PETROHAWK [LOGO GOES HERE]
ENERGY CORPORATION
JULY 14, 2003
VIA EMAIL AND OVERNIGHT DELIVERY
MI XXXX XXXXXXX PRESIDENT
MAINLAND RESOURCES, INC
117314 SH 000, XXXXX 000
XXXXXXX, XXXXX 00000
RE LETTER AGREEMENT RELATING TO DEVELOPMENT OF ACREAGE IN DESOTO PARISH,
LOUISIANA
DEAR MR. NEWPORT:
PETROHAWK ENERGY CORPORATION AND/OR ITS AFFILIATES (HEREINAFTER REFERRED TO AS
"HAWK") IS PLEASED TO PROVIDE YOU THIS "LETTER AGREEMENT" SETTING FORTH OUR
UNDERSTANDING OF A JOINT DEVELOPMENT PROJECT BETWEEN MAINLAND RESOURCES INC
AND/OR ITS AFFILIATES ( MAINLAND) AND HAWK. IT IS OUR INTENT THAT THIS LETTER
AGREEMENT SHALL BE BINDING ON BOTH PARTIES TO THE EXTENT SET FORTH HEREIN.
XXXX HAS UTILIZED INFORMATION PROVIDED BY MAINLAND FOR PURPOSES OF MAKING THIS
OFFER. THIS PROPOSAL IS BASED ON THE ASSUMPTION THAT MAINLAND OWNS ALL RIGHTS TO
ALL DEPTHS BELOW THE BASE OF THE COTTON VALLEY FORMATION (WHICH SHALL INCLUDE
THE HAYNESVILLE SHALE FORMATION,) PURSUANT TO THE OIL AND GAS LEASES (TOTALING
APPROXIMATELY 2,695 NET ACES.) AS DESCRIBED ON EXHIBIT A (THE 'LEASES') AND OWNS
AT LEAST A 75.00% NET REVENUE INTEREST IN THE LEASES HAWK WILL BE SUBJECT TO THE
TERMS OF THAT CERTAIN LETTER AGREEMENT DATED DECEMBER 11, 2007 BY AND BETWEEN
PERMIAN BASIN ACQUISITION FUND AND XXXXXXXX RESOURCES INC (THE 'PERMIAN-XXXXXXXX
AGREEMENT") PARAGRAPH 6 TO THE PERMIAN-XXXXXXXX AGREEMENT CREATED AN AMI
CONSISTING OF SECTIONS 11 12.13.14.15.16 00 00.00.00 OF T13N-RMW AND SECTION 7,
T13N-R13W DESOTO PARISH LOUISIANA THE AMI SHALL BE FOR A TERM OF SIX YEARS FROM
DECEMBER 11, 2007. IN THE EVENT ANY ADDITIONAL LEASES ARE ACQUIRED BY MAINLAND
(SUCCESSOR IN TITLE) TO XXXXXXXX RESOURCES INC. PETROLEUM BASIN ACQUISITION FUND
WILL RECEIVE A 2% ORRI. HAWK AND MAINLAND WILL ENTER INTO AN AMI COVERING THIS
SAME AREA.
MAINLAND AND XXXX HAVE AGREED TO THE FOLLOWING
1. ASSETS TO BE TRANSFERRED TO HAWK BY MAINLAND. MAINLAND WILL
TRANSFER 60% OF THE LEASES TO HAWK AT CLOSING BUT ONLY AS THE
LEASES RELATE TO ALL DEPTHS BELOW THE BASE OF THE COTTON VALLEY
FORMATION. THIS TRANSFER WILL INCLUDE 60% OF MAINLAND'S INTEREST
IN RIGHTS OF WAY EASEMENTS SERVITUDES AND 60% OF ALL CONTRACT
RIGHTS AND ALL OTHER
1000 Louisiana. Suite 5600 Houston. TX 7 7002
Ph. 000 000 0000 Fax: 000 000 0000
XX. XXXX XXXXXXX
MAINLAND RESOURCES, INC.
PAGE 2
RELATED REAL PROPERTY PERTAINING TO THE OWNERSHIP OF SUCH
PROPERTIES, INCLUDING ANY OVERRIDING ROYALTY INTEREST, FEE
INTEREST, NET PROFITS INTEREST, PRODUCTION PAYMENTS, REVERSIONARY
INTERESTS AND OTHER INTERESTS IN THE OIL AND GAS IN PLACE OR THE
PRODUCTION THEREOF FROM THE AFFECTED LANDS. COLLECTIVELY, THE
ASSETS TO BE TRANSFERRED MAY BE REFERRED TO HEREIN AS "ACQUIRED
PROPERTIES". HAWK WILL BE ALLOWED TO COPY ALL LEASE, TITLE AND
OTHER FILES RELATED TO THE ACQUIRED PROPERTIES. MAINLAND WILL
RETAIN ALL RIGHTS ABOVE THE BASE OF THE COTTON VALLEY FORMATION.
