Filed by Automated Filing Services Inc. (604) 609-0244 - Arkanova Energy Corproration - Exhibit 10.1






EXECUTIVE EMPLOYMENT
AGREEMENT 

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of October 18, 2007, by and between ARKANOVA
ENERGY CORPORATION, a Nevada corporation (the
“Company”), and REGINALD DENNY, an individual and resident of Fort Worth,
Texas (the "Executive"). 

WHEREAS, the Company is in the business of locating,
acquiring and exploring natural resource mineral properties; and 

WHEREAS, Executive has experience in the controller and
senior management functions of companies in the oil & gas industry in
particular; and

WHEREAS, the Company desires to retain the services of
Executive; and 

WHEREAS, Executive is willing to be employed by the
Company;

NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows: 

1.                     
 Employment. Executive is hereby employed and engaged to serve the
Company as the Chief Financial Officer of the Company, and such additional
titles as the Board of Directors of the Company shall specify from time to time,
and Executive does hereby accept, and Executive hereby agrees to such engagement
and employment.

2.                       Duties.
Executive’s duties shall be such duties and responsibilities as the Company
shall specify from time to time, and shall entail those duties customarily
performed by the Chief Financial Officer of a company with a sales volume and
number of employees commensurate with those of the Company. Executive shall
diligently and faithfully execute and perform such duties and responsibilities,
subject to the general supervision and control of the Company’s President and
Chief Executive Officer. The Company’s Board of Directors, in their sole and
absolute discretion, shall determine Executive’s duties and responsibilities and
may assign or reassign Executive to such duties and responsibilities as it deems
in the Company's best interest. Executive shall devote his attention, energy,
and skill to the business and affairs of the Company. Company recognizes that
Executive is actively engaged in other business, investments, and personal
pursuits, which the Executive may continue to participate in so long as such
activities do not result in an actual or perceived conflict of interest with the
Executive’s duties with the Company. Executive’s duties shall include, but shall
not be limited, to the following: 

	 	(a) 	
      Hands on and management of the complete accounting
      function to include payables, receivables, payroll, general ledger, asset
      control, purchasing, inventory, depletion and depreciation, etc.

	 	 	 
	 	(b) 	
      Production of financial statements in accordance with
      United States GAAP, and management reports, on a monthly basis and on an
      as needed basis.

	 	 	 
	 	(c) 	
      Preparation of budgets and forecasts with expenditure
      analysis and variance reporting to include capital, operational and
      financial.







2 

	 	(d) 	
      Management of cash balances for timely commitment of
      funds and float control.

	 	 	 
	 	(e) 	
      Responsible for all tax matters as to production and
      timely filing.

	 	 	 
	 	(f) 	
      Preparation and filing of necessary documents and reports
      with the Securities and Exchange Commission (the “SEC”), such as quarterly
      reports on Form 10- QSB, annual reports on Form 10-KSB, current reports on
      Form 8-K, and to the Federal Energy Regulatory Commission, and any and all
      necessary for the State of Arkansas and other agencies.

	 	 	 
	 	(g) 	
      Ensure compliance with contracts and agreements, their
      recording and classification, enforceability and legality and coordinate
      with legal counsel regarding same.

	 	 	 
	 	(h) 	
      Maintain the corporate records, minutes and bylaws for
      compliance with management, shareholders and the IRS and government
      agencies.

	 	 	 
	 	(i) 	
      Maintain adequate insurance for all coverage and conduct
      periodic reviews for rates, coverage and any changes to operating
      conditions.

	 	 	 
	 	(j) 	
      Implement a software package to facilitate the recording
      of operations, update as necessary and maintain the security of the
      system.

	 	 	 
	 	(k) 	
      Liaison with audit firms for the annual audit and SEC
      filings.

	 	 	 
	 	(l) 	
      Conduct and maintain a professional relationship with all
      parties interacting with the Company with the utmost regard for honesty
      and integrity.



