FARMOUT AND AMI AGREEMENT

GEARY PROSPECT
NATRONA AND CONVERSE COUNTIES, WYOMING

This Farmout and AMI Agreement (“Agreement”) dated and effective as of
_____________, 2008 (“Effective Date”), is made by and between TYLER ROCKIES
EXPLORATION, LTD. (“FARMOR”), a Texas limited partnership, whose address is P.O.
Box 119, Tyler, Texas 75710 and AMERIWEST ENERGY CORP. (“FARMEE”), a Nevada
corporation authorized to do business within the State of Wyoming, whose address
is 123 West 1st, Suite 215, Casper, Wyoming 82601. FARMOR hereby agrees to
assign to FARMEE all of FARMOR’S leasehold interest in and to certain leases,
subject to the rights and reservations set out herein.

I. FARMOUT AREA

A. Lands and Leases. The “Farmout Area” is comprised of all of FARMOR’S present
leasehold interest in and to the lands and oil and gas leases described on
Exhibit “A-1” (“Leases”) and the area outlined and labeled as the “AMI” on the
plat attached hereto as Exhibit “A-2”, insofar as said Leases cover oil or gas
and all associated liquid or liquefiable hydrocarbons. To the extent any oil and
gas leases within the AMI are obtained by either party under the provisions of
Article X during the AMI Term, as defined in Article X, then subject to the
terms of this Agreement, those oil and gas leases shall also be considered part
of the Farmout Area and included as Leases.

B. Renewals or Extensions of Leases. As long as this Agreement remains in force
and effect as to all or any part of the Farmout Area, any new Lease or a renewal
or extension of a Lease, whether acquired by FARMEE or by FARMOR, shall be
subject hereto, the same as if such new, renewal or extension were described in
Exhibit “A-1” and the lands covered thereby fell within the Farmout Area. Should
any Lease covered by the Agreement contain greater burdens including, but not
limited to, royalties, overriding royalties and production payments after
obtaining a new Lease or being renewed or extended than it contained prior to
said new, renewal or extension, then that portion of the burden on the new,
renewed or extended Lease which is greater than the burden that existed prior to
said new, renewal or extension (exclusive of the interests reserved by the
parties hereunder) shall be borne entirely by the party creating it.

II. FARMOUT WELLS

A. Initial Well. On or before May 1, 2009 (“Spudding Deadline”), FARMEE shall
commence or cause to be commenced the actual drilling (“spudding”) of a well,
hereinafter called the “Initial Well,” at a location of FARMEE’S choice within
the Farmout Area. The location selected by FARMEE will be a legal location or an
exception location approved by the governmental agency authorized to issue
drilling permits. Subject to the provisions of this Agreement, in the event that
FARMEE fails to timely commence the Initial Well and/or fails to drill said well
to the Contract Depth, as defined below, then this Agreement shall automatically
terminate, and FARMEE shall have no rights to earn any leasehold interest in and
to the Farmout Area from FARMOR.
 
B. Contract Depth. The Initial Well shall be drilled in a good and workmanlike
manner and with due diligence to at least the Dakota formation hereinafter
called “Contract Depth”. Each Additional Well shall be drilled to the depth and
formation selected by FARMEE in its sole discretion, but at such time as FARMEE
has drilled a total of three (3) wells to at least the Contract Depth and
regardless of whether said wells have been completed, then the assignment of
fifty percent (50%) of FARMOR’S interest the Leases within the Farmout Area
shall be conveyed to FARMEE as stated in Article IV.E.

C. Additional Wells. Each well spudded after the Initial Well shall be referred
to as an “Additional Well”. FARMEE may elect to drill Additional Wells at
locations of FARMEE’S choice, but until the assignment of fifty percent (50%) of
FARMOR’s interest in the Leases within the Farmout Area as stated in Article
IV.E., each Additional Well must be spudded not later than one-hundred twenty
(120) days after the rig release of the previous well. There shall be no
requirement to attempt a completion of the Initial Well or any Additional Well.
Failure of FARMEE to commence any wells hereunder as required shall not result
in any penalty to FARMEE other than the termination of FARMEE’S right to earn
additional interests in the Leases which have not been previously earned
pursuant to this Agreement.

D. Time Between Spudding and Completion/Abandonment. After timely spudding any
well hereunder, FARMEE will proceed to drill said well in a workmanlike manner
without cessation of operations until FARMEE completes a well capable of
producing oil and/or gas in paying quantities or until FARMEE plugs and abandon
the well within a reasonable time. For the purpose of calculating the number of
days between wells, completion for any well hereunder shall be the date the
drilling rig is released.

 
 

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E. Substitute Well. If, prior to reaching Contract Depth in any well which is
being drilled pursuant to this Agreement, FARMEE encounters a formation or other
physical condition in the well which renders further drilling impracticable,
FARMEE may plug and abandon such well and spud another well, referred to herein
as a Substitute Well. The Substitute Well shall be spudded at a location of
FARMEE’S choice within 60 days after the date of abandonment (being the date the
drilling rig is released) of the well for which it is a substitute. The
Substitute Well shall be drilled subject to all provisions of this Agreement
applicable to the abandoned well for which it is a substitute and reference to
the Initial Well or Additional Wells shall include its Substitute Well, if any.

