Document:

Exhibit 10.35

 

This Warrant and the rights
represented hereby shall not be transferable at any time unless (i) a
registration statement under the Securities Act of 1933, as amended, shall be
in effect with respect to this Warrant or the Shares issuable hereunder at such
time, or (ii) the transfer is made in compliance with the provisions of Section
5.

 

	
  Number:

  	
   

  	
  50,000   Shares

  

 

WARRANT

TO PURCHASE SHARES

OF

TIPPERARY CORPORATION

 

This certifies that, for value received, Kenneth
L.Ancell, an individual residing in Houston, Texas (“Holder”), or their
registered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texas
corporation (the “Company”), fifty thousand (50,000) Shares, as defined 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 in accordance
with 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 exercised
prior thereto, two (2) years after the resignation or removal of the Holder as
an employee or director of the Company. 
If the Holder should resign or be removed as an employee or director
from the Company, then this Warrant shall be vested only to the extent vested
on such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the initial
exercise price set forth above and the number of Shares to be issued upon the
occurrence of certain events (the Provisions as to Adjustment) are more fully
set forth in Annex 1 hereto. 
(Hereinafter, the initial exercise price set forth above in this paragraph
for the purchase of Shares upon the exercise of this Warrant, as adjusted
pursuant to the Provisions as to Adjustment, is referred to as the “Exercise
Price”).  This Warrant is subject to the
following provisions, terms and conditions:

 

1.             Exercise of Warrant.

 

(a)           The rights represented by this Warrant may be exercised by
the Holder, in whole or in part, (but not as to a fractional Share), by the
surrender of this Warrant at the Company’s principal office located in Denver,
Colorado (or such other office or agency of the Company as the Company may
designate by notice in writing to the Holder at the address of such holder
appearing on the books of the Company at any time within the period above
named) and delivery of a completed subscription form in the form attached to
this Warrant as Exhibit A, and upon payment to the Company of the
Exercise Price for such Shares

 

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

 

(i)                                     By application, to the extent permitted by
applicable 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
thereof determined in good faith by the Company and the Holder at the time of
such exercise; provided, however, that in order to apply such Shares or other
securities of the Company in the exercise hereof, each of the following
conditions must be met:

 

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

 

 

option, warrant or right to
obtain such Shares of other securities or through the conversion of any other
security; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.             No Rights or Liabilities as a
Shareholder.  This Warrant shall not entitle the Holder as
such to any rights whatsoever, including, without limitation, voting rights, as
a holder of Shares of the Company.  No
provisions hereof, in the absence of affirmative action by the Holder to
purchase Shares, and no mere enumeration

 

2

 

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

 

5.             Restrictions on Transfer.

 

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

 

(b)           This Warrant and the Warrant Shares shall not be
transferable (except for a transfer of this Warrant or the Warrant Shares in an
offering registered under the Securities Act, including, without limitation, a
transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer) unless, prior to any transfer, the Holder shall have
received from its transferee reasonable assurances that such person is aware
that this Warrant and the Warrant Shares have not been registered under the
Securities Act and that such person is acquiring this Warrant or the Warrant
Shares for investment only and not with the view to the disposition or public
offering thereof (unless in an offering registered under the Securities Act or
exempt therefrom), and that such person is aware that the stock certificates
evidencing the Warrant Shares shall bear a legend restricting transfer and disposition
thereof in accordance with the Securities Act unless, in the opinion of counsel
to the Company, such legend may be omitted. 
In the event of any transfer of this Warrant (other than a transfer in
an offering registered under the Securities Act, including, without limitation,
a transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer), the Holder shall provide an opinion of counsel, who shall
be reasonably satisfactory to the Company, that an exemption from the
registration requirements of the Securities Act is available.

 

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

 

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

 

6.             Registration Under Securities
Act.

 

(a)           If the Company, at any time, proposes to register any
issuance of its securities under the Securities Act (other than a registration
on Form S-8 in connection with an employee stock purchase or option plan or on
Form S-4 in connection with mergers, acquisitions or exchange offerings), the
Company will at such time give prompt written notice to the holder hereof and
to the holders of all other Warrant Shares issuable from any outstanding
Warrants (such holders are hereinafter referred to as the “Prospective Sellers”
or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a Prospective
Seller, given within 30 days after receipt of any such notice (which request
shall state the intended method of disposition of the Warrant Shares to be
transferred by such Prospective Seller), the Company shall use its best efforts
to cause all Warrant Shares, the holders of which (or of the Warrants to which
the same are related), to the extent vested in accordance with the Vesting
Schedule, shall have so requested registration of the transfer thereof, to be
registered under the Securities Act, all to the extent requisite to permit the
sale or other disposition (in accordance with the intended method thereof as
aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section
6(a) shall not be effective with respect to the Prospective Seller in the case
of an underwritten public offering of securities of the Company by the Company
unless each Prospective Seller agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such Warrant Shares.  The Company shall have the right to reduce
the number of Warrant Shares of the Prospective Sellers to be included in a
registration statement pursuant to the exercise of the rights granted by this
Section 6(a) if, and to the extent, that the managing underwriter of such
offering is of the good faith opinion, supported by written reasons therefor,
that the inclusion of such Warrant Shares would materially and adversely

 

3

 

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

 

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

 

(i)                                     prepare and file with the Commission a
registration statement with respect to such transfer and use its best efforts
to cause such registration statement to become and remain effective, but not
for any period longer than nine months;

 

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

 

(iii)                               furnish to each Prospective Seller such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in order to
facilitate the disposition of the Warrant Shares owned by such Prospective
Seller and covered by such registration statement;

 

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

 

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

 

(vi)                              furnish to the Prospective Sellers whose
intended dispositions are required a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and describing the
application provisions of the securities or blue sky laws of each state or
jurisdiction in which the Company shall be required, pursuant to Section
6(c)(iv), to register or qualify such intended dispositions of such Warrant
Shares, or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, such Prospective Sellers;

 

4

 

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

 

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

 

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

 

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

 

(d)                                 (i)            In
the event of any registration of any transfer of Warrant Shares under the
Securities Act pursuant to this Section 6, the Company will indemnify and hold
harmless each Prospective Seller of such securities, each of its officers,
directors and partners, and each other person, if any, who controls such
Prospective Seller within the meaning of the Securities Act, and each
underwriter, if any, who participates in the offering of such securities,
against any losses, claims, damages or liabilities (or actions in respect
thereof), joint or several, to which each Prospective Seller, officer, director
or partner, controlling person or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
transfer of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act, and will reimburse such Prospective Seller
and each of its officers, directors and partners, and each such controlling
person or underwriter, for any legal or any other expenses reasonably incurred
by such Prospective Seller or its officers, directors and partners or
controlling persons or by each such underwriter, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary prospectus or
prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such Prospective Seller specifically for use in the preparation
thereof.  In the event of any
registration by the Company or any transfer of securities under the Securities
Act pursuant to this Section 6, each Prospective Seller of Warrant Shares
covered by such registration will indemnify and hold harmless the Company, each
other person, if any, who controls the Company within the meaning of the
Securities Act and each officer and director of the Company and the other
Prospective Sellers to the same extent that the Company agrees to indemnify it,
but only with respect

 

5

 

to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid.

 

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

 

7.             Transfer; Ownership. 
Subject to Section 5, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
referred to in Section 1 by the 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 the Company, of the same tenor as this Warrant but registered in
the name of the transferee.  The Holder,
by taking or holding the same, consents and agrees that this Warrant, when
endorsed in blank, shall be deemed negotiable, and that the Holder, when this
Warrant shall have been so endorsed, may be treated by the Company and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant
and to transfer this Warrant on the books of the Company, any notice to the
contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered the Holder as the owner hereof for all purposes.  Any transfer of this Warrant shall be made in
compliance with the Securities Act and any applicable state securities or blue
sky laws.

 

8.             Exchange and Replacement. 
Subject to Section 7, this Warrant is exchangeable, upon the surrender
hereof by the Holder at the office or agency of the Company referred to in
Section 1, for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Shares which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of Shares as shall be designated by the Holder at the time of such
surrender.  Upon receipt by the Company,
at the office or agency referred to in Section 1, of evidence reasonably
satisfactory to it of the loss, theft or destruction of this Warrant and of
indemnity or security reasonably satisfactory to it (provided that the written
indemnity of the Holder shall be deemed reasonably satisfactory to the Company
for such purposes), the Company will deliver a new Warrant of like tenor and
date in replacement of this Warrant. 
This Warrant shall be promptly canceled by the Company upon the surrender
hereof in connection with any transfer, exchange or replacement.  The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.

 

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

 

6

 

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

 

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

 

11.          Miscellaneous.  This
Warrant will be binding upon any entity succeeding to the Company by
consolidation or acquisition of all or substantially all of the Company’s
assets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against whom
enforcement of the same is sought.  The
headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereon.

 

IN
WITNESS WHEREOF,
Tipperary Corporation has caused this Warrant to be signed by its duly
authorized 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 

  	
   

  
						

 

7

 

Annex 1

 

TIPPERARY
CORPORATION

 

PROVISIONS
AS TO ADJUSTMENT OF

EXERCISE PRICE AND NUMBER OF SHARES

ISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and the
number of Shares issuable upon the exercise of the annexed Warrant to purchase
shares of TIPPERARY CORPORATION, a Texas corporation (herein and in this
Warrant referred to as the “Company”), shall be subject to adjustment from time
to time as hereinafter provided; that in no event shall the Exercise Price be
increased 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 thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of Shares obtained by multiplying the number of Shares purchasable
pursuant hereto immediately prior to such adjustment by a fraction, the
numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment.  In making the
adjustments to the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or sell any Shares
for consideration per Share that is less than the Exercise Price in effect
immediately prior to the time of such issue or sale at less than the Market
Price (as hereinafter defined) of such Shares on the date of such issue or
sale, then forthwith upon such issue or sale the Exercise Price in effect
immediately prior thereto shall be adjusted to an amount (calculated to the
nearest cent) determined by dividing (i) an amount equal to the sum of (a) the
number of Shares outstanding immediately prior to such issue or sale multiplied
by the Exercise Price in effect immediately prior to such issue or sale, and (b)
the consideration, if any, received by the Company upon such issue or sale by
(ii) the total number of Shares outstanding immediately after such issue or
sale; provided, however, that no adjustment shall be made hereunder by reason
of:

 

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

 

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

 

(iii)                   the issuance (whether directly or by
assumption in a merger or otherwise) or sale (including any issuance or sale to
holders of Shares) of any securities convertible into or exchangeable for
Shares (such convertible or exchangeable securities are herein referred to as “Convertible
Securities”), or the grant of rights to subscribe for or to purchase, or of
options for the purchase of (including any grant of such rights or options to
holders of shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or exchange
such Convertible Securities or such rights or options are immediately
exercisable.

 

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

 

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

 

(i)                                     If, at the time Shares are issued and sold
upon the conversion or exchange of Convertible Securities or upon the exercise
of rights or options previously granted by the Company, the price per Share for
which such Shares are issued (determined by dividing (a) the total amount, if
any, received by the Company as consideration for such Convertible Securities
or for the granting of such rights or options, plus the aggregate amount of
additional consideration paid to the Company upon the conversion or exchange of
such Convertible

 

1

 

Securities (which, if so
provided in such Convertible Securities, shall be deemed to be equal to the
outstanding principal amount of the indebtedness represented by such
Convertible Securities) or upon the exercise of such rights or options, by (b)
the total number of Shares issued upon the conversion or exchange of such
Convertible Securities or upon the exercise of such rights or options shall be
less than the Exercise Price in effect immediately prior to such issue, sale or
exercise, then the adjustments provided for by the first paragraph of this
Annex 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 be
considered the consideration received by the Company upon the issue or sale of
the Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)           In case at any time any Shares or
Convertible Securities or any rights or options to purchase any Shares or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith.  In case any Shares
or Convertible Securities or any rights or options to purchase any Shares or
Convertible Securities shall be issued or sold, in whole or in part, for
consideration other than cash, the amount of the consideration other than cash
received by the Company in exchange for the issue or sale of such Convertible
Securities shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith; provided
that if the holder or holders of at least 66-2/3% of the Warrant Shares
purchasable under this Warrant shall request in writing, the value of such
consideration shall be determined by an independent expert selected by such
holders, the costs and expenses of which shall be borne by the Company, and, if
the value of such consideration as so determined is less than the value
determined by the Board of Directors of the Company, the lesser value shall be
utilized in calculating the consideration per Share received by the Company for
purposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidation
of the Company in which the Company is not the surviving corporation or in the
event of any sale of all or substantially all of the assets of the Company
outside of the ordinary course of business of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a
number of Shares for stock or securities of such other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated
and for consideration that is equal to the fair market value on the date of
such transaction of such stock or securities of the other corporation, and if
any such calculation results in adjustment of the Exercise Price, the
determination of the number of Shares issuable upon exercise of this Warrant
immediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall be
made after giving effect to such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding at
any given time shall not include Shares that have been redeemed by the Company
and not canceled, if any, and that are thus owned or held by or for the account
of the Company, and the disposition of any such Shares shall be considered an
issue or sale of Shares for purposes of paragraph (A).

 

(iv)          “Market Price” shall mean the lower of
(a) the average closing sales prices of Shares recorded on the principal
national securities exchange on which the Shares are listed or in a national
market system for securities in which the Shares are admitted to trading or (b)
the average of the closing bid and asked prices of Shares reported in the domestic
over-the-counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined.  If the Shares are not listed on any national
securities exchange or admitted for trading in any national market system or traded
in the domestic over-the-counter market, the Market Price shall be the higher
of (y) the book value of the Shares as determined by a firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Company as of the last day of any month ending within 60 days preceding the
date as of which the determination is to be made or (z) the fair market value
of the Shares determined in good faith by the Board of Directors of the
Company,

 

2

 

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

 

(v)           Anything herein to the contrary notwithstanding,
in case the Company shall issue any Shares in connection with the acquisition
by the Company of the stock or assets of any other corporation or the merger of
any other corporation into the Company under circumstances where, on the date
of the issuance of such Shares, the consideration received for such Shares is
less than the Market Price of the Shares, but on the date the number of Shares
was determined, the consideration received for such Shares would not have been
less than the Market Price thereof, such Shares shall not be deemed to have
been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this
paragraph (B) to the contrary notwithstanding, in the case of an acquisition
where all or part of the purchase price is payable in Shares or Convertible
Securities but is stated as a dollar amount, where the Company upon making the
acquisition pays only part of a maximum dollar purchase price which is payable
in Shares or Convertible Securities and where the balance of such purchase
price is deferred or is contingently payable under a formula related to
earnings over a period of time, (a) the consideration received for any Shares
or Convertible Securities delivered at the time of the acquisition shall be
deemed to be such part of the total consideration as the portion of the dollar
purchase price then paid in Shares or Convertible Securities bears to the total
maximum dollar purchase price payable in Shares or Convertible Securities and
(b) in connection with each issuance of additional Shares or Convertible
Securities pursuant to the terms of the agreement relating to such acquisition,
the consideration received shall be deemed to be such part of the total
consideration as the portion of the dollar purchase price then and theretofore
paid in Shares or Convertible Shares bears to the total maximum dollar purchase
price payable in Shares or Convertible Securities multiplied by a fraction, the
numerator of which shall be the number of Shares (or in the case of Convertible
Securities other than capital stock of the Company, the aggregate principal
amount of such Convertible Securities) then issued and the denominator of which
shall be the total number of shares (or in the case of Convertible Securities
other than capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then and theretofore issued under such acquisition
agreement.  In the event only a part of
the purchase price for an acquisition is paid in Shares or Convertible
Securities in the manner referred to in this clause (vi), the term “total
consideration” as used in this clause (vi) shall mean that part of the
aggregate consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this clause (vi),
as determined by the Board of Directors of the Company.

 

(C)           In the case at any time the Company shall subdivide its
outstanding Shares into a greater number of Shares, then from and after the
record date for such subdivision the Exercise Price in effect immediately prior
to such subdivision shall be proportionately reduced and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
increased, and, conversely, in case the outstanding Shares shall be combined
into a smaller number of Shares, then from and after the record date for such
combination the Exercise Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares purchasable upon
the exercise of this Warrant shall be correspondingly decreased.

 

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

 

3

 

the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding Shares
(or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of Shares (or other securities) purchasable upon the exercise
of this Warrant and for the registration thereof as provided in Section 6 of
this Warrant) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the Exercise Price to the value of the Shares
(or other securities) reflected by the terms of such consolidation, merger or
sale if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger of
the Company with or into another corporation as a result of which a greater or
lesser number of securities of the surviving corporation are issuable to
holders of Shares in respect of the number of Shares outstanding immediately
prior to such consolidation or merger, then the Exercise Price in effect
immediately prior to such consolidation or merger shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Shares.  The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the surviving or successor corporation (if other than the
Company) resulting from such consolidation or merger of the corporation
purchasing such assets shall assume, by written instrument executed and mailed
to the registered Holder at the last address of such holder appearing on the
books of the Company, the obligation to deliver to such holder such Shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase, and containing the express assumption
of such surviving or successor corporation of the due performance of every
provision of this Warrant to be performed by the Company and of all liabilities
and obligations of the Company hereunder.

 

(E)           In the event of a change in control of the Company, as
defined in this paragraph (E), then the Board of Directors shall accelerate the
exercise date of the Warrant or make this Warrant fully vested and exercisable
and, 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 necessary
to pay the Exercise Price of all or any portion of the Warrant then held by
such person; (b) pay cash to any holder of this Warrant in exchange for the
cancellation of the holder’s Warrant in an amount equal to the difference
between the Exercise Price of such Warrant and the greater of the tender offer
price for the underlying Shares or the Market Price of the Shares on the date
of the cancellation of the Warrant; and (c) make any other adjustments or
amendments to this Warrant.  For purposes
of this paragraph (E), a “change in control” shall be deemed to have occurred
if (a) any “person” or “group” (within the meaning of Sections 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 under an 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 more than 50% of the then
outstanding voting stock of the Company; or (b) at any time during any period
of three consecutive years after the date of this Warrant, individuals who at
the beginning of such period constitute the Board (and any new director whose
election by the Board or whose nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority thereof; or (c) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any dividend on
or make any other distribution with respect to Shares (or any other securities
of the Company then issuable upon the exercise of the Warrant) that is payable
in Shares, Convertible Securities, any other securities of the Company or other
stock, securities or assets, other than cash, then thereafter, and in lieu of
any adjustment of the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the holder of this Warrant, upon any exercise of the
rights represented hereby, shall be entitled to receive the number of Shares
(or other securities) being purchased upon such exercise and, in addition to
and without further payment, the Shares, Convertible Securities, other
securities of any company or other stock, securities or assets which the holder
of this Warrant would have received by way of such distributions if
continuously since the date of the Warrant (or, if this Warrant shall have been
issued pursuant to Section 7 of this Warrant, the date of the predecessor
Warrant to which this Warrant relates) such holder had been the record holder
of the number of Shares (or other securities), then being purchased and had
retained all such

 

4

 

Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets
distributable with respect to such Shares (or other securities) and,
furthermore, all cash, stock, securities or assets payable as dividends or
distributions with respect to the foregoing and originating directly or
indirectly therefrom.  The Company shall
reserve and retain in escrow from any such dividend or distribution of Shares,
Convertible Securities, other securities of the Company or other stock,
securities or assets, and from any such dividends or distributions with respect
thereto and originating directly or indirectly therefrom, such Shares,
Convertible Securities, other securities of the Company and other stock,
securities, assets and cash as shall be necessary to fulfill its obligations to
the Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of action taken
by the Company, which in the good faith opinion of the Board of Directors of
the Company, are not adequately covered by the provisions of this Annex 1, and
which might materially adversely affect the rights of the holder of this Warrant,
the Company shall appoint a firm of independent public accountants of
recognized standing (which may be the regular accountants or auditors of the
Company), which shall give their opinion as to the adjustments, if any, in the
Exercise Price and the number of Shares purchasable upon the exercise of this
Warrant, or other change in the rights of the Holder, on a basis consistent
with the other provisions of this Annex 1, necessary to preserve without
diminution the rights of the Holder. 
Upon receipt of such opinion, the Company shall forthwith make the
adjustments described therein.

 

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

 

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

 

(I)            In case at any time:

 

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

 

5

 

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

 

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

 

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

 

6

 

EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered Holder

Desiring to Exercise the Within Warrant of

TIPPERARY CORPORATION

 

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

 

	
  Name of Registered Holder:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title of Signing Officer

  	
   

  
	
  or Agent (if any):

  	
   

  	
   

  
	
   

  	
   

  
	
  Address of Registered
  Holder:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Tax I.D. No.:

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  , 20

  	
   

  	
   

  
											

 

 

This Warrant and the rights
represented hereby shall not be transferable at any time unless (i) a
registration statement under the Securities Act of 1933, as amended, shall be
in effect with respect to this Warrant or the Shares issuable hereunder at such
time, or (ii) the transfer is made in compliance with the provisions of Section
5.

 

	
  Number:

  	
   

  	
  200,000   Shares

  

 

WARRANT

TO PURCHASE SHARES

OF

TIPPERARY CORPORATION

 

This certifies that, for value received, David L.
Bradshaw, an individual residing in Littleton, Colorado (“Holder”), or their
registered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texas
corporation (the “Company”), two hundred thousand (200,000) Shares, as defined
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 in accordance
with 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 exercised
prior thereto, two (2) years after the resignation or removal of the Holder as
an employee or director of the Company. 
If the Holder should resign or be removed as an employee or director
from the Company, then this Warrant shall be vested only to the extent vested
on such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the initial
exercise price set forth above and the number of Shares to be issued upon the
occurrence of certain events (the Provisions as to Adjustment) are more fully
set forth in Annex 1 hereto. 
(Hereinafter, the initial exercise price set forth above in this paragraph
for the purchase of Shares upon the exercise of this Warrant, as adjusted
pursuant to the Provisions as to Adjustment, is referred to as the “Exercise
Price”).  This Warrant is subject to the
following provisions, terms and conditions:

 

1.             Exercise of Warrant.

 

(a)           The rights represented by this Warrant may be exercised by
the Holder, in whole or in part, (but not as to a fractional Share), by the
surrender of this Warrant at the Company’s principal office located in Denver,
Colorado (or such other office or agency of the Company as the Company may
designate by notice in writing to the Holder at the address of such holder
appearing on the books of the Company at any time within the period above
named) and delivery of a completed subscription form in the form attached to
this Warrant as Exhibit A, and upon payment to the Company of the
Exercise Price for such Shares.

