Royalty Agreement (2006)Full Document 

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                              AMENDED AND RESTATED
                                    PRIMEWEST
                                ROYALTY AGREEMENT


               ----------------------------------------------------






                                                                   MAY 5, 2005


                                TABLE OF CONTENTS


                                    ARTICLE 1
                                 INTERPRETATION

1.1         Definitions.......................................................1
1.2         1990 CAPL Terms - Additional Definitions.........................15
1.3         Number and Gender................................................15
1.4         References.......................................................16
1.5         Choice of Law....................................................16
1.6         Attornment.......................................................16
1.7         Monetary Sums....................................................16
1.8         Amendments to Agreements and Laws................................16
1.9         Meaning of "accrued" and "incurred"..............................16
1.10        Effect of Restatement............................................17

                                    ARTICLE 2
                                     ROYALTY

2.1         Grant of Royalty.................................................18
2.2         Payment for Royalty..............................................18
2.3         Deferred Purchase Price Obligation...............................19
2.4         Royalty..........................................................20
2.5         Right to Take In Kind............................................20
2.6         Royalty Share of Production not Taken in Kind....................22
2.7         Petroleum Substances Lost or Used in Operations..................22
2.8         Not an Interest In Land..........................................22
2.9         Reimbursement of Non-Deductible Crown Royalties..................22

                                    ARTICLE 3
                                   ACCOUNTING

3.1         Payments.........................................................23
3.2         Statements.......................................................23
3.3         Overpayments.....................................................24
3.4         Carry Forward of Deductible Production Costs.....................24
3.5         Collection of Production Revenues and Other Revenues.............24
3.6         Payment of Production Costs......................................24

                                    ARTICLE 4
                                    INSURANCE

4.1         Insurance........................................................24


                                     (i)


                                    ARTICLE 5
                                BOOKS AND RECORDS

5.1         Examination......................................................25
5.2         Audit............................................................25
5.3         Confidentiality..................................................25

                                    ARTICLE 6
                                   OPERATIONS

6.1         Generally........................................................26
6.2         No Obligation to Develop.........................................27
6.3         Compliance with and Maintenance of Properties Agreements.........27
6.4         Rights and Obligations...........................................27
6.5         Marketing........................................................28
6.6         Additional Title and Operating Documents.........................28
6.7         Restriction on Capital Expenditures..............................28
6.8         No Exploratory Operations........................................28
6.9         No Other Businesses..............................................29
6.10        Credit Facilities Unaffected.....................................29
6.11        Grant and Assignment of Security.................................29
6.12        Restrictions on Future Acquisitions..............................29

                                    ARTICLE 7
                                    RESERVES

7.1         Establishment....................................................30
7.2         Contributions to the Reserves....................................30
7.3         Use of the Reserves..............................................31
7.4         Termination of the Reserves......................................31
7.5         Reclamation Trust................................................32

                                    ARTICLE 8
                 POOLING, UNITIZATION, SURRENDER AND ABANDONMENT

8.1         Pooling and Unitization..........................................33
8.2         Surrender........................................................33
8.3         Abandonment......................................................33

                                    ARTICLE 9
                                   ASSIGNMENT

9.1         Assignment.......................................................33
9.2         Multiple Royalty Owners..........................................34
9.3         Dispositions Subject to This Agreement...........................34


                                     (ii)


                                   ARTICLE 10
                                TERM OF AGREEMENT

10.1        Term.............................................................34

                                   ARTICLE 11
                                  DISPOSITIONS

11.1        Restrictions on Disposition of Properties........................35
11.2        Dispositions of Tangibles and Miscellaneous Assets...............35
11.3        Dispositions of Petroleum and Natural Gas Rights.................35
11.4        Concurrent Disposition Documentation.............................36
11.5        Merger on Concurrent Disposition.................................36
11.6        Proceeds of a Concurrent Disposition.............................36
11.7        Merger upon Farmout..............................................37

                                   ARTICLE 12
                              NOTICES AND PAYMENTS

12.1        Addresses for Service and Payments...............................37
12.2        Giving and Deemed Receipt of Notices.............................37
12.3        Addresses........................................................38
12.4        Change of Address................................................38

                                   ARTICLE 13
                                  MISCELLANEOUS

13.1        Enurement........................................................38
13.2        Waivers in Writing...............................................38
13.3        Time of Essence..................................................39
13.4        No Partnership...................................................39
13.5        Severability.....................................................39
13.6        Amendments.......................................................39

                                   ARTICLE 14
                             CONCERNING THE TRUSTEE

14.1        Acknowledgment...................................................40



                                    (iii)


                AMENDED AND RESTATED PRIMEWEST ROYALTY AGREEMENT

         THIS  AGREEMENT  is made as of the  16th  day of  October,  1996  and
amended and restated as of the 5th day of May, 2005.

