Document:

Exhibit 10.2

                                 PROMISSORY NOTE

                               CUBIC ENERGY, INC.

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February 6, 2006                                                   $7,000,000.00

         FOR VALUE  RECEIVED,  the  undersigned,  CUBIC  ENERGY,  INC.,  a Texas
corporation ("Maker"),  promises to pay to the order of PETRO CAPITAL V, L.P., a
Texas limited  partnership  (herein called  "Payee",  which term shall herein in
every  instance  refer to any  owner or  holder  of this  Note) the sum of SEVEN
MILLION DOLLARS ($7,000,000.00),  or so much thereof as may be actually advanced
to Maker by Payee,  together with interest on the principal  hereof  outstanding
until maturity, said principal and interest being payable in lawful money of the
United States of America as more  particularly  provided in that certain  Credit
Agreement of even date herewith, between Maker and Payee (as such may be amended
or restated from time to time, the "Credit Agreement").  Capitalized terms used,
but not otherwise defined, herein shall have the meaning given such terms in the
Credit Agreement.

         Maker  may  prepay  this  Note in whole or in part as  provided  in the
Credit  Agreement  without being required to pay any penalty or premium for such
privilege,  provided that following such  prepayment,  Borrower may not reborrow
such amounts under this Note. All prepayments  hereunder,  whether designated as
payments of  principal  or  interest,  shall be applied in  accordance  with the
Credit Agreement.

         Maker and any and all sureties,  guarantors  and endorsers of this Note
and all other  parties now or hereafter  liable  hereon,  severally  waive grace
(except to the extent  otherwise  set forth in the  Credit  Agreement),  demand,
presentment for payment, protest, notice of any kind (including, but not limited
to, notice of dishonor, notice of protest, notice of intention to accelerate and
notice of  acceleration)  and diligence in collecting  and bringing suit against
any party hereto and agree (i) to all extensions and partial  payments,  with or
without notice, before or after maturity, (ii) to any substitution,  exchange or
release of any  security  now or  hereafter  given for this  Note,  (iii) to the
release of any party  primarily or secondarily  liable hereon,  and (iv) that it
will not be necessary  for Payee,  in order to enforce  payment of this Note, to
first  institute or exhaust  Payee's  remedies  against Maker or any other party
liable therefor or against any security for this Note.

         If any sum payable under this Note or under the Credit Agreement is not
paid when due (whether the same becomes due by  acceleration  or otherwise)  and
this Note is placed in the hands of an attorney for collection or enforcement of
this Note or the Credit  Agreement,  or if this Note is  collected  through  any
legal proceedings,  including,  but not limited to suit, probate,  insolvency or
bankruptcy  proceedings,  Maker agrees to pay all reasonable attorneys' fees and
all reasonable expenses of collection and costs of court.

         Regardless  of any  provision  contained in this Note or any other Loan
Document  executed or delivered in  connection  therewith,  Payee shall never be
deemed to have  contracted  for or be entitled  to receive,  collect or apply as
interest on this Note (whether  termed  interest herein or deemed to be interest
by judicial  determination  or  operation  of law),  any amount in excess of the
Highest  Lawful  Rate  (hereafter  defined),  and,  in the event that Payee ever
receives,  collects or applies as interest  any such  excess,  such amount which
would be  excessive  interest  shall be applied to the  reduction  of the unpaid
principal  balance of this Note,  and, if the principal  balance of this Note is
paid in  full,  any  remaining  excess  shall  forthwith  be paid to  Maker.  In
determining  whether  or not the  interest  paid or payable  under any  specific
contingency  exceeds the Highest  Lawful  Rate,  Maker and Payee  shall,  to the
maximum  extent  permitted  under  applicable  law,  (a)  characterize  any  non
principal  payment  (other  than  payments  which are  expressly  designated  as
interest payments  hereunder) as an expense or fee rather than as interest,  (b)