 

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

 

(i)                                     By application, to the extent permitted by
applicable 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
thereof determined in good faith by the Company and the Holder at the time of
such exercise; provided, however, that in order to apply such Shares or other
securities of the Company in the exercise hereof, each of the following
conditions must be met:

 

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

 

 

option, warrant or right to
obtain such Shares of other securities or through the conversion of any other
security; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.             No Rights or Liabilities as a
Shareholder.  This Warrant shall not entitle the Holder as
such to any rights whatsoever, including, without limitation, voting rights, as
a holder of Shares of the Company.  No
provisions hereof, in the absence of affirmative action by the Holder to
purchase Shares, and no mere enumeration

 

2

 

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

 

5.             Restrictions on Transfer.

 

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

 

(b)           This Warrant and the Warrant Shares shall not be
transferable (except for a transfer of this Warrant or the Warrant Shares in an
offering registered under the Securities Act, including, without limitation, a
transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer) unless, prior to any transfer, the Holder shall have
received from its transferee reasonable assurances that such person is aware
that this Warrant and the Warrant Shares have not been registered under the
Securities Act and that such person is acquiring this Warrant or the Warrant
Shares for investment only and not with the view to the disposition or public
offering thereof (unless in an offering registered under the Securities Act or
exempt therefrom), and that such person is aware that the stock certificates
evidencing the Warrant Shares shall bear a legend restricting transfer and
disposition thereof in accordance with the Securities Act unless, in the
opinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant
(other than a transfer in an offering registered under the Securities Act,
including, without limitation, a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the Holder shall provide
an opinion of counsel, who shall be reasonably satisfactory to the Company,
that an exemption from the registration requirements of the Securities Act is
available.

 

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

 

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

 

6.             Registration Under Securities
Act.

 

(a)           If the Company, at any time, proposes to register any
issuance of its securities under the Securities Act (other than a registration
on Form S-8 in connection with an employee stock purchase or option plan or on
Form S-4 in connection with mergers, acquisitions or exchange offerings), the
Company will at such time give prompt written notice to the holder hereof and
to the holders of all other Warrant Shares issuable from any outstanding
Warrants (such holders are hereinafter referred to as the “Prospective Sellers”
or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a Prospective
Seller, given within 30 days after receipt of any such notice (which request
shall state the intended method of disposition of the Warrant Shares to be
transferred by such Prospective Seller), the Company shall use its best efforts
to cause all Warrant Shares, the holders of which (or of the Warrants to which
the same are related), to the extent vested in accordance with the Vesting
Schedule, shall have so requested registration of the transfer thereof, to be
registered under the Securities Act, all to the extent requisite to permit the
sale or other disposition (in accordance with the intended method thereof as
aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section
6(a) shall not be effective with respect to the Prospective Seller in the case
of an underwritten public offering of securities of the Company by the Company
unless each Prospective Seller agrees to the terms and conditions, including underwriting
discounts and allowances, specified by the managing underwriter of such
offering with respect to such Warrant Shares. 
The Company shall have the right to reduce the number of Warrant Shares
of the Prospective Sellers to be included in a registration statement pursuant
to the exercise of the rights granted by this Section 6(a) if, and to the
extent, that the managing underwriter of such offering is of the good faith
opinion, supported by written reasons therefor, that the inclusion of such
Warrant Shares would materially and adversely

 

3

 

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

 

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

 

(i)                                     prepare and file with the Commission a
registration statement with respect to such transfer and use its best efforts
to cause such registration statement to become and remain effective, but not
for any period longer than nine months;

 

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

 

(iii)                               furnish to each Prospective Seller such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in order to
facilitate the disposition of the Warrant Shares owned by such Prospective
Seller and covered by such registration statement;

 

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

 

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

 

(vi)                              furnish to the Prospective Sellers whose
intended dispositions are required a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and describing the
application provisions of the securities or blue sky laws of each state or
jurisdiction in which the Company shall be required, pursuant to Section
6(c)(iv), to register or qualify such intended dispositions of such Warrant
Shares, or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, such Prospective Sellers;

 

4

 

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

 

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

 

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

 

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

 

(d)                                 (i)           In
the event of any registration of any transfer of Warrant Shares under the
Securities Act pursuant to this Section 6, the Company will indemnify and hold
harmless each Prospective Seller of such securities, each of its officers,
directors and partners, and each other person, if any, who controls such
Prospective Seller within the meaning of the Securities Act, and each
underwriter, if any, who participates in the offering of such securities,
against any losses, claims, damages or liabilities (or actions in respect
thereof), joint or several, to which each Prospective Seller, officer, director
or partner, controlling person or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
transfer of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act, and will reimburse such Prospective Seller
and each of its officers, directors and partners, and each such controlling
person or underwriter, for any legal or any other expenses reasonably incurred
by such Prospective Seller or its officers, directors and partners or
controlling persons or by each such underwriter, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary prospectus or
prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such Prospective Seller specifically for use in the preparation
thereof.  In the event of any
registration by the Company or any transfer of securities under the Securities
Act pursuant to this Section 6, each Prospective Seller of Warrant Shares
covered by such registration will indemnify and hold harmless the Company, each
other person, if any, who controls the Company within the meaning of the
Securities Act and each officer and director of the Company and the other
Prospective Sellers to the same extent that the Company agrees to indemnify it,
but only with respect

 

5

 

to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid.

 

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

 

7.             Transfer; Ownership. 
Subject to Section 5, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
referred to in Section 1 by the 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 the Company, of the same tenor as this Warrant but registered in
the name of the transferee.  The Holder,
by taking or holding the same, consents and agrees that this Warrant, when
endorsed in blank, shall be deemed negotiable, and that the Holder, when this
Warrant shall have been so endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant and to transfer this Warrant on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered the Holder as the owner hereof for all
purposes.  Any transfer of this Warrant
shall be made in compliance with the Securities Act and any applicable state
securities or blue sky laws.

 

8.             Exchange and Replacement. 
Subject to Section 7, this Warrant is exchangeable, upon the surrender
hereof by the Holder at the office or agency of the Company referred to in
Section 1, for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Shares which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of Shares as shall be designated by the Holder at the time of such
surrender.  Upon receipt by the Company,
at the office or agency referred to in Section 1, of evidence reasonably
satisfactory to it of the loss, theft or destruction of this Warrant and of
indemnity or security reasonably satisfactory to it (provided that the written
indemnity of the Holder shall be deemed reasonably satisfactory to the Company
for such purposes), the Company will deliver a new Warrant of like tenor and
date in replacement of this Warrant. 
This Warrant shall be promptly canceled by the Company upon the surrender
hereof in connection with any transfer, exchange or replacement.  The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.

 

9.             Notices.  Any
notice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent by
certified or registered mail to, 8998 W. Brandt Drive, Littleton, Colorado
80123-2230, or to such other address as shall have been furnished to the
Company in writing by the Holder.  Any

 

6

 

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

 

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

 

11.          Miscellaneous.  This
Warrant will be binding upon any entity succeeding to the Company by
consolidation or acquisition of all or substantially all of the Company’s
assets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against whom
enforcement of the same is sought.  The
headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereon.

 

IN
WITNESS WHEREOF,
Tipperary Corporation has caused this Warrant to be signed by its duly
authorized 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

  	
   

  
							

 

7

Annex
1

 

TIPPERARY
CORPORATION

 

PROVISIONS
AS TO ADJUSTMENT OF

EXERCISE PRICE AND NUMBER OF SHARES

ISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and the
number of Shares issuable upon the exercise of the annexed Warrant to purchase
shares of TIPPERARY CORPORATION, a Texas corporation (herein and in this
Warrant referred to as the “Company”), shall be subject to adjustment from time
to time as hereinafter provided; that in no event shall the Exercise Price be
increased 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 thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of Shares obtained by multiplying the number of Shares purchasable
pursuant hereto immediately prior to such adjustment by a fraction, the
numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment.  In making the
adjustments to the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or
sell any Shares for consideration per Share that is less than the Exercise
Price in effect immediately prior to the time of such issue or sale at less
than the Market Price (as hereinafter defined) of such Shares on the date of
such issue or sale, then forthwith upon such issue or sale the Exercise Price
in effect immediately prior thereto shall be adjusted to an amount (calculated
to the nearest cent) determined by dividing (i) an amount equal to the sum of
(a) the number of Shares outstanding immediately prior to such issue or sale
multiplied by the Exercise Price in effect immediately prior to such issue or
sale, and (b) the consideration, if any, received by the Company upon such
issue or sale by (ii) the total number of Shares outstanding immediately after
such issue or sale; provided, however, that no adjustment shall be made
hereunder by reason of:

 

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

 

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

 

(iii)      the issuance (whether directly or by
assumption in a merger or otherwise) or sale (including any issuance or sale to
holders of Shares) of any securities convertible into or exchangeable for
Shares (such convertible or exchangeable securities are herein referred to as “Convertible
Securities”), or the grant of rights to subscribe for or to purchase, or of
options for the purchase of (including any grant of such rights or options to
holders of shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or exchange
such Convertible Securities or such rights or options are immediately
exercisable.

 

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

 

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

 

(i)            If, at the time Shares are issued and sold
upon the conversion or exchange of Convertible Securities or upon the exercise
of rights or options previously granted by the Company, the price per Share for
which such Shares are issued (determined by dividing (a) the total amount, if
any, received by the Company as consideration for such Convertible Securities
or for the granting of such rights or options, plus the aggregate amount of
additional consideration paid to the Company upon the conversion or exchange of
such Convertible

 

1

 

Securities
(which, if so provided in such Convertible Securities, shall be deemed to be
equal to the outstanding principal amount of the indebtedness represented by
such Convertible Securities) or upon the exercise of such rights or options, by
(b) the total number of Shares issued upon the conversion or exchange of such
Convertible Securities or upon the exercise of such rights or options shall be
less than the Exercise Price in effect immediately prior to such issue, sale or
exercise, then the adjustments provided for by the first paragraph of this
Annex 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 be
considered the consideration received by the Company upon the issue or sale of
the Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)           In case at any time any Shares or Convertible
Securities or any rights or options to purchase any Shares or Convertible
Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor
without deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith.  In case any Shares or
Convertible Securities or any rights or options to purchase any Shares or
Convertible Securities shall be issued or sold, in whole or in part, for
consideration other than cash, the amount of the consideration other than cash
received by the Company in exchange for the issue or sale of such Convertible
Securities shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith; provided
that if the holder or holders of at least 66-2/3% of the Warrant Shares
purchasable under this Warrant shall request in writing, the value of such
consideration shall be determined by an independent expert selected by such
holders, the costs and expenses of which shall be borne by the Company, and, if
the value of such consideration as so determined is less than the value
determined by the Board of Directors of the Company, the lesser value shall be
utilized in calculating the consideration per Share received by the Company for
purposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidation
of the Company in which the Company is not the surviving corporation or in the
event of any sale of all or substantially all of the assets of the Company
outside of the ordinary course of business of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a
number of Shares for stock or securities of such other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated
and for consideration that is equal to the fair market value on the date of
such transaction of such stock or securities of the other corporation, and if
any such calculation results in adjustment of the Exercise Price, the
determination of the number of Shares issuable upon exercise of this Warrant
immediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall be
made after giving effect to such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding at any given
time shall not include Shares that have been redeemed by the Company and not
canceled, if any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an issue or
sale of Shares for purposes of paragraph (A).

 

(iv)          “Market Price” shall mean the lower of (a)
the average closing sales prices of Shares recorded on the principal national
securities exchange on which the Shares are listed or in a national market
system for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the domestic
over-the-counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined.  If the Shares are not listed on any national
securities exchange or admitted for trading in any national market system or
traded in the domestic over-the-counter market, the Market Price shall be the
higher of (y) the book value of the Shares as determined by a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z) the fair
market value of the Shares determined in good faith by the Board of Directors
of the Company,

 

2

 

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

 

(v)           Anything herein to the contrary
notwithstanding, in case the Company shall issue any Shares in connection with
the acquisition by the Company of the stock or assets of any other corporation
or the merger of any other corporation into the Company under circumstances
where, on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on the date
the number of Shares was determined, the consideration received for such Shares
would not have been less than the Market Price thereof, such Shares shall not
be deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)
to the contrary notwithstanding, in the case of an acquisition where all or
part of the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the acquisition
pays only part of a maximum dollar purchase price which is payable in Shares or
Convertible Securities and where the balance of such purchase price is deferred
or is contingently payable under a formula related to earnings over a period of
time, (a) the consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such part of the
total consideration as the portion of the dollar purchase price then paid in
Shares or Convertible Securities bears to the total maximum dollar purchase
price payable in Shares or Convertible Securities and (b) in connection with
each issuance of additional Shares or Convertible Securities pursuant to the
terms of the agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the portion of
the dollar purchase price then and theretofore paid in Shares or Convertible
Shares bears to the total maximum dollar purchase price payable in Shares or
Convertible Securities multiplied by a fraction, the numerator of which shall
be the number of Shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then and theretofore issued under such acquisition
agreement.  In the event only a part of
the purchase price for an acquisition is paid in Shares or Convertible
Securities in the manner referred to in this clause (vi), the term “total
consideration” as used in this clause (vi) shall mean that part of the
aggregate consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this clause (vi),
as determined by the Board of Directors of the Company.

 

(C)           In the case at any time the Company shall
subdivide its outstanding Shares into a greater number of Shares, then from and
after the record date for such subdivision the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Shares purchasable upon the exercise of this Warrant shall be
correspondingly increased, and, conversely, in case the outstanding Shares
shall be combined into a smaller number of Shares, then from and after the
record date for such combination the Exercise Price in effect immediately prior
to such combination shall be proportionately increased and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
decreased.

 

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

 

3

 

the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding Shares
(or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of Shares (or other securities) purchasable upon the exercise
of this Warrant and for the registration thereof as provided in Section 6 of
this Warrant) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the Exercise Price to the value of the Shares
(or other securities) reflected by the terms of such consolidation, merger or
sale if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger of
the Company with or into another corporation as a result of which a greater or
lesser number of securities of the surviving corporation are issuable to
holders of Shares in respect of the number of Shares outstanding immediately
prior to such consolidation or merger, then the Exercise Price in effect
immediately prior to such consolidation or merger shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Shares.  The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the surviving or successor corporation (if other than the
Company) resulting from such consolidation or merger of the corporation
purchasing such assets shall assume, by written instrument executed and mailed
to the registered Holder at the last address of such holder appearing on the
books of the Company, the obligation to deliver to such holder such Shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase, and containing the express assumption
of such surviving or successor corporation of the due performance of every
provision of this Warrant to be performed by the Company and of all liabilities
and obligations of the Company hereunder.

 

(E)           In the event of a change in control of the
Company, as defined in this paragraph (E), then the Board of Directors shall
accelerate the exercise date of the Warrant or make this Warrant fully vested
and exercisable and, 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 necessary to pay the Exercise Price of all or any portion of the
Warrant then held by such person; (b) pay cash to any holder of this Warrant in
exchange for the cancellation of the holder’s Warrant in an amount equal to the
difference between the Exercise Price of such Warrant and the greater of the
tender offer price for the underlying Shares or the Market Price of the Shares
on the date of the cancellation of the Warrant; and (c) make any other
adjustments or amendments to this Warrant. 
For purposes of this paragraph (E), a “change in control” shall be
deemed to have occurred if (a) any “person” or “group” (within the meaning of
Sections 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 under
an 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 more
than 50% of the then outstanding voting stock of the Company; or (b) at any
time during any period of three consecutive years after the date of this
Warrant, individuals who at the beginning of such period constitute the Board
(and any new director whose election by the Board or whose nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof;
or (c) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 50% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any
dividend on or make any other distribution with respect to Shares (or any other
securities of the Company then issuable upon the exercise of the Warrant) that
is payable in Shares, Convertible Securities, any other securities of the
Company or other stock, securities or assets, other than cash, then thereafter,
and in lieu of any adjustment of the Exercise Price and the number of Shares
issuable upon the exercise of this Warrant, the holder of this Warrant, upon
any exercise of the rights represented hereby, shall be entitled to receive the
number of Shares (or other securities) being purchased upon such exercise and,
in addition to and without further payment, the Shares, Convertible Securities,
other securities of any company or other stock, securities or assets which the
holder of this Warrant would have received by way of such distributions if
continuously since the date of the Warrant (or, if this Warrant shall have been
issued pursuant to Section 7 of this Warrant, the date of the predecessor
Warrant to which this Warrant relates) such holder had been the record holder
of the number of Shares (or other securities), then being purchased and had
retained all such

 

4

 

Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets
distributable with respect to such Shares (or other securities) and,
furthermore, all cash, stock, securities or assets payable as dividends or
distributions with respect to the foregoing and originating directly or
indirectly therefrom.  The Company shall
reserve and retain in escrow from any such dividend or distribution of Shares,
Convertible Securities, other securities of the Company or other stock,
securities or assets, and from any such dividends or distributions with respect
thereto and originating directly or indirectly therefrom, such Shares,
Convertible Securities, other securities of the Company and other stock,
securities, assets and cash as shall be necessary to fulfill its obligations to
the Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of
action taken by the Company, which in the good faith opinion of the Board of
Directors of the Company, are not adequately covered by the provisions of this
Annex 1, and which might materially adversely affect the rights of the holder
of this Warrant, the Company shall appoint a firm of independent public
accountants of recognized standing (which may be the regular accountants or
auditors of the Company), which shall give their opinion as to the adjustments,
if any, in the Exercise Price and the number of Shares purchasable upon the
exercise of this Warrant, or other change in the rights of the Holder, on a
basis consistent with the other provisions of this Annex 1, necessary to
preserve without diminution the rights of the Holder.  Upon receipt of such opinion, the Company
shall forthwith make the adjustments described therein.

 

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

 

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

 

(I)            In case at any time:

 

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

 

5

 

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

 

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

 

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

 

6

 

EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered Holder

Desiring to Exercise the Within Warrant of

TIPPERARY CORPORATION

 

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

 

 

	
  Name of Registered Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Title of Signing Officer

  	
   

  
	
  or Agent (if any):

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address of Registered
  Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Tax I.D. No.:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  , 20

  	
   

  	
   

  
												

 

 

This Warrant and the rights
represented hereby shall not be transferable at any time unless (i) a
registration statement under the Securities Act of 1933, as amended, shall be
in effect with respect to this Warrant or the Shares issuable hereunder at such
time, or (ii) the transfer is made in compliance with the provisions of Section
5.

 

	
  Number:

  	
   

  	
  25,000
  Shares

  

 

WARRANT

TO PURCHASE SHARES

OF

TIPPERARY CORPORATION

 

This certifies that, for value received, Jeff T.
Obourn an individual residing in Greenwood Village, Colorado (“Holder”), or
their registered assigns, is entitled to purchase from TIPPERARY CORPORATION, a
Texas corporation (the “Company”), twenty-five thousand (25,000) Shares, as
defined 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 in
accordance 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 exercised
prior thereto, two (2) years after the resignation or removal of the Holder as
an employee or director of the Company. 
If the Holder should resign or be removed as an employee or director
from the Company, then this Warrant shall be vested only to the extent vested on
such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the
initial exercise price set forth above and the number of Shares to be issued
upon the occurrence of certain events (the Provisions as to Adjustment) are
more fully set forth in Annex 1 hereto. 
(Hereinafter, the initial exercise price set forth above in this
paragraph for the purchase of Shares upon the exercise of this Warrant, as
adjusted pursuant to the Provisions as to Adjustment, is referred to as the “Exercise
Price”).  This Warrant is subject to the
following provisions, terms and conditions:

 

1.             Exercise of Warrant.

 

(a)           The rights represented by this Warrant may be
exercised by the Holder, in whole or in part, (but not as to a fractional
Share), by the surrender of this Warrant at the Company’s principal office
located in Denver, Colorado (or such other office or agency of the Company as
the Company may designate by notice in writing to the Holder at the address of
such holder appearing on the books of the Company at any time within the period
above named) and delivery of a completed subscription form in the form attached
to this Warrant as Exhibit A, and upon payment to the Company of the
Exercise Price for such Shares.

 

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

 

(i)            By application, to the extent permitted by
applicable 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
thereof determined in good faith by the Company and the Holder at the time of
such exercise; provided, however, that in order to apply such Shares or other
securities of the Company in the exercise hereof, each of the following
conditions must be met:

 

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

 

 

option, warrant or right to
obtain such Shares of other securities or through the conversion of any other
security; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.             No Rights or Liabilities as a
Shareholder.  This
Warrant shall not entitle the Holder as such to any rights whatsoever,
including, without limitation, voting rights, as a holder of Shares of the
Company.  No provisions hereof, in the
absence of affirmative action by the Holder to purchase Shares, and no mere
enumeration

 

2

 

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

 

5.             Restrictions on Transfer.

 

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

 

(b)           This Warrant and the Warrant Shares shall not
be transferable (except for a transfer of this Warrant or the Warrant Shares in
an offering registered under the Securities Act, including, without limitation,
a transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer) unless, prior to any transfer, the Holder shall have
received from its transferee reasonable assurances that such person is aware
that this Warrant and the Warrant Shares have not been registered under the
Securities Act and that such person is acquiring this Warrant or the Warrant
Shares for investment only and not with the view to the disposition or public
offering thereof (unless in an offering registered under the Securities Act or
exempt therefrom), and that such person is aware that the stock certificates
evidencing the Warrant Shares shall bear a legend restricting transfer and
disposition thereof in accordance with the Securities Act unless, in the
opinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant
(other than a transfer in an offering registered under the Securities Act,
including, without limitation, a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the Holder shall provide
an opinion of counsel, who shall be reasonably satisfactory to the Company,
that an exemption from the registration requirements of the Securities Act is
available.

