AGREEMENT

 

                              Barnett Shale Project

                    Cooke, Montague, and Wise Counties, Texas

 

 

         This Agreement ("Agreement") is entered by and between EBS Oil and Gas

Partners Production Company, L.P., a Texas limited partnership, whose address is

3131 Turtle Creek, Suite 1210, Dallas, Texas 75219, hereinafter sometimes

referred to as "EBS," and Westside Energy Corp., whose address is 4400 Post Oak

Parkway, Suite 2530, Houston, Texas 77027, hereinafter referred to as

"Westside."

 

Article 1)

                            Introduction; Definitions

 

1.1.      This Agreement is based upon the following matters:

 

1.1.1.    EBS has heretofore acquired various oil and gas leases covering lands

         located in Cooke, Montague, and Wise Counties, Texas, and EBS has been

         engaged in the drilling and completion of wells on such leases for

         production from the Barnett Shale formation.

 

1.1.2.    EBS desires to acquire additional leases in such area for exploration

         and production from the Barnett Shale formation, such additional leases

         to be acquired by EBS or the Acquisition Parties.

 

1.1.3.    Westside desires (i) to acquire an overriding royalty interest, or

         carried working interest, as the case may be, in future leases acquired

         by EBS, whether acquired in its own name or in the name of an

         Acquisition Party on behalf of EBS, by providing the Lease Bank Funds

         to EBS under this Agreement, and (ii) to have an option to acquire up

         to an undivided twenty-five percent (i.e., 25%) of the leasehold

         interest in and to such future leases, and (iii) to participate in the

         drilling of the initial test well on each of such future leases, and

         (iv) to have the opportunity to participate in other subsequent wells

         drilled on the future leases, all in the manner and as further provided

         in this agreement.

 

1.2.      For purposes of this Agreement, the following terms shall have the

         following meanings:

 

1.2.1.    "prospect area" shall mean and refer to the following lands located in

         the State of Texas: the west one-half of Cooke County, the south

         one-half of Montague County, and the north one-fourth of Wise County,

          Texas.

 

1.2.2.    "Lease" in the singular, and "Leases" in the plural shall mean and

         refer to oil and gas leases covering lands in the prospect area which

         are acquired by EBS or an Acquisition Party from and after the date of

         this Agreement by use of the Lease Bank Funds. "Lease" and "Leases" do

         not include any leases covering lands in the prospect area acquired by

         the parties prior to this Agreement.

 

 

 

<PAGE>

 

 

1.2.3.    "Lease Bank Funds" shall mean and refer to the funds provided by

         Westside, pursuant to Article 2 below, to cover the Land Costs incurred

         by EBS in the acquisition of the Leases in an aggregate maximum amount

         outstanding at any one time not to exceed One Million Dollars

         ($1,000,000).

 

1.2.4.    "Lease Tract" shall mean and refer to a single Lease and the leasehold

         premises covered by such Lease, or, in the event multiple Leases cover

         a common leased premises, then such term shall refer to the multiple

         Leases and the common leased premises covered by such Leases.

 

1.2.5.    "Land   Costs,"   for each and every   Lease,   shall   mean (i) all actual

         costs paid by EBS as the   purchase price for the particular   lease

         (e.g.   the bonus payment to the   landowners if EBS is the original  

         lessee of the Lease) plus (ii) an   additional   sum,   being $25.00 per

         acre for each Net Mineral Acre covered by a particular   Lease.   The

         $25.00 per acre is a sum,   agreed to by the parties,   as a reasonable  

         estimate of both direct and   indirect   costs   incurred by EBS in the  

         acquisition   of Leases (the direct and   indirect costs would include,  

         but not necessarily be limited to, bank fees,   landman fees,   employee

         landmen fees, legal fees, and   miscellaneous   expense such as travel

         costs,   meals,   copy costs,   recording fees, etc.). It is understood  

         that the   determination   of the net mineral acres covered by a Lease

         will not be made by survey on the ground,   but rather on other  

         available   information,   such as, by way of   example,   (i) the acreage

         calls   contained in the   description   of the leasehold   premises of the

          Leases,   (ii) the landman reports   covering   the   Leases,   (iii) the  

         acreage   calls for   which the lease   bonuses   were paid to the lessors,

         (iv) generally available land plats, and/or (v) tax records from the

         local taxing authorities.

 

1.2.6.    The term "drilling operations" shall mean and refer to (i) drilling of

         a well on any of the Leases to the Test Depth, (ii) conducting such

         tests to the point of setting casing as the Operator shall deem

         appropriate, and (iii) the plugging and abandoning of the well if no

         completion attempt is made.

