Filed by Automated Filing Services Inc. (604) 609-0244 - Arkanova Energy Corp. - Exhibit 10.






Exhibit 10.2

ARKANOVA ENERGY, INC.
8150
NORTH CENTRAL EXPRESSWAY 
SUITE 1800 
DALLAS, TEXAS 75206

 

July 24, 2006

Mr. David Griffin 
P.O. Box 659 
Elaine, AR 72333

Re:      Oil
and Gas Lease Acquisition and Development Agreement 

Dear Mr. Griffin:

          This
letter (herein called the “Agreement”) constitutes the agreement between
Arkanova Energy, Inc., a Delaware corporation (“AEI”), and
David Griffin, an individual who is a resident of Phillips County,
Arkansas (“Griffin”), concerning the acqusition by AEI from Griffin of
oil and gas leases covering lands and minerals located in Phillips, Monroe and
Desha Counties, Arkansas, and the development of the lands and minerals covered
by said leases. The principal terms of the Agreement are as follows:

          1.     
Mineral Ownership. Griffin hereby represents that he owns or controls one
hundred percent (100%) of the minerals underlying Fifty Thousand (50,000) gross
acres of land, more or less, in Phillips and Monroe Counties, Arkansas (the
“Lease Lands”), as more particularly described in Annex “A” attached
hereto, incorporated herein by reference and made a part hereof for all
purposes, and he hereby covenants that he will deliver to AEI one or more oil
and gas leases covering the entire Leased Lands. In addition, Griffin represents
that he owns or controls one hundred percent (100%) of the minerals underlying
Fifteen Thousand (15,000) contiguous gross acres of land, more or less, in Desha
County, Arkansas (the “Option Lands”) more particularly described in the
annex to the Option Agreement.(as such term is defined in Section 5 of this
Agreement) and he hereby covenants that he will deliver to AEI oil and gas
leases covering the entire Option Lands in the event that AEI exercises its
option (a more particularly described herein, to acquire same.

          2.     
Delivery of Leases. From time to time hereafter but in no event later
than six (6) months for the date hereof, Griffin shall deliver to AEI one or
more oil and gas leases providing for the payment of a royalty to Griffin of
seventeen and one-half percent (17.5%), subject to to adjustment as provided in
Section 4 hereof, in the form attached hereto as Annex “B,” incorporated herein
by reference and made a part hereof for all purposes covering one hundred
percent (100%) of the minerals underlying the Leased Lands he owns or otherwise
controls, being approximately Fifty Thousand (50,000) acres, in increments of
not more than Eight Thousand Two Hundred Fifty (8,250) acres unless otherwise
approved by AEI, together with evidence of ownership in form and substance
reasonably satisfactory to AEI and its legal counsel. Each oil and gas lease
covering the Lease Lands, except the oil and gas lease covering the last and
final segment of the Lease Lands, shall be delivered undated by Griffin, and
Griffin hereby specifically grants to AEI his irrevocable special power of
attorney to date each such oil and gas lease the date of the delivery of the
last and final oil and gas lease delivered by Griffin with respect to the Lease
Lands or the date of filing of the applicable oil and gas lease (or Memorandum
relating thereto) in the 




records of the applicable county, whichever is earlier, and AEI
and Griffin agree that the term of each such oil and gas lease shall commence on
the date inserted by AEI as herein permitted. AEI covenants and agrees that it
will accept and timely pay the Lease Bonus (as such term is defined in Section 3
hereof) for each properly executed oil and gas lease in the form attached as
Annex “B” covering one hundred percent (100%) of the mineral interests, without
any title defect or curative issue, in the Lease Lands described in said oil and
gas lease, together with evidence of ownership of said minerals as herein
provided, that it receives from Griffin.

          3.     
Payment for Leases. Upon acceptance of each oil and gas lease delivered
by Griffin to AEI as provided in Section 2 of this Agreement, AEI shall cause to
be delivered by wire transfer in immediately available funds to such account as
Griffin may designate to AEI the sum of Three Hundred and No/100 Dollars
($300.00) per net mineral acre covered by such oil and gas lease (the “Lease
Bonus”). AEI shall be deemed to have accepted an oil and gas lease upon the
later of (i) payment in full of the Lease Bonus for such oil and gas lease, and
(ii) notification in writing by AEI or its legal counsel that the evidence of
ownership with respect to the mineral interests covered by such oil and gas
lease has been accepted by AEI, and no oil and gas lease shall be effective to
convey an interest in the minerals covered thereby until it has been accepted by
AEI as herein provided. Griffin shall be responsible for all costs he and his
affiliates may incur in connection with each oil and gas lease up to the date of
acceptable of same by AEI.