 

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

 

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

 

6.             Registration Under Securities Act.

 

(a)           If the Company, at any time, proposes to
register any issuance of its securities under the Securities Act (other than a
registration on Form S-8 in connection with an employee stock purchase or
option plan or on Form S-4 in connection with mergers, acquisitions or exchange
offerings), the Company will at such time give prompt written notice to the
holder hereof and to the holders of all other Warrant Shares issuable from any
outstanding Warrants (such holders are hereinafter referred to as the “Prospective
Sellers” or, individually, as a “Prospective Seller”) of its intention to do
so.  Upon the written request of a
Prospective Seller, given within 30 days after receipt of any such notice
(which request shall state the intended method of disposition of the Warrant
Shares to be transferred by such Prospective Seller), the Company shall use its
best efforts to cause all Warrant Shares, the holders of which (or of the
Warrants to which the same are related), to the extent vested in accordance
with the Vesting Schedule, shall have so requested registration of the transfer
thereof, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition (in accordance with the intended method
thereof as aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section
6(a) shall not be effective with respect to the Prospective Seller in the case
of an underwritten public offering of securities of the Company by the Company
unless each Prospective Seller agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such Warrant Shares.  The Company shall have the right to reduce
the number of Warrant Shares of the Prospective Sellers to be included in a
registration statement pursuant to the exercise of the rights granted by this
Section 6(a) if, and to the extent, that the managing underwriter of such
offering is of the good faith opinion, supported by written reasons therefor,
that the inclusion of such Warrant Shares would materially and adversely

 

3

 

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

 

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

 

(i)            prepare and file with the Commission a
registration statement with respect to such transfer and use its best efforts
to cause such registration statement to become and remain effective, but not
for any period longer than nine months;

 

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

 

(iii)          furnish to each Prospective Seller such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in order to
facilitate the disposition of the Warrant Shares owned by such Prospective
Seller and covered by such registration statement;

 

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

 

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

 

(vi)          furnish to the Prospective Sellers whose
intended dispositions are required a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and describing the
application provisions of the securities or blue sky laws of each state or
jurisdiction in which the Company shall be required, pursuant to Section
6(c)(iv), to register or qualify such intended dispositions of such Warrant
Shares, or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, such Prospective Sellers;

 

4

 

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

 

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

 

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

 

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

 

(d)           (i)           In the event of any registration of any
transfer of Warrant Shares under the Securities Act pursuant to this Section 6,
the Company will indemnify and hold harmless each Prospective Seller of such
securities, each of its officers, directors and partners, and each other
person, if any, who controls such Prospective Seller within the meaning of the
Securities Act, and each underwriter, if any, who participates in the offering
of such securities, against any losses, claims, damages or liabilities (or
actions in respect thereof), joint or several, to which each Prospective
Seller, officer, director or partner, controlling person or underwriter may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which such transfer of securities was registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act, and will reimburse such
Prospective Seller and each of its officers, directors and partners, and each
such controlling person or underwriter, for any legal or any other expenses
reasonably incurred by such Prospective Seller or its officers, directors and
partners or controlling persons or by each such underwriter, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary prospectus or
prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such Prospective Seller specifically for use in the preparation
thereof.  In the event of any
registration by the Company or any transfer of securities under the Securities
Act pursuant to this Section 6, each Prospective Seller of Warrant Shares
covered by such registration will indemnify and hold harmless the Company, each
other person, if any, who controls the Company within the meaning of the
Securities Act and each officer and director of the Company and the other
Prospective Sellers to the same extent that the Company agrees to indemnify it,
but only with respect

 

5

 

to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid

 

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

 

7.             Transfer; Ownership. 
Subject to Section 5, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
referred to in Section 1 by the 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 the Company, of the same tenor as this Warrant but registered in
the name of the transferee.  The Holder,
by taking or holding the same, consents and agrees that this Warrant, when
endorsed in blank, shall be deemed negotiable, and that the Holder, when this
Warrant shall have been so endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant and to transfer this Warrant on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered the Holder as the owner hereof for all
purposes.  Any transfer of this Warrant
shall be made in compliance with the Securities Act and any applicable state
securities or blue sky laws.

 

8.             Exchange and Replacement. 
Subject to Section 7, this Warrant is exchangeable, upon the surrender
hereof by the Holder at the office or agency of the Company referred to in
Section 1, for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Shares which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of Shares as shall be designated by the Holder at the time of such
surrender.  Upon receipt by the Company,
at the office or agency referred to in Section 1, of evidence reasonably satisfactory
to it of the loss, theft or destruction of this Warrant and of indemnity or
security reasonably satisfactory to it (provided that the written indemnity of
the Holder shall be deemed reasonably satisfactory to the Company for such
purposes), the Company will deliver a new Warrant of like tenor and date in
replacement of this Warrant.  This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any transfer, exchange or replacement.  The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.

 

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

 

6

 

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

 

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

 

11.          Miscellaneous.  This
Warrant will be binding upon any entity succeeding to the Company by
consolidation or acquisition of all or substantially all of the Company’s
assets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against whom
enforcement of the same is sought.  The
headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereon.

 

IN
WITNESS WHEREOF,
Tipperary Corporation has caused this Warrant to be signed by its duly authorized
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 

  
						

 

7

 

Annex
1

 

TIPPERARY
CORPORATION

 

PROVISIONS
AS TO ADJUSTMENT OF

EXERCISE PRICE AND NUMBER OF SHARES

ISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and the
number of Shares issuable upon the exercise of the annexed Warrant to purchase
shares of TIPPERARY CORPORATION, a Texas corporation (herein and in this
Warrant referred to as the “Company”), shall be subject to adjustment from time
to time as hereinafter provided; that in no event shall the Exercise Price be
increased 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 thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of Shares obtained by multiplying the number of Shares purchasable
pursuant hereto immediately prior to such adjustment by a fraction, the
numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment.  In making the
adjustments to the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or
sell any Shares for consideration per Share that is less than the Exercise
Price in effect immediately prior to the time of such issue or sale at less
than the Market Price (as hereinafter defined) of such Shares on the date of
such issue or sale, then forthwith upon such issue or sale the Exercise Price
in effect immediately prior thereto shall be adjusted to an amount (calculated
to the nearest cent) determined by dividing (i) an amount equal to the sum of
(a) the number of Shares outstanding immediately prior to such issue or sale
multiplied by the Exercise Price in effect immediately prior to such issue or
sale, and (b) the consideration, if any, received by the Company upon such
issue or sale by (ii) the total number of Shares outstanding immediately after
such issue or sale; provided, however, that no adjustment shall be made
hereunder by reason of:

 

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

 

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

 

(iii)      the issuance (whether directly or by
assumption in a merger or otherwise) or sale (including any issuance or sale to
holders of Shares) of any securities convertible into or exchangeable for
Shares (such convertible or exchangeable securities are herein referred to as “Convertible
Securities”), or the grant of rights to subscribe for or to purchase, or of
options for the purchase of (including any grant of such rights or options to
holders of shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or exchange
such Convertible Securities or such rights or options are immediately
exercisable.

 

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

 

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

 

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

 

1

 

Securities
or for the granting of such rights or options, plus the aggregate amount of
additional consideration paid to the Company upon the conversion or exchange of
such Convertible Securities (which, if so provided in such Convertible
Securities, shall be deemed to be equal to the outstanding principal amount of
the indebtedness represented by such Convertible Securities) or upon the
exercise of such rights or options, by (b) the total number of Shares issued
upon the conversion or exchange of such Convertible Securities or upon the
exercise of such rights or options shall be less than the Exercise Price in
effect immediately prior to such issue, sale or exercise, then the adjustments
provided for by the first paragraph of this Annex 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 be considered the consideration received by
the Company upon the issue or sale of the Shares for purposes of clause (i)(b)
of paragraph (A).

 

(ii)           In case at any time any Shares or Convertible
Securities or any rights or options to purchase any Shares or Convertible
Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor
without deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith.  In case any Shares or
Convertible Securities or any rights or options to purchase any Shares or
Convertible Securities shall be issued or sold, in whole or in part, for
consideration other than cash, the amount of the consideration other than cash
received by the Company in exchange for the issue or sale of such Convertible
Securities shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith; provided
that if the holder or holders of at least 66-2/3% of the Warrant Shares purchasable
under this Warrant shall request in writing, the value of such consideration
shall be determined by an independent expert selected by such holders, the
costs and expenses of which shall be borne by the Company, and, if the value of
such consideration as so determined is less than the value determined by the
Board of Directors of the Company, the lesser value shall be utilized in
calculating the consideration per Share received by the Company for purposes of
making the adjustment provided by paragraph (A).  In the event of any merger or consolidation
of the Company in which the Company is not the surviving corporation or in the
event of any sale of all or substantially all of the assets of the Company
outside of the ordinary course of business of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a
number of Shares for stock or securities of such other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated and
for consideration that is equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and if any
such calculation results in adjustment of the Exercise Price, the determination
of the number of Shares issuable upon exercise of this Warrant immediately
prior to such merger, consolidation or 
sale, for purposes of paragraph (A), shall be made after giving effect
to such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding at any given
time shall not include Shares that have been redeemed by the Company and not
canceled, if any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an issue or
sale of Shares for purposes of paragraph (A).

 

(iv)          “Market Price” shall mean the lower of (a)
the average closing sales prices of Shares recorded on the principal national
securities exchange on which the Shares are listed or in a national market
system for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the domestic
over-the-counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined.  If the Shares are not listed on any national
securities exchange or admitted for trading in any national market system or
traded in the domestic over-the-counter market, the Market Price shall be the
higher of (y) the book value of the Shares as determined by a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z) the fair
market value of the Shares determined in good faith by the Board of Directors
of the Company,

 

2

 

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

 

(v)           Anything herein to the contrary
notwithstanding, in case the Company shall issue any Shares in connection with
the acquisition by the Company of the stock or assets of any other corporation
or the merger of any other corporation into the Company under circumstances
where, on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on the date
the number of Shares was determined, the consideration received for such Shares
would not have been less than the Market Price thereof, such Shares shall not
be deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)
to the contrary notwithstanding, in the case of an acquisition where all or
part of the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the acquisition pays
only part of a maximum dollar purchase price which is payable in Shares or
Convertible Securities and where the balance of such purchase price is deferred
or is contingently payable under a formula related to earnings over a period of
time, (a) the consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such part of the
total consideration as the portion of the dollar purchase price then paid in
Shares or Convertible Securities bears to the total maximum dollar purchase
price payable in Shares or Convertible Securities and (b) in connection with
each issuance of additional Shares or Convertible Securities pursuant to the
terms of the agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the portion of
the dollar purchase price then and theretofore paid in Shares or Convertible
Shares bears to the total maximum dollar purchase price payable in Shares or
Convertible Securities multiplied by a fraction, the numerator of which shall
be the number of Shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then and theretofore issued under such acquisition agreement.  In the event only a part of the purchase
price for an acquisition is paid in Shares or Convertible Securities in the
manner referred to in this clause (vi), the term “total consideration” as used
in this clause (vi) shall mean that part of the aggregate consideration as is
fairly allocable to the purchase price paid in Shares or Convertible Securities
in the manner referred to in this clause (vi), as determined by the Board of
Directors of the Company.

 

(C)           In the case at any time the Company shall
subdivide its outstanding Shares into a greater number of Shares, then from and
after the record date for such subdivision the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Shares purchasable upon the exercise of this Warrant shall be
correspondingly increased, and, conversely, in case the outstanding Shares
shall be combined into a smaller number of Shares, then from and after the
record date for such combination the Exercise Price in effect immediately prior
to such combination shall be proportionately increased and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
decreased.

 

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

 

3

 

the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding Shares
(or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of Shares (or other securities) purchasable upon the exercise
of this Warrant and for the registration thereof as provided in Section 6 of
this Warrant) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the Exercise Price to the value of the Shares
(or other securities) reflected by the terms of such consolidation, merger or
sale if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger of
the Company with or into another corporation as a result of which a greater or
lesser number of securities of the surviving corporation are issuable to
holders of Shares in respect of the number of Shares outstanding immediately
prior to such consolidation or merger, then the Exercise Price in effect
immediately prior to such consolidation or merger shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Shares.  The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the surviving or successor corporation (if other than the
Company) resulting from such consolidation or merger of the corporation
purchasing such assets shall assume, by written instrument executed and mailed
to the registered Holder at the last address of such holder appearing on the
books of the Company, the obligation to deliver to such holder such Shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase, and containing the express assumption
of such surviving or successor corporation of the due performance of every
provision of this Warrant to be performed by the Company and of all liabilities
and obligations of the Company hereunder.

 

(E)           In the event of a change in control of the
Company, as defined in this paragraph (E), then the Board of Directors shall
accelerate the exercise date of the Warrant or make this Warrant fully vested
and exercisable and, 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 necessary to pay the Exercise Price of all or any portion of the
Warrant then held by such person; (b) pay cash to any holder of this Warrant in
exchange for the cancellation of the holder’s Warrant in an amount equal to the
difference between the Exercise Price of such Warrant and the greater of the
tender offer price for the underlying Shares or the Market Price of the Shares
on the date of the cancellation of the Warrant; and (c) make any other
adjustments or amendments to this Warrant. 
For purposes of this paragraph (E), a “change in control” shall be
deemed to have occurred if (a) any “person” or “group” (within the meaning of
Sections 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 under
an 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 more
than 50% of the then outstanding voting stock of the Company; or (b) at any
time during any period of three consecutive years after the date of this
Warrant, individuals who at the beginning of such period constitute the Board
(and any new director whose election by the Board or whose nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof;
or (c) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any
dividend on or make any other distribution with respect to Shares (or any other
securities of the Company then issuable upon the exercise of the Warrant) that
is payable in Shares, Convertible Securities, any other securities of the
Company or other stock, securities or assets, other than cash, then thereafter,
and in lieu of any adjustment of the Exercise Price and the number of Shares
issuable upon the exercise of this Warrant, the holder of this Warrant, upon any
exercise of the rights represented hereby, shall be entitled to receive the
number of Shares (or other securities) being purchased upon such exercise and,
in addition to and without further payment, the Shares, Convertible Securities,
other securities of any company or other stock, securities or assets which the
holder of this Warrant would have received by way of such distributions if
continuously since the date of the Warrant (or, if this Warrant shall have been
issued pursuant to Section 7 of this Warrant, the date of the predecessor
Warrant to which this Warrant relates) such holder had been the record holder
of the number of Shares (or other securities), then being purchased and had
retained all such

 

4

 

Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets
distributable with respect to such Shares (or other securities) and,
furthermore, all cash, stock, securities or assets payable as dividends or
distributions with respect to the foregoing and originating directly or
indirectly therefrom.  The Company shall
reserve and retain in escrow from any such dividend or distribution of Shares,
Convertible Securities, other securities of the Company or other stock, securities
or assets, and from any such dividends or distributions with respect thereto
and originating directly or indirectly therefrom, such Shares, Convertible
Securities, other securities of the Company and other stock, securities, assets
and cash as shall be necessary to fulfill its obligations to the Holder
pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of
action taken by the Company, which in the good faith opinion of the Board of
Directors of the Company, are not adequately covered by the provisions of this
Annex 1, and which might materially adversely affect the rights of the holder
of this Warrant, the Company shall appoint a firm of independent public
accountants of recognized standing (which may be the regular accountants or
auditors of the Company), which shall give their opinion as to the adjustments,
if any, in the Exercise Price and the number of Shares purchasable upon the
exercise of this Warrant, or other change in the rights of the Holder, on a
basis consistent with the other provisions of this Annex 1, necessary to
preserve without diminution the rights of the Holder.  Upon receipt of such opinion, the Company
shall forthwith make the adjustments described therein.

 

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

 

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

 

(I)            In case at any time:

 

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

 

5

 

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

 

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

 

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

 

6

 

EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered Holder

Desiring to Exercise the Within Warrant of

TIPPERARY CORPORATION

 

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

 

 

	
  Name of Registered Holder:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title of Signing Officer

  	
   

  
	
  or Agent (if any):

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address of Registered
  Holder:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Tax I.D. No.:

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  , 20

  	
   

  	
   

  
											

 

7

 

This Warrant and the rights
represented hereby shall not be transferable at any time unless (i) a
registration statement under the Securities Act of 1933, as amended, shall be
in effect with respect to this Warrant or the Shares issuable hereunder at such
time, or (ii) the transfer is made in compliance with the provisions of Section
5.

 

	
  Number:

  	
   

  	
  25,000 Shares

  

 

WARRANT

TO PURCHASE SHARES

OF

TIPPERARY CORPORATION

 

This certifies that, for value received, D. Leroy
Sample, an individual residing in Estero, Florida (“Holder”), or their
registered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texas
corporation (the “Company”), twenty-five thousand (25,000) Shares, as defined
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 in accordance
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 exercised
prior thereto, two (2) years after the resignation or removal of the Holder as
an employee or director of the Company. 
If the Holder should resign or be removed as an employee or director
from the Company, then this Warrant shall be vested only to the extent vested
on such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the
initial exercise price set forth above and the number of Shares to be issued
upon the occurrence of certain events (the Provisions as to Adjustment) are
more fully set forth in Annex 1 hereto. 
(Hereinafter, the initial exercise price set forth above in this
paragraph for the purchase of Shares upon the exercise of this Warrant, as
adjusted pursuant to the Provisions as to Adjustment, is referred to as the “Exercise
Price”).  This Warrant is subject to the
following provisions, terms and conditions:

 

1.             Exercise of Warrant.

 

(a)           The rights represented by this Warrant may be
exercised by the Holder, in whole or in part, (but not as to a fractional
Share), by the surrender of this Warrant at the Company’s principal office
located in Denver, Colorado (or such other office or agency of the Company as
the Company may designate by notice in writing to the Holder at the address of
such holder appearing on the books of the Company at any time within the period
above named) and delivery of a completed subscription form in the form attached
to this Warrant as Exhibit A, and upon payment to the Company of the Exercise
Price for such Shares.

 

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

 

(i)            By application, to the extent permitted by
applicable 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 thereof
determined in good faith by the Company and the Holder at the time of such
exercise; provided, however, that in order to apply such Shares or other
securities of the Company in the exercise hereof, each of the following
conditions must be met:

 

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

 

 

option, warrant or right to
obtain such Shares of other securities or through the conversion of any other
security; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.             No Rights or Liabilities as a
Shareholder.  This
Warrant shall not entitle the Holder as such to any rights whatsoever,
including, without limitation, voting rights, as a holder of Shares of the
Company.  No provisions hereof, in the
absence of affirmative action by the Holder to purchase Shares, and no mere
enumeration

 

2

 

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

 

5.             Restrictions on Transfer.

 

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

 

(b)           This Warrant and the Warrant Shares shall not
be transferable (except for a transfer of this Warrant or the Warrant Shares in
an offering registered under the Securities Act, including, without limitation,
a transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer) unless, prior to any transfer, the Holder shall have
received from its transferee reasonable assurances that such person is aware
that this Warrant and the Warrant Shares have not been registered under the
Securities Act and that such person is acquiring this Warrant or the Warrant
Shares for investment only and not with the view to the disposition or public
offering thereof (unless in an offering registered under the Securities Act or
exempt therefrom), and that such person is aware that the stock certificates
evidencing the Warrant Shares shall bear a legend restricting transfer and
disposition thereof in accordance with the Securities Act unless, in the
opinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant
(other than a transfer in an offering registered under the Securities Act,
including, without limitation, a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the Holder shall provide
an opinion of counsel, who shall be reasonably satisfactory to the Company,
that an exemption from the registration requirements of the Securities Act is
available.

