EXHIBIT 10.2


NEITHER THESE  SECURITIES  NOR THE  SECURITIES  INTO WHICH THESE  SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS  EVIDENCED BY A LEGAL  OPINION OF COUNSEL TO THE  TRANSFEROR
REASONABLY  ACCEPTABLE  TO THE COMPANY TO SUCH  EFFECT,  THE  SUBSTANCE OF WHICH
SHALL  BE  REASONABLY  ACCEPTABLE  TO THE  COMPANY.  THESE  SECURITIES  AND  THE
SECURITIES  ISSUABLE  UPON  CONVERSION  OF THESE  SECURITIES  MAY BE  PLEDGED IN
CONNECTION  WITH A BONA  FIDE  MARGIN  ACCOUNT  OR OTHER  LOAN  SECURED  BY SUCH
SECURITIES.

Original Issue Date:  September 30, 2004
Original Conversion Price (subject to adjustment herein): $0.50

                                                              $_________________


                    7.0% SENIOR SECURED CONVERTIBLE DEBENTURE
                             DUE SEPTEMBER 30, 2009

         THIS  DEBENTURE is one of a series of duly  authorized  and issued 7.0%
Senior  Secured   Convertible   Debentures  of  Cubic  Energy,   Inc.,  a  Texas
corporation, having a principal place of business at 9870 Plano Road, Dallas, TX
75238  (the  "Company"),  designated  as its  7.0%  Senior  Secured  Convertible
Debenture, due September 30, 2009 (the "Debentures").

         FOR   VALUE    RECEIVED,    the    Company    promises    to   pay   to
________________________ or its registered assigns (the "Holder"), the principal
sum of  $_______________  on  September  30,  2009 or such  earlier  date as the
Debentures  are required or permitted  to be repaid as provided  hereunder  (the
"Maturity Date"), and to pay interest to the Holder on the aggregate unconverted
and then  outstanding  principal amount of this Debenture in accordance with the
provisions  hereof.  This  Debenture  is  subject  to the  following  additional
provisions:

         Section 1.  Definitions.  For the purposes  hereof,  in addition to the
terms defined  elsewhere in this Debenture:  (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase  Agreement,
and (b) the following terms shall have the following meanings:

                  "Alternate  Consideration" shall have the meaning set forth in
         Section 5(d)(iii).




                             Exhibit 10.2 - Page 1


<PAGE>

                  "Average Price" means,  for any date, the price  determined by
         the first of the  following  clauses  that  applies:  (a) if the Common
         Stock is then listed or quoted on a Trading Market, the average closing
         price of the Common  Stock for the ten Trading  Days prior to such date
         (or the nearest  preceding date) on the primary Trading Market on which
         the Common  Stock is then  listed or quoted as  reported  by  Bloomberg
         Financial L.P.  (based on a Trading Day from 9:30 a.m.  Eastern Time to
         4:02 p.m.  Eastern Time); (b) if the Common Stock is not then listed or
         quoted on the  Trading  Market and if prices  for the Common  Stock are
         then reported in the "Pink Sheets" published by the National  Quotation
         Bureau Incorporated (or a similar  organization or agency succeeding to
         its functions of reporting prices),  the closing bid price per share of
         the Common  Stock so reported  for the ten  Trading  Days prior to such
         date;  or (c) in all other  cases,  the fair market value of a share of
         Common  Stock  as  determined  by a  nationally  recognized-independent
         appraiser  selected in good faith by  Purchasers  holding a majority of
         the principal amount of Shares then outstanding.

                  "Business Day" means any day except  Saturday,  Sunday and any
         day which shall be a federal  legal  holiday in the United  States or a
         day on  which  banking  institutions  in the  State  of  New  York  are
         authorized or required by law or other government action to close.

                  "Change of Control Transaction" means the occurrence after the
         date  hereof of any of (i) an  acquisition  by an  individual  or legal
         entity or "group" (as described in Rule 13d-5(b)(1)  promulgated  under
         the  Exchange  Act) of  effective  control  (whether  through  legal or
         beneficial  ownership of capital  stock of the Company,  by contract or
         otherwise) of in excess of 50% of the voting securities of the Company,
         or (ii) a replacement  at one time or within a one-year  period of more
         than one-half of the members of the Company's  board of directors which
         is not approved by a majority of those  individuals  who are members of
         the board of directors on the date hereof (or by those  individuals who
         are  serving  as members  of the board of  directors  on any date whose
         nomination  to the board of directors was approved by a majority of the
         members of the board of directors  who are members on the date hereof),
         or (iii) the  execution  by the  Company of an  agreement  to which the
         Company  is a party or by which it is bound,  providing  for any of the
         events set forth above in (i) or (ii).

                  "Commission" means the Securities and Exchange Commission.

                  "Common  Stock"  means the common  stock,  par value $0.05 per
         share,  of the  Company  and stock of any other  class  into which such
         shares may hereafter have been reclassified or changed.

                  "Conversion  Date" shall have the meaning set forth in Section
         4(a) hereof.

                  "Conversion Price" shall have the meaning set forth in Section
         4(b).

                  "Conversion  Shares" means the shares of Common Stock issuable
         upon  conversion  of Debentures or as payment of interest in accordance
         with the terms hereof.




                             Exhibit 10.2 - Page 2

<PAGE>

                  "Effectiveness  Period"  shall have the meaning  given to such
         term in the Registration Rights Agreement.

                  "Equity Conditions" shall mean, during the period in question,
         (i) the Company shall have duly honored all conversions and redemptions
         scheduled  to occur or  occurring  by virtue of one or more  Conversion
         Notices, if any, (ii) all liquidated damages and other amounts owing in
         respect  of the  Debentures  shall have been  paid;  (iii)  there is an
         effective  Registration  Statement  pursuant  to which  the  Holder  is
         permitted  to utilize the  prospectus  thereunder  to resell all of the
         shares issuable pursuant to the Transaction  Documents (and the Company
         believes,   in  good  faith,  that  such  effectiveness  will  continue
         uninterrupted  for the  foreseeable  future),  (iv) the Common Stock is
         trading on the Trading Market and all of the shares  issuable  pursuant
         to the  Transaction  Documents  are  listed  for  trading  on a Trading
         Market,  if applicable (and the Company  believes,  in good faith, that
         trading  of  the  Common  Stock  on  a  Trading  Market  will  continue
         uninterrupted  for the foreseeable  future),  (v) there is a sufficient
         number of authorized  but unissued and otherwise  unreserved  shares of
         Common Stock for the issuance of all of the shares issuable pursuant to
         the  Transaction  Documents,  (vi) there is then  existing  no Event of
         Default  or event  which,  with the  passage  of time or the  giving of
         notice,  would  constitute  an Event of  Default  and  (vii) all of the
         shares  issued or issuable  pursuant to the  Transaction  Documents  in
         full,  ignoring for such purposes any conversion or exercise limitation
         therein,  would not violate the  limitations set forth in Sections 4(c)
         and (ix) no public  announcement  of a pending or proposed  Fundamental
         Transaction or acquisition  transaction  has occurred that has not been
         consummated.

                  "Event of Default" shall have the meaning set forth in Section
         8.

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
         amended.

                  "Fundamental  Transaction" shall have the meaning set forth in
         Section 5(d)(iii) hereof.

                  "Interest  Conversion Rate" means 95% of the lesser of (a) the
         Average Price immediately prior to the applicable Interest Payment Date
         and (b) the Average Price  immediately prior to the date the applicable
         interest  payment shares are issued and delivered if after the Interest
         Payment Date.

                  "Late  Fees"  shall have the  meaning  set forth in the second
         paragraph to this Debenture.

                  "Mandatory  Prepayment  Amount" for any Debentures shall equal
         100% of the  principal  amount of  Debentures  to be prepaid,  plus all
         accrued  and unpaid  interest  thereon  and all other  amounts,  costs,
         expenses and liquidated damages due in respect of such Debentures.