F. Cost and Liabilities. Any well drilling operations conducted pursuant to this
Agreement, including without limitation, drilling and completion or plugging and
abandonment operations, by FARMEE shall be free of any costs or liability to
FARMOR.

G. Assignment of Drilling Location. Upon written request from FARMEE and if
required by any state or federal governmental agency having jurisdiction over
the granting of drilling permits, FARMOR agrees to assign to FARMEE those rights
listed in Article IV, below, in the Leases covering a forty (40) acre drilling
location. Such assignment shall be done so as to not cause FARMEE material
delays in obtaining the drilling permit and of spudding a well hereunder. In the
event FARMEE fails to earn an assignment pursuant to this Agreement for such
well that FARMOR executed a drilling location assignment, then FARMEE agrees to
reassign to FARMOR all rights previously assigned to it in that drilling
location assignment, without creating any encumbrances or additional burdens
thereon.

H. Recognition of Force Majeure. The parties acknowledge that circumstances
beyond the control of either party may limit or delay strict compliance with the
deadlines established under this Article, and agree that the provisions of
Article XII., Force Majeure, may operate to supersede said deadlines.

III. WELL DATA, ACCESS TO RIG FLOOR, AND TITLE

A. Tests. During the drilling of any well pursuant to this Agreement, FARMEE may
test all oil and/or gas shows encountered in the formation FARMEE may earn its
interest in accordance with appropriate operating practices.

B. Access to Rig Floor. FARMOR will have access, at its sole cost, risk and
expense, to the rig floor in connection with wells drilled by FARMEE so long as
FARMEE is not hindered in the performance of its operations and duties; provided
that provisions of this Agreement pertaining to FARMEE’s compliance,
indemnification, and insurance requirements shall not apply with regard to
FARMOR’s access to the rig floor.

C. Ownership of Data. All data, including without limitation test results, logs
and cores, including those things contained in Exhibit “B” that are generated in
the course of drilling, testing and completing wells hereunder by FARMEE will be
furnished to FARMOR. All data furnished to FARMOR shall be treated as
confidential, and FARMOR shall not disclose or transmit such data to third
parties.

D. Title. At the execution of this Agreement, FARMEE has remitted to FARMOR the
sum of Fifty Thousand Dollars ($50,000.00), which reimburses FARMOR for the
costs of conducting land brokerage services and title examination within the
Farmout Area, the product of which is already in the possession of FARMEE to use
in its performance of this Agreement. On FARMEE’S request, FARMOR will provide
FARMEE with copies any additional title opinions and other title materials in
its possession, custody or control to which FARMEE does not already possess.
FARMOR will assume no responsibility for the accuracy of any such opinions and
materials and FARMEE may rely on any abstracts and title materials furnished at
FARMEE’S own risk. On FARMOR’S request, FARMEE will provide FARMOR with copies
of all additional title opinions and curative materials pertaining to the
Farmout Area that FARMEE obtains during this Agreement.

 
 

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IV. ASSIGNMENT OF INTERESTS

A. Prerequisites to Assignment. Unless otherwise provided in Article II.G.,
above, or Article IV.E., FARMEE shall be entitled to an assignment on the form
substantially identical to that which is contained in Exhibit “C”, attached
hereto, which will be prepared by FARMOR and delivered to FARMEE within thirty
(30) days after receipt of a request for same, conveying FARMOR’S leasehold
interest in the Farmout Area as set forth in this Article IV upon:

 
(1)
FARMEE drilling to at least the Contract Depth and completing any well provided
for herein as a well capable of producing oil and/or gas in paying quantities,
and

(2) Creation of a production unit around any well provided for herein in
accordance with Article IV.Q.

B. Effective Date. The effective date of any assignment made hereunder shall be
the date of spudding the well.

C. No Warranty. Any assignment made hereunder shall be without warranty of
title, express or implied, except by, through and under FARMOR, but not
otherwise.

D. Taxes. FARMEE shall pay all production, severance, and ad valorem taxes
assessed against the Leases conveyed to FARMEE under this Agreement on and after
the effective date of the assignment. Ad valorem taxes shall be prorated between
the parties for the year in which the conveyance is effective and in the year of
any re-assignment or reversion. Any increase in ad valorem taxes assessed
against the Leases conveyed to FARMEE as a result of wells drilled hereunder
shall be for FARMEE’S account.
 
E. Oil and Gas Rights Assigned. Any assignment made hereunder shall convey all
of the right, title and interest of FARMOR in the oil, gas, and associated
liquid or liquefiable hydrocarbon rights, only, contained in those Leases
comprising the Farmout Area, insofar as said Leases are contained within the
surface boundaries of a production unit formed around the well (giving credit
for any drilling location assignment made pursuant to Article II.G.) entitling
FARMEE to said assignment, however, in the event FARMEE drills its third well to
at least the Contract Depth, then at that time, FARMEE shall have earned, and
FARMOR shall also immediately assign to FARMEE, an undivided fifty percent (50%)
of FARMOR’S interest in all of the remaining Leases within the Farmout Area that
have not previously been earned by FARMEE, without depth limitation. The
assignments for the three wells shall be made by FARMOR on a well-by-well basis
without depth limitation.