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exclude voluntary pre payments and the effect thereof,  and (c) spread the total
amount of interest  throughout the entire contemplated term of this Note so that
the interest rate is uniform throughout such term; provided that if this Note is
paid  and  performed  in full  prior to the end of the  full  contemplated  term
hereof,  and if the interest received for the actual period of existence thereof
exceeds the Highest  Lawful Rate,  if any, then Payee or any holder hereof shall
refund to Maker the amount of such  excess,  or credit the amount of such excess
against the aggregate unpaid principal  balance of all advances made by Payee or
any holder  hereof under this Note at the time in question.  Texas Finance Code,
Chapter 346,  which  regulates  certain  revolving  loan  accounts and revolving
tri-party accounts, shall not apply to any revolving loan accounts created under
this Note or the other Loan Documents or maintained in connection therewith.

         Maker  warrants  that this Note is  executed  solely  for  business  or
commercial  purposes,  other than agricultural  purposes and warrants that it is
not a consumer lending transaction  primarily for personal,  family or household
purposes.

         Any check,  draft,  money order or other instrument given in payment of
all or any portion  hereof may be accepted by Payee and handled in collection in
the customary  manner,  but the same shall not constitute  payment  hereunder or
diminish any rights of Payee  except to the extent that actual cash  proceeds of
such instrument are unconditionally received by Payee.

         Except to the  extent  required  by  federal  law,  this Note  shall be
governed by and construed under the laws of the State of Texas.

                                                    CUBIC ENERGY, INC.,
                                                    a Texas corporation

                                                    By: /s/ Calvin Wallen, III
                                                       -------------------------
                                                       Calvin Wallen, III
                                                       Chief Executive Officer

                                                              - MAKER -Exhibit 10.3

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

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

No. 11                                        Warrant to Purchase 250,000 Shares
February 6, 2006                      of Common Stock, $0.05 Par Value Per Share

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

         This certifies that, for value received, Petro Capital Securities, LLC,
or its registered assigns ("Holder") is entitled, subject to the terms set forth
below, to purchase from Cubic Energy, Inc., a Texas corporation (the "Company"),
250,000 shares of Common Stock,  $0.05 par value per share, of the Company (such
class of stock being  referred to herein as "Common  Stock"),  as constituted on
February  6,  2006  (the  "Issue  Date"),  upon  compliance  with  the  exercise
provisions  set forth in Section 1 hereof,  at the price of $1.00 per share (the
"Exercise  Price").  This Warrant  must be  exercised,  if at all,  prior to the
earlier  to occur of 5:00 p.m.,  Dallas,  Texas time on  February  6, 2011.  The
shares of Common  Stock  issued or issuable  upon  exercise of this  Warrant are
sometimes  referred to as the  "Warrant  Shares."  The term  "Warrants"  as used
herein shall include this Warrant and any warrants  delivered in substitution or
exchange therefor as provided herein.

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         Section 1. Exercise of Warrant.

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

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

                  Net Number = (A x B) - (A x C)
                               -----------------
                                       B

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                  For purposes of the foregoing formula:

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

                  B=       the  closing  sale price of the  Common  Stock on the
                           trading  day  immediately  preceding  the date of the
                           Exercise Notice.

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

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

         Section 3. Transfer and Exchange. Subject to the restrictions set forth
in Section 10(a)(iv), this Warrant and all rights hereunder are transferable, in
whole or in part.  This  Warrant  is  transferable  on the books of the  Company
maintained  for such purpose at its  principal  office by Holder in person or by
duly authorized  attorney,  upon surrender of this Warrant properly endorsed and
upon payment of any necessary transfer tax or other governmental  charge imposed
upon such transfer.  Each taker and holder of this Warrant, by taking or holding
the same,  consents and agrees that this Warrant,  when endorsed in blank, shall
be deemed negotiable and that when this Warrant shall have been so endorsed, the
Holder hereof may be treated by the Company and all other  persons  dealing with
this  Warrant as the  absolute  owner  hereof for any  purpose and as the person
entitled to exercise the rights  represented hereby or to the transfer hereof on
the books of the Company, any notice to the contrary notwithstanding;  but until
such transfer on such books, the Company may treat the registered  Holder hereof
as the owner for all purposes.

         Section 4. Certain Adjustments.

         (a) In order to prevent dilution of the rights granted  hereunder,  the
Exercise  Price shall be subject to  adjustment  from time to time in accordance
with this  Section 4. For purposes of this Section 4, the term "Number of Common
Shares Deemed  Outstanding" at any given time shall mean the number of shares of
Common Stock  outstanding at such time on a fully diluted  basis,  including all
options,  warrants and securities convertible into or exchangeable for shares of
Common Stock and, without duplication,  the number of shares of the Common Stock
deemed to be outstanding  under paragraphs  4(b)(1) to (9),  inclusive,  at such

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time, and excluding (i) any default warrants issued pursuant to the transactions
contemplated by the  Confidential  Private  Placement  Memorandum of the Company
dated as of November 8, 2005,  and (ii) the issuance,  at any time prior to June
2,  2007,  of up to  1,500,000  shares of Common  Stock (as  adjusted  for stock
splits,  reverse  stock  splits and stock  dividends)  issuable as  equity-based
compensation  to certain  of the  Company's  directors,  executive  officers  or
employees under the Company's 2005 Stock Option Plan.

         (b) Except as provided in Section  4(c),  4(d) or 4(e)  hereof,  if and
whenever  after the date  hereof the Company  shall  issue or sell,  or shall in
accordance with paragraphs 4(b)(1) to (9),  inclusive,  be deemed to have issued
or sold any shares of its Common Stock for a  consideration  per share less than
the Current Market Price in effect  immediately  prior to the time of such issue
or sale, then forthwith upon such issue or sale (the "Triggering  Transaction"),
the Exercise Price shall, subject to paragraphs (1) to (9) of this Section 4(b),
be reduced to an adjusted Exercise Price (calculated to the nearest hundredth of
a cent) determined by multiplying the Exercise Price  immediately  preceding the
new share issuance by a fraction:

                  (i) the numerator of which shall be an amount equal to the sum
         of (x) the Number of Common Shares Deemed Outstanding immediately prior
         to  such   Triggering   Transaction   plus  (y)  the  quotient  of  the
         consideration, if any, received by the Company upon consummation of the
         Triggering  Transaction divided by the Current Market Price immediately
         prior to the time of such issue or sale; and

                  (ii) the  denominator  of which  shall be the Number of Common
         Shares  Deemed   Outstanding   immediately  prior  to  such  Triggering
         Transaction  plus (y) the number of shares of Common  Stock  issued (or
         deemed to be issued in accordance  with  paragraphs  4(b)(1) to (9)) in
         connection with the Triggering Transaction.

         "Current Market Price" on any date specified herein,  means the average
daily Market Price during the period of the most recent 20 consecutive  business
days,  ending on the business day  immediately  prior to such date, on which the
national  securities  exchanges were open for trading,  except that if no Common
Stock is then listed or admitted to trading on any national  securities exchange
or quoted in the over-the-counter  market, the Current Market Price shall be the
Market Price on such date.  "Market Price" on any date specified  herein,  means
the amount per share of the  Common  Stock,  equal to (a) the last sale price of
such Common Stock,  regular way, on such date or, if no such sale takes place on
such date, the average of the closing bid and asked prices thereof on such date,
in  each  case as  officially  reported  on the  principal  national  securities
exchange  on which such Common  Stock is then listed or admitted to trading,  or
(b) if such  Common  Stock is not then  listed or  admitted  to  trading  on any
national  securities  exchange but is  designated  as a national  market  system
security by the NASD,  the last trading  price of the Common Stock on such date,
or (c) if there  shall have been no trading on such date or if the Common  Stock

                                      -4-
<PAGE>

is not so  designated,  the average of the  closing bid and asked  prices of the
Common  Stock on such date as shown by the NASD  automated  quotation  system or
over-the-counter  market,  or (d) if such  Common  Stock is not then  listed  or
admitted to trading on any national  exchange or quoted in the  over-the-counter
market,  the  fair  value  thereof  determined  in good  faith  by the  Board of
Directors  of the Company as of a date which is within 20 days of the date as of
which the determination is to be made.

