<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 December 31, 1999
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 February 14, 2000
- ---------------------------- -----------------------------
Common Stock, $.02 par value 18,052,157 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
December 31, 1999 and September 30, 1999 1
Consolidated Statement of Operations
Three months ended December 31, 1999 and 1998 2
Consolidated Statement of Cash Flows
Three months ended December 31, 1999 and 1998 3
Notes to Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,314 $ 430
Receivables 1,589 1,525
Inventory - 209
Other current assets 1,357 899
Properties held for sale (Note 3) 15,025 -
------------- -------------
Total current assets 23,285 3,063
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Property, plant and equipment, at cost:
Oil and gas properties, full cost
method 30,260 136,562
Other property and equipment 982 2,402
------------- -------------
31,242 138,964
Less accumulated depreciation, depletion
and amortization (1,625) (95,642)
------------- -------------
Property, plant and equipment, net 29,617 43,322
------------- -------------
Noncurrent portion of deferred income
taxes, net 1,573 1,573
Other noncurrent assets 43 47
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$ 54,518 $ 48,005
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable -
related party $ 174 $ 174
Accounts payable and accrued
liabilities 1,543 2,418
Royalties payable 227 201
------------- -------------
Total current liabilities 1,944 2,793
------------- -------------
Long-term debt 7,800 11,800
Long-term notes payable - related party 10,990 9,465
Commitments and contingencies (Note 5)
Minority interest 441 495
Manditorily redeemable preferred stock;
$1.00 par value; 10,000,000 shares
authorized;
3,429,114 shares Series A
Cumulative Convertible
issued and outstanding
at December 31, 1999 4,660 -
Stockholders' equity
Common stock; $.02 par value;
20,000,000 shares authorized;
18,061,755 issued and 18,052,157
outstanding at December 31, 1999;
15,161,755 issued and 15,152,157
outstanding at September 30, 1999 361 303
Capital in excess of par value 113,151 107,977
Accumulated deficit (84,804) (84,803)
Treasury stock, at cost; 9,598 shares (25) (25)
------------- -------------
Total stockholders' equity 28,683 23,452
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$ 54,518 $ 48,005
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
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TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues $ 2,919 $ 1,749
Costs and expenses:
Operating 1,329 1,145
General and administrative 669 672
Depreciation, depletion and amortization 437 1,160
Write-down of oil and gas properties - 5,727
---------- ----------
Total costs and expenses 2,435 8,704
---------- ----------
Operating income (loss) 484 (6,955)
Other income (expense):
Interest income 6 4
Interest expense (544) (414)
Foreign currency exchange gain (loss) (1) 26
---------- ----------
Total other expense (539) (384)
---------- ----------
Loss before income tax (55) (7,339)
Current income tax expense - -
---------- ----------
Net loss before minority interest (55) (7,339)
Minority interest in loss of subsidiary 54 3
---------- ----------
Net loss $ (1) $ (7,336)
========== ==========
Net loss per share - basic and diluted $ - $ (.55)
========== ==========
Weighted average shares outstanding 15,436 13,351
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1) $ (7,336)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation, depletion and amortization 437 1,160
Write-down of oil and gas properties - 5,727
Minority interest in loss of subsidiary (54) (3)
Change in assets and liabilities:
(Increase) decrease in receivables (64) 313
Increase in inventory - (1)
Increase in other current assets (458) (168)
Decrease in accounts payable, and
accrued liabilities (875) (59)
Increase in royalties payable 26 3
Other (1) -
---------- ----------
Net cash used in operating activities (990) (364)
---------- ----------
Cash flows from investing activities:
Proceeds from asset sales 714 705
Payments in connection with divestiture of
assets (15) -
Capital expenditures (2,212) (1,385)
---------- ----------
Net cash used in investing activities (1,513) (680)
---------- ----------
Cash flows from financing activities:
Proceeds from borrowing 1,586 2,800
Principal repayments (4,061) (4,700)
Proceeds from issuance of preferred and
common stock 8,692 2,375
Proceeds from sale of stock in subsidiary - 610
Proceeds from issuance of warrants 1,200 310
Payments for debt and equity financing (30) (86)
---------- ----------
Net cash provided by financing
activities 7,387 1,309
---------- ----------
Net increase in cash and cash equivalents 4,884 265
Cash and cash equivalents at beginning of period 430 633
---------- ----------
Cash and cash equivalents at end of period $ 5,314 $ 898
========== ==========
</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 (the "Company") at December 31, 1999, and the results of
its operations for the three-month periods ended December 31, 1999 and 1998.
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 majority-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
transactions and 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, if any, 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 preferred stock
accrues cumulative dividends of 7.75% of the face value per share ($1.58) per
year payable semiannually in arrears, on June 30 and December 31. Dividends on
the preferred stock are payable in common stock at the option of the Company
based on the greater of the per share book value as set forth in its most recent
published financial statements or the average closing market price of the common
stock during the preceding 10 trading days.
The preferred stock, plus accumulated but unpaid dividends, is convertible, at
the option of the holder, into common stock at any time after issuance and prior
to maturity or earlier redemption. Each share of preferred stock is convertible
into one share of common stock. The number of shares of common stock issuable
upon conversion of the preferred stock is subject to customary anti-dilution
provisions. The preferred stock is callable or redeemable by the Company at
face amount plus accumulated but unpaid dividends, five years after issuance of
the preferred stock, with mandatory redemption 10 years after issuance at this
price. The preferred stock is subordinated to all existing and future debt and
has no voting rights, other than as a class as provided by Texas law.
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 will be used for general
corporate purposes.
4
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NOTE 3 - OIL & GAS PROPERTIES HELD FOR SALE
Property held for resale at December 31, 1999, consists of substantially all of
the Company's U.S. oil and gas properties and equipment inventory. In November
1999, the Company announced its plans to divest its then existing domestic oil
and gas properties and redirect its focus towards increasing reserves and
production of natural gas from coalbed methane properties in connection with the
financing from Slough discussed above. The Company has engaged an investment
banking firm to act as the Company' financial advisor in selling the Company'
proved domestic reserves as well as certain other properties for which proved
reserves have not been established. It is anticipated that these properties will
be sold during March and April 2000.
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 plus equipment inventory had a total carrying value of $15,025,000 at
December 31, 1999. The standardized measure of discounted after-tax future net
cash flows of the U.S. oil and gas proved reserves reported as of September 30,
1999, was $22,308,000. The carrying value of the properties held for sale will
be 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. During the quarter ended
December 31, 1999, the Company reported operating revenues of $2,457,000 and
operating expenses of $1,020,000, or net income of $1,437,000 from its domestic
oil and gas operations. 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
first quarter of fiscal 2000 is $244,000 associated with U.S. properties for the
period prior to the date the Company decided to sell the assets.
It is anticipated that the proceeds from the asset sales will be dedicated first
to the repayment of bank debt and then to repay the subordinated promissory note
to Slough in the amount of $6,500,000, with any excess used as working capital.
During December 1999, the Company reported net proceeds of $714,000 from the
sale of a property and used $700,000 from these proceeds to reduce bank debt
from $7,800,000 to $7,100,000 in January 2000.
NOTE 4 - LOSS 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
December 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Numerator:
Net loss $ (1) $ (7,336)
======== ========
Denominator:
Weighted average shares outstanding 15,436 13,351
Effect of dilutive securities:
Assumed conversion of dilutive options - -
-------- --------
Weighted average shares and dilutive
potential common shares 15,436 13,351
======== ========
Basic earnings (loss) per share $ - $ (0.55)
======== ========
Diluted earnings (loss) per share $ - $ (0.55)
======== ========
</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 quarters ended December 31, 1999 and 1998, respectively, as their effect
was antidilutive.
5
<PAGE>
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.
The complaint, which concerns the Comet Ridge coalbed methane project in
Queensland, Australia, alleges that Tri-Star Petroleum Company ("Tri-Star"),
operator of the project, has failed or refused to perform its duties under the
operating agreement, has failed to operate in a good and workmanlike manner and
has breached a mediation agreement between the parties. The Company seeks the
removal of Tri-Star as operator, an accounting of expenses charged to the joint
interest account and unspecified amounts for damages for breach of contract.
