**Exhibit 10.3**

 

ExecutionCopy

 

INDENTURE,dated as of July 9, 2003 between Baytex Energy Ltd., a corporation dulyorganized and existing under the laws of the Province of Alberta, Canada(herein called the “Company”) and The Bank of Nova Scotia Trust Company of NewYork, a bank and trust company duly organized and existing under the laws ofNew York, as trustee (herein called the “Trustee”).

 

**RECITALS OF THE COMPANY**

 

TheCompany has duly authorized the creation of and issue of 95/8% Senior Subordinated Notes due 2010 (herein called the “InitialSecurities”), and 95/8% Senior Series BSubordinated Notes due 2010 (the “Exchange Securities” and, together with theInitial Securities, the “Securities”) of substantially the tenor and amounthereinafter set forth, and to provide therefor the Company has duly authorizedthe execution and delivery of this Indenture.

 

Uponthe issuance of the Exchange Securities, if any, or the effectiveness of theExchange Offer Registration Statement (as defined herein) or, under certaincircumstances, the effectiveness of the Shelf Registration Statement (asdefined herein), this Indenture will be subject to the provisions of the TrustIndenture Act of 1939, as amended, that are required to be part of thisIndenture and shall, to the extent applicable, be governed by such provisions.

 

TheCompany has also duly authorized the issuance of an unlimited amount ofadditional Securities to be issued from time to time having identical terms andconditions to the Securities offered hereby.

 

Allthings necessary have been done to make the Securities, when executed by theCompany and authenticated and delivered hereunder and duly issued by theCompany, the valid obligations of the Company and to make this Indenture avalid agreement of the Company, each in accordance with their respective terms.

 

**NOW, THEREFORE, THIS INDENTURE WITNESSETH:**

 

Forand in consideration of the premises and the purchase of the Securities by theHolders thereof, it is mutually covenanted and agreed, for the equal and proportionatebenefit of all Holders of the Securities, as follows:

 

# **ARTICLE I**DEFINITIONS AND OTHER PROVISIONSOF GENERAL APPLICATION

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## **Section 1.01**        Definitions.

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Forall purposes of this Indenture, except as otherwise expressly provided orunless the context otherwise requires:

 

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### **(a)          the terms defined in this Article have the meanings assigned to them inthis Article, and include the plural as well as the singular;**

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### **(b)          all other terms used herein which are defined in the Trust Indenture Act,either directly or by reference therein, have the meanings assigned to themtherein, and the terms “cash transaction” and “self-liquidating paper”, as usedin TIA Section 311, shall have the meanings assigned to them in the rulesof the Commission adopted under the Trust Indenture Act;**

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### **(c)          the words “herein”, “hereof” and “hereunder” and other words of similar importrefer to this Indenture as a whole and not to any particular Article,Section or other subdivision.**

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“AcquiredIndebtedness” means Indebtedness of a Person or any of its Subsidiaries(a) existing at the time such Person is amalgamated, merged with or intothe Company or becomes a Restricted Subsidiary or (b) assumed in connectionwith the acquisition of assets from such Person; *provided* that any Indebtedness of such Person that isredeemed, defeased, retired or otherwise repaid at the time of or immediatelyupon consummation of the transaction by which such Person is merged with orinto the Company, becomes a Restricted Subsidiary or such assets are acquiredfrom such Person shall not be Acquired Indebtedness.

 

“Act”,when used with respect to any Holder, has the meaning specified inSection 1.04.

 

“AdditionalMirror Note” means an additional mirror note issued to the Company by aRestricted Subsidiary upon the Company’s issuance of Additional Securities, inan amount equivalent to the aggregate principal amount of Additional Securitiesissued, in form and substance substantially similar to the Mirror Note, *provided* that there shall be no AdditionalMirror Notes after the release and discharge of the Collateral Documentspursuant to the terms of this Indenture.

 

“AdditionalAmounts” has the meaning set forth in Section 10.23.

 

“AdditionalSecurities” has the meaning set forth in Section 3.01.

 

“AdjustedNet Assets” has the meaning set forth in Section 13.01.

 

“AdjustedConsolidated Net Tangible Assets” means, without duplication, as of the date ofdetermination:

 

#### **(i)           the sum of (a) discounted future net cash flows from the proved oil andgas reserves of the Company and its Restricted Subsidiaries calculated inaccordance with Commission guidelines but before any federal, state, provincialor foreign income taxes, as estimated by the Company and confirmed by a Canadiannationally recognized firm of independent petroleum engineers in a reservereport prepared as of the end of the Company’s most recently completed fiscalyear for which**

 

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#### **auditedfinancial statements are available, increased and/or decreased, as the case maybe, as described in clause (b), and determined without including as anencumbrance the Net Profits Interest, (b) the capitalized costs that areattributable to the oil and gas properties of the Company and its RestrictedSubsidiaries to which no proved oil and gas reserves are attributable, based onthe Company’s books and records as of a date no earlier than the date of theCompany’s latest annual or quarterly financial statements, (c) the Net WorkingCapital on a date no earlier than the date of the Company’s latest annual orquarterly financial statements and (d) the greater of:**

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##### **(1)          the net book value on a date no earlier than the date of the Company’s latestannual or quarterly financial statements, and**

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##### **(2)          appraised value, as estimated by independent appraisers, of other tangibleassets of the Company and its Restricted Subsidiaries, including, withoutduplication, Investments in unconsolidated Restricted Subsidiaries, as of thedate no earlier than the date of the Company’s latest audited financialstatements,**

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#### **(ii)          minus the sum of**

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###### **(a)          minority interests,**

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###### **(b)          any net gas balancing liabilities of the Company and its RestrictedSubsidiaries reflected in the Company’s latest audited financial statements,**

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###### **(c)          to the extent included in the clause (i)(a) above, the discounted future netcash flows, calculated in accordance with Commission guidelines but before anyfederal, state, provincial or foreign income taxes and utilizing the pricesutilized in the Company’s and its Restricted Subsidiaries’ year-end reservereport, attributable to reserves which are required to be delivered to thirdparties to fully satisfy the obligations of the Company and its RestrictedSubsidiaries with respect to Volumetric Production Payments on the schedulesspecified with respect thereto.**

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###### **(d)          the discounted future net cash flows, calculated in accordance with Commissionguidelines but before any federal, state, provincial or foreign income taxes,attributable to reserves subject to Dollar-Denominated Production Paymentswhich, based on the estimates of production and price assumptions included indetermining the discounted future cash flows specified in clause (i)(a) above,would be necessary to fully satisfy payment obligations of the Company and itsRestricted Subsidiaries with respect to Dollar-Denominated Production paymentson the schedules specified with respect thereto.**

 

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Discountedfuture net cash flows will be increased pursuant to clauses (i) and (ii)below and decreased pursuant to clauses (iii) and (iv) below, as of the date ofdetermination, by the estimated discounted future net cash flows, calculated inaccordance with Commission guidelines but before any federal, state, provincialor foreign income taxes and utilizing the prices utilized in such year-endreserve report referred to in clause (i)(a) above, from:

 

#### **(i)           estimated proved oil and gas reserves acquired since such year-end, whichreserves were not reflected in such year-end reserve report,**

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#### **(ii)          estimated oil and gas reserves attributable to upward revisions of estimates ofproved oil and gas reserves since such year-end due to exploration,development, exploitation, production or other activities,**

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#### **(iii)         estimated proved oil and gas reserves produced or disposed of since suchyear-end, and**

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#### **(iv)         estimated oil and gas reserves attributable to downward revisions of estimatesof proved oil and gas reserves since such year-end due to exploration,development, exploitation, production or other activities.**

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Inthe case of each of the determinations made pursuant to clauses (i) through(iv) immediately above, such increases and decreases shall be as estimated bythe Company’s petroleum engineers, except that in the event there is a MaterialChange as a result of such acquisitions, dispositions or revisions, then thediscounted future net cash flows utilized for purposes of clauses (i)(a)through (i)(d) shall be confirmed in writing by a Canadian nationallyrecognized firm of independent petroleum engineers.

 

“AffectedObligor” has the meaning set forth in Section 14.02.

 

“AffectedObligor Senior Indebtedness” has the meaning set forth in Section 14.02.

 

“Affiliate”means, with respect to any specified Person, (a) any other Person directly orindirectly controlling or controlled by or under direct or indirect commoncontrol with such specified Person or (b) any other Person that owns, directlyor indirectly, 10% or more of such specified Person’s Capital Stock or withrespect to any natural Person, any Person having a relationship with suchPerson by blood, marriage or adoption no more remote than first cousin. For the purposes of this definition, “control”, when used with respect to anyspecified Person, means the power to direct the management and policies of suchPerson, directly or indirectly, whether through the ownership of votingsecurities, by contract or otherwise; and the terms “controlling” and“controlled” have meanings correlative to the foregoing.

 

“AgentMember” means any member of, or participant in, the Depositary.

 

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“ApplicableProcedures” means applicable procedures of the Depositary, CDS, EuroclearSystem or Clearstream Banking, as the case may be.

 

“AssetSale” means any sale, issuance, conveyance, transfer, lease or otherdisposition (including, without limitation, by way of merger, consolidation orsale and leaseback transaction) (collectively, a “transfer”) by the Company ora Restricted Subsidiary, directly or indirectly, in one transaction or a seriesof related transactions, of:  (a) any Capital Stock of any Restricted Subsidiary(other than directors’ qualifying shares or shares required by applicable lawto be held by a Person other than the Company or a Restricted Subsidiary) or(b) all or substantially all of the properties and assets of the Company andits Restricted Subsidiaries representing a division or line of business or (c)any other properties or assets of the Company or any Restricted Subsidiary,other than in the ordinary course of business.  For the purposes of thisdefinition, the term “Asset Sale” shall not include any transfer of propertiesor assets (i) that is governed by the provisions of Article VIII, (ii)between or among the Company and its Restricted Subsidiaries pursuant totransactions that do not violate any other provision of this Indenture, (iii) toany Person to the extent it constitutes a Restricted Payment that is permittedunder Section 10.11, (iv) consisting of inventory or worn-out, obsolete orpermanently retired equipment and facilities, (v) that constitutes a PermittedInvestment, or (vi) in connection with the Reorganization.

 

“AssetSale Offer” has the meaning set forth in Section 10.13.

 

“AssetSale Purchase Date” has the meaning set forth in Section 10.13.

 

“BankruptcyLaw” means the Bankruptcy and Insolvency Act (Canada), the Companies’ CreditorsArrangement Act (Canada) or any other Canadian federal or provincial lawrelating to, or Title 11, U.S. Code or any similar United States federal orstate law relating to, the relief of debtors.

 

“Banks”means the banks and other financial institutions that from time to time arelenders under the Senior Credit Facilities.

 

“BaytexMarketing Agreement” means the Crude Oil Supply Agreement, dated as ofDecember 16, 2002, between the Company and Baytex Marketing Ltd.

 

“BlockageNotice” has the meaning set forth in Section 14.03.

 

“Boardof Directors” means, as the context requires, either the board of directors ofthe Company or a Guarantor, if any, as the case may be, or any duly authorizedcommittee of that board.

 

“BoardResolution” means, as the context requires, a copy of a resolution certified bythe Secretary or an Assistant Secretary of the Company, to have been dulyadopted by the Board of Directors and to be in full force and effect on thedate of such certification, and delivered to the Trustee.

 

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“BorrowingBase” means the borrowing base under the Senior Credit Facilities, which mayinclude any other covenant in such Senior Credit Facilities which limits theamount of Indebtedness the Company may incur or have outstanding.

 

“BusinessDay” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not aday on which banking institutions in New York or Calgary, Alberta, Canadaare authorized or obligated by law, regulation or executive order to close.

 

“CanadianFinal Prospectus” means the final prospectus filed with each of the CanadianSecurities Commissions qualifying the distribution of Exchange Securitiesissuable in exchange for Initial Securities pursuant to the Exchange Offer.

 

“CanadianSecurities Commissions” shall mean the securities commission or otherappropriate regulatory authority in each of the Relevant Provinces.

 

“CapitalLease Obligation” means, at the time any determination thereof is to be made,the amount of the liability in respect of a capital lease that would at suchtime be required to be capitalized on a balance sheet in accordance with GAAP.

 

“CapitalStock” of any Person means any and all shares, partnership interests, trustunits, participations, rights in or other equivalents of, or interests in, theequity of such Person, including each class of common stock and PreferredStock, but excluding any debt securities convertible into such equity.

 

“CashEquivalents” means (a) any evidence of Indebtedness with a maturity of oneyear or less issued or directly and fully guaranteed or insured by the UnitedStates or Canada or any agency or instrumentality of the United States orCanada or any province or agency thereof (*provided*that the full faith and credit of the United States or Canada or any provincethereof, as the case may be, is pledged in support thereof, and *provided*, *further*,that any province of Canada must be rated, as the case may be, at least “R-1”by the Dominion Bond Rating Service Limited (in the case of a Canadianprovincial issuer); (b) certificates of deposit or acceptances orEurodollar time deposits with a maturity of one year or less of, and overnightbank deposits with, any financial institution that is a member of the FederalReserve System or any Canadian chartered bank having combined capital andsurplus and undivided profits of not less than US$500 million;(c) commercial paper with a maturity of 180 days or less issued by acorporation that is not an Affiliate of the Company and is organized under thelaws of any state of the United States or the District of Columbia or Canada orany province thereof and rated at least A-1 by S&P or at least P-1 byMoody’s or at least “R-1” by Dominion Bond Rating Service Limited (in the caseof a Canadian issuer), and (d) funds which invest in any of the foregoing.

 

“CDS”means The Canadian Depository for Securities Limited

 

“Changeof Control” means the occurrence of any of the following events:

 

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### **(a)          prior to the Reorganization, any Person or “group” (as such term is used inSections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficialowner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except thata Person will be deemed to have “beneficial ownership” of all securities thatsuch Person has the right to acquire, whether such right is exercisableimmediately or only after the passage of time), directly or indirectly, of morethan 50% of the voting power of all classes of the Company’s Voting Stock,**

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### **(b)          subsequent to the Reorganization, any Person or “group” (as such term is usedin Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficialowner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except thata Person will be deemed to have “beneficial ownership” of all securities thatsuch Person has the right to acquire, whether such right is exercisableimmediately or only after the passage of time), directly or indirectly, of morethan 50% of the voting power of all classes of the Voting Stock of theCompany’s direct parent Baytex Energy Trust,**

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### **(c)          during any consecutive two-year period, individuals who at the beginning ofsuch period constituted the Board of Directors of the Company (together withany new directors whose election to such Board of Directors, or whosenomination for election by the stockholders of the Company, was approved by avote of at least a majority of the directors then still in office who wereeither directors at the beginning of such period or whose election ornomination for election was previously so approved) cease for any reason toconstitute a majority of the Board of Directors of the Company then in office;or**

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### **(d)          the Company is liquidated or dissolved or adopts a plan of liquidation ordissolution, other than a transaction that complies with the provisions ofArticle VIII.**

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“Changeof Control Offer” has the meaning set forth in Section 10.12.

 

“Changeof Control Payment Date” has the meaning set forth in Section 10.12.

 

“Clearstream”means Clearstream Banking, or any successor securities clearing agency.

 

“ClosingDate” means the date on which the Initial Securities are originally issuedunder this Indenture.

 

“CollateralDocuments” means the Mirror Note, along with all guarantees of the Mirror Note(including the Guarantee and Indemnity from each of Baytex Resources Ltd. andBaytex Exploration Ltd.), the Mirror Note Assignment from Baytex Energy Ltd. infavor of the Trustee, the Baytex Energy Partnership Consent and Acknowledgment,the Baytex Resources Ltd. Consent and Acknowledgment, the Baytex ExplorationLtd. Consent and Acknowledgment and all other related documents pledging suchnote and guarantees to the Trustee for the benefit of the Holders, and anyAdditional

 

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Mirror Notes, along with allguarantees of such Additional Mirror Notes (if any) and all other relateddocuments pledging such notes and guarantees to the Trustee for the benefit ofthe Holders.

 

“CollateralDocuments Subordination Agreement” means the Subordination Agreement dated asof July 9, 2003 among Baytex Energy Ltd., Baytex Energy Partnership,Baytex Resources Ltd., Baytex Exploration Ltd. and the Trustee, substantiallyin the form of Exhibit F hereto, as such agreement may be amended fromtime to time after the date hereof.

 

“Commission”means the U.S. Securities and Exchange Commission and any successor agency ororganization.

 

“Company”means the Person named as the “Company” in the first paragraph of thisIndenture, until a successor Person shall have become such pursuant to theapplicable provisions of this Indenture, and thereafter “Company” shall meansuch successor Person.

 

“CompanyRequest” or “Company Order” means a written request or order signed in the nameof the Company by its Chairman, its Chief Executive Officer, its President, anyVice President, its Treasurer or an Assistant Treasurer, and delivered to theTrustee.

 

“ConsolidatedCash Flow from Operations” means, for any period, the sum of, withoutduplication, Consolidated Net Income for such period, plus (or, in the case ofclause (3) below, plus or minus) the following items to the extent included incomputing Consolidated Net Income for such period:

 

(1)          the Company’s and its Restricted Subsidiaries’ federal, state, local andforeign future income tax expense for such period accrued in accordance withGAAP for such period (other than income taxes attributable to extraordinary,unusual or nonrecurring gains or losses or taxes attributable to sale ordispositions outside the ordinary course of business and *provided* that current income tax expensedetermined in accordance with GAAP shall not be included), plus

 

(2)          the Company and its Restricted Subsidiaries’ depletion, depreciation andamortization expense for such period, plus

 

(3)          site restoration costs plus any other non-cash charges for such period(including any non-cash charges related to a ceiling test write-down requiredunder GAAP) and minus non-cash credits for such period, other than non-cashcharges or credits resulting from changes in prepaid assets or accruedliabilities in the ordinary course of business.

 

*provided* that income tax expense, depletion, depreciationand amortization expense and non-cash charges and credits of a RestrictedSubsidiary will be included in Consolidated

 

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Cash Flow from Operationsonly to the extent, and in the same proportion, that the net income of suchRestricted Subsidiary was included in calculating Consolidated Net Income forsuch period.

 

“ConsolidatedDebt” means, at any time, Indebtedness of the Company and Indebtedness of itsRestricted Subsidiaries, other than Hedging Obligations, at such time asdetermined on a consolidated basis in accordance with GAAP and as shown on theCompany’s most recent annual audited or quarterly unaudited balance sheets; *provided, however,* that Consolidated Debtshall not include Deeply Subordinated Inter-company Debt.

 

“ConsolidatedEBITDA” means, for any period, the sum of, without duplication, ConsolidatedNet Income for such period, plus (or, in the case of clauses (d) and (e) below,plus or minus) the following items to the extent included in computingConsolidated Net Income for such period (a) Fixed Charges for such period, plus(b) the federal, provincial, state, local and foreign income tax expense of theCompany and its Restricted Subsidiaries for such period paid or accrued inaccordance with GAAP for such period (other than income taxes attributable toextraordinary, unusual or nonrecurring gains or losses or taxes attributable tosales or dispositions outside the ordinary course of business), plus (c) thedepletion, depreciation and amortization expense of the Company and itsRestricted Subsidiaries for such period, plus (d) site restoration costs,plus (e) any other non-cash charges for such period (including anynon-cash charges related to a ceiling test write-down required under GAAP) andminus non-cash credits for such period, other than non-cash charges or creditsresulting from changes in prepaid assets or accrued liabilities in the ordinarycourse of business; *provided* thatincome tax expense, depletion, depreciation and amortization expense andnon-cash charges and credits of a Restricted Subsidiary shall be included inConsolidated EBITDA only to the extent (and in the same proportion) that thenet income of such Restricted Subsidiary was included in calculatingConsolidated Net Income for such period.

 

“ConsolidatedNet Income” means, for any period, the net income (or net loss) of the Companyand its Restricted Subsidiaries for such period as determined on a consolidatedbasis in accordance with GAAP, adjusted to the extent included in calculatingsuch net income or loss by excluding (a) any net after-tax extraordinary gainsor losses (less all fees and expenses relating thereto), (b) any net after-taxgains or losses (less all fees and expenses relating thereto) attributable to AssetSales, (c) the net income (but not the net loss) of any Person (other than theCompany or a Restricted Subsidiary), in which the Company or any RestrictedSubsidiary has an equity interest, except that the aggregate amount ofdividends or other distributions actually paid to the Company or any RestrictedSubsidiary in cash during such period will be included in such Consolidated NetIncome, (d) the net income (or loss) of any Person acquired by the Company orany Restricted Subsidiary in a “pooling of interests” transaction attributableto any period prior to the date of such acquisition, (e) the net income (butnot the net loss) of any Restricted Subsidiary to the extent that thedeclaration or payment of dividends or similar distributions by such RestrictedSubsidiary of such net income is at the date of

 

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determination restricted,directly or indirectly, except that the aggregate amount of such net incomethat could be paid to the Company or a Restricted Subsidiary thereof by loans,advances, intercompany transfers, principal repayments or otherwise will beincluded in such Consolidated Net Income, (f) any non-cash charges related to aceiling test write down under GAAP, (g) any interest expense on DeeplySubordinated Inter-company Debt and (h) any distributions made by the Companyon account of the Net Profits Interest.

 

“ConsolidatedNet Worth” means, at any date of determination, the shareholders’ equity as setforth on the most recently available quarterly or annual consolidated balancesheet of the Company and its Restricted Subsidiaries, less any amountsattributable to Disqualified Stock or any equity security convertible into orexchangeable for Indebtedness, the cost of treasury stock and the principalamount of any promissory notes receivable from the sale of the Capital Stock ofthe Company and less, to the extent included in calculating such shareholders’equity of the Company and its Restricted Subsidiaries, the shareholders’ equityattributable to Unrestricted Subsidiaries, each item to be determined inconformity with GAAP.

 

“CorporateTrust Office” means the principal corporate trust office of the Trustee, atwhich at any particular time its corporate trust business shall beadministered, which office at the date of execution of this Indenture islocated at One Liberty Plaza, New York, New York 10006, except that withrespect to presentation of Securities for payment or for registration oftransfer or exchange, such term shall mean the office or agency of the Trusteeat which, at any particular time, its corporate trust and agency business shallbe conducted.

 

“CurrencyAgreements” means, with respect to any Person, any spot or forward foreignexchange agreements and currency swap, currency option or other similarfinancial agreements or arrangements entered into by such Person or any of itsRestricted Subsidiaries in the ordinary course of business and designed toprotect against or manage exposure to fluctuations in foreign currency exchangerates.

 

“Custodian”means any receiver, trustee, assignee, liquidator, sequestrator or similarofficial under any Bankruptcy Law.

 

“DeeplySubordinated Inter-company Debt” means any Subordinated Indebtedness owed bythe Company or any Restricted Subsidiary to any Person that owns, directly orindirectly, 100% of the Outstanding Voting Stock of the Company, *provided that* such SubordinatedIndebtedness cannot by its terms mature prior to the maturity of the Securitiesunder this Indenture.

 

“Default”means any event that is, or after notice or passage of time or both would be,an Event of Default.

 

“DefaultedInterest” has the meaning specified in Section 3.09.

 

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“Depositary”means The Depository Trust Company, its nominees and successors.

 

“DesignatedSenior Indebtedness” means (i) all Senior Indebtedness under the Senior CreditFacilities and (ii) any other issue of Senior Indebtedness or refinancingthereof permitted by the definition of Senior Indebtedness, having a principalamount of at least US$20.0 million.

 

“DisinterestedDirector” means, with respect to any transaction or series of transactions inrespect of which the Board of Directors is required to deliver a resolution ofthe Board of Directors, to make a finding or otherwise take action under thisIndenture, a member of the Board of Directors who does not have any materialdirect or indirect financial interest in or with respect to such transaction orseries of transactions.

 

“DisqualifiedStock” means any class or series of Capital Stock that, either by its terms, orby the terms of any security into which it is convertible or exchangeable or bycontract or otherwise (a) is, or upon the happening of an event or passage oftime would be, required to be redeemed on or prior to the final Stated Maturityof the Securities, (b) is redeemable at the option of the holder thereof at anytime on or prior to such final Stated Maturity or (c) at the option of theholder thereof, is convertible into or exchangeable for debt securities at anytime on or prior to such final Stated Maturity; *provided* that any Capital Stock that would not constituteDisqualified Stock but for provisions therein giving holders thereof the rightto cause the issuer thereof to repurchase or redeem such Capital Stock upon theoccurrence of an “asset sale” or “change of control” occurring prior to theStated Maturity of the Securities will not constitute Disqualified Stock if the“asset sale” or “change of control” provisions applicable to such Capital Stockare no more favorable to the holders of such Capital Stock than the provisionscontained in Sections 10.12 and 10.13 and such Capital Stock specificallyprovides that the issuer will not repurchase or redeem any of such stockpursuant to such provision prior to the Company’s repurchase of such of theSecurities as are required to be repurchased pursuant to Sections 10.12 and10.13.

 

“Dollar-DenominatedProduction Payments” means production payment obligations of the Company or aRestricted Subsidiary recorded as liabilities in accordance with GAAP, togetherwith all undertakings and obligations in connection therewith.

 

“Euroclear”means the Euroclear Clearance System, or any successor securities clearingagency.

 

“Eventof Default” has the meaning specified in Section 5.01.

 

“ExcessProceeds” has the meaning set forth in Section 10.13.

 

“ExchangeAct” means the Securities and Exchange Act of 1934, as amended from time totime, and the rules and regulations thereunder.

 

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“ExchangeOffer” means the exchange offer that may be effected pursuant to theRegistration Rights Agreement.

 

“ExchangeOffer Registration Statement” means the Exchange Offer Registration Statementas defined in the Registration Rights Agreement.

 

“ExchangeSecurities” has the meaning stated in the first recital of this Indenture andrefers to any Exchange Securities containing terms substantially identical tothe Initial Securities (except that such Exchange Securities shall not containterms with respect to the interest rate step-up provisions in Section 3.09of the Initial Securities and transfer restrictions in Section 3.07 of theInitial Securities) that are issued and exchanged for the Initial Securities pursuantto the Registration Rights Agreement and this Indenture.

 

“ExchangedProperties” means properties or assets used or useful in the Oil and GasBusiness received by the Company or a Restricted Subsidiary, whether directlyor indirectly through the acquisition of the Capital Stock of a Person holdingsuch assets so that such Person becomes a Wholly Owned Restricted Subsidiary ofthe Company, in trade or as a portion of the total consideration for such otherproperties or assets.

 

“ExcludedHolder” has the meaning specified in Section 10.25.

 

“fairmarket value” means (unless the context otherwise requires), with respect toany asset, the price which could be negotiated in an arm’s-length free markettransaction, for cash, between an informed and willing seller and an informedand willing buyer, neither of which is under pressure or compulsion to completethe transaction.

 

“FederalBankruptcy Code” means the Bankruptcy Act of Title 11 of the United StatesCode, as amended from time to time.

 

“FixedCharges” means, for any period, without duplication, the sum of (a) the amountthat, in conformity with GAAP, would be set forth opposite the caption“interest expense” (or any like caption) on a consolidated statement ofoperations of the Company and its Restricted Subsidiaries for such period,including, without limitation, (i) amortization of debt discount,(ii) the net cost of Interest Rate Agreements (including amortization ofdiscounts), (iii) the interest portion of any deferred payment obligation,(iv) amortization of debt issuance costs and (v) the interestcomponent of Capital Lease Obligations, plus (b) cash dividends paid onPreferred Stock and Disqualified Stock by the Company and any RestrictedSubsidiary to any Person other than the Company and its Restricted Subsidiaries,plus (c) all interest on any Indebtedness of any Person guaranteed by theCompany or any of its Restricted Subsidiaries; *provided*,*however*, that Fixed Charges shallnot include (i) any gain or loss from extinguishment of debt, includingthe write-off of debt issuance costs and (ii) the fixed charges of aRestricted Subsidiary to the extent (and in the same proportion) that the netincome of such Subsidiary was excluded in calculating Consolidated Net Incomepursuant to clause (e) of

 

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the definition thereof forsuch period and (iii) interest on any Deeply Subordinated Inter-company Debt.

