Exhibit 10.4

 

AMENDED AND RESTATED WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
CUBIC ENERGY, INC.

 

THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE “ACT”), NOR HAS IT BEEN APPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITY
OF ANY STATE.  NEITHER THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED FOR
SALE, SOLD, MORTGAGED, PLEDGED, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED
OF WITHOUT REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

No. 2007-1A

 

Warrant to Purchase 2,500,000 Shares

Originally issued: March 5, 2007

 

of Common Stock, $0.05 Par Value Per Share

Amended and Restated: December 18, 2009

 

 

 

AMENDED AND RESTATED WARRANT TO PURCHASE COMMON STOCK
of
CUBIC ENERGY, INC.,
a Texas corporation
Void after the date set forth in the first paragraph hereof

 

This certifies that, for value received, Wells Fargo Energy Capital, Inc., a
Texas corporation, or its registered assigns (“Holder”) is entitled, subject to
the terms set forth below, to purchase from Cubic Energy, Inc., a Texas
corporation (the “Company”), 2,500,000 shares of Common Stock, $0.05 par value
per share, of the Company (such class of stock being referred to herein as
“Common Stock”), as constituted on March 5, 2007 (the “Issue Date”), upon
compliance with the exercise provisions set forth in Section 1 hereof, at the
price of $0.9911 per share (the “Exercise Price”).  This Warrant must be
exercised, if at all, prior to 5:00 p.m., Dallas, Texas time on December 1,
2014.  The shares of Common Stock issued or issuable upon exercise of this
Warrant are sometimes referred to as the “Warrant Shares.”  The term “Warrant”
as used herein shall include this Warrant and any warrants delivered in
substitution or exchange therefor as provided herein.

 

1

--------------------------------------------------------------------------------

 

This Amendment and Restated Warrant to Purchase Common Stock of Cubic
Energy, Inc. amends and restated that certain Warrant to Purchase Common Stock
of Cubic Energy, Inc., No. 2007-1, dated March 5, 2007.

 

Section 1.              Exercise of Warrant.

 

(a)                                  This Warrant may be exercised at any time
or from time to time, on any business day, for all or part of the full number of
Warrant Shares during the period of time described above, by (i) delivery of a
written notice, in the form of the subscription notice attached hereto or a
reasonable facsimile thereof (the “Exercise Notice”), to the Company, of
Holder’s election to exercise all or a portion of this Warrant, specifying the
number of Warrant Shares to be purchased, (ii) (A) payment to the Company of an
amount equal to the Exercise Price multiplied by the number of Warrant Shares as
to which this Warrant is being exercised (the “Aggregate Exercise Price”) in
cash or delivery of a certified check or bank draft payable to the order of the
Company or wire transfer of immediately available funds or (B) notification to
the Company that this Warrant is being exercised pursuant to a Cashless Exercise
(as defined in Section 1(b) of this Warrant), and (iii) the surrender of this
Warrant to a common carrier for overnight delivery to the Company on the date
the Exercise Notice is delivered to the Company (or evidence of lost Warrant, in
accordance with Section 7).  No other form of consideration shall be acceptable
for the exercise of this Warrant.  A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of delivery of
the Exercise Notice, this Warrant and either the Aggregate Exercise Price
referred to in clause (ii)(A) above or notification to the Company of a Cashless
Exercise referred to in Section 1(b) of this Warrant.  The person entitled to
receive the shares of Common Stock issuable upon such exercise shall be treated
for all purposes as the record holder of such shares as of the close of business
on such date.  As soon as practicable on or after such date, and in any event
within 10 days thereof, the Company shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares of Common Stock issuable upon such exercise.  Upon any partial
exercise, the Company will issue and deliver to Holder a new Warrant with
respect to the Warrant Shares not previously purchased.  No fractional shares of
Common Stock shall be issued upon exercise of a Warrant.  In lieu of any
fractional share to which Holder would be entitled upon exercise, the Company
shall pay cash equal to the product of such fraction multiplied by the then
Market Price (defined below) of one share of Common Stock, as determined in good
faith by the Company.