F. Reservation of Overriding Royalty. In any assignment made hereunder for units
of each earning well, FARMOR will reserve an overriding royalty interest on that
portion of the oil and gas, including condensate, produced and saved from or
allocated to FARMOR’S interest in the Leases that is assigned to FARMEE, equal
to the difference between 25% of 8/8ths and all payments out of production for
which FARMOR is responsible as of the date of this Agreement (including but not
limited to royalties, overriding royalties, and production payments). It is the
intent hereof for FARMOR to deliver to FARMEE a 75% of 8/8ths net revenue
interest in each Lease proportionately reduced to FARMOR’S interest in the
Leases. Said overriding royalty shall be free and clear of all costs of
exploring, drilling, producing, separating, compressing, gathering,
transportation, treating and marketing, but shall bear its part of gross
production taxes and ad valorem taxes. This overriding royalty shall be subject
to the possibility of converting to a working interest as prescribed by Article
IV.J., below. Notwithstanding anything contained herein to the contrary, FARMOR
shall not receive or retain an overriding royalty interest by this provision for
those Leases taken by FARMEE pursuant to Article XII.A., below.

G.  Proportionate Reduction. If FARMOR owns less than the entire undivided
leasehold estate in the Leases or if FARMOR’S Leases cover less than the entire
fee simple estate, whether or not such lease purports to cover the whole or
fractional interest, then the interests reserved to FARMOR therein shall be
proportionately reduced to accord with the interest assigned to FARMEE.

H. New Leases and Lease Extensions and Renewals. FARMOR’S reserved overriding
royalty and all other rights and interests allowed under this Agreement to be
retained in any assignment made pursuant hereto, shall apply to any renewal,
extension or new lease (if, in the case of a new lease, it is acquired to
replace an expired Lease that had been previously included in this Agreement) of
any Lease which is subject to this Agreement, whether taken or renewed in its
entirety or in part, and which is acquired by FARMEE or on its behalf prior to
or within one (1) year after the expiration, termination, release, or
abandonment of said Lease, except to the extent that any expiration,
termination, release or abandonment is caused by the acts or omissions of
FARMOR. Should such a lease contain a greater burden (including but not limited
to royalties, overriding royalties and production payments) after being taken a
new, renewed or extended than it contained prior to said new, renewal or
extension, that portion of the burden on the new, renewed or extended lease
which is greater than the burden that existed on the date of this Agreement,
exclusive of the interests reserved by FARMOR hereunder, shall be borne entirely
by the party creating it.

 
 

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I. Operating Agreement. Upon FARMEE earning an assignment from FARMOR, then the
rights and obligations of the Parties for the earning well and the area so
assigned for that earning well shall be governed by an Operating Agreement, the
form of which is attached hereto as Exhibit “D”, except to the extent this
Agreement modifies or amends the terms of such Operating Agreement. Separate,
but identical, Operating Agreements shall govern for each well and its area
assigned pursuant to this Agreement. FARMEE shall be designated the “Operator”
for each Operating Agreement created by this Agreement.

J. Conversion of Overriding Royalty. In any assignment made hereunder, FARMOR
will reserve the option, to be exercised at Payout on a well-by-well basis, as
hereinafter defined, to convert its reserved overriding royalty to a 25% working
interest at an 84.50% net revenue factor, being a 21.125 net revenue interest,
in the leasehold estate assigned to FARMEE by FARMOR, subject to proportionate
reduction, together with a like interest in the well which reached Payout,
casing, surface equipment, and all personal property used in connection
therewith that is attributable to said leasehold estate, free of any payments
out of production created since the date of this Agreement (including but not
limited to overriding royalties and production payments).

K. Notification of Payout and Election. FARMEE shall notify FARMOR, in writing,
when Payout is reached as to any well provided for herein and shall furnish
FARMOR with all necessary reports evidencing Payout. FARMOR shall have thirty
(30) days after receipt of such notification and reports to provide its written
election to convert its overriding royalty. If FARMOR fails to timely notify
FARMEE of its election, FARMOR shall be deemed to have elected to not convert
its overriding royalty to a twenty-five percent (25%) working interest. A
conversion election shall be effective as of 7:00 A.M. on the first day of the
month following the month Payout occurs. Within forty-five (45) days after
notification of FARMOR’S election to convert its overriding royalty to a working
interest, FARMEE shall deliver to FARMOR an assignment and bill of sale, to
evidence the conversion to a leasehold interest. If FARMOR elects to convert its
overriding royalty interest to a leasehold interest, such interest will be
subject to an Operating Agreement in the form attached hereto as Exhibit “D”,
which will be conformed to identify the Contract Area, being the proration unit
for said well.

L. Payout. Payout shall be on a well-by-well basis and shall occur when the Net
Proceeds, as hereinafter defined, from the sale of all production from the well
which entitled FARMEE to the assigned lease premises equals the total tangible
and intangible costs of drilling, equipping (an oil well through the oil storage
tanks and a gas well through the point of sale), testing, completing, and
operating said well, as such costs are attributable to the interest assigned.

M. Net Proceeds. “Net Proceeds” is defined as the gross proceeds received from
the sale of production attributable to said Well or, if not sold but purchased
or used by FARMEE off the premises, the market value in the field of such
production, less severance, production, or other taxes payable on said
production, shut-in royalties, and payments out of production (including but not
limited to royalties, overriding royalties, and production payments) in effect
on the effective date of this Agreement, and the overriding royalties reserved
herein. Market value as used in this paragraph shall mean the price which a
producer would reasonably expect to receive from a third party under a new sales
contract entered into during the accounting period in which oil or gas was
produced and purchased or used by FARMEE.