 

1.2.7.    "Drilling Costs" shall mean and refer to the costs and expenses of

         conducting the drilling operations for a particular well, as such costs

         and expenses are determined under the Operating Agreement.

 

1.2.8.    The term "completion operations" shall mean and refer to (i) completing

         and testing a well, and (ii) conducting the initial frac on the well,

         with a fracing procedure designed and approved by the Operator, and

         (iii) if any such completion attempt is successful, of equipping such

         well for production through the tanks, in the event of an oil well, and

         production into the pipeline, in the event of a gas well, or, if any

         such completion attempt is unsuccessful, the plugging and abandoning of

         the well and costs of restoring the surface.

 

1.2.9.    "Completion Costs" shall mean and refer to the costs and expense of

          conducting the completion operations for a particular well, as such

         costs and expense are determined under the Operating Agreement.

 

 

 

<PAGE>

 

 

1.2.10.   "Carried Working Interest" shall mean and refer to an undivided

         leasehold interest in a Lease Tract which shall be free of Drilling

         Costs and Completion Costs for all wells drilled and completed on such

         Lease Tract for production from the Barnett Shale formation.

 

1.2.11.   "Proration Unit" shall mean and refer to the lands allocated to a well

         by EBS for a regular location under the Railroad Commission Rules of

         the State of Texas. For vertical wells drilled to test the Barnett

         Shale Formation not less than 40 acres of land shall be allocated to

          such wells. The location and boundaries of the proration units are in

         the sole and absolute discretion of EBS. EBS may delegate such

         discretion to the Operator. The "Proration Unit" for a particular well

         may comprise all or part of a pooled unit created under the pooling

         authority of the applicable leases, which pools and combines the

         particular leases and lands for production from the particular well.

 

1.2.12.   "Operating Agreement" shall mean and refer to that certain Operating

         Agreement, covering the Leases, which shall be executed by EBS,

         Westside, and Operator, on or about the date of this Agreement.

 

1.2.13.   "Operator" shall mean and refer to EBS Oil and Gas Partners Operating

          Company, L.P., and any successor operator under the Operating

         Agreement.

 

1.2.14.   "Test Well" in the singular, and "Test Wells" in the plural, shall mean

         and refer to the initial well drilled on a Lease Tract.

 

1.2.15.   "Test Depth," unless the parties should agree in writing otherwise,

         shall mean and refer to the depth of a particular well which the

         Operator shall determine, based upon the facts and circumstances of

         such well, to be sufficient to test the Barnett Shale Formation.

 

1.2.16.   "Development Well" in the singular and "Development Wells" in the

         plural shall mean and refer to any wells drilled on any Lease Tract

         subsequent to the Test Well drilled on the particular Lease Tract.

 

1.2.17.   "Acquisition Parties" shall mean those Persons that are taking leases

         on behalf of EBS and subject to the Master Land Services Agreement.

 

1.2.18.   "Person(s)" shall mean an individual, corporation, partnership, limited

         liability company, joint venture, trust or unincorporated organization,

         joint stock company or other similar organization, government or any

         political subdivision thereof, a court, or any other legal entity,

         whether acting in an individual, fiduciary or other capacity.

 

1.2.19.   "Net Mineral Acre" shall mean the sum of (x) the gross acreage covered

         by a Lease multiplied by (y) the percentage of the mineral interests in

         the gross acreage owned by the lessor(s) under such Lease.

 

1.2.20.   "Master Land Services Agreement" means that certain AAPL Master Land

         Services Agreement entered into by EBS, Westside and certain other

         Persons who acquire Leases.

 

Article 2)

                                Lease Bank Funds

 

2.1. Subject to the terms of this Agreement, Westside agrees to make available

to EBS, on a revolving basis, funds of up to a maximum sum of One Million

Dollars ($1,000,000), to cover the Land Costs for the Leases ("Lease Bank

Funds").

 

 

 

<PAGE>

 

 

2.2. Any Lease Bank Funds which Westside elects to advance to EBS shall be

advanced to a separate account established for the deposit and handling of the

Lease Bank Funds at Plains Capital Bank, whose principal office is 2911 Turtle

Creek Boulevard, Suite 1300, Dallas, Texas 75219. EBS shall have the right in

its discretion to transfer the account to another banking institution; provided

EBS (i) continues to maintain such account as a separate account and (ii)

provides Westside prompt notice of any such change. Such account shall be

referred to herein as the Lease Bank Account.