 

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

 

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

 

6.             Registration Under Securities Act.

 

(a)           If the Company, at any time, proposes to
register any issuance of its securities under the Securities Act (other than a
registration on Form S-8 in connection with an employee stock purchase or
option plan or on Form S-4 in connection with mergers, acquisitions or exchange
offerings), the Company will at such time give prompt written notice to the
holder hereof and to the holders of all other Warrant Shares issuable from any
outstanding Warrants (such holders are hereinafter referred to as the “Prospective
Sellers” or, individually, as a “Prospective Seller”) of its intention to do
so.  Upon the written request of a Prospective
Seller, given within 30 days after receipt of any such notice (which request
shall state the intended method of disposition of the Warrant Shares to be
transferred by such Prospective Seller), the Company shall use its best efforts
to cause all Warrant Shares, the holders of which (or of the Warrants to which
the same are related), to the extent vested in accordance with the Vesting
Schedule, shall have so requested registration of the transfer thereof, to be
registered under the Securities Act, all to the extent requisite to permit the
sale or other disposition (in accordance with the intended method thereof as
aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section
6(a) shall not be effective with respect to the Prospective Seller in the case
of an underwritten public offering of securities of the Company by the Company
unless each Prospective Seller agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such Warrant Shares.  The Company shall have the right to reduce
the number of Warrant Shares of the Prospective Sellers to be included in a
registration statement pursuant to the exercise of the rights granted by this
Section 6(a) if, and to the extent, that the managing underwriter of such
offering is of the good faith opinion, supported by written reasons therefor,
that the inclusion of such Warrant Shares would materially and adversely

 

3

 

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

 

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

 

(i)            prepare and file with the Commission a
registration statement with respect to such transfer and use its best efforts
to cause such registration statement to become and remain effective, but not
for any period longer than nine months;

 

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

 

(iii)          furnish to each Prospective Seller such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in order to
facilitate the disposition of the Warrant Shares owned by such Prospective
Seller and covered by such registration statement;

 

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

 

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

 

(vi)          furnish to the Prospective Sellers whose
intended dispositions are required a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and describing the
application provisions of the securities or blue sky laws of each state or
jurisdiction in which the Company shall be required, pursuant to Section
6(c)(iv), to register or qualify such intended dispositions of such Warrant
Shares, or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, such Prospective Sellers;

 

4

 

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

 

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

 

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

 

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

 

(d)           (i)           In the event of any registration of any
transfer of Warrant Shares under the Securities Act pursuant to this Section 6,
the Company will indemnify and hold harmless each Prospective Seller of such
securities, each of its officers, directors and partners, and each other
person, if any, who controls such Prospective Seller within the meaning of the
Securities Act, and each underwriter, if any, who participates in the offering
of such securities, against any losses, claims, damages or liabilities (or
actions in respect thereof), joint or several, to which each Prospective
Seller, officer, director or partner, controlling person or underwriter may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which such transfer of securities was registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act, and will reimburse such
Prospective Seller and each of its officers, directors and partners, and each
such controlling person or underwriter, for any legal or any other expenses
reasonably incurred by such Prospective Seller or its officers, directors and
partners or controlling persons or by each such underwriter, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary prospectus or
prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such Prospective Seller specifically for use in the preparation
thereof.  In the event of any
registration by the Company or any transfer of securities under the Securities
Act pursuant to this Section 6, each Prospective Seller of Warrant Shares
covered by such registration will indemnify and hold harmless the Company, each
other person, if any, who controls the Company within the meaning of the
Securities Act and each officer and director of the Company and the other
Prospective Sellers to the same extent that the Company agrees to indemnify it,
but only with respect

 

5

 

to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid

 

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

 

7.             Transfer; Ownership. 
Subject to Section 5, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
referred to in Section 1 by the 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 the
Company, of the same tenor as this Warrant but registered in the name of the
transferee.  The Holder, by taking or
holding the same, consents and agrees that this Warrant, when endorsed in
blank, shall be deemed negotiable, and that the Holder, when this Warrant shall
have been so endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant and to
transfer this Warrant on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered the Holder as the owner hereof for all purposes.  Any transfer of this Warrant shall be made in
compliance with the Securities Act and any applicable state securities or blue
sky laws.

 

8.             Exchange and Replacement.  Subject
to Section 7, this Warrant is exchangeable, upon the surrender hereof by the
Holder at the office or agency of the Company referred to in Section 1, for new
Warrants of like tenor and date representing in the aggregate the right to
purchase the number of Shares which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of Shares as shall
be designated by the Holder at the time of such surrender.  Upon receipt by the Company, at the office or
agency referred to in Section 1, of evidence reasonably satisfactory to it of
the loss, theft or destruction of this Warrant and of indemnity or security
reasonably satisfactory to it (provided that the written indemnity of the
Holder shall be deemed reasonably satisfactory to the Company for such
purposes), the Company will deliver a new Warrant of like tenor and date in
replacement of this Warrant.  This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any transfer, exchange or replacement.  The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.

 

9.             Notices.  Any
notice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent by
certified or registered mail to, 20383 Wildcat Run Drive, Estero, Florida
33928, or to such other address as shall have been furnished to the Company in
writing by the Holder.  Any

 

6

 

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

 

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

 

11.          Miscellaneous.  This
Warrant will be binding upon any entity succeeding to the Company by
consolidation or acquisition of all or substantially all of the Company’s
assets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against whom
enforcement of the same is sought.  The
headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereon.

 

IN
WITNESS WHEREOF,
Tipperary Corporation has caused this Warrant to be signed by its duly
authorized 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

  	
   

  
					

 

7

 

Annex
1

 

TIPPERARY
CORPORATION

 

PROVISIONS
AS TO ADJUSTMENT OF

EXERCISE PRICE AND NUMBER OF SHARES

ISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and the
number of Shares issuable upon the exercise of the annexed Warrant to purchase
shares of TIPPERARY CORPORATION, a Texas corporation (herein and in this
Warrant referred to as the “Company”), shall be subject to adjustment from time
to time as hereinafter provided; that in no event shall the Exercise Price be
increased 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 thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of Shares obtained by multiplying the number of Shares purchasable
pursuant hereto immediately prior to such adjustment by a fraction, the
numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment.  In making the
adjustments to the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or sell any Shares
for consideration per Share that is less than the Exercise Price in effect
immediately prior to the time of such issue or sale at less than the Market
Price (as hereinafter defined) of such Shares on the date of such issue or
sale, then forthwith upon such issue or sale the Exercise Price in effect
immediately prior thereto shall be adjusted to an amount (calculated to the
nearest cent) determined by dividing (i) an amount equal to the sum of (a) the
number of Shares outstanding immediately prior to such issue or sale multiplied
by the Exercise Price in effect immediately prior to such issue or sale, and
(b) the consideration, if any, received by the Company upon such issue or sale
by (ii) the total number of Shares outstanding immediately after such issue or
sale; provided, however, that no adjustment shall be made hereunder by reason
of:

 

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

 

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

 

(iii)                   the issuance (whether directly or by
assumption in a merger or otherwise) or sale (including any issuance or sale to
holders of Shares) of any securities convertible into or exchangeable for
Shares (such convertible or exchangeable securities are herein referred to as “Convertible
Securities”), or the grant of rights to subscribe for or to purchase, or of
options for the purchase of (including any grant of such rights or options to
holders of shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or exchange
such Convertible Securities or such rights or options are immediately
exercisable.

 

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

 

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

 

(i)                                     If, at the time Shares are issued and sold
upon the conversion or exchange of Convertible Securities or upon the exercise
of rights or options previously granted by the Company, the price per Share for
which such Shares are issued (determined by dividing (a) the total amount, if
any, received by the Company as consideration for such Convertible Securities
or for the granting of such rights or options, plus the aggregate amount of
additional consideration paid to the Company upon the conversion or exchange of
such Convertible

 

1

 

Securities
(which, if so provided in such Convertible Securities, shall be deemed to be
equal to the outstanding principal amount of the indebtedness represented by
such Convertible Securities) or upon the exercise of such rights or options, by
(b) the total number of Shares issued upon the conversion or exchange of such
Convertible Securities or upon the exercise of such rights or options shall be
less than the Exercise Price in effect immediately prior to such issue, sale or
exercise, then the adjustments provided for by the first paragraph of this
Annex 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 be
considered the consideration received by the Company upon the issue or sale of
the Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)                                  In case at any time any Shares or Convertible
Securities or any rights or options to purchase any Shares or Convertible
Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor
without deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith.  In case any Shares or
Convertible Securities or any rights or options to purchase any Shares or
Convertible Securities shall be issued or sold, in whole or in part, for consideration
other than cash, the amount of the consideration other than cash received by
the Company in exchange for the issue or sale of such Convertible Securities
shall be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Company, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith; provided
that if the holder or holders of at least 66-2/3% of the Warrant Shares
purchasable under this Warrant shall request in writing, the value of such
consideration shall be determined by an independent expert selected by such
holders, the costs and expenses of which shall be borne by the Company, and, if
the value of such consideration as so determined is less than the value
determined by the Board of Directors of the Company, the lesser value shall be
utilized in calculating the consideration per Share received by the Company for
purposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidation
of the Company in which the Company is not the surviving corporation or in the
event of any sale of all or substantially all of the assets of the Company
outside of the ordinary course of business of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a
number of Shares for stock or securities of such other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated
and for consideration that is equal to the fair market value on the date of
such transaction of such stock or securities of the other corporation, and if
any such calculation results in adjustment of the Exercise Price, the
determination of the number of Shares issuable upon exercise of this Warrant
immediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall be
made after giving effect to such adjustment of the Exercise Price.

 

(iii)                               The number of Shares outstanding at any given
time shall not include Shares that have been redeemed by the Company and not
canceled, if any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an issue or
sale of Shares for purposes of paragraph (A).

 

(iv)                              “Market Price” shall mean the lower of (a)
the average closing sales prices of Shares recorded on the principal national
securities exchange on which the Shares are listed or in a national market
system for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the domestic
over-the-counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined.  If the Shares are not listed on any national
securities exchange or admitted for trading in any national market system or
traded in the domestic over-the-counter market, the Market Price shall be the
higher of (y) the book value of the Shares as determined by a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z) the fair
market value of the Shares determined in good faith by the Board of Directors
of the Company,

 

2

 

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

 

(v)                                 Anything herein to the contrary
notwithstanding, in case the Company shall issue any Shares in connection with
the acquisition by the Company of the stock or assets of any other corporation
or the merger of any other corporation into the Company under circumstances
where, on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on the date
the number of Shares was determined, the consideration received for such Shares
would not have been less than the Market Price thereof, such Shares shall not
be deemed to have been issued for less than the Market Price.

 

(vi)                              Anything in clause (ii) of this paragraph (B)
to the contrary notwithstanding, in the case of an acquisition where all or
part of the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the acquisition
pays only part of a maximum dollar purchase price which is payable in Shares or
Convertible Securities and where the balance of such purchase price is deferred
or is contingently payable under a formula related to earnings over a period of
time, (a) the consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such part of the
total consideration as the portion of the dollar purchase price then paid in
Shares or Convertible Securities bears to the total maximum dollar purchase
price payable in Shares or Convertible Securities and (b) in connection with
each issuance of additional Shares or Convertible Securities pursuant to the
terms of the agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the portion of
the dollar purchase price then and theretofore paid in Shares or Convertible
Shares bears to the total maximum dollar purchase price payable in Shares or
Convertible Securities multiplied by a fraction, the numerator of which shall
be the number of Shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then and theretofore issued under such acquisition
agreement.  In the event only a part of
the purchase price for an acquisition is paid in Shares or Convertible
Securities in the manner referred to in this clause (vi), the term “total
consideration” as used in this clause (vi) shall mean that part of the
aggregate consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this clause (vi),
as determined by the Board of Directors of the Company.

 

(C)           In the case at any time the Company shall subdivide its
outstanding Shares into a greater number of Shares, then from and after the
record date for such subdivision the Exercise Price in effect immediately prior
to such subdivision shall be proportionately reduced and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
increased, and, conversely, in case the outstanding Shares shall be combined
into a smaller number of Shares, then from and after the record date for such
combination the Exercise Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares purchasable upon
the exercise of this Warrant shall be correspondingly decreased.

 

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

 

3

 

the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding Shares
(or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of Shares (or other securities) purchasable upon the exercise
of this Warrant and for the registration thereof as provided in Section 6 of
this Warrant) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the Exercise Price to the value of the Shares
(or other securities) reflected by the terms of such consolidation, merger or
sale if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger of
the Company with or into another corporation as a result of which a greater or
lesser number of securities of the surviving corporation are issuable to
holders of Shares in respect of the number of Shares outstanding immediately prior
to such consolidation or merger, then the Exercise Price in effect immediately
prior to such consolidation or merger shall be adjusted in the same manner as
though there were a subdivision or combination of the outstanding Shares.  The Company shall not effect any such
consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the surviving or successor corporation (if other than the
Company) resulting from such consolidation or merger of the corporation
purchasing such assets shall assume, by written instrument executed and mailed
to the registered Holder at the last address of such holder appearing on the
books of the Company, the obligation to deliver to such holder such Shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase, and containing the express assumption
of such surviving or successor corporation of the due performance of every
provision of this Warrant to be performed by the Company and of all liabilities
and obligations of the Company hereunder.

 

(E)           In the event of a change in control of the Company, as
defined in this paragraph (E), then the Board of Directors shall accelerate the
exercise date of the Warrant or make this Warrant fully vested and exercisable
and, 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 necessary
to pay the Exercise Price of all or any portion of the Warrant then held by
such person; (b) pay cash to any holder of this Warrant in exchange for the
cancellation of the holder’s Warrant in an amount equal to the difference
between the Exercise Price of such Warrant and the greater of the tender offer
price for the underlying Shares or the Market Price of the Shares on the date
of the cancellation of the Warrant; and (c) make any other adjustments or
amendments to this Warrant.  For purposes
of this paragraph (E), a “change in control” shall be deemed to have occurred
if (a) any “person” or “group” (within the meaning of Sections 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 under an 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 more than 50% of the then
outstanding voting stock of the Company; or (b) at any time during any period
of three consecutive years after the date of this Warrant, individuals who at
the beginning of such period constitute the Board (and any new director whose
election by the Board or whose nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority thereof; or (c) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any dividend on
or make any other distribution with respect to Shares (or any other securities
of the Company then issuable upon the exercise of the Warrant) that is payable
in Shares, Convertible Securities, any other securities of the Company or other
stock, securities or assets, other than cash, then thereafter, and in lieu of
any adjustment of the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the holder of this Warrant, upon any exercise of the
rights represented hereby, shall be entitled to receive the number of Shares
(or other securities) being purchased upon such exercise and, in addition to
and without further payment, the Shares, Convertible Securities, other
securities of any company or other stock, securities or assets which the holder
of this Warrant would have received by way of such distributions if
continuously since the date of the Warrant (or, if this Warrant shall have been
issued pursuant to Section 7 of this Warrant, the date of the predecessor
Warrant to which this Warrant relates) such holder had been the record holder
of the number of Shares (or other securities), then being purchased and had
retained all such

 

4

 

Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets
distributable with respect to such Shares (or other securities) and,
furthermore, all cash, stock, securities or assets payable as dividends or
distributions with respect to the foregoing and originating directly or
indirectly therefrom.  The Company shall
reserve and retain in escrow from any such dividend or distribution of Shares,
Convertible Securities, other securities of the Company or other stock,
securities or assets, and from any such dividends or distributions with respect
thereto and originating directly or indirectly therefrom, such Shares,
Convertible Securities, other securities of the Company and other stock,
securities, assets and cash as shall be necessary to fulfill its obligations to
the Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of action taken
by the Company, which in the good faith opinion of the Board of Directors of
the Company, are not adequately covered by the provisions of this Annex 1, and
which might materially adversely affect the rights of the holder of this
Warrant, the Company shall appoint a firm of independent public accountants of
recognized standing (which may be the regular accountants or auditors of the
Company), which shall give their opinion as to the adjustments, if any, in the
Exercise Price and the number of Shares purchasable upon the exercise of this
Warrant, or other change in the rights of the Holder, on a basis consistent
with the other provisions of this Annex 1, necessary to preserve without
diminution the rights of the Holder. 
Upon receipt of such opinion, the Company shall forthwith make the
adjustments described therein.

 

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

 

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

 

(I)            In case at any time:

 

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

 

5

 

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

 

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

 

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

 

6

 

EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered Holder

Desiring to Exercise the Within Warrant of

TIPPERARY CORPORATION

 

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

 

	
  Name of Registered Holder:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title of Signing Officer

  	
   

  	
   

  
	
  or Agent (if any):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address of Registered
  Holder:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tax I.D. No.:

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  , 20

  	
   

  	
   

  	
   

  
											

 

 

This Warrant and the rights
represented hereby shall not be transferable at any time unless (i) a
registration statement under the Securities Act of 1933, as amended, shall be
in effect with respect to this Warrant or the Shares issuable hereunder at such
time, or (ii) the transfer is made in compliance with the provisions of Section
5.

 

	
  Number:

  	
   

  	
  25,000
  Shares

  

 

WARRANT

TO PURCHASE SHARES

OF

TIPPERARY CORPORATION

 

This certifies that, for value received, Eugene I.
Davis, an individual residing in Livingston, New Jersey (“Holder”), or their
registered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texas
corporation (the “Company”), twenty-five thousand (25,000) Shares, as defined
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 in accordance
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 exercised
prior thereto, two (2) years after the resignation or removal of the Holder as
an employee or director of the Company. 
If the Holder should resign or be removed as an employee or director
from the Company, then this Warrant shall be vested only to the extent vested
on such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the
initial exercise price set forth above and the number of Shares to be issued
upon the occurrence of certain events (the Provisions as to Adjustment) are more
fully set forth in Annex 1 hereto.  (Hereinafter,
the initial exercise price set forth above in this paragraph for the purchase
of Shares upon the exercise of this Warrant, as adjusted pursuant to the
Provisions as to Adjustment, is referred to as the “Exercise Price”).  This Warrant is subject to the following
provisions, terms and conditions:

 

1.             Exercise of Warrant.

 

(a)           The rights represented by this Warrant may be exercised by
the Holder, in whole or in part, (but not as to a fractional Share), by the
surrender of this Warrant at the Company’s principal office located in Denver,
Colorado (or such other office or agency of the Company as the Company may
designate by notice in writing to the Holder at the address of such holder
appearing on the books of the Company at any time within the period above
named) and delivery of a completed subscription form in the form attached to
this Warrant as Exhibit A, and upon payment to the Company of the
Exercise Price for such Shares.

 

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

 

(i)                                     By application, to the extent permitted by
applicable 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
thereof determined in good faith by the Company and the Holder at the time of
such exercise; provided, however, that in order to apply such Shares or other
securities of the Company in the exercise hereof, each of the following
conditions must be met:

 

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

 

 

option, warrant or right to
obtain such Shares of other securities or through the conversion of any other
security; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.             No Rights or Liabilities as a
Shareholder.  This Warrant shall not entitle the Holder as
such to any rights whatsoever, including, without limitation, voting rights, as
a holder of Shares of the Company.  No
provisions hereof, in the absence of affirmative action by the Holder to
purchase Shares, and no mere enumeration

 

2

 

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

 

5.             Restrictions on Transfer.

 

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

 

(b)           This Warrant and the Warrant Shares shall not be
transferable (except for a transfer of this Warrant or the Warrant Shares in an
offering registered under the Securities Act, including, without limitation, a
transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer) unless, prior to any transfer, the Holder shall have
received from its transferee reasonable assurances that such person is aware
that this Warrant and the Warrant Shares have not been registered under the
Securities Act and that such person is acquiring this Warrant or the Warrant
Shares for investment only and not with the view to the disposition or public
offering thereof (unless in an offering registered under the Securities Act or
exempt therefrom), and that such person is aware that the stock certificates
evidencing the Warrant Shares shall bear a legend restricting transfer and
disposition thereof in accordance with the Securities Act unless, in the
opinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant
(other than a transfer in an offering registered under the Securities Act,
including, without limitation, a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the Holder shall provide
an opinion of counsel, who shall be reasonably satisfactory to the Company,
that an exemption from the registration requirements of the Securities Act is
available.

 

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

 

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

 

6.             Registration Under Securities
Act.

 

(a)           If the Company, at any time, proposes to register any
issuance of its securities under the Securities Act (other than a registration
on Form S-8 in connection with an employee stock purchase or option plan or on
Form S-4 in connection with mergers, acquisitions or exchange offerings), the
Company will at such time give prompt written notice to the holder hereof and
to the holders of all other Warrant Shares issuable from any outstanding
Warrants (such holders are hereinafter referred to as the “Prospective Sellers”
or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a Prospective
Seller, given within 30 days after receipt of any such notice (which request
shall state the intended method of disposition of the Warrant Shares to be
transferred by such Prospective Seller), the Company shall use its best efforts
to cause all Warrant Shares, the holders of which (or of the Warrants to which
the same are related), to the extent vested in accordance with the Vesting
Schedule, shall have so requested registration of the transfer thereof, to be
registered under the Securities Act, all to the extent requisite to permit the
sale or other disposition (in accordance with the intended method thereof as
aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section
6(a) shall not be effective with respect to the Prospective Seller in the case
of an underwritten public offering of securities of the Company by the Company
unless each Prospective Seller agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such Warrant Shares.  The Company shall have the right to reduce
the number of Warrant Shares of the Prospective Sellers to be included in a
registration statement pursuant to the exercise of the rights granted by this
Section 6(a) if, and to the extent, that the managing underwriter of such
offering is of the good faith opinion, supported by written reasons therefor,
that the inclusion of such Warrant Shares would materially and adversely

 

3

 

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

 

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

 

(i)                                     prepare and file with the Commission a
registration statement with respect to such transfer and use its best efforts
to cause such registration statement to become and remain effective, but not
for any period longer than nine months;

 

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

 

(iii)                               furnish to each Prospective Seller such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in order to
facilitate the disposition of the Warrant Shares owned by such Prospective
Seller and covered by such registration statement;

 

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

 

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

 

(vi)                              furnish to the Prospective Sellers whose
intended dispositions are required a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and describing the
application provisions of the securities or blue sky laws of each state or
jurisdiction in which the Company shall be required, pursuant to Section
6(c)(iv), to register or qualify such intended dispositions of such Warrant
Shares, or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, such Prospective Sellers;

 

4

 

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

 

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

 

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

 

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

 

(d)                                 (i)           In
the event of any registration of any transfer of Warrant Shares under the
Securities Act pursuant to this Section 6, the Company will indemnify and hold
harmless each Prospective Seller of such securities, each of its officers,
directors and partners, and each other person, if any, who controls such
Prospective Seller within the meaning of the Securities Act, and each
underwriter, if any, who participates in the offering of such securities,
against any losses, claims, damages or liabilities (or actions in respect
thereof), joint or several, to which each Prospective Seller, officer, director
or partner, controlling person or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
transfer of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act, and will reimburse such Prospective Seller
and each of its officers, directors and partners, and each such controlling
person or underwriter, for any legal or any other expenses reasonably incurred
by such Prospective Seller or its officers, directors and partners or
controlling persons or by each such underwriter, in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, preliminary prospectus or prospectus or
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such Prospective Seller specifically for use in the preparation thereof.  In the event of any registration by the
Company or any transfer of securities under the Securities Act pursuant to this
Section 6, each Prospective Seller of Warrant Shares covered by such
registration will indemnify and hold harmless the Company, each other person,
if any, who controls the Company within the meaning of the Securities Act and
each officer and director of the Company and the other Prospective Sellers to
the same extent that the Company agrees to indemnify it, but only with respect

 

5

 

to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid

 

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

 

7.             Transfer; Ownership. 
Subject to Section 5, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
referred to in Section 1 by the 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 the Company, of the same tenor as this Warrant but registered in
the name of the transferee.  The Holder,
by taking or holding the same, consents and agrees that this Warrant, when
endorsed in blank, shall be deemed negotiable, and that the Holder, when this
Warrant shall have been so endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant and to transfer this Warrant on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered the Holder as the owner hereof for all
purposes.  Any transfer of this Warrant
shall be made in compliance with the Securities Act and any applicable state
securities or blue sky laws.