N. Payout Period. The period during which the Net Proceeds are to be applied
against the costs is called the “Payout Period”. Charges and expenditures during
the Payout Period shall be made in accordance with the provisions in the
Accounting Procedure attached hereto as part of Exhibit “D”. Nothing herein, or
in said Accounting Procedure, shall be construed as constituting joint
operations during said period. Well costs as referenced in Article IV.K., above,
will not include FARMEE’S COPAS overhead charges or salaries of FARMEE’S
employees. Within 90 days after completion of any well provided for herein as a
well capable of producing oil and/or gas in paying quantities, FARMEE shall
furnish the cumulative costs of drilling, completing, and equipping said well as
a producer. Quarterly thereafter during the Payout Period, FARMEE shall furnish
reports showing operating expenses, production volumes, and proceeds from the
sale of FARMEE’S share of production from the well for the preceding month.

O. Audit. FARMOR shall have the right to audit FARMEE’S records pertaining to
all costs of any well during drilling, Payout Period, and subsequent to Payout
Period, in accordance with the audit provisions of the Accounting Procedure
attached as part of Exhibit “D”.

 
 

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P. Second Well in Unit Prior to Payout of First Well. If FARMEE drills another
well within a unit in which FARMEE by a prior well drilled and earned a portion
of the Farmout Area, but which first well has not yet paid out, then FARMOR will
retain in such other well an overriding royalty and the separate right to
convert to a working interest at Payout in that other well, separate and a part
from the well earning the Leases within that unit.

Q. Proration Units. Subject to requirements of the state or federal governmental
agencies, the shape of any production unit for any successfully completed well
shall be mutually determined by FARMOR and FARMEE, but shall not exceed in area
of 40 acres. FARMEE shall be solely responsible for obtaining any agreements
that may be required from mineral and/or royalty owners for the formation of any
units including such Leases, and that, to the extent that FARMEE fails to obtain
such consents, FARMEE shall bear any additional burdens on production, and any
other obligations or liabilities, resulting from such failure.
 
R. Cooperation with Pooling and Unitization for Wells.  FARMEE has the ongoing
right to pool or unitize any part of the land within the Farmout Area in order
to establish production units for wells drilled hereunder with other lands or
interests when in FARMEE’S judgment it is necessary or advisable in order to
promote conservation, to properly develop or operate the land and interests for
such wells. FARMOR agrees to cooperate in any such pooling and unitization
within the Farmout Area, including the execution and delivery of documents
necessary to effect said efforts.
 
V. WELL TAKEOVER AND ABANDONMENT
There is no Article V. Well Takeover and Abandonment provision.
VI. LEASE OBLIGATIONS

A. Surface. FARMEE shall comply with all Lease provisions, express and implied
by law pertaining to surface use, shall conduct its operations as would a
reasonably prudent operator, and shall restore the surface to its original
condition insofar as practicable, or as required by the applicable Lease
provisions.

B. Responsibility for Payments.

(1) Delay Rentals Prior to Assignment. As long as this Agreement is in force,
FARMOR shall use its best efforts to pay any rental payments necessary to
perpetuate the Leases subject to this Agreement and any payments provided for in
any lease subject hereto to renew or extend such lease. FARMEE agrees to
promptly reimburse FARMOR for 100% of such rentals. FARMEE’S obligation to
reimburse FARMOR for such payments shall continue so long as the lease for which
payment is made is subject to the Agreement or assignment unless at least 45
days prior to the date such payment is due, FARMEE notifies FARMOR that FARMEE
wishes to terminate the Agreement as to such lease or, if a lease has been
assigned to FARMEE, that FARMEE wishes to reassign the lease to FARMOR.

(2) Shut-in Payments Prior to Assignment. In the event it appears that FARMEE
will complete a gas well and shut in that well which requires the payment of
shut-in payments prior to an assignment being due to FARMOR, then FARMEE shall
give FARMOR immediate notice that timely shut-in payments must be made. FARMOR
shall then use its best efforts to pay any shut-in payments due prior to
assignment that may be necessary to perpetuate the Leases.

(3) Confirmation of Payment. Within fifteen (15) days from the request of
FARMEE, FARMOR shall provide such documentation as is necessary to confirm
timely payments by FARMOR.

C. Royalties and Other Lease Burdens. FARMEE shall be responsible for making all
payments out of production attributable to the assigned lease premises,
including but not limited to royalties, overriding royalties, and production
payments, beginning with the date of first production from any well drilled on
the assigned lease premises or land pooled therewith and at all times
thereafter. Such payments shall be made in accordance with the Leases or other
instruments creating such payments and obligations, including this Agreement.

VII. COMPLIANCE AND INDEMNITY

A. Disposal of Wastes and Cleanup. FARMEE shall dispose of or discharge any
waste from its operations (including but not limited to produced water, drilling
fluids and other associated wastes) in accordance with applicable local, state
and federal laws, rules, and regulations. To the extent required by law or by
prudent oil field operation, FARMEE shall keep records of the types, amounts and
location of wastes that are disposed of onsite and those wastes relating to its
operations hereunder that are disposed of offsite. When and if any Lease or an
interest therein which is earned and assigned in accordance with this Agreement
is terminated, FARMEE shall take whatever remedial action on the property is
necessary to meet any local, state, or federal requirements directed at
protecting human health and the environment at that time.
 