Among the allegations in the complaint are that Tri-Star has refused to allow
the Company to inspect the books and records of the project, has attempted to
block the Company's right to take its proportionate share of gas production in
kind, may have improperly billed expenses to the joint interest owners and has
an impermissible conflict of interest precluding it from acting as a reasonable
and prudent operator. Tri-Star has answered the complaint denying the claims
and has asserted counterclaims against the Company for breach of the operating
agreement and mediation agreement between the parties and interference with
prospective contracts and business relations. Tri-Star filed a counterclaim
seeking monetary damages, but has not pleaded for any specific sum. Two
additional non-operating joint owners have intervened in the action as
plaintiffs, asserting a claim for the removal of Tri-Star as operator, and other
claims similar to those asserted by the Company. Discovery is in process.
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 - SUBSEQUENT EVENTS
In February 2000, the Company acquired additional interests in the Comet Ridge
coalbed methane project in Queensland, Australia for approximately $5,161,000.
The purchase price included $3,300,000 in cash and 1,163,328 shares of
restricted common stock valued at $1.60 per share. For the cash portion of the
acquisition, the Company used $900,000 of cash on hand and $2,400,000 received
from the sale of 1,518,988 shares of restricted common stock at $1.58 per share
to two individual investors. The investors also received warrants to acquire a
total of 288,000 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 31,
2001 and ending December 31, 2009.
The total additional interest acquired was 5.5% in capital-bearing interest,
5.7% in leasehold ownership, and a 5.13% net revenue interest before project
payout. After project payout, the total acquired interests will be a capital-
bearing and leasehold ownership of 6.15% and a net revenue interest of 5.54%.
The acquisition of these additional interests increased the Company's estimated
proved gas reserves by approximately 15 billion cubic feet (Bcf) and increased
the pretax present value of future net revenues, discounted 10%, by
approximately $6,700,000. Following these acquisitions, the Company's interest
in the Comet Ridge project is 61.25% of capital costs and 58.20% of operating
expenses, and its net revenue interest is 51.47% and 47.80% from the Fairview #1
through #20 wells and the Fairview #21 through #28 wells, respectively, prior
to project payout. Subsequent to project payout, the Company's interest is
51.5% of capital costs and operating expenses, and its net revenue interest is
45.52% from the Fairview #1 through #20 wells and 42.35% from the Fairview #21
through #28 wells.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 December 31, 1999, 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 $10,000,000 refinancing (discussed in more detail below) and 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% 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 December 31, 1999, the Company's 90%-owned Australian subsidiary, Tipperary
Oil & Gas (Australia) Pty Ltd ("TOGA"), owned a 55.75% non-operating capital
interest in the project. The Company acquired additional interests in February
2000, bringing its capital-bearing interest to 61.25%. See Note 6 to the
Consolidated Financial Statements herein. The Company has also acquired an
Authority to Prospect ("ATP") covering approximately 370,000 acres near the
Comet Ridge project's ATP 526 and expects to be issued another 850,000-acre ATP
in the vicinity of ATP 526.
Financial Condition
The Company had cash and temporary investments of $5,314,000 as of December 31,
1999 compared to $430,000 as of September 30, 1999. At December 31, 1999, the
Company had working capital of $21,341,000 compared to working capital of
$270,000 as of September 30, 1999. Working capital as of December 31, 1999,
includes $15,025,000 of assets held for sale. In recent years, the Company's
primary sources of funding have been debt and equity financing, operating cash
flows, and sales of producing properties and other assets. During the three
months ended December 31, 1999, cash flows were provided by debt and equity
financing from Slough and by sales of oil and gas assets. These proceeds were
used to reduce bank debt and for capital expenditures and operating activities.
Net cash used in operating activities was $990,000 during the first quarter of
fiscal 2000 compared to $364,000 for the prior year quarter.
During the three months ended December 31, 1999, net cash provided by financing
activities was $7,387,000. Total borrowings of $1,586,000 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
$2,000,000 previously advanced to the Company. See Note 3 to the Consolidated
Financial Statements herein. The Company incurred financing costs of $108,000
related to this transaction, used $4,000,000 of the proceeds to reduce bank debt
and anticipates using the remainder for capital expenditures and working
capital. In the prior fiscal year's quarter, proceeds of $6,800,000 from Slough
included loans totaling $2,800,000 and $4,000,000 from the sale of 2,000,000
shares of the Company's common stock. Of the $4,000,000 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 the
Australian reserves, $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 $2,100,000 for working capital and capital
expenditures.
7
<PAGE>
During the three months ended December 31, 1999, net cash flows used by
investing activities were $1,513,000. Capital expenditures incurred totaled
$2,212,000 and proceeds from asset sales totaled $714,000. Costs related to the
Australia operations were approximately $1,125,000. In the Comet Ridge area
approximately $690,000 was expended for the Fairview No. 21 through 28 drilling
project; $210,000 for inventory and gathering system expenses; and $225,000 for
other ongoing capital costs. Domestic expenditures totaled approximately
$1,087,000 and included costs of approximately $847,000 for the purchase of the
non-operating interest in the Hanna Draw Prospect discussed above. Other
domestic expenditures included exploratory costs of approximately $57,000 and
workover and other capital costs of approximately $183,000. A property sale
provided proceeds of $714,000.
During the three months ended December 31, 1998, the Company incurred capital
expenditures of $1,385,000 and received proceeds of $705,000 for the contractual
payment right to revenue from the Comet Ridge project discussed above. A total
of approximately $200,000 was expended for domestic operations and included
$79,000 for the purchase of additional interests in two of the Company's
operated wells, non-producing leasehold costs of $35,000 and development costs
and other capital expenditures of $86,000. Expenditures for the Comet Ridge
project in Queensland, Australia totaled approximately $1,185,000 for the first
quarter of fiscal 1999. Costs of approximately $300,000 were primarily
attributable to seismic data gathering activities. Two additional wells were
drilled and cased. The Company's share of the costs to drill these wells was
approximately $400,000. The remaining $485,000 was expended for gas gathering
and other capital items.
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 quarter of fiscal 2000, the Company hedged 22,500 barrels
(approximately 27%) of its oil production. Net (payments) receipts pursuant to
the Company's hedging activity for the quarters ended December 31, 1999, and
December 31, 1998, were ($93,000) and $23,000, respectively.
As of December 31, 1999, the Company had in place swap agreements for the months
of January through March 2000 covering 15,000 barrels of oil per month at a
floor price of $20.21 per barrel, with the Company retaining 50% of price
increases above the floor. None of the Company's gas production is currently
hedged and the Company does not intend to enter into any further hedges of oil
or gas production beyond March 2000 due to the planned sale of the Company's
domestic assets. The fair value of the hedging contracts as of December 31,
1999, was approximately $(135,000).
The Company's bank credit agreement (the "agreement") contains provisions for
both fixed rate and variable rate borrowings. The loan agreement, as amended,
provides for a two-tranche revolver with interest at either the London Interbank
Offered Rate ("LIBOR") plus 2.5%, or the bank's Base Rate on the first
$12,000,000 and either LIBOR plus 3.8% or the bank's Base Rate plus 1% on the
remainder. The LIBOR-based option may be selected for periods not exceeding 90
days. The outstanding bank debt at December 31, 1999, and September 30, 1999,
was $7,800,000 and $11,800,000, respectively, under both LIBOR and Base Rate
loans. The weighted average interest rate was 8.5% as of December 31, 1999, and
7.89% as of September 30, 1999. Upon expiration of the revolver (the
"Conversion Date"), the principal balance will convert to a three-year term
loan. The Conversion Date has been extended by the bank to October 4, 2001.
The borrowing base is subject to redetermination semiannually and is currently
$7,100,000. The Company is obligated to pay a commitment fee of 3/8% per annum
on the difference between the bank's average outstanding loan balance and the
borrowing base. The bank agreement provides that the Company may not pay
dividends or incur additional debt without the prior approval of the bank.