         For  purposes of  determining  the adjusted  Exercise  Price under this
Section  4(b),  the  following  paragraphs  (1)  to  (9),  inclusive,  shall  be
applicable:

                  (1) In case the Company at any time shall in any manner  grant
         (whether directly or by assumption in a merger or otherwise) any rights
         to subscribe  for or to  purchase,  or any options for the purchase of,
         Common  Stock  or any  stock or other  securities  convertible  into or
         exchangeable  for Common Stock other than  options (and the  securities
         issued in exercise  thereof)  with respect to the  3,750,000  shares of
         Common Stock (as adjusted for stock  splits,  reverse  stock splits and
         stock dividends) issuable under the Company's 2005 Stock Option Plan so
         long as the option price on the initial date of grant equals or exceeds
         the then  Current  Market  Price (such  rights or options  being herein
         called  "Options"  and  such  convertible  or  exchangeable   stock  or
         securities being herein called  "Convertible  Securities"),  whether or
         not  such  Options  or the  right  to  convert  or  exchange  any  such
         Convertible  Securities are  immediately  exercisable and the price per
         share for which the Common Stock is issuable upon exercise,  conversion
         or exchange  (determined  by  dividing  (x) the total  amount,  if any,
         received or receivable by the Company as consideration for the granting
         of such  Options,  plus the  minimum  aggregate  amount  of  additional
         consideration  payable to the  Company  upon the  exercise  of all such
         Options,  plus, in the case of such Options which relate to Convertible
         Securities,  the minimum aggregate amount of additional  consideration,
         if any, payable upon the issue or sale of such  Convertible  Securities
         and upon the conversion or exchange  thereof,  by (y) the total maximum
         number of shares of Common  Stock  issuable  upon the  exercise of such
         Options or the conversion or exchange of such  Convertible  Securities)
         shall be less than the Exercise  Price in effect  immediately  prior to
         the time of the granting of such Option,  then the total maximum amount
         of Common  Stock  issuable  upon the exercise of such Options or in the
         case of Options for  Convertible  Securities,  upon the  conversion  or
         exchange  of  such  Convertible  Securities  shall  (as of the  date of
         granting of such Options) be deemed to be outstanding  and to have been
         issued and sold by the Company for such price per share.  No adjustment
         of the  Exercise  Price  shall be made  upon the  actual  issue of such
         shares of Common Stock or such Convertible Securities upon the exercise
         of such Options, except as otherwise provided in paragraph (3) below.

                  (2) In case the Company at any time shall in any manner  issue
         (whether  directly or by  assumption  in a merger or otherwise) or sell
         any  Convertible  Securities,  whether or not the rights to exchange or
         convert thereunder are immediately exercisable, and the price per share

                                      -5-
<PAGE>

         for which Common  Stock is issuable  upon such  conversion  or exchange
         (determined by dividing (x) the total amount  received or receivable by
         the Company as consideration  for the issue or sale of such Convertible
         Securities,   plus  the   minimum   aggregate   amount  of   additional
         consideration,  if any,  payable to the Company upon the  conversion or
         exchange  thereof,  by (y) the total maximum number of shares of Common
         Stock issuable upon the conversion or exchange of all such  Convertible
         Securities) shall be less than the Exercise Price in effect immediately
         prior to the time of such issue or sale,  then the total maximum number
         of shares of Common Stock  issuable upon  conversion or exchange of all
         such Convertible  Securities shall (as of the date of the issue or sale
         of such Convertible Securities) be deemed to be outstanding and to have
         been  issued  and sold by the  Company  for such  price per  share.  No
         adjustment of the Exercise Price shall be made upon the actual issue of
         such  Common  Stock upon  exercise of the rights to exchange or convert
         under such  Convertible  Securities,  except as  otherwise  provided in
         paragraph (3) below.

