Exhibit 10.3
THIS INSTRUMENT RELATES TO AN OFFERING OF
SECURITIES IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S.
PERSONS (AS DEFINED IN REGULATION S UNDER THE 1933 ACT) PURSUANT TO
REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”). NONE OF THE SECURITIES TO
WHICH THIS INSTRUMENT RELATES HAVE BEEN REGISTERED UNDER THE 1933
ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED,
NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED
STATES OR TO U.S. PERSONS (AS DEFINED HEREIN EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, 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 AND IN EACH CASE ONLY
IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS. IN ADDITION,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN ACCORDANCE WITH THE 1933 ACT.
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USD $ 12, 000,000.00
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October 1, 2009
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ARKANOVA ACQUISITION
CORPORATION
SECURED PROMISSORY
NOTE
A.
FOR VALUE RECEIVED, Arkanova
Acquisition Corporation , a corporation organized and existing
under the laws of the State of Delaware (the “ Company
”), promises to pay to Aton Select Funds Limited , the
registered holder hereof (the “ Holder ”), the
principal sum of Twelve Million and No/100 United States Dollars
(US $12,000,000.00) on the Maturity Date (as defined below) and to
pay interest on the principal sum outstanding from time to time in
arrears at the rate of six percent (6.0 %) per annum (computed on
the basis of the actual number of days elapsed and a year of 365
days), accruing from the date of initial issuance of this Note,
until payment in full of the principal sum has been made or duly
provided for (whether before or after the Maturity Date).
This Note is being issued by the Company in exchange for the loan
by the Holder to the Company of an additional One Million One
Hundred Sixty-Eight Thousand Seven Hundred Twenty-Nine and 17/100
United States Dollars (US $1,668,729.17) plus the cancellation of
the following Promissory Notes:
(i)
Promissory Note from the Company to
Aton Select Fund Limited dated September 3, 2008, in the original
principal amount of Nine Million and No/100 United States Dollars
(US $9,000,000.00) (the “ $9 Million Note
”);
(ii)
Promissory Note from the Company to
Aton Select Fund Limited dated April 29, 2009, in the original
principal amount of Six Hundred Thousand and No/100 United States
Dollars (US $600,000); and
(iii)
Promissory Note from the Company to
Aton Select Fund Limited dated April 14, 2009, in the original
principal amount of Four Hundred Twelve Thousand Five Hundred and
No/100 United States Dollars (US $412,500).
This Note is also being issued
pursuant to the terms of a Note Purchase Agreement of even date
herewith (the “ NPA ”), to which the Company and
the Holder (or the Holder’s predecessor in interest) are
parties. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the NPA.
This Note is subject to the
following additional provisions:
1.
Maturity Date
. The term “ Maturity
Date ” means September 30, 2011.
2.
Security . The payment when due of this Note is
secured by a pledge of all of the membership interests in the
Company’s wholly owned subsidiary, Provident Energy
Associates of Montana, LLC, a Montana limited liability company, in
accordance with the terms and conditions of a Pledge Agreement of
even date herewith.
3.
Alternative Interest Payment
Option . Interest
on this Note shall be paid within ten (10) Business Days following
the Maturity Date in shares of common stock of Arkanova Energy
Corporation, the publicly traded parent corporation of the Company
(“ AEC ”). The number of shares of common
stock of AEC payable as interest on the Note shall be determined by
dividing Seven Hundred Twenty Thousand and No/100 United States
Dollars (US $720,000.00) by the average stock price for AEC’s
common stock over the fifteen (15) Business Day period immediately
preceding the Maturity Date.
4.
Prepayment Provisions
. This Note may be prepaid in
whole or in part at any time prior to the Maturity Date, without
penalty, so long as all accrued interest is paid in shares of
common stock AEC as determined in Section 3 above with the date of
payment (as such term is defined in Section 7 hereof) being
substituted for the Maturity Date in making the calculation of the
number of shares to be delivered to the Holder by the
Company.
5.
Default . The Company shall be in default
hereunder if payment is not made by the end of the Holder’s
close of business on the tenth (10 th )
Business Day following the Maturity Date.
6.
Manner of Payments
. Except as provided in
Section 3 hereof, all payments contemplated hereby to be made
“in cash” shall be made in immediately available good
funds of United States of America currency by wire transfer to an
account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). For
purposes of this Note, the phrase “date of payment”
means the date good funds are received in the account designated by
the notice which is then currently effective.
7.
No Impairment; Direct
Obligation .
Subject to the terms of the NPA, no provision of this Note shall
alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this
Note at the time, place, and rate, and in the coin or currency, as
herein prescribed. This Note is a direct obligation of the
Company.
8.
Limited Recourse
. No recourse shall be had for
the payment of the principal of, or the interest on, this Note, or
for any claim based hereon, or otherwise in respect hereof, against
any incorporator, shareholder, officer or director, as such, past,
present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereo
