Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
March 5, 2007 by and between Cubic Energy, Inc., a Texas corporation (the
"Company"), and Xxxxx Fargo Energy Capital, Inc., a Texas corporation (the
"Holder").
WHEREAS, concurrently with the execution of this Agreement, (a) the Company
is entering into that certain Credit Agreement (the "Credit Agreement") with the
Holder pursuant to which the Holder will make loans, including a "Term Loan" (as
defined in the Credit Agreement) to the Company that is convertible into shares
of the common stock, par value $0.05 per share (the "Common Stock"), issued by
the Company as provided in Section 2.15 of the Credit Agreement, and (b) the
Company is issuing to the Holder that certain Warrant To Purchase Shares of
Common Stock of Cubic Energy, Inc. (the "Warrant") to purchase shares of Common
Stock as provided therein;
WHEREAS, Section 2.12(a) of the Credit Agreement provides for the Company's
issuance of the Supplemental Warrant to the Holder as and when described in
Section 2.12(a);
WHEREAS, this Agreement provides a method for the registration of the
shares of Common Stock to be issued pursuant to Section 2.15 of the Credit
Agreement and upon exercise of the Warrant or the Supplemental Warrant or both
(the "Shares"); and
WHEREAS, the Credit Agreement requires the simultaneous execution and
delivery of this Agreement as a condition precedent to the Closing (as defined
in the Credit Agreement).
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
agreements set forth herein, and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Certain Definitions.
As used in this Agreement, in addition to the other terms defined herein,
the following capitalized defined terms shall have the following meanings:
"Additional Shares" means shares or other securities issued by the Company
with respect to the Common Stock in connection with any stock dividend, stock
distribution, stock split or similar issuance.
"Affiliate" shall mean, with respect to any Person, a Person that directly,
or indirectly though one or more intermediaries, controls, is controlled by, or
is under common control with the first mentioned Person.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Business Day" means any day other than a day on which the SEC is closed.
"Common Stock" shall have the meaning set forth in the recitals to this
Agreement.
"Company" shall mean Cubic Energy, Inc., a Texas corporation.
1
"Credit Agreement" shall have the meaning set forth in the recitals to this
Agreement.
"Effective Time" means each of the three (3) dates the Holder shall have
given the Registration Notice.
"End of Suspension Notice" shall have the meaning set forth in Section 3(b)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Holder" has the meaning assigned in the preamble and any other lawful
assignee of the rights in this Agreement.
"Indemnitee" shall have the meaning set forth in Section 9 hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTCBB" means the OTC Bulletin Board quotation system.
"Person" shall mean an individual, partnership, corporation, trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, as amended or supplemented by
any prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration Statement, and by
all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
"Registrable Shares" shall mean all Shares issued upon conversion of the
Term Loan as provided in Section 2.15 of the Credit Agreement and upon exercise
of the Warrant, the Supplemental Warrant or either of them, or other securities
issued or issuable in respect of the Common Stock by way of spin-off, dividend
or stock split or in connection with a combination of shares, reclassification,
merger, consolidation or reorganization; provided, however, that "Registrable
Shares" shall not include (i) Common Stock for which a Registration Statement
relating to the sale thereof shall have become effective under the Securities
Act and which have been disposed of, as applicable, under such Registration
Statement, (ii) Common Stock sold pursuant to Rule 144, (iii) Common Stock which
otherwise have been transferred by Holder, for which the Company has delivered a
new certificate not bearing a legend restricting further transfer (or registered
such Common Stock in an uncertificated registration without restriction on
further transfers) and such Common Stock may be resold without subsequent
registration under the Securities Act or (iv) Common Stock eligible for sale
pursuant to Rule 144(k) (or any successor provision) by the Holder.