 

8.             Exchange and Replacement. 
Subject to Section 7, this Warrant is exchangeable, upon the surrender
hereof by the Holder at the office or agency of the Company referred to in
Section 1, for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Shares which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of Shares as shall be designated by the Holder at the time of such
surrender.  Upon receipt by the Company,
at the office or agency referred to in Section 1, of evidence reasonably
satisfactory to it of the loss, theft or destruction of this Warrant and of
indemnity or security reasonably satisfactory to it (provided that the written
indemnity of the Holder shall be deemed reasonably satisfactory to the Company
for such purposes), the Company will deliver a new Warrant of like tenor and date
in replacement of this Warrant.  This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any transfer, exchange or replacement.  The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.

 

9.             Notices.  Any
notice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent by
certified or registered mail to, Five Canoe Brook Drive, Livingston, New Jersey
07039, or to such other address as shall have been furnished to the Company in
writing by the Holder.  Any notice

 

6

 

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

 

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

 

11.          Miscellaneous.  This
Warrant will be binding upon any entity succeeding to the Company by
consolidation or acquisition of all or substantially all of the Company’s
assets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against whom
enforcement of the same is sought.  The
headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereon.

 

IN
WITNESS WHEREOF,
Tipperary Corporation has caused this Warrant to be signed by its duly
authorized 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

  	
   

  
					

 

7

 

Annex
1

 

TIPPERARY
CORPORATION

 

PROVISIONS
AS TO ADJUSTMENT OF

EXERCISE PRICE AND NUMBER OF SHARES

ISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and the
number of Shares issuable upon the exercise of the annexed Warrant to purchase
shares of TIPPERARY CORPORATION, a Texas corporation (herein and in this
Warrant referred to as the “Company”), shall be subject to adjustment from time
to time as hereinafter provided; that in no event shall the Exercise Price be
increased 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 thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of Shares obtained by multiplying the number of Shares purchasable
pursuant hereto immediately prior to such adjustment by a fraction, the
numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment.  In making the
adjustments to the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or sell any Shares
for consideration per Share that is less than the Exercise Price in effect
immediately prior to the time of such issue or sale at less than the Market
Price (as hereinafter defined) of such Shares on the date of such issue or
sale, then forthwith upon such issue or sale the Exercise Price in effect
immediately prior thereto shall be adjusted to an amount (calculated to the
nearest cent) determined by dividing (i) an amount equal to the sum of (a) the
number of Shares outstanding immediately prior to such issue or sale multiplied
by the Exercise Price in effect immediately prior to such issue or sale, and
(b) the consideration, if any, received by the Company upon such issue or sale
by (ii) the total number of Shares outstanding immediately after such issue or
sale; provided, however, that no adjustment shall be made hereunder by reason
of:

 

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

 

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

 

(iii)                   the issuance (whether directly or by
assumption in a merger or otherwise) or sale (including any issuance or sale to
holders of Shares) of any securities convertible into or exchangeable for
Shares (such convertible or exchangeable securities are herein referred to as “Convertible
Securities”), or the grant of rights to subscribe for or to purchase, or of
options for the purchase of (including any grant of such rights or options to
holders of shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or exchange
such Convertible Securities or such rights or options are immediately
exercisable.

 

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

 

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

 

(i)                                     If, at the time Shares are issued and sold
upon the conversion or exchange of Convertible Securities or upon the exercise
of rights or options previously granted by the Company, the price per Share for
which such Shares are issued (determined by dividing (a) the total amount, if
any, received by the Company as consideration for such Convertible Securities
or for the granting of such rights or options, plus the aggregate amount of
additional consideration paid to the Company upon the conversion or exchange of
such Convertible 

 

1

 

Securities (which, if so
provided in such Convertible Securities, shall be deemed to be equal to the
outstanding principal amount of the indebtedness represented by such
Convertible Securities) or upon the exercise of such rights or options, by (b)
the total number of Shares issued upon the conversion or exchange of such
Convertible Securities or upon the exercise of such rights or options shall be
less than the Exercise Price in effect immediately prior to such issue, sale or
exercise, then the adjustments provided for by the first paragraph of this
Annex 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 be
considered the consideration received by the Company upon the issue or sale of
the Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)                                  In case at any time any Shares or Convertible
Securities or any rights or options to purchase any Shares or Convertible
Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor
without deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith.  In case any Shares or
Convertible Securities or any rights or options to purchase any Shares or
Convertible Securities shall be issued or sold, in whole or in part, for
consideration other than cash, the amount of the consideration other than cash
received by the Company in exchange for the issue or sale of such Convertible
Securities shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith; provided
that if the holder or holders of at least 66-2/3% of the Warrant Shares
purchasable under this Warrant shall request in writing, the value of such
consideration shall be determined by an independent expert selected by such
holders, the costs and expenses of which shall be borne by the Company, and, if
the value of such consideration as so determined is less than the value
determined by the Board of Directors of the Company, the lesser value shall be
utilized in calculating the consideration per Share received by the Company for
purposes of making the adjustment provided by paragraph (A).  In the event of any merger or consolidation
of the Company in which the Company is not the surviving corporation or in the
event of any sale of all or substantially all of the assets of the Company
outside of the ordinary course of business of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a
number of Shares for stock or securities of such other corporation computed on
the basis of the actual exchange ratio on which the transaction was predicated
and for consideration that is equal to the fair market value on the date of
such transaction of such stock or securities of the other corporation, and if
any such calculation results in adjustment of the Exercise Price, the
determination of the number of Shares issuable upon exercise of this Warrant
immediately prior to such merger, consolidation or  sale, for purposes of paragraph (A), shall be
made after giving effect to such adjustment of the Exercise Price.

 

(iii)                               The number of Shares outstanding at any given
time shall not include Shares that have been redeemed by the Company and not
canceled, if any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an issue or
sale of Shares for purposes of paragraph (A).

 

(iv)                              “Market Price” shall mean the lower of (a)
the average closing sales prices of Shares recorded on the principal national
securities exchange on which the Shares are listed or in a national market
system for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the domestic
over-the-counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined.  If the Shares are not listed on any national
securities exchange or admitted for trading in any national market system or
traded in the domestic over-the-counter market, the Market Price shall be the
higher of (y) the book value of the Shares as determined by a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z) the fair
market value of the Shares determined in good faith by the Board of Directors
of the Company,

 

2

 

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

 

(v)                                 Anything herein to the contrary
notwithstanding, in case the Company shall issue any Shares in connection with
the acquisition by the Company of the stock or assets of any other corporation
or the merger of any other corporation into the Company under circumstances
where, on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on the date
the number of Shares was determined, the consideration received for such Shares
would not have been less than the Market Price thereof, such Shares shall not
be deemed to have been issued for less than the Market Price.

 

(vi)                              Anything in clause (ii) of this paragraph (B)
to the contrary notwithstanding, in the case of an acquisition where all or
part of the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the acquisition
pays only part of a maximum dollar purchase price which is payable in Shares or
Convertible Securities and where the balance of such purchase price is deferred
or is contingently payable under a formula related to earnings over a period of
time, (a) the consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such part of the
total consideration as the portion of the dollar purchase price then paid in
Shares or Convertible Securities bears to the total maximum dollar purchase
price payable in Shares or Convertible Securities and (b) in connection with
each issuance of additional Shares or Convertible Securities pursuant to the
terms of the agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the portion of
the dollar purchase price then and theretofore paid in Shares or Convertible
Shares bears to the total maximum dollar purchase price payable in Shares or
Convertible Securities multiplied by a fraction, the numerator of which shall
be the number of Shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then and theretofore issued under such acquisition
agreement.  In the event only a part of
the purchase price for an acquisition is paid in Shares or Convertible
Securities in the manner referred to in this clause (vi), the term “total
consideration” as used in this clause (vi) shall mean that part of the
aggregate consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this clause (vi),
as determined by the Board of Directors of the Company.

 

(C)           In the case at any time the Company shall subdivide its outstanding
Shares into a greater number of Shares, then from and after the record date for
such subdivision the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
increased, and, conversely, in case the outstanding Shares shall be combined
into a smaller number of Shares, then from and after the record date for such
combination the Exercise Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares purchasable upon
the exercise of this Warrant shall be correspondingly decreased.

 

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

 

3

 

the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding Shares
(or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of Shares (or other securities) purchasable upon the exercise
of this Warrant and for the registration thereof as provided in Section 6 of
this Warrant) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the Exercise Price to the value of the Shares
(or other securities) reflected by the terms of such consolidation, merger or
sale if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger of
the Company with or into another corporation as a result of which a greater or
lesser number of securities of the surviving corporation are issuable to
holders of Shares in respect of the number of Shares outstanding immediately
prior to such consolidation or merger, then the Exercise Price in effect
immediately prior to such consolidation or merger shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Shares.  The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the surviving or successor corporation (if other than the
Company) resulting from such consolidation or merger of the corporation
purchasing such assets shall assume, by written instrument executed and mailed
to the registered Holder at the last address of such holder appearing on the
books of the Company, the obligation to deliver to such holder such Shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase, and containing the express assumption
of such surviving or successor corporation of the due performance of every
provision of this Warrant to be performed by the Company and of all liabilities
and obligations of the Company hereunder.

 

(E)           In the event of a change in control of the Company, as
defined in this paragraph (E), then the Board of Directors shall accelerate the
exercise date of the Warrant or make this Warrant fully vested and exercisable
and, 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 necessary
to pay the Exercise Price of all or any portion of the Warrant then held by such
person; (b) pay cash to any holder of this Warrant in exchange for the
cancellation of the holder’s Warrant in an amount equal to the difference
between the Exercise Price of such Warrant and the greater of the tender offer
price for the underlying Shares or the Market Price of the Shares on the date
of the cancellation of the Warrant; and (c) make any other adjustments or
amendments to this Warrant.  For purposes
of this paragraph (E), a “change in control” shall be deemed to have occurred
if (a) any “person” or “group” (within the meaning of Sections 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 under an 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 more than 50% of the then
outstanding voting stock of the Company; or (b) at any time during any period
of three consecutive years after the date of this Warrant, individuals who at
the beginning of such period constitute the Board (and any new director whose
election by the Board or whose nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority thereof; or (c) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any dividend on
or make any other distribution with respect to Shares (or any other securities
of the Company then issuable upon the exercise of the Warrant) that is payable
in Shares, Convertible Securities, any other securities of the Company or other
stock, securities or assets, other than cash, then thereafter, and in lieu of
any adjustment of the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the holder of this Warrant, upon any exercise of the rights
represented hereby, shall be entitled to receive the number of Shares (or other
securities) being purchased upon such exercise and, in addition to and without
further payment, the Shares, Convertible Securities, other securities of any
company or other stock, securities or assets which the holder of this Warrant
would have received by way of such distributions if continuously since the date
of the Warrant (or, if this Warrant shall have been issued pursuant to Section
7 of this Warrant, the date of the predecessor Warrant to which this Warrant
relates) such holder had been the record holder of the number of Shares (or
other securities), then being purchased and had retained all such

 

4

 

Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets
distributable with respect to such Shares (or other securities) and,
furthermore, all cash, stock, securities or assets payable as dividends or
distributions with respect to the foregoing and originating directly or
indirectly therefrom.  The Company shall
reserve and retain in escrow from any such dividend or distribution of Shares,
Convertible Securities, other securities of the Company or other stock,
securities or assets, and from any such dividends or distributions with respect
thereto and originating directly or indirectly therefrom, such Shares,
Convertible Securities, other securities of the Company and other stock,
securities, assets and cash as shall be necessary to fulfill its obligations to
the Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of action taken
by the Company, which in the good faith opinion of the Board of Directors of
the Company, are not adequately covered by the provisions of this Annex 1, and
which might materially adversely affect the rights of the holder of this
Warrant, the Company shall appoint a firm of independent public accountants of
recognized standing (which may be the regular accountants or auditors of the
Company), which shall give their opinion as to the adjustments, if any, in the
Exercise Price and the number of Shares purchasable upon the exercise of this
Warrant, or other change in the rights of the Holder, on a basis consistent
with the other provisions of this Annex 1, necessary to preserve without
diminution the rights of the Holder. 
Upon receipt of such opinion, the Company shall forthwith make the
adjustments described therein.

 

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

 

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

 

(I)            In case at any time:

 

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

 

5

 

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

 

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

 

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

 

6

 

EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered Holder

Desiring to Exercise the Within Warrant of

TIPPERARY CORPORATION

 

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

 

	
  Name
  of Registered Holder:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title
  of Signing Officer

  	
   

  
	
  or
  Agent (if any):

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address
  of Registered Holder:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Tax
  I.D. No.:

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  ,
  20

  	
   

  	
   

  	
   

  
										

 

 

This Warrant and the rights
represented hereby shall not be transferable at any time unless (i) a
registration statement under the Securities Act of 1933, as amended, shall be
in effect with respect to this Warrant or the Shares issuable hereunder at such
time, or (ii) the transfer is made in compliance with the provisions of Section
5.

 

	
  Number:

  	
   

  	
  25,000
  Shares

  

 

WARRANT

TO PURCHASE SHARES

OF

TIPPERARY CORPORATION

 

This certifies that, for value received, Douglas
Kramer, an individual residing in 
Winnetka, Illinois (“Holder”), or their registered assigns, is entitled
to purchase from TIPPERARY CORPORATION, a Texas corporation (the “Company”),
twenty-five thousand (25,000) Shares, as defined 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 in accordance 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 exercised
prior thereto, two (2) years after the resignation or removal of the Holder as
an employee or director of the Company. 
If the Holder should resign or be removed as an employee or director
from the Company, then this Warrant shall be vested only to the extent vested
on such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the
initial exercise price set forth above and the number of Shares to be issued
upon the occurrence of certain events (the Provisions as to Adjustment) are
more fully set forth in Annex 1 hereto. 
(Hereinafter, the initial exercise price set forth above in this
paragraph for the purchase of Shares upon the exercise of this Warrant, as
adjusted pursuant to the Provisions as to Adjustment, is referred to as the “Exercise
Price”).  This Warrant is subject to the
following provisions, terms and conditions:

 

1.             Exercise of Warrant.

 

(a)           The rights represented by this Warrant may be exercised by
the Holder, in whole or in part, (but not as to a fractional Share), by the
surrender of this Warrant at the Company’s principal office located in Denver,
Colorado (or such other office or agency of the Company as the Company may
designate by notice in writing to the Holder at the address of such holder
appearing on the books of the Company at any time within the period above
named) and delivery of a completed subscription form in the form attached to
this Warrant as Exhibit A, and upon payment to the Company of the
Exercise Price for such Shares.

 

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

 

(i)                                     By application, to the extent permitted by
applicable 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
thereof determined in good faith by the Company and the Holder at the time of
such exercise; provided, however, that in order to apply such Shares or other
securities of the Company in the exercise hereof, each of the following
conditions must be met:

 

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

 

 

option, warrant or right to
obtain such Shares of other securities or through the conversion of any other
security; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.             No Rights or Liabilities as a
Shareholder.  This Warrant shall not entitle the Holder as
such to any rights whatsoever, including, without limitation, voting rights, as
a holder of Shares of the Company.  No
provisions hereof, in the absence of affirmative action by the Holder to
purchase Shares, and no mere enumeration

 

2

 

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

 

5.             Restrictions on Transfer.

 

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

 

(b)           This Warrant and the Warrant Shares shall not be
transferable (except for a transfer of this Warrant or the Warrant Shares in an
offering registered under the Securities Act, including, without limitation, a
transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer) unless, prior to any transfer, the Holder shall have
received from its transferee reasonable assurances that such person is aware
that this Warrant and the Warrant Shares have not been registered under the
Securities Act and that such person is acquiring this Warrant or the Warrant
Shares for investment only and not with the view to the disposition or public
offering thereof (unless in an offering registered under the Securities Act or
exempt therefrom), and that such person is aware that the stock certificates
evidencing the Warrant Shares shall bear a legend restricting transfer and
disposition thereof in accordance with the Securities Act unless, in the
opinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant
(other than a transfer in an offering registered under the Securities Act,
including, without limitation, a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the Holder shall provide
an opinion of counsel, who shall be reasonably satisfactory to the Company,
that an exemption from the registration requirements of the Securities Act is
available.

 

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

 

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

 

6.             Registration Under Securities
Act.

 

(a)           If the Company, at any time, proposes to register any
issuance of its securities under the Securities Act (other than a registration
on Form S-8 in connection with an employee stock purchase or option plan or on
Form S-4 in connection with mergers, acquisitions or exchange offerings), the
Company will at such time give prompt written notice to the holder hereof and
to the holders of all other Warrant Shares issuable from any outstanding
Warrants (such holders are hereinafter referred to as the “Prospective Sellers”
or, individually, as a “Prospective Seller”) of its intention to do so.  Upon the written request of a Prospective
Seller, given within 30 days after receipt of any such notice (which request
shall state the intended method of disposition of the Warrant Shares to be
transferred by such Prospective Seller), the Company shall use its best efforts
to cause all Warrant Shares, the holders of which (or of the Warrants to which
the same are related), to the extent vested in accordance with the Vesting
Schedule, shall have so requested registration of the transfer thereof, to be
registered under the Securities Act, all to the extent requisite to permit the
sale or other disposition (in accordance with the intended method thereof as aforesaid)
by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section
6(a) shall not be effective with respect to the Prospective Seller in the case
of an underwritten public offering of securities of the Company by the Company
unless each Prospective Seller agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such Warrant Shares.  The Company shall have the right to reduce
the number of Warrant Shares of the Prospective Sellers to be included in a
registration statement pursuant to the exercise of the rights granted by this
Section 6(a) if, and to the extent, that the managing underwriter of such
offering is of the good faith opinion, supported by written reasons therefor,
that the inclusion of such Warrant Shares would materially and adversely

 

3

 

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

 

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

 

(i)                                     prepare and file with the Commission a
registration statement with respect to such transfer and use its best efforts
to cause such registration statement to become and remain effective, but not
for any period longer than nine months;

 

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

 

(iii)                               furnish to each Prospective Seller such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in order to facilitate
the disposition of the Warrant Shares owned by such Prospective Seller and
covered by such registration statement;

 

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

 

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

 

(vi)                              furnish to the Prospective Sellers whose
intended dispositions are required a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and describing the application
provisions of the securities or blue sky laws of each state or jurisdiction in
which the Company shall be required, pursuant to Section 6(c)(iv), to register
or qualify such intended dispositions of such Warrant Shares, or, in the event
counsel for the underwriters in such offering shall be preparing a blue sky
survey, cause such counsel to furnish such survey to, and to allow reliance
thereon by, such Prospective Sellers;

 

4

 

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

 

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

 

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

 

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

 

(d)           (i)           In the event of any registration of any
transfer of Warrant Shares under the Securities Act pursuant to this Section 6,
the Company will indemnify and hold harmless each Prospective Seller of such securities,
each of its officers, directors and partners, and each other person, if any,
who controls such Prospective Seller within the meaning of the Securities Act,
and each underwriter, if any, who participates in the offering of such
securities, against any losses, claims, damages or liabilities (or actions in
respect thereof), joint or several, to which each Prospective Seller, officer,
director or partner, controlling person or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
transfer of securities was registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act, and will reimburse such Prospective Seller
and each of its officers, directors and partners, and each such controlling
person or underwriter, for any legal or any other expenses reasonably incurred
by such Prospective Seller or its officers, directors and partners or
controlling persons or by each such underwriter, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary prospectus or
prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such Prospective Seller specifically for use in the preparation
thereof.  In the event of any
registration by the Company or any transfer of securities under the Securities
Act pursuant to this Section 6, each Prospective Seller of Warrant Shares
covered by such registration will indemnify and hold harmless the Company, each
other person, if any, who controls the Company within the meaning of the
Securities Act and each officer and director of the Company and the other
Prospective Sellers to the same extent that the Company agrees to indemnify it,
but only with respect

 

5

 

to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid

 

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

 

7.             Transfer; Ownership. 
Subject to Section 5, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
referred to in Section 1 by the 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 the Company, of the same tenor as this Warrant but registered in
the name of the transferee.  The Holder,
by taking or holding the same, consents and agrees that this Warrant, when
endorsed in blank, shall be deemed negotiable, and that the Holder, when this
Warrant shall have been so endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant and to transfer this Warrant on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered the Holder as the owner hereof for all
purposes.  Any transfer of this Warrant
shall be made in compliance with the Securities Act and any applicable state
securities or blue sky laws.

 

8.             Exchange and Replacement. 
Subject to Section 7, this Warrant is exchangeable, upon the surrender
hereof by the Holder at the office or agency of the Company referred to in
Section 1, for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Shares which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of Shares as shall be designated by the Holder at the time of such
surrender.  Upon receipt by the Company,
at the office or agency referred to in Section 1, of evidence reasonably satisfactory
to it of the loss, theft or destruction of this Warrant and of indemnity or
security reasonably satisfactory to it (provided that the written indemnity of
the Holder shall be deemed reasonably satisfactory to the Company for such
purposes), the Company will deliver a new Warrant of like tenor and date in
replacement of this Warrant.  This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any transfer, exchange or replacement.  The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.