          4.      Drilling
Commitment. AEI shall drill and complete, if warranted, not less than six
(6) wells over a period of two (2) years at such locations as may be selected by
AEI after consultation with Griffin, with the first of such wells to be
commenced within six (6) months of the date of the acceptance by AEI of the last
of the oil and gas leases covering the Leased Lands. Each well drilled and
completed on the Leased Lands or, in the event the option herein described is
exercised by AEI, on the Option Lands, irrespective or whether classified as an
oil or gas well, that is capable of producing oil and/or gas in paying
quantities shall hold, and shall be considered for the purposes of this
Agreement to be production from, Six Thousand Four Hundred (6,400) acres of the
Lease Lands or Option Lands, as applicable. After AEI has earned Thirty Eight
Thousand Four Hundred (38,400) acres by drilling the wells required to hold this
acreage, the royalty percentage in the oil and gas leases for all of the acreage
in excess of Thirty Eight Thousand Four Hundred (38,400) covered by leases from
Griffin to AEI in the Area of Mutual Interest described in Section 6 below shall
decrease from Seventeen and One-Half percent (17.5%) to Fifteen percent
(15%).

          5.     
Desha Option. Simultaneously with the payment of the acceptance of the
first oil and gas lease delivered by Griffin to AEI as provided herein and in
consideration for the payment of the Option Payment (as such term is hereinafter
in the Option Agreement (the “Option Agreement”) attached hereto as Annex
“C,” incorporated herein by reference and made a part hereof for all purposes),
Griffin shall grant to AEI an exclusive option (the “Desha Option”) to
acquire an oil and gas lease in the form attached hereto as Annex “B” covering
the mineral interests that Griffin owns or controls in the Option Lands, which
option shall be evidenced by the execution and delivery by the parties of the
Option Agreement. In the event that AEI does not exercise the Option within the
time period specified in the Option Agreement, AEI shall deliver to Griffin a
copy of all of the seismic interpretations and other scientific materials in
AEI’s possession relating to the lands covered by the Option Agreement;
provided, however, that notwithstanding the foregoing, AEI shall not be required
to deliver any data or information that is subject to a confidentiality
agreement, license or similar agreement with any third party providing such
information or data and that prohibits transfer of the information or data. 

          6.     
Area of Mutual Interest. An Area of Mutual Interest (“AMI”) is
hereby established covering lands situated within Phillips, Monroe and Desha
Counties, Arkansas and all lands within Fifty (50) miles of the boundary of each
of such counties. If at any time Griffin or any of his 




affiliates, irrespective of whether before or following the
execution of this Agreement, acquires, is offered or learns of the availability
to lease ofthe minerals, or any part thereof, covering lands situated in whole
or in part within the AMI (an “AMI Interest”), Griffin shall give AEI
prompt written notice of the acquisition, offer or availability to lease of such
AMI Interest, accompanied by all pertinent data and information relating
thereto, whereupon AEI shall have a period of thirty (30) days after receipt of
the notice in which to elect to acquire such AMI Interest by delivering written
notice of such election within said time period. In a situation where Griffin or
one of his affiliates is offered a lease or learns of the availability to lease
of acreage within the AMI, he shall be entitled to receive from AEI an
overriding royalty interest equal to the difference between the actual royalty
that AEI acquires in said acreage and Fifteen percent (15%). The failure of AEI
to timely deliver such notice or payment as aforesaid shall be deemed an
election by AEI not to acquire the AMI Interest from Griffin.

          7.      Miscellaneous
Provisions. The following provisions shall also be applicable to this
Agreement:

          A.     
Notices. In the event a notice or other document is required to be sent
hereunder to a party hereto, such notice or other document shall be in writing
and shall be deemed to have been given upon receipt if either (i) personally
delivered, (ii) sent by prepaid first class mail, and registered or certified
and a return receipt requested, (iii) sent by overnight delivery via a
nationally recognized carrier or (iv) by facsimile with completed transmission
acknowledged to the party entitled to receive such notice or other document at
the address set forth below its name on the first page of this Agreement or at
such other address as such party shall request in a written notice, sent to the
other parties hereto. Any party may change its address by giving all other
parties notice of the change in accordance with this Section. A notice shall be
deemed to be received on the date that it is delivered in person, written
confirmation is received or it is placed in the United States mail with
appropriate postage.

          B.     
Further Assurances. The Parties hereto agree to furnish upon request to
each other such further information, to execute and deliver to each other such
other documents, including the documents attached as annexes to this Agreement;
and to do such other acts and things, all as the other party hereto may at any
time reasonably request for the purpose of carrying out the intent of this
Agreement.