2. CARRIED INTEREST OBLIGATION. IN CONSIDERATION OF THE TRANSFERS SET
FORTH IN PARAGRAPH 1 ABOVE, XXXX WILL PAY 100% OF ALL COSTS (AS
SUCH COSTS RELATE TO THE INTERESTS OWNED BY HAWK AND MAINLAND)
ASSOCIATED WITH THE FIRST WELL DRILLED BELOW THE BASE OF THE
COTTON VALLEY FORMATION ON THE LEASES. THE FIRST WELL (XXXXXXXX
#1-H) WILL BE LOCATED 330 FNL & 510 FWL IN SECTION 11. T13N-R14W.
HAWK WILL ATTEMPT TO DRILL A 4575' LATERAL TO A BOTTOM HOLE
LOCATION AT 380 FWL AND 380 FSL IN SECTION 11. THE LOCATION PLAT
DESCRIBING THE INITIAL SURFACE LOCATION AND LATERAL ARE ATTACHED
HERETO AS EXHIBIT B. SUCH COSTS SHALL INCLUDE, BUT NOT BE LIMITED
TO, DRILLING, COMPLETING, TITLE OPINIONS AND FRACTURE STIMULATING
AND SHALL INCLUDE ALL COSTS UP TO AND INCLUDING THE PIPELINE
CONNECTION, IN ADDITION, HAWK WILL PAY 80% OF ALL COSTS (AS SUCH
COSTS RELATE TO THE INTERESTS OWNED BY HAWK AND MAINLAND) OF THE
SECOND WELL DRILLED ON THE LEASES BELOW THE BASE OF THE COTTON
VALLEY FORMATION AND MAINLAND SHALL PAY 20% OF SUCH COSTS. FOR THE
THIRD AND ALL SUBSEQUENT XXXXX DRILLED ON THE LEASES BELOW THE
BASE OF THE COTTON VALLEY FORMATION, HAWK SHALL PAY 60% AND
MAINLAND SHALL PAY 40% OF SUCH COSTS (AS SUCH COSTS RELATE TO THE
INTERESTS OF HAWK AND MAINLAND). HAWK WILL ATTEMPT TO LOG ALL
DEPTHS IN AND TO EACH WELL DRILLED AND PROVIDE THE RESULTS OF ALL
LOGS TO MAINLAND. MAINLAND WILL PAY FOR THE INCREMENTAL COST OF
LOGGING THE ZONES ABOVE THE BASE OF THE COTTON VALLEY FORMATION.
3. ASSIGNMENT. XXXXXXXX, AT CLOSING, SHALL CONVEY THE ACQUIRED
PROPERTIES TO HAWK BY A MUTUALLY ACCEPTABLE ASSIGNMENT AND BILL OF
SALE, WHICH SHALL INCLUDE A SPECIAL WARRANTY OF TITLE, DEFENDING
AGAINST ANY PERSON CLAIMING BY. THROUGH OR UNDER MAINLAND, BUT NOT
OTHERWISE.
4. LIENS AND ENCUMBRANCES. THE ACQUIRED PROPERTIES SHALL BE
TRANSFERRED FROM MAINLAND TO HAWK FREE AND CLEAR OF ALL LIENS,
MORTGAGES, RIGHTS OF REASSIGNMENT, REVERSIONARY RIGHTS, CALLS ON
PRODUCTION, PREFERENTIAL RIGHTS, CONSENTS TO ASSIGN, TAXES (OTHER
THAN THOSE FOR THE CURRENT YEAR), OBLIGATIONS (INCLUDING
DELINQUENT OPERATING EXPENSES), CLAIMS, SUITS, OR ANY OTHER
ENCUMBRANCES.
5. EFFECTIVE DATE. CLOSING AND OPERATIONS POST CLOSING. THE EFFECTIVE
DATE OF THE CONVEYANCE OF THE ACQUIRED PROPERTIES SHALL BE AT 7:00
A.M. LOCAL TIME ON THE CLOSING DATE (THE "EFFECTIVE DATE").
REVENUES AND EXPENSES, AND ALL BENEFITS, BURDENS AND OBLIGATIONS,
ATTRIBUTABLE TO THE ACQUIRED PROPERTIES SHALL BE PRO-RATED AS OF
THE EFFECTIVE DATE. THE PARTIES WILL USE THEIR BEST EFFORTS TO
CLOSE NO LATER THAN JULY 31, 2008 (THE "CLOSING"). THE PARTIES
WILL JOINTLY DEVELOP THE LEASES BELOW THE BASE OF THE COTTON
VALLEY FORMATION. HAWK (OR ITS AFFILIATE) WILL BE DESIGNATED
OPERATOR BY THE PARTIES AND THE PARTIES AGREE TO ENTER INTO AN
A.A.P.L. FORM 610 MODEL FORM OPERATING AGREEMENT -- 1982 (THE
"OPERATING AGREEMENT"). THE BLANK IN ARTICLE VI (DEALING WITH
OPERATIONS BY LESS THAN ALL PARTIES) SHALL BE FILLED IN WITH 500%.
