registration statement shall desire to dispose of the same;
(iii) furnish to each Prospective Seller such number of copies of a
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in
order to facilitate the disposition of the Warrant Shares owned
by such Prospective Seller and covered by such registration
statement;
(iv) use its best efforts to register or qualify the securities
covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each
Prospective Seller shall request, and use its best efforts to do
any and all other acts and things which may be reasonably
necessary to enable such Prospective Seller to consummate the
disposition in such jurisdiction of the Warrant Shares owned by
such Prospective Seller and covered by such registration
statement; provided that, notwithstanding the foregoing, the
Company shall not be required to register in any jurisdiction as
a broker or dealer of securities or to grant its consent to
service of process in any such jurisdiction solely on account of
such intended disposition by such Prospective Seller;
(v) furnish to the Prospective Sellers whose intended dispositions
are registered a signed copy of an opinion of counsel for the
Company, in form and substance acceptable to such Prospective
Sellers, to the effect that: (A) a registration statement
covering such dispositions of Warrant Shares has been filed with
the Commission under the Securities Act and has been made
effective by order of the Commission, (B) such registration
statement and the prospectus contained therein and any amendments
or supplements thereto comply as to form in all material respects
with the requirements of the Securities Act, and nothing has come
to such counsel's attention which would cause him to believe that
the registration statement or such prospectus, amendment or
supplement, at the time such registration statement or amendment
became effective or such supplement was filed with the
Commission, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of such
prospectus, amendment or supplement, in the light of the
circumstances under which they were made) not misleading
(provided that such counsel need not render any opinion with
respect to the financial statements and other financial,
engineering and statistical data included therein), and (C) to
the best of such counsel's knowledge, no stop order has been
issued by the Commission suspending the effectiveness of such
registration statement and no proceedings for the issuance of
such a stop order are threatened or contemplated;
(vi) furnish to the Prospective Sellers whose intended dispositions
are required a blue sky survey in the form and of the substance
customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and
describing the application provisions of the securities or blue
sky laws of each state or jurisdiction in which the Company shall
be required, pursuant to Section 6(b)(iv), to register or quality
such intended dispositions of such Warrant Shares, or, in the
event counsel for the underwriters in such offering shall be
preparing a blue sky
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<PAGE>
survey, cause such counsel to furnish such survey to, and to
allow reliance thereon by, such Prospective Sellers;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission under the Securities Act
and the Exchange Act, insofar as they relate to such registration
and such registration statement; and
(viii) use its best efforts to list such Warrant Shares on any
securities exchange on which any securities of the Company are
then listed or to admit such Warrant Shares for trading in any
national market system in which any securities of the Company are
then admitted for trading, if the listing or admission of such
securities is then permitted under the rules of such exchange or
system.
(c) With respect to the registration by the Company of transfers of
Warrant Shares under the Securities Act pursuant to Section 6(a), the Company
shall pay all expenses incurred by it in complying with this Section 6
(including, without limitation, all registration and filing fees, printing
expenses, blue sky fees and expenses, costs and expenses of audits, and
reasonable fees and disbursements of counsel for the Company and special counsel
designated by Prospective Sellers owning a majority of the Warrant Shares
covered by such registration, but specifically excluding any underwriting
discounts and allowances that are allocable to the Warrant Shares being sold by,
and which shall be paid by, the Prospective Sellers; provided, however, that if
any registration statement filed with the Commission by the Company under
Section 6(b) shall not be declared effective by the Commission, such attempted
registration shall not constitute a registration under this Section 6(c).
(d) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 6 that each Prospective Seller, the
transfer of whose Warrant Shares is registered or to be registered under each
such registration, shall furnish to the Company such written information
regarding the securities held by such Prospective Seller as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
(e) (i) in the event of any registration of any transfer of Warrant
Shares under the Securities Act pursuant to this Section 6, the Company will
indemnify and hold harmless each Prospective Seller of such securities, each of
its officers, directors and partners, and each other person, if any, who
controls such Prospective Seller within the meaning of the Securities Act, and
each underwriter, if any, who participates in the offering of such securities,
against any losses, claims, damages or liabilities (or actions in respect
thereof, joint or several, to which each Prospective Seller, officer, director
or partner, controlling person or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
transfer of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act, and will reimburse such Prospective Seller and each of its
officers, directors and partners, and each such controlling person or
underwriter, for any legal or any other expenses reasonably incurred by such
Prospective Seller or its officers, directors and partners or controlling
persons or by each such underwriter, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary prospectus or prospectus or such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Prospective Seller specifically for use in the preparation thereof. In the
event of any registration by the Company or any transfer of securities under the
Securities Act pursuant to this Section 6, each Prospective Seller of Warrant
Shares covered by such
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<PAGE>
registration will indemnify and hold harmless the Company, each other person, if
any, who controls the Company within the meaning of the Securities Act and each
officer and director of the Company and the other Prospective Sellers to the
same extent that the Company agrees to indemnity it, but only with respect to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid.
(ii) Each indemnified party shall, as promptly as practicable upon receipt
of notice of the commencement of any action against such indemnified party or
its officers, directors or partners, or any controlling person of such
indemnified party, in respect of which indemnity may be sought from an
indemnifying party on account of the indemnity agreement contained in Section
6(e)(i), notify the indemnifying party in writing of the commencement thereof.
The omission of such indemnified party to so notify the indemnifying party of
any such action shall not relieve the indemnifying party from any liability
which it may have on account of the indemnity agreement contained in Section
6(e)(i) to the extent that the failure to receive such notice within a
reasonable period of time shall not have caused harm, loss or damage to the
indemnifying party, provided that, conversely, if such failure to receive notice
shall have caused any harm, loss or damage to the indemnifying party, such
failure shall constitute a defense to any liability which such indemnifying
party may have on account of such agreement to the extent of the harm, loss or
damage so caused. In case any such action shall be brought against any
indemnified party, its officers, directors and partners, or any such controlling
person, and such indemnified party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
(and, to the extent that the indemnifying party shall wish, to direct) the
defense thereof at the indemnifying party's own expense, in which event the
defense shall be conducted by recognized counsel chosen by the indemnifying
party and approved by the indemnified party (whose approval shall not
unreasonably be withheld) and the indemnified party may participate in such
defense at its own expense (unless it is advised by counsel that actual or
potential differing interests or defenses exist or may exist, in which case such
expenses shall be paid by the indemnifying party, provided that the indemnifying
party shall not be required to pay the expenses for more than one counsel for
all such indemnified parties).
7. TRANSFER; OWNERSHIP. Subject to Section 5, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company referred to in Section 1 by the holder hereof in person or by a
duly authorized attorney, upon surrender of this Warrant, with an assignment,
acceptable to the Company, duly completed, at which time a new Warrant shall be
made and delivered by the Company, of the same tenor as this Warrant but
registered in the name of the transferee. The holder of this Warrant, by taking
or holding the same, consents and agrees that this Warrant, when endorsed in
blank, shall be deemed negotiable, and that the holder hereof, when this Warrant
shall have been so endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant and to
transfer this Warrant on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered holder hereof as the owner hereof for all purposes. Any transfer
of this Warrant shall be made in compliance with the Securities Act and any
applicable state securities or blue sky laws.
8. EXCHANGE AND REPLACEMENT. Subject to Section 7, this Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 1, for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
Shares which may be purchased hereunder, each of such new Warrants to represent
the right to purchase such number of Shares as shall be designated by said
holder hereof at the time of such surrender. Upon receipt by the Company at the
office or agency referred to in Section 1 of evidence reasonably satisfactory to
it of the loss, theft or destruction of this Warrant and of indemnity or
security reasonably satisfactory to it (provided that the written indemnity of
the holder hereof shall be deemed reasonably satisfactory to the Company for
such purposes), the Company will deliver a new Warrant of like tenor and date in
replacement of this Warrant. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any transfer, exchange or
replacement. The Company will pay all expenses and charges
-6-
<PAGE>
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.
