Document:

Exhibit 10.1

                               CUBIC ENERGY, INC.

                 SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT

     This  Subscription  and Registration  Rights Agreement (this  "Agreement"),
dated as of July 26, 2006, by and between Cubic Energy, Inc. (the "Company") and
George  Karfunkel  (the   "Subscriber"),   is  intended  to  set  forth  certain
representations,   covenants  and   agreements   between  the  Company  and  the
Subscriber,  with  respect  to the  offering  (the  "Offering")  for sale by the
Company of units (the  "Units"),  each of which  consists of one share of Common
Stock, par value $0.05 per share (the "Common  Stock"),  together with a warrant
to purchase one-half of a share of Common Stock at an initial exercise price per
share of Common Stock equal to the Offering Price (as defined below),  the terms
of which  are set  forth in the form of  Warrant  Agreement  attached  hereto as
Exhibit D hereto.  The shares of Common Stock included in Units purchased hereby
are  referred  to herein as the  "Shares,"  the  warrants  included in the Units
purchased  hereby are  referred  to herein as the  "Warrants"  and the shares of
Common Stock  issuable  upon  exercise of the Warrants are referred to herein as
the  "Exercise  Shares." The Shares,  the  Warrants and the Exercise  Shares are
collectively referred to herein as the "Securities." The Shares and Warrants are
immediately  separable and may be transferred  separately in compliance with the
restrictions  on transfer set forth  herein and in the terms of the Warrant,  as
applicable.

     1. Subscription. Subject to the terms and conditions hereof, the Subscriber
hereby  irrevocably  subscribes  for and agrees to purchase from the Company the
number of Units set forth  under the  Subscriber's  name on the  signature  page
hereto at a purchase  price of $0.70 per Unit (the  "Offering  Price"),  and the
Company  agrees to sell such  Units to the  Subscriber  at the  Offering  Price,
subject to the Company's  right to sell to the Subscriber  such lesser number of
Units as the Company may, in its sole discretion, deem necessary or desirable.

     2. Delivery of Subscription Amount; Acceptance of Subscription; Delivery of
Units.  Subscriber understands and agrees that this subscription is made subject
to the following terms and conditions:

         (a) Subscriber  understands that separate subscription  agreements will
be executed  with other  investors  for the remainder of the Units to be sold in
the Offering;

         (b)   Contemporaneously   with  the  execution  and  delivery  of  this
Agreement,  Subscriber  shall execute and deliver the  Certificate of Accredited
Investor  Status  attached  hereto as Exhibit  B, and shall wire to the  Company
immediately available funds in the amount equal to the Offering Price multiplied
by  the  number  of  Units  for  which  the  Subscriber   has  subscribed   (the
"Subscription  Amount") in accordance with the instructions set forth on Exhibit
A hereto.  The  subscription  for Units shall be deemed to be accepted only when
this Agreement has been signed by an authorized officer of the Company;

         (c) The Company  shall have the right to reject this  subscription,  in
whole or in part, and shall have the right to allocate  Units among  subscribers
in any manner it may desire;  provided, that no subscriber shall be obligated to
purchase more than the number of Units set forth under its name on the signature
page hereto without its prior written consent;

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         (d)  The  payment  of the  Subscription  Amount  (or,  in the  case  of
rejection of a portion of the Subscriber's subscription, the part of the payment
relating to such rejected portion) will be returned,  without  interest,  (1) if
Subscriber's  subscription  is  rejected  in  whole  or in  part,  or (2) if the
Offering is withdrawn or canceled;

         (e)  Certificates  representing  the  Shares and the  Warrants  will be
issued in the name of each  Subscriber  at Closing as set forth under  Section 3
hereof;

         (f)  Jefferies  & Company,  Inc.  (the  "Placement  Agent")  shall have
received the favorable opinion, dated as of Closing, of counsel for the Company,
in form and substance satisfactory to counsel for the Placement Agent.

         (g) The  representations  and  warranties of the Company and Subscriber
set forth  herein  shall be true and  correct  as of the date  that the  Company
accepts this subscription.

     3. Terms of Subscription.

         (a) The  subscription  period will begin as of July 26th, 2006 and will
terminate at 4:59 p.m.,  Eastern time, on July 27, 2006,  unless extended by the
Company,  on one or more  occasions,  for up to an additional ten (10) days (the
"Termination  Date").  Such  extension  may be  effected  without  notice to the
Subscribers.  The  purchase and sale of the Units (the  "Closing"),  and funding
thereof,  shall  occur  as soon  as  practicable  after  the  execution  of this
Agreement by the Company and each of the  Subscribers  in the Offering at a time
and  location  (the  "Closing   Date")  agreed  upon  by  the  Company  and  the
Subscribers, and in no event later than 4:59 pm, Central time, on July 28, 2006.
Immediately  after the Closing  Date,  the Company  will  deliver or cause to be
delivered,  one or more physical certificates  representing the Shares purchased
by each Subscriber.

         (b) As compensation for advisory services,  the Company will pay to the
Placement  Agent  aggregate  fees  equal to two  percent  (2%) of the  aggregate
purchase  price of the Units sold and shall issue  Warrants  convertible  into a
number  of  shares of Common  Stock  equal to 5 percent  of the total  number of
shares of Common  Stock  sold in the  Offering.  The  Company  will also pay all
reasonable and documented expenses of the Placement Agent in connection with the
Offering, up to $30,000.

         (c) If the  Subscriber is not a United States  person,  the  Subscriber
hereby  represents that it has satisfied itself as to the full observance of the
laws of its  jurisdiction in connection with any invitation to subscribe for the
Units or any use of this Agreement,  including (i) the legal requirements within
its  jurisdiction  for the  purchase  of the Units,  (ii) any  foreign  exchange
restrictions  applicable  to such  purchase,  (iii)  any  governmental  or other
consents  that may need to be  obtained,  and (iv) the  income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Securities.  The  Subscriber's  subscription and payment
for, and his or her  continued  beneficial  ownership of any of the  Securities,
will not violate any  applicable  securities  or other laws of the  Subscriber's
jurisdiction.

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     4. Registration Rights.

         (a) Subscriber  acknowledges that it is acquiring the Units for its own
account  and  for  the  purpose  of  investment  and  not  with  a  view  to any
distribution or resale thereof within the meaning of the Securities Act of 1933,
as amended,  (the "Securities  Act"). The Subscriber further agrees that it will
not sell,  assign or  transfer  any  Security  at any time in  violation  of the
Securities Act and acknowledges that, in taking unregistered securities, it must
continue to bear the economic risk of its investment for an indefinite period of
time  because of the fact that  Securities  have not been  registered  under the
Securities  Act, and further  realizes that none of the  Securities  can be sold
unless  subsequently  registered  under the  Securities Act or an exemption from
such  registration  is available.  The Subscriber  further  recognizes  that the
Company is not  assuming  any  obligation  to register  any  Security  except as
expressly set forth herein.  The Subscriber also  acknowledges  that appropriate
legends  reflecting the status of the Securities under the Securities Act may be
placed on the face of the  certificates  for each such  Security  at the time of
their transfer and delivery to the holder thereof.

         (b) No Security may be transferred  except in a transaction which is in
compliance with the Securities Act. Except as provided hereafter with respect to
registration of the Shares and the Exercise  Shares,  it shall be a condition to
any such transfer that the Company shall be furnished with an opinion of counsel
to the holder of such Security,  reasonably  satisfactory to the Company, to the
effect that the proposed  transfer  would be in compliance  with the  Securities
Act.

         (c) Within 45 days after the Closing (the "Filing  Date"),  the Company
shall use its best efforts to prepare and file with the  Securities and Exchange
Commission  (the  "SEC"),  one or more  registration  statements  and such other
documents as may be necessary in the opinion of counsel for the Company, and use
its commercially reasonable efforts to have such registration statement declared
effective  within  120 days after the  Filing  Date in order to comply  with the
provisions of the Securities  Act so as to permit the  registered  resale of the
Shares,  for a period of two (2)  years  following  the  Closing  Date,  and the
registered  resale  of the  Exercise  Shares,  for so long as the  Warrants  are
outstanding. The Shares and Exercise Shares that are registered for resale under
such registration statement are referred to herein as the "Offering Securities,"
and the Subscriber,  together with its affiliates and transferees, are hereafter
referred to as "Offering Holders." The Company will include in such registration
statement  (i)  the  information  required  under  the  Securities  Act to be so
included concerning the Offering Holders, as provided by the Offering Holders at
the  reasonable   request  of  the  Company,   including  any  changes  in  such
information,  or  information  provided  by new  Offering  Holders,  that may be
provided by the  Offering  Holders in writing to the Company  from time to time,
and (ii) a section entitled "Plan of Distribution," substantially in the form of
Exhibit C hereto,  that describes the various procedures that may be used by the
Offering  Holders in the sale of Shares or Exercise Shares;  provided,  however,
that no holder of Shares or Exercise  Shares (other than a Subscriber)  shall be
entitled  to have  the  securities  held  by it  covered  by  such  registration
statement unless such holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such holder.

         (d) If the registration statement referred to in Section 4(c) above has
not been  declared  effective by the SEC within 120 days after the Closing Date,
the Company shall pay  liquidated  damages of 1% of the Offering Price per share

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for every Share.  In addition,  the Company shall pay  liquidated  damages of an
additional  1% of the  Offering  Price per share for every Share for each 30-day
period of delay following such initial 120-day period. The payment of liquidated
damages  may be made,  at the option of the  Company,  in  additional  shares of
Common  Stock  valued at the  average  market  price of such shares for the five
trading  days  preceding  the  date of  payment.  The  foregoing  payment  shall
constitute  the sole monetary  remedy  available to the  Subscriber in the event
that the Company  does not comply with the  deadlines  set forth in Section 4(c)
with  respect to the  filing and  effectiveness  of the  registration  statement
referred to therein.

         (e)  Notwithstanding  the  foregoing  provisions of this Section 4, the
Company may voluntarily suspend the use of any such registration statement for a
limited time,  which in no event shall be longer than 30 days in any three month
period and no longer than 90 days in any twelve month period, if the Company has
been  advised in writing by counsel  or  underwriters  to the  Company  that the
offering of any Offering Securities pursuant to the registration statement would
materially  adversely  affect,  or would  be  improper  in view of (or  improper
without  disclosure in a prospectus),  a proposed  financing,  a reorganization,
recapitalization,  merger,  consolidation,  or similar transaction involving the
Company.  In  addition,  the Company  may  suspend the use of such  registration
statement  for the 15 calendar  days  following the filing of any Form 8-K, Form
10-QSB  or Form  10-KSB,  or other  comparable  form for  purposes  of  filing a
post-effective amendment to the registration statement. If any event occurs that
would cause any such registration  statement to contain a material  misstatement
or  omission  or not to be  effective  and usable  during  the period  that such
registration  statement is required to be effective  and usable,  subject to the
time periods set forth above,  the Company  shall  promptly file an amendment to
the registration statement and use its commercially  reasonable efforts to cause
such  amendment  to be declared  effective  as soon as  practicable  thereafter.
Notwithstanding  any provision  contained herein to the contrary,  the Company's
obligation to include,  or continue to include,  Offering Securities in any such
registration  statement  under this Section 4 shall terminate to the extent such
securities  are  eligible  for resale  under Rule 144(k)  promulgated  under the
Securities Act.

