**Exhibit 10.35**

 

**This Warrant and the rightsrepresented hereby shall not be transferable at any time unless (i) aregistration statement under the Securities Act of 1933, as amended, shall bein effect with respect to this Warrant or the Shares issuable hereunder at suchtime, or (ii) the transfer is made in compliance with the provisions of Section5.**

 
| **Number:** | ** ** | **50,000   Shares** |
|-------------|------------|-------------------------------|

 

**WARRANTTO PURCHASE SHARESOFTIPPERARY CORPORATION**

 

This certifies that, for value received, KennethL.Ancell, an individual residing in Houston, Texas (“Holder”), or theirregistered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texascorporation (the “Company”), fifty thousand (50,000) Shares, as defined inSection 3, at the price of Four Dollars and 95/100 ($4.95) per Share (asdefined in Section 3) at any time, or in part from time to time in accordancewith the following Vesting Schedule (“Vesting Schedule”):

 
| **Date:**             | ** ** | **Total Shares Subject to Exercise** | ** ** |
|-----------------------|------------|--------------------------------------|------------|
|                  |       |                                 |       |
| From January 10, 2006 |       | 16,667                               |       |
| From January 10, 2007 |       | 33,334                               |       |
| From January 10, 2008 |       | 50,000                               |       |

 

This Warrant shall expire, if not exercisedprior thereto, two (2) years after the resignation or removal of the Holder asan employee or director of the Company. If the Holder should resign or be removed as an employee or directorfrom the Company, then this Warrant shall be vested only to the extent vestedon such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the initialexercise price set forth above and the number of Shares to be issued upon theoccurrence of certain events (the Provisions as to Adjustment) are more fullyset forth in Annex 1 hereto. (Hereinafter, the initial exercise price set forth above in this paragraphfor the purchase of Shares upon the exercise of this Warrant, as adjustedpursuant to the Provisions as to Adjustment, is referred to as the “ExercisePrice”).  This Warrant is subject to thefollowing provisions, terms and conditions:

 

**1.             Exercise of Warrant.**

 

(a)           The rights represented by this Warrant may be exercised bythe Holder, in whole or in part, (but not as to a fractional Share), by thesurrender 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 maydesignate by notice in writing to the Holder at the address of such holderappearing on the books of the Company at any time within the period abovenamed) and delivery of a completed subscription form in the form attached tothis Warrant as Exhibit A, and upon payment to the Company of theExercise Price for such Shares

 

(b)           Payment of the Exercise Price shall be made by acombination of any one or more of the following:

 

(i)                                     By application, to the extent permitted byapplicable law, of Shares or other securities of the Company owned by theHolder, the value of which for such purpose shall be the fair market valuethereof determined in good faith by the Company and the Holder at the time ofsuch exercise; provided, however, that in order to apply such Shares or othersecurities of the Company in the exercise hereof, each of the followingconditions must be met:

 

(A)                              such Shares or other securities of theCompany shall have been owned, without material encumbrance, contingency orrisk of forfeiture relating to the ownership rights, for at least six monthsand at all times during said six month period by the Holder, and within saidsix month period such Shares or other securities of the Company shall not havebeen obtained through exercise of any

 

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option, warrant or right toobtain such Shares of other securities or through the conversion of any othersecurity; and

 

(B)                                such Shares or other securities shall not beor include: (1) options, warrants or similar rights to acquire Shares or othersecurities of the Company by the Holder; or (2) securities owned by the Holderwhich are convertible in whole or in part into Shares or other securities ofthe Company; and

 

(ii)                                  in cash or by certified check or bank draftin New York Clearing House funds.

 

(c)           The Company agrees that any Shares so purchased by theexercise of this Warrant shall be deemed to be issued to the Holder as therecord owner of such Shares as of the close of business on the date on whichthis Warrant shall have been surrendered, the completed subscription formdelivered, and payment in full is made and delivered to the Company for suchShares as aforesaid.

 

(d)           Stock certificates evidencing Shares so purchased shall bedelivered to the Holder as promptly as practicable, after the rights representedby this Warrant shall have been so exercised. If this Warrant shall have been exercised only in part, and unless thisWarrant has expired, a new Warrant representing the number of Shares withrespect to which this Warrant shall not then have been exercised shall also bedelivered to the Holder within such time. Notwithstanding the foregoing, however, the Company shall not berequired to deliver any stock certificate evidencing Shares upon exercise ofthis Warrant except in accordance with the provisions, and subject to thelimitations, of Section 5.  The Companywill pay all expenses and charges payable in connection with the preparation,execution and delivery of stock certificates and any new Warrants.

 

**2.             Certain Covenants of the Company.**  TheCompany covenants and agrees as follows:

 

(a)           All Shares which may be issued upon the exercise of therights represented by this Warrant (all such Shares, whether previously issuedor subject to issuance upon the exercise of this Warrant, are from time to timereferred to herein as “Warrant Shares”) will, upon issuance, be duly authorizedand issued, fully paid and nonassessable and free from all taxes, liens andcharges with respect to the issuance thereof.

 

(b)           During the period within which the rights represented bythis Warrant may be exercised, and only insofar as the Vesting Schedule hereinpermits the exercise of this Warrant, the Company will, at all times, haveauthorized and reserved free of preemptive or other rights for the exclusivepurpose of issuance upon exercise of the purchase rights evidenced by thisWarrant, a sufficient number of Shares to provide for the exercise of rightsrepresented by this Warrant.

 

(c)           The Company will not, by amendment or restatement of theArticles of  Incorporation or through anyreorganization, transfer of assets, consolidation, merger, issuance or sale ofsecurities or otherwise, avoid or take any action which would have the effectof avoiding the performance of any of the terms to be performed hereunder by theCompany, but will at all times in good faith carry out all of the provisions ofthis Warrant and take all such action as may be necessary or appropriate toprotect the rights of the Holder against dilution or other impairment and, inparticular, will not permit the par value of any Share to be or become greaterthan the then effective Exercise Price.

 

**3.             Definition of Shares.**  Asused herein, the term “Shares” shall mean and include shares of the CommonStock, par value $.02 per share, of the Company as are constituted and exist onthe date hereof, and shall also include any other class of the capital stock ofthe Company hereafter authorized which shall neither be limited to a fixed sumor percentage of par value in respect to the rights of the holders thereof toreceive dividends and to participate in the distribution of assets upon thevoluntary or involuntary liquidation, dissolution or winding up of the Company,nor be subject at any time to redemption by the Company; provided that theShares receivable upon exercise of this Warrant shall include only Shares ofthe type as are constituted and exist on the date hereof or Shares resultingfrom any reclassification of the Shares as provided for in paragraph (C) of theProvisions as to Adjustment.

 

**4.             No Rights or Liabilities as aShareholder.**  This Warrant shall not entitle the Holder assuch to any rights whatsoever, including, without limitation, voting rights, asa holder of Shares of the Company.  Noprovisions hereof, in the absence of affirmative action by the Holder topurchase Shares, and no mere enumeration

 

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herein of the rights orprivileges of such holder, shall give rise to any liability of such holder as aholder 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 transfereehereof and/or transferable and the Warrant Shares shall not be transferableexcept upon the conditions specified in this Section 5, which conditions areintended, among other things, to ensure compliance with the provisions of theSecurities Act of 1933, as amended, and the rules and regulations of theSecurities and Exchange Commission (the “Commission”) thereunder (collectivelythe “Securities Act”), in respect of the exercise and/or transfer of thisWarrant and/or transfer of such Warrant Shares.

 

(b)           This Warrant and the Warrant Shares shall not betransferable (except for a transfer of this Warrant or the Warrant Shares in anoffering registered under the Securities Act, including, without limitation, atransfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer) unless, prior to any transfer, the Holder shall havereceived from its transferee reasonable assurances that such person is awarethat this Warrant and the Warrant Shares have not been registered under theSecurities Act and that such person is acquiring this Warrant or the WarrantShares for investment only and not with the view to the disposition or publicoffering thereof (unless in an offering registered under the Securities Act orexempt therefrom), and that such person is aware that the stock certificatesevidencing the Warrant Shares shall bear a legend restricting transfer and dispositionthereof in accordance with the Securities Act unless, in the opinion of counselto the Company, such legend may be omitted. In the event of any transfer of this Warrant (other than a transfer inan offering registered under the Securities Act, including, without limitation,a transfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer), the Holder shall provide an opinion of counsel, who shallbe reasonably satisfactory to the Company, that an exemption from theregistration requirements of the Securities Act is available.

 

(c)           Any permitted subsequent holder of this Warrant shall besubject to all the terms and conditions herein, and shall acknowledge, inwriting, upon receipt of this Warrant his or her acceptance of the terms andconditions herein.

 

(d)           To facilitate sales by a holder of this Warrant or WarrantShares in transactions qualifying under Rule 144 promulgated by the Commissionunder the Securities Act, if available, the Company agrees to satisfy the currentpublic information requirements of said Rule 144, for as long as the Sharesremain registered under the Securities Exchange Act of 1934, as amended, andthe rules and regulations of the Commission thereunder (collectively the “ExchangeAct”), and to provide said holder upon request with such other information assuch holder may require for compliance with the provisions of said Rule 144.

 

**6.             Registration Under SecuritiesAct.**

 

(a)           If the Company, at any time, proposes to register anyissuance of its securities under the Securities Act (other than a registrationon Form S-8 in connection with an employee stock purchase or option plan or onForm S-4 in connection with mergers, acquisitions or exchange offerings), theCompany will at such time give prompt written notice to the holder hereof andto the holders of all other Warrant Shares issuable from any outstandingWarrants (such holders are hereinafter referred to as the “Prospective Sellers”or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a ProspectiveSeller, given within 30 days after receipt of any such notice (which requestshall state the intended method of disposition of the Warrant Shares to betransferred by such Prospective Seller), the Company shall use its best effortsto cause all Warrant Shares, the holders of which (or of the Warrants to whichthe same are related), to the extent vested in accordance with the VestingSchedule, shall have so requested registration of the transfer thereof, to beregistered under the Securities Act, all to the extent requisite to permit thesale or other disposition (in accordance with the intended method thereof asaforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section6(a) shall not be effective with respect to the Prospective Seller in the caseof an underwritten public offering of securities of the Company by the Companyunless each Prospective Seller agrees to the terms and conditions, includingunderwriting discounts and allowances, specified by the managing underwriter ofsuch offering with respect to such Warrant Shares.  The Company shall have the right to reducethe number of Warrant Shares of the Prospective Sellers to be included in aregistration statement pursuant to the exercise of the rights granted by thisSection 6(a) if, and to the extent, that the managing underwriter of suchoffering is of the good faith opinion, supported by written reasons therefor,that the inclusion of such Warrant Shares would materially and adversely

 

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affect the marketing of thesecurities of the Company to be offered; provided, that any such reduction ofthe number of Warrant Shares, the transfer of which is to be registered onbehalf of the Prospective Sellers, shall be made on the basis of a pro ratareduction of all Warrant Shares of all Prospective Sellers.

 

If and whenever the Companyis required by the provisions of this Section 6 to use its best efforts to effectthe 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 aregistration statement with respect to such transfer and use its best effortsto cause such registration statement to become and remain effective, but notfor any period longer than nine months;

 

(ii)                                  prepare and file with the Commission suchamendments and supplements to such registration statement and the prospectusused in connection therewith as may be necessary to keep such registrationstatement effective, and to comply with the provisions of the Securities Actwith respect to the transfer of all securities covered by such registrationstatement, including, without limitation, taking all necessary actions wheneverthe Prospective Sellers of the Warrant Shares covered by such registrationstatement shall desire to dispose of the same;

 

(iii)                               furnish to each Prospective Seller suchnumber of copies of a prospectus, including a preliminary prospectus, inconformity with the requirements of the Securities Act, and such otherdocuments, as such Prospective Seller may reasonably request in order tofacilitate the disposition of the Warrant Shares owned by such ProspectiveSeller and covered by such registration statement;

 

(iv)                              use its best efforts to register or qualifythe securities covered by such registration statement under such othersecurities or blue sky laws of such jurisdictions as each Prospective Sellershall request, and use its best efforts to do any and all other acts and thingswhich may be reasonably necessary to enable such Prospective Seller toconsummate the disposition in such jurisdiction of the Warrant Shares owned bysuch Prospective Seller and covered by such registration statement; providedthat, notwithstanding the foregoing, the Company shall not be required toregister in any jurisdiction as a broker or dealer of securities or to grantits consent to service of process in any such jurisdiction solely on account ofsuch intended disposition by such Prospective Seller;

 

(v)                                 furnish to the Prospective Sellers, whoseintended dispositions are registered, a signed copy of an opinion of counselfor the Company, in form and substance acceptable to such Prospective Sellers,to the effect that: (A) a registration statement covering such dispositions ofWarrant Shares has been filed with the Commission under the Securities Act andhas been made effective by order of the Commission, (B) such registrationstatement and the prospectus contained therein and any amendments orsupplements thereto comply as to form in all material respects with therequirements of the Securities Act, and (C) to the best of such counsel’sknowledge, no stop order has been issued by the Commission suspending theeffectiveness of such registration statement and no proceedings for theissuance of such a stop order are threatened or contemplated;

 

(vi)                              furnish to the Prospective Sellers whoseintended dispositions are required a blue sky survey in the form and of thesubstance customarily prepared by counsel for the Company and accepted bysellers of securities in similar offerings, discussing and describing theapplication provisions of the securities or blue sky laws of each state orjurisdiction in which the Company shall be required, pursuant to Section6(c)(iv), to register or qualify such intended dispositions of such WarrantShares, or, in the event counsel for the underwriters in such offering shall bepreparing a blue sky survey, cause such counsel to furnish such survey to, andto allow reliance thereon by, such Prospective Sellers;

 

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(vii)                           otherwise use its best efforts to comply withall applicable rules and regulations of the Commission under the Securities Actand the Exchange Act, insofar as they relate to such registration and suchregistration statement; and

 

(viii)                        use its best efforts to list such WarrantShares on any securities exchange on which any securities of the Company arethen listed or to admit such Warrant Shares for trading in any national marketsystem in which any securities of the Company are then admitted for trading, ifthe listing or admission of such securities is then permitted under the rulesof such exchange or system.

 

(b)           With respect to the registration by the Company oftransfers of Warrant Shares under the Securities Act pursuant to Section 6(a),the Company shall pay all expenses incurred by it in complying with thisSection 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 onespecial counsel designated by Prospective Sellers owning a majority of the WarrantShares covered by such registration, but specifically excluding anyunderwriting discounts and allowances that are allocable to the Warrant Sharesbeing sold by, and which shall be paid by, the Prospective Sellers; provided,however, that if any registration statement filed with the Commission by theCompany under Section 6(a) shall not be declared effective by the Commission,such attempted registration shall not constitute a registration under thisSection 6(b)

 

(c)           It shall be a condition precedent to the obligations ofthe Company to take any action pursuant to this Section 6 that each ProspectiveSeller, the transfer of whose Warrant Shares is registered or to be registeredunder each such registration, shall furnish to the Company such written informationregarding the securities held by such Prospective Seller as the Company shallreasonably request and as shall be required in connection with the action to betaken by the Company.

 

(d)                                 (i)            Inthe event of any registration of any transfer of Warrant Shares under theSecurities Act pursuant to this Section 6, the Company will indemnify and holdharmless each Prospective Seller of such securities, each of its officers,directors and partners, and each other person, if any, who controls suchProspective Seller within the meaning of the Securities Act, and eachunderwriter, if any, who participates in the offering of such securities,against any losses, claims, damages or liabilities (or actions in respectthereof), joint or several, to which each Prospective Seller, officer, directoror partner, controlling person or underwriter may become subject under theSecurities Act or otherwise, insofar as such losses, claims, damages orliabilities (or actions in respect thereof) arise out of or are based upon anyuntrue statement or alleged untrue statement of any material fact contained, onthe effective date thereof, in any registration statement under which suchtransfer of securities was registered under the Securities Act, any preliminaryprospectus or final prospectus contained therein, or any amendment orsupplement thereto, or arise out of or are based upon the omission or allegedomission to state therein a material fact required to be stated therein ornecessary to make the statements therein not misleading, or any violation bythe Company of the Securities Act, and will reimburse such Prospective Sellerand each of its officers, directors and partners, and each such controllingperson or underwriter, for any legal or any other expenses reasonably incurredby such Prospective Seller or its officers, directors and partners orcontrolling persons or by each such underwriter, in connection withinvestigating or defending any such loss, claim, damage, liability or action;provided, however, that the Company will not be liable in any such case to theextent that any such loss, claim, damage or liability arises out of or is basedupon an untrue statement or alleged untrue statement or omission or allegedomission made in such registration statement, preliminary prospectus orprospectus or such amendment or supplement in reliance upon and in conformitywith written information furnished to the Company through an instrument dulyexecuted by such Prospective Seller specifically for use in the preparationthereof.  In the event of anyregistration by the Company or any transfer of securities under the SecuritiesAct pursuant to this Section 6, each Prospective Seller of Warrant Sharescovered by such registration will indemnify and hold harmless the Company, eachother person, if any, who controls the Company within the meaning of theSecurities Act and each officer and director of the Company and the otherProspective Sellers to the same extent that the Company agrees to indemnify it,but only with respect

 

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tothe written information relating to such Prospective Seller furnished to theCompany by such Prospective Seller aforesaid.

 

(ii)                                  Each indemnified party shall, as promptly aspracticable upon receipt of notice of the commencement of any action againstsuch indemnified party or its officers, directors or partners, or anycontrolling person of such indemnified party, in respect of which indemnity maybe sought from an indemnifying party on account of the indemnity agreementcontained in Section 6(d)(i), notify the indemnifying party in writing of thecommencement thereof.  The omission ofsuch indemnified party to so notify the indemnifying party of any such actionshall not relieve the indemnifying party from any liability which it may haveon account of the indemnity agreement contained in Section 6(d)(i) to theextent that the failure to receive such notice within a reasonable period oftime shall not have caused harm, loss or damage to the indemnifying party,provided that, conversely, if such failure to receive notice shall have causedany harm, loss or damage to the indemnifying party, such failure shallconstitute a defense to any liability which such indemnifying party may have onaccount 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, itsofficers, directors and partners, or any such controlling person, and suchindemnified party shall notify the indemnifying party of the commencementthereof, the indemnifying party shall be entitled to participate in (and, tothe extent that the indemnifying party shall wish, to direct) the defensethereof at the indemnifying party’s own expense, in which event the defenseshall be conducted by recognized counsel chosen by the indemnifying party andapproved by the indemnified party (whose approval shall not unreasonably bewithheld) and the indemnified party may participate in such defense at its ownexpense (unless it is advised by counsel that actual or potential differinginterests or defenses exist or may exist, in which case such expenses shall bepaid by the indemnifying party, provided that the indemnifying party shall notbe required to pay the expenses for more than one counsel for all suchindemnified parties).

 

**7.             Transfer; Ownership.** Subject to Section 5, this Warrant and all rights hereunder aretransferable, in whole or in part, at the office or agency of the Companyreferred to in Section 1 by the Holders in person or by a duly authorizedattorney, upon surrender of this Warrant, with an assignment, acceptable to theCompany, duly completed, at which time a new Warrant shall be made anddelivered by the Company, of the same tenor as this Warrant but registered inthe name of the transferee.  The Holder,by taking or holding the same, consents and agrees that this Warrant, whenendorsed in blank, shall be deemed negotiable, and that the Holder, when thisWarrant shall have been so endorsed, may be treated by the Company and all otherpersons dealing with this Warrant as the absolute owner hereof for any purposeand as the person entitled to exercise the rights represented by this Warrantand to transfer this Warrant on the books of the Company, any notice to thecontrary notwithstanding; but until such transfer on such books, the Companymay treat the registered the Holder as the owner hereof for all purposes.  Any transfer of this Warrant shall be made incompliance with the Securities Act and any applicable state securities or bluesky laws.

 

**8.             Exchange and Replacement.** Subject to Section 7, this Warrant is exchangeable, upon the surrenderhereof by the Holder at the office or agency of the Company referred to inSection 1, for new Warrants of like tenor and date representing in theaggregate the right to purchase the number of Shares which may be purchasedhereunder, each of such new Warrants to represent the right to purchase suchnumber of Shares as shall be designated by the Holder at the time of suchsurrender.  Upon receipt by the Company,at the office or agency referred to in Section 1, of evidence reasonablysatisfactory to it of the loss, theft or destruction of this Warrant and ofindemnity or security reasonably satisfactory to it (provided that the writtenindemnity of the Holder shall be deemed reasonably satisfactory to the Companyfor such purposes), the Company will deliver a new Warrant of like tenor anddate in replacement of this Warrant. This Warrant shall be promptly canceled by the Company upon the surrenderhereof in connection with any transfer, exchange or replacement.  The Company will pay all expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to Section 7 and this Section 8.

 

**9.             Notices.**  Anynotice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent bycertified or registered mail to, 8848 Cedarspar, Houston, Texas 77055, or tosuch other address as shall have been furnished to the Company in writing by theHolder.  Any notice or other

 

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document required or permittedto be given or delivered to the Company shall be delivered at, or sent bycertified or registered mail to, 633 Seventeenth Street, Suite 1550, Denver,Colorado 80202, or to such other address as shall have been furnished inwriting to the Holder by the Company. Any notice so addressed and mailed by registered or certified mail orotherwise delivered, shall be deemed to be given when actually received by theaddressee.

 

**10.          GOVERNING LAW.    THISWARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF TEXAS.**

 

**11.          Miscellaneous.**  ThisWarrant will be binding upon any entity succeeding to the Company byconsolidation or acquisition of all or substantially all of the Company’sassets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may bechanged, waived, discharged or terminated only by an instrument in writingsigned by the party (or any predecessor in interest thereof) against whomenforcement of the same is sought.  Theheadings in this Warrant are for purposes of reference only and shall notaffect the meaning or construction of any of the provisions hereon.

 

**INWITNESS WHEREOF**,Tipperary Corporation has caused this Warrant to be signed by its dulyauthorized officers, under its corporate seal, to be dated April 27, 2005.

 
|                | **TIPPERARY CORPORATION**      |
|---------------------|--------------------------------|
|                |                           |
|                |                           |
| ** **          | **BY:**                        | ** /s/ David L. Bradshaw** | ** ** |
|                | **ITS:**                       | President |
|                |                           |
| **CORPORATE SEAL)** |                           |
|                |                           |
|                |                           |
| **ATTEST:**         | ** /s/ Elaine R. Treece** | ** ** | ** ** |
| **ITS:**            | Secretary                      |   |
|                     |                                |  |  |  |  |

 

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Annex 1

 

TIPPERARYCORPORATION

 

PROVISIONSAS TO ADJUSTMENT OFEXERCISE PRICE AND NUMBER OF SHARESISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and thenumber of Shares issuable upon the exercise of the annexed Warrant to purchaseshares of TIPPERARY CORPORATION, a Texas corporation (herein and in thisWarrant referred to as the “Company”), shall be subject to adjustment from timeto time as hereinafter provided; that in no event shall the Exercise Price beincreased to a price greater than Four Dollars and 95/100 ($4.95) per Share,except as provided by paragraph (C). Upon each adjustment of the Exercise Price, the Holder shall thereafterbe entitled to purchase, at the Exercise Price resulting from such adjustment,the number of Shares obtained by multiplying the number of Shares purchasablepursuant hereto immediately prior to such adjustment by a fraction, thenumerator of which is the Exercise Price in effect immediately prior to suchadjustment and the denominator of which is the Exercise Price resulting fromsuch adjustment.  In making theadjustments to the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or sell any Sharesfor consideration per Share that is less than the Exercise Price in effectimmediately prior to the time of such issue or sale at less than the MarketPrice (as hereinafter defined) of such Shares on the date of such issue orsale, then forthwith upon such issue or sale the Exercise Price in effectimmediately prior thereto shall be adjusted to an amount (calculated to thenearest cent) determined by dividing (i) an amount equal to the sum of (a) thenumber of Shares outstanding immediately prior to such issue or sale multipliedby 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 orsale; provided, however, that no adjustment shall be made hereunder by reasonof:

 

(i)    the grant of this Warrant or the issuance of Shares upon theexercise of this Warrant or any other outstanding Warrant;

 

(ii)                      the grant by the Company of options topurchase shares in connection with any purchase or option plan for the benefitof employees of the Company, or any affiliates or subsidiaries thereof; or

 

(iii)                   the issuance (whether directly or byassumption in a merger or otherwise) or sale (including any issuance or sale toholders of Shares) of any securities convertible into or exchangeable forShares (such convertible or exchangeable securities are herein referred to as “ConvertibleSecurities”), or the grant of rights to subscribe for or to purchase, or ofoptions for the purchase of (including any grant of such rights or options toholders of shares, other than pursuant to a dividend on Shares), Shares ofConvertible Securities, regardless of whether the right to convert or exchangesuch Convertible Securities or such rights or options are immediatelyexercisable.

 

No adjustment of the Exercise Price shall berequired to be made by the Company and no notice hereunder must be given if theamount of any required adjustment is less than 5% of the Exercise Price.  In such case any such adjustment shall becarried forward and shall be made (and notice thereof shall be given hereunder)at the time of and together with the next subsequent adjustment which, togetherwith any adjustment so carried forward, shall amount to not less than 5% of theExercise Price.

 

(B)           For the purposes of paragraph (A), the followingprovisions (i) through (vi), inclusive, shall also be applicable:

 

(i)                                     If, at the time Shares are issued and soldupon the conversion or exchange of Convertible Securities or upon the exerciseof rights or options previously granted by the Company, the price per Share forwhich such Shares are issued (determined by dividing (a) the total amount, ifany, received by the Company as consideration for such Convertible Securitiesor for the granting of such rights or options, plus the aggregate amount ofadditional consideration paid to the Company upon the conversion or exchange ofsuch Convertible

 

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Securities (which, if soprovided in such Convertible Securities, shall be deemed to be equal to theoutstanding principal amount of the indebtedness represented by suchConvertible Securities) or upon the exercise of such rights or options, by (b)the total number of Shares issued upon the conversion or exchange of suchConvertible Securities or upon the exercise of such rights or options shall beless than the Exercise Price in effect immediately prior to such issue, sale orexercise, then the adjustments provided for by the first paragraph of thisAnnex 1 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 beconsidered the consideration received by the Company upon the issue or sale ofthe Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)           In case at any time any Shares orConvertible Securities or any rights or options to purchase any Shares orConvertible Securities shall be issued or sold for cash, the considerationreceived therefor shall be deemed to be the amount received by the Companytherefor without deduction therefrom of any expenses incurred or anyunderwriting commissions or concessions paid or allowed by the Company inconnection therewith.  In case any Sharesor Convertible Securities or any rights or options to purchase any Shares orConvertible Securities shall be issued or sold, in whole or in part, forconsideration other than cash, the amount of the consideration other than cashreceived by the Company in exchange for the issue or sale of such ConvertibleSecurities shall be deemed to be the fair value of such consideration asdetermined in good faith by the Board of Directors of the Company, withoutdeduction therefrom of any expenses incurred or any underwriting commissions orconcessions paid or allowed by the Company in connection therewith; providedthat if the holder or holders of at least 66-2/3% of the Warrant Sharespurchasable under this Warrant shall request in writing, the value of suchconsideration shall be determined by an independent expert selected by suchholders, the costs and expenses of which shall be borne by the Company, and, ifthe value of such consideration as so determined is less than the valuedetermined by the Board of Directors of the Company, the lesser value shall beutilized in calculating the consideration per Share received by the Company forpurposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidationof the Company in which the Company is not the surviving corporation or in theevent of any sale of all or substantially all of the assets of the Companyoutside of the ordinary course of business of the Company for stock or othersecurities of any corporation, the Company shall be deemed to have issued anumber of Shares for stock or securities of such other corporation computed onthe basis of the actual exchange ratio on which the transaction was predicatedand for consideration that is equal to the fair market value on the date ofsuch transaction of such stock or securities of the other corporation, and ifany such calculation results in adjustment of the Exercise Price, thedetermination of the number of Shares issuable upon exercise of this Warrantimmediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall bemade after giving effect to such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding atany given time shall not include Shares that have been redeemed by the Companyand not canceled, if any, and that are thus owned or held by or for the accountof the Company, and the disposition of any such Shares shall be considered anissue 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 principalnational securities exchange on which the Shares are listed or in a nationalmarket 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 domesticover-the-counter market, for the 20 trading days immediately prior to the dayas of which the Market Price is being determined.  If the Shares are not listed on any nationalsecurities exchange or admitted for trading in any national market system or tradedin the domestic over-the-counter market, the Market Price shall be the higherof (y) the book value of the Shares as determined by a firm of independentpublic accountants of recognized standing selected by the Board of Directors ofthe Company as of the last day of any month ending within 60 days preceding thedate as of which the determination is to be made or (z) the fair market valueof the Shares determined in good faith by the Board of Directors of theCompany,

 

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provided that if the holderor holders of at least 66-2/3% of the Warrant Shares purchasable under theWarrant shall request in writing, the fair market value of the Shares shall bedetermined by an independent investment banking firm or other independentexpert selected by such holders and reasonably satisfactory to the Company,which determination shall be as of a date which is within 15 days of the dateas 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 acquisitionby the Company of the stock or assets of any other corporation or the merger ofany other corporation into the Company under circumstances where, on the dateof the issuance of such Shares, the consideration received for such Shares isless than the Market Price of the Shares, but on the date the number of Shareswas determined, the consideration received for such Shares would not have beenless than the Market Price thereof, such Shares shall not be deemed to havebeen issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of thisparagraph (B) to the contrary notwithstanding, in the case of an acquisitionwhere all or part of the purchase price is payable in Shares or ConvertibleSecurities but is stated as a dollar amount, where the Company upon making theacquisition pays only part of a maximum dollar purchase price which is payablein Shares or Convertible Securities and where the balance of such purchaseprice is deferred or is contingently payable under a formula related toearnings over a period of time, (a) the consideration received for any Sharesor Convertible Securities delivered at the time of the acquisition shall bedeemed to be such part of the total consideration as the portion of the dollarpurchase price then paid in Shares or Convertible Securities bears to the totalmaximum dollar purchase price payable in Shares or Convertible Securities and(b) in connection with each issuance of additional Shares or ConvertibleSecurities pursuant to the terms of the agreement relating to such acquisition,the consideration received shall be deemed to be such part of the totalconsideration as the portion of the dollar purchase price then and theretoforepaid in Shares or Convertible Shares bears to the total maximum dollar purchaseprice payable in Shares or Convertible Securities multiplied by a fraction, thenumerator of which shall be the number of Shares (or in the case of ConvertibleSecurities other than capital stock of the Company, the aggregate principalamount of such Convertible Securities) then issued and the denominator of whichshall be the total number of shares (or in the case of Convertible Securitiesother than capital stock of the Company, the aggregate principal amount of suchConvertible Securities) then and theretofore issued under such acquisitionagreement.  In the event only a part ofthe purchase price for an acquisition is paid in Shares or ConvertibleSecurities in the manner referred to in this clause (vi), the term “totalconsideration” as used in this clause (vi) shall mean that part of theaggregate consideration as is fairly allocable to the purchase price paid inShares 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 itsoutstanding Shares into a greater number of Shares, then from and after therecord date for such subdivision the Exercise Price in effect immediately priorto such subdivision shall be proportionately reduced and the number of Sharespurchasable upon the exercise of this Warrant shall be correspondinglyincreased, and, conversely, in case the outstanding Shares shall be combinedinto a smaller number of Shares, then from and after the record date for suchcombination the Exercise Price in effect immediately prior to such combinationshall be proportionately increased and the number of Shares purchasable uponthe exercise of this Warrant shall be correspondingly decreased.

 

(D)          Unless the provisions of paragraph (E) apply, if anycapital reorganization or reclassification of the capital stock of the Company,or consolidation or merger of the Company with another corporation, or sale ofall or substantially all of its assets to another corporation outside of theordinary course of business, shall be effected in such a way that holders ofShares (or any other securities of the Company then issuable upon the exerciseof this Warrant) shall be entitled to receive stock, securities or assets withrespect to or exchange for Shares (or such other securities) then, as acondition of such reorganization, reclassification, consolidation, merger orsale, lawful and adequate provision shall be made whereby the Holder shallthereafter have the right to purchase and receive upon the basis and upon theterms and conditions specified in this Warrant and in lieu of the Shares (orother securities) of

 

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the Company immediatelytheretofore purchasable and receivable upon the exercise of the rightsrepresented hereby, such shares of stock, securities or assets as may be issuedor 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 anysuch case appropriate provision shall be made with respect to the rights andinterests of the holder of this Warrant to the end that the provisions hereof(including, without limitation, provisions for adjustment of the Exercise Priceand of the number of Shares (or other securities) purchasable upon the exerciseof this Warrant and for the registration thereof as provided in Section 6 ofthis Warrant) shall thereafter be applicable, as nearly as may be, in relationto any shares of stock, securities or assets thereafter deliverable upon theexercise hereof (including an immediate adjustment, by reason of suchconsolidation, merger or sale, of the Exercise Price to the value of the Shares(or other securities) reflected by the terms of such consolidation, merger orsale if the value so reflected is less than the Exercise Price in effectimmediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger ofthe Company with or into another corporation as a result of which a greater orlesser number of securities of the surviving corporation are issuable toholders of Shares in respect of the number of Shares outstanding immediatelyprior to such consolidation or merger, then the Exercise Price in effectimmediately prior to such consolidation or merger shall be adjusted in the samemanner as though there were a subdivision or combination of the outstandingShares.  The Company shall not effect anysuch consolidation, merger or sale, unless prior to or simultaneously with theconsummation thereof the surviving or successor corporation (if other than theCompany) resulting from such consolidation or merger of the corporationpurchasing such assets shall assume, by written instrument executed and mailedto the registered Holder at the last address of such holder appearing on thebooks of the Company, the obligation to deliver to such holder such Shares ofstock, securities or assets as, in accordance with the foregoing provisions,such holder may be entitled to purchase, and containing the express assumptionof such surviving or successor corporation of the due performance of everyprovision of this Warrant to be performed by the Company and of all liabilitiesand obligations of the Company hereunder.

 

(E)           In the event of a change in control of the Company, asdefined in this paragraph (E), then the Board of Directors shall accelerate theexercise date of the Warrant or make this Warrant fully vested and exercisableand, in its sole discretion, may take any or all of the following actions: (a)grant a cash bonus award to any holder of this Warrant in an amount necessaryto pay the Exercise Price of all or any portion of the Warrant then held bysuch person; (b) pay cash to any holder of this Warrant in exchange for thecancellation of the holder’s Warrant in an amount equal to the differencebetween the Exercise Price of such Warrant and the greater of the tender offerprice for the underlying Shares or the Market Price of the Shares on the dateof the cancellation of the Warrant; and (c) make any other adjustments oramendments to this Warrant.  For purposesof this paragraph (E), a “change in control” shall be deemed to have occurredif (a) any “person” or “group” (within the meaning of Sections 13(d) and14(d)(2) of the Securities Exchange Act of 1934, as amended (“1934 Act”), otherthan a trustee or other fiduciary holding securities under an employee benefitplan of the Company is or becomes the “beneficial owner” (as defined in Rule13d-3 under the 1934 Act), directly or indirectly, of more than 50% of the thenoutstanding voting stock of the Company; or (b) at any time during any periodof three consecutive years after the date of this Warrant, individuals who atthe beginning of such period constitute the Board (and any new director whoseelection by the Board or whose nomination for election by the Company’sstockholders was approved by a vote of at least two-thirds of the directorsthen still in office who either were directors at the beginning of such periodor whose election or nomination for election was previously so approved) ceasefor any reason to constitute a majority thereof; or (c) the stockholders of theCompany approve a merger or consolidation of the Company with any othercorporation, other than a merger or consolidation which would result in thevoting securities of the Company outstanding immediately prior theretocontinuing to represent (either by remaining outstanding or by being convertedinto voting securities of the surviving entity) at least 50% of the combinedvoting power of the voting securities of the Company or such surviving entityoutstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any dividend onor make any other distribution with respect to Shares (or any other securitiesof the Company then issuable upon the exercise of the Warrant) that is payablein Shares, Convertible Securities, any other securities of the Company or otherstock, securities or assets, other than cash, then thereafter, and in lieu ofany adjustment of the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the holder of this Warrant, upon any exercise of therights represented hereby, shall be entitled to receive the number of Shares(or other securities) being purchased upon such exercise and, in addition toand without further payment, the Shares, Convertible Securities, othersecurities of any company or other stock, securities or assets which the holderof this Warrant would have received by way of such distributions ifcontinuously since the date of the Warrant (or, if this Warrant shall have beenissued pursuant to Section 7 of this Warrant, the date of the predecessorWarrant to which this Warrant relates) such holder had been the record holderof the number of Shares (or other securities), then being purchased and hadretained all such

 

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Shares, Convertible Securities,other securities of the Company or other stock, securities or assetsdistributable with respect to such Shares (or other securities) and,furthermore, all cash, stock, securities or assets payable as dividends ordistributions with respect to the foregoing and originating directly orindirectly therefrom.  The Company shallreserve 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 respectthereto 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 tothe Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of action takenby the Company, which in the good faith opinion of the Board of Directors ofthe Company, are not adequately covered by the provisions of this Annex 1, andwhich might materially adversely affect the rights of the holder of this Warrant,the Company shall appoint a firm of independent public accountants ofrecognized standing (which may be the regular accountants or auditors of theCompany), which shall give their opinion as to the adjustments, if any, in theExercise Price and the number of Shares purchasable upon the exercise of thisWarrant, or other change in the rights of the Holder, on a basis consistentwith the other provisions of this Annex 1, necessary to preserve withoutdiminution the rights of the Holder. Upon receipt of such opinion, the Company shall forthwith make theadjustments described therein.

