Exhibit
4.79(e)


 


SECURITY
AGREEMENT


 


THIS SECURITY AGREEMENT (this “Agreement”) is made as of 9 June,
2004, by Tipperary CSG Inc., a Colorado corporation (“TCSG”), and
Tipperary Oil & Gas (Australia) Pty Limited (“Borrower”) (TCSG and
Borrower are sometimes collectively referred to herein as “Debtors” and
each individually as a “Debtor”) in favor of ANZ Fiduciary Services Pty
Ltd., as Security Trustee of the trust established under the Security Trust
Deed (described in the Facilities Agreement) (“Secured Party”).


 


W  I  T  N
E  S  S  E  T  H:


 


WHEREAS, Borrower, Tipperary Corporation (“TC”), Tipperary Oil
& Gas Corporation, (“TOGC”), Debtor, Slough Estates USA Inc. (“Slough”),
Slough Estates plc, Australia and New Zealand Banking Group Limited, as Agent,
and as Working Capital Facility Provider, BOS International (Australia)
Limited, as Technical Bank, Secured Party, each Security Beneficiary (as
defined below), Tipperary Pastoral Company Pty Ltd (“Pastoral”), each of the
parties listed as Hedge Providers, and each of the financial institutions
listed as financiers (collectively, the “Financiers”) are parties to the
Comet Ridge Project Facilities Agreement of even date herewith (as from time to
time amended, supplemented, or restated, the “Facilities Agreement”);
and


 


WHEREAS, pursuant to the Finance Documents further described in the
Facilities Agreement, Security Beneficiaries have agreed to extend credit to
Borrower; and


 


WHEREAS, in order to induce Security Beneficiaries to extend such
credit pursuant to the Finance Documents, Debtor has agreed to grant to Secured
Party, for the benefit of Security Beneficiaries, a security interest in the
Collateral as defined herein; and


 


WHEREAS, the Board of Directors of Debtor has determined that the
execution, delivery and performance of this Agreement may reasonably be
expected to benefit Debtor, directly or indirectly, and are in the best
interests of Debtor;


 


NOW, THEREFORE, in consideration of the premises and in order to induce
Security Beneficiaries to extend such credit under the Finance Documents,
Debtor hereby agrees with Secured Party, for the benefit of Security
Beneficiaries and Secured Party, as follows:


 

















 


ARTICLE I


 


Definitions and References


 


Section 1.1.  General
Definitions.  As used herein, the
terms “Agreement”, “TCSG”, “Debtor”, “Borrower”, “Pastoral” and “Facilities
Agreement” shall have the meanings indicated above, and the following terms
shall have the following meanings:


 


“Collateral” means all property, of whatever type, which is
described in Section 2.1 as being at any time subject to a security
interest granted hereunder to Secured Party.


 


“Commitment” means the agreement or commitment by Security
Beneficiaries to make loans or otherwise extend credit to Borrower under the
Finance Documents, and any other agreement, commitment, statement of terms or
other document contemplating the making of loans or advances or other extension
of credit by Security Beneficiaries or Secured Party to or for the account of
Borrower which is now or at any time hereafter intended to be secured by the
Collateral under this Agreement.


 


“Documents” means all “documents” (as defined in the UCC) or
other receipts covering, evidencing or representing inventory, equipment, or
other goods.


 


“Equipment” means all “equipment” (as defined in the UCC) in
whatever form, wherever located, and whether now or hereafter existing, and all
parts thereof, all accessions thereto, and all replacements therefor.


 


“Financiers” means the Persons who are from time to time
“Financiers” as defined in the Facilities Agreement.


 


“First Recalculation Date” has the meaning assigned to such term
in the Facilities Agreement.


 


“Guaranty” means that certain Guaranty of even date herewith
between TC, TOGC, TCGS and Slough as Guarantors and Secured Party as Guaranty
Trustee.


 


“Hedge Providers” means the Persons who are from time to time
“Hedge Providers” as defined in the Facilities Agreement.


 


“General Intangibles” means all “general intangibles” (as
defined in the UCC) of any kind (including choses in action, Software, Payment
Intangibles, Intellectual Property, tax refunds, insurance proceeds, warranty
claims and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of


 


2

















 


property, including all general intangibles under which an account
debtor’s principal obligation is a monetary obligation, all Revenue, and all
insurance policies related to the Comet Ridge Project.


 


“Instruments” means all “instruments”, “chattel paper” or
“letters of credit” (as each is defined in the UCC) and all Letter-of-Credit
Rights.


 


“Intellectual Property” means any registered and
unregistered name, trade mark, trade secret, know-how, patent, patent
application, discovery, invention, design, copyright, circuit layouts, plant
breeding rights or any similar or analogous right.


 


“Intercompany Debt” means all indebtedness and obligations now
or hereafter owed by Borrower, TCSG or Pastoral and any other Related Person to
Debtor.


 


“Inventory” means all “inventory” (as defined in the UCC) in all
of its forms, wherever located and whether now or hereafter existing, including
(a) all movable property and other goods held for sale or lease, all movable
property and other goods furnished or to be furnished under contracts of
service, all raw materials and work in process, and all materials and supplies
used or consumed in a business, (b) all movable property and other goods which
are part of a product or mass, (c) all movable property and other goods which
are returned to or repossessed by the seller, lessor, or supplier thereof, (d)
all goods and substances in which any of the foregoing is commingled or to
which any of the foregoing is added, and (e) all accessions to, products of,
and documents for any of the foregoing.


