DEVELOPMENT AGREEMENT



THIS AGREEMENT, entered into and effective this 14th day of October, 1999

("Effective Date") is by and between GMX Resources Inc., (hereinafter referred

to as "GMX") and Tara Energy Services Limited, as managing partner of the Tara

Energy Partnerships (hereinafter referred to as "Tara") (sometimes collectively

referred to as the "Parties").



         WHEREAS, GMX is a corporation engaged in oil and gas exploration and

development activities and represents that it is the owner of certain oil and

gas properties as listed on the attached Exhibit "A" which are known to the

Parties as the Leases (the "Leases"), and



         WHEREAS, Tara desires to enter into a Development Agreement regarding

the hereinafter detailed program of work ("Work Program") to be conducted on the

Leases, this Agreement shall serve to set out the terms whereby said agreement

shall be made. Tara hereby represents that it has researched this investment.

Tara is a professional oil and gas entity engaged in oil and gas exploration and

development and as such is capable of properly evaluating same.



         NOW THEREFORE, in consideration of the mutual promises and conditions

contained herein, and other good and valuable consideration, the receipt of

which is hereby acknowledged, the Parties agree as follows:



1.       The Parties shall in accordance with the terms of this Agreement and

         the joint operating agreement attached as Exhibit "C" to this Agreement

         (the "JOA") conduct the program of drilling and development of two

         wells on the Leases as set forth in detail on the attached Exhibit "B"

         ("the Wells"). The costs shown on Exhibit "B" are target AFE costs

         based on the Turnkey Bid of Patterson Drilling, for drilling to the

         required depths plus estimated third party and supervision costs. Tara

         will be liable for its share of the costs plus cost overruns, not to

         exceed in total 110% of the amounts shown in Exhibit "B". Overruns in

         excess of 10% of the total AFE cost will be submitted as a

         supplementary AFE for Tara's agreement before any such additional

         expenditure is undertaken. Tara's notification to the Operator as to

         whether its agrees to incur such additional cost, and (if it does so

         approve) its payments therefor will be timely in conformance with this

         Agreement and the JOA. The location of the Wells will be as agreed by

         the Parties.



2.       Tara shall be liable for 85% of the cost of the Work Program, on a cost

         basis described in Clause 1 above.



3.       In discharge of its share of the cost of the Work Program, subject to

         the conditions herein, Tara shall make (or cause to be made on its

         behalf) the following payments ("Advances") to GMX or its designated

         affiliate ("GMX"):

{TABLE}

                 {S}                        {C}

                  October 15, 1999            $792,900.00 in US$ AFE Costs

                                              $ 45,000.00 in US$ G&G Costs

                                              -----------

                                              $837,900.00 in US$ Total



{/TABLE}



{PAGE}



4.       Upon payment by Tara of the aforesaid Advances, GMX shall assign to

         Tara (in the form of its U.S. affiliate Tara Energy Inc. as nominee for

         Tara) an 85% working interest limited to the forty (40) acres

         surrounding the "initial test wells" (the wells), and including the

         location or locations of any twin wells of the wells, in the lands

         described on Exhibit "A" attached hereto. Said assignment shall

         comprise full working interest and net revenue interest rights for each

         well and the forty (40) acres attributable to each well drilled

         hereunder, limited to the depths penetrated by each well. Should the

         Texas spacing units attributable to each well be greater than forty

         (40) acres, then in no event will Tara earn a working interest or net

         revenue interest for development purposes outside the forty (40) acres

         surrounding said wellbore. GMX agrees that no offset well(s) will be

         drilled closer than 1200 feet from the Tara wellbore(s) and in said

         forty (40) acre tracts without approval from Tara and with Tara's

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