Filed by Automated Filing Services Inc. (604) 609-0244 - Arkanova Energy Corproration - Exhibit 10.2






NONE OF THE SECURITIES TO WHICH THIS SUBSCRIPTION AGREEMENT
(THE "AGREEMENT") RELATES HAVE BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY U.S. STATE
SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. 

STOCK OPTION AND SUBSCRIPTION AGREEMENT 
For U.S.
Persons 

This AGREEMENT is entered into as of the 18th day of October,
2007 (the "Date of Grant"). 

BETWEEN: 


  
    
      
        ARKANOVA ENERGY CORPORATION., with an office
          at 21 Waterway Avenue, Suite 300, The Woodlands, Texas 77380 (the "Company")
        

      

    

  



AND: 


  
    
      
        REGINALD DENNY, a person with a business address
          at 257 Willow Ridge Road, Fort Worth, Texas 76103 (the "Optionee") 

      

    

  



WHEREAS: 

A.                   
The Company's board of directors (the "Board") has approved a Stock Option Plan
(the "Plan"), whereby the Board is authorized to grant stock options to purchase
common shares of the Company pursuant to the Plan to the directors, officers,
employees, management company employees and consultants of the Company; 

B.                    
  The Optionee has entered into an Executive Employment Agreement dated October
  18, 2007 (the "Employment Agreement") with the Company, pursuant to which the
  Optionee will provide the services as the Chief Financial Officer (the "Services");
  and 

C.                    
The Company seeks to grant stock options to purchase a total of TWO HUNDRED
THOUSAND (200,000) shares of Common Stock to the Optionee as an incentive for
the provision of the Services. 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of
the covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, the
parties hereto agree as follows:

1.1            
        In this Agreement, the following
terms shall have the following meanings: 

	 	(a) 	
      "Common Stock" means the shares of common stock of
      the Company;

	 	 	 
	 	(b) 	
      "Exercise Payment" means the amount of money equal
      to the Exercise Price multiplied by the number of Optioned Shares
      specified in the Notice of Exercise;







2 

	 	(c) 	
      "Exercise Price" means $1.70;

	 	 	 
	 	(d) 	
      "Expiry Date" means October 18, 2012;

	 	 	 
	 	(e) 	
      "Notice of Exercise" means a notice in writing
      addressed to the Company at its address first recited (or such other
      address of the Company as may from time to time be notified to the
      Optionee in writing), substantially in the form attached as Appendix "A"
      hereto, which notice shall specify therein the number of Optioned Shares
      in respect of which the Options are being exercised;

	 	 	 
	 	(f) 	
      "Options" means the irrevocable right and option
      to purchase, from time to time, all, or any part of the Optioned Shares
      granted to the Optionee by the Company pursuant to Section 1.2 of this
      Agreement;

	 	 	 
	 	(g) 	
      "Optioned Shares" means the shares of Common
      Stock, subject to the Options;

	 	 	 
	 	(h) 	
      "Securities" means, collectively, the Options and
      the Optioned Shares;

	 	 	 
	 	(i) 	
      "Shareholders" means holders of record of the
      shares of Common Stock;

	 	 	 
	 	(j) 	
      "U.S. Person" shall have the meaning ascribed
      thereto in Regulation S under the 1933 Act, and for the purpose of the
      Agreement includes any person in the United States; and

	 	 	 
	 	(k) 	
      "Vested Options" means the Options that have
      vested in accordance with Section 1.3 of this
Agreement.



1.2                   
The Company hereby grants to the Optionee, on the terms and conditions set out
in this Agreement and in the Plan, Options to purchase a total of TWO
HUNDRED THOUSAND (200,000) Optioned Shares at the Exercise Price. 

1.3                    
The TWO HUNDRED THOUSAND (200,000) Options shall vest in accordance with the
following schedule: 

	 	(a) 	
      SIXTY SIX THOUSAND SIX HUNDRED AND SIXTY SIX (66,666)
      Options shall vest on the Date of Grant,

	 	 	 
	 	(b) 	
      SIXTY SIX THOUSAND SIX HUNDRED AND SIXTY SEVEN (66,667)
      Options shall vest on the first anniversary of the Date of Grant,
    and

	 	 	 
	 	(c) 	
      SIXTY SIX THOUSAND SIX HUNDRED AND SIXTY SEVEN (66,667)
      Options shall vest on the second anniversary of the Date of
  Grant.



