Document:

STOCK PURCHASE WARRANT

EXHIBIT 4.1

THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  EXCEPT AS OTHERWISE SET FORTH HEREIN, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH ACT.

STOCK PURCHASE WARRANT

Issued ____________, 2009

     THIS CERTIFIES THAT, for value received, _________________ or its registered assigns, is entitled to purchase from Miller Petroleum, Inc., a Tennessee corporation (the "Company"), at any time or from time to time during the period specified in Section 2 hereof, _________ (_____) fully paid and nonassessable shares of the Company's Common Stock, $0.0001 par value per share (the "Common Stock"), at an exercise price per share equal to _________ (_____) (the "Exercise Price").  The term "Warrant Shares," as used herein, refers to the shares of Common Stock purchasable hereunder. 

 

This Warrant is subject to the following terms, provisions, and conditions:

     1. Manner of Exercise

          (a) Procedure.  Subject to the provisions hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the "Exercise Agreement"), to the Company during normal business hours on any business day at the Company's principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company of the Exercise Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder's designee, as the record owner of such shares, as of the close of business on the date on which the completed Exercise Agreement shall have been delivered and payment shall have been made for such shares as set forth above.  Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof (with an appropriate restrictive legend until properly sold under the Registration Statement, and without restrictive legend thereon when such exercise occurs while such Warrant Shares so purchased may be resold by the holder pursuant to Rule 144(k) or any similar successor rule) within a reasonable time 

after this Warrant shall have been so exercised.  The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder, and shall be subject to all other applicable securities laws.  If this Warrant shall have been exercised only in part, then, at the option of the holder (i) the holder may surrender this Warrant to the Company and, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such Warrant, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised, or (ii) the holder may retain this certificate and the Warrant Shares purchasable under this Warrant shall be reduced by such number of Warrant Shares so exercised by the holder and properly delivered by the Company hereunder.

         

     2. Period of Exercise.

This Warrant is exercisable at any time or from time to time on or before 5:00 p.m., Knoxville, Tennessee time five (5) years from the Issuance Date above (the “Exercise Period").

     3. Certain Agreements of the Company.

The Company hereby covenants and agrees as follows:

          (a) Shares to be Fully Paid.  All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, and charges with respect to the issue thereof.

          (b) Reservation of Shares.  During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant.

          (c) Certain Actions Prohibited.  The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant.  Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

          (d) Successors and Assigns.  This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all the Company's assets.

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          (e) Delivery of Common Stock will be by physical certificate representing the Common Stock issuable upon exercise, by the Company's transfer agent. The Company shall use its best efforts to cause its transfer agent to expedite the Common Stock issuable upon exercise to the holder.

     4. Consolidation, Merger or Sale.  

The Company hereby covenants and agrees as follows: 

          (a) In case of any consolidation of the Company with, or merger of the Company into any other corporation, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder of this Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place.  In any such case, the Company will make appropriate provision to insure that the provisions of this Section 4 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant.  The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Section 4 and the obligations to deliver to the holder of this Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire.

                      (b) No Fractional Shares.  No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the average Market Price per share of Common Stock for the five (5) Trading Days immediately prior to the date of such exercise. 

                      (c) In case at any time there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place.  Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be.  Such notice shall be given at least 30 days prior to the record date or the date on which the Company's books are closed in respect 

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thereto. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above. 

                      (d) Certain Definitions.

              

(i) "Market Price" means, as of any date, (i) the average of the high and low trading price on such date for the shares of Common Stock on the OTCBB as reported by Yahoo, or (ii) if the OTCBB is not the principal trading market for the shares of Common Stock, the closing bid price on the principal trading market for the Common Stock as reported by Yahoo, or

              

(ii) if market value cannot be calculated as of such date on any of the foregoing bases, the Market Price shall be the fair market value as reasonably determined in good faith by (a) the Board of Directors of the Company or by (b) an independent investment bank of nationally recognized standing in the valuation of businesses similar to the business of the corporation. The manner of determining the Market Price of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to market value or market price must be made hereunder.

              

(iii) "Common Stock," for purposes of this Section 4, includes the Common Stock, par value $0.0001 per share, and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only shares of Common Stock, par value $0.0001 per share, in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Section 4 hereof, the stock or other securities or property provided for in such Section.

              

(iv) "Trading Day" shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.  The foregoing definition of "Trading Day" shall apply with respect to any other security to which a Trading Day is referred.

                  5. Issue Tax.

The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of this Warrant.