         (f) If and whenever the Company is required by the  provisions  of this
Agreement to use its commercially  reasonable efforts to effect the registration
of the  Offering  Securities  under the  Securities  Act for the  account  of an
Offering Holder, the Company will, as promptly as possible:

                  (i)  prepare  and file with the SEC a  registration  statement
         with respect to such  securities  and use its  commercially  reasonable
         efforts  to cause  such  registration  statement  to become  and remain
         effective,  subject to the Company's obligations to file post-effective
         amendments to such registration statement;

                  (ii)  prepare  and  file  with  the SEC  such  amendments  and
         supplements to such  registration  statement and the prospectus used in
         connection  therewith  as may be  necessary  to keep such  registration
         statement  effective  and  to  comply  with  the  requirements  of  the
         Securities  Act and the rules and  regulations  promulgated  by the SEC
         thereunder  relating to the sale or other disposition of the securities
         covered by such registration statement;

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<PAGE>

                  (iii)  include  in  each  such  document  the  names  of  each
         Subscriber who continues to hold Offering Securities,  except for those
         Subscribers who designate on the signature page hereto that they do not
         wish to have their securities  included in the registration  statement,
         and the names of any new Offering  Holders who have  delivered  written
         notice to the Company at least three  business days prior to the filing
         thereof that they propose to sell Offering  Securities  pursuant to the
         registration statement as selling securityholders;

                  (iv) file pursuant to Rule 424(b) under the  Securities Act an
         amendment  to the  registration  statement or amend,  if required,  the
         registration  statement  and  prospectus,  in each  case,  to cover new
         Offering  Holders  upon at least seven  business  days'  prior  written
         notice by such new Offering Holders to such effect; provided,  however,
         that (A) in no event shall the Company be required to file  pursuant to
         Rule 424(b) under the Securities  Act a supplement to the  registration
         statement  to  cover  new  Offering  Holders  other  than on the  third
         Thursday of each calendar  month  following the calendar month in which
         the  registration  statement is declared  effective and (B) in the case
         where a  post-effective  amendment is  required,  in no event shall the
         Company be required  to file a  post-effective  amendment  to cover new
         Offering  Holders  other than on the third  Thursday  of the third full
         calendar month  following the calendar month in which the  registration
         statement  is  declared  effective  and  the  third  Thursday  of  each
         subsequent  third month  thereafter;  any delay in  effectiveness  as a
         result of the foregoing shall be excluded from the periods set forth in
         subsection (e) above; and

                  (v) furnish to each Offering  Holder such numbers of copies of
         a prospectus,  including a preliminary  prospectus,  complying with the
         requirements  of the Securities  Act, and such other  documents as such
         Offering  Holder  may  reasonably  request in order to  facilitate  the
         public sale or other  disposition of the Offering  Securities  owned by
         such Offering Holder, but such Offering Holder shall not be entitled to
         use any  selling  materials  other  than a  prospectus  and such  other
         materials as may be approved by the Company, which approval will not be
         unreasonably withheld.

         (g) Except as provided  below in this Section 4, the expenses  incurred
by the Company in  connection  with  action  taken by the Company to comply with
this Section 4, including, without limitation, all registration and filing fees,
printing and delivery  expenses,  accounting  fees,  fees and  disbursements  of
counsel to the  Company,  consultant  and expert fees,  premiums  for  liability
insurance,  if the  Company  chooses  to  obtain  such  insurance,  obtained  in
connection with a registration statement filed to effect such compliance and all
expenses,  including  counsel fees, of complying with any state  securities laws
("State Acts"),  shall be paid by the Company. All fees and disbursements of any
counsel,  experts, or consultants employed by any Offering Holder shall be borne
by such  Offering  Holder.  The  Company  shall not be  obligated  in any way in
connection  with any  registration  pursuant  to this  Section 4 for any selling
commissions or discounts  payable by any Offering  Holder to any  underwriter or
broker of securities to be sold by such Offering  Holder.  Subscriber  agrees to
pay all expenses required to be borne by such Offering Holder.

         (h) In the event of any registration of Offering Securities pursuant to
this Section 4, the Company  will  indemnify  and hold  harmless  each  Offering
Holder,  its officers,  directors,  investment  advisors and each underwriter of

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such securities, and any person who controls such Offering Holder or underwriter
within the  meaning of Section 15 of the  Securities  Act,  against  all claims,
actions,  losses, damages,  liabilities and expenses, joint or several, to which
any of such persons may become  subject under the  Securities  Act or otherwise,
insofar as such losses, claims, damages,  liabilities or actions arise out of or
are based  upon any untrue  statement  of any  material  fact  contained  in any
registration  statement under which such  securities  were registered  under the
Securities  Act,  any  preliminary  prospectus  or  final  prospectus  contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements  therein not misleading,  and will reimburse
such Offering  Holder,  its officers,  directors  and each  underwriter  of such
securities,  and each such  controlling  person or entity  for any legal and any
other expenses reasonably incurred by such Offering Holder, such underwriter, or
such controlling  person or entity in connection with investigating or defending
any such loss, action, claim, damage,  liability, or action; provided,  however,
that the Company will not be liable in any such case to the extent that any such
loss,  claim,  damage,  liability or action  arises  directly out of or is based
primarily  upon an  untrue  statement  or  omission  made  in said  registration
statement,  said preliminary prospectus or said prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Offering Holder or such underwriter  specifically for use
in the preparation thereof.

         (i) At any time when a prospectus  relating to the Offering  Securities
is required to be delivered  under the  Securities  Act, the Company will notify
the Offering  Holder of the  happening of any event,  upon the  notification  or
awareness of such event by an executive  officer of the Company,  as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue  statement of material fact or omits to state a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the circumstances then existing.

         (j) In the event of any  registration of any Offering  Securities under
the  Securities  Act pursuant to this Section 4, the Offering  Holder  agrees to
indemnify and hold harmless the Company, its officers,  directors and any person
who controls the Company within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages,  liabilities, or actions, joint or several,
to which the Company,  its officers,  directors,  or such controlling  person or
entity may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages,  liabilities, or actions arise out of or are based upon
any  untrue  statement  of any  material  fact  contained  in  any  registration
statement  under  which  such  Offering  Securities  were  registered  under the
Securities  Act,  any  preliminary  prospectus  or  final  prospectus  contained
therein,  or any amendment or supplement  thereto,  or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,  in each case to the
extent and only to the extent that any such loss, claim, damage,  liability,  or
action  arises out of or is based upon an untrue  statement or omission  made in
said registration  statement,  said preliminary prospectus or said prospectus or
said  amendment or supplement  in reliance  upon and in conformity  with written
information  furnished to the Company by such  Offering  Holder or any affiliate
(as defined in the Securities Act) of such Offering Holder  specifically for use
in the preparation thereof.

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         (k) If a claim for indemnification under Section 4 is unavailable to an
indemnified party because of a failure or refusal of a governmental authority to
enforce such  indemnification  in accordance with its terms (by reason of public
policy or otherwise), then each indemnifying party, in lieu of indemnifying such
indemnified  party,  shall  contribute  to the  amount  paid or  payable by such
indemnified  party  as a  result  of  such  Losses,  in  such  proportion  as is
appropriate  to  reflect  the  relative  fault  of the  indemnifying  party  and
indemnified  party in connection with the actions,  statements or omissions that
resulted in such Losses as well as any other relevant equitable  considerations.
The relative fault of such  indemnifying  party and  indemnified  party shall be
determined by reference to, among other things,  whether any action in question,
including any untrue or alleged untrue  statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information  supplied by, such indemnifying  party or indemnified party, and the
parties'  relative intent,  knowledge,  access to information and opportunity to
correct or prevent  such  action,  statement  or  omission.  The amount  paid or
payable  by a party as a result  of any such  contribution  shall be  deemed  to
include any reasonable  attorneys' or other reasonable fees or expenses incurred
by such party in  connection  with the  defense of any Losses to the extent such
party   would  have  been   indemnified   for  such  fees  or  expenses  if  the
indemnification  provided for under  Section 4(h) or 4(j) was  available to such
party in  accordance  with its terms.  Notwithstanding  anything to the contrary
contained  herein,  no Offering Holder shall be liable or required to contribute
under this  Section  4(k) for any amount that  exceeds the net  proceeds to such
Offering Holder as a result of the sale of Shares or Exercise Shares pursuant to
the registration  statement provided by this Section 4. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
4(k) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in this
paragraph. No person guilty of fraudulent  misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to  contribution  from
any  person  who  was  not  guilty  of such  fraudulent  misrepresentation.  The
indemnity  and  contribution  agreements  contained  in  this  Section  4 are in
addition  to any  liability  that  the  indemnifying  parties  may  have  to the
indemnified parties.

         (l) Any  party  entitled  to  indemnification  hereunder  will (i) give
prompt  written  notice to the  indemnifying  party of any claim with respect to
which it seeks  indemnification  and (ii)  unless  in such  indemnified  party's
reasonable  judgment  a  conflict  of  interest  between  such  indemnified  and
indemnifying parties exists with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel  reasonably  satisfactory
to the indemnified  party. If such defense is assumed,  the  indemnifying  party
will not be subject to any liability for any settlement  made by the indemnified
party without its consent (which consent may not be unreasonably  withheld).  An
indemnifying  party who is not entitled to, or elects not to, assume the defense
of a claim will not be  obligated  to pay the fees and expenses of more than one
counsel for all parties  indemnified by such indemnifying  party with respect to
such  claim,  unless  in the  reasonable  judgment  of any  indemnified  party a
conflict of interest exists between such indemnified party and any other of such
indemnified parties with respect to such claim.

         (m) With a view to making available to the Offering Holder the benefits
of Rule 144  promulgated  under the  Securities  Act, the Company agrees that it
will use its  commercially  reasonable  efforts to maintain  registration of its
Common Stock under Section 12 or 15 of the  Securities  Exchange Act of 1934, as

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amended,  (the "Exchange  Act"), and to file with the SEC in a timely manner all
reports  and other  documents  required  to be filed by an issuer of  securities
registered  under the Exchange Act so as to maintain  the  availability  of Rule
144.  Upon the request of any record  owner,  the Company  will  deliver to such
owner a written  statement  as to whether  it has  complied  with the  reporting
requirements of Rule 144. At any time when the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company will  promptly  furnish or cause to
be furnished to the Offering  Holders,  upon request,  copies of the information
required to be delivered to holders and prospective purchasers of the Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto) in order to permit compliance with Rule 144A in connection with resales
by such holders of the Securities.

     5.  Representations  and Warranties of the  Subscriber.  Subscriber  hereby
represents and warrants to the Company as follows:

         (a)  Subscriber  is  acquiring  the  Units  for  its own  account,  for
investment  and not  with a view to,  or for  resale  in  connection  with,  any
distribution  or public  offering  thereof  within the meaning of the Securities
Act, and applicable state securities laws.

         (b) The  Subscriber  understands  that (A) the  Units (1) have not been
registered  under the Securities Act or any state  securities  laws, (2) will be
issued in  reliance  upon an  exemption  from the  registration  and  prospectus
delivery  requirements  of the  Securities  Act  pursuant to Section 4(2) and/or
Regulation D thereof and (3) will be issued in reliance upon exemptions from the
registration and prospectus delivery requirements of state securities laws which
relate to private  offerings,  and (B) the  Subscriber  must  therefore bear the
economic risk of such investment  indefinitely  unless a subsequent  disposition
thereof is registered  under the Securities Act and applicable  state securities
laws or is exempt therefrom. Subscriber further understands that such exemptions
depend upon, among other things,  the bona fide nature of the investment  intent
of the Subscriber  expressed herein.  Pursuant to the foregoing,  the Subscriber
acknowledges that the certificates representing each of the Shares, the Warrants
and the  Exercise  Shares  shall  bear a  restrictive  legend  substantially  as
follows:

         "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
         TO  RESTRICTIONS  ON TRANSFER  UNDER THE  SECURITIES  ACT OF
         1933, AS AMENDED,  AND STATE SECURITIES LAWS, AND MAY NOT BE
         OFFERED FOR SALE, SOLD,  ASSIGNED,  TRANSFERRED,  PLEDGED OR
         OTHERWISE  DISPOSED  OF  UNLESS  (I)  REGISTERED  UNDER  THE
         APPLICABLE  SECURITIES  LAWS OR (II) AN OPINION OF  COUNSEL,
         WHICH OPINION AND COUNSEL ARE BOTH  REASONABLY  SATISFACTORY
         TO THE COMPANY,  HAS BEEN  DELIVERED TO THE COMPANY AND SUCH
         OPINION  STATES  THAT  THE  SECURITIES  MAY  BE  TRANSFERRED
         WITHOUT SUCH REGISTRATION."