 


“Lien” means, with respect to any property or assets, any right
or interest therein of a creditor to secure obligations owed to it or any other
arrangement with such creditor which provides for the payment of such
obligations out of such property or assets or which allows such creditor to
have such obligations satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security
interest, pledge, deposit, production payment, rights of a vendor under any
title retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic’s or materialman’s lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business.  “Lien”
also means any filed financing statement, any registration of a pledge (such as
with an issuer of uncertificated securities), or any other arrangement or
action which serve to perfect a Lien described in the preceding sentence,
regardless of whether such financing statement is filed, such registration is
made, or such arrangement or action is undertaken before or after such Lien
exists.


 


“Letter-of-Credit Rights” means all rights to payment or
performance under a “letter of credit” (as defined in the UCC) whether or not
the beneficiary has demanded or is at the time entitled to demand payment or
performance.


 


“Operator” has the meaning assigned to such term in the
Facilities Agreement.


 


3

















 


“Other Interests” has the meaning assigned to such term in the
Facilities Agreement.


 


“Other Liable Party” means any Person, other than Debtor, who
may now or may at any time hereafter be primarily or secondarily liable for any
of the Secured Obligations or who may now or may at any time hereafter have
granted to Secured Party or Security Beneficiaries a Lien upon any property as
security for the Secured Obligations.


 


“Payment Intangibles” means all “payment intangibles” (as
defined in the UCC).


 


“Person” means an individual, corporation, general partnership,
limited partnership, limited liability company, association, joint stock
company, trust or trustee thereof, estate or executor thereof, court,
administrative agency, or any other legally recognizable entity.


 


“Proceeds” means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with
respect to) insurance in respect of, such property (regardless of whether
Secured Party is named a loss payee thereunder), and any payments paid or owing
by any third party under any indemnity, warranty, or guaranty with respect to
such property, and any condemnation or requisition payments with respect to
such property, in each case whether now existing or hereafter arising.


 


“Project Assets” has the meaning assigned to such term in the
Facilities Agreement.


 


“Project Support Deed” means that certain Project Support Deed
of even date herewith among Debtors, TC and TOGC, as from time to time amended,
modified or restated.


 


“Receivables” means (a) all “accounts” (as defined in the UCC)
and all other rights to payment for goods or other personal property which have
been (or are to be) sold, leased, or exchanged or for services which have been
(or are to be) rendered, regardless of whether such accounts or other rights to
payment have been earned by performance and regardless of whether such accounts
or other rights to payment are evidenced by or characterized as accounts
receivable, contract rights, book debts, notes, drafts or other obligations of
indebtedness, (b) all Documents and Instruments of any kind relating to such
accounts or other rights to payment or otherwise arising out of or in
connection with the sale, lease or exchange of goods or other personal property
or the rendering of services, (c) all rights in, to, or under all security
agreements, leases and other contracts securing or otherwise relating to any
such accounts, rights to payment, Documents, or Instruments, (d) all rights in,
to and under any purchase orders, service contracts, or other contracts out of
which such accounts and other rights to payment arose (or will arise on
performance), and (e) all rights in or pertaining to any goods arising out of
or in


 


4

















 


connection with any such purchase orders, service contracts, or other
contracts, including rights in returned or repossessed goods and rights of
replevin, repossession, and reclamation.


 


“Related Person” means Debtors, each Subsidiary of Debtor and
each Other Liable Party.


 


“Secured Obligations” has the meaning given such term in
Section 2.2.


 


“Security Beneficiary” means the Agent (for its own account or
for the account of another Security Beneficiary), the Secured Party (for its
own account or for the account of another Security Beneficiary), each
Financier, each Hedge Provider, the Technical Bank, the Working Capital
Facility Provider, and each other person the Secured Party and the Borrower
agree in writing from time to time is a Security Beneficiary (for its own
account or for the account of another Security Beneficiary).


 


“Secured Party” means the Person named as such at the beginning
of this Agreement, together with its successors and assigns.


 


“Software” means all “software” (as defined in the UCC),
including all computer programs, any supporting information provided in
connection with a transaction relating to a computer program, all licenses or
other rights to use any of such computer programs, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights.


 


“UCC” means the Uniform Commercial Code in effect in the State
of Texas from time to time.


 


“Warranty Notice” has the meaning assigned such term in the
Facilities Agreement.


 


Section 1.2.  Other
Definitions.  Reference is hereby
made to the Facilities Agreement for a statement of the terms thereof.  All capitalized terms used in this Agreement
which are defined in the Facilities Agreement and not otherwise defined herein
shall have the same meanings as set forth in the Facilities Agreement and for
those not defined therein which are defined in the Security Trust Deed (as
described in the Facilities Agreement), shall have the meanings when used
therein.  All terms used in this
Agreement which are defined in the UCC and not otherwise defined herein or in
the Facilities Agreement shall have the same meanings herein as set forth
therein, except where the context otherwise requires.  The parties intend that the terms used herein which are defined
in the UCC have, at all times, the broadest and most inclusive meanings
possible.  Accordingly, if the UCC shall
in the future be amended or held by a court to define any term used herein more
broadly or inclusively than the UCC in effect on the date hereof, then such
term, as used herein, shall be given such broadened meaning.  If the UCC shall in the future be amended or
held by a court to define any term used herein more narrowly, or less inclusively,
than the UCC in effect on the date hereof, such amendment or holding shall be
disregarded in defining terms used herein.


 


5

















 


Section 1.3.  Attachments.  All exhibits or schedules which may be
attached to this Agreement, as initialed (or executed) by the parties are a
part hereof for all purposes.


