Exhibit 1
CUBIC ENERGY, INC.
SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT
This Subscription and Registration Rights Agreement (this "Agreement"),
dated as of November 21, 2006, by and between Cubic Energy, Inc. (the "Company")
and (the "Subscriber"), is intended to set forth certain representations,
covenants and agreements between the Company and the Subscriber, with respect to
the offering (the "Offering") for sale by the Company of units (the "Units"),
each of which consists of one share of Common Stock, par value $0.05 per share
(the "Common Stock") at the Offering Price (as defined below) , together with a
warrant to purchase one-half of a share of Common Stock at an initial exercise
price per share of Common Stock at $0.70, the terms of which are set forth in
the form of Warrant Agreement attached hereto as Exhibit D hereto. The shares of
Common Stock included in Units purchased hereby are referred to herein as the
"Shares," the warrants included in the Units purchased hereby are referred to
herein as the "Warrants" and the shares of Common Stock issuable upon exercise
of the Warrants are referred to herein as the "Exercise Shares." The Shares, the
Warrants and the Exercise Shares are collectively referred to herein as the
"Securities." The Shares and Warrants are immediately separable and may be
transferred separately in compliance with the restrictions on transfer set forth
herein and in the terms of the Warrant, as applicable.
1. Subscription. Subject to the terms and conditions hereof, the Subscriber
hereby irrevocably subscribes for and agrees to purchase from the Company the
number of Units set forth under the Subscriber's name on the signature page
hereto at a purchase price of $0.50 per Unit (the "Offering Price"), and the
Company agrees to sell such Units to the Subscriber at the Offering Price,
subject to the Company's right to sell to the Subscriber such lesser number of
Units as the Company may, in its sole discretion, deem necessary or desirable.
2. Delivery of Subscription Amount; Acceptance of Subscription; Delivery of
Units. Subscriber understands and agrees that this subscription is made subject
to the following terms and conditions:
(a) Subscriber understands that separate subscription agreements will
be executed with other investors for the remainder of the Units to be sold in
the Offering;
(b) Contemporaneously with the execution and delivery of this
Agreement, Subscriber shall execute and deliver the Certificate of Accredited
Investor Status attached hereto as Exhibit B, and shall wire to the Company
immediately available funds in the amount equal to the Offering Price multiplied
by the number of Units for which the Subscriber has subscribed (the
"Subscription Amount") in accordance with the instructions set forth on Exhibit
A hereto. The subscription for Units shall be deemed to be accepted only when
this Agreement has been signed by an authorized officer of the Company;
(c) The Company shall have the right to reject this subscription, in
whole or in part, and shall have the right to allocate Units among subscribers
in any manner it may desire; provided, that no subscriber shall be obligated to
purchase more than the number of Units set forth under its name on the signature
page hereto without its prior written consent;
(d) The payment of the Subscription Amount (or, in the case of
rejection of a portion of the Subscriber's subscription, the part of the payment
relating to such rejected portion) will be returned, without interest, (1) if
Subscriber's subscription is rejected in whole or in part, or (2) if the
Offering is withdrawn or canceled;
(e) Certificates representing the Shares and the Warrants will be
issued in the name of each Subscriber at Closing as set forth under Section 3
hereof;
(f) The representations and warranties of the Company and Subscriber
set forth herein shall be true and correct as of the date that the Company
accepts this subscription.
3. Terms of Subscription.
(a) The subscription period will begin as of November 17, 2006 and will
terminate at 4:59 p.m., Central time, on November 30, 2006, unless extended by
the Company, on one or more occasions, for up to an additional fifteen (15) days
(the "Termination Date"). Such extension may be effected without notice to the
Subscribers. The purchase and sale of the Units (the "Closing"), and funding
thereof, shall occur as soon as practicable after the execution of this
Agreement by the Company and each of the Subscribers in the Offering at a time
and location (the "Closing Date") agreed upon by the Company and the
Subscribers, and in no event later than 4:59 pm, Central time, on December 15,
2006. Immediately after the Closing Date, the Company will deliver or cause to
be delivered, one or more physical certificates representing the Shares
purchased by each Subscriber.
