EXHIBIT 10.1
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PARTICIPATION AGREEMENT
This Participation Agreement (this "Agreement"), executed the date as
of each signature hereinbelow, but dated effective as of December 5, 2003
("EFFECTIVE DATE"), by and between PENN VIRGINIA OIL & GAS CORPORATION, with
offices at ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("PVOG") and GMX
RESOURCES INC. and its wholly-owned subsidiaries, EXPEDITION NATURAL RESOURCES
INC. and ENDEAVOR PIPELINE, INC., with offices at One ▇▇▇▇▇▇ Place, Suite 600,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (collectively, "GMX"). PVOG and
GMX are sometimes referred to herein collectively as the "Parties" and each
individually as a "Party".
RECITATION
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GMX is the leasehold owner of 100% of the working interest comprising
17,816 gross and 15,374 net acres in ▇▇▇▇▇▇▇▇ and Panola Counties, Texas
hereinafter referred to as the "BLOCKER PROSPECT". For purposes of addressing
the rights and obligations of the Parties herein, the Blocker Prospect is
divided into three geographic Phases. "PHASE I", "PHASE II" AND "PHASE III" each
are located on the plat identified in Exhibit "A-2" with the applicable leases
for Phases I and II being identified in Exhibits "A-3" and "A-4". Such exhibits
are further referenced as follows:
Exhibit "A-1" Identification of Properties for each Phase
Exhibit "A-2" Plat of the Leases and AMI
Exhibit "A-3" Description of Leases for Phase I
Exhibit "A-4" Description of Leases for Phase II
The Parties desire to enter into this Agreement to provide for the
exploration and development of the Blocker Prospect subject to the terms and
conditions set forth herein.
NOW THEREFORE, for and in consideration of the mutual covenants,
promises, rights and obligations contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
SECTION I
GMX DRILLING LOCATION PADS
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1.1 DRILLING LOCATION PADS.
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PVOG will prepay GMX $250,000 to be used as a reimbursement for future drilling
location pads previously built by GMX. Such location pads and GMX's actual costs
are identified on Exhibit "B" attached hereto. PVOG agrees that if there are any
drilling locations PVOG identifies within 467 feet of a GMX location pad, then
PVOG will utilize such GMX location pad and reimburse GMX for the actual
location and title costs incurred for the applicable location in accordance with
Exhibit "B"; provided, however, if the objective depth for any well is 7,000
feet or less, the reimbursement obligation shall be limited to $40,000 plus a
mutually agreed amount for any GMX's costs in excess of pad construction costs.
The $250,000 reimbursement for future drilling location pads shall be paid no
later than January 7, 2004. At such time such location pads may be used, the
costs will be joint billed to the participating Parties pursuant to the
respective AFE. To the extent GMX is obligated to pay costs for drilling on any
such location, it will pay its share of such costs. Otherwise, the $250,000
payment to GMX will be nonrefundable.
Page 1 of 11
SECTION II
OPERATIONS
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2.1 OPERATIONS.
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PVOG will be designated as Operator on all new drilling, completion and
production activities affecting Phase I and Phase II while this Agreement is in
effect. The Blocker Prospect will be subject to either "OPERATING
AGREEMENT-UNIT" as attached in Exhibit "C-1" or "OPERATING AGREEMENT-WELLBORE"
as attached as Exhibit "C-2". The respective Operating Agreement-Unit or
Operating Agreement-Wellbore shall be applicable as identified in the Sections
hereinbelow. No more than one well in which GMX has elected to participate may
be drilled or drilling at the same time for ▇▇▇▇▇ in Phase I, Part B and Phase
II, Part B collectively. If either Party elects not to participate in a well in
Phase I, Part B or Phase II, Part B, the non-consenting Party shall farmout its
interest to the consenting Party in the applicable wellbore with a 77% NRI,
proportionately reduced to its interest, and retaining an overriding royalty for
any NRI in excess of such amount.
SECTION III
BLOCKER PROSPECT PHASES (PHASE I, PHASE II AND PHASE III)
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3.1 PHASE I.
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3.1.1 PHASE I, PART A.
3.1.1.1 ACQUISITION OF OIL & GAS LEASES.
3.1.1.1.1 LEASE COSTS REIMBURSEMENT. Upon
execution of this Agreement, PVOG shall pay
GMX an upfront land reimbursement cost of
$700,932 ($200/acre for 4,289 net acres for
an 80% working interest) in exchange for an
assignment of 80% of GMX's leasehold working
interest in all of GMX's leases within Phase
I. The net revenue interest ("NRI")
delivered to PVOG will be GMX's recorded
lease NRI. The assignment shall be in the
form of Exhibit D, which shall include an
exclusion for existing wellbores, equipment
and certain other rights which will be
retained by GMX.
3.1.1.1.2 TITLE TO LEASES. GMX represents
and warrants that the interest being
delivered to PVOG is free of any burdens,
liens or encumbrances created by, through
and under GMX but not otherwise. In order
that the Parties may close this Agreement on
or before December 31, 2003 and given the
insufficient time for PVOG to verify title
to the Phase I leases, GMX agrees that if
title should fail to any of the GMX leases
within Phase I, provided such failure is
identified within one (1) year, then GMX
shall promptly reimburse PVOG $200 per net
mineral acre, proportionally reduced to
PVOG's working interest.
3.1.1.1.3 LEASE MAINTENANCE. GMX agrees to
properly and timely pay, or cause to be
paid, all delay rentals and shut-in payments
(collectively the "Lease Maintenance Costs")
which are required to be paid to maintain in
force and effect as to the existing GMX
leases identified in Exhibit "A-3" until
such time as PVOG has the opportunity to
Page 2 of 11
input such leases within PVOG's system. PVOG
will notify GMX in writing when it is
prepared to take over such lease maintenance
responsibilities.
3.1.1.2 DRILLING OPERATIONS OF PHASE I, PART A.
3.1.1.2.1 DRILLING PROGRAM. Upon the
execution of this Agreement, PVOG will have
the right to select locations with the
option to drill five (5) ▇▇▇▇▇ to the Cotton
Valley Formation within the current GMX
designated acreage position or Phase I AMI.
PVOG will pay 100% of the costs of the
completed well to the tanks or sales line as
the case may be, excluding any acreage costs
to acquire additional acreage in any unit in
which a well is drilled for which GMX will
bear its 20% proportionate share of costs.
As of first sales from each well drilled
under this paragraph, PVOG will have an 80%
working interest and GMX will have a 20%
working interest in all future costs and
elections pursuant to Operating
Agreement-Unit attributable to such well and
applicable unit.
3.1.1.2.2 CONTINUOUS DRILLING. It is PVOG's
intent to drill five (5) ▇▇▇▇▇ on a
back-to-back basis. If (i) PVOG does not
drill 5 ▇▇▇▇▇; (ii) the first well is not
commenced prior to March 1, 2004 or (iii) if
there is a delay of more than sixty (60)
days between the completion of one well and
the commencement of operations on the next
well under this paragraph, this Agreement
shall terminate, PVOG shall have no further
rights hereunder. PVOG will have the right
to bank any unused continuous drilling or
operation days between ▇▇▇▇▇ to be credited
for future ▇▇▇▇▇ if it elects to do so.
3.1.1.2.3 SUBSTITUTE WELL. PVOG shall
commence the drilling of ▇▇▇▇▇ as provided
herein and continue the operation with due
diligence (i) to the objective depth, or
(ii) until it encounters mechanical
difficulties, uncontrolled influx of
subsurface water, abnormal pressures,
pressured or heaving shale, salt, granite or
other practicably impenetrable substances or
other similar conditions prevail in the hole
that render further drilling impracticable.
If such well is abandoned due to the
conditions described above, then PVOG may
drill a substitute well.
3.1.2 PHASE I, PART B.
3.1.2.1 DRILLING OPERATIONS FOR PHASE I,
PART B.
3.1.2.1.1 DRILLING PROGRAM. Following
the completion of drilling of five
▇▇▇▇▇ in Phase I, Part A, Phase I,
Part B will begin. At any time in
Phase I, Part B either Party may
propose the drilling of a well within
the Phase I area on a ground floor
Penn Virginia-70%, GMX-30% working
interest basis pursuant to the
Operating Agreement- Wellbore (unless
it is an additional well in a unit
established in Phase I, Part A, in
which event the existing Operating
Agreement-Unit will apply). The
Parties will own a wellbore working
interest as to these ▇▇▇▇▇, and if GMX
elects to participate, PVOG will make
an assignment of a 10% working
Page 3 of 11
interest in such wellbore to the
extent it arises from leases relating
to the 80% interest assigned by GMX to
PVOG. In the event PVOG elects to
participate in the 1st well in Phase
I, Part B and PVOG has not spent at
least $1,500,000 attributable to GMX's
20% carry in Phase I, Part A, then
PVOG agrees to pay GMX's share of the
well costs attributable to such well
in the amount of the difference
between $1,500,000 and actual carry
costs, up to a maximum of $160,000. At
such time PVOG has carried GMX for
$1,500,000 in drilling, completion and
hook up costs, PVOG and GMX working
interest participation shall be borne
on a ground floor basis pursuant to
the terms of the applicable Operating
Agreement.
3.2 PHASE II
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3.2.1 PHASE II, PART A
3.2.1.1 DRILLING OPERATIONS FOR PHASE II,
PART A.
3.2.1.1.1 DRILLING PROGRAM. Phase II,
Part A may commence after completion
of Phase I, Part A. If proposed by
PVOG, the first Phase II well may spud
no earlier than January 1, 2005 and no
later than July 1, 2005. In Phase II,
Part A, PVOG will select locations
with the option to drill four (4)
▇▇▇▇▇ to the Cotton Valley Formation
within the current GMX designated
acreage position or Phase II AMI. Such
drilling will be governed by an
Operating Agreement- Unit for each
unit in which a well is drilled. In
the event PVOG selects an existing GMX
location, as identified in Exhibit
"B", PVOG will reimburse GMX for
actual location and title costs
incurred for the applicable location
in accordance with Exhibit B. PVOG
will pay 100% of the costs of the
completed well to the tanks or sales
line as the case may be, excluding any
additional acreage costs for acreage
in the unit in which the well is
drilled. As of first sales from each
well drilled under this paragraph,
PVOG will earn an assignment of (i)
80% of the GMX working interest and
GMX will have a 20% working interest
in all future costs and elections
relating to such well; and (ii) 50% of
the GMX working interest in the unit
(excluding the wellbore of such well)
and GMX will have the remaining 50% as
it relates to all future operations
and elections in such unit, pursuant
to the Operating Agreement-Unit
attributable to such well and
applicable unit. GMX will retain a
100% working interest, including any
liability for operations or
abandonment in their existing
wellbores and equipment as to the HBP
acreage included in Phase II. The
assignment shall be free of any
burdens, liens or other encumbrances
created by, through or under GMX but
not otherwise.
3.2.1.1.2 CONTINUOUS DRILLING. It is
PVOG's intent to drill four (4) ▇▇▇▇▇
on a back-to-back basis in Phase II,
Part A. If (i) the first well is not
commenced before July 1, 2005; (ii)
four ▇▇▇▇▇ are not drilled or (iii)
there is a delay of more than sixty
(60) days between the completion of
Page 4 of 11
one well and the commencement of
operations on the next well under this
paragraph, PVOG will forfeit its
rights under this Agreement as it
relates to Phase II, Part B and Phase
III, retaining only the interest that
has been earned as of the date of the
forfeiture. PVOG will have the right
to bank any unused continuous drilling
or operation days between ▇▇▇▇▇ to be
credited for future ▇▇▇▇▇ if it elects
to do so. PVOG will incur no other
penalties or liabilities other than as
provided above.
3.2.1.1.3 SUBSTITUTE WELL. PVOG shall
commence the drilling of ▇▇▇▇▇ as
provided herein and continue the
operation with due diligence (i) to
the objective depth, or (ii) until it
encounters mechanical difficulties,
uncontrolled influx of subsurface
water, abnormal pressures, pressured
or heaving shale, salt, granite or
other practicably impenetrable
substances or other similar conditions
prevail in the hole that render
further drilling impracticable. If
such well is abandoned due to the
conditions described above, then PVOG
may drill a substitute well
3.2.1.2 LEASE MAINTENANCE AND TITLE.
3.2.1.2.1 LEASE COSTS REIMBURSEMENT.
There will be no reimbursement for
lease costs from PVOG to GMX for
current GMX leases located within
Phase II.