 


Section 1.4.  Amendment
of Defined Instruments.  Unless the
context otherwise requires or unless otherwise provided herein, references in
this Agreement to a particular agreement, instrument or document (including,
but not limited to, references in Section 2.1) also refer to and include
all renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be construed to authorize any
Person to execute or enter into any such renewal, extension, amendment,
modification, supplement or restatement.


 


Section 1.5.  References
and Titles.  All references in this
Agreement to Exhibits, Articles, Sections, subsections, and other subdivisions
refer to the Exhibits, Articles, Sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise.  Titles appearing at the beginning of any
subdivision are for convenience only and do not constitute any part of any such
subdivision and shall be disregarded in construing the language contained in
this Agreement.  The words “this
Agreement”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited.  The
phrases “this Section” and “this subsection” and similar phrases refer only to
the Sections or subsections hereof in which the phrase occurs.  The word “or” is not exclusive, and the word
“including” (in all of its forms) means “including without limitation”.  Pronouns in masculine, feminine and neuter
gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.


 


ARTICLE II


 


Security Interest


 


Section 2.1.  Grant of
Security Interest.  As collateral
security for all of the Secured Obligations, Debtors hereby pledge and assign
to Secured Party and grant to Secured Party a continuing security interest, for
the benefit of Security Beneficiaries, in and to all right, title and interest
of such Debtor in and to any and all of the following, whether now owned or
existing or hereafter acquired or arising and regardless of where located:


 


(a) 
all Receivables.


 


(b)  all General Intangibles.


 


(c)  all Documents.


 


(d)  all Instruments.


 


6

















 


(e)  all Inventory.


 


(f)  all Equipment.


 


(g)  the Project Documents.


 


(h)  all Intercompany Debt;
provided, however, that nothing in this paragraph 2.1(h) shall be deemed to
create a security interest in (1) any receivables between TOGC and TC, (2) any
receivables between TC and Slough, and (3) any receivables between TOGC and
Slough.


 


(i)  the Project Support Deed.


 


(j)  all books and records
(including, without limitation, customer lists, marketing information, credit
files, price lists, operating records, vendor and supplier price lists, sales
literature, computer software, computer hardware,
computer disks and tapes and other storage media, printouts and other materials
and records) of Debtor pertaining to any of the Collateral.


 


(k)  all moneys and property of
any kind of Debtor in the possession or under the control of Secured Party.


 


(l)  all Other Interests.


 


(m)  the Project Assets, and all
other rights arising under said leases, license or authority to project, and
all improvements, fixtures, and other real and/or personal property (including,
without limitation, all wells, pumping units, wellhead equipment, tanks,
pipelines, flow lines, gathering lines, compressors, dehydration units,
separators, meters, buildings, injection facilities, salt water disposal
facilities, and power, telephone and telegraph lines), and all easements,
servitudes, rights-of-way, surface leases, licenses, permits and other surface
rights, which are now or hereafter used, or held for use, in connection with
such property described in this subsection (l), or in connection with the
operation of such property, or in connection with the treating, handling,
storing, processing, transporting or marketing of oil, gas, other hydrocarbons,
or other minerals produced from (or allocated to) such property.


 


(n)  all Proceeds of any and all
of the foregoing Collateral.


 


In each case, the foregoing shall be covered by this Agreement, whether
Debtor’s ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor’s interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise). Without limiting the
generality of the foregoing, the Collateral includes all right, title or
interest of any Debtor in any of the foregoing regardless of whether such
right, title or interest is legal, beneficial, equitable or otherwise including
any right,


 


7

















 


title or interest arising as a result of the Operator holding an
interest in any of the foregoing whether on trust (express, implied,
constructive, by operation of law or otherwise) or otherwise for any Debtor,
including any right, tile or interest in any of the above any Debtor holds on
trust (whether express, implied, constructive, by operation of law or
otherwise), including without limitation, because it is the Operator.


 


Section 2.2.  Secured
Obligations Secured.  The security
interest created hereby in the Collateral constitutes continuing collateral
security for all of the following obligations, indebtedness and liabilities,
whether now existing or hereafter incurred or arising:


 


(a)                                  Finance
Document Indebtedness.  The payment
by Borrower, as and when due and payable, of all amounts from time to time
owing by Borrower under or in respect of any of the Finance Documents.


 


(b)                                 Guaranteed
Indebtedness. The payment by TCSG, when due and payable, of all amounts
from time to time owing by TCSG under or in respect of its guaranty in the
Facilities Agreement and that certain Guaranty.


 


 (c)          Renewals. 
All renewals, extensions, amendments, modifications, supplements, or
restatements of or substitutions for any of the foregoing.


 


As used herein, the term “Secured Obligations” refers to all present
and future indebtedness, obligations and liabilities of whatever type which are
described above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtors and Borrower.  Debtors hereby acknowledge that the Secured
Obligations are owed to the various Security Beneficiaries and that each
Security Beneficiary is entitled to the benefits of the Liens given under this
Agreement.  It is the intention of each
Debtor and Secured Party that this Agreement not constitute a fraudulent transfer
or fraudulent conveyance under any state or federal law that may be applied
hereto.  Each Debtor and, by its
acceptance hereof, Secured Party hereby acknowledges and agrees that,
notwithstanding any other provision of this Agreement: (a) the indebtedness
secured hereby shall be limited to the maximum amount of indebtedness that can
be incurred or secured by such Debtor without rendering this Agreement subject
to avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provisions of any applicable state or federal law, and (b) the
Collateral pledged by each Debtor hereunder shall be limited to the maximum
amount of Collateral that can be pledged by such Debtor without rendering this
Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law.