 

(b)                                 Notwithstanding anything contained herein to
the contrary, Holder may, at its election exercised in its sole discretion,
exercise this Warrant as to all or a portion of the Warrant Shares and, in lieu
of making the cash payment otherwise contemplated to be made to the Company upon
such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of shares of Common Stock determined
according to the following formula (a “Cashless Exercise”):

 

2

--------------------------------------------------------------------------------

 

Net Number =  A x (B - C)
                                  B   

 

For purposes of the foregoing formula:

 

A=                              the total number of shares with respect to which
this Warrant is then being exercised.

 

B=                                the Market Price of the Common Stock on the
trading day immediately preceding the date of the Exercise Notice.

 

C=                                the Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.

 

“Market Price” on any date specified herein, means the amount per share of the
Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is traded in an over-the-counter market, the last trading price of the
Common Stock on such date, or (c) if there shall have been no trading on such
date, the average of the closing bid and asked prices of the Common Stock on
such date as shown by the automated quotation system or over-the-counter market,
or (d) if such Common Stock is not then listed or admitted to trading on any
national exchange or quoted in an over-the-counter market, the fair value
thereof determined in good faith by the Board of Directors of the Company as of
a date which is within 20 days of the date as of which the determination is to
be made.

 

Section 2.              Payment of Taxes.  All shares of Common Stock issued
upon the exercise of a Warrant shall be duly authorized, validly issued and
outstanding, fully paid and non-assessable.  Holder shall pay all taxes and
other governmental charges that may be imposed in respect of the issue or
delivery thereof and any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock in
any name other than that of the registered Holder of the Warrant surrendered in
connection with the purchase of such shares, and in such case the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company’s
satisfaction that no tax or other charge is due.

 

Section 3.              Transfer and Exchange.

 

Subject to the restrictions set forth in Section 10(a)(iv), this Warrant and all
rights hereunder are transferable, in whole or in part.  This Warrant is
transferable on the books of the Company maintained for such purpose at its
principal office by Holder in person or

 

3

--------------------------------------------------------------------------------

 

by duly authorized attorney, upon surrender of this Warrant properly endorsed
and upon payment of any necessary transfer tax or other governmental charge
imposed upon such transfer.  Each taker and holder of this Warrant, by taking or
holding the same, consents and agrees that this Warrant, when endorsed in blank,
shall be deemed negotiable and that when this Warrant shall have been so
endorsed, the Holder hereof may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby or to the transfer
hereof on the books of the Company, any notice to the contrary notwithstanding;
but until such transfer on such books, the Company may treat the registered
Holder hereof as the owner for all purposes.

 

Section 4.              Certain Adjustments.

 

(a)           In order to prevent dilution of the rights granted hereunder, from
and after December 18, 2009, the Exercise Price shall be subject to adjustment
from time to time in accordance with this Section 4.  For purposes of this
Section 4, the term “Number of Common Shares Deemed Outstanding” at any given
time shall mean the number of shares of Common Stock outstanding at such time on
a fully diluted basis, including all options, warrants and securities
convertible into or exchangeable for shares of Common Stock and, without
duplication, the number of shares of the Common Stock deemed to be outstanding
under paragraphs 4(b)(1) to (10), inclusive, at such time, but excluding the
issuance of (i) up to 3,750,000 shares of Common Stock (as adjusted for stock
splits, reverse stock splits and stock dividends) or grants of options to
acquire shares of Common Stock issued or granted as equity-based compensation to
certain of the Company’s directors, executive officers or employees under the
Company’s Director and Officer Compensation Plan approved by its shareholders on
December 29, 2005 (the “Plan”) and (ii) up to an additional 2,000,000 shares of
Common Stock (as adjusted for stock splits, reverse stock splits and stock
dividends) or grants of options to acquire shares of Common Stock issued or
granted as equity-based compensation to certain of the Company’s directors,
executive officers or employees pursuant to an increase in the number of shares
subject to the Plan or otherwise.  Notwithstanding anything herein to the
contrary, the Exercise Price shall not be subject to adjustment as a result of
the consummation of the transactions described in the Company’s Current Report
on Form  8-K filed with the Securities and Exchange Commission on December 1,
2009, including any conversion of shares of preferred stock that may be issued
in connection therewith.