3.2.1.2.2 TITLE TO LEASES. GMX
represents and warrants that it holds
title to the GMX leases currently
owned and described in Exhibit "A-4".
At such time the interest is delivered
to PVOG, pursuant to the terms herein,
such interest shall be free of any
liens, burdens, or other encumbrances
created by, through or under GMX but
not otherwise..
3.2.1.2.3 LEASE MAINTENANCE. GMX will
maintain and be responsible for all
GMX leases within Phase II. GMX will
use its best efforts to properly and
timely pay all Lease Maintenance Costs
which are required to be paid to
maintain in force and effect as to the
existing GMX leases identified in
Exhibit "A-4" until such time PVOG
earns its acreage within Phase II and
mutually agrees as to a transfer of
lease maintenance responsibility to
PVOG as operator of such ▇▇▇▇▇.
3.2.2 PHASE II, PART B
3.2.2.1 DRILLING OPERATIONS FOR PHASE II,
PART B.
3.2.2.1.1 DRILLING PROGRAM. After the
completion of drilling of four ▇▇▇▇▇
in Phase II, Part A, Phase II, Part B
shall begin. In Phase II, Part B
either party may propose the drilling
of a well on a ground floor Penn
Virginia-50%, GMX-50% working interest
Page 5 of 11
basis pursuant to the Operating
Agreement. The Operating
Agreement-Wellbore shall become
effective for Phase II, Part B upon
the proposal of the first well. The
Parties will own a wellbore working
interest as to all rights and depths
to these ▇▇▇▇▇. All other terms and
conditions applicable to Phase II,
Part A shall also apply under this
Part B.
3.2.2.1.2 ACREAGE ASSIGNMENT. Prior to
the drilling of each well within Phase
II, Part B for any well covered by
existing GMX acreage, GMX shall
deliver PVOG an assignment for 50% of
GMX's interest (in accordance with the
form attached as Exhibit "D") that
lies within the unit for such well and
GMX HBP acreage . The NRI will be
GMX's recorded lease NRI. The
assignment shall be free of any
burdens, liens or other encumbrances
created by, through and under GMX, but
not otherwise.
3.3 PHASE III
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3.3.1 FIRST RIGHT OF REFUSAL. The current GMX acreage position
in Phase III ("Phase III Acreage") shall be retained by GMX on
a 100% working interest basis. However, in the event GMX
desires to accept a bona fide offer to sell, trade, farmout,
create a joint venture agreement or otherwise dispose any of
its Phase III Acreage to an unrelated third party industry
partner, then PVOG shall have a first right of refusal to
match such offer and shall be subject to the same terms and
conditions stated therein, including rights to operate ▇▇▇▇▇,
if any. GMX shall notify PVOG of the terms and conditions of
such offer within 15 days of receipt of an offer in the form
GMX is prepared to accept and provide a copy of such written
documentation to evidence such offer. PVOG shall then have
fifteen (15) days after receipt of such notice in which to
notify GMX of its election to accept or reject such terms and
if PVOG does not notify GMX of its election by such date, PVOG
shall be deemed to have rejected such offer and GMX may
complete the transaction on the terms proposed and any Phase
III Acreage transferred shall no longer be subject to this
Agreement. The right of first refusal shall not apply to any
merger, consolidation, reorganization or sale of all or
substantially all of the assets of GMX. Notwithstanding
anything herein to the contrary, should GMX accept an offer
pursuant to the terms and conditions herein prior to PVOG
having the opportunity to complete, at no fault of their own,
Phase I, Part A and/or Phase II, Part A, then PVOG shall
nevertheless have such first right of refusal as provided
herein.