 

“FixedCharge Coverage Ratio” means, for any period, the ratio of Consolidated EBITDAfor such period to Fixed Charges for such period.

 

“FrontierAgreement” means the Crude Oil Supply Agreement dated as of October 15,2002 between the Company and Frontier Oil and Refining Company, as assigned toBaytex Marketing Ltd. pursuant to the Assignment and Novation Agreement datedNovember 29, 2002, among the Company, Baytex Marketing Ltd. and FrontierOil and Refining Company.

 

“FundingGuarantor” has the meaning set forth in Section 13.02.

 

“GenerallyAccepted Accounting Principles” or “GAAP” means generally accepted accountingprinciples in Canada, consistently applied, that are in effect on the date ofthis Indenture.

 

“GlobalSecurity” shall have the meaning specified in Section 2.01.

 

“guarantee”means, as applied to any obligation, (a) a guarantee (other than by endorsementof negotiable instruments for collection in the ordinary course of business),direct or indirect, in any manner, of all or any part of such obligation and(b) an agreement, direct or indirect, contingent or otherwise, the practicaleffect of which is to assure in any way the payment or performance (or paymentof damages in the event of non-performance) of all or any part of suchobligation, including, without limitation, the payment of amounts drawn downunder letters of credit.

 

“Guarantee”means a guarantee of the Securities that is made pursuant to the covenant inSection 10.21(b) or 10.22(b).

 

“Guarantor”means each Restricted Subsidiary that has executed a Guarantee, *provided* that any Person constituting aGuarantor shall cease to constitute a Guarantor when its respective Guaranteeis released in accordance with the terms of this Indenture.

 

“GuarantorSenior Indebtedness” means, as to any Guarantor, the principal of (premium, ifany) and interest on (including interest accruing after the filing of apetition initiating any proceeding pursuant to any bankruptcy law, whether ornot allowed) and other amounts due on or in connection with any Indebtedness ofsuch Guarantor (other than the Guarantee made by such Guarantor or Pari PassuIndebtedness), whether outstanding on the Closing Date or thereafter incurred,unless, in the case of any particular Indebtedness, the instrument creating orevidencing the same or pursuant to which the same is outstanding expresslyprovides that such Indebtedness will be subordinate in right of payment to theGuarantees by such Guarantor.  Without limiting the generality of theforegoing, “Guarantor Senior Indebtedness” includes the principal of (premium,if any) and interest (including interest accruing after the

 

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occurrence of an event ofdefault or after the filing of a petition initiating any proceeding pursuant toany bankruptcy law, whether or not allowed) on and all other amounts owing inrespect of (i) all obligations of every nature of such Guarantor from timeto time owed to the Banks and the Senior Credit Facilities Agent under theSenior Credit Facilities; *provided, however,*that any Indebtedness under any refinancing, refunding or replacement of theSenior Credit Facilities shall not constitute Guarantor Senior Indebtedness tothe extent that the Indebtedness thereunder is by its express terms subordinateto any other Indebtedness of such Guarantor, and (ii) all HedgingObligations, including, in each such case, any guarantee by such Guarantor inrespect thereof.  Notwithstanding the foregoing, “Guarantor SeniorIndebtedness” shall not include (a) Indebtedness that is represented byDisqualified Stock, (b) any trade payables, (c) Indebtedness of oramounts owed by such Guarantor for compensation to employees or for servicesrendered to such Guarantor, (d) any liability for foreign, federal, provincial,state, local or other taxes owed or owing by such Guarantor,(e) Indebtedness of such Guarantor to the Company, a Subsidiary of theCompany or any other Affiliate of the Company or any of such Affiliate’sSubsidiaries, (f) that portion of any Indebtedness that, at the time of theincurrence, is incurred by such Guarantor in violation of this Indenture, and (g)amounts owing under leases (other than Capital Lease Obligations).

 

“HedgingObligations” means the obligations of any Person under Interest RateAgreements, Currency Agreements and Oil and Gas Hedging Contracts.

 

“Holder”means the Person in whose name a Security is, at the time of determination,registered on the Security Register.

 

“Indebtedness”means (without duplication), with respect to any Person, whether recourse is toall or a portion of the assets of such Person and whether or not contingent, (a)every obligation of such Person for money borrowed, excluding any tradeaccounts payable and accrued liabilities incurred in the ordinary course ofbusiness, (b) every obligation of such Person evidenced by bonds, debentures,notes or other similar instruments, (c) every reimbursement obligation of suchPerson with respect to letters of credit, bankers’ acceptances or similarfacilities issued for the account of such Person, (d) every obligation of suchPerson issued or assumed as the deferred purchase price of property orservices, (e) all conditional sale obligations or all obligations under anytitle retention agreement, but excluding a title retention agreement to theextent it constitutes an operating lease under Canadian law, (f) everyCapital Lease Obligation of such Person, (g) all Disqualified Stock of suchPerson valued at its maximum fixed repurchase price (including, withoutduplication, accrued and unpaid dividends), (h) all obligations of such Personunder or in respect of Hedging Obligations and (i) every obligation of the typereferred to in clauses (a) through (h) of another Person and all dividends ofanother Person the payment of which, in either case, such Person hasguaranteed.  For purposes of this definition, the “maximum fixed repurchaseprice” of any Disqualified Stock that does not have a fixed repurchase priceshall be calculated in accordance with the terms of such Disqualified Stock asif such Disqualified Stock were repurchased on any date on which Indebtednessis required to be determined pursuant to this Indenture, and if such price isbased upon, or measured by, the fair market value of such Disqualified Stock,such fair

 

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market value shall be determined in good faith by the board ofdirectors of the issuer of such Disqualified Stock.

 

“Indenture” means thisinstrument as originally executed and as it may from time to time besupplemented or amended by one or more indentures supplemental hereto enteredinto pursuant to the applicable provisions hereof.

 

“Indenture Obligations”means the obligations of the Company and any other obligor hereunder or underthe Securities, including the Guarantors, if any, to pay principal of (premium,if any) and interest on the Securities when due and payable at Maturity, andall other amounts due or to become due under or in connection with thisIndenture, the Securities and the performance of all other obligations to theTrustee (including all amounts due to the Trustee under Section 6.06)hereof) and the Holders under this Indenture and the Securities, according tothe terms hereof and thereof.

 

“Initial Period” has themeaning set forth in Section 14.03.

 

“Initial Securities” hasthe meaning stated in the first recital of this Indenture.

 

“Interest Payment Date”means the Stated Maturity of an installment of interest on the Securities.

 

“Interest RateAgreements” means any interest rate protection agreements and other types ofinterest rate hedging agreements including, without limitation, interest rateswaps, caps, floors, collars and similar agreements and other relatedagreements entered into in the ordinary course of business and designed toprotect against or manage exposure to fluctuations in interest rates.

 

“Investment” in anyPerson means (a) any direct or indirect advance, loan or other extensionof credit (including, without limitation, a guarantee) or capital contribution(by means of any transfer of cash or other property to others or any paymentfor property or services for the account or use of others) to, or any purchase,acquisition or ownership of, any Capital Stock, Indebtedness or othersecurities issued by such Person, the acquisition (by purchase or otherwise) ofall or substantially all of the business or assets of such Person, or themaking of any investment of cash or other property in such Person, (b) thedesignation of any Restricted Subsidiary as an Unrestricted Subsidiary,(c) the transfer of any assets or properties from the Company or aRestricted Subsidiary to an Unrestricted Subsidiary, other than the transfer ofassets or properties made in the ordinary course of business and (d) thefair market value of the Capital Stock (or any other Investment), held by theCompany or any of its Restricted Subsidiaries, of (or in) any Person that hasceased to be a Restricted Subsidiary. Investments exclude extensions of trade credit on commerciallyreasonable terms in accordance with normal trade practices.

 

“Lien” means any mortgage,pledge, security interest, encumbrance, lien or charge of any kind, includingany conditional sale or other title retention agreement or

 

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lease in the naturethereof, but excluding a title retention agreement to the extent it constitutesan operating lease under Canadian law.

 

“Liquid Securities” meanssecurities of an issuer that is not an Affiliate of the Company, and that arepublicly traded on the New York Stock Exchange, the American Stock Exchange,the Toronto Stock Exchange, the London Stock Exchange, the Nasdaq NationalMarket or the Canadian Venture Exchange. Securities meeting the requirements of the preceding sentence shall betreated as Liquid Securities from the date of receipt thereof until and onlyuntil the earlier of:  (a) the dateon which such securities, or securities exchangeable for, or convertible into,such securities, are sold or exchanged for cash or Cash Equivalents, and (b) 180days following the date of receipt of such securities.  If such securities, or securitiesexchangeable for, or convertible into, such securities, are not sold orexchanged for cash or Cash Equivalents within 180 days of receipt thereof, forpurposes of determining whether the transaction pursuant to which the Companyor its Restricted Subsidiary received the securities was in compliance with theprovisions of Section 10.13, such securities shall not be deemed to havebeen Liquid Securities until 181 days following the date of receipt of such securities.

 

“Material Change” meansan increase or decrease, excluding changes that result solely from changes inprices, of more than 30% during a fiscal quarter in the estimated discountedfuture net cash flows from proved oil and gas reserves of the Company and itsRestricted Subsidiaries, calculated in accordance with clause (i) of thedefinition of Adjusted Consolidated Net Tangible Assets; *provided*, *however*,that the following will be excluded from the calculation of Material Change:(a) any acquisitions during the quarter of oil and gas reserves that havebeen estimated by a Canadian nationally recognized firm of independentpetroleum engineers and on which a report or reports exist, and (b) anydisposition of properties held at the beginning of such quarter that have beendisposed of as provided in the covenant described under Section 10.13.

 

“Maturity”, when usedwith respect to any Security, means the date on which the principal of suchSecurity or an installment of principal becomes due and payable as therein orherein provided, whether at the Stated Maturity or by declaration ofacceleration, notice of redemption or otherwise.

 

“Mirror Note” means thedemand note issued to the Company by Baytex Energy Partnership, in the amountof US$179,699,000, with interest to accrue at the rate of at least 95/8  % and which will be pledged to the Trusteefor the benefit of Holders.

 

“Moody’s” means Moody’sInvestors Service, Inc. and its successors.

 

“Net Cash Proceeds”means, with respect to any Asset Sale, the proceeds thereof in the form of cashor Cash Equivalents, including payments in respect of deferred paymentobligations, but only as and when received, in the form of, or stock or otherassets when disposed of for, cash or Cash Equivalents (except to the extentthat such obligations are financed or sold with recourse to the Company or anyRestricted Subsidiary), net of (a) brokerage commissions and otherreasonable fees and expenses (including fees and expenses of legal counsel,accountants and investment banks) related

 

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to such Asset Sale, (b)provisions for all taxes payable or required to be accrued in accordance withGAAP as a result of such Asset Sale, (c) payments made to retire Indebtednesswhere payment of such Indebtedness is secured by a Lien on the assets that arethe subject of such Asset Sale, (d) amounts required to be paid to any Person(other than the Company or any Restricted Subsidiary) owning a beneficialinterest in the assets that are subject to the Asset Sale, and (e) appropriateamounts to be provided by the Company or any Restricted Subsidiary, as the casemay be, as a reserve required in accordance with GAAP against any liabilitiesassociated with such Asset Sale and retained by the seller after such AssetSale, including pension and other post-employment benefit liabilities,liabilities related to environmental matters and liabilities under anyindemnification obligations associated with such Asset Sale.

 

“Net Profits Interest”means the interest in the Company’s revenue from resource properties, less allroyalties, operating and administrative costs, interest, principal repayments,cash taxes and capital spending funded from the Company’s cash flow, which willbe created and issued to Baytex Energy Trust in connection with theReorganization, which will entitle Baytex Energy Trust to receive distributionsfrom the Company, and which interest is subordinated to the Securities to thesame extent as Subordinated Indebtedness.

 

“Net Working Capital”means, as set forth in the Company’s consolidated financial statements preparedin accordance with GAAP:  (a) allof the Company’s and its Restricted Subsidiaries’ current assets, less (b) allof the Company’s and its Restricted Subsidiaries’ current liabilities, exceptcurrent liabilities included in Indebtedness.

 

“Non-Guarantors” meansSubsidiaries which are not Guarantors.

 

“Non-Recourse PurchaseMoney Indebtedness” means:  (a) theCompany’s and any Restricted Subsidiary’s Indebtedness, other than CapitalLease Obligations, incurred in connection with the acquisition by the Companyor such Restricted Subsidiary in the ordinary course of business of fixedassets used in the Oil and Gas Business, including office buildings and otherreal property used the Company or such Restricted Subsidiary in conducting theCompany’s or such Restricted Subsidiary’s operations, and (b) any renewalsand refinancings of such Indebtedness. For Indebtedness described in the clauses (a) and (b) to qualify asNon-Recourse Purchase Money Indebtedness, the holders of such Indebtedness mustagree that they will look solely to the fixed assets so acquired and theproceeds thereof which secure such Indebtedness, subject to customaryexceptions such as indemnifications for environmental, title, fraud and othermatters, and neither the Company nor any Restricted Subsidiary may:  (x) be directly or indirectly liablefor such Indebtedness, or (y) provide credit support, including anyundertaking, guarantee, agreement or instrument that would constituteIndebtedness, other than the grant of a Lien on such acquired fixed assets andthe proceeds therefrom.

 

“Offering” means theoffering of 95/8 % Senior Subordinated Notes Due 2011 by the Company.