IF
MR, XXXX XXXXXXX
MAINLAND RESOURCES, INC.
PAGE 3
MAINLAND OR HAWK DOES NOT PARTICIPATE IN THE FIRST WELL IN A
DESIGNATED UNIT IT WILL FORFEIT ITS RIGHTS TO PARTICIPATE IN ALL
SUBSEQUENT XXXXX IN THAT UNIT. HAWK WILL USE ITS REASONABLE BEST
EFFORTS TO CAUSE A WELL TO BE SPUD IN SECTION 11 OF T13N R14W NO
LATER THAN SEPTEMBER 30. 2008. IN THE EVENT XXXX DOES NOT SPUD THE
WELL ON OR BEFORE THIS DATE, XXXX WILL REASSIGN ALL RIGHTS
PREVIOUSLY ASSIGNED BY MAINLAND TO HAWK IN PARAGRAPH 1 ABOVE.
6. CONFIRMING DUE DILIGENCE. XXXX WILL CONDUCT CONFIRMING DUE
DILIGENCE WHICH SHALL INCLUDE, BUT NOT BE LIMITED TO THE
FOLLOWING:
A. CONFIRMATION OF THE MARKETABILITY OF TITLE (INCLUDING
VERIFICATION OF HBP LEASES BEING IN FULL FORCE AND EFFECT).
IF, IN THE REASONABLE OPINION OF HAWK, MAINLAND DOES NOT OWN
MARKETABLE TITLE TO AT LEAST A 75.00% NET REVENUE INTEREST IN
AT LEAST 2,000 NET ACRES WHICH ARE INCLUDED IN THE LEASES,
HAWK, AT ITS OPTION MAY TERMINATE THIS LETTER AGREEMENT AND
NEITHER PARTY SHALL HAVE ANY FURTHER OBLIGATIONS TO THE OTHER
HEREUNDER.
B. REVIEW OF ALL LEASE AGREEMENTS (INCLUDING LEASE EXPIRATIONS,
SURFACE ACCESS RESTRICTIONS AND DRILLING COMMITMENTS, IF ANY),
UNIT AGREEMENTS, AND OTHER CONTRACTS APPLICABLE TO THE
ACQUIRED PROPERTIES. HAWK'S OBLIGATIONS HEREUNDER SHALL BE
SUBJECT TO ITS REASONABLE APPROVAL OF THE LEASE AGREEMENTS AND
OTHER MATERIAL AGREEMENTS AFFECTING THE ACQUIRED PROPERTIES,
C. OTHER ACTS OF DUE DILIGENCE APPROPRIATE TO THE TRANSACTION AS
MUTUALLY AGREED BETWEEN THE PARTIES.
7. COOPERATION AND EXCLUSIVITY. HAWK AND MAINLAND WILL COOPERATE IN
GOOD FAITH AND PROCEED EXPEDITIOUSLY IN THE PREPARATION OF ALL
DOCUMENTS NECESSARY TO CONSUMMATE THE TRANSACTION CONTEMPLATED
HEREBY. XXXXXXXX AGREES THAT AFTER EXECUTION OF THIS LETTER
AGREEMENT, AND FOR SO LONG AS IT IS IN EFFECT, IT WILL NOT
DIRECTLY OR INDIRECTLY SOLICIT OR ENTERTAIN ANY OTHER OFFER TO
ACQUIRE THE ACQUIRED PROPERTIES OR ENTER INTO ANY NEGOTIATION OR
AGREEMENT THAT PROVIDES FOR THE JOINT DEVELOPMENT OF THE ACQUIRED
PROPERTIES.
8. ACCESS TO DATA. XXXXXXXX AGREES TO PROVIDE HAWK REASONABLE ACCESS
IN XXXXXXXX'S OFFICE TO THE BOOKS AND RECORDS OF MAINLAND
PERTAINING TO THE ACQUIRED PROPERTIES PROMPTLY AFTER EXECUTION OF
THIS LETTER AGREEMENT.