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

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

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

                                      -6-
<PAGE>

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

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

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

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

         (c) In the event the Company  shall  declare a dividend upon the Common
Stock (other than a dividend payable in Common Stock) payable otherwise than out
of earnings or earned surplus,  determined in accordance with generally accepted
accounting  principles,  including  the  making of  appropriate  deductions  for
minority interests,  if any, in subsidiaries (herein referred to as "Liquidating
Dividends"),  then, as soon as possible after the exercise of this Warrant,  the
Company shall pay to the person  converting  this Warrant an amount equal to the
aggregate  value at the time of such  exercise of all  Liquidating  Dividends to
which such holder  would have been  entitled if such holder had  converted  this

                                      -7-
<PAGE>

Warrant to Common Stock prior to the declaration of the  Liquidating  Dividends,
at the then applicable  Exercise Price. For the purposes of this Section 4(c), a
dividend  other than in cash shall be  considered  payable  out of  earnings  or
earned  surplus  only to the extent  that such  earnings  or earned  surplus are
charged an amount equal to the fair value of such dividend as determined in good
faith by the Board of Directors.

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

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

         (f) In the event that:

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

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

                                      -8-
<PAGE>

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

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

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

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

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

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

         Such  notice in  accordance  with the  foregoing  clause (i) shall also
specify, in the case of any such dividend,  distribution or subscription rights,
the date on which the holders of Common  Stock shall be  entitled  thereto,  and
such notice in accordance with the foregoing  clause (ii) shall also specify the
date on which the holders of Common  Stock  shall be entitled to exchange  their
Common  Stock  for   securities  or  other   property   deliverable   upon  such
reorganization,  reclassification,  consolidation,  merger,  sale,  dissolution,
liquidation or winding up, as the case may be. Each such written notice shall be
given by first class mail,  postage  prepaid,  addressed  to the holders of this
Warrant at the address of each such holder as shown on the books of the Company.

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

                                      -9-
<PAGE>

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

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

         (h) If any event  occurs as to which,  in the  opinion  of the Board of
Directors  of the  Company,  the  provisions  of this Section 6 are not strictly
applicable or if strictly  applicable would not fairly protect the rights of the
holders of the Warrants in accordance  with the essential  intent and principles
of such provisions,  then the Board of Directors shall make an adjustment in the
application of such  provisions,  in accordance  with such essential  intent and
principles, so as to protect such rights as aforesaid, but in no event shall any
adjustment  have the  effect  of  increasing  the  Exercise  Price as  otherwise
determined  pursuant to any of the  provisions  of this  Section 4 except in the
case of a combination  of shares of a type  contemplated  in Section 4(d) hereof
and then in no event to an amount  larger  than the  Exercise  Price as adjusted
pursuant to Section 4(d) hereof.

         Section 5. Reorganization,  Reclassification,  Merger, Consolidation or
Disposition of Assets.  If the Company shall reorganize its capital,  reclassify
its capital  stock,  consolidate  or merge with or into another  corporation  or
entity (where the Company is not the surviving  corporation  or where there is a
change in or  distribution  with  respect to the  shares of Common  Stock of the
Company) or sell,  transfer or otherwise dispose of all or substantially all its
property,  assets or  business  to another  corporation  or other  entity  (such
successor or acquiring  corporation  or entity,  an  "Acquiring  Entity"),  and,
pursuant  to  the  terms  of  such  reorganization,   reclassification,  merger,
consolidation or disposition of assets,  common shares of the Acquiring  Entity,
or any cash,  shares of stock or other  securities  or  property  of any  nature
whatsoever  (including  warrants or other  subscription  or purchase  rights) in
addition  to or in  lieu  of  common  shares  of the  Acquiring  Entity  ("Other
Property"),  are to be received by or distributed to the holders of Common Stock
of the Company,  then the holder of this Warrant shall have the right thereafter
to  receive in lieu of the Common  Stock  described  in Section 1, the number of
shares of common stock of the  Acquiring  Entity or Common Stock of the Company,
if it is the surviving  corporation,  and Other Property receivable upon or as a
result  of  such  reorganization,  reclassification,  merger,  consolidation  or
disposition  of assets by a holder of the number of shares of Common  Stock that