 


ARTICLE III


 


Representations, Warranties and Covenants


 


Section 3.1.  Representations
and Warranties.  Each of the
representations and warranties in the Facilities Agreement made by Debtors is
true and correct.  In addition, each
Debtor hereby


 


8

















 


represents and warrants to Secured Party and Security Beneficiaries
(except in relation to matters disclosed to Secured Party and Security Beneficiaries
by the relevant party and accepted by Secured Party in writing, or disclosed
and accepted in some other manner with which Secured Party agrees) as follows:


 


(a)  Ownership Free of Liens.


 


(i)                   As of the First Recalculation Date, such
Debtor has good and marketable title to the Collateral, free and clear of all
Liens, encumbrances or adverse claims except for Permitted Encumbrances.


 


(ii)                No effective financing statement or
other registration or instrument similar in effect covering all or any part of
the Collateral is on file in any recording office except any which have been
filed in favor of Secured Party relating to this Agreement.  None of the Collateral is in the possession
of any Person other than Debtors or Secured Party, except for Collateral being
transported in the ordinary course of business.


 


(b)  No Conflicts or Consents.  Except as expressly contemplated in the
Finance Documents, no consent, approval, authorization or order of, and no
notice to or filing with any court, governmental authority or third party is
required in connection with the grant by Debtors of the security interest
herein, or the exercise by Secured Party of its rights and remedies hereunder.


 


(c)  Security Interest.


 


(i)                                     Debtors have and
will have at all times full right, corporate power and corporate authority to
grant a security interest in the Collateral to Secured Party as provided
herein, free and clear of any Lien, adverse claim, or encumbrance except for
any Permitted Encumbrance.  This
Agreement creates a valid and binding security interest in favor of Secured
Party in the Collateral, which security interest secures all of the Secured
Obligations.


 


(ii)                                  As of the First
Recalculation Date, Debtors have and will have at all times full rights, power
and authority to grant a security interest in the Collateral to Secured Party
as provided herein, free and clear of any Lien, adverse claim, or encumbrance
except for any Permitted Encumbrance.


 


(d)  Perfection.  The taking possession by Secured Party of
all money constituting Collateral from time to time will perfect, and establish
the first priority of, Secured Party’s security interest hereunder in such
Collateral.  Secured Party’s control of
all Investment Property, Deposit Accounts, and Letter-of-Credit Rights constituting
Collateral from time to time will perfect, and establish the first priority of,
Secured Party’s security interest hereunder in such Collateral.  The filing of a financing statement with the
secretary of state (or equivalent


 


9

















 


governmental official) of the state in which Debtors are organized
which sufficiently describes all other Collateral will perfect, and establish
the first priority of, Secured Party’s security interest hereunder in such
Collateral.  No further or subsequent
filing, recording, registration, other public notice or other action is
necessary or desirable to perfect or otherwise continue, preserve or protect
such security interest in the state of organization of the relevant Debtor, or with
respect to Borrower, the District of Columbia, except (i) for continuation
statements described in UCC ‘9.515(d), (ii) for filings required to be filed in
the event of a change in the name, identity, or corporate structure of a
Debtor, or (iii) in the event any financing statement filed by Secured Party
relating hereto otherwise becomes inaccurate or incomplete.


 


(e)  Solvency.  Each Debtor is not “insolvent” on the date
hereof (that is, the sum of each Debtor’s absolute and contingent liabilities,
including the Secured Obligations, does not exceed the fair market value of
such Debtor’s assets).  Each Debtor’s
capital is adequate for the businesses in which such Debtor is engaged and
intends to be engaged.  Each Debtor has
not incurred (whether hereby or otherwise), nor does such Debtor intend to
incur or believe that it will incur, debts which will be beyond its ability to
pay as such debts mature.


 


(f)  Finance Documents.  Each Debtor gives and repeats the
representations and warranties set forth above, to the Secured Party, at the
same time as it gives or repeats the representations or warranties in the
Facilities Agreement or any other Finance Document.


 


Section 3.2.  General
Covenants Applicable to Collateral. 
Unless Secured Party shall otherwise consent in writing, Debtors will at
all times comply with the covenants contained in the Facilities Agreement which
are applicable to Debtors for so long as any part of the Secured Obligations or
the Commitment is outstanding.  In
addition, Debtors will at all times comply with the covenants contained in this
Section 3.2.


 


(a)  Change of Name,
Location, or Structure; Additional Filings.  Debtors recognize that financing statements pertaining to the
Collateral have been or may be filed with the secretary of state (or equivalent
governmental official) of the state in which Debtors are organized.  Without limitation of any other covenant in
the Finance Documents, no Debtor will cause or permit any change to be made in
its name, identity or corporate structure, or any change to be made to its
jurisdiction of organization, unless such Debtor shall have first (1) notified
Secured Party of such change at least forty-five (45) days prior to the
effective date of such change, (2) taken all action requested by Secured Party
(under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party’s security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party’s security interests and rights under this Agreement or the
perfection or priority thereof.  In any
notice furnished pursuant to this subsection, Debtors will expressly state that
the notice is required by this Agreement and contains facts that may require
additional filings of financing statements or other notices for the purposes of
continuing perfection of Secured Party’s security interest in the Collateral.