         (c) The Subscriber  has  knowledge,  skill and experience in financial,
business and  investment  matters  relating to an investment of this type and is
capable of evaluating the merits and risks of such investment and protecting the

                                       8
<PAGE>

Subscriber's  interest in  connection  with the  acquisition  of the Units.  The
Subscriber  understands  that the  acquisition  of the  Units  is a  speculative
investment and involves substantial risks and that the Subscriber could lose the
Subscriber's  entire  investment in the Units. To the extent deemed necessary by
the  Subscriber,  the  Subscriber has retained,  at its own expense,  and relied
upon,  appropriate  professional advice regarding the investment,  tax and legal
merits and consequences of purchasing and owning the Share, the Warrants and the
Exercise  Shares.  The  Subscriber has the ability to bear the economic risks of
the  Subscriber's  investment  in the Company,  including a complete loss of the
investment, and the Subscriber has no need for liquidity in such investment.

         (d) The Subscriber  has been  furnished by the Company all  information
(or provided  access to all  information)  regarding  the business and financial
condition of the Company, its expected plans for future business activities, the
attributes  of the  Securities  and the merits and risks of an investment in the
Securities which the Subscriber has requested or otherwise needs to evaluate the
investment in the Company.

         (e) Subscriber is in receipt of and has carefully read and  understands
the following items:

                  (i) Annual  Report on Form  10-KSB and Form  10-KSB/A  for the
         period ended June 30, 2005 filed by the Company with the SEC;

                  (ii)  Quarterly  Report on Form  10-QSB for the  period  ended
         March 31, 2006 filed by the Company with the SEC;

                  (iii)  Current  Reports on Form 8-K filed by the Company  with
         the SEC on June 28, 2006;

                  (iv) Confidential Private Placement Memorandum, dated July 10,
         2006  (together  with the  exhibits  thereto,  collectively,  items (i)
         through (iv), the "Disclosure Documents").

         (f) In making the  proposed  investment  decision,  the  Subscriber  is
relying solely on  investigations  made by the  Subscriber and the  Subscriber's
representatives.  The Subscriber  acknowledges  that documents listed in Section
5(e) are the only information provided to the Subscriber by the Company and that
the  Subscriber is not relying on any other  information  in making the proposed
investment  decision.  The  offer  to sell the  Units  was  communicated  to the
Subscriber in such a manner that the Subscriber was able to ask questions of and
receive  answers from the  management  of the Company  concerning  the terms and
conditions of the proposed  transaction  and that at no time was the  Subscriber
presented  with or  solicited  by or through  any  leaflet,  public  promotional
meeting,  television  advertisement  or any  other  form of  general  or  public
advertising or solicitation.

         (g) The  Subscriber  acknowledges  that the Subscriber has been advised
that:

                  (i) The Units,  and the  Securities  that  comprise the Units,
         offered  hereby have not been approved or disapproved by the SEC or any
         state  securities  commission  nor has the SEC or any state  securities
         commission passed upon the accuracy or adequacy of any  representations

                                       9
<PAGE>

         by the  Company.  Any  representation  to the  contrary  is a  criminal
         offense.

                  (ii) In making an investment  decision,  the  Subscriber  must
         rely  on its own  examination  of the  Company  and  the  terms  of the
         Offering,  including the merits and risks involved.  The Units, and the
         Securities  that comprise the Units,  have not been  recommended by any
         federal  or  state  securities   commission  or  regulatory  authority.
         Furthermore,  the foregoing authorities have not confirmed the accuracy
         or determined the adequacy of any representation. Any representation to
         the contrary is a criminal offense.

                  (iii) The Shares and the  Warrants are and,  when issued,  the
         Exercise Shares will be, "Restricted  Securities" within the meaning of
         Rule 144 under the  Securities  Act,  are  subject to  restrictions  on
         transferability  and resale and may not be transferred or resold except
         as permitted under the Securities Act and applicable  state  securities
         laws, pursuant to registration or exemption  therefrom.  The Subscriber
         is aware that the  Subscriber  may be  required  to bear the  financial
         risks of this investment for an indefinite period of time.

         (h) The Subscriber  acknowledges and is aware that there has never been
any  representation,  guarantee or warranty  made by the Company or any officer,
director,  employee or agent or representative  of the Company,  expressly or by
implication,  as to (i)  the  approximate  or  exact  length  of time  that  the
Subscriber  will be  required  to  remain  an  owner of any  Security;  (ii) the
percentage of profit and/or amount of or type of  consideration,  profit or loss
to be  realized,  if any,  as a result  of this  investment;  or (iii)  that the
limited past performance or experience on the part of the Company, or any future
expectations  will in any way indicate the predictable  results of the ownership
of any Security or of the overall financial performance of the Company.

         (i) The Subscriber agrees to furnish the Company such other information
as the Company  may  reasonably  request in order to verify the  accuracy of the
information contained herein and agrees to notify the Company immediately of any
material  change in the  information  provided  herein that occurs  prior to the
Company's acceptance of this Agreement.

         (j) The Subscriber  further represents and warrants that the Subscriber
is an "accredited investor" within the meaning of Rule 501 of Regulation D under
the Securities  Act, and  Subscriber has executed the  Certificate of Accredited
Investor Status, attached hereto as Exhibit B.

         (k) As of the date of this  Agreement the Subscriber and its affiliates
do not have,  and during the 30-day  period prior to the date of this  Agreement
the  Subscriber and its  affiliates  have not entered into, any "put  equivalent
position"  as such term is defined in Rule 16a-1 under the Exchange Act or short
sale  positions  with  respect to the  Common  Stock of the  Company.  Until the
registration  statement referred to in Section 4(c) is declared  effective,  the
Subscriber  hereby  agrees not to, and will cause its  affiliates  not to, enter
into any such "put equivalent position" or short sale position.

                                       10
<PAGE>

The foregoing  representations  and warranties and  undertakings are made by the
Subscriber  with  the  intent  that  they  be  relied  upon in  determining  its
suitability  as  an  investor  and  the  Subscriber   hereby  agrees  that  such
representations and warranties shall survive its purchase of the Units.

     6.  Representations  and  Warranties  of the  Company.  The Company  hereby
represents and warrants to the Subscriber as follows:

         (a) Each of the  Company  and its  subsidiaries  is duly  incorporated,
validly  existing  and  in  good  standing  under  the  laws  of  its  state  of
incorporation,  and is duly qualified to do business as a foreign corporation in
all  jurisdictions  in which the failure to be so qualified would materially and
adversely affect the business or financial  condition,  properties or operations
of the  Company.  Each of the Company  and its  subsidiaries  has all  requisite
corporate  power and authority (i) to own and lease the properties and assets it
currently  owns and leases (if any) and it  contemplates  owning and leasing and
(ii) to  conduct  its  activities  as such  activities  (if any)  are  currently
conducted and as currently contemplated to be conducted.

         (b) The  authorized  capital of the  Company  immediately  prior to the
Closing will consist of 100,000,000  shares of common stock, par value $0.05 and
10,000,000 shares of preferred stock, par value $0.01.

         (c) The  Company  has  duly  authorized  the  issuance  and sale of the
Shares,  the Warrants and the Exercise  Shares in  accordance  with the terms of
this  Agreement  (as  described  herein)  by  all  requisite  corporate  action,
including the  authorization of the Company's Board of Directors of the issuance
and  sale  of  the  Shares  and  the  Warrants  in  accordance   herewith,   the
authorization  and reservation of the Exercise Shares for issuance upon exercise
of the Warrants,  the issuance and sale of the Exercise  Shares upon exercise of
the Warrants and the execution, delivery and performance of any other agreements
and instruments  executed in connection herewith.  This Agreement  constitutes a
valid and legally binding  obligation of the Company,  enforceable in accordance
with its terms,  except (i) as limited  by  applicable  bankruptcy,  insolvency,
reorganization,  moratorium,  and other  laws of general  application  affecting
enforcement of creditors' rights generally,  (ii) as limited by laws relating to
the availability of specific  performance,  injunctive relief or other equitable
remedies and (iii) to the extent the indemnification provisions contained herein
may be limited by applicable federal or state securities laws.

         (d) The  Shares,  when  issued  and paid for in  accordance  with  this
Agreement,  and the Exercise Shares, when issued and paid for in accordance with
the terms of the Warrants,  will represent validly  authorized,  duly issued and
fully paid and  nonassessable  shares of Common  Stock of the  Company,  and the
issuance  thereof will not conflict with the articles of incorporation or bylaws
of  the  Company  and,  subject  to the  accuracy  of  the  representations  and
warranties of Subscriber herein, will be in full compliance with all federal and
state securities laws applicable to such issuance and sale.

         (e) The execution and delivery of this  Agreement,  the  fulfillment of
the terms set forth herein and the consummation of the transactions contemplated
hereby will not conflict with, or constitute a breach of or default  under,  any
agreement,  indenture  or  instrument  by which the Company is bound or any law,

                                       11
<PAGE>

administrative rule,  regulation or decree of any court or any governmental body
or administrative agency applicable to the Company.

         (f) As of the date of this Agreement,  the Disclosure  Documents do not
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated  therein or necessary in order to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

         (g) The Disclosure  Documents that have been filed with the SEC, at the
time they were filed with the SEC,  complied in all material  respects  with the
requirements  of the Exchange  Act,  and,  when read together and with the other
information in the Disclosure Documents, do not contain an untrue statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary  in  order  to  make  the  statements  therein,  in the  light  of the
circumstances under which they were made, not misleading.

         (h)  Subsequent  to the dates as of which  information  is given in the
Disclosure  Documents,  except  as  described  therein,  there  has not been any
material  adverse  change  with regard to the assets or  properties,  results of
operations or financial condition of the Company.

     7. Survival; Indemnification. All representations, warranties and covenants
contained in this Agreement and the indemnification  contained in this Section 7
shall survive (i) the acceptance of this Agreement by the Company,  (ii) changes
in the  transactions,  documents and instruments  described herein which are not
material  or which  are to the  benefit  of  Subscriber,  and (iii) the death or
disability  of  Subscriber.   Subscriber  acknowledges  the  meaning  and  legal
consequences  of the  representations,  warranties  and  covenants  in Section 5
hereof and that the Company has relied upon such representations, warranties and
covenants in determining Subscriber's  qualification and suitability to purchase
the Units.  Subscriber hereby agrees to indemnify,  defend and hold harmless the
Company,  its officers,  directors,  employees,  agents and controlling persons,
from and against  any and all losses,  claims,  damages,  liabilities,  expenses
(including  attorneys'  fees and  disbursements),  judgments  or amounts paid in
settlement  of  actions  arising  out of or  resulting  from the  untruth of any
representation  of  Subscriber  herein or the breach of any warranty or covenant
herein by Subscriber. Notwithstanding the foregoing, however, no representation,
warranty,  covenant or  acknowledgment  made herein by  Subscriber  shall in any
manner be deemed to  constitute  a waiver of any rights  granted to it under the
Securities Act or state securities laws.