                                      -10-
<PAGE>

the Holder of this  Warrant  would have owned or been  entitled  to receive  had
Common Stock been issued to such Holder under Section 1 on full exercise of this
Warrant  immediately  prior to such event.  In case of any such  reorganization,
reclassification,  merger, consolidation or disposition of assets, the Acquiring
Entity (if other than the Company) shall  expressly  assume all the  obligations
and liabilities of the Company  hereunder,  subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the board of
directors  of the  Company)  in order to provide  for  adjustments  of shares of
Common Stock  issuable  under  Section 1 which shall be as nearly  equivalent as
practicable to the  adjustments  provided for in Section 4. For purposes of this
Section 5, "common shares of the Acquiring Entity" shall include shares or other
ownership interests of such Acquiring Entity of any class which is not preferred
as to  dividends  or  assets  over any other  class of stock or other  ownership
interests of such  Acquiring  Entity and which is not subject to redemption  and
shall also include any  evidences of  indebtedness,  shares or other  securities
which  are  convertible  into or  exchangeable  for any  such  shares  or  other
ownership interests,  either immediately or upon the arrival of a specified date
or the  happening  of a  specified  event and any  warrants  or other  rights to
subscribe  for or  purchase  any such stock or other  ownership  interests.  The
foregoing  provisions  of this  Section 4 shall  similarly  apply to  successive
reorganizations,   reclassifications,  mergers,  consolidations,  spin-offs,  or
dispositions of assets.

         Section 6. Certain Notices,  Etc.  Whenever the Exercise Price shall be
adjusted as provided in Section 4 hereof,  the Company shall  forthwith  file at
each office designated for the exercise of Warrants, a statement,  signed by the
Chairman of the Board,  the  President,  any Vice  President or Treasurer of the
Company,  showing in reasonable  detail the facts  requiring such adjustment and
the Exercise  Price that will be effective  after such  adjustment.  The Company
shall also cause a notice setting forth any such adjustments to be sent by mail,
first class,  postage prepaid,  to each record holder of a Warrant at his or its
address appearing on the stock register. If such notice relates to an adjustment
resulting from an event referred to in Section 4(f) hereof, such notice shall be
included  as part of the notice  required to be mailed and  published  under the
provisions of Section 4(f) hereof.

         Section 7. Loss or Mutilation.  Upon receipt by the Company of evidence
satisfactory  to it (in the exercise of reasonable  discretion) of the ownership
of and the loss,  theft,  destruction  or  mutilation of any Warrant and (in the
case of loss,  theft or  destruction)  of indemnity  satisfactory  to it (in the
exercise  of  reasonable  discretion),  and (in the  case  of  mutilation)  upon
surrender and cancellation thereof, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor.

         Section 8.  Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its  authorized but unissued  shares of Common
Stock,  solely for the purpose of effecting  the  exercise of the Warrant,  such
number of its shares of Common Stock as shall from time to time be sufficient to
effect exercise of the Warrant;  and if at any time the number of authorized but

                                      -11-
<PAGE>

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

         Section 9.  Notices of Record  Date.  In the event of (i) any taking by
the  Company  of a record  of the  holders  of any class of  securities  for the
purpose of  determining  the  holders  thereof  who are  entitled to receive any
dividend  or other  distribution,  or (ii)  any  capital  reorganization  of the
Company,  any  reclassification  or recapitalization of the capital stock of the
Company,  any  merger or  consolidation  of the  Company  with or into any other
corporation (other than a merger of a wholly owned subsidiary into the Company),
or any transfer of all or substantially  all of the assets of the Company to any
other person or any voluntary or involuntary dissolution, liquidation or winding
up of the Company, the Company shall provide to the Holder, at least twenty (20)
days prior to the record date  specified  therein,  a notice  specifying (1) the
date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which  any  such  reorganization,   reclassification,  transfer,  consolidation,
merger, dissolution,  liquidation or winding up is expected to become effective,
and (3) the date, if any, that is to be fixed,  as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of  Common  Stock  (or  other  securities)  for  securities  or  other  property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.