 

9.             Notices.  Any
notice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent by
certified 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 writing
by the Holder.  Any notice

 

6

 

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

 

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

 

11.          Miscellaneous.  This
Warrant will be binding upon any entity succeeding to the Company by
consolidation or acquisition of all or substantially all of the Company’s
assets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against whom
enforcement of the same is sought.  The
headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereon.

 

IN
WITNESS WHEREOF,
Tipperary Corporation has caused this Warrant to be signed by its duly
authorized 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

  	
   

  
						

 

7

 

Annex
1

 

TIPPERARY
CORPORATION

 

PROVISIONS
AS TO ADJUSTMENT OF

EXERCISE PRICE AND NUMBER OF SHARES

ISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and the
number of Shares issuable upon the exercise of the annexed Warrant to purchase
shares of TIPPERARY CORPORATION, a Texas corporation (herein and in this
Warrant referred to as the “Company”), shall be subject to adjustment from time
to time as hereinafter provided; that in no event shall the Exercise Price be
increased 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 thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of Shares obtained by multiplying the number of Shares purchasable
pursuant hereto immediately prior to such adjustment by a fraction, the
numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment.  In making the
adjustments to the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or
sell any Shares for consideration per Share that is less than the Exercise
Price in effect immediately prior to the time of such issue or sale at less
than the Market Price (as hereinafter defined) of such Shares on the date of
such issue or sale, then forthwith upon such issue or sale the Exercise Price
in effect immediately prior thereto shall be adjusted to an amount (calculated
to the nearest cent) determined by dividing (i) an amount equal to the sum of
(a) the number of Shares outstanding immediately prior to such issue or sale
multiplied by the Exercise Price in effect immediately prior to such issue or
sale, and (b) the consideration, if any, received by the Company upon such
issue or sale by (ii) the total number of Shares outstanding immediately after
such issue or sale; provided, however, that no adjustment shall be made
hereunder by reason of:

 

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

 

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

 

(iii)      the issuance (whether directly or by
assumption in a merger or otherwise) or sale (including any issuance or sale to
holders of Shares) of any securities convertible into or exchangeable for
Shares (such convertible or exchangeable securities are herein referred to as “Convertible
Securities”), or the grant of rights to subscribe for or to purchase, or of
options for the purchase of (including any grant of such rights or options to
holders of shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or exchange
such Convertible Securities or such rights or options are immediately
exercisable.

 

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

 

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

 

(i)            If, at the time Shares are issued and sold
upon the conversion or exchange of Convertible Securities or upon the exercise
of rights or options previously granted by the Company, the price per Share for
which such Shares are issued (determined by dividing (a) the total amount, if
any, received by the Company as consideration for such Convertible Securities
or for the granting of such rights or options, plus the aggregate amount of
additional consideration paid to the Company upon the conversion or exchange of
such Convertible 

 

1

 

Securities (which, if so
provided in such Convertible Securities, shall be deemed to be equal to the
outstanding principal amount of the indebtedness represented by such
Convertible Securities) or upon the exercise of such rights or options, by (b)
the total number of Shares issued upon the conversion or exchange of such
Convertible Securities or upon the exercise of such rights or options shall be
less than the Exercise Price in effect immediately prior to such issue, sale or
exercise, then the adjustments provided for by the first paragraph of this
Annex 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 be
considered the consideration received by the Company upon the issue or sale of
the Shares for purposes of clause (i)(b) of paragraph (A).

 

(ii)           In case at any time any Shares or Convertible
Securities or any rights or options to purchase any Shares or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith.  In case any Shares or Convertible Securities
or any rights or options to purchase any Shares or Convertible Securities shall
be issued or sold, in whole or in part, for consideration other than cash, the
amount of the consideration other than cash received by the Company in exchange
for the issue or sale of such Convertible Securities shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company, without deduction therefrom of any expenses incurred
or any underwriting commissions or concessions paid or allowed by the Company
in connection therewith; provided that if the holder or holders of at least
66-2/3% of the Warrant Shares purchasable under this Warrant shall request in
writing, the value of such consideration shall be determined by an independent
expert selected by such holders, the costs and expenses of which shall be borne
by the Company, and, if the value of such consideration as so determined is
less than the value determined by the Board of Directors of the Company, the
lesser value shall be utilized in calculating the consideration per Share
received by the Company for purposes of making the adjustment provided by
paragraph (A).  In the event of any
merger or consolidation of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or substantially all
of the assets of the Company outside of the ordinary course of business of the
Company for stock or other securities of any corporation, the Company shall be
deemed to have issued a number of Shares for stock or securities of such other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated and for consideration that is equal to the fair
market value on the date of such transaction of such stock or securities of the
other corporation, and if any such calculation results in adjustment of the
Exercise Price, the determination of the number of Shares issuable upon
exercise of this Warrant immediately prior to such merger, consolidation
or  sale, for purposes of paragraph (A),
shall be made after giving effect to such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding at any given
time shall not include Shares that have been redeemed by the Company and not
canceled, if any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an issue or
sale of Shares for purposes of paragraph (A).

 

(iv)          “Market Price” shall mean the lower of (a)
the average closing sales prices of Shares recorded on the principal national
securities exchange on which the Shares are listed or in a national market
system for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the domestic
over-the-counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined.  If the Shares are not listed on any national
securities exchange or admitted for trading in any national market system or
traded in the domestic over-the-counter market, the Market Price shall be the
higher of (y) the book value of the Shares as determined by a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z) the fair
market value of the Shares determined in good faith by the Board of Directors
of the Company,

 

2

 

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

 

(v)           Anything herein to the contrary
notwithstanding, in case the Company shall issue any Shares in connection with
the acquisition by the Company of the stock or assets of any other corporation
or the merger of any other corporation into the Company under circumstances
where, on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on the date the
number of Shares was determined, the consideration received for such Shares
would not have been less than the Market Price thereof, such Shares shall not
be deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)
to the contrary notwithstanding, in the case of an acquisition where all or
part of the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the acquisition
pays only part of a maximum dollar purchase price which is payable in Shares or
Convertible Securities and where the balance of such purchase price is deferred
or is contingently payable under a formula related to earnings over a period of
time, (a) the consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such part of the
total consideration as the portion of the dollar purchase price then paid in
Shares or Convertible Securities bears to the total maximum dollar purchase
price payable in Shares or Convertible Securities and (b) in connection with
each issuance of additional Shares or Convertible Securities pursuant to the
terms of the agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the portion of
the dollar purchase price then and theretofore paid in Shares or Convertible
Shares bears to the total maximum dollar purchase price payable in Shares or
Convertible Securities multiplied by a fraction, the numerator of which shall
be the number of Shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then and theretofore issued under such acquisition
agreement.  In the event only a part of
the purchase price for an acquisition is paid in Shares or Convertible
Securities in the manner referred to in this clause (vi), the term “total
consideration” as used in this clause (vi) shall mean that part of the
aggregate consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this clause (vi),
as determined by the Board of Directors of the Company.

 

(C)           In the case at any time the Company shall
subdivide its outstanding Shares into a greater number of Shares, then from and
after the record date for such subdivision the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Shares purchasable upon the exercise of this Warrant shall be
correspondingly increased, and, conversely, in case the outstanding Shares
shall be combined into a smaller number of Shares, then from and after the
record date for such combination the Exercise Price in effect immediately prior
to such combination shall be proportionately increased and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
decreased.

 

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

 

3

 

the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding Shares
(or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of Shares (or other securities) purchasable upon the exercise
of this Warrant and for the registration thereof as provided in Section 6 of
this Warrant) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the Exercise Price to the value of the Shares
(or other securities) reflected by the terms of such consolidation, merger or
sale if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger of
the Company with or into another corporation as a result of which a greater or
lesser number of securities of the surviving corporation are issuable to
holders of Shares in respect of the number of Shares outstanding immediately
prior to such consolidation or merger, then the Exercise Price in effect
immediately prior to such consolidation or merger shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Shares.  The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the surviving or successor corporation (if other than the
Company) resulting from such consolidation or merger of the corporation purchasing
such assets shall assume, by written instrument executed and mailed to the
registered Holder at the last address of such holder appearing on the books of
the Company, the obligation to deliver to such holder such Shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase, and containing the express assumption of
such surviving or successor corporation of the due performance of every
provision of this Warrant to be performed by the Company and of all liabilities
and obligations of the Company hereunder.

 

(E)           In the event of a change in control of the
Company, as defined in this paragraph (E), then the Board of Directors shall
accelerate the exercise date of the Warrant or make this Warrant fully vested
and exercisable and, 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 necessary to pay the Exercise Price of all or any portion of the
Warrant then held by such person; (b) pay cash to any holder of this Warrant in
exchange for the cancellation of the holder’s Warrant in an amount equal to the
difference between the Exercise Price of such Warrant and the greater of the
tender offer price for the underlying Shares or the Market Price of the Shares
on the date of the cancellation of the Warrant; and (c) make any other
adjustments or amendments to this Warrant. 
For purposes of this paragraph (E), a “change in control” shall be
deemed to have occurred if (a) any “person” or “group” (within the meaning of
Sections 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 under
an 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 more
than 50% of the then outstanding voting stock of the Company; or (b) at any
time during any period of three consecutive years after the date of this
Warrant, individuals who at the beginning of such period constitute the Board
(and any new director whose election by the Board or whose nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof;
or (c) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any
dividend on or make any other distribution with respect to Shares (or any other
securities of the Company then issuable upon the exercise of the Warrant) that
is payable in Shares, Convertible Securities, any other securities of the
Company or other stock, securities or assets, other than cash, then thereafter,
and in lieu of any adjustment of the Exercise Price and the number of Shares
issuable upon the exercise of this Warrant, the holder of this Warrant, upon
any exercise of the rights represented hereby, shall be entitled to receive the
number of Shares (or other securities) being purchased upon such exercise and,
in addition to and without further payment, the Shares, Convertible Securities,
other securities of any company or other stock, securities or assets which the
holder of this Warrant would have received by way of such distributions if
continuously since the date of the Warrant (or, if this Warrant shall have been
issued pursuant to Section 7 of this Warrant, the date of the predecessor
Warrant to which this Warrant relates) such holder had been the record holder
of the number of Shares (or other securities), then being purchased and had
retained all such

 

4

 

Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets
distributable with respect to such Shares (or other securities) and,
furthermore, all cash, stock, securities or assets payable as dividends or
distributions with respect to the foregoing and originating directly or
indirectly therefrom.  The Company shall
reserve and retain in escrow from any such dividend or distribution of Shares,
Convertible Securities, other securities of the Company or other stock,
securities or assets, and from any such dividends or distributions with respect
thereto and originating directly or indirectly therefrom, such Shares,
Convertible Securities, other securities of the Company and other stock,
securities, assets and cash as shall be necessary to fulfill its obligations to
the Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of
action taken by the Company, which in the good faith opinion of the Board of
Directors of the Company, are not adequately covered by the provisions of this
Annex 1, and which might materially adversely affect the rights of the holder
of this Warrant, the Company shall appoint a firm of independent public
accountants of recognized standing (which may be the regular accountants or auditors
of the Company), which shall give their opinion as to the adjustments, if any,
in the Exercise Price and the number of Shares purchasable upon the exercise of
this Warrant, or other change in the rights of the Holder, on a basis
consistent with the other provisions of this Annex 1, necessary to preserve
without diminution the rights of the Holder. 
Upon receipt of such opinion, the Company shall forthwith make the
adjustments described therein.

 

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

 

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

 

(I)            In case at any time:

 

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

 

5

 

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

 

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

 

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

 

6

 

EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered Holder

Desiring to Exercise the Within Warrant of

TIPPERARY CORPORATION

 

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

 

 

	
  Name
  of Registered Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Title
  of Signing Officer

  	
   

  
	
  or
  Agent (if any):

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address
  of Registered Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Tax
  I.D. No.:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  ,
  20

  	
   

  	
   

  	
   

  
												

 

 

This Warrant and the rights
represented hereby shall not be transferable at any time unless (i) a
registration statement under the Securities Act of 1933, as amended, shall be
in effect with respect to this Warrant or the Shares issuable hereunder at such
time, or (ii) the transfer is made in compliance with the provisions of Section
5.

 

	
  Number:

  	
   

  	
  25,000
  Shares

  

 

WARRANT

TO PURCHASE SHARES

OF

TIPPERARY CORPORATION

 

This certifies that, for value received, D. Leroy
Sample, an individual residing in Estero, Florida (“Holder”), or their
registered assigns, is entitled to purchase from TIPPERARY CORPORATION, a Texas
corporation (the “Company”), twenty-five thousand (25,000) Shares, as defined
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 in accordance
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 exercised
prior thereto, two (2) years after the resignation or removal of the Holder as
an employee or director of the Company. 
If the Holder should resign or be removed as an employee or director
from the Company, then this Warrant shall be vested only to the extent vested
on such date of resignation or removal according to the Vesting Schedule.  The provisions as to adjustment of the
initial exercise price set forth above and the number of Shares to be issued
upon the occurrence of certain events (the Provisions as to Adjustment) are
more fully set forth in Annex 1 hereto. 
(Hereinafter, the initial exercise price set forth above in this
paragraph for the purchase of Shares upon the exercise of this Warrant, as
adjusted pursuant to the Provisions as to Adjustment, is referred to as the “Exercise
Price”).  This Warrant is subject to the
following provisions, terms and conditions:

 

1.             Exercise of Warrant.

 

(a)           The rights represented by this Warrant may be
exercised by the Holder, in whole or in part, (but not as to a fractional
Share), by the surrender of this Warrant at the Company’s principal office
located in Denver, Colorado (or such other office or agency of the Company as
the Company may designate by notice in writing to the Holder at the address of
such holder appearing on the books of the Company at any time within the period
above named) and delivery of a completed subscription form in the form attached
to this Warrant as Exhibit A, and upon payment to the Company of the
Exercise Price for such Shares.

 

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

 

(i)            By application, to the extent permitted by
applicable 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
thereof determined in good faith by the Company and the Holder at the time of
such exercise; provided, however, that in order to apply such Shares or other
securities of the Company in the exercise hereof, each of the following
conditions must be met:

 

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

 

 

option, warrant or right to
obtain such Shares of other securities or through the conversion of any other
security; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.             No Rights or Liabilities as a
Shareholder.  This
Warrant shall not entitle the Holder as such to any rights whatsoever,
including, without limitation, voting rights, as a holder of Shares of the
Company.  No provisions hereof, in the
absence of affirmative action by the Holder to purchase Shares, and no mere
enumeration

 

2

 

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

 

5.             Restrictions on Transfer.

 

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

 

(b)           This Warrant and the Warrant Shares shall not
be transferable (except for a transfer of this Warrant or the Warrant Shares in
an offering registered under the Securities Act, including, without limitation,
a transfer in a registered offering effected pursuant to Section 6, and any
subsequent transfer) unless, prior to any transfer, the Holder shall have
received from its transferee reasonable assurances that such person is aware
that this Warrant and the Warrant Shares have not been registered under the
Securities Act and that such person is acquiring this Warrant or the Warrant
Shares for investment only and not with the view to the disposition or public
offering thereof (unless in an offering registered under the Securities Act or
exempt therefrom), and that such person is aware that the stock certificates
evidencing the Warrant Shares shall bear a legend restricting transfer and
disposition thereof in accordance with the Securities Act unless, in the
opinion of counsel to the Company, such legend may be omitted.  In the event of any transfer of this Warrant
(other than a transfer in an offering registered under the Securities Act,
including, without limitation, a transfer in a registered offering effected
pursuant to Section 6, and any subsequent transfer), the Holder shall provide
an opinion of counsel, who shall be reasonably satisfactory to the Company,
that an exemption from the registration requirements of the Securities Act is
available.

 

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

 

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

 

6.             Registration Under Securities Act.

 

(a)           If the Company, at any time, proposes to
register any issuance of its securities under the Securities Act (other than a
registration on Form S-8 in connection with an employee stock purchase or
option plan or on Form S-4 in connection with mergers, acquisitions or exchange
offerings), the Company will at such time give prompt written notice to the
holder hereof and to the holders of all other Warrant Shares issuable from any
outstanding Warrants (such holders are hereinafter referred to as the “Prospective
Sellers” or, individually, as a “Prospective Seller”) of its intention to do
so.  Upon the written request of a
Prospective Seller, given within 30 days after receipt of any such notice
(which request shall state the intended method of disposition of the Warrant
Shares to be transferred by such Prospective Seller), the Company shall use its
best efforts to cause all Warrant Shares, the holders of which (or of the
Warrants to which the same are related), to the extent vested in accordance
with the Vesting Schedule, shall have so requested registration of the transfer
thereof, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition (in accordance with the intended method
thereof as aforesaid) by the Prospective Sellers of such Warrant Shares.  The rights granted pursuant to this Section
6(a) shall not be effective with respect to the Prospective Seller in the case
of an underwritten public offering of securities of the Company by the Company
unless each Prospective Seller agrees to the terms and conditions, including
underwriting discounts and allowances, specified by the managing underwriter of
such offering with respect to such Warrant Shares.  The Company shall have the right to reduce
the number of Warrant Shares of the Prospective Sellers to be included in a
registration statement pursuant to the exercise of the rights granted by this
Section 6(a) if, and to the extent, that the managing underwriter of such
offering is of the good faith opinion, supported by written reasons therefor,
that the inclusion of such Warrant Shares would materially and adversely

 

3

 

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

 

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

 

(i)            prepare and file with the Commission a
registration statement with respect to such transfer and use its best efforts
to cause such registration statement to become and remain effective, but not
for any period longer than nine months;

 

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

 

(iii)          furnish to each Prospective Seller such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such Prospective Seller may reasonably request in order to
facilitate the disposition of the Warrant Shares owned by such Prospective
Seller and covered by such registration statement;

 

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

 

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

 

(vi)          furnish to the Prospective Sellers whose
intended dispositions are required a blue sky survey in the form and of the
substance customarily prepared by counsel for the Company and accepted by
sellers of securities in similar offerings, discussing and describing the
application provisions of the securities or blue sky laws of each state or
jurisdiction in which the Company shall be required, pursuant to Section
6(c)(iv), to register or qualify such intended dispositions of such Warrant
Shares, or, in the event counsel for the underwriters in such offering shall be
preparing a blue sky survey, cause such counsel to furnish such survey to, and
to allow reliance thereon by, such Prospective Sellers;

 

4

 

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

 

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

 

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

 

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

 

(d)           (i)           In the event of any registration of any
transfer of Warrant Shares under the Securities Act pursuant to this Section 6,
the Company will indemnify and hold harmless each Prospective Seller of such
securities, each of its officers, directors and partners, and each other
person, if any, who controls such Prospective Seller within the meaning of the
Securities Act, and each underwriter, if any, who participates in the offering
of such securities, against any losses, claims, damages or liabilities (or
actions in respect thereof), joint or several, to which each Prospective
Seller, officer, director or partner, controlling person or underwriter may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which such transfer of securities was registered under the Securities
Act, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act, and will reimburse such
Prospective Seller and each of its officers, directors and partners, and each
such controlling person or underwriter, for any legal or any other expenses
reasonably incurred by such Prospective Seller or its officers, directors and
partners or controlling persons or by each such underwriter, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary prospectus or
prospectus or such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such Prospective Seller specifically for use in the preparation
thereof.  In the event of any
registration by the Company or any transfer of securities under the Securities
Act pursuant to this Section 6, each Prospective Seller of Warrant Shares
covered by such registration will indemnify and hold harmless the Company, each
other person, if any, who controls the Company within the meaning of the
Securities Act and each officer and director of the Company and the other
Prospective Sellers to the same extent that the Company agrees to indemnify it,
but only with respect

 

5

 

to
the written information relating to such Prospective Seller furnished to the
Company by such Prospective Seller aforesaid

 

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

 

7.             Transfer; Ownership. 
Subject to Section 5, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
referred to in Section 1 by the 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 the Company, of the same tenor as this Warrant but registered in
the name of the transferee.  The Holder,
by taking or holding the same, consents and agrees that this Warrant, when
endorsed in blank, shall be deemed negotiable, and that the Holder, when this
Warrant shall have been so endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant and to transfer this Warrant on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered the Holder as the owner hereof for all
purposes.  Any transfer of this Warrant
shall be made in compliance with the Securities Act and any applicable state
securities or blue sky laws.

 

8.             Exchange and Replacement. 
Subject to Section 7, this Warrant is exchangeable, upon the surrender
hereof by the Holder at the office or agency of the Company referred to in
Section 1, for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Shares which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of Shares as shall be designated by the Holder at the time of such
surrender.  Upon receipt by the Company,
at the office or agency referred to in Section 1, of evidence reasonably satisfactory
to it of the loss, theft or destruction of this Warrant and of indemnity or
security reasonably satisfactory to it (provided that the written indemnity of
the Holder shall be deemed reasonably satisfactory to the Company for such
purposes), the Company will deliver a new Warrant of like tenor and date in
replacement of this Warrant.  This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any transfer, exchange or replacement.  The Company will pay all expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to Section 7 and this Section 8.

 

9.             Notices.  Any
notice or other document required or permitted to be given or delivered to  the Holder shall be delivered at, or sent by
certified or registered mail to, 20383 Wildcat Run Drive, Estero, Florida
33928, or to such other address as shall have been furnished to the Company in
writing by the Holder.  Any notice

 

6

 

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

 

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

 

11.          Miscellaneous.  This
Warrant will be binding upon any entity succeeding to the Company by
consolidation or acquisition of all or substantially all of the Company’s
assets, and upon any successor or assign of the holder hereto.  This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party (or any predecessor in interest thereof) against whom
enforcement of the same is sought.  The
headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereon.