(b) If the Subscriber is not a United States person, the Subscriber
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
Units or any use of this Agreement, including (i) the legal requirements within
its jurisdiction for the purchase of the Units, (ii) any foreign exchange
restrictions applicable to such purchase, (iii) any governmental or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Securities. The Subscriber's subscription and payment
for, and his or her continued beneficial ownership of any of the Securities,
will not violate any applicable securities or other laws of the Subscriber's
jurisdiction.
4. Registration Rights.
(a) Subscriber acknowledges that it is acquiring the Units for its own
account and for the purpose of investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act of 1933,
as amended, (the "Securities Act"). The Subscriber further agrees that it will
not sell, assign or transfer any Security at any time in violation of the
Securities Act and acknowledges that, in taking unregistered securities, it must
continue to bear the economic risk of its investment for an indefinite period of
time because of the fact that Securities have not been registered under the
Securities Act, and further realizes that none of the Securities can be sold
unless subsequently registered under the Securities Act or an exemption from
such registration is available. The Subscriber further recognizes that the
Company is not assuming any obligation to register any Security except as
expressly set forth herein. The Subscriber also acknowledges that appropriate
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legends reflecting the status of the Securities under the Securities Act may be
placed on the face of the certificates for each such Security at the time of
their transfer and delivery to the holder thereof.
(b) No Security may be transferred except in a transaction which is in
compliance with the Securities Act. Except as provided hereafter with respect to
registration of the Shares and the Exercise Shares, it shall be a condition to
any such transfer that the Company shall be furnished with an opinion of counsel
to the holder of such Security, reasonably satisfactory to the Company, to the
effect that the proposed transfer would be in compliance with the Securities
Act.
(c) Within 60 days after the Closing (the "Filing Date"), the Company
shall use its best efforts to prepare and file with the Securities and Exchange
Commission (the "SEC"), one or more registration statements and such other
documents as may be necessary in the opinion of counsel for the Company, and use
its commercially reasonable efforts to have such registration statement declared
effective within 120 days after the Filing Date in order to comply with the
provisions of the Securities Act so as to permit the registered resale of the
Shares, for a period of two (2) years following the Closing Date, and the
registered resale of the Exercise Shares, for so long as the Warrants are
outstanding. The Shares and Exercise Shares that are registered for resale under
such registration statement are referred to herein as the "Offering Securities,"
and the Subscriber, together with its affiliates and transferees, are hereafter
referred to as "Offering Holders." The Company will include in such registration
statement (i) the information required under the Securities Act to be so
included concerning the Offering Holders, as provided by the Offering Holders at
the reasonable request of the Company, including any changes in such
information, or information provided by new Offering Holders, that may be
provided by the Offering Holders in writing to the Company from time to time,
and (ii) a section entitled "Plan of Distribution," substantially in the form of
Exhibit C hereto, that describes the various procedures that may be used by the
Offering Holders in the sale of Shares or Exercise Shares; provided, however,
that no holder of Shares or Exercise Shares (other than a Subscriber) shall be
entitled to have the securities held by it covered by such registration
statement unless such holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such holder.
(d) Notwithstanding the foregoing provisions of this Section 4, the
Company may voluntarily suspend the use of any such registration statement for a
limited time, which in no event shall be longer than 60 days in any three month
period and no longer than 100 days in any twelve month period, if the Company
has been advised in writing by counsel or underwriters to the Company that the
offering of any Offering Securities pursuant to the registration statement would
materially adversely affect, or would be improper in view of (or improper
without disclosure in a prospectus), a proposed financing, a reorganization,
recapitalization, merger, consolidation, or similar transaction involving the
Company. In addition, the Company may suspend the use of such registration
statement for the 15 business days following the filing of any Form 8-K, Form
10-QSB or Form 10-KSB, or other comparable form for purposes of filing a
post-effective amendment to the registration statement. If any event occurs that
would cause any such registration statement to contain a material misstatement
or omission or not to be effective and usable during the period that such
registration statement is required to be effective and usable, subject to the
time periods set forth above, the Company shall promptly file an amendment to
the registration statement and use its commercially reasonable efforts to cause
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such amendment to be declared effective as soon as practicable thereafter.