 


10

















 


(b)  Further Assurances.  Debtors will, at their expense as from time
to time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further
action, in order:  (i) to confirm and
validate this Agreement and Secured Party’s rights and remedies hereunder, (ii)
to correct any errors or omissions in the descriptions herein of the Secured Obligations
or the Collateral or in any other provisions hereof, (iii) to perfect, register
and protect the security interests and rights created or purported to be
created hereby or to maintain or upgrade in rank the priority of such security
interests and rights, including without limitation registering such security
interests and rights in any international jurisdiction deemed necessary by
Secured Party including Australia, (iv) to enable Secured Party to exercise and
enforce its rights and remedies hereunder in respect of the Collateral, or (v)
to otherwise give Secured Party the full benefits of the rights and remedies
described in or granted under this Agreement. 
As part of the foregoing Debtors will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party’s security
interests and rights hereunder, and any amendments thereto, and (2) mark their
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder.  To the extent requested by Secured Party
from time to time, Debtors will obtain from any material account debtor or other
obligor on the Collateral the acknowledgment of such account debtor or obligor
that such Collateral is subject to this Agreement.


 


(c)  Inspection of Collateral.  Debtors will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of the Collateral
and the books and records of or relating to the Collateral at any time during
normal business hours, and to make photocopies and photographs thereof, and to
write down and record any information which such representatives obtain.


 


(d)  Ownership, Liens,
Possession and Transfers.  As of the
First Recalculation Date, Debtors will maintain good and marketable title to
all Collateral, free and clear of all Liens, encumbrances or adverse claims
except for Permitted Encumbrances. 
Debtors will not grant or allow to remain in effect, and Debtors will
cause to be terminated, any financing statement or other registration or
instrument similar in effect covering all or any part of the Collateral, except
any which have been filed in favor of Secured Party relating to this
Agreement.  Debtors will defend Secured
Party’s right, title and special property and security interest in and to the Collateral
against the claims of any Person.


 


(e)  Impairment of Security
Interest.  Debtors will not take or
fail to take any action which would in any manner impair the enforceability of
Secured Party’s security interest in any Collateral.


 


11

















 


(f)                                    Finance
Documents.  Each Debtor agrees to
comply with all of its obligations under the Finance Documents in accordance
with their terms.


 


ARTICLE IV.


 


Remedies, Powers and Authorizations


 


Section 4.1.  Normal Provisions
Concerning the Collateral.


 


(a)  Authorization to File
Financing Statements.  Each Debtor
hereby irrevocably authorizes Secured Party at any time and from time to time
to file, without the signature of such Debtor, in any jurisdiction (including
without limitation any international jurisdiction deemed necessary by Secured
Party including any jurisdiction in Australia) any amendments to existing
financing statements, any initial financing statements and amendments thereto
and any registration forms that (i) indicate the Collateral; (ii) contain any
other information required by subchapter E of Chapter 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement or
amendment, including whether such Debtor is an organization, the type of
organization and any organization identification number issued to Debtor; and
(iii) are necessary to properly effectuate the transactions described in the
Finance Documents, as determined by Secured Party in its commercially
reasonable discretion.  Each Debtor
agrees to furnish any such information to Secured Party promptly upon written
request.  Each Debtor further agrees
that a carbon, photographic or other reproduction of this Agreement or any
financing statement describing any Collateral is sufficient as a financing
statement and may be filed in any jurisdiction by Secured Party.


 


(b)  Power of Attorney.  Each Debtor hereby appoints Secured Party as
such Debtor’s attorney-in-fact and proxy, with full authority in the place and
stead of such Debtor and in the name of such Debtor or otherwise, upon an Event
of Default or Potential Event of Default which shall have occurred and be
continuing, to take any action and to execute any instrument which Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement including any action or instrument:  (i) to obtain and
adjust any insurance required to be paid to Secured Party pursuant to any
Finance Document; (ii) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral; (iii) to receive, indorse and
collect any drafts or other Instruments or Documents; (iv) to enforce any
obligations included among the Collateral; and (v) to file any claims or take
any action or institute any proceedings which Secured Party may deem necessary
or desirable for the collection of any of the Collateral or otherwise to
enforce the rights of such Debtor or Secured Party with respect to any of the
Collateral.  Each Debtor hereby
acknowledges that such power of attorney and proxy are coupled with an
interest, are irrevocable, and are to be used by Secured Party for the sole
benefit of Security Beneficiaries.


 


12

















 


(c)  Performance by Secured
Party.  If Debtors fail to perform
any agreement or obligation contained herein, Secured Party may itself perform,
or cause performance of, such agreement or obligation, and the reasonable
expenses of Secured Party incurred in connection therewith shall be payable by
Debtors under Section 4.4.


 


Section 4.2.  Event of
Default Remedies.  If an Event of
Default or Potential Event of Default shall have occurred and be continuing,
Secured Party may from time to time in its discretion, without limitation and
without notice except as expressly provided below:


 


(a)  exercise in respect of the
Collateral, in addition to any other rights and remedies provided for herein,
under the other Finance Documents, or otherwise available to it, all the
rights, remedies, duties and obligations of a secured party on default under
the UCC (whether or not the UCC applies to the affected Collateral);


 


(b)  require Debtors to, and
Debtors hereby agree that they will at their expense and upon written request
of Secured Party forthwith, assemble all or part of the Collateral as directed
by Secured Party and make it (together with all books, records and information
of Debtors relating thereto) available to Secured Party at a place to be designated
by Secured Party which is reasonably convenient to both parties;


 


