EXHIBIT 10.3
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
Cubic Energy, Inc.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, _____________ (the "Holder"), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date hereof (the "Initial Exercise Date") and on or
prior to the close of business on the five year anniversary of the Initial
Exercise Date (the "Termination Date") but not thereafter, to subscribe for and
purchase from Cubic Energy, Inc., a Texas corporation (the "Company"), up to
______ shares (the "Warrant Shares") of Common Stock, par value $0.05 per share,
of the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be $1.00, subject to
adjustment hereunder.
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated September 30, 2004, among
the Company and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination Date
by delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto (or such other office or agency
of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books
of the Company); provided, however, within 5 Trading Days of the date
Exhibit 10.3 - Page 1
said Notice of Exercise is delivered to the Company, the Holder shall
have surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier's check drawn on a United States
bank.
Notwithstanding the foregoing, the exercise of the purchase rights
represented by this Warrant shall be required if, following the
Effectiveness Date of the initial Registration Statement filed pursuant
to the Registration Rights Agreement, the closing price for any period
of 30 consecutive Trading Days is equal to or in excess of $2.00;
provided that the average daily trading volume during such period is
not less than 50,000 shares. The Company shall provide written notice
to the Holders of such occurrence, or issue a press release with
respect thereto, notifying Holders that they shall have 30 calendar
days to exercise the Warrant as provided herein. If the Warrant is not
exercised within such 30-day period, any unexercised purchase rights
represented by this Warrant shall expire.
b) Exercise Price. The Exercise Price of each share of Common
Stock under this Warrant shall be $1.00, subject to adjustment
hereunder.
c) Cashless Exercise. If at any time after one year from the
date of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the Holder,
and the Company has not complied with the terms of the Registration
Rights Agreement with respect thereto, then this Warrant may also be
exercised at such time by means of a "cashless exercise" in which the
Holder shall be entitled to receive a certificate for the number of
Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)]
by (A), where:
(A) = the Average Price on the Trading Day immediately
preceding the date of such election;
(B) = the Exercise Price of this Warrant, as adjusted;
and
(X) = the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
d) Exercise Limitations. The Holder shall not have the right
to exercise any portion of this Warrant, pursuant to Section 2(c) or
otherwise, to the extent that after giving effect to such issuance
after exercise, the Holder (together with the Holder's affiliates), as
set forth on the applicable Notice of Exercise, would beneficially own
in excess of 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to such issuance. For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder
or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the
Exhibit 10.3 - Page 2
Company (including, without limitation, any other Debentures or
Warrants) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder or
any of its affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 2(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act, it
being acknowledged by Holder that the Company is not representing to
Holder that such calculation is in compliance with Section 13(d) of the
Exchange Act and Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that the
limitation contained in this Section 2(d) applies, the determination of
whether this Warrant is exercisable (in relation to other securities
owned by the Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of such Xxxxxx, and the
submission of a Notice of Exercise shall be deemed to be such Holder's
determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder) and of which portion of this
Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For purposes of
this Section 2(d), in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company's most recent Form
10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or
the Company's Transfer Agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of the
Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by the
Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.
e) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company
covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in
respect of the issue thereof (other than taxes in respect of
any transfer occurring contemporaneously with such issue). The
Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any
purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty
of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the
Exhibit 10.3 - Page 3
exercise of the purchase rights under this Warrant. The
Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed.
ii. Delivery of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be delivered
to the Holder within 3 Trading Days from the delivery to the
Company of the Notice of Exercise Form and the receipt of
payment of the Exercise Price, surrender of this Warrant and
payment of the aggregate Exercise Price as set forth above
("Warrant Share Delivery Date"). This Warrant shall be deemed
to have been exercised on the date the last of the foregoing
events occurs. The Warrant Shares shall be deemed to have been
issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the
Warrant has been exercised and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(e)(vii) prior to
the issuance of such shares, have been paid.
iii. Delivery of New Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
iv. Rescission Rights. If the Company fails to
deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)
by the Warrant Share Delivery Date, then the Holder will have
the right to rescind such exercise
v. Buy-In Compensation. In addition to any other
rights available to the Holder, if the Company fails to
deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or
before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open
market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (1) pay in cash
to the Holder the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for
the shares of Common Stock required to be so purchased exceeds
(y) the amount obtained by multiplying (A) the number of
Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (B) the
price per Share at which the sell order giving rise to such
purchase obligation was executed, and (2) at the option of the
Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise
Exhibit 10.3 - Page 4
was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common
Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable confirmations
and other evidence reasonably requested by the Company.
Nothing herein shall limit a Holder's right to pursue any
other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.
vi. No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. As to any fraction of a
share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price.
vii. Charges, Taxes and Expenses. Issuance of
certificates for Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event certificates
for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto
duly executed by the Holder; and the Company may require, as a
condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto. viii.