 

(b)           Except as provided in Section 4(c), 4(d) or 4(e) hereof, if and
whenever after the date hereof the Company shall issue or sell, or shall in
accordance with paragraphs 4(b)(1) to (10), inclusive, be deemed to have issued
or sold any shares of its Common Stock for a consideration per share less than
the Exercise Price in effect immediately prior to the time of such issue or
sale, then forthwith upon such issue or sale (the “Triggering Transaction”), the
Exercise Price shall, subject to paragraphs (1) to (10) of this Section 4(b), be
reduced to an adjusted Exercise Price (calculated to the nearest

 

4

--------------------------------------------------------------------------------

 

hundredth of a cent) determined by multiplying the Exercise Price immediately
preceding the new share issuance by a fraction:

 

(i)            the numerator of which shall be an amount equal to the sum of
(x) the product of the Number of Common Shares Deemed Outstanding immediately
prior to such Triggering Transaction multiplied by the prior Exercise Price, as
previously adjusted, plus (y) the consideration, if any, received by the Company
upon consummation of the Triggering Transaction; and

 

(ii)           the denominator of which shall be the Number of Common Shares
Deemed Outstanding immediately prior to such Triggering Transaction plus (y) the
number of shares of Common Stock issued (or deemed to be issued in accordance
with paragraphs 4(b)(1) to (10)) in connection with the Triggering Transaction.

 

For purposes of determining the adjusted Exercise Price under this Section 4(b),
the following paragraphs (1) to (10), inclusive, shall be applicable:

 

(1)           In case the Company at any time shall in any manner (A) grant
(whether directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, Common Stock
or any stock or other securities convertible into or exchangeable for Common
Stock, (such rights or options being herein called “Options” and such
convertible or exchangeable stock or securities being herein called “Convertible
Securities”), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, other than Options
(and the securities issued in exercise thereof) with respect to the 3,750,000
shares of Common Stock (as adjusted for stock splits, reverse stock splits and
stock dividends) issuable under the Plan or the additional 2,000,000 shares of
Common Stock described in Section 4(a)(ii), and (B) the price per share for
which the Common Stock is issuable upon exercise, conversion or exchange
(determined by dividing (x) the total amount, if any, received or receivable by
the Company as consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus, in the case of Options that relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
the conversion or exchange of such Convertible Securities) shall be less than
the Exercise Price in effect immediately prior to the time of the granting of
such Option, then the total maximum amount of Common Stock issuable upon the
exercise of such Options or in the case of Options for Convertible Securities,
upon the conversion or exchange of such Convertible Securities shall (as of the
date of granting of such Options) be

 

5

--------------------------------------------------------------------------------

 

deemed to be outstanding and to have been issued and sold by the Company for
such price per share.  No additional adjustment of the Exercise Price shall be
made upon the actual issue of such shares of Common Stock or such Convertible
Securities upon the exercise of such Options, except as otherwise provided in
paragraph (3) below.

 

(2)           In case the Company at any time shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (x) the total
amount received or receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Exercise Price in effect immediately prior to the time of
such issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible Securities) be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share.  No additional adjustment of the Exercise Price shall be made upon
the actual issue of such Common Stock upon exercise of the rights to exchange or
convert under such Convertible Securities, except as otherwise provided in
paragraph (3) below.

 

(3)           If the purchase price provided for in any Options referred to in
paragraph (1), the additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities referred to in paragraphs (1) or (2),
or the rate at which any Convertible Securities referred to in paragraphs (1) or
(2) are convertible into or exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions designed to protect against
dilution of the type set forth in Section 4), the Exercise Price in effect at
the time of such change shall forthwith be readjusted to the Exercise Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.