     8. Notices. All notices and other communications  provided for herein shall
be in  writing  and  shall be  deemed  to have  been  duly  given  if  delivered
personally or sent by registered or certified  mail,  return receipt  requested,
postage prepaid:

         (a) if to the Company, to the following address:

             Cubic Energy, Inc.
             9870 Plano Road
             Dallas, Texas 75238
             Attn: Mr. Jon S. Ross
             Telephone: (972) 681-8047

                                       12
<PAGE>

         (b) if to  Subscriber,  to the address set forth on the signature  page
hereto.

         (c) or at such other  address  as any party  shall  have  specified  by
notice in writing to the others.

     9.  Notification of Changes.  Subscriber agrees and covenants to notify the
Company  immediately  upon the occurrence of any event prior to the consummation
of this  Offering  that would cause any  representation,  warranty,  covenant or
other  statement  contained in this Agreement to be false or incorrect or of any
change in any statement made herein  occurring prior to the consummation of this
Offering.

     10. Assignability.  This Agreement is not assignable by the Subscriber, and
may not be modified,  waived or  terminated  except by an  instrument in writing
signed by the party against whom  enforcement  of such  modification,  waiver or
termination is sought.

     11. Binding Effect.  Except as otherwise  provided  herein,  this Agreement
shall be binding  upon and inure to the benefit of the parties and their  heirs,
executors,  administrators,  successors,  legal  representatives  and  permitted
assigns,  and the agreements,  representations,  warranties and  acknowledgments
contained  herein  shall be deemed to be made by and be binding upon such heirs,
executors,  administrators,  successors,  legal  representatives  and  permitted
assigns.

     12.  Obligations  Irrevocable.  The obligations of the Subscriber  shall be
irrevocable,  except with the consent of the Company,  until the consummation or
termination of the Offering.

     13. Entire  Agreement.  This Agreement  constitutes the entire agreement of
the  Subscriber  and the  Company  relating  to the  matters  contained  herein,
superseding all prior contracts or agreements, whether oral or written.

     14.  Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of law thereof that would  require the  application  of the laws of
any jurisdiction other than Texas.

     15.  Severability.  If any provision of this  Agreement or the  application
thereof to Subscriber or any circumstance shall be held invalid or unenforceable
to any extent,  the  remainder of this  Agreement  and the  application  of such
provision to other  subscriptions or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.

     16.  Headings.  The headings in this Agreement are inserted for convenience
and identification only and are not intended to describe,  interpret,  define or
limit the scope, extent or intent of this Agreement or any provision hereof.

     17.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts, each of which when so executed and delivered shall be deemed to be
an  original  and all of which  together  shall be deemed to be one and the same
agreement.

                           [Signature Page to follow]

                                       13
<PAGE>

     IN  WITNESS  WHEREOF,   Subscriber  has  executed  this   Subscription  and
Registration Rights Agreement as of July ____, 2006.

                                         SUBSCRIBER

                                         ---------------------------------------

                                         Number of Units: 2,250,000
                                         Offering Price per Unit:  $0.70
                                         Subscription Amount:  $1,575,000US

                                         By:
                                             -----------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------
                                         Address:
                                                   -----------------------------

     The Company hereby accepts the foregoing  subscription subject to the terms
and conditions hereof as of July ____, 2006.

                                         Cubic Energy, Inc
                                         a Texas corporation

                                         By:
                                            ------------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------

                                       14
<PAGE>

                                                                       Exhibit A
                                                                       ---------

                                HOW TO SUBSCRIBE

     (1) If you are subscribing for the purchase of Units,  please date and sign
the signature page to this Subscription and Registration Rights Agreement in the
applicable  spaces.  Please  signify the amount of Units you are  purchasing  by
inserting  such amount in the space  provided for on the  signature  page to the
Agreement.

     (2) Complete and sign the accompanying  Certificate of Accredited  Investor
Status.

     (3) Send all completed documents to:

         Jefferies & Company, Inc.
         Three Allen Center
         333 Clay Street, Suite 1000
         Houston, Texas 77002
         Attn: Mr. Frank D. Bracken, III
         Telephone: (281) 774-2143

     (4) Transmit  funds in an  amount  equal  to the  number  of Units  you are
purchasing multiplied by the Offering Price via wire to the following account:

         Domestic
         --------

         American National Bank
         2865 Ridge Rd.
         Rockwall, Texas 75032
         Wire Dept. Fax No. (214) 863-6153
         Phone (214) 863-6224
         Account No. 300021912
         Routing No. 111901519

         For Further Credit To:

         Foreign
         -------

         ----------------------
         ----------------------
         ----------------------

         For Further Credit To:

ATTENTION SUBSCRIBERS: NO SUBSCRIPTION WILL BE ACCEPTED UNLESS ALL DOCUMENTATION
PRESCRIBED HEREIN IS FULLY COMPLETED AND EXECUTED.  ANY MATERIALS  RECEIVED THAT
ARE INCOMPLETE IN ANY RESPECT WILL BE RETURNED BY THE COMPANY.

                                       A-1
<PAGE>

                                                                       Exhibit B
                                                                       ---------

                    CERTIFICATE OF ACCREDITED INVESTOR STATUS

     Except as may be indicated by the undersigned  below, the undersigned is an
individual  "accredited investor," as that term is defined in Regulation D under
the Securities Act of 1933, as amended (the  "Securities  Act"). The undersigned
has checked the box below  indicating the basis on which he is representing  his
status as an "accredited investor":

[_]  a bank as defined in Section  3(a)(2) of the Securities Act, or any savings
     and loan association or other institution as defined in Section  3(a)(5)(A)
     of the  Securities  Act  whether  acting  in its  individual  or  fiduciary
     capacity;  a broker or dealer  registered  pursuant  to  Section  15 of the
     Securities  Exchange  Act of 1934,  as amended  (the  "Securities  Exchange
     Act");  an insurance  company as defined in Section 2(13) of the Securities
     Act; an investment  company  registered under the Investment Company Act of
     1940 or a business  development  company as defined in Section  2(a)(48) of
     that Act; a small business  investment  company  licensed by the U.S. Small
     Business  Administration  under Section 301(c) or (d) of the Small Business
     Investment Act of 1958; a plan  established and maintained by a state,  its
     political subdivisions,  or any agency or instrumentality of a state or its
     political subdivisions, for the benefit of its employees, and such plan has
     total assets in excess of $5,000,000;  an employee  benefit plan within the
     meaning of the Employee  Retirement  Income  Security  Act of 1974,  if the
     investment  decision  is made by a plan  fiduciary,  as  defined in Section
     3(21) of such Act,  which is either a bank,  savings and loan  association,
     insurance company,  or registered  investment  adviser,  or if the employee
     benefit  plan  has  total  assets  in  excess  of   $5,000,000   or,  if  a
     self-directed  plan, with investment  decisions made solely by persons that
     are "accredited investors";

[_]  a private business  development company as defined in Section 202(a)(22) of
     the Investment Advisers Act of 1940;

[_]  an  organization  described in Section  501(c)(3)  of the Internal  Revenue
     Code, corporation, Massachusetts or similar business trust, or partnership,
     not formed for the specific  purpose of acquiring the  securities  offered,
     with total assets in excess of $5,000,000;

[_]  a natural person whose  individual  net worth,  or joint net worth with the
     undersigned's spouse, at the time of this purchase exceeds $1,000,000;

[_]  a natural person who had an individual income in excess of $200,000 in each
     of the two most recent years or joint income with the undersigned's  spouse
     in  excess  of  $300,000  in  each of  those  years  and  has a  reasonable
     expectation of reaching the same income level in the current year;

[_]  a trust  with  total  assets in excess of  $5,000,000,  not  formed for the
     specific  purpose of acquiring the  securities  offered,  whose purchase is
     directed by a person who has such knowledge and experience in financial and
     business  matters that he is capable of evaluating  the merits and risks of
     the prospective investment; or

                                       B-1
<PAGE>

[_]  an entity in which all of the equity holders are "accredited  investors" by
     virtue of their meeting one or more of the above standards.

[_]  an individual who is a director or executive officer of _______________.

     IN WITNESS  WHEREOF,  the  undersigned  has executed  this  Certificate  of
Accredited Investor Status effective as of July ____, 2006.

                                       -----------------------------------------
                                       Name of Subscriber

                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                       B-2
<PAGE>

                                                                       Exhibit C
                                                                       ---------

                              PLAN OF DISTRIBUTION

     As of the date of this prospectus,  we have not been advised by the selling
stockholders as to any plan of distribution.  Distributions of the shares by the
selling  stockholders,   or  by  their  partners,  pledgees,  donees  (including
charitable organizations), transferees or other successors in interest, may from
time to time be offered for sale either directly by such individual,  or through
underwriters,  dealers or agents or on any exchange on which the shares may from
time to time be traded,  in the  over-the-counter  market,  or in  independently
negotiated  transactions  or  otherwise.  The methods by which the shares may be
sold include:

     o    a block  trade  (which  may  involve  crosses)  in which the broker or
          dealer so engaged will attempt to sell the securities as agent but may
          position and resell a portion of the block as principal to  facilitate
          the transaction;

     o    purchases by a broker or dealer as principal and resale by such broker
          or dealer for its own account pursuant to this prospectus;

     o    exchange distributions and/or secondary distributions;

     o    sales in the over-the-counter market;

     o    underwritten transactions;

     o    ordinary  brokerage  transactions and transactions in which the broker
          solicits purchasers; and

     o    privately negotiated transactions.

     Such  transactions  may be effected by the selling  stockholders  at market
prices  prevailing  at the time of sale or at  negotiated  prices.  The  selling
stockholders  may  effect  such  transactions  by selling  the  Common  Stock to
underwriters  or  to  or  through  broker-dealers,   and  such  underwriters  or
broker-dealers may receive compensations in the form of discounts or commissions
from the selling stockholders and may receive commissions from the purchasers of
the Common Stock for whom they may act as agent.  The selling  stockholders  may
agree to indemnify any underwriter,  broker-dealer or agent that participates in
transactions   involving  sales  of  the  shares  against  certain  liabilities,
including  liabilities  arising  under the  Securities  Act.  We have  agreed to
register  the shares  for sale under the  Securities  Act and to  indemnify  the
selling  stockholders  and each person who participates as an underwriter in the
offering of the shares  against  certain civil  liabilities,  including  certain
liabilities under the Securities Act.

     In  connection  with sales of the Common Stock under this  prospectus,  the
selling  stockholders may enter into hedging  transactions with  broker-dealers,
who may in turn  engage  in short  sales of the  Common  Stock in the  course of
hedging the positions they assume. The selling stockholders also may sell shares
of Common Stock short and deliver them to close out the short positions, or loan

                                       C-1
<PAGE>

or pledge the  shares of Common  Stock to  broker-dealers  that in turn may sell
them.

     The  selling  stockholders  and any  underwriters,  dealers or agents  that
participate in distribution of the shares may be deemed to be underwriters,  and
any  profit on sale of the  shares  by them and any  discounts,  commissions  or
concessions  received  by any  underwriter,  dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.

     There can be no assurances that the selling  stockholders  will sell any or
all of the shares offered under this prospectus.

                                       C-2
<PAGE>

                                                                       Exhibit D
                                                                       ---------

                            Form of Warrant Agreement

                                       D-1Exhibit 10.2

                               CUBIC ENERGY, INC.