1.4                    
The Options shall, at 5:00 p.m. (Houston time) on the Expiry Date, expire and be
of no further force or effect whatsoever. 

1.5                    
Vested Options shall terminate, to the extent not previously exercised, in
accordance with Section 5(g) of the Plan. Each unvested Option granted pursuant
hereto shall terminate immediately upon termination of or resignation from the
Optionee's employment or contractual relationship with the Company for any
reason whatsoever. 

1.6                    
Subject to the provisions of this Agreement and the Plan and subject to
compliance with any applicable securities laws, the Options shall be
exercisable, in full or in part, at any time after vesting, 




3 

until termination, subject to the provisions below; provided,
however, that if the Optionee is subject to the reporting and liability
provisions of Section 16 of the Securities Exchange Act of 1934 with
respect to the Common Stock, the Optionee shall be precluded from selling,
transferring or otherwise disposing of any Common Stock underlying any Options
during the six (6) months immediately following the grant of that Option. If
less than all of the shares included in the vested portion of any Options are
purchased, the remainder may be purchased at any subsequent time prior to the
Expiry Date. Only whole shares may be issued pursuant to the exercise of any
Options, and to the extent that any Options covers less than one (1) share, it
is unexercisable. 

Notwithstanding any other provision herein, in the event of the
termination of Optionee's employment for any reason, Optionee shall have one
year from the date of such termination to exercise any vested, but unexercised
Options granted pursuant hereto. 

Each exercise of the Options shall be by means of delivery of a
Notice of Exercise (which may be in the form attached hereto as Appendix A) to
the President of the Company at its principal executive office, specifying the
number of shares of Common Stock to be purchased and accompanied by payment in
cash by certified check or cashier's check in the amount of the full exercise
price for the Common Stock to be purchased. In addition to payment in cash by
certified check or cashier's check, an Optionee or transferee of the Options may
pay for all or any portion of the aggregate exercise price by complying with one
or more of the following alternatives: 

	 	(a) 	
      by delivering a properly executed Notice of Exercise
      together with irrevocable instructions to a broker promptly to sell or
      margin a sufficient portion of the Common Stock and deliver directly to
      the Company the amount of sale or margin loan proceeds to pay the exercise
      price; or

	 	 	 
	 	(b) 	
      by complying with any other payment mechanism approved by
      the Board at the time of exercise.



It is a condition precedent to the issuance of Optioned Shares
that the Optionee execute and/or deliver to the Company all documents and
withholding taxes required in accordance with applicable laws. 

1.7                    
Nothing in this Agreement shall obligate the Optionee to purchase any Optioned
Shares except those Optioned Shares in respect of which the Optionee shall have
exercised the Options in the manner provided in this Agreement. 

1.8                    
Reference is made to the Plan and the Employment Agreement for particulars of
the rights and obligations of the Optionee and the Company in respect of: 

	 	(a) 	
      the terms and conditions on which the Options are
      granted; and

	 	 	 
	 	(b) 	
      a consolidation or subdivision of the Company's share
      capital or an amalgamation or merger;



all to the same effect as if the provisions of the Plan were
set out in this Agreement and to all of which the Optionee assents. 

1.9                    
The terms of the Options are subject to the provisions of the Plan, as the same
may from time to time be amended, and any inconsistencies among this Agreement,
the Employment Agreement and the Plan, as the same may be from time to time
amended, shall be governed by the provisions of the Plan. 




4 

2.                      
Documents Required from Optionee 

2.1                    
The Optionee must complete, sign and return an executed copy of this Agreement
to the Company. 

2.2                    
The Optionee shall complete, sign and return to the Company as soon as possible,
on request by the Company, any documents, questionnaires, notices and
undertakings as may be required by regulatory authorities, and applicable law.