 

IN
WITNESS WHEREOF,
Tipperary Corporation has caused this Warrant to be signed by its duly
authorized 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

  	
   

  
					

 

7

 

Annex
1

 

TIPPERARY
CORPORATION

 

PROVISIONS
AS TO ADJUSTMENT OF

EXERCISE PRICE AND NUMBER OF SHARES

ISSUED UPON OCCURRENCE OF CERTAIN EVENTS

 

The Exercise Price and the
number of Shares issuable upon the exercise of the annexed Warrant to purchase
shares of TIPPERARY CORPORATION, a Texas corporation (herein and in this
Warrant referred to as the “Company”), shall be subject to adjustment from time
to time as hereinafter provided; that in no event shall the Exercise Price be
increased 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 thereafter
be entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of Shares obtained by multiplying the number of Shares purchasable
pursuant hereto immediately prior to such adjustment by a fraction, the
numerator of which is the Exercise Price in effect immediately prior to such
adjustment and the denominator of which is the Exercise Price resulting from
such adjustment.  In making the
adjustments to the Exercise Price and the number of Shares issuable upon the
exercise of this Warrant, the following provisions shall be applicable:

 

(A)          If and whenever the Company shall issue or
sell any Shares for consideration per Share that is less than the Exercise
Price in effect immediately prior to the time of such issue or sale at less
than the Market Price (as hereinafter defined) of such Shares on the date of
such issue or sale, then forthwith upon such issue or sale the Exercise Price
in effect immediately prior thereto shall be adjusted to an amount (calculated
to the nearest cent) determined by dividing (i) an amount equal to the sum of
(a) the number of Shares outstanding immediately prior to such issue or sale
multiplied by the Exercise Price in effect immediately prior to such issue or
sale, and (b) the consideration, if any, received by the Company upon such
issue or sale by (ii) the total number of Shares outstanding immediately after
such issue or sale; provided, however, that no adjustment shall be made
hereunder by reason of:

 

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

 

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

 

(iii)      the issuance (whether directly or by
assumption in a merger or otherwise) or sale (including any issuance or sale to
holders of Shares) of any securities convertible into or exchangeable for
Shares (such convertible or exchangeable securities are herein referred to as “Convertible
Securities”), or the grant of rights to subscribe for or to purchase, or of
options for the purchase of (including any grant of such rights or options to
holders of shares, other than pursuant to a dividend on Shares), Shares of
Convertible Securities, regardless of whether the right to convert or exchange
such Convertible Securities or such rights or options are immediately
exercisable.

 

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

 

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

 

(i)            If, at the time Shares are issued and sold
upon the conversion or exchange of Convertible Securities or upon the exercise
of rights or options previously granted by the Company, the price per Share for
which such Shares are issued (determined by dividing (a) the total amount, if
any, received by the Company as consideration for such Convertible Securities
or for the granting of such rights or options, plus the aggregate amount of
additional consideration paid to the Company upon the conversion or exchange of
such Convertible Securities (which, if so provided in such Convertible
Securities, shall be deemed to be equal to the outstanding principal amount of
the indebtedness represented by such Convertible Securities) or upon the
exercise of such rights or options, by (b) the total number of Shares issued
upon the conversion or exchange of such Convertible

 

1

 

Securities or upon the
exercise of such rights or options shall be less than the Exercise Price in
effect immediately prior to such issue, sale or exercise, then the adjustments
provided for by the first paragraph of this Annex 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 be considered the consideration received by
the Company upon the issue or sale of the Shares for purposes of clause (i)(b)
of paragraph (A).

 

(ii)           In case at any time any Shares or Convertible
Securities or any rights or options to purchase any Shares or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Company in connection therewith.  In case any Shares or Convertible Securities
or any rights or options to purchase any Shares or Convertible Securities shall
be issued or sold, in whole or in part, for consideration other than cash, the
amount of the consideration other than cash received by the Company in exchange
for the issue or sale of such Convertible Securities shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company, without deduction therefrom of any expenses incurred
or any underwriting commissions or concessions paid or allowed by the Company
in connection therewith; provided that if the holder or holders of at least
66-2/3% of the Warrant Shares purchasable under this Warrant shall request in
writing, the value of such consideration shall be determined by an independent
expert selected by such holders, the costs and expenses of which shall be borne
by the Company, and, if the value of such consideration as so determined is
less than the value determined by the Board of Directors of the Company, the
lesser value shall be utilized in calculating the consideration per Share
received by the Company for purposes of making the adjustment provided by
paragraph (A).  In the event of any
merger or consolidation of the Company in which the Company is not the
surviving corporation or in the event of any sale of all or substantially all
of the assets of the Company outside of the ordinary course of business of the
Company for stock or other securities of any corporation, the Company shall be
deemed to have issued a number of Shares for stock or securities of such other
corporation computed on the basis of the actual exchange ratio on which the
transaction was predicated and for consideration that is equal to the fair
market value on the date of such transaction of such stock or securities of the
other corporation, and if any such calculation results in adjustment of the
Exercise Price, the determination of the number of Shares issuable upon
exercise of this Warrant immediately prior to such merger, consolidation
or  sale, for purposes of paragraph (A),
shall be made after giving effect to such adjustment of the Exercise Price.

 

(iii)          The number of Shares outstanding at any given
time shall not include Shares that have been redeemed by the Company and not
canceled, if any, and that are thus owned or held by or for the account of the
Company, and the disposition of any such Shares shall be considered an issue or
sale of Shares for purposes of paragraph (A).

 

(iv)          “Market Price” shall mean the lower of (a)
the average closing sales prices of Shares recorded on the principal national
securities exchange on which the Shares are listed or in a national market
system for securities in which the Shares are admitted to trading or (b) the
average of the closing bid and asked prices of Shares reported in the domestic
over-the-counter market, for the 20 trading days immediately prior to the day
as of which the Market Price is being determined.  If the Shares are not listed on any national
securities exchange or admitted for trading in any national market system or
traded in the domestic over-the-counter market, the Market Price shall be the
higher of (y) the book value of the Shares as determined by a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made or (z) the fair
market value of the Shares determined in good faith by the Board of Directors
of the Company,

 

2

 

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

 

(v)           Anything herein to the contrary
notwithstanding, in case the Company shall issue any Shares in connection with
the acquisition by the Company of the stock or assets of any other corporation
or the merger of any other corporation into the Company under circumstances
where, on the date of the issuance of such Shares, the consideration received
for such Shares is less than the Market Price of the Shares, but on the date the
number of Shares was determined, the consideration received for such Shares
would not have been less than the Market Price thereof, such Shares shall not
be deemed to have been issued for less than the Market Price.

 

(vi)          Anything in clause (ii) of this paragraph (B)
to the contrary notwithstanding, in the case of an acquisition where all or
part of the purchase price is payable in Shares or Convertible Securities but
is stated as a dollar amount, where the Company upon making the acquisition
pays only part of a maximum dollar purchase price which is payable in Shares or
Convertible Securities and where the balance of such purchase price is deferred
or is contingently payable under a formula related to earnings over a period of
time, (a) the consideration received for any Shares or Convertible Securities
delivered at the time of the acquisition shall be deemed to be such part of the
total consideration as the portion of the dollar purchase price then paid in
Shares or Convertible Securities bears to the total maximum dollar purchase
price payable in Shares or Convertible Securities and (b) in connection with
each issuance of additional Shares or Convertible Securities pursuant to the
terms of the agreement relating to such acquisition, the consideration received
shall be deemed to be such part of the total consideration as the portion of
the dollar purchase price then and theretofore paid in Shares or Convertible
Shares bears to the total maximum dollar purchase price payable in Shares or
Convertible Securities multiplied by a fraction, the numerator of which shall
be the number of Shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then issued and the denominator of which shall be the
total number of shares (or in the case of Convertible Securities other than
capital stock of the Company, the aggregate principal amount of such
Convertible Securities) then and theretofore issued under such acquisition
agreement.  In the event only a part of
the purchase price for an acquisition is paid in Shares or Convertible
Securities in the manner referred to in this clause (vi), the term “total
consideration” as used in this clause (vi) shall mean that part of the
aggregate consideration as is fairly allocable to the purchase price paid in
Shares or Convertible Securities in the manner referred to in this clause (vi),
as determined by the Board of Directors of the Company.

 

(C)           In the case at any time the Company shall
subdivide its outstanding Shares into a greater number of Shares, then from and
after the record date for such subdivision the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Shares purchasable upon the exercise of this Warrant shall be
correspondingly increased, and, conversely, in case the outstanding Shares
shall be combined into a smaller number of Shares, then from and after the
record date for such combination the Exercise Price in effect immediately prior
to such combination shall be proportionately increased and the number of Shares
purchasable upon the exercise of this Warrant shall be correspondingly
decreased.

 

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

 

3

 

the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding Shares
(or other securities) equal to the number of Shares (or other securities)
immediately theretofore so purchasable and receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of Shares (or other securities) purchasable upon the exercise
of this Warrant and for the registration thereof as provided in Section 6 of
this Warrant) shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the Exercise Price to the value of the Shares
(or other securities) reflected by the terms of such consolidation, merger or
sale if the value so reflected is less than the Exercise Price in effect
immediately prior to such consolidation, merger or sale).  In the event of a consolidation or merger of
the Company with or into another corporation as a result of which a greater or
lesser number of securities of the surviving corporation are issuable to
holders of Shares in respect of the number of Shares outstanding immediately
prior to such consolidation or merger, then the Exercise Price in effect
immediately prior to such consolidation or merger shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
Shares.  The Company shall not effect any
such consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the surviving or successor corporation (if other than the
Company) resulting from such consolidation or merger of the corporation purchasing
such assets shall assume, by written instrument executed and mailed to the
registered Holder at the last address of such holder appearing on the books of
the Company, the obligation to deliver to such holder such Shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase, and containing the express assumption of
such surviving or successor corporation of the due performance of every
provision of this Warrant to be performed by the Company and of all liabilities
and obligations of the Company hereunder.

 

(E)           In the event of a change in control of the
Company, as defined in this paragraph (E), then the Board of Directors shall
accelerate the exercise date of the Warrant or make this Warrant fully vested
and exercisable and, 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 necessary to pay the Exercise Price of all or any portion of the
Warrant then held by such person; (b) pay cash to any holder of this Warrant in
exchange for the cancellation of the holder’s Warrant in an amount equal to the
difference between the Exercise Price of such Warrant and the greater of the
tender offer price for the underlying Shares or the Market Price of the Shares
on the date of the cancellation of the Warrant; and (c) make any other
adjustments or amendments to this Warrant. 
For purposes of this paragraph (E), a “change in control” shall be
deemed to have occurred if (a) any “person” or “group” (within the meaning of
Sections 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 under
an 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 more
than 50% of the then outstanding voting stock of the Company; or (b) at any
time during any period of three consecutive years after the date of this
Warrant, individuals who at the beginning of such period constitute the Board
(and any new director whose election by the Board or whose nomination for
election by the Company’s stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof;
or (c) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 50% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation.

 

(F)           In case at any time the Company shall pay any
dividend on or make any other distribution with respect to Shares (or any other
securities of the Company then issuable upon the exercise of the Warrant) that
is payable in Shares, Convertible Securities, any other securities of the
Company or other stock, securities or assets, other than cash, then thereafter,
and in lieu of any adjustment of the Exercise Price and the number of Shares
issuable upon the exercise of this Warrant, the holder of this Warrant, upon
any exercise of the rights represented hereby, shall be entitled to receive the
number of Shares (or other securities) being purchased upon such exercise and,
in addition to and without further payment, the Shares, Convertible Securities,
other securities of any company or other stock, securities or assets which the
holder of this Warrant would have received by way of such distributions if
continuously since the date of the Warrant (or, if this Warrant shall have been
issued pursuant to Section 7 of this Warrant, the date of the predecessor
Warrant to which this Warrant relates) such holder had been the record holder
of the number of Shares (or other securities), then being purchased and had
retained all such

 

4

 

Shares, Convertible Securities,
other securities of the Company or other stock, securities or assets
distributable with respect to such Shares (or other securities) and,
furthermore, all cash, stock, securities or assets payable as dividends or
distributions with respect to the foregoing and originating directly or
indirectly therefrom.  The Company shall
reserve and retain in escrow from any such dividend or distribution of Shares,
Convertible Securities, other securities of the Company or other stock,
securities or assets, and from any such dividends or distributions with respect
thereto and originating directly or indirectly therefrom, such Shares,
Convertible Securities, other securities of the Company and other stock,
securities, assets and cash as shall be necessary to fulfill its obligations to
the Holder pursuant to this paragraph (F).

 

(G)           If at any time conditions arise by reason of
action taken by the Company, which in the good faith opinion of the Board of
Directors of the Company, are not adequately covered by the provisions of this
Annex 1, and which might materially adversely affect the rights of the holder
of this Warrant, the Company shall appoint a firm of independent public
accountants of recognized standing (which may be the regular accountants or
auditors of the Company), which shall give their opinion as to the adjustments,
if any, in the Exercise Price and the number of Shares purchasable upon the
exercise of this Warrant, or other change in the rights of the Holder, on a
basis consistent with the other provisions of this Annex 1, necessary to
preserve without diminution the rights of the Holder.  Upon receipt of such opinion, the Company
shall forthwith make the adjustments described therein.

 

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

 

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

 

(I)            In case at any time:

 

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

 

5

 

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

 

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

 

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

 

6

 

EXHIBIT A

 

SUBSCRIPTION FORM

 

To be Executed by the Registered Holder

Desiring to Exercise the Within Warrant of

TIPPERARY CORPORATION

 

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

 

	
  Name
  of Registered Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Title
  of Signing Officer

  	
   

  
	
  or
  Agent (if any):

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address
  of Registered Holder:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Tax
  I.D. No.:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
  ,
  20Exhibit
10.36

 

CHANGE IN CONTROL
SEVERANCE AGREEMENT

 

THIS CHANGE IN CONTROL
SEVERANCE AGREEMENT (this “Agreement”)
is made effective as of April 1, 2005 by and between Tipperary
Corporation, a Texas corporation (the “Company”)
and David L. Bradshaw, Chairman, President and Chief Executive Officer (“Executive”).

 

Explanatory
Statements

 

WHEREAS, the Executive
and Company are parties to that certain Employment and Confidentiality
Agreement dated September 18, 2001 (the “Employment
Agreement”) (capitalized terms not defined herein shall have the
definition set forth in the Employment Agreement); and

 

WHEREAS, the Board of
Directors of the Company (the “Board”)
recognizes that the possibility of a Change in Control (as hereinafter defined)
exists or may exist in the future and that the threat or the occurrence of a
Change in Control can result in significant distractions of its key management
personnel and employees because of the uncertainties inherent in such a
situation; and

 

WHEREAS, the Board has
determined that it is essential and in the best interest of the Company and its
shareholders to retain the services of the Executive in the event of a threat
or occurrence of a Change in Control and to ensure his continued dedication and
efforts in such event without undue concern for his personal financial and
employment security; and

 

WHEREAS, in order to
induce the Executive to remain in the employ of the Company particularly in the
event of a threat or the occurrence of a Change in Control, the Employer
desires to enter into this Agreement with the Executive to provide the
Executive with certain benefits in the event his employment is terminated as a
result of, or in connection with, a Change in Control.

 

Agreement

 

NOW THEREFORE, in
consideration of the mutual promises and agreements set forth herein, the
Company and Executive agree as follows:

 

1.  Term.  This
Agreement shall commence as of the date hereof and shall continue in effect
until the date the Executive’s employment by the Company is terminated; provided,
however, that if the Executive’s employment is terminated following, or in
anticipation of, a Change in Control, the term shall continue in effect until
all payments and benefits have been made or provided to the Executive
hereunder.

 

2.              Definitions.

 

2.1           “Bonus”
shall mean a sum equal to the average of the Executive’s annual bonuses  paid by the Company in 2003, 2004 and 2005 by
March 31, 2005.

 

 

2.2         “Change
in Control” shall mean:

 

(a)  The acquisition
by any “Person” (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”))
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (i) the then
outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company  Voting Securities”);
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; or

 

(b)  Individuals
who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

 

(c)  Consummation of
a reorganization, merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another corporation (a “Business Combination”),
in each case, unless, following such Business Combination,

 

(i) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination,

 

(ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of 

 

2

 

the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and

 

(iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

 

(d)  Approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.

 

3.  Change in Control.  In the event of a Change in Control of the
Company at any time during the Term of this Agreement, and Executive’s
termination without cause under Section 9 of the Employment Agreement
within a period of twenty four (24) months following the date of a Change in
Control, Executive shall be entitled to the following Benefits:

 

(a)  The Company
shall pay Executive a lump-sum severance amount within thirty (30) days
following such termination equal to three (3) times the Executive’s Basic
Compensation and Bonus, which amount shall be in lieu of and not in addition to
Termination Compensation set forth in Section 9 of the Employment
Agreement; and

 

(b)  The Company
shall provide for Executive to receive medical, dental, life, and disability
insurance coverage for twenty four (24) months following such termination at
levels and a net cost to Executive comparable to that provided to Executive
immediately prior to such termination; and

 

(c) Company shall
provide Executive with outplacement services not to exceed a total cost of
$5,000.

 

4.  Constructive Termination.  If, within a period of twenty-four (24) months
following the date of a Change in Control, (a) Executive’s Basic
Compensation is reduced (unless such reduction is part of an across the board
reduction affecting all Company executives with a comparable level of
responsibility, title or stature), or (b) Executive is removed from or
denied participation in incentive plans, benefit plans, or perquisites
generally provided by the Company to other Company executives with a comparable
level of responsibility, title or stature, or (c) Executive’s target
incentive opportunity, benefits or perquisites are reduced relative to other
Company executives with comparable responsibility, title or stature, or (d) Executive
is assigned duties or obligations inconsistent with his position with the
Company or (e) there is a material adverse change in the nature and scope
of Executive’s authority or his overall working environment, such event shall
be considered a termination without cause and Executive shall be entitled to
the benefits set forth in Section 3 above. 
For purposes of definition, an adverse change in overall working
environment would include movement of the Executive’s primary office to outside
the Denver, Colorado metro area.

 

3

 

5.              Miscellaneous
Provisions.

 

5.1  All terms and conditions of this Agreement
are set forth herein and in the Employment Agreement, and there are no
warranties, agreements or understandings, express or implied, except those
expressly set forth herein and in the Employment Agreement.

 

5.2  Any modification to this Agreement shall be
binding only if evidenced in writing signed by all parties hereto.

 

5.3  Any notice or other communication required or
permitted to be given hereunder shall be deemed properly given if personally
delivered or deposited in the United States mail, registered or certified and
postage prepaid, addressed to the Company at its most recent address on file
with the United State Securities and Exchange Commission, or to Executive at
his or her most recent home address on file with Company, or at other such
addresses as may from time to time be designated in writing by the respective
parties.

 

5.4  The laws of the State of Colorado shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties involved.

 

5.5  In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein.

 

5.6  This Agreement shall be binding upon, and
inure to the benefit of, the successors and assigns of the Company and the
personal representatives, heirs and legatees of Executive.

 

5.7  There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Executive.

 

5.8  As a condition to receiving the payments and
benefits hereunder, the Executive shall execute a document in customary form,
releasing and waiving any and all claims, causes of actions and the like
against the Company and its successors, shareholders, officers, trustees,
agents and employees, regarding all matters relating to the Executive’s service
as an employee of the Company or any affiliates and the termination of such
relationship.  Such claims include,
without limitation, any claims arising under the Age Discrimination in
Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991, as amended; the Equal Pay Act of
1962; the American Disabilities Act of 1990; the Family Medical Leave Act, as
amended; the Employee Retirement Income Security Act of 1976, as amended, or any
like acts under the laws of Australia, as the case may be.

 

[Signature page follows]

 

4

 

IN WITNESS WHEREOF, the
parties have executed this Agreement effective as of the date first above
written.

 

 

	
  TIPPERARY CORPORATION

  	
   

  
	
   

  	
   

  
	
  On Behalf of the
  Compensation Committee

  	
   

  
	
  Of the Board of
  Directors

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/
  Eugene I. Davis

  	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
    Eugene
  I. Davis

  	
   

  	
   

  
	
  Name

  	
   

  
	
   

  	
   

  
	
    Director

  	
   

  	
   

  
	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  DAVID L. BRADSHAW

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/
  David L. Bradshaw

  	
   

  	
   

  

 

5

 

CHANGE IN CONTROL
SEVERANCE AGREEMENT

 

THIS CHANGE IN CONTROL
SEVERANCE AGREEMENT (this “Agreement”)
is made effective as of April 1, 2005 by and between Tipperary
Corporation, a Texas corporation (the “Company”)
and Kenneth L. Ancell, Executive Vice President – Corporate Development (“Executive”).

 

Explanatory
Statements

 

WHEREAS, the Executive
and Company are parties to that certain Employment and Confidentiality
Agreement dated October 17, 2002 (the “Employment
Agreement”) (capitalized terms not defined herein shall have the
definition set forth in the Employment Agreement); and

 

WHEREAS, the Board of
Directors of the Company (the “Board”)
recognizes that the possibility of a Change in Control (as hereinafter defined)
exists or may exist in the future and that the threat or the occurrence of a
Change in Control can result in significant distractions of its key management
personnel and employees because of the uncertainties inherent in such a
situation; and

 

WHEREAS, the Board has
determined that it is essential and in the best interest of the Company and its
shareholders to retain the services of the Executive in the event of a threat
or occurrence of a Change in Control and to ensure his continued dedication and
efforts in such event without undue concern for his personal financial and
employment security; and

 

WHEREAS, in order to
induce the Executive to remain in the employ of the Company particularly in the
event of a threat or the occurrence of a Change in Control, the Employer
desires to enter into this Agreement with the Executive to provide the
Executive with certain benefits in the event his employment is terminated as a
result of, or in connection with, a Change in Control.