Notwithstanding any provision contained herein to the contrary, the Company's
obligation to include, or continue to include, Offering Securities in any such
registration statement under this Section 4 shall terminate to the extent such
securities are eligible for resale under Rule 144(k) promulgated under the
Securities Act.
(e) If and whenever the Company is required by the provisions of this
Agreement to use its commercially reasonable efforts to effect the registration
of the Offering Securities under the Securities Act for the account of an
Offering Holder, the Company will, as promptly as possible:
(i) prepare and file with the SEC a registration statement
with respect to such securities and use its commercially reasonable
efforts to cause such registration statement to become and remain
effective, subject to the Company's obligations to file post-effective
amendments to such registration statement;
(ii) prepare and file with the SEC 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 requirements of the
Securities Act and the rules and regulations promulgated by the SEC
thereunder relating to the sale or other disposition of the securities
covered by such registration statement;
(iii) include in each such document the names of each
Subscriber who continues to hold Offering Securities, except for those
Subscribers who designate on the signature page hereto that they do not
wish to have their securities included in the registration statement,
and the names of any new Offering Holders who have delivered written
notice to the Company at least three business days prior to the filing
thereof that they propose to sell Offering Securities pursuant to the
registration statement as selling securityholders;
(iv) file pursuant to Rule 424(b) under the Securities Act an
amendment to the registration statement or amend, if required, the
registration statement and prospectus, in each case, to cover new
Offering Holders upon at least seven business days' prior written
notice by such new Offering Holders to such effect; provided, however,
that (A) in no event shall the Company be required to file pursuant to
Rule 424(b) under the Securities Act a supplement to the registration
statement to cover new Offering Holders other than on the third
Thursday of each calendar month following the calendar month in which
the registration statement is declared effective and (B) in the case
where a post-effective amendment is required, in no event shall the
Company be required to file a post-effective amendment to cover new
Offering Holders other than on the third Thursday of the third full
calendar month following the calendar month in which the registration
statement is declared effective and the third Thursday of each
subsequent third month thereafter; any delay in effectiveness as a
result of the foregoing shall be excluded from the periods set forth in
subsection (e) above; and
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(v) furnish to each Offering Holder such numbers of copies of
a prospectus, including a preliminary prospectus, complying with the
requirements of the Securities Act, and such other documents as such
Offering Holder may reasonably request in order to facilitate the
public sale or other disposition of the Offering Securities owned by
such Offering Holder, but such Offering Holder shall not be entitled to
use any selling materials other than a prospectus and such other
materials as may be approved by the Company, which approval will not be
unreasonably withheld.
(f) Except as provided below in this Section 4, the expenses incurred
by the Company in connection with action taken by the Company to comply with
this Section 4, including, without limitation, all registration and filing fees,
printing and delivery expenses, accounting fees, fees and disbursements of
counsel to the Company, consultant and expert fees, premiums for liability
insurance, if the Company chooses to obtain such insurance, obtained in
connection with a registration statement filed to effect such compliance and all
expenses, including counsel fees, of complying with any state securities laws
("State Acts"), shall be paid by the Company. All fees and disbursements of any
counsel, experts, or consultants employed by any Offering Holder shall be borne
by such Offering Holder. The Company shall not be obligated in any way in
connection with any registration pursuant to this Section 4 for any selling
commissions or discounts payable by any Offering Holder to any underwriter or
broker of securities to be sold by such Offering Holder. Subscriber agrees to
pay all expenses required to be borne by such Offering Holder.
(g) In the event of any registration of Offering Securities pursuant to
this Section 4, the Company will indemnify and hold harmless each Offering
Holder, its officers, directors, investment advisors and each underwriter of
such securities, and any person who controls such Offering Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all claims,
actions, losses, damages, liabilities and expenses, joint or several, to which
any of such persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
such Offering Holder, its officers, directors and each underwriter of such
securities, and each such controlling person or entity for any legal and any
other expenses reasonably incurred by such Offering Holder, such underwriter, or
such controlling person or entity in connection with investigating or defending
any such loss, action, 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, liability or action arises directly out of or is based
primarily upon an untrue statement or omission made in said registration
statement, said preliminary prospectus or said prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Offering Holder or such underwriter specifically for use
in the preparation thereof.
(h) At any time when a prospectus relating to the Offering Securities
is required to be delivered under the Securities Act, the Company will notify
the Offering Holder of the happening of any event, upon the notification or
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awareness of such event by an executive officer of the Company, as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(i) In the event of any registration of any Offering Securities under
the Securities Act pursuant to this Section 4, the Offering Holder agrees to
indemnify and hold harmless the Company, its officers, directors and any person
who controls the Company within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages, liabilities, or actions, joint or several,
to which the Company, its officers, directors, or such controlling person or
entity may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities, or actions arise out of or are based upon
any untrue statement of any material fact contained in any registration
statement under which such Offering Securities were 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 to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent and only to the extent that any such loss, claim, damage, liability, or
action arises out of or is based upon an untrue statement or omission made in
said registration statement, said preliminary prospectus or said prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Offering Holder or any affiliate
(as defined in the Securities Act) of such Offering Holder specifically for use
in the preparation thereof.
(j) If a claim for indemnification under Section 4 is unavailable to an
indemnified party because of a failure or refusal of a governmental authority to
enforce such indemnification in accordance with its terms (by reason of public
policy or otherwise), then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any such contribution shall be deemed to
include any reasonable attorneys' or other reasonable fees or expenses incurred
by such party in connection with the defense of any Losses to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for under Section 4(h) or 4(j) was available to such
party in accordance with its terms. Notwithstanding anything to the contrary
contained herein, no Offering Holder shall be liable or required to contribute
under this Section 4(k) for any amount that exceeds the net proceeds to such
Offering Holder as a result of the sale of Shares or Exercise Shares pursuant to
the registration statement provided by this Section 4. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
4(k) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in this
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paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
indemnity and contribution agreements contained in this Section 4 are in
addition to any liability that the indemnifying parties may have to the
indemnified parties.
(k) Any party entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties exists with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party. If such defense is assumed, the indemnifying party
will not be subject to any liability for any settlement made by the indemnified
party without its consent (which consent may not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest exists between such indemnified party and any other of such
indemnified parties with respect to such claim.
(l) With a view to making available to the Offering Holder the benefits
of Rule 144 promulgated under the Securities Act, the Company agrees that it
will use its commercially reasonable efforts to maintain registration of its
Common Stock under Section 12 or 15 of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), and to file with the SEC in a timely manner all
reports and other documents required to be filed by an issuer of securities
registered under the Exchange Act so as to maintain the availability of Rule
144. Upon the request of any record owner, the Company will deliver to such
owner a written statement as to whether it has complied with the reporting
requirements of Rule 144. At any time when the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company will promptly furnish or cause to
be furnished to the Offering Holders, upon request, copies of the information
required to be delivered to holders and prospective purchasers of the Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto) in order to permit compliance with Rule 144A in connection with resales
by such holders of the Securities.
5. Representations and Warranties of the Subscriber. Subscriber hereby
represents and warrants to the Company as follows:
(a) Subscriber is acquiring the Units for its own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act, and applicable state securities laws.
(b) The Subscriber understands that (A) the Units (1) have not been
registered under the Securities Act or any state securities laws, (2) will be
issued in reliance upon an exemption from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) and/or
Regulation D thereof and (3) will be issued in reliance upon exemptions from the
registration and prospectus delivery requirements of state securities laws which
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relate to private offerings, and (B) the Subscriber must therefore bear the
economic risk of such investment indefinitely unless a subsequent disposition
thereof is registered under the Securities Act and applicable state securities
laws or is exempt therefrom. Subscriber further understands that such exemptions
depend upon, among other things, the bona fide nature of the investment intent
of the Subscriber expressed herein. Pursuant to the foregoing, the Subscriber
acknowledges that the certificates representing each of the Shares, the Warrants
and the Exercise Shares shall bear a restrictive legend substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR
SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES LAWS OR
(II) AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE BOTH
REASONABLY SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO THE
COMPANY AND SUCH OPINION STATES THAT THE SECURITIES MAY BE
TRANSFERRED WITHOUT SUCH REGISTRATION."
(c) The Subscriber has knowledge, skill and experience in financial,
business and investment matters relating to an investment of this type and is
capable of evaluating the merits and risks of such investment and protecting the
Subscriber's interest in connection with the acquisition of the Units. The
Subscriber understands that the acquisition of the Units is a speculative
investment and involves substantial risks and that the Subscriber could lose the
Subscriber's entire investment in the Units. To the extent deemed necessary by
the Subscriber, the Subscriber has retained, at its own expense, and relied
upon, appropriate professional advice regarding the investment, tax and legal
merits and consequences of purchasing and owning the Share, the Warrants and the
Exercise Shares. The Subscriber has the ability to bear the economic risks of
the Subscriber's investment in the Company, including a complete loss of the
investment, and the Subscriber has no need for liquidity in such investment.
(d) The Subscriber has been furnished by the Company all information
(or provided access to all information) regarding the business and financial
condition of the Company, its expected plans for future business activities, the
attributes of the Securities and the merits and risks of an investment in the
Securities which the Subscriber has requested or otherwise needs to evaluate the
investment in the Company.
(e) Subscriber is in receipt of and has carefully read and understands
the following items:
(i) Annual Report on Form 10-KSB for the period ended June 30,
2006 filed by the Company with the SEC;
(ii) Quarterly Report on Form 10-QSB for the period ended
September 30, 2006 filed by the Company with the SEC;
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(iii) Current Reports on Form 8-K filed by the Company with
the SEC on June 28, 2006;
(iv) Confidential Private Placement Memorandum, dated November
14, 2006 (together with the exhibits thereto, collectively, items (i)
through (iv), the "Disclosure Documents").
(f) In making the proposed investment decision, the Subscriber is
relying solely on investigations made by the Subscriber and the Subscriber's
representatives. The Subscriber acknowledges that documents listed in Section
5(e) are the only information provided to the Subscriber by the Company and that
the Subscriber is not relying on any other information in making the proposed
investment decision. The offer to sell the Units was communicated to the
Subscriber in such a manner that the Subscriber was able to ask questions of and
receive answers from the management of the Company concerning the terms and
conditions of the proposed transaction and that at no time was the Subscriber
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general or public
advertising or solicitation.
(g) The Subscriber acknowledges that the Subscriber has been advised
that:
(i) The Units, and the Securities that comprise the Units,
offered hereby have not been approved or disapproved by the SEC or any
state securities commission nor has the SEC or any state securities
commission passed upon the accuracy or adequacy of any representations
by the Company. Any representation to the contrary is a criminal
offense.
(ii) In making an investment decision, the Subscriber must
rely on its own examination of the Company and the terms of the
Offering, including the merits and risks involved. The Units, and the
Securities that comprise the Units, have not been recommended by any
federal or state securities commission or regulatory authority.
Furthermore, the foregoing authorities have not confirmed the accuracy
or determined the adequacy of any representation. Any representation to
the contrary is a criminal offense.
(iii) The Shares and the Warrants are and, when issued, the
Exercise Shares will be, "Restricted Securities" within the meaning of
Rule 144 under the Securities Act, are subject to restrictions on
transferability and resale and may not be transferred or resold except
as permitted under the Securities Act and applicable state securities
laws, pursuant to registration or exemption therefrom. The Subscriber
is aware that the Subscriber may be required to bear the financial
risks of this investment for an indefinite period of time.
(h) The Subscriber acknowledges and is aware that there has never been
any representation, guarantee or warranty made by the Company or any officer,
director, employee or agent or representative of the Company, expressly or by
implication, as to (i) the approximate or exact length of time that the
Subscriber will be required to remain an owner of any Security; (ii) the
percentage of profit and/or amount of or type of consideration, profit or loss
to be realized, if any, as a result of this investment; or (iii) that the
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limited past performance or experience on the part of the Company, or any future
expectations will in any way indicate the predictable results of the ownership
of any Security or of the overall financial performance of the Company.