"Registration Expenses" shall mean any and all expenses incident to the
performance of or compliance with this Agreement, including without limitation:
(a) all registration and filing fees; (b) all fees and expenses associated with
a required listing of the Registrable Shares on any securities exchange; (c)
fees and expenses with respect to filings required to be made with an exchange
or the NASD; (d) fees and expenses of compliance with securities or "blue sky"
2
laws (including reasonable fees and disbursements of counsel for the
underwriters or holders of securities in connection with blue sky qualifications
of the securities and determination of their eligibility for investment under
the laws of such jurisdictions); (e) printing, messenger, telephone and delivery
expenses of the Company; (f) fees and disbursements of counsel for the Company
and customary fees and expenses for independent certified public accountants
retained by the Company (including the expenses of any comfort letters, or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters, if such comfort letter or comfort letters is
required by the managing underwriter); (g) securities acts liability insurance,
if the Company so desires; (h) all internal expenses of the Company (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties); (i) the expense of any annual audit; (j)
the fees and expenses of any Person, including special experts, retained by the
Company; and (k) the reasonable out-of-pocket expenses of one legal counsel (who
shall be reasonably acceptable to the Company) for the Holders in connection
with providing the information with respect to the Holders that is required to
be included in the Registration Statements filed by the Company pursuant to this
Agreement and the review of that information in the Registration Statement, in
an amount not to exceed Five Thousand Dollars ($5,000.00) for each Registration
Statement filed provided, however, that Registration Expenses shall not include,
and the Company shall not have any obligation to pay, any underwriting fees,
discounts or commissions attributable to the sale of such Registrable Shares, or
any legal fees and expenses of counsel to any Holder (except as specifically
provided above).
"Registration Notice" shall have the meaning set forth in Section 2(a)
hereof.
"Registration Statement" shall mean any registration statement of the
Company that covers the sale or resale of any of the Registrable Shares under
the Securities Act on an appropriate form, and all amendments and supplements to
such registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.
"Resale Shelf Registration Expiration Date" shall have the meaning set
forth in Section 2(b) hereof.
"Resale Shelf Registration Statement" shall have the meaning set forth in
Section 2(b) hereof.
"Rule 144" means Rule 144 under the Securities Act (or any successor
provision).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shares" shall have the meaning set forth in the recitals of this
Agreement.
"Subsequent Shelf Registration Statement" shall have the meaning set forth
in Section 3(d) hereof.
3
"Supplemental Warrant" shall have the meaning assigned in the Credit
Agreement.
"Suspension Event" shall have the meaning set forth in Section 3(a) hereof.
"Suspension Notice" shall have the meaning set forth in Section 3(b)
hereof.
"Term Loan" shall have the meaning assigned in the recitals of this
Agreement.
"Warrant" shall have the meaning assigned in the recitals of this
Agreement.
2. Resale Registration Rights.
(a) Registration Notice. At any time that the Holder is the holder of
Registrable Shares, the Holder may give a notice (the "Registration Notice")
stating that the Holder is exercising the right granted in Section 2(b) of this
Agreement and stating the number of Registrable Shares to be registered, which
shall be no less than (i) in the case of the first and second exercises under
this Section 2, One Million (1,000,000) Shares, and (ii) in the case of the
third exercise, the lesser of One Million (1,000,000) Shares or all of the
Registrable Shares then held by the Holder.
(b) Registration Statement Covering Resale of Registrable Shares. As soon
as practicable, but in no event more than forty-five (45) days, after each
Effective Time, the Company shall (i) file with the SEC, or (ii) have filed with
the SEC prior to the Effective Time a shelf Registration Statement (the "Resale
Shelf Registration Statement") pursuant to Rule 415 under the Securities Act
pursuant to which all of the Registrable Shares to be registered shall be
included (on the initial filing or by supplement thereto) to enable the public
resale on a delayed or continuous basis of such Registrable Shares by the
Holder. The Company shall file the Resale Shelf Registration Statement on such
form as the Company may then utilize under the rules of the SEC and use its
commercially reasonable efforts to have the Resale Shelf Registration Statement
declared effective under the Securities Act as soon as practicable. The Company
agrees to use its commercially reasonable efforts to maintain the effectiveness
of the Resale Shelf Registration Statement, including by filing any necessary
post-effective amendments and prospectus supplements, or, alternatively, by
filing new registration statements relating to the Registrable Shares as
required by Rule 415 under the Securities Act, continuously until the date (the
"Resale Shelf Registration Expiration Date") that is the earlier of (i) two (2)
years following the date of effectiveness of the Resale Shelf Registration
Statement or (ii) the date on which the Holder no longer holds any Registrable
Shares covered by such Resale Shelf Registration Statement. The Company shall
not be obligated to file more than three (3) Resale Shelf Registration
Statements pursuant to this Section 2(b).