 

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“Officers’ Certificate”means a certificate signed by the Chairman, the Chief Executive Officer, thePresident, or a Vice President, and by the Treasurer, an Assistant Treasurer,the Secretary or an Assistant Secretary of the Company, and delivered to theTrustee.

 

“Oil and Gas Business”means:  (a) the acquisition,exploration, development, operation and disposition of interests in oil, gasand other hydrocarbon properties, (b) the gathering, marketing, treating,processing, storage, selling and transporting of any production from suchinterests or properties, (c) any business relating to or arising fromexploration for or development, production, treatment, processing, storage,transportation or marketing of oil, gas and other minerals and productsproduced in association therewith, (d) any power generation and electricaltransmission business in a jurisdiction within North America where fuelrequired by such business is supplied, directly or indirectly, from productionreserves substantially from blocks in which the Company or its RestrictedSubsidiaries participate, and (e) any activity necessary, appropriate orincidental to the activities described in the clauses (a) through (d).

 

“Oil and Gas HedgingContracts” means any agreement or arrangement, or any combination thereof,relating to oil and gas prices, transportation or basis costs or differentialsor other similar financial factors, that is customary in the Oil and GasBusiness and is entered into by such Person in the ordinary course of businessfor the purpose of limiting or managing risk associated with fluctuations insuch prices, costs, differentials or similar factors.

 

“Opinion of Counsel”means a written opinion of counsel, who may be counsel for the Company,including an employee of the Company, and who shall be acceptable to theTrustee.

 

“Outstanding”, when usedwith respect to Securities, means, as of the date of determination, allSecurities theretofore authenticated and delivered under this Indenture,except:

 

### (a)           Securities theretofore cancelled bythe Trustee or delivered to the Trustee for cancellation;

###  

### (b)           Securities, or portions thereof, forwhose payment, redemption or purchase money in the necessary amount has beentheretofore deposited with the Trustee or any Paying Agent (other than theCompany) in trust or set aside and segregated in trust by the Company (if theCompany shall act as its own Paying Agent) for the Holders of such Securities; *provided*that, if such Securities are to be redeemed, notice of such redemption has beenduly given pursuant to this Indenture or provision therefor satisfactory to theTrustee has been made;

###  

### (c)           Securities, except to the extentprovided in Sections 12.02 and 12.03, with respect to which the Companyhas effected defeasance and/or covenant defeasance as provided inArticle XII; and

 

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### (d)           Securities which have been paidpursuant to Section 3.08 or in exchange for or in lieu of which otherSecurities have been authenticated and delivered pursuant to this Indenture,other than any such Securities in respect of which there shall have beenpresented to the Trustee proof satisfactory to it that such Securities are heldby a bona fide purchaser in whose hands the Securities are valid obligations ofthe Company;

###  

*provided, however*,that in determining whether the Holders of the requisite principal amount ofOutstanding Securities have given any request, demand, authorization,direction, consent, notice or waiver hereunder, and for the purpose of makingthe calculations required by TIA Section 313, Securities owned by theCompany or any other obligor upon the Securities or any Affiliate of theCompany or such other obligor shall be disregarded and deemed not to beOutstanding, except that, in determining whether the Trustee shall be protectedin making such calculation or in relying upon any such request, demand,authorization, direction, notice, consent or waiver, only Securities which theTrustee knows to be so owned shall be so disregarded.  Securities so owned which have been pledged in good faith may beregarded as Outstanding if the pledgee establishes to the satisfaction of theTrustee the pledgee’s right so to act with respect to such Securities and thatthe pledgee is not the Company or any other obligor upon the Securities or anyAffiliate of the Company or such other obligor.

 

“Pari Passu Indebtedness”means any Indebtedness of the Company or any Guarantor, if any, whetheroutstanding at the date of this Indenture or incurred thereafter, that rankspari passu in right of payment with the Securities.

 

“Paying Agent” means TheBank of Nova Scotia Trust Company of New York and any successor (including theCompany acting as Paying Agent) authorized by the Company to pay the principalof (premium, if any) or interest on any Securities on behalf of the Company.

 

“Payment Blockage Period”has the meaning set forth in Section 14.03.

 

“Permitted Consideration”has the meaning set forth in Section 10.13.

 

“Permitted Indebtedness”means, without duplication:

 

#### (i)            Indebtedness of the Company or anyRestricted Subsidiary under the Senior Credit Facilities in an aggregateprincipal amount at any one time outstanding not to exceed the greater of (x)CAN$165.0 million, which amount shall be permanently reduced by the amount ofNet Cash Proceeds used to permanently repay Indebtedness under the SeniorCredit Facilities and not subsequently invested in property and assets thatwill be used in the Oil and Gas Business or used to reduce other Senior Indebtednesspursuant to the provisions of Section 10.13 and (y) the Borrowing Base;

####  

#### (ii)           Indebtedness of the Company or anyRestricted Subsidiary outstanding on the Closing Date, reduced by the amount ofany scheduled amortization

 

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payments or mandatoryprepayments when actually paid or permanent reductions thereon, other thanIndebtedness described under clause (i) above;

####  

#### (iii)          Indebtedness owed by the Company toany Wholly-Owned Restricted Subsidiary or owed by any Restricted Subsidiary tothe Company or a Wholly-Owned Restricted Subsidiary, *provided*, *however*,that if the Company is the obligor on such Indebtedness, such Indebtedness inunsecured; and *provided, further, however*, that if any such Wholly-OwnedRestricted Subsidiary ceases to be (for any reason) a Wholly-Owned RestrictedSubsidiary, then this clause (iii) shall no longer be applicable toIndebtedness owed by the Company or any Restricted Subsidiary to suchRestricted Subsidiary that was formerly a Wholly-Owned Restricted Subsidiary;

####  

#### (iv)          Indebtedness represented by theSecurities (other than the Additional Securities) and the Guarantees (if any);

####  

#### (v)           Indebtedness of the Company or anyRestricted Subsidiary in respect of Hedging Obligations incurred in theordinary course of business; *provided*that, with respect to InterestRate Agreements, the notional amount of any such Interest Rate Agreement doesnot exceed the principal amount of the Indebtedness to which the Interest RateAgreement relates;

####  

#### (vi)          Capital Lease Obligations of theCompany or any Restricted Subsidiary, *provided* that the aggregate amount ofIndebtedness under this clause (vi) does not exceed US$5,000,000 at any onetime outstanding;

####  

#### (vii)         Indebtedness of the Company or anyRestricted Subsidiary under purchase money mortgages or secured by purchasemoney security interests so long as (x) such Indebtedness is not secured by anyproperty or assets of the Company or any Restricted Subsidiary other than theproperty and assets so acquired and the proceeds thereof and (y) suchIndebtedness is created within 90 days of the acquisition of the relatedproperty; *provided*that the aggregate amount of Indebtedness under this clause (vii) does notexceed US$5,000,000 at any one time outstanding;

####  

#### (viii)        guarantees by the Company or anyRestricted Subsidiary of Indebtedness that was permitted to be incurred by theprovisions of Section 10.10, and, with respect to guarantees by anyRestricted Subsidiary, that fall within the definition of Collateral Documents;

####  

#### (ix)           in-kind obligations relating to netgas balancing positions arising in the ordinary course of business andconsistent with past practice;

####  

#### (x)            Non-Recourse Purchase MoneyIndebtedness;

####  

#### (xi)           Indebtedness pursuant to any of theCollateral Documents;

####  

#### (xii)          Deeply Subordinated Inter-companyDebt;

 

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#### (xiii)         any renewals, extensions,substitutions, refinancings or replacements (each, for purposes of this clause,a “refinancing”) of any outstanding Indebtedness incurred pursuant to clause(ii), (iv), (xi) (including the refinancing of Additional Securities, if any)or (xii) above, including any successive refinancings thereof, so long as (A)any such new Indebtedness is in a principal amount that does not exceed theprincipal amount so refinanced, plus the amount of any premium required to bepaid in connection with such refinancing pursuant to the terms of theIndebtedness refinanced or the amount of any premium reasonably determined bythe Company as necessary to accomplish such refinancing, plus the amount of theexpenses of the Company reasonably estimated to be incurred in connection withsuch refinancing, (B) in the case of any refinancing of SubordinatedIndebtedness of the Company, any Guarantors or any guarantors or issuer of theMirror Note or any Additional Mirror Note, such new Indebtedness issubordinated to the Securities or the Guarantees or Collateral Documents, asthe case may be, at least to the same extent as the Indebtedness beingrefinanced and (C) such refinancing Indebtedness has a Weighted Average Lifeequal to or greater than the Weighted Average Life of the Indebtedness beingrefinanced and has a final Stated Maturity no earlier than the final StatedMaturity of the Indebtedness being refinanced *provided*that if suchIndebtedness being refinanced is Indebtedness of the Company, then suchrefinancing Indebtedness shall be solely the Company’s Indebtedness; and

####  

#### (xiv)        Indebtedness not otherwise permitted bythe first paragraph of Section 10.10 and any other clause of thisdefinition, in an aggregate principal amount not to exceed US$20.0 million atany one time outstanding.

####  

For purposes ofdetermining compliance with Section 10.10, in the event that an item ofIndebtedness meets the criteria of more than one of the categories of PermittedIndebtedness described in clauses (i) through (xiv) above or is entitled to beincurred pursuant to the Fixed Charge Coverage Ratio provisions ofSection 10.10, the Company will, in its sole discretion, classify (orlater reclassify) such item of Indebtedness in any manner that complies withSection 10.10.  Accrual ofinterest, accretion or amortization of original issue discount, the payment ofinterest on any Indebtedness in the form of additional Indebtedness with thesame terms, and the payment of dividends on Disqualified Stock in the form ofadditional shares of the same class of Disqualified Stock will not be deemed tobe an incurrence of Indebtedness or an issuance of Disqualified Stock forpurposes of Section 10.10.

 

“Permitted Investments”means any of the following:

 

### (a)           Investments in Cash Equivalents.

###  

### (b)           Investments by the Company or anyRestricted Subsidiary in another Person, if as a result of such Investment suchother Person (i) becomes a Wholly-Owned Restricted Subsidiary or (ii) ismerged, amalgamated or consolidated with or into, or transfers or conveys allor substantially all of its assets to, the Company or a Wholly-Owned RestrictedSubsidiary.

 

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### (c)           Investments by the Company or any ofthe Restricted Subsidiaries in any one of the other of them; *provided*thatany Indebtedness evidencing such Investment is unsecured.

###  

### (d)           Investments existing on the ClosingDate.

###  

### (e)           Investments made as a result of thereceipt of non-cash consideration in an Asset Sale permitted underSection 10.13.

###  

### (f)            Investments consisting of loans andadvances to officers and employees of the Company for reasonable travel,relocation and business expenses in the ordinary course of business for bonafide business purposes not in excess of US$1,000,000 at any one timeoutstanding.

###  

### (g)           Investments the payment for whichconsists exclusively of Capital Stock (exclusive of Disqualified Stock) of theCompany.

###  

### (h)           Hedging Obligations of the Companyand its Restricted Subsidiaries in compliance with this Indenture.

###  

### (i)            Investments made by the Company orany of its Restricted Subsidiaries in connection with the Reorganization.

###  

### (j)            Other Investments that do not exceedUS$7,500,000 in the aggregate at any one time outstanding.

###  

“Person” means anyindividual, corporation, limited or general partnership, limited liabilitycompany,  joint venture, association,joint-stock company, trust, unincorporated organization or government or anyagency or political subdivision thereof.

 

“Predecessor Security” ofany particular Security means every previous Security evidencing all or aportion of the same debt as that evidenced by such particular Security; and,for the purposes of this definition, any Security authenticated and deliveredunder Section 3.08 in exchange for a mutilated security or in lieu of alost, destroyed or stolen Security shall be deemed to evidence the same debt asthe mutilated, lost, destroyed or stolen Security.

 

“Preferred Stock” means,with respect to any Person, any and all shares, interests, partnershipinterests, participations, or other equivalents (however designated) of suchPerson’s preferred or preference stock, whether now outstanding or issued afterthe Closing Date, and including, without limitation, all classes and series ofpreferred or preference stock of such Person.

 

“Principal OperatingSubsidiaries” means, at the date of this Indenture, Baytex Exploration Ltd.(formerly known as Bellator Exploration Inc.), Baytex Resources Ltd. (formerlyknown as Aquilo Energy Inc.) and Baytex Energy Partnership.

 

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“Production Payments”means, collectively, Dollar-Denominated Production Payments and VolumetricProduction Payments.

 

“Private PlacementLegend” has the meaning specified in Section 2.02.

 

“Proceeding” has themeaning set forth in Section 14.02.

 

“Qualified EquityInterest” means any Qualified Stock and all warrants, options or other rightsto acquire Qualified Stock (but excluding any debt security that is convertibleinto or exchangeable for Capital Stock).

 

“Qualified Stock” of anyPerson means any and all Capital Stock of such Person, other than DisqualifiedStock.

 

“QIB” means a “QualifiedInstitutional Buyer” under Rule 144A.

 

“Redemption Date”, whenused with respect to any Security to be redeemed, in whole or in part, meansthe date fixed for such redemption by or pursuant to this Indenture.

 

“Redemption Price”, whenused with respect to any Security to be redeemed, means the price at which itis to be redeemed pursuant to this Indenture.

 

“Registrar” means TheBank of Nova Scotia Trust Company of New York and any successor authorized bythe Company to act as Registrar.

 

“Registration RightsAgreement” means the Registration Rights Agreement between the Company and thedealer managers named therein, dated as of July 9, 2003 relating to theSecurities.

 

Registration Statement”means the Exchange Offer Registration Statement or the Shelf RegistrationStatement, as the case may be.

 

“Regular Record Date” forthe interest payable on any Interest Payment Date means the February 1 orAugust 1 (whether or not a Business Day), as the case may be, nextpreceding such Interest Payment Date.

 

“Regulation S” meansRegulation S under the Securities Act.