3.3.2 RESTRICTION ON ACREAGE ACQUISTION. During the period
commencing on the date of this Agreement and ending on the
earlier of (i) the date which is one (1) year after the
termination of this Agreement, or (ii) the date GMX no longer
owns any Phase III Acreage, except as permitted by Section
3.3.1, neither PVOG nor any of its affiliates will, without
the prior written consent of GMX or as otherwise specifically
permitted under paragraph hereof, directly or indirectly, own,
acquire or solicit the acquisition of (or assist any other
person to own, acquire or solicit the acquisition of) any
leases, farmouts, royalty or overriding royalty interests or
any interest of any kind relating to oil and gas properties in
whole or in part in the Phase III area or conduct (or assist
any third person to conduct) any oil and gas business on or
with respect to the Phase III area..
Page 6 of 11
SECTION IV
AREA OF MUTUAL INTEREST
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4.1 TERM. The Parties hereby establish an Area of Mutual Interest
("AMI") consisting of Phase I and Phase II within the outlines attached
hereto as Exhibit "A-2". The AMI covering each such Phase shall be
effective for a term of three (3) years from the Effective Date.
4.2 ACQUISITIONS. During the term of the AMI, either Party shall have
the right and authority to acquire oil and gas leases, option
agreements, mineral interests, royalty interests, farmouts or other
contracts with respect thereto which affect lands and minerals lying
wholly or partially within the Phase I and Phase II AMI's ("AMI
Acreage"). If the acquisition requires drilling, seismic, or other
operations on the lands lying within the AMI, the election of the
non-acquiring Party to participate in any acquisition shall be deemed
an election to participate in the agreement governing such operations,
to the extent necessary to acquire the interest.
4.2.1 PHASE I AMI. Within the Phase I AMI, PVOG will have the
right to participate for 70% and GMX the right to participate
for 30% on all new leasehold or other acquisitions of Acreage.
4.2.2 PHASE II, AMI. Within the Phase II AMI, PVOG shall have
the right to participate for 50% and GMX the right to
participate for 50% on all new leasehold or other acquisitions
of Acreage.
4.2.3 ELECTIONS. Each Party shall give the other party notice
of any new leases or other Acreage acquisitions made in the
AMI on a calendar quarterly basis within 15 days after the end
of each calendar quarter, which shall contain a description of
the acreage acquired, the terms of any leases and the
acquisition cost. Within 25 days after the receipt of such
notice, the non-acquiring party shall notify the acquiring
party of its election to participate in whole or in part in
any new leases or other acquisitions of Acreage that occurred
during the quarter. Such elections may not include a
fractional interest in any interest acquired. Notwithstanding
the foregoing, for new leases or other Acreage acquisitions in
a unit in which a well is being drilled or in any contiguous
tracts, a separate notice shall be given and the non-acquiring
Party shall have 48 hours to notify the acquiring Party of its
election to participate. The Party electing to participate in
such acquisition shall pay the Party who acquired such
interest its proportionate share of the applicable leasehold
and/or acquisition costs as follows:
4.2.3.1 Land, lease, brokerage, and legal costs
incurred within the confines of an existing GMX
acreage block (which shall mean any unit or proposed
unit in which GMX owns acreage consisting of 50% or
more of such unit), the Party electing to participate
for its interest shall pay its proportionate share
within thirty (30) days of receipt of billing.
4.2.3.2 Land, lease, brokerage, and legal costs
incurred outside the confines of any existing GMX
acreage block but within the AMI, the party electing
to participate for its interest shall pay its
proportionate share on December 1 for acquisitions
during the preceding calendar quarters.
Within thirty (30) days after receipt of payment from the
non-acquiring Party for the acquired interests, the acquiring
Party will deliver to the non-acquiring Party an appropriate
assignment. The non-acquiring Party's failure to timely elect
or pay its share of costs associated with the acquired
interest will be deemed an election by the non-acquiring Party
not to acquire such interest.
Page 7 of 11
SECTION V
FACILITIES
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5.1 EXISTING WELLBORES, FLOWLINES, FACILITIES AND COSTS. GMX will
retain ownership and liability of all existing wellbores, flowlines,
and facilities associated within the Blocker Prospect. Notwithstanding
the prior sentence, PVOG shall have the right to take over up to three
(3) mutually agreeable inactive GMX wellbores to be used for salt well
disposal purposes in exchange for PVOG assuming the costs of the
plugging and abandonment of same. GMX agrees to work in good faith to
make such ▇▇▇▇▇ available as needed in each of the Phase areas. In the
event such flowlines and facilities are needed by PVOG to develop its
operated ▇▇▇▇▇ and assets, the Parties agree to work in good faith to
mutually agree on a cost structure to account for PVOG's utilization of
such GMX owned flowlines and facilities.