 

(H)                               (i)        Within ten (10) days ofany adjustment of the Exercise Price or change in the number of Sharespurchasable upon the exercise of this Warrant made pursuant to paragraphs (A),(B), (C) , or (F) or any change in the rights of the holder of this Warrant byreason of the occurrence of events described in paragraphs (D), (E), or (F),the Company shall give written notice by certified or registered mail to theregistered holder of this Warrant at the address of such holder as shown on thebooks of the Company, which notice shall describe the event requiring suchadjustments (with respect to any adjustment made pursuant to paragraphs (C),(D), (E) or (F), the Exercise Price resulting from such adjustment, theincrease or decrease, if any, in the number of Shares purchasable upon theexercise of this Warrant, or the other change in the rights of such holder, andset forth in reasonable detail the method of calculation of such adjustmentsand the facts upon which such calculations are based.  Within two (2) days of receipt from theholder of this Warrant upon the surrender hereof for exercise pursuant toSection 1 of this Warrant, and within three (3) days of receipt from the Holdera written request therefor (which request shall not be made more than once eachcalendar quarter), the Company shall give written notice by certified orregistered mail to such holder at his address as shown on the books of theCompany of the Exercise Price in effect as of the date of receipt by theCompany of this Warrant for exercise, or the date of receipt of such writtenrequest, and the number of Shares purchasable or the number or amount of othershares of stock, securities or assets receivable as of such date, and set forthin reasonable detail the method of calculation of such numbers; provided thatno further adjustments to the Exercise Price or the number of Sharespurchasable or number or amount of shares, securities or assets receivable onexercise of this Warrant shall be made after receipt of this Warrant by theCompany for exercise.

 

(ii)                      Upon each adjustment of the Exercise Price and each change in thenumber of Shares purchasable upon the exercise of this Warrant, and change inthe rights of the holder of this Warrant by reason of the occurrence of otherevents herein set forth, then and in each case, upon written request of theholder of this Warrant (which request shall be made not more often than onceeach calendar year), the Company will at its expense promptly obtain an opinionof independent public accountants reasonably satisfactory to each holderstating the then effective Exercise Price and the number of Shares thenpurchasable, or specifying the other shares of stock, securities or assets andthe amount thereof then receivable, and setting forth in reasonable detail themethod of calculation of such numbers and the facts upon which suchcalculations are based.  The Company willpromptly mail a copy of such opinion to the registered Holder.

 

(I)            In case at any time:

 

(i)                         The Company shall pay any dividend payable incapital stock on its outstanding Shares or make any distribution (other thanregular cash dividends) to the holders of Shares;

 

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(ii)                      The Company shall offer for subscription prorata to the holders of Shares any additional capital stock or other rights;

 

(iii)                   There shall be authorized any capitalreorganization or reclassification of the capital stock of the Company, orconsolidation or merger of the Company with, or sale of all or substantiallyall of its assets to, another corporation; or

 

(iv)                  There shall be authorized or commence avoluntary or involuntary dissolution, liquidation or winding up of the Company then,in one or more of said cases, the Company shall given written notice bycertified or registered mail to Holder at the address of Holder as shown on thebooks of the Company on the date on which (1) the books of the Company shallclose or a record shall be taken for such dividend, distribution, orsubscription rights, or (2) such reorganization, reclassification,consolidation, merger, sale, dissolution, liquidation or winding up shall takeplace or be voted upon by the shareholders of the Company, as the case may be.  Such notice shall also specify the date as ofwhich the holders of record of Shares shall participate in such dividend,distribution or subscription rights, or shall be entitled to exchange theirShares for securities or other property deliverable upon such reorganization,reclassification, consolidation, merger, sale, dissolution, liquidation orwinding up, as the case may be.  Suchwritten notice shall be given at least thirty (30) days prior to the action inquestion and no less than thirty (30) days prior to the record date or the dateon which the Company’s books are closed in respect thereto.

 

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EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered HolderDesiring to Exercise the Within Warrant ofTIPPERARY CORPORATION

 

The undersigned registeredholder hereby exercises the right to purchase                                                Shares covered by the within Warrant according to the conditions thereof, andherewith makes payment of the Exercise Price of such Shares, $                               .

 
| Name of Registered Holder:     |   |   |
|--------------------------------|--------|--------|
|                           |   |
| Signature:                     |   |   |
|                           |   |
| Title of Signing Officer       |   |
| or Agent (if any):             |   |   |
|                           |   |
| Address of Registered  Holder: |   |   |
|                           |   |   |
|                           |   |   |
|                           |   |
| Tax I.D. No.:                  |   |   |
|                           |   |
| Dated:                         |   | , 20   |   |   |
|                                |        |        |  |  |  |  |  |  |  |  |

 

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**This Warrant and the rightsrepresented hereby shall not be transferable at any time unless (i) aregistration statement under the Securities Act of 1933, as amended, shall bein effect with respect to this Warrant or the Shares issuable hereunder at suchtime, or (ii) the transfer is made in compliance with the provisions of Section5.**

 
| **Number:** | ** ** | **200,000   Shares** |
|-------------|------------|--------------------------------|

 

**WARRANTTO PURCHASE SHARESOFTIPPERARY CORPORATION**

 

This certifies that, for value received, David L.Bradshaw, an individual residing in Littleton, Colorado (“Holder”), or theirregistered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texascorporation (the “Company”), two hundred thousand (200,000) Shares, as definedin Section 3, at the price of Four Dollars and 95/100 ($4.95) per Share (asdefined in Section 3) at any time, or in part from time to time in accordancewith the following Vesting Schedule (“Vesting Schedule”):

 
| **Date:**             | ** ** | **Total Shares Subject to Exercise** | ** ** |
|-----------------------|------------|--------------------------------------|------------|
|                  |       |                                 |       |
| From January 10, 2006 |       | 66,667                               |       |
| From January 10, 2007 |       | 133,334                              |       |
| From January 10, 2008 |       | 200,000                              |       |

 

This Warrant shall expire, if not exercisedprior thereto, two (2) years after the resignation or removal of the Holder asan employee or director of the Company. If the Holder should resign or be removed as an employee or directorfrom the Company, then this Warrant shall be vested only to the extent vestedon such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the initialexercise price set forth above and the number of Shares to be issued upon theoccurrence of certain events (the Provisions as to Adjustment) are more fullyset forth in Annex 1 hereto. (Hereinafter, the initial exercise price set forth above in this paragraphfor the purchase of Shares upon the exercise of this Warrant, as adjustedpursuant to the Provisions as to Adjustment, is referred to as the “ExercisePrice”).  This Warrant is subject to thefollowing provisions, terms and conditions:

 

**1.             Exercise of Warrant.**

 

(a)           The rights represented by this Warrant may be exercised bythe Holder, in whole or in part, (but not as to a fractional Share), by thesurrender 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 maydesignate by notice in writing to the Holder at the address of such holderappearing on the books of the Company at any time within the period abovenamed) and delivery of a completed subscription form in the form attached tothis Warrant as Exhibit A, and upon payment to the Company of theExercise Price for such Shares.

 

(b)           Payment of the Exercise Price shall be made by acombination of any one or more of the following:

 

(i)                                     By application, to the extent permitted byapplicable law, of Shares or other securities of the Company owned by theHolder, the value of which for such purpose shall be the fair market valuethereof determined in good faith by the Company and the Holder at the time ofsuch exercise; provided, however, that in order to apply such Shares or othersecurities of the Company in the exercise hereof, each of the followingconditions must be met:

 

(A)                              such Shares or other securities of theCompany shall have been owned, without material encumbrance, contingency orrisk of forfeiture relating to the ownership rights, for at least six monthsand at all times during said six month period by the Holder, and within saidsix month period such Shares or other securities of the Company shall not havebeen obtained through exercise of any

 

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option, warrant or right toobtain such Shares of other securities or through the conversion of any othersecurity; and

 

(B)                                such Shares or other securities shall not beor include: (1) options, warrants or similar rights to acquire Shares or othersecurities of the Company by the Holder; or (2) securities owned by the Holderwhich are convertible in whole or in part into Shares or other securities ofthe Company; and

 

(ii)                                  in cash or by certified check or bank draftin New York Clearing House funds.

 

(c)           The Company agrees that any Shares so purchased by theexercise of this Warrant shall be deemed to be issued to the Holder as therecord owner of such Shares as of the close of business on the date on whichthis Warrant shall have been surrendered, the completed subscription formdelivered, and payment in full is made and delivered to the Company for suchShares as aforesaid.

 

(d)           Stock certificates evidencing Shares so purchased shall bedelivered to the Holder as promptly as practicable, after the rightsrepresented by this Warrant shall have been so exercised.  If this Warrant shall have been exercisedonly in part, and unless this Warrant has expired, a new Warrant representingthe number of Shares with respect to which this Warrant shall not then havebeen exercised shall also be delivered to the Holder within such time.  Notwithstanding the foregoing, however, theCompany shall not be required to deliver any stock certificate evidencingShares 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 withthe preparation, execution and delivery of stock certificates and any newWarrants.

 

**2.             Certain Covenants of the Company.**  TheCompany covenants and agrees as follows:

 

(a)           All Shares which may be issued upon the exercise of therights represented by this Warrant (all such Shares, whether previously issuedor subject to issuance upon the exercise of this Warrant, are from time to timereferred to herein as “Warrant Shares”) will, upon issuance, be duly authorizedand issued, fully paid and nonassessable and free from all taxes, liens andcharges with respect to the issuance thereof.

 

(b)           During the period within which the rights represented bythis Warrant may be exercised, and only insofar as the Vesting Schedule hereinpermits the exercise of this Warrant, the Company will, at all times, haveauthorized and reserved free of preemptive or other rights for the exclusivepurpose of issuance upon exercise of the purchase rights evidenced by thisWarrant, a sufficient number of Shares to provide for the exercise of rightsrepresented by this Warrant.

 

(c)           The Company will not, by amendment or restatement of theArticles of  Incorporation or through anyreorganization, transfer of assets, consolidation, merger, issuance or sale ofsecurities or otherwise, avoid or take any action which would have the effectof avoiding the performance of any of the terms to be performed hereunder by theCompany, but will at all times in good faith carry out all of the provisions ofthis Warrant and take all such action as may be necessary or appropriate toprotect the rights of the Holder against dilution or other impairment and, inparticular, will not permit the par value of any Share to be or become greaterthan the then effective Exercise Price.

 

**3.             Definition of Shares.**  Asused herein, the term “Shares” shall mean and include shares of the CommonStock, par value $.02 per share, of the Company as are constituted and exist onthe date hereof, and shall also include any other class of the capital stock ofthe Company hereafter authorized which shall neither be limited to a fixed sumor percentage of par value in respect to the rights of the holders thereof toreceive dividends and to participate in the distribution of assets upon thevoluntary or involuntary liquidation, dissolution or winding up of the Company,nor be subject at any time to redemption by the Company; provided that theShares receivable upon exercise of this Warrant shall include only Shares ofthe type as are constituted and exist on the date hereof or Shares resultingfrom any reclassification of the Shares as provided for in paragraph (C) of theProvisions as to Adjustment.

 

**4.             No Rights or Liabilities as aShareholder.**  This Warrant shall not entitle the Holder assuch to any rights whatsoever, including, without limitation, voting rights, asa holder of Shares of the Company.  Noprovisions hereof, in the absence of affirmative action by the Holder topurchase Shares, and no mere enumeration

 

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herein of the rights orprivileges of such holder, shall give rise to any liability of such holder as aholder 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 transfereehereof and/or transferable and the Warrant Shares shall not be transferableexcept upon the conditions specified in this Section 5, which conditions areintended, among other things, to ensure compliance with the provisions of theSecurities Act of 1933, as amended, and the rules and regulations of theSecurities and Exchange Commission (the “Commission”) thereunder (collectivelythe “Securities Act”), in respect of the exercise and/or transfer of thisWarrant and/or transfer of such Warrant Shares.

 

(b)           This Warrant and the Warrant Shares shall not betransferable (except for a transfer of this Warrant or the Warrant Shares in anoffering registered under the Securities Act, including, without limitation, atransfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer) unless, prior to any transfer, the Holder shall havereceived from its transferee reasonable assurances that such person is awarethat this Warrant and the Warrant Shares have not been registered under theSecurities Act and that such person is acquiring this Warrant or the WarrantShares for investment only and not with the view to the disposition or publicoffering thereof (unless in an offering registered under the Securities Act orexempt therefrom), and that such person is aware that the stock certificatesevidencing the Warrant Shares shall bear a legend restricting transfer anddisposition thereof in accordance with the Securities Act unless, in theopinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant(other than a transfer in an offering registered under the Securities Act,including, without limitation, a transfer in a registered offering effectedpursuant to Section 6, and any subsequent transfer), the Holder shall providean opinion of counsel, who shall be reasonably satisfactory to the Company,that an exemption from the registration requirements of the Securities Act isavailable.

 

(c)           Any permitted subsequent holder of this Warrant shall besubject to all the terms and conditions herein, and shall acknowledge, inwriting, upon receipt of this Warrant his or her acceptance of the terms andconditions herein.

 

(d)           To facilitate sales by a holder of this Warrant or WarrantShares in transactions qualifying under Rule 144 promulgated by the Commissionunder the Securities Act, if available, the Company agrees to satisfy thecurrent public information requirements of said Rule 144, for as long as theShares remain registered under the Securities Exchange Act of 1934, as amended,and the rules and regulations of the Commission thereunder (collectively the “ExchangeAct”), and to provide said holder upon request with such other information assuch holder may require for compliance with the provisions of said Rule 144.

 

**6.             Registration Under SecuritiesAct.**

 

(a)           If the Company, at any time, proposes to register anyissuance of its securities under the Securities Act (other than a registrationon Form S-8 in connection with an employee stock purchase or option plan or onForm S-4 in connection with mergers, acquisitions or exchange offerings), theCompany will at such time give prompt written notice to the holder hereof andto the holders of all other Warrant Shares issuable from any outstandingWarrants (such holders are hereinafter referred to as the “Prospective Sellers”or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a ProspectiveSeller, given within 30 days after receipt of any such notice (which requestshall state the intended method of disposition of the Warrant Shares to betransferred by such Prospective Seller), the Company shall use its best effortsto cause all Warrant Shares, the holders of which (or of the Warrants to whichthe same are related), to the extent vested in accordance with the VestingSchedule, shall have so requested registration of the transfer thereof, to beregistered under the Securities Act, all to the extent requisite to permit thesale or other disposition (in accordance with the intended method thereof asaforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section6(a) shall not be effective with respect to the Prospective Seller in the caseof an underwritten public offering of securities of the Company by the Companyunless each Prospective Seller agrees to the terms and conditions, including underwritingdiscounts and allowances, specified by the managing underwriter of suchoffering with respect to such Warrant Shares. The Company shall have the right to reduce the number of Warrant Sharesof the Prospective Sellers to be included in a registration statement pursuantto the exercise of the rights granted by this Section 6(a) if, and to theextent, that the managing underwriter of such offering is of the good faithopinion, supported by written reasons therefor, that the inclusion of suchWarrant Shares would materially and adversely

 

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affect the marketing of thesecurities of the Company to be offered; provided, that any such reduction ofthe number of Warrant Shares, the transfer of which is to be registered onbehalf of the Prospective Sellers, shall be made on the basis of a pro ratareduction of all Warrant Shares of all Prospective Sellers.

 

If and whenever the Companyis required by the provisions of this Section 6 to use its best efforts to effectthe 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 aregistration statement with respect to such transfer and use its best effortsto cause such registration statement to become and remain effective, but notfor any period longer than nine months;

 

(ii)                                  prepare and file with the Commission suchamendments and supplements to such registration statement and the prospectusused in connection therewith as may be necessary to keep such registrationstatement effective, and to comply with the provisions of the Securities Actwith respect to the transfer of all securities covered by such registrationstatement, including, without limitation, taking all necessary actions wheneverthe Prospective Sellers of the Warrant Shares covered by such registrationstatement shall desire to dispose of the same;

 

(iii)                               furnish to each Prospective Seller suchnumber of copies of a prospectus, including a preliminary prospectus, inconformity with the requirements of the Securities Act, and such otherdocuments, as such Prospective Seller may reasonably request in order tofacilitate the disposition of the Warrant Shares owned by such ProspectiveSeller and covered by such registration statement;

 

(iv)                              use its best efforts to register or qualifythe securities covered by such registration statement under such othersecurities or blue sky laws of such jurisdictions as each Prospective Sellershall request, and use its best efforts to do any and all other acts and thingswhich may be reasonably necessary to enable such Prospective Seller toconsummate the disposition in such jurisdiction of the Warrant Shares owned bysuch Prospective Seller and covered by such registration statement; providedthat, notwithstanding the foregoing, the Company shall not be required toregister in any jurisdiction as a broker or dealer of securities or to grantits consent to service of process in any such jurisdiction solely on account ofsuch intended disposition by such Prospective Seller;

 

(v)                                 furnish to the Prospective Sellers, whoseintended dispositions are registered, a signed copy of an opinion of counselfor the Company, in form and substance acceptable to such Prospective Sellers,to the effect that: (A) a registration statement covering such dispositions ofWarrant Shares has been filed with the Commission under the Securities Act andhas been made effective by order of the Commission, (B) such registrationstatement and the prospectus contained therein and any amendments orsupplements thereto comply as to form in all material respects with therequirements of the Securities Act, and (C) to the best of such counsel’sknowledge, no stop order has been issued by the Commission suspending theeffectiveness of such registration statement and no proceedings for theissuance of such a stop order are threatened or contemplated;

 

(vi)                              furnish to the Prospective Sellers whoseintended dispositions are required a blue sky survey in the form and of thesubstance customarily prepared by counsel for the Company and accepted bysellers of securities in similar offerings, discussing and describing theapplication provisions of the securities or blue sky laws of each state orjurisdiction in which the Company shall be required, pursuant to Section6(c)(iv), to register or qualify such intended dispositions of such WarrantShares, or, in the event counsel for the underwriters in such offering shall bepreparing a blue sky survey, cause such counsel to furnish such survey to, andto allow reliance thereon by, such Prospective Sellers;

 

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(vii)                           otherwise use its best efforts to comply withall applicable rules and regulations of the Commission under the Securities Actand the Exchange Act, insofar as they relate to such registration and suchregistration statement; and

 

(viii)                        use its best efforts to list such WarrantShares on any securities exchange on which any securities of the Company arethen listed or to admit such Warrant Shares for trading in any national marketsystem in which any securities of the Company are then admitted for trading, ifthe listing or admission of such securities is then permitted under the rulesof such exchange or system.

 

(b)           With respect to the registration by the Company oftransfers of Warrant Shares under the Securities Act pursuant to Section 6(a),the Company shall pay all expenses incurred by it in complying with thisSection 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 onespecial counsel designated by Prospective Sellers owning a majority of the WarrantShares covered by such registration, but specifically excluding anyunderwriting discounts and allowances that are allocable to the Warrant Sharesbeing sold by, and which shall be paid by, the Prospective Sellers; provided,however, that if any registration statement filed with the Commission by theCompany under Section 6(a) shall not be declared effective by the Commission,such attempted registration shall not constitute a registration under thisSection 6(b).

 

(c)           It shall be a condition precedent to the obligations ofthe Company to take any action pursuant to this Section 6 that each ProspectiveSeller, the transfer of whose Warrant Shares is registered or to be registeredunder each such registration, shall furnish to the Company such written informationregarding the securities held by such Prospective Seller as the Company shallreasonably request and as shall be required in connection with the action to betaken by the Company.

 

(d)                                 (i)           Inthe event of any registration of any transfer of Warrant Shares under theSecurities Act pursuant to this Section 6, the Company will indemnify and holdharmless each Prospective Seller of such securities, each of its officers,directors and partners, and each other person, if any, who controls suchProspective Seller within the meaning of the Securities Act, and eachunderwriter, if any, who participates in the offering of such securities,against any losses, claims, damages or liabilities (or actions in respectthereof), joint or several, to which each Prospective Seller, officer, directoror partner, controlling person or underwriter may become subject under theSecurities Act or otherwise, insofar as such losses, claims, damages orliabilities (or actions in respect thereof) arise out of or are based upon anyuntrue statement or alleged untrue statement of any material fact contained, onthe effective date thereof, in any registration statement under which suchtransfer of securities was registered under the Securities Act, any preliminaryprospectus or final prospectus contained therein, or any amendment orsupplement thereto, or arise out of or are based upon the omission or allegedomission to state therein a material fact required to be stated therein ornecessary to make the statements therein not misleading, or any violation bythe Company of the Securities Act, and will reimburse such Prospective Sellerand each of its officers, directors and partners, and each such controllingperson or underwriter, for any legal or any other expenses reasonably incurredby such Prospective Seller or its officers, directors and partners orcontrolling persons or by each such underwriter, in connection withinvestigating or defending any such loss, claim, damage, liability or action;provided, however, that the Company will not be liable in any such case to theextent that any such loss, claim, damage or liability arises out of or is basedupon an untrue statement or alleged untrue statement or omission or allegedomission made in such registration statement, preliminary prospectus orprospectus or such amendment or supplement in reliance upon and in conformitywith written information furnished to the Company through an instrument dulyexecuted by such Prospective Seller specifically for use in the preparationthereof.  In the event of anyregistration by the Company or any transfer of securities under the SecuritiesAct pursuant to this Section 6, each Prospective Seller of Warrant Sharescovered by such registration will indemnify and hold harmless the Company, eachother person, if any, who controls the Company within the meaning of theSecurities Act and each officer and director of the Company and the otherProspective Sellers to the same extent that the Company agrees to indemnify it,but only with respect

 

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tothe written information relating to such Prospective Seller furnished to theCompany by such Prospective Seller aforesaid.

 

(ii)                              Each indemnified party shall, as promptly as practicable upon receiptof notice of the commencement of any action against such indemnified party orits officers, directors or partners, or any controlling person of suchindemnified party, in respect of which indemnity may be sought from anindemnifying party on account of the indemnity agreement contained in Section6(d)(i), notify the indemnifying party in writing of the commencementthereof.  The omission of suchindemnified party to so notify the indemnifying party of any such action shallnot relieve the indemnifying party from any liability which it may have onaccount of the indemnity agreement contained in Section 6(d)(i) to the extentthat the failure to receive such notice within a reasonable period of timeshall not have caused harm, loss or damage to the indemnifying party, providedthat, conversely, if such failure to receive notice shall have caused any harm,loss or damage to the indemnifying party, such failure shall constitute adefense to any liability which such indemnifying party may have on account ofsuch agreement to the extent of the harm, loss or damage so caused. In case anysuch action shall be brought against any indemnified party, its officers,directors and partners, or any such controlling person, and such indemnifiedparty shall notify the indemnifying party of the commencement thereof, theindemnifying party shall be entitled to participate in (and, to the extent thatthe indemnifying party shall wish, to direct) the defense thereof at theindemnifying party’s own expense, in which event the defense shall be conductedby recognized counsel chosen by the indemnifying party and approved by theindemnified party (whose approval shall not unreasonably be withheld) and theindemnified party may participate in such defense at its own expense (unless itis advised by counsel that actual or potential differing interests or defensesexist or may exist, in which case such expenses shall be paid by theindemnifying party, provided that the indemnifying party shall not be requiredto pay the expenses for more than one counsel for all such indemnifiedparties).

 

**7.             Transfer; Ownership.** Subject to Section 5, this Warrant and all rights hereunder aretransferable, in whole or in part, at the office or agency of the Companyreferred to in Section 1 by the Holders in person or by a duly authorizedattorney, upon surrender of this Warrant, with an assignment, acceptable to theCompany, duly completed, at which time a new Warrant shall be made anddelivered by the Company, of the same tenor as this Warrant but registered inthe name of the transferee.  The Holder,by taking or holding the same, consents and agrees that this Warrant, whenendorsed in blank, shall be deemed negotiable, and that the Holder, when thisWarrant shall have been so endorsed, may be treated by the Company and allother persons dealing with this Warrant as the absolute owner hereof for anypurpose and as the person entitled to exercise the rights represented by thisWarrant and to transfer this Warrant on the books of the Company, any notice tothe contrary notwithstanding; but until such transfer on such books, theCompany may treat the registered the Holder as the owner hereof for allpurposes.  Any transfer of this Warrantshall be made in compliance with the Securities Act and any applicable statesecurities or blue sky laws.

 

**8.             Exchange and Replacement.** Subject to Section 7, this Warrant is exchangeable, upon the surrenderhereof by the Holder at the office or agency of the Company referred to inSection 1, for new Warrants of like tenor and date representing in theaggregate the right to purchase the number of Shares which may be purchasedhereunder, each of such new Warrants to represent the right to purchase suchnumber of Shares as shall be designated by the Holder at the time of suchsurrender.  Upon receipt by the Company,at the office or agency referred to in Section 1, of evidence reasonablysatisfactory to it of the loss, theft or destruction of this Warrant and ofindemnity or security reasonably satisfactory to it (provided that the writtenindemnity of the Holder shall be deemed reasonably satisfactory to the Companyfor such purposes), the Company will deliver a new Warrant of like tenor anddate in replacement of this Warrant. This Warrant shall be promptly canceled by the Company upon the surrenderhereof in connection with any transfer, exchange or replacement.  The Company will pay all expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to Section 7 and this Section 8.

 

**9.             Notices.**  Anynotice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent bycertified or registered mail to, 8998 W. Brandt Drive, Littleton, Colorado80123-2230, or to such other address as shall have been furnished to theCompany in writing by the Holder.  Any

 

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notice or other documentrequired or permitted to be given or delivered to the Company shall bedelivered at, or sent by certified or registered mail to, 633 SeventeenthStreet, Suite 1550, Denver, Colorado 80202, or to such other address as shallhave been furnished in writing to the Holder by the Company.  Any notice so addressed and mailed byregistered or certified mail or otherwise delivered, shall be deemed to begiven when actually received by the addressee.

 

**10.          GOVERNING LAW.    THISWARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF TEXAS.**

 

**11.          Miscellaneous.**  ThisWarrant will be binding upon any entity succeeding to the Company byconsolidation or acquisition of all or substantially all of the Company’sassets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may bechanged, waived, discharged or terminated only by an instrument in writingsigned by the party (or any predecessor in interest thereof) against whomenforcement of the same is sought.  Theheadings in this Warrant are for purposes of reference only and shall notaffect the meaning or construction of any of the provisions hereon.

 

**INWITNESS WHEREOF**,Tipperary Corporation has caused this Warrant to be signed by its dulyauthorized officers, under its corporate seal, to be dated April 27, 2005

 
|                  | **TIPPERARY  CORPORATION** |
|-----------------------|----------------------------|
|                  |                       |
|                  |                       |
| ** **            | **BY:**                    | **/s/ Joseph B. Feiten** |   |
|                  | **ITS:**                   | **Chief  Financial Officer** |
| **(CORPORATE  SEAL)** |                       |
|                  |                       |
| **ATTEST:**           | **/s/ Elaine R. Treece**   | ** ** |   |
| **ITS:**              | Secretary                  |   |
|                       |                            |  |  |  |  |  |

 

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Annex1

 

TIPPERARYCORPORATION

 

PROVISIONSAS TO ADJUSTMENT OFEXERCISE PRICE AND NUMBER OF SHARESISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and thenumber of Shares issuable upon the exercise of the annexed Warrant to purchaseshares of TIPPERARY CORPORATION, a Texas corporation (herein and in thisWarrant referred to as the “Company”), shall be subject to adjustment from timeto time as hereinafter provided; that in no event shall the Exercise Price beincreased to a price greater than Four Dollars and 95/100 ($4.95) per Share,except as provided by paragraph (C). Upon each adjustment of the Exercise Price, the Holder shall thereafterbe entitled to purchase, at the Exercise Price resulting from such adjustment,the number of Shares obtained by multiplying the number of Shares purchasablepursuant hereto immediately prior to such adjustment by a fraction, thenumerator of which is the Exercise Price in effect immediately prior to suchadjustment and the denominator of which is the Exercise Price resulting fromsuch adjustment.  In making theadjustments to the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue orsell any Shares for consideration per Share that is less than the ExercisePrice in effect immediately prior to the time of such issue or sale at lessthan the Market Price (as hereinafter defined) of such Shares on the date ofsuch issue or sale, then forthwith upon such issue or sale the Exercise Pricein effect immediately prior thereto shall be adjusted to an amount (calculatedto 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 salemultiplied by the Exercise Price in effect immediately prior to such issue orsale, and (b) the consideration, if any, received by the Company upon suchissue or sale by (ii) the total number of Shares outstanding immediately aftersuch issue or sale; provided, however, that no adjustment shall be madehereunder by reason of:

 

(i)    thegrant of this Warrant or the issuance of Shares upon the exercise of thisWarrant or any other outstanding Warrant;

 

(ii)       the grant by the Company of options topurchase shares in connection with any purchase or option plan for the benefitof employees of the Company, or any affiliates or subsidiaries thereof; or

 

(iii)      the issuance (whether directly or byassumption in a merger or otherwise) or sale (including any issuance or sale toholders of Shares) of any securities convertible into or exchangeable forShares (such convertible or exchangeable securities are herein referred to as “ConvertibleSecurities”), or the grant of rights to subscribe for or to purchase, or ofoptions for the purchase of (including any grant of such rights or options toholders of shares, other than pursuant to a dividend on Shares), Shares ofConvertible Securities, regardless of whether the right to convert or exchangesuch Convertible Securities or such rights or options are immediatelyexercisable.

 

No adjustment of the Exercise Price shall berequired to be made by the Company and no notice hereunder must be given if theamount of any required adjustment is less than 5% of the Exercise Price.  In such case any such adjustment shall becarried forward and shall be made (and notice thereof shall be given hereunder)at the time of and together with the next subsequent adjustment which, togetherwith any adjustment so carried forward, shall amount to not less than 5% of theExercise Price.

 

(B)           For the purposes of paragraph (A), thefollowing provisions (i) through (vi), inclusive, shall also be applicable:

 

(i)            If, at the time Shares are issued and soldupon the conversion or exchange of Convertible Securities or upon the exerciseof rights or options previously granted by the Company, the price per Share forwhich such Shares are issued (determined by dividing (a) the total amount, ifany, received by the Company as consideration for such Convertible Securitiesor for the granting of such rights or options, plus the aggregate amount ofadditional consideration paid to the Company upon the conversion or exchange ofsuch Convertible

 

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Securities(which, if so provided in such Convertible Securities, shall be deemed to beequal to the outstanding principal amount of the indebtedness represented bysuch 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 suchConvertible Securities or upon the exercise of such rights or options shall beless than the Exercise Price in effect immediately prior to such issue, sale orexercise, then the adjustments provided for by the first paragraph of thisAnnex 1 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 beconsidered the consideration received by the Company upon the issue or sale ofthe Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)           In case at any time any Shares or ConvertibleSecurities or any rights or options to purchase any Shares or ConvertibleSecurities shall be issued or sold for cash, the consideration receivedtherefor shall be deemed to be the amount received by the Company thereforwithout deduction therefrom of any expenses incurred or any underwritingcommissions or concessions paid or allowed by the Company in connectiontherewith.  In case any Shares orConvertible Securities or any rights or options to purchase any Shares orConvertible Securities shall be issued or sold, in whole or in part, forconsideration other than cash, the amount of the consideration other than cashreceived by the Company in exchange for the issue or sale of such ConvertibleSecurities shall be deemed to be the fair value of such consideration asdetermined in good faith by the Board of Directors of the Company, without deductiontherefrom of any expenses incurred or any underwriting commissions orconcessions paid or allowed by the Company in connection therewith; providedthat if the holder or holders of at least 66-2/3% of the Warrant Sharespurchasable under this Warrant shall request in writing, the value of suchconsideration shall be determined by an independent expert selected by suchholders, the costs and expenses of which shall be borne by the Company, and, ifthe value of such consideration as so determined is less than the valuedetermined by the Board of Directors of the Company, the lesser value shall beutilized in calculating the consideration per Share received by the Company forpurposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidationof the Company in which the Company is not the surviving corporation or in theevent of any sale of all or substantially all of the assets of the Companyoutside of the ordinary course of business of the Company for stock or othersecurities of any corporation, the Company shall be deemed to have issued anumber of Shares for stock or securities of such other corporation computed onthe basis of the actual exchange ratio on which the transaction was predicatedand for consideration that is equal to the fair market value on the date ofsuch transaction of such stock or securities of the other corporation, and ifany such calculation results in adjustment of the Exercise Price, thedetermination of the number of Shares issuable upon exercise of this Warrantimmediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall bemade after giving effect to such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding at any giventime shall not include Shares that have been redeemed by the Company and notcanceled, if any, and that are thus owned or held by or for the account of theCompany, and the disposition of any such Shares shall be considered an issue orsale 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 nationalsecurities exchange on which the Shares are listed or in a national marketsystem for securities in which the Shares are admitted to trading or (b) theaverage of the closing bid and asked prices of Shares reported in the domesticover-the-counter market, for the 20 trading days immediately prior to the dayas of which the Market Price is being determined.  If the Shares are not listed on any nationalsecurities exchange or admitted for trading in any national market system ortraded in the domestic over-the-counter market, the Market Price shall be thehigher of (y) the book value of the Shares as determined by a firm ofindependent public accountants of recognized standing selected by the Board ofDirectors of the Company as of the last day of any month ending within 60 dayspreceding the date as of which the determination is to be made or (z) the fairmarket value of the Shares determined in good faith by the Board of Directorsof the Company,

 

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providedthat if the holder or holders of at least 66-2/3% of the Warrant Sharespurchasable under the Warrant shall request in writing, the fair market valueof the Shares shall be determined by an independent investment banking firm orother independent expert selected by such holders and reasonably satisfactoryto the Company, which determination shall be as of a date which is within 15days of the date as of which the determination is to be made.

 

(v)           Anything herein to the contrarynotwithstanding, in case the Company shall issue any Shares in connection withthe acquisition by the Company of the stock or assets of any other corporationor the merger of any other corporation into the Company under circumstanceswhere, on the date of the issuance of such Shares, the consideration receivedfor such Shares is less than the Market Price of the Shares, but on the datethe number of Shares was determined, the consideration received for such Shareswould not have been less than the Market Price thereof, such Shares shall notbe deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)to the contrary notwithstanding, in the case of an acquisition where all orpart of the purchase price is payable in Shares or Convertible Securities butis stated as a dollar amount, where the Company upon making the acquisitionpays only part of a maximum dollar purchase price which is payable in Shares orConvertible Securities and where the balance of such purchase price is deferredor is contingently payable under a formula related to earnings over a period oftime, (a) the consideration received for any Shares or Convertible Securitiesdelivered at the time of the acquisition shall be deemed to be such part of thetotal consideration as the portion of the dollar purchase price then paid inShares or Convertible Securities bears to the total maximum dollar purchaseprice payable in Shares or Convertible Securities and (b) in connection witheach issuance of additional Shares or Convertible Securities pursuant to theterms of the agreement relating to such acquisition, the consideration receivedshall be deemed to be such part of the total consideration as the portion ofthe dollar purchase price then and theretofore paid in Shares or ConvertibleShares bears to the total maximum dollar purchase price payable in Shares orConvertible Securities multiplied by a fraction, the numerator of which shallbe the number of Shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then issued and the denominator of which shall be thetotal number of shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then and theretofore issued under such acquisitionagreement.  In the event only a part ofthe purchase price for an acquisition is paid in Shares or ConvertibleSecurities in the manner referred to in this clause (vi), the term “totalconsideration” as used in this clause (vi) shall mean that part of theaggregate consideration as is fairly allocable to the purchase price paid inShares 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 shallsubdivide its outstanding Shares into a greater number of Shares, then from andafter the record date for such subdivision the Exercise Price in effectimmediately prior to such subdivision shall be proportionately reduced and thenumber of Shares purchasable upon the exercise of this Warrant shall becorrespondingly increased, and, conversely, in case the outstanding Sharesshall be combined into a smaller number of Shares, then from and after therecord date for such combination the Exercise Price in effect immediately priorto such combination shall be proportionately increased and the number of Sharespurchasable upon the exercise of this Warrant shall be correspondinglydecreased.

 

(D)          Unless the provisions of paragraph (E) apply,if any capital reorganization or reclassification of the capital stock of theCompany, or consolidation or merger of the Company with another corporation, orsale of all or substantially all of its assets to another corporation outsideof the ordinary course of business, shall be effected in such a way thatholders of Shares (or any other securities of the Company then issuable uponthe exercise of this Warrant) shall be entitled to receive stock, securities orassets with respect to or exchange for Shares (or such other securities) then,as a condition of such reorganization, reclassification, consolidation, mergeror sale, lawful and adequate provision shall be made whereby the Holder shallthereafter have the right to purchase and receive upon the basis and upon theterms and conditions specified in this Warrant and in lieu of the Shares (orother securities) of

 

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the Company immediatelytheretofore purchasable and receivable upon the exercise of the rightsrepresented hereby, such shares of stock, securities or assets as may be issuedor 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 anysuch case appropriate provision shall be made with respect to the rights andinterests of the holder of this Warrant to the end that the provisions hereof(including, without limitation, provisions for adjustment of the Exercise Priceand of the number of Shares (or other securities) purchasable upon the exerciseof this Warrant and for the registration thereof as provided in Section 6 ofthis Warrant) shall thereafter be applicable, as nearly as may be, in relationto any shares of stock, securities or assets thereafter deliverable upon theexercise hereof (including an immediate adjustment, by reason of suchconsolidation, merger or sale, of the Exercise Price to the value of the Shares(or other securities) reflected by the terms of such consolidation, merger orsale if the value so reflected is less than the Exercise Price in effectimmediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger ofthe Company with or into another corporation as a result of which a greater orlesser number of securities of the surviving corporation are issuable toholders of Shares in respect of the number of Shares outstanding immediatelyprior to such consolidation or merger, then the Exercise Price in effectimmediately prior to such consolidation or merger shall be adjusted in the samemanner as though there were a subdivision or combination of the outstandingShares.  The Company shall not effect anysuch consolidation, merger or sale, unless prior to or simultaneously with theconsummation thereof the surviving or successor corporation (if other than theCompany) resulting from such consolidation or merger of the corporationpurchasing such assets shall assume, by written instrument executed and mailedto the registered Holder at the last address of such holder appearing on thebooks of the Company, the obligation to deliver to such holder such Shares ofstock, securities or assets as, in accordance with the foregoing provisions,such holder may be entitled to purchase, and containing the express assumptionof such surviving or successor corporation of the due performance of everyprovision of this Warrant to be performed by the Company and of all liabilitiesand obligations of the Company hereunder.

 

(E)           In the event of a change in control of theCompany, as defined in this paragraph (E), then the Board of Directors shallaccelerate the exercise date of the Warrant or make this Warrant fully vestedand exercisable and, in its sole discretion, may take any or all of thefollowing actions: (a) grant a cash bonus award to any holder of this Warrantin an amount necessary to pay the Exercise Price of all or any portion of theWarrant then held by such person; (b) pay cash to any holder of this Warrant inexchange for the cancellation of the holder’s Warrant in an amount equal to thedifference between the Exercise Price of such Warrant and the greater of thetender offer price for the underlying Shares or the Market Price of the Shareson the date of the cancellation of the Warrant; and (c) make any otheradjustments or amendments to this Warrant. For purposes of this paragraph (E), a “change in control” shall bedeemed to have occurred if (a) any “person” or “group” (within the meaning ofSections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended(“1934 Act”), other than a trustee or other fiduciary holding securities underan employee benefit plan of the Company is or becomes the “beneficial owner”(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of morethan 50% of the then outstanding voting stock of the Company; or (b) at anytime during any period of three consecutive years after the date of thisWarrant, individuals who at the beginning of such period constitute the Board(and any new director whose election by the Board or whose nomination forelection by the Company’s stockholders was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors atthe beginning of such period or whose election or nomination for election waspreviously so approved) cease for any reason to constitute a majority thereof;or (c) the stockholders of the Company approve a merger or consolidation of theCompany with any other corporation, other than a merger or consolidation whichwould result in the voting securities of the Company outstanding immediatelyprior thereto continuing to represent (either by remaining outstanding or by beingconverted into voting securities of the surviving entity) at least 50% of thecombined voting power of the voting securities of the Company or such survivingentity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay anydividend on or make any other distribution with respect to Shares (or any othersecurities of the Company then issuable upon the exercise of the Warrant) thatis payable in Shares, Convertible Securities, any other securities of theCompany 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 Sharesissuable upon the exercise of this Warrant, the holder of this Warrant, uponany exercise of the rights represented hereby, shall be entitled to receive thenumber 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 any company or other stock, securities or assets which theholder of this Warrant would have received by way of such distributions ifcontinuously since the date of the Warrant (or, if this Warrant shall have beenissued pursuant to Section 7 of this Warrant, the date of the predecessorWarrant to which this Warrant relates) such holder had been the record holderof the number of Shares (or other securities), then being purchased and hadretained all such

 

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Shares, Convertible Securities,other securities of the Company or other stock, securities or assetsdistributable with respect to such Shares (or other securities) and,furthermore, all cash, stock, securities or assets payable as dividends ordistributions with respect to the foregoing and originating directly orindirectly therefrom.  The Company shallreserve 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 respectthereto 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 tothe Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason ofaction taken by the Company, which in the good faith opinion of the Board ofDirectors of the Company, are not adequately covered by the provisions of thisAnnex 1, and which might materially adversely affect the rights of the holderof this Warrant, the Company shall appoint a firm of independent publicaccountants of recognized standing (which may be the regular accountants orauditors 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 theexercise of this Warrant, or other change in the rights of the Holder, on abasis consistent with the other provisions of this Annex 1, necessary topreserve without diminution the rights of the Holder.  Upon receipt of such opinion, the Companyshall forthwith make the adjustments described therein.

 

(H)          (i)        Within ten (10) days of any adjustment of theExercise Price or change in the number of Shares purchasable upon the exerciseof this Warrant made pursuant to paragraphs (A), (B), (C) , or (F) or anychange in the rights of the holder of this Warrant by reason of the occurrenceof events described in paragraphs (D), (E), or (F), the Company shall givewritten notice by certified or registered mail to the registered holder of thisWarrant at the address of such holder as shown on the books of the Company,which notice shall describe the event requiring such adjustments (with respectto any adjustment made pursuant to paragraphs (C), (D), (E) or (F), theExercise Price resulting from such adjustment, the increase or decrease, ifany, in the number of Shares purchasable upon the exercise of this Warrant, orthe other change in the rights of such holder, and set forth in reasonabledetail the method of calculation of such adjustments and the facts upon whichsuch calculations are based.  Within two(2) days of receipt from the holder of this Warrant upon the surrender hereoffor exercise pursuant to Section 1 of this Warrant, and within three (3) daysof receipt from the Holder a written request therefor (which request shall notbe made more than once each calendar quarter), the Company shall give writtennotice by certified or registered mail to such holder at his address as shownon the books of the Company of the Exercise Price in effect as of the date ofreceipt by the Company of this Warrant for exercise, or the date of receipt ofsuch written request, and the number of Shares purchasable or the number oramount of other shares of stock, securities or assets receivable as of suchdate, and set forth in reasonable detail the method of calculation of suchnumbers; provided that no further adjustments to the Exercise Price or thenumber of Shares purchasable or number or amount of shares, securities orassets receivable on exercise of this Warrant shall be made after receipt ofthis Warrant by the Company for exercise.

 

(ii)       Upon each adjustment of the Exercise Price andeach change in the number of Shares purchasable upon the exercise of thisWarrant, and change in the rights of the holder of this Warrant by reason ofthe occurrence of other events herein set forth, then and in each case, uponwritten request of the holder of this Warrant (which request shall be made notmore often than once each calendar year), the Company will at its expensepromptly obtain an opinion of independent public accountants reasonablysatisfactory to each holder stating the then effective Exercise Price and thenumber of Shares then purchasable, or specifying the other shares of stock,securities or assets and the amount thereof then receivable, and setting forthin reasonable detail the method of calculation of such numbers and the facts uponwhich such calculations are based.  TheCompany will promptly mail a copy of such opinion to the registered Holder.

 

(I)            In case at any time:

 

(i)        The Company shall pay any dividend payable in capital stock on itsoutstanding Shares or make any distribution (other than regular cash dividends)to the holders of Shares;

 

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(ii)       The Company shall offer for subscription pro rata to the holders ofShares any additional capital stock or other rights;

 

(iii)      There shall be authorized any capital reorganization orreclassification of the capital stock of the Company, or consolidation ormerger of the Company with, or sale of all or substantially all of its assetsto, another corporation; or

 

(iv)      There shall be authorized or commence a voluntary or involuntarydissolution, liquidation or winding up of the Company then, in one or more ofsaid cases, the Company shall given written notice by certified or registeredmail to Holder at the address of Holder as shown on the books of the Company onthe date on which (1) the books of the Company shall close or a record shall betaken for such dividend, distribution, or subscription rights, or (2) suchreorganization, reclassification, consolidation, merger, sale, dissolution,liquidation or winding up shall take place or be voted upon by the shareholdersof the Company, as the case may be.  Suchnotice shall also specify the date as of which the holders of record of Sharesshall participate in such dividend, distribution or subscription rights, orshall be entitled to exchange their Shares for securities or other propertydeliverable upon such reorganization, reclassification, consolidation, merger,sale, dissolution, liquidation or winding up, as the case may be.  Such written notice shall be given at leastthirty (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 areclosed in respect thereto.

 

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EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered HolderDesiring to Exercise the Within Warrant ofTIPPERARY CORPORATION

 

The undersigned registeredholder hereby exercises the right to purchase                                                Shares covered by the within Warrant according to the conditions thereof, andherewith makes payment of the Exercise Price of such Shares, $                        .

 

 
| Name of Registered Holder:     |   |   |   |
|--------------------------------|--------|--------|--------|
|                           |   |
| Signature:                     |   |   |   |
|                           |   |
| Title of Signing Officer       |   |
| or Agent (if any):             |   |   |   |
|                           |   |
|                           |   |
| Address of Registered  Holder: |   |   |   |
|                           |   |   |   |
|                           |   |   |   |
|                           |   |
| Tax I.D. No.:                  |   |   |   |
|                           |   |
| Dated:                         |   | , 20   |   |   |
|                                |        |        |        |  |  |  |  |  |  |  |  |

 

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**This Warrant and the rightsrepresented hereby shall not be transferable at any time unless (i) aregistration statement under the Securities Act of 1933, as amended, shall bein effect with respect to this Warrant or the Shares issuable hereunder at suchtime, or (ii) the transfer is made in compliance with the provisions of Section5.**

 
| **Number:** | ** ** | **25,000  Shares** |
|-------------|------------|--------------------|

 

**WARRANTTO PURCHASE SHARESOFTIPPERARY CORPORATION**

 

This certifies that, for value received, Jeff T.Obourn an individual residing in Greenwood Village, Colorado (“Holder”), ortheir registered assigns, is entitled to purchase from TIPPERARY CORPORATION, aTexas corporation (the “Company”), twenty-five thousand (25,000) Shares, asdefined in Section 3, at the price of Four Dollars and 95/100 ($4.95) per Share(as defined in Section 3) at any time, or in part from time to time inaccordance with the following Vesting Schedule (“Vesting Schedule”):

 
| **Date:**             | ** ** | **Total Shares Subject to Exercise** | ** ** |
|-----------------------|------------|--------------------------------------|------------|
|                  |       |                                 |       |
| From January 10, 2006 |       | 8,334                                |       |   |
| From January 10, 2007 |       | 16,667                               |       |   |
| From January 10, 2008 |       | 25,000                               |       |   |

 

This Warrant shall expire, if not exercisedprior thereto, two (2) years after the resignation or removal of the Holder asan employee or director of the Company. If the Holder should resign or be removed as an employee or directorfrom the Company, then this Warrant shall be vested only to the extent vested onsuch date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of theinitial exercise price set forth above and the number of Shares to be issuedupon the occurrence of certain events (the Provisions as to Adjustment) aremore fully set forth in Annex 1 hereto. (Hereinafter, the initial exercise price set forth above in thisparagraph for the purchase of Shares upon the exercise of this Warrant, asadjusted pursuant to the Provisions as to Adjustment, is referred to as the “ExercisePrice”).  This Warrant is subject to thefollowing provisions, terms and conditions:

 

**1.****            ****Exercise of Warrant****.**

 

(a)           The rights represented by this Warrant may beexercised by the Holder, in whole or in part, (but not as to a fractionalShare), by the surrender of this Warrant at the Company’s principal officelocated in Denver, Colorado (or such other office or agency of the Company asthe Company may designate by notice in writing to the Holder at the address ofsuch holder appearing on the books of the Company at any time within the periodabove named) and delivery of a completed subscription form in the form attachedto this Warrant as Exhibit A, and upon payment to the Company of theExercise Price for such Shares.

 

(b)           Payment of the Exercise Price shall be madeby a combination of any one or more of the following:

 

(i)            By application, to the extent permitted byapplicable law, of Shares or other securities of the Company owned by theHolder, the value of which for such purpose shall be the fair market valuethereof determined in good faith by the Company and the Holder at the time ofsuch exercise; provided, however, that in order to apply such Shares or othersecurities of the Company in the exercise hereof, each of the followingconditions must be met:

 

(A)          such Shares or other securities of theCompany shall have been owned, without material encumbrance, contingency orrisk of forfeiture relating to the ownership rights, for at least six monthsand at all times during said six month period by the Holder, and within said sixmonth period such Shares or other securities of the Company shall not have beenobtained through exercise of any

 

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option, warrant or right toobtain such Shares of other securities or through the conversion of any othersecurity; and

 

(B)           such Shares or other securities shall not beor include: (1) options, warrants or similar rights to acquire Shares or othersecurities of the Company by the Holder; or (2) securities owned by the Holderwhich are convertible in whole or in part into Shares or other securities ofthe Company; and

 

(ii)           in cash or by certified check or bank draftin New York Clearing House funds.

 

(c)           The Company agrees that any Shares sopurchased by the exercise of this Warrant shall be deemed to be issued to theHolder as the record owner of such Shares as of the close of business on thedate on which this Warrant shall have been surrendered, the completedsubscription form delivered, and payment in full is made and delivered to theCompany for such Shares as aforesaid.

 

(d)           Stock certificates evidencing Shares sopurchased shall be delivered to the Holder as promptly as practicable, afterthe rights represented by this Warrant shall have been so exercised.  If this Warrant shall have been exercisedonly in part, and unless this Warrant has expired, a new Warrant representingthe number of Shares with respect to which this Warrant shall not then havebeen exercised shall also be delivered to the Holder within such time.  Notwithstanding the foregoing, however, theCompany shall not be required to deliver any stock certificate evidencingShares 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 withthe preparation, execution and delivery of stock certificates and any newWarrants.

 

**2.****            ****Certain Covenants of the Company****.**  TheCompany covenants and agrees as follows:

 

(a)           All Shares which may be issued upon theexercise of the rights represented by this Warrant (all such Shares, whetherpreviously issued or subject to issuance upon the exercise of this Warrant, arefrom time to time referred to herein as “Warrant Shares”) will, upon issuance,be duly authorized and issued, fully paid and nonassessable and free from alltaxes, liens and charges with respect to the issuance thereof.

 

(b)           During the period within which the rightsrepresented by this Warrant may be exercised, and only insofar as the VestingSchedule herein permits the exercise of this Warrant, the Company will, at alltimes, have authorized and reserved free of preemptive or other rights for theexclusive purpose of issuance upon exercise of the purchase rights evidenced bythis Warrant, a sufficient number of Shares to provide for the exercise of rightsrepresented by this Warrant.

 

(c)           The Company will not, by amendment orrestatement of the Articles of Incorporation or through any reorganization, transfer of assets,consolidation, merger, issuance or sale of securities or otherwise, avoid ortake any action which would have the effect of avoiding the performance of anyof the terms to be performed hereunder by the Company, but will at all times ingood faith carry out all of the provisions of this Warrant and take all suchaction as may be necessary or appropriate to protect the rights of the Holderagainst dilution or other impairment and, in particular, will not permit thepar value of any Share to be or become greater than the then effective ExercisePrice.

 

**3.****            ****Definition of Shares****.**  Asused herein, the term “Shares” shall mean and include shares of the CommonStock, par value $.02 per share, of the Company as are constituted and exist onthe date hereof, and shall also include any other class of the capital stock ofthe Company hereafter authorized which shall neither be limited to a fixed sumor percentage of par value in respect to the rights of the holders thereof toreceive dividends and to participate in the distribution of assets upon thevoluntary or involuntary liquidation, dissolution or winding up of the Company,nor be subject at any time to redemption by the Company; provided that theShares receivable upon exercise of this Warrant shall include only Shares ofthe type as are constituted and exist on the date hereof or Shares resultingfrom any reclassification of the Shares as provided for in paragraph (C) of theProvisions as to Adjustment.

 

**4.****            ****No Rights or Liabilities as aShareholder****.**  ThisWarrant shall not entitle the Holder as such to any rights whatsoever,including, without limitation, voting rights, as a holder of Shares of theCompany.  No provisions hereof, in theabsence of affirmative action by the Holder to purchase Shares, and no mereenumeration

 

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herein of the rights orprivileges of such holder, shall give rise to any liability of such holder as aholder of Shares of the Company, regardless of who may assert such liability.

 

**5.****            ****Restrictions on Transfer****.**

 

(a)           This Warrant shall not be exercisable by atransferee hereof and/or transferable and the Warrant Shares shall not betransferable except upon the conditions specified in this Section 5, whichconditions are intended, among other things, to ensure compliance with theprovisions of the Securities Act of 1933, as amended, and the rules andregulations of the Securities and Exchange Commission (the “Commission”)thereunder (collectively the “Securities Act”), in respect of the exerciseand/or transfer of this Warrant and/or transfer of such Warrant Shares.

 

(b)           This Warrant and the Warrant Shares shall notbe transferable (except for a transfer of this Warrant or the Warrant Shares inan offering registered under the Securities Act, including, without limitation,a transfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer) unless, prior to any transfer, the Holder shall havereceived from its transferee reasonable assurances that such person is awarethat this Warrant and the Warrant Shares have not been registered under theSecurities Act and that such person is acquiring this Warrant or the WarrantShares for investment only and not with the view to the disposition or publicoffering thereof (unless in an offering registered under the Securities Act orexempt therefrom), and that such person is aware that the stock certificatesevidencing the Warrant Shares shall bear a legend restricting transfer anddisposition thereof in accordance with the Securities Act unless, in theopinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant(other than a transfer in an offering registered under the Securities Act,including, without limitation, a transfer in a registered offering effectedpursuant to Section 6, and any subsequent transfer), the Holder shall providean opinion of counsel, who shall be reasonably satisfactory to the Company,that an exemption from the registration requirements of the Securities Act isavailable.

 

(c)           Any permitted subsequent holder of thisWarrant shall be subject to all the terms and conditions herein, and shallacknowledge, in writing, upon receipt of this Warrant his or her acceptance ofthe terms and conditions herein.

 

(d)           To facilitate sales by a holder of thisWarrant or Warrant Shares in transactions qualifying under Rule 144 promulgatedby the Commission under the Securities Act, if available, the Company agrees tosatisfy the current public information requirements of said Rule 144, for aslong 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 withsuch other information as such holder may require for compliance with theprovisions of said Rule 144.

 

**6.****            ****Registration Under Securities Act****.**

 

(a)           If the Company, at any time, proposes toregister any issuance of its securities under the Securities Act (other than aregistration on Form S-8 in connection with an employee stock purchase oroption plan or on Form S-4 in connection with mergers, acquisitions or exchangeofferings), the Company will at such time give prompt written notice to theholder hereof and to the holders of all other Warrant Shares issuable from anyoutstanding Warrants (such holders are hereinafter referred to as the “ProspectiveSellers” or, individually, as a “Prospective Seller”) of its intention to doso.  Upon the written request of aProspective Seller, given within 30 days after receipt of any such notice(which request shall state the intended method of disposition of the WarrantShares to be transferred by such Prospective Seller), the Company shall use itsbest efforts to cause all Warrant Shares, the holders of which (or of theWarrants to which the same are related), to the extent vested in accordancewith the Vesting Schedule, shall have so requested registration of the transferthereof, to be registered under the Securities Act, all to the extent requisiteto permit the sale or other disposition (in accordance with the intended methodthereof as aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section6(a) shall not be effective with respect to the Prospective Seller in the caseof an underwritten public offering of securities of the Company by the Companyunless each Prospective Seller agrees to the terms and conditions, includingunderwriting discounts and allowances, specified by the managing underwriter ofsuch offering with respect to such Warrant Shares.  The Company shall have the right to reducethe number of Warrant Shares of the Prospective Sellers to be included in aregistration statement pursuant to the exercise of the rights granted by thisSection 6(a) if, and to the extent, that the managing underwriter of suchoffering is of the good faith opinion, supported by written reasons therefor,that the inclusion of such Warrant Shares would materially and adversely

 

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affect the marketing of thesecurities of the Company to be offered; provided, that any such reduction ofthe number of Warrant Shares, the transfer of which is to be registered onbehalf of the Prospective Sellers, shall be made on the basis of a pro ratareduction of all Warrant Shares of all Prospective Sellers.

 

If and whenever the Companyis required by the provisions of this Section 6 to use its best efforts toeffect the registration of any transfer of Warrant Shares under the SecuritiesAct, the Company will, as expeditiously as possible,

 

(i)            prepare and file with the Commission aregistration statement with respect to such transfer and use its best effortsto cause such registration statement to become and remain effective, but notfor any period longer than nine months;

 

(ii)           prepare and file with the Commission suchamendments and supplements to such registration statement and the prospectusused in connection therewith as may be necessary to keep such registrationstatement effective, and to comply with the provisions of the Securities Act withrespect to the transfer of all securities covered by such registrationstatement, including, without limitation, taking all necessary actions wheneverthe Prospective Sellers of the Warrant Shares covered by such registrationstatement shall desire to dispose of the same;

 

(iii)          furnish to each Prospective Seller suchnumber of copies of a prospectus, including a preliminary prospectus, inconformity with the requirements of the Securities Act, and such otherdocuments, as such Prospective Seller may reasonably request in order tofacilitate the disposition of the Warrant Shares owned by such ProspectiveSeller and covered by such registration statement;

 

(iv)          use its best efforts to register or qualifythe securities covered by such registration statement under such othersecurities or blue sky laws of such jurisdictions as each Prospective Sellershall request, and use its best efforts to do any and all other acts and thingswhich may be reasonably necessary to enable such Prospective Seller toconsummate the disposition in such jurisdiction of the Warrant Shares owned bysuch Prospective Seller and covered by such registration statement; providedthat, notwithstanding the foregoing, the Company shall not be required toregister in any jurisdiction as a broker or dealer of securities or to grantits consent to service of process in any such jurisdiction solely on account ofsuch intended disposition by such Prospective Seller;

 

(v)           furnish to the Prospective Sellers, whoseintended dispositions are registered, a signed copy of an opinion of counselfor the Company, in form and substance acceptable to such Prospective Sellers,to the effect that: (A) a registration statement covering such dispositions ofWarrant Shares has been filed with the Commission under the Securities Act andhas been made effective by order of the Commission, (B) such registrationstatement and the prospectus contained therein and any amendments orsupplements thereto comply as to form in all material respects with therequirements of the Securities Act, and (C) to the best of such counsel’sknowledge, no stop order has been issued by the Commission suspending theeffectiveness of such registration statement and no proceedings for theissuance of such a stop order are threatened or contemplated;

 

(vi)          furnish to the Prospective Sellers whoseintended dispositions are required a blue sky survey in the form and of thesubstance customarily prepared by counsel for the Company and accepted bysellers of securities in similar offerings, discussing and describing theapplication provisions of the securities or blue sky laws of each state orjurisdiction in which the Company shall be required, pursuant to Section6(c)(iv), to register or qualify such intended dispositions of such WarrantShares, or, in the event counsel for the underwriters in such offering shall bepreparing a blue sky survey, cause such counsel to furnish such survey to, andto allow reliance thereon by, such Prospective Sellers;

 

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(vii)         otherwise use its best efforts to comply withall applicable rules and regulations of the Commission under the Securities Actand the Exchange Act, insofar as they relate to such registration and suchregistration statement; and

 

(viii)        use its best efforts to list such WarrantShares on any securities exchange on which any securities of the Company arethen listed or to admit such Warrant Shares for trading in any national marketsystem in which any securities of the Company are then admitted for trading, ifthe listing or admission of such securities is then permitted under the rulesof such exchange or system.

 

(b)           With respect to the registration by theCompany of transfers of Warrant Shares under the Securities Act pursuant toSection 6(a), the Company shall pay all expenses incurred by it in complyingwith this Section 6 (including, without limitation, all registration and filingfees, printing expenses, blue sky fees and expenses, costs and expenses ofaudits, and reasonable fees and disbursements of counsel for the Company andone special counsel designated by Prospective Sellers owning a majority of theWarrant Shares covered by such registration, but specifically excluding anyunderwriting discounts and allowances that are allocable to the Warrant Sharesbeing sold by, and which shall be paid by, the Prospective Sellers; provided,however, that if any registration statement filed with the Commission by theCompany under Section 6(a) shall not be declared effective by the Commission,such attempted registration shall not constitute a registration under thisSection 6(b).

 

(c)           It shall be a condition precedent to theobligations of the Company to take any action pursuant to this Section 6 thateach Prospective Seller, the transfer of whose Warrant Shares is registered orto be registered under each such registration, shall furnish to the Companysuch written information regarding the securities held by such ProspectiveSeller as the Company shall reasonably request and as shall be required in connectionwith the action to be taken by the Company.

 

(d)           (i)           In the event of any registration of anytransfer of Warrant Shares under the Securities Act pursuant to this Section 6,the Company will indemnify and hold harmless each Prospective Seller of suchsecurities, each of its officers, directors and partners, and each otherperson, if any, who controls such Prospective Seller within the meaning of theSecurities Act, and each underwriter, if any, who participates in the offeringof such securities, against any losses, claims, damages or liabilities (oractions in respect thereof), joint or several, to which each ProspectiveSeller, officer, director or partner, controlling person or underwriter maybecome subject under the Securities Act or otherwise, insofar as such losses,claims, damages or liabilities (or actions in respect thereof) arise out of orare based upon any untrue statement or alleged untrue statement of any materialfact contained, on the effective date thereof, in any registration statementunder which such transfer of securities was registered under the SecuritiesAct, any preliminary prospectus or final prospectus contained therein, or anyamendment or supplement thereto, or arise out of or are based upon the omissionor alleged omission to state therein a material fact required to be statedtherein or necessary to make the statements therein not misleading, or anyviolation by the Company of the Securities Act, and will reimburse suchProspective Seller and each of its officers, directors and partners, and eachsuch controlling person or underwriter, for any legal or any other expensesreasonably incurred by such Prospective Seller or its officers, directors andpartners or controlling persons or by each such underwriter, in connection withinvestigating or defending any such loss, claim, damage, liability or action;provided, however, that the Company will not be liable in any such case to theextent that any such loss, claim, damage or liability arises out of or is basedupon an untrue statement or alleged untrue statement or omission or allegedomission made in such registration statement, preliminary prospectus orprospectus or such amendment or supplement in reliance upon and in conformitywith written information furnished to the Company through an instrument dulyexecuted by such Prospective Seller specifically for use in the preparationthereof.  In the event of anyregistration by the Company or any transfer of securities under the SecuritiesAct pursuant to this Section 6, each Prospective Seller of Warrant Sharescovered by such registration will indemnify and hold harmless the Company, eachother person, if any, who controls the Company within the meaning of theSecurities Act and each officer and director of the Company and the otherProspective Sellers to the same extent that the Company agrees to indemnify it,but only with respect

 

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tothe written information relating to such Prospective Seller furnished to theCompany by such Prospective Seller aforesaid

 

(ii)          Each indemnified party shall, as promptly aspracticable upon receipt of notice of the commencement of any action againstsuch indemnified party or its officers, directors or partners, or anycontrolling person of such indemnified party, in respect of which indemnity maybe sought from an indemnifying party on account of the indemnity agreementcontained in Section 6(d)(i), notify the indemnifying party in writing of thecommencement thereof.  The omission ofsuch indemnified party to so notify the indemnifying party of any such actionshall not relieve the indemnifying party from any liability which it may haveon account of the indemnity agreement contained in Section 6(d)(i) to theextent that the failure to receive such notice within a reasonable period oftime shall not have caused harm, loss or damage to the indemnifying party,provided that, conversely, if such failure to receive notice shall have causedany harm, loss or damage to the indemnifying party, such failure shallconstitute a defense to any liability which such indemnifying party may have onaccount 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, itsofficers, directors and partners, or any such controlling person, and suchindemnified party shall notify the indemnifying party of the commencementthereof, the indemnifying party shall be entitled to participate in (and, tothe extent that the indemnifying party shall wish, to direct) the defensethereof at the indemnifying party’s own expense, in which event the defenseshall be conducted by recognized counsel chosen by the indemnifying party andapproved by the indemnified party (whose approval shall not unreasonably bewithheld) and the indemnified party may participate in such defense at its ownexpense (unless it is advised by counsel that actual or potential differinginterests or defenses exist or may exist, in which case such expenses shall bepaid by the indemnifying party, provided that the indemnifying party shall notbe required to pay the expenses for more than one counsel for all suchindemnified parties).

 

**7.****            ****Transfer; Ownership****.** Subject to Section 5, this Warrant and all rights hereunder aretransferable, in whole or in part, at the office or agency of the Companyreferred to in Section 1 by the Holders in person or by a duly authorizedattorney, upon surrender of this Warrant, with an assignment, acceptable to theCompany, duly completed, at which time a new Warrant shall be made anddelivered by the Company, of the same tenor as this Warrant but registered inthe name of the transferee.  The Holder,by taking or holding the same, consents and agrees that this Warrant, whenendorsed in blank, shall be deemed negotiable, and that the Holder, when thisWarrant shall have been so endorsed, may be treated by the Company and allother persons dealing with this Warrant as the absolute owner hereof for anypurpose and as the person entitled to exercise the rights represented by thisWarrant and to transfer this Warrant on the books of the Company, any notice tothe contrary notwithstanding; but until such transfer on such books, theCompany may treat the registered the Holder as the owner hereof for allpurposes.  Any transfer of this Warrantshall be made in compliance with the Securities Act and any applicable statesecurities or blue sky laws.

 

**8.****            ****Exchange and Replacement****.** Subject to Section 7, this Warrant is exchangeable, upon the surrenderhereof by the Holder at the office or agency of the Company referred to inSection 1, for new Warrants of like tenor and date representing in theaggregate the right to purchase the number of Shares which may be purchasedhereunder, each of such new Warrants to represent the right to purchase suchnumber of Shares as shall be designated by the Holder at the time of suchsurrender.  Upon receipt by the Company,at the office or agency referred to in Section 1, of evidence reasonably satisfactoryto it of the loss, theft or destruction of this Warrant and of indemnity orsecurity reasonably satisfactory to it (provided that the written indemnity ofthe Holder shall be deemed reasonably satisfactory to the Company for suchpurposes), the Company will deliver a new Warrant of like tenor and date inreplacement of this Warrant.  ThisWarrant shall be promptly canceled by the Company upon the surrender hereof inconnection with any transfer, exchange or replacement.  The Company will pay all expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to Section 7 and this Section 8.

 

**9.****            ****Notices****.**  Anynotice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent bycertified or registered mail to, 5585 Cherryville Way, Greenwood Village,Colorado 80121, or to such other address as shall have been furnished to theCompany in writing by the Holder.

 

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Any notice or other documentrequired or permitted to be given or delivered to the Company shall bedelivered at, or sent by certified or registered mail to, 633 SeventeenthStreet, Suite 1550, Denver, Colorado 80202, or to such other address as shallhave been furnished in writing to the Holder by the Company.  Any notice so addressed and mailed byregistered or certified mail or otherwise delivered, shall be deemed to begiven when actually received by the addressee.

 

**10.****         ****GOVERNING LAW****.    THISWARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF TEXAS.**

 

**11.****         ****Miscellaneous****.**  ThisWarrant will be binding upon any entity succeeding to the Company byconsolidation or acquisition of all or substantially all of the Company’sassets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may bechanged, waived, discharged or terminated only by an instrument in writingsigned by the party (or any predecessor in interest thereof) against whomenforcement of the same is sought.  Theheadings in this Warrant are for purposes of reference only and shall notaffect the meaning or construction of any of the provisions hereon.

 

**INWITNESS WHEREOF**,Tipperary Corporation has caused this Warrant to be signed by its duly authorizedofficers, under its corporate seal, to be dated April 27, 2005

 
|                | **TIPPERARY CORPORATION**                  |
|---------------------|--------------------------------------------|
|                |                                       |
|                |                                       |
| ** **          | **BY:**                                    | **  /s/  David L. Bradshaw** | ** ** |
|                | **ITS:**                                   | President |
| **CORPORATE SEAL)** |                                       |
|                |                                       |
| **ATTEST:**         | **   /s/ Elaine R. Treece** | ** ** |
| **ITS:**            | Secretary                                  |
|                     |                                            |  |  |  |  |

 

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Annex1

 

TIPPERARYCORPORATION

 

PROVISIONSAS TO ADJUSTMENT OFEXERCISE PRICE AND NUMBER OF SHARESISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and thenumber of Shares issuable upon the exercise of the annexed Warrant to purchaseshares of TIPPERARY CORPORATION, a Texas corporation (herein and in thisWarrant referred to as the “Company”), shall be subject to adjustment from timeto time as hereinafter provided; that in no event shall the Exercise Price beincreased to a price greater than Four Dollars and 95/100 ($4.95) per Share,except as provided by paragraph (C). Upon each adjustment of the Exercise Price, the Holder shall thereafterbe entitled to purchase, at the Exercise Price resulting from such adjustment,the number of Shares obtained by multiplying the number of Shares purchasablepursuant hereto immediately prior to such adjustment by a fraction, thenumerator of which is the Exercise Price in effect immediately prior to suchadjustment and the denominator of which is the Exercise Price resulting fromsuch adjustment.  In making theadjustments to the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue orsell any Shares for consideration per Share that is less than the ExercisePrice in effect immediately prior to the time of such issue or sale at lessthan the Market Price (as hereinafter defined) of such Shares on the date ofsuch issue or sale, then forthwith upon such issue or sale the Exercise Pricein effect immediately prior thereto shall be adjusted to an amount (calculatedto 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 salemultiplied by the Exercise Price in effect immediately prior to such issue orsale, and (b) the consideration, if any, received by the Company upon suchissue or sale by (ii) the total number of Shares outstanding immediately aftersuch issue or sale; provided, however, that no adjustment shall be madehereunder by reason of:

 

(i)    thegrant of this Warrant or the issuance of Shares upon the exercise of thisWarrant or any other outstanding Warrant;

 

(ii)       the grant by the Company of options topurchase shares in connection with any purchase or option plan for the benefitof employees of the Company, or any affiliates or subsidiaries thereof; or

 

(iii)      the issuance (whether directly or byassumption in a merger or otherwise) or sale (including any issuance or sale toholders of Shares) of any securities convertible into or exchangeable forShares (such convertible or exchangeable securities are herein referred to as “ConvertibleSecurities”), or the grant of rights to subscribe for or to purchase, or ofoptions for the purchase of (including any grant of such rights or options toholders of shares, other than pursuant to a dividend on Shares), Shares ofConvertible Securities, regardless of whether the right to convert or exchangesuch Convertible Securities or such rights or options are immediatelyexercisable.

 

No adjustment of the Exercise Price shall berequired to be made by the Company and no notice hereunder must be given if theamount of any required adjustment is less than 5% of the Exercise Price.  In such case any such adjustment shall becarried forward and shall be made (and notice thereof shall be given hereunder)at the time of and together with the next subsequent adjustment which, togetherwith any adjustment so carried forward, shall amount to not less than 5% of theExercise Price.