(c) Notification and Distribution of Materials. The Company shall notify
the Holder of the effectiveness of any Registration Statement applicable to the
Registrable Shares and shall furnish to the Holders, without charge, such number
of copies of the Registration Statement (including any amendments, supplements
and exhibits), the Prospectus contained therein (including each preliminary
prospectus and all related amendments and supplements) and any documents
incorporated by reference in the Registration Statement or such other documents
as the Holder may reasonably request in order to facilitate the sale of the
Registrable Shares in the manner described in the Registration Statement.
4
(d) Amendments and Supplements. Subject to Section 3, (i) the Company shall
promptly prepare and file with the SEC from time to time such amendments and
supplements to each Registration Statement and Prospectus used in connection
therewith as may be necessary to keep that Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all the Registrable Shares so registered until the Resale Shelf
Registration Expiration Date and (ii) upon five (5) Business Days' notice, the
Company shall file any supplement or post-effective amendment to the
Registration Statement with respect to the plan of distribution or the Holder's
ownership interests in his, her or its Registrable Shares that is reasonably
necessary to permit the sale of the Holder's Registrable Shares pursuant to the
Registration Statement. Notwithstanding anything herein to the contrary, any
period of time during which any Resale Shelf Registration Statement and
Prospectus is not available for use by the Holders because of action taken
pursuant to clause (ii) of the preceding sentence shall not be considered with
respect to the calculation of any other period of time referred to herein.
(e) Notice of Certain Events. The Company shall promptly and in any event within
three (3) Business Days notify the Holders of, and confirm in writing, any
request by the SEC for any amendment or supplement to, or additional information
in connection with, any Registration Statement required to be prepared and filed
hereunder (or Prospectus relating thereto). The Company shall promptly and in
any event within three (3) Business Days notify each Holder of, and confirm in
writing, the filing of the Registration Statement or any Prospectus, amendment
or supplement related thereto or any post-effective amendment to the
Registration Statement and the effectiveness of any post-effective amendment.
(f) Stop Orders. During the period referred to in Section 2(b), the Company
shall use its commercially reasonable efforts to avoid the issuance of, or if
issued, to obtain the withdrawal of, any order enjoining or suspending the use
or effectiveness of a Registration Statement or suspending the qualification (or
exemption from qualification) of any of the Registrable Shares for sale in any
jurisdiction, as promptly as practicable.
(g) Eligibility for Form X-0, XX-0 or S-1; Conversion to Form S-3. The
Company represents and warrants that it meets the requirements for the use of
SEC Form X-0, XX-0 or S-1 for the registration of the sale by the Holders of the
Registrable Shares. The Company agrees to file all reports required to be filed
by the Company with the SEC in a timely manner so as to remain eligible or
become eligible, as the case may be, and thereafter to maintain its eligibility,
for the use of Form S-3. If the Company is not currently eligible to use XXX
Xxxx X-0, not later than five (5) business days after the Company first meets
the registration eligibility and transaction requirements for the use of Form
S-3 (or any successor form) for registration of the offer and sale by the
Holders of the Registrable Shares, the Company shall file a Registration
Statement on Form S-3 (or such successor form) with respect to the Registrable
Shares covered by the Registration Statement on Form SB-2 or Form S-1, whichever
is applicable, filed pursuant to this Section 2 (and include in such
Registration Statement on Form S-3 the information required by Rule 429 under
the Securities Act) or convert the Registration Statement on Form SB-2 or Form
S-1, whichever is applicable, filed pursuant to this Section 2 to a Form S-3
pursuant to Rule 429 under the Securities Act and cause such Registration
Statement (or such amendment) to be declared effective no later than thirty (30)
days after filing.
5
(h) Underwriter. In the event Holders holding a majority-in-interest of the
Registrable Shares being registered determine to engage the services of an
underwriter, the Company agrees to enter into and perform the Company's
obligations under an underwriting agreement in the usual and customary form for
secondary offerings at the time of execution, including, without limitation,
indemnification and contribution obligations customary for issuers, and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Shares included in the registration
statement.