 

2.3. >From time to time hereafter EBS may make a draw request of Lease Bank

Funds advanced by Westside into the Lease Bank Account. EBS may request that

Westside advance Lease Bank Funds from time to time by submitting a written draw

request to Westside. Any such draw request shall be accompanied with (i) a Lease

report and copy of the executable applicable lease, which form of the Lease

reports attached hereto as Exhibit C, (ii) a summary of the amount of Land Costs

paid or payable to the lessor or assignor under the applicable Lease, (iii) a

summary of the Net Mineral Acres covered by the Lease and (iv) a copy of any

title opinions or reports covering such Leases. Within forty-eight hours of each

draw request, subject to Westside's election to advance the requested Lease Bank

Funds, Westside shall transfer the amount of the draw request by wire transfer

into the Lease Bank Account. During such forty-eight-hour period, Westside may

(i) refuse to pay the Land Costs applicable to the submitted Leases and notify

EBS of deficiencies in the Lease or Leases that were presented to Westside; or

(ii) refuse to reimburse the Land Costs and by written instrument relinquish all

rights to the Lease. In the event that Land Costs are not paid because Westside

has asserted deficiencies in the Lease or Leases, EBS may elect to submit such

Lease or Leases to Westside after satisfaction of the Lease deficiencies

specified by Westside. Failure of Westside to respond during any such

forty-eight-hour period, shall be deemed a rejection by Westside to provide the

applicable Lease Bank Funds. At no time will advanced Lease Bank Funds exceed

$1,000,000.

 

2.4. All Lease Bank Funds shall be utilized by EBS to pay Land Costs for the

Leases. Subject to Westside's election to fund the applicable Land Costs and

upon the acquisition of a particular Lease, EBS (i) may pay direct from the Land

Bank Account any or all of the Land Costs for the particular Lease directly to

the third parties in connection with such Lease, and (ii) shall transfer to

itself from the Land Bank Account any of the Land Costs for the particular Lease

which remain, after taking into account the direct payments to any third parties

from the Land Bank Account for any such Lease.

 

2.5. It is the intention of EBS to attempt to sell to third parties an undivided

interest in the Leases as to each Lease Tract. With a sale of an undivided

interest in a Lease Tract to a third party, it is the intention of EBS to secure

from the third party a commitment to participate in the drilling of the Test

Well on the particular Lease Tract. At such time that EBS has secured the sale

proceeds from all third parties to whom it is selling an interest in a Lease

Tract, but in no event later than thirty (30) days before the commencement of

actual drilling of the Test Well on the particular Lease Tract, EBS shall

transfer into the Lease Bank Account such sales proceeds which shall constitute

repaid Land Costs for the particular Lease or Leases which comprise the

particular Lease Tract.

 

2.6. For each Lease, EBS shall maintain a record of all Land Costs paid from, or

transferred out of, the Lease Bank Account, and the Land Costs transferred back

into the Lease Bank Account. No later than the last day of each month EBS shall

deliver, with regard to the immediately preceding month, to Westside a copy of

(i) the bank statement for the Lease Bank Account from the banking institution

in which such account is established, and (ii) EBS's records of Land Costs

transferred into, and out of, such account.

 

2.7. The Lease Bank Fund shall continue for a period of eighteen months from the

date of this Agreement, and shall continue month to month thereafter until

terminated by either party hereto. Termination shall be the first day of the

month following thirty days following the delivery of written notice electing

termination by one party to the other party. Upon the termination of the Lease

Bank Fund, all funds then remaining in the Lease Bank Account shall be

transferred by EBS to Westside. Thereafter, from time to time, when EBS would

otherwise have transferred back into the Lease Fund Account the Land Costs for a

particular Lease Tract, pursuant to Section 2.5 above, EBS shall transfer such

Land Costs to Westside.

 

2.8. In the event that Lease Bank Funds advanced by Westside have not been

repaid by EBS, on or before the termination date described in Section 2.7

hereof, Westside's sole remedy shall be to take title to the Leases held by EBS

or any Acquisition Party for which there have not been a full repayment of the

Land Costs, unless EBS shall have purchased such leases from the lease bank

neither EBS nor any Acquisition party shall have any further rights or claims to

any interests in such Leases after the termination date. EBS shall, and shall,

if necessary, cause any Acquisition Party to, execute any documents necessary to

ensure any record title not in Westside's name to be assigned to Westside,

should EBS not purchase said leases.

 

2.9. Until the termination of the Lease Bank Fund, so long as there are funds

available in the Lease Bank Fund to cover the Land Costs for a particular Lease,

then EBS shall acquire such Lease utilizing the funds from the Lease Bank Fund.