5.2 SALT WATER DISPOSAL. PVOG has intentions to install its own salt
water disposal system within Phase I and possibly Phase II and Phase
III. Prior to such installation, PVOG will have a right to utilize
GMX's salt water disposal system in accordance with the terms of the
saltwater disposal agreement attached hereto as Exhibit F. PVOG's
access to such system shall be subject to the system capacity needs of
GMX, but PVOG shall have the right to use any excess capacity.
Likewise, GMX will have a right to utilize PVOG's salt water disposal
system on the same terms, with GMX and PVOG having pro-rata rights to
system capacity based on their respective ownership in the ▇▇▇▇▇ being
served by such system. The Parties agree to negotiate in good faith a
final Salt Water Disposal Agreement by January 21, 2004.
5.3 GAS GATHERING. PVOG has intentions to install its own gas gathering
system within Phase I and possibly Phase II and Phase III. Prior to
such installation, PVOG will have a right to utilize GMX's gas
gathering system in accordance with the terms of the gas gathering
agreement attached as Exhibit G. PVOG's access to such system shall be
subject to the system capacity needs of GMX, but PVOG shall have the
right to use any excess capacity. Likewise, GMX will have a right to
utilize PVOG's gas gathering system on the same terms with GMX and PVOG
having pro-rata rights to system capacity based on their respective
ownership in the ▇▇▇▇▇ being served by such system. The Parties agree
to negotiate in good faith a final Gas Gathering Agreement by January
21, 2004.
SECTION VI
DISPUTE RESOLUTION
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6.1 The Parties agree to try to resolve all disputes under this
Agreement through good faith negotiations. If the negotiations are
unsuccessful, the Parties agree to submit the resolution of such
disputes to binding arbitration in Dallas, Texas, in accordance with
the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), including the AAA Optional Rules for Emergency
Measures of Protection and the Optional Procedures for Large, Complex
Commercial Disputes.
SECTION VII
Miscellaneous Terms
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7.1. CONFLICTING AGREEMENTS. In the event of a conflict between the
terms of this Agreement and those of the Operating Agreements attached
Page 8 of 11
hereto as Exhibit "C-1" and "C-2", the terms and provisions of this
Agreement shall prevail and supersede those of such Operating
Agreement.
7.2 EXISTING AGREEMENTS. GMX represents and warrants that the only
material agreements applicable to the Blocker Prospect are disclosed
in Exhibit "H".
7.3. ASSIGNMENT. Any assignment of leases in the Blocker Prospect shall
be made subject to the terms of this Agreement.
7.4 CHOICE OF LAW. This Agreement will be construed under and governed
by the laws of the State of Texas without giving effect to conflicts of
law principles which might apply the law of a different jurisdiction.
7.5 INDEMNITY OF GMX. GMX shall protect, indemnify and hold PVOG
harmless from and against any liabilities, obligations, claims, losses,
demands and causes of action arising from or as a result of GMX's
ownership and operations of the Blocker Prospect, except as may be
otherwise provided in any applicable Operating Agreement between GMX
and PVOG. On and after the Effective Date, the Parties shall assume and
be responsible for liabilities associated with their respective
ownership and operations within the Blocker Prospect, and shall
protect, indemnify and hold each other harmless from and against any
liabilities, obligations, claims, losses, demands and causes of action
arising or as a result of its ownership and operations in accordance
with any applicable Operating Agreement between GMX and PVOG.
7.6 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under the present or future laws
effective during the term of this Agreement, then the provision will be
fully severable; this Agreement will be modified, construed and
enforced as if the illegal, invalid or unenforceable provision had
never been in the Agreement; and the remaining provisions will remain
in full force and effect.
7.7 NOTICES. Any notices, communications or documents that may be
required to be delivered to any of the Parties to fulfill obligations
of this Agreement shall be effective upon receipt and may be sent via
telecopy, email, delivered in person or by overnight courier or sent by
United States Mail, certified mail, postage prepaid, return receipt
requested, or an equivalent delivery service, addressed to the Parties
as follows:
Penn Virginia Oil & Gas Corporation
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇▇▇▇▇
Email: ▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
GMX Resources Inc.