                  6. No Rights or Liabilities as a Stockholder.

This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company.  No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a 

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stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

                  7. Transfer, Exchange, and Replacement of Warrant.

                        (a) Restriction on Transfer.  This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in Section 7(e) below, provided, however, that any transfer or assignment shall be subject to the conditions set forth in Section 7(f) hereof.  Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary..

                        (b) Warrant Exchangeable for Different Denominations.  This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Section 7(e) below, for new Warrants of like tenor representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by the holder hereof at the time of such surrender.

                         (c) Replacement of Warrant.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor.

                         (d) Cancellation; Payment of Expenses.  Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Section 7, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the holder or transferees) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 7.

                         (e) Register.  The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant.

                         (f) Exercise or Transfer Without Registration.  If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel, which opinion and counsel are reasonably acceptable to the Company, to the effect that such exercise, transfer, or exchange may be made without registration under said Act and under applicable state securities or 

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blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act.  The first holder of this Warrant, by taking and holding the same, represents to the Company that such holder is acquiring this Warrant for investment and not with a view to the distribution thereof.

                  8. Notices.

All notices, requests, and other communications required or permitted to be given or delivered hereunder to the holder of this Warrant shall be in writing, and shall be personally delivered, or shall be sent by certified or registered mail or by recognized overnight mail courier, postage prepaid and addressed, to such holder at the address shown for such holder on the books of the Company, or at such other address as shall have been furnished to the Company by notice from such holder.  All notices, requests, and other communications required or permitted to be given or delivered hereunder to the Company shall be in writing, and shall be personally delivered, or shall be sent by certified or registered mail or by recognized overnight mail courier, postage prepaid and addressed, to the office of the Company at 3651 Baker Highway, Huntsville, Tennessee 37756, Attention: Chief Financial Officer, or at such other address as shall have been furnished to the holder of this Warrant by notice from the Company.  Any such notice, request, or other communication may be sent by facsimile, but shall in such case be subsequently confirmed by a writing personally delivered or sent by certified or registered mail or by recognized overnight mail courier as provided above.  All notices, requests, and other communications shall be deemed to have been given either at the time of the receipt thereof by the person entitled to receive such notice at the address of such person for purposes of this Section 9, or, if mailed by registered or certified mail or with a recognized overnight mail courier upon deposit with the United States Post Office or such overnight mail courier, if postage is prepaid and the mailing is properly addressed, as the case may be.

                  9. Governing Law.

This Warrant shall be enforced, governed by and construed in accordance with the laws of the State of Tennessee applicable to agreements made and to be performed entirely within such state, without regard to the principles of conflict of laws.  The Company and recipient of the Warrant(s) hereby submit to the exclusive jurisdiction of the United States Federal Courts located in Knoxville, Tennessee with respect to any dispute arising under this Warrant, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby.  The Company irrevocably waives the defense of an inconvenient forum to the maintenance of such suit or proceeding.  The Company further agrees that service of process upon it mailed by first class mail shall be deemed in every respect effective service of process upon it in any such suit or proceeding.  Nothing herein shall affect the holder's right to serve process in any other manner permitted by law.  The parties agree that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.  The party which does not prevail in any dispute arising under this Warrant shall be responsible for all fees and expenses, including attorneys' fees, incurred by the prevailing party in connection with such dispute.

     

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10. Miscellaneous.

                         (a) Amendments.  This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the holder hereof.

                         (b) Descriptive Headings.  The descriptive headings of the several  sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof.

                         (c) Remedies.  The Company acknowledges that a breach by it of its obligations hereunder may cause irreparable harm to the holder, by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Warrant may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Warrant, that the holder may be entitled upon a proper showing and in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Warrant and to enforce specifically the terms and provisions thereof.

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer.

MILLER PETROLEUM, INC.

By: _______________________________

Dated as of  __________, 2009

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FORM OF EXERCISE AGREEMENT

                                                     Dated:  ________ __,20__

To:  ______________________

     The undersigned, pursuant to the provisions set forth in the within Warrant, hereby agrees to purchase ________ shares of Common Stock covered by such Warrant, and makes payment herewith in full therefor at the price per share provided by such Warrant in cash or by certified or official bank check or by wired funds in the amount of, or, if the resale of such Common Stock by the undersigned is not currently registered pursuant to an effective registration statement under the Securities Act of 1933, as amended, by surrender of securities issued by the Company (including a portion of the Warrant) having a market value (in the case of a portion of this Warrant, determined in accordance with Section 1(c) of the Warrant) equal to $_________.  Please issue a certificate or certificates for such shares of Common Stock in the name of and pay any cash for any fractional share to: 

                                          

Name:______________________________

                                         

Signature:

                                         

Address: ___________________________

                                                

          ___________________________

Note: The above signature should correspond exactly with the name on the face of the within Warrant, if applicable.

and, if said number of shares of Common Stock shall not be all the shares purchasable under the within Warrant, a new Warrant is to be issued in the name of said undersigned covering the balance of the shares purchasable thereunder less any fraction of a share paid in cash.