 

(4)           On the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities described in paragraphs (1),
(2) or (3), the Exercise Price then in effect hereunder shall forthwith be
increased to the Exercise Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued.

 

6

--------------------------------------------------------------------------------

 

(5)           In case any Options shall be issued in connection with the issue
or sale of other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration.

 

(6)           In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold or deemed to have been issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor.  In case any shares of Common Stock, Options
or Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be the fair value of such consideration as determined in good faith by the
Board of Directors.  In case any shares of Common Stock, Options or Convertible
Securities shall be issued in connection with any merger in which the Company is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving corporation as shall be attributable to such Common Stock, Options
or Convertible Securities, as the case may be as determined in good faith by the
Board of Directors.

 

(7)           The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the Company, and
the disposition of any shares so owned or held shall be considered an issue or
sale of Common Stock for the purpose of this Section 4(b).

 

(8)           In case the Company shall declare a dividend or make any other
distribution upon the stock of the Company payable in Options or Convertible
Securities, then in such case any Options or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.

 

(9)           For purposes of this Section 4(b), in case the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them
(x) to receive a dividend or other distribution payable in Common Stock, Options
or in Convertible Securities, or (y) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right or subscription or
purchase, as the case may be.

 

(10)         Notwithstanding anything herein to the contrary, any grants of
Common Stock, Options, appreciation or other rights under the Plan, or the
additional 2,000,000 shares of Common Stock described in Section 4(a)(ii), or
the

 

7

--------------------------------------------------------------------------------

 

exercise of such Options or rights prior to or after the Issue Date shall not be
considered for purposes of making the adjustments to the Exercise Price provided
in this Section 4(b).

 

(c)                                  In the event the Company shall declare a
dividend upon the Common Stock (other than a dividend payable in Common Stock)
payable otherwise than out of earnings or earned surplus, determined in
accordance with generally accepted accounting principles, including the making
of appropriate deductions for minority interests, if any, in subsidiaries
(herein referred to as “Liquidating Dividends”), then, as soon as possible after
the exercise of this Warrant, the Company shall pay to the person converting
this Warrant an amount equal to the aggregate value at the time of such exercise
of all Liquidating Dividends to which such holder would have been entitled if
such holder had converted this Warrant to Common Stock prior to the declaration
of the Liquidating Dividends, at the then applicable Exercise Price.  For the
purposes of this Section 4(c), a dividend other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus are charged an amount equal to the fair value of such dividend
as determined in good faith by the Board of Directors.

 

(d)                                 In case the Company shall at any time
(i) subdivide the outstanding Common Stock or (ii) issue a dividend on its
outstanding Common Stock payable in shares of Common Stock, the number of shares
of Common Stock issuable upon exercise of the Warrant shall be proportionately
increased by the same ratio as the subdivision or dividend (with appropriate
adjustments to the Exercise Price in effect immediately prior to such
subdivision or dividend).  In case the Company shall at any time combine its
outstanding Common Stock, the number of shares issuable upon exercise of this
Warrant immediately prior to such combination shall be proportionately decreased
by the same ratio as the combination (with appropriate adjustments to the
Exercise Price in effect immediately prior to such combination).

 

(e)                                  If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, or the sale of all or substantially all
of its assets to another corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock, securities, cash or
other property with respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the holders of this
Warrant shall have the right to acquire and receive upon exercise of the Warrant
such shares of stock, securities, cash or other property issuable or payable (as
part of the reorganization, reclassification, consolidation, merger or sale)
with respect to or in exchange for such number of outstanding shares of Common
Stock as would have been received upon exercise of the Warrant at the relevant
Exercise Price then in effect.  The Company will not effect any such
consolidation, merger or sale, unless prior to or contemporaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the Company purchasing such
assets shall assume

 

8

--------------------------------------------------------------------------------

 

by written instrument mailed or delivered to the holders of the Warrant at the
last address of each such holder appearing on the books of the Company, the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase.