Provided such activities do not result in an actual or
perceived conflict of interest with the Company, nothing in this Agreement shall
preclude Executive from devoting reasonable time required for: 

	 	(a) 	
      serving as a director or member of a committee of any
      organization or corporation;

	 	 	 
	 	(b) 	
      serving as a consultant in his area of expertise (in
      areas other than in connection with the business of the Company), to
      government, industrial, and academic panels where it does not conflict
      with the interests of the Company; and

	 	 	 
	 	(c) 	
      managing his personal investments or engaging in any
      other non-competing business; provided that such activities do not
      interfere with the regular performance of his duties and responsibilities
      under this Agreement as determined by the Company



3.                      
Best Efforts of Executive. During his employment hereunder, Executive shall,
subject to the direction and supervision of the Company’s Board of Directors,
President and Chief Executive Officer, devote his business time, best efforts,
business judgment, skill, and knowledge to the advancement of the Company's
interests and to the discharge of his duties and responsibilities hereunder.




3 

4.                       Employment
Term. This Agreement shall have a term of one (1) year, beginning on the
date hereof (the "Employment Term"). Upon expiration of the initial Employment
Term, this Agreement will automatically renew for another one (a) year unless
terminated in writing by either party no less than sixty (60) days prior to the
expiration or by either party pursuant to Section 13. 

5.                       Familiarization
  Period. During the first 120 days of the Employment Term, this agreement
  shall be considered at-will, meaning during this period Executive may be terminated
  without notice. Employment is voluntary and employees are free to resign without
  notice during this time without penalty. During this period, Executive is eligible
  for all applicable benefits. The familiarization period will allow Executive
  to adjust and adapt to the job demands and the work situation, while at the
  same time, allow the Company to observe firsthand whether Executive will be
  able to meet the job specifications and demands.

6.                       Compensation
of Executive. As compensation for the services provided by Executive under
this Paragraph, the Company shall pay Executive an annual salary of Eighty Five
Thousand Dollars ($85,000.00) to be paid in accordance with the Company's usual
payroll procedures. In addition to the above base compensation, Executive may be
eligible to receive an annual bonus determined by the Board of Directors based
on the performance of the Company. 

7.                       Stock
Option Grant. The Company hereby agrees to grant the Execute an incentive
stock option (the “Option”), effective as at the date of this Agreement, to
acquire up to 200,000 shares of the Company’s common stock with a per share
exercise price equal to the closing market price of the Company’s stock the day
before the date of grant of the Option. The terms of the Option are set out in
the Stock Option Agreement in the form attached hereto as Schedule A, and are
subject to the provisions of the Company’s 2007 Stock Option Plan, as may be
amended from time to time. Any inconsistencies among this Agreement, the Stock
Option Agreement and the 2007 Stock Option Plan shall be governed by the
provisions of the 2007 Stock Option Plan. 

8.                       Benefits.
Executive shall also be entitled to participate in any and all Company benefit
plans, from time to time, in effect for employees of the Company. Such
participation shall be subject to the terms of the applicable plan documents and
generally applicable Company policies. 

9.                       Vacation,
Sick Leave and Holidays. Executive shall be entitled to four weeks of paid
vacation in accordance with Company policies established and in effect from time
to time, with such vacation to be scheduled and taken in accordance with the
Company's standard vacation policies. In addition, Executive shall be entitled
to such sick leave and holidays at full pay in accordance with the Company's
policies established and in effect from time to time. 

10.                     Business
Expenses and Indemnity. The Company shall promptly reimburse Executive for
all reasonable out-of-pocket business expenses incurred in performing
Executive’s duties and responsibilities hereunder in accordance with the
Company's policies, provided 




4 

Executive promptly furnishes to the Company adequate records of
such expenses. Company agrees to indemnify and hold Executive harmless from any
liability, damage, or claim, including reasonable attorneys’ fees incurred by
Executive related to the Company or its activities, provided that Company shall
not be liable for any action for Executive’s gross negligence or willful
neglect.