3. Suspension of Registration Requirement; Restriction on Sales.
(a) As promptly as practicable after becoming aware of such event, the
Company shall notify each Holder of the happening of any event (a "Suspension
Event"), of which the Company has knowledge, as a result of which the prospectus
included in any Resale Shelf Registration Statement, as then in effect, includes
an untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to any Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Holder as such Holder may reasonably request; provided, however, that, for
not more than fifteen (15) consecutive trading days (or a total of not more than
thirty (30) trading days in any twelve (12) month period), the Company may delay
the disclosure of material non-public information concerning the Company (as
well as prospectus or Resale Shelf Registration Statement updating) the
disclosure of which at the time is not, in the good faith opinion of the
Company, in the best interests of the Company; provided, further, that, if the
Resale Shelf Registration Statement was not filed on Form S-3, such number of
days shall not include the fifteen (15) calendar 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 Resale Shelf Registration Statement.
(b) Upon a Suspension Event, the Company shall give written notice (a
"Suspension Notice") to each Holder to suspend sales of the Registrable Shares,
and such notice shall state that such suspension shall continue only for so long
as the Suspension Event or its effect is continuing and the Company is pursuing
with reasonable diligence the completion of the matter giving rise to the
Suspension Event or otherwise taking all reasonable steps to terminate
suspension of the effectiveness or use of the Registration Statement within the
time limits contemplated pursuant to Section 3(a). In no event shall the
Company, without the prior written consent of a Holder, disclose to the Holder
any of the facts or circumstances giving rise to the Suspension Event. The
Holder shall not effect any sales of the Registrable Shares pursuant to such
Registration Statement (or such filings) at any time after it has received a
Suspension Notice and prior to receipt of an End of Suspension Notice. The
Holder may resume effecting sales of the Registrable Shares under the
Registration Statement (or such filings) following further notice to such effect
(an "End of Suspension Notice") from the Company. This End of Suspension Notice
shall be given by the Company to the Holder in the manner described above
promptly following the conclusion of any Suspension Event and its effect.
(c) Notwithstanding any provision herein to the contrary, if the Company
gives a Suspension Notice pursuant to this Section 3 with respect to the Resale
Shelf Registration Statement, the Company shall extend the period during which
6
such Resale Shelf Registration Statement shall be maintained effective under
this Agreement by the number of days during the period from the date of the
giving of the Suspension Notice to and including the date when Holders shall
have received the End of Suspension Notice and copies of the supplemented or
amended Prospectus necessary to resume sales; provided, however, such period of
time shall not be extended beyond the date that the Shares are no longer
Registrable Shares.
(d) If any Additional Shares are issued or distributed to the Holder after
the later of (i) the effectiveness of the Resale Shelf Registration Statement or
(ii) the Effective Time, or such Additional Shares were otherwise not included
in a prior Registration Statement, then the Company shall as soon as
practicable, at the option of the Company and subject to compliance with Section
2(b) with respect to the Holder of the Registrable Shares with respect to which
such Additional Shares are issued, either (A) file an additional shelf
Registration Statement (including the Prospectus, amendments and supplements to
such Registration Statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement,
a "Subsequent Shelf Registration Statement") covering such Additional Shares on
behalf of the Holders thereof in the same manner, and subject to the same
provisions in this Agreement as the Resale Shelf Registration Statement or (B)
file a supplement to the Resale Shelf Registration Statement to include therein
and cover such Additional Shares on behalf of the Holders.
4. Holder's Obligations. In connection with the registration of the
Registrible Securities, each Holder shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete each registration pursuant to this Agreement with respect to the
Registrable Shares that each Holder shall have furnished to the Company such
information regarding itself, the Registrable Shares held by it and the intended
method of disposition of the Registrable Shares held by it as shall be
reasonably required to effect the registration of such Registrable Shares and
shall execute such questionnaires addressing these matters in connection with a
registration as the Company may reasonably request. At least five (5) Business
Days prior to the first anticipated filing date of any Registration Statement
(and any other amendments) hereunder, the Company shall notify each Holder of
the information the Company requires from each such Holder.