(i) The Subscriber agrees to furnish the Company such other information
as the Company may reasonably request in order to verify the accuracy of the
information contained herein and agrees to notify the Company immediately of any
material change in the information provided herein that occurs prior to the
Company's acceptance of this Agreement.
(j) The Subscriber further represents and warrants that the Subscriber
is an "accredited investor" within the meaning of Rule 501 of Regulation D under
the Securities Act, and Subscriber has executed the Certificate of Accredited
Investor Status, attached hereto as Exhibit B.
(k) As of the date of this Agreement the Subscriber and its affiliates
do not have, and during the 30-day period prior to the date of this Agreement
the Subscriber and its affiliates have not entered into, any "put equivalent
position" as such term is defined in Rule 16a-1 under the Exchange Act or short
sale positions with respect to the Common Stock of the Company. Until the
registration statement referred to in Section 4(c) is declared effective, the
Subscriber hereby agrees not to, and will cause its affiliates not to, enter
into any such "put equivalent position" or short sale position.
The foregoing representations and warranties and undertakings are made by the
Subscriber with the intent that they be relied upon in determining its
suitability as an investor and the Subscriber hereby agrees that such
representations and warranties shall survive its purchase of the Units.
6. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Subscriber as follows:
(a) Each of the Company and its subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its state of
incorporation, and is duly qualified to do business as a foreign corporation in
all jurisdictions in which the failure to be so qualified would materially and
adversely affect the business or financial condition, properties or operations
of the Company. Each of the Company and its subsidiaries has all requisite
corporate power and authority (i) to own and lease the properties and assets it
currently owns and leases (if any) and it contemplates owning and leasing and
(ii) to conduct its activities as such activities (if any) are currently
conducted and as currently contemplated to be conducted.
(b) The authorized capital of the Company immediately prior to the
Closing will consist of 100,000,000 shares of common stock, par value $0.05 and
10,000,000 shares of preferred stock, par value $0.01.
(c) The Company has duly authorized the issuance and sale of the
Shares, the Warrants and the Exercise Shares in accordance with the terms of
this Agreement (as described herein) by all requisite corporate action,
including the authorization of the Company's Board of Directors of the issuance
and sale of the Shares and the Warrants in accordance herewith, the
authorization and reservation of the Exercise Shares for issuance upon exercise
of the Warrants, the issuance and sale of the Exercise Shares upon exercise of
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the Warrants and the execution, delivery and performance of any other agreements
and instruments executed in connection herewith. This Agreement constitutes a
valid and legally binding obligation of the Company, enforceable in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) to the extent the indemnification provisions contained herein
may be limited by applicable federal or state securities laws.
(d) The Shares, when issued and paid for in accordance with this
Agreement, and the Exercise Shares, when issued and paid for in accordance with
the terms of the Warrants, will represent validly authorized, duly issued and
fully paid and nonassessable shares of Common Stock of the Company, and the
issuance thereof will not conflict with the articles of incorporation or bylaws
of the Company and, subject to the accuracy of the representations and
warranties of Subscriber herein, will be in full compliance with all federal and
state securities laws applicable to such issuance and sale.
(e) The execution and delivery of this Agreement, the fulfillment of
the terms set forth herein and the consummation of the transactions contemplated
hereby will not conflict with, or constitute a breach of or default under, any
agreement, indenture or instrument by which the Company is bound or any law,
administrative rule, regulation or decree of any court or any governmental body
or administrative agency applicable to the Company.
(f) As of the date of this Agreement, the Disclosure Documents do not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(g) The Disclosure Documents that have been filed with the SEC, at the
time they were filed with the SEC, complied in all material respects with the
requirements of the Exchange Act, and, when read together and with the other
information in the Disclosure Documents, do not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(h) Subsequent to the dates as of which information is given in the
Disclosure Documents, except as described therein, there has not been any
material adverse change with regard to the assets or properties, results of
operations or financial condition of the Company.