11.                     Location
of Executive's Activities. Executive’s principal place of business in the
performance of his duties and obligations under this Agreement shall be in the
Houston metropolitan area. Notwithstanding the preceding sentence, Executive
will engage in such travel and spend such time in other places as may be
necessary or appropriate in furtherance of his duties hereunder. 

12.                     Confidentiality.
Executive recognizes that the Company has and will have business affairs,
products, future plans, trade secrets, customer lists, and other vital
information (collectively "Confidential Information") that are valuable assets
of the Company. Executive agrees that he shall not at any time or in any manner,
either directly or indirectly, divulge, disclose, or communicate in any manner
any Confidential Information to any third party without the prior written
consent of the Company’s Board of Directors. Executive will protect the
Confidential Information and treat it as strictly confidential. The Executive
acknowledges that any violation of this section will cause the Company immediate
and irreparable harm and that the damages which the Company will suffer may be
difficult or impossible to measure. Therefore, upon any actual or impending
violation of this section, the Company shall be entitled to the issuance of a
restraining order, preliminary and permanent injunction, without bond,
restraining or enjoining such violation by the Executive or any entity or person
acting in concert with the Executive. Such remedy shall be additional to and not
in limitation of any other remedy which may otherwise be available to the
Company. 

13.                     Termination.
Notwithstanding any other provisions hereof to the contrary, and except as
provided in Section 5, Executive’s employment hereunder shall terminate under
the following circumstances: 

	 	(a) 	
      Voluntary Termination by Executive. Executive
      shall have the right to voluntarily terminate this Agreement and his
      employment hereunder at any time during the Employment Term upon three
      months’ prior written notice.

	 	 	 
	 	(b) 	
      Voluntary Termination by Company. The Company
      shall have the right to voluntarily terminate this Agreement and
      Executive’s employment hereunder at any time during the Employment Term
      upon three months’ prior written notice, or with three months pay in lieu
      of such notice.

	 	 	 
	 	(c) 	
      Termination for Cause. The Company shall have the
      right to terminate this Agreement and Executive’s employment hereunder at
      any time for cause. As used in this Agreement, "cause" shall mean refusal
      by Executive to implement or adhere to lawful policies or directives of
      the Company’s Board of Directors or President and Chief Executive Officer,
      breach of this Agreement, Executive’s conviction of a felony, other
      conduct of a criminal nature that may have a material adverse impact on
      the Company's reputation, breach of fiduciary duty or the criminal
      misappropriation by Executive of funds from or resources of the Company.
      Cause shall not be deemed to exist unless the Company shall have first
      given Executive a written notice thereof specifying in reasonable detail
      the facts and circumstances alleged to constitute "cause" and thirty (30)
      days after







5 

	 		
      such notice such conduct has, or such circumstances have,
      as the case may be, not entirely ceased and not been entirely
    remedied.

	 	 	 
	 	(d) 	
      Termination Upon Death or for Disability. This
      Agreement and Executive’s employment hereunder, shall automatically
      terminate upon Executive’s death or upon written notice to Executive and
      certification of Executive’s disability by a qualified physician or a
      panel of qualified physicians if Executive becomes disabled beyond a
      period of twelve (12) months and is unable to perform the duties contained
      in this Agreement.

	 	 	 
	 	(e) 	
      Effect of Termination. In the event that this
      Agreement and Executive’s employment is terminated for cause pursuant to
      paragraph (c) of this Section 13, all obligations of the Company and all
      duties, responsibilities and obligations of Executive under this Agreement
      shall cease upon the effective date of such termination. Upon such
      termination, Executive shall be entitled to receive only the compensation,
      benefits, and reimbursement earned by or accrued to Executive under the
      terms of this Agreement prior to the date of termination, but shall not be
      entitled to any further compensation, benefits, or reimbursement after
      such date. In the event the Executive or the Company voluntarily
      terminates this Agreement pursuant to Sections 13(a) or 13(b), or in the
      event of the termination of this Agreement upon death or disability of
      Executive pursuant to Section 13(d), Executive shall be entitled to all
      compensation pursuant to Section 6 for the period through the effective
      termination date, provided that in the case of death or disability,
      payment may be made to the Executive’s appointed trustee. Other than as
      set forth above, Executive shall not be entitled to any further
      compensation, benefits, or reimbursement after the date of his
      termination. In the event of a merger, consolidation, sale, or change of
      control, the Company's rights hereunder shall be assigned to the surviving
      or resulting company, which company shall then honor this Agreement with
      Executive.



14.                     Governing
Law, Jurisdiction and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without giving
effect to any applicable conflicts of law provisions. 

15.                     Business
Opportunities. During the Employment Term, Executive agrees to bring to the
attention of the Company’s Board of Directors all written business proposals
that come to Executive’s attention and all business or investment opportunities
of whatever nature that are created or devised by Executive and that relate to
areas in which the Company conducts business and might reasonably be expected to
be of benefit or interest to the Company or any of its subsidiaries. 

15.                     Executive’s
Representations and Warranties. Executive hereby represents and warrants
that he is not under any contractual obligation to any other company, entity or
individual that would prohibit or impede Executive from performing his duties
and responsibilities under this Agreement and that he is free to enter into and
perform the duties and responsibilities required by this Agreement. Executive
hereby agrees to indemnify and hold the Company and its officers, directors,
employees, shareholders and agents harmless in connection with the
representations and warranties made by Executive in this Section 15. 

16.                     Notices.
All demands, notices, and other communications to be given 




6 

hereunder, if any, shall be in writing and shall be sufficient
for all purposes if personally delivered, sent by facsimile or sent by United
States mail to the address below or such other address or addresses as such
party may hereafter designate in writing to the other party as herein provided.



  	Company: 	Executive: 
	  	  
	Arkanova Energy Corporation 	Reginald Denny 
	21 Waterway Avenue, Suite 300 	257 Willow Ridge Road 
	The Woodlands, Texas 77380 	Fort Worth, Texas 76103 




17.                     Entire
Agreement. This Agreement contains the entire agreement of the parties and
there are no other promises or conditions in any other agreement, whether oral
or written. This Agreement supersedes any prior written or oral agreements
between the parties. This Agreement may be modified or amended, if the amendment
is made in writing and is signed by both parties. This Agreement is for the
unique personal services of Executive and is not assignable or delegable, in
whole or in part, by Executive. This Agreement may be assigned or delegated, in
whole or in part, by the Company and, in such case, shall be assumed by and
become binding upon the person, firm, company, corporation or business
organization or entity to which this Agreement is assigned. The headings
contained in this Agreement are for reference only and shall not in any way
affect the meaning or interpretation of this Agreement. If any provision of this
Agreement shall be held to be invalid or unenforceable for any reason, the
remaining provisions shall continue to be valid and enforceable. The failure of
either party to enforce any provision of this Agreement shall not be construed
as a waiver or limitation of that party's right to subsequently enforce and
compel strict compliance with every provision of this Agreement. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument
and, in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts. This Agreement may be
executed by fax or other form of electronic transmission and will be effective
for all purposes. 

[the remainder of this page left intentionally blank]





7 

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written. 

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


 

ARKANOVA ENERGY CORPORATION 

 

By:    /s/ Pierre
Mulacek                                            
         Pierre
Mulacek, President 




8 

SCHEDULE A 
STOCK OPTION AGREEMENT 

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 ____ 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 ___,
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;







9 

	 	(c) 	
      "Exercise Price" means $_____;

	 	 	 
	 	(d) 	
      "Expiry Date" means October ____, 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, 




10 

until termination; 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. 

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. 




11 

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







12 

	 		
      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;







13 

	 	(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:







14 

	 	(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. 




15 

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. 




16 

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

ARKANOVA ENERGY CORPORATION 

 

By:   
_______________________________________
           
Authorized Signatory 

	WITNESSED BY: 	) 	  
	  	) 	  
	  	) 	  
	Name 	) 	  
	  	) 	  
	Address 	) 	 
    
	  	) 	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)