                             Exhibit 10.2 - Page 3

<PAGE>

                  "Original  Issue  Date"  shall  mean  the  date  of the  first
         issuance of the Debentures regardless of the number of transfers of any
         Debenture  and  regardless  of the number of  instruments  which may be
         issued to evidence such Debenture.

                  "Permitted Liens" means:

                  (i)  Liens  created  by or  otherwise  existing,  under  or in
         connection  with the Debentures or the other  Transaction  Documents in
         favor of the Holders;

                  (ii) Purchase money liens securing purchase money indebtedness
         (and refinancings  thereof) in an amount not to exceed $20,000 [as well
         as any purchase money liens in excess of $20,000 with the prior written
         consent of Purchasers  holding a majority of the outstanding  principal
         amount  of the  Debentures,  which  consent  may  not  be  unreasonably
         withheld]  provided,  that (a) any such lien  attaches to such property
         concurrently with or within 20 days after the acquisition  thereof, and
         (b) such lien  attaches  solely to the  property  so  acquired  in such
         transaction;

                  (iii)   Liens  for  taxes,   assessments,   charges  or  other
         governmental levies not yet due or as to which the period of grace (not
         to exceed 60 days),  if any,  related  thereto has not expired or which
         are being contested in good faith by appropriate proceedings;  provided
         that adequate reserves with respect thereto are maintained on the books
         of the Company or its  Subsidiaries,  as the case may be, in conformity
         with GAAP (or, in the case of Subsidiaries with significant  operations
         outside of the United States of America,  generally accepted accounting
         principles   in  effect   from   time  to  time  in  their   respective
         jurisdictions of incorporation);

                  (iv)  Carriers',  warehousemen's,  mechanics',  materialmen's,
         repairmen's  or other like  liens  arising  in the  ordinary  course of
         business  which  are not  overdue  for a period of more than 30 days or
         which are being contested in good faith by appropriate proceedings;

                  (v)   Pledges  or  deposits  in   connection   with   workers'
         compensation,   unemployment   insurance  and  other  social   security
         legislation and deposits securing liability to insurance carriers under
         insurance or self-insurance arrangements;

                  (vi)  Deposits  to  secure  the  performance  of  bids,  trade
         contracts   (other  than  for  borrowed   money),   leases,   statutory
         obligations,  surety  and  appeal  bonds,  performance  bonds and other
         obligations  of a like  nature  incurred  in  the  ordinary  course  of
         business;

                  (vii) Easements, rights-of-way, restrictions and other similar
         encumbrances  affecting real property which, in the aggregate,  are not
         substantial in amount,  and which do not in any case materially detract
         from the value of the property subject thereto or materially  interfere
         with the ordinary conduct of the business of the applicable person;

                  (viii) Any extension,  renewal or  replacement  (or successive
         extensions,  renewals or  replacements)  , in whole or in part,  of any
         lien  referred  to  in  the  foregoing  clauses;   provided  that  such




                             Exhibit 10.2 - Page 4

<PAGE>

         extension,  renewal  or  replacement  lien shall be limited to all or a
         part of the property  which  secured the lien so  extended,  renewed or
         replaced (plus improvements on such property);

                  (ix) Liens  existing on the Original  Issue Date and set forth
         on Schedule 2; and

                  (x) Liens arising in connection with capitalized leases.

                  "Person" means a corporation,  an association,  a partnership,
         organization,  a business,  an  individual,  a government  or political
         subdivision thereof or a governmental agency.

                  "Purchase  Agreement" means the Securities Purchase Agreement,
         dated as of September  30, 2004,  to which the Company and the original
         Holder are parties,  as amended,  modified or supplemented from time to
         time in accordance with its terms.

                  "Registration  Rights Agreement" means the Registration Rights
         Agreement,  dated as of the Original  Issue Date,  to which the Company
         and  the  original  Holder  are  parties,   as  amended,   modified  or
         supplemented from time to time in accordance with its terms.

                  "Registration   Statement"  means  a  registration   statement
         meeting  the  requirements   set  forth  in  the  Registration   Rights
         Agreement,  covering  among other  things the resale of the  Conversion
         Shares and naming the Holder as a "selling stockholder" thereunder.

                  "Securities Act" means the Securities Act of 1933, as amended,
         and the rules and regulations promulgated thereunder.

                  "Security Agreement" means the Security Agreement, dated as of
         the Original  Issue Date, to which the Company and the original  Holder
         are parties, as amended,  modified or supplemented from time to time in
         accordance with its terms.

                  "Subsidiary"  shall have the meaning given to such term in the
         Purchase Agreement.

                  "Trading  Day" means a day on which the Common Stock is traded
         on a Trading Market.  "Trading  Market" means the following  markets or
         exchanges  on which the Common Stock is listed or quoted for trading on
         the date in question:  the Nasdaq SmallCap  Market,  the American Stock
         Exchange,  the New York Stock  Exchange,  the Nasdaq National Market or
         the OTC Bulletin Board.

                  "Transaction  Documents"  shall have the  meaning set forth in
         the Purchase Agreement.




                             Exhibit 10.2 - Page 5

<PAGE>


         Section 2. Interest.

                  a) Payment of Interest in Cash or Kind.  The Company shall pay
         interest  to  the  Holder  on  the  aggregate   unconverted   and  then
         outstanding  principal amount of this Debenture at the rate of 7.0% per
         annum,  payable  quarterly  on  March  31,  June 30,  September  30 and
         December 31,  beginning on the first such date after the Original Issue
         Date after  September 30, 2004 and on each  Conversion Date (as to that
         principal amount then being converted) and on the Maturity Date (except
         that,  if any such date is not a Business  Day, then such payment shall
         be due on the  next  succeeding  Business  Day)  (each  such  date,  an
         "Interest  Payment  Date"),  in cash or shares  of Common  Stock at the
         Interest Conversion Rate, or a combination thereof; provided,  however,
         payment  in  shares of Common  Stock  may only  occur if during  the 20
         Trading Days immediately prior to the applicable  Interest Payment Date
         all of the Equity  Conditions  have been met and the Company shall have
         given the Holder notice in accordance with the notice  requirements set
         forth below.

                  b) Company's  Election to Pay Interest in Kind. Subject to the
         terms and  conditions  herein,  the  decision  whether to pay  interest
         hereunder in shares of Common Stock or cash shall be at the  discretion
         of the Company.  Not less than 20 Trading  Days prior to each  Interest
         Payment Date,  the Company shall provide the Holder with written notice
         of its election to pay interest  hereunder  either in cash or shares of
         Common Stock (the Company may indicate in such notice that the election
         contained  in such  notice  shall  continue  for  later  periods  until
         revised).  On the 20th Trading Day prior to the  immediately  following
         Interest Payment Date, the Company's election (whether specific to such
         Interest  Payment Date or continuous)  shall be irrevocable  only as to
         the  immediately  following  Interest  Payment  Date.  Subject  to  the
         aforementioned  conditions,  failure  to timely  provide  such  written
         notice  shall be deemed an election by the Company to pay the  interest
         on such Interest Payment Date in cash.

                  c) Interest Calculations.  Interest shall be calculated on the
         basis of a  360-day  year and  shall  accrue  daily  commencing  on the
         Original  Issue  Date  until  payment  in  full of the  principal  sum,
         together  with all accrued and unpaid  interest and other amounts which
         may become due hereunder,  has been made. Payment of interest in shares
         of Common Stock shall otherwise occur pursuant to Section  4(d)(ii) and
         only for  purposes of the payment of interest in shares,  the  Interest
         Payment Date shall be deemed the Conversion Date.  Interest shall cease
         to accrue with respect to any principal amount converted, provided that
         the Company in fact  delivers  the  Conversion  Shares  within the time
         period required by Section 4(d)(ii). Interest hereunder will be paid to
         the Person in whose name this Debenture is registered on the records of
         the Company  regarding  registration  and transfers of Debentures  (the
         "Debenture  Register").  Except as otherwise provided herein, if at any
         time the Company  pays  interest  partially  in cash and  partially  in
         shares of Common Stock, then such payment shall be distributed  ratably
         among the Holders based upon the principal amount of Debentures held by
         each Holder.

