**Exhibit 10.2**

 

**FIRST AMENDMENT TO**

**CREDIT AGREEMENT**

 

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the“First Amendment”) made and entered into the 8th day of May, 2008, byand between **CUBIC ENERGY, INC.,**aTexas corporation, and **WELLS FARGO ENERGYCAPITAL, INC.,**a Texas corporation.

 

WITNESSETH:

 

WHEREAS, the above named parties did execute and exchange counterpartsof that certain Credit Agreement dated as of March 5, 2007 (the “Agreement”)to which reference is here made for all purposes;

 

WHEREAS, the above named parties are desirous of amending the Agreementin the particulars hereinafter set forth;

 

NOW THEREFORE, in consideration of the mutual covenants and agreementsof the parties to the Agreement and agreements of the parties hereto as setforth in this First Amendment, the parties hereto agree as follows:

 

**ARTICLE IDEFINITIONS**

 

As used herein, each term defined in the Agreement shall have themeaning assigned thereto in the Agreement and terms defined herein shall beincorporated into the Agreement unless expressly provided to the contrary.

 

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**ARTICLE IIAMENDMENTS**

 

2.01                          The Agreement is herebyamended to add the following defined terms to Section 1.1 of theAgreement:

 

“Bethany Longstreet Wells” means twooil and gas wells to be drilled vertically by the Borrower and its industrypartners to test the Haynesville Shale and which are located in Sections 5 and7, T14N, R15W, Caddo Parish, Louisiana.

 

“Diversified Dynamics Note” means thatcertain Subordinated Promissory Note dated May 6, 2008 executed by theBorrower to the order of Diversified Dynamics Corporation in the principalamount of $2,000,000.00, a photocopy of which is attached hereto as Exhibit XVI.

 

“Johnson Branch Wells” means the followingfour oil and gas wells all located in Caddo Parish, Louisiana:

 
| (a)    |   | Hudson 10-1, Section 10, T15N, R16W;     |
|--------|--------|-----------------------------------------------|
|   |   |                                          |
| (b)    |   | Daniels 3-1, Section 3, T15N, R15W;      |
|   |   |                                          |
| (c)    |   | Bonomo 35-1, Section 35, T16N, R15W; and |
|   |   |                                          |
| (d)    |   | Wilbanks 36-1, Section 36, T16N, R15W.   |

 

2.02                          TheAgreement is hereby amended to substitute for the definition of “Subject Areas”the following:

 

“Subject Areas” means all of CaddoParish, Louisiana and DeSoto Parish, Louisiana.

 

2.03                          TheAgreement is hereby amended to substitute for the definition of “Subject Properties” the following:

 

“Subject Properties” means any Oil andGas Properties of the Borrower in the Subject Areas. Any Oil and Gas Propertyhereafter acquired by the Borrower in the Subject Areas shall be a Subject Property at the time ofsuch acquisition; provided that no Oil and Gas Properties acquired by Borrowerin the Subject Areas following the date all of the

 

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Debt evidenced by the Note is repaid in full and Lender has no furtherobligations to make Advances hereunder shall be considered Subject Propertiesunder this Agreement.

 

2.04                          TheAgreement is hereby amended to add the following subsections to the end of Section 2.4of the Agreement, to wit:

 

(c)                                 Onand after May 8, 2008 proceeds from Revolving Advances shall be used topay or reimburse the Borrowerfor:

 

(i)                                    CompletionCosts associated with the completion of the Johnson Branch Wells, provided,however, proceeds from Revolving Advances will not be used to pay or reimbursethe Borrower for more than $2,700,000.00 of such Completion Costs; and

 

(ii)                                 DryHole Costs and Completion Costs associated with the drilling and completion ofthe Bethany Longstreet Wells, provided, however, proceeds from RevolvingAdvances will not be used to pay or reimbursethe Borrower for more than $2,800,000.00 of such Dry Hole Costs and CompletionCosts.

 

2.05                          TheAgreement is hereby amended to substitute for Subsection 2.6(a) of theAgreement the following:

 

(a)                                 Duringthe period from and after May 8, 2008 until the next scheduledredetermination of the Borrowing Base (scheduled to be September 1, 2008)in accordance with this Section 2.6, the amount of the Borrowing Baseshall he $20,000,000.00.

 

2.06                          TheAgreement is hereby amended to substitute for Subsection 2.12(a) of theAgreement the following:

 

(a)  The Borrower shall not have the right and optionto prepay all or any part of the principalbalance outstanding on the Term Note.

 

2.07                          The Agreement is hereby amended tosubstitute for Section 2.14 of the Agreement the following:

 

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***2.14******                       NetProfits Interests.   ***As consideration for the Loansgoverned by this Agreement and in addition to interest accruing on principalevidenced by the Note, the Borrower agrees to convey to the Lender, as anadditional charge, upon the repayment in full of the Debt evidenced by theRevolving Note and the repayment in full orconversion of the Debt evidenced by the Term Note and confirmation ofthe title of the Lender to such interest upon conveyance by the Borrower, anundivided five percent (5%) net profits interest in the future production ofhydrocarbons from or attributable to the Subject Properties, which conveyanceshall be effective as of the date the Debt evidenced by the Revolving Note isrepaid in full and the Debtevidenced by the Term Note is repaid in full or converted and evidenced by aninstrument substantially in the form attached hereto as Exhibit X.

 

Should the Borrower elect, at any timesubsequent to the conveyance of the Net Profits Interests, to sell its interestin any of the Subject Properties, then the Borrower agrees to extend to the Lender, by way ofprompt written notice setting forth the terms of any such transaction, theright to sell the Net Profits Interests burdening the relevant SubjectProperties to be sold by the Borrower on the same terms (including, withoutlimitation, price based on per unit of production) as those for the sale by theBorrower. Such right may be exercised at the sole discretion of the Lender and,should the Lender elect not to exercise such right, the Subject Properties sosold shall be conveyed by way of instrument(s) of conveyance madeexpressly subject to the Net Profits Interests and the provisions of this Agreementapplicable thereto and shall remain subject to the Net Profits Interests.

 

2.08                          TheAgreement is hereby amended to substitute for Section 6.1 of the Agreementthe following:

 

***6.1******                              OtherDebt of Borrower****.*   The Borrower will not incur, create,assume or suffer to exist any Debt except: (a) Loans hereunder, (b) unsecuredcurrent accounts payable incurred in the ordinary course of business, providedsuch accounts are paid timely or within ninety (90) days of the due date or arebeing Contested in Good Faith, (c) pursuant to Derivative Contractsrequired or allowed under this Agreement,(d) evidenced by the Diversified DynamicsNote or (c) other Debt not exceeding $250,000.00 in the aggregate at anyone time.

 

The Borrower shall not repay any Debt,principal or interest, evidenced by the Diversified Dynamics Note; provided,however, so long as no Event of Default or Unmatured Event of Default exists orwould

 

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exist as a result thereof, the Borrower may make regularly scheduledinterest payments accruing on the principal outstanding under the DiversifiedDynamics Note.

 

2.09                          TheAgreement is hereby amended to substitute for Section 6.7 of the Agreementthe following:

 

***6.7******                             ******Sales ofProperty******.***Except for the obligation of the Borrowerto convey a net profits interest to DiversifiedDynamics Corporation pursuant to the Diversified Dynamics Note after the Debtevidenced by the Notes is repaid in full and the Lender is no longer obligatedto make Advances, the Borrower will not sell, transfer or otherwise dispose of,in one or any series of transactions, any of the Subject Properties.

 

**ARTICLE IIIREPRESENTATIONS AND WARRANTIES**

 

The Borrower hereby expressly remakes in favor of the Lender all of therepresentations and warranties set forth in ARTICLE 4 of theAgreement, as amended hereby, and represents and warrants that all suchrepresentations and warranties remain true and unbreached, except as affectedby the transactions contemplated in the Agreement.

 

**ARTICLE IVRATIFICATION**

 

Each of the parties hereto does hereby adopt, ratify and confirm theAgreement, in all things in accordance with the terms and provisions thereof,as modified or amended by this First Amendment.

 

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**ARTICLE VMISCELLANEOUS**

 

5.01                          All references to theAgreement in any document heretofore or hereafter executed in connection withthe transactions contemplated in the Agreement shall be deemed to refer to theAgreement as amended by this First Amendment.

 

5.02                          This First Amendment may beexecuted in two or more counterparts and multiple originals of suchcounterparts, and it shall not be necessary that the signatures of all partieshereto be contained on any one counterpart hereof. Any executed First Amendmentor any counterpart thereof shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

5.03                          **THE CREDIT AGREEMENT (AS AMENDED BY THIS FIRST AMENDMENT) AND THE OTHERLOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOTBE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORALAGREEMENTS OF THE PARTIES.**

 

**THERE ARE NO UNWRITTEN ORAL AGREEMENTSBETWEEN THE PARTIES.**

 

5.04                          **THIS FIRST AMENDMENT SHALL BE DEEMED TO BE A CONTRACTMADE UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OFTEXAS.**

 

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IN WITNESS WHEREOF, this First Amendment to Credit Agreement is executedas of the date first above written.

 

 
|   | **BORROWER:**                    |
|--------|----------------------------------|
|   |                             |
|   | CUBIC ENERGY, INC.               |
|   |                             |
|   | By:                              |   |
|   | Calvin A. Wallen III             |
|   | President                        |
|   |                             |
|   |                             |
|   | **LENDER:**                      |
|   |                             |
|   | WELLS FARGO ENERGY CAPITAL, INC. |
|   |                             |
|   | By:                              |   |
|   | Gary Milavec                     |
|   | Senior Vice President            |

 

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