(b) Each Holder agrees that, upon receipt of any Suspension Notice, such
Holder will immediately discontinue disposition of Registrable Shares pursuant
to the Registration Statement covering such Registrable Shares until such
Holder's receipt of the End of Suspension Notice and, if so directed by the
Company, such Holder shall deliver to the Company (at the expense of the
Company) or destroy all copies in such Holder's possession, of the prospectus
covering such Registrable Shares current at the time of receipt of the
Suspension Notice.
(c) In the event Holder(s) holding a majority-in-interest of the
Registrable Shares being registered determine to engage the services of an
underwriter, each Holder agrees to enter into and perform such Holder's
obligations under an underwriting agreement, in usual and customary form for
secondary offerings, at the time of execution, including, without limitation,
7
indemnification and contribution obligations customary for selling security
holders, and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Shares, unless such
Holder has notified the Company in writing of such Holder's election to exclude
all of such Holder's Registrable Shares from such Registration Statement.
(d) No Holder may participate in any underwritten registration hereunder
unless such Holder (i) agrees to sell such Holder's Registrable Shares on the
basis provided in any underwriting arrangements entered into by the Company, in
usual and customary form, (ii) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to Section 8 below.
5. Rule 144 Reporting and Other Covenants. The Company covenants and agrees
with each Holder, that:
(a) Exchange Act Filings. For so long as a Holder holds Registrable
Shares and may not sell those shares pursuant to Rule 144(k), the Company
agrees:
(i) to make and keep public information available, as those terms
are understood and defined in Rule 144(c);
(ii) to use its commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required to be
filed by the Company under the Exchange Act so long as the Company has
a class of securities outstanding that is registered under Section
12(b) or 12(g) of the Exchange Act and the filing of reports and other
documents is required for the provisions of Rule 144 applicable to the
Holder's sale of the Shares; and
(iii) to furnish to any Holder promptly upon request a written
statement by the Company as to its compliance in all material respects
with the reporting requirements of Rule 144 and of the Exchange Act,
furnish or make available to any Holder a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents of the Company, and take such reasonable further actions
consistent with this Section 5, as a Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a Holder
to sell any such Registrable Shares under Rule 144 without
registration.
(b) Other Financial Information. If at any time after the date hereof
the Company is not subject to the requirements of Section 13 or 15(d) of
the Exchange Act and the Holder holds Registrable Shares, the Company shall
provide or cause to be provided to the Holder all of the following, in form
and detail satisfactory to the Holder:
(i) not later than 90 days after and as of the end of each fiscal
year, an audited financial statement of the Company, audited by an
independent accounting firm, to include consolidated balance sheets
and consolidated statements of income, retained earnings and cash
8
flow, in accordance with generally accepted accounting principles,
together with an opinion of such auditors on the financial statements;
(ii) not later than 45 days after and as of the end of each
calendar quarter, a financial statement of the Company, prepared by
the Company, to include consolidated balance sheets and consolidated
statements of income, retained earnings and cash flow, in accordance
with generally accepted accounting principles, certified by a senior
financial officer; and
(iii) from time to time such other information as the holder may
reasonably request.
(c) Transactions with Affiliates. For so long as the Warrant is
outstanding, the Company shall not, and shall not permit any of its
Subsidiaries to, (i) enter into any transaction, including without
limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate of the Company unless such
transactions are in the ordinary course of its business or are upon fair
and reasonable terms no less favorable to it than the Company would obtain
in a comparable arm's-length transaction with a person not an Affiliate, or
(ii) other than issuances pursuant to the Plan, issue, or agree to issue,
any shares of capital stock (including rights or warrants with respect
thereto) or stock appreciation rights, stock benefit plans, phantom stock
rights or plans or any similar plans or rights or other rights measured by
earnings, profits, or revenues of the Company or its Subsidiaries to any
Affiliate including shareholders, directors and officers and their
respective Affiliates, unless such transaction is fair to the Company. If a
transaction referred to in subsection (i) or (ii) hereof is approved by a
majority of Independent Directors (for example, if the Company has four
directors - two of whom are Independent Directors and two of whom are not -
and a transaction is approved by a majority of the directors including both
Independent Directors, that approval constitutes a majority of Independent
Directors), that approval shall be presumptive evidence that such
transaction complies with the provisions of this Section. As used herein,
an Independent Director shall mean any director who does not have an
economic interest in the proposed transaction and who is not related by
blood or marriage to any person who has an economic interest. As used
herein, "Affiliate" means any person controlled by, controlling or under
common control with another person; provided however, the Holder and its
direct and indirect wholly-owned subsidiaries and the Persons that directly
or indirectly own the Holder shall not be deemed Affiliates of the Company.