3.                      
Acknowledgements of the Optionee 

3.1                    
The Optionee acknowledges and agrees that: 

	 	(a) 	
      the Optionee is an executive officer of the
    Company;

	 	 	 
	 	(b) 	
      the Securities have not been registered under the 1933
      Act or under any state securities or "blue sky" laws of any state of the
      United States, and are being offered only in a transaction not involving
      any public offering within the meaning of the 1933 Act, and, unless so
      registered, may not be offered or sold in the United States or to U.S.
      Persons (as defined herein), except pursuant to an effective registration
      statement under the 1933 Act, or pursuant to an exemption from, or in a
      transaction not subject to, the registration requirements of the 1933 Act,
      and in each case only in accordance with applicable state securities
      laws;

	 	 	 
	 	(c) 	
      the Company will refuse to register any transfer of the
      Securities not made in accordance with the provisions of Regulation S,
      pursuant to an effective registration statement under the 1933 Act or
      pursuant to an available exemption from, or in a transaction not subject
      to, the registration requirements of the 1933 Act;

	 	 	 
	 	(d) 	
      the decision to execute this Agreement and acquire the
      Securities hereunder has not been based upon any oral or written
      representation as to fact or otherwise made by or on behalf of the Company
      and such decision is based solely upon a review of publicly available
      information regarding the Company available on the website of the United
      States Securities and Exchange Commission (the "SEC") available at
      www.sec.gov (the "Company Information");

	 	 	 
	 	(e) 	
      the Company is entitled to rely on the representations
      and warranties and the statements and answers of the Optionee contained in
      this Agreement, and the Optionee will hold harmless the Company from any
      loss or damage it may suffer as a result of the Optionee's failure to
      correctly complete this Agreement;

	 	 	 
	 	(f) 	
      the Optionee has been advised to consult its own legal,
      tax and other advisors with respect to the merits and risks regarding the
      exercise of the Options and the issuance of the Optioned Shares and with
      respect to applicable resale restrictions and it is solely responsible
      (and the Company is in any way responsible) for compliance with applicable
      resale restrictions;

	 	 	 
	 	(g) 	
      the Securities are not listed on any stock exchange or
      automated dealer quotation system and no representation has been made to
      the Optionee that any of the Securities will become listed on any stock
      exchange or automated dealer quotation system, except
  that







5 

	 		
      currently certain market makers make market in the shares
      of the Company's common stock on the OTC Bulletin Board;

	 	 	 
	 	(h) 	
      neither the SEC nor any other securities commission or
      similar regulatory authority has reviewed or passed on the merits of the
      Securities;

	 	 	 
	 	(i) 	
      no documents in connection with this Agreement have been
      reviewed by the SEC or any state securities administrators;

	 	 	 
	 	(j) 	
      there is no government or other insurance covering any of
      the Securities; and

	 	 	 
	 	(k) 	
      this Agreement is not enforceable by the Optionee unless
      it has been accepted by the Company.



4.                     
 Representations, Warranties and Covenants of the Optionee


4.1                    
The Optionee hereby represents and warrants to and covenants with the Company
(which representations, warranties and covenants shall survive the closing)
that: 

	 	(a) 	
      the Optionee is an executive officer of the
    Company;

	 	 	 
	 	(b) 	
      the Optionee is a U.S. Person;

	 	 	 
	 	(c) 	
      the Optionee has received and carefully read this
      Agreement;

	 	 	 
	 	(d) 	
      the Optionee has the legal capacity and competence to
      enter into and execute this Agreement and to take all actions required
      pursuant hereto and, if the Optionee is a corporation, it is duly
      incorporated and validly subsisting under the laws of its jurisdiction of
      incorporation and all necessary approvals by its directors, shareholders
      and others have been obtained to authorize execution and performance of
      this Agreement on behalf of the Optionee;

	 	 	 
	 	(e) 	
      the Optionee (i) has adequate net worth and means of
      providing for its current financial needs and possible personal
      contingencies, (ii) has no need for liquidity in this investment, and
      (iii) is able to bear the economic risks of an investment in the
      Securities for an indefinite period of time, and can afford the complete
      loss of such investment;

	 	 	 
	 	(f) 	
      all information contained in this Agreement is complete
      and accurate and may be relied upon by the Company;

	 	 	 
	 	(g) 	
      the Optionee has the requisite knowledge and experience
      in financial and business matters as to be capable of evaluating the
      merits and risks of the investment in the Securities and the Company, and
      the Optionee is providing evidence of such knowledge and experience in
      these matters through the information requested in this
  Agreement;

	 	 	 
	 	(h) 	
      the Optionee understands and agrees that the Company and
      others will rely upon the truth and accuracy of the acknowledgements,
      representations, warranties, covenants and agreements contained in this
      Agreement and agrees that if any of such acknowledgements, representations
      and agreements are no longer accurate or have been breached, the Optionee
      shall promptly notify the Company;







6 

	 	(i) 	
      the Optionee is aware that an investment in the Company
      is speculative and involves certain risks, including the possible loss of
      the investment;