 

(B)           For the purposes of paragraph (A), thefollowing provisions (i) through (vi), inclusive, shall also be applicable:

 

(i)            If, at the time Shares are issued and soldupon the conversion or exchange of Convertible Securities or upon the exerciseof rights or options previously granted by the Company, the price per Share forwhich such Shares are issued (determined by dividing (a) the total amount, ifany, received by the Company as consideration for such Convertible

 

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Securitiesor for the granting of such rights or options, plus the aggregate amount ofadditional consideration paid to the Company upon the conversion or exchange ofsuch Convertible Securities (which, if so provided in such ConvertibleSecurities, shall be deemed to be equal to the outstanding principal amount ofthe indebtedness represented by such Convertible Securities) or upon theexercise of such rights or options, by (b) the total number of Shares issuedupon the conversion or exchange of such Convertible Securities or upon theexercise of such rights or options shall be less than the Exercise Price ineffect immediately prior to such issue, sale or exercise, then the adjustmentsprovided for by the first paragraph of this Annex 1 and paragraph (A) shall bemade.  In making the adjustment of theExercise Price provided for by paragraph (A), the amount described in clause(a) of this paragraph (B)(i) shall be considered the consideration received bythe 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 ConvertibleSecurities or any rights or options to purchase any Shares or ConvertibleSecurities shall be issued or sold for cash, the consideration receivedtherefor shall be deemed to be the amount received by the Company thereforwithout deduction therefrom of any expenses incurred or any underwritingcommissions or concessions paid or allowed by the Company in connectiontherewith.  In case any Shares orConvertible Securities or any rights or options to purchase any Shares orConvertible Securities shall be issued or sold, in whole or in part, forconsideration other than cash, the amount of the consideration other than cashreceived by the Company in exchange for the issue or sale of such ConvertibleSecurities shall be deemed to be the fair value of such consideration asdetermined in good faith by the Board of Directors of the Company, withoutdeduction therefrom of any expenses incurred or any underwriting commissions orconcessions paid or allowed by the Company in connection therewith; providedthat if the holder or holders of at least 66-2/3% of the Warrant Shares purchasableunder this Warrant shall request in writing, the value of such considerationshall be determined by an independent expert selected by such holders, thecosts and expenses of which shall be borne by the Company, and, if the value ofsuch consideration as so determined is less than the value determined by theBoard of Directors of the Company, the lesser value shall be utilized incalculating the consideration per Share received by the Company for purposes ofmaking the adjustment provided by paragraph (A).  In the event of any merger or consolidationof the Company in which the Company is not the surviving corporation or in theevent of any sale of all or substantially all of the assets of the Companyoutside of the ordinary course of business of the Company for stock or othersecurities of any corporation, the Company shall be deemed to have issued anumber of Shares for stock or securities of such other corporation computed onthe basis of the actual exchange ratio on which the transaction was predicated andfor consideration that is equal to the fair market value on the date of suchtransaction of such stock or securities of the other corporation, and if anysuch calculation results in adjustment of the Exercise Price, the determinationof the number of Shares issuable upon exercise of this Warrant immediatelyprior to such merger, consolidation or sale, for purposes of paragraph (A), shall be made after giving effectto such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding at any giventime shall not include Shares that have been redeemed by the Company and notcanceled, if any, and that are thus owned or held by or for the account of theCompany, and the disposition of any such Shares shall be considered an issue orsale 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 nationalsecurities exchange on which the Shares are listed or in a national marketsystem for securities in which the Shares are admitted to trading or (b) theaverage of the closing bid and asked prices of Shares reported in the domesticover-the-counter market, for the 20 trading days immediately prior to the dayas of which the Market Price is being determined.  If the Shares are not listed on any nationalsecurities exchange or admitted for trading in any national market system ortraded in the domestic over-the-counter market, the Market Price shall be thehigher of (y) the book value of the Shares as determined by a firm ofindependent public accountants of recognized standing selected by the Board ofDirectors of the Company as of the last day of any month ending within 60 dayspreceding the date as of which the determination is to be made or (z) the fairmarket value of the Shares determined in good faith by the Board of Directorsof the Company,

 

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providedthat if the holder or holders of at least 66-2/3% of the Warrant Sharespurchasable under the Warrant shall request in writing, the fair market valueof the Shares shall be determined by an independent investment banking firm orother independent expert selected by such holders and reasonably satisfactoryto the Company, which determination shall be as of a date which is within 15days of the date as of which the determination is to be made.

 

(v)           Anything herein to the contrarynotwithstanding, in case the Company shall issue any Shares in connection withthe acquisition by the Company of the stock or assets of any other corporationor the merger of any other corporation into the Company under circumstanceswhere, on the date of the issuance of such Shares, the consideration receivedfor such Shares is less than the Market Price of the Shares, but on the datethe number of Shares was determined, the consideration received for such Shareswould not have been less than the Market Price thereof, such Shares shall notbe deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)to the contrary notwithstanding, in the case of an acquisition where all orpart of the purchase price is payable in Shares or Convertible Securities butis stated as a dollar amount, where the Company upon making the acquisition paysonly part of a maximum dollar purchase price which is payable in Shares orConvertible Securities and where the balance of such purchase price is deferredor is contingently payable under a formula related to earnings over a period oftime, (a) the consideration received for any Shares or Convertible Securitiesdelivered at the time of the acquisition shall be deemed to be such part of thetotal consideration as the portion of the dollar purchase price then paid inShares or Convertible Securities bears to the total maximum dollar purchaseprice payable in Shares or Convertible Securities and (b) in connection witheach issuance of additional Shares or Convertible Securities pursuant to theterms of the agreement relating to such acquisition, the consideration receivedshall be deemed to be such part of the total consideration as the portion ofthe dollar purchase price then and theretofore paid in Shares or ConvertibleShares bears to the total maximum dollar purchase price payable in Shares orConvertible Securities multiplied by a fraction, the numerator of which shallbe the number of Shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then issued and the denominator of which shall be thetotal number of shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then and theretofore issued under such acquisition agreement.  In the event only a part of the purchaseprice for an acquisition is paid in Shares or Convertible Securities in themanner referred to in this clause (vi), the term “total consideration” as usedin this clause (vi) shall mean that part of the aggregate consideration as isfairly allocable to the purchase price paid in Shares or Convertible Securitiesin the manner referred to in this clause (vi), as determined by the Board ofDirectors of the Company.

 

(C)           In the case at any time the Company shallsubdivide its outstanding Shares into a greater number of Shares, then from andafter the record date for such subdivision the Exercise Price in effectimmediately prior to such subdivision shall be proportionately reduced and thenumber of Shares purchasable upon the exercise of this Warrant shall becorrespondingly increased, and, conversely, in case the outstanding Sharesshall be combined into a smaller number of Shares, then from and after therecord date for such combination the Exercise Price in effect immediately priorto such combination shall be proportionately increased and the number of Sharespurchasable upon the exercise of this Warrant shall be correspondinglydecreased.

 

(D)          Unless the provisions of paragraph (E) apply,if any capital reorganization or reclassification of the capital stock of theCompany, or consolidation or merger of the Company with another corporation, orsale of all or substantially all of its assets to another corporation outsideof the ordinary course of business, shall be effected in such a way thatholders of Shares (or any other securities of the Company then issuable uponthe exercise of this Warrant) shall be entitled to receive stock, securities orassets with respect to or exchange for Shares (or such other securities) then,as a condition of such reorganization, reclassification, consolidation, mergeror sale, lawful and adequate provision shall be made whereby the Holder shallthereafter have the right to purchase and receive upon the basis and upon theterms and conditions specified in this Warrant and in lieu of the Shares (orother securities) of

 

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the Company immediatelytheretofore purchasable and receivable upon the exercise of the rightsrepresented hereby, such shares of stock, securities or assets as may be issuedor 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 anysuch case appropriate provision shall be made with respect to the rights andinterests of the holder of this Warrant to the end that the provisions hereof(including, without limitation, provisions for adjustment of the Exercise Priceand of the number of Shares (or other securities) purchasable upon the exerciseof this Warrant and for the registration thereof as provided in Section 6 ofthis Warrant) shall thereafter be applicable, as nearly as may be, in relationto any shares of stock, securities or assets thereafter deliverable upon theexercise hereof (including an immediate adjustment, by reason of suchconsolidation, merger or sale, of the Exercise Price to the value of the Shares(or other securities) reflected by the terms of such consolidation, merger orsale if the value so reflected is less than the Exercise Price in effectimmediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger ofthe Company with or into another corporation as a result of which a greater orlesser number of securities of the surviving corporation are issuable toholders of Shares in respect of the number of Shares outstanding immediatelyprior to such consolidation or merger, then the Exercise Price in effectimmediately prior to such consolidation or merger shall be adjusted in the samemanner as though there were a subdivision or combination of the outstandingShares.  The Company shall not effect anysuch consolidation, merger or sale, unless prior to or simultaneously with theconsummation thereof the surviving or successor corporation (if other than theCompany) resulting from such consolidation or merger of the corporationpurchasing such assets shall assume, by written instrument executed and mailedto the registered Holder at the last address of such holder appearing on thebooks of the Company, the obligation to deliver to such holder such Shares ofstock, securities or assets as, in accordance with the foregoing provisions,such holder may be entitled to purchase, and containing the express assumptionof such surviving or successor corporation of the due performance of everyprovision of this Warrant to be performed by the Company and of all liabilitiesand obligations of the Company hereunder.

 

(E)           In the event of a change in control of theCompany, as defined in this paragraph (E), then the Board of Directors shallaccelerate the exercise date of the Warrant or make this Warrant fully vestedand exercisable and, in its sole discretion, may take any or all of thefollowing actions: (a) grant a cash bonus award to any holder of this Warrantin an amount necessary to pay the Exercise Price of all or any portion of theWarrant then held by such person; (b) pay cash to any holder of this Warrant inexchange for the cancellation of the holder’s Warrant in an amount equal to thedifference between the Exercise Price of such Warrant and the greater of thetender offer price for the underlying Shares or the Market Price of the Shareson the date of the cancellation of the Warrant; and (c) make any otheradjustments or amendments to this Warrant. For purposes of this paragraph (E), a “change in control” shall bedeemed to have occurred if (a) any “person” or “group” (within the meaning ofSections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended(“1934 Act”), other than a trustee or other fiduciary holding securities underan employee benefit plan of the Company is or becomes the “beneficial owner”(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of morethan 50% of the then outstanding voting stock of the Company; or (b) at anytime during any period of three consecutive years after the date of thisWarrant, individuals who at the beginning of such period constitute the Board(and any new director whose election by the Board or whose nomination forelection by the Company’s stockholders was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors atthe beginning of such period or whose election or nomination for election waspreviously so approved) cease for any reason to constitute a majority thereof;or (c) the stockholders of the Company approve a merger or consolidation of theCompany with any other corporation, other than a merger or consolidation whichwould result in the voting securities of the Company outstanding immediatelyprior thereto continuing to represent (either by remaining outstanding or bybeing converted into voting securities of the surviving entity) at least 50% ofthe combined voting power of the voting securities of the Company or suchsurviving entity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay anydividend on or make any other distribution with respect to Shares (or any othersecurities of the Company then issuable upon the exercise of the Warrant) thatis payable in Shares, Convertible Securities, any other securities of theCompany 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 Sharesissuable upon the exercise of this Warrant, the holder of this Warrant, upon anyexercise of the rights represented hereby, shall be entitled to receive thenumber 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 any company or other stock, securities or assets which theholder of this Warrant would have received by way of such distributions ifcontinuously since the date of the Warrant (or, if this Warrant shall have beenissued pursuant to Section 7 of this Warrant, the date of the predecessorWarrant to which this Warrant relates) such holder had been the record holderof the number of Shares (or other securities), then being purchased and hadretained all such

 

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Shares, Convertible Securities,other securities of the Company or other stock, securities or assetsdistributable with respect to such Shares (or other securities) and,furthermore, all cash, stock, securities or assets payable as dividends ordistributions with respect to the foregoing and originating directly orindirectly therefrom.  The Company shallreserve and retain in escrow from any such dividend or distribution of Shares,Convertible Securities, other securities of the Company or other stock, securitiesor assets, and from any such dividends or distributions with respect theretoand originating directly or indirectly therefrom, such Shares, ConvertibleSecurities, other securities of the Company and other stock, securities, assetsand cash as shall be necessary to fulfill its obligations to the Holderpursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason ofaction taken by the Company, which in the good faith opinion of the Board ofDirectors of the Company, are not adequately covered by the provisions of thisAnnex 1, and which might materially adversely affect the rights of the holderof this Warrant, the Company shall appoint a firm of independent publicaccountants of recognized standing (which may be the regular accountants orauditors 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 theexercise of this Warrant, or other change in the rights of the Holder, on abasis consistent with the other provisions of this Annex 1, necessary topreserve without diminution the rights of the Holder.  Upon receipt of such opinion, the Companyshall forthwith make the adjustments described therein.

 

(H)          (i)        Within ten (10) days of any adjustment of theExercise Price or change in the number of Shares purchasable upon the exerciseof this Warrant made pursuant to paragraphs (A), (B), (C) , or (F) or anychange in the rights of the holder of this Warrant by reason of the occurrenceof events described in paragraphs (D), (E), or (F), the Company shall givewritten notice by certified or registered mail to the registered holder of thisWarrant at the address of such holder as shown on the books of the Company,which notice shall describe the event requiring such adjustments (with respectto any adjustment made pursuant to paragraphs (C), (D), (E) or (F), theExercise Price resulting from such adjustment, the increase or decrease, ifany, in the number of Shares purchasable upon the exercise of this Warrant, orthe other change in the rights of such holder, and set forth in reasonabledetail the method of calculation of such adjustments and the facts upon whichsuch calculations are based.  Within two(2) days of receipt from the holder of this Warrant upon the surrender hereoffor exercise pursuant to Section 1 of this Warrant, and within three (3) daysof receipt from the Holder a written request therefor (which request shall notbe made more than once each calendar quarter), the Company shall give writtennotice by certified or registered mail to such holder at his address as shownon the books of the Company of the Exercise Price in effect as of the date ofreceipt by the Company of this Warrant for exercise, or the date of receipt ofsuch written request, and the number of Shares purchasable or the number oramount of other shares of stock, securities or assets receivable as of suchdate, and set forth in reasonable detail the method of calculation of suchnumbers; provided that no further adjustments to the Exercise Price or thenumber of Shares purchasable or number or amount of shares, securities orassets receivable on exercise of this Warrant shall be made after receipt ofthis Warrant by the Company for exercise.

 

(ii)       Upon each adjustment of the Exercise Price and each change in thenumber of Shares purchasable upon the exercise of this Warrant, and change inthe rights of the holder of this Warrant by reason of the occurrence of otherevents herein set forth, then and in each case, upon written request of theholder of this Warrant (which request shall be made not more often than onceeach calendar year), the Company will at its expense promptly obtain an opinionof independent public accountants reasonably satisfactory to each holderstating the then effective Exercise Price and the number of Shares thenpurchasable, or specifying the other shares of stock, securities or assets andthe amount thereof then receivable, and setting forth in reasonable detail themethod of calculation of such numbers and the facts upon which suchcalculations are based.  The Company willpromptly mail a copy of such opinion to the registered Holder.

 

(I)            In case at any time:

 

(i)        The Company shall pay any dividend payable in capital stock on itsoutstanding Shares or make any distribution (other than regular cash dividends)to the holders of Shares;

 

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(ii)       The Company shall offer for subscription pro rata to the holders ofShares any additional capital stock or other rights;

 

(iii)      There shall be authorized any capital reorganization orreclassification of the capital stock of the Company, or consolidation ormerger of the Company with, or sale of all or substantially all of its assetsto, another corporation; or

 

(iv)      There shall be authorized or commence a voluntary or involuntarydissolution, liquidation or winding up of the Company then, in one or more ofsaid cases, the Company shall given written notice by certified or registeredmail to Holder at the address of Holder as shown on the books of the Company onthe date on which (1) the books of the Company shall close or a record shall betaken for such dividend, distribution, or subscription rights, or (2) suchreorganization, reclassification, consolidation, merger, sale, dissolution,liquidation or winding up shall take place or be voted upon by the shareholdersof the Company, as the case may be.  Suchnotice shall also specify the date as of which the holders of record of Sharesshall participate in such dividend, distribution or subscription rights, orshall be entitled to exchange their Shares for securities or other propertydeliverable upon such reorganization, reclassification, consolidation, merger,sale, dissolution, liquidation or winding up, as the case may be.  Such written notice shall be given at leastthirty (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 areclosed in respect thereto.

 

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EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered HolderDesiring to Exercise the Within Warrant ofTIPPERARY CORPORATION

 

The undersigned registeredholder hereby exercises the right to purchase                                                         Shares covered by the within Warrant according to the conditions thereof, andherewith makes payment of the Exercise Price of such Shares, $                                                  .

 

 
| Name of Registered Holder:     |   |   |
|--------------------------------|--------|--------|
|                           |   |
| Signature:                     |   |   |
|                           |   |
| Title of Signing Officer       |   |
| or Agent (if any):             |   |   |
|                           |   |
|                           |   |
| Address of Registered  Holder: |   |   |
|                           |   |   |
|                           |   |   |
|                           |   |
| Tax I.D. No.:                  |   |   |
|                           |   |
| Dated:                         |   | , 20   |   |   |
|                                |        |        |  |  |  |  |  |  |  |  |

 

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**This Warrant and the rightsrepresented hereby shall not be transferable at any time unless (i) aregistration statement under the Securities Act of 1933, as amended, shall bein effect with respect to this Warrant or the Shares issuable hereunder at suchtime, or (ii) the transfer is made in compliance with the provisions of Section5.**

 
| **Number:** | ** ** | **25,000 Shares** |
|-------------|------------|-------------------|

 

**WARRANTTO PURCHASE SHARESOFTIPPERARY CORPORATION**

 

This certifies that, for value received, D. LeroySample, an individual residing in Estero, Florida (“Holder”), or theirregistered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texascorporation (the “Company”), twenty-five thousand (25,000) Shares, as definedin Section 3, at the price of Four Dollars and 95/100 ($4.95) per Share (asdefined in Section 3) at any time, or in part from time to time in accordancewith the following Vesting Schedule (“Vesting Schedule”):

 
| **Date:**             | ** ** | ** ** | **Total Shares Subject to Exercise** | ** ** |
|-----------------------|------------|------------|--------------------------------------|------------|
|                  |       |       |                                 |       |
| From January 10, 2006 |       |       | 8,334                                |       |   |
| From January 10, 2007 |       |       | 16,667                               |       |   |
| From January 10, 2008 |       |       | 25,000                               |       |   |

 

This Warrant shall expire, if not exercisedprior thereto, two (2) years after the resignation or removal of the Holder asan employee or director of the Company. If the Holder should resign or be removed as an employee or directorfrom the Company, then this Warrant shall be vested only to the extent vestedon such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of theinitial exercise price set forth above and the number of Shares to be issuedupon the occurrence of certain events (the Provisions as to Adjustment) aremore fully set forth in Annex 1 hereto. (Hereinafter, the initial exercise price set forth above in thisparagraph for the purchase of Shares upon the exercise of this Warrant, asadjusted pursuant to the Provisions as to Adjustment, is referred to as the “ExercisePrice”).  This Warrant is subject to thefollowing provisions, terms and conditions:

 

**1.****            ****Exercise of Warrant****.**

 

(a)           The rights represented by this Warrant may beexercised by the Holder, in whole or in part, (but not as to a fractionalShare), by the surrender of this Warrant at the Company’s principal officelocated in Denver, Colorado (or such other office or agency of the Company asthe Company may designate by notice in writing to the Holder at the address ofsuch holder appearing on the books of the Company at any time within the periodabove named) and delivery of a completed subscription form in the form attachedto this Warrant as Exhibit A, and upon payment to the Company of the ExercisePrice for such Shares.

 

(b)           Payment of the Exercise Price shall be madeby a combination of any one or more of the following:

 

(i)            By application, to the extent permitted byapplicable law, of Shares or other securities of the Company owned by the Holder,the value of which for such purpose shall be the fair market value thereofdetermined in good faith by the Company and the Holder at the time of suchexercise; provided, however, that in order to apply such Shares or othersecurities of the Company in the exercise hereof, each of the followingconditions must be met:

 

(A)          such Shares or other securities of theCompany shall have been owned, without material encumbrance, contingency orrisk of forfeiture relating to the ownership rights, for at least six monthsand at all times during said six month period by the Holder, and within saidsix month period such Shares or other securities of the Company shall not havebeen obtained through exercise of any

 

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option, warrant or right toobtain such Shares of other securities or through the conversion of any othersecurity; and

 

(B)           such Shares or other securities shall not beor include: (1) options, warrants or similar rights to acquire Shares or othersecurities of the Company by the Holder; or (2) securities owned by the Holderwhich are convertible in whole or in part into Shares or other securities ofthe Company; and

 

(ii)           in cash or by certified check or bank draftin New York Clearing House funds.

 

(c)           The Company agrees that any Shares sopurchased by the exercise of this Warrant shall be deemed to be issued to theHolder as the record owner of such Shares as of the close of business on thedate on which this Warrant shall have been surrendered, the completedsubscription form delivered, and payment in full is made and delivered to theCompany for such Shares as aforesaid.

 

(d)           Stock certificates evidencing Shares sopurchased shall be delivered to the Holder as promptly as practicable, afterthe rights represented by this Warrant shall have been so exercised.  If this Warrant shall have been exercisedonly in part, and unless this Warrant has expired, a new Warrant representingthe number of Shares with respect to which this Warrant shall not then havebeen exercised shall also be delivered to the Holder within such time.  Notwithstanding the foregoing, however, theCompany shall not be required to deliver any stock certificate evidencingShares 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 withthe preparation, execution and delivery of stock certificates and any newWarrants.

 

**2.****            ****Certain Covenants of the Company****.**  TheCompany covenants and agrees as follows:

 

(a)           All Shares which may be issued upon theexercise of the rights represented by this Warrant (all such Shares, whetherpreviously issued or subject to issuance upon the exercise of this Warrant, arefrom time to time referred to herein as “Warrant Shares”) will, upon issuance,be duly authorized and issued, fully paid and nonassessable and free from alltaxes, liens and charges with respect to the issuance thereof.

 

(b)           During the period within which the rightsrepresented by this Warrant may be exercised, and only insofar as the VestingSchedule herein permits the exercise of this Warrant, the Company will, at alltimes, have authorized and reserved free of preemptive or other rights for theexclusive purpose of issuance upon exercise of the purchase rights evidenced bythis Warrant, a sufficient number of Shares to provide for the exercise ofrights represented by this Warrant.

 

(c)           The Company will not, by amendment orrestatement of the Articles of Incorporation or through any reorganization, transfer of assets,consolidation, merger, issuance or sale of securities or otherwise, avoid ortake any action which would have the effect of avoiding the performance of anyof the terms to be performed hereunder by the Company, but will at all times ingood faith carry out all of the provisions of this Warrant and take all suchaction as may be necessary or appropriate to protect the rights of the Holderagainst dilution or other impairment and, in particular, will not permit thepar value of any Share to be or become greater than the then effective ExercisePrice.

 

**3.****            ****Definition of Shares****.**  Asused herein, the term “Shares” shall mean and include shares of the CommonStock, par value $.02 per share, of the Company as are constituted and exist onthe date hereof, and shall also include any other class of the capital stock ofthe Company hereafter authorized which shall neither be limited to a fixed sumor percentage of par value in respect to the rights of the holders thereof toreceive dividends and to participate in the distribution of assets upon thevoluntary or involuntary liquidation, dissolution or winding up of the Company,nor be subject at any time to redemption by the Company; provided that theShares receivable upon exercise of this Warrant shall include only Shares ofthe type as are constituted and exist on the date hereof or Shares resultingfrom any reclassification of the Shares as provided for in paragraph (C) of theProvisions as to Adjustment.

 

**4.****            ****No Rights or Liabilities as aShareholder****.**  ThisWarrant shall not entitle the Holder as such to any rights whatsoever,including, without limitation, voting rights, as a holder of Shares of theCompany.  No provisions hereof, in theabsence of affirmative action by the Holder to purchase Shares, and no mereenumeration

 

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hereinof the rights or privileges of such holder, shall give rise to any liability ofsuch holder as a holder of Shares of the Company, regardless of who may assertsuch liability.

 

**5.****            ****Restrictions on Transfer****.**

 

(a)           This Warrant shall not be exercisable by atransferee hereof and/or transferable and the Warrant Shares shall not betransferable except upon the conditions specified in this Section 5, whichconditions are intended, among other things, to ensure compliance with theprovisions of the Securities Act of 1933, as amended, and the rules andregulations of the Securities and Exchange Commission (the “Commission”)thereunder (collectively the “Securities Act”), in respect of the exerciseand/or transfer of this Warrant and/or transfer of such Warrant Shares.

 

(b)           This Warrant and the Warrant Shares shall notbe transferable (except for a transfer of this Warrant or the Warrant Shares inan offering registered under the Securities Act, including, without limitation,a transfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer) unless, prior to any transfer, the Holder shall havereceived from its transferee reasonable assurances that such person is awarethat this Warrant and the Warrant Shares have not been registered under theSecurities Act and that such person is acquiring this Warrant or the WarrantShares for investment only and not with the view to the disposition or publicoffering thereof (unless in an offering registered under the Securities Act orexempt therefrom), and that such person is aware that the stock certificatesevidencing the Warrant Shares shall bear a legend restricting transfer anddisposition thereof in accordance with the Securities Act unless, in theopinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant(other than a transfer in an offering registered under the Securities Act,including, without limitation, a transfer in a registered offering effectedpursuant to Section 6, and any subsequent transfer), the Holder shall providean opinion of counsel, who shall be reasonably satisfactory to the Company,that an exemption from the registration requirements of the Securities Act isavailable.

 

(c)           Any permitted subsequent holder of thisWarrant shall be subject to all the terms and conditions herein, and shallacknowledge, in writing, upon receipt of this Warrant his or her acceptance ofthe terms and conditions herein.

 

(d)           To facilitate sales by a holder of thisWarrant or Warrant Shares in transactions qualifying under Rule 144 promulgatedby the Commission under the Securities Act, if available, the Company agrees tosatisfy the current public information requirements of said Rule 144, for aslong 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 withsuch other information as such holder may require for compliance with theprovisions of said Rule 144.

 

**6.****            ****Registration Under Securities Act****.**

 

(a)           If the Company, at any time, proposes toregister any issuance of its securities under the Securities Act (other than aregistration on Form S-8 in connection with an employee stock purchase oroption plan or on Form S-4 in connection with mergers, acquisitions or exchangeofferings), the Company will at such time give prompt written notice to theholder hereof and to the holders of all other Warrant Shares issuable from anyoutstanding Warrants (such holders are hereinafter referred to as the “ProspectiveSellers” or, individually, as a “Prospective Seller”) of its intention to doso.  Upon the written request of a ProspectiveSeller, given within 30 days after receipt of any such notice (which requestshall state the intended method of disposition of the Warrant Shares to betransferred by such Prospective Seller), the Company shall use its best effortsto cause all Warrant Shares, the holders of which (or of the Warrants to whichthe same are related), to the extent vested in accordance with the VestingSchedule, shall have so requested registration of the transfer thereof, to beregistered under the Securities Act, all to the extent requisite to permit thesale or other disposition (in accordance with the intended method thereof asaforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section6(a) shall not be effective with respect to the Prospective Seller in the caseof an underwritten public offering of securities of the Company by the Companyunless each Prospective Seller agrees to the terms and conditions, includingunderwriting discounts and allowances, specified by the managing underwriter ofsuch offering with respect to such Warrant Shares.  The Company shall have the right to reducethe number of Warrant Shares of the Prospective Sellers to be included in aregistration statement pursuant to the exercise of the rights granted by thisSection 6(a) if, and to the extent, that the managing underwriter of suchoffering is of the good faith opinion, supported by written reasons therefor,that the inclusion of such Warrant Shares would materially and adversely

 

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affect the marketing of thesecurities of the Company to be offered; provided, that any such reduction ofthe number of Warrant Shares, the transfer of which is to be registered onbehalf of the Prospective Sellers, shall be made on the basis of a pro ratareduction of all Warrant Shares of all Prospective Sellers.

 

If and whenever the Companyis required by the provisions of this Section 6 to use its best efforts toeffect the registration of any transfer of Warrant Shares under the SecuritiesAct, the Company will, as expeditiously as possible,

 

(i)            prepare and file with the Commission aregistration statement with respect to such transfer and use its best effortsto cause such registration statement to become and remain effective, but notfor any period longer than nine months;

 

(ii)           prepare and file with the Commission suchamendments and supplements to such registration statement and the prospectusused in connection therewith as may be necessary to keep such registrationstatement effective, and to comply with the provisions of the Securities Actwith respect to the transfer of all securities covered by such registrationstatement, including, without limitation, taking all necessary actions wheneverthe Prospective Sellers of the Warrant Shares covered by such registrationstatement shall desire to dispose of the same;

 

(iii)          furnish to each Prospective Seller suchnumber of copies of a prospectus, including a preliminary prospectus, inconformity with the requirements of the Securities Act, and such otherdocuments, as such Prospective Seller may reasonably request in order tofacilitate the disposition of the Warrant Shares owned by such ProspectiveSeller and covered by such registration statement;

 

(iv)          use its best efforts to register or qualifythe securities covered by such registration statement under such othersecurities or blue sky laws of such jurisdictions as each Prospective Sellershall request, and use its best efforts to do any and all other acts and thingswhich may be reasonably necessary to enable such Prospective Seller toconsummate the disposition in such jurisdiction of the Warrant Shares owned bysuch Prospective Seller and covered by such registration statement; providedthat, notwithstanding the foregoing, the Company shall not be required toregister in any jurisdiction as a broker or dealer of securities or to grantits consent to service of process in any such jurisdiction solely on account ofsuch intended disposition by such Prospective Seller;

 

(v)           furnish to the Prospective Sellers, whoseintended dispositions are registered, a signed copy of an opinion of counselfor the Company, in form and substance acceptable to such Prospective Sellers,to the effect that: (A) a registration statement covering such dispositions ofWarrant Shares has been filed with the Commission under the Securities Act andhas been made effective by order of the Commission, (B) such registrationstatement and the prospectus contained therein and any amendments or supplementsthereto comply as to form in all material respects with the requirements of theSecurities Act, and (C) to the best of such counsel’s knowledge, no stop orderhas been issued by the Commission suspending the effectiveness of suchregistration statement and no proceedings for the issuance of such a stop orderare threatened or contemplated;

 

(vi)          furnish to the Prospective Sellers whoseintended dispositions are required a blue sky survey in the form and of thesubstance customarily prepared by counsel for the Company and accepted bysellers of securities in similar offerings, discussing and describing theapplication provisions of the securities or blue sky laws of each state orjurisdiction in which the Company shall be required, pursuant to Section6(c)(iv), to register or qualify such intended dispositions of such WarrantShares, or, in the event counsel for the underwriters in such offering shall bepreparing a blue sky survey, cause such counsel to furnish such survey to, andto allow reliance thereon by, such Prospective Sellers;

 

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(vii)         otherwise use its best efforts to comply withall applicable rules and regulations of the Commission under the Securities Actand the Exchange Act, insofar as they relate to such registration and suchregistration statement; and

 

(viii)        use its best efforts to list such WarrantShares on any securities exchange on which any securities of the Company arethen listed or to admit such Warrant Shares for trading in any national marketsystem in which any securities of the Company are then admitted for trading, ifthe listing or admission of such securities is then permitted under the rulesof such exchange or system.

 

(b)           With respect to the registration by the Companyof transfers of Warrant Shares under the Securities Act pursuant to Section6(a), the Company shall pay all expenses incurred by it in complying with thisSection 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 onespecial counsel designated by Prospective Sellers owning a majority of theWarrant Shares covered by such registration, but specifically excluding anyunderwriting discounts and allowances that are allocable to the Warrant Sharesbeing sold by, and which shall be paid by, the Prospective Sellers; provided,however, that if any registration statement filed with the Commission by theCompany under Section 6(a) shall not be declared effective by the Commission,such attempted registration shall not constitute a registration under thisSection 6(b).

 

(c)           It shall be a condition precedent to theobligations of the Company to take any action pursuant to this Section 6 thateach Prospective Seller, the transfer of whose Warrant Shares is registered orto be registered under each such registration, shall furnish to the Companysuch written information regarding the securities held by such ProspectiveSeller as the Company shall reasonably request and as shall be required inconnection with the action to be taken by the Company.

 

(d)           (i)           In the event of any registration of anytransfer of Warrant Shares under the Securities Act pursuant to this Section 6,the Company will indemnify and hold harmless each Prospective Seller of suchsecurities, each of its officers, directors and partners, and each otherperson, if any, who controls such Prospective Seller within the meaning of theSecurities Act, and each underwriter, if any, who participates in the offeringof such securities, against any losses, claims, damages or liabilities (oractions in respect thereof), joint or several, to which each ProspectiveSeller, officer, director or partner, controlling person or underwriter maybecome subject under the Securities Act or otherwise, insofar as such losses,claims, damages or liabilities (or actions in respect thereof) arise out of orare based upon any untrue statement or alleged untrue statement of any materialfact contained, on the effective date thereof, in any registration statementunder which such transfer of securities was registered under the SecuritiesAct, any preliminary prospectus or final prospectus contained therein, or anyamendment or supplement thereto, or arise out of or are based upon the omissionor alleged omission to state therein a material fact required to be statedtherein or necessary to make the statements therein not misleading, or anyviolation by the Company of the Securities Act, and will reimburse suchProspective Seller and each of its officers, directors and partners, and eachsuch controlling person or underwriter, for any legal or any other expensesreasonably incurred by such Prospective Seller or its officers, directors andpartners or controlling persons or by each such underwriter, in connection withinvestigating or defending any such loss, claim, damage, liability or action;provided, however, that the Company will not be liable in any such case to theextent that any such loss, claim, damage or liability arises out of or is basedupon an untrue statement or alleged untrue statement or omission or allegedomission made in such registration statement, preliminary prospectus orprospectus or such amendment or supplement in reliance upon and in conformitywith written information furnished to the Company through an instrument dulyexecuted by such Prospective Seller specifically for use in the preparationthereof.  In the event of anyregistration by the Company or any transfer of securities under the SecuritiesAct pursuant to this Section 6, each Prospective Seller of Warrant Sharescovered by such registration will indemnify and hold harmless the Company, eachother person, if any, who controls the Company within the meaning of theSecurities Act and each officer and director of the Company and the otherProspective Sellers to the same extent that the Company agrees to indemnify it,but only with respect

 

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tothe written information relating to such Prospective Seller furnished to theCompany by such Prospective Seller aforesaid

 

(ii)          Each indemnified party shall, as promptly aspracticable upon receipt of notice of the commencement of any action againstsuch indemnified party or its officers, directors or partners, or anycontrolling person of such indemnified party, in respect of which indemnity maybe sought from an indemnifying party on account of the indemnity agreementcontained in Section 6(d)(i), notify the indemnifying party in writing of thecommencement thereof.  The omission ofsuch indemnified party to so notify the indemnifying party of any such actionshall not relieve the indemnifying party from any liability which it may haveon account of the indemnity agreement contained in Section 6(d)(i) to theextent that the failure to receive such notice within a reasonable period oftime shall not have caused harm, loss or damage to the indemnifying party,provided that, conversely, if such failure to receive notice shall have causedany harm, loss or damage to the indemnifying party, such failure shallconstitute a defense to any liability which such indemnifying party may have onaccount of such agreement to the extent of the harm, loss or damage so caused. Incase any such action shall be brought against any indemnified party, itsofficers, directors and partners, or any such controlling person, and suchindemnified party shall notify the indemnifying party of the commencementthereof, the indemnifying party shall be entitled to participate in (and, tothe extent that the indemnifying party shall wish, to direct) the defensethereof at the indemnifying party’s own expense, in which event the defenseshall be conducted by recognized counsel chosen by the indemnifying party andapproved by the indemnified party (whose approval shall not unreasonably bewithheld) and the indemnified party may participate in such defense at its ownexpense (unless it is advised by counsel that actual or potential differinginterests or defenses exist or may exist, in which case such expenses shall bepaid by the indemnifying party, provided that the indemnifying party shall notbe required to pay the expenses for more than one counsel for all suchindemnified parties).

 

**7.****            ****Transfer; Ownership****.** Subject to Section 5, this Warrant and all rights hereunder aretransferable, in whole or in part, at the office or agency of the Companyreferred to in Section 1 by the Holders 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 theCompany, of the same tenor as this Warrant but registered in the name of thetransferee.  The Holder, by taking orholding the same, consents and agrees that this Warrant, when endorsed inblank, shall be deemed negotiable, and that the Holder, when this Warrant shallhave been so endorsed, may be treated by the Company and all other personsdealing with this Warrant as the absolute owner hereof for any purpose and asthe person entitled to exercise the rights represented by this Warrant and totransfer this Warrant on the books of the Company, any notice to the contrarynotwithstanding; but until such transfer on such books, the Company may treatthe registered the Holder as the owner hereof for all purposes.  Any transfer of this Warrant shall be made incompliance with the Securities Act and any applicable state securities or bluesky laws.

 

**8.****            ****Exchange and Replacement****.**  Subjectto Section 7, this Warrant is exchangeable, upon the surrender hereof by theHolder at the office or agency of the Company referred to in Section 1, for newWarrants of like tenor and date representing in the aggregate the right topurchase the number of Shares which may be purchased hereunder, each of suchnew Warrants to represent the right to purchase such number of Shares as shallbe designated by the Holder at the time of such surrender.  Upon receipt by the Company, at the office oragency referred to in Section 1, of evidence reasonably satisfactory to it ofthe loss, theft or destruction of this Warrant and of indemnity or securityreasonably satisfactory to it (provided that the written indemnity of theHolder shall be deemed reasonably satisfactory to the Company for suchpurposes), the Company will deliver a new Warrant of like tenor and date inreplacement of this Warrant.  ThisWarrant shall be promptly canceled by the Company upon the surrender hereof inconnection with any transfer, exchange or replacement.  The Company will pay all expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to Section 7 and this Section 8.

 

**9.****            ****Notices****.**  Anynotice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent bycertified or registered mail to, 20383 Wildcat Run Drive, Estero, Florida33928, or to such other address as shall have been furnished to the Company inwriting by the Holder.  Any

 

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notice or other documentrequired or permitted to be given or delivered to the Company shall bedelivered at, or sent by certified or registered mail to, 633 SeventeenthStreet, Suite 1550, Denver, Colorado 80202, or to such other address as shallhave been furnished in writing to the Holder by the Company.  Any notice so addressed and mailed byregistered or certified mail or otherwise delivered, shall be deemed to be givenwhen actually received by the addressee.

 

**10.****         ****GOVERNING LAW****.    THISWARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF TEXAS.**

 

**11.****         ****Miscellaneous****.**  ThisWarrant will be binding upon any entity succeeding to the Company byconsolidation or acquisition of all or substantially all of the Company’sassets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may bechanged, waived, discharged or terminated only by an instrument in writingsigned by the party (or any predecessor in interest thereof) against whomenforcement of the same is sought.  Theheadings in this Warrant are for purposes of reference only and shall notaffect the meaning or construction of any of the provisions hereon.

 

**INWITNESS WHEREOF**,Tipperary Corporation has caused this Warrant to be signed by its dulyauthorized officers, under its corporate seal, to be dated April 27, 2005.

 
|                | **TIPPERARY  CORPORATION**     |
|---------------------|--------------------------------|
|                |                           |
|                |                           |
| ** **          | **BY:**                        | ** /s/ David L. Bradshaw** |
|                | **ITS:**                       | **President** |
|                |                           |
| **CORPORATE  SEAL** |                           |
|                |                           |
|                |                           |
| **ATTEST:**         | ** /s/ Elaine R. Treece** | ** ** | ** ** |
| **ITS:**            | Secretary                      |   |
|                     |                                |  |  |  |

 

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Annex1

 

TIPPERARYCORPORATION

 

PROVISIONSAS TO ADJUSTMENT OFEXERCISE PRICE AND NUMBER OF SHARESISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and thenumber of Shares issuable upon the exercise of the annexed Warrant to purchaseshares of TIPPERARY CORPORATION, a Texas corporation (herein and in thisWarrant referred to as the “Company”), shall be subject to adjustment from timeto time as hereinafter provided; that in no event shall the Exercise Price beincreased to a price greater than Four Dollars and 95/100 ($4.95) per Share,except as provided by paragraph (C). Upon each adjustment of the Exercise Price, the Holder shall thereafterbe entitled to purchase, at the Exercise Price resulting from such adjustment,the number of Shares obtained by multiplying the number of Shares purchasablepursuant hereto immediately prior to such adjustment by a fraction, thenumerator of which is the Exercise Price in effect immediately prior to suchadjustment and the denominator of which is the Exercise Price resulting fromsuch adjustment.  In making theadjustments to the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or sell any Sharesfor consideration per Share that is less than the Exercise Price in effectimmediately prior to the time of such issue or sale at less than the MarketPrice (as hereinafter defined) of such Shares on the date of such issue orsale, then forthwith upon such issue or sale the Exercise Price in effectimmediately prior thereto shall be adjusted to an amount (calculated to thenearest cent) determined by dividing (i) an amount equal to the sum of (a) thenumber of Shares outstanding immediately prior to such issue or sale multipliedby 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 saleby (ii) the total number of Shares outstanding immediately after such issue orsale; provided, however, that no adjustment shall be made hereunder by reasonof:

 

(i)    the grant of this Warrant or the issuance of Shares upon theexercise of this Warrant or any other outstanding Warrant;

 

(ii)                      the grant by the Company of options topurchase shares in connection with any purchase or option plan for the benefitof employees of the Company, or any affiliates or subsidiaries thereof; or

 

(iii)                   the issuance (whether directly or byassumption in a merger or otherwise) or sale (including any issuance or sale toholders of Shares) of any securities convertible into or exchangeable forShares (such convertible or exchangeable securities are herein referred to as “ConvertibleSecurities”), or the grant of rights to subscribe for or to purchase, or ofoptions for the purchase of (including any grant of such rights or options toholders of shares, other than pursuant to a dividend on Shares), Shares ofConvertible Securities, regardless of whether the right to convert or exchangesuch Convertible Securities or such rights or options are immediatelyexercisable.

 

No adjustment of the Exercise Price shall berequired to be made by the Company and no notice hereunder must be given if theamount of any required adjustment is less than 5% of the Exercise Price.  In such case any such adjustment shall becarried forward and shall be made (and notice thereof shall be given hereunder)at the time of and together with the next subsequent adjustment which, togetherwith any adjustment so carried forward, shall amount to not less than 5% of theExercise Price.

 

(B)           For the purposes of paragraph (A), the followingprovisions (i) through (vi), inclusive, shall also be applicable:

 

(i)                                     If, at the time Shares are issued and soldupon the conversion or exchange of Convertible Securities or upon the exerciseof rights or options previously granted by the Company, the price per Share forwhich such Shares are issued (determined by dividing (a) the total amount, ifany, received by the Company as consideration for such Convertible Securitiesor for the granting of such rights or options, plus the aggregate amount ofadditional consideration paid to the Company upon the conversion or exchange ofsuch Convertible

 

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Securities(which, if so provided in such Convertible Securities, shall be deemed to beequal to the outstanding principal amount of the indebtedness represented bysuch 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 suchConvertible Securities or upon the exercise of such rights or options shall beless than the Exercise Price in effect immediately prior to such issue, sale orexercise, then the adjustments provided for by the first paragraph of thisAnnex 1 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 beconsidered the consideration received by the Company upon the issue or sale ofthe Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)                                  In case at any time any Shares or ConvertibleSecurities or any rights or options to purchase any Shares or ConvertibleSecurities shall be issued or sold for cash, the consideration receivedtherefor shall be deemed to be the amount received by the Company thereforwithout deduction therefrom of any expenses incurred or any underwritingcommissions or concessions paid or allowed by the Company in connectiontherewith.  In case any Shares orConvertible Securities or any rights or options to purchase any Shares orConvertible Securities shall be issued or sold, in whole or in part, for considerationother than cash, the amount of the consideration other than cash received bythe Company in exchange for the issue or sale of such Convertible Securitiesshall be deemed to be the fair value of such consideration as determined ingood faith by the Board of Directors of the Company, without deductiontherefrom of any expenses incurred or any underwriting commissions orconcessions paid or allowed by the Company in connection therewith; providedthat if the holder or holders of at least 66-2/3% of the Warrant Sharespurchasable under this Warrant shall request in writing, the value of suchconsideration shall be determined by an independent expert selected by suchholders, the costs and expenses of which shall be borne by the Company, and, ifthe value of such consideration as so determined is less than the valuedetermined by the Board of Directors of the Company, the lesser value shall beutilized in calculating the consideration per Share received by the Company forpurposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidationof the Company in which the Company is not the surviving corporation or in theevent of any sale of all or substantially all of the assets of the Companyoutside of the ordinary course of business of the Company for stock or othersecurities of any corporation, the Company shall be deemed to have issued anumber of Shares for stock or securities of such other corporation computed onthe basis of the actual exchange ratio on which the transaction was predicatedand for consideration that is equal to the fair market value on the date ofsuch transaction of such stock or securities of the other corporation, and ifany such calculation results in adjustment of the Exercise Price, thedetermination of the number of Shares issuable upon exercise of this Warrantimmediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall bemade after giving effect to such adjustment of the Exercise Price.

 

(iii)                               The number of Shares outstanding at any giventime shall not include Shares that have been redeemed by the Company and notcanceled, if any, and that are thus owned or held by or for the account of theCompany, and the disposition of any such Shares shall be considered an issue orsale 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 nationalsecurities exchange on which the Shares are listed or in a national marketsystem for securities in which the Shares are admitted to trading or (b) theaverage of the closing bid and asked prices of Shares reported in the domesticover-the-counter market, for the 20 trading days immediately prior to the dayas of which the Market Price is being determined.  If the Shares are not listed on any nationalsecurities exchange or admitted for trading in any national market system ortraded in the domestic over-the-counter market, the Market Price shall be thehigher of (y) the book value of the Shares as determined by a firm ofindependent public accountants of recognized standing selected by the Board ofDirectors of the Company as of the last day of any month ending within 60 dayspreceding the date as of which the determination is to be made or (z) the fairmarket value of the Shares determined in good faith by the Board of Directorsof the Company,

 

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providedthat if the holder or holders of at least 66-2/3% of the Warrant Sharespurchasable under the Warrant shall request in writing, the fair market valueof the Shares shall be determined by an independent investment banking firm orother independent expert selected by such holders and reasonably satisfactoryto the Company, which determination shall be as of a date which is within 15days of the date as of which the determination is to be made.

 

(v)                                 Anything herein to the contrarynotwithstanding, in case the Company shall issue any Shares in connection withthe acquisition by the Company of the stock or assets of any other corporationor the merger of any other corporation into the Company under circumstanceswhere, on the date of the issuance of such Shares, the consideration receivedfor such Shares is less than the Market Price of the Shares, but on the datethe number of Shares was determined, the consideration received for such Shareswould not have been less than the Market Price thereof, such Shares shall notbe deemed to have been issued for less than the Market Price.

 

(vi)                              Anything in clause (ii) of this paragraph (B)to the contrary notwithstanding, in the case of an acquisition where all orpart of the purchase price is payable in Shares or Convertible Securities butis stated as a dollar amount, where the Company upon making the acquisitionpays only part of a maximum dollar purchase price which is payable in Shares orConvertible Securities and where the balance of such purchase price is deferredor is contingently payable under a formula related to earnings over a period oftime, (a) the consideration received for any Shares or Convertible Securitiesdelivered at the time of the acquisition shall be deemed to be such part of thetotal consideration as the portion of the dollar purchase price then paid inShares or Convertible Securities bears to the total maximum dollar purchaseprice payable in Shares or Convertible Securities and (b) in connection witheach issuance of additional Shares or Convertible Securities pursuant to theterms of the agreement relating to such acquisition, the consideration receivedshall be deemed to be such part of the total consideration as the portion ofthe dollar purchase price then and theretofore paid in Shares or ConvertibleShares bears to the total maximum dollar purchase price payable in Shares orConvertible Securities multiplied by a fraction, the numerator of which shallbe the number of Shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then issued and the denominator of which shall be thetotal number of shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then and theretofore issued under such acquisitionagreement.  In the event only a part ofthe purchase price for an acquisition is paid in Shares or ConvertibleSecurities in the manner referred to in this clause (vi), the term “totalconsideration” as used in this clause (vi) shall mean that part of theaggregate consideration as is fairly allocable to the purchase price paid inShares 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 itsoutstanding Shares into a greater number of Shares, then from and after therecord date for such subdivision the Exercise Price in effect immediately priorto such subdivision shall be proportionately reduced and the number of Sharespurchasable upon the exercise of this Warrant shall be correspondinglyincreased, and, conversely, in case the outstanding Shares shall be combinedinto a smaller number of Shares, then from and after the record date for suchcombination the Exercise Price in effect immediately prior to such combinationshall be proportionately increased and the number of Shares purchasable uponthe exercise of this Warrant shall be correspondingly decreased.

 

(D)          Unless the provisions of paragraph (E) apply, if anycapital reorganization or reclassification of the capital stock of the Company,or consolidation or merger of the Company with another corporation, or sale ofall or substantially all of its assets to another corporation outside of theordinary course of business, shall be effected in such a way that holders ofShares (or any other securities of the Company then issuable upon the exerciseof this Warrant) shall be entitled to receive stock, securities or assets withrespect to or exchange for Shares (or such other securities) then, as acondition of such reorganization, reclassification, consolidation, merger orsale, lawful and adequate provision shall be made whereby the Holder shallthereafter have the right to purchase and receive upon the basis and upon theterms and conditions specified in this Warrant and in lieu of the Shares (orother securities) of

 

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the Company immediatelytheretofore purchasable and receivable upon the exercise of the rightsrepresented hereby, such shares of stock, securities or assets as may be issuedor 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 anysuch case appropriate provision shall be made with respect to the rights andinterests of the holder of this Warrant to the end that the provisions hereof(including, without limitation, provisions for adjustment of the Exercise Priceand of the number of Shares (or other securities) purchasable upon the exerciseof this Warrant and for the registration thereof as provided in Section 6 ofthis Warrant) shall thereafter be applicable, as nearly as may be, in relationto any shares of stock, securities or assets thereafter deliverable upon theexercise hereof (including an immediate adjustment, by reason of suchconsolidation, merger or sale, of the Exercise Price to the value of the Shares(or other securities) reflected by the terms of such consolidation, merger orsale if the value so reflected is less than the Exercise Price in effectimmediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger ofthe Company with or into another corporation as a result of which a greater orlesser number of securities of the surviving corporation are issuable toholders of Shares in respect of the number of Shares outstanding immediately priorto such consolidation or merger, then the Exercise Price in effect immediatelyprior to such consolidation or merger shall be adjusted in the same manner asthough there were a subdivision or combination of the outstanding Shares.  The Company shall not effect any suchconsolidation, merger or sale, unless prior to or simultaneously with theconsummation thereof the surviving or successor corporation (if other than theCompany) resulting from such consolidation or merger of the corporationpurchasing such assets shall assume, by written instrument executed and mailedto the registered Holder at the last address of such holder appearing on thebooks of the Company, the obligation to deliver to such holder such Shares ofstock, securities or assets as, in accordance with the foregoing provisions,such holder may be entitled to purchase, and containing the express assumptionof such surviving or successor corporation of the due performance of everyprovision of this Warrant to be performed by the Company and of all liabilitiesand obligations of the Company hereunder.

 

(E)           In the event of a change in control of the Company, asdefined in this paragraph (E), then the Board of Directors shall accelerate theexercise date of the Warrant or make this Warrant fully vested and exercisableand, in its sole discretion, may take any or all of the following actions: (a)grant a cash bonus award to any holder of this Warrant in an amount necessaryto pay the Exercise Price of all or any portion of the Warrant then held bysuch person; (b) pay cash to any holder of this Warrant in exchange for thecancellation of the holder’s Warrant in an amount equal to the differencebetween the Exercise Price of such Warrant and the greater of the tender offerprice for the underlying Shares or the Market Price of the Shares on the dateof the cancellation of the Warrant; and (c) make any other adjustments oramendments to this Warrant.  For purposesof this paragraph (E), a “change in control” shall be deemed to have occurredif (a) any “person” or “group” (within the meaning of Sections 13(d) and14(d)(2) of the Securities Exchange Act of 1934, as amended (“1934 Act”), otherthan a trustee or other fiduciary holding securities under an employee benefitplan of the Company is or becomes the “beneficial owner” (as defined in Rule13d-3 under the 1934 Act), directly or indirectly, of more than 50% of the thenoutstanding voting stock of the Company; or (b) at any time during any periodof three consecutive years after the date of this Warrant, individuals who atthe beginning of such period constitute the Board (and any new director whoseelection by the Board or whose nomination for election by the Company’sstockholders was approved by a vote of at least two-thirds of the directorsthen still in office who either were directors at the beginning of such periodor whose election or nomination for election was previously so approved) ceasefor any reason to constitute a majority thereof; or (c) the stockholders of theCompany approve a merger or consolidation of the Company with any othercorporation, other than a merger or consolidation which would result in thevoting securities of the Company outstanding immediately prior theretocontinuing to represent (either by remaining outstanding or by being convertedinto voting securities of the surviving entity) at least 50% of the combinedvoting power of the voting securities of the Company or such surviving entityoutstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any dividend onor make any other distribution with respect to Shares (or any other securitiesof the Company then issuable upon the exercise of the Warrant) that is payablein Shares, Convertible Securities, any other securities of the Company or otherstock, securities or assets, other than cash, then thereafter, and in lieu ofany adjustment of the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the holder of this Warrant, upon any exercise of therights represented hereby, shall be entitled to receive the number of Shares(or other securities) being purchased upon such exercise and, in addition toand without further payment, the Shares, Convertible Securities, othersecurities of any company or other stock, securities or assets which the holderof this Warrant would have received by way of such distributions ifcontinuously since the date of the Warrant (or, if this Warrant shall have beenissued pursuant to Section 7 of this Warrant, the date of the predecessorWarrant to which this Warrant relates) such holder had been the record holderof the number of Shares (or other securities), then being purchased and hadretained all such

 

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Shares, Convertible Securities,other securities of the Company or other stock, securities or assetsdistributable with respect to such Shares (or other securities) and,furthermore, all cash, stock, securities or assets payable as dividends ordistributions with respect to the foregoing and originating directly orindirectly therefrom.  The Company shallreserve 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 respectthereto 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 tothe Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of action takenby the Company, which in the good faith opinion of the Board of Directors ofthe Company, are not adequately covered by the provisions of this Annex 1, andwhich might materially adversely affect the rights of the holder of thisWarrant, the Company shall appoint a firm of independent public accountants ofrecognized standing (which may be the regular accountants or auditors of theCompany), which shall give their opinion as to the adjustments, if any, in theExercise Price and the number of Shares purchasable upon the exercise of thisWarrant, or other change in the rights of the Holder, on a basis consistentwith the other provisions of this Annex 1, necessary to preserve withoutdiminution the rights of the Holder. Upon receipt of such opinion, the Company shall forthwith make theadjustments described therein.

 

(H)                               (i)        Within ten (10) days ofany adjustment of the Exercise Price or change in the number of Sharespurchasable upon the exercise of this Warrant made pursuant to paragraphs (A),(B), (C) , or (F) or any change in the rights of the holder of this Warrant byreason of the occurrence of events described in paragraphs (D), (E), or (F),the Company shall give written notice by certified or registered mail to theregistered holder of this Warrant at the address of such holder as shown on thebooks of the Company, which notice shall describe the event requiring such adjustments(with respect to any adjustment made pursuant to paragraphs (C), (D), (E) or(F), the Exercise Price resulting from such adjustment, the increase ordecrease, if any, in the number of Shares purchasable upon the exercise of thisWarrant, or the other change in the rights of such holder, and set forth inreasonable detail the method of calculation of such adjustments and the factsupon which such calculations are based. Within two (2) days of receipt from the holder of this Warrant upon thesurrender hereof for exercise pursuant to Section 1 of this Warrant, and withinthree (3) days of receipt from the Holder a written request therefor (whichrequest shall not be made more than once each calendar quarter), the Companyshall give written notice by certified or registered mail to such holder at hisaddress as shown on the books of the Company of the Exercise Price in effect asof the date of receipt by the Company of this Warrant for exercise, or the dateof receipt of such written request, and the number of Shares purchasable or thenumber or amount of other shares of stock, securities or assets receivable asof such date, and set forth in reasonable detail the method of calculation ofsuch numbers; provided that no further adjustments to the Exercise Price or thenumber of Shares purchasable or number or amount of shares, securities orassets receivable on exercise of this Warrant shall be made after receipt ofthis Warrant by the Company for exercise.

 

(ii)                      Upon each adjustment of the Exercise Priceand each change in the number of Shares purchasable upon the exercise of thisWarrant, and change in the rights of the holder of this Warrant by reason ofthe occurrence of other events herein set forth, then and in each case, uponwritten request of the holder of this Warrant (which request shall be made notmore often than once each calendar year), the Company will at its expensepromptly obtain an opinion of independent public accountants reasonablysatisfactory to each holder stating the then effective Exercise Price and thenumber of Shares then purchasable, or specifying the other shares of stock,securities or assets and the amount thereof then receivable, and setting forthin reasonable detail the method of calculation of such numbers and the factsupon which such calculations are based. The Company will promptly mail a copy of such opinion to the registeredHolder.

 

(I)            In case at any time:

 

(i)                         The Company shall pay any dividend payable incapital stock on its outstanding Shares or make any distribution (other thanregular cash dividends) to the holders of Shares;

 

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(ii)                      The Company shall offer for subscription prorata to the holders of Shares any additional capital stock or other rights;

 

(iii)                   There shall be authorized any capitalreorganization or reclassification of the capital stock of the Company, orconsolidation or merger of the Company with, or sale of all or substantiallyall of its assets to, another corporation; or

 

(iv)                  There shall be authorized or commence avoluntary or involuntary dissolution, liquidation or winding up of the Company then,in one or more of said cases, the Company shall given written notice bycertified or registered mail to Holder at the address of Holder as shown on thebooks of the Company on the date on which (1) the books of the Company shallclose or a record shall be taken for such dividend, distribution, orsubscription rights, or (2) such reorganization, reclassification,consolidation, merger, sale, dissolution, liquidation or winding up shall takeplace or be voted upon by the shareholders of the Company, as the case maybe.  Such notice shall also specify thedate as of which the holders of record of Shares shall participate in suchdividend, distribution or subscription rights, or shall be entitled to exchangetheir Shares for securities or other property deliverable upon suchreorganization, 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 tothe action in question and no less than thirty (30) days prior to the recorddate or the date on which the Company’s books are closed in respect thereto.

 

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EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered HolderDesiring to Exercise the Within Warrant ofTIPPERARY CORPORATION

 

The undersigned registeredholder hereby exercises the right to purchase                                      Shares covered by the within Warrant according to the conditions thereof, andherewith makes payment of the Exercise Price of such Shares, $                      .

 
| Name of Registered Holder:     |   |   |
|--------------------------------|--------|--------|
|                           |   |   |
| Signature:                     |   |   |
|                           |   |   |
| Title of Signing Officer       |   |   |
| or Agent (if any):             |   |   |
|                           |   |   |
|                           |   |   |
| Address of Registered  Holder: |   |   |
|                           |   |   |
|                           |   |   |
|                           |   |   |
| Tax I.D. No.:                  |   |   |
|                           |   |
| Dated:                         |   | , 20   |   |   |   |
|                                |        |        |  |  |  |  |  |  |  |  |

 

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**This Warrant and the rightsrepresented hereby shall not be transferable at any time unless (i) aregistration statement under the Securities Act of 1933, as amended, shall bein effect with respect to this Warrant or the Shares issuable hereunder at suchtime, or (ii) the transfer is made in compliance with the provisions of Section5.**

 
| **Number:** | ** ** | **25,000  Shares** |
|-------------|------------|--------------------|

 

**WARRANTTO PURCHASE SHARESOFTIPPERARY CORPORATION**

 

This certifies that, for value received, Eugene I.Davis, an individual residing in Livingston, New Jersey (“Holder”), or theirregistered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texascorporation (the “Company”), twenty-five thousand (25,000) Shares, as definedin Section 3, at the price of Four Dollars and 95/100 ($4.95) per Share (asdefined in Section 3) at any time, or in part from time to time in accordancewith the following Vesting Schedule (“Vesting Schedule”):

 
| **Date:**             | ** ** | **Total Shares Subject to Exercise** | ** ** |
|-----------------------|------------|--------------------------------------|------------|
|                  |       |                                 |       |
| From January 10, 2006 |       | 8,334                                |       |   |
| From January 10, 2007 |       | 16,667                               |       |   |
| From January 10, 2008 |       | 25,000                               |       |   |

 

This Warrant shall expire, if not exercisedprior thereto, two (2) years after the resignation or removal of the Holder asan employee or director of the Company. If the Holder should resign or be removed as an employee or directorfrom the Company, then this Warrant shall be vested only to the extent vestedon such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of theinitial exercise price set forth above and the number of Shares to be issuedupon the occurrence of certain events (the Provisions as to Adjustment) are morefully set forth in Annex 1 hereto.  (Hereinafter,the initial exercise price set forth above in this paragraph for the purchaseof Shares upon the exercise of this Warrant, as adjusted pursuant to theProvisions as to Adjustment, is referred to as the “Exercise Price”).  This Warrant is subject to the followingprovisions, terms and conditions:

 

**1.             Exercise of Warrant.**

 

(a)           The rights represented by this Warrant may be exercised bythe Holder, in whole or in part, (but not as to a fractional Share), by thesurrender 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 maydesignate by notice in writing to the Holder at the address of such holderappearing on the books of the Company at any time within the period abovenamed) and delivery of a completed subscription form in the form attached tothis Warrant as Exhibit A, and upon payment to the Company of theExercise Price for such Shares.

 

(b)           Payment of the Exercise Price shall be made by acombination of any one or more of the following:

 

(i)                                     By application, to the extent permitted byapplicable law, of Shares or other securities of the Company owned by theHolder, the value of which for such purpose shall be the fair market valuethereof determined in good faith by the Company and the Holder at the time ofsuch exercise; provided, however, that in order to apply such Shares or othersecurities of the Company in the exercise hereof, each of the followingconditions must be met:

 

(A)                              such Shares or other securities of theCompany shall have been owned, without material encumbrance, contingency orrisk of forfeiture relating to the ownership rights, for at least six monthsand at all times during said six month period by the Holder, and within saidsix month period such Shares or other securities of the Company shall not havebeen obtained through exercise of any

 

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option, warrant or right toobtain such Shares of other securities or through the conversion of any othersecurity; and

 

(B)                                such Shares or other securities shall not beor include: (1) options, warrants or similar rights to acquire Shares or othersecurities of the Company by the Holder; or (2) securities owned by the Holderwhich are convertible in whole or in part into Shares or other securities of theCompany; and

 

(ii)                                  in cash or by certified check or bank draftin New York Clearing House funds.

 

(c)           The Company agrees that any Shares so purchased by theexercise of this Warrant shall be deemed to be issued to the Holder as therecord owner of such Shares as of the close of business on the date on whichthis Warrant shall have been surrendered, the completed subscription formdelivered, and payment in full is made and delivered to the Company for suchShares as aforesaid.

 

(d)           Stock certificates evidencing Shares so purchased shall bedelivered to the Holder as promptly as practicable, after the rightsrepresented by this Warrant shall have been so exercised.  If this Warrant shall have been exercisedonly in part, and unless this Warrant has expired, a new Warrant representingthe number of Shares with respect to which this Warrant shall not then havebeen exercised shall also be delivered to the Holder within such time.  Notwithstanding the foregoing, however, theCompany shall not be required to deliver any stock certificate evidencingShares 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 withthe preparation, execution and delivery of stock certificates and any newWarrants.

 

**2.             Certain Covenants of the Company.**  TheCompany covenants and agrees as follows:

 

(a)           All Shares which may be issued upon the exercise of therights represented by this Warrant (all such Shares, whether previously issuedor subject to issuance upon the exercise of this Warrant, are from time to timereferred to herein as “Warrant Shares”) will, upon issuance, be duly authorizedand issued, fully paid and nonassessable and free from all taxes, liens andcharges with respect to the issuance thereof.

 

(b)           During the period within which the rights represented bythis Warrant may be exercised, and only insofar as the Vesting Schedule hereinpermits the exercise of this Warrant, the Company will, at all times, haveauthorized and reserved free of preemptive or other rights for the exclusivepurpose of issuance upon exercise of the purchase rights evidenced by thisWarrant, a sufficient number of Shares to provide for the exercise of rightsrepresented by this Warrant.

 

(c)           The Company will not, by amendment or restatement of theArticles of  Incorporation or through anyreorganization, transfer of assets, consolidation, merger, issuance or sale ofsecurities or otherwise, avoid or take any action which would have the effectof avoiding the performance of any of the terms to be performed hereunder bythe Company, but will at all times in good faith carry out all of theprovisions of this Warrant and take all such action as may be necessary orappropriate to protect the rights of the Holder against dilution or otherimpairment and, in particular, will not permit the par value of any Share to beor become greater than the then effective Exercise Price.

 

**3.             Definition of Shares.**  Asused herein, the term “Shares” shall mean and include shares of the CommonStock, par value $.02 per share, of the Company as are constituted and exist onthe date hereof, and shall also include any other class of the capital stock ofthe Company hereafter authorized which shall neither be limited to a fixed sumor percentage of par value in respect to the rights of the holders thereof toreceive dividends and to participate in the distribution of assets upon thevoluntary or involuntary liquidation, dissolution or winding up of the Company,nor be subject at any time to redemption by the Company; provided that theShares receivable upon exercise of this Warrant shall include only Shares ofthe type as are constituted and exist on the date hereof or Shares resultingfrom any reclassification of the Shares as provided for in paragraph (C) of theProvisions as to Adjustment.

 

**4.             No Rights or Liabilities as aShareholder.**  This Warrant shall not entitle the Holder assuch to any rights whatsoever, including, without limitation, voting rights, asa holder of Shares of the Company.  Noprovisions hereof, in the absence of affirmative action by the Holder topurchase Shares, and no mere enumeration

 

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herein of the rights orprivileges of such holder, shall give rise to any liability of such holder as aholder 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 transfereehereof and/or transferable and the Warrant Shares shall not be transferableexcept upon the conditions specified in this Section 5, which conditions areintended, among other things, to ensure compliance with the provisions of theSecurities Act of 1933, as amended, and the rules and regulations of theSecurities and Exchange Commission (the “Commission”) thereunder (collectivelythe “Securities Act”), in respect of the exercise and/or transfer of thisWarrant and/or transfer of such Warrant Shares.

 

(b)           This Warrant and the Warrant Shares shall not betransferable (except for a transfer of this Warrant or the Warrant Shares in anoffering registered under the Securities Act, including, without limitation, atransfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer) unless, prior to any transfer, the Holder shall havereceived from its transferee reasonable assurances that such person is awarethat this Warrant and the Warrant Shares have not been registered under theSecurities Act and that such person is acquiring this Warrant or the WarrantShares for investment only and not with the view to the disposition or publicoffering thereof (unless in an offering registered under the Securities Act orexempt therefrom), and that such person is aware that the stock certificatesevidencing the Warrant Shares shall bear a legend restricting transfer anddisposition thereof in accordance with the Securities Act unless, in theopinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant(other than a transfer in an offering registered under the Securities Act,including, without limitation, a transfer in a registered offering effectedpursuant to Section 6, and any subsequent transfer), the Holder shall providean opinion of counsel, who shall be reasonably satisfactory to the Company,that an exemption from the registration requirements of the Securities Act isavailable.

 

(c)           Any permitted subsequent holder of this Warrant shall besubject to all the terms and conditions herein, and shall acknowledge, inwriting, upon receipt of this Warrant his or her acceptance of the terms andconditions herein.

 

(d)           To facilitate sales by a holder of this Warrant or WarrantShares in transactions qualifying under Rule 144 promulgated by the Commissionunder the Securities Act, if available, the Company agrees to satisfy thecurrent public information requirements of said Rule 144, for as long as theShares remain registered under the Securities Exchange Act of 1934, as amended,and the rules and regulations of the Commission thereunder (collectively the “ExchangeAct”), and to provide said holder upon request with such other information assuch holder may require for compliance with the provisions of said Rule 144.

 

**6.             Registration Under SecuritiesAct.**

 

(a)           If the Company, at any time, proposes to register anyissuance of its securities under the Securities Act (other than a registrationon Form S-8 in connection with an employee stock purchase or option plan or onForm S-4 in connection with mergers, acquisitions or exchange offerings), theCompany will at such time give prompt written notice to the holder hereof andto the holders of all other Warrant Shares issuable from any outstandingWarrants (such holders are hereinafter referred to as the “Prospective Sellers”or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a ProspectiveSeller, given within 30 days after receipt of any such notice (which requestshall state the intended method of disposition of the Warrant Shares to betransferred by such Prospective Seller), the Company shall use its best effortsto cause all Warrant Shares, the holders of which (or of the Warrants to whichthe same are related), to the extent vested in accordance with the VestingSchedule, shall have so requested registration of the transfer thereof, to beregistered under the Securities Act, all to the extent requisite to permit thesale or other disposition (in accordance with the intended method thereof asaforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section6(a) shall not be effective with respect to the Prospective Seller in the caseof an underwritten public offering of securities of the Company by the Companyunless each Prospective Seller agrees to the terms and conditions, includingunderwriting discounts and allowances, specified by the managing underwriter ofsuch offering with respect to such Warrant Shares.  The Company shall have the right to reducethe number of Warrant Shares of the Prospective Sellers to be included in aregistration statement pursuant to the exercise of the rights granted by thisSection 6(a) if, and to the extent, that the managing underwriter of suchoffering is of the good faith opinion, supported by written reasons therefor,that the inclusion of such Warrant Shares would materially and adversely

 

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affect the marketing of thesecurities of the Company to be offered; provided, that any such reduction ofthe number of Warrant Shares, the transfer of which is to be registered onbehalf of the Prospective Sellers, shall be made on the basis of a pro ratareduction of all Warrant Shares of all Prospective Sellers.

 

If and whenever the Companyis required by the provisions of this Section 6 to use its best efforts toeffect the registration of any transfer of Warrant Shares under the SecuritiesAct, the Company will, as expeditiously as possible,

 

(i)                                     prepare and file with the Commission aregistration statement with respect to such transfer and use its best effortsto cause such registration statement to become and remain effective, but notfor any period longer than nine months;

 

(ii)                                  prepare and file with the Commission suchamendments and supplements to such registration statement and the prospectusused in connection therewith as may be necessary to keep such registrationstatement effective, and to comply with the provisions of the Securities Actwith respect to the transfer of all securities covered by such registrationstatement, including, without limitation, taking all necessary actions wheneverthe Prospective Sellers of the Warrant Shares covered by such registrationstatement shall desire to dispose of the same;

 

(iii)                               furnish to each Prospective Seller suchnumber of copies of a prospectus, including a preliminary prospectus, inconformity with the requirements of the Securities Act, and such otherdocuments, as such Prospective Seller may reasonably request in order tofacilitate the disposition of the Warrant Shares owned by such ProspectiveSeller and covered by such registration statement;

 

(iv)                              use its best efforts to register or qualifythe securities covered by such registration statement under such othersecurities or blue sky laws of such jurisdictions as each Prospective Sellershall request, and use its best efforts to do any and all other acts and thingswhich may be reasonably necessary to enable such Prospective Seller toconsummate the disposition in such jurisdiction of the Warrant Shares owned bysuch Prospective Seller and covered by such registration statement; providedthat, notwithstanding the foregoing, the Company shall not be required toregister in any jurisdiction as a broker or dealer of securities or to grantits consent to service of process in any such jurisdiction solely on account ofsuch intended disposition by such Prospective Seller;

 

(v)                                 furnish to the Prospective Sellers, whoseintended dispositions are registered, a signed copy of an opinion of counselfor the Company, in form and substance acceptable to such Prospective Sellers,to the effect that: (A) a registration statement covering such dispositions ofWarrant Shares has been filed with the Commission under the Securities Act andhas been made effective by order of the Commission, (B) such registrationstatement and the prospectus contained therein and any amendments orsupplements thereto comply as to form in all material respects with therequirements of the Securities Act, and (C) to the best of such counsel’sknowledge, no stop order has been issued by the Commission suspending theeffectiveness of such registration statement and no proceedings for theissuance of such a stop order are threatened or contemplated;

 

(vi)                              furnish to the Prospective Sellers whoseintended dispositions are required a blue sky survey in the form and of thesubstance customarily prepared by counsel for the Company and accepted bysellers of securities in similar offerings, discussing and describing theapplication provisions of the securities or blue sky laws of each state orjurisdiction in which the Company shall be required, pursuant to Section6(c)(iv), to register or qualify such intended dispositions of such WarrantShares, or, in the event counsel for the underwriters in such offering shall bepreparing a blue sky survey, cause such counsel to furnish such survey to, andto allow reliance thereon by, such Prospective Sellers;

 

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(vii)                           otherwise use its best efforts to comply withall applicable rules and regulations of the Commission under the Securities Actand the Exchange Act, insofar as they relate to such registration and suchregistration statement; and

 

(viii)                        use its best efforts to list such WarrantShares on any securities exchange on which any securities of the Company arethen listed or to admit such Warrant Shares for trading in any national marketsystem in which any securities of the Company are then admitted for trading, ifthe listing or admission of such securities is then permitted under the rulesof such exchange or system.

 

(b)           With respect to the registration by the Company oftransfers of Warrant Shares under the Securities Act pursuant to Section 6(a),the Company shall pay all expenses incurred by it in complying with thisSection 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 onespecial counsel designated by Prospective Sellers owning a majority of theWarrant Shares covered by such registration, but specifically excluding anyunderwriting discounts and allowances that are allocable to the Warrant Sharesbeing sold by, and which shall be paid by, the Prospective Sellers; provided,however, that if any registration statement filed with the Commission by theCompany under Section 6(a) shall not be declared effective by the Commission,such attempted registration shall not constitute a registration under thisSection 6(b).

 

(c)           It shall be a condition precedent to the obligations ofthe Company to take any action pursuant to this Section 6 that each ProspectiveSeller, the transfer of whose Warrant Shares is registered or to be registeredunder each such registration, shall furnish to the Company such writteninformation regarding the securities held by such Prospective Seller as theCompany shall reasonably request and as shall be required in connection with theaction to be taken by the Company.

 

(d)                                 (i)           Inthe event of any registration of any transfer of Warrant Shares under theSecurities Act pursuant to this Section 6, the Company will indemnify and holdharmless each Prospective Seller of such securities, each of its officers,directors and partners, and each other person, if any, who controls suchProspective Seller within the meaning of the Securities Act, and eachunderwriter, if any, who participates in the offering of such securities,against any losses, claims, damages or liabilities (or actions in respectthereof), joint or several, to which each Prospective Seller, officer, directoror partner, controlling person or underwriter may become subject under theSecurities Act or otherwise, insofar as such losses, claims, damages orliabilities (or actions in respect thereof) arise out of or are based upon anyuntrue statement or alleged untrue statement of any material fact contained, onthe effective date thereof, in any registration statement under which suchtransfer of securities was registered under the Securities Act, any preliminaryprospectus or final prospectus contained therein, or any amendment orsupplement thereto, or arise out of or are based upon the omission or allegedomission to state therein a material fact required to be stated therein ornecessary to make the statements therein not misleading, or any violation bythe Company of the Securities Act, and will reimburse such Prospective Sellerand each of its officers, directors and partners, and each such controllingperson or underwriter, for any legal or any other expenses reasonably incurredby such Prospective Seller or its officers, directors and partners orcontrolling persons or by each such underwriter, in connection with investigatingor defending any such loss, claim, damage, liability or action; provided,however, that the Company will not be liable in any such case to the extentthat any such loss, claim, damage or liability arises out of or is based uponan untrue statement or alleged untrue statement or omission or alleged omissionmade in such registration statement, preliminary prospectus or prospectus orsuch amendment or supplement in reliance upon and in conformity with writteninformation furnished to the Company through an instrument duly executed bysuch Prospective Seller specifically for use in the preparation thereof.  In the event of any registration by theCompany or any transfer of securities under the Securities Act pursuant to thisSection 6, each Prospective Seller of Warrant Shares covered by suchregistration will indemnify and hold harmless the Company, each other person,if any, who controls the Company within the meaning of the Securities Act andeach officer and director of the Company and the other Prospective Sellers tothe same extent that the Company agrees to indemnify it, but only with respect

 

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tothe written information relating to such Prospective Seller furnished to theCompany by such Prospective Seller aforesaid

 

(ii)                                  Each indemnified party shall, as promptly aspracticable upon receipt of notice of the commencement of any action againstsuch indemnified party or its officers, directors or partners, or anycontrolling person of such indemnified party, in respect of which indemnity maybe sought from an indemnifying party on account of the indemnity agreementcontained in Section 6(d)(i), notify the indemnifying party in writing of thecommencement thereof.  The omission ofsuch indemnified party to so notify the indemnifying party of any such actionshall not relieve the indemnifying party from any liability which it may haveon account of the indemnity agreement contained in Section 6(d)(i) to theextent that the failure to receive such notice within a reasonable period oftime shall not have caused harm, loss or damage to the indemnifying party,provided that, conversely, if such failure to receive notice shall have causedany harm, loss or damage to the indemnifying party, such failure shall constitutea defense to any liability which such indemnifying party may have on account ofsuch agreement to the extent of the harm, loss or damage so caused. In case anysuch action shall be brought against any indemnified party, its officers,directors and partners, or any such controlling person, and such indemnifiedparty shall notify the indemnifying party of the commencement thereof, theindemnifying party shall be entitled to participate in (and, to the extent thatthe indemnifying party shall wish, to direct) the defense thereof at theindemnifying party’s own expense, in which event the defense shall be conductedby recognized counsel chosen by the indemnifying party and approved by theindemnified party (whose approval shall not unreasonably be withheld) and theindemnified party may participate in such defense at its own expense (unless itis advised by counsel that actual or potential differing interests or defensesexist or may exist, in which case such expenses shall be paid by theindemnifying party, provided that the indemnifying party shall not be requiredto pay the expenses for more than one counsel for all such indemnifiedparties).

 

**7.             Transfer; Ownership.** Subject to Section 5, this Warrant and all rights hereunder aretransferable, in whole or in part, at the office or agency of the Companyreferred to in Section 1 by the Holders in person or by a duly authorizedattorney, upon surrender of this Warrant, with an assignment, acceptable to theCompany, duly completed, at which time a new Warrant shall be made anddelivered by the Company, of the same tenor as this Warrant but registered inthe name of the transferee.  The Holder,by taking or holding the same, consents and agrees that this Warrant, whenendorsed in blank, shall be deemed negotiable, and that the Holder, when thisWarrant shall have been so endorsed, may be treated by the Company and allother persons dealing with this Warrant as the absolute owner hereof for anypurpose and as the person entitled to exercise the rights represented by thisWarrant and to transfer this Warrant on the books of the Company, any notice tothe contrary notwithstanding; but until such transfer on such books, theCompany may treat the registered the Holder as the owner hereof for allpurposes.  Any transfer of this Warrantshall be made in compliance with the Securities Act and any applicable statesecurities or blue sky laws.

 

**8.             Exchange and Replacement.** Subject to Section 7, this Warrant is exchangeable, upon the surrenderhereof by the Holder at the office or agency of the Company referred to inSection 1, for new Warrants of like tenor and date representing in theaggregate the right to purchase the number of Shares which may be purchasedhereunder, each of such new Warrants to represent the right to purchase suchnumber of Shares as shall be designated by the Holder at the time of suchsurrender.  Upon receipt by the Company,at the office or agency referred to in Section 1, of evidence reasonablysatisfactory to it of the loss, theft or destruction of this Warrant and ofindemnity or security reasonably satisfactory to it (provided that the writtenindemnity of the Holder shall be deemed reasonably satisfactory to the Companyfor such purposes), the Company will deliver a new Warrant of like tenor and datein replacement of this Warrant.  ThisWarrant shall be promptly canceled by the Company upon the surrender hereof inconnection with any transfer, exchange or replacement.  The Company will pay all expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to Section 7 and this Section 8.

 

**9.             Notices.**  Anynotice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent bycertified or registered mail to, Five Canoe Brook Drive, Livingston, New Jersey07039, or to such other address as shall have been furnished to the Company inwriting by the Holder.  Any notice

 

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or other document required orpermitted to be given or delivered to the Company shall be delivered at, orsent by certified or registered mail to, 633 Seventeenth Street, Suite 1550,Denver, Colorado 80202, or to such other address as shall have been furnishedin writing to the Holder by the Company. Any notice so addressed and mailed by registered or certified mail orotherwise delivered, shall be deemed to be given when actually received by theaddressee.

 

**10.          GOVERNING LAW.    THISWARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF TEXAS.**

 

**11.          Miscellaneous.**  ThisWarrant will be binding upon any entity succeeding to the Company byconsolidation or acquisition of all or substantially all of the Company’sassets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may bechanged, waived, discharged or terminated only by an instrument in writingsigned by the party (or any predecessor in interest thereof) against whomenforcement of the same is sought.  Theheadings in this Warrant are for purposes of reference only and shall notaffect the meaning or construction of any of the provisions hereon.

 

**INWITNESS WHEREOF**,Tipperary Corporation has caused this Warrant to be signed by its dulyauthorized officers, under its corporate seal, to be dated April 27, 2005.

 
|                | **TIPPERARY  CORPORATION** |
|---------------------|----------------------------|
|                |                       |
|                |                       |
| ** **          | **BY:**                    | **/s/ David L. Bradshaw** |
|                | **ITS:**                   | **President** |
| **CORPORATE  SEAL** |                       |
|                |                       |
| **ATTEST:**         | **/s/ Elaine R. Treece**   |   |   |
| **ITS:**            | Secretary                  |   |
|                     |                            |  |  |  |

 

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Annex1

 

TIPPERARYCORPORATION

 

PROVISIONSAS TO ADJUSTMENT OFEXERCISE PRICE AND NUMBER OF SHARESISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and thenumber of Shares issuable upon the exercise of the annexed Warrant to purchaseshares of TIPPERARY CORPORATION, a Texas corporation (herein and in thisWarrant referred to as the “Company”), shall be subject to adjustment from timeto time as hereinafter provided; that in no event shall the Exercise Price beincreased to a price greater than Four Dollars and 95/100 ($4.95) per Share,except as provided by paragraph (C). Upon each adjustment of the Exercise Price, the Holder shall thereafterbe entitled to purchase, at the Exercise Price resulting from such adjustment,the number of Shares obtained by multiplying the number of Shares purchasablepursuant hereto immediately prior to such adjustment by a fraction, thenumerator of which is the Exercise Price in effect immediately prior to suchadjustment and the denominator of which is the Exercise Price resulting fromsuch adjustment.  In making theadjustments to the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or sell any Sharesfor consideration per Share that is less than the Exercise Price in effectimmediately prior to the time of such issue or sale at less than the MarketPrice (as hereinafter defined) of such Shares on the date of such issue orsale, then forthwith upon such issue or sale the Exercise Price in effectimmediately prior thereto shall be adjusted to an amount (calculated to thenearest cent) determined by dividing (i) an amount equal to the sum of (a) thenumber of Shares outstanding immediately prior to such issue or sale multipliedby 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 saleby (ii) the total number of Shares outstanding immediately after such issue orsale; provided, however, that no adjustment shall be made hereunder by reasonof:

 

(i)    the grant of this Warrant or the issuance of Shares upon theexercise of this Warrant or any other outstanding Warrant;

 

(ii)                      the grant by the Company of options topurchase shares in connection with any purchase or option plan for the benefitof employees of the Company, or any affiliates or subsidiaries thereof; or

 

(iii)                   the issuance (whether directly or byassumption in a merger or otherwise) or sale (including any issuance or sale toholders of Shares) of any securities convertible into or exchangeable forShares (such convertible or exchangeable securities are herein referred to as “ConvertibleSecurities”), or the grant of rights to subscribe for or to purchase, or ofoptions for the purchase of (including any grant of such rights or options toholders of shares, other than pursuant to a dividend on Shares), Shares ofConvertible Securities, regardless of whether the right to convert or exchangesuch Convertible Securities or such rights or options are immediatelyexercisable.

 

No adjustment of the Exercise Price shall berequired to be made by the Company and no notice hereunder must be given if theamount of any required adjustment is less than 5% of the Exercise Price.  In such case any such adjustment shall becarried forward and shall be made (and notice thereof shall be given hereunder)at the time of and together with the next subsequent adjustment which, togetherwith any adjustment so carried forward, shall amount to not less than 5% of theExercise Price.

 

(B)           For the purposes of paragraph (A), the followingprovisions (i) through (vi), inclusive, shall also be applicable:

 

(i)                                     If, at the time Shares are issued and soldupon the conversion or exchange of Convertible Securities or upon the exerciseof rights or options previously granted by the Company, the price per Share forwhich such Shares are issued (determined by dividing (a) the total amount, ifany, received by the Company as consideration for such Convertible Securitiesor for the granting of such rights or options, plus the aggregate amount ofadditional consideration paid to the Company upon the conversion or exchange ofsuch Convertible 

 

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Securities (which, if soprovided in such Convertible Securities, shall be deemed to be equal to theoutstanding principal amount of the indebtedness represented by suchConvertible Securities) or upon the exercise of such rights or options, by (b)the total number of Shares issued upon the conversion or exchange of suchConvertible Securities or upon the exercise of such rights or options shall beless than the Exercise Price in effect immediately prior to such issue, sale orexercise, then the adjustments provided for by the first paragraph of thisAnnex 1 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 beconsidered the consideration received by the Company upon the issue or sale ofthe Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)                                  In case at any time any Shares or ConvertibleSecurities or any rights or options to purchase any Shares or ConvertibleSecurities shall be issued or sold for cash, the consideration receivedtherefor shall be deemed to be the amount received by the Company thereforwithout deduction therefrom of any expenses incurred or any underwritingcommissions or concessions paid or allowed by the Company in connectiontherewith.  In case any Shares orConvertible Securities or any rights or options to purchase any Shares orConvertible Securities shall be issued or sold, in whole or in part, forconsideration other than cash, the amount of the consideration other than cashreceived by the Company in exchange for the issue or sale of such ConvertibleSecurities shall be deemed to be the fair value of such consideration asdetermined in good faith by the Board of Directors of the Company, without deductiontherefrom of any expenses incurred or any underwriting commissions orconcessions paid or allowed by the Company in connection therewith; providedthat if the holder or holders of at least 66-2/3% of the Warrant Sharespurchasable under this Warrant shall request in writing, the value of suchconsideration shall be determined by an independent expert selected by suchholders, the costs and expenses of which shall be borne by the Company, and, ifthe value of such consideration as so determined is less than the valuedetermined by the Board of Directors of the Company, the lesser value shall beutilized in calculating the consideration per Share received by the Company forpurposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidationof the Company in which the Company is not the surviving corporation or in theevent of any sale of all or substantially all of the assets of the Companyoutside of the ordinary course of business of the Company for stock or othersecurities of any corporation, the Company shall be deemed to have issued anumber of Shares for stock or securities of such other corporation computed onthe basis of the actual exchange ratio on which the transaction was predicatedand for consideration that is equal to the fair market value on the date ofsuch transaction of such stock or securities of the other corporation, and ifany such calculation results in adjustment of the Exercise Price, thedetermination of the number of Shares issuable upon exercise of this Warrantimmediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall bemade after giving effect to such adjustment of the Exercise Price.

 

(iii)                               The number of Shares outstanding at any giventime shall not include Shares that have been redeemed by the Company and notcanceled, if any, and that are thus owned or held by or for the account of theCompany, and the disposition of any such Shares shall be considered an issue orsale 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 nationalsecurities exchange on which the Shares are listed or in a national marketsystem for securities in which the Shares are admitted to trading or (b) theaverage of the closing bid and asked prices of Shares reported in the domesticover-the-counter market, for the 20 trading days immediately prior to the dayas of which the Market Price is being determined.  If the Shares are not listed on any nationalsecurities exchange or admitted for trading in any national market system ortraded in the domestic over-the-counter market, the Market Price shall be thehigher of (y) the book value of the Shares as determined by a firm ofindependent public accountants of recognized standing selected by the Board ofDirectors of the Company as of the last day of any month ending within 60 dayspreceding the date as of which the determination is to be made or (z) the fairmarket value of the Shares determined in good faith by the Board of Directorsof the Company,

 

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provided that if the holderor holders of at least 66-2/3% of the Warrant Shares purchasable under theWarrant shall request in writing, the fair market value of the Shares shall bedetermined by an independent investment banking firm or other independentexpert selected by such holders and reasonably satisfactory to the Company,which determination shall be as of a date which is within 15 days of the dateas of which the determination is to be made.

 

(v)                                 Anything herein to the contrarynotwithstanding, in case the Company shall issue any Shares in connection withthe acquisition by the Company of the stock or assets of any other corporationor the merger of any other corporation into the Company under circumstanceswhere, on the date of the issuance of such Shares, the consideration receivedfor such Shares is less than the Market Price of the Shares, but on the datethe number of Shares was determined, the consideration received for such Shareswould not have been less than the Market Price thereof, such Shares shall notbe deemed to have been issued for less than the Market Price.

 

(vi)                              Anything in clause (ii) of this paragraph (B)to the contrary notwithstanding, in the case of an acquisition where all orpart of the purchase price is payable in Shares or Convertible Securities butis stated as a dollar amount, where the Company upon making the acquisitionpays only part of a maximum dollar purchase price which is payable in Shares orConvertible Securities and where the balance of such purchase price is deferredor is contingently payable under a formula related to earnings over a period oftime, (a) the consideration received for any Shares or Convertible Securitiesdelivered at the time of the acquisition shall be deemed to be such part of thetotal consideration as the portion of the dollar purchase price then paid inShares or Convertible Securities bears to the total maximum dollar purchaseprice payable in Shares or Convertible Securities and (b) in connection witheach issuance of additional Shares or Convertible Securities pursuant to theterms of the agreement relating to such acquisition, the consideration receivedshall be deemed to be such part of the total consideration as the portion ofthe dollar purchase price then and theretofore paid in Shares or ConvertibleShares bears to the total maximum dollar purchase price payable in Shares orConvertible Securities multiplied by a fraction, the numerator of which shallbe the number of Shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then issued and the denominator of which shall be thetotal number of shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then and theretofore issued under such acquisitionagreement.  In the event only a part ofthe purchase price for an acquisition is paid in Shares or ConvertibleSecurities in the manner referred to in this clause (vi), the term “totalconsideration” as used in this clause (vi) shall mean that part of theaggregate consideration as is fairly allocable to the purchase price paid inShares 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 outstandingShares into a greater number of Shares, then from and after the record date forsuch subdivision the Exercise Price in effect immediately prior to suchsubdivision shall be proportionately reduced and the number of Sharespurchasable upon the exercise of this Warrant shall be correspondinglyincreased, and, conversely, in case the outstanding Shares shall be combinedinto a smaller number of Shares, then from and after the record date for suchcombination the Exercise Price in effect immediately prior to such combinationshall be proportionately increased and the number of Shares purchasable uponthe exercise of this Warrant shall be correspondingly decreased.

 

(D)          Unless the provisions of paragraph (E) apply, if anycapital reorganization or reclassification of the capital stock of the Company,or consolidation or merger of the Company with another corporation, or sale ofall or substantially all of its assets to another corporation outside of theordinary course of business, shall be effected in such a way that holders ofShares (or any other securities of the Company then issuable upon the exerciseof this Warrant) shall be entitled to receive stock, securities or assets withrespect to or exchange for Shares (or such other securities) then, as a conditionof such reorganization, reclassification, consolidation, merger or sale, lawfuland adequate provision shall be made whereby the Holder shall thereafter havethe right to purchase and receive upon the basis and upon the terms andconditions specified in this Warrant and in lieu of the Shares (or othersecurities) of

 

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the Company immediatelytheretofore purchasable and receivable upon the exercise of the rightsrepresented hereby, such shares of stock, securities or assets as may be issuedor 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 anysuch case appropriate provision shall be made with respect to the rights andinterests of the holder of this Warrant to the end that the provisions hereof(including, without limitation, provisions for adjustment of the Exercise Priceand of the number of Shares (or other securities) purchasable upon the exerciseof this Warrant and for the registration thereof as provided in Section 6 ofthis Warrant) shall thereafter be applicable, as nearly as may be, in relationto any shares of stock, securities or assets thereafter deliverable upon theexercise hereof (including an immediate adjustment, by reason of suchconsolidation, merger or sale, of the Exercise Price to the value of the Shares(or other securities) reflected by the terms of such consolidation, merger orsale if the value so reflected is less than the Exercise Price in effectimmediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger ofthe Company with or into another corporation as a result of which a greater orlesser number of securities of the surviving corporation are issuable toholders of Shares in respect of the number of Shares outstanding immediatelyprior to such consolidation or merger, then the Exercise Price in effectimmediately prior to such consolidation or merger shall be adjusted in the samemanner as though there were a subdivision or combination of the outstandingShares.  The Company shall not effect anysuch consolidation, merger or sale, unless prior to or simultaneously with theconsummation thereof the surviving or successor corporation (if other than theCompany) resulting from such consolidation or merger of the corporationpurchasing such assets shall assume, by written instrument executed and mailedto the registered Holder at the last address of such holder appearing on thebooks of the Company, the obligation to deliver to such holder such Shares ofstock, securities or assets as, in accordance with the foregoing provisions,such holder may be entitled to purchase, and containing the express assumptionof such surviving or successor corporation of the due performance of everyprovision of this Warrant to be performed by the Company and of all liabilitiesand obligations of the Company hereunder.

 

(E)           In the event of a change in control of the Company, asdefined in this paragraph (E), then the Board of Directors shall accelerate theexercise date of the Warrant or make this Warrant fully vested and exercisableand, in its sole discretion, may take any or all of the following actions: (a)grant a cash bonus award to any holder of this Warrant in an amount necessaryto pay the Exercise Price of all or any portion of the Warrant then held by suchperson; (b) pay cash to any holder of this Warrant in exchange for thecancellation of the holder’s Warrant in an amount equal to the differencebetween the Exercise Price of such Warrant and the greater of the tender offerprice for the underlying Shares or the Market Price of the Shares on the dateof the cancellation of the Warrant; and (c) make any other adjustments oramendments to this Warrant.  For purposesof this paragraph (E), a “change in control” shall be deemed to have occurredif (a) any “person” or “group” (within the meaning of Sections 13(d) and14(d)(2) of the Securities Exchange Act of 1934, as amended (“1934 Act”), otherthan a trustee or other fiduciary holding securities under an employee benefitplan of the Company is or becomes the “beneficial owner” (as defined in Rule13d-3 under the 1934 Act), directly or indirectly, of more than 50% of the thenoutstanding voting stock of the Company; or (b) at any time during any periodof three consecutive years after the date of this Warrant, individuals who atthe beginning of such period constitute the Board (and any new director whoseelection by the Board or whose nomination for election by the Company’sstockholders was approved by a vote of at least two-thirds of the directorsthen still in office who either were directors at the beginning of such periodor whose election or nomination for election was previously so approved) ceasefor any reason to constitute a majority thereof; or (c) the stockholders of theCompany approve a merger or consolidation of the Company with any othercorporation, other than a merger or consolidation which would result in thevoting securities of the Company outstanding immediately prior theretocontinuing to represent (either by remaining outstanding or by being convertedinto voting securities of the surviving entity) at least 50% of the combinedvoting power of the voting securities of the Company or such surviving entityoutstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any dividend onor make any other distribution with respect to Shares (or any other securitiesof the Company then issuable upon the exercise of the Warrant) that is payablein Shares, Convertible Securities, any other securities of the Company or otherstock, securities or assets, other than cash, then thereafter, and in lieu ofany adjustment of the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the holder of this Warrant, upon any exercise of the rightsrepresented hereby, shall be entitled to receive the number of Shares (or othersecurities) being purchased upon such exercise and, in addition to and withoutfurther payment, the Shares, Convertible Securities, other securities of anycompany or other stock, securities or assets which the holder of this Warrantwould have received by way of such distributions if continuously since the dateof the Warrant (or, if this Warrant shall have been issued pursuant to Section7 of this Warrant, the date of the predecessor Warrant to which this Warrantrelates) such holder had been the record holder of the number of Shares (orother securities), then being purchased and had retained all such

 

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Shares, Convertible Securities,other securities of the Company or other stock, securities or assetsdistributable with respect to such Shares (or other securities) and,furthermore, all cash, stock, securities or assets payable as dividends ordistributions with respect to the foregoing and originating directly orindirectly therefrom.  The Company shallreserve 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 respectthereto 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 tothe Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of action takenby the Company, which in the good faith opinion of the Board of Directors ofthe Company, are not adequately covered by the provisions of this Annex 1, andwhich might materially adversely affect the rights of the holder of thisWarrant, the Company shall appoint a firm of independent public accountants ofrecognized standing (which may be the regular accountants or auditors of theCompany), which shall give their opinion as to the adjustments, if any, in theExercise Price and the number of Shares purchasable upon the exercise of thisWarrant, or other change in the rights of the Holder, on a basis consistentwith the other provisions of this Annex 1, necessary to preserve withoutdiminution the rights of the Holder. Upon receipt of such opinion, the Company shall forthwith make theadjustments described therein.

 

(H)                               (i)        Within ten (10) days ofany adjustment of the Exercise Price or change in the number of Sharespurchasable upon the exercise of this Warrant made pursuant to paragraphs (A),(B), (C) , or (F) or any change in the rights of the holder of this Warrant byreason of the occurrence of events described in paragraphs (D), (E), or (F),the Company shall give written notice by certified or registered mail to theregistered holder of this Warrant at the address of such holder as shown on thebooks of the Company, which notice shall describe the event requiring such adjustments(with respect to any adjustment made pursuant to paragraphs (C), (D), (E) or(F), the Exercise Price resulting from such adjustment, the increase ordecrease, if any, in the number of Shares purchasable upon the exercise of thisWarrant, or the other change in the rights of such holder, and set forth inreasonable detail the method of calculation of such adjustments and the factsupon which such calculations are based. Within two (2) days of receipt from the holder of this Warrant upon thesurrender hereof for exercise pursuant to Section 1 of this Warrant, and withinthree (3) days of receipt from the Holder a written request therefor (whichrequest shall not be made more than once each calendar quarter), the Companyshall give written notice by certified or registered mail to such holder at hisaddress as shown on the books of the Company of the Exercise Price in effect asof the date of receipt by the Company of this Warrant for exercise, or the dateof receipt of such written request, and the number of Shares purchasable or thenumber or amount of other shares of stock, securities or assets receivable asof such date, and set forth in reasonable detail the method of calculation ofsuch numbers; provided that no further adjustments to the Exercise Price or thenumber of Shares purchasable or number or amount of shares, securities orassets receivable on exercise of this Warrant shall be made after receipt ofthis Warrant by the Company for exercise.

 

(ii)                      Upon each adjustment of the Exercise Price andeach change in the number of Shares purchasable upon the exercise of thisWarrant, and change in the rights of the holder of this Warrant by reason ofthe occurrence of other events herein set forth, then and in each case, uponwritten request of the holder of this Warrant (which request shall be made notmore often than once each calendar year), the Company will at its expensepromptly obtain an opinion of independent public accountants reasonablysatisfactory to each holder stating the then effective Exercise Price and thenumber of Shares then purchasable, or specifying the other shares of stock,securities or assets and the amount thereof then receivable, and setting forthin reasonable detail the method of calculation of such numbers and the facts uponwhich such calculations are based.  TheCompany will promptly mail a copy of such opinion to the registered Holder.

 

(I)            In case at any time:

 

(i)                         The Company shall pay any dividend payable incapital stock on its outstanding Shares or make any distribution (other thanregular cash dividends) to the holders of Shares;

 

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(ii)                      The Company shall offer for subscription prorata to the holders of Shares any additional capital stock or other rights;

 

(iii)                   There shall be authorized any capitalreorganization or reclassification of the capital stock of the Company, orconsolidation or merger of the Company with, or sale of all or substantiallyall of its assets to, another corporation; or

 

(iv)                  There shall be authorized or commence avoluntary or involuntary dissolution, liquidation or winding up of the Company then,in one or more of said cases, the Company shall given written notice bycertified or registered mail to Holder at the address of Holder as shown on thebooks of the Company on the date on which (1) the books of the Company shallclose or a record shall be taken for such dividend, distribution, orsubscription rights, or (2) such reorganization, reclassification,consolidation, merger, sale, dissolution, liquidation or winding up shall takeplace or be voted upon by the shareholders of the Company, as the case maybe.  Such notice shall also specify thedate as of which the holders of record of Shares shall participate in suchdividend, distribution or subscription rights, or shall be entitled to exchangetheir Shares for securities or other property deliverable upon suchreorganization, 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 tothe action in question and no less than thirty (30) days prior to the recorddate or the date on which the Company’s books are closed in respect thereto.

 

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EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered HolderDesiring to Exercise the Within Warrant ofTIPPERARY CORPORATION

 

The undersigned registeredholder hereby exercises the right to purchase                                    Shares covered by the within Warrant according to the conditions thereof, andherewith makes payment of the Exercise Price of such Shares,$                    .

 
| Name  of Registered Holder:    |   |   |
|--------------------------------|--------|--------|
|                           |   |
| Signature:                     |   |   |
|                           |   |
| Title  of Signing Officer      |   |
| or  Agent (if any):            |   |   |
|                           |   |
|                           |   |
| Address  of Registered Holder: |   |   |
|                           |   |   |
|                           |   |   |
|                           |   |
| Tax  I.D. No.:                 |   |   |
|                           |   |
| Dated:                         |   | ,  20  |   |   |   |
|                                |        |        |  |  |  |  |  |  |  |

 

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**This Warrant and the rightsrepresented hereby shall not be transferable at any time unless (i) aregistration statement under the Securities Act of 1933, as amended, shall bein effect with respect to this Warrant or the Shares issuable hereunder at suchtime, or (ii) the transfer is made in compliance with the provisions of Section5.**

 
| **Number:** | ** ** | **25,000  Shares** |
|-------------|------------|--------------------|

 

**WARRANTTO PURCHASE SHARESOFTIPPERARY CORPORATION**

 

This certifies that, for value received, DouglasKramer, an individual residing in Winnetka, Illinois (“Holder”), or their registered assigns, is entitledto purchase from TIPPERARY CORPORATION, a Texas corporation (the “Company”),twenty-five thousand (25,000) Shares, as defined in Section 3, at the price ofFour Dollars and 95/100 ($4.95) per Share (as defined in Section 3) at anytime, or in part from time to time in accordance with the following VestingSchedule (“Vesting Schedule”):

 
| **Date:**             | ** ** | **Total Shares Subject to Exercise** | ** ** |
|-----------------------|------------|--------------------------------------|------------|
|                  |       |                                 |       |
| From January 10, 2006 |       | 8,334                                |       |   |
| From January 10, 2007 |       | 16,667                               |       |   |
| From January 10, 2008 |       | 25,000                               |       |   |

 

This Warrant shall expire, if not exercisedprior thereto, two (2) years after the resignation or removal of the Holder asan employee or director of the Company. If the Holder should resign or be removed as an employee or directorfrom the Company, then this Warrant shall be vested only to the extent vestedon such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of theinitial exercise price set forth above and the number of Shares to be issuedupon the occurrence of certain events (the Provisions as to Adjustment) aremore fully set forth in Annex 1 hereto. (Hereinafter, the initial exercise price set forth above in thisparagraph for the purchase of Shares upon the exercise of this Warrant, asadjusted pursuant to the Provisions as to Adjustment, is referred to as the “ExercisePrice”).  This Warrant is subject to thefollowing provisions, terms and conditions:

 

**1.             Exercise of Warrant.**

 

(a)           The rights represented by this Warrant may be exercised bythe Holder, in whole or in part, (but not as to a fractional Share), by thesurrender 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 maydesignate by notice in writing to the Holder at the address of such holderappearing on the books of the Company at any time within the period abovenamed) and delivery of a completed subscription form in the form attached tothis Warrant as Exhibit A, and upon payment to the Company of theExercise Price for such Shares.

 

(b)           Payment of the Exercise Price shall be made by acombination of any one or more of the following:

 

(i)                                     By application, to the extent permitted byapplicable law, of Shares or other securities of the Company owned by theHolder, the value of which for such purpose shall be the fair market valuethereof determined in good faith by the Company and the Holder at the time ofsuch exercise; provided, however, that in order to apply such Shares or othersecurities of the Company in the exercise hereof, each of the followingconditions must be met:

 

(A)                              such Shares or other securities of the Companyshall have been owned, without material encumbrance, contingency or risk offorfeiture relating to the ownership rights, for at least six months and at alltimes during said six month period by the Holder, and within said six monthperiod such Shares or other securities of the Company shall not have been obtainedthrough exercise of any

 

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option, warrant or right toobtain such Shares of other securities or through the conversion of any othersecurity; and

 

(B)                                such Shares or other securities shall not beor include: (1) options, warrants or similar rights to acquire Shares or othersecurities of the Company by the Holder; or (2) securities owned by the Holderwhich are convertible in whole or in part into Shares or other securities ofthe Company; and

 

(ii)                                  in cash or by certified check or bank draftin New York Clearing House funds.

 

(c)           The Company agrees that any Shares so purchased by theexercise of this Warrant shall be deemed to be issued to the Holder as therecord owner of such Shares as of the close of business on the date on whichthis Warrant shall have been surrendered, the completed subscription formdelivered, and payment in full is made and delivered to the Company for suchShares as aforesaid.

 

(d)           Stock certificates evidencing Shares so purchased shall bedelivered to the Holder as promptly as practicable, after the rightsrepresented by this Warrant shall have been so exercised.  If this Warrant shall have been exercisedonly in part, and unless this Warrant has expired, a new Warrant representingthe number of Shares with respect to which this Warrant shall not then havebeen exercised shall also be delivered to the Holder within such time.  Notwithstanding the foregoing, however, theCompany shall not be required to deliver any stock certificate evidencingShares 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 withthe preparation, execution and delivery of stock certificates and any newWarrants.

 

**2.             Certain Covenants of the Company.**  TheCompany covenants and agrees as follows:

 

(a)           All Shares which may be issued upon the exercise of therights represented by this Warrant (all such Shares, whether previously issuedor subject to issuance upon the exercise of this Warrant, are from time to timereferred to herein as “Warrant Shares”) will, upon issuance, be duly authorizedand issued, fully paid and nonassessable and free from all taxes, liens and chargeswith respect to the issuance thereof.

 

(b)           During the period within which the rights represented bythis Warrant may be exercised, and only insofar as the Vesting Schedule hereinpermits the exercise of this Warrant, the Company will, at all times, haveauthorized and reserved free of preemptive or other rights for the exclusivepurpose of issuance upon exercise of the purchase rights evidenced by thisWarrant, a sufficient number of Shares to provide for the exercise of rightsrepresented by this Warrant.

 

(c)           The Company will not, by amendment or restatement of theArticles of  Incorporation or through anyreorganization, transfer of assets, consolidation, merger, issuance or sale ofsecurities or otherwise, avoid or take any action which would have the effectof avoiding the performance of any of the terms to be performed hereunder bythe Company, but will at all times in good faith carry out all of theprovisions of this Warrant and take all such action as may be necessary orappropriate to protect the rights of the Holder against dilution or otherimpairment and, in particular, will not permit the par value of any Share to beor become greater than the then effective Exercise Price.

 

**3.             Definition of Shares.**  Asused herein, the term “Shares” shall mean and include shares of the CommonStock, par value $.02 per share, of the Company as are constituted and exist onthe date hereof, and shall also include any other class of the capital stock ofthe Company hereafter authorized which shall neither be limited to a fixed sumor percentage of par value in respect to the rights of the holders thereof toreceive dividends and to participate in the distribution of assets upon thevoluntary or involuntary liquidation, dissolution or winding up of the Company,nor be subject at any time to redemption by the Company; provided that theShares receivable upon exercise of this Warrant shall include only Shares ofthe type as are constituted and exist on the date hereof or Shares resultingfrom any reclassification of the Shares as provided for in paragraph (C) of theProvisions as to Adjustment.

 

**4.             No Rights or Liabilities as aShareholder.**  This Warrant shall not entitle the Holder assuch to any rights whatsoever, including, without limitation, voting rights, asa holder of Shares of the Company.  Noprovisions hereof, in the absence of affirmative action by the Holder topurchase Shares, and no mere enumeration

 

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herein of the rights orprivileges of such holder, shall give rise to any liability of such holder as aholder 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 transfereehereof and/or transferable and the Warrant Shares shall not be transferableexcept upon the conditions specified in this Section 5, which conditions areintended, among other things, to ensure compliance with the provisions of theSecurities Act of 1933, as amended, and the rules and regulations of theSecurities and Exchange Commission (the “Commission”) thereunder (collectivelythe “Securities Act”), in respect of the exercise and/or transfer of thisWarrant and/or transfer of such Warrant Shares.

 

(b)           This Warrant and the Warrant Shares shall not betransferable (except for a transfer of this Warrant or the Warrant Shares in anoffering registered under the Securities Act, including, without limitation, atransfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer) unless, prior to any transfer, the Holder shall havereceived from its transferee reasonable assurances that such person is awarethat this Warrant and the Warrant Shares have not been registered under theSecurities Act and that such person is acquiring this Warrant or the WarrantShares for investment only and not with the view to the disposition or publicoffering thereof (unless in an offering registered under the Securities Act orexempt therefrom), and that such person is aware that the stock certificatesevidencing the Warrant Shares shall bear a legend restricting transfer anddisposition thereof in accordance with the Securities Act unless, in theopinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant(other than a transfer in an offering registered under the Securities Act,including, without limitation, a transfer in a registered offering effectedpursuant to Section 6, and any subsequent transfer), the Holder shall providean opinion of counsel, who shall be reasonably satisfactory to the Company,that an exemption from the registration requirements of the Securities Act isavailable.

 

(c)           Any permitted subsequent holder of this Warrant shall besubject to all the terms and conditions herein, and shall acknowledge, inwriting, upon receipt of this Warrant his or her acceptance of the terms andconditions herein.

 

(d)           To facilitate sales by a holder of this Warrant or WarrantShares in transactions qualifying under Rule 144 promulgated by the Commissionunder the Securities Act, if available, the Company agrees to satisfy thecurrent public information requirements of said Rule 144, for as long as theShares remain registered under the Securities Exchange Act of 1934, as amended,and the rules and regulations of the Commission thereunder (collectively the “ExchangeAct”), and to provide said holder upon request with such other information assuch holder may require for compliance with the provisions of said Rule 144.

 

**6.             Registration Under SecuritiesAct.**

 

(a)           If the Company, at any time, proposes to register anyissuance of its securities under the Securities Act (other than a registrationon Form S-8 in connection with an employee stock purchase or option plan or onForm S-4 in connection with mergers, acquisitions or exchange offerings), theCompany will at such time give prompt written notice to the holder hereof andto the holders of all other Warrant Shares issuable from any outstandingWarrants (such holders are hereinafter referred to as the “Prospective Sellers”or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a ProspectiveSeller, given within 30 days after receipt of any such notice (which requestshall state the intended method of disposition of the Warrant Shares to betransferred by such Prospective Seller), the Company shall use its best effortsto cause all Warrant Shares, the holders of which (or of the Warrants to whichthe same are related), to the extent vested in accordance with the VestingSchedule, shall have so requested registration of the transfer thereof, to beregistered under the Securities Act, all to the extent requisite to permit thesale or other disposition (in accordance with the intended method thereof as aforesaid)by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section6(a) shall not be effective with respect to the Prospective Seller in the caseof an underwritten public offering of securities of the Company by the Companyunless each Prospective Seller agrees to the terms and conditions, includingunderwriting discounts and allowances, specified by the managing underwriter ofsuch offering with respect to such Warrant Shares.  The Company shall have the right to reducethe number of Warrant Shares of the Prospective Sellers to be included in aregistration statement pursuant to the exercise of the rights granted by thisSection 6(a) if, and to the extent, that the managing underwriter of suchoffering is of the good faith opinion, supported by written reasons therefor,that the inclusion of such Warrant Shares would materially and adversely

 

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affect the marketing of thesecurities of the Company to be offered; provided, that any such reduction ofthe number of Warrant Shares, the transfer of which is to be registered onbehalf of the Prospective Sellers, shall be made on the basis of a pro ratareduction of all Warrant Shares of all Prospective Sellers.