                  d) Late Fee.  All accrued and unpaid  principal  and  interest
         shall bear interest at the rate of 18% per annum (or such lower maximum
         amount of interest permitted to be charged under applicable law) ("Late
         Fee")  which will  accrue  daily,  from the date such  interest  is due



                             Exhibit 10.2 - Page 6

<PAGE>

         hereunder  through and including  the date of payment.  Notwithstanding
         anything to the contrary  contained  herein, if on any Interest Payment
         Date the Company has elected to pay interest in Common Stock and is not
         able to pay  accrued  interest in the form of Common  Stock  because it
         does not then satisfy the  conditions for payment in the form of Common
         Stock set forth above,  then, at the option of the Holder, the Company,
         in lieu of delivering  either  shares of Common Stock  pursuant to this
         Section 2 or paying the  regularly  scheduled  cash  interest  payment,
         shall deliver,  within three Trading Days of each  applicable  Interest
         Payment  Date,  an amount in cash equal to the product of the number of
         shares  of  Common  Stock  otherwise   deliverable  to  the  Holder  in
         connection  with the payment of interest due on such  Interest  Payment
         Date and the Average Price.

                  e) Prepayment. At any time until the second anniversary of the
         Original  Issue Date,  the Company  may redeem this  Debenture,  or any
         portion  thereof,  for 120% of the  Mandatory  Prepayment  Amount,  and
         beginning on the second  anniversary  of the Original  Issue Date,  the
         Company may redeem this  Debenture,  or any  portion  thereof,  for the
         Mandatory  Prepayment Amount, in either case without the consent of the
         Holder;  provided,  however,  that the  Company  must  provide  30 days
         advance  notice of any such  redemption.  Once notice of  redemption is
         given,  this Debenture,  or the portion thereof specified in the notice
         of redemption,  shall become due on the date specified in the notice of
         redemption.  Upon  payment by the Company of the  Mandatory  Prepayment
         Amount and premium thereon, if applicable,  interest on this Debenture,
         or portion thereof  specified in the notice of redemption,  shall cease
         to accrue.

         Section 3. Registration of Transfers and Exchanges.

                  a) Different Denominations. This Debenture is exchangeable for
         an  equal  aggregate   principal  amount  of  Debentures  of  different
         authorized  denominations,  as requested by the Holder surrendering the
         same. No service charge will be made for such  registration of transfer
         or exchange.

                  b) Investment Representations.  This Debenture has been issued
         subject to certain  investment  representations  of the original Holder
         set forth in the Purchase Agreement and may be transferred or exchanged
         only in compliance with the Purchase  Agreement and applicable  federal
         and state securities laws and regulations.

                  c) Reliance on Debenture Register. Prior to due presentment to
         the Company for transfer of this  Debenture,  the Company and any agent
         of the  Company  may treat the Person in whose name this  Debenture  is
         duly  registered on the Debenture  Register as the owner hereof for the
         purpose  of  receiving  payment  as herein  provided  and for all other
         purposes,  whether or not this  Debenture  is overdue,  and neither the
         Company nor any such agent shall be affected by notice to the contrary.





                             Exhibit 10.2 - Page 7

<PAGE>

         Section 4. Conversion.

                  a) Voluntary Conversion.  At any time after the Original Issue
         Date until this  Debenture  is no longer  outstanding,  this  Debenture
         shall be  convertible  into shares of Common Stock at the option of the
         Holder,  in whole or in part at any time and from time to time (subject
         to the limitations on conversion set forth in Section 4(c) hereof). The
         Holder shall effect  conversions  by delivering to the Company the form
         of Notice  of  Conversion  attached  hereto  as Annex A (a  "Notice  of
         Conversion"),  specifying therein the principal amount of Debentures to
         be converted and the date on which such conversion is to be effected (a
         "Conversion  Date").  If no Conversion Date is specified in a Notice of
         Conversion,  the Conversion  Date shall be the date that such Notice of
         Conversion is provided hereunder. To effect conversions hereunder,  the
         Holder shall not be required to physically  surrender Debentures to the
         Company unless the entire  principal  amount of this Debenture plus all
         accrued and unpaid interest thereon has been so converted.  Conversions
         hereunder shall have the effect of lowering the  outstanding  principal
         amount  of  this  Debenture  in  an  amount  equal  to  the  applicable
         conversion.  The Holder and the Company shall maintain  records showing
         the principal amount converted and the date of such conversions. In the
         event of any dispute or discrepancy, the records of the Holder shall be
         controlling and  determinative  in the absence of manifest  error.  The
         Holder and any assignee,  by acceptance of this Debenture,  acknowledge
         and  agree  that,  by  reason  of the  provisions  of  this  paragraph,
         following  conversion  of a portion of this  Debenture,  the unpaid and
         unconverted  principal  amount of this  Debenture  may be less than the
         amount stated on the face hereof.

                  b) Conversion  Price.  The  conversion  price in effect on any
         Conversion Date shall be equal to $0.50 (subject to adjustment  herein)
         (the "Conversion Price").

                  c)  Conversion  Limitations.   Except  in  connection  with  a
         Fundamental Transaction, the Company shall not effect any conversion of
         this Debenture,  and the Holder shall not have the right to convert any
         portion of this  Debenture,  pursuant to Section 4(a) or otherwise,  to
         the extent  that after  giving  effect to such  conversion,  the Holder
         (together with the Holder's affiliates), as set forth on the applicable
         Notice of Conversion,  would beneficially own in excess of 4.99% of the
         number of shares of the  Common  Stock  outstanding  immediately  after
         giving  effect  to  such  conversion.  For  purposes  of the  foregoing
         sentence,  the number of shares of Common Stock  beneficially  owned by
         the Holder and its  affiliates  shall  include  the number of shares of
         Common Stock issuable upon conversion of this Debenture with respect to
         which the  determination  of such  sentence  is being  made,  but shall
         exclude  the number of shares of Common  Stock  which would be issuable
         upon (A)  conversion  of the  remaining,  nonconverted  portion of this
         Debenture beneficially owned by the Holder or any of its affiliates and
         (B) exercise or conversion of the unexercised or  nonconverted  portion
         of any other securities of the Company (including,  without limitation,
         any other  Debentures  or the  Warrants)  subject  to a  limitation  on
         conversion or exercise  analogous to the  limitation  contained  herein
         beneficially  owned by the Holder or any of its  affiliates.  Except as
         set forth in the preceding sentence, for purposes of this Section 4(c),
         beneficial  ownership  shall be calculated  in accordance  with Section
         13(d) of the Exchange Act. To the extent that the limitation  contained



                             Exhibit 10.2 - Page 8

<PAGE>

         in this section applies, the determination of whether this Debenture is
         convertible (in relation to other  securities  owned by the Holder) and
         of which portion of this Debenture is convertible  shall be in the sole
         discretion of such Holder.  To ensure compliance with this restriction,
         the Holder  will be deemed to  represent  to the  Company  each time it
         delivers a Notice of Conversion  that such Notice of Conversion has not
         violated the  restrictions  set forth in this paragraph and the Company
         shall have no  obligation  to verify or confirm  the  accuracy  of such
         determination.  For purposes of this Section 4(c), in  determining  the
         number of  outstanding  shares of Common Stock,  the Holder may rely on
         the number of  outstanding  shares of Common  Stock as reflected in (x)
         the Company's  most recent Form 10-QSB or Form 10-KSB,  as the case may
         be, (y) a more  recent  public  announcement  by the Company or (z) any
         other notice by the Company or the  Company's  Transfer  Agent  setting
         forth  the  number of shares  of  Common  Stock  outstanding.  Upon the
         written or oral  request of the Holder,  the Company  shall  within two
         Trading Days confirm  orally and in writing to the Holder the number of
         shares of Common  Stock then  outstanding.  In any case,  the number of
         outstanding  shares of Common  Stock shall be  determined  after giving
         effect to the  conversion  or exercise of  securities  of the  Company,
         including this  Debenture,  by the Holder or its  affiliates  since the
         date as of which such number of outstanding  shares of Common Stock was
         reported.

                  d) Mechanics of Conversion

                           i.  Conversion  Shares  Issuable  Upon  Conversion of
                  Principal  Amount.  The  number  of  shares  of  Common  Stock
                  issuable  upon a conversion  hereunder  shall be determined by
                  the  quotient   obtained  by  dividing  (x)  the   outstanding
                  principal  amount of this Debenture to be converted by (y) the
                  Conversion Price.