          C.      Waiver.
The rights and remedies of the Parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay on the part of any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. To the maximum extent permitted
by applicable law, (i) no claim or right arising out of this Agreement can be
discharged by one party hereto, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party hereto; (ii)
no waiver which may be given by a party hereto shall be applicable except in the
specific instance for which it is given; and (iii) no notice to or demand on one
party hereto shall be deemed to be a waiver of any obligation of such party or
of the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement.

          D.      Entire
Agreement and Modification. This Agreement, the attachments hereto and the
agreements and instruments required to be executed and delivered hereunder set
forth the entire agreement of the parties with respect to the subject matter
hereof and supersede and discharge all prior agreements (written or oral) and
negotiations and all contemporaneous oral agreements concerning such subject
matter and negotiations. This Agreement may not be 




modified, rescinded or terminated
orally, and no modification, rescission, termination or attempted waiver of any
of the provisions hereof (including this Section) shall be valid unless in
writing and signed by the party against whom the same is sought to be
enforced.

          E.     
Limitations on Assignment. Neither this Agreement, nor the rights,
privileges or obligations set forth herein, are assignable by Griffin to any
other person, and in the event of any assignment in contravention of this
Agreement, such assignment shall not be valid or enforceable.

          F.      Persons
Bound. This Agreement shall apply to and be binding in all respects upon,
and shall inure to the benefit of the Parties hereto. Nothing expressed or
referred to in this Agreement is intended or shall be construed to give any
person or entity other than the Parties to this Agreement, and their permitted
successors and assigns, any legal or equitable right, remedy or claim under or
with respect to this Agreement, or any provision hereof, it being the intention
of the Parties hereto that this Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the Parties to this
Agreement, and for the benefit of no other person or entity.

          G.      Section
Headings, Construction. The headings of articles and sections contained in
this Agreement are provided for convenience only. They form no part of this
Agreement and shall not affect its construction or interpretation. All
references to articles and sections in this Agreement refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number, as the circumstances require. Unless
otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer to
this Agreement as a whole and not to any particular section, subsection,
paragraph, clause or other subdivision hereof.

          H.      Time
of Essence. With regard to all time periods set forth or referred to in this
Agreement, time is of the essence.

          I.     
Specific Performance. Each party hereto acknowledges that a remedy at law
for any breach or attempted breach of this Agreement will be inadequate, agrees
that each other party hereto shall be entitled to specific performance and
injunctive and other equitable relief in case of any such breach or attempted
breach, and further agrees to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such injunctive or other
equitable relief.

          J.      Conflicts.
To the extent that any conflict may arise between the terms of this Agreement
and the terms of the oil and gas leases or the Option Agreement executed
pursuant hereto, the terms of the applicable oil and gas lease or the Option
Agreement shall control over the terms of this Agreement.

          K     .
Absence of Finders. Neither AEI nor Griffin is a party to any agreement
that provides for the payment of a finder’s fee, brokerage fee, commission or
other fee or amount which is or may become payable to any third party in
connection with the execution or delivery of this Agreement or the transactions
contemplated herein and hereby, other than as follows: AEI has agreed to pay a
finder’s fee to Rodney H. Langford, and Griffin has agreed to apy a finder’s fee
to James Michael Hanks. AEI agrees to indemnify Griffin against any and all
claims for finder’s fees by Rodney H. Langford, and Griffin agrees to indemnify
AEI against any and all claims for finder’s fees by James Michael Hanks.

          L.     
Governing Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF 




ARKANSAS AS TO OIL AND GAS REGULATORY
MATTERS AND THE LAWS OF THE STATE OF TEXAS AS REGARDS ALL OTHER MATTERS, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.

          M.      Dispute
Resolution. The parties to this Agreement acknowledge that disputes may
arise between them, and it is in their best interests to resolve such disputes
in an orderly and consistent manner, and agree as follows:

	 	(a) 	
      The parties will attempt to resolve promptly any
      controversy or claim arising out of or relating to this Agreement or the
      transactions contemplated or consummated pursuant to this Agreement (a
      “Dispute”), by negotiating directly and in good faith. Both parties
      may seek the advice and assistance of legal counsel in connection with any
      such negotiation.

	 	 	 	 
	 	(b) 	
      If the parties cannot resolve and settle a Dispute by
      private negotiation within 60 days after one party gives the other written
      notice that a Dispute exists, the parties mutually agree to submit the
      Dispute to non-binding mediation, as follows:

	 	 	 	 
	 		(i) 	
      Mediation shall occur in Dallas, Texas, before a single
      mediator, using the facilities and mediation rules of a professional
      dispute-resolution organization selected by mutual agreement of the
      parties (the "Mediation Organization"). If the parties cannot agree on a
      Mediation Organization, they will use the facilities and mediation rules
      of Judicial Arbitration and Mediation Services, Inc. in Dallas, Texas
      (“JAMS”).