 

“Regulation S GlobalSecurity” has the meaning specified in Section 2.01.

 

“Relevant Provinces”shall mean any of the provinces of Canada in which purchases of InitialSecurities were made pursuant to applicable exceptions from prospectusrequirements.

 

“Reorganization” meansthe transactions contemplated by the Company’s plan of reorganization, whichtransactions include, without limitation, the formation of a new oil and gastrust and the transfer, directly and indirectly, of 100% of the Company’s

 

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Voting Stock to thetrust; the formation of a new wholly-owned Subsidiary by the Company thatfocuses primarily on oil and gas exploration, the transfer of a portion of theCompany’s assets and undeveloped land to such Subsidiary and the distributionby the Company of such Subsidiary’s Capital Stock to the Company’sshareholders; the issuance by the Company of Deeply Subordinated Inter-companyDebt to the newly-formed trust; the creation and distribution by the Company ofthe Net Profits Interest; and the issuance by the Company to the Company’sshareholders of non-voting exchangeable shares exchangeable for units of thetrust; *provided*that these transactions will have substantially the same economic consequencesas described in the offering memorandum, dated as of June 4, 2003,relating to the Offering.

 

“Restricted GlobalSecurity” has the meaning specified in Section 2.01.

 

“Restricted Payment” meansany of the following:

 

### (a)           the declaration or payment of anydividend on, or the making of any distribution to holders of, any shares of theCapital Stock of the Company or any Restricted Subsidiary other than (i)dividends or distributions payable solely in Qualified Equity Interests (ii)dividends or distributions to holders of exchangeable shares in connection withthe Reorganization or (iii) dividends or distributions by a RestrictedSubsidiary payable to the Company or another Restricted Subsidiary;

###  

### (b)           the purchase, redemption or otheracquisition or retirement for value, directly or indirectly of any shares ofCapital Stock (or any options, warrants or other rights to acquire shares ofCapital Stock) of (i) the Company or any Unrestricted Subsidiary or (ii) anyRestricted Subsidiary held by any Affiliate of the Company (other than, ineither case, any such Capital Stock owned by the Company or any of itsRestricted Subsidiaries);

###  

### (c)           the making of any principal paymenton, or the repurchase, redemption, defeasance or other acquisition orretirement for value, prior to any scheduled principal payment, sinking fundpayment or maturity, of any Pari Passu Indebtedness or any SubordinatedIndebtedness;

###  

### (d)           the making of any Investment (otherthan a Permitted Investment) in any Person;

###  

### (e)           the making of any payment of interestor principal on Deeply Subordinated Inter-company Debt; or

###  

### (f)            the making of any payment ordistribution on the Net Profits Interest.

###  

“Restricted Period” hasthe meaning set forth in Section 3.06.

 

“Restricted Subsidiary”means any Subsidiary, including the Principal Operating Subsidiaries, otherthan an Unrestricted Subsidiary.

 

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“Rule 144A” means Rule144A under the Securities Act.

 

“Securities” has themeaning stated in the first recital of this Indenture and more particularlymeans any Securities authenticated and delivered under this Indenture.  For all purposes of this Indenture, the term“Securities” shall include any Exchange Securities to be issued and exchangedfor any Initial Securities in accordance with the Exchange Offer as providedfor in the Registration Rights Agreement and this Indenture.  From and after the issuance of anyAdditional Securities pursuant to Section 3.12 (but, not for purposes ofdetermining whether such issuance is permitted hereunder), “Securities” shallinclude such Additional Securities for purposes of this Indenture, and allInitial Securities, Exchange Securities and Additional Securities shall votetogether as one series of Securities under this Indenture.

 

“Securities Act” meansthe Securities Act of 1933, as amended from time to time, and the rules andregulations thereunder.

 

“Securities Payment” hasthe meaning set forth in Section 14.02.

 

“Security Register” hasthe meaning set forth in Section 3.05.

 

“Senior CreditFacilities” means the credit agreement made as of July 9, 2003, among the Company, the Banks and TheToronto-Dominion Bank, as agent, together with the related documents thereto(including, without limitation, any guarantee agreements and securitydocuments), as the credit agreement or such other documents may be amended,renewed, extended, substituted, assigned by the agent or any lender, restated,refinanced, restructured, supplemented or otherwise modified from time to time(including, without limitation, any successive amendments, renewals,extensions, substitutions, assignments, restatements, refinancings,restructuring, supplements or other modifications of the foregoing (includingincreasing the amount of available borrowings thereunder, *provided*that such increasein borrowings is permitted by Section 10.10, or adding RestrictedSubsidiaries as additional borrowers or guarantors thereunder)) of all or anyportion of the Indebtedness under such agreement or any successor orreplacement agreement and whether by the same or any other agent, lender orgroup of lenders).

 

“Senior Credit FacilitiesAgent” means The Toronto-Dominion Bank, as agent for the Banks under the SeniorCredit Facilities or any successor thereto identified as “agent” in writtennotice to the Trustee given by the predecessor agent.

 

“Senior Indebtedness”means the principal of (and premium, if any) and interest on (includinginterest accruing after the filing of a petition initiating any proceedingpursuant to any bankruptcy law, whether or not allowed) and other amounts dueon or in connection with any Indebtedness of the Company (other than theSecurities or Pari Passu Indebtedness), whether outstanding on the Closing Dateor thereafter incurred, unless, in the case of such Indebtedness, theinstrument creating or evidencing the same or pursuant to which the same isoutstanding expressly provides that such Indebtedness will be subordinate inright of payment to the Securities. Without limiting the generality of the foregoing, “Senior Indebtedness”includes the principal of (and

 

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premium, if any) andinterest (including interest accruing after the occurrence of an event ofdefault or after the filing of a petition initiating any proceeding pursuant toany bankruptcy law, whether or not allowed) on and all other amounts owing inrespect of (i) all obligations of every nature of the Company from time totime owed to the Banks and the Senior Credit Facilities Agent under the SeniorCredit Facilities,*provided, however*, that any Indebtedness under anyrefinancing, refunding or replacement of the Senior Credit Facilities shall notconstitute Senior Indebtedness to the extent that the Indebtedness thereunderis by its express terms subordinate to any other Indebtedness of the Companyand (ii) all Hedging Obligations. Notwithstanding the foregoing, “Senior Indebtedness” shall not include(a) Indebtedness that is represented by Disqualified Stock, (b) anytrade payables, (c) Indebtedness of or amounts owed by the Company forcompensation to employees or for services rendered to the Company, (d) anyliability for foreign, federal, provincial, state, local or other taxes owed orowing by the Company, (e) Indebtedness of the Company to a Subsidiary ofthe Company or any other Affiliate of the Company or any of such Affiliate’sSubsidiaries, (f) that portion of any Indebtedness that, at the time ofthe incurrence, is incurred by the Company in violation of this Indenture and(g) amounts owing under leases (other than Capital Lease Obligations).

 

“Senior NonmonetaryDefault” has the meaning set forth in Section 14.03.

 

“Senior Payment Default”has the meaning set forth in Section 14.03.

 

“Shelf RegistrationStatement” means the Shelf Registration Statement as defined in theRegistration Rights Agreement.

 

“Significant Subsidiary”means any Restricted Subsidiary of the Company that would be a “SignificantSubsidiary” of the Company within the meaning of Rule 1-02 under Regulation S-Xpromulgated by the Commission as such Rule is in effect on the date of thisIndenture.

 

“S&P” means Standard& Poor’s Ratings Services, a division of The McGraw Hill Companies, and itssuccessors.

 

“Special Record Date” forthe payment of any Defaulted Interest means a date fixed by the Trusteepursuant to Section 3.09.

 

“Stated Maturity” means,when used with respect to any Security or any installment of interest thereon,the date specified in such Security as the fixed date on which the principal ofsuch Security or such installment of interest is due and payable and, when usedwith respect to any other Indebtedness, means the date specified in theinstrument governing such Indebtedness as the fixed date on which the principalof such Indebtedness or any installment of interest thereon is due and payable,and will not, in either case, include any contingent obligations to repay,redeem or repurchase any such interest or principal prior to the dateoriginally scheduled for the payment thereof.

 

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“SubordinatedIndebtedness” means Indebtedness of the Company or a Guarantor that issubordinated in right of payment to the Securities or the Guarantee issued bysuch Guarantor (if any), as the case may be.

 

“Subsidiary” means anyPerson a majority of the equity ownership or Voting Stock (including, withoutlimitation, partnership interests) of which is at the time owned, directly orindirectly, by the Company and/or one or more Subsidiaries of the Company.

 

“Surviving Entity” hasthe meaning specified in Section 8.01.

 

“Taxes” has the meaningspecified in Section 10.23.

 

“Trust Indenture Act” or“TIA” means the Trust Indenture Act of 1939, as amended, as in force at thedate as of which this Indenture was executed, except as provided inSection 9.05.

 

“Trustee” means thePerson named as the “Trustee” in the first paragraph of this Indenture until asuccessor Trustee shall have become such pursuant to the applicable provisionsof this Indenture, and thereafter “Trustee” shall mean such successor Trustee.

 

“Unpaid RestrictedPayment Funds” means the total amount of Restricted Payments that the Companyand its Restricted Subsidiaries were permitted to make pursuant toclause (a)(i) of Section 10.11, but that the Company did not actuallymake, and that for the purposes of this Indenture have only accrued on acumulative basis for every fiscal quarter during which the Company waspermitted to make Restricted Payments pursuant to such clause (a)(i).

 

“Unrestricted Subsidiary”means (a) any Subsidiary that is designated by the Board of Directors as anUnrestricted Subsidiary in accordance with Section 10.18 and (b) anySubsidiary of an Unrestricted Subsidiary.

 

“U.S. GovernmentObligations” has the meaning set forth in Section 12.04.

 

“U.S. PhysicalSecurities” has the meaning set forth in Section 2.01.

 

“Voting Stock” means anyclass or classes of Capital Stock pursuant to which the holders thereof havethe general voting power under ordinary circumstances to elect at least amajority of the board of directors, managers or trustees of any Person(irrespective of whether or not, at the time, stock of any other class orclasses has, or might have, voting power by reason of the happening of anycontingency).

 

“Volumetric ProductionPayments” means production payment obligations of the Company or its RestrictedSubsidiaries recorded as deferred revenue in accordance with GAAP, togetherwith all undertakings and obligations in connection therewith.

 

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“Weighted Average Life”means, as of the date of determination with respect to any Indebtedness orDisqualified Stock, the quotient obtained by dividing (a) the sum of the productof (i) the number of years from the date of determination to the date or datesof each successive scheduled principal or liquidation value payment of suchIndebtedness or Disqualified Stock, respectively, multiplied by (ii) the amountof each such principal or liquidation value payment, by (b) the sum of all suchprincipal or liquidation value payments.

 

“Wholly-Owned RestrictedSubsidiary” means any Restricted Subsidiary, all of the Capital Stock (otherthan directors’ qualifying shares or shares of Restricted Subsidiaries requiredto be owned by foreign nationals pursuant to applicable law) of which is owned,directly or indirectly, by the Company.

 

## **Section 1.02**         Compliance Certificates and Opinions.

 

Upon any application orrequest by the Company or any Guarantor, if any, to the Trustee to take anyaction under any provision of this Indenture, the Company or such Guarantor, asthe case may be, shall furnish to the Trustee an Officers’ Certificate statingthat all conditions precedent, if any, provided for in this Indenture(including any covenant compliance with which constitutes a conditionprecedent) relating to the proposed action have been complied with and anOpinion of Counsel stating that in the opinion of such counsel all suchconditions precedent, if any, have been complied with, except that in the caseof any such application or request as to which the furnishing of such documentsis specifically required by any provision of this Indenture relating to suchparticular application or request, no additional certificate or opinion need befurnished.

 

Every certificate oropinion with respect to compliance with a condition or covenant provided for inthis Indenture (other than pursuant to Section 10.08(a)) shallinclude:

 

### (a)           a statement that each individualsigning such certificate or opinion has read such covenant or condition and thedefinitions herein relating thereto;

###  

### (b)           a brief statement as to the natureand scope of the examination or investigation upon which the statements oropinions contained in such certificate or opinion are based;

###  

### (c)           a statement that, in the opinion ofeach such individual, he has made such examination or investigation as isnecessary to enable him to express an informed opinion as to whether or notsuch covenant or condition has been complied with; and

###  

### (d)           a statement as to whether, in theopinion of each such individual, such condition or covenant has been compliedwith.

 

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## **Section 1.03**         Form of Documents Delivered to Trustee.

## ** **

In any case where severalmatters are required to be certified by, or covered by an opinion of, anyspecified Person, it is not necessary that all such matters be certified by, orcovered by the opinion of, only one such Person, or that they be so certifiedor covered by only one document, but one such Person may certify or give anopinion with respect to some matters and one or more other such Persons as toother matters, and any such Person may certify or give an opinion as to suchmatters in one or several documents.

 

Any certificate oropinion of an officer of the Company and/or any Guarantor, if any, may bebased, insofar as it relates to legal matters, upon a certificate or opinionof, or representations by, counsel, unless such officer knows, or in theexercise of reasonable care should know, that the certificate or opinion orrepresentations with respect to the matters upon which his certificate oropinion is based are erroneous.  Anysuch certificate or Opinion of Counsel may be based, insofar as it relates tofactual matters, upon a certificate or opinion of, or representations by, anofficer or officers of the Company and/or any such Guarantor stating that theinformation with respect to such factual matters is in the possession of the Companyand/or any such Guarantors, as applicable, unless such counsel knows, or in theexercise of reasonable care should know, that the certificate or opinion orrepresentations with respect to such matters are erroneous.

 

Where any Person isrequired to make, give or execute two or more applications, requests, consents,certificates, statements, opinions or other instruments under this Indenture,they may, but need not, be consolidated and form one instrument.