                           ii.  Delivery of  Certificate  Upon  Conversion.  Not
                  later than three Trading Days after any  Conversion  Date, the
                  Company  will  deliver  to the  Holder  (A) a  certificate  or
                  certificates representing the Conversion Shares which shall be
                  free of restrictive  legends and trading  restrictions  (other
                  than those  required by the Purchase  Agreement)  representing
                  the number of shares of Common Stock being  acquired  upon the
                  conversion of Debentures  (including,  if so timely elected by
                  the Company,  shares of Common Stock  representing the payment
                  of  accrued  interest)  and (B) a bank  check in the amount of
                  accrued and unpaid interest (if the Company is required to pay
                  accrued interest in cash).

                           iii. Failure to Deliver Certificates.  If in the case
                  of any Notice of Conversion  such  certificate or certificates
                  are not delivered to or as directed by the  applicable  Holder
                  by the fifth Trading Day after a Conversion  Date,  the Holder
                  shall be entitled by written notice to the Company at any time
                  on or before its receipt of such  certificate or  certificates
                  thereafter,  to rescind  such  conversion,  in which event the
                  Company shall immediately return the certificates representing
                  the principal amount of Debentures tendered for conversion.




                             Exhibit 10.2 - Page 9

<PAGE>

                           iv. Partial Liquidated  Damages. If the Company fails
                  for any reason to deliver to the Holder  such  certificate  or
                  certificates pursuant to Section 4(d)(ii) by the third Trading
                  Day after the  Conversion  Date, the Company shall pay to such
                  Holder,  in cash, as liquidated  damages and not as a penalty,
                  for each $1000 of principal  amount being  converted,  $10 per
                  Trading Day (increasing to $20 per Trading Day after 5 Trading
                  Days after such damages  begin to accrue) for each Trading Day
                  after  such third  Trading  Day until  such  certificates  are
                  delivered.  The Company's obligations to issue and deliver the
                  Conversion   Shares  upon  conversion  of  this  Debenture  in
                  accordance   with  the   terms   hereof   are   absolute   and
                  unconditional,  irrespective  of any action or inaction by the
                  Holder to enforce the same, any waiver or consent with respect
                  to any provision hereof,  the recovery of any judgment against
                  any Person or any action to enforce  the same,  or any setoff,
                  counterclaim,  recoupment,  limitation or termination,  or any
                  breach or alleged  breach by the Holder or any other Person of
                  any  obligation  to the  Company or any  violation  or alleged
                  violation  of law by the  Holder  or  any  other  person,  and
                  irrespective of any other  circumstance  which might otherwise
                  limit  such  obligation  of  the  Company  to  the  Holder  in
                  connection  with  the  issuance  of  such  Conversion  Shares;
                  provided, however, such delivery shall not operate as a waiver
                  by the Company of any such action the Company may have against
                  the  Holder.  In the  event a Holder of this  Debenture  shall
                  elect  to  convert  any or all  of the  outstanding  principal
                  amount hereof,  the Company may not refuse conversion based on
                  any claim that the Holder or anyone  associated  or affiliated
                  with the Holder  has been  engaged  in any  violation  of law,
                  agreement or for any other reason,  unless, an injunction from
                  a court, on notice, restraining and or enjoining conversion of
                  all or part of this  Debenture  shall  have  been  sought  and
                  obtained  and the Company  posts a surety bond for the benefit
                  of the Holder in the amount of 150% of the principal amount of
                  this   Debenture   outstanding,   which  is   subject  to  the
                  injunction,  which  bond  shall  remain  in  effect  until the
                  completion  of  arbitration/litigation  of the dispute and the
                  proceeds  of which  shall be  payable  to such  Holder  to the
                  extent it obtains  judgment.  In the absence of an  injunction
                  precluding the same, the Company shall issue Conversion Shares
                  or, if applicable,  cash, upon a properly noticed  conversion.
                  Nothing  herein shall limit a Holder's  right to pursue actual
                  damages or declare an Event of Default  pursuant  to Section 8
                  herein for the Company's failure to deliver  Conversion Shares
                  within the period  specified herein and such Holder shall have
                  the right to pursue all remedies  available to it at law or in
                  equity  including,  without  limitation,  a decree of specific
                  performance and/or injunctive relief. The exercise of any such
                  rights  shall not  prohibit the Holder from seeking to enforce
                  damages   pursuant  to  any  other  Section  hereof  or  under
                  applicable law.

                           v.  Failure  to  Timely  Deliver   Certificates  Upon
                  Conversion.  In addition to any other rights  available to the
                  Holder,  if the Company fails for any reason to deliver to the
                  Holder such  certificate or  certificates  pursuant to Section
                  4(d)(ii) by the third Trading Day after the  Conversion  Date,
                  and if after such third  Trading Day the Holder is required by
                  its brokerage firm to purchase (in an open market  transaction
                  or  otherwise)  Common Stock to deliver in  satisfaction  of a
                  sale by such Holder of the Conversion  Shares which the Holder



                             Exhibit 10.2 - Page 10

<PAGE>

                  anticipated receiving upon such conversion (a "Buy-In"),  then
                  the Company  shall (A) pay in cash to the Holder (in  addition
                  to any  remedies  available  to or elected by the  Holder) the
                  amount  by  which  (x)  the  Holder's   total  purchase  price
                  (including brokerage commissions, if any) for the Common Stock
                  required to be so purchased exceeds (y) the product of (1) the
                  aggregate  number of shares of Common  Stock that such  Holder
                  anticipated  receiving from the conversion at issue multiplied
                  by (2) the actual sale price per Share of the Common  Stock at
                  the time of the sale (including brokerage commissions, if any)
                  giving rise to such purchase  obligation and (B) at the option
                  of the Holder,  either reissue  Debentures in principal amount
                  equal to the principal  amount of the attempted  conversion or
                  deliver to the  Holder  the  number of shares of Common  Stock
                  that would have been  issued had the Company  timely  complied
                  with its delivery  requirements  under Section  4(d)(ii).  For
                  example,  if the Holder  purchases Common Stock having a total
                  purchase price of $11,000 to cover a Buy-In with respect to an
                  attempted  conversion of Debentures  with respect to which the
                  actual sale price of the Conversion  Shares at the time of the
                  sale (including brokerage commissions,  if any) giving rise to
                  such purchase  obligation  was a total of $10,000 under clause
                  (A) of the immediately  preceding sentence,  the Company shall
                  be required to pay the Holder $1,000. The Holder shall provide
                  the Company  written notice  indicating the amounts payable to
                  the Holder in respect of the Buy-In.  Notwithstanding anything
                  contained  herein to the  contrary,  if a Holder  requires the
                  Company to make payment in respect of a Buy-In for the failure
                  to  timely  deliver  certificates  hereunder  and the  Company
                  timely pays in full such  payment,  the  Company  shall not be
                  required to pay such Holder  liquidated  damages under Section
                  4(d)(iv)  in respect  of the  certificates  resulting  in such
                  Buy-In.

                           vi.  Reservation of Shares Issuable Upon  Conversion.
                  The Company  covenants  that it will at all times  reserve and
                  keep available out of its  authorized  and unissued  shares of
                  Common  Stock   solely  for  the  purpose  of  issuance   upon
                  conversion  of the  Debentures  and payment of interest on the
                  Debenture,  each as  herein  provided,  free  from  preemptive
                  rights  or any  other  actual  contingent  purchase  rights of
                  persons  other than the Holders,  not less than such number of
                  shares of the Common Stock as shall (subject to any additional
                  requirements  of the Company as to  reservation of such shares
                  set forth in the Purchase  Agreement) be issuable (taking into
                  account the  adjustments  and  restrictions of Section 5) upon
                  the  conversion  of the  outstanding  principal  amount of the
                  Debentures  and  payment of  interest  hereunder.  The Company
                  covenants  that all  shares of Common  Stock  that shall be so
                  issuable shall,  upon issue,  be duly and validly  authorized,
                  issued and fully paid,  nonassessable and, if the Registration
                  Statement  is  then  effective   under  the  Securities   Act,
                  registered   for   public   sale  in   accordance   with  such
                  Registration Statement.

                           vii. Fractional Shares.  Upon a conversion  hereunder
                  the Company shall not be required to issue stock  certificates
                  representing  fractions of shares of the Common Stock, but may



                             Exhibit 10.2 - Page 11

<PAGE>

                  if otherwise permitted,  make a cash payment in respect of any
                  final  fraction of a share based on the Average  Price at such
                  time. If the Company elects not, or is unable,  to make such a
                  cash payment, the Holder shall be entitled to receive, in lieu
                  of the final  fraction  of a share,  one whole share of Common
                  Stock.

                           viii.  Transfer  Taxes.  The issuance of certificates
                  for shares of the Common Stock on conversion of the Debentures
                  shall be made  without  charge to the Holders  thereof for any
                  documentary  stamp or  similar  taxes  that may be  payable in
                  respect of the issue or delivery of such certificate, provided
                  that the Company shall not be required to pay any tax that may
                  be payable in respect of any transfer involved in the issuance
                  and delivery of any such certificate upon conversion in a name
                  other than that of the Holder of such  Debentures so converted
                  and the Company shall not be required to issue or deliver such
                  certificates  unless or until the person or persons requesting
                  the issuance thereof shall have paid to the Company the amount
                  of such tax or shall have  established to the  satisfaction of
                  the Company that such tax has been paid.

         Section 5. Certain Adjustments.

                  a) Stock  Dividends and Stock Splits.  If the Company,  at any
         time  while  this  Debenture  is  outstanding:  (A)  shall  pay a stock
         dividend or otherwise make a distribution or distributions on shares of
         its Common  Stock or any other equity or equity  equivalent  securities
         payable in shares of Common Stock (which, for avoidance of doubt, shall
         not include any shares of Common Stock  issued by the Company  pursuant
         to this  Debenture,  including  as  interest  thereon),  (B)  subdivide
         outstanding  shares of Common Stock into a larger number of shares, (C)
         combine (including by way of reverse stock split) outstanding shares of
         Common  Stock  into  a  smaller  number  of  shares,  or (D)  issue  by
         reclassification  of shares of the  Common  Stock any shares of capital
         stock of the Company,  then the Conversion Price shall be multiplied by
         a  fraction  of which the  numerator  shall be the  number of shares of
         Common Stock  (excluding  treasury shares,  if any) outstanding  before
         such event and of which the  denominator  shall be the number of shares
         of Common  Stock  outstanding  after such event.  Any  adjustment  made
         pursuant to this Section shall become effective  immediately  after the
         record date for the  determination of stockholders  entitled to receive
         such dividend or distribution  and shall become  effective  immediately
         after the effective date in the case of a  subdivision,  combination or
         re-classification.

                  b) Pro Rata  Distributions.  If the Company, at any time while
         this  Debenture  is  outstanding,  shall  distribute  to all holders of
         Common  Stock (and not to Holders)  evidences  of its  indebtedness  or
         assets  (other  than as  described  in a  notice  pursuant  to  Section
         5(d)(ii))  or rights or  warrants  to  subscribe  for or  purchase  any
         security,  then in  each  such  case  the  Conversion  Price  shall  be
         determined by multiplying such Conversion  Price in effect  immediately
         prior to the  record  date  fixed  for  determination  of  stockholders
         entitled  to  receive  such  distribution  by a  fraction  of which the
         denominator shall be the Average Price determined as of the record date




                             Exhibit 10.2 - Page 12

<PAGE>

         mentioned above, and of which the numerator shall be such Average Price
         on such record date less the then fair market value at such record date
         of  the  portion  of  such  assets  or  evidence  of   indebtedness  so
         distributed  applicable to one outstanding share of the Common Stock as
         determined by the Board of Directors in good faith.  In either case the
         adjustments  shall be described in a statement  provided to the Holders
         of the portion of assets or evidences of indebtedness so distributed or
         such subscription  rights applicable to one share of Common Stock. Such
         adjustment  shall be made  whenever any such  distribution  is made and
         shall  become  effective  immediately  after the record date  mentioned
         above.

                  c) Calculations.  All calculations  under this Section 5 shall
         be made to the nearest cent or the nearest  1/100th of a share,  as the
         case may be. For  purposes  of this  Section 5, the number of shares of
         Common  Stock  outstanding  as of a given  date shall be the sum of the
         number of shares of Common Stock (excluding  treasury  shares,  if any)
         outstanding.

                  d) Notice to Holders.

                           i.  Adjustment  to  Conversion  Price.  Whenever  the
                  Conversion  Price is adjusted  pursuant to any of this Section
                  5, the  Company  shall  promptly  mail to each Holder a notice
                  setting forth the Conversion  Price after such  adjustment and
                  setting forth a brief  statement of the facts  requiring  such
                  adjustment.

                           ii. Notice to Allow Conversion by Holder.  If (A) the
                  Company shall  declare a dividend (or any other  distribution)
                  on the Common  Stock;  (B) the Company shall declare a special
                  nonrecurring  cash  dividend on or a redemption  of the Common
                  Stock;  (C) the Company  shall  authorize  the granting to all
                  holders of the Common  Stock  rights or warrants to  subscribe
                  for or purchase any shares of capital stock of any class or of
                  any  rights;  (D)  the  approval  of any  stockholders  of the
                  Company   shall   be   required   in   connection   with   any
                  reclassification  of the Common Stock,  any  consolidation  or
                  merger to which the  Company is a party,  any sale or transfer
                  of all or substantially  all of the assets of the Company,  of
                  any  compulsory  share  exchange  whereby the Common  Stock is
                  converted  into other  securities,  cash or property;  (E) the
                  Company  shall   authorize   the   voluntary  or   involuntary
                  dissolution,  liquidation  or winding up of the affairs of the
                  Company or enter into a Change of Control  Transaction;  then,
                  in each  case,  the  Company  shall  cause to be filed at each
                  office or agency  maintained  for the purpose of conversion of
                  the Debentures, and shall cause to be mailed to the Holders at
                  their last  addresses as they shall appear upon the  Debenture
                  Register,  at least 20 calendar  days prior to the  applicable
                  record  or  effective  date  hereinafter  specified,  a notice
                  stating  (x) the date on which a record is to be taken for the
                  purpose of such dividend, distribution,  redemption, rights or
                  warrants,  or if a record is not to be  taken,  the date as of
                  which the holders of the Common Stock of record to be entitled
                  to  such  dividend,   distributions,   redemption,  rights  or
                  warrants  are to be  determined  or (y) the date on which such
                  reclassification,  consolidation,  merger,  sale,  transfer or
                  share exchange is expected to become  effective or close,  and
                  the date as of which it is expected that holders of the Common



                             Exhibit 10.2 - Page 13

<PAGE>

                  Stock of record shall be entitled to exchange  their shares of
                  the  Common  Stock  for  securities,  cash or  other  property
                  deliverable upon such reclassification, consolidation, merger,
                  sale, transfer or share exchange;  provided,  that the failure
                  to mail such  notice or any defect  therein or in the  mailing
                  thereof shall not affect the validity of the corporate  action
                  required to be specified in such notice.  Holders are entitled
                  to convert  Debentures during the 20-day period commencing the
                  date  of  such  notice  to the  effective  date  of the  event
                  triggering such notice.