Endeavor Natural Resources Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇@▇▇▇.▇▇▇
Page 9 of 11
7.8 ENTIRE AGREEMENT. This Agreement, including the Exhibits, embodies
the entire agreement between the Parties, supercedes all prior
agreements and understandings, if any, relating to the subject matter
hereof, and may be amended only by an instrument in writing executed
jointly by an authorized representative of the Parties.
7.9 CONFIDENTIALITY. All jointly owned well data, geophysical,
geological and other geoscience data acquired, compiled or generated
pursuant to and after the Effective Date of this Agreement shall be
treated as confidential during the term of this Agreement and for a
period of one (1) year after termination of this Agreement, and shall
not be sold, traded or otherwise disposed of or divulged without the
prior written consent of the Party participating in the acquisition of
such data; provided that access to such data may be made available to a
party's parent company and/or its subsidiaries, agents, employees,
contractors engaged in the performance of any work or performing
services to any Party, a lender or other financing source of a Party or
any person interested in acquiring a Party or otherwise entering into a
business transaction with a Party, or to any other person or entity
where disclosure is required by law. Such jointly owned data shall not
be available for brokerage, trade or sale until termination of the
confidentiality obligations specified herein, unless otherwise mutually
agreed to by all Parties owning the data. If any income or information
is derived from sale or trade of any jointly owned information, data or
materials, such information or income shall be shared by the Parties
participating in their respective interests. A merger, consolidation,
reorganization or sale of all or substantially all of the assets of a
Party shall not be considered a sale or disposition of any such data.
7.10 PARTNERSHIP. The liabilities, obligations, options, elections or
rights of the Parties hereunder shall be several, not joint or
collective. It is not the intention of the Parties to create, nor shall
this Agreement be deemed as creating, a mining, tax or other
partnership or association or to render the Parties liable as partners.
However, if for federal income tax purposes, this Agreement and the
operations contemplated hereunder are regarded as a partnership, each
Party thereby affected elects to be excluded from the application of
all of the provisions of Subchapter "K", Chapter 1, Subtitle "A" of the
Internal Revenue Code of 1986, as amended (hereinafter referred to as
the "Code"), as permitted and authorized by Section 761 of the Code and
the regulations promulgated thereunder. Should there be any requirement
that any Party hereby affected give further evidence of this election,
each such Party shall execute such documents and furnish such other
evidence as may be required by the Federal Internal Revenue Service or
as may be necessary to evidence this election. No Party shall give any
notice or take any other action inconsistent with the election made
hereby. In making the foregoing election, each Party states that the
income derived by such Party from the operations contemplated hereunder
can be adequately determined without the computation of partnership
taxable income.
7.11 PRESS RELEASES. The Parties shall make no press release, public
announcement or public disclosure relating to this Agreement, except as
necessary to meet legal or regulatory requirements or as mutually
approved. The Party electing to issue such press release shall send a
draft copy to the other Party who will have 48 hours in which to
comment on such statements. PVOG acknowledges that GMX will make a
press release relating to this Agreement and that this Agreement will
be filed as an Exhibit to GMX's reports filed with the Securities and
Exchange Commission.
7.12 TERM OF AGREEMENT. Unless earlier terminated pursuant to the
provisions hereof, this Agreement shall be in effect for the life of
the leases. The provisions of Sections 3.3.2, 5.2, 5.3, 6.1, 7.9 and
7.5 shall survive any termination of this Agreement.
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IN WITNESS WHEREOF, the Parties have executed this Agreement effective
as of the Effective Date.
GMX RESOURCES INC., PENN VIRGINIA OIL & GAS
EXPEDITION NATURAL RESOURCES INC. CORPORATION
AND ENDEAVOR PIPELINE, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇ ▇. ▇▇▇
-------------------------- -----------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇ ▇. ▇▇▇
Executive Vice President, GMX Resources Inc. Land Manager
President, Expedition Natural Resources Inc.
President, Endeavor Pipeline, Inc.
Date: December 29, 2003 Date: December 29, 2003
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