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FORM OF ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights of the undersigned under the within Warrant, with respect to the number of shares of Common Stock covered thereby set forth herein below, to:

Name of Assignee          

    Address                      

 No of Shares

, and hereby irrevocably constitutes and appoints_____________________________ as agent and attorney-in-fact to transfer said Warrant on the books of the within-named corporation, with full power of substitution in the premises.

Dated: ________ __, 20__

In the presence of:

___________________________________

___________________________________

Name: _____________________________

Signature: __________________________

Title of Signing Officer or Agent (if any):

____________________________________

 

Address: ____________________________

____________________________________

____________________________________

Note: The above signature should correspond exactly with the name on the face of the within Warrant, if applicable.

9AGREEMENT FOR SALE

EXHIBIT 4.2

AGREEMENT FOR SALE OF 

MEMBERSHIP INTERESTS IN 

COOK INLET ENERGY, LLC

THIS AGREEMENT is made and entered into this 10 day of December, 2009 (the “Effective Date”), by and between MILLER PETROLEUM, INC., a Tennessee corporation, (hereinafter referred to as “Purchaser” or “Miller”), and DAVID M. HALL, WALTER J. WILCOX II and TROY D. STAFFORD (hereinafter referred to the “Seller, individually and as the “Sellers”, collectively) being the sole and only members and owners, directly and indirectly of COOK INLET ENERGY, LLC, an Alaska limited liability company, ("CIE"), with an address of P.O. Box 90834, Anchorage, Alaska 99509.

W I T N E S S E T H:

WHEREAS, Purchaser is desirous of acquiring all of the membership interests in COOK INLET ENERGY, LLC (the “Transaction”); and

WHEREAS, Sellers are desirous of disposing of all of their right, title and interest in the Company; and

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and in consideration of the mutual promises and covenants herein contained, the parties hereto represent, warrant, covenant and agree as follows (the “Agreement”):

1.

Purchase by Purchaser.  Subject to the terms and conditions set forth herein, each of the Sellers individually and collectively agree to sell to Purchaser, and Purchaser agrees to purchase from Sellers, 100% of the Sellers’ membership interests in CIE (the "Membership Interests") as follows:

		
	Parties

	CIE Membership Interest Held

	 David M. Hall

	48.00%

	Walter J. Wilcox II

	32.00%

	Troy D Stafford

	20.00%

2.

Purchase Price - Warrants.  As consideration the Purchaser shall issue and deliver at closing Stock Purchase Warrants (“Warrants”) for three million five hundred thousand (3,500,000) shares of the Common Stock of Miller Petroleum, Inc., to be allocated via CIE Membership Interest to the Sellers in the corresponding ownership of the CIE Membership Interest in Section 1 (Above). 

Three hundred and fifty thousand (350,000) of the first tranche of the above Warrants shall be delivered to First American Title in Anchorage, Alaska in the name of Sellers and Miller.  These Warrants shall be immediately released to the Sellers from the escrow account simultaneously upon the delivery to the Purchaser of the release of all claims from VAI, Inc. and its successors.  All warrants delivered to the Sellers shall carry standard proforma language essentially as follows:

a.

Adjustments for Stock Splits and Subdivisions.  In the event the Company should at any time or from time to time after the date of issuance hereof complete a split or subdivision of the outstanding shares of Common Stock or complete to all its stockholders another distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of the date of such dividend distribution, split or subdivision, the Conversion Price of this Warrant shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Warrant shall be increased in proportion to such increase of outstanding shares.

b.

Adjustments for Reverse Stock Splits.  If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the date of such combination, the Conversion Price for this Warrant shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in outstanding shares.

3.

The Warrants shall be issued in accordance with the following schedule:  

a.

A first tranche of Warrants entitling the Sellers to purchase from Miller Petroleum, Inc., (“Miller”) at any time or from time to time during the period of the date of this agreement to four years from the date of this agreement, one million (1,000,000) fully paid and nonassessable shares of Miller's Common Stock, $0.0001 par value per share, at an exercise price per share equal to one cent ($0.01).

b.

A second tranche of Warrants entitling the Sellers to purchase from Miller at any time or from time to time during the period of one year from the date of this agreement to four years from the date of this agreement, one million five hundred thousand (1,500,000) fully paid and nonassessable shares of Miller's Common Stock, $0.0001 par value per share, at an exercise price per share equal to one dollar ($1.00).

c.