(c)  prior to the disposition of
any Collateral, (i) to the extent permitted by applicable law, enter, with or
without process of law and without breach of the peace, any premises where any
of the Collateral is or may be located, and without charge or liability to
Secured Party seize and remove such Collateral from such premises, (ii) have
access to and use the Debtors’ books, records, and information relating to the
Collateral, and (iii) store or transfer any of the Collateral without charge in
or by means of any storage or transportation facility owned or leased by
Debtors, process, repair or recondition any of the Collateral or otherwise
prepare it for disposition in any manner;


 


(d)  reduce its claim to
judgment or foreclose or otherwise enforce, in whole or in part, the security
interest created hereby by any available judicial procedure;


 


(e)  subject to the requirements
and obligations of a secured party under the UCC, dispose of, at its office, on
the premises of Debtors or elsewhere, all or any part of the Collateral, as a
unit or in parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale of any part of the Collateral shall
not exhaust Secured Party’s power of sale, but sales may be made from time to
time, and at any time, until all of the Collateral has been sold or until the
Secured Obligations have been paid and performed in full), and at any such sale
it shall not be necessary to exhibit any of the Collateral;


 


(f)  subject to the requirements
and obligations of a secured party under the UCC, buy (or allow one or more of
the Security Beneficiaries to buy) the Collateral, or any part thereof, at any
public sale;


 


13

















 


(g)  subject to the requirements
and obligations of a secured party under the UCC ,buy (or allow one or more of
the Security Beneficiaries to buy) the Collateral, or any part thereof, at any
private sale if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed standard
price quotations; and


 


(h)  apply by appropriate
judicial proceedings for appointment of a receiver for the Collateral, or any
part thereof, and Debtors hereby consent to any such appointment.


 


Debtors agree that, to the extent notice of sale shall be required by
law, at least ten (10) days’ notice to Debtors of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. 
Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given.  Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.


 


Section 4.3.  Application
of Proceeds.  If any Event of
Default or Potential Event of Default shall have occurred and be continuing,
Secured Party may in its discretion apply any cash held by Secured Party as
Collateral, and any cash proceeds received by Secured Party in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral, to any or all of the following in such order as Secured Party may
(subject to the rights of Security Beneficiaries under the Facilities
Agreement) elect:


 


(a)  To the repayment of the
reasonable costs and expenses, including reasonable attorneys’ fees and legal
expenses, incurred by Secured Party in connection with (i) the administration
of this Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any Collateral, (iii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or
(iv) the failure of Debtors to perform or observe any of the provisions hereof;


 


(b)  To the payment or other
satisfaction of any Liens, encumbrances, or adverse claims upon or against any
of the Collateral;


 


(c)  To the reimbursement of
Secured Party for the amount of any obligations of Debtors or any Other Liable
Party paid or discharged by Secured Party pursuant to the provisions of this
Agreement or the other Finance Documents, and of any expenses of Secured Party
payable by Debtor hereunder or under the other Finance Documents;


 


(d)  As set forth in the Comet
Ridge Project Security Deed and the Facilities Agreement;


 


(e)  By holding the same as
Collateral;


 


14

















 


(f)  To the payment of any other
amounts required by applicable law (including any provision of the UCC); and


 


(g)  By delivery to Debtors or
to whoever shall be lawfully entitled to receive the same or as a court of competent
jurisdiction shall direct.


 


Section 4.4.  Indemnity
and Expenses.  In addition to, but
not in qualification or limitation of, any similar obligations under other
Finance Documents:


 


(a)  Debtors will indemnify Secured Party and
each Security Beneficiary from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including
enforcement of this Agreement), WHETHER OR NOT SUCH CLAIMS, LOSSES AND
LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR ARISING OUT OF SUCH
INDEMNIFIED PARTY’S OWN NEGLIGENCE OR STRICT LIABILITY, except to the extent
such claims, losses or liabilities are proximately caused by such indemnified
party’s individual gross negligence or willful misconduct.


 


(b)  Debtors will upon demand
pay to Secured Party the amount of any and all costs and expenses, including
the reasonable fees and disbursements of Secured Party’s counsel and of any
experts and agents, which Secured Party may incur in connection with (i) the
transactions which give rise to this Agreement, (ii) the preparation of
this Agreement and the perfection and preservation of this security interest
created under this Agreement, (iii) the administration of this Agreement; (iv)
the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Collateral, except expenses resulting from
Secured Party’s individual gross negligence or willful misconduct.  Debtors will also upon demand pay to Secured
Party the amount of any and all costs and expenses, including the fees and
disbursements of Secured Party’s counsel and of any experts and agents, which
Secured Party may incur in connection with (i) the exercise or enforcement
of any of the rights of Secured Party hereunder; or (ii) the failure by Debtors
to perform or observe any of the provisions hereof, except expenses resulting
from Secured Party’s individual gross negligence or willful misconduct.


 


Section 4.5.  Non-Judicial
Remedies.  In granting to Secured
Party the power to enforce its rights hereunder without prior judicial process
or judicial hearing, Debtors expressly waive, renounce and knowingly relinquish
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process.  In so
providing for non-judicial remedies, Debtors recognize and concede that such
remedies are consistent with the usage of trade, are responsive to commercial
necessity, and are the result of a bargain at arm’s length.  Nothing herein is intended, however, to
prevent Secured Party from resorting to judicial process at its option.