(d) Restrictions on Dividend Payments. For so long as the Warrant is
outstanding, the Company shall not pay any dividends with respect to its
Common Stock (other than dividends payable in shares of its Common Stock)
out of its surplus or otherwise or return any capital to its stockholders
as such or authorize or make any other distribution, payment or delivery of
property or cash to its holders of Common Stock as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a consideration
(otherwise than in exchange for, or from the proceeds of the substantially
concurrent sale of, other shares of capital stock of the Company), any
shares of any class of its Common Stock now or hereafter outstanding.
6. State Securities Laws. Subject to the conditions set forth in this
Agreement, the Company shall, in connection with the filing of any Registration
Statement hereunder, file such documents as may be necessary to register or
qualify the Registrable Shares under the securities or "blue
9
sky" laws of such states as the Holders may reasonably request in connection
with the offer and sale of Registrable Shares pursuant to the intended methods
of disposition by the Holders as set forth in the applicable Registration
Statement, and the Company shall use its commercially reasonable efforts to
cause such filings to become effective in a timely manner; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 6, (b) subject itself to
general taxation in any such jurisdiction, (c) file a general consent to service
of process in any such jurisdiction (other than customary consents to service of
process filed with state securities administrators), (d) provide any
undertakings that are not customary in similar registrations of securities and
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its shareholders. Once
effective, the Company shall use its commercially reasonable efforts to keep
such filings effective until the earlier of (x) such time as all of the
Registrable Shares so registered have been disposed of in accordance with the
intended methods of disposition by the Holders as set forth in the applicable
Registration Statement, (y) in the case of a particular state, the applicable
Holders have notified the Company that they no longer require an effective
filing in such state in accordance with their original request for filing or (z)
the date on which the applicable Registration Statement ceases to be effective.
7. Listing. The Company's Common Stock is not currently listed for trading
on any national exchanges or markets, but trades are reported on the OTCBB.
Should the Common Stock be listed or otherwise eligible for full trading
privileges on the New York Stock Exchange or the NASDAQ Global Market or NASDAQ
Capital Market, the Company shall, not later than ten (10) Business Days after
the date on which the Registrable Shares are issued by the Company to the
Holder, cause the Registrable Shares to be listed for trading. The Company will
use its commercially reasonable efforts to continue the listing or trading
privilege for all Registrable Shares on any such exchange or market for so long
as such listing or trading privileges are generally available to the Common
Stock. The Company will as promptly as practicable notify the Holder of, and
confirm in writing, the delisting of the Common Stock by such exchange or
market.
8. Expenses. The Company shall bear all Registration Expenses incurred in
connection with the registration of the Registrable Shares pursuant to this
Agreement and the Company's performance of its other obligations under the terms
of this Agreement. The Holder shall bear all underwriting fees, discounts or
commissions attributable to the sale of securities by the Holder, or any legal
fees and expenses of counsel to the Holder (except those expenses included in
Registration Expenses and as otherwise specifically provided herein) and all
other expenses incurred by the Holder in connection with the performance by the
Holder of its obligations, and exercise of its rights, under the terms of this
Agreement.
9. Indemnification by the Company. The Company agrees to indemnify the
Holder and, if a Holder is a Person other than an individual, such Holder's
officers, directors, employees, agents, representatives and Affiliates, and each
Person, if any, that controls a Holder within the meaning of the Securities Act,
and each other Person, if any, subject to liability because of his, her or its
connection with a Holder (each, an "Indemnitee"), against any and all losses,
claims, damages, actions, liabilities, costs and expenses (including without
limitation reasonable fees, expenses and disbursements of attorneys and other
10
professionals), joint or several, arising out of or based upon any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company under the terms of this Agreement or in connection with any Registration
Statement or Prospectus, or upon any untrue or alleged untrue statement of
material fact contained in any Registration Statement or any Prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company shall not be liable to such Indemnitee or any Person who
participates as an underwriter in the offering or sale of Registrable Shares or
any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission (a) made in such Registration Statement or in any
such Prospectus in reliance upon and in conformity with information regarding
such Indemnitee or its plan of distribution or ownership interests which was
furnished in writing to the Company pursuant to an investor questionnaire or
otherwise expressly for use in connection with such Registration Statement or
the Prospectus contained therein by such Indemnitee; (b) made in any preliminary
prospectus if the Holder failed to deliver or make available a copy of the
Prospectus with or prior to delivery of written confirmation of the sale by the
Holder to the party asserting the claim and such Prospectus would have corrected
such untrue statement or admission; or (c) made in any Prospectus if any untrue
statement or omission was corrected in an amendment or supplement to such
Prospectus delivered to the Holder prior to the sale of Registrable Shares and
the Holder failed to deliver or make available such amendment or supplement
prior to or concurrently with the sale of Registrable Shares to the party
asserting the claim. The indemnity provided for herein shall remain in full
force and effect regardless of any investigation made by or on behalf of any
Indemnitee.
10. Covenants of Holder. The Holder hereby agrees (a) to cooperate with the
Company and to furnish to the Company all such information (including customary
investor questionnaires) concerning its plan of distribution and ownership
interests with respect to its Registrable Shares in connection with the
preparation of each Registration Statement with respect to the Holder's
Registrable Shares and any filings with any state securities commissions as the
Company may reasonably request, (b) to indemnify the Company, its officers,
directors, employees, agents, representatives and Affiliates, and each Person,
if any, who controls the Company within the meaning of the Securities Act, and
each other Person, if any, subject to liability because of his, her or its
connection with the Company, against any and all losses, claims, damages,
actions, liabilities, costs and expenses (including without limitation
reasonable fees, expenses and disbursements of attorneys and other
professionals), joint or several, arising out of or based upon any untrue
statement or alleged untrue statement of material fact contained in any such
Registration Statement or the Prospectus contained therein, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, if and only to the extent that such
statement or omission occurs from reliance upon and in conformity with written
information regarding the Holder, his, her or its plan of distribution or his,
her or its ownership interests, that was furnished to the Company in writing by
the Holder pursuant to an investor questionnaire or otherwise expressly for use
11
therein unless such statement or omission was corrected in writing to the
Company prior to the date one day prior to the date of the final Prospectus (as
supplemented or amended, as the case may be).
11. Indemnification Procedures. Any Person entitled to indemnification
under this Agreement shall notify promptly the indemnifying party in writing of
the commencement of any action or proceeding with respect to which a claim for
indemnification may be made hereunder, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations hereunder, except to the extent the indemnifying party is materially
prejudiced thereby and shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than hereunder.
In case any action or proceeding is brought against an indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, unless in the
reasonable opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, to assume the defense thereof (alone or jointly with any other
indemnifying party similarly notified), to the extent that it chooses, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party that it so chooses (provided
that in connection with such assumption the indemnifying parties provide the
indemnified parties a full release of any costs or other expenses in connection
therewith), the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof; provided, however, that (a) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the action or proceeding within twenty (20) Business Days after receiving notice
from such indemnified party that the indemnified party believes it has failed to
do so; or (b) if such indemnified party who is a defendant in any action or
proceeding that is also brought against the indemnifying party shall have
reasonably concluded, based on the advice of counsel, that there may be one or
more legal defenses available to such indemnified party which are not available
to the indemnifying party; or (c) if representation of both parties by the same
counsel is otherwise inappropriate under applicable standards of professional
conduct, then, in any such case, the indemnified party shall have the right to
assume or continue its own defense as set forth above (but with no more than one
firm of counsel for all indemnified parties in each jurisdiction) and the
indemnifying party shall be liable for any expenses therefor. No indemnifying
party shall, without the written consent of the indemnified party (which shall
not be unreasonably withheld), effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or (to the
knowledge of the indemnifying party) threatened action or claim in respect of
which indemnification or contribution may be sought hereunder (whether or not
the indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (x) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim, (y) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party and
(z) does not and is not likely to materially adversely affect the indemnified
party.
12. Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holder enter into any agreement with any holder or prospective holder of any
securities of the Company that would allow such holder or prospective holder to
include such securities in the Resale Shelf Registration Statement filed
pursuant to the terms hereof, unless under the terms of such agreement, such
12
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will not
reduce the amount of Registrable Shares of the Holders that is included.
13. Contribution.
(a) If the indemnification provided for in Section 9 or Section 10 is
unavailable to an indemnified party with respect to any losses, claims,
damages, actions, liabilities, costs or expenses referred to therein or is
insufficient to hold the indemnified party harmless as contemplated
therein, then the 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, claims, damages, actions,
liabilities, costs or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party, on the one hand, and
the indemnified party, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages, actions,
liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the indemnifying party, on the one
hand, and of the indemnified party, on the other hand, shall be determined
by reference to, among other factors, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission; provided,
however, that in no event shall the obligation of any indemnifying party to
contribute under this Section 13 exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 9 or Section 10 hereof had been
available under the circumstances.
(b) The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 13 were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph.
(c) Notwithstanding the provisions of this Section 13, the Holder
shall not be required to contribute any amount in excess of the amount by
which the gross proceeds from the sale of Registrable Shares exceeds the
amount of any damages that the Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission. No
indemnified party that has made a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any indemnifying party who was not guilty of such
fraudulent misrepresentation.
14. Amendments and Waivers. The provisions of this Agreement may not be
amended, modified, or supplemented or waived without the prior written consent
of the Company and the Holders.
15. Notices. Any notice required or permitted to be given under or in
connection with this Agreement or any of the other Loan Documents (except as may
otherwise be expressly required therein) shall be in writing and shall be mailed
by certified mail, return receipt requested, postage prepaid, or sent by telex,
telegram, telecopy, facsimile, electronically by e-mail or other similar form of
rapid transmission confirmed by mailing (by certified mail, return receipt
13
requested, postage prepaid) written confirmation at substantially the same time
as such rapid transmission, or personally delivered to an officer of the
receiving party. All such communications shall be mailed, sent, delivered, faxed
or e-mailed,
(a) if to the Company to:
Cubic Energy, Inc.
0000 Xxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
e-mail: xxx@xxxxxxxxxxxxxx.xxx
or to such other address or to such individual's or department's attention as
the Borrower may have furnished the Lender in writing; and
(b) if to the Holder to:
Xxxxx Fargo Energy Capital, Inc.
1000 Louisiana
0xx Xxxxx
XXX X0000-000
Xxxxxxx, Xxxxx 77002
Attn: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
e-mail: xxxxxxxx@xxxxxxxxxx.xxx
or to such other address or to such individual's or department's attention as
the Lender may have furnished the Borrower in writing.
16. Successors and Assigns; Third Party Beneficiaries. Neither the Company,
or Holder shall be entitled to assign any of its rights or obligations under
this Agreement without, in the case of the Company, the consent of a majority of
the aggregate number of the outstanding Registrable Shares or, in the case of
the Holder, upon the prior written consent of the Company (which consent the
Company may withhold in its sole discretion); provided, however, the Holder may
assign its rights hereunder pro rata to any subsequent transferee of Registrable
Shares. This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties hereto and shall inure
to the benefit of each Holder. The Indemnities shall be third-party
beneficiaries of Section 9, Section 10, Section 11, Section 12 and Section 13 of
this Agreement, but no other Person not a party hereto shall have any rights
under this Agreement.
17. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
14
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas applicable to contracts made and
to be performed wholly within said State.
19. Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
20. Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
21. Survival. The indemnification and contribution obligations under
Section 9, Section 10 and Section 13 shall survive the completion or termination
of the Company's obligations under Section 2.
[The Remainder of This Page Has Been Intentionally Left Blank.]
15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
CUBIC ENERGY, INC.
By:/s/ Xxxxxx X. Xxxxxx III
Name: Xxxxxx X. Xxxxxx III
Title: President
XXXXX FARGO ENERGY CAPITAL, INC.
By:/s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Senior Vice President
16