9. CONFIDENTIALITY. IT IS UNDERSTOOD AND AGREED THAT THIS LETTER
AGREEMENT AND ITS SUBSTANCE SHALL REMAIN CONFIDENTIAL BY AND
BETWEEN MAINLAND AND HAWK AND SHALL NOT BE DISCLOSED TO ANY THIRD
PARTIES, OTHER THAN THOSE PERSONS WHO HAVE A CONFIDENTIAL
RELATIONSHIP WITH MAINLAND OR HAWK, ALL OF WHOM SHALL AGREE TO BE
BOUND BY THIS CONFIDENTIALITY OBLIGATION. ANY PUBLIC ANNOUNCEMENT
OF THE PROPOSED TRANSACTION BY EITHER PARTY SHALL BE APPROVED IN
ADVANCE BY THE OTHER PARTY.
10. COUNTERPARTS. THIS LETTER AGREEMENT MAY BE EXECUTED IN ANY NUMBER
OF COUNTERPARTS EACH OF WHICH WILL BE DEEMED TO BE AN ORIGINAL BUT
ALL OF WHICH SHALL BE DEEMED ONE AND THE SAME DOCUMENT.
XX. XXXX XXXXXXX
MAINLAND RESOURCES, INC.
PAGE 4
11. GOVERNING LAW. THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS. THE PARTIES HERETO HEREBY CONSENT TO THE JURISDICTION AND
VENUE OF THE COURTS OF XXXXXX COUNTY, TEXAS.
12. EXPENSES. EACH PARTY WILL PAY ITS OWN EXPENSES AND COSTS
INCIDENTAL TO THE NEGOTIATION AND COMPLETION OF THE TRANSACTION,
INCLUDING LEGAL AND ACCOUNTING FEES.
13. MAINTENANCE OF LEASES HELD BY PRODUCTION. THE PARTIES RECOGNIZE
THAT SOME OF THE LEASES ALLOW FOR OPERATIONS BELOW THE BASE OF THE
COTTON VALLEY FORMATION BECAUSE OF PRODUCTION FROM XXXXX ABOVE THE
BASE OF THE COTTON VALLEY FORMATION. BEFORE MAINLAND ABANDONS ANY
SUCH WELL IT WILL GIVE WRITTEN NOTICE TO HAWK OF ITS INTENTION TO
DO SO AT LEAST 30 DAYS IN ADVANCE AND HAWK SHALL HAVE THE OPTION
TO ELECT TO TAKE OVER OWNERSHIP AND OPERATION OF SUCH WELL BY
GIVING WRITTEN NOTICE TO MAINLAND WITHIN 10 DAYS OF THE NOTICE
RECEIVED FROM MAINLAND. IF HAWK SO ELECTS, IT WILL INDEMNIFY
MAINLAND FROM ANY AND ALL LIABILITY ASSOCIATED WITH THE WELL
INCLUDING BUT NOT LIMITED TO PLUGGING AND ABANDONMENT LIABILITY.
14. MARKETING OF PRODUCTION. XXXX AGREES TO GATHER AND MARKET
MAINLAND'S PRODUCTION FROM ABOVE THE BASE OF THE COTTON VALLEY
FORMATION, PURSUANT TO A MUTUALLY ACCEPTABLE AGREEMENT.
IF YOU AGREE WITH THE PROVISIONS CONTAINED IN THIS LETTER AGREEMENT, PLEASE
INDICATE BY SIGNING AND RETURNING THE DUPLICATE COPY OF THIS LETTER TO THE
UNDERSIGNED. THE RETURN OF EXECUTED DOCUMENTS BY FACSIMILE TRANSMISSION OR
ELECTRONIC MAIL SHALL BE EFFECTIVE BETWEEN THE PARTIES AND SHALL BE FOLLOWED BY
RETURN OF EXECUTED ORIGINALS. IF XXXX HAS NOT RECEIVED A WRITTEN RESPONSE TO
THIS OFFER ON OR BEFORE JULY 16, 2008 AT 5:00 P.M., CDT, THIS OFFER WILL EXPIRE.
SINCERELY,
PETROHAWK ENERGY CORPORATION
/s/ XXXXX X. XXXXX
XXXXX X. XXXXX
EXECUTIVE VICE PRESIDENT - CORPORATE DEVELOPMENT
XX. XXXX XXXXXXX
MAINLAND RESOURCES, INC.
PAGE 5
AGREED TO AND ACCEPTED THIS 14TH DAY OF JULY, 2003
MAINLAND RESOURCES INC.
/s/ XXXXXXX X. XXXXXXX
_________________________
NAME: XXXXXXX X XXXXXXX
TITLE: PRESIDENT
EXHIBIT A
LETTER AGREEMENT DATED JULY 14.2008 BY AND BETWEEN PETROHAWK ENERGY CORPORATION
AND MAINLAND RESOURCES, INC. EAST XXXXX PROSPECT DESOTO PARISH, LOUISIANA
[DETAILED GRID OF PROSPECT ACRES GOES HERE]
EXHIBIT B
[MAP GOES HERE]