 

Agreement

 

NOW THEREFORE, in consideration
of the mutual promises and agreements set forth herein, the Company and
Executive agree as follows:

 

1.  Term.  This
Agreement shall commence as of the date hereof and shall continue in effect
until the date the Executive’s employment by the Company is terminated;
provided, however, that if the Executive’s employment is terminated following,
or in anticipation of, a Change in Control, the term shall continue in effect
until all payments and benefits have been made or provided to the Executive
hereunder.

 

2.              Definitions.

 

3.              2.1  “Bonus”
shall mean a sum equal to the average of the Executive’s annual bonuses paid by
the Company  in 2003, 2004 and 2005 by March 31,
2005.

 

 

2.2  “Change in Control”
shall mean:

 

(a)  The acquisition
by any “Person” (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”))
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (i) the then
outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company  Voting Securities”);
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; or

 

(b)  Individuals
who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

 

(c)  Consummation of
a reorganization, merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another corporation (a “Business Combination”),
in each case, unless, following such Business Combination,

 

(i) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination,

 

(ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of 

 

2

 

the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination, and

 

(iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

 

(d)  Approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.

 

3.  Change in Control.  In the event of a Change in Control of the
Company at any time during the Term of this Agreement, and Executive’s
termination without cause under Section 8 of the Employment Agreement
within a period of eighteen (18) months following the date of a Change in
Control, Executive shall be entitled to the following Benefits:

 

(a)  The Company
shall pay Executive a lump-sum severance amount within thirty (30) days
following such termination equal to two (2) times the Executive’s Basic
Compensation and Bonus, which amount shall be in lieu of and not in addition to
Termination Compensation set forth in Section 8 of the Employment
Agreement; and

 

(b)  The Company
shall provide for Executive to receive medical, dental, life, and disability
insurance coverage for twenty four (24) months following such termination at
levels and a net cost to Executive comparable to that provided to Executive
immediately prior to such termination; and

 

(c)  Company shall
provide Executive with outplacement services not to exceed a total cost of
$5,000.

 

4.  Constructive Termination.  If, within a period of eighteen (18) months
following the date of a Change in Control, (a) Executive’s Basic
Compensation is reduced (unless such reduction is part of an across the board
reduction affecting all Company executives with a comparable level of
responsibility, title or stature), or (b) Executive is removed from or
denied participation in incentive plans, benefit plans, or perquisites
generally provided by the Company to other Company executives with a comparable
level of responsibility, title or stature, or (c) Executive’s target
incentive opportunity, benefits or perquisites are reduced relative to other
Company executives with comparable responsibility, title or stature, or (d) Executive
is assigned duties or obligations inconsistent with his position with the
Company or (e) there is a material adverse change in the nature and scope
of Executive’s authority or his overall working environment, such event shall
be considered a termination without cause and Executive shall be entitled to
the benefits set forth in Section 3 above. 
For purposes of definition, an adverse change in overall working
environment would include movement of the Executive’s primary office to outside
the Houston, Texas metro area.

 

3

 

5.              Miscellaneous
Provisions.

 

5.1  All terms and conditions of this Agreement
are set forth herein and in the Employment Agreement, and there are no
warranties, agreements or understandings, express or implied, except those
expressly set forth herein and in the Employment Agreement.

 

5.2  Any modification to this Agreement shall be
binding only if evidenced in writing signed by all parties hereto.

 

5.3  Any notice or other communication required or
permitted to be given hereunder shall be deemed properly given if personally
delivered or deposited in the United States mail, registered or certified and
postage prepaid, addressed to the Company at its most recent address on file
with the United State Securities and Exchange Commission, or to Executive at
his or her most recent home address on file with Company, or at other such
addresses as may from time to time be designated in writing by the respective
parties.

 

5.4  The laws of the State of Colorado shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties involved.

 

5.5  In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein.

 

5.6  This Agreement shall be binding upon, and
inure to the benefit of, the successors and assigns of the Company and the
personal representatives, heirs and legatees of Executive.

 

5.7  There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Executive.

 

5.8  As a condition to receiving the payments and
benefits hereunder, the Executive shall execute a document in customary form,
releasing and waiving any and all claims, causes of actions and the like
against the Company and its successors, shareholders, officers, trustees,
agents and employees, regarding all matters relating to the Executive’s service
as an employee of the Company or any affiliates and the termination of such
relationship.  Such claims include,
without limitation, any claims arising under the Age Discrimination in
Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991, as amended; the Equal Pay Act of
1962; the American Disabilities Act of 1990; the Family Medical Leave Act, as
amended; the Employee Retirement Income Security Act of 1976, as amended, or
any like acts under the laws of Australia, as the case may be.

 

4

 

IN WITNESS WHEREOF, the
parties have executed this Agreement effective as of the date first above
written.

 

TIPPERARY CORPORATION

 

On Behalf of the
Compensation Committee

Of the Board of Directors

 

 

	
    /s/
  Eugene I. Davis

  	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
    Eugene
  I. Davis

  	
   

  	
   

  
	
  Name

  	
   

  
	
   

  	
   

  
	
    Director

  	
   

  	
   

  
	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  KENNETH L. ANCELL

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/
  Kenneth L. Ancell

  	
   

  	
   

  

 

5

 

CHANGE IN CONTROL
SEVERANCE AGREEMENT

 

THIS CHANGE IN CONTROL
SEVERANCE AGREEMENT (this “Agreement”)
is made effective as of April 1, 2005 by and between Tipperary
Corporation, a Texas corporation (the “Company”)
and Jeffrey T. Obourn, Senior Vice President (“Executive”).

 

Explanatory
Statements

 

WHEREAS, the Executive
and Company are parties to that certain Employment and Confidentiality
Agreement dated January 17, 2002, as amended by an Amendment to Employment
Agreement dated January 6, 2005 (collectively the “Employment
Agreement”)(capitalized terms not defined herein shall have the
definition set forth in the Employment Agreement); and

 

WHEREAS, the Board of
Directors of the Company (the “Board”)
recognizes that the possibility of a Change in Control (as hereinafter defined)
exists or may exist in the future and that the threat or the occurrence of a
Change in Control can result in significant distractions of its key management
personnel and employees because of the uncertainties inherent in such a
situation; and

 

WHEREAS, the Board has
determined that it is essential and in the best interest of the Company and its
shareholders to retain the services of the Executive in the event of a threat
or occurrence of a Change in Control and to ensure his continued dedication and
efforts in such event without undue concern for his personal financial and
employment security; and

 

WHEREAS, in order to
induce the Executive to remain in the employ of the Company particularly in the
event of a threat or the occurrence of a Change in Control, the Employer
desires to enter into this Agreement with the Executive to provide the
Executive with certain benefits in the event his employment is terminated as a
result of, or in connection with, a Change in Control.

 

Agreement

 

NOW THEREFORE, in
consideration of the mutual promises and agreements set forth herein, the
Company and Executive agree as follows:

 

1.  Term.  This
Agreement shall commence as of the date hereof and shall continue in effect
until the date the Executive’s employment by the Company is terminated;
provided, however, that if the Executive’s employment is terminated following,
or in anticipation of, a Change in Control, the term shall continue in effect
until all payments and benefits have been made or provided to the Executive
hereunder.

 

2.              Definitions.

 

2.1  “Bonus”
shall mean a sum equal to the average of the Executive’s annual bonuses paid by
the Company in 2003, 2004 and 2005 by March 31, 2005.

 

 

2.2  “Change in Control”
shall mean:

 

(a)  The acquisition
by any “Person” (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”))
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (i) the then
outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company  Voting Securities”);
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; or

 

(b)  Individuals
who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

 

(c)  Consummation of
a reorganization, merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another corporation (a “Business Combination”),
in each case, unless, following such Business Combination,

 

(i) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination,

 

(ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of 

 

2

 

the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and

 

(iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

 

(d)  Approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.

 

3.  Change in Control.  In the event of a Change in Control of the
Company at any time during the Term of this Agreement, and Executive’s
termination without cause under Section 9 of the Employment Agreement
within a period of eighteen (18) months following the date of a Change in
Control, Executive shall be entitled to the following Benefits:

 

(a)  The Company
shall pay Executive a lump-sum severance amount within thirty (30) days
following such termination equal to two (2) times the Executive’s Basic
Compensation and Bonus, which amount shall be in lieu of and not in addition to
Termination Compensation set forth in Section 9 of the Employment
Agreement; and

 

(b)  The Company
shall provide for Executive to receive medical, dental, life, and disability
insurance coverage for twenty four (24) months following such termination at
levels and a net cost to Executive comparable to that provided to Executive
immediately prior to such termination; and

 

(c) Company shall
provide Executive with outplacement services not to exceed a total cost of
$5,000.

 

4.  Constructive Termination.  If, within a period of eighteen (18) months
following the date of a Change in Control, (a) Executive’s Basic
Compensation is reduced (unless such reduction is part of an across the board
reduction affecting all Company executives with a comparable level of
responsibility, title or stature), or (b) Executive is removed from or
denied participation in incentive plans, benefit plans, or perquisites
generally provided by the Company to other Company executives with a comparable
level of responsibility, title or stature, or (c) Executive’s target
incentive opportunity, benefits or perquisites are reduced relative to other
Company executives with comparable responsibility, title or stature, or (d) Executive
is assigned duties or obligations inconsistent with his position with the
Company or (e) there is a material adverse change in the nature and scope
of Executive’s authority or his overall working environment, such event shall
be considered a termination without cause and Executive shall be entitled to
the benefits set forth in Section 3 above. 
For purposes of definition, an adverse change in overall working
environment would include movement of the Executive’s primary office to outside
the Denver, Colorado metro area.

 

3

 

5.              Miscellaneous
Provisions.

 

5.1  All terms and conditions of this Agreement
are set forth herein and in the Employment Agreement, and there are no
warranties, agreements or understandings, express or implied, except those
expressly set forth herein and in the Employment Agreement.

 

5.2  Any modification to this Agreement shall be
binding only if evidenced in writing signed by all parties hereto.

 

5.3  Any notice or other communication required or
permitted to be given hereunder shall be deemed properly given if personally
delivered or deposited in the United States mail, registered or certified and
postage prepaid, addressed to the Company at its most recent address on file
with the United State Securities and Exchange Commission, or to Executive at
his or her most recent home address on file with Company, or at other such
addresses as may from time to time be designated in writing by the respective
parties.

 

5.4  The laws of the State of Colorado shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties involved.

 

5.5  In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein.

 

5.6  This Agreement shall be binding upon, and
inure to the benefit of, the successors and assigns of the Company and the
personal representatives, heirs and legatees of Executive.

 

5.7  There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Executive.

 

5.8  As a condition to receiving the payments and
benefits hereunder, the Executive shall execute a document in customary form,
releasing and waiving any and all claims, causes of actions and the like
against the Company and its successors, shareholders, officers, trustees, agents
and employees, regarding all matters relating to the Executive’s service as an
employee of the Company or any affiliates and the termination of such
relationship.  Such claims include,
without limitation, any claims arising under the Age Discrimination in
Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991, as amended; the Equal Pay Act of
1962; the American Disabilities Act of 1990; the Family Medical Leave Act, as
amended; the Employee Retirement Income Security Act of 1976, as amended, or
any like acts under the laws of Australia, as the case may be.

 

[Signature page follows]

 

4

 

IN WITNESS WHEREOF, the
parties have executed this Agreement effective as of the date first above
written.

 

 

TIPPERARY CORPORATION

 

On Behalf of the
Compensation Committee

Of the Board of Directors

 

 

	
    /s/
  Eugene I. Davis

  	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
    Eugene
  I. Davis

  	
   

  	
   

  
	
  Name

  	
   

  
	
   

  	
   

  
	
    Director

  	
   

  	
   

  
	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  JEFFREY T. OBOURN

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    Jeffrey
  T. Obourn

  	
   

  	
   

  

 

5

 

CHANGE IN CONTROL
SEVERANCE AGREEMENT

 

THIS CHANGE IN CONTROL
SEVERANCE AGREEMENT (this “Agreement”)
is made effective as of April 1, 2005 by and between Tipperary
Corporation, a Texas corporation (the “Company”)
and Joseph Feiten, Chief Financial Officer (“Executive”).

 

Explanatory
Statements

 

WHEREAS, the Board of
Directors of the Company (the “Board”)
recognizes that the possibility of a Change in Control (as hereinafter defined)
exists or may exist in the future and that the threat or the occurrence of a
Change in Control can result in significant distractions of its key management
personnel and employees because of the uncertainties inherent in such a
situation; and

 

WHEREAS, the Board has
determined that it is essential and in the best interest of the Company and its
shareholders to retain the services of the Executive in the event of a threat
or occurrence of a Change in Control and to ensure his continued dedication and
efforts in such event without undue concern for his personal financial and
employment security; and

 

WHEREAS, in order to
induce the Executive to remain in the employ of the Company particularly in the
event of a threat or the occurrence of a Change in Control, the Employer
desires to enter into this Agreement with the Executive to provide the
Executive with certain benefits in the event his employment is terminated as a
result of, or in connection with, a Change in Control.

 

Agreement

 

NOW THEREFORE, in consideration
of the mutual promises and agreements set forth herein, the Company and
Executive agree as follows:

 

1.  Term.  This
Agreement shall commence as of the date hereof and shall continue in effect
until the date the Executive’s employment by the Company is terminated;
provided, however, that if the Executive’s employment is terminated following,
or in anticipation of, a Change in Control, the term shall continue in effect
until all payments and benefits have been made or provided to the Executive hereunder.  The Executive is an “at will” employee of the
Company.  Subject to the terms and
conditions of this Agreement, the Company may terminate the Executive’s
employment at any time by giving written notice to Executive of termination for
Cause (as defined herein) or termination without Cause.

 

2.              Definitions.

 

2.1  “Accrued Compensation”
shall mean an amount which shall include all amounts earned or accrued through
the date the Executive’s employment is terminated (the “Termination
Date”) but not paid as of the Termination Date including (i) the
Base Amount (as hereinafter defined) (ii) reimbursement for reasonable and
necessary expenses incurred by the Executive on behalf of the Company during
the period ending on the Termination Date, (iii) paid time off (to 

 

 

the extent provided by
Company policy or applicable law), and (iv) any Bonus  (as hereinafter defined).

 

2.2  “Bonus”
shall mean a sum equal to the average of the Executive’s annual bonuses paid by
the Company in 2003, 2004 and 2005 by March 31, 2005..

 

2.3  “Base Amount”
shall mean the greater of (a) the Executive’s annual base salary, at the
rate in effect immediately prior to the Change in Control and (b) the
Executive’s annual base salary, at the rate in effect on the Termination Date.

 

2.4         For
purposes of this Agreement, a termination of employment is for “Cause” if:

 

(a) it is the result
of the Executive’s (i) failure to observe or perform any of the material
terms or provisions of this Agreement, (ii) failure to comply fully with
the lawful directives of the Chief Executive Officer, (iii) disclosure or
unauthorized use of any confidential information of the Company, (iv) participation
directly or indirectly or providing information which results in competition
with the Company, (v) deception, (vi) willful misconduct, (vii) material
neglect of the Company’s business, (viii) conviction of a felony or other
crime involving moral turpitude, (ix) misappropriation of funds, or (x)
habitual insobriety; or

 

(b) the Executive
becomes “totally disabled”, as defined below, the Company may terminate this
Agreement by notice to the Executive, and as of the termination date, the
Company shall have no further liability or obligation to the Executive
hereunder except as follows: the Executive shall receive any unpaid Accrued
Compensation, if any, through the Termination Date.  For the purposes hereof, the Executive shall
be deemed to be “totally disabled” if the Executive is considered totally
disabled according to the definition under any group disability plan maintained
by the Company and in effect at the Termination Date, or in the absence of any
plan, under applicable Social Security regulations.  In the event of any dispute under this
Section, the Executive shall submit to a physical examination by a licensed
physician mutually satisfactory to the Company and the Executive, the cost of
such examination to be paid by the Company, and the determination of such
physician shall be determinative; or

 

(c) the Executive dies during employment with the
Company, this Agreement shall terminate on the date of death, and thereafter
the Company shall not have any further liability or obligation to the
Executive, his executors, administrators, heirs, assigns or any other person
claiming under or through the Executive’s estate except that the Executive’s
estate shall receive any unpaid Accrued Compensation, if any, through the date
of death.

 

2.5  “Change in Control”
shall mean:

 

(a)  The acquisition
by any “Person” (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”))
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (i) the then
outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of 

 

2

 

directors (the “Outstanding Company  Voting Securities”); provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; or

 

(b)  Individuals
who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

 

(c)  Consummation of
a reorganization, merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets of
another corporation (a “Business Combination”),
in each case, unless, following such Business Combination,

 

(i) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination,

 

(ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination, and

 

(iii) at
least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

 

3

 

(d)  Approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.

 

3.  Change in Control.  In the event of a Change in Control of the
Company at any time during the Term of this Agreement, and Executive’s
termination without Cause within a period of eighteen (18) months following the
date of a Change in Control, Executive shall be entitled to the following
Benefits:

 

(a)  The Company
shall pay Executive the Accrued Compensation, and a lump-sum severance amount
within thirty (30) days following such termination equal to two (2) times
the Executive’s Base Amount and Bonus; and

 

(b)  The Company
shall provide for Executive to receive medical, dental, life, and disability
insurance coverage for twenty four (24) months following such termination at
levels and a net cost to Executive comparable to that provided to Executive
immediately prior to such termination.

 

(c)  Any of
Executive’s options and/or warrants under the Company’s equity compensation
plans outstanding as of the termination date and which are not then exercisable
and vested, shall become fully exercisable and vested to the full extent of the
original grant; and

 

(d)  Company shall
provide Executive with outplacement services not to exceed a total cost of
$5,000.

 

4.  Constructive Termination.  If, within a period of eighteen (18) months
following the date of a Change in Control, (a) Executive’s Basic
Compensation is reduced (unless such reduction is part of an across the board
reduction affecting all Company executives with a comparable level of
responsibility, title or stature), or (b) Executive is removed from or
denied participation in incentive plans, benefit plans, or perquisites
generally provided by the Company to other Company executives with a comparable
level of responsibility, title or stature, or (c) Executive’s target
incentive opportunity, benefits or perquisites are reduced relative to other
Company executives with comparable responsibility, title or stature, or (d) Executive
is assigned duties or obligations inconsistent with his position with the
Company or (e) there is a material adverse change in the nature and scope
of Executive’s authority or his overall working environment, such event shall
be considered a termination without cause and Executive shall be entitled to
the benefits set forth in Section 3 above. 
For purposes of definition, an adverse change in overall working
environment would include movement of the Executive’s primary office to outside
the Denver, Colorado metro area.

 

5.              Employee Covenants

 

5.1  Executive agrees that any and all
confidential knowledge or information, including but not limited to customer
lists, books, records, data, formulae, specifications, inventions, processes
and methods, and developments and improvements, which have been or may be
obtained or learned by Employee in the course of his employment with the
Company, will be held confidential by Executive, and that Executive shall not
disclose the same to any person 

 

4

 

outside of the Company
either during his employment with the Company or after his employment by the
Company has terminated.

 

5.2  Executive agrees that upon termination of his
employment with the Company he will immediately surrender and turn over to the
Company all books, records, forms, specifications, formulae, data, and all
papers and writings relating to the business of the Company and all other
property belonging to the Company, it being understood and agreed that the same
are the sole property of the Company and that Executive shall not make or
retain any copies thereof.

 

5.3  Executive agrees that all inventions,
developments or improvements which he has made or may make, conceive, invent,
discover or otherwise acquire during his employment with the Company in the
scope of his responsibilities or otherwise shall become the sole property of the
Company.

 

6.              Miscellaneous
Provisions.

 

6.1  All terms and conditions of this Agreement
are set forth herein and in the Employment Agreement, and there are no
warranties, agreements or understandings, express or implied, except those
expressly set forth herein and in the Employment Agreement.

 

6.2  Any modification to this Agreement shall be
binding only if evidenced in writing signed by all parties hereto.

 

6.3  Any notice or other communication required or
permitted to be given hereunder shall be deemed properly given if personally
delivered or deposited in the United States mail, registered or certified and
postage prepaid, addressed to the Company at its most recent address on file
with the United State Securities and Exchange Commission, or to Executive at
his or her most recent home address on file with Company, or at other such
addresses as may from time to time be designated in writing by the respective
parties.

 

6.4  The laws of the State of Colorado shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties involved.

 

6.5  In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provisions had never been contained herein.

 

6.6  This Agreement shall be binding upon, and
inure to the benefit of, the successors and assigns of the Company and the
personal representatives, heirs and legatees of Executive.

 

6.7  There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by any
governmental authority to be withheld and paid over by the Company to such
governmental authority for the account of Executive.

 

5

 

6.8  As a condition to receiving the payments and
benefits hereunder, the Executive shall execute a document in customary form,
releasing and waiving any and all claims, causes of actions and the like
against the Company and its successors, shareholders, officers, trustees,
agents and employees, regarding all matters relating to the Executive’s service
as an employee of the Company or any affiliates and the termination of such
relationship.  Such claims include,
without limitation, any claims arising under the Age Discrimination in
Employment Act of 1967, as amended; Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991, as amended; the Equal Pay Act of
1962; the American Disabilities Act of 1990; the Family Medical Leave Act, as
amended; the Employee Retirement Income Security Act of 1976, as amended, or
any like acts under the laws of Australia, as the case may be.

 

IN WITNESS WHEREOF, the
parties have executed this Agreement effective as of the date first above
written.

 

 

TIPPERARY CORPORATION

 

On Behalf of the
Compensation Committee

Of the Board of Directors

 

 

	
    /s/
  Eugene I. Davis

  	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
    Eugene
  I. Davis

  	
   

  	
   

  
	
  Name

  	
   

  
	
   

  	
   

  
	
    Director

  	
   

  	
   

  
	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  JOSEPH FEITEN

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/
  Joseph Feiten

  	
   

  	
   

  

 

6

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