                           iii. Fundamental  Transaction.  If, at any time while
                  this  Debenture is  outstanding,  (A) the Company  effects any
                  merger or  consolidation  of the Company  with or into another
                  Person,  and as a result,  the  Company  is not the  surviving
                  entity  in  such   transaction  or  (B)  Company  effects  any
                  reclassification  of the Common Stock or any compulsory  share
                  exchange  pursuant  to which the Common  Stock is  effectively
                  converted  into or  exchanged  for other  securities,  cash or
                  property (in any such case, a "Fundamental Transaction"), then
                  upon any subsequent  conversion of this Debenture,  the Holder
                  shall have the right to  receive,  for each  Conversion  Share
                  that would have been issuable upon such conversion absent such
                  Fundamental   Transaction,   the  same  kind  and   amount  of
                  securities, cash or property as it would have been entitled to
                  receive upon the occurrence of such Fundamental Transaction if
                  it  had   been,   immediately   prior   to  such   Fundamental
                  Transaction,  the  holder of one share of  Common  Stock  (the
                  "Alternate   Consideration").   For   purposes   of  any  such
                  conversion, the determination of the Conversion Price shall be
                  appropriately    adjusted   to   apply   to   such   Alternate
                  Consideration  based on the amount of Alternate  Consideration
                  issuable  in  respect  of one  share of  Common  Stock in such
                  Fundamental  Transaction,  and the Company shall apportion the
                  Conversion  Price  among  the  Alternate  Consideration  in  a
                  reasonable   manner  reflecting  the  relative  value  of  any
                  different  components  of  the  Alternate  Consideration.   If
                  holders  of  Common  Stock  are  given  any  choice  as to the
                  securities,  cash or property to be received in a  Fundamental
                  Transaction, then the Holder shall be given the same choice as
                  to the Alternate Consideration it receives upon any conversion
                  of this Debenture following such Fundamental  Transaction.  To
                  the extent  necessary to effectuate the foregoing  provisions,
                  any  successor  to the  Company  or  surviving  entity in such
                  Fundamental  Transaction  shall  issue  to  the  Holder  a new
                  debenture   consistent  with  the  foregoing   provisions  and
                  evidencing  the Holder's  right to convert such debenture into
                  Alternate  Consideration.  The terms of any agreement pursuant
                  to which a Fundamental  Transaction  is effected shall include
                  terms  requiring  any such  successor or  surviving  entity to
                  comply with the  provisions  of this  paragraph  (d)(iii)  and
                  insuring  that  this   Debenture  (or  any  such   replacement
                  security)  will be  similarly  adjusted  upon  any  subsequent
                  transaction analogous to a Fundamental Transaction.

                           iv. Exempt Issuance.  Notwithstanding  the foregoing,
                  no adjustment  will be made under this Section 5 in respect of
                  an Exempt Issuance.

         Section 6. Security. This Debenture is entitled to the benefits granted
in the Security Agreement.




                             Exhibit 10.2 - Page 14

<PAGE>

         Section 7. Negative Covenants. So long as any portion of this Debenture
is outstanding, the Company will not and will not permit any of its Subsidiaries
to directly or indirectly:

                  a) enter into,  create,  incur,  assume or suffer to exist any
         indebtedness  or liens of any kind,  on or with  respect  to any of its
         property  or assets now owned or  hereafter  acquired  or any  interest
         therein or any income or profits  therefrom  that is senior to, or pari
         passu  with,  in any  respect,  the  Company's  obligations  under  the
         Debentures, except for Permitted Liens;

                  b)  amend  its  articles  of  incorporation,  bylaws  or other
         charter documents so as to adversely affect any rights of the Holder;

                  c)  repay,   repurchase  or  offer  to  repay,  repurchase  or
         otherwise acquire more than a de minimis number of shares of its Common
         Stock or other equity securities other than as to the Conversion Shares
         to the extent permitted or required under the Transaction  Documents or
         as otherwise permitted by the Transaction Documents; or

                  d)  enter  into  any  agreement  with  respect  to  any of the
         foregoing.

         Section 8. Events of Default.


                  a) "Event of Default," wherever used herein,  means any one of
         the  following  events  (whatever  the reason  and  whether it shall be
         voluntary or involuntary or effected by operation of law or pursuant to
         any  judgment,  decree or order of any  court,  or any  order,  rule or
         regulation of any administrative or governmental body):

                           i. any  default in the  payment of (A) the  principal
                  amount of any Debenture  when due, or (B) interest  (including
                  Late  Fees) on, or  liquidated  damages  in  respect  of,  any
                  Debenture,  as and when the same shall  become due and payable
                  which default, is not cured, within 3 Trading Days;

                           ii. the Company  shall fail to observe or perform any
                  other covenant or agreement contained in this Debenture or any
                  of the other Transaction Documents (other than a breach by the
                  Company of its  obligations  to deliver shares of Common Stock
                  to the Holder upon  conversion  which  breach is  addressed in
                  clause (xi) below) which failure is not cured,  if possible to
                  cure,  within the earlier to occur of (A) 5 Trading Days after
                  notice  of such  default  sent by the  Holder  or by any other
                  Holder and (B)10  Trading Days after the Company  shall become
                  aware of such failure.




                             Exhibit 10.2 - Page 15

<PAGE>

                           iii. a default or event of  default  (subject  to any
                  grace or cure period provided for in the applicable agreement,
                  document  or  instrument)  shall  occur  under  (A) any of the
                  Transaction  Documents other than the  Debentures,  or (B) any
                  other  material  agreement,  lease,  document or instrument to
                  which the  Company  or any  Subsidiary  is bound (a  "Material
                  Agreement") if Company or such  Subsidiary has received notice
                  of the intent of another party to such  Material  Agreement to
                  exercise  its  rights  and/or  remedies  under  such  Material
                  Agreement in such a fashion that the exercise of such right or
                  remedy  would have a material  adverse  effect on the business
                  operations or properties of Company or such Subsidiary;

                           iv. any  representation  or warranty made herein,  in
                  any  other  Transaction  Document,  in any  written  statement
                  pursuant hereto or thereto, or in any other report,  financial
                  statement  or  certificate  made or delivered to the Holder or
                  any other holder of Debentures shall be untrue or incorrect in
                  any material respect as of the date when made or deemed made;