7. Survival; Indemnification. All representations, warranties and covenants
contained in this Agreement and the indemnification contained in this Section 7
shall survive (i) the acceptance of this Agreement by the Company, (ii) changes
in the transactions, documents and instruments described herein which are not
material or which are to the benefit of Subscriber, and (iii) the death or
disability of Subscriber. Subscriber acknowledges the meaning and legal
consequences of the representations, warranties and covenants in Section 5
hereof and that the Company has relied upon such representations, warranties and
covenants in determining Subscriber's qualification and suitability to purchase
11
the Units. Subscriber hereby agrees to indemnify, defend and hold harmless the
Company, its officers, directors, employees, agents and controlling persons,
from and against any and all losses, claims, damages, liabilities, expenses
(including attorneys' fees and disbursements), judgments or amounts paid in
settlement of actions arising out of or resulting from the untruth of any
representation of Subscriber herein or the breach of any warranty or covenant
herein by Subscriber. Notwithstanding the foregoing, however, no representation,
warranty, covenant or acknowledgment made herein by Subscriber shall in any
manner be deemed to constitute a waiver of any rights granted to it under the
Securities Act or state securities laws.
8. Notices. All notices and other communications provided for herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) if to the Company, to the following address:
Cubic Energy, Inc.
0000 Xxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn: Xx. Xxx X. Xxxx
Telephone: (000) 000-0000
(b) if to Subscriber, to the address set forth on the signature page
hereto.
(c) or at such other address as any party shall have specified by
notice in writing to the others.
9. Notification of Changes. Subscriber agrees and covenants to notify the
Company immediately upon the occurrence of any event prior to the consummation
of this Offering that would cause any representation, warranty, covenant or
other statement contained in this Agreement to be false or incorrect or of any
change in any statement made herein occurring prior to the consummation of this
Offering.
10. Assignability. This Agreement is not assignable by the Subscriber, and
may not be modified, waived or terminated except by an instrument in writing
signed by the party against whom enforcement of such modification, waiver or
termination is sought.
11. Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns, and the agreements, representations, warranties and acknowledgments
contained herein shall be deemed to be made by and be binding upon such heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
12. Obligations Irrevocable. The obligations of the Subscriber shall be
irrevocable, except with the consent of the Company, until the consummation or
termination of the Offering.
12
13. Entire Agreement. This Agreement constitutes the entire agreement of
the Subscriber and the Company relating to the matters contained herein,
superseding all prior contracts or agreements, whether oral or written.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of law thereof that would require the application of the laws of
any jurisdiction other than Texas.
15. Severability. If any provision of this Agreement or the application
thereof to Subscriber or any circumstance shall be held invalid or unenforceable
to any extent, the remainder of this Agreement and the application of such
provision to other subscriptions or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
16. Headings. The headings in this Agreement are inserted for convenience
and identification only and are not intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
[Signature Page to follow]
13
IN WITNESS WHEREOF, Subscriber has executed this Subscription and
Registration Rights Agreement as of November ____, 2006.
SUBSCRIBER
---------------------------------------
Number of Units:
Offering Price per Unit: $0.50
Subscription Amount:
By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
-------------------------------
The Company hereby accepts the foregoing subscription subject to the terms
and conditions hereof as of November ____, 2006.
Cubic Energy, Inc
a Texas corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
14
Exhibit A
---------
HOW TO SUBSCRIBE
(1) If you are subscribing for the purchase of Units, please date and sign
the signature page to this Subscription and Registration Rights Agreement in the
applicable spaces. Please signify the amount of Units you are purchasing by
inserting such amount in the space provided for on the signature page to the
Agreement.
(2) Complete and sign the accompanying Certificate of Accredited Investor
Status.