 

(f)                                    In the event that:

 

(1)           The Company shall declare any cash dividend upon its Common Stock,
or

 

(2)           The Company shall declare any dividend upon its Common Stock
payable in stock or make any special dividend or other distribution to the
holders of its Common Stock, or

 

(3)           The Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other rights,
or

 

(4)           there shall be any capital reorganization or reclassification of
the capital stock of the Company, including any subdivision or combination of
its outstanding shares of Common Stock, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation, or

 

(5)           there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;

 

then, in connection with such event, the Company shall give to the holders of
this Warrant:

 

(i)            at least twenty (20) days prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up; and

 

(ii)           in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days prior written notice of the date when the same shall take
place.

 

Notice given in accordance with the foregoing clause (i) shall also specify, in
the case of any such dividend, distribution or subscription rights, the record
date on which the holders of Common Stock shall be entitled thereto, and notice
given in accordance with the foregoing clause (ii) shall also specify the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.  Each such written notice shall

 

9

--------------------------------------------------------------------------------

 

be given by first class mail, postage prepaid, addressed to the holders of this
Warrant at the address of each such holder as shown on the books of the Company.

 

(g)                                 If at any time or from time to time after
the date hereof the Company shall grant, issue or sell any Options, Convertible
Securities or rights to purchase property (the “Purchase Rights”) pro rata to
the record holders of any class of Common Stock and such grants, issuances or
sales do not result in an adjustment of the Exercise Price under
Section 4(b) hereof, then each holder of a Warrant shall be entitled to acquire
(within thirty (30) days after the later to occur of the initial exercise date
of such Purchase Rights or receipt by such holder of the notice concerning
Purchase Rights to which such holder shall be entitled under Section 4(g)) upon
the terms applicable to such Purchase Rights either:

 

(i)            the aggregate Purchase Rights which such holder could have
acquired if it had held the number of shares of Common Stock acquirable upon
exercise of the Warrant immediately before the grant, issuance or sale of such
Purchase Rights; provided that if any Purchase Rights were distributed to
holders of Common Stock without the payment of additional consideration by such
holders, corresponding Purchase Rights shall be distributed to the holders of
the Warrants as soon as possible and it shall not be necessary for the
exercising holder of the Warrants specifically to request delivery of such
rights; or

 

(ii)           in the event that any such Purchase Rights shall have expired or
shall expire prior to the end of the 30-day period, the number of shares of
Common Stock or the amount of property which such holder could have acquired
upon such exercise at the time or times at which the Company granted, issued or
sold such expired Purchase Rights.

 

(h)                                 If any event occurs as to which, in the
opinion of the Board of Directors of the Company, the provisions of this
Section 4 are not strictly applicable or if strictly applicable would not fairly
protect the rights of the Holder of this Warrant in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of increasing
the Exercise Price as otherwise determined pursuant to any of the provisions of
this Section 4 except in the case of a combination of shares of a type
contemplated in Section 4(d) hereof and then in no event to an amount larger
than the Exercise Price as adjusted pursuant to Section 4(d) hereof.

 

Section 5.              Reorganization, Reclassification, Merger, Consolidation
or Disposition of Assets.

 

If the Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another corporation or entity (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the

 

10

--------------------------------------------------------------------------------

 

shares of Common Stock of the Company) or sell, transfer or otherwise dispose of
all or substantially all its property, assets or business to another corporation
or other entity (such successor or acquiring corporation or entity, an
“Acquiring Entity”), and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets, common shares
of the Acquiring Entity, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common shares of the Acquiring
Entity (“Other Property”), are to be received by or distributed to the holders
of Common Stock of the Company, then the Holder of this Warrant shall have the
right thereafter to receive in lieu of the Common Stock described in Section 1,
the number of shares of common stock of the Acquiring Entity or Common Stock of
the Company, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares of
Common Stock that the Holder of this Warrant would have owned or been entitled
to receive had Common Stock been issued to such Holder under Section 1 on full
exercise of this Warrant immediately prior to such event.  In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the Acquiring Entity (if other than the Company) shall expressly assume
all the obligations and liabilities of the Company hereunder, subject to such
modifications as may be deemed appropriate (as determined in good faith by
resolution of the board of directors of the Company) in order to provide for
adjustments of shares of Common Stock issuable under Section 1 which shall be as
nearly equivalent as practicable to the adjustments provided for in Section 4. 
For purposes of this Section 5, “common shares of the Acquiring Entity” shall
include shares or other ownership interests of such Acquiring Entity of any
class which is not preferred as to dividends or assets over any other class of
stock or other ownership interests of such Acquiring Entity and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares or other securities which are convertible into or exchangeable for any
such shares or other ownership interests, either immediately or upon the arrival
of a specified date or the happening of a specified event and any warrants or
other rights to subscribe for or purchase any such stock or other ownership
interests.  The foregoing provisions of this Section 5 shall similarly apply to
successive reorganizations, reclassifications, mergers, consolidations,
spin-offs, or dispositions of assets.

 

Section 6.              Certain Notices, Etc.

 

Whenever the Exercise Price shall be adjusted as provided in Section 4 hereof,
the Company shall forthwith file at each office designated for the exercise of
Warrants, a statement, signed by the Chairman of the Board, the President, any
Vice President or Treasurer of the Company, showing in reasonable detail the
facts requiring such adjustment and the Exercise Price that will be effective
after such adjustment.  The Company shall also cause a notice setting forth any
such adjustments to be sent by mail, first class, postage prepaid, to each
record holder of a Warrant at his or its address appearing on the stock
register.  If such notice relates to an adjustment resulting from an

 

11

--------------------------------------------------------------------------------

 

event referred to in Section 4(f) hereof, such notice shall be included as part
of the notice required to be mailed and published under the provisions of
Section 4(f) hereof.

 

Section 7.              Loss or Mutilation.

 

Upon receipt by the Company of evidence satisfactory to it (in the exercise of
reasonable discretion) of the ownership of and the loss, theft, destruction or
mutilation of any Warrant and (in the case of loss, theft or destruction) of
indemnity satisfactory to it (in the exercise of reasonable discretion), and (in
the case of mutilation) upon surrender and cancellation thereof, the Company
will execute and deliver in lieu thereof a new Warrant of like tenor; provided
however, if the Holder is other than Wells Fargo Energy Capital, Inc.,
Wells Fargo & Co. or any direct or indirect subsidiary of Wells Fargo & Co., the
Company may require the Holder to furnish a customary bond in the event of the
replacement of a lost Warrant.

 

Section 8.              Reservation of Common Stock.

 

The Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the Warrant, such number of its shares of Common Stock as shall from
time to time be sufficient to effect exercise of the Warrant; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect such exercise, the Company will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.  Before taking any action that would cause an
adjustment reducing the Exercise Price below the then par value of the shares of
Common Stock issuable upon exercise of the Warrants, the Company will take any
corporate action that may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully-paid and nonassessable
shares of such Common Stock at such adjusted exercise price.

 

Section 9.              Notices of Record Date.

 

In the event of (i) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or (ii) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company, any merger or consolidation of the Company with or
into any other corporation (other than a merger of a wholly owned subsidiary
into the Company), or any transfer of all or substantially all of the assets of
the Company to any other person or any voluntary or involuntary dissolution,
liquidation or winding up of the Company, the Company shall provide to the
Holder, at least twenty (20) days prior to the record date specified therein, a
notice specifying (1) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such reorganization, reclassification,
transfer, consolidation, merger,

 

12

--------------------------------------------------------------------------------

 

dissolution, liquidation or winding up is expected to become effective, and
(3) the date, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.

 

Section 10.            Investment Representation and Restriction on Transfer.

 

(a)          Securities Law Requirements.

 

(i)            By its acceptance of this Warrant, Holder hereby represents and
warrants to the Company that this Warrant and the Warrant Shares will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and that it has no
present intention of selling, granting participations in or otherwise
distributing the same.  By acceptance of this Warrant, Holder further represents
and warrants that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to any
person, with respect to this Warrant or the Warrant Shares.

 

(ii)           By its acceptance of this Warrant, Holder understands that this
Warrant is not, and the Warrant Shares will not be, registered under the
Securities Act of 1933 (the “Securities Act”), on the basis that the issuance of
this Warrant and the Warrant Shares are exempt from registration under the Act
pursuant to Section 4(2) thereof, and that the Company’s reliance on such
exemption is predicated on Holder’s representations and warranties set forth
herein.

 

(iii)          By its acceptance of this Warrant, Holder understands that the
Warrant and the Warrant Shares may not be sold, transferred, or otherwise
disposed of without registration under the Act, or an exemption therefrom, and
that in the absence of an effective registration statement covering the Warrant
and the Warrant Shares or an available exemption from registration under the
Securities Act, the Warrant and the Warrant Shares must be held indefinitely. 
In particular, Holder is aware that the Warrant and the Warrant Shares may not
be sold pursuant to Rule 144 promulgated under the Securities Act unless all of
the conditions of Rule 144 applicable to Holder are satisfied.  Among the
conditions for use of Rule 144 in certain instances are the availability of
current information about the Company to the public, prescribed holding periods
which will commence only upon Holder’s payment for the securities being sold,
manner of sale restrictions, volume limitations and certain other restrictions. 
By its acceptance of this Warrant, Holder represents and warrants that, in the
absence of an effective registration statement covering the Warrant or the
Warrant Shares, it will sell, transfer or otherwise dispose of the Warrant and
the Warrant Shares only in a manner consistent with its representations and
warranties set forth herein and then only in accordance with the provisions of
Section 10(a)(iv).

 

13

--------------------------------------------------------------------------------

 

(iv)          By its acceptance of this Warrant, Holder agrees that in no event
will it transfer or dispose of any of the Warrants or the Warrant Shares other
than pursuant to an effective registration statement under the Securities Act,
unless and until (i) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the disposition and adequate assurance that the
transferee is an “accredited investor” as defined in Rule 501 of Regulation D
promulgated under the Securities Act, and (ii) if requested by the Company, at
the expense of the Holder or transferee, it shall have furnished to the Company
an opinion of counsel, reasonably satisfactory to the Company, to the effect
that (A) such transfer may be made without registration under the Act and
(B) such transfer or disposition will not cause the termination or the
non-applicability of any exemption to the registration and prospectus delivery
requirements of the Securities Act or to the qualification or registration
requirements of the securities laws of any other jurisdiction on which the
Company relied in issuing the Warrant or the Warrant Shares; provided, however,
no legal opinion shall be required for any transfer of this Warrant to
Wells Fargo & Co., any of its direct or indirect subsidiaries or any investor
that is a “qualified institutional buyer” as defined in Rule 144A under the
Securities Act.

 

(v)           Holder represents and warrants that it is an “accredited
investor.”

 

(b)          Legends; Stop Transfer.

 

(i)            All certificates evidencing the Warrant Shares shall bear a
legend in substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAWS.  THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION AND
MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY IN FORM AND CONTENT TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.

 

(ii)           The certificates evidencing the Warrant Shares shall also bear
any legend required by any applicable state securities law.

 

14

--------------------------------------------------------------------------------

 

(iii)          In addition, the Company shall make, or cause its transfer agent
to make, a notation regarding the transfer restrictions of the Warrant and the
Warrant Shares in its stock books, and the Warrant and the Warrant Shares shall
be transferred on the books of the Company only if transferred or sold pursuant
to an effective registration statement under the Securities Act covering the
same or pursuant to and in compliance with the provisions of Section 4 and
Section 10(a)(iv).

 

Section 11.            Company Indemnification.