If from time to time EBS has the opportunity to acquire oil and gas leases in

the prospect area, and there are no funds in the Lease Bank Fund at the time of

the particular lease acquisition, of if from time to time Westside has rejected

the purchase of particular leases with Lease Bank Funds, EBS may acquire such

leases with its own funds, or funds from other sources, and such oil and gas

leases, so acquired, shall not be Leases under this Agreement. In a lease is so

acquired which is not covered by this Agreement, then any further leases

acquired by EBS on the leased premises of such lease shall not covered by this

Agreement, and the funds for such leases shall not be from the Lease Bank Funds.

In the event any such leases that do not constitute Leases under this Agreement

are adjacent to any Lease Tract, such leases shall be operated in strict

accordance with the rules and regulations of the Railroad Commission of Texas,

without exception to spacing or density rules.

 

Article 3)

              Overriding Royalty Interest/Carried Working Interest

 

3.1. It is the intention of the parties that the minimum net revenue threshold

to the leasehold interest owners of each and every Lease, after taking into

account the overriding royalty interest to Westside, shall not be less than 78%

of the oil, gas and minerals produced under and by virtue of each Lease. In

consideration of Westside providing the Lease Bank Funds, Westside shall be

entitled to an overriding royalty interest in each Lease equal to three percent

(3%) of 8/8ths of the oil, gas and minerals produced under and by virtue of the

particular Lease. If the royalty reserved by the landowner in a particular Lease

is 1/5th or greater (i.e. 20% or greater), then the overriding royalty to which

Westside will be entitled in the Lease shall be two percent (2%) of 8/8ths. In

such case, Westside will also be entitled to a Carried Working Interest in the

particular Lease equal to an undivided two percent (2%) of 8/8ths of the

leasehold interest in and to the Lease, proportionately reduced to bear all

royalty burdens of record. Notwithstanding the foregoing, in the event EBS

desires to acquire a lease with lease burdens greater than 20% using Lease Bank

Funds, EBS and Westside shall endeavor to negotiate a separate arrangement

between the parties. If EBS and Westside are unable to negotiate a separate

arrangement, and, provided Westside has been offered the opportunity of

receiving, as Carried Working Interest, two times the excess of (i) the 3%

overriding royalty interest provided in this Agreement, over (ii) the 78% net

revenue threshold to the working interest owners, EBS may purchase the proposed

lease with its own funds, or other funds, and such lease will not be a Lease

covered by this Agreement. The overriding royalty interest to which Westside is

entitled in a Lease shall be assigned to Westside by EBS, using the form of

assignment attached hereto as Exhibit A, which assignment shall be delivered to

Westside within thirty days of the recording of the particular Lease in the

county records of the applicable county. The Carried Working Interest to which

Westside is entitled in a Lease shall be assigned to Westside by EBS, using the

form of assignment attached hereto as Exhibit B, which assignment shall be

delivered to Westside within thirty days of the recording of the particular

Lease in the county records of the applicable county.

 

 

 

<PAGE>

 

 

Article 4)

                             Leasehold Acquisition;

                                   Test Wells

 

4.1.      Until terminated pursuant to the terms herein, Westside shall have an

         option, on a Lease Tract by Lease Tract basis, to acquire an undivided

         share of the leasehold interest in and to each Lease Tract on the

         following terms:

 

4.1.1.    The   undivided   share shall be an amount   selected by   Westside;  

         provided,   however,   without the express consent of EBS, such undivided

         share shall not be greater than an undivided   twenty-five   percent

         (i.e., 25%)   of the   leasehold   interest   in and to the   particular  

         Lease   Tract.   The   purchase   price   for the undivided   share of the  

         Lease   Tract   which   Westside   shall   elect to   purchase   shall be a  

         sum of money determined as follows:   the undivided   share of the

          leasehold   interest being acquired by Westside,   times the Land Costs

         for the Leases   covering   the   particular   Lease   Tract.   By way of  

         example,   if   Westside acquires an undivided   25% of the   leasehold  

         interest in a Lease Tract,   and the Land Costs for the Lease Tract is

         $100,000, then Westside's purchase price would be 25% times $100,000,

         or $25,000.00.

 

4.1.2.    The leasehold interest in the Lease Tract acquired by Westside shall

         bear its proportionate part of the royalty reserved by the landowners,

         and shall bear its proportionate part of any overriding royalty

         interest or other burdens to which the Leases were subject when

         acquired by EBS. No overriding royalty interests shall be reserved by

         EBS from and out of the interest in the Leases acquired by Westside.