                 SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT

     This  Subscription  and Registration  Rights Agreement (this  "Agreement"),
dated as of July 26, 2006, by and between Cubic Energy, Inc. (the "Company") and
Yehuda Neuberger & Anne Neuberger JTWROS (the "Subscriber"),  is intended to set
forth certain representations,  covenants and agreements between the Company and
the  Subscriber,  with respect to the offering (the  "Offering") for sale by the
Company of units (the  "Units"),  each of which  consists of one share of Common
Stock, par value $0.05 per share (the "Common  Stock"),  together with a warrant
to purchase one-half of a share of Common Stock at an initial exercise price per
share of Common Stock equal to the Offering Price (as defined below),  the terms
of which  are set  forth in the form of  Warrant  Agreement  attached  hereto as
Exhibit D hereto.  The shares of Common Stock included in Units purchased hereby
are  referred  to herein as the  "Shares,"  the  warrants  included in the Units
purchased  hereby are  referred  to herein as the  "Warrants"  and the shares of
Common Stock  issuable  upon  exercise of the Warrants are referred to herein as
the  "Exercise  Shares." The Shares,  the  Warrants and the Exercise  Shares are
collectively referred to herein as the "Securities." The Shares and Warrants are
immediately  separable and may be transferred  separately in compliance with the
restrictions  on transfer set forth  herein and in the terms of the Warrant,  as
applicable.

     1. Subscription. Subject to the terms and conditions hereof, the Subscriber
hereby  irrevocably  subscribes  for and agrees to purchase from the Company the
number of Units set forth  under the  Subscriber's  name on the  signature  page
hereto at a purchase  price of $0.70 per Unit (the  "Offering  Price"),  and the
Company  agrees to sell such  Units to the  Subscriber  at the  Offering  Price,
subject to the Company's  right to sell to the Subscriber  such lesser number of
Units as the Company may, in its sole discretion, deem necessary or desirable.

     2. Delivery of Subscription Amount; Acceptance of Subscription; Delivery of
Units.  Subscriber understands and agrees that this subscription is made subject
to the following terms and conditions:

         (a) Subscriber  understands that separate subscription  agreements will
be executed  with other  investors  for the remainder of the Units to be sold in
the Offering;

         (b)   Contemporaneously   with  the  execution  and  delivery  of  this
Agreement,  Subscriber  shall execute and deliver the  Certificate of Accredited
Investor  Status  attached  hereto as Exhibit  B, and shall wire to the  Company
immediately available funds in the amount equal to the Offering Price multiplied
by  the  number  of  Units  for  which  the  Subscriber   has  subscribed   (the
"Subscription  Amount") in accordance with the instructions set forth on Exhibit
A hereto.  The  subscription  for Units shall be deemed to be accepted only when
this Agreement has been signed by an authorized officer of the Company;

         (c) The Company  shall have the right to reject this  subscription,  in
whole or in part, and shall have the right to allocate  Units among  subscribers
in any manner it may desire;  provided, that no subscriber shall be obligated to
purchase more than the number of Units set forth under its name on the signature
page hereto without its prior written consent;

<PAGE>

         (d)  The  payment  of the  Subscription  Amount  (or,  in the  case  of
rejection of a portion of the Subscriber's subscription, the part of the payment
relating to such rejected portion) will be returned,  without  interest,  (1) if
Subscriber's  subscription  is  rejected  in  whole  or in  part,  or (2) if the
Offering is withdrawn or canceled;

         (e)  Certificates  representing  the  Shares and the  Warrants  will be
issued in the name of each  Subscriber  at Closing as set forth under  Section 3
hereof;

         (f)  Jefferies  & Company,  Inc.  (the  "Placement  Agent")  shall have
received the favorable opinion, dated as of Closing, of counsel for the Company,
in form and substance satisfactory to counsel for the Placement Agent.

         (g) The  representations  and  warranties of the Company and Subscriber
set forth  herein  shall be true and  correct  as of the date  that the  Company
accepts this subscription.

     3. Terms of Subscription.

         (a) The  subscription  period will begin as of July 26th, 2006 and will
terminate at 4:59 p.m.,  Eastern time, on July 27, 2006,  unless extended by the
Company,  on one or more  occasions,  for up to an additional ten (10) days (the
"Termination  Date").  Such  extension  may be  effected  without  notice to the
Subscribers.  The  purchase and sale of the Units (the  "Closing"),  and funding
thereof,  shall  occur  as soon  as  practicable  after  the  execution  of this
Agreement by the Company and each of the  Subscribers  in the Offering at a time
and  location  (the  "Closing   Date")  agreed  upon  by  the  Company  and  the
Subscribers, and in no event later than 4:59 pm, Central time, on July 28, 2006.
Immediately  after the Closing  Date,  the Company  will  deliver or cause to be
delivered,  one or more physical certificates  representing the Shares purchased
by each Subscriber.

         (b) As compensation for advisory services,  the Company will pay to the
Placement  Agent  aggregate  fees  equal to two  percent  (2%) of the  aggregate
purchase  price of the Units sold and shall issue  Warrants  convertible  into a
number  of  shares of Common  Stock  equal to 5 percent  of the total  number of
shares of Common  Stock  sold in the  Offering.  The  Company  will also pay all
reasonable and documented expenses of the Placement Agent in connection with the
Offering, up to $30,000.

         (c) If the  Subscriber is not a United States  person,  the  Subscriber
hereby  represents that it has satisfied itself as to the full observance of the
laws of its  jurisdiction in connection with any invitation to subscribe for the
Units or any use of this Agreement,  including (i) the legal requirements within
its  jurisdiction  for the  purchase  of the Units,  (ii) any  foreign  exchange
restrictions  applicable  to such  purchase,  (iii)  any  governmental  or other
consents  that may need to be  obtained,  and (iv) the  income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Securities.  The  Subscriber's  subscription and payment
for, and his or her  continued  beneficial  ownership of any of the  Securities,
will not violate any  applicable  securities  or other laws of the  Subscriber's
jurisdiction.

                                       2
<PAGE>

     4. Registration Rights.

         (a) Subscriber  acknowledges that it is acquiring the Units for its own
account  and  for  the  purpose  of  investment  and  not  with  a  view  to any
distribution or resale thereof within the meaning of the Securities Act of 1933,
as amended,  (the "Securities  Act"). The Subscriber further agrees that it will
not sell,  assign or  transfer  any  Security  at any time in  violation  of the
Securities Act and acknowledges that, in taking unregistered securities, it must
continue to bear the economic risk of its investment for an indefinite period of
time  because of the fact that  Securities  have not been  registered  under the
Securities  Act, and further  realizes that none of the  Securities  can be sold
unless  subsequently  registered  under the  Securities Act or an exemption from
such  registration  is available.  The Subscriber  further  recognizes  that the
Company is not  assuming  any  obligation  to register  any  Security  except as
expressly set forth herein.  The Subscriber also  acknowledges  that appropriate
legends  reflecting the status of the Securities under the Securities Act may be
placed on the face of the  certificates  for each such  Security  at the time of
their transfer and delivery to the holder thereof.

         (b) No Security may be transferred  except in a transaction which is in
compliance with the Securities Act. Except as provided hereafter with respect to
registration of the Shares and the Exercise  Shares,  it shall be a condition to
any such transfer that the Company shall be furnished with an opinion of counsel
to the holder of such Security,  reasonably  satisfactory to the Company, to the
effect that the proposed  transfer  would be in compliance  with the  Securities
Act.

         (c) Within 45 days after the Closing (the "Filing  Date"),  the Company
shall use its best efforts to prepare and file with the  Securities and Exchange
Commission  (the  "SEC"),  one or more  registration  statements  and such other
documents as may be necessary in the opinion of counsel for the Company, and use
its commercially reasonable efforts to have such registration statement declared
effective  within  120 days after the  Filing  Date in order to comply  with the
provisions of the Securities  Act so as to permit the  registered  resale of the
Shares,  for a period of two (2)  years  following  the  Closing  Date,  and the
registered  resale  of the  Exercise  Shares,  for so long as the  Warrants  are
outstanding. The Shares and Exercise Shares that are registered for resale under
such registration statement are referred to herein as the "Offering Securities,"
and the Subscriber,  together with its affiliates and transferees, are hereafter
referred to as "Offering Holders." The Company will include in such registration
statement  (i)  the  information  required  under  the  Securities  Act to be so
included concerning the Offering Holders, as provided by the Offering Holders at
the  reasonable   request  of  the  Company,   including  any  changes  in  such
information,  or  information  provided  by new  Offering  Holders,  that may be
provided by the  Offering  Holders in writing to the Company  from time to time,
and (ii) a section entitled "Plan of Distribution," substantially in the form of
Exhibit C hereto,  that describes the various procedures that may be used by the
Offering  Holders in the sale of Shares or Exercise Shares;  provided,  however,
that no holder of Shares or Exercise  Shares (other than a Subscriber)  shall be
entitled  to have  the  securities  held  by it  covered  by  such  registration
statement unless such holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such holder.

         (d) If the registration statement referred to in Section 4(c) above has
not been  declared  effective by the SEC within 120 days after the Closing Date,
the Company shall pay  liquidated  damages of 1% of the Offering Price per share

                                       3
<PAGE>

for every Share.  In addition,  the Company shall pay  liquidated  damages of an
additional  1% of the  Offering  Price per share for every Share for each 30-day
period of delay following such initial 120-day period. The payment of liquidated
damages  may be made,  at the option of the  Company,  in  additional  shares of
Common  Stock  valued at the  average  market  price of such shares for the five
trading  days  preceding  the  date of  payment.  The  foregoing  payment  shall
constitute  the sole monetary  remedy  available to the  Subscriber in the event
that the Company  does not comply with the  deadlines  set forth in Section 4(c)
with  respect to the  filing and  effectiveness  of the  registration  statement
referred to therein.

         (e)  Notwithstanding  the  foregoing  provisions of this Section 4, the
Company may voluntarily suspend the use of any such registration statement for a
limited time,  which in no event shall be longer than 30 days in any three month
period and no longer than 90 days in any twelve month period, if the Company has
been  advised in writing by counsel  or  underwriters  to the  Company  that the
offering of any Offering Securities pursuant to the registration statement would
materially  adversely  affect,  or would  be  improper  in view of (or  improper
without  disclosure in a prospectus),  a proposed  financing,  a reorganization,
recapitalization,  merger,  consolidation,  or similar transaction involving the
Company.  In  addition,  the Company  may  suspend the use of such  registration
statement  for the 15 calendar  days  following the filing of any Form 8-K, Form
10-QSB  or Form  10-KSB,  or other  comparable  form for  purposes  of  filing a
post-effective amendment to the registration statement. If any event occurs that
would cause any such registration  statement to contain a material  misstatement
or  omission  or not to be  effective  and usable  during  the period  that such
registration  statement is required to be effective  and usable,  subject to the
time periods set forth above,  the Company  shall  promptly file an amendment to
the registration statement and use its commercially  reasonable efforts to cause
such  amendment  to be declared  effective  as soon as  practicable  thereafter.
Notwithstanding  any provision  contained herein to the contrary,  the Company's
obligation to include,  or continue to include,  Offering Securities in any such
registration  statement  under this Section 4 shall terminate to the extent such
securities  are  eligible  for resale  under Rule 144(k)  promulgated  under the
Securities Act.