A third tranche of Warrants entitling the Sellers to purchase from Miller at any time or from time to time during the period of two years from the date of this agreement to four years from the date of this agreement, one million (1,000,000) fully paid and nonassessable shares of Miller's Common Stock, $0.0001 par value per share, at an exercise price per share equal to two dollars ($2.00). 

d.

If at any time, Purchaser shall receive a bona fide offer from any third-Person of all or a portion of the Membership Interests (including through the sale of Miller Petroleum itself), which offer Purchaser shall desire to accept, then Purchaser shall promptly provide Sellers with notice of such offer.  Within thirty (30) days thereof, each Seller may elect to receive the balance of the total Warrants due to them under this Agreement, regardless of date, or (b) choose to receive a cash payment equal to the number of unexercised and/or un-awarded warrants as of the Company’s stock price on the close of the business day immediately prior 

to the completion of the sale.  This provision shall not apply with respect to transfers between Purchaser and any of its affiliates.

e.

Should any of the Sellers be declared deceased or otherwise become incapacitated, their estate shall have full entitlement to the award of warrants, which would have been due to that party in life.

f.

The stock certificates evidencing the shares of Common Stock issued to Sellers hereunder will bear the following legend: 

“THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERRED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENSE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SHARES OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT THAT IS THEN APPLICABLE TO THE SHARES, AS TO WHICH A PRIOR OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER OR TRANSFER AGENT MAY BE REQUIRED.”

 

4.

Purchase Price - Fee.  The Purchaser shall issue and deliver into an escrow account within 90 days of closing, $250,000 cash consideration to Sellers and shall issue and deliver said cash into an escrow account, which shall be simultaneously released to the Sellers upon: 1.  the delivery to the Purchaser a  release of all claims from VAI Inc. and its successors, 2. the delivery to the Purchaser a an adjudication result by the court releasing CIE of all claims by VAI Inc. and its successors, or 3. the passage of 36 months from the Effective Date and the escrow account remaining undelivered from Section 4(1) or 4 (2).  Cash amounts from the escrow account will be allocated via CIE Membership Interest to the Sellers in the corresponding ownership of the CIE Membership Interest in Section 1 (Above).    

5.

Purchase Price - Reimbursement of Expenses.  The Purchaser shall also deliver to the Seller, reasonable and normal out of pocket expenses that the Seller has incurred since December of 2008 through the Effective Date.  Seller will deliver to Purchaser evidence of said Expenses, which shall be paid promptly by Purchaser.  Reasonable and normal out of pocket expenses shall include monthly fees paid to VAI Inc. since December 2008 to the Effective Date.  

6.

Representations and Warranties of Sellers.  Each of the Sellers of CIE at the date of this Agreement jointly and severally represent and warrant to the best of its knowledge, information and belief as follows:

1.

CIE is a limited liability company, respectively, duly organized, validity existing and in good standing under the laws of the State of Alaska, with a total of 100% membership interest;  

2.

CIE does not have issued or outstanding any subscription or other rights to the issuance or receipt of membership interest; all voting rights are vested exclusively in such membership interest; 

3.

CIE does not have outstanding any evidence of indebtedness, other than possible fees associated with VAI, which shall be borne by the Sellers;

4.

CIE and its officers and owners are authorized to enter into the sale of CIE membership interests to Purchaser and have completed all authorizations under the corporate governance of CIE.

5.

All the membership interest is owned beneficially and of record by the Sellers as follows:

		
	Parties

	CIE Membership Interest Held

	 David M. Hall

	48.00%

	Walter J. Wilcox II

	32.00%

	Troy D. Stafford

	20.00%

6.

Each of the Sellers represents that he has full right and title, without any lien or encumbrance whatsoever, to the percentage of membership interest of CIE set opposite his name, and full and unrestricted right and power to deliver such membership interest to Purchaser, pursuant to the provisions of this Agreement; upon the delivery of the membership interest to be purchased by Purchaser under this Agreement, such membership interest shall be lawfully issued, fully paid and non-assessable interest in CIE, and Purchaser will receive good and absolute title thereto, free from any liens, charges, or encumbrances;

7.

CIE is not in default in the payment or performance of any of their material obligations, including the obligations of filing reports or returns to any federal, state, or municipal authority other than possible fees associated with VAI, which shall be borne by the Sellers;

8.

Sellers have all requisite power and authority to enter into this Agreement and perform their obligations under this Agreement;  

9.

Entering into this Agreement and performing the obligations imposed on them by the Agreement will not violate or be in conflict with any provision of Sellers’ Articles of Organization or other governing documents, or any agreement or instrument to which Sellers are parties or by which Sellers are bound, or any judgment, decree, order, statute, rule or regulation applicable to Sellers;

10.

Execution and delivery of this Agreement and the transaction contemplated by it has been duly and validly authorized by all requisite action, corporate and otherwise, on the part of Sellers, and if necessary CIE and will not require authorization or approval by any third party or entity and will not violate any judgment or order of any court pertaining to Sellers or CIE the assets to be conveyed, will not conflict with or result in a breach of or default under any agreement, contract, commitment, lease or undertaking to which Sellers or CIE are parties and will not result in the creation or imposition of any encumbrances upon the assets to be conveyed;

11.

This Agreement constitutes the legal, valid and binding obligation of Sellers enforceable in accordance with its terms;

12.

Attached as Exhibit 1 is a list of all assets and liabilities CIE is able to identify;

13.

Attached as Exhibit 2 is a list of all contracts in which the CIE is a party, including any employment contracts;

14.

To the best of their knowledge Sellers and/or CIE have paid in full all taxes and assessments imposed on CIE or the assets to be conveyed by any local, state, federal or other taxing authority and there are no tax liens of record, or pending or threatened, with regard to the assets of CIE other than any identified as Exhibit 3 to this Agreement;

15.

Exhibit 4 identifies all liens and encumbrances affecting the assets of CIE.  Except for any Permitted Encumbrances identified on the attached Exhibit 5, CIE has good and marketable title to their assets, free and clear of all liens, encumbrances, burdens and claims, other than possible fees associated with VAI, to be paid by Seller; 

16.

Sellers have not received written notice that CIE is in default under any contract or agreement pertaining to the assets to be conveyed, other than possible fees associated with VAI, which shall be borne by Sellers;

17.

All financial information and statements provided to Miller are accurate;

18.

All contracts, documents and information concerning the assets of CIE have been provided to Miller, other than possible fees associated with VAI, to be paid by Seller;

19.

All contracts, leases or other agreements to which CIE are parties have been disclosed, other than possible fees associated with VAI, to be paid by Seller;

20.

CIE’s operations in regard to the assets being conveyed have been in full compliance with all federal, state and local laws, rules and regulations, and those warranties required by state and federal securities laws;

21.

No brokerage commission will be due as a result of this transaction;

22.

All litigation and claims, or potential claims, of which Sellers are aware, are identified on the attached Exhibit 6, other than possible fees associated with VAI, to be paid by Seller;

23.

There are no undisclosed liens, encumbrances, claims or liabilities other than possible fees associated with VAI, to be paid by Seller;

24.

That all materials provided or to be provided to the Purchaser regarding the Company’s financial affairs or operations are and shall be truthful and accurate and in compliance with any and all applicable federal and state securities laws.  

7.

Representations and Warranties of Purchaser.  Miller, at the date of this Agreement, represents and warrants to the best of its knowledge, information and belief as follows:

1.

Due Organization.  Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee; 

2.

Due Authorization.  Purchaser’s purchase of the Membership Interest as set forth in this Agreement, and the execution, delivery and performance of this Agreement by Purchaser, has been duly authorized and approved by the Board of Directors of Purchaser and does not require any further or additional approval or authorization;

3.

No Violation.  Purchaser’s purchase of the Membership Interest as set forth in this Agreement, and the execution, delivery and performance of this Agreement by Purchaser, will not constitute a violation, breach or default of or under any contract, agreement or commitment to which Purchaser is a party or is otherwise bound;

4.

Investment Purpose.  Purchaser is acquiring the Stock hereunder for its own account for investment and with no intention of immediately reselling or otherwise distributing the same.  Purchaser understands and agrees that the Membership Interest has not been registered under any federal or state securities laws;

5.

Inspections and Examinations by Purchaser.  Purchaser represents and warrants that it has examined the facilities, properties, equipment, machinery, books, records and papers of CIE;

6.

Broker’s Fees.  Purchaser has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement;

8.

Non-Competition Agreement.  As an inducement to Purchaser to purchase the Membership Interests, each of the Sellers agrees that for a period of Three (3) years from and after the date of this Agreement they shall not engage, directly or indirectly, in competition with Purchaser in regard to oil and gas operations, including but not limited to oil and gas development, drilling, exploration, production or management activities.  Anything consummated as a result of “Right of First Refusal” shall not violate this Non Competition Agreement.  In the event of a violation of this provision, Purchaser shall be entitled to injunctive relief. 