	 	 	 
	 	(j) 	
      the entering into of this Agreement and the transactions
      contemplated hereby do not result in the violation of any of the terms and
      provisions of any law applicable to, or, if applicable, the constating
      documents of, the Optionee, or of any agreement, written or oral, to which
      the Optionee may be a party or by which the Optionee is or may be
      bound;

	 	 	 
	 	(k) 	
      the Optionee has duly executed and delivered this
      Agreement and it constitutes a valid and binding agreement of the Optionee
      enforceable against the Optionee;

	 	 	 
	 	(l) 	
      the Optionee has the requisite knowledge and experience
      in financial and business matters as to be capable of evaluating the
      merits and risks of the investment in the Securities and the Company, and
      the Optionee is providing evidence of such knowledge and experience in
      these matters through the information requested in this
  Agreement;

	 	 	 
	 	(m) 	
      the Optionee understands and agrees that the Company and
      others will rely upon the truth and accuracy of the acknowledgements,
      representations and agreements contained in this Agreement, and agrees
      that if any of such acknowledgements, representations and agreements are
      no longer accurate or have been breached, the Optionee shall promptly
      notify the Company;

	 	 	 
	 	(n) 	
      the Optionee is purchasing the Securities for its own
      account for investment purposes only and not for the account of any other
      person and not for distribution, assignment or resale to others, and no
      other person has a direct or indirect beneficial interest is such
      Securities, and the Optionee has not subdivided his interest in the
      Securities with any other person;

	 	 	 
	 	(o) 	
      the Optionee is not an underwriter of, or dealer in, the
      shares of the Company's common stock, nor is the Optionee participating,
      pursuant to a contractual agreement or otherwise, in the distribution of
      the Securities;

	 	 	 
	 	(p) 	
      the Optionee has made an independent examination and
      investigation of an investment in the Securities and the Company and has
      depended on the advice of its legal and financial advisors and agrees that
      the Company will not be responsible in anyway whatsoever for the
      Optionee's decision to acquire the Securities;

	 	 	 
	 	(q) 	
      if the Optionee is acquiring the Securities as a
      fiduciary or agent for one or more investor accounts, the Optionee has
      sole investment discretion with respect to each such account, and the
      Optionee has full power to make the foregoing acknowledgements,
      representations and agreements on behalf of such account;

	 	 	 
	 	(r) 	
      the Optionee is not aware of any advertisement of any of
      the Securities and is not acquiring the Securities as a result of any form
      of general solicitation or general advertising including advertisements,
      articles, notices or other communications published in any newspaper,
      magazine or similar media or broadcast over radio or television, or any
      seminar or meeting whose attendees have been invited by general
      solicitation or general advertising;

	 	 	 
	 	(s) 	
      no person has made to the Optionee any written or oral
      representations:







7 

	 	(i) 	
      that any person will resell or repurchase any of the
      Securities,

	 	 	 
	 	(ii) 	
      that any person will refund the purchase price of any of
      the Securities,

	 	 	 
	 	(iii) 	
      as to the future price or value of any of the Securities,
      or

	 	 	 
	 	(iv) 	
      that any of the Securities will be listed and posted for
      trading on any stock exchange or automated dealer quotation system or that
      application has been made to list and post any of the Securities of the
      Company on any stock exchange or automated dealer quotation system, except
      that currently certain market makers make market in the shares of the
      Company's common stock on the OTC Bulletin Board;
and




	 	(t) 	
      In this Agreement, the term "U.S. Person" shall have the
      meaning ascribed thereto in Regulation S promulgated under the 1933 Act
      and for the purpose of this Agreement includes any person in the United
      States.



5.                      
Acknowledgement and Waiver 

5.1                    
The Optionee has acknowledged that the decision to enter into this Agreement was
solely made on the basis of publicly available information contained in the
Company Information. The Optionee hereby waives, to the fullest extent permitted
by law, any rights of withdrawal, rescission or compensation for damages to
which the Optionee might be entitled in connection with the distribution of any
of the Securities. 

6.                      
Legending of Subject Securities 

6.1                    
The Optionee hereby acknowledges that that upon the issuance thereof, and until
such time as the same is no longer required under the applicable securities laws
and regulations, the certificates representing any of the Securities will bear a
legend in substantially the following form: 


  
    "NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN
      REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
      "1933 ACT"), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED,
      NONE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
      NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH
      CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS." 