At December 31, 1999, $4,000,000 of proceeds from the recent Slough financing
was used to reduce bank debt from $11,800,000 to $7,800,000. In January 2000,
the Company used property sale proceeds to make an additional principal payment
of $700,000, bringing the loan balance to $7,100,000. The Company anticipates
retirement of bank debt with proceeds from domestic asset sales. See Note 3 to
the Consolidated Financial Statements herein.
Outstanding loans due Slough at December 31, 1999 include a corporate loan in
the amount of $6,500,000 and a loan for $4,664,000 for the development of the
Company's Comet Ridge project. Interest is due quarterly on the subordinated
$6.5 million note at the 90-day London Interbank Offered Rate plus 3.5%. The
weighted-average interest rate was 9.5% at December 31, 1999. The unpaid
principal balance of this note is due and payable March 11, 2002. 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
8
<PAGE>
Fairview #1 through #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.
The Company expects to pay part or all of the $6.5 million corporate note
balance with proceeds from domestic asset sales.
With the anticipated sale of the Company's domestic producing properties,
operating cash flow will decrease and the cash on hand from the sale of
preferred stock to Slough and subsequent proceeds from 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
currently 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 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 have to later be reduced.
Results of Operations - Comparison of the Three Months Ended December 31, 1999
and 1998
The Company reported a net loss of $1,000 for the three months ended December
31, 1999, compared to a net loss of $7,336,000 for the three months ended
December 31, 1998. The loss for the first quarter of fiscal 1999 included a
non-cash write-down of U.S. oil and gas properties totaling $5,727,000, due to a
significant decrease in oil and gas prices. Operating income increased
$7,439,000 to $484,000 in the fiscal 2000 quarter from an operating loss of
$6,955,000 in the corresponding fiscal 1999 quarter. This improvement is
primarily due to the aforementioned write-down of oil and gas assets and to
higher oil and gas prices. The following are detailed comparisons of the
components of the respective periods.
Operating revenues for the three months ended December 31, 1999, increased
$1,170,000, or 67%, to $2,919,000 from $1,749,000 reported for the corresponding
fiscal 1999 period. Oil volumes produced during the fiscal 2000 quarter
decreased 15% to 83,000 barrels from 98,000 barrels in the prior year's quarter,
decreasing revenue by $153,000. Domestic gas volumes produced decreased 15% to
279,000 Mcf compared to 327,000 Mcf in the quarter ended December 31, 1998,
resulting in a $71,000 decrease in revenues. These volume decreases are
attributable to natural production declines. Average oil prices increased 110%
to $21.52 for the three months ended December 31, 1999, from $10.23 for the
corresponding prior year's quarter, resulting in a $937,000 increase in revenue.
Gas prices relating to domestic production increased 61% to $2.38 in the current
quarter versus $1.48 in the prior year's quarter, resulting in a $251,000
revenue increase.
Sales from the Company's Comet Ridge project in the fiscal 2000 quarter
increased $199,000 to $422,000 from $223,000 in the corresponding prior year
quarter. Volumes sold increased 135,000 Mcf or 75% from 181,000 Mcf in fiscal
quarter ended December 31, 1998, to 316,000 Mcf in the fiscal quarter ended
December 31, 1999, contributing an increase in revenues of $166,000. The U.S.
dollar equivalent of gas prices received increased 9% to $1.34 per Mcf in the
fiscal 2000 quarter from $1.23 per Mcf in the prior year first quarter,
resulting in an increase in revenues of $35,000. Increased revenue in the Comet
Ridge area resulted primarily from increased sales and higher prices received
under a five-year contract.
Operating expenses increased $184,000, or 16%, to $1,329,000 in the quarter
ended December 31, 1999, from $1,145,000 reported in the corresponding quarter
in fiscal 1999. The Company's average domestic lifting cost per BOE increased
to $7.85 in the three months ended December 31, 1999, from $6.59 in the prior
year's three-month period. This increase was attributable primarily to an
increase in production taxes resulting from higher oil and gas prices in the
first quarter of fiscal 2000 as compared to the corresponding quarter of fiscal
1999. The average lifting cost related to Comet Ridge production was $6.43 per
BOE for the quarter ended December 31, 1999, a decrease of 1% as compared to
$6.49 per BOE in the prior year quarter. The Company believes that operating
expenses for the Comet Ridge project have been higher than they should be and is
currently involved in litigation with the operator concerning this and other
matters. See Note 5 to the Consolidated Financial Statements herein.
9
<PAGE>
General and administrative expenses remained flat decreasing $3,000 to $669,000
in the quarter ended December 31, 1999, from $672,000 in the quarter ended
December 31, 1998. Costs related to Comet Ridge project litigation were
approximately $140,000 during both the fiscal 2000 and fiscal 1999 quarters.
Depreciation, depletion and amortization ("DD&A") expense for the three months
ended December 31, 1999, decreased $723,000, or 62%, to $437,000 from
$1,160,000 in the prior year quarter. 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 increased $130,000, or 31%, to $544,000 in the first quarter of
fiscal 2000 from $414,000 in the first quarter of fiscal 1999. The increase was
primarily attributable to an increase in interest rates and to an increase in
debt due Slough for the Comet Ridge project financing.
The Company recognizes foreign currency exchange gains and losses related to
payments received in Australia's currency for coalbed methane gas sales from the
Comet Ridge project. Changes in the exchange rate during the fiscal 1999 quarter
resulted in a net increase of $26,000 in U.S. dollar equivalent revenues
received. The exchange rates remained generally flat during the quarter ended
December 31, 1999.
10
<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
- ------
On December 23, 1999, the Company issued the following securities to
Slough Estates USA Inc., its largest shareholder. 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 Company issued 6,329,114 shares of 1999 Series A Convertible
Cumulative Preferred Stock at $1.58 per share. The preferred stock
accrues cumulative dividends of 7.75% of the face value per share
($1.58) per year payable semiannually in arrears, on June 30 and
December 31. Dividends on the preferred stock are payable in common
stock at the option of the Company based on the greater of the per
share book value as set forth in its most recent published financial
statements or the average closing market price of the common stock
during the preceding 10 trading days. The preferred stock plus
accumulated but unpaid dividends are convertible into common stock at
any time after issuance at the option of the holder and prior to
maturity or earlier redemption. Each share of preferred stock is
convertible into one share of common stock. The number of shares of
common stock issuable upon conversion of the preferred stock will be
subject to customary anti-dilution provisions. The preferred stock is
callable or redeemable by the Company at face amount plus accumulated
but unpaid dividends, five years after issuance of the preferred
stock, with mandatory redemption 10 years after issuance at this
price. The preferred stock is subordinated to all existing and future
debt and has no voting rights, other than as a class as provided by
Texas law. Upon the closing of this transaction, 2,900,000 shares of
common stock were issued upon the immediate conversion of 2,900,000
shares of the 1999 Series A Convertible Cumulative Preferred Stock.
Slough Estates USA Inc. 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.
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 will
be used for general corporate purposes.
Item 3. Defaults Upon Senior Securities
- ------
None
Item 4. Submission of Matters to a Vote of Security Holders
- ------
None
Item 5. Other Information
- ------
None
11
<PAGE>
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
3.11 Articles of Amendment of the Articles of Incorporation of
Tipperary Corporation adopted January 25, 2000, filed
herewith.
3.12 Statement of Resolution Establishing a Series of Shares
dated December 23, 1999, filed herewith.
10.60 Warrant to Purchase the Registrant's common stock
dated December 23, 1999, issued to Slough Estates USA Inc.,
filed herewith.
10.61 Registration Rights Agreement between Tipperary Corporation
and Slough Estates USA Inc., dated December 23, 1999, filed
herewith.
(b) Reports on Form 8-K:
-------------------
On December 15, 1999, the issuer filed a Current Report on Form 8-K
disclosing the agreement entered into with Slough Estates USA Inc.