9. NOTICES. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be delivered at, or sent by
certified or registered mail to, James H. Marshall, 27261 Lakeway Court, Bonita
Springs, FL 34134, or to such other address as shall have been furnished to the
Company in writing by the holder hereof. Any notice or other document required
or permitted to be given or delivered to the Company shall be delivered at, or
sent by certified or registered mail to, 633 Seventeenth, Suite 1550, Denver,
Colorado 80202, Attn: President, or to such other address as shall have been
furnished in writing to the holder by the Company. Any notice so addressed and
mailed by registered or certified mail or otherwise delivered, shall be deemed
to be given when actually received by the addressee.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
11. MISCELLANEOUS. This Warrant will be binding upon any partnership or
corporation succeeding to the Company by consolidation or acquisition of all or
substantially all of the Company's assets, and upon any successor or assign of
the holder hereto. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against whom enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, Tipperary Corporation has caused this Warrant to be
signed by its duly authorized officers, under its corporate seal, to be dated
February 9, 2000.
TIPPERARY CORPORATION
By: /s/ David L. Bradshaw
---------------------------------------
David L. Bradshaw, President and
Chief Executive Officer
-7-
<PAGE>
Annex I
TIPPERARY CORPORATION
PROVISIONS AS TO ADJUSTMENT OF
EXERCISE PRICE AND NUMBER OF SHARES
ISSUED UPON OCCURRENCE OF CERTAIN EVENTS
The Exercise Price and the number of Shares issuable upon the exercise of
the annexed Warrant to purchase shares of TIPPERARY CORPORATION, a Texas
corporation (herein and in this Warrant referred to as the "Company"), shall be
subject to adjustment from time to time as hereinafter provided; however, that
in no event shall the Exercise Price be increased to a price greater than Two
Dollars and no/100 ($2.00) per Share, except as provided by paragraph (C)
hereof. Upon each adjustment of the Exercise Price, the holder of this Warrant
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Shares obtained by multiplying the number of
Shares purchasable pursuant hereto immediately prior to such adjustment by a
fraction, the numerator of which is the Exercise Price in effect immediately
prior to such adjustment and the denominator of which is the Exercise Price
resulting from such adjustment. In making the adjustments to the Exercise Price
and the number of Shares issuable upon the exercise of this Warrant, the
following provisions shall be applicable:
(A) If and whenever the Company shall issue or sell any Shares for
consideration per Share at less than the Market Price (as hereinafter defined)
of such Shares on the date of such issue or sale, then forthwith upon such issue
or sale the Exercise Price in effect immediately prior thereto shall be adjusted
to an amount (calculated to the nearest cent) determined by dividing (i) an
amount equal to the sum of (a) the number of Shares outstanding immediately
prior to such issue or sale multiplied by the Exercise Price in effect
immediately prior to such issue or sale, and (b) the consideration, if any,
received by the Company upon such issue or sale by (ii) the total number of
Shares outstanding immediately after such issue or sale; provided, however, that
no adjustment shall be made hereunder by reason of:
(i) the grant of this Warrant or the issuance of Shares upon the exercise
of this Warrant or any other warrant of the Company (except for a
warrant issued after the date hereof the exercise price of which is
less than the Market Price on the date of issuance of such warrant);
(ii) the issuance of 1,163,328 shares at $1.60 per share included in the
purchase price of the acquisition of interests in the Comet Ridge
project and the issuance of 759,494 shares at $1.58 per share , all of
which are contemplated in connection with the transaction with which
this Warrant is issued; or
(iii) the grant by the Company of options to purchase Shares in connection
with any purchase or option plan for the benefit of employees of the
Company, or any affiliates or subsidiaries thereof.
No adjustment of the Exercise Price shall be required to be made by the Company
and no notice hereunder must be given if the amount of any required adjustment
is less than 5% of the Exercise Price. In such case any such adjustment shall
be carried forward and shall be made (and notice thereof shall be given
hereunder) at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to not less
than 5% of the Exercise Price; provided, however, any such adjustment, whether
or not it is less than 5% of the Exercise Price, shall be made upon exercise.
(B) For the purposes of paragraph (A), the following provisions (i)
through (vi), inclusive, shall also be applicable:
(i) If, at the time Shares are issued and sold upon the conversion or
exchange of Convertible Securities or upon the exercise of rights or
options previously granted by the Company, the
Annex - Page 1
<PAGE>
price per Share for which such Shares are issued (determined by
dividing (a) the total amount, if any, received by the Company as
consideration for such Convertible Securities or for the granting of
such rights or options, plus the aggregate amount of additional
consideration paid to the Company upon the conversion or exchange of
such Convertible Securities (which, if so provided in such Convertible
Securities, shall be deemed to be equal to the outstanding principal
amount of the indebtedness represented by such Convertible Securities)
or upon the exercise of such rights or options, by (b) the total
number of Shares issued upon the conversion or exchange of such
Convertible Securities or upon the exercise of such rights or options)
shall be less than the Exercise Price in effect immediately prior to
such issue, sale or exercise, then the adjustments provided for by the
first paragraph of this Annex I and paragraph (A) shall be made. In
making the adjustment of the Exercise Price provided for by paragraph
(A), the amount described in clause (a) of this paragraph (B)(i) shall
be considered the consideration received by the Company upon the issue
or sale of the Shares for purposes of clause (i)(b) of paragraph (A).
(ii) In case at any time any Shares or Convertible Securities or any rights
or options to purchase any Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case any Shares or Convertible Securities or
any rights or options to purchase any Shares or Convertible Securities
shall be issued or sold, in whole or in part, for consideration other
than cash, the amount of the consideration other than cash received by
the Company in exchange for the issue or sale of such Convertible
Securities shall be deemed to be the fair value of such consideration
as determined in good faith by the board of directors of the Company,
without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company
in connection therewith; provided that if the holder or holders of at
least 66-2/3% of the Warrant Shares purchasable under this Warrant
shall request in writing, the value of such consideration shall be
determined by an independent expert selected by such holders, the
costs and expenses of which shall be borne by the Company, and, if the
value of such consideration as so determined is less than the value
determined by the board of directors of the Company, the lesser value
shall be utilized in calculating the consideration per Share received
by the Company for purposes of making the adjustment provided by
paragraph (A). In the event of any merger or consolidation of the
Company in which the Company is not the surviving corporation or in
the event of any sale of all or substantially all of the assets of the
Company for stock or other securities of any corporation, the Company
shall be deemed to have issued a number of Shares for stock or
securities of such other corporation computed on the basis of the
actual exchange ratio on which the transaction was predicated and for
consideration that is equal to the fair market value on the date of
such transaction of such stock or securities of the other corporation,
and if any such calculation results in adjustment of the Exercise
Price, the determination of the number of Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for purposes of paragraph (A), shall be made
after giving effect to such adjustment of the Exercise Price.
(iii) The number of Shares outstanding at any given time shall not include
Shares that have been redeemed by the Company and not canceled, if
any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an
issue or sale of Shares for purposes of paragraph (A).
(iv) "Market Price" shall mean the lower of (a) the average closing sales
prices of Shares recorded on the principal national securities
exchange on which the Shares are listed or in a national market system
for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the
domestic over-the-
Annex - Page 2
<PAGE>
counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined. If the Shares are
not listed on any national securities exchange or admitted for trading
in any national market system or traded in the domestic over-the-
counter market, the Market Price shall be the higher of (y) the book
value of the Shares as determined by a firm of independent public
accountants of recognized standing selected by the board of directors
of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z)
the fair market value of the Shares determined in good faith by the
board of directors of the Company, provided that if the holder or
holders of at least 66-2/3% of the Warrant Shares purchasable under
the Warrant shall request in writing, the fair market value of the
Shares shall be determined by an independent investment banking firm
or other independent expert selected by such holders and reasonably
satisfactory to the Company, the costs and expenses of which shall be
born by the Company, which determination shall be as of a date which
is within 15 days of the date as of which the determination is to be
made.
(v) Anything herein to the contrary notwithstanding, in case the Company
shall issue any Shares in connection with the acquisition by the
Company of the stock or assets of any other corporation or the merger
of any other corporation into the Company under circumstances where,
on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on
the date the number of Shares was determined, the consideration
received for such Shares would not have been less than the Market
Price thereof, such Shares shall not be deemed to have been issued for
less than the Market Price, provided that the date the number of
shares was determined is not greater than ten days prior to the date
of issuance of such shares.
(vi) Anything in clause (ii) of this paragraph (B) to the contrary
notwithstanding, in the case of an acquisition where all or part of
the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the
acquisition pays only part of a maximum dollar purchase price which is
payable in Shares or Convertible Securities and where the balance of
such purchase price is deferred or is contingently payable under a
formula related to earnings over a period of time, (a) the
consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such
part of the total consideration as the portion of the dollar purchase
price then paid in Shares or Convertible Securities bears to the total
maximum dollar purchase price payable in Shares or Convertible
Securities and (b) in connection with each issuance of additional
Shares or Convertible Securities pursuant to the terms of the
agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the
portion of the dollar purchase price then and theretofore paid in
Shares or Convertible Shares bears to the total maximum dollar
purchase price payable in Shares or Convertible Securities multiplied
by a fraction the numerator of which shall be the number of Shares (or
in the case of Convertible Securities other than capital stock of the
Company, the aggregate principal amount of such Convertible
Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other
than capital stock of the Company, the aggregate principal amount of
such Convertible Securities) then and theretofore issued under such
acquisition agreement. In the event only a part of the purchase price
for an acquisition is paid in Shares or Convertible Securities in the
manner referred to in this clause (vi), the term "total consideration"
as used in this clause (vi) shall mean that part of the aggregate
consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this
clause (vi), as determined by the board of directors of the Company.
(C) In the case at any time the Company shall subdivide its outstanding
Shares into a greater number of Shares, then from and after the record date for
such subdivision the Exercise Price in effect
Annex - Page 3
<PAGE>
immediately prior to such subdivision shall be proportionately reduced and the
number of Shares purchasable upon the exercise of this Warrant shall be
correspondingly increased, and, conversely, in case the outstanding Shares shall
be combined into a smaller number of Shares, then from and after the record date
for such combination the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
decreased.
(D) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Shares (or any
other securities of the Company then issuable upon the exercise of this Warrant)
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Shares (or such other securities) then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holder hereof shall thereafter have
the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the Shares (or other
securities) of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Shares (or other securities) equal to the number of
Shares (or other securities) immediately theretofore so purchasable and
receivable had such reorganization, reclassification, consolidation, merger or
sale not taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the holder of this Warrant to the
end that the provisions hereof (including, without limitation, provisions for
adjustment of the Exercise Price and of the number of Shares (or other
securities) purchasable upon the exercise of this Warrant and for the
registration thereof as provided in Section 6 of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof (including
an immediate adjustment, by reason of such consolidation, merger or sale, of the
Exercise Price to the value of the Shares (or other securities) reflected by the
terms of such consolidation, merger or sale if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). In the event of a consolidation or merger of the Company with
or into another corporation as a result of which a greater or lesser number of
securities of the surviving corporation are issuable to holders of Shares in
respect of the number of Shares outstanding immediately prior to such
consolidation or merger, then the Exercise Price in effect immediately prior to
such consolidation or merger shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding Shares. The Company
shall not effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof the surviving or successor
corporation (if other than the Company) resulting from such consolidation or
merger of the corporation purchasing such assets shall assume, by written
instrument executed and mailed to the registered holder hereof at the last
address of such holder appearing on the books of the Company, the obligation to
deliver to such holder such Shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and containing the express assumption of such surviving or successor
corporation of the due performance of every provision of this Warrant to be
performed by the Company and of all liabilities and obligations of the Company
hereunder.
(E) In case at any time the Company shall pay any dividend on or make any
other distribution with respect to Shares (or any other securities of the
Company then issuable upon the exercise of the Warrant) that is payable in
Shares, Convertible Securities, any other securities of the Company or other
stock, securities or assets, other than cash, then thereafter, and in lieu of
any adjustment of the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the holder of this Warrant, upon any exercise of the
rights represented hereby, shall be entitled to receive the number of Shares (or
other securities) being purchased upon such exercise and, in addition to and
without further payment, the Shares, Convertible Securities, other Securities of
the Company or other stock, securities or assets which the holder of this
Warrant would have received by way of such distributions, as if continuously
since the date of the Warrant (or, if this Warrant shall have been issued
pursuant to Section 7 of this Warrant, the date of the predecessor Warrant to
which this Warrant relates), such holder had been the record holder of the
number of Shares (or other securities) then being purchased upon the exercise
hereof and had retained all such
Annex - Page 4
<PAGE>
Shares, Convertible Securities, other securities of the Company or other stock,
securities or assets distributable with respect to such Shares (or other
securities) then being purchased upon the exercise hereof and, furthermore, all
cash, stock, securities or assets payable as dividends or distributions with
respect to the foregoing distributable securities or assets and originating
directly or indirectly therefrom. The Company shall reserve and retain in
escrow from any such dividend or distribution of Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets, and from
any such dividends or distributions with respect thereto and originating
directly or indirectly therefrom, such Shares, Convertible Securities, other
securities of the Company and other stock, securities, assets and cash as shall
be necessary to fulfill its obligations to the holder hereof pursuant to this
paragraph (E).
(F) If at any time conditions arise by reason of action taken by the
Company, which in the good faith opinion of the board of directors of the
Company, are not adequately covered by the provisions of this Annex I, and which
might materially adversely affect the rights of the holder of this Warrant, the
Company shall appoint a firm of independent public accountants of recognized
standing (which may be the regular accountants or auditors of the Company),
which shall give their opinion as to the adjustments, if any, in the Exercise
Price and the number of Shares purchasable upon the exercise of this Warrant, or
other change in the rights of the holder hereof, on a basis consistent with the
other provisions of this Annex I, necessary to preserve without diminution the
rights of the holder hereof. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described herein.
(G)(i) Within two (2) days of any adjustment of the Exercise Price or
change in the number of Shares purchasable upon the exercise of
this Warrant made pursuant to the above paragraphs (A) through
(F) or any change in the rights of the holder of this Warrant by
reason of the occurrence of events described such paragraphs, the
Company shall give written notice by certified or registered mail
to the registered holder of this Warrant at the address of such
holder as shown on the books of the Company, which notice shall
describe the event requiring such adjustments, the Exercise Price
resulting from such adjustment, the increase or decrease in the
number of Shares purchasable upon the exercise of this Warrant,
and any other change in the rights of such holder, and set forth
in reasonable detail the method of calculation of such
adjustments and the facts upon which such calculations are based.
Within three (3) days of receipt from the holder hereof of a
written request therefor (which request shall not be made more
than once each calendar quarter), the Company shall give written
notice by certified or registered mail to such holder at his
address as shown on the books of the Company of the Exercise
Price in effect as of the date of receipt of such written
request, and the number of Shares purchasable or the number or
amount of other shares of stock, securities or assets receivable
as of such date, and set forth in reasonable detail the method of
calculation of such numbers.
(ii) Upon each adjustment of the Exercise Price and each change in the
number of Shares purchasable upon the exercise of this Warrant,
and change in the rights of the holder of this Warrant by reason
of the occurrence of other events herein set forth, then and in
each case, upon written request of the holder of this Warrant
(which request shall be made not more often than once each
calendar year), the Company will at its expense promptly obtain
an opinion of independent public accountants reasonably
satisfactory to each holder stating the then effective Exercise
Price and the number of Shares then purchasable, or specifying
the other shares of stock, securities or assets and the amount
thereof then receivable, and setting forth in reasonable detail
the method of calculation of such numbers and the facts upon
which such calculations are based. The Company will promptly
mail a copy of such opinion to the registered holder hereof.
Annex - Page 5
<PAGE>
(H) In case at any time:
(i) The Company shall pay any dividend payable in capital stock on its
outstanding Shares or make any distribution (other than regular cash
dividends) to the holders of Shares;
(ii) The Company shall offer for subscription pro rata to the holders of
Shares any additional capital stock or other rights;
iii) There shall be authorized any capital reorganization or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(iv) There shall be authorized or commence a voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in one or more of said cases, the Company shall given written notice by
certified or registered mail to the holder of this Warrant at the address of
such holder as shown on the books of the Company on the date on which (1) the
books of the Company shall close or a record shall be taken for such dividend,
distribution, or subscription rights, or (2) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place or be voted upon by the shareholders of the Company,
as the case may be. Such notice shall also specify the date as of which the
holders of record of Shares shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such written notice shall be given at least
thirty (30) days prior to the action in question and no less than thirty (30)
days prior to the record date or the date on which the Company's books are
closed in respect thereto.
Annex - Page 6
<PAGE>
EXHIBIT A
- ---------
SUBSCRIPTION FORM
To be Executed by the Registered Holder
Desiring to Exercise the Within Warrant of
TIPPERARY CORPORATION
The undersigned registered holder hereby exercises the right to purchase
____________ Shares (not less than 10,000 Shares, except for the final exercise
of this Warrant, which may be for a lesser number of Shares) covered by the
within Warrant according to the conditions thereof, and herewith makes payment
of the Exercise Price of such Shares, $___________.
Name of Registered Holder:
----------------------------------------------
Address of Registered Holder:
---------------------------------
---------------------------------
Registered Holder's Tax I.D. No.:
-----------------------------
Name of Nominee (if applicable):
-----------------------------
Address of Nominee:
-------------------------------------------
-------------------------------------------
Nominee's Tax I.D. No.:
---------------------------
Signature of
Registered Holder:
--------------------------------------------
Title of Signing Officer
or Agent (if any):
--------------------------------------------
Dated: , .
------------ ----
<PAGE>
This Warrant and the rights represented hereby shall not be transferable at any
time unless (i) a registration statement under the Securities Act of 1933, as
amended, shall be in effect with respect to this Warrant or the Shares issuable
hereunder at such time, or (ii) the transfer is made in compliance with the
provisions of Section 5.
Number: * * 144,000 Shares
of Common Stock
WARRANT
TO PURCHASE SHARES
OF
TIPPERARY CORPORATION
This certifies that, for value received, JAMES F. KNOTT, or his registered
assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texas corporation
(the "Company"), One Hundred Forty Four Thousand (144,000) Shares, as defined
below, at the price of Two Dollars and no/100 ($2.00) per Share (as defined in
Section 3) at any time, or in part from time to time on or after December 31,
2001. This Warrant shall expire, if not exercised prior thereto, on December
31, 2009. The provisions as to adjustment of the initial exercise price set
forth above and the number of Shares to be issued upon the occurrence of certain
events (the Provisions as to Adjustment) are more fully set forth in Annex I
hereto, all of which is incorporated herein by reference. (Hereinafter, the
initial exercise price set forth above in this paragraph for the purchase of
Shares upon the exercise of this Warrant, as adjusted pursuant to the Provisions
as to Adjustment, is referred to as the "Exercise Price"). This Warrant is
subject to the following provisions, terms and conditions:
1. EXERCISE OF WARRANT.
(a) The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, (but not as to a fractional Share), by the
surrender of this Warrant at the Company's principal office located in Denver,
Colorado (or such other office or agency of the Company as the Company may
designate by notice in writing to the holder at the address of the holder
appearing on the books of the Company at anytime within the period above named)
and delivery of a completed subscription form in the form attached to this
Warrant as Exhibit A, and upon payment to the Company of the Exercise Price for
such Shares; provided, however, that any partial exercise of this Warrant shall
be for at least 10,000 Shares, except that the final, partial exercise of this
Warrant may be for less than 10,000 Shares.
(b) Payment of the Exercise Price shall be made in same day funds or by
wire transfer to such account as the Company may designate.
(c) The Company agrees that any Shares so purchased by the exercise of
this Warrant shall be deemed to be issued to the holder hereof or his nominee as
the record owner of such Shares as of the close of business on the date on which
this Warrant shall have been surrendered, the completed subscription form
delivered, and payment made for such Shares as aforesaid.
(d) Stock certificates evidencing Shares so purchased shall be delivered
to the holder hereof or his nominee as promptly as practicable, after the rights
represented by this Warrant shall have been so exercised. If this Warrant shall
have been exercised only in part, and unless this Warrant has expired, a new
Warrant representing the number of Shares with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder within
such time. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any stock certificate evidencing Shares upon exercise of
this Warrant except in accordance with the provisions, and subject to the
limitations, of Section 5. The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of stock
certificates and any new Warrants. If a fractional Share would be issuable upon
the exercise of the rights represented by this Warrant, the Company shall,
within five business days after the date of the exercise of this Warrant or any
portion hereof, deliver to the holder a check payable to such
<PAGE>
holder in lieu of such fractional share in an amount equal to the difference
between the Market Price of such fractional share as of the date of exercise and
the Exercise Price of such fractional share.
2. CERTAIN COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:
(a) All Shares which may be issued upon the exercise of the rights
represented by this Warrant (all such Shares, whether previously issued or
subject to issuance upon the exercise of this Warrant, are from time to time
referred to herein as "Warrant Shares") will, upon issuance, be duly authorized
and issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof.
(b) During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved
free of preemptive or other rights for the exclusive purpose of issuance upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of Shares to provide for the exercise of rights represented by this Warrant.
(c) The Company will not, by amendment or restatement of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, issuance or sale of securities or otherwise, avoid or take any action
which would have the effect of avoiding the performance of any of the terms to
be performed hereunder by the Company, but will at all times in good faith carry
out all of the provisions of this Warrant and take all such action as may be
necessary or appropriate to protect the rights of the holder hereof against such
impairment and, in particular, will not permit the par value of any Share to be
or become greater than the then effective Exercise Price.
3. DEFINITION OF SHARES. As used herein, the term "Shares" shall mean
and include shares of the Common Stock, par value $.02 per share, of the Company
as are constituted and exist on the date hereof, and shall also include any
other class of the capital stock of the Company hereafter authorized which shall
neither be limited to a fixed sum or percentage of par value in respect to the
rights of the holders thereof to receive dividends and to participate in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, nor be subject at any time to
redemption by the Company; provided that the Shares receivable upon exercise of
this Warrant shall include only Shares of the type as are constituted and exist
on the date hereof or Shares resulting from any reclassification of the Shares
as provided for in paragraph (C) of the Provisions as to Adjustment.
4. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof as such to any rights whatsoever, including, without
limitation, voting rights, as a holder of Shares of the Company. No provisions
hereof, in the absence of affirmative action by the holder hereof to purchase
Shares, and no mere enumeration herein of the rights or privileges of such
holder, shall give rise to any liability of such holder as a holder of Shares of
the Company, regardless of who may assert such liability.
5. RESTRICTIONS ON TRANSFER.
(a) This Warrant shall not be exercisable by a transferee hereof and/or
transferable and the Warrant Shares shall not be transferable except upon the
conditions specified in this Section 5, which conditions are intended, among
other things, to ensure compliance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder (collectively the "Securities Act"), in
respect of the exercise and/or transfer of this Warrant and/or transfer of such
Warrant Shares.
(b) This Warrant and the Warrant Shares shall not be transferable (except
for a transfer of this Warrant or the Warrant Shares in an offering registered
under the Securities Act, including, without limitation, a transfer in a
registered offering effected pursuant to Section 6, and any subsequent transfer)
unless, prior to any transfer, the holder hereof shall have received from his
transferee reasonable assurances that such person is aware that this Warrant and
the Warrant Shares have not been registered under the Securities Act and that
such person is acquiring this Warrant or the Warrant Shares for investment
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<PAGE>
only and not with the view to the disposition or public offering thereof (unless
in an offering registered under the Securities Act or exempt therefrom), and
that such person is aware that the stock certificates evidencing the Warrant
Shares shall bear a legend restricting transfer and disposition thereof in
accordance with the Securities Act unless, in the opinion of counsel to the
Company, such legend may be omitted. In the event of any transfer of this
Warrant (other than a transfer in an offering registered under the Securities
Act, including, without limitation a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the holder hereof shall
provide an opinion of counsel, who shall be reasonably satisfactory to the
Company, that an exemption from the registration requirements of the Securities
Act is available.
(c) Any subsequent holder of this Warrant shall be subject to all the
terms and conditions herein, and shall acknowledge, in writing, upon receipt of
this Warrant, his or her acceptance of the terms and conditions herein.
(d) To facilitate sales by a holder of this Warrant or Warrant Shares in
transactions qualifying under Rule 144 promulgated by the Commission under the
Securities Act, if available, the Company agrees to satisfy the current public
information requirements of said Rule 144, for as long as the Shares remain
registered under the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder (collectively the "Exchange Act"),
and to provide said holder upon request with such other information as such
holder may require for compliance with the provisions of said Rule 144.
6. REGISTRATION UNDER THE SECURITIES ACT.
(a) If the Company at any time proposes to register any issuance of its
securities under the Securities Act (other than a registration on Form S-8 in
connection with an employee stock purchase or option plan or on Form S-4 in
connection with mergers, acquisitions or exchange offerings), the Company will
at such time give prompt written notice to the holder hereof and to the holders
of all other Warrant Shares issuable from any outstanding Warrants (such holders
are hereinafter referred to as the "Prospective Sellers") of its intention to do
so. Upon the written request of a Prospective Seller, given within 30 days
after receipt of any such notice (which request shall state the intended method
of disposition of the Warrant Shares to be transferred by such Prospective
Seller), the Company shall use its best efforts to cause all Warrant Shares, the
holders of which (or of the Warrants to which the same are related), shall have
so requested registration of the transfer thereof, to be registered under the
Securities Act, all to the extent requisite to permit the sale or other
disposition (in accordance with the intended method thereof as aforesaid) by the
Prospective Sellers of such Warrant Shares. The rights granted pursuant to this
Section 6(a) shall not be effective with respect to the Prospective Seller in
the case of an underwritten public offering of securities of the Company by the
Company unless each Prospective Seller agrees to the terms and conditions,
including underwriting discounts and allowances, specified by the managing
underwriter of such offering with respect to such Warrant Shares. The Company
shall have the right to reduce the number of Warrant Shares of the Prospective
Sellers to be included in a registration statement pursuant to the exercise of
the rights granted by this Section 6(a) if, and to the extent, that the managing
underwriter of such offering is of the good faith opinion, supported by written
reasons therefor that the inclusion of such Warrant Shares would materially,
adversely affect the marketing of the securities of the Company to be offered;
provided, that any such reduction of the number of Warrant Shares the transfer
of which is to be registered on behalf of the Prospective Sellers shall be made
on the basis of a pro rata reduction of all Warrant Shares of all Prospective
Sellers.
(b) If and whenever the Company is required by the provisions of this
Section 6 to use its best efforts to effect the registration of any transfer of
Warrant Shares under the Securities Act, the Company will, as expeditiously as
possible,
(i) prepare and file with the Commission a registration statement
with respect to such transfer and use its best efforts to cause
such registration statement to become and remain effective, but
not for any period longer than nine months;
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<PAGE>
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective, and to comply with the
provisions of the Securities Act with respect to the transfer of
all securities covered by such registration statement, including,
without limitation, taking all necessary actions whenever the
Prospective Sellers of the Warrant Shares covered by such
registration statement shall desire to dispose of the same;
(iii) furnish to each Prospective Seller such number of copies of a
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in
order to facilitate the disposition of the Warrant Shares owned
by such Prospective Seller and covered by such registration
statement;
(iv) use its best efforts to register or qualify the securities
covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each
Prospective Seller shall request, and use its best efforts to do
any and all other acts and things which may be reasonably
necessary to enable such Prospective Seller to consummate the
disposition in such jurisdiction of the Warrant Shares owned by
such Prospective Seller and covered by such registration
statement; provided that, notwithstanding the foregoing, the
Company shall not be required to register in any jurisdiction as
a broker or dealer of securities or to grant its consent to
service of process in any such jurisdiction solely on account of
such intended disposition by such Prospective Seller;
(v) furnish to the Prospective Sellers whose intended dispositions
are registered a signed copy of an opinion of counsel for the
Company, in form and substance acceptable to such Prospective
Sellers, to the effect that: (A) a registration statement
covering such dispositions of Warrant Shares has been filed with
the Commission under the Securities Act and has been made
effective by order of the Commission, (B) such registration
statement and the prospectus contained therein and any amendments
or supplements thereto comply as to form in all material respects
with the requirements of the Securities Act, and nothing has come
to such counsel's attention which would cause him to believe that
the registration statement or such prospectus, amendment or
supplement, at the time such registration statement or amendment
became effective or such supplement was filed with the
Commission, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of such
prospectus, amendment or supplement, in the light of the
circumstances under which they were made) not misleading
(provided that such counsel need not render any opinion with
respect to the financial statements and other financial,
engineering and statistical data included therein), and (C) to
the best of such counsel's knowledge, no stop order has been
issued by the Commission suspending the effectiveness of such
registration statement and no proceedings for the issuance of
such a stop order are threatened or contemplated;
(vi) furnish to the Prospective Sellers whose intended dispositions
are required a blue sky survey in the form and of the substance
customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and
describing the application provisions of the securities or blue
sky laws of each state or jurisdiction in which the Company shall
be required, pursuant to Section 6(b)(iv), to register or quality
such intended dispositions of such Warrant Shares, or, in the
event counsel for the underwriters in such offering shall be
preparing a blue sky
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<PAGE>
survey, cause such counsel to furnish such survey to, and to
allow reliance thereon by, such Prospective Sellers;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission under the Securities Act
and the Exchange Act, insofar as they relate to such registration
and such registration statement; and
(viii) use its best efforts to list such Warrant Shares on any
securities exchange on which any securities of the Company are
then listed or to admit such Warrant Shares for trading in any
national market system in which any securities of the Company are
then admitted for trading, if the listing or admission of such
securities is then permitted under the rules of such exchange or
system.
(c) With respect to the registration by the Company of transfers of
Warrant Shares under the Securities Act pursuant to Section 6(a), the Company
shall pay all expenses incurred by it in complying with this Section 6
(including, without limitation, all registration and filing fees, printing
expenses, blue sky fees and expenses, costs and expenses of audits, and
reasonable fees and disbursements of counsel for the Company and special counsel
designated by Prospective Sellers owning a majority of the Warrant Shares
covered by such registration, but specifically excluding any underwriting
discounts and allowances that are allocable to the Warrant Shares being sold by,
and which shall be paid by, the Prospective Sellers; provided, however, that if
any registration statement filed with the Commission by the Company under
Section 6(b) shall not be declared effective by the Commission, such attempted
registration shall not constitute a registration under this Section 6(c).
(d) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 6 that each Prospective Seller, the
transfer of whose Warrant Shares is registered or to be registered under each
such registration, shall furnish to the Company such written information
regarding the securities held by such Prospective Seller as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
(e) (i) in the event of any registration of any transfer of Warrant
Shares under the Securities Act pursuant to this Section 6, the Company will
indemnify and hold harmless each Prospective Seller of such securities, each of
its officers, directors and partners, and each other person, if any, who
controls such Prospective Seller within the meaning of the Securities Act, and
each underwriter, if any, who participates in the offering of such securities,
against any losses, claims, damages or liabilities (or actions in respect
thereof, joint or several, to which each Prospective Seller, officer, director
or partner, controlling person or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
transfer of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act, and will reimburse such Prospective Seller and each of its
officers, directors and partners, and each such controlling person or
underwriter, for any legal or any other expenses reasonably incurred by such
Prospective Seller or its officers, directors and partners or controlling
persons or by each such underwriter, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary prospectus or prospectus or such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Prospective Seller specifically for use in the preparation thereof. In the
event of any registration by the Company or any transfer of securities under the
Securities Act pursuant to this Section 6, each Prospective Seller of Warrant
Shares covered by such
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<PAGE>
registration will indemnify and hold harmless the Company, each other person, if
any, who controls the Company within the meaning of the Securities Act and each
officer and director of the Company and the other Prospective Sellers to the
same extent that the Company agrees to indemnity it, but only with respect to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid.
(ii) Each indemnified party shall, as promptly as practicable upon receipt
of notice of the commencement of any action against such indemnified party or
its officers, directors or partners, or any controlling person of such
indemnified party, in respect of which indemnity may be sought from an
indemnifying party on account of the indemnity agreement contained in Section
6(e)(i), notify the indemnifying party in writing of the commencement thereof.
The omission of such indemnified party to so notify the indemnifying party of
any such action shall not relieve the indemnifying party from any liability
which it may have on account of the indemnity agreement contained in Section
6(e)(i) to the extent that the failure to receive such notice within a
reasonable period of time shall not have caused harm, loss or damage to the
indemnifying party, provided that, conversely, if such failure to receive notice
shall have caused any harm, loss or damage to the indemnifying party, such
failure shall constitute a defense to any liability which such indemnifying
party may have on account of such agreement to the extent of the harm, loss or
damage so caused. In case any such action shall be brought against any
indemnified party, its officers, directors and partners, or any such controlling
person, and such indemnified party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
(and, to the extent that the indemnifying party shall wish, to direct) the
defense thereof at the indemnifying party's own expense, in which event the
defense shall be conducted by recognized counsel chosen by the indemnifying
party and approved by the indemnified party (whose approval shall not
unreasonably be withheld) and the indemnified party may participate in such
defense at its own expense (unless it is advised by counsel that actual or
potential differing interests or defenses exist or may exist, in which case such
expenses shall be paid by the indemnifying party, provided that the indemnifying
party shall not be required to pay the expenses for more than one counsel for
all such indemnified parties).
7. TRANSFER; OWNERSHIP. Subject to Section 5, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company referred to in Section 1 by the holder hereof in person or by a
duly authorized attorney, upon surrender of this Warrant, with an assignment,
acceptable to the Company, duly completed, at which time a new Warrant shall be
made and delivered by the Company, of the same tenor as this Warrant but
registered in the name of the transferee. The holder of this Warrant, by taking
or holding the same, consents and agrees that this Warrant, when endorsed in
blank, shall be deemed negotiable, and that the holder hereof, when this Warrant
shall have been so endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant and to
transfer this Warrant on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered holder hereof as the owner hereof for all purposes. Any transfer
of this Warrant shall be made in compliance with the Securities Act and any
applicable state securities or blue sky laws.
8. EXCHANGE AND REPLACEMENT. Subject to Section 7, this Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 1, for new Warrants of like tenor
and date representing in the aggregate the right to purchase the number of
Shares which may be purchased hereunder, each of such new Warrants to represent
the right to purchase such number of Shares as shall be designated by said
holder hereof at the time of such surrender. Upon receipt by the Company at the
office or agency referred to in Section 1 of evidence reasonably satisfactory to
it of the loss, theft or destruction of this Warrant and of indemnity or
security reasonably satisfactory to it (provided that the written indemnity of
the holder hereof shall be deemed reasonably satisfactory to the Company for
such purposes), the Company will deliver a new Warrant of like tenor and date in
replacement of this Warrant. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any transfer, exchange or
replacement. The Company will pay all expenses and charges
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<PAGE>
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.
9. NOTICES. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be delivered at, or sent by
certified or registered mail to, James F. Knott, 4405 Brynwood Drive, Quail
West, Naples FL 33999, or to such other address as shall have been furnished to
the Company in writing by the holder hereof. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
at, or sent by certified or registered mail to, 633 Seventeenth, Suite 1550,
Denver, Colorado 80202, Attn: President, or to such other address as shall have
been furnished in writing to the holder by the Company. Any notice so addressed
and mailed by registered or certified mail or otherwise delivered, shall be
deemed to be given when actually received by the addressee.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
11. MISCELLANEOUS. This Warrant will be binding upon any partnership or
corporation succeeding to the Company by consolidation or acquisition of all or
substantially all of the Company's assets, and upon any successor or assign of
the holder hereto. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against whom enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, Tipperary Corporation has caused this Warrant to be
signed by its duly authorized officers, under its corporate seal, to be dated
February 9, 2000.
TIPPERARY CORPORATION
By: /s/ David L. Bradshaw
-------------------------------------------
David L. Bradshaw, President and
Chief Executive Officer
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<PAGE>
Annex I
TIPPERARY CORPORATION
PROVISIONS AS TO ADJUSTMENT OF
EXERCISE PRICE AND NUMBER OF SHARES
ISSUED UPON OCCURRENCE OF CERTAIN EVENTS
The Exercise Price and the number of Shares issuable upon the exercise of
the annexed Warrant to purchase shares of TIPPERARY CORPORATION, a Texas
corporation (herein and in this Warrant referred to as the "Company"), shall be
subject to adjustment from time to time as hereinafter provided; however, that
in no event shall the Exercise Price be increased to a price greater than Two
Dollars and no/100 ($2.00) per Share, except as provided by paragraph (C)
hereof. Upon each adjustment of the Exercise Price, the holder of this Warrant
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Shares obtained by multiplying the number of
Shares purchasable pursuant hereto immediately prior to such adjustment by a
fraction, the numerator of which is the Exercise Price in effect immediately
prior to such adjustment and the denominator of which is the Exercise Price
resulting from such adjustment. In making the adjustments to the Exercise Price
and the number of Shares issuable upon the exercise of this Warrant, the
following provisions shall be applicable:
(A) If and whenever the Company shall issue or sell any Shares for
consideration per Share at less than the Market Price (as hereinafter defined)
of such Shares on the date of such issue or sale, then forthwith upon such issue
or sale the Exercise Price in effect immediately prior thereto shall be adjusted
to an amount (calculated to the nearest cent) determined by dividing (i) an
amount equal to the sum of (a) the number of Shares outstanding immediately
prior to such issue or sale multiplied by the Exercise Price in effect
immediately prior to such issue or sale, and (b) the consideration, if any,
received by the Company upon such issue or sale by (ii) the total number of
Shares outstanding immediately after such issue or sale; provided, however, that
no adjustment shall be made hereunder by reason of:
(i) the grant of this Warrant or the issuance of Shares upon the exercise
of this Warrant or any other warrant of the Company (except for a
warrant issued after the date hereof the exercise price of which is
less than the Market Price on the date of issuance of such warrant);
(ii) the issuance of 1,163,328 shares at $1.60 per share included in the
purchase price of the acquisition of interests in the Comet Ridge
project and the issuance of 759,494 shares at $1.58 per share , all of
which are contemplated in connection with the transaction with which
this Warrant is issued; or
(iii) the grant by the Company of options to purchase Shares in connection
with any purchase or option plan for the benefit of employees of the
Company, or any affiliates or subsidiaries thereof.
