Exhibit
AGREEMENT
This Agreement (this "Agreement"), effective as of January 1, 2002, is by
and between Cubic Energy, Inc., a Texas corporation ("Cubic"), and Tauren
Exploration, Inc., a Texas corporation ("Tauren").
WHEREAS, Cubic currently maintains accounts payable to Tauren in the
aggregate amount of US$856,712 due for monies paid and services provided by
Tauren to Cubic (the "Accounts Receivable");
WHEREAS, Tauren is willing to transfer and assign the Accounts Receivable
to Cubic, in exchange for the issuance to Tauren by Cubic of newly issued and
unregistered shares of common stock, $0.05 par value, at a price of $1.00 per
share for each dollar of Accounts Receivable;
WHEREAS, Cubic desires that Tauren provide Cubic access to and the use of
Tauren's accounting department, exploration department, general and
administrative departments, physical office space, and secretarial personnel at
Tauren's cost calculated on a pro rata basis as provided herein; and Tauren
agrees to provide the same to Cubic;
WHEREAS, Tauren maintains an inventory of prospective oil and gas
exploration projects in which Tauren owns a working interest;
WHEREAS, Cubic may be interested in participating on a "ground floor" basis
in some of the prospective oil and gas projects in which Tauren owns a working
interest and in which Tauren plans to commence exploration and/or development;
AND, WHEREAS, in exchange for the rights and/or privileges set forth
herein, Cubic is willing to issue three warrants to Tauren to purchase Cubic
common stock;
NOW THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which is hereby acknowledged, Tauren and Cubic agree as follows:
1. Tauren shall transfer and assign the Accounts Receivable to Cubic in
exchange for 856,712 shares of newly issued and unregistered shares of common
stock of Cubic. Tauren acknowledges that Tauren is an affiliate of Cubic as such
is defined in the Securities Act of 1933 and the Securities Exchange Act of
1934. TAUREN ACKNOWLEDGES THAT THESE SHARES IT IS RECEIVING HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND THIS COMMON STOCK MAY NOT BE SOLD, TRANSFERRED
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OR OTHERWISE DISPOSED OF UNLESS REGISTERED AND QUALIFIED IN ACCORDANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO CUBIC, SUCH REGISTRATION AND QUALIFICATION
ARE NOT REQUIRED.
2. (a) Tauren agrees to provide to Cubic, from time to time as Cubic requests,
the services of Tauren's employees in its accounting department, exploration
department, and general and administrative department (collectively, the
"Services"). In consideration for Tauren providing the Services, Cubic shall pay
to Tauren the Pro Rata Cost (as defined below) for each of the Services
provided. As used herein, "Pro Rata Cost" means, such employee's hourly wage or
salary (plus the costs of employee benefits provided to such employee on an
hourly basis, excluding bonuses) multiplied by the number of hours actually
worked providing such services to Cubic.
(b) Tauren agrees to provide to Cubic reasonable access to and use of its
principal executive offices, including the reasonable use of office equipment
and supplies, furniture, telephones and utilities (the "Offices"). For so long
as Tauren shall be entitled to the use of its current principal executive
offices, in consideration of the foregoing access and use, Cubic agrees to pay
to Tauren $1,050 per month. In the event that Tauren relocates its principal
executive offices during the term of this Agreement, Tauren and Cubic agree to
negotiate in good faith an increase or decrease in such monthly charge in order
to reflect the cost to Tauren to acquire or lease such new executive offices.
Provided, however, that Tauren agrees that the monthly charge for use of any new
principal executive offices initially shall not exceed the fair market lease
rate for the portion of such facility utilized by Cubic. Cubic agrees that the
monthly charge for Offices then in effect shall increase by 10% on January 1 of
each succeeding year.
(c) Within 30 days following each calendar month in which Cubic utilizes
any of the Services or the Offices, Tauren shall provide Cubic with a written
invoice detailing (i) the specific services utilized by Cubic during the
preceding month, (ii) the individual Pro Rata Cost for each, (iii) the total of
all Pro Rata Costs and (iv) the current monthly charge for the Offices. Cubic
shall pay to Tauren all undisputed amounts set forth on such invoice within
thirty days following receipt of such invoice.
3. On April 1 of each year during which this Agreement is in effect and has
not been terminated, Tauren shall submit to Cubic a list of all oil and gas
exploration and development prospects in which Tauren owns a working interest,
for which Tauren plans to commence exploration and/or development in the
upcoming July 1 through June 30 year ("Tauren Prospects"). Tauren will meet with
Cubic by April 15 of that year to further explain the Tauren Prospects. By May 1
of each year, Cubic may elect to participate, on a "ground floor" basis, in any
or all of the Tauren Prospects for that year. Cubic shall never be obligated to
purchase a working interest in any prospect listed on the Tauren Prospects.