         Section 10. Investment Representation and Restriction on Transfer.

         (a) Securities Law Requirements.

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

                                      -12-
<PAGE>

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

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

                  (iv) By its acceptance of this Warrant,  Holder agrees that in
         no event will it  transfer  or dispose  of any of the  Warrants  or the
         Warrant  Shares  other  than  pursuant  to  an  effective  registration
         statement  under  the Act,  unless  and  until (i)  Holder  shall  have
         notified  the  Company  of the  proposed  disposition  and  shall  have
         furnished the Company with a statement of the circumstances surrounding
         the disposition,  and (ii) if requested by the Company,  at the expense
         of the Holder or transferee,  it shall have furnished to the Company an
         opinion of counsel,  reasonably  satisfactory  to the  Company,  to the
         effect that (A) such  transfer may be made without  registration  under
         the Act and (B)  such  transfer  or  disposition  will  not  cause  the
         termination   or  the   non-applicability   of  any  exemption  to  the
         registration and prospectus delivery  requirements of the Act or to the
         qualification  or  registration  requirements of the securities laws of
         any other  jurisdiction  on which the  Company  relied in  issuing  the
         Warrant or the Warrant Shares.

                  (v) Holder  represents  and warrants that it is an "accredited
         investor" as defined in Rule 501 of Regulation D promulgated  under the
         Securities Act.

         (b) Legends; Stop Transfer.

                                      -13-
<PAGE>

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

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

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

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

         Section 11.  Notices.  All notices  and other  communications  from the
Company  to the  Holder of this  Warrant  shall be mailed by hand  delivery,  by
telecopier,  by courier guaranteeing  overnight delivery or by first-class mail,
return  receipt  requested,  and shall be deemed given (i) when made, if made by
hand delivery,  (ii) upon  confirmation,  if made by  telecopier,  (iii) one (1)
Business  Day after being  deposited  with such  courier,  if made by  overnight
courier  or (iv) on the date  indicated  on the  notice of  receipt,  if made by
first-class mail.

         Section 12.  Change;  Waiver.  Neither this Warrant nor any term hereof
may be  changed,  waived,  discharged  or  terminated  orally,  but  only  by an
instrument  in writing  signed by the party  against  which  enforcement  of the
change, waiver, discharge or termination is sought.

         Section 13. Headings.  The headings in this Warrant are for purposes of
convenience  in  reference  only,  and shall not be deemed to  constitute a part
hereof.

         Section 14. Governing Law. This Warrant shall be construed and enforced
in  accordance  with  and  governed  by the  internal  laws,  and not the law of
conflicts, of the State of Texas.

                                      -14-
<PAGE>

                                                CUBIC ENERGY, INC.,
                                                a Texas corporation
                                                By:     /s/Calvin Wallen, III
                                                       -------------------------
                                                Name:  Calvin Wallen, III
                                                       -------------------------
                                                Title: Chief Executive Officer
                                                       -------------------------

                                      -15-
<PAGE>

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

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

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

         _______  "Cash  Exercise"  with  respect to  ________  Warrant  Shares;
                  and/or

         _______  "Cashless  Exercise"  with respect to ________  Warrant Shares
                  (to the extent permitted by the terms of the Warrant)

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

DATED:______________

                                       _________________________________________
                                       (Signature of Holder)

                                       _________________________________________
                                       (Street Address)

                                       _________________________________________
                                       (City) (State) (Zip)

<PAGE>

                               FORM OF ASSIGNMENT

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

Name of Assignee                   Address                         No. of Shares
----------------                   -------                         -------------

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

DATED:  ___________________

                                       _________________________________________
                                       (Signature)

                                       _________________________________________
                                       (Witness)

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