 
 

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B. Compliance with Laws, Release, and Indemnity
 
(1) FARMEE SHALL COMPLY WITH ALL VALID LOCAL, STATE AND FEDERAL LAWS, RULES AND
REGULATIONS, INCLUDING BUT NOT LIMITED TO THOSE DIRECTED AT PROTECTING HUMAN
HEALTH AND THE ENVIRONMENT, SUCH AS (BY WAY OF EXAMPLE AND NOT LIMITATION AND
INCLUDING ALL AMENDMENTS) THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION
AND LIABILITY ACT OF 1980, THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976,
THE CLEAN WATER ACT, THE SAFE DRINKING WATER ACT, THE HAZARDOUS MATERIALS
TRANSPORTATION ACT, THE TOXIC SUBSTANCES CONTROL ACT, AND THE CLEAN AIR ACT.
 
(2) FARMEE ACKNOWLEDGES THAT THE LAND SUBJECT TO THIS AGREEMENT MAY HAVE BEEN
USED FOR OIL AND GAS OPERATIONS IN THE PAST. FARMEE AGREES THAT ANY CONVEYANCE
OF INTERESTS HEREUNDER SHALL BE ON AN "AS IS" BASIS.
 
(3) FARMEE SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD FARMOR HARMLESS FROM ANY
AND ALL DAMAGES, EXPENSES (INCLUDING COURT COSTS AND ATTORNEY'S FEES), CIVIL
FINES, PENALTIES AND OTHER COSTS AND LIABILITIES (HEREINAFTER COLLECTIVELY
REFERRED TO AS "CLAIMS") ARISING, ASSERTED, COMMENCED OR MADE ON OR AFTER THE
EFFECTIVE DATE OF THIS AGREEMENT THAT RESULT FROM FARMEE’S ACTS AND OMISSIONS
(OR THOSE OF OTHER PARTIES ON YOUR BEHALF) IN CARRYING OUT OPERATIONS UNDER THIS
AGREEMENT AND/OR ON LEASES CONVEYED UNDER THIS AGREEMENT. THE ABOVE CLAIMS SHALL
INCLUDE, BUT NOT BE LIMITED TO, THOSE ASSERTED OR BROUGHT BY ANY PARTY
(INCLUDING, WITHOUT LIMITATION, FARMEE’S OR FARMOR’S, CONTRACTORS, ANY
LANDOWNERS OR INDIVIDUALS, LOCAL, STATE OR FEDERAL GOVERNMENTAL BODY OR AGENCY)
FOR DEATH, PERSONAL INJURY, DAMAGE TO PROPERTY OR NATURAL RESOURCES, AND/OR
FAILURE TO COMPLY WITH THE EXPRESS OR IMPLIED TERMS OF A MINERAL LEASE. SUCH
CLAIMS SHALL ALSO INCLUDE ANY THAT ARISE OUT OF THE PLUGGING AND ABANDONING OR
FAILURE TO PLUG AND ABANDON ANY WELLS ON OR IN LANDS COVERED HEREBY (WHETHER
PLUGGED AND ABANDONED PRIOR TO OR AFTER THE EFFECTIVE DATE OF THIS AGREEMENT) OR
ARISING OUT OF THE REMOVAL OF OR FAILURE TO REMOVE ANY PIPELINE OR OTHER
FACILITIES, OR ON ACCOUNT OF THE PRESENCE, DISPOSAL, AND/OR RELEASE OF ANY
MATERIAL OF ANY KIND IN, ON OR UNDER THE LANDS COVERED HEREBY (WHETHER OR NOT
SUCH MATERIAL WAS PRESENT PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT). 
 
THE TERMS OF THIS PROVISION (3) SHALL APPLY NOTWITHSTANDING THE STRICT
LIABILITY, JOINT NEGLIGENCE OR FAULT OF FARMOR OR ANY PARTY OR PARTIES. THE
PROVISIONS SET FORTH IN THIS ARTICLE VII. SHALL SURVIVE TERMINATION OF THIS
AGREEMENT.
 
VIII. FAILURE TO PERFORM

A. Operations. In addition to the rights granted to FARMOR in other provisions
of this Agreement, in the event of FARMEE’S failure to commence or complete the
drilling of the Initial Well or any Additional Well in the time and manner
herein provided, this Agreement shall terminate as to all of the Farmout Area
not previously earned by FARMEE; however, FARMEE shall continue to be
responsible for all obligations accrued by FARMEE prior to such default.

B. Notice of Termination. FARMOR will give FARMEE written notice of termination,
however in the event FARMEE fails to commence the drilling of the Initial Well
or any Additional Well, termination will occur automatically and no such notice
will be required to effectuate the termination of FARMEE’S rights under this
Agreement.

 
 

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IX. INSURANCE AND FINANCIAL RESPONSIBILITY

Prior to the commencement of any drilling operations on the Farmout Area, and
for as long as this Agreement remains in effect, FARMEE shall, at its own
expense, provide and maintain in force the following insurance covering its
interest in the Farmout Area:

(1) Worker’s Compensation Insurance and Employer’s Liability Insurance as may be
required by the laws of the state deemed by law to govern operations hereunder;
and

(2) Comprehensive General Liability Insurance covering both bodily injury
liability and property liability with a Combined Single Limit of $500,000 for
each occurrence; and

(3) Comprehensive Automobile Public Liability and Property Damage Insurance with
a combined single limit of $500,000 for each occurrence; and

(4) Catastrophe Comprehensive Liability Insurance with minimum limits of not
less than $1,000,000.