         (f) If and whenever the Company is required by the  provisions  of this
Agreement to use its commercially  reasonable efforts to effect the registration
of the  Offering  Securities  under the  Securities  Act for the  account  of an
Offering Holder, the Company will, as promptly as possible:

                  (i)  prepare  and file with the SEC a  registration  statement
         with respect to such  securities  and use its  commercially  reasonable
         efforts  to cause  such  registration  statement  to become  and remain
         effective,  subject to the Company's obligations to file post-effective
         amendments to such registration statement;

                  (ii)  prepare  and  file  with  the SEC  such  amendments  and
         supplements to such  registration  statement and the prospectus used in
         connection  therewith  as may be  necessary  to keep such  registration
         statement  effective  and  to  comply  with  the  requirements  of  the
         Securities  Act and the rules and  regulations  promulgated  by the SEC
         thereunder  relating to the sale or other disposition of the securities
         covered by such registration statement;

                                       4
<PAGE>

                  (iii)  include  in  each  such  document  the  names  of  each
         Subscriber who continues to hold Offering Securities,  except for those
         Subscribers who designate on the signature page hereto that they do not
         wish to have their securities  included in the registration  statement,
         and the names of any new Offering  Holders who have  delivered  written
         notice to the Company at least three  business days prior to the filing
         thereof that they propose to sell Offering  Securities  pursuant to the
         registration statement as selling securityholders;

                  (iv) file pursuant to Rule 424(b) under the  Securities Act an
         amendment  to the  registration  statement or amend,  if required,  the
         registration  statement  and  prospectus,  in each  case,  to cover new
         Offering  Holders  upon at least seven  business  days'  prior  written
         notice by such new Offering Holders to such effect; provided,  however,
         that (A) in no event shall the Company be required to file  pursuant to
         Rule 424(b) under the Securities  Act a supplement to the  registration
         statement  to  cover  new  Offering  Holders  other  than on the  third
         Thursday of each calendar  month  following the calendar month in which
         the  registration  statement is declared  effective and (B) in the case
         where a  post-effective  amendment is  required,  in no event shall the
         Company be required  to file a  post-effective  amendment  to cover new
         Offering  Holders  other than on the third  Thursday  of the third full
         calendar month  following the calendar month in which the  registration
         statement  is  declared  effective  and  the  third  Thursday  of  each
         subsequent  third month  thereafter;  any delay in  effectiveness  as a
         result of the foregoing shall be excluded from the periods set forth in
         subsection (e) above; and

                  (v) furnish to each Offering  Holder such numbers of copies of
         a prospectus,  including a preliminary  prospectus,  complying with the
         requirements  of the Securities  Act, and such other  documents as such
         Offering  Holder  may  reasonably  request in order to  facilitate  the
         public sale or other  disposition of the Offering  Securities  owned by
         such Offering Holder, but such Offering Holder shall not be entitled to
         use any  selling  materials  other  than a  prospectus  and such  other
         materials as may be approved by the Company, which approval will not be
         unreasonably withheld.

         (g) Except as provided  below in this Section 4, the expenses  incurred
by the Company in  connection  with  action  taken by the Company to comply with
this Section 4, including, without limitation, all registration and filing fees,
printing and delivery  expenses,  accounting  fees,  fees and  disbursements  of
counsel to the  Company,  consultant  and expert fees,  premiums  for  liability
insurance,  if the  Company  chooses  to  obtain  such  insurance,  obtained  in
connection with a registration statement filed to effect such compliance and all
expenses,  including  counsel fees, of complying with any state  securities laws
("State Acts"),  shall be paid by the Company. All fees and disbursements of any
counsel,  experts, or consultants employed by any Offering Holder shall be borne
by such  Offering  Holder.  The  Company  shall not be  obligated  in any way in
connection  with any  registration  pursuant  to this  Section 4 for any selling
commissions or discounts  payable by any Offering  Holder to any  underwriter or
broker of securities to be sold by such Offering  Holder.  Subscriber  agrees to
pay all expenses required to be borne by such Offering Holder.

         (h) In the event of any registration of Offering Securities pursuant to
this Section 4, the Company  will  indemnify  and hold  harmless  each  Offering
Holder,  its officers,  directors,  investment  advisors and each underwriter of

                                       5
<PAGE>

such securities, and any person who controls such Offering Holder or underwriter
within the  meaning of Section 15 of the  Securities  Act,  against  all claims,
actions,  losses, damages,  liabilities and expenses, joint or several, to which
any of such persons may become  subject under the  Securities  Act or otherwise,
insofar as such losses, claims, damages,  liabilities or actions arise out of or
are based  upon any untrue  statement  of any  material  fact  contained  in any
registration  statement under which such  securities  were registered  under the
Securities  Act,  any  preliminary  prospectus  or  final  prospectus  contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements  therein not misleading,  and will reimburse
such Offering  Holder,  its officers,  directors  and each  underwriter  of such
securities,  and each such  controlling  person or entity  for any legal and any
other expenses reasonably incurred by such Offering Holder, such underwriter, or
such controlling  person or entity in connection with investigating or defending
any such loss, action, claim, damage,  liability, or action; provided,  however,
that the Company will not be liable in any such case to the extent that any such
loss,  claim,  damage,  liability or action  arises  directly out of or is based
primarily  upon an  untrue  statement  or  omission  made  in said  registration
statement,  said preliminary prospectus or said prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Offering Holder or such underwriter  specifically for use
in the preparation thereof.

         (i) At any time when a prospectus  relating to the Offering  Securities
is required to be delivered  under the  Securities  Act, the Company will notify
the Offering  Holder of the  happening of any event,  upon the  notification  or
awareness of such event by an executive  officer of the Company,  as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue  statement of material fact or omits to state a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the circumstances then existing.

         (j) In the event of any  registration of any Offering  Securities under
the  Securities  Act pursuant to this Section 4, the Offering  Holder  agrees to
indemnify and hold harmless the Company, its officers,  directors and any person
who controls the Company within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages,  liabilities, or actions, joint or several,
to which the Company,  its officers,  directors,  or such controlling  person or
entity may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages,  liabilities, or actions arise out of or are based upon
any  untrue  statement  of any  material  fact  contained  in  any  registration
statement  under  which  such  Offering  Securities  were  registered  under the
Securities  Act,  any  preliminary  prospectus  or  final  prospectus  contained
therein,  or any amendment or supplement  thereto,  or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,  in each case to the
extent and only to the extent that any such loss, claim, damage,  liability,  or
action  arises out of or is based upon an untrue  statement or omission  made in
said registration  statement,  said preliminary prospectus or said prospectus or
said  amendment or supplement  in reliance  upon and in conformity  with written
information  furnished to the Company by such  Offering  Holder or any affiliate
(as defined in the Securities Act) of such Offering Holder  specifically for use
in the preparation thereof.

                                       6
<PAGE>

         (k) If a claim for indemnification under Section 4 is unavailable to an
indemnified party because of a failure or refusal of a governmental authority to
enforce such  indemnification  in accordance with its terms (by reason of public
policy or otherwise), then each indemnifying party, in lieu of indemnifying such
indemnified  party,  shall  contribute  to the  amount  paid or  payable by such
indemnified  party  as a  result  of  such  Losses,  in  such  proportion  as is
appropriate  to  reflect  the  relative  fault  of the  indemnifying  party  and
indemnified  party in connection with the actions,  statements or omissions that
resulted in such Losses as well as any other relevant equitable  considerations.
The relative fault of such  indemnifying  party and  indemnified  party shall be
determined by reference to, among other things,  whether any action in question,
including any untrue or alleged untrue  statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information  supplied by, such indemnifying  party or indemnified party, and the
parties'  relative intent,  knowledge,  access to information and opportunity to
correct or prevent  such  action,  statement  or  omission.  The amount  paid or
payable  by a party as a result  of any such  contribution  shall be  deemed  to
include any reasonable  attorneys' or other reasonable fees or expenses incurred
by such party in  connection  with the  defense of any Losses to the extent such
party   would  have  been   indemnified   for  such  fees  or  expenses  if  the
indemnification  provided for under  Section 4(h) or 4(j) was  available to such
party in  accordance  with its terms.  Notwithstanding  anything to the contrary
contained  herein,  no Offering Holder shall be liable or required to contribute
under this  Section  4(k) for any amount that  exceeds the net  proceeds to such
Offering Holder as a result of the sale of Shares or Exercise Shares pursuant to
the registration  statement provided by this Section 4. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
4(k) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in this
paragraph. No person guilty of fraudulent  misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to  contribution  from
any  person  who  was  not  guilty  of such  fraudulent  misrepresentation.  The
indemnity  and  contribution  agreements  contained  in  this  Section  4 are in
addition  to any  liability  that  the  indemnifying  parties  may  have  to the
indemnified parties.

         (l) Any  party  entitled  to  indemnification  hereunder  will (i) give
prompt  written  notice to the  indemnifying  party of any claim with respect to
which it seeks  indemnification  and (ii)  unless  in such  indemnified  party's
reasonable  judgment  a  conflict  of  interest  between  such  indemnified  and
indemnifying parties exists with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel  reasonably  satisfactory
to the indemnified  party. If such defense is assumed,  the  indemnifying  party
will not be subject to any liability for any settlement  made by the indemnified
party without its consent (which consent may not be unreasonably  withheld).  An
indemnifying  party who is not entitled to, or elects not to, assume the defense
of a claim will not be  obligated  to pay the fees and expenses of more than one
counsel for all parties  indemnified by such indemnifying  party with respect to
such  claim,  unless  in the  reasonable  judgment  of any  indemnified  party a
conflict of interest exists between such indemnified party and any other of such
indemnified parties with respect to such claim.

         (m) With a view to making available to the Offering Holder the benefits
of Rule 144  promulgated  under the  Securities  Act, the Company agrees that it
will use its  commercially  reasonable  efforts to maintain  registration of its
Common Stock under Section 12 or 15 of the  Securities  Exchange Act of 1934, as

                                       7
<PAGE>

amended,  (the "Exchange  Act"), and to file with the SEC in a timely manner all
reports  and other  documents  required  to be filed by an issuer of  securities
registered  under the Exchange Act so as to maintain  the  availability  of Rule
144.  Upon the request of any record  owner,  the Company  will  deliver to such
owner a written  statement  as to whether  it has  complied  with the  reporting
requirements of Rule 144. At any time when the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company will  promptly  furnish or cause to
be furnished to the Offering  Holders,  upon request,  copies of the information
required to be delivered to holders and prospective purchasers of the Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto) in order to permit compliance with Rule 144A in connection with resales
by such holders of the Securities.

     5.  Representations  and Warranties of the  Subscriber.  Subscriber  hereby
represents and warrants to the Company as follows:

         (a)  Subscriber  is  acquiring  the  Units  for  its own  account,  for
investment  and not  with a view to,  or for  resale  in  connection  with,  any
distribution  or public  offering  thereof  within the meaning of the Securities
Act, and applicable state securities laws.