 


Section 4.6.  Other
Recourse.  Debtors waive any right
to require Secured Party or any Security Beneficiary to proceed against any
other Person, to exhaust any Collateral or other security for the Secured
Obligations, to have any Other Liable Party joined with Debtors in any


 


15

















 


suit arising out of the Secured Obligations or the Finance Documents,
or to pursue any other remedy in Secured Party’s power.  Debtors further waive any and all notice of
acceptance of the this Agreement and of the creation, modification,
rearrangement, renewal or extension for any period of any of the Secured
Obligations of any Other Liable Party from time to time.  Debtors further waive any defense arising by
reason of any disability or other defense of any Other Liable Party or by
reason of the cessation from any cause whatsoever of the liability of any Other
Liable Party.  This Agreement shall
continue irrespective of the fact that the liability of any Other Liable Party
may have ceased and irrespective of the validity or enforceability of any other
Finance Document to which Debtor or any Other Liable Party may be a party, and
notwithstanding any death, incapacity, reorganization, or bankruptcy of any
Other Liable Party or any other event or proceeding affecting any Other Liable
Party.  Until all of the Secured
Obligations shall have been paid in full, Debtors shall have no right to
subrogation and Debtors waive the right to enforce any remedy which Secured
Party or any Security Beneficiary has or may hereafter have against any Other
Liable Party, and waives any benefit of and any right to participate in any
other security whatsoever now or hereafter held by Secured Party.  Debtors authorize Secured Party and each
Security Beneficiary, without notice or demand, without any reservation of
rights against Debtors, and without in any way affecting Debtors’ liability
hereunder or on the Secured Obligations, from time to time to (a) take or hold
any other property of any type from any other Person as security for the
Secured Obligations, and exchange, enforce, waive and release any or all of
such other property, (b) after and during the continuation of an Event of Default
or Potential Event of Default, apply the Collateral or such other property and
direct the order or manner of sale thereof as Secured Party may in its
discretion determine, (c) renew, extend for any period, accelerate, modify,
compromise, settle or release any of the obligations of any Other Liable Party
in respect to any or all of the Secured Obligations or other security for the
Secured Obligations, (d) waive, enforce, modify, amend or supplement any of the
provisions of any Finance Document with any Person other than Debtors, and (e)
release or substitute any Other Liable Party.


 


Section 4.7  Limitation
on Duty of Secured Party in Respect of Collateral.  Beyond the exercise of reasonable care in
the custody thereof, Secured Party shall have no duty as to any Collateral in
its possession or control or in the possession or control of any agent or
bailee or as to the preservation of rights against prior parties or any other
rights pertaining thereto.  Secured
Party shall be deemed to have exercised reasonable care in the custody of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and in the
absence of fraud, gross negligence, breach of trust or wilful misconduct, shall
not be liable or responsible for any loss or damage to any of the Collateral,
or for any diminution in the value thereof, by reason of the act or omission of
the Secured Party or any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by Secured Party in good faith.


 


Section 4.8.  Appointment
of Collateral Agents.  At any time
or times, in order to comply with any legal requirement in any jurisdiction,
Secured Party may appoint any bank or trust company or one or more other Persons,
either to act as co-agent or co-agents, jointly with


 


16

















 


Secured Party, or to act as separate agent or agents on behalf of the
Security Beneficiary, with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment.  In so doing
Secured Party may, in the name and on behalf of Debtors, give to such co-agent
or separate agent indemnities and other protections similar to those provided
in Section 4.4.


 


ARTICLE V.


 


Miscellaneous


 


Section 5.1.  Notices.  Any notice or communication required or
permitted hereunder shall be given as provided in the Facilities Agreement.


 


Section 5.2.  Amendments.  No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtors and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtors therefrom, shall be effective unless it is in
writing and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given and to the extent specified in such writing.


 


Section 5.3.  Preservation
of Rights.  No failure on the part
of Secured Party or any Security Beneficiary to exercise, and no delay in
exercising, any right hereunder or under any other Finance Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right.  Neither the execution
nor the delivery of this Agreement shall in any manner impair or affect any
other security for the Secured Obligations. 
The rights and remedies of Secured Party provided herein and in the
other Finance Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law or otherwise.  The rights of Secured Party under any
Finance Document against any party thereto are not conditional or contingent on
any attempt by Secured Party to exercise any of its rights under any other
Finance Document against such party or against any other Person.


 


Section 5.4.  Unenforceability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.


 


Section 5.5.  Survival
of Agreements.  All representations
and warranties of Debtors herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Finance Documents and the creation of the Secured
Obligations, but expire upon the termination of this Agreement pursuant to
Section 5.8 below.


 


17

















 


Section 5.6.  Other
Liable Parties.  Neither this Agreement
nor the exercise by Secured Party or the failure of Secured Party to exercise
any right, power or remedy conferred herein or by law shall be construed as
relieving any Other Liable Party from liability on the Secured Obligations or
any deficiency thereon.


 


Section 5.7.  Binding
Effect.  This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtors and their successors and assigns and (b) shall inure, together with all
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and Security Beneficiaries and both of their respective permitted successors,
transferees, substitutes and assigns.


 


Section 5.8.  Termination.  It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured
Obligations.  Upon the satisfaction in
full of the Secured Obligations and the termination or expiration of the
Facilities Agreement and any other commitment of Security Beneficiaries to
extend credit or other financial accommodations (including without limitation
interest rate and currency hedges and other derivatives) to Borrower, then upon
written request for the termination hereof delivered by Debtors to Secured
Party this Agreement and the security interest created hereby shall terminate
and all rights to the Collateral shall revert to Debtors.  Secured Party will promptly and fully
thereafter, upon Debtors’ request and at Debtors’ expense, (a) return to
Debtors such of the Collateral in Secured Party’s possession as shall not have
been sold or otherwise disposed of or applied pursuant to the terms hereof free
and clear of all debts, liens, encumbrances and/or impediments by, through and
under Secured Party but not otherwise, and (b) execute and deliver to Debtors
such documents as Debtors shall reasonably request to evidence such
termination.