No adjustment of the Exercise Price shall be required to be made by the Company
and no notice hereunder must be given if the amount of any required adjustment
is less than 5% of the Exercise Price. In such case any such adjustment shall
be carried forward and shall be made (and notice thereof shall be given
hereunder) at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to not less
than 5% of the Exercise Price; provided, however, any such adjustment, whether
or not it is less than 5% of the Exercise Price, shall be made upon exercise.
(B) For the purposes of paragraph (A), the following provisions (i)
through (vi), inclusive, shall also be applicable:
(i) If, at the time Shares are issued and sold upon the conversion or
exchange of Convertible Securities or upon the exercise of rights or
options previously granted by the Company, the
Annex - Page 1
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price per Share for which such Shares are issued (determined by
dividing (a) the total amount, if any, received by the Company as
consideration for such Convertible Securities or for the granting of
such rights or options, plus the aggregate amount of additional
consideration paid to the Company upon the conversion or exchange of
such Convertible Securities (which, if so provided in such Convertible
Securities, shall be deemed to be equal to the outstanding principal
amount of the indebtedness represented by such Convertible Securities)
or upon the exercise of such rights or options, by (b) the total
number of Shares issued upon the conversion or exchange of such
Convertible Securities or upon the exercise of such rights or options)
shall be less than the Exercise Price in effect immediately prior to
such issue, sale or exercise, then the adjustments provided for by the
first paragraph of this Annex I and paragraph (A) shall be made. In
making the adjustment of the Exercise Price provided for by paragraph
(A), the amount described in clause (a) of this paragraph (B)(i) shall
be considered the consideration received by the Company upon the issue
or sale of the Shares for purposes of clause (i)(b) of paragraph (A).
(ii) In case at any time any Shares or Convertible Securities or any rights
or options to purchase any Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor without
deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. In case any Shares or Convertible Securities or
any rights or options to purchase any Shares or Convertible Securities
shall be issued or sold, in whole or in part, for consideration other
than cash, the amount of the consideration other than cash received by
the Company in exchange for the issue or sale of such Convertible
Securities shall be deemed to be the fair value of such consideration
as determined in good faith by the board of directors of the Company,
without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company
in connection therewith; provided that if the holder or holders of at
least 66-2/3% of the Warrant Shares purchasable under this Warrant
shall request in writing, the value of such consideration shall be
determined by an independent expert selected by such holders, the
costs and expenses of which shall be borne by the Company, and, if the
value of such consideration as so determined is less than the value
determined by the board of directors of the Company, the lesser value
shall be utilized in calculating the consideration per Share received
by the Company for purposes of making the adjustment provided by
paragraph (A). In the event of any merger or consolidation of the
Company in which the Company is not the surviving corporation or in
the event of any sale of all or substantially all of the assets of the
Company for stock or other securities of any corporation, the Company
shall be deemed to have issued a number of Shares for stock or
securities of such other corporation computed on the basis of the
actual exchange ratio on which the transaction was predicated and for
consideration that is equal to the fair market value on the date of
such transaction of such stock or securities of the other corporation,
and if any such calculation results in adjustment of the Exercise
Price, the determination of the number of Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for purposes of paragraph (A), shall be made
after giving effect to such adjustment of the Exercise Price.
(iii) The number of Shares outstanding at any given time shall not include
Shares that have been redeemed by the Company and not canceled, if
any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an
issue or sale of Shares for purposes of paragraph (A).
(iv) "Market Price" shall mean the lower of (a) the average closing sales
prices of Shares recorded on the principal national securities
exchange on which the Shares are listed or in a national market system
for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the
domestic over-the-
Annex - Page 2
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counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined. If the Shares are
not listed on any national securities exchange or admitted for trading
in any national market system or traded in the domestic over-the-
counter market, the Market Price shall be the higher of (y) the book
value of the Shares as determined by a firm of independent public
accountants of recognized standing selected by the board of directors
of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z)
the fair market value of the Shares determined in good faith by the
board of directors of the Company, provided that if the holder or
holders of at least 66-2/3% of the Warrant Shares purchasable under
the Warrant shall request in writing, the fair market value of the
Shares shall be determined by an independent investment banking firm
or other independent expert selected by such holders and reasonably
satisfactory to the Company, the costs and expenses of which shall be
born by the Company, which determination shall be as of a date which
is within 15 days of the date as of which the determination is to be
made.
(v) Anything herein to the contrary notwithstanding, in case the Company
shall issue any Shares in connection with the acquisition by the
Company of the stock or assets of any other corporation or the merger
of any other corporation into the Company under circumstances where,
on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on
the date the number of Shares was determined, the consideration
received for such Shares would not have been less than the Market
Price thereof, such Shares shall not be deemed to have been issued for
less than the Market Price, provided that the date the number of
shares was determined is not greater than ten days prior to the date
of issuance of such shares.
(vi) Anything in clause (ii) of this paragraph (B) to the contrary
notwithstanding, in the case of an acquisition where all or part of
the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the
acquisition pays only part of a maximum dollar purchase price which is
payable in Shares or Convertible Securities and where the balance of
such purchase price is deferred or is contingently payable under a
formula related to earnings over a period of time, (a) the
consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such
part of the total consideration as the portion of the dollar purchase
price then paid in Shares or Convertible Securities bears to the total
maximum dollar purchase price payable in Shares or Convertible
Securities and (b) in connection with each issuance of additional
Shares or Convertible Securities pursuant to the terms of the
agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the
portion of the dollar purchase price then and theretofore paid in
Shares or Convertible Shares bears to the total maximum dollar
purchase price payable in Shares or Convertible Securities multiplied
by a fraction the numerator of which shall be the number of Shares (or
in the case of Convertible Securities other than capital stock of the
Company, the aggregate principal amount of such Convertible
Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other
than capital stock of the Company, the aggregate principal amount of
such Convertible Securities) then and theretofore issued under such
acquisition agreement. In the event only a part of the purchase price
for an acquisition is paid in Shares or Convertible Securities in the
manner referred to in this clause (vi), the term "total consideration"
as used in this clause (vi) shall mean that part of the aggregate
consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this
clause (vi), as determined by the board of directors of the Company.
(C) In the case at any time the Company shall subdivide its outstanding
Shares into a greater number of Shares, then from and after the record date for
such subdivision the Exercise Price in effect
Annex - Page 3
<PAGE>
immediately prior to such subdivision shall be proportionately reduced and the
number of Shares purchasable upon the exercise of this Warrant shall be
correspondingly increased, and, conversely, in case the outstanding Shares shall
be combined into a smaller number of Shares, then from and after the record date
for such combination the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
decreased.