         (b) The  Subscriber  understands  that (A) the  Units (1) have not been
registered  under the Securities Act or any state  securities  laws, (2) will be
issued in  reliance  upon an  exemption  from the  registration  and  prospectus
delivery  requirements  of the  Securities  Act  pursuant to Section 4(2) and/or
Regulation D thereof and (3) will be issued in reliance upon exemptions from the
registration and prospectus delivery requirements of state securities laws which
relate to private  offerings,  and (B) the  Subscriber  must  therefore bear the
economic risk of such investment  indefinitely  unless a subsequent  disposition
thereof is registered  under the Securities Act and applicable  state securities
laws or is exempt therefrom. Subscriber further understands that such exemptions
depend upon, among other things,  the bona fide nature of the investment  intent
of the Subscriber  expressed herein.  Pursuant to the foregoing,  the Subscriber
acknowledges that the certificates representing each of the Shares, the Warrants
and the  Exercise  Shares  shall  bear a  restrictive  legend  substantially  as
follows:

         "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
         TO  RESTRICTIONS  ON TRANSFER  UNDER THE  SECURITIES  ACT OF
         1933, AS AMENDED,  AND STATE SECURITIES LAWS, AND MAY NOT BE
         OFFERED FOR SALE, SOLD,  ASSIGNED,  TRANSFERRED,  PLEDGED OR
         OTHERWISE  DISPOSED  OF  UNLESS  (I)  REGISTERED  UNDER  THE
         APPLICABLE  SECURITIES  LAWS OR (II) AN OPINION OF  COUNSEL,
         WHICH OPINION AND COUNSEL ARE BOTH  REASONABLY  SATISFACTORY
         TO THE COMPANY,  HAS BEEN  DELIVERED TO THE COMPANY AND SUCH
         OPINION  STATES  THAT  THE  SECURITIES  MAY  BE  TRANSFERRED
         WITHOUT SUCH REGISTRATION."

         (c) The Subscriber  has  knowledge,  skill and experience in financial,
business and  investment  matters  relating to an investment of this type and is
capable of evaluating the merits and risks of such investment and protecting the

                                       8
<PAGE>

Subscriber's  interest in  connection  with the  acquisition  of the Units.  The
Subscriber  understands  that the  acquisition  of the  Units  is a  speculative
investment and involves substantial risks and that the Subscriber could lose the
Subscriber's  entire  investment in the Units. To the extent deemed necessary by
the  Subscriber,  the  Subscriber has retained,  at its own expense,  and relied
upon,  appropriate  professional advice regarding the investment,  tax and legal
merits and consequences of purchasing and owning the Share, the Warrants and the
Exercise  Shares.  The  Subscriber has the ability to bear the economic risks of
the  Subscriber's  investment  in the Company,  including a complete loss of the
investment, and the Subscriber has no need for liquidity in such investment.

         (d) The Subscriber  has been  furnished by the Company all  information
(or provided  access to all  information)  regarding  the business and financial
condition of the Company, its expected plans for future business activities, the
attributes  of the  Securities  and the merits and risks of an investment in the
Securities which the Subscriber has requested or otherwise needs to evaluate the
investment in the Company.

         (e) Subscriber is in receipt of and has carefully read and  understands
the following items:

                  (i) Annual  Report on Form  10-KSB and Form  10-KSB/A  for the
         period ended June 30, 2005 filed by the Company with the SEC;

                  (ii)  Quarterly  Report on Form  10-QSB for the  period  ended
         March 31, 2006 filed by the Company with the SEC;

                  (iii)  Current  Reports on Form 8-K filed by the Company  with
         the SEC on June 28, 2006;

                  (iv) Confidential Private Placement Memorandum, dated July 10,
         2006  (together  with the  exhibits  thereto,  collectively,  items (i)
         through (iv), the "Disclosure Documents").

         (f) In making the  proposed  investment  decision,  the  Subscriber  is
relying solely on  investigations  made by the  Subscriber and the  Subscriber's
representatives.  The Subscriber  acknowledges  that documents listed in Section
5(e) are the only information provided to the Subscriber by the Company and that
the  Subscriber is not relying on any other  information  in making the proposed
investment  decision.  The  offer  to sell the  Units  was  communicated  to the
Subscriber in such a manner that the Subscriber was able to ask questions of and
receive  answers from the  management  of the Company  concerning  the terms and
conditions of the proposed  transaction  and that at no time was the  Subscriber
presented  with or  solicited  by or through  any  leaflet,  public  promotional
meeting,  television  advertisement  or any  other  form of  general  or  public
advertising or solicitation.

         (g) The  Subscriber  acknowledges  that the Subscriber has been advised
that:

                  (i) The Units,  and the  Securities  that  comprise the Units,
         offered  hereby have not been approved or disapproved by the SEC or any
         state  securities  commission  nor has the SEC or any state  securities
         commission passed upon the accuracy or adequacy of any  representations

                                       9
<PAGE>

         by the  Company.  Any  representation  to the  contrary  is a  criminal
         offense.

                  (ii) In making an investment  decision,  the  Subscriber  must
         rely  on its own  examination  of the  Company  and  the  terms  of the
         Offering,  including the merits and risks involved.  The Units, and the
         Securities  that comprise the Units,  have not been  recommended by any
         federal  or  state  securities   commission  or  regulatory  authority.
         Furthermore,  the foregoing authorities have not confirmed the accuracy
         or determined the adequacy of any representation. Any representation to
         the contrary is a criminal offense.

                  (iii) The Shares and the  Warrants are and,  when issued,  the
         Exercise Shares will be, "Restricted  Securities" within the meaning of
         Rule 144 under the  Securities  Act,  are  subject to  restrictions  on
         transferability  and resale and may not be transferred or resold except
         as permitted under the Securities Act and applicable  state  securities
         laws, pursuant to registration or exemption  therefrom.  The Subscriber
         is aware that the  Subscriber  may be  required  to bear the  financial
         risks of this investment for an indefinite period of time.

         (h) The Subscriber  acknowledges and is aware that there has never been
any  representation,  guarantee or warranty  made by the Company or any officer,
director,  employee or agent or representative  of the Company,  expressly or by
implication,  as to (i)  the  approximate  or  exact  length  of time  that  the
Subscriber  will be  required  to  remain  an  owner of any  Security;  (ii) the
percentage of profit and/or amount of or type of  consideration,  profit or loss
to be  realized,  if any,  as a result  of this  investment;  or (iii)  that the
limited past performance or experience on the part of the Company, or any future
expectations  will in any way indicate the predictable  results of the ownership
of any Security or of the overall financial performance of the Company.

         (i) The Subscriber agrees to furnish the Company such other information
as the Company  may  reasonably  request in order to verify the  accuracy of the
information contained herein and agrees to notify the Company immediately of any
material  change in the  information  provided  herein that occurs  prior to the
Company's acceptance of this Agreement.

         (j) The Subscriber  further represents and warrants that the Subscriber
is an "accredited investor" within the meaning of Rule 501 of Regulation D under
the Securities  Act, and  Subscriber has executed the  Certificate of Accredited
Investor Status, attached hereto as Exhibit B.

         (k) As of the date of this  Agreement the Subscriber and its affiliates
do not have,  and during the 30-day  period prior to the date of this  Agreement
the  Subscriber and its  affiliates  have not entered into, any "put  equivalent
position"  as such term is defined in Rule 16a-1 under the Exchange Act or short
sale  positions  with  respect to the  Common  Stock of the  Company.  Until the
registration  statement referred to in Section 4(c) is declared  effective,  the
Subscriber  hereby  agrees not to, and will cause its  affiliates  not to, enter
into any such "put equivalent position" or short sale position.

                                       10
<PAGE>

The foregoing  representations  and warranties and  undertakings are made by the
Subscriber  with  the  intent  that  they  be  relied  upon in  determining  its
suitability  as  an  investor  and  the  Subscriber   hereby  agrees  that  such
representations and warranties shall survive its purchase of the Units.

     6.  Representations  and  Warranties  of the  Company.  The Company  hereby
represents and warrants to the Subscriber as follows:

         (a) Each of the  Company  and its  subsidiaries  is duly  incorporated,
validly  existing  and  in  good  standing  under  the  laws  of  its  state  of
incorporation,  and is duly qualified to do business as a foreign corporation in
all  jurisdictions  in which the failure to be so qualified would materially and
adversely affect the business or financial  condition,  properties or operations
of the  Company.  Each of the Company  and its  subsidiaries  has all  requisite
corporate  power and authority (i) to own and lease the properties and assets it
currently  owns and leases (if any) and it  contemplates  owning and leasing and
(ii) to  conduct  its  activities  as such  activities  (if any)  are  currently
conducted and as currently contemplated to be conducted.

         (b) The  authorized  capital of the  Company  immediately  prior to the
Closing will consist of 100,000,000  shares of common stock, par value $0.05 and
10,000,000 shares of preferred stock, par value $0.01.

         (c) The  Company  has  duly  authorized  the  issuance  and sale of the
Shares,  the Warrants and the Exercise  Shares in  accordance  with the terms of
this  Agreement  (as  described  herein)  by  all  requisite  corporate  action,
including the  authorization of the Company's Board of Directors of the issuance
and  sale  of  the  Shares  and  the  Warrants  in  accordance   herewith,   the
authorization  and reservation of the Exercise Shares for issuance upon exercise
of the Warrants,  the issuance and sale of the Exercise  Shares upon exercise of
the Warrants and the execution, delivery and performance of any other agreements
and instruments  executed in connection herewith.  This Agreement  constitutes a
valid and legally binding  obligation of the Company,  enforceable in accordance
with its terms,  except (i) as limited  by  applicable  bankruptcy,  insolvency,
reorganization,  moratorium,  and other  laws of general  application  affecting
enforcement of creditors' rights generally,  (ii) as limited by laws relating to
the availability of specific  performance,  injunctive relief or other equitable
remedies and (iii) to the extent the indemnification provisions contained herein
may be limited by applicable federal or state securities laws.

         (d) The  Shares,  when  issued  and paid for in  accordance  with  this
Agreement,  and the Exercise Shares, when issued and paid for in accordance with
the terms of the Warrants,  will represent validly  authorized,  duly issued and
fully paid and  nonassessable  shares of Common  Stock of the  Company,  and the
issuance  thereof will not conflict with the articles of incorporation or bylaws
of  the  Company  and,  subject  to the  accuracy  of  the  representations  and
warranties of Subscriber herein, will be in full compliance with all federal and
state securities laws applicable to such issuance and sale.

         (e) The execution and delivery of this  Agreement,  the  fulfillment of
the terms set forth herein and the consummation of the transactions contemplated
hereby will not conflict with, or constitute a breach of or default  under,  any
agreement,  indenture  or  instrument  by which the Company is bound or any law,

                                       11
<PAGE>

administrative rule,  regulation or decree of any court or any governmental body
or administrative agency applicable to the Company.

         (f) As of the date of this Agreement,  the Disclosure  Documents do not
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated  therein or necessary in order to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

         (g) The Disclosure  Documents that have been filed with the SEC, at the
time they were filed with the SEC,  complied in all material  respects  with the
requirements  of the Exchange  Act,  and,  when read together and with the other
information in the Disclosure Documents, do not contain an untrue statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary  in  order  to  make  the  statements  therein,  in the  light  of the
circumstances under which they were made, not misleading.

         (h)  Subsequent  to the dates as of which  information  is given in the
Disclosure  Documents,  except  as  described  therein,  there  has not been any
material  adverse  change  with regard to the assets or  properties,  results of
operations or financial condition of the Company.

     7. Survival; Indemnification. All representations, warranties and covenants
contained in this Agreement and the indemnification  contained in this Section 7
shall survive (i) the acceptance of this Agreement by the Company,  (ii) changes
in the  transactions,  documents and instruments  described herein which are not
material  or which  are to the  benefit  of  Subscriber,  and (iii) the death or
disability  of  Subscriber.   Subscriber  acknowledges  the  meaning  and  legal
consequences  of the  representations,  warranties  and  covenants  in Section 5
hereof and that the Company has relied upon such representations, warranties and
covenants in determining Subscriber's  qualification and suitability to purchase
the Units.  Subscriber hereby agrees to indemnify,  defend and hold harmless the
Company,  its officers,  directors,  employees,  agents and controlling persons,
from and against  any and all losses,  claims,  damages,  liabilities,  expenses
(including  attorneys'  fees and  disbursements),  judgments  or amounts paid in
settlement  of  actions  arising  out of or  resulting  from the  untruth of any
representation  of  Subscriber  herein or the breach of any warranty or covenant
herein by Subscriber. Notwithstanding the foregoing, however, no representation,
warranty,  covenant or  acknowledgment  made herein by  Subscriber  shall in any
manner be deemed to  constitute  a waiver of any rights  granted to it under the
Securities Act or state securities laws.