Closing of Books. The Company will not close its stockholder
books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding: (A) pays a stock dividend or
otherwise makes a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to
Exhibit 10.3 - Page 5
this Warrant), (B) subdivides outstanding shares of Common Stock into a
larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number
of shares, or (D) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section 3(a)
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Pro Rata Distributions. If the Company, at any time prior
to the Termination Date, shall distribute to all holders of Common
Stock (and not to Holders of the Warrants) evidences of its
indebtedness or assets or rights or warrants to subscribe for or
purchase any security other than the Common Stock (which shall be
subject to Section 3(b)), then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the Average Price determined as of the
record date mentioned above, and of which the numerator shall be such
Average Price on such record date less the then per share fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the
Common Stock as determined by the Board of Directors in good faith. In
either case the adjustments shall be described in a statement provided
to the Holders of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
c) Calculations. All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding.
d) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the
Exercise Price is adjusted pursuant to this Section 3, the
Company shall promptly mail to each Holder a notice setting
forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such
adjustment.
ii. Notice of Certain Transactions. If (A) the
Company shall declare a dividend (or any other distribution)
on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common
Exhibit 10.3 - Page 6
Stock; (C) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of
any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last addresses as it shall appear
upon the Warrant Register of the Company, at least 20 calendar
days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of the
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, that the failure
to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the 20-day period
commencing the date of such notice to the effective date of
the event triggering such notice
e) Fundamental Transaction. If, at any time while this Warrant
is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, and as a result, the Company
is not the surviving entity in such transaction or (B) Company effects
any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted
into or exchanged for other securities, cash or property (in any such
case, a "Fundamental Transaction"), then upon any subsequent exercise
of this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise absent
such Fundamental Transaction, the same kind and amount of securities,
cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of one share of
Common Stock (the "Alternate Consideration"). For purposes of any such
exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in
Exhibit 10.3 - Page 7
a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new Warrant consistent with the foregoing
provisions and evidencing the Holder's right to convert such Warrant
into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the
provisions of this paragraph (e) and insuring that this Warrant (or any
such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Transaction.
f) Exempt Issuance. Notwithstanding the foregoing, no
adjustments, Alternate Consideration nor notices shall be made, paid or
issued under this Section 3 in respect of an Exempt Issuance.
g) Voluntary Adjustment By Company. The Company may at any
time during the term of this Warrant reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
Exhibit 10.3 - Page 8
c) Warrant Register. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time
to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the
transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under
applicable state securities or blue sky laws, the Company may require,
as a condition of allowing such transfer (i) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions)
to the effect that such transfer may be made without registration under
the Securities Act and under applicable state securities or blue sky
laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the
Company and (iii) that the transferee be an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(5), (a)(6), (a)(7), or
(a)(8) promulgated under the Securities Act or a qualified
institutional buyer as defined in Rule 144A(a) under the Securities
Act.
Section 5. Miscellaneous.
a) Title to Warrant. Prior to the Termination Date and subject
to compliance with applicable laws and Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part,
at the office or agency of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with
the Assignment Form annexed hereto properly endorsed. The transferee
shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the
surrender of this Warrant and the payment of the aggregate Exercise
Price (or by means of a cashless exercise), the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
c) Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
Exhibit 10.3 - Page 9
d) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal
holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
e) Authorized Shares.
The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable
law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this
Warrant, and (c) use commercially reasonable efforts to obtain
all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations
under this Warrant.
Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this
Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
f) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
Exhibit 10.3 - Page 10
g) Restrictions. The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal
securities laws.
h) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's
rights, powers or remedies, notwithstanding all rights hereunder
terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
i) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
j) Limitation of Liability. No provision hereof, in the
absence of any affirmative action by Holder to exercise this Warrant or
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by
creditors of the Company.
k) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The
Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
l) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the
Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by
any such Holder or holder of Warrant Shares.
m) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holder.
n) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall
be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
Exhibit 10.3 - Page 11
o) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
********************
Exhibit 10.3 - Page 12
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: September 30, 2004
CUBIC ENERGY, INC.
By:__________________________________________
Name: Xxxxxx X. Xxxxxx III
Title: Chief Executive Officer
Exhibit 10.3 - Page 13
NOTICE OF EXERCISE
To: Cubic Energy, Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares
of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[_] in lawful money of the United States; or
[_] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
____________________________
The Warrant Shares shall be delivered to the following:
____________________________
____________________________
____________________________
(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[PURCHASER]
By:____________________________
Name:
Title:
Dated:_________________________
Exhibit 10.3 - Page 14
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to _____________ whose address is _________________.
_________ Dated:______________, 2004
Holder's Signature: ___________________________
Holder's Address: ___________________________
___________________________
Signature Guaranteed:___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank
or trust company. Officers of corporations and those acting in a
fiduciary or other representative capacity should file proper evidence
of authority to assign the foregoing Warrant.
Exhibit 10.3 - Page 15