(D) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Shares (or any
other securities of the Company then issuable upon the exercise of this Warrant)
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Shares (or such other securities) then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holder hereof shall thereafter have
the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant and in lieu of the Shares (or other
securities) of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Shares (or other securities) equal to the number of
Shares (or other securities) immediately theretofore so purchasable and
receivable had such reorganization, reclassification, consolidation, merger or
sale not taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the holder of this Warrant to the
end that the provisions hereof (including, without limitation, provisions for
adjustment of the Exercise Price and of the number of Shares (or other
securities) purchasable upon the exercise of this Warrant and for the
registration thereof as provided in Section 6 of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof (including
an immediate adjustment, by reason of such consolidation, merger or sale, of the
Exercise Price to the value of the Shares (or other securities) reflected by the
terms of such consolidation, merger or sale if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). In the event of a consolidation or merger of the Company with
or into another corporation as a result of which a greater or lesser number of
securities of the surviving corporation are issuable to holders of Shares in
respect of the number of Shares outstanding immediately prior to such
consolidation or merger, then the Exercise Price in effect immediately prior to
such consolidation or merger shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding Shares. The Company
shall not effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof the surviving or successor
corporation (if other than the Company) resulting from such consolidation or
merger of the corporation purchasing such assets shall assume, by written
instrument executed and mailed to the registered holder hereof at the last
address of such holder appearing on the books of the Company, the obligation to
deliver to such holder such Shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and containing the express assumption of such surviving or successor
corporation of the due performance of every provision of this Warrant to be
performed by the Company and of all liabilities and obligations of the Company
hereunder.
(E) In case at any time the Company shall pay any dividend on or make any
other distribution with respect to Shares (or any other securities of the
Company then issuable upon the exercise of the Warrant) that is payable in
Shares, Convertible Securities, any other securities of the Company or other
stock, securities or assets, other than cash, then thereafter, and in lieu of
any adjustment of the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the holder of this Warrant, upon any exercise of the
rights represented hereby, shall be entitled to receive the number of Shares (or
other securities) being purchased upon such exercise and, in addition to and
without further payment, the Shares, Convertible Securities, other Securities of
the Company or other stock, securities or assets which the holder of this
Warrant would have received by way of such distributions, as if continuously
since the date of the Warrant (or, if this Warrant shall have been issued
pursuant to Section 7 of this Warrant, the date of the predecessor Warrant to
which this Warrant relates), such holder had been the record holder of the
number of Shares (or other securities) then being purchased upon the exercise
hereof and had retained all such
Annex - Page 4
<PAGE>
Shares, Convertible Securities, other securities of the Company or other stock,
securities or assets distributable with respect to such Shares (or other
securities) then being purchased upon the exercise hereof and, furthermore, all
cash, stock, securities or assets payable as dividends or distributions with
respect to the foregoing distributable securities or assets and originating
directly or indirectly therefrom. The Company shall reserve and retain in
escrow from any such dividend or distribution of Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets, and from
any such dividends or distributions with respect thereto and originating
directly or indirectly therefrom, such Shares, Convertible Securities, other
securities of the Company and other stock, securities, assets and cash as shall
be necessary to fulfill its obligations to the holder hereof pursuant to this
paragraph (E).
(F) If at any time conditions arise by reason of action taken by the
Company, which in the good faith opinion of the board of directors of the
Company, are not adequately covered by the provisions of this Annex I, and which
might materially adversely affect the rights of the holder of this Warrant, the
Company shall appoint a firm of independent public accountants of recognized
standing (which may be the regular accountants or auditors of the Company),
which shall give their opinion as to the adjustments, if any, in the Exercise
Price and the number of Shares purchasable upon the exercise of this Warrant, or
other change in the rights of the holder hereof, on a basis consistent with the
other provisions of this Annex I, necessary to preserve without diminution the
rights of the holder hereof. Upon receipt of such opinion, the Company shall
forthwith make the adjustments described herein.
(G)(i) Within two (2) days of any adjustment of the Exercise Price or
change in the number of Shares purchasable upon the exercise of
this Warrant made pursuant to the above paragraphs (A) through
(F) or any change in the rights of the holder of this Warrant by
reason of the occurrence of events described such paragraphs, the
Company shall give written notice by certified or registered mail
to the registered holder of this Warrant at the address of such
holder as shown on the books of the Company, which notice shall
describe the event requiring such adjustments, the Exercise Price
resulting from such adjustment, the increase or decrease in the
number of Shares purchasable upon the exercise of this Warrant,
and any other change in the rights of such holder, and set forth
in reasonable detail the method of calculation of such
adjustments and the facts upon which such calculations are based.
Within three (3) days of receipt from the holder hereof of a
written request therefor (which request shall not be made more
than once each calendar quarter), the Company shall give written
notice by certified or registered mail to such holder at his
address as shown on the books of the Company of the Exercise
Price in effect as of the date of receipt of such written
request, and the number of Shares purchasable or the number or
amount of other shares of stock, securities or assets receivable
as of such date, and set forth in reasonable detail the method of
calculation of such numbers.
(ii) Upon each adjustment of the Exercise Price and each change in the
number of Shares purchasable upon the exercise of this Warrant,
and change in the rights of the holder of this Warrant by reason
of the occurrence of other events herein set forth, then and in
each case, upon written request of the holder of this Warrant
(which request shall be made not more often than once each
calendar year), the Company will at its expense promptly obtain
an opinion of independent public accountants reasonably
satisfactory to each holder stating the then effective Exercise
Price and the number of Shares then purchasable, or specifying
the other shares of stock, securities or assets and the amount
thereof then receivable, and setting forth in reasonable detail
the method of calculation of such numbers and the facts upon
which such calculations are based. The Company will promptly
mail a copy of such opinion to the registered holder hereof.
Annex - Page 5
<PAGE>
(H) In case at any time:
(i) The Company shall pay any dividend payable in capital stock on its
outstanding Shares or make any distribution (other than regular cash
dividends) to the holders of Shares;
(ii) The Company shall offer for subscription pro rata to the holders of
Shares any additional capital stock or other rights;
(iii) There shall be authorized any capital reorganization or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all of
its assets to, another corporation; or
(iv) There shall be authorized or commence a voluntary or involuntary
dissolution, liquidation or winding up of the Company,
then, in one or more of said cases, the Company shall given written notice by
certified or registered mail to the holder of this Warrant at the address of
such holder as shown on the books of the Company on the date on which (1) the
books of the Company shall close or a record shall be taken for such dividend,
distribution, or subscription rights, or (2) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place or be voted upon by the shareholders of the Company,
as the case may be. Such notice shall also specify the date as of which the
holders of record of Shares shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Such written notice shall be given at least
thirty (30) days prior to the action in question and no less than thirty (30)
days prior to the record date or the date on which the Company's books are
closed in respect thereto.
Annex - Page 6
<PAGE>
EXHIBIT A
- ---------
SUBSCRIPTION FORM
To be Executed by the Registered Holder
Desiring to Exercise the Within Warrant of
TIPPERARY CORPORATION
The undersigned registered holder hereby exercises the right to purchase
____________ Shares (not less than 10,000 Shares, except for the final exercise
of this Warrant, which may be for a lesser number of Shares) covered by the
within Warrant according to the conditions thereof, and herewith makes payment
of the Exercise Price of such Shares, $___________.
Name of Registered Holder:
----------------------------------------------
Address of Registered Holder:
----------------------------------
----------------------------------
Registered Holder's Tax I.D. No.:
------------------------------
Name of Nominee (if applicable):
------------------------------
Address of Nominee:
--------------------------------------------
--------------------------------------------
Nominee's Tax I.D. No.:
----------------------
Signature of
Registered Holder:
--------------------------------------------
Title of Signing Officer
or Agent (if any):
--------------------------------------------
Dated: __________________, _______.