 

## **Section 1.04**         Acts of Holders.

## ** **

### (a)           Any request, demand, authorization,direction, notice, consent, waiver or other action provided by this Indentureto be given or taken by Holders may be embodied in and evidenced by one or moreinstruments of substantially similar tenor signed by such Holders in person orby agents duly appointed in writing; and, except as herein otherwise expresslyprovided, such action shall become effective when such instrument orinstruments are delivered to the Trustee and, where it is hereby expresslyrequired, to the Company and the Guarantors, if any.  Such instrument or instruments (and the action embodied thereinand evidenced thereby) are herein sometimes referred to as the “Act” of theHolders signing such instrument or instruments.  Proof of execution of any such instrument or of a writingappointing any such agent shall be sufficient for any purpose of this Indentureand conclusive in favor of the Trustee, the Company and the Guarantors, if madein the manner provided in this Section.

###  

### (b)           The fact and date of the execution byany Person of any such instrument or writing may be proved by the affidavit ofa witness of such execution or by a certificate of a notary public or otherofficer authorized by law to take acknowledgments of deeds, certifying that theindividual signing such instrument or writing acknowledged to him the executionthereof.  Where such execution is by asigner

 

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acting in a capacityother than his individual capacity, such certificate or affidavit shall alsoconstitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, orthe authority of the Person executing the same, may also be proved in any othermanner that the Trustee deems sufficient and in accordance with such reasonablerules as the Trustee may determine; and the Trustee may in any instance requirefurther reasonable proof with respect to any of the matters referred to in thisSection.

###  

### (c)           The ownership, principal amount andserial numbers of Securities held by any Person, and the dates of commencementand termination of holding the same, shall be proved by the Security Register.

###  

### (d)           If the Company or any Guarantor, ifany, shall solicit from the Holders of Securities any request, demand, authorization,direction, notice, consent, waiver or other Act, the Company or any suchGuarantor (as the case may be) may, at its option, by or pursuant to a BoardResolution, fix in advance a record date for the determination of Holdersentitled to give such request, demand, authorization, direction, notice,consent, waiver or other Act, but the Company or any such Guarantor (as thecase may be) shall have no obligation to do so.  Notwithstanding TIA Section 316(c), such record date shallbe the record date specified in or pursuant to such Board Resolution, whichshall be a date not earlier than the date 30 days prior to the firstsolicitation of Holders generally in connection therewith and not later thanthe date such solicitation is completed. If such a record date is fixed, such request, demand, authorization,direction, notice, consent, waiver or other Act may be given before or aftersuch record date, but only the Holders of record at the close of business onsuch record date shall be deemed to be Holders for the purposes of determiningwhether Holders of the requisite proportion of Outstanding Securities haveauthorized or agreed or consented to such request, demand, authorization,direction, notice, consent, waiver or other Act, and for that purpose the OutstandingSecuritiesshall be computed as of such record date; *provided* that no suchauthorization, agreement or consent by the Holders on such record date shall bedeemed effective unless it shall become effective pursuant to the provisions ofthis Indenture not later than eleven months after the record date.

###  

### (e)           Any request, demand, authorization,direction, notice, consent, waiver or other Act of the Holder of any Security****shallbind every future Holder of the same Security****and the Holder of every Security****issuedupon the registration of transfer thereof or in exchange therefor or in lieuthereof in respect of anything done, omitted or suffered to be done by theTrustee or the Company and/or the Guarantors in reliance thereon, whether ornot notation of such action is made upon such Security.

###  

### (f)            For all purposes of this Indenture,all Initial Securities and Exchange Securities shall vote together as oneseries of Securities under this Indenture.

 

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## **Section 1.05**         Notices, etc., to Trustee, Companyor Guarantors.

## ** **

Any request, demand,authorization, direction, notice, consent, waiver or Act of Holders or otherdocument provided or permitted by this Indenture to be made upon, given orfurnished to, or filed with:

 

### (a)           the Trustee by any Holder, theCompany or any Guarantor shall be sufficient for every purpose hereunder ifmade, given, furnished or filed in writing or mailed, first-class postageprepaid, to or with the Trustee at its Corporate Trust Office, Attention:Corporate Finance Department, (212) 225-5436, or sent by facsimile to theTrustee at One Liberty Plaza, New York, New York 10006 (with receipt confirmedby telephone at (212) 225-5426); or

###  

### (b)           the Company by the Trustee, anyHolder or any Guarantor shall be sufficient for every purpose hereunder (unlessotherwise herein expressly provided) if in writing and mailed, first-classpostage prepaid, to the Company, addressed to it at 205 –5th Avenue S.W., Suite2200, Calgary, Alberta, Canada T2P 2V7, Attention:  Chief Financial Officer, or sent byfacsimile to the Company at (403) 205-3845 with receipt confirmed by telephoneat (403) 269-4282 (or at any other address or facsimile number previouslyfurnished in writing to the Trustee by the Company); or

###  

### (c)           any Guarantor by the Company, anyother Guarantor, the Trustee or any Holder shall be sufficient for any purposehereunder (unless otherwise herein expressly provided) if in writing, andmailed, first class postage prepaid, to such Guarantor addressed to it at c/oBaytex Energy Ltd., 205 –5th Avenue S.W., Suite 2200, Calgary, Alberta, CanadaT2P 2V7, Attention:  ChiefFinancial Officer, or sent by facsimile to such Guarantor at (403) 205-3845(with receipt confirmed by telephone at (403) 269-4282), or at any otheraddress or facsimile number previously furnished in writing to the Trustee bysuch Guarantor.

###  

## **Section 1.06**         Notice to Holders, Waiver.

## ** **

Where this Indentureprovides for notice of any event to Holders by the Company or the Trustee, suchnotice shall be sufficiently given (unless otherwise herein expressly provided)if in writing and mailed, first-class postage prepaid, to each Holder affectedby such event, at his address as it appears in the Security Register, not laterthan the latest date, and not earlier than the earliest date, prescribed forthe giving of such notice.  In any casewhere notice to Holders is given by mail, neither the failure to mail suchnotice, nor any defect in any notice so mailed, to any particular Holder shallaffect the sufficiency of such notice with respect to other Holders.  Any notice mailed to a Holder in the mannerherein prescribed shall be conclusively deemed to have been received by suchHolder, whether or not such Holder actually receives such notice.  Where this Indenture provides for notice inany manner, such notice may be waived in writing by the Person entitled toreceive such notice, either before or after the event, and such waiver shall bethe equivalent of such notice.  Waiversof notice by Holders shall be filed with the Trustee, but such filing shall notbe a condition precedent to the validity of any action taken in reliance uponsuch waiver.

 

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In case, by reason of thesuspension of or irregularities in regular mail service or by reason of anyother cause, it shall be impracticable to mail notice of any event to Holderswhen such notice is required to be given pursuant to any provision of thisIndenture, then any manner of giving such notice as shall be directed by theCompany and reasonably satisfactory to the Trustee shall be deemed to be asufficient giving of such notice for every purpose hereunder.

 

## **Section 1.07**         Conflict of any Provision ofIndenture with Trust Indenture Act.

## ** **

If and to the extent thatany provision of this Indenture limits, qualifies or conflicts with the dutiesimposed by Sections 310 to 318, inclusive, of the Trust Indenture Act, orconflicts with any provision (an “incorporated provision”) required by ordeemed to be included in this Indenture by operation of such Trust IndentureAct sections, such imposed duties or incorporated provision shall control.  Notwithstanding the previous sentence, ifany provision of this Indenture modifies or excludes any provision of the TrustIndenture Act that may be so modified or excluded, the latter provision shallbe deemed to apply to this Indenture as so modified or excluded, as the casemay be.

 

## **Section 1.08**         Effect of Headings and Table ofContents.

## ** **

The Article andSection headings herein and the Table of Contents are for convenience onlyand shall not affect the construction hereof.

 

## **Section 1.09**         Successors and Assigns.

## ** **

All covenants andagreements in this Indenture by the Company and the guarantors, if any, shallbind their respective successors and assigns, whether so expressed or not.

 

## **Section 1.10**         Severability Clause.

## ** **

In case any provision inthis Indenture or in the Securities shall be invalid, illegal or unenforceable,the validity, legality and enforceability of the remaining provisions shall notin any way be affected or impaired thereby.

 

## **Section 1.11**         Benefits of Indenture.

## ** **

Nothing in this Indentureor in the Securities, express or implied, shall give to any Person, other thanthe parties hereto, any Paying Agent, any Securities****Registrar and theirsuccessors hereunder, the Holders and any holder of Senior Indebtedness withrespect to Article XIV, any benefit or any legal or equitable right,remedy or claim under this Indenture.

 

## **Section 1.12**         Governing Law.

## ** **

This Indenture and theSecurities shall be governed by and construed in accordance with the law of theState of New York (without regard to applicable

 

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principles of conflictsof law thereof).  Upon the issuance ofthe Exchange Securities, if any, or the effectiveness of the Exchange OfferRegistration Statement or, under certain circumstances, the effectiveness ofthe Shelf Registration Statement, this Indenture shall be subject to theprovisions of the Trust Indenture Act of 1939, as amended, that are required tobe part of this Indenture and shall, to the extent applicable, be governed bysuch provisions.

 

## **Section 1.13**         Legal Holidays.

## ** **

In any case where anyInterest Payment Date, Redemption Date, date established for payment ofDefaulted Interest pursuant to Section 3.09, Stated Maturity or Maturity,Change of Control Purchase Date or Asset Sale Purchase Date with respect to anySecurity or other day on which principal (premium, if any) or interest inrespect or the Securities is due, shall not be a Business Day, then(notwithstanding any other provision of this Indenture or of the Securities)payment of principal (or premium, if any) or interest need not be made on suchdate, but may be made on the next succeeding Business Day with the same forceand effect as if made on the Interest Payment Date, Redemption Date, dateestablished for payment of Defaulted Interest pursuant to Section 3.09,Stated Maturity or Maturity, Change of Control Purchase Date or Asset Sale PurchaseDate; *provided*that no interest shall accrue for the period from and after suchInterest Payment Date or other such day, Redemption Date, date established forpayment of Defaulted Interest pursuant to Section 3.09, Stated Maturity orMaturity, Change in Control Purchase Date or Asset Sale Purchase Date, as thecase may be, to the next succeeding Business Day.

 

## **Section 1.14**         Rules of Construction.

## ** **

Unless the contextotherwise requires:

 

##### (1)           a term has the meaning assigned toit;

#####  

##### (2)           an accounting term not otherwisedefined has the meaning assigned to it in accordance with generally acceptedaccounting principles in effect in Canada from time to time, and any otherreference in this Indenture to “generally accepted accounting principles”refers to GAAP, as defined in this Indenture;

#####  

##### (3)           “or” is not exclusive;

#####  

##### (4)           words in the singular include theplural, and words in the plural include the singular;

#####  

##### (5)           provisions apply to successive eventsand transactions;

 

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##### (6)           all references to “US$”, U.S.dollars” or ‘United States Dollars” shall refer to the lawful currency of theUnited States of America.

#####  

## **Section 1.15**         Agent for Service; Submission toJurisdiction; Waiver of Immunities.

## ** **

By the execution anddelivery of this Agreement, the Company (i) acknowledges that it will, byseparate written instrument, designate and appoint CT Corporation System, 111Eighth Avenue, 13th Floor, New York, New York 10011 (and anysuccessor entity) as its authorized agent upon which process may be served inany suit or proceeding arising out of or relating to this Indenture, theSecurities or the Exchange Securities that may be instituted in any Federal orstate court in the State of New York, the City of New York, the Borough of Manhattan,or brought under federal or state securities laws, and acknowledges that CTCorporation System will accept such designation, (ii) submits to thejurisdiction of any such court in any such suit or proceeding, and(iii) agrees that service of process upon CT Corporation System andwritten notice of said service to the Company in accordance withSection 1.05 shall be deemed in every respect effective service of processupon the Company in any such suit or proceeding.

 

To the extent that theCompany has or hereafter may acquire any immunity from jurisdiction of anycourt or from any legal process (whether through service of notice, attachmentprior to judgment, attachment in aid of execution, execution or otherwise) withrespect to itself or its property, it hereby irrevocably waives such immunityin respect of its obligations under the above-referenced documents, to theextent permitted by law.

 

## **Section 1.16**         Judgment Currency.

## ** **

The Company agrees toindemnify each Holder against any loss incurred by such Holder as a result ofany judgment or order being given or made against the Company for any U.S.dollar amount due under this Indenture and such judgment or order beingexpressed and paid in a currency (the “Judgment Currency”) other than UnitedStates dollars and as a result of any variation as between (i) the rate ofexchange at which the United States dollar amount is converted into theJudgment Currency for the purpose of such judgment or order and (ii) thespot rate of exchange in the City of New York at which such party on the dateof payment of such judgment or order is able to purchase United States dollarswith the amount of the Judgment Currency actually received by such party ifsuch party had utilized such amount of Judgment Currency to purchase UnitedStates dollars as promptly as practicable upon such party’s receiptthereof.  The foregoing indemnity shallcontinue in full force and effect notwithstanding any such judgment or order asaforesaid.  The term “spot rate ofexchange” shall include any premiums and costs of exchange payable inconnection with the purchase or, or conversion into, United States dollars.

 

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# **ARTICLE II**SECURITY FORMS

# ** **

## **Section 2.01**         Forms Generally.

## ** **

The Securities and theTrustee’s certificate of authentication shall be in substantially the formannexed hereto as Exhibit A, with such appropriate insertions, omissions,substitutions and other variations as are required or permitted by thisIndenture, and may have such letters, numbers or other marks of identificationand such legends or endorsements placed thereon as may be required to complywith the rules of any securities exchange or as may, consistently herewith, bedetermined by the officers executing such Securities, as evidenced by theirexecution of the Securities.  Anyportion of the text of any Security may be set forth on the reverse thereof,with an appropriate reference thereto on the face of the Security.

 

The definitive Securitiesshall be printed, lithographed or engraved on steel-engraved borders or may beproduced in any other manner, all as determined by the officers of the Companyexecuting such Securities, as evidenced by their execution of such Securities.