 

If and whenever the Companyis required by the provisions of this Section 6 to use its best efforts toeffect the registration of any transfer of Warrant Shares under the SecuritiesAct, the Company will, as expeditiously as possible,

 

(i)                                     prepare and file with the Commission aregistration statement with respect to such transfer and use its best effortsto cause such registration statement to become and remain effective, but notfor any period longer than nine months;

 

(ii)                                  prepare and file with the Commission suchamendments and supplements to such registration statement and the prospectusused in connection therewith as may be necessary to keep such registrationstatement effective, and to comply with the provisions of the Securities Actwith respect to the transfer of all securities covered by such registrationstatement, including, without limitation, taking all necessary actions wheneverthe Prospective Sellers of the Warrant Shares covered by such registrationstatement shall desire to dispose of the same;

 

(iii)                               furnish to each Prospective Seller suchnumber of copies of a prospectus, including a preliminary prospectus, inconformity with the requirements of the Securities Act, and such otherdocuments, as such Prospective Seller may reasonably request in order to facilitatethe disposition of the Warrant Shares owned by such Prospective Seller andcovered by such registration statement;

 

(iv)                              use its best efforts to register or qualifythe securities covered by such registration statement under such othersecurities or blue sky laws of such jurisdictions as each Prospective Sellershall request, and use its best efforts to do any and all other acts and thingswhich may be reasonably necessary to enable such Prospective Seller toconsummate the disposition in such jurisdiction of the Warrant Shares owned bysuch Prospective Seller and covered by such registration statement; providedthat, notwithstanding the foregoing, the Company shall not be required toregister in any jurisdiction as a broker or dealer of securities or to grantits consent to service of process in any such jurisdiction solely on account ofsuch intended disposition by such Prospective Seller;

 

(v)                                 furnish to the Prospective Sellers, whoseintended dispositions are registered, a signed copy of an opinion of counselfor the Company, in form and substance acceptable to such Prospective Sellers,to the effect that: (A) a registration statement covering such dispositions ofWarrant Shares has been filed with the Commission under the Securities Act andhas been made effective by order of the Commission, (B) such registrationstatement and the prospectus contained therein and any amendments orsupplements thereto comply as to form in all material respects with therequirements of the Securities Act, and (C) to the best of such counsel’sknowledge, no stop order has been issued by the Commission suspending theeffectiveness of such registration statement and no proceedings for theissuance of such a stop order are threatened or contemplated;

 

(vi)                              furnish to the Prospective Sellers whoseintended dispositions are required a blue sky survey in the form and of thesubstance customarily prepared by counsel for the Company and accepted bysellers of securities in similar offerings, discussing and describing the applicationprovisions of the securities or blue sky laws of each state or jurisdiction inwhich the Company shall be required, pursuant to Section 6(c)(iv), to registeror qualify such intended dispositions of such Warrant Shares, or, in the eventcounsel for the underwriters in such offering shall be preparing a blue skysurvey, cause such counsel to furnish such survey to, and to allow reliancethereon by, such Prospective Sellers;

 

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(vii)         otherwise use its best efforts to comply withall applicable rules and regulations of the Commission under the Securities Actand the Exchange Act, insofar as they relate to such registration and suchregistration statement; and

 

(viii)        use its best efforts to list such WarrantShares on any securities exchange on which any securities of the Company arethen listed or to admit such Warrant Shares for trading in any national marketsystem in which any securities of the Company are then admitted for trading, ifthe listing or admission of such securities is then permitted under the rulesof such exchange or system.

 

(b)           With respect to the registration by theCompany of transfers of Warrant Shares under the Securities Act pursuant toSection 6(a), the Company shall pay all expenses incurred by it in complyingwith this Section 6 (including, without limitation, all registration and filingfees, printing expenses, blue sky fees and expenses, costs and expenses ofaudits, and reasonable fees and disbursements of counsel for the Company andone special counsel designated by Prospective Sellers owning a majority of theWarrant Shares covered by such registration, but specifically excluding anyunderwriting discounts and allowances that are allocable to the Warrant Sharesbeing sold by, and which shall be paid by, the Prospective Sellers; provided,however, that if any registration statement filed with the Commission by theCompany under Section 6(a) shall not be declared effective by the Commission,such attempted registration shall not constitute a registration under thisSection 6(b).

 

(c)           It shall be a condition precedent to theobligations of the Company to take any action pursuant to this Section 6 thateach Prospective Seller, the transfer of whose Warrant Shares is registered orto be registered under each such registration, shall furnish to the Companysuch written information regarding the securities held by such ProspectiveSeller as the Company shall reasonably request and as shall be required in connectionwith the action to be taken by the Company.

 

(d)           (i)           In the event of any registration of anytransfer 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 suchsecurities, against any losses, claims, damages or liabilities (or actions inrespect thereof), joint or several, to which each Prospective Seller, officer,director or partner, controlling person or underwriter may become subject underthe Securities Act or otherwise, insofar as such losses, claims, damages orliabilities (or actions in respect thereof) arise out of or are based upon anyuntrue statement or alleged untrue statement of any material fact contained, onthe effective date thereof, in any registration statement under which suchtransfer of securities was registered under the Securities Act, any preliminaryprospectus or final prospectus contained therein, or any amendment orsupplement thereto, or arise out of or are based upon the omission or allegedomission to state therein a material fact required to be stated therein ornecessary to make the statements therein not misleading, or any violation bythe Company of the Securities Act, and will reimburse such Prospective Sellerand each of its officers, directors and partners, and each such controllingperson or underwriter, for any legal or any other expenses reasonably incurredby such Prospective Seller or its officers, directors and partners orcontrolling persons or by each such underwriter, in connection withinvestigating or defending any such loss, claim, damage, liability or action;provided, however, that the Company will not be liable in any such case to theextent that any such loss, claim, damage or liability arises out of or is basedupon an untrue statement or alleged untrue statement or omission or allegedomission made in such registration statement, preliminary prospectus orprospectus or such amendment or supplement in reliance upon and in conformitywith written information furnished to the Company through an instrument dulyexecuted by such Prospective Seller specifically for use in the preparationthereof.  In the event of anyregistration by the Company or any transfer of securities under the SecuritiesAct pursuant to this Section 6, each Prospective Seller of Warrant Sharescovered by such registration will indemnify and hold harmless the Company, eachother person, if any, who controls the Company within the meaning of theSecurities Act and each officer and director of the Company and the otherProspective Sellers to the same extent that the Company agrees to indemnify it,but only with respect

 

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tothe written information relating to such Prospective Seller furnished to theCompany by such Prospective Seller aforesaid

 

(ii)           Each indemnified party shall, as promptly as practicable upon receiptof notice of the commencement of any action against such indemnified party orits officers, directors or partners, or any controlling person of such indemnifiedparty, in respect of which indemnity may be sought from an indemnifying partyon account of the indemnity agreement contained in Section 6(d)(i), notify theindemnifying party in writing of the commencement thereof.  The omission of such indemnified party to sonotify the indemnifying party of any such action shall not relieve theindemnifying party from any liability which it may have on account of theindemnity agreement contained in Section 6(d)(i) to the extent that the failureto receive such notice within a reasonable period of time shall not have causedharm, loss or damage to the indemnifying party, provided that, conversely, ifsuch failure to receive notice shall have caused any harm, loss or damage tothe indemnifying party, such failure shall constitute a defense to anyliability which such indemnifying party may have on account of such agreementto the extent of the harm, loss or damage so caused. In case any such actionshall be brought against any indemnified party, its officers, directors andpartners, or any such controlling person, and such indemnified party shallnotify the indemnifying party of the commencement thereof, the indemnifyingparty shall be entitled to participate in (and, to the extent that theindemnifying party shall wish, to direct) the defense thereof at theindemnifying party’s own expense, in which event the defense shall be conductedby recognized counsel chosen by the indemnifying party and approved by theindemnified party (whose approval shall not unreasonably be withheld) and theindemnified party may participate in such defense at its own expense (unless itis advised by counsel that actual or potential differing interests or defensesexist or may exist, in which case such expenses shall be paid by the indemnifyingparty, provided that the indemnifying party shall not be required to pay theexpenses for more than one counsel for all such indemnified parties).

 

**7.****            ****Transfer; Ownership****.** Subject to Section 5, this Warrant and all rights hereunder aretransferable, in whole or in part, at the office or agency of the Companyreferred to in Section 1 by the Holders in person or by a duly authorizedattorney, upon surrender of this Warrant, with an assignment, acceptable to theCompany, duly completed, at which time a new Warrant shall be made anddelivered by the Company, of the same tenor as this Warrant but registered inthe name of the transferee.  The Holder,by taking or holding the same, consents and agrees that this Warrant, whenendorsed in blank, shall be deemed negotiable, and that the Holder, when thisWarrant shall have been so endorsed, may be treated by the Company and allother persons dealing with this Warrant as the absolute owner hereof for anypurpose and as the person entitled to exercise the rights represented by thisWarrant and to transfer this Warrant on the books of the Company, any notice tothe contrary notwithstanding; but until such transfer on such books, theCompany may treat the registered the Holder as the owner hereof for allpurposes.  Any transfer of this Warrantshall be made in compliance with the Securities Act and any applicable statesecurities or blue sky laws.

 

**8.****            ****Exchange and Replacement****.** Subject to Section 7, this Warrant is exchangeable, upon the surrenderhereof by the Holder at the office or agency of the Company referred to inSection 1, for new Warrants of like tenor and date representing in theaggregate the right to purchase the number of Shares which may be purchasedhereunder, each of such new Warrants to represent the right to purchase suchnumber of Shares as shall be designated by the Holder at the time of suchsurrender.  Upon receipt by the Company,at the office or agency referred to in Section 1, of evidence reasonably satisfactoryto it of the loss, theft or destruction of this Warrant and of indemnity orsecurity reasonably satisfactory to it (provided that the written indemnity ofthe Holder shall be deemed reasonably satisfactory to the Company for suchpurposes), the Company will deliver a new Warrant of like tenor and date inreplacement of this Warrant.  ThisWarrant shall be promptly canceled by the Company upon the surrender hereof inconnection with any transfer, exchange or replacement.  The Company will pay all expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to Section 7 and this Section 8.

 

**9.****            ****Notices****.**  Anynotice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent bycertified or registered mail to, 33 Oriole Avenue, Bronxville, New York 10708,or to such other address as shall have been furnished to the Company in writingby the Holder.  Any notice

 

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or other document required orpermitted to be given or delivered to the Company shall be delivered at, orsent by certified or registered mail to, 633 Seventeenth Street, Suite 1550,Denver, Colorado 80202, or to such other address as shall have been furnishedin writing to the Holder by the Company. Any notice so addressed and mailed by registered or certified mail orotherwise delivered, shall be deemed to be given when actually received by theaddressee.

 

**10.****         ****GOVERNING LAW****.    THISWARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF TEXAS.**

 

**11.****         ****Miscellaneous****.**  ThisWarrant will be binding upon any entity succeeding to the Company byconsolidation or acquisition of all or substantially all of the Company’sassets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may bechanged, waived, discharged or terminated only by an instrument in writingsigned by the party (or any predecessor in interest thereof) against whomenforcement of the same is sought.  Theheadings in this Warrant are for purposes of reference only and shall notaffect the meaning or construction of any of the provisions hereon.

 

**INWITNESS WHEREOF**,Tipperary Corporation has caused this Warrant to be signed by its dulyauthorized officers, under its corporate seal, to be dated April 27, 2005.

 
| ** **           | **TIPPERARY  CORPORATION** |
|----------------------|----------------------------|
|                 |                       |
|                 |                       |
| ** **           | **BY:**                    | **/s/ David L. Bradshaw** |   |
| ** **           | **ITS:**                   | President |
| **CORPORATE  SEAL)** |                       |
|                 |                       |
| **ATTEST:**          | **/s/ Elaine R. Treece**   |   |   |
| **ITS:**             | Secretary                  |   |
|                      |                            |  |  |  |  |

 

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Annex1

 

TIPPERARYCORPORATION

 

PROVISIONSAS TO ADJUSTMENT OFEXERCISE PRICE AND NUMBER OF SHARESISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and thenumber of Shares issuable upon the exercise of the annexed Warrant to purchaseshares of TIPPERARY CORPORATION, a Texas corporation (herein and in thisWarrant referred to as the “Company”), shall be subject to adjustment from timeto time as hereinafter provided; that in no event shall the Exercise Price beincreased to a price greater than Four Dollars and 95/100 ($4.95) per Share,except as provided by paragraph (C). Upon each adjustment of the Exercise Price, the Holder shall thereafterbe entitled to purchase, at the Exercise Price resulting from such adjustment,the number of Shares obtained by multiplying the number of Shares purchasablepursuant hereto immediately prior to such adjustment by a fraction, thenumerator of which is the Exercise Price in effect immediately prior to suchadjustment and the denominator of which is the Exercise Price resulting fromsuch adjustment.  In making theadjustments to the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue orsell any Shares for consideration per Share that is less than the ExercisePrice in effect immediately prior to the time of such issue or sale at lessthan the Market Price (as hereinafter defined) of such Shares on the date ofsuch issue or sale, then forthwith upon such issue or sale the Exercise Pricein effect immediately prior thereto shall be adjusted to an amount (calculatedto 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 salemultiplied by the Exercise Price in effect immediately prior to such issue orsale, and (b) the consideration, if any, received by the Company upon suchissue or sale by (ii) the total number of Shares outstanding immediately aftersuch issue or sale; provided, however, that no adjustment shall be madehereunder by reason of:

 

(i)    thegrant of this Warrant or the issuance of Shares upon the exercise of thisWarrant or any other outstanding Warrant;

 

(ii)       the grant by the Company of options topurchase shares in connection with any purchase or option plan for the benefitof employees of the Company, or any affiliates or subsidiaries thereof; or

 

(iii)      the issuance (whether directly or byassumption in a merger or otherwise) or sale (including any issuance or sale toholders of Shares) of any securities convertible into or exchangeable forShares (such convertible or exchangeable securities are herein referred to as “ConvertibleSecurities”), or the grant of rights to subscribe for or to purchase, or ofoptions for the purchase of (including any grant of such rights or options toholders of shares, other than pursuant to a dividend on Shares), Shares ofConvertible Securities, regardless of whether the right to convert or exchangesuch Convertible Securities or such rights or options are immediatelyexercisable.

 

No adjustment of the Exercise Price shall berequired to be made by the Company and no notice hereunder must be given if theamount of any required adjustment is less than 5% of the Exercise Price.  In such case any such adjustment shall becarried forward and shall be made (and notice thereof shall be given hereunder)at the time of and together with the next subsequent adjustment which, togetherwith any adjustment so carried forward, shall amount to not less than 5% of theExercise Price.

 

(B)           For the purposes of paragraph (A), thefollowing provisions (i) through (vi), inclusive, shall also be applicable:

 

(i)            If, at the time Shares are issued and soldupon the conversion or exchange of Convertible Securities or upon the exerciseof rights or options previously granted by the Company, the price per Share forwhich such Shares are issued (determined by dividing (a) the total amount, ifany, received by the Company as consideration for such Convertible Securitiesor for the granting of such rights or options, plus the aggregate amount ofadditional consideration paid to the Company upon the conversion or exchange ofsuch Convertible 

 

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Securities (which, if soprovided in such Convertible Securities, shall be deemed to be equal to theoutstanding principal amount of the indebtedness represented by suchConvertible Securities) or upon the exercise of such rights or options, by (b)the total number of Shares issued upon the conversion or exchange of suchConvertible Securities or upon the exercise of such rights or options shall beless than the Exercise Price in effect immediately prior to such issue, sale orexercise, then the adjustments provided for by the first paragraph of thisAnnex 1 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 beconsidered the consideration received by the Company upon the issue or sale ofthe Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)           In case at any time any Shares or ConvertibleSecurities or any rights or options to purchase any Shares or Convertible Securitiesshall be issued or sold for cash, the consideration received therefor shall bedeemed to be the amount received by the Company therefor without deductiontherefrom of any expenses incurred or any underwriting commissions orconcessions paid or allowed by the Company in connection therewith.  In case any Shares or Convertible Securitiesor any rights or options to purchase any Shares or Convertible Securities shallbe issued or sold, in whole or in part, for consideration other than cash, theamount of the consideration other than cash received by the Company in exchangefor the issue or sale of such Convertible Securities shall be deemed to be thefair value of such consideration as determined in good faith by the Board ofDirectors of the Company, without deduction therefrom of any expenses incurredor any underwriting commissions or concessions paid or allowed by the Companyin connection therewith; provided that if the holder or holders of at least66-2/3% of the Warrant Shares purchasable under this Warrant shall request inwriting, the value of such consideration shall be determined by an independentexpert selected by such holders, the costs and expenses of which shall be borneby the Company, and, if the value of such consideration as so determined isless than the value determined by the Board of Directors of the Company, thelesser value shall be utilized in calculating the consideration per Sharereceived by the Company for purposes of making the adjustment provided byparagraph (A).  In the event of anymerger or consolidation of the Company in which the Company is not thesurviving corporation or in the event of any sale of all or substantially allof the assets of the Company outside of the ordinary course of business of theCompany for stock or other securities of any corporation, the Company shall bedeemed to have issued a number of Shares for stock or securities of such othercorporation computed on the basis of the actual exchange ratio on which thetransaction was predicated and for consideration that is equal to the fairmarket value on the date of such transaction of such stock or securities of theother corporation, and if any such calculation results in adjustment of theExercise Price, the determination of the number of Shares issuable uponexercise of this Warrant immediately prior to such merger, consolidationor  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 giventime shall not include Shares that have been redeemed by the Company and notcanceled, if any, and that are thus owned or held by or for the account of theCompany, and the disposition of any such Shares shall be considered an issue orsale 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 nationalsecurities exchange on which the Shares are listed or in a national marketsystem for securities in which the Shares are admitted to trading or (b) theaverage of the closing bid and asked prices of Shares reported in the domesticover-the-counter market, for the 20 trading days immediately prior to the dayas of which the Market Price is being determined.  If the Shares are not listed on any nationalsecurities exchange or admitted for trading in any national market system ortraded in the domestic over-the-counter market, the Market Price shall be thehigher of (y) the book value of the Shares as determined by a firm ofindependent public accountants of recognized standing selected by the Board ofDirectors of the Company as of the last day of any month ending within 60 dayspreceding the date as of which the determination is to be made or (z) the fairmarket value of the Shares determined in good faith by the Board of Directorsof the Company,

 

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provided that if the holderor holders of at least 66-2/3% of the Warrant Shares purchasable under theWarrant shall request in writing, the fair market value of the Shares shall bedetermined by an independent investment banking firm or other independentexpert selected by such holders and reasonably satisfactory to the Company,which determination shall be as of a date which is within 15 days of the dateas of which the determination is to be made.

 

(v)           Anything herein to the contrarynotwithstanding, in case the Company shall issue any Shares in connection withthe acquisition by the Company of the stock or assets of any other corporationor the merger of any other corporation into the Company under circumstanceswhere, on the date of the issuance of such Shares, the consideration receivedfor such Shares is less than the Market Price of the Shares, but on the date thenumber of Shares was determined, the consideration received for such Shareswould not have been less than the Market Price thereof, such Shares shall notbe deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)to the contrary notwithstanding, in the case of an acquisition where all orpart of the purchase price is payable in Shares or Convertible Securities butis stated as a dollar amount, where the Company upon making the acquisitionpays only part of a maximum dollar purchase price which is payable in Shares orConvertible Securities and where the balance of such purchase price is deferredor is contingently payable under a formula related to earnings over a period oftime, (a) the consideration received for any Shares or Convertible Securitiesdelivered at the time of the acquisition shall be deemed to be such part of thetotal consideration as the portion of the dollar purchase price then paid inShares or Convertible Securities bears to the total maximum dollar purchaseprice payable in Shares or Convertible Securities and (b) in connection witheach issuance of additional Shares or Convertible Securities pursuant to theterms of the agreement relating to such acquisition, the consideration receivedshall be deemed to be such part of the total consideration as the portion ofthe dollar purchase price then and theretofore paid in Shares or ConvertibleShares bears to the total maximum dollar purchase price payable in Shares orConvertible Securities multiplied by a fraction, the numerator of which shallbe the number of Shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then issued and the denominator of which shall be thetotal number of shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then and theretofore issued under such acquisitionagreement.  In the event only a part ofthe purchase price for an acquisition is paid in Shares or ConvertibleSecurities in the manner referred to in this clause (vi), the term “totalconsideration” as used in this clause (vi) shall mean that part of theaggregate consideration as is fairly allocable to the purchase price paid inShares 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 shallsubdivide its outstanding Shares into a greater number of Shares, then from andafter the record date for such subdivision the Exercise Price in effectimmediately prior to such subdivision shall be proportionately reduced and thenumber of Shares purchasable upon the exercise of this Warrant shall becorrespondingly increased, and, conversely, in case the outstanding Sharesshall be combined into a smaller number of Shares, then from and after therecord date for such combination the Exercise Price in effect immediately priorto such combination shall be proportionately increased and the number of Sharespurchasable upon the exercise of this Warrant shall be correspondinglydecreased.

 

(D)          Unless the provisions of paragraph (E) apply,if any capital reorganization or reclassification of the capital stock of theCompany, or consolidation or merger of the Company with another corporation, orsale of all or substantially all of its assets to another corporation outsideof the ordinary course of business, shall be effected in such a way thatholders of Shares (or any other securities of the Company then issuable uponthe exercise of this Warrant) shall be entitled to receive stock, securities orassets with respect to or exchange for Shares (or such other securities) then,as a condition of such reorganization, reclassification, consolidation, mergeror sale, lawful and adequate provision shall be made whereby the Holder shallthereafter have the right to purchase and receive upon the basis and upon theterms and conditions specified in this Warrant and in lieu of the Shares (orother securities) of

 

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the Company immediatelytheretofore purchasable and receivable upon the exercise of the rightsrepresented hereby, such shares of stock, securities or assets as may be issuedor 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 anysuch case appropriate provision shall be made with respect to the rights andinterests of the holder of this Warrant to the end that the provisions hereof(including, without limitation, provisions for adjustment of the Exercise Priceand of the number of Shares (or other securities) purchasable upon the exerciseof this Warrant and for the registration thereof as provided in Section 6 ofthis Warrant) shall thereafter be applicable, as nearly as may be, in relationto any shares of stock, securities or assets thereafter deliverable upon theexercise hereof (including an immediate adjustment, by reason of suchconsolidation, merger or sale, of the Exercise Price to the value of the Shares(or other securities) reflected by the terms of such consolidation, merger orsale if the value so reflected is less than the Exercise Price in effectimmediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger ofthe Company with or into another corporation as a result of which a greater orlesser number of securities of the surviving corporation are issuable toholders of Shares in respect of the number of Shares outstanding immediatelyprior to such consolidation or merger, then the Exercise Price in effectimmediately prior to such consolidation or merger shall be adjusted in the samemanner as though there were a subdivision or combination of the outstandingShares.  The Company shall not effect anysuch consolidation, merger or sale, unless prior to or simultaneously with theconsummation thereof the surviving or successor corporation (if other than theCompany) resulting from such consolidation or merger of the corporation purchasingsuch assets shall assume, by written instrument executed and mailed to theregistered Holder at the last address of such holder appearing on the books ofthe Company, the obligation to deliver to such holder such Shares of stock,securities or assets as, in accordance with the foregoing provisions, suchholder may be entitled to purchase, and containing the express assumption ofsuch surviving or successor corporation of the due performance of everyprovision of this Warrant to be performed by the Company and of all liabilitiesand obligations of the Company hereunder.

 

(E)           In the event of a change in control of theCompany, as defined in this paragraph (E), then the Board of Directors shallaccelerate the exercise date of the Warrant or make this Warrant fully vestedand exercisable and, in its sole discretion, may take any or all of thefollowing actions: (a) grant a cash bonus award to any holder of this Warrantin an amount necessary to pay the Exercise Price of all or any portion of theWarrant then held by such person; (b) pay cash to any holder of this Warrant inexchange for the cancellation of the holder’s Warrant in an amount equal to thedifference between the Exercise Price of such Warrant and the greater of thetender offer price for the underlying Shares or the Market Price of the Shareson the date of the cancellation of the Warrant; and (c) make any otheradjustments or amendments to this Warrant. For purposes of this paragraph (E), a “change in control” shall bedeemed to have occurred if (a) any “person” or “group” (within the meaning ofSections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended(“1934 Act”), other than a trustee or other fiduciary holding securities underan employee benefit plan of the Company is or becomes the “beneficial owner”(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of morethan 50% of the then outstanding voting stock of the Company; or (b) at anytime during any period of three consecutive years after the date of thisWarrant, individuals who at the beginning of such period constitute the Board(and any new director whose election by the Board or whose nomination forelection by the Company’s stockholders was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors atthe beginning of such period or whose election or nomination for election waspreviously so approved) cease for any reason to constitute a majority thereof;or (c) the stockholders of the Company approve a merger or consolidation of theCompany with any other corporation, other than a merger or consolidation whichwould result in the voting securities of the Company outstanding immediatelyprior thereto continuing to represent (either by remaining outstanding or bybeing converted into voting securities of the surviving entity) at least 50% ofthe combined voting power of the voting securities of the Company or suchsurviving entity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay anydividend on or make any other distribution with respect to Shares (or any othersecurities of the Company then issuable upon the exercise of the Warrant) thatis payable in Shares, Convertible Securities, any other securities of theCompany 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 Sharesissuable upon the exercise of this Warrant, the holder of this Warrant, uponany exercise of the rights represented hereby, shall be entitled to receive thenumber 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 any company or other stock, securities or assets which theholder of this Warrant would have received by way of such distributions ifcontinuously since the date of the Warrant (or, if this Warrant shall have beenissued pursuant to Section 7 of this Warrant, the date of the predecessorWarrant to which this Warrant relates) such holder had been the record holderof the number of Shares (or other securities), then being purchased and hadretained all such

 

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Shares, Convertible Securities,other securities of the Company or other stock, securities or assetsdistributable with respect to such Shares (or other securities) and,furthermore, all cash, stock, securities or assets payable as dividends ordistributions with respect to the foregoing and originating directly orindirectly therefrom.  The Company shallreserve 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 respectthereto 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 tothe Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason ofaction taken by the Company, which in the good faith opinion of the Board ofDirectors of the Company, are not adequately covered by the provisions of thisAnnex 1, and which might materially adversely affect the rights of the holderof this Warrant, the Company shall appoint a firm of independent publicaccountants of recognized standing (which may be the regular accountants or auditorsof 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 ofthis Warrant, or other change in the rights of the Holder, on a basisconsistent with the other provisions of this Annex 1, necessary to preservewithout diminution the rights of the Holder. Upon receipt of such opinion, the Company shall forthwith make theadjustments described therein.

 

(H)          (i)        Within ten (10) days of any adjustment of theExercise Price or change in the number of Shares purchasable upon the exerciseof this Warrant made pursuant to paragraphs (A), (B), (C) , or (F) or anychange in the rights of the holder of this Warrant by reason of the occurrenceof events described in paragraphs (D), (E), or (F), the Company shall givewritten notice by certified or registered mail to the registered holder of thisWarrant at the address of such holder as shown on the books of the Company,which notice shall describe the event requiring such adjustments (with respectto any adjustment made pursuant to paragraphs (C), (D), (E) or (F), theExercise Price resulting from such adjustment, the increase or decrease, ifany, in the number of Shares purchasable upon the exercise of this Warrant, orthe other change in the rights of such holder, and set forth in reasonabledetail the method of calculation of such adjustments and the facts upon whichsuch calculations are based.  Within two(2) days of receipt from the holder of this Warrant upon the surrender hereoffor exercise pursuant to Section 1 of this Warrant, and within three (3) daysof receipt from the Holder a written request therefor (which request shall notbe made more than once each calendar quarter), the Company shall give written noticeby certified or registered mail to such holder at his address as shown on thebooks of the Company of the Exercise Price in effect as of the date of receiptby the Company of this Warrant for exercise, or the date of receipt of suchwritten request, and the number of Shares purchasable or the number or amountof other shares of stock, securities or assets receivable as of such date, andset forth in reasonable detail the method of calculation of such numbers;provided that no further adjustments to the Exercise Price or the number ofShares purchasable or number or amount of shares, securities or assetsreceivable on exercise of this Warrant shall be made after receipt of thisWarrant by the Company for exercise.

 

(ii)       Upon each adjustment of the Exercise Price and each change in thenumber of Shares purchasable upon the exercise of this Warrant, and change inthe rights of the holder of this Warrant by reason of the occurrence of otherevents herein set forth, then and in each case, upon written request of theholder of this Warrant (which request shall be made not more often than onceeach calendar year), the Company will at its expense promptly obtain an opinionof independent public accountants reasonably satisfactory to each holderstating the then effective Exercise Price and the number of Shares thenpurchasable, or specifying the other shares of stock, securities or assets andthe amount thereof then receivable, and setting forth in reasonable detail themethod of calculation of such numbers and the facts upon which suchcalculations are based.  The Company willpromptly mail a copy of such opinion to the registered Holder.

 

(I)            In case at any time:

 

(i)        The Company shall pay any dividend payable in capital stock on itsoutstanding Shares or make any distribution (other than regular cash dividends)to the holders of Shares;

 

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(ii)       The Company shall offer for subscription pro rata to the holders ofShares any additional capital stock or other rights;

 

(iii)      There shall be authorized any capital reorganization orreclassification of the capital stock of the Company, or consolidation ormerger of the Company with, or sale of all or substantially all of its assetsto, another corporation; or

 

(iv)      There shall be authorized or commence a voluntary or involuntarydissolution, liquidation or winding up of the Company then, in one or more ofsaid cases, the Company shall given written notice by certified or registeredmail to Holder at the address of Holder as shown on the books of the Company onthe date on which (1) the books of the Company shall close or a record shall betaken for such dividend, distribution, or subscription rights, or (2) suchreorganization, reclassification, consolidation, merger, sale, dissolution,liquidation or winding up shall take place or be voted upon by the shareholdersof the Company, as the case may be.  Suchnotice shall also specify the date as of which the holders of record of Sharesshall participate in such dividend, distribution or subscription rights, orshall be entitled to exchange their Shares for securities or other propertydeliverable upon such reorganization, reclassification, consolidation, merger,sale, dissolution, liquidation or winding up, as the case may be.  Such written notice shall be given at leastthirty (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 areclosed in respect thereto.

 

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EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered HolderDesiring to Exercise the Within Warrant ofTIPPERARY CORPORATION

 

The undersigned registeredholder hereby exercises the right to purchase                                          Shares covered by the within Warrant according to the conditions thereof, andherewith makes payment of the Exercise Price of such Shares, $                             .

 

 
| Name  of Registered Holder:    |   |   |   |
|--------------------------------|--------|--------|--------|
|                           |   |
| Signature:                     |   |   |   |
|                           |   |
| Title  of Signing Officer      |   |
| or  Agent (if any):            |   |   |   |
|                           |   |
|                           |   |
| Address  of Registered Holder: |   |   |   |
|                           |   |   |   |
|                           |   |   |   |
|                           |   |   |   |
| Tax  I.D. No.:                 |   |   |   |
|                           |   |
| Dated:                         |   | ,  20  |   |   |   |
|                                |        |        |        |  |  |  |  |  |  |  |  |

 

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**This Warrant and the rightsrepresented hereby shall not be transferable at any time unless (i) aregistration statement under the Securities Act of 1933, as amended, shall bein effect with respect to this Warrant or the Shares issuable hereunder at suchtime, or (ii) the transfer is made in compliance with the provisions of Section5.**

 
| **Number:** | ** ** | **25,000  Shares** |
|-------------|------------|--------------------|

 

**WARRANTTO PURCHASE SHARESOFTIPPERARY CORPORATION**

 

This certifies that, for value received, D. LeroySample, an individual residing in Estero, Florida (“Holder”), or theirregistered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texascorporation (the “Company”), twenty-five thousand (25,000) Shares, as definedin Section 3, at the price of Four Dollars and 95/100 ($4.95) per Share (asdefined in Section 3) at any time, or in part from time to time in accordancewith the following Vesting Schedule (“Vesting Schedule”):

 
| **Date:**             | ** ** | **Total Shares Subject to Exercise** | ** ** |
|-----------------------|------------|--------------------------------------|------------|
|                  |       |                                 |       |
| From January 10, 2006 |       | 8,334                                |       |   |
| From January 10, 2007 |       | 16,667                               |       |   |
| From January 10, 2008 |       | 25,000                               |       |   |

 

This Warrant shall expire, if not exercisedprior thereto, two (2) years after the resignation or removal of the Holder asan employee or director of the Company. If the Holder should resign or be removed as an employee or directorfrom the Company, then this Warrant shall be vested only to the extent vestedon such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of theinitial exercise price set forth above and the number of Shares to be issuedupon the occurrence of certain events (the Provisions as to Adjustment) aremore fully set forth in Annex 1 hereto. (Hereinafter, the initial exercise price set forth above in thisparagraph for the purchase of Shares upon the exercise of this Warrant, asadjusted pursuant to the Provisions as to Adjustment, is referred to as the “ExercisePrice”).  This Warrant is subject to thefollowing provisions, terms and conditions:

 

**1.****            ****Exercise of Warrant****.**

 

(a)           The rights represented by this Warrant may beexercised by the Holder, in whole or in part, (but not as to a fractionalShare), by the surrender of this Warrant at the Company’s principal officelocated in Denver, Colorado (or such other office or agency of the Company asthe Company may designate by notice in writing to the Holder at the address ofsuch holder appearing on the books of the Company at any time within the periodabove named) and delivery of a completed subscription form in the form attachedto this Warrant as Exhibit A, and upon payment to the Company of theExercise Price for such Shares.

 

(b)           Payment of the Exercise Price shall be madeby a combination of any one or more of the following:

 

(i)            By application, to the extent permitted byapplicable law, of Shares or other securities of the Company owned by theHolder, the value of which for such purpose shall be the fair market valuethereof determined in good faith by the Company and the Holder at the time ofsuch exercise; provided, however, that in order to apply such Shares or othersecurities of the Company in the exercise hereof, each of the followingconditions must be met:

 

(A)          such Shares or other securities of theCompany shall have been owned, without material encumbrance, contingency orrisk of forfeiture relating to the ownership rights, for at least six monthsand at all times during said six month period by the Holder, and within saidsix month period such Shares or other securities of the Company shall not havebeen obtained through exercise of any

 

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option, warrant or right toobtain such Shares of other securities or through the conversion of any othersecurity; and

 

(B)           such Shares or other securities shall not beor include: (1) options, warrants or similar rights to acquire Shares or othersecurities of the Company by the Holder; or (2) securities owned by the Holderwhich are convertible in whole or in part into Shares or other securities ofthe Company; and

 

(ii)           in cash or by certified check or bank draftin New York Clearing House funds.

 

(c)           The Company agrees that any Shares sopurchased by the exercise of this Warrant shall be deemed to be issued to theHolder as the record owner of such Shares as of the close of business on thedate on which this Warrant shall have been surrendered, the completedsubscription form delivered, and payment in full is made and delivered to theCompany for such Shares as aforesaid.

 

(d)           Stock certificates evidencing Shares sopurchased shall be delivered to the Holder as promptly as practicable, afterthe rights represented by this Warrant shall have been so exercised.  If this Warrant shall have been exercisedonly in part, and unless this Warrant has expired, a new Warrant representingthe number of Shares with respect to which this Warrant shall not then havebeen exercised shall also be delivered to the Holder within such time.  Notwithstanding the foregoing, however, theCompany shall not be required to deliver any stock certificate evidencingShares 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 withthe preparation, execution and delivery of stock certificates and any newWarrants.

 

**2.****            ****Certain Covenants of the Company****.**  TheCompany covenants and agrees as follows:

 

(a)           All Shares which may be issued upon theexercise of the rights represented by this Warrant (all such Shares, whetherpreviously issued or subject to issuance upon the exercise of this Warrant, arefrom time to time referred to herein as “Warrant Shares”) will, upon issuance,be duly authorized and issued, fully paid and nonassessable and free from alltaxes, liens and charges with respect to the issuance thereof.

 

(b)           During the period within which the rightsrepresented by this Warrant may be exercised, and only insofar as the VestingSchedule herein permits the exercise of this Warrant, the Company will, at alltimes, have authorized and reserved free of preemptive or other rights for theexclusive purpose of issuance upon exercise of the purchase rights evidenced bythis Warrant, a sufficient number of Shares to provide for the exercise ofrights represented by this Warrant.

 

(c)           The Company will not, by amendment orrestatement of the Articles of Incorporation or through any reorganization, transfer of assets,consolidation, merger, issuance or sale of securities or otherwise, avoid or takeany action which would have the effect of avoiding the performance of any ofthe terms to be performed hereunder by the Company, but will at all times ingood faith carry out all of the provisions of this Warrant and take all suchaction as may be necessary or appropriate to protect the rights of the Holderagainst dilution or other impairment and, in particular, will not permit thepar value of any Share to be or become greater than the then effective ExercisePrice.