                           v. (i) the Company or any of its  Subsidiaries  shall
                  commence, a case under any applicable bankruptcy or insolvency
                  laws as now or hereafter in effect or any  successor  thereto,
                  or  the  Company  or  any   Subsidiary   commences  any  other
                  proceeding under any reorganization,  arrangement,  adjustment
                  of  debt,  relief  of  debtors,  dissolution,   insolvency  or
                  liquidation or similar law of any jurisdiction  whether now or
                  hereafter in effect  relating to the Company or any Subsidiary
                  thereof or (ii) there is commenced  against the Company or any
                  Subsidiary  thereof any such  bankruptcy,  insolvency or other
                  proceeding which remains  undismissed for a period of 60 days;
                  or (iii) the Company or any Subsidiary  thereof is adjudicated
                  by a court of competent jurisdiction insolvent or bankrupt; or
                  any order of relief or other order  approving any such case or
                  proceeding is entered;  or (iv) the Company or any  Subsidiary
                  thereof  suffers any  appointment of any custodian or the like
                  for it or any substantial part of its property which continues
                  undischarged  or unstayed for a period of 60 days;  or (v) the
                  Company or any Subsidiary  thereof makes a general  assignment
                  for the benefit of  creditors;  or (vi) the Company shall fail
                  to pay,  or shall  state that it is unable to pay, or shall be
                  unable to pay,  its debts  generally  as they  become  due; or
                  (vii) the  Company  or any  Subsidiary  thereof  shall  call a
                  meeting  of  its   creditors   with  a  view  to  arranging  a
                  composition,  adjustment  or  restructuring  of its debts;  or
                  (viii) the Company or any Subsidiary  thereof shall by any act
                  or failure to act expressly  indicate its consent to, approval
                  of or  acquiescence  in any  of the  foregoing;  or  (ix)  any
                  corporate  or other  action  is taken  by the  Company  or any
                  Subsidiary  thereof  for the purpose of  effecting  any of the
                  foregoing;

                           vi. the Company or any  Subsidiary  shall  default in
                  any of its obligations under any mortgage, credit agreement or
                  other facility,  indenture  agreement,  factoring agreement or
                  other instrument under which there may be issued,  or by which
                  there  may  be  secured  or  evidenced  any  indebtedness  for
                  borrowed  money or money due under  any long term  leasing  or
                  factoring  arrangement  of the Company in an amount  exceeding
                  $50,000,   whether  such  indebtedness  now  exists  or  shall
                  hereafter  be created and such  default  shall  result in such
                  indebtedness  becoming or being declared due and payable prior
                  to the  date  on  which  it  would  otherwise  become  due and
                  payable;




                             Exhibit 10.2 - Page 16

<PAGE>

                           vii.  the  Common  Stock  shall not be  eligible  for
                  quotation  on or quoted for  trading  on a Trading  Market and
                  shall  not again be  eligible  for and  quoted  or listed  for
                  trading thereon within five Trading Days;

                           viii.   except  as  permitted   by  the   Transaction
                  Documents,  the Company shall redeem or  repurchase  more than
                  ten percent (10%) of its outstanding shares of Common Stock or
                  other equity securities of the Company (other than redemptions
                  of Conversion Shares and repurchases of shares of Common Stock
                  or other equity securities of departing officers and directors
                  of the Company;  provided such repurchases exceed $100,000, in
                  the aggregate,  for all officers and directors during the term
                  of this Debenture);

                           ix. if, during the  Effectiveness  Period (as defined
                  in the Registration  Rights  Agreement),  the effectiveness of
                  the Registration Statement lapses for any reason or the Holder
                  shall not be permitted to resell  Registrable  Securities  (as
                  defined  in  the  Registration  Rights  Agreement)  under  the
                  Registration  Statement,  in  either  case,  for more  than 15
                  consecutive calendar days or 25 non-consecutive  calendar days
                  during any 12 month  period;  provided,  however,  that in the
                  event that the Company is negotiating a merger, consolidation,
                  acquisition or sale of all or substantially  all of its assets
                  or a similar transaction and in the written opinion of counsel
                  to the Company, the Registration Statement,  would be required
                  to  be  amended  to  include   information   concerning   such
                  transactions  or the parties  thereto that is not available or
                  may not be publicly  disclosed at the time,  the Company shall
                  be permitted an additional 10 consecutive  Trading Days during
                  any 12 month period relating to such an event;

                           x. an Event (as  defined in the  Registration  Rights
                  Agreement)  shall  not  have  been  cured  to  the  reasonable
                  satisfaction  of the Holder prior to the  expiration of thirty
                  days  from the  Event  Date (as  defined  in the  Registration
                  Rights  Agreement)  relating  thereto  (other  than  an  Event
                  resulting  from a failure of a  Registration  Statement  to be
                  declared  effective  by  the  Commission  on or  prior  to the
                  Effectiveness  Date (as  defined  in the  Registration  Rights
                  Agreement), which shall be covered by Section 8(a)(xiii);

                           xi. the Company  shall fail for any reason to deliver
                  certificates  to a Holder after a Conversion  Date pursuant to
                  and in  accordance  with  Section  4(d) or the  Company  shall
                  provide  notice  to the  Holder,  including  by way of  public
                  announcement, at any time, of its intention not to comply with
                  requests for  conversions of any Debentures in accordance with
                  the terms hereof; or

                           xii. the Company shall fail for any reason to deliver
                  the payment in cash  pursuant to a Buy-In (as defined  herein)
                  within 5  Trading  Days  after  notice  thereof  is  delivered
                  hereunder; or





                             Exhibit 10.2 - Page 17

<PAGE>

                           xiii.  the  Company  shall fail to have  available  a
                  sufficient  number  of  authorized  and  unreserved  shares of
                  Common  Stock  to  issue  to  such  Holder  upon a  conversion
                  hereunder.

                  b)  Remedies  Upon Event of  Default.  If any Event of Default
         occurs,  the full  principal  amount of this  Debenture,  together with
         interest and other  amounts  owing in respect  thereof,  to the date of
         acceleration  shall become, at the Holder's  election,  immediately due
         and payable in cash.  The  aggregate  amount  payable  upon an Event of
         Default shall be equal to the Mandatory Prepayment Amount. Commencing 5
         Trading Days after the  occurrence of any Event of Default that results
         in the eventual  acceleration of this  Debenture,  the interest rate on
         this Debenture shall accrue at the rate of 18% per annum, or such lower
         maximum  amount of interest  permitted to be charged  under  applicable
         law. All  Debentures  for which the full  Mandatory  Prepayment  Amount
         hereunder shall have been paid in accordance herewith shall promptly be
         surrendered  to or as  directed  by the  Company.  The Holder  need not
         provide and the Company hereby waives any presentment,  demand, protest
         or other notice of any kind, and the Holder may immediately and without
         expiration  of any grace  period  enforce any and all of its rights and
         remedies  hereunder  and  all  other  remedies  available  to it  under
         applicable  law.  Such  declaration  may be  rescinded  and annulled by
         Holder at any time prior to payment hereunder and the Holder shall have
         all rights as a Debenture  holder until such time,  if any, as the full
         payment  under this  Section  shall have been  received  by it. No such
         rescission or annulment shall affect any subsequent Event of Default or
         impair any right consequent thereon.

         Section 9. Miscellaneous.

                  a)  Notices.  Any and all notices or other  communications  or
         deliveries to be provided by the Holder hereunder,  including,  without
         limitation, any Notice of Conversion, shall be in writing and delivered
         personally,  by facsimile, or sent by a nationally recognized overnight
         courier  service,  addressed to the  Company,  at the address set forth
         above,  facsimile number  972-681-9687,  Attn:  Calvin A. Wallen III or
         such other  address or facsimile  number as the Company may specify for
         such purposes by notice to the Holder delivered in accordance with this
         Section.  Any and all notices or other  communications or deliveries to
         be provided by the Company  hereunder shall be in writing and delivered
         personally,  by facsimile, or sent by a nationally recognized overnight
         courier  service  addressed  to the Holder at the  facsimile  telephone
         number or address of such Holder  appearing on the Debenture  Register,
         or if no such facsimile  telephone  number or address  appears,  at the
         principal  place  of  business  of the  Holder.  Any  notice  or  other
         communication  or  deliveries  hereunder  shall  be  deemed  given  and
         effective  on the  earliest  of (i) the date of  transmission,  if such
         notice or  communication  is delivered  via  facsimile at the facsimile
         telephone number specified in this Section prior to 5:30 p.m. (New York
         City  time),  (ii) the date  after  the date of  transmission,  if such
         notice or  communication  is delivered  via  facsimile at the facsimile
         telephone  number  specified in this Section  later than 5:30 p.m. (New
         York City time) on any date and earlier than 11:59 p.m.  (New York City
         time) on such  date,  (iii)  the  Business  Day  following  the date of
         deposit,  if sent by nationally  recognized  overnight  courier service
         with next day delivery instructions, or (iv) upon actual receipt by the
         party to whom such notice is required to be given.