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As for each prospect on the Tauren Prospects list, Cubic may elect to
purchase, at Tauren's cost therefore, up to twenty-five percent of Tauren's
working interest in that prospect. Cubic shall pay Tauren in cash for the
working interest purchased from Tauren, and shall pay its share of expenses
attributable to working interest owners for prospects in which it owns a working
interest.
Tauren reserves the right to change its Tauren Prospects list at any time,
provided that Tauren shall not commence exploration and development on any such
prospect that has been removed from the Tauren Prospects list during such year.
Tauren shall use good faith and commercially reasonable efforts to replace any
oil and gas exploration and development prospect deleted from the Tauren
Prospects list with a similar prospect for which it then intends to commence
exploration and development during such year. At Cubic's option, Tauren shall
refund any monies paid to it by Cubic for a working interest in any prospect for
which exploration and development is not commenced during such year.
4. On the date hereof, Cubic shall issue to Tauren three warrants, in the
forms attached hereto as Exhibits "A", "B", and "C". These warrants shall allow
Tauren to purchase Cubic unregistered common shares as follows: (a) Tauren shall
receive a warrant from Cubic, exercisable following May 1, 2002 to purchase
125,000 unregistered common shares of Cubic at an exercise price of $1.00 per
share, to expire on April 30, 2003, unless the Agreement is terminated prior to
May 1, 2002, in which event such warrant shall immediately terminate, (b) Tauren
shall receive a warrant from Cubic, exercisable following May 1, 2003 to
purchase 150,000 unregistered common shares of Cubic at an exercise price of
$1.50 per share, to expire on April 30, 2004, unless the Agreement is terminated
prior to May 1, 2003, in which event such warrant shall immediately terminate,
and (c) Tauren shall receive a warrant from Cubic, exercisable following May 1,
2004 to purchase 200,000 unregistered common shares of Cubic at an exercise
price of $2.00 per share, to expire on April 30, 2005, unless the Agreement is
terminated prior to May 1, 2004, in which event such warrant shall immediately
terminate.
5. This Agreement shall commence as of the effective date so stated above.
This Agreement shall terminate upon the earliest of (a) December 31, 2004, (b)
ninety (90) days following written notice from Cubic to Tauren of Cubic's intent
to terminate this Agreement prior to December 31, 2004 or (c) such time as
▇▇▇▇▇▇ ▇▇▇▇▇▇ ceases to serve as the Chief Executive Officer of Cubic without
his prior written consent.
6. THE OPERATION, CONSTRUCTION, VALIDITY AND EFFECT OF THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. TAUREN AND CUBIC
AGREE THAT THE COURTS OF DALLAS COUNTY, TEXAS AND THE UNITED STATES DISTRICT
COURTS FOR THE NORTHERN DISTRICT OF TEXAS SHALL HAVE EXCLUSIVE JURISDICTION
REGARDING ANY DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT.
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7. If any provision or covenant of this Agreement is found to be illegal,
invalid or unenforceable, the remaining provisions and covenants shall remain in
full force and effect. Further, that illegal, invalid or unenforceable provision
or covenant shall be deemed modified to the extent necessary to alleviate such
illegality, invalidity or unenforceability, with such modified provision or
covenant treated as if always contained herein.
8. This Agreement, and the respective rights and obligations of each of the
parties hereto, may not be assigned by either party without the prior written
consent of the other party. Further, this Agreement, and the respective rights
and obligations of each of the parties hereto, shall not inure to the benefit of
any purchaser or owner of the common stock or voting stock of Cubic, and shall
not inure to the benefit of the purchaser of the assets or substantially all of
the assets of Cubic; and, this Agreement, and the respective rights and
obligations of each of the parties hereto, shall not inure to the benefit of any
purchaser or owner of the common stock or voting stock of Tauren, and shall not
inure to the benefit of the purchaser of the assets or substantially all of the
assets of Tauren. Subject to the preceding sentence, this Agreement shall inure
to the benefit of and be binding upon any legal successor to or permitted assign
of either party hereto.
9. This Agreement is the complete integration of the agreement as between
Cubic and Tauren with respect to the subject matter hereof. Any amendment or
modification to this Agreement must be in writing, dated, and signed by both
Cubic and Tauren.
10. Where applicable, the provisions and covenants of this Agreement shall
survive the termination of this Agreement.
EXECUTED as of___ the day of February, 2002, but effective as of January
1, 2002.
Tauren Exploration, Inc. Cubic Energy, Inc.
By:___________________________ By:________________________
Its: Its:
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