BETWEEN:

                              PRIMEWEST ENERGY INC.
                  a body corporate amalgamated pursuant to the laws of
                  Alberta (hereinafter called the "GRANTOR")

                                     - and -

                      COMPUTERSHARE TRUST COMPANY OF CANADA
                  a trust company incorporated under the laws of Canada,
                  in its capacity as trustee of PrimeWest Energy Trust,
                  a trust formed under the laws of the Province of
                  Alberta pursuant to the Declaration of Trust
                  (hereinafter called the "ROYALTY OWNER")

         WHEREAS  the  Grantor  has agreed to grant the Royalty to the Royalty
Owner and the Royalty Owner has agreed to purchase and accept the Royalty from
the Grantor, on the terms and conditions hereinafter set forth;

         NOW THEREFORE,  in  consideration  of the covenants  hereinafter  set
forth, the Parties hereby agree as follows:

                                   ARTICLE 1
                                INTERPRETATION

1.1      DEFINITIONS

         In this  Agreement,  including this Article,  the following words and
expressions shall have the following meanings:

"ACQUISITION" means an acquisition by the Grantor of Petroleum and Natural Gas
Rights or  interests  therein,  whether  directly  or  indirectly  through the
acquisition by the Grantor of all of the  outstanding  securities of an entity
which owns  Petroleum  and Natural Gas Rights or interests  therein;  provided
that in respect of such  indirect  acquisition  the  Petroleum and Natural Gas
Rights owned by the entity become subject to the Royalty, either by themselves
or together with interests in related Tangibles and Miscellaneous Assets;

"ACQUISITION COSTS" means costs and expenses incurred by the Grantor in making
an Acquisition including, without limitation, the purchase price paid pursuant
thereto (net


                                     -2-


of  all  adjustments  thereto),   brokers  fees  and  commissions,   costs  of
registration  of  conveyances  of title and fees and  expenses of  consultants
(including lawyers,  landmen and engineering and other technical and financial
advisors);

"AFFILIATE" means, with respect to the relationship between corporations, that
one of them is controlled by the other or that both of them are  controlled by
the same  Person  and for this  purpose  a  corporation  shall be deemed to be
controlled by the Person who owns or effectively  controls,  other than by way
of  security  only,  sufficient  voting  shares  of the  corporation  (whether
directly  through the  ownership of shares of the  corporation  or  indirectly
through the ownership of shares of another  corporation or otherwise) to elect
the majority of its board of directors,  provided that a partnership  which is
comprised  solely of corporations  which are Affiliates,  as described  above,
shall be deemed to be an  Affiliate  of each  such  corporation  and its other
Affiliates;

"AGREEMENT",  "HEREIN",  "HERETO",  "HEREOF" and similar  expressions refer to
this Royalty Agreement, and any agreement amending this Royalty Agreement;

"AMOCO" means Amoco Canada Petroleum Company Ltd.;

"AMOCO SALE  AGREEMENT"  means the  Agreement of Purchase and Sale dated as of
the 1st day of August,  1996 between Amoco Canada  Petroleum  Company Ltd. and
3061434 Canada Ltd., as vendor, and the Grantor, as purchaser, as amended;

"AMOCO TAX  INDEMNITY"  means the tax indemnity  granted by Amoco in favour of
the Grantor and the Trust pursuant to the Amoco Sale Agreement;

"ARTC" means credits or rebates in respect of Crown  Royalties  which are paid
or credited by the Crown,  including  those paid or credited under the ALBERTA
CORPORATE TAX ACT which are commonly known as "Alberta Royalty Tax Credits";

"BUSINESS DAY" means a day other than a Saturday,  Sunday or statutory holiday
in Alberta;

"CAPITAL EXPENDITURES" means:

(a)      drilling costs, completion costs and equipping costs; and

(b)      other costs relating to the  Properties  which would be classified as
         capital costs in accordance with GAAP;

but does not include Acquisition Costs;


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