(3) Send all completed documents to: Cubic Energy, Inc., ATTN: Xxx Xxxxx,
0000 Xxxxx Xx., Xxxxxx, Xxxxx 00000, (000) 000-0000, (000) 000-0000 facsimile.
(4) Transmit funds in an amount equal to the number of Units you are
purchasing multiplied by the Offering Price via wire to the following account:
Domestic
--------
American National Bank
0000 Xxxxx Xx.
Xxxxxxxx, Xxxxx 00000
Wire Dept. Fax No. (000) 000-0000
Phone (000) 000-0000
Account No. 300021912
Routing No. 000000000
For Further Credit To:
Foreign
-------
----------------------
----------------------
----------------------
For Further Credit To:
ATTENTION SUBSCRIBERS: NO SUBSCRIPTION WILL BE ACCEPTED UNLESS ALL DOCUMENTATION
PRESCRIBED HEREIN IS FULLY COMPLETED AND EXECUTED. ANY MATERIALS RECEIVED THAT
ARE INCOMPLETE IN ANY RESPECT WILL BE RETURNED BY THE COMPANY.
A-1
Exhibit B
---------
CERTIFICATE OF ACCREDITED INVESTOR STATUS
Except as may be indicated by the undersigned below, the undersigned is an
individual "accredited investor," as that term is defined in Regulation D under
the Securities Act of 1933, as amended (the "Securities Act"). The undersigned
has checked the box below indicating the basis on which he is representing his
status as an "accredited investor":
[_] a bank as defined in Section 3(a)(2) of the Securities Act, or any savings
and loan association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange
Act"); an insurance company as defined in Section 2(13) of the Securities
Act; an investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of
that Act; a small business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, and such plan has
total assets in excess of $5,000,000; an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section
3(21) of such Act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that
are "accredited investors";
[_] a private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940;
[_] an organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the securities offered,
with total assets in excess of $5,000,000;
[_] a natural person whose individual net worth, or joint net worth with the
undersigned's spouse, at the time of this purchase exceeds $1,000,000;
[_] a natural person who had an individual income in excess of $200,000 in each
of the two most recent years or joint income with the undersigned's spouse
in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
[_] a trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of
the prospective investment; or
B-1
[_] an entity in which all of the equity holders are "accredited investors" by
virtue of their meeting one or more of the above standards.
[_] an individual who is a director or executive officer of _______________.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Accredited Investor Status effective as of November ____, 2006.
Name of Subscriber
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
B-2
Exhibit C
---------
PLAN OF DISTRIBUTION
As of the date of this prospectus, we have not been advised by the selling
stockholders as to any plan of distribution. Distributions of the shares by the
selling stockholders, or by their partners, pledgees, donees (including
charitable organizations), transferees or other successors in interest, may from
time to time be offered for sale either directly by such individual, or through
underwriters, dealers or agents or on any exchange on which the shares may from
time to time be traded, in the over-the-counter market, or in independently
negotiated transactions or otherwise. The methods by which the shares may be
sold include:
o a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate
the transaction;
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its own account pursuant to this prospectus;
o exchange distributions and/or secondary distributions;
o sales in the over-the-counter market;
o underwritten transactions;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately negotiated transactions.
Such transactions may be effected by the selling stockholders at market
prices prevailing at the time of sale or at negotiated prices. The selling
stockholders may effect such transactions by selling the Common Stock to
underwriters or to or through broker-dealers, and such underwriters or
broker-dealers may receive compensations in the form of discounts or commissions
from the selling stockholders and may receive commissions from the purchasers of
the Common Stock for whom they may act as agent. The selling stockholders may
agree to indemnify any underwriter, broker-dealer or agent that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. We have agreed to
register the shares for sale under the Securities Act and to indemnify the
selling stockholders and each person who participates as an underwriter in the
offering of the shares against certain civil liabilities, including certain
liabilities under the Securities Act.
In connection with sales of the Common Stock under this prospectus, the
selling stockholders may enter into hedging transactions with broker-dealers,
who may in turn engage in short sales of the Common Stock in the course of
hedging the positions they assume. The selling stockholders also may sell shares
C-1
of Common Stock short and deliver them to close out the short positions, or loan
or pledge the shares of Common Stock to broker-dealers that in turn may sell
them.
The selling stockholders and any underwriters, dealers or agents that
participate in distribution of the shares may be deemed to be underwriters, and
any profit on sale of the shares by them and any discounts, commissions or
concessions received by any underwriter, dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
There can be no assurances that the selling stockholders will sell any or
all of the shares offered under this prospectus.
C-2
Exhibit D
---------
Form of Warrant Agreement
D-1