     8. Notices. All notices and other communications  provided for herein shall
be in  writing  and  shall be  deemed  to have  been  duly  given  if  delivered
personally or sent by registered or certified  mail,  return receipt  requested,
postage prepaid:

         (a) if to the Company, to the following address:

             Cubic Energy, Inc.
             9870 Plano Road
             Dallas, Texas 75238
             Attn: Mr. Jon S. Ross
             Telephone: (972) 681-8047

                                       12
<PAGE>

         (b) if to  Subscriber,  to the address set forth on the signature  page
hereto.

         (c) or at such other  address  as any party  shall  have  specified  by
notice in writing to the others.

     9.  Notification of Changes.  Subscriber agrees and covenants to notify the
Company  immediately  upon the occurrence of any event prior to the consummation
of this  Offering  that would cause any  representation,  warranty,  covenant or
other  statement  contained in this Agreement to be false or incorrect or of any
change in any statement made herein  occurring prior to the consummation of this
Offering.

     10. Assignability.  This Agreement is not assignable by the Subscriber, and
may not be modified,  waived or  terminated  except by an  instrument in writing
signed by the party against whom  enforcement  of such  modification,  waiver or
termination is sought.

     11. Binding Effect.  Except as otherwise  provided  herein,  this Agreement
shall be binding  upon and inure to the benefit of the parties and their  heirs,
executors,  administrators,  successors,  legal  representatives  and  permitted
assigns,  and the agreements,  representations,  warranties and  acknowledgments
contained  herein  shall be deemed to be made by and be binding upon such heirs,
executors,  administrators,  successors,  legal  representatives  and  permitted
assigns.

     12.  Obligations  Irrevocable.  The obligations of the Subscriber  shall be
irrevocable,  except with the consent of the Company,  until the consummation or
termination of the Offering.

     13. Entire  Agreement.  This Agreement  constitutes the entire agreement of
the  Subscriber  and the  Company  relating  to the  matters  contained  herein,
superseding all prior contracts or agreements, whether oral or written.

     14.  Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of law thereof that would  require the  application  of the laws of
any jurisdiction other than Texas.

     15.  Severability.  If any provision of this  Agreement or the  application
thereof to Subscriber or any circumstance shall be held invalid or unenforceable
to any extent,  the  remainder of this  Agreement  and the  application  of such
provision to other  subscriptions or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.

     16.  Headings.  The headings in this Agreement are inserted for convenience
and identification only and are not intended to describe,  interpret,  define or
limit the scope, extent or intent of this Agreement or any provision hereof.

     17.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts, each of which when so executed and delivered shall be deemed to be
an  original  and all of which  together  shall be deemed to be one and the same
agreement.

                           [Signature Page to follow]

                                       13
<PAGE>

     IN  WITNESS  WHEREOF,   Subscriber  has  executed  this   Subscription  and
Registration Rights Agreement as of July ____, 2006.

                                           SUBSCRIBER

                                           -------------------------------------

                                           Number of Units: 750,000
                                           Offering Price per Unit:  $0.70
                                           Subscription Amount:  $525,000US

                                           By:
                                               ---------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------
                                           Address:
                                                     ---------------------------

     The Company hereby accepts the foregoing  subscription subject to the terms
and conditions hereof as of July ____, 2006.

                                           Cubic Energy, Inc
                                           a Texas corporation

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                       14
<PAGE>

                                                                       Exhibit A
                                                                       ---------

                                HOW TO SUBSCRIBE

     (1) If you are subscribing for the purchase of Units,  please date and sign
the signature page to this Subscription and Registration Rights Agreement in the
applicable  spaces.  Please  signify the amount of Units you are  purchasing  by
inserting  such amount in the space  provided for on the  signature  page to the
Agreement.

     (2) Complete and sign the accompanying  Certificate of Accredited  Investor
Status.

     (3) Send all completed documents to:

         Jefferies & Company, Inc.
         Three Allen Center
         333 Clay Street, Suite 1000
         Houston, Texas 77002
         Attn: Mr. Frank D. Bracken, III
         Telephone: (281) 774-2143

     (4) Transmit  funds in an  amount  equal  to the  number  of Units  you are
purchasing multiplied by the Offering Price via wire to the following account:

         Domestic
         --------

         American National Bank
         2865 Ridge Rd.
         Rockwall, Texas 75032
         Wire Dept. Fax No. (214) 863-6153
         Phone (214) 863-6224
         Account No. 300021912
         Routing No. 111901519

         For Further Credit To:

         Foreign
         -------

         ----------------------
         ----------------------
         ----------------------

         For Further Credit To:

ATTENTION SUBSCRIBERS: NO SUBSCRIPTION WILL BE ACCEPTED UNLESS ALL DOCUMENTATION
PRESCRIBED HEREIN IS FULLY COMPLETED AND EXECUTED.  ANY MATERIALS  RECEIVED THAT
ARE INCOMPLETE IN ANY RESPECT WILL BE RETURNED BY THE COMPANY.

                                       A-1
<PAGE>

                                                                       Exhibit B
                                                                       ---------

                    CERTIFICATE OF ACCREDITED INVESTOR STATUS

     Except as may be indicated by the undersigned  below, the undersigned is an
individual  "accredited investor," as that term is defined in Regulation D under
the Securities Act of 1933, as amended (the  "Securities  Act"). The undersigned
has checked the box below  indicating the basis on which he is representing  his
status as an "accredited investor":

[_]  a bank as defined in Section  3(a)(2) of the Securities Act, or any savings
     and loan association or other institution as defined in Section  3(a)(5)(A)
     of the  Securities  Act  whether  acting  in its  individual  or  fiduciary
     capacity;  a broker or dealer  registered  pursuant  to  Section  15 of the
     Securities  Exchange  Act of 1934,  as amended  (the  "Securities  Exchange
     Act");  an insurance  company as defined in Section 2(13) of the Securities
     Act; an investment  company  registered under the Investment Company Act of
     1940 or a business  development  company as defined in Section  2(a)(48) of
     that Act; a small business  investment  company  licensed by the U.S. Small
     Business  Administration  under Section 301(c) or (d) of the Small Business
     Investment Act of 1958; a plan  established and maintained by a state,  its
     political subdivisions,  or any agency or instrumentality of a state or its
     political subdivisions, for the benefit of its employees, and such plan has
     total assets in excess of $5,000,000;  an employee  benefit plan within the
     meaning of the Employee  Retirement  Income  Security  Act of 1974,  if the
     investment  decision  is made by a plan  fiduciary,  as  defined in Section
     3(21) of such Act,  which is either a bank,  savings and loan  association,
     insurance company,  or registered  investment  adviser,  or if the employee
     benefit  plan  has  total  assets  in  excess  of   $5,000,000   or,  if  a
     self-directed  plan, with investment  decisions made solely by persons that
     are "accredited investors";

[_]  a private business  development company as defined in Section 202(a)(22) of
     the Investment Advisers Act of 1940;

[_]  an  organization  described in Section  501(c)(3)  of the Internal  Revenue
     Code, corporation, Massachusetts or similar business trust, or partnership,
     not formed for the specific  purpose of acquiring the  securities  offered,
     with total assets in excess of $5,000,000;

[_]  a natural person whose  individual  net worth,  or joint net worth with the
     undersigned's spouse, at the time of this purchase exceeds $1,000,000;

[_]  a natural person who had an individual income in excess of $200,000 in each
     of the two most recent years or joint income with the undersigned's  spouse
     in  excess  of  $300,000  in  each of  those  years  and  has a  reasonable
     expectation of reaching the same income level in the current year;

[_]  a trust  with  total  assets in excess of  $5,000,000,  not  formed for the
     specific  purpose of acquiring the  securities  offered,  whose purchase is
     directed by a person who has such knowledge and experience in financial and
     business  matters that he is capable of evaluating  the merits and risks of
     the prospective investment; or

                                       B-1
<PAGE>

[_]  an entity in which all of the equity holders are "accredited  investors" by
     virtue of their meeting one or more of the above standards.

[_]  an individual who is a director or executive officer of _______________.

     IN WITNESS  WHEREOF,  the  undersigned  has executed  this  Certificate  of
Accredited Investor Status effective as of July ____, 2006.

                                       -----------------------------------------
                                       Name of Subscriber

                                       By:
                                          --------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                       B-2
<PAGE>

                                                                       Exhibit C
                                                                       ---------

                              PLAN OF DISTRIBUTION

     As of the date of this prospectus,  we have not been advised by the selling
stockholders as to any plan of distribution.  Distributions of the shares by the
selling  stockholders,   or  by  their  partners,  pledgees,  donees  (including
charitable organizations), transferees or other successors in interest, may from
time to time be offered for sale either directly by such individual,  or through
underwriters,  dealers or agents or on any exchange on which the shares may from
time to time be traded,  in the  over-the-counter  market,  or in  independently
negotiated  transactions  or  otherwise.  The methods by which the shares may be
sold include:

     o    a block  trade  (which  may  involve  crosses)  in which the broker or
          dealer so engaged will attempt to sell the securities as agent but may
          position and resell a portion of the block as principal to  facilitate
          the transaction;

     o    purchases by a broker or dealer as principal and resale by such broker
          or dealer for its own account pursuant to this prospectus;

     o    exchange distributions and/or secondary distributions;

     o    sales in the over-the-counter market;

     o    underwritten transactions;

     o    ordinary  brokerage  transactions and transactions in which the broker
          solicits purchasers; and

     o    privately negotiated transactions.

     Such  transactions  may be effected by the selling  stockholders  at market
prices  prevailing  at the time of sale or at  negotiated  prices.  The  selling
stockholders  may  effect  such  transactions  by selling  the  Common  Stock to
underwriters  or  to  or  through  broker-dealers,   and  such  underwriters  or
broker-dealers may receive compensations in the form of discounts or commissions
from the selling stockholders and may receive commissions from the purchasers of
the Common Stock for whom they may act as agent.  The selling  stockholders  may
agree to indemnify any underwriter,  broker-dealer or agent that participates in
transactions   involving  sales  of  the  shares  against  certain  liabilities,
including  liabilities  arising  under the  Securities  Act.  We have  agreed to
register  the shares  for sale under the  Securities  Act and to  indemnify  the
selling  stockholders  and each person who participates as an underwriter in the
offering of the shares  against  certain civil  liabilities,  including  certain
liabilities under the Securities Act.

     In  connection  with sales of the Common Stock under this  prospectus,  the
selling  stockholders may enter into hedging  transactions with  broker-dealers,
who may in turn  engage  in short  sales of the  Common  Stock in the  course of
hedging the positions they assume. The selling stockholders also may sell shares
of Common Stock short and deliver them to close out the short positions, or loan

                                       C-1
<PAGE>

or pledge the  shares of Common  Stock to  broker-dealers  that in turn may sell
them.

     The  selling  stockholders  and any  underwriters,  dealers or agents  that
participate in distribution of the shares may be deemed to be underwriters,  and
any  profit on sale of the  shares  by them and any  discounts,  commissions  or
concessions  received  by any  underwriter,  dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.

     There can be no assurances that the selling  stockholders  will sell any or
all of the shares offered under this prospectus.

                                       C-2
<PAGE>

                                                                       Exhibit D
                                                                       ---------

                            Form of Warrant Agreement

                                       D-1

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