 

4.1.3.    EBS shall acquire the Leases upon its belief,   based upon landman  

         reports,   and other title   information, that the Leases shall  

         collectively   cover all of the mineral   estate in and to the leasehold

         premises of the Leases,   and that a reasonably   prudent   operator would

         conduct   drilling   operations on the Leases. Notwithstanding   such  

         information   and   belief,   EBS makes no   representations   or   warranty,

         express or implied,   of title to the Leases.   Prior to the commencement

         of drilling   operations for the Test Well on a Lease Tract,   Operator  

         shall   acquire an opinion of title from and attorney   licensed to

         practice   law, which   opinion of title shall cover lands which comprise

         at the   minimum   the   proration   unit for the particular   well. A copy

         of such title   opinion   shall be delivered   to Westside at its request.

         In the event of any   losses   of   title,   such   losses   shall be joint  

         losses,   in the   manner   set   forth in the Operating Agreement.

 

 

 

<PAGE>

 

 

4.2.               For each Lease Tract in which Westside agrees to acquire an

                  undivided leasehold interest, Westside shall participate in

                  the drilling operations of the Test Well drilled on such Lease

                  Tract by paying, as its share of the Drilling Costs for such

                  well, the following, all subject to the proper submission of

                  an AEF pursuant to the Operating Agreement:

 

4.2.1.             Westside's share of the Drilling Costs for each Test Well

                  shall be determined by multiplying the Drilling Costs for the

                  particular well, times the undivided leasehold interest

                  acquired by Westside in the particular Lease (or Leases, as

                  the case may be) times 1.3333.

 

4.2.2.             Westside's share of the Completion Costs shall be determined

                  by multiplying the Completion Costs times the undivided

                  leasehold interest acquired by Westside in the particular

                  Lease Tract, all subject to the proper submission of an AFE

                  pursuant to the Operating Agreement.

 

4.3.               From time to time EBS shall notify Westside in writing of the

                  particular Lease Tract as to which Westside may exercise its

                  option to acquire an undivided share of the leasehold

                  interest, together with copies of the Leases covering the

                  particular Lease Tract, information of the net revenue

                  threshold to the working interest as to such Leases, and the

                  Land Costs for the Leases. Further, EBS shall also notify

                  Westside of the Test Well to be drilled on such Lease Tract.

                  Such proposal shall contain a plat showing the well location,

                  proposed depth, the estimated commencement date, information

                  regarding the market for all products to be sold from the

                  related area and such other information as EBS may deem

                  pertinent or appropriate to advise Westside of such proposed

                  Test Well. EBS shall also provide to Westside an AFE, which

                  shall set forth the then estimated Drilling Costs and the

                  then-estimated Completion Costs for the proposed well. EBS

                  shall also inform Westside of the date upon which Westside

                  shall pay and deliver to EBS, in the event that Westside

                  elects to purchase an undivided interest in the Lease Tract

                  and participate in the Test Well, Westside's purchase price

                  for its interest in the Lease Tract, and its share of the

                  estimated Drilling Costs of the Test Well. Such date of

                  payment shall not be earlier than (i) fifteen days after such

                  notice from EBS, or (ii) the thirtieth day prior to the

                  estimated date for spudding the Test Well. Such date so

                  designated by EBS shall be referred to herein as the "Payment

                  Date." Each such notice from EBS shall be referred to herein

                  as an "Offer."

 

4.3.1.             After delivery of an Offer to Westside, EBS shall promptly

                   respond to any information requested by Westside relating to

                  the particular Lease Tract and proposed Test Well. Westside

                  shall have the opportunity of reviewing the files and records

                  of EBS relating to the Lease Tract.

 

4.3.2.             To elect to acquire an interest in the particular Lease Tract,

                  and to participate in the proposed Test Well for the

                  particular Lease Tract, covered by an Offer, then:

 

4.3.2.1.           On or before the earlier of (i) thirty (30) days from its

                  receipt of the Offer, or (ii) the Payment Date, Westside shall

                  notify EBS in writing of its election to purchase an interest

                  in the particular Lease Tract, which shall be deemed to

                  include its commitment to participate, to the extend of the

                  undivided leasehold interest Westside elects to purchase, in

                  the proposed Test Well for such Lease Tract, and

 

 

 

<PAGE>

 

 

4.3.2.2.           On or before the Payment Date, Westside shall deliver to EBS

                  (i) the purchase price for the interest in the Lease Tract

                  being acquired by Westside, and (ii) Westside's share of the

                  estimated Drilling Costs for the proposed Test Well for such

                  Lease Tract. Drilling Costs shall be requested as provided

                  heretofore.

 

         Westside's failure, for any reason, to timely deliver such notice and

         funds shall be deemed an election by Westside not to purchase any

         interest in the Lease Tract covered by the particular Offer, and not to

         participate in the Test Well for such Lease Tract.

 

4.4. EBS shall have sole discretion on when to present an Offer