("Slough") for the sale of 6,329,114 shares of a new series of
convertible cumulative preferred stock from the Company for $10
million.
12
<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: February 14, 2000 By: /s/ David L. Bradshaw
-----------------------------------
David L. Bradshaw, President, Chief
Executive
Officer and Chairman of the Board
of Directors
Date: February 14, 2000 By: /s/ Lisa S. Wilson
-----------------------------------
Lisa S. Wilson, Chief Financial
Officer and Principal Accounting
Officer
13
<PAGE>
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
TIPPERARY CORPORATION
ARTICLE ONE
The name of the corporation is Tipperary Corporation.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted on
January 25, 2000.
Article Four is amended in its entirety which shall read as follows:
ARTICLE FOUR
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is seventy million (70,000,000) shares, consisting
of ten million (10,000,000) shares of Cumulative Preferred Stock of the par
value of one dollar ($1.00) per share, ten million (10,000,000) shares of
Non-cumulative Preferred Stock of the par value of one dollar ($1.00) per share,
and fifty million (50,000,000) shares of Common Stock of the par value of two
cents ($.02) per share. The Cumulative Preferred Stock and Non-cumulative
Preferred Stock are sometimes hereinafter referred to jointly as the "Preferred
Stock" and shall be equal in rights and preferences and in all respects
identical except as specifically set forth in the preferences, limitations and
relative rights of the Preferred Stock. The preferences, limitations and
relative rights of the Preferred Stock and Common Stock shall be as follows:
(A) PREFERRED STOCK
(1) The shares of each class of Preferred Stock may be divided into and
issued in series. Each such series shall be so designated as to distinguish the
shares thereof from the shares of all other series and classes, and all shares
of the Preferred Stock shall be identical, except as set forth in Section 3(a)
and Section 4 hereof and as to the following relative rights and preferences, as
to which there may be variations between different series:
(a) The rate of dividend:
(b) The price at, and the terms and conditions on which, shares may
be redeemed;
(c) The amount payable upon shares in the event of involuntary
liquidation;
(d) The amount payable upon shares in the event of voluntary
liquidation;
<PAGE>
(e) Mandatory or optional sinking fund provisions, if any, for the
redemption or purchase of shares;
(f) The terms and conditions on which shares may be converted, if the
shares of any series are issued with the privilege of conversion; and
(g) Voting rights, including the number of votes per share, or any
fraction thereof, the matters on which such shares can vote and the
contingencies which make such voting rights effective.
(2) The Board of Directors of the Corporation is hereby authorized, from
time to time, by resolution or resolutions providing for the issuance thereof,
to divide the shares of Cumulative Preferred Stock and Non-cumulative Preferred
Stock into and to establish series thereof, to designate each such series, to
fix and determine the relative rights and preferences of the shares of any
series so established, and to issue and sell any and all of the authorized and
unissued shares of Preferred Stock as shares of any series thereof established
by action of the Board of Directors pursuant hereto.
(3) Except as specifically noted, the following provisions shall apply to
all shares of the Preferred Stock irrespective of class or series:
(a) To the extent that the resolution or resolutions creating any
series of either class of Preferred Stock shall provide that any dividends shall
be paid thereon, the holders of Preferred Stock of each such class and series
shall be entitled to receive on the dates and for the periods hereafter
specified by the Board of Directors, dividends in cash, payable when, if , and
as declared by the Board of Directors out of any funds legally available
therefor, at such rates as shall be determined by the Board of Directors for
the respective series, from the date upon which such shares shall have been
originally issued.
(i) With respect to Cumulative Preferred Stock, such dividends
if any, shall be cumulative from the date of issue, and no dividend (other than
a dividend payable in Common Stock of the Corporation) or other distribution
shall be paid or declared or made on, and no amounts shall be applied to the
purchase or redemption of, Non-cumulative Preferred Stock, the Common Stock or
any other class of stock ranking junior to the Cumulative Preferred Stock as to
dividends or assets unless: (i) full cumulative dividends for all past dividend
periods shall have been paid or declared and set apart for payment, and full
dividends for the then current dividend period shall have been or simultaneously
therewith shall be paid or declared and set apart for payment on outstanding
Cumulative Preferred Stock of all series entitled to receive dividends at the
rates determined for the respective series; and (ii) after giving effect to such
payment of dividends, other distribution, purchase, or payment of dividends,
other distribution, purchase, or redemption, the aggregate capital of the
Corporation applicable to all capital stock of the Corporation then outstanding,
plus the consolidated earned and capital surplus of the Corporation, shall
exceed the aggregate amount payable on involuntary dissolution, liquidation or
winding up of the Corporation on all shares of the Preferred Stock and all stock
ranking prior to or on a parity with the Preferred
2
<PAGE>
Stock as to dividends or assets outstanding after the payment of such dividends,
other distribution, purchase, or redemption. Accumulations of dividends shall
not bear interest. Dividends shall not be paid or declared and set apart for
payment on the Cumulative Preferred Stock of any one series for any dividend
period unless dividends have been or are contemporaneously paid or declared and
set apart for payment on the Cumulative Preferred Stock of all series entitled
thereto for all dividend periods terminating on the same or earlier date.
(ii) With respect to Non-cumulative Preferred Stock, no dividend
(other than a dividend payable in Common Stock of the Corporation) or other
distribution shall be paid or declared or made on, and no amounts shall be
applied to the purchase or redemption of the Common Stock or any other class of
stock ranking junior to the Non-cumulative Preferred Stock as to dividends or
assets unless (i) full cumulative dividends for all past dividend periods shall
have been paid or declared and set apart for payment, and full dividends for the
then current dividend period shall have been or simultaneously therewith shall
be paid or declared and set apart for payment, on outstanding Cumulative
Preferred Stock of all series entitled to receive dividends at the rates
determined for the respective series, (ii) full dividends for the then current
dividend period shall have been or simultaneously therewith shall be paid or
declared and set apart for payment, on outstanding Non-cumulative Preferred
Stock of all series entitled to receive dividends at the rates determined for
the respective series, and (iii) after giving effect to such payment of
dividends, other distribution, purchase, or redemption, the aggregate capital of
the Corporation applicable to all capital stock of the Corporation then
outstanding, plus the consolidated earned and capital surplus of the
Corporation, shall exceed the aggregate amount payable on involuntary
dissolution, liquidation or winding up of the Corporation on all shares of the
Preferred Stock and all stock ranking prior to or on a parity with the Preferred
Stock as to dividends or assets outstanding after the payment of such dividends,
other distribution, purchase, or redemption. Dividends shall not be paid or
declared and set apart for payment on the Non-cumulative Preferred Stock of any
one series for any dividend period unless dividends have been or are
contemporaneously paid or declared and set apart for the payment on Non-
cumulative Preferred Stock of all series entitled thereto for all dividend
periods terminating on the same or earlier date.
(b) In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntarily, or involuntarily, the holders of Preferred
Stock of each class and series then outstanding, without any preference for the
shares of any class or series of Preferred Stock over the shares of any other
class or series of Preferred Stock, shall be entitled to receive in cash out of
the assets of the Corporation, whether capital or surplus or otherwise, before
any distribution of the assets shall be made to the holders of Common Stock or
of any other class of stock ranking junior to the Preferred Stock as to
dividends or assets, the amount determined by the Board of Directors, pursuant
to the authority granted in Paragraph (A)(2) of this Article, to be payable on
the shares of such series in the event of voluntary or involuntary dissolution,
liquidation or winding up, as the case may be, together, in all cases involving
the Cumulative Preferred Stock with unpaid accumulated dividends, if any,
whether such dividends are earned, declared or otherwise, to the date fixed on
all shares of the Preferred Stock. In the event of such voluntary or
involuntary dissolution, liquidation or winding up, as the case may be, then the
assets available for payment shall be distributed ratably
3
<PAGE>
among the holders of the Preferred Stock of all classes and series in accordance
with the amounts so determined to be payable on the shares of each series in the
event of voluntary or involuntary dissolution, liquidation or winding up, as the
case may be, in proportion to the full preferential amounts, together with any
and all dividend arrearages to which they are respectively entitled. After
payment to the holders of the Preferred Stock of the full preferential amounts
hereinbefore provided for, the holders of Preferred Stock will have no other
rights or claims to any of the remaining assets of the Corporation either upon
distribution of such assets or upon dissolution, liquidation, or winding up.
The sale of all or substantially all of the property of the Corporation to, or
the merger, consolidation or reorganization of the Corporation into or with, any
other corporation, or the purchase or redemption by the Corporation of the
shares of its Preferred Stock or its Common Stock or any other class of its
stock shall not be deemed to be a distribution of assets or a dissolution,
liquidation or winding up for the purposes of this paragraph.
(c) So long as full cumulative dividends on all outstanding shares of
Cumulative Preferred Stock for all dividend periods ending on or prior to the
date fixed for redemption and full dividends on all outstanding shares of Non-
cumulative Preferred Stock for the then current dividend period shall have been
paid or declared and set apart for payment and subject to any applicable
requirements of Texas law, the Corporation may: (i) at the option of the Board
of Directors of the Corporation, redeem the whole or any part of the shares of
any class or series of Preferred Stock determined by it to be redeemable
pursuant to the authority granted in Paragraph (A) (2) of this Article, and
without redeeming the shares of any other class or series thereof; or (ii)
redeem the whole or any part of any class or series of Preferred Stock to meet
any sinking fund requirement determined pursuant to the authority granted in
Paragraph (A) (2) of this Article, and without redeeming the shares of any
other class or series thereof, in each case on the terms and conditions and at
the redemption price so determined for such series, plus the amount of unpaid
accumulated dividends, if any, to the date of such redemption. All such
redemptions of Preferred Stock shall be effected in accordance with the
procedure for redemptions set forth in the Texas Business Corporation Act in
effect at the times of such redemptions.
On or before the date fixed for redemption, the Corporation may provide for
payment of a sum sufficient to redeem the shares called for redemption either
(1) by setting aside the sum, separate from its other funds, in trust for the
benefit of the holders of the shares to be redeemed; or (2) by depositing such
sum in a bank or trust company (either such a financial institution located in
Texas having capital and surplus of at least ten million dollars ($10,000,000)
according to its latest statement of condition, or in such other financial
institution which is now or hereafter duly appointed and acting as transfer
agent of the Corporation) as a trust fund, with irrevocable instructions and
authority to the bank or trust company to give or complete the notice of
redemption and to pay, on or after the date fixed for redemption, the redemption
price on surrender of certificates evidencing the shares of Preferred Stock
called for redemption. From and after the date fixed for redemption, (a) the
shares shall be deemed to be redeemed; (b) dividends thereon shall cease to
accumulate; (c) such setting aside or deposit shall be deemed to constitute
full payment for the shares; (d) the shares shall no longer be deemed to be
outstanding; (e) the holders thereof shall cease to be shareholders with respect
to such shares; and (f) the holders shall have no right with respect thereto,
except the
4
<PAGE>
right to receive their proportionate shares of the funds set aside pursuant
hereto or deposited upon surrender of the respective certificates, and any right
to convert such shares which may exist. Any interest accrued on funds set aside
or deposited pursuant hereto shall belong to the Corporation. If the holders of
shares do not, within six (6) years after such deposit, claim any amount so
deposited for redemption thereof, the bank or trust company shall upon demand
pay over to the Corporation the balance of the funds so deposited and the bank
or trust company shall thereupon be relieved of all responsibility to such
holders.
(d) So long as full cumulative dividends on all outstanding shares of
Cumulative Preferred Stock for all dividend periods and full dividends on all
shares of Non-cumulative Preferred Stock for the then current dividend period
ending on or prior to the date of purchase shall have been paid or declared and
set apart for payment and subject to any applicable requirements of Texas law,
the Corporation may purchase, directly or indirectly, shares of Preferred Stock
of any class or series to the extent of the aggregate of unrestricted capital
surplus and unrestricted reduction surplus available therefor.
(e) Upon any issue for money or other consideration of any stock of
the Corporation that may be authorized from time to time, or treasury stock, no
holder of Preferred Stock shall have any preemptive or other right to subscribe
for, purchase, or receive any proportionate or other share of the stock so
issued, but rather the Board of Directors may dispose of all or any portion of
such stock as and when it may determine, free of any such rights, whether by
offering the same to shareholders or by sale to other disposition as said Board
of Directors may deem advisable.
(4) Voting Powers
(a) Except as provided by law, as set forth herein or as may be
provided with respect to any series by the Board of Directors pursuant to the
authority granted in Paragraph (A) (2) of this Article, the holders of Preferred
Stock shall not have any right to vote for any purpose or on any matter
whatsoever, all such voting power being vested exclusively in the shares of
Common Stock. Holders of Preferred Stock shall not be entitled to receive
notice of any meeting of shareholders of the Corporation at which they are not
entitled to vote.
(b) The holders of shares of any and all series of Cumulative
Preferred Stock outstanding on the record date for any such meeting of the
shareholders shall be entitled to vote, as a single class, upon any proposed
amendment to these Articles of Incorporation, if such amendment would: (i)
increase or decrease the aggregate number of authorized shares of Cumulative
Preferred Stock; (ii) increase or decrease the par value of shares of Cumulative
Preferred Stock; (iii) effect an exchange, reclassification, or cancellation of
all or a part of the shares of Cumulative Preferred Stock; (iv) effect an
exchange, or create a right of exchange, of all or any part of the shares of
another class into shares of Cumulative Preferred Stock; (v) change the
designations, preferences, limitations, or relative rights of any series of
Cumulative Preferred Stock at the time outstanding in those respects in which
the shares thereof vary from shares of other series of Cumulative Preferred
Stock at the time outstanding; (vi) change the shares of Cumulative Preferred
Stock, whether with
5
<PAGE>
or without par value, into the same or a different number of shares either with
or without par value, of the same class or another class or classes; (vii)
create a new class of Preferred Stock having rights and preferences equal,
prior, or superior to the shares of the Cumulative Preferred Stock, or increase
the rights and preferences of any class having rights, and preferences equal,
prior or superior to the shares of the Cumulative Preferred Stock, or increase
the rights and preferences of any class having rights or preferences later or
inferior to the shares of the Cumulative Preferred Stock in such a manner as to
become equal, prior or superior to the shares of the Cumulative Preferred Stock;
or (viii) cancel or otherwise affect accumulated but undeclared dividends on the
shares of Cumulative Preferred Stock, and no such proposed amendment shall be
deemed to have been adopted and approved without the affirmative vote of holders
of that number of shares of Cumulative Preferred Stock then outstanding which
shall be required pursuant to the provisions of the Texas Business Corporation
Act in effect at the time of such vote.
(c) The holders of shares of any and all series of Non-cumulative
Preferred Stock outstanding on the record date for any such meeting of the
shareholders shall be entitled to vote, as a single class, upon any proposed
amendment to these Articles of Incorporation, if such amendment would: (i)
increase or decrease the aggregate number of authorized shares of Non-cumulative
Preferred Stock; (ii) increase or decrease the par value of shares of Non-
cumulative Preferred Stock; (iii) effect an exchange, reclassification, or
cancellation of all or a part of the shares of Non-cumulative Preferred Stock;
(iv) effect an exchange, or create a right of exchange, of all or any part of
the shares of another class into shares of Non-cumulative Preferred Stock; (v)
change the designations, preferences, limitations, or relative rights of any
series of Non-cumulative Preferred Stock at the time outstanding in those
respects in which the shares thereof vary from shares of other series of
Non-cumulative Preferred Stock at the time outstanding; (vi) change the shares
of Non-cumulative Preferred Stock, whether with or without par value, into the
same or a different number of shares either with or without par value, of the
same class or another class or classes; or (vii) create a new class of
Preferred Stock having rights and preferences equal, prior, or superior to the
shares of the Non-cumulative Preferred Stock, or increase the rights and
preferences of any class having rights and preferences equal, prior or superior
to the shares of the Non-cumulative Preferred Stock, or increase the rights and
preferences of any class having rights or preferences later or inferior to the
shares of the Non-cumulative Preferred Stock, and no such proposed amendment
shall be deemed to have been adopted and approved without the affirmative vote
of holders of that number of shares of Non-cumulative Preferred Stock then
outstanding which shall be required pursuant to the provisions of the Texas
Business Corporation Act then in effect at the time of such vote.
(d) The holders of shares of any and all classes and series of
Preferred Stock outstanding on the record date fixed for any such meeting of the
shareholders shall be entitled to vote, as a single class, upon any resolution
authorizing: (i) any plan of merger or consolidation involving the Corporation;
(ii) the dissolution of the Corporation; and (iii) the sale, lease, exchange, or
other disposition of all, or substantially all, of the property and assets of
the Corporation, if not made in the regular course of business, and no such
resolution shall be deemed to have been adopted and approved without the
affirmative vote of holders of that number of shares of Preferred Stock
6
<PAGE>
then outstanding which shall be required pursuant to the provisions of the Texas
Business Corporation Act in effect at the time of such vote.
(B) COMMON STOCK
(1) Dividends
Subject to the provisions of Paragraph (A)(3)(a) of this Article, and after
making such provisions, if any, as may be required for any mandatory sinking
fund applicable to any class or series of Preferred Stock, cash dividends may be
paid on the Common Stock to the exclusion of the Preferred Stock as and when
declared by the Corporation out of any funds legally available for the payment
of cash dividends.
(2) Voting Rights
The holders of shares of Common Stock issued and outstanding, except where
otherwise provided by law or by these Articles of Incorporation, shall have and
possess the exclusive rights to notice of stockholders' meetings and the
exclusive voting rights and powers. Each holder of Common Stock shall be
entitled to cast one vote for each share of stock registered in the name of the
holder on the books of the Corporation.
(3) Distribution of Assets
In the event of any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, after there shall have been paid
or set aside in cash for the holders of Preferred Stock the full preferential
amounts, together with any and all dividend arrearages, to which they are
entitled pursuant to the provisions of Part (A) of this Article, the funds,
assets, and property of the Corporation shall be distributed pro rata to the
holders of Common Stock.
ARTICLE THREE
This amendment does not effect any change in stated capital.
ARTICLE FOUR
The number of shares of Common Stock of the Corporation outstanding and
entitled to vote at the time of adoption of the amendment was 15,152,157.
There were no other shares of the Corporation entitled to vote at the time of
adoption of the amendment.
ARTICLE FIVE
The number of shares of Common Stock voted for was 12,934,453; the number
of shares of Common Stock voted against such amendment was 1,269,026. The
shares voting for the amendment
7
<PAGE>
were sufficient to adopt the amendment under the Texas Business Corporation Act
and the Articles of Incorporation of the Corporation.
Dated: January 25, 2000 TIPPERARY CORPORATION
By: /s/ David L. Bradshaw
--------------------------------------
David L. Bradshaw, President and
Chairman of the Board
/s/ Elaine R. Treece
-------------------------------------------
Elaine R. Treece, Secretary
8
<PAGE>
TIPPERARY CORPORATION
STATEMENT OF
RESOLUTION ESTABLISHING A SERIES OF SHARES
TO THE SECRETARY OF STATE
OF THE STATE OF TEXAS:
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of shares and fixing and
determining the relative rights and preferences thereof:
FIRST: The name of the corporation is Tipperary Corporation (the
"Corporation").
SECOND: The Corporation, a corporation organized and existing under the
laws of the State of Texas, HEREBY CERTIFIES
1. that the following resolution was duly adopted on December 23, 1999,
by the Board of Directors of the Corporation pursuant to the authority
conferred upon the Board of Directors of the Corporation by the
Restated Articles of Incorporation of the Corporation (the "Articles
of Incorporation") and by the Texas Business Corporation Act; and
2. that the following resolution was duly adopted by all necessary action
on the part of the Corporation:
"RESOLVED, that, pursuant to the authority expressly vested in the
Board of Directors of the Corporation by the provisions of the
Articles of Incorporation, the Board of Directors of the Corporation
hereby establishes a series of Cumulative Preferred Stock of the
Corporation from the authorized but unissued Cumulative Preferred
Stock, $1.00 par value, of the Corporation, to consist of six million
three hundred twenty-nine thousand one hundred fourteen (6,329,114)
shares, and the Board of Directors of the Corporation hereby fixes the
designation, powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such Series of Cumulative
Preferred Stock (in addition to the designation, powers, preferences
and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof, set forth in
the Articles of Incorporation which are applicable to the Cumulative
Preferred Stock) as follows:
1. Designation and Number. The distinctive designation of the series
shall be the 1999 Series A Convertible Cumulative Preferred Stock (the "Series A
Preferred Stock"); the number of shares of the Series A Preferred Stock which
the Corporation is authorized to issue shall be six million three hundred
twenty-nine thousand one hundred fourteen (6,329,114).
2. Liquidation Value. Subject to the Articles of Incorporation, shares
of the Series A Preferred Stock shall have a preference upon liquidation
(whether voluntary or involuntary), dissolution or winding up of the Corporation
of $1.58 per share.
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3. Dividends. Subject to the Articles of Incorporation, holders of
outstanding shares of Series A Preferred Stock shall be entitled to receive, but
only as the Board of Directors shall declare out of funds of the Corporation
legally available therefor, semi-annual cash dividends or accrued dividends for
less than a full semi-annual period at the annual rate of $.1225 per share. At
the election of the Corporation, dividends may be payable in restricted Common
Stock of the Corporation, the value shall be determined by the Corporation based
upon the greater of per share book value as of the date the dividend is declared
as set forth in the Corporation's most recent published financial statements or
the average closing market price (the "Common Market Price") of the Common Stock
of the Corporation on the principal national securities exchange on which the
shares of Common Stock are listed or, if not available, in a national market
system for securities in which the Common Stock is admitted to trading, or if
not available, the average of the closing bid and asked prices of the Common
Stock reported in the domestic over-the-counter market, all of which shall be
determined for the 10 trading days preceding the date on which the dividend is
declared. In the event there is no market for the Common Stock, the valuation
shall be based upon book value per share as determined by a firm of independent
public accountants of recognized standing selected by the Corporation.
Dividends on the outstanding shares of Series A Preferred Stock shall begin to
accrue from the date of issuance, and shall be payable, if declared, for and at
the end of each semi-annual period on June 30 and December 31 of each year (each
of such dates shall be referred to herein as a "Dividend Payment Date")
commencing June 30, 2000. Each such semi-annual period ended June 30 and
December 31 shall be and correspond to a "dividend period," as such term is used
in the Articles of Incorporation. Each such dividend shall be payable, if
declared, to the holders of record as they appear on the stock books of the
Corporation at the close of business on such record dates, not more than 30
calendar days and nor less than 10 calendar days preceding the Dividend Payment
Dates therefor, as are determined by the Board of Directors. In any case where
the date fixed for any dividend or other payment with respect to the Series A
Preferred Stock shall not be a Business Day (as defined below), then such
payments need not be made on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the date fixed
therefor, without interest. The term "Business Day" shall mean any day except a
Saturday, a Sunday or a day on which banking institutions are authorized or
required by law to close in the State of Texas or the State of Colorado.
4. Redemption and Conversion.
(a) Subject to and as provided in the Articles of Incorporation: (1) the
Corporation may require the redemption of the Series A Preferred Stock, as
follows, at any time and from time to time, in whole or in part, on or after the
date which is five years from the issuance of the Series A Preferred Stock, for
a redemption price equal to the liquidation value of $1.58 per share plus
accrued but unpaid dividends through the date of redemption; and (2) the
Corporation shall, subject to the terms and conditions of the Corporation's then
existing debt obligations, redeem all of the outstanding shares of Series A
Preferred Stock on the date which is 10 years from the issuance of the Series A
Preferred Stock or the Business Day following such date if it does not fall on a
Business Day, for a redemption price equal to the liquidation value of $1.58 per
share plus accrued but unpaid dividends through the date of redemption.
(b) The Corporation shall mail or deliver written notice of redemption,
pursuant to Section 4(a) above, to each holder of record of Series A Preferred
Stock to be redeemed as the holders appear on the stock books of the Corporation
at the close of business on a date not less than 60 calendar days prior to the
date fixed for redemption, as determined by the Board of Directors. Such notice
of redemption, if mailed,
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shall be sent by first class mail to the holder's address shown on the stock
books of the Corporation, and such notice shall be deemed given and shall be
binding on the holder upon receipt by the holder; provided, however, that the
failure to give such notice or any defect therein or in the mailing thereof
shall not affect the validity of the proceedings for such redemption, except as
to any holder to whom the Corporation failed to give proper notice or whose
notice was defective. Each such notice shall specify (i) the number of shares
to be redeemed from such holder, (ii) the certificate numbers for the shares
being redeemed and the number of shares represented by each such certificate,
(iii) the date fixed for redemption, (iv) the redemption price per share of
Series A Preferred Stock, (v) the places and times at which certificates may be
surrendered and payment may be obtained and (vii) that dividends on the shares
to be redeemed shall be payable as provided in Section 3 and that no dividends
shall be payable thereafter. Following receipt of certificates for the shares
of Series A Preferred Stock duly endorsed for transfer to the Corporation, the
Corporation promptly shall pay the required amounts of cash, except as such
payment or delivery may be delayed or restricted as required by law.
(c) In the event that fewer than all of the outstanding shares of the
Series A Preferred Stock are to be redeemed pursuant to Section 4(a), the number
of shares to be redeemed shall be determined by lot, pro rata (subject to
rounding to avoid fractional shares) or by any other method as may be determined
by the Board of Directors to be equitable; provided, however, that the Board of
Directors may, in selecting shares of Series A Preferred Stock to be redeemed,
choose to redeem all shares of Series A Preferred Stock held by holders of a
number of such shares not to exceed 10, including all shares held by holders
who, after giving effect to the redemption, would hold fewer than 10 shares of
Series A Preferred Stock, as may be specified by the Board of Directors.
(d) At any time after the issuance of the Series A Preferred Stock and
before redemption, the holders of the Series A Preferred Stock may, at their
option, convert all or any part of their Series A Preferred Stock and
accumulated but unpaid dividends into the Common Stock of the Corporation;
provided, however, that any notice of the exercise of such conversion rights by
a record holder must be with respect to at least 100,000 shares, or the total
number of shares registered in such holder's name, of the Series A Preferred
Stock. To exercise conversion rights, the shareholder must deliver to the
Secretary of the Corporation a written notice (i) clearly stating the
shareholder's intent to convert all or a portion of the shareholder's Series A
Preferred Stock into Common Stock, (ii) specifying the number of shares of the
Series A Preferred Stock which are being converted, and (iii) stating the
certificate numbers for the shares being converted and the number of shares
represented by each such certificate. The notice must be accompanied by the
certificates for the shares to be converted, duly endorsed for transfer to the
Corporation. The Conversion Price with respect to the Series A Preferred Stock
shall be $1.58 per share of Common Stock (the "Share Conversion Price"). The
Conversion Price with respect to the accumulated but unpaid dividends of the
Series A Preferred Stock (the "Dividend Conversion Price") shall be, as of the
effective date of conversion, the greater of the per share book value as set
forth in the Corporation's most recent published financial statements or the
Common Market Price. The number of common shares to be issued upon any such
conversion shall be the sum of (i) the number of shares of the Series A
Preferred Stock to be converted multiplied by $1.58 and divided by the Share
Conversion Price and (ii) the accumulated but unpaid dividends divided by the
Dividend Conversion Price. If, at any time following the adoption of this
Statement, the Corporation subdivides its outstanding shares of Common Stock or
makes a distribution of Common Stock to the holders of the Corporation's
outstanding Common Stock such that immediately thereafter a greater number of
shares of Common Stock is outstanding, then the amount of Share Conversion
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Price shall be proportionately decreased. Conversely, if the Corporation should
combine the outstanding shares of Common Stock into a smaller number of shares,
the amount of Share Conversion Price shall be proportionately increased. The
Corporation will not issue fractional shares of the Common Stock, but rather,
the number of common shares computed shall be rounded to the next higher or
lower number of whole shares. All shares of Common Stock to be delivered
pursuant to this Section 4(d) shall be delivered promptly except as such
delivery may be delayed or restricted as required by law.
(e) From and after the effective date of conversion (i) no further
dividends shall accrue or be payable with respect to the shares of the Series A
Preferred Stock to be converted, (ii) such shares of Series A Preferred Stock
shall no longer be deemed to be outstanding and shall not have the status of
Series A Preferred Stock, and (iii) all rights of the holders thereof (except
the right to receive the delivery of the Common Stock) shall cease with respect
to such shares. The effective date of the conversion of the Series A Preferred
Stock into Common Stock, pursuant to Section 4(d), shall be the date the
Corporation receives the shareholder's substantially correct written notice of
the shareholder's election to convert the Series A Preferred Stock or, if such
date is not a Business Day, the next succeeding Business Day. The conversion of
such shares of Series A Preferred Stock shall be deemed to be completed as of
such effective date. From and after the effective date of conversion pursuant
to Section 4(d), the shareholders having rights to receive Common Stock pursuant
thereto shall have all of the rights and privileges bestowed upon them as owners
of such Common Stock. However, no such shareholder shall at any time have any
rights as an owner of a fractional share of Common Stock.
(f) If the Corporation shall consolidate with or merge into another
corporation (other than a merger or consolidation in which the Corporation is
the continuing corporation), each holder of the Series A Preferred Stock then
outstanding shall have the right to convert his Series A Preferred Stock into
the kind and amount of shares of stock, other securities, property or cash or
any combination thereof receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock of the Corporation into which such
Series A Preferred Stock might have been converted immediately prior to such
consolidation or merger.
(g) Whenever the Share Conversion Price is adjusted as provided in Section
4(d) or the rights of the holders of the Series A Preferred Stock are adjusted
under Section 4(f), then, in each such case, the Corporation shall notify the
transfer agent for the Series A Preferred Stock and shall mail to the holders of
the Series A Preferred Stock, of record not more than 15 days before the date of
mailing, a notice in writing setting forth the adjusted Share Conversion Price
or other adjustments thereafter effective under the provisions hereof, the
method of calculating any such adjusted Share Conversion Price shown in
reasonable detail, and the pertinent underlying facts. An affidavit of the
transfer agent for the Series A Preferred Stock or of the Secretary of the
Corporation that any such notice has been mailed shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
(h) From and after any date fixed for redemption or effective date of
conversion, shares of the Series A Preferred Stock redeemed or converted into
Common Stock shall, upon compliance with any applicable provisions of law, be
restored to the status of authorized but unissued shares of Cumulative Preferred
Stock, without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors.
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<PAGE>
(i) If fewer than all of the shares of Series A Preferred Stock
represented by any certificate are redeemed or converted pursuant to Section
4(a) or 4(d), the Corporation will deliver to the holder (without cost to the
holder) a new certificate for the Series A Preferred Stock (which shall contain
such legends as were set forth on the surrendered certificate), representing any
shares which were represented by the certificate that was delivered to the
Corporation in connection with such conversion or redemption, but which were not
redeemed or converted, as well as a certificate for the common shares to be
delivered pursuant to Section 4(d). With respect to the issuance by the
Corporation of certificates for such shares of Series A Preferred Stock or
Common Stock, the Corporation will pay any and all stamp, transfer and other
similar taxes that may be payable in respect of the issuance or delivery of such
new certificate or certificates but shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issuance or
delivery of such new certificate or certificates in a name other than that in
which such shares of Series A Preferred Stock were registered immediately prior
to such redemption, and no such issuance or delivery shall be made unless and
until the person requesting such issuance or delivery shall have paid to the
Corporation the amount of any and all such taxes or shall have established to
the satisfaction of the Corporation that such taxes have been paid in full.
5. No Other Rights. The shares of Series A Preferred Stock shall not
have any preferences, voting powers or relative, participating, optional or
other special rights except as set forth above and in the Articles of
Incorporation or as otherwise required by applicable law.
IN WITNESS WHEREOF, the Corporation has caused this Statement of Resolution
Establishing the Series A Preferred Stock to be duly executed as of December 23,
1999.
TIPPERARY CORPORATION
By: /s/ David L. Bradshaw
-------------------------------------------
David L. Bradshaw, President
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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: *1* 1,200,000 Shares
of Common Stock
WARRANT
TO PURCHASE SHARES
OF
TIPPERARY CORPORATION
This certifies that, for value received, Slough Estates USA Inc., a
Delaware corporation, or its registered assigns, is entitled to purchase from
TIPPERARY CORPORATION, a Texas corporation (the "Company"), One Million Two
Hundred Thousand (1,200,000) 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 23, 2001. This Warrant shall
expire, if not exercised prior thereto, on December 23, 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 hereof at the address of such
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 100,000 Shares, except that the final, partial exercise of
this Warrant may be for less than 100,000 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 its 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 its 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 hereof
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.
<PAGE>
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
dilution or other 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 its
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 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
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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 limitations 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 permitted 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 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 dis
position (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
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Securities Act pursuant to this Section 6, each Prospective Seller of Warrant
Shares covered by such 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
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connection with any transfer, exchange or replacement. The Company will pay all
expenses and charges 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, Slough Estates USA Inc., 33 West Monroe Street,
Suite 2000, Chicago, Illinois 60603, 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, or to such other address as shall have been
furnished in writing to the holder hereof 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
December 23, 1999.
TIPPERARY CORPORATION
By:/s/ David L. Bradshaw
--------------------------------------------
David L. Bradshaw, President and
Chief Executive Officer
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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);
or
(ii) 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.
(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 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
Annex - Page 1
<PAGE>
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-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
Annex - Page 2
<PAGE>
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 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
Annex - Page 3
<PAGE>
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 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
Annex - Page 4
<PAGE>
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 its
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.
(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;
Annex - Page 5
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(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
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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 100,000 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: __________________, 19_____.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made this 23rd
day of December 1999, 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 Slough Estates USA Inc., a Delaware
corporation (the "Holder"), whose office is located at 33 West Monroe Street,
Suite 2000, Chicago, Illinois 60603.
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 6,329,114 shares of the Company's 1999 Series A
Convertible Cumulative Preferred Stock (the "Series A Preferred Stock"); and
WHEREAS, under the Statement of Resolution Establishing a Series of Shares
(the "Statement of Resolution"), holders of shares of the Series A Preferred
Stock may convert such shares, in whole or in part, along with accumulated but
unpaid dividends, into restricted shares of the Company's Common Stock, $.02 par
value ("Common Stock"); and
WHEREAS, under the Statement of Resolution, at the election of the Company,
dividends on the Series A Preferred Stock may be payable in shares of restricted
Common Stock; and
WHEREAS, the parties have agreed that the Holder or a subsequent holder of
restricted shares of Common Stock received upon conversion of the Series A
Preferred Stock or received in payment of dividends on the Series A Preferred
Stock will have rights, subject to certain terms and conditions, to demand that
such shares of Common Stock be registered under the Securities Act of 1933, as
amended (the "Securities Act");
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 Series A Preferred Stock or restricted shares of Common Stock
received upon conversion of any shares of the Series A Preferred Stock or in
respect of dividends on the Series A Preferred Stock; provided, however, that no
such assignment shall be deemed to have occurred unless and until the transfer
of the shares of Series A Preferred Stock or such Common Stock is registered on
the books of the Company. Such shares of Common Stock, whether received upon
such conversion or in respect of dividends shall hereafter be referred to as
"Conversion Shares," and hereafter references to the "Holder" or "Holders"
shall, as the context may permit, be deemed to refer to the Holder and/or any
other holders of shares of the Series A Preferred Stock or Conversion Shares.
Each Holder shall provide a copy of this Agreement to each transferee of any
shares of the Series A Preferred Stock or Conversion Shares.
2. Demand Registration Rights.
(a) The Holders who, in the aggregate, own a majority of the total number
of Conversion Shares issued or issuable upon conversion of the Series A
Preferred Stock may request that the Company prepare and file a registration
statement under the Securities Act to permit the public offering
<PAGE>
and sale of the Conversion Shares on one occasion. Such registration of
Conversion Shares 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 Conversion Shares which it desires to include in such
registration. Any Holder of Series A Preferred Stock which desires to register
the underlying Conversion Shares must, within 40 days after a majority of the
Holders first request the Demand Registration, convert such shares of Series A
Preferred Stock into Conversion Shares and request that such Conversion Shares
be included in the Demand Registration. Each request by a Holder for the Demand
Registration shall state the intended method of disposition of the Conversion
Shares to be transferred by the Holder. The Company shall use its best efforts
to cause all of the Conversion Shares 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 Conversion 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 Conversion 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 primarily attributable to the
selling Holders of Conversion Shares, (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 of Conversion Shares; or (iii) the
holders of Conversion Shares are not able to register and sell at least ninety
percent (90%) of the Conversion Shares requested to be included in such
registration.
(c) With respect to the Demand Registration, the investment banker or
investment bankers that will manage the offering will be selected by the Holders
of at least a majority of the Conversion 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.
(d) Any securities other than Conversion Shares 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 Conversion 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 Conversion Shares included in such
offering.
(e) The Company, if requested by at least a majority of the Conversion
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
90-day period following the effective date of a registration statement relating
to a public offering of Conversion 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
-2-
<PAGE>
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 90-day period following the
effective date of a registration statement relating to a public offering of the
Conversion 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 Conversion Shares to be transferred by the
Holder), the Company shall use its best efforts to cause all of the Conversion
Shares 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 Conversion 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 Conversion 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 Conversion Shares. The
Company shall have the right to reduce the number of Conversion 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 Conversion Shares would materially
adversely affect the marketing of the securities of the Company to be offered.
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 Conversion Shares 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 Conversion 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
-3-
<PAGE>
the Holders may reasonably request in order to facilitate the disposition of the
Conversion 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 Conversion
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 Conversion 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 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 Conversion 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; and
(g) use its best efforts to list such Conversion Shares on any securities
exchange on which any securities of the Company are then listed or to admit such
Conversion 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.
5. Expenses of Registration. With respect to the registration by the
Company of transfers of Conversion Shares under the Securities Act pursuant this
Agreement, the Company shall pay all
-4-
<PAGE>
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 Conversions
Shares to be registered, but specifically excluding any underwriting discounts
and allowances that are allocable to the Conversion 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 Conversion Shares
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 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.
(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
-5-
<PAGE>
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).
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 of Company. 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.
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.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
TIPPERARY CORPORATION SLOUGH ESTATES USA INC.
By:/s/ David L. Bradshaw By:/s/ Marshall D. Lees
---------------------------------- ------------------------------
David L. Bradshaw, President and Marshall D. Lees, President
Chief Executive Officer
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES 1 AND 2 OF THE COMPANY'S FORM 10-QSB FOR THE THREE MONTHS ENDED DECEMBER
31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,314
<SECURITIES> 0
<RECEIVABLES> 1,589
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,285
<PP&E> 31,242
<DEPRECIATION> 1,625
<TOTAL-ASSETS> 54,518
<CURRENT-LIABILITIES> 1,944
<BONDS> 18,790
4,660
0
<COMMON> 361
<OTHER-SE> 28,322
<TOTAL-LIABILITY-AND-EQUITY> 54,518
<SALES> 2,919
<TOTAL-REVENUES> 2,919
<CGS> 1,329
<TOTAL-COSTS> 2,435
<OTHER-EXPENSES> (5)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 544
<INCOME-PRETAX> (1)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