 


Section 5.9.  Governing
Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE
PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY
INTEREST CREATED HEREBY HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.


 


Section 5.10.  Final Agreement.  THIS WRITTEN AGREEMENT AND THE OTHER FINANCE DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE
CONTRADICTED BY


 


18

















 


EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES HERETO.


 


Section 5.11.  Counterparts;
Fax.  This Agreement may be
separately executed in any number of counterparts, all of which when so
executed shall be deemed to constitute one and the same Agreement.  This Agreement may be validly executed and
delivered by facsimile or other electronic transmission.


 


Section 5.12.  “Finance
Documents”.  This Agreement is a
“Finance Document”, as defined in the Facilities Agreement, and, except as
expressly provided herein to the contrary, this Agreement is subject to all
provisions of the Facilities Agreement governing such Finance Documents.


 


Section 5.13.  Priorities.  This Section 5.13 and Section 5.14
have been inserted solely for the purpose of Australian law and solely for the
purpose of fixing priorities in accordance with Section 282 of the
Australian Corporations Act between the security given by each Debtor in this
Agreement and any other agreement involving security given by each such Debtor
and without affecting any obligation of any Debtor under this Agreement, the
prospective liabilities secured by each security given by each Debtor in this
Agreement include the prospective liabilities of the nature specified below up
to the maximum amount specified below, for each such Debtor:


 


Nature of liabilities:


 


a.                                       the obligations
of each Debtor and each Other Liable Party to pay and repay advances under the
Finance Documents, to pay and repay the Secured Money as set forth in the
Finance Documents, and to pay under the guaranty in the Facilities Agreement,
and that certain Guaranty;


 


b.                                      the obligations
of each Debtor and each Other Liable Party to pay all amounts paid under bank
guarantees issued under the Finance Documents and to indemnify against all loss
or liability in respect of them;


 


c.                                       the obligations
of each Debtor and each Other Liable Party to pay interest, fees, indemnity
amounts, costs, expenses and other amounts payable under the Finance Documents;


 


d.                                      the obligations
of each Debtor and each Other Liable Party to pay money under Hedge Agreements
including following any close-out or termination of any of them;


 


e.                                       the obligations
of each Debtor and any Other Liable Party to pay or reimburse the Secured Party
and the Security Beneficiaries for any of their Costs (as defined in the
Facilities Agreement), indemnities, increased costs or loss incurred in
connection with the Finance


 


19

















 


Documents, including those of any attorney or any receiver or receiver
and manager, or other controller (as defined in the Corporations Act) appointed
under this Agreement.


 


Maximum amount:  A$300,000,000 (FOR EACH DEBTOR)


 


Petroleum Act.  Despite any other provisions of this
Agreement, if by virtue of the Petroleum Act 1923 (Qld.) under Australian Law,
the interest of a Debtor in any Project Production Lease, Project Pipeline
Licence or Other Interests (each as defined in the Facilities Agreement) cannot
be charged, mortgaged or secured without the prior consent or approval of a
Governmental Agency or a Minister in right of the Crown (all as described in
the Facilities Agreement), each Debtor agrees to charge, mortgage, secure and
assign its interest in such property to the Secured Party as additional
property to be considered Collateral for the payment of the Secured Obligations
when the consent or approval of that Government Agency or Minister in right of
Crown is obtained.  Each Debtor must use
reasonable endeavors to obtain all such consents and approvals as soon as
possible.


 


Section 5.14.                             Capacity of Secured Party.


 


(a)                                  The Secured Party holds the benefit of this
Agreement solely in its capacity as security trustee under the Security Trust
Deed.


 


(b)                                 The Secured Party holds the benefit of this
Agreement for the Security Beneficiaries on the terms of the Security Trust
Deed and the Facilities Agreement.


 


(c)                                  The Secured Party is bound to act on the
instructions given to it pursuant to the terms of the Facilities Agreement.


 


(d)                                 Any rights which a person may have against
the Secured Party under or in respect of this Agreement are not against the
Secured Party personally but against the Secured Party solely in its capacity
as trustee of the trust established under the Security Trust Deed.


 


(e)                                  The Secured Party may not be called on and is
not liable to satisfy any obligation or liability under or in connection with
this Agreement except to the extent to which the Secured Party is entitled to
be indemnified out of the assets of the trust established under the Security
Trust Deed provided that this paragraph (e) does not apply to any obligation or
liability of the Secured Party to the extent that it is not satisfied under the
Facilities Agreement or by operation of law there is a reduction in the extent
of the Secured Party’s indemnification or exoneration out of the assets of the
trust established under the Security Trust Deed as a result of the Secured
Party’s fraud, gross negligence or willful default.


 


[THE REMAINDER OF THIS PAGE IS
INTENTIONALLY LEFT BLANK]


 


20

















 


IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement as
of the date first above written.


 


 


	
   

  	
  TIPPERARY CSG INC., a Colorado corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David L. Bradshaw

  	
   

  
	
   

  	
  Name: David Bradshaw

  
	
   

  	
  Title: 
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TIPPERARY Oil & Gas (Australia) Pty Limited

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David L. Bradshaw

  	
   

  
	
   

  	
  Name: David Bradshaw

  
	
   

  	
  Title: 
  Director

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard A. Barber

  	
   

  
	
   

  	
  Name: 
  Richard Barber

  
	
   

  	
  Title: 
  Director

  



 


21