                             Exhibit 10.2 - Page 18

<PAGE>

                  b) Absolute  Obligation.  Except as expressly provided herein,
         no provision of this Debenture  shall alter or impair the obligation of
         the Company, which is absolute and unconditional,  to pay the principal
         of, interest and liquidated  damages (if any) on, this Debenture at the
         time, place, and rate, and in the coin or currency,  herein prescribed.
         This  Debenture  is a  direct  debt  obligation  of the  Company.  This
         Debenture ranks pari passu with all other  Debentures  issued under the
         terms set forth in the Securities Purchase Agreement.

                  c) Lost or Mutilated  Debenture.  If this  Debenture  shall be
         mutilated,  lost,  stolen or  destroyed,  the Company shall execute and
         deliver,  in exchange and substitution  for and upon  cancellation of a
         mutilated  Debenture,  or in  lieu  of or in  substitution  for a lost,
         stolen or destroyed Debenture, a new Debenture for the principal amount
         of this Debenture so mutilated, lost, stolen or destroyed but only upon
         receipt  of  evidence  of  such  loss,  theft  or  destruction  of such
         Debenture,  and of the ownership hereof,  and indemnity,  if requested,
         all reasonably satisfactory to the Company.

                  d) Governing Law. All questions  concerning the  construction,
         validity,  enforcement  and  interpretation  of this Debenture shall be
         governed by and construed and enforced in accordance  with the internal
         laws of the State of New York,  without  regard  to the  principles  of
         conflicts of law thereof.  Each party agrees that all legal proceedings
         concerning  the   interpretations,   enforcement  and  defense  of  the
         transactions  contemplated by any of the Transaction Documents (whether
         brought against a party hereto or its respective affiliates, directors,
         officers, shareholders,  employees or agents) shall be commenced in the
         state and federal  courts  sitting in the City of New York,  Borough of
         Manhattan (the "New York Courts"). Each party hereto hereby irrevocably
         submits to the  exclusive  jurisdiction  of the New York Courts for the
         adjudication of any dispute hereunder or in connection herewith or with
         any transaction contemplated hereby or discussed herein (including with
         respect to the  enforcement of any of the Transaction  Documents),  and
         hereby irrevocably waives, and agrees not to assert in any suit, action
         or  proceeding,  any claim  that it is not  personally  subject  to the
         jurisdiction of any such court, or such New York Courts are improper or
         inconvenient  venue for such proceeding.  Each party hereby irrevocably
         waives personal service of process and consents to process being served
         in any such suit,  action or  proceeding  by mailing a copy thereof via
         registered or certified  mail or overnight  delivery  (with evidence of
         delivery)  to such party at the  address  in effect  for  notices to it
         under this Debenture and agrees that such service shall constitute good
         and sufficient service of process and notice thereof. Nothing contained
         herein  shall be deemed to limit in any way any right to serve  process
         in any manner  permitted by law. Each party hereto  hereby  irrevocably
         waives,  to the fullest extent permitted by applicable law, any and all
         right  to  trial  by jury in any  legal  proceeding  arising  out of or
         relating to this Debenture or the transactions  contemplated hereby. If
         either  party  shall  commence an action or  proceeding  to enforce any
         provisions of this Debenture,  then the prevailing party in such action
         or proceeding  shall be reimbursed by the other party for its attorneys
         fees and other  costs and  expenses  incurred  with the  investigation,
         preparation and prosecution of such action or proceeding.




                             Exhibit 10.2 - Page 19

<PAGE>

                  e) Waiver. Any waiver by the Company or the Holder of a breach
         of any provision of this Debenture shall not operate as or be construed
         to be a waiver of any other  breach of such  provision or of any breach
         of any other provision of this Debenture. The failure of the Company or
         the  Holder  to  insist  upon  strict  adherence  to any  term  of this
         Debenture on one or more occasions  shall not be considered a waiver or
         deprive  that  party of the  right  thereafter  to insist  upon  strict
         adherence to that term or any other term of this Debenture.  Any waiver
         must be in writing.

                  f)  Severability.  If  any  provision  of  this  Debenture  is
         invalid, illegal or unenforceable,  the balance of this Debenture shall
         remain in effect, and if any provision is inapplicable to any person or
         circumstance,  it shall  nevertheless  remain  applicable  to all other
         persons and  circumstances.  If it shall be found that any  interest or
         other amount deemed  interest due hereunder  violates  applicable  laws
         governing  usury,  the applicable  rate of interest due hereunder shall
         automatically  be  lowered  to  equal  the  maximum  permitted  rate of
         interest.  The Company covenants (to the extent that it may lawfully do
         so) that it shall not at any time insist upon,  plead, or in any manner
         whatsoever  claim  or take the  benefit  or  advantage  of,  any  stay,
         extension or usury law or other law which would prohibit or forgive the
         Company from paying all or any portion of the  principal of or interest
         on this Debenture as contemplated  herein,  wherever enacted, now or at
         any time  hereafter in force,  or which may affect the covenants or the
         performance  of this  indenture,  and the Company (to the extent it may
         lawfully do so) hereby  expressly  waives all  benefits or advantage of
         any such law,  and  covenants  that it will not,  by resort to any such
         law, hinder,  delay or impede the execution of any power herein granted
         to the Holder,  but will suffer and permit the  execution of every such
         covenant as though no such law has been enacted.

                  g) Next Business Day. Whenever any payment or other obligation
         hereunder shall be due on a day other than a Business Day, such payment
         shall be made on the next succeeding Business Day.

                  h) Headings. The headings contained herein are for convenience
         only,  do not  constitute  a part of this  Debenture  and  shall not be
         deemed to limit or affect any of the provisions hereof.

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
















                             Exhibit 10.2 - Page 20
<PAGE>

         IN WITNESS WHEREOF,  the Company has caused this Convertible  Debenture
to be duly  executed  by a duly  authorized  officer as of the date first  above
indicated.


                                            CUBIC ENERGY, INC.


                                            By:_________________________________
                                               Name: Calvin A. Wallen III
                                               Title:  Chief Executive Officer





























                             Exhibit 10.2 - Page 21
<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION


         The  undersigned  hereby  elects to  convert  principal  under the 7.0%
Senior Secured Convertible  Debenture of Cubic Energy, Inc., a Texas corporation
(the  "Company"),  due on September 30, 2009,  into shares of common stock,  par
value $0.05 per share (the  "Common  Stock"),  of the Company  according  to the
conditions  hereof,  as of the date written below. If shares are to be issued in
the name of a person other than the  undersigned,  the undersigned  will pay all
transfer  taxes  payable with respect  thereto and is  delivering  herewith such
certificates  and opinions as reasonably  requested by the Company in accordance
therewith.  No fee will be charged to the holder for any conversion,  except for
such transfer taxes, if any.

         By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its  ownership  of the  Company's  Common Stock
does not exceed the amounts  determined in accordance  with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.

         The  undersigned   agrees  to  comply  with  the  prospectus   delivery
requirements  under  the  applicable  securities  laws in  connection  with  any
transfer of the aforesaid shares of Common Stock.

Conversion calculations:

                        Date to Effect Conversion:

                        Principal Amount of Debentures to be Converted:

                        Payment of Interest in Common Stock __ yes __ no


                                    If  yes,  $_____  of  Interest   Accrued  on
                                    Account of Conversion at Issue.

                        Number of shares of Common Stock to be issued:


                        Signature:

                        Name:

                        Address: