Exhibit 10.3


 


SECOND
AMENDED AND RESTATED


REGISTRATION
RIGHTS AGREEMENT


 


THIS
SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
is entered into as of August 30, 2010 by and between Cubic Energy, Inc.,
a Texas corporation (the “Company”), and Wells Fargo Energy Capital, Inc.,
a Texas corporation (the “Holder”), and amends and restates that certain
Registration Rights Agreement, dated March 5, 2007, by and between the
parties to this Agreement that was previously amended and restated by the
Amended and Restated Registration Rights Agreement, dated December 18,
2009.


 


WHEREAS,
previously, (a) the Company entered into that certain Credit Agreement
(together with the amendments described below collectively herein referred to
as the “Credit Agreement”), dated as of March 5, 2007, with the
Holder pursuant to which the Holder made 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,
(b)  the Company issued 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, and (c) entered into
the Registrations Rights Agreement, dated March 5, 2007 and referenced
above;


 


WHEREAS,
on May 8, 2008, the Company and the Holder executed a First Amendment to
Credit Agreement, which, among other things deleted the need for the
Supplemental Warrant (as that term was defined in the original Credit
Agreement);


 


WHEREAS,
on December 18, 2009, the Company and the Holder executed a Second
Amendment to Credit Agreement (the “Second Amendment”), pursuant to
which, amount other things, (a) the maturity of the Term Loan was extended
by the execution and delivery of a replacement Term Note, (b) the terms of
the Warrant were amended and restated by the execution and delivery of an
Amended and Restated Warrant To Purchase Shares of Common Stock of Cubic Energy, Inc.
(No. 2007-1A) (the “A&R Warrant”), and (c) the Company
issued to the Holder a second Warrant to Purchase Shares of Common Stock of
Cubic Energy, Inc. (No. 2009-1) (the “Second Warrant”);


 


WHEREAS,
contemporaneously with the execution of this Agreement, the Company and the
Holder have executed a Third Amendment to Credit Agreement (the “Third
Amendment”) of even date, pursuant to which, among other things, (a) the
Borrowing Base was increased from $25,000,000 to $30,000,000, and (b) the
Company issued to the Holder a third Warrant to Purchase Shares of Common Stock
of Cubic Energy, Inc. (No. 2010-1) (the “Third Warrant”);


 


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 A&R Warrant, the Second Warrant or the Third Warrant
or any of the foregoing (the “Shares”); and


 


WHEREAS,
among other things, the Third Amendment requires the simultaneous execution and
delivery of this Agreement and the Third Warrant as conditions precedent to the
effectiveness of the Third Amendment;


 


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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:


 


“A&R
Warrant” shall have the meaning set forth in the recitals to this
Agreement.


 


“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.


 


“Credit
Agreement” shall have the meaning set forth in the recitals to this
Agreement.


 


“Effective
Time” means each of the four (4) 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.


 


“NYSE
Amex” shall mean the national securities exchange operated by the NYSE Amex
LLC on which the Common Stock is admitted for trading.


 


“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 


 


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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
A&R Warrant, the Second Warrant, or the Third Warrant, or any of the
foregoing, 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(b)(1)(i) free of the requirement
contained in Rule 144(c)(1) (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 any securities industry self-regulatory body; (d) fees and
expenses of compliance with securities or “blue sky” 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).


 


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“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.


 


“Second
Amendment” shall have the meaning set forth in the recitals to this
Agreement.


 


“Second
Warrant” shall have the meaning set forth in the recitals to this
Agreement.


 


“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.


 


“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.


 


“Third
Amendment” shall have the meaning set forth in the recitals
to this Agreement.


 


“Third
Warrant” shall have the meaning set forth in the recitals to 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, second and third exercises under
this Section 2, One Million (1,000,000) Shares, and (ii) in
the 


 


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case
of the fourth 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 four (4) 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.


 


(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.


 


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(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 S-3
or S-1; Conversion to Form S-3. 
The Company represents and warrants that it meets the requirements for
the use of SEC Form S-3 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 SEC Form S-3, 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 S-1,
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 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.


 


(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 


 


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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-Q
or Form 10-K, 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 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 


 


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“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 Registrable 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, 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:


 


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(a)           Exchange Act Filings.  For so long as a Holder holds Registrable
Shares and may not sell those shares pursuant to Rule 144(b)(1)(i) free
of the requirement contained in Rule 144(c)(1), 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 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 any of the A&R
Warrant, the Second Warrant or the Third Warrant is outstanding, the Company
shall not, and shall not permit any of its Subsidiaries (i) to 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 


 


9

















 


arm’s-length
transaction with a person not an Affiliate, or (ii) other than issuances
of securities pursuant to the Company’s 2005 Stock Option Plan which shall be
issued as incentive compensation and issuances of Common Stock upon exercise of
the A&R Warrant, the Second Warrant or the Third Warrant, to 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. 
Notwithstanding anything herein to the contrary, the consummation of the
transactions described in the Company’s Current Report on Form 8-K filed
with the SEC on December 1, 2009, including any conversion of shares of
the preferred stock described in that filing, shall be deemed not to violate
the provisions hereof.


 


(d)           Restrictions on Dividend Payments. For so
long as any of the A&R Warrant, the Second Warrant or the Third 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, unless the Company has provided
notice to the Holder not less than five (5) business days prior to the
record date thereof.


 


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 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


 


10
















 


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
currently listed for trading on the NYSE Amex, and the Company has listed all
of the Registrable Shares for trading on the NYSE Amex, other than the
Registrable Shares issuable upon exercise of the Third Warrant which the
Company shall cause to be listed for trading on the NYSE Amex within sixty (60)
days after the execution of this Agreement. 
Should the Common Stock be listed or otherwise eligible for full trading
privileges on any other securities exchange, 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 the NYSE Amex and 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 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 


 


11

















 


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 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



 


12

















 


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 Registration Rights.  Neither the Company nor any of
its security holders (other than the Holder acting pursuant to this Agreement)
may include securities of the Company in any Registration Statement filed
pursuant to this Agreement other than Registrable Securities.


 


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 


 


13

















 


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
Holder 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 Holder.


 


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 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.


9870 Plano Road


Dallas,
Texas 75238


Attn: Larry G. Badgley


 


14

















 


Telephone: (972) 681-8047


Fax: (972) 681-9687


e-mail: larry@cubicenergyinc.com


 


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:


 


Wells Fargo Energy Capital, Inc.


1000 Louisiana


9th Floor


MAC T5002-090


Houston, Texas 77002


Attn: Gary Milavec


Telephone: (713) 319-1612


Fax:  (713)
652-5874


e-mail:  milavega@wellsfargo.com


 


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 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 


 


15

















 


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, Section 11
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.]


 


16

















 


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


 


	
   

  	
   

  	
  CUBIC ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Calvin A. Wallen III

  
	
   

  	
   

  	
  Name: Calvin A. Wallen III

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WELLS FARGO ENERGY
  CAPITAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Chris Carter

  
	
   

  	
   

  	
  Name: Chris Carter

  
	
   

  	
   

  	
  Title: Director

  



 


17