9.

Right of First Refusal.  The Sellers, acting collectively with interest corresponding to their membership interest in CIE prior to the Effective Date, shall have a right of first refusal (“Right of First Refusal”) with respect to Susitna license # 390078.  Such a right of First Refusal shall pass to the Sellers if (1) Miller does not fulfill the obligation of the minimum work commitment as defined by the State of Alaska under the Susitna license # 390078 by June 1, 2009, or (2) if Miller does not deliver the capital to CIE required to meet the obligation of the minimum work commitment defined by the State of Alaska under the Susitna license # 390078 by April 30, 2009.  If, after the Right of First Refusal has passed to the Sellers and the Sellers have not been able to deliver the required capital to complete the work commitment defined by the State of Alaska under the Susitna license # 390078 within 30 days of the receipt of the Right of First Refusal, said ownership rights shall revert to the Purchaser 

10.

Waiver of Stock Transfer Restrictions.  Each of the Sellers hereby waives all pre-emptive rights and restrictions, if any, on the sale and transfer of the membership interests being sold hereunder.  Each of the Sellers consents to the signing of this Agreement by the other Sellers and waives any option, right of first refusal or other right or claim to purchase the Membership Interests owned by the other Sellers. 

11.

Conditions.  Purchaser's obligation to consummate the transaction contemplated by this Agreement is subject to the condition that CIE has good and marketable title in fee simple to all of their real properties other than leasehold interests, and good and marketable title to all of their personal properties and assets, and that the said real estate and personal properties, and assets are 

free of any mortgage, pledge, liens, conditional sales agreements, encumbrances, and charges except as identified on Exhibit 5 as a Permitted Encumbrance.

12.

Retention of Titles and Positions.  Upon the closing of this transaction, David Hall shall remain CEO of CIE and Walter Wilcox shall remain President of CIE.  Mr. Hall shall retain their authority to hire, supervise and fire CIE non-officer operational personnel.  Mr. Hall, Mr. Wilcox and Mr. Stafford shall be retained as employees of Miller for a period of three years from the date of this Agreement.  Mr. Hall, Mr. Wilcox and Mr. Stafford shall receive standard employment agreements after the effective date of their Agreement.  As such, they shall retain, the same titles, compensation levels, and benefits detailed in each individual’s employment agreement.  Their base annual salaries before bonuses shall in no case be lower than those listed below:

		
	Mr. Hall

	$195,000

	Mr. Wilcox

	$175,000

	Mr. Stafford

	$165,000

Sellers' employment shall not be subject to termination prior to the expiration of the three-year term except (a) for failure to satisfactorily perform their job responsibilities, (b) for cause, or (c) upon the sale of the Companies to a third-party purchaser.  The terms and conditions of this section shall survive the Effective Date unless mutually agreed upon, modified or amended in the individual employment agreements.  Said employment agreements shall have standard benefits and compensation arrangements comparable to other similar energy companies. 

13.

Board Representation.  CIE shall be represented by a seat on the Board of Directors of Miller Petroleum and of Cook Inlet Energy, if applicable for a period of three years from the Effective Date.  The Director(s) representing CIE will be Mr. Hall or his designee(s).  Should Mr. Hall become deceased, incapacitated or otherwise unavailable to act as director or appoint a designee, the Director(s) will become Mr. Wilcox or his designee(s).  Should both Mr. Hall and Mr. Wilcox become deceased, incapacitated or otherwise unavailable to act as director or appoint a designee, the Director(s) will become Mr. Stafford or his designee(s).  The terms and conditions of this section shall survive the Effective Date unless mutually agreed upon, modified or amended in the individual Employment Agreements.

14.

Severance.  Should Mr. Hall, Mr. Wilcox or Mr. Stafford be terminated in accordance with the Section 12(a) or 12(c) above, the terminated party shall be immediately entitled to (a) the balance of their un-awarded warrants if any and (b) a cash payment equal to one and a half times their 

annual base pay.  The terms and conditions of this section shall survive the Effective Date unless mutually agreed upon, modified or amended in the individual Employment Agreements.

15.