	 	 	 	 
	 		(ii) 	
      The parties shall jointly select a mediator from the
      panel of mediators maintained by the Mediation Organization. The mediator
      must be an attorney who has no prior business or professional relationship
      with either party. If the parties are unable to agree on a mediator within
      30 days after the Dispute is submitted to mediation, the Mediation
      Organization will select a mediator who possesses the indicated
      qualifications.

	 	 	 	 
	 		(iii) 	
      The parties will share the mediation filing fee equally,
      but will otherwise separately bear their own costs and expenses (including
      legal fees) of participating in the mediation process. Each party agrees
      to send at least one representative to the mediation conference who has
      authority to enter into binding contracts on that party s behalf. Each
      party further agrees to sign a confidentiality agreement that prohibits
      the mediator from disclosing, orally or in writing, any information the
      other party discloses to the mediator in confidence at any stage of the
      mediation process.

	 	 	 	 
	 		(iv) 	
      Either party's failure or refusal to participate in
      mediation in accordance with this Section 7.M.(b) shall be considered a
      dispute subject to binding arbitration in accordance with Section
      7.M.(c).




	 	(c) 	
      If the parties cannot fully resolve and settle a dispute
      through mediation within 30 days after the mediation conference concludes,
      all unresolved issues involved in the Dispute shall be submitted to
      binding arbitration, as follows:

	 	 	 
	 		
      (i)          
      Either party may make a demand for
arbitration.








	 	(ii) 	
      Arbitration proceedings shall be conducted in Dallas,
      Texas, before a single arbitrator, using the facilities and commercial
      arbitration rules of the Mediation Organization or another professional
      dispute-resolution organization selected by Seller and reasonably
      acceptable to Buyer (the “Arbitration Organization”). If Seller
      selects an Arbitration Organization other than the Mediation Organization
      and Buyer reasonably objects to Seller’s choice, the parties will use
      JAMS' facilities and commercial arbitration rules.

	 	 	 
	 	(iii) 	
      The Arbitration Organization's expedited arbitration
      procedure shall apply to the arbitration proceedings. To the greatest
      extent permitted by law, the parties waive the application of all rules of
      discovery and evidence the Arbitration organization's expedited procedure
      does not expressly make applicable.

	 	 	 
	 	(iv) 	
      The parties shall jointly select an arbitrator from the
      panel of arbitrators maintained by the Arbitration Organization. The
      arbitrator must be an attorney who has no prior business or professional
      relationship with either party and who agrees to follow and apply the
      express provisions of this Agreement in determining his or her award. If
      the parties are unable to agree on an arbitrator within thirty (30) days
      after the arbitration demand is filed, the Arbitration Organization will
      select an arbitrator who possesses the indicated qualifications.

	 	 	 
	 	(v) 	
      The arbitrator‘s award shall be final and binding on all
      parties, and neither party shall have any right to contest or appeal the
      arbitrator‘s award except on the grounds expressly provided by the United
      States Arbitration Act (the “Arbitration Act”). The party who
      demands arbitration shall pay the arbitration filing fee, but the parties
      will otherwise separately bear their own costs and expenses (including
      legal fees) of participating in the arbitration process. Responsibility
      for the arbitrator s fees and expenses shall be determined as part of the
      arbitrator s award.

	 	 	 
	 	(vi) 	
      The procedures contemplated by and the enforceability of
      this Section 7.M.(c) shall be governed by the Arbitration Act and shall be
      interpreted and enforced in accordance with United States federal judicial
      interpretations of the Arbitration Act.




	 	(d) 	
      The parties further agree to submit to the jurisdiction
      and venue of JAMS and that service of process by certified mail, return
      receipt requested, shall be sufficient to confer in personam
      jurisdiction over them. Buyer specifically agrees to waive all
      questions of personal jurisdiction or venue for the purpose of carrying
      out this provision.

	 	 	 
	 	(e) 	
      The party which does not prevail in any Dispute submitted
      to binding arbitration as required by this Agreement shall be responsible
      for all fees and expenses, including attorneys’ fees, incurred by the
      prevailing party in connection with such Dispute.



          N.     
Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original copy of this Agreement, and all
of which, when 




taken together, shall be deemed to
constitute but one and the same agreement.

          If
the foregoing correctly sets forth your understanding as to the matters set
forth herein, kindly so indicate by executing the enclosed copy of this letter
in the space provided below and returning it to the undersigned.

Very truly yours,

ARKANOVA ENERGY INC.

 

By: 
Name: 
Title: 

Agreed and accepted as of, but not necessarily on, the date
first above written.

 

___________________________________________
David
Griffin