 

The terms and provisionscontained in the form of the Securities annexed hereto as Exhibit A shallconstitute, and are hereby expressly made, a part of this Indenture.  To the extent applicable, the Company andthe Trustee, by their execution and delivery of this Indenture, expressly agreeto such terms and provisions and to be bound thereby.

 

Initial Securitiesoffered and sold in reliance on Rule 144A shall be issued initially in theform of one or more permanent global Securities without interest couponssubstantially in the form set forth in Exhibit A (collectively “RestrictedGlobal Security”) deposited with, or on behalf of, the Depositary or with theTrustee, as custodian for the Depositary, duly executed by the Company andauthenticated by the Trustee as hereinafter provided.  The aggregate principal amount of the Restricted Global Securitymay from time to time be increased or decreased by adjustments made on therecords of the Trustee, as custodian for the Depositary or its nominee, ashereinafter provided.

 

Initial Securitiesoffered and sold in reliance on Regulation S shall be issued initially inthe form of one or more permanent global Securities in fully registered formwithout interest coupons substantially in the form set forth in Exhibit A(collectively, the “Regulation S Global Security” and, together with theRestricted Global Security, the “Global Securities” or each individually, a“Global Security”) deposited with, or on behalf of the Depository or with theTrustee, as custodian for the Depositary. Interests in the Regulation S Global Security may be held through theaccounts of CDS, Euroclear and Clearstream, which are indirect participants inDTC, duly executed by the Company and authenticated by the Trustee ashereinafter provided.  The aggregateprincipal amount of the Regulation S Global Security may from time to time beincreased

 

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or decreased byadjustments made on the records of the Depositary or its nominee, or of theTrustee, as custodian for the Depositary or its nominee, as hereinafterprovided.

 

If DTC is at any timeunwilling or unable to continue as a depositary, the Company will issuecertificates for the Securities in definitive, fully registered, non-globalform without interest coupons in exchange for the Regulation S GlobalSecurity or Restricted Global Security, as the case may be. In all cases,certificates for Securities delivered in exchange for any Global Security orbeneficial interests therein will be registered in the names, and issued in anyapproved denominations, requested by DTC.

 

In the case ofcertificates for Securities in non-global form issued in exchange for theRegulation S Global Security or Restricted Global Security, suchcertificates will bear the first legend appearing under Section 2.02 of thisIndenture (unless the Company determines otherwise in accordance withapplicable law). The holder of a Security in non-global form may transfer suchSecurity, subject to compliance with the provisions of such legend, bysurrendering it at the office or agency maintained by the Company for suchpurpose in the Borough of Manhattan, The City of New York, which initially willbe the office of the Trustee.

 

Initial Securitiesoffered and sold other than as global securities shall be issued in the form ofpermanent certificated Securities in registered form in substantially the formset forth in this Article (the “U.S. Physical Securities”).

 

## **Section 2.02**         Restrictive Legends.

## ** **

Unless and until anInitial Security is sold under an effective Registration Statement, exchangedfor an Exchange Security in connection with an effective Registration Statementor exchanged pursuant to a Canadian Final Prospectus for which receipts havebeen issued by each of the Canadian Securities Commissions in the RelevantProvinces, in each case pursuant to the Registration Rights Agreement, eachcertificate representing a Security shall contain a legend substantially to thefollowing effect (the “Private Placement Legend”) on the face thereof:

 

THIS SECURITY HAS NOT BEENREGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE“SECURITIES ACT”).  THE HOLDER HEREOF,BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THISSECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THESECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR(Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THETHREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE

 

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OTHER THAN (1) TO THE COMPANY,(2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144AUNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON WHOM THE SELLER REASONABLYBELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144APURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONALBUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER ISBEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFERORON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN ANOFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OFTRANSFER ON THE REVERSE OF THIS SECURITY), OR (4) PURSUANT TO AN EXEMPTION FROMREGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE)UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLESECURITIES LAWS OF ANY STATE OF THE UNITED STATES;

 

and, if issued to holders resident in Canada:

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THESECURITIES SHALL NOT TRADE THE SECURITIES BEFORE [INSERT THE DATE THAT IS FOURMONTHS, OR SUCH OTHER DATE AS MAY BE REQUIRED BY THE SECURITIES LAWS IN THEPROVINCE IN WHICH THE HOLDER IS RESIDENT, AND A DAY AFTER THE DATE OF ISSUE].

 

Each Global Security,whether or not an Initial Security, shall also bear the following legend on theface thereof:

 

UNLESS THIS CERTIFICATEIS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, ANEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OFTRANSFER,

 

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EXCHANGE OR PAYMENT, ANDANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCHOTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC OR SUCHOTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANYPAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS ISREQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OROTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCETHE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

TRANSFERS OF THIS GLOBALSECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEESOF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE ANDTRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERSMADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.06 AND 3.07 OFTHE INDENTURE.

 

# **ARTICLE III**THE SECURITIES

# ** **

## **Section 3.01**         Title and Terms.

## ** **

The initial aggregateprincipal amount of Securities which may be authenticated and delivered underthis Indenture is limited to US$179,699,000, except for Securitiesauthenticated and delivered upon registration of transfer of, or in exchangefor, or in lieu of, other Securities pursuant to Section 3.04, 3.05, 3.06,3.07, 3.08, 9.06, 10.12, 10.13 or 11.08, pursuant to an Exchange Offer orpursuant to Section 3.12.  TheCompany may also issue additional Securities under this Indenture havingidentical terms and conditions to the Securities, subject to compliance withthe covenants contained herein including, without limitation, the covenantcontained in Section 10.22 (the “Additional Securities”).

 

The Initial Securitiesshall be known and designated as the “95/8% SeniorSubordinated Notes due 2010” and the Exchange Securities shall be known anddesignated as the “95/8% Senior Series B SubordinatedNotes due 2010.”  Their Stated Maturityshall be July 15, 2010, and they shall bear interest at the rate of 95/8%per annum from the Closing Date, or from the most recent Interest Payment Dateto which interest has been paid or duly provided for, payable semiannually inarrears on January 15 and July 15 in each year, commencingJanuary 15, 2004, until the principal thereof is paid or

 

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duly provided for, to thePerson in whose name the Security (or any predecessor Security) is registeredat the close of business on the January 1 or July 1 next precedingsuch Interest Payment Date.

 

The principal of(premium, if any) and interest on the Securities shall be payable, and theSecurities shall be exchangeable and transferable, at the office or agency ofthe Company in The City of New York maintained for such purposes, (whichinitially shall be the office of the Trustee located at One Liberty Plaza, 23rdFloor, New York, New York 10006) or, at the option of the Company, interest maybe paid by check mailed to the address of the Person entitled thereto as suchaddress shall appear on the Security Register; *provided* that all paymentswith respect to the U.S. Global Securities, as well as Physical Securities theHolders of which have given wire transfer instructions to the Trustee (or otherPaying Agent) by the Regular Record Date for such payment, will be required tobe made by wire transfer of immediately available funds to the accountsspecified by the Holders thereof.

 

Securities that remainoutstanding after the consummation of the Exchange Offer and ExchangeSecurities issued in connection with the Exchange Offer will be treated as asingle class of securities under this Indenture.

 

The Securities shall beredeemable as provided in Article XI.

 

## **Section 3.02**         Denominations.

## ** **

The Securities shall beissuable only in registered form without coupons and only in denominations ofUS$1,000 and any integral multiple thereof.

 

## **Section 3.03**         Execution, Authentication, Deliveryand Dating.

## ** **

The Securities shall beexecuted on behalf of the Company by its Chairman, its President or a VicePresident.  The signature of any ofthese officers on the Securities may be manual or facsimile signatures of thepresent or any future such authorized officer and may be imprinted or otherwisereproduced on the Securities.

 

Securities bearing themanual or facsimile signatures of individuals who were at any time the properofficers of the Company shall bind the Company, notwithstanding that suchindividuals or any of them have ceased to hold such offices prior to theauthentication and delivery of such Securities or did not hold such offices atthe date of such Securities.

 

At any time and from timeto time after the execution and delivery of this Indenture, the Company maydeliver Initial Securities executed by the Company to the Trustee forauthentication, together with a Company Order for the authentication anddelivery of such Initial Securities directing the Trustee to authenticate theSecurities and certifying that all conditions precedent to the issuance ofSecurities contained herein have been fully complied with, and the Trustee inaccordance with such Company Order shall authenticate and deliver such InitialSecurities.  On Company Order, theTrustee shall

 

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authenticate for originalissue Exchange Securities in an aggregate principal amount not to exceedUS$179,699,000 plus the aggregate principal amount of any Additional Securitiesissued; *provided*that such Exchange Securities shall be issuable only upon the valid surrenderfor cancellation of Initial Securities of a like aggregate principal amount inaccordance with an Exchange Offer pursuant to the Registration Rights Agreementand a Company Order for the authentication of such securities certifying thatall conditions precedent to the issuance have been complied with (including theeffectiveness of a registration statement related thereto).  In each case, the Trustee shall be entitledto receive an Officers’ Certificate and an Opinion of Counsel of the Companythat it may reasonably request in connection with such authentication ofSecurities.  Such order shall specifythe amount of Securities to be authenticated and the date on which the originalissue of Initial Securities or Exchange Securities is to be authenticated.

 

Each Security shall bedated the date of its authentication.

 

No Security shall beentitled to any benefit under this Indenture or be valid or obligatory for anypurpose unless there appears on such Security a certificate of authenticationsubstantially in the form provided for in Exhibit A duly executed by theTrustee by manual signature of an authorized officer, and such certificate uponany Security shall be conclusive evidence, and the only evidence, that suchSecurity has been duly authenticated and delivered hereunder and is entitled tothe benefits of this Indenture.

 

In case the Company,pursuant to Article VIII, shall be amalgamated, consolidated or mergedwith or into any other Person or shall convey, transfer, lease or otherwisedispose of its properties and assets substantially as an entirety to anyPerson, and the successor Person resulting from such amalgamation,consolidation, or surviving such merger, or into which the Company shall havebeen merged, or the Person which shall have received a conveyance, transfer,lease or other disposition as aforesaid, shall have executed an indenturesupplemental hereto with the Trustee pursuant to Article VIII, any of theSecurities authenticated or delivered prior to such amalgamation,consolidation, merger, conveyance, transfer, lease or other disposition may,from time to time, at the request of the successor Person, be exchanged forother Securities executed in the name of the successor Person with such changesin phraseology and form as may be appropriate, but otherwise in substance oflike tenor as the Securities surrendered for such exchange and of likeprincipal amount; and the Trustee, upon Company Request of the successorPerson, shall authenticate and deliver Securities as specified in such requestfor the purpose of such exchange.  IfSecurities shall at any time be authenticated and delivered in any new name ofa successor Person pursuant to this Section in exchange or substitutionfor or upon registration of transfer of any Securities, such successor Person,at the option of the Holders but without expense to them, shall provide for theexchange of all Securities at the time Outstanding for Securities authenticatedand delivered in such new name.

 

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## **Section 3.04**         Temporary Securities.

## ** **

Pending the preparationof definitive Securities, the Company may execute, and upon Company Order theTrustee shall authenticate and deliver, temporary Securities which are printed,lithographed, typewritten, mimeographed or otherwise produced, in anyauthorized denomination, substantially of the tenor of the definitiveSecurities in lieu of which they are issued and with such appropriateinsertions, omissions, substitutions and other variations as the officersexecuting such Securities may determine, as conclusively evidenced by theirexecution of such Securities.

 

If temporary Securitiesare issued, the Company will cause definitive Securities to be prepared withoutunreasonable delay.  After thepreparation of definitive Securities, the temporary Securities shall beexchangeable for definitive Securities upon surrender of the temporarySecurities at the office or agency of the Company designated for such purposepursuant to Section 10.02, without charge to the Holder.  Upon surrender for cancellation of any oneor more temporary Securities, the Company shall execute and the Trustee shallauthenticate and deliver in exchange therefor a like principal amount ofdefinitive Securities of authorized denominations.  Until so exchanged, the temporary Securities shall in allrespects be entitled to the same benefits under this Indenture as definitiveSecurities.

 

## **Section 3.05**         Registration, Registration ofTransfer and Exchange.

## ** **

The Company shall causeto be kept at the Corporate Trust Office of the Trustee a register (theregister maintained in such office and in any other office or agency designatedpursuant to Section 10.02 being herein sometimes referred to as the“Security Register”) in which, subject to such reasonable regulations as it mayprescribe, the Company shall provide for the registration of Securities and oftransfers of Securities.  The SecurityRegister shall be in written form or any other form capable of being convertedinto written form within a reasonable time. At all reasonable times, the Security Register shall be open toinspection by the Trustee.  The Trusteeis hereby initially appointed as “Registrar” for the purpose of registeringSecurities and transfers of Securities as herein provided.   The Company shall have the right to removeand replace from time to time the Registrar; *provided*,*that*,no such removal or replacement shall be effective until a successor Registrarwith respect to such Securities shall have been appointed by the Company andshall have accepted such appointment by the Company.  In the event that the Trustee shall not be or shall cease to bethe Registrar with respect to the Securities, it shall have the right toexamine the Security Register at any reasonable times.  There shall be the one Security Register forsuch Securities.

 

Upon surrender forregistration of transfer of any Security at the office or agency of the Companydesignated pursuant to Section 10.02, the Company shall execute, and theTrustee shall authenticate and deliver, in the name of the designatedtransferee or transferees, one or more new Securities of any authorizeddenomination or denominations of a like aggregate principal amount.

 

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At the option of theHolder, Securities may be exchanged for other Securities of any authorizeddenomination and of a like aggregate principal amount, upon surrender of theSecurities to be exchanged at such office or agency.  Whenever any Securities are so surrendered for exchange(including an exchange of Initial Securities for Exchange Securities), theCompany shall execute, and the Trustee shall authenticate and deliver, theSecurities, which the Holder making the exchange is entitled to receive; *provided*that no exchange of Initial Securities for Exchange Securities shall occuruntil an Exchange Offer Registration Statement shall have been declaredeffective by the Commission or receipts for a Canadian Final Prospectus havebeen issued by the Canadian Securities Commissions in each of the RelevantProvinces, as applicable, and that the Initial Securities to be exchanged forthe Exchange Securities shall be cancelled by the Trustee.