 

The Company shall indemnify and hold harmless the Holder, and its respective
officers, directors, employees, agents, representatives and affiliates
(collectively “Indemnitees”) from and against any and all expenses, claims,
charges, losses, damages, fines or penalties, including without limitation
reasonable attorneys’ fees incurred in defending or resisting any claims,
actions or proceedings or in enforcing this indemnity (hereinafter “Damages”),
that an Indemnitee may suffer, sustain, incur or become subject to, whether
directly or indirectly, arising out of, based upon, or resulting from any
violation or inaccuracy of any representations, warranties, obligations or
covenants of the Company set forth in this Warrant other than with respect to
Damages resulting from the Holder’s own gross negligence or willful misconduct.

 

Section 12.            Notices.

 

All notices and other communications from the Company to the Holder of this
Warrant shall be mailed by hand delivery, by telecopier, by courier guaranteeing
overnight delivery or by first-class mail, return receipt requested, and shall
be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation,
if made by telecopier, (iii) one (1) Business Day after being deposited with
such courier, if made by overnight courier or (iv) on the date indicated on the
notice of receipt, if made by first-class mail.

 

Section 13.            Change; Waiver.

 

Neither this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.

 

Section 14.            Headings.

 

The headings in this Warrant are for purposes of convenience in reference only,
and shall not be deemed to constitute a part hereof.

 

15

--------------------------------------------------------------------------------

 

Section 15.            Governing Law.

 

This Warrant shall be construed and enforced in accordance with and governed by
the internal laws, and not the law of conflicts, of the State of Texas.

 

16

--------------------------------------------------------------------------------

 

* * * * * * * * * * * * * * * * * * * * * * * *

 

 

CUBIC ENERGY, INC.,
a Texas corporation

 

 

 

 

 

By:

 

 

Name:

Calvin Wallen, III

 

Title:

Chief Executive Officer

 

ACKNOWLEDGEMENT

 

The undersigned Wells Fargo Energy Capital, Inc. acknowledges delivery of the
foregoing Amended and Restated Warrant to Purchase Common Stock of Cubic
Energy, Inc. (No. 2007-1A), dated December 18, 2009, executed by Cubic
Energy, Inc. and agrees that this instrument is give in substitution and
replacement for that certain Warrant to Purchase Common Stock of Cubic
Energy, Inc. (No. 2007-1), dated March 5, 2007.

 

 

WELLS FARGO ENERGY CAPITAL, INC.

 

 

 

 

 

 

 

By:

 

 

 

Gary Milavec, Senior Vice President

December 18, 2009

 

 

 

17

--------------------------------------------------------------------------------

 

SUBSCRIPTION NOTICE
(To be executed only upon exercise of Warrant)

 

The undersigned, registered owner of this Warrant, irrevocably exercises this
Warrant and purchases                          of the number of shares of Common
Stock, $0.05 par value per share (“Warrant Shares”), of Cubic Energy, Inc., a
Texas corporation (the “Company”), purchasable with the attached Warrant (the
“Warrant”).  Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.

 

1.             Form of Exercise Price:  Holder intends that payment of the
Exercise Price shall be made as:

 

“Cash Exercise” with respect to                  Warrant Shares; and/or

 

“Cashless Exercise” with respect to                  Warrant Shares (to the
extent permitted by the terms of the Warrant)

 

2.             Payment of Exercise Price:  In the event that Holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, Holder shall pay the sum of $                                
to the Company in accordance with the terms of the Warrant.

 

 

DATED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Signature of Holder)

 

 

 

 

 

 

 

 

 

 

 

(Street Address)

 

 

 

 

 

 

 

 

 

 

 

(City)        (State)       (Zip)

 

18

--------------------------------------------------------------------------------

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED the undersigned, registered owner of this Warrant, hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock, $0.05 par value per share, set forth below:

 

Name of Assignee

 

Address

 

No. of Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and does hereby irrevocably constitute and appoint
                                                  
                                                                                                  
Attorney to make such transfer on the books of Cubic Energy, Inc., a Texas
corporation, maintained for the purpose, with full power of substitution in the
premises.

 

DATED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

 

 

 

 

 

(Witness)

 

19

--------------------------------------------------------------------------------