Indemnification   The Seller agrees as follows:

a)

To indemnify and hold harmless the Purchaser, its bankers, professionals, lawyers, consultants and affiliates, their respective directors, officers, shareholders, partners, members, managers, agents and employees and each other person, if any, controlling the Puchaser, the banker or any of its affiliates to the full extent lawful, from and against all losses, claims, damages, liabilities and expenses incurred by them (including reasonable attorneys' fees and disbursements) that result from actions taken or omitted to be taken (including any statements made or any statement omitted to be made) by the Puchaser, its agents or employees which relate to the scope of this Transaction and the performance of the services by the Purchaser hereunder.  

b)

The Sellers will also indemnify and hold harmless the Purchaser, its affiliates and the respective directors, officers, agents and employees of Purchaser, its affiliates (Purchaser and each such entity or person, an "Indemnified Person") from and against any losses, claims, damages, judgments, assessments, costs and other liabilities (collectively "Liabilities") that result from this Transaction, and will reimburse each Indemnified Person for all fees and expenses (including the reasonable fees and expenses of counsel) (collectively, "Expenses") as they are incurred in investigating, preparing, pursuing or defending any claim, action, proceeding or investigation, whether or not in connection with pending or threatened litigation and whether or not any Indemnified Person is a party (collectively, "Actions"):

1.

caused by, or arising out of, or in connection with, any information or statement, or materials provided by the Sellers including any statements or alleged misstatement of a material fact in connection with this Transaction, 

2.

otherwise arising out of or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant to this Agreement, 

3.

otherwise arising out of or in connection with the transactions contemplated hereby, 

4.

or any Indemnified Person's actions or inactions in connection with any such advice, services or transactions with regard to this Transaction, the Sellers also agrees to reimburse each Indemnified Person for all Expenses as they are incurred in connection with enforcing such Indemnified Person's rights under this Agreement.  

c)

This indemnity by the Seller to the Purchaser also holds forth specifically against any potential claims brought by VAI, Inc., including any of its successors, affiliates, respective directors, officers, shareholders, partners, members, managers, agents and employees against CIE, the Purchaser or any of its successors, affiliates, respective directors, officers, shareholders, partners, members, managers, agents and employees.

d)

Upon receipt by an Indemnified Person of actual notice of an Action against such Indemnified Person with respect to which indemnity may be sought under this Agreement, such Indemnified Person shall promptly notify the Sellers in writing; provided that failure so to notify the Sellers shall not relieve the Sellers from any liability which the Sellers may have on account of this indemnity or otherwise, except to the extent the Sellers shall have been materially prejudiced by such failure.  

e)

The Sellers shall, if requested by Purchaser, assume the defense of any such Action including the employment of counsel reasonably satisfactory to Purchaser.  Any Indemnified Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be 

at the expense of such Indemnified Person, unless: (i) the Sellers have failed promptly to assume the defense and employ counsel or (ii) the named parties to any such Action (including any impleaded parties) include such Indemnified Person and the Sellers, and such Indemnified Person shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the Sellers; provided that the Sellers shall not in such event be responsible hereunder for the fees and expenses of more than one firm of separate counsel in connection with any Action in the same jurisdiction, in addition to any local counsel.

f)

The Sellers shall not be liable for any settlement of any Action effected without its written consent (which shall not be unreasonably withheld).  

g)

In addition, the Sellers will not, without prior written consent of Purchaser, settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened Action in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Person from all Liabilities arising out of such Action.  

h)

In the event that the foregoing indemnity is judicially determined to be unavailable to an Indemnified Person (other than in accordance with the terms hereof), the Sellers shall contribute to the Liabilities and Expenses paid or payable by such Indemnified Person in such proportion as is appropriate to reflect (i) benefits to the Sellers and its shareholders, on the one hand or (ii) if the allocation provided by the immediately preceding clause is not permitted by the applicable law, not only such relative benefits but also the relative fault of the Sellers, on the one hand, and Purchaser, on the other hand, in connection with the matters as to which such Liabilities or Expenses relate, as well as any other relevant equitable considerations; provided that in no event shall the Sellers contribute less than the amount necessary to ensure that all Indemnified Persons, in the aggregate, are not liable for any Liabilities and Expenses pursuant to this Agreement.  

i)

The Sellers also agree that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Sellers for or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant to this Agreement, the Transaction contemplated hereby or any Indemnified Person's actions or inactions in connection with any such advice, services or transactions except for Liabilities (and related Expenses) of the Sellers that are determined by a judgment of a court of competent jurisdiction which is no longer subject to appeal or further review to have resulted solely from such Indemnified Person's gross negligence or willful misconduct in connection with any such advice, actions, inactions or services in connection with this Transaction.

j)

The reimbursement, indemnity and contribution obligations of the Company set forth herein shall apply to any modification of this Agreement and shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Person's services under or in connection with, this Agreement.

16.

Further Documentation.  All parties hereto agree to execute such further documents or agreements as may be necessary or desirable to affect the purposes of this Agreement and to carry out its provisions.

17.

Breach.  In the event that either party defaults on or refuses to abide by any provision of this Agreement and the non-defaulting party is forced to resort to legal action against the defaulting party then the defaulting party shall reimburse the non-defaulting party for all attorney’s fees and costs reasonably incurred in curing the default or refusal.

18.

Other Items   If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.  

19.

Governing Law.  This Agreement shall be construed according to the laws of the State of Tennessee and the exclusive jurisdiction of any legal actions relating to this transaction shall be in the courts of the State of Tennessee.

20.

Signatures.  The parties agree that this Agreement may be executed in counterpart originals and that signatures for this Agreement may be transmitted or delivered electronically or digitally, and that signatures delivered via e-mail or facsimile transmission shall be deemed to be, and treated as, original signatures.

21.

Notification.  All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received: (i) when delivered, if sent by hand delivery; (ii) the next day, if deposited with a reputable overnight courier service such as FedEx; (iii) when sent, if sent by facsimile with confirmation of receipt; or (iv) on the fifth (5th) day following deposit in the United States mails, certified, postage prepaid, return receipt requested, addressed as set forth below:

Seller:

TBA

Purchaser:

Paul Boyd

Chief Financial Officer

Miller Petroleum Inc.

3651 Baker Highway

P.O. Box 130

Huntsville, Tennessee  37756

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

PURCHASER:

MILLER PETROLEUM, INC.

By:  _______________________________

Title:  ______________________________

SELLERS:

_______________________________

David M. Hall, CEO

Cook Inlet Energy, LLC

_______________________________

Walter J. Wilcox II, President

Cook Inlet Energy, LLC

_______________________________

Troy Stafford, CFO

Cook Inlet Energy, LLC

STATE OF TENNESSEE

)

)

COUNTY OF KNOX

)

Personally appeared before me, Paul W. Boyd, the CFO of MILLER PETROLEUM, INC., who acknowledged before me that he did sign the foregoing instrument, the same is the free act and deed of said Corporation and the free act and deed of him personally as such officer.

WITNESS my hand at office this ______ day of _______________, 2009.

________________________________

________________________________

Notary Public

My Commission Expires: ___________

STATE OF ALASKA

)

)

THIRD JUDICIAL DISTRICT

)

Personally appeared before me, _____________________, a Notary Public of the State of Alaska, the within named bargainor, David M. Hall, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who acknowledged that he executed the within instrument for the purpose therein contained.

WITNESS my hand at office this _____ day of ________________, 2009.

________________________________

________________________________

Notary Public

My Commission Expires: ___________

STATE OF ALASKA

)

)

THIRD JUDICIAL DISTRICT

)

Personally appeared before me, _____________________, a Notary Public of the State of Alaska, the within named bargainor, Walter J Wilcox II, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who acknowledged that he executed the within instrument for the purpose therein contained.

WITNESS my hand at office this _____ day of ______________, 2009.

________________________________

________________________________

Notary Public

My Commission Expires: ___________

STATE OF ALASKA

)

)

THIRD JUDICIAL DISTRICT

)

Personally appeared before me, _______________________, a Notary Public of the State of Alaska, the within named bargainor, Troy Stafford, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who acknowledged that he executed the within instrument for the purpose therein contained.

WITNESS my hand at office this _____ day of ________________, 2009.

________________________________

________________________________

Notary Public

My Commission Expires: ___________

EXHIBIT 1 - COOK INLET ENERGY, LLC ASSETS & LIABILITIES

Assets

See attached Exhibit “A” from Pacific Energy-CIE Purchase and Sale Agreement.

Liabilities

·

None over $1,000.

EXHIBIT 2-COOK INLET ENERGY, LLC CONTRACTS

·

Conditions for Consent (CIRI/Salamatof Pipeline Easements), Oct. 27, 2009

·

Oversight Agreement with Alaska Department of Natural Resources, Oct. 14, 2009

·

Pacific Energy Alaska Operating, LLC Contract dated December 10, 2009

·

Pacific Energy Alaska Holdings, LLC Contract date December 10, 2009

·

VAI Inc. contract dated June 12, 2009, which remains the responsibility of the Sellers

EXHIBIT 3 - PENDING OR THREATENED TAX LIENS

·

None.

EXHIBIT 4 - LIENS AND ENCUMBRANCES

·

None.

EXHIBIT 5 - PERMITTED ENCUMBRANCES

·

None.

EXHIBIT 6 - SUITS, CLAIMS OR THREATENED OR PENDING CLAIMS

·

VAI Inc. contract dated June 12, 2009, which remains responsibility of the Sellers

·

No other items

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