X. AMI

A. AMI. By this Agreement, the parties hereby create an area of mutual interest
(“AMI”) being the same area and depths as the Farmout Area, whereby the Parties
shall jointly develop the Leases pursuant to this Agreement. The provisions of
Article II, above, control the parties’ actions related to FARMEE drilling and
earning interests held by FARMOR as of the Effective Date within the Farmout
Area and the AMI. The terms of this Article X shall apply during the AMI Term to
those matters between the parties relating to leased areas of the Farmout Area
other than those earned by FARMEE as drilling occurs pursuant to Article II.

(i) FARMEE is designated as ”Operator” of the AMI, and it shall be responsible
for seeing that leasing and exploration activities in the AMI are conducted. In
discharging its duties as Operator of the AMI, FARMEE shall have the same
liability to FARMOR as it does being the Operator of each Operating Agreement.

(ii) FARMEE shall have the sole and exclusive right as between the parties to
acquire directly or indirectly any lease from third-parties within the AMI;
provided however, that in the event FARMOR does acquire a lease from a
third-party within the AMI during the AMI Term, then FARMEE shall have the right
to acquire and be assigned its proportionate share of such lease from FARMOR at
the same cost and/or terms as FARMOR acquired the Lease under the same terms,
deadlines and costs as described in Paragraph X.A(iii) below but by substituting
FARMOR for FARMEE.

(iii) During the AMI Term, if FARMEE acquires a Lease within the AMI that is not
either (1) within an established unit for an earning well under Article II,
above, or (2) outside of a unit established for a well to which the parties have
previously made an election to drill, then FARMEE shall notify FARMOR within
thirty (30) days of such acquisition.

(a) For all leases acquired by FARMEE from third-parties within the AMI during
the AMI Term, FARMEE shall be responsible for paying all of the lease bonuses up
to $500 for each net mineral acre so acquired. FARMOR shall be responsible for
paying its 50% working interest share for all lease bonuses that exceed $500 per
net mineral acre. FARMOR and FARMEE shall share equally in all other
out-of-pocket expenses incurred in leasing under this AMI provision. In such
notice, FARMEE shall include all pertinent information about the interest so
acquired, including written documentation as may be reasonably requested by
FARMOR. For a period of fifteen (15) days from receipt of the notice, FARMOR
shall the right, but not obligation, to advise in writing FARMEE that it wishes
to acquire an undivided fifty percent (50%) interest in such lease, and at that
same time, remit its share of the acquisition costs for such Lease.

(b) In the event of the failure by FARMEE to receive FARMOR’S written notice and
reimbursement of acquisition costs of such Lease within fifteen (15) days from
receipt of such notice, it shall be deemed that FARMOR has declined to receive
its proportionate share of such Lease. If FARMOR declines or is deemed to have
declined to acquire its proportionate share of a Lease under this provision,
then that Lease shall be excluded from this Agreement for all purposes, and
FARMEE shall be free to participate in any future wells with such rights
separate and a part from this Agreement.

 
 

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(c) Within thirty (30) days after FARMEE’S receipt of FARMOR’S timely written
notice and share of acquisition costs, then FARMEE shall execute and deliver to
FARMOR the appropriate assignment, without covenants of warranty, except by,
through and under FARMEE.

(d) If FARMEE acquires any Lease within a unit established for a well to be
drilled or has been drilled pursuant to Article II, above, then the Lease shall
be considered as a Lease which may be earned by FARMEE as to FARMOR’S purchased
fifty percent (50%) interest in such Lease.

C. AMI Term. The term of this AMI provision shall commence upon the Effective
Date of this Agreement, and it shall continue for so long as FARMEE has the
right to earn Leases under Article II, above. Upon either the termination of
FARMEE’S right to earn Leases or performance by FARMEE resulting in the
conveyance of all remaining Leases as provided in Article IV.E., the AMI
provision contained in each Operating Agreement covering any portion of the
Farmout Area then existing shall become effective. Each such Operating Agreement
will be considered a separate agreement covering the Contract Area for each such
agreement. If there are any Leases subject to this Agreement lying outside
Contract Areas on the date of termination, a separate Operating Agreement will
be deemed to be in effect to govern such Leases on a tract-by-tract basis within
the Farmout Area. The termination of this AMI provision shall not affect any
unsatisfied obligations any Party may have hereunder to another Party that arose
prior to the termination date.

D. Wold Acreage. Notwithstanding anything to the contrary herein, with regard to
the the tract of land described as T.34N., R.77W. of the 6th P.M.: Sec. 28:
N/2SE/4; Sec. 27: SW/4, W/2SE/4 (referred to as the “Wold Acreage”), FARMOR
shall not be entitled to receive any interest that FARMEE may receive pursuant
to a third party farmout agreement within the Wold Acreage for the first two (2)
earning wells and their respective units pursuant to that agreement. However,
FARMOR shall be entitled to receive from FARMEE an assignment of one-half (1/2)
of the leasehold interest FARMEE may be assigned from the third party farmor for
those Wold Acreage lands and leases which are outside of the units of the first
two (2) wells drilled under that third party farmout.

XI. ASSIGNMENT OF AGREEMENT

This Agreement is binding upon the parties hereto, their successors, and
assigns; and assignment of this Agreement shall not be made by FARMEE without
prior written notice to FARMOR, subject to the requirement that any proposed
third party assignee shall be financially responsible in the sole discretion of
FARMOR. Any such assignment shall provide that the assignee will assume the
proper and timely performance of all of FARMEE’S obligations hereunder. Any
assignment that is not in compliance with the terms of this paragraph shall be
null and void. Consent by FARMOR to any such assignment shall not relieve FARMEE
nor any assignee from the rights and obligations as to any future assignment or
from the timely and proper performance of any of FARMEE’S obligations hereunder,
except with the written consent of FARMOR. If FARMEE assigns this Agreement, it
shall assign all of its rights in this Agreement.

XII. FORCE MAJEURE

A. Except for the duty to make payments hereunder when due, and the
indemnification provisions under this Agreement, neither FARMOR nor FARMEE shall
be responsible to the other for any delay, damage or failure caused by or
occasioned by a Force Majeure Event. As used in this Agreement, “Force Majeure
Event” includes: acts of God, action of the elements, warlike action,
insurrection, revolution or civil strife, piracy, civil war or hostile action,
strikes, differences with workers, acts of public enemies, federal or state
laws, rules and regulations of any governmental authorities having jurisdiction
in the premises or of any other group, organization or informal association
(whether or not formally recognized as a government); inability to procure
material, equipment or necessary labor in the open market, acute and unusual
labor or material or equipment shortages, or any other causes (except financial)
beyond the control of either party. Delays due to the above causes, or any of
them, shall not be deemed to be a breach of or failure to perform under this
contract. Neither FARMOR nor FARMEE shall be required against its will to adjust
any labor or similar disputes except in accordance with applicable law.

 
 

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B. Neither party that is unable, in whole or part, to carry out its obligations
under this Agreement due to Force Majeure Event shall promptly give written
notice to that effect to the other party stating in reasonable detail the
circumstances underlying such Force Majeure Event. Any party calling Force
Majeure Event shall diligently use reasonable efforts to remove the cause of
such Force Majeure Event, and shall resume performance of any suspended
obligations as soon as reasonably possible after termination of such Force
Majeure Event.

XIII. GENERAL PROVISIONS

A. Relationship of Parties. It is not the purpose or intention of this Agreement
to create, nor shall the same be construed as creating any mining partnership,
or partnership relation, nor shall the operations of the parties hereunder be
construed to be considered as a joint venture. The liability of the parties
hereto shall be several and not joint or collective.

B. Resolution of Disputes: The parties hereby stipulate and agree that all
claims, controversies, and disputes (LESS AND EXCEPT THOSE CLAIMS WHICH ARE
CRIMINAL IN NATURE) between FARMOR and FARMEE which are incident to, arise out
of, or in any way connected with this Agreement and/or the performance or breach
of this Agreement shall be resolved promptly, practically, fairly and as
economically as reasonably practical. Therefore, FARMOR and FARMEE hereby
stipulate and agree that any and all claims, controversies and disputes, as well
as all disagreements regarding any interpretation or application of this
Agreement between said parties, shall be resolved pursuant to the procedures
contained this provision of the Agreement.

(i) Either party may send a notice of dispute to the other party, which notice
shall clearly state the issue which the sending party has with the other party.
Within twenty-one (21) days from the receipt of such notice, the parties’ senior
management or representatives thereof shall meet to try to resolve the issue. If
the parties cannot resolve the dispute through meetings with senior management
or their representatives within sixty (60) days from the first meeting, then
either party shall have the right to request binding arbitration.

(ii) Subject to any modifications set forth in a written agreement executed by
the parties, binding arbitration shall be conducted in accordance with the
following general rules and guidelines:

(a) Arbitration may be initiated by either FARMOR or FARMEE, or jointly.

(b) Such arbitration shall be submitted to and conducted by the Denver, Colorado
regional office of the American Arbitration Association in accordance with its
Commercial Arbitration Rules in effect at that time.

(c) Except as provided below, a single qualified, independent and neutral
arbitrator shall be chosen by the parties to the arbitration in accordance with
the applicable procedures of the American Arbitration Association.

(d) All motions filed of a judicial nature, in connection with the arbitration,
shall be filed only in the State Courts of Natrona County, Wyoming.

(e) All such arbitrations shall apply the substantive and procedural laws of the
State of Wyoming.

(f) The arbitrator(s) shall be required to commence the actual hearing of the
dispute within sixty (60) days from the date the arbitrator has been chosen and
agreed to serve. The arbitrator(s) shall provide all parties to such arbitration
with a copy of the arbitrator’s written decision or award within thirty (30)
days of the conclusion of the arbitration proceedings. Such decision or award
shall be conclusive, final and binding on all parties to such arbitration and no
party may appeal such decision or award.

(g) The arbitrator’s decision shall include assessment of the actual costs and
expenses of the parties, including reasonable and necessary attorney’s fees, and
shall be enforceable in any Court of competent jurisdiction. However, the costs
for the arbitrator’s fees shall be borne equally between the FARMOR and FARMEE,
and each party shall be responsible for its payments to the arbitrator directly.
All other costs and expenses shall be borne by the party who incurred them.

 
 

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(h) The arbitrator shall not award or assess any punitive, exemplary, indirect
or consequential damages in connection with such arbitration.

(i) Each party hereto shall be limited to that discovery (written and by oral
deposition) reasonably necessary to adequately develop the case of each party.
No party to such arbitration shall request or conduct more than four (4)
depositions and four (4) requests for admissions and/or the production of
documents prior to the actual arbitration hearing.

(k) All matters concerning the conduct of the arbitrator(s) shall be governed by
the provisions of the American Arbitration Association.

(l) In the event the claim, controversy, or dispute involves or reasonably could
be anticipated to involve an amount in excess of Five Hundred Thousand Dollars
($500,000.00) (excluding attorney fees and arbitration related costs), then any
party to such arbitration may elect for such arbitration to be heard, conducted
and decided by a panel of three (3) qualified, independent and neutral
arbitrators instead of a single arbitrator, and such panel shall be chosen by
the parties to the arbitration in accordance with the applicable procedures of
the American Arbitration Association. In the event of a dispute between the
FARMOR and the FARMEE as to the amount in dispute or which reasonably could be
anticipated to be in dispute, the FARMOR and the FARMEE agree that the first
arbitrator chosen by such parties shall conclusively make a determination in
regard to the amount involved or reasonably anticipated to be involved in such
dispute, thereby determining whether or not such arbitration shall be conducted
by a single arbitrator or by a panel of three (3) arbitrators.

C Severability. In the event any provision in this Agreement is determined to be
invalid by a court of law, such determination shall not operate to invalidate
any other provision contained herein and said Agreement shall otherwise remain
in full force and effect according to its terms.

D. Headings. The underlined headings in this Agreement are used for convenience
and shall not be considered in construing this Agreement.

E. Exhibits. The exhibits referred to in this Agreement are attached hereto and
made a part hereof. Should any provision of an exhibit attached hereto conflict
with the provisions of this Agreement, this Agreement will prevail to the extent
of the conflict.

F. Previous Communications. This Agreement supersedes and replaces any prior
oral or written communications, agreements or understandings between the Parties
related to the subject matter of this Agreement.

G. Amendments. This Agreement shall not be modified except by written instrument
executed by the parties hereto or their successors and assigns.

H. No Waiver of Rights. The failure of either party to exercise any right
granted hereunder shall not be deemed as a waiver of such party's privilege to
exercise such right at any time or times.
 

 
 

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I.  Forward Looking Statements. The parties are including the following
cautionary statement in this Agreement to make applicable and take advantage of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 for any forward-looking statements made by, or on behalf of any party
hereto. Forward-looking statements include but are not limited to, statements
concerning plans, objectives, goals, strategies, future events or performance
and underlying assumptions and other statements, which are other than historical
facts. The statements in this Agreement, as well as any oral statements and
written materials provided by any party to the other parties before or after the
execution of this Agreement including, but not limited to, production
performance, recoverable reserves, projected revenues, expenses, net income and
expected drilling and development activities, etc. are forward-looking
statements. Certain statements contained herein as well as any oral statements
and written materials provided by any party to the other parties before or after
the execution of this Agreement, including but not limited to those statements
which are identified by language that speaks of future events such as “may”,
“could”, “believe”, “expect”, “intend”, “anticipate”, “estimate”, “continue”,
“projected”, “future”, “will”, “seek”, and “plan”, are inherently uncertain, and
actual results or outcomes could differ materially from those expressed in these
forward-looking statements. Important factors that could cause actual results to
differ materially from those expressed in forward-looking statements, include
but are not limited to state and federal regulatory development and statutory
changes; the timing and extent of changes in commodity prices and markets; the
timing and extent of success in acquiring leasehold interests and in
discovering, developing, or acquiring oil and gas reserves; significant changes
from expectations in actual capital expenditures and operating expenses and
unanticipated delays or changes in costs; the nature and projected profitability
of pending and potential prospects and other investments; uncertainty of oil and
gas reserves estimates, etc. Furthermore, such forward-looking statements speak
only as of the date of this Agreement, and no party accepts or agrees to
undertake any obligation to update any such statement(s) to reflect the
occurrence of new information, future events, or otherwise.

J. Counterpart Execution. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original for all purposes and
shall be binding on the party or parties executing same, notwithstanding the
lack of execution of same by all parties hereto.

[EXECUTIONS ON FOLLOWING PAGE]

 
 

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FARMOUT AND AMI AGREEMENT
GEARY PROSPECT
NATRONA AND CONVERSE COUNTIES, WYOMING
 
EXECUTION PAGE
   
IN WITNESS HEREOF, this Agreement is executed by the Parties as of the Effective
Date.
   
TYLER ROCKIES EXPLORATION, LTD.
 
By:__________________________
Name:_______________________
Its:__________________________
     
AMERIWEST ENERGY CORP.
 
By:_________________________
Name:_______________________
Its:__________________________

 
 
 

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EXHIBIT A-1
 
LANDS AND LEASES OF FARMOUT AREA AS OF THE EFFECTIVE DATE
   
LANDS:
 
Township 34 North, Range 77 West, of the 6th P.M., Natrona and Converse
Counties, Wyoming:
 
Sec:
16:     S/2S/2
17:     SW/4, S/2SE/4
20:     All
21:     All
22:     SW/4, SE/4
26:     SW/4
27:     W/2, E/2
28:     N/2, SE/4
34:     NW/4, NE/4
35:     NW/4
   
Leases:

 
 
 

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