  



6.2                    
The Optionee hereby acknowledges and agrees to the Company making a notation on
its records or giving instructions to the registrar and transfer agent of the
Company in order to implement the restrictions on transfer set forth and
described in this Agreement. 

7.                      
Costs 

7.1                    
The Optionee acknowledges and agrees that all costs and expenses incurred by the
Optionee (including any fees and disbursements of any special counsel retained
by the Optionee) relating to the acquisition of the Securities shall be borne by
the Optionee. 




8 

8.                     
 Governing Law 

8.1                    
This Agreement is exclusively governed by the laws of the State of Texas and the
federal laws of the United States applicable therein. The Optionee irrevocably
and exclusively attorns to the jurisdiction of the courts of the State of Texas.


9.                      
Survival 

9.1                    
This Agreement, including without limitation the representations, warranties and
covenants contained herein, shall survive and continue in full force and effect
and be binding upon the parties hereto notwithstanding the exercise of the
Options and the corresponding acquisition of the shares underlying the Options
by the Optionee pursuant hereto. 

10.                    
Assignment 

10.1                   This
Agreement is not transferable or assignable. 

11.                    
Counterparts and Electronic Means 

11.1                   This
Agreement may be executed in several counterparts, each of which will be deemed
to be an original and all of which will together constitute one and the same
instrument. Delivery of an executed copy of this Agreement by electronic
facsimile transmission or other means of electronic communication capable of
producing a printed copy will be deemed to be execution and delivery of this
Agreement as of the date first above written. 

12.                    
Currency 

12.1                  
Unless explicitly stated otherwise, all funds in this Agreement are stated in
United States dollars. 

13.                    
Severability 

13.1                   The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect or limit the validity or enforceability of the remaining
provisions of this Agreement. 

14.                    
Entire Agreement 

14.1                   Except
as expressly provided in this Agreement and in the agreements, instruments and
other documents contemplated or provided for herein, this Agreement is the only
agreement between the Optionee and the Company with respect to the Options, and
this Agreement supersedes all prior and contemporaneous oral and written
statements and representations and contains the entire agreement between the
parties with respect to the Securities. 

15.                    
  Effectiveness

15.1                   This
Agreement shall be deemed to be effective following the delivery by the Optionee
to the Company of two fully executed copies of this Agreement. 




9 

IN WITNESS WHEREOF the parties hereto have duly executed
this Agreement as of the date first above written. 

ARKANOVA ENERGY CORPORATION 

 

By:  /s/ Pierre
Mulacek                                                          

       Authorized Signatory 

	WITNESSED BY: 	) 	  
	  	) 	  
	/s/ Signed
    	) 	  
	Name 	) 	  
	  	) 	  
	Address 	) 	/s/
      Reginald Denny 
	  	) 	REGINALD DENNY 
	  	) 	  
	  	) 	  
	Occupation 	) 	  






APPENDIX A

	TO: 	Arkanova Energy Corporation 
	  	21 Waterway Avenue, Suite 300 
	  	The Woodlands, Texas 77380 


Notice of Exercise 

This Notice of Exercise shall constitute proper notice pursuant
to Section 1.6 of the Stock Option and Subscription Agreement dated as of
October ____, 2007 (the "Agreement"), between the Company and the undersigned.
The undersigned hereby elects to exercise Optionee's option to purchase
____________________ shares of the common stock of the Company at a price of
$____ per share, for aggregate consideration of $____________, on the terms and
conditions set forth in the Agreement. Such aggregate consideration, in the form
specified in Section 1.6 of the Agreement, accompanies this notice. 

The Optionee hereby directs the Company to issue, register and
  deliver the certificates representing the shares as follows: 

	Registration Information: 	 	Delivery Instructions: 
	 	 	 
	 	 	 
	Name to appear on certificates
    	 	Name 
	 	 	 
	 	 	 
	Address 	 	Address
    
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 
    	 	  
	  	 	Telephone Number 


DATED at ____________________________________ , the _______day
  of______________, _______. 

	 	 
	 	(Name of Optionee – Please type or print)
    
	 	 
	 	 
	 	(Signature and, if applicable, Office) 
	 	 
	 	 
	 	(Address of Optionee) 
	 	 
	 	 
	 	(City, State, and Zip Code of Optionee) 
	 	 
	 	 
	 	(Fax Number)