 

**3.****            ****Definition of Shares****.**  Asused herein, the term “Shares” shall mean and include shares of the CommonStock, par value $.02 per share, of the Company as are constituted and exist onthe date hereof, and shall also include any other class of the capital stock ofthe Company hereafter authorized which shall neither be limited to a fixed sumor percentage of par value in respect to the rights of the holders thereof toreceive dividends and to participate in the distribution of assets upon thevoluntary or involuntary liquidation, dissolution or winding up of the Company,nor be subject at any time to redemption by the Company; provided that theShares receivable upon exercise of this Warrant shall include only Shares ofthe type as are constituted and exist on the date hereof or Shares resultingfrom any reclassification of the Shares as provided for in paragraph (C) of theProvisions as to Adjustment.

 

**4.****            ****No Rights or Liabilities as aShareholder****.**  ThisWarrant shall not entitle the Holder as such to any rights whatsoever,including, without limitation, voting rights, as a holder of Shares of theCompany.  No provisions hereof, in theabsence of affirmative action by the Holder to purchase Shares, and no mereenumeration

 

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herein of the rights orprivileges of such holder, shall give rise to any liability of such holder as aholder of Shares of the Company, regardless of who may assert such liability.

 

**5.****            ****Restrictions on Transfer****.**

 

(a)           This Warrant shall not be exercisable by atransferee hereof and/or transferable and the Warrant Shares shall not betransferable except upon the conditions specified in this Section 5, whichconditions are intended, among other things, to ensure compliance with theprovisions of the Securities Act of 1933, as amended, and the rules andregulations of the Securities and Exchange Commission (the “Commission”)thereunder (collectively the “Securities Act”), in respect of the exerciseand/or transfer of this Warrant and/or transfer of such Warrant Shares.

 

(b)           This Warrant and the Warrant Shares shall notbe transferable (except for a transfer of this Warrant or the Warrant Shares inan offering registered under the Securities Act, including, without limitation,a transfer in a registered offering effected pursuant to Section 6, and anysubsequent transfer) unless, prior to any transfer, the Holder shall havereceived from its transferee reasonable assurances that such person is awarethat this Warrant and the Warrant Shares have not been registered under theSecurities Act and that such person is acquiring this Warrant or the WarrantShares for investment only and not with the view to the disposition or publicoffering thereof (unless in an offering registered under the Securities Act orexempt therefrom), and that such person is aware that the stock certificatesevidencing the Warrant Shares shall bear a legend restricting transfer anddisposition thereof in accordance with the Securities Act unless, in theopinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant(other than a transfer in an offering registered under the Securities Act,including, without limitation, a transfer in a registered offering effectedpursuant to Section 6, and any subsequent transfer), the Holder shall providean opinion of counsel, who shall be reasonably satisfactory to the Company,that an exemption from the registration requirements of the Securities Act isavailable.

 

(c)           Any permitted subsequent holder of thisWarrant shall be subject to all the terms and conditions herein, and shallacknowledge, in writing, upon receipt of this Warrant his or her acceptance ofthe terms and conditions herein.

 

(d)           To facilitate sales by a holder of thisWarrant or Warrant Shares in transactions qualifying under Rule 144 promulgatedby the Commission under the Securities Act, if available, the Company agrees tosatisfy the current public information requirements of said Rule 144, for aslong 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 withsuch other information as such holder may require for compliance with theprovisions of said Rule 144.

 

**6.****            ****Registration Under Securities Act****.**

 

(a)           If the Company, at any time, proposes toregister any issuance of its securities under the Securities Act (other than aregistration on Form S-8 in connection with an employee stock purchase oroption plan or on Form S-4 in connection with mergers, acquisitions or exchangeofferings), the Company will at such time give prompt written notice to theholder hereof and to the holders of all other Warrant Shares issuable from anyoutstanding Warrants (such holders are hereinafter referred to as the “ProspectiveSellers” or, individually, as a “Prospective Seller”) of its intention to doso.  Upon the written request of aProspective Seller, given within 30 days after receipt of any such notice(which request shall state the intended method of disposition of the WarrantShares to be transferred by such Prospective Seller), the Company shall use itsbest efforts to cause all Warrant Shares, the holders of which (or of theWarrants to which the same are related), to the extent vested in accordancewith the Vesting Schedule, shall have so requested registration of the transferthereof, to be registered under the Securities Act, all to the extent requisiteto permit the sale or other disposition (in accordance with the intended methodthereof as aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section6(a) shall not be effective with respect to the Prospective Seller in the caseof an underwritten public offering of securities of the Company by the Companyunless each Prospective Seller agrees to the terms and conditions, includingunderwriting discounts and allowances, specified by the managing underwriter ofsuch offering with respect to such Warrant Shares.  The Company shall have the right to reducethe number of Warrant Shares of the Prospective Sellers to be included in aregistration statement pursuant to the exercise of the rights granted by thisSection 6(a) if, and to the extent, that the managing underwriter of suchoffering is of the good faith opinion, supported by written reasons therefor,that the inclusion of such Warrant Shares would materially and adversely

 

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affect the marketing of thesecurities of the Company to be offered; provided, that any such reduction ofthe number of Warrant Shares, the transfer of which is to be registered onbehalf of the Prospective Sellers, shall be made on the basis of a pro ratareduction of all Warrant Shares of all Prospective Sellers.

 

If and whenever the Companyis required by the provisions of this Section 6 to use its best efforts toeffect the registration of any transfer of Warrant Shares under the SecuritiesAct, the Company will, as expeditiously as possible,

 

(i)            prepare and file with the Commission aregistration statement with respect to such transfer and use its best effortsto cause such registration statement to become and remain effective, but notfor any period longer than nine months;

 

(ii)           prepare and file with the Commission suchamendments and supplements to such registration statement and the prospectusused in connection therewith as may be necessary to keep such registrationstatement effective, and to comply with the provisions of the Securities Act withrespect to the transfer of all securities covered by such registrationstatement, including, without limitation, taking all necessary actions wheneverthe Prospective Sellers of the Warrant Shares covered by such registrationstatement shall desire to dispose of the same;

 

(iii)          furnish to each Prospective Seller suchnumber of copies of a prospectus, including a preliminary prospectus, inconformity with the requirements of the Securities Act, and such otherdocuments, as such Prospective Seller may reasonably request in order tofacilitate the disposition of the Warrant Shares owned by such ProspectiveSeller and covered by such registration statement;

 

(iv)          use its best efforts to register or qualifythe securities covered by such registration statement under such othersecurities or blue sky laws of such jurisdictions as each Prospective Sellershall request, and use its best efforts to do any and all other acts and thingswhich may be reasonably necessary to enable such Prospective Seller to consummatethe disposition in such jurisdiction of the Warrant Shares owned by suchProspective Seller and covered by such registration statement; provided that,notwithstanding the foregoing, the Company shall not be required to register inany jurisdiction as a broker or dealer of securities or to grant its consent toservice of process in any such jurisdiction solely on account of such intendeddisposition by such Prospective Seller;

 

(v)           furnish to the Prospective Sellers, whoseintended dispositions are registered, a signed copy of an opinion of counselfor the Company, in form and substance acceptable to such Prospective Sellers,to the effect that: (A) a registration statement covering such dispositions ofWarrant Shares has been filed with the Commission under the Securities Act andhas been made effective by order of the Commission, (B) such registrationstatement and the prospectus contained therein and any amendments orsupplements thereto comply as to form in all material respects with therequirements of the Securities Act, and (C) to the best of such counsel’sknowledge, no stop order has been issued by the Commission suspending theeffectiveness of such registration statement and no proceedings for theissuance of such a stop order are threatened or contemplated;

 

(vi)          furnish to the Prospective Sellers whoseintended dispositions are required a blue sky survey in the form and of thesubstance customarily prepared by counsel for the Company and accepted bysellers of securities in similar offerings, discussing and describing theapplication provisions of the securities or blue sky laws of each state orjurisdiction in which the Company shall be required, pursuant to Section6(c)(iv), to register or qualify such intended dispositions of such WarrantShares, or, in the event counsel for the underwriters in such offering shall bepreparing a blue sky survey, cause such counsel to furnish such survey to, andto allow reliance thereon by, such Prospective Sellers;

 

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(vii)         otherwise use its best efforts to comply withall applicable rules and regulations of the Commission under the Securities Actand the Exchange Act, insofar as they relate to such registration and suchregistration statement; and

 

(viii)        use its best efforts to list such WarrantShares on any securities exchange on which any securities of the Company arethen listed or to admit such Warrant Shares for trading in any national marketsystem in which any securities of the Company are then admitted for trading, ifthe listing or admission of such securities is then permitted under the rulesof such exchange or system.

 

(b)           With respect to the registration by theCompany of transfers of Warrant Shares under the Securities Act pursuant toSection 6(a), the Company shall pay all expenses incurred by it in complyingwith this Section 6 (including, without limitation, all registration and filingfees, printing expenses, blue sky fees and expenses, costs and expenses ofaudits, and reasonable fees and disbursements of counsel for the Company andone special counsel designated by Prospective Sellers owning a majority of theWarrant Shares covered by such registration, but specifically excluding anyunderwriting discounts and allowances that are allocable to the Warrant Sharesbeing sold by, and which shall be paid by, the Prospective Sellers; provided,however, that if any registration statement filed with the Commission by theCompany under Section 6(a) shall not be declared effective by the Commission,such attempted registration shall not constitute a registration under thisSection 6(b).

 

(c)           It shall be a condition precedent to theobligations of the Company to take any action pursuant to this Section 6 thateach Prospective Seller, the transfer of whose Warrant Shares is registered orto be registered under each such registration, shall furnish to the Companysuch written information regarding the securities held by such ProspectiveSeller as the Company shall reasonably request and as shall be required in connectionwith the action to be taken by the Company.

 

(d)           (i)           In the event of any registration of anytransfer of Warrant Shares under the Securities Act pursuant to this Section 6,the Company will indemnify and hold harmless each Prospective Seller of suchsecurities, each of its officers, directors and partners, and each otherperson, if any, who controls such Prospective Seller within the meaning of theSecurities Act, and each underwriter, if any, who participates in the offeringof such securities, against any losses, claims, damages or liabilities (oractions in respect thereof), joint or several, to which each ProspectiveSeller, officer, director or partner, controlling person or underwriter maybecome subject under the Securities Act or otherwise, insofar as such losses,claims, damages or liabilities (or actions in respect thereof) arise out of orare based upon any untrue statement or alleged untrue statement of any materialfact contained, on the effective date thereof, in any registration statementunder which such transfer of securities was registered under the SecuritiesAct, any preliminary prospectus or final prospectus contained therein, or anyamendment or supplement thereto, or arise out of or are based upon the omissionor alleged omission to state therein a material fact required to be statedtherein or necessary to make the statements therein not misleading, or anyviolation by the Company of the Securities Act, and will reimburse suchProspective Seller and each of its officers, directors and partners, and eachsuch controlling person or underwriter, for any legal or any other expensesreasonably incurred by such Prospective Seller or its officers, directors andpartners or controlling persons or by each such underwriter, in connection withinvestigating or defending any such loss, claim, damage, liability or action;provided, however, that the Company will not be liable in any such case to theextent that any such loss, claim, damage or liability arises out of or is basedupon an untrue statement or alleged untrue statement or omission or allegedomission made in such registration statement, preliminary prospectus orprospectus or such amendment or supplement in reliance upon and in conformitywith written information furnished to the Company through an instrument dulyexecuted by such Prospective Seller specifically for use in the preparationthereof.  In the event of anyregistration by the Company or any transfer of securities under the SecuritiesAct pursuant to this Section 6, each Prospective Seller of Warrant Sharescovered by such registration will indemnify and hold harmless the Company, eachother person, if any, who controls the Company within the meaning of theSecurities Act and each officer and director of the Company and the otherProspective Sellers to the same extent that the Company agrees to indemnify it,but only with respect

 

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tothe written information relating to such Prospective Seller furnished to theCompany by such Prospective Seller aforesaid

 

(ii)          Each indemnified party shall, as promptly aspracticable upon receipt of notice of the commencement of any action againstsuch indemnified party or its officers, directors or partners, or anycontrolling person of such indemnified party, in respect of which indemnity maybe sought from an indemnifying party on account of the indemnity agreementcontained in Section 6(d)(i), notify the indemnifying party in writing of thecommencement thereof.  The omission ofsuch indemnified party to so notify the indemnifying party of any such actionshall not relieve the indemnifying party from any liability which it may haveon account of the indemnity agreement contained in Section 6(d)(i) to theextent that the failure to receive such notice within a reasonable period oftime shall not have caused harm, loss or damage to the indemnifying party,provided that, conversely, if such failure to receive notice shall have causedany harm, loss or damage to the indemnifying party, such failure shallconstitute a defense to any liability which such indemnifying party may have onaccount 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, itsofficers, directors and partners, or any such controlling person, and suchindemnified party shall notify the indemnifying party of the commencementthereof, the indemnifying party shall be entitled to participate in (and, tothe extent that the indemnifying party shall wish, to direct) the defensethereof at the indemnifying party’s own expense, in which event the defenseshall be conducted by recognized counsel chosen by the indemnifying party andapproved by the indemnified party (whose approval shall not unreasonably bewithheld) and the indemnified party may participate in such defense at its ownexpense (unless it is advised by counsel that actual or potential differinginterests or defenses exist or may exist, in which case such expenses shall bepaid by the indemnifying party, provided that the indemnifying party shall notbe required to pay the expenses for more than one counsel for all suchindemnified parties).

 

**7.****            ****Transfer; Ownership****.** Subject to Section 5, this Warrant and all rights hereunder aretransferable, in whole or in part, at the office or agency of the Companyreferred to in Section 1 by the Holders in person or by a duly authorizedattorney, upon surrender of this Warrant, with an assignment, acceptable to theCompany, duly completed, at which time a new Warrant shall be made anddelivered by the Company, of the same tenor as this Warrant but registered inthe name of the transferee.  The Holder,by taking or holding the same, consents and agrees that this Warrant, whenendorsed in blank, shall be deemed negotiable, and that the Holder, when thisWarrant shall have been so endorsed, may be treated by the Company and allother persons dealing with this Warrant as the absolute owner hereof for anypurpose and as the person entitled to exercise the rights represented by thisWarrant and to transfer this Warrant on the books of the Company, any notice tothe contrary notwithstanding; but until such transfer on such books, theCompany may treat the registered the Holder as the owner hereof for allpurposes.  Any transfer of this Warrantshall be made in compliance with the Securities Act and any applicable statesecurities or blue sky laws.

 

**8.****            ****Exchange and Replacement****.** Subject to Section 7, this Warrant is exchangeable, upon the surrenderhereof by the Holder at the office or agency of the Company referred to inSection 1, for new Warrants of like tenor and date representing in theaggregate the right to purchase the number of Shares which may be purchasedhereunder, each of such new Warrants to represent the right to purchase suchnumber of Shares as shall be designated by the Holder at the time of suchsurrender.  Upon receipt by the Company,at the office or agency referred to in Section 1, of evidence reasonably satisfactoryto it of the loss, theft or destruction of this Warrant and of indemnity orsecurity reasonably satisfactory to it (provided that the written indemnity ofthe Holder shall be deemed reasonably satisfactory to the Company for suchpurposes), the Company will deliver a new Warrant of like tenor and date inreplacement of this Warrant.  ThisWarrant shall be promptly canceled by the Company upon the surrender hereof inconnection with any transfer, exchange or replacement.  The Company will pay all expenses and chargespayable in connection with the preparation, execution and delivery of Warrantspursuant to Section 7 and this Section 8.

 

**9.****            ****Notices****.**  Anynotice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent bycertified or registered mail to, 20383 Wildcat Run Drive, Estero, Florida33928, or to such other address as shall have been furnished to the Company inwriting by the Holder.  Any notice

 

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or other document required orpermitted to be given or delivered to the Company shall be delivered at, orsent by certified or registered mail to, 633 Seventeenth Street, Suite 1550,Denver, Colorado 80202, or to such other address as shall have been furnishedin writing to the Holder by the Company. Any notice so addressed and mailed by registered or certified mail orotherwise delivered, shall be deemed to be given when actually received by theaddressee.

 

**10.****         ****GOVERNING LAW****.    THISWARRANT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE LAWS OF THE STATE OF TEXAS.**

 

**11.****         ****Miscellaneous****.**  ThisWarrant will be binding upon any entity succeeding to the Company byconsolidation or acquisition of all or substantially all of the Company’sassets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may bechanged, waived, discharged or terminated only by an instrument in writingsigned by the party (or any predecessor in interest thereof) against whomenforcement of the same is sought.  Theheadings in this Warrant are for purposes of reference only and shall notaffect the meaning or construction of any of the provisions hereon.

 

**INWITNESS WHEREOF**,Tipperary Corporation has caused this Warrant to be signed by its dulyauthorized officers, under its corporate seal, to be dated April 27, 2005.

 
|                 | **TIPPERARY  CORPORATION**            |
|----------------------|---------------------------------------|
|                 |                                  |
|                 |                                  |
| ** **           | **BY:**                               | **/s/ David L. Bradshaw** |
|                 | **ITS:**                              | President |
| **CORPORATE  SEAL)** |                                  |
|                 |                                  |
| **ATTEST:**          | **  /s/  Elaine R. Treece** | ** ** |   |
| **ITS:**             | Secretary                             |   |
|                      |                                       |  |  |  |

 

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Annex1

 

TIPPERARYCORPORATION

 

PROVISIONSAS TO ADJUSTMENT OFEXERCISE PRICE AND NUMBER OF SHARESISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and thenumber of Shares issuable upon the exercise of the annexed Warrant to purchaseshares of TIPPERARY CORPORATION, a Texas corporation (herein and in thisWarrant referred to as the “Company”), shall be subject to adjustment from timeto time as hereinafter provided; that in no event shall the Exercise Price beincreased to a price greater than Four Dollars and 95/100 ($4.95) per Share,except as provided by paragraph (C). Upon each adjustment of the Exercise Price, the Holder shall thereafterbe entitled to purchase, at the Exercise Price resulting from such adjustment,the number of Shares obtained by multiplying the number of Shares purchasablepursuant hereto immediately prior to such adjustment by a fraction, thenumerator of which is the Exercise Price in effect immediately prior to suchadjustment and the denominator of which is the Exercise Price resulting fromsuch adjustment.  In making theadjustments to the Exercise Price and the number of Shares issuable upon theexercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue orsell any Shares for consideration per Share that is less than the ExercisePrice in effect immediately prior to the time of such issue or sale at lessthan the Market Price (as hereinafter defined) of such Shares on the date ofsuch issue or sale, then forthwith upon such issue or sale the Exercise Pricein effect immediately prior thereto shall be adjusted to an amount (calculatedto 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 salemultiplied by the Exercise Price in effect immediately prior to such issue orsale, and (b) the consideration, if any, received by the Company upon suchissue or sale by (ii) the total number of Shares outstanding immediately aftersuch issue or sale; provided, however, that no adjustment shall be madehereunder by reason of:

 

(i)    thegrant of this Warrant or the issuance of Shares upon the exercise of thisWarrant or any other outstanding Warrant;

 

(ii)       the grant by the Company of options topurchase shares in connection with any purchase or option plan for the benefitof employees of the Company, or any affiliates or subsidiaries thereof; or

 

(iii)      the issuance (whether directly or byassumption in a merger or otherwise) or sale (including any issuance or sale toholders of Shares) of any securities convertible into or exchangeable forShares (such convertible or exchangeable securities are herein referred to as “ConvertibleSecurities”), or the grant of rights to subscribe for or to purchase, or ofoptions for the purchase of (including any grant of such rights or options toholders of shares, other than pursuant to a dividend on Shares), Shares ofConvertible Securities, regardless of whether the right to convert or exchangesuch Convertible Securities or such rights or options are immediatelyexercisable.

 

No adjustment of the Exercise Price shall berequired to be made by the Company and no notice hereunder must be given if theamount of any required adjustment is less than 5% of the Exercise Price.  In such case any such adjustment shall becarried forward and shall be made (and notice thereof shall be given hereunder)at the time of and together with the next subsequent adjustment which, togetherwith any adjustment so carried forward, shall amount to not less than 5% of theExercise Price.

 

(B)           For the purposes of paragraph (A), thefollowing provisions (i) through (vi), inclusive, shall also be applicable:

 

(i)            If, at the time Shares are issued and soldupon the conversion or exchange of Convertible Securities or upon the exerciseof rights or options previously granted by the Company, the price per Share forwhich such Shares are issued (determined by dividing (a) the total amount, ifany, received by the Company as consideration for such Convertible Securitiesor for the granting of such rights or options, plus the aggregate amount ofadditional consideration paid to the Company upon the conversion or exchange ofsuch Convertible Securities (which, if so provided in such ConvertibleSecurities, shall be deemed to be equal to the outstanding principal amount ofthe indebtedness represented by such Convertible Securities) or upon theexercise of such rights or options, by (b) the total number of Shares issuedupon the conversion or exchange of such Convertible

 

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Securities or upon theexercise of such rights or options shall be less than the Exercise Price ineffect immediately prior to such issue, sale or exercise, then the adjustmentsprovided for by the first paragraph of this Annex 1 and paragraph (A) shall bemade.  In making the adjustment of theExercise Price provided for by paragraph (A), the amount described in clause(a) of this paragraph (B)(i) shall be considered the consideration received bythe 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 ConvertibleSecurities or any rights or options to purchase any Shares or Convertible Securitiesshall be issued or sold for cash, the consideration received therefor shall bedeemed to be the amount received by the Company therefor without deductiontherefrom of any expenses incurred or any underwriting commissions orconcessions paid or allowed by the Company in connection therewith.  In case any Shares or Convertible Securitiesor any rights or options to purchase any Shares or Convertible Securities shallbe issued or sold, in whole or in part, for consideration other than cash, theamount of the consideration other than cash received by the Company in exchangefor the issue or sale of such Convertible Securities shall be deemed to be thefair value of such consideration as determined in good faith by the Board ofDirectors of the Company, without deduction therefrom of any expenses incurredor any underwriting commissions or concessions paid or allowed by the Companyin connection therewith; provided that if the holder or holders of at least66-2/3% of the Warrant Shares purchasable under this Warrant shall request inwriting, the value of such consideration shall be determined by an independentexpert selected by such holders, the costs and expenses of which shall be borneby the Company, and, if the value of such consideration as so determined isless than the value determined by the Board of Directors of the Company, thelesser value shall be utilized in calculating the consideration per Sharereceived by the Company for purposes of making the adjustment provided byparagraph (A).  In the event of anymerger or consolidation of the Company in which the Company is not thesurviving corporation or in the event of any sale of all or substantially allof the assets of the Company outside of the ordinary course of business of theCompany for stock or other securities of any corporation, the Company shall bedeemed to have issued a number of Shares for stock or securities of such othercorporation computed on the basis of the actual exchange ratio on which thetransaction was predicated and for consideration that is equal to the fairmarket value on the date of such transaction of such stock or securities of theother corporation, and if any such calculation results in adjustment of theExercise Price, the determination of the number of Shares issuable uponexercise of this Warrant immediately prior to such merger, consolidationor  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 giventime shall not include Shares that have been redeemed by the Company and notcanceled, if any, and that are thus owned or held by or for the account of theCompany, and the disposition of any such Shares shall be considered an issue orsale 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 nationalsecurities exchange on which the Shares are listed or in a national marketsystem for securities in which the Shares are admitted to trading or (b) theaverage of the closing bid and asked prices of Shares reported in the domesticover-the-counter market, for the 20 trading days immediately prior to the dayas of which the Market Price is being determined.  If the Shares are not listed on any nationalsecurities exchange or admitted for trading in any national market system ortraded in the domestic over-the-counter market, the Market Price shall be thehigher of (y) the book value of the Shares as determined by a firm ofindependent public accountants of recognized standing selected by the Board ofDirectors of the Company as of the last day of any month ending within 60 dayspreceding the date as of which the determination is to be made or (z) the fairmarket value of the Shares determined in good faith by the Board of Directorsof the Company,

 

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provided that if the holderor holders of at least 66-2/3% of the Warrant Shares purchasable under theWarrant shall request in writing, the fair market value of the Shares shall bedetermined by an independent investment banking firm or other independentexpert selected by such holders and reasonably satisfactory to the Company,which determination shall be as of a date which is within 15 days of the dateas of which the determination is to be made.

 

(v)           Anything herein to the contrarynotwithstanding, in case the Company shall issue any Shares in connection withthe acquisition by the Company of the stock or assets of any other corporationor the merger of any other corporation into the Company under circumstanceswhere, on the date of the issuance of such Shares, the consideration receivedfor such Shares is less than the Market Price of the Shares, but on the date thenumber of Shares was determined, the consideration received for such Shareswould not have been less than the Market Price thereof, such Shares shall notbe deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)to the contrary notwithstanding, in the case of an acquisition where all orpart of the purchase price is payable in Shares or Convertible Securities butis stated as a dollar amount, where the Company upon making the acquisitionpays only part of a maximum dollar purchase price which is payable in Shares orConvertible Securities and where the balance of such purchase price is deferredor is contingently payable under a formula related to earnings over a period oftime, (a) the consideration received for any Shares or Convertible Securitiesdelivered at the time of the acquisition shall be deemed to be such part of thetotal consideration as the portion of the dollar purchase price then paid inShares or Convertible Securities bears to the total maximum dollar purchaseprice payable in Shares or Convertible Securities and (b) in connection witheach issuance of additional Shares or Convertible Securities pursuant to theterms of the agreement relating to such acquisition, the consideration receivedshall be deemed to be such part of the total consideration as the portion ofthe dollar purchase price then and theretofore paid in Shares or ConvertibleShares bears to the total maximum dollar purchase price payable in Shares orConvertible Securities multiplied by a fraction, the numerator of which shallbe the number of Shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then issued and the denominator of which shall be thetotal number of shares (or in the case of Convertible Securities other thancapital stock of the Company, the aggregate principal amount of suchConvertible Securities) then and theretofore issued under such acquisitionagreement.  In the event only a part ofthe purchase price for an acquisition is paid in Shares or ConvertibleSecurities in the manner referred to in this clause (vi), the term “totalconsideration” as used in this clause (vi) shall mean that part of theaggregate consideration as is fairly allocable to the purchase price paid inShares 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 shallsubdivide its outstanding Shares into a greater number of Shares, then from andafter the record date for such subdivision the Exercise Price in effectimmediately prior to such subdivision shall be proportionately reduced and thenumber of Shares purchasable upon the exercise of this Warrant shall becorrespondingly increased, and, conversely, in case the outstanding Sharesshall be combined into a smaller number of Shares, then from and after therecord date for such combination the Exercise Price in effect immediately priorto such combination shall be proportionately increased and the number of Sharespurchasable upon the exercise of this Warrant shall be correspondinglydecreased.

 

(D)          Unless the provisions of paragraph (E) apply,if any capital reorganization or reclassification of the capital stock of theCompany, or consolidation or merger of the Company with another corporation, orsale of all or substantially all of its assets to another corporation outsideof the ordinary course of business, shall be effected in such a way thatholders of Shares (or any other securities of the Company then issuable uponthe exercise of this Warrant) shall be entitled to receive stock, securities orassets with respect to or exchange for Shares (or such other securities) then,as a condition of such reorganization, reclassification, consolidation, mergeror sale, lawful and adequate provision shall be made whereby the Holder shallthereafter have the right to purchase and receive upon the basis and upon theterms and conditions specified in this Warrant and in lieu of the Shares (orother securities) of

 

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the Company immediatelytheretofore purchasable and receivable upon the exercise of the rightsrepresented hereby, such shares of stock, securities or assets as may be issuedor 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 anysuch case appropriate provision shall be made with respect to the rights andinterests of the holder of this Warrant to the end that the provisions hereof(including, without limitation, provisions for adjustment of the Exercise Priceand of the number of Shares (or other securities) purchasable upon the exerciseof this Warrant and for the registration thereof as provided in Section 6 ofthis Warrant) shall thereafter be applicable, as nearly as may be, in relationto any shares of stock, securities or assets thereafter deliverable upon theexercise hereof (including an immediate adjustment, by reason of suchconsolidation, merger or sale, of the Exercise Price to the value of the Shares(or other securities) reflected by the terms of such consolidation, merger orsale if the value so reflected is less than the Exercise Price in effectimmediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger ofthe Company with or into another corporation as a result of which a greater orlesser number of securities of the surviving corporation are issuable toholders of Shares in respect of the number of Shares outstanding immediatelyprior to such consolidation or merger, then the Exercise Price in effectimmediately prior to such consolidation or merger shall be adjusted in the samemanner as though there were a subdivision or combination of the outstandingShares.  The Company shall not effect anysuch consolidation, merger or sale, unless prior to or simultaneously with theconsummation thereof the surviving or successor corporation (if other than theCompany) resulting from such consolidation or merger of the corporation purchasingsuch assets shall assume, by written instrument executed and mailed to theregistered Holder at the last address of such holder appearing on the books ofthe Company, the obligation to deliver to such holder such Shares of stock,securities or assets as, in accordance with the foregoing provisions, suchholder may be entitled to purchase, and containing the express assumption ofsuch surviving or successor corporation of the due performance of everyprovision of this Warrant to be performed by the Company and of all liabilitiesand obligations of the Company hereunder.

 

(E)           In the event of a change in control of theCompany, as defined in this paragraph (E), then the Board of Directors shallaccelerate the exercise date of the Warrant or make this Warrant fully vestedand exercisable and, in its sole discretion, may take any or all of thefollowing actions: (a) grant a cash bonus award to any holder of this Warrantin an amount necessary to pay the Exercise Price of all or any portion of theWarrant then held by such person; (b) pay cash to any holder of this Warrant inexchange for the cancellation of the holder’s Warrant in an amount equal to thedifference between the Exercise Price of such Warrant and the greater of thetender offer price for the underlying Shares or the Market Price of the Shareson the date of the cancellation of the Warrant; and (c) make any otheradjustments or amendments to this Warrant. For purposes of this paragraph (E), a “change in control” shall bedeemed to have occurred if (a) any “person” or “group” (within the meaning ofSections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended(“1934 Act”), other than a trustee or other fiduciary holding securities underan employee benefit plan of the Company is or becomes the “beneficial owner”(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of morethan 50% of the then outstanding voting stock of the Company; or (b) at anytime during any period of three consecutive years after the date of thisWarrant, individuals who at the beginning of such period constitute the Board(and any new director whose election by the Board or whose nomination forelection by the Company’s stockholders was approved by a vote of at leasttwo-thirds of the directors then still in office who either were directors atthe beginning of such period or whose election or nomination for election waspreviously so approved) cease for any reason to constitute a majority thereof;or (c) the stockholders of the Company approve a merger or consolidation of theCompany with any other corporation, other than a merger or consolidation whichwould result in the voting securities of the Company outstanding immediatelyprior thereto continuing to represent (either by remaining outstanding or bybeing converted into voting securities of the surviving entity) at least 50% ofthe combined voting power of the voting securities of the Company or suchsurviving entity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay anydividend on or make any other distribution with respect to Shares (or any othersecurities of the Company then issuable upon the exercise of the Warrant) thatis payable in Shares, Convertible Securities, any other securities of theCompany 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 Sharesissuable upon the exercise of this Warrant, the holder of this Warrant, uponany exercise of the rights represented hereby, shall be entitled to receive thenumber 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 any company or other stock, securities or assets which theholder of this Warrant would have received by way of such distributions ifcontinuously since the date of the Warrant (or, if this Warrant shall have beenissued pursuant to Section 7 of this Warrant, the date of the predecessorWarrant to which this Warrant relates) such holder had been the record holderof the number of Shares (or other securities), then being purchased and hadretained all such

 

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Shares, Convertible Securities,other securities of the Company or other stock, securities or assetsdistributable with respect to such Shares (or other securities) and,furthermore, all cash, stock, securities or assets payable as dividends ordistributions with respect to the foregoing and originating directly orindirectly therefrom.  The Company shallreserve 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 respectthereto 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 tothe Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason ofaction taken by the Company, which in the good faith opinion of the Board ofDirectors of the Company, are not adequately covered by the provisions of thisAnnex 1, and which might materially adversely affect the rights of the holderof this Warrant, the Company shall appoint a firm of independent publicaccountants of recognized standing (which may be the regular accountants orauditors 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 theexercise of this Warrant, or other change in the rights of the Holder, on abasis consistent with the other provisions of this Annex 1, necessary topreserve without diminution the rights of the Holder.  Upon receipt of such opinion, the Companyshall forthwith make the adjustments described therein.

 

(H)          (i)        Within ten (10) days of any adjustment of theExercise Price or change in the number of Shares purchasable upon the exerciseof this Warrant made pursuant to paragraphs (A), (B), (C) , or (F) or anychange in the rights of the holder of this Warrant by reason of the occurrenceof events described in paragraphs (D), (E), or (F), the Company shall givewritten notice by certified or registered mail to the registered holder of thisWarrant at the address of such holder as shown on the books of the Company,which notice shall describe the event requiring such adjustments (with respectto any adjustment made pursuant to paragraphs (C), (D), (E) or (F), theExercise Price resulting from such adjustment, the increase or decrease, ifany, in the number of Shares purchasable upon the exercise of this Warrant, orthe other change in the rights of such holder, and set forth in reasonabledetail the method of calculation of such adjustments and the facts upon whichsuch calculations are based.  Within two(2) days of receipt from the holder of this Warrant upon the surrender hereoffor exercise pursuant to Section 1 of this Warrant, and within three (3) daysof receipt from the Holder a written request therefor (which request shall notbe made more than once each calendar quarter), the Company shall give written noticeby certified or registered mail to such holder at his address as shown on thebooks of the Company of the Exercise Price in effect as of the date of receiptby the Company of this Warrant for exercise, or the date of receipt of suchwritten request, and the number of Shares purchasable or the number or amountof other shares of stock, securities or assets receivable as of such date, andset forth in reasonable detail the method of calculation of such numbers;provided that no further adjustments to the Exercise Price or the number ofShares purchasable or number or amount of shares, securities or assetsreceivable on exercise of this Warrant shall be made after receipt of thisWarrant by the Company for exercise.

 

(ii)           Upon each adjustment of the Exercise Priceand each change in the number of Shares purchasable upon the exercise of thisWarrant, and change in the rights of the holder of this Warrant by reason ofthe occurrence of other events herein set forth, then and in each case, uponwritten request of the holder of this Warrant (which request shall be made notmore often than once each calendar year), the Company will at its expensepromptly obtain an opinion of independent public accountants reasonablysatisfactory to each holder stating the then effective Exercise Price and thenumber of Shares then purchasable, or specifying the other shares of stock,securities or assets and the amount thereof then receivable, and setting forthin reasonable detail the method of calculation of such numbers and the factsupon which such calculations are based. The Company will promptly mail a copy of such opinion to the registeredHolder.

 

(I)            In case at any time:

 

(i)        The Company shall pay any dividend payable in capital stock on itsoutstanding Shares or make any distribution (other than regular cash dividends)to the holders of Shares;

 

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(ii)       The Company shall offer for subscription pro rata to the holders ofShares any additional capital stock or other rights;

 

(iii)      There shall be authorized any capital reorganization orreclassification of the capital stock of the Company, or consolidation ormerger of the Company with, or sale of all or substantially all of its assetsto, another corporation; or

 

(iv)      There shall be authorized or commence a voluntary or involuntarydissolution, liquidation or winding up of the Company then, in one or more ofsaid cases, the Company shall given written notice by certified or registeredmail to Holder at the address of Holder as shown on the books of the Company onthe date on which (1) the books of the Company shall close or a record shall betaken for such dividend, distribution, or subscription rights, or (2) suchreorganization, reclassification, consolidation, merger, sale, dissolution,liquidation or winding up shall take place or be voted upon by the shareholdersof the Company, as the case may be.  Suchnotice shall also specify the date as of which the holders of record of Sharesshall participate in such dividend, distribution or subscription rights, orshall be entitled to exchange their Shares for securities or other propertydeliverable upon such reorganization, reclassification, consolidation, merger,sale, dissolution, liquidation or winding up, as the case may be.  Such written notice shall be given at leastthirty (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 areclosed in respect thereto.

 

6

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EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered HolderDesiring to Exercise the Within Warrant ofTIPPERARY CORPORATION

 

The undersigned registeredholder hereby exercises the right to purchase                                   Shares covered by the within Warrant according to the conditions thereof, andherewith makes payment of the Exercise Price of such Shares, $                          .

 
| Name  of Registered Holder:    |   |   |   |
|--------------------------------|--------|--------|--------|
|                           |   |
| Signature:                     |   |   |   |
|                           |   |
| Title  of Signing Officer      |   |
| or  Agent (if any):            |   |   |   |
|                           |   |
|                           |   |
| Address  of Registered Holder: |   |   |   |
|                           |   |   |   |
|                           |   |   |   |
|                           |   |
| Tax  I.D. No.:                 |   |   |   |
|                           |   |
| Dated:                         |   | ,  20  |   |   |   |
|                                |        |        |        |  |  |  |  |  |  |  |  |

 

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