 

Whenever any Securitiesare so surrendered for exchange, the Company shall execute and the Trusteeshall authenticate and deliver, the Securities which the Holder making theelection is entitled to receive.

 

Notwithstanding theforegoing, except as otherwise specified as contemplated by Section 2.01,any permanent global Security shall be exchangeable only as provided in thisparagraph and the immediately following paragraph.  If any beneficial owner of an interest in a permanent globalSecurity is entitled to exchange such interest for Securities of such seriesand of like tenor and principal amount of another authorized form anddenomination, as contemplated by Section 3.01 and provided that anyapplicable notice provided in the permanent global Security shall have beengiven, then without unnecessary delay but in any event not later than theearliest date on which such interest may be so exchanged, the Company shalldeliver to the Trustee definitive Securities in aggregate principal amountequal to the principal amount of such beneficial owner’s interest in suchpermanent global Security, executed by the Company.  On or after the earliest date on which such interests may be soexchanged, such permanent global Security shall be surrendered by DTC or suchother depository as shall be specified in the Company Order with respectthereto to the Trustee, as the Company’s agent for such purpose, to beexchanged, in whole or from time to time in part, for definitive Securitieswithout charge, and the Trustee shall authenticate and deliver, in exchange foreach portion of such permanent global Security, an equal aggregate principalamount of definitive Securities of the same series of authorized denominationsand of like tenor as the portion of such permanent global Security to beexchanged, which shall be in the form of definitive Securities, *provided,however*, that no such exchanges may occur during a period beginningat the opening of business 15 days before any selection of Securities to beredeemed and ending on the relevant Redemption Date if the Security for whichexchange is requested may be among those selected for redemption.  If a Security is issued in exchange for anyportion of a permanent global Security after the close of business at theoffice or agency where such exchange occurs on (i) any Regular Record Date andbefore the opening of business at such office or agency on the relevantInterest Payment Date, or (ii) any special date for payment of DefaultedInterest, interest or Defaulted Interest, as the case may be, will not bepayable on such Interest Payment Date or proposed date for payment, as the casemay be, in respect of such

 

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Security, but will bepayable on such Interest Payment Date or proposed date for payment, as the casemay be, only to the Person to whom interest in respect of such portion of suchpermanent global Security is payable in accordance with the provisions of thisIndenture.

 

Upon the exchange of aglobal Security for Securities in definitive registered form, such globalSecurities shall be cancelled by the Trustee. Securities issued in exchange for a global Security pursuant to thisSection shall be registered in such names and in such authorizeddenominations as the Depositary, pursuant to instructions from its direct orindirect participants or otherwise, shall instruct the Trustee in writing.  The Trustee shall deliver such Securities tothe person in whose name such Securities are so registered.

 

All Securities issuedupon any registration of transfer or exchange of Securities shall be the validobligations of the Company, evidencing the same debt, and entitled to the samebenefits under this Indenture, as the Securities surrendered upon suchregistration of transfer or exchange.

 

Every Security presentedor surrendered for registration of transfer or for exchange shall (if sorequired by the Company or the Registrar) be duly endorsed, or be accompaniedby a written instrument of transfer, in form satisfactory to the Company and theRegistrar, duly executed by the Holder thereof or his attorney duly authorizedin writing.

 

No service charge shallbe made for any registration of transfer or exchange or redemption ofSecurities, but the Company may require payment of a sum sufficient to coverany tax or other governmental charge that may be imposed in connection with anyregistration of transfer or exchange of Securities, other than exchangespursuant to Section 3.04, 9.06, 10.12, 10.13 or 11.08 not involving anytransfer.

 

The Company shall not berequired (i) to issue, register the transfer of or exchange any Securityduring a period beginning at the opening of business 15 days before theselection of Securities to be redeemed under Section 11.04 and ending atthe close of business on the day of such mailing of the relevant notice ofredemption, or (ii) to register the transfer of or exchange any Securityso selected for redemption in whole or in part, except the unredeemed portionof any Security being redeemed in part.

 

Notwithstanding anythingto the contrary contained herein, the Trustee shall have no duty whatsoever tomonitor Federal or State securities laws.

 

## **Section 3.06**         Book-Entry Provisions for RestrictedGlobal Security.

## ** **

### (a)           The Global Security initially shall(i) be registered in the name of Cede & Co., as nominee of the Depositary,(ii) be deposited with, or on behalf of, the Depositary or with the Trustee, ascustodian for such Depositary, and (iii) bear legends as set forth inSection 2.02.

 

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The Depositary or itsnominee shall be the Holder of the Global Securities, and owners of beneficialinterests in the Securities represented by the Global Securities shall holdsuch interests pursuant to the procedures and practices of the Depositary.  Any such owner’s beneficial ownership of anysuch Securities will be shown only on, and the transfer of such ownershipinterest shall be effected only through, records maintained by the Depositaryor its nominee.  Investors in the RegulationS Global Security may hold their interests in Regulation S Global Securitythrough CDS, Euroclear or Clearstream, if they are participants in suchsystems, or indirectly through organizations which are participants in suchsystems.  CDS, Euroclear and Clearstreamwill hold interests in the Regulation S Global Security on behalf of theirparticipants through customers’ securities accounts in their respective nameson the books of their respective depositaries, which, in turn, will hold suchinterests in the Regulation S Global Security in customer’s securities accountsin the depositaries’ names on the books of the Depositary.  All interests in a Global Security,including those held through CDS, Euroclear or Clearstream, may be subject tothe procedures and requirements of the Depositary.  Those interests held through CDS, Euroclear and Clearstream willbe subject to the procedures and requirements of such system.

 

### (b)           Transfers of any Global Securityshall be limited to transfers of such Global Security in whole, but not inpart, to the Depositary, its successors or their respective nominees.  Interests of beneficial owners in any GlobalSecurity may be transferred in accordance with the rules and procedures of theDepositary and the provisions of Section 3.07.

###  

Unless (i) theDepositary notifies the Company that it is unwilling or unable to continue asdepositary for a Global Security or ceases to be a “Clearing Agency” registeredunder the Exchange Act or announces an intention permanently to cease businessor does in fact do so and a successor Depositary is not appointed by theCompany within 90 days of such notice, or (ii) an Event of Default hasoccurred and is continuing with respect to a Global Security, owners ofbeneficial interests in a Global Security will not be entitled to have anyportions of such Global Security registered in their names, will not receive orbe entitled to receive physical delivery of Securities in definitive form andwill not be considered the owners or holders of the Global Security.

 

### (c)           Securities issued in exchange for aGlobal Security or any portion thereof pursuant to the last sentence ofsubsection (b) of this Section shall be issued in definitive, fullyregistered form, without interest coupons, shall have an aggregate principalamount equal to that of such Global Security or portion thereof to be soexchanged, shall be registered in such names and be in such authorizeddenominations as the Depositary shall designate and shall bear any legendsrequired hereunder.  Any Global Securityto be exchanged in whole shall be surrendered by the Depositary to the Trustee,as Registrar.  With regard to any GlobalSecurity to be exchanged in part, either such Global Security shall be so surrenderedfor exchange or, if the Trustee is acting as custodian for the Depositary orits nominee with respect to such Global Security, the principal amount thereofshall be reduced, by an amount equal to the portion thereof to be so exchanged,by means of an appropriate adjustment made on the records of the Trustee.

 

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Upon any such surrenderor adjustment, the Trustee shall authenticate and make available for deliverythe Security issuable on such exchange to or upon the order of the Depositaryor an authorized representative thereof. In the event of the occurrence of any of the events specified in thelast sentence of subsection (b) of this Section 3.06, the Companywill promptly make available to the Trustee a reasonable supply of certificatedSecurities in definitive form.

###  

### (d)           Except as otherwise set forth in thisIndenture or a Global Security, owners of beneficial interests in theSecurities evidenced by a Global Security will not be entitled to any rightsunder this Indenture with respect to such Global Security, and the Depositaryor its nominee may be treated by the Company, the Trustee and any agent of theCompany or the Trustee as the owner and Holder of such Global Security for allpurposes whatsoever.  None of theCompany, the Trustee, any Paying Agent or the Registrar will have anyresponsibility or liability for any aspect of the records relating tobeneficial ownership interest of a Security in global form or for maintainingany records relating to such beneficial ownership interests.  Notwithstanding the foregoing, nothingherein shall prevent the Company, the Trustee or any such agent from givingeffect to any written certification, proxy or other authorization furnished bythe Depositary or its nominee or impair, as between the Depositary or itsnominee and such owners of beneficial interests, the operation of customarypractices governing the exercise of the rights of the Depositary or its nomineeas Holder of any Security.

###  

## **Section 3.07**         Special Transfer Provisions.

## ** **

Unless and until(i) an Initial Security is sold under an effective Registration Statement,or (ii) an Initial Security is exchanged for an Exchange Security inconnection with an effective Registration Statement, the following provisionsshall apply:

 

### (a)           Restricted Global Security toRegulation S Global Security.  If,at any time, an owner of a beneficial interest in a Restricted Global Securitydeposited with the Depositary (or the Trustee as custodian for the Depositary)wishes to transfer its interest in such Restricted Global Security to a Personwho is required or permitted to take delivery thereof in the form of aninterest in a Regulation S Global Security, such owner shall, subject to theApplicable Procedures, exchange or cause the exchange of such interest for anequivalent beneficial interest in a Regulation S Global Security as provided inthis Section 3.07(a).  Upon receiptby the Trustee of (1) instructions given in accordance with the ApplicableProcedures from an Agent Member directing the Trustee to credit or cause to becredited a beneficial interest in the Regulation S Global Security in an amountequal to the beneficial interest in the applicable Restricted Global Securityto be exchanged, (2) a written order given in accordance with the Applicable Procedurescontaining information regarding the participant account of the Depositary andthe CDS, Euroclear or Clearstream account (if applicable) to be credited withsuch increase, and (3) a certificate substantially in the form ofExhibit B hereto given by the owner of such beneficial interest, theTrustee, as Registrar, shall instruct the Depositary to reduce or cause to bereduced the aggregate principal amount of the applicable Restricted GlobalSecurity and to increase or cause to be increased the aggregate principalamount of the

 

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applicable Regulation SGlobal Security by the principal amount of the beneficial interest in theRestricted Global Security to be exchanged, to credit or cause to be creditedto the account of the Person specified in such instructions a beneficialinterest in the Regulation S Global Security equal to the reduction in theaggregate principal amount of the applicable Restricted Global Security, and todebit, or cause to be debited, from the account of the Person making suchexchange or transfer the beneficial interest in the Restricted Global Securitythat is being exchanged or transferred.

###  

### (b)           Regulation S Global Security toRestricted Global Security.  If, atany time, an owner of a beneficial interest in a Regulation S Global Securitydeposited with the Depositary or with the Trustee as custodian for theDepositary wishes to transfer its interest in such Regulation S Global Securityto a Person who is required or permitted to take delivery thereof in the formof an interest in a Restricted Global Security, such owner shall, subject tothe Applicable Procedures, exchange or cause the exchange of such interest foran equivalent beneficial interest in a Restricted Global Security, as providedin this Section 3.07(b).  Uponreceipt by the Trustee of (1) instructions given in accordance with theApplicable Procedures from an Agent Member, directing the Trustee, asRegistrar, to credit or cause to be credited a beneficial interest in theRestricted Global Security equal to the beneficial interest in the Regulation SGlobal Security to be exchanged, (2) a written order given in accordance withthe Applicable Procedures containing information regarding the participantaccount of the Depositary to be credited with such increase and (3) if suchtransfer is requested prior to the expiration of the Restricted Period, acertificate in the form of Exhibit C attached hereto given by the owner ofsuch beneficial interest, the Trustee, as Registrar, shall instruct theDepositary to reduce or cause to be reduced the aggregate principal amount ofsuch Regulation S Global Security and to increase or cause to be increased theaggregate principal amount of the applicable Restricted Global Security by theprincipal amount of the beneficial interest in the Regulation S Global Securityto be exchanged, and the Trustee, as Registrar, shall instruct the Depositary,concurrently with such reduction, to credit or cause to be credited to theaccount of the Person specified in such instructions a beneficial interest inthe applicable Restricted Global Security equal to the reduction in theaggregate principal amount of such Regulation S Global Security and to debit orcause to be debited from the account of the Person making such transfer thebeneficial interest in the Regulation S Global Security that is beingtransferred.  After the expiration ofthe Restricted Period, the certificate described in clause (3) above shall nolonger be required to effect transfers pursuant to this Section 3.07(b).

###  

### (c)           Transfers of U.S. PhysicalSecurities for Restricted Global Security or Regulation S Global Security.  If the holder of a U.S. Physical Securitywishes at any time to transfer such holder’s U.S. Physical Security to a Personwho wishes to take delivery thereof in the form of a beneficial interest in theRegulation S Global Security or the Restricted Global Security, such transfermay be effected, subject to the Applicable Procedures, only in accordance withthe provisions of this Section 3.07(c). Upon receipt by the Trustee of (1) instructions given in accordance withthe Applicable Procedures from an Agent Member directing the Trustee to creditor cause to be credited a beneficial interest in the Regulation S GlobalSecurity or Restricted Global Security, as the case may be, in a principalamount equal to that of the U.S. Physical Securities to be so

 

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transferred, (2) awritten order given in accordance with the Applicable Procedures containinginformation regarding the participant account of the Depositary (and CDS,Euroclear or Clearstream account, as applicable) to be credited with suchbeneficial interest and (3) a certificate in substantially the form set forthin Exhibit D, given by the holder of such U.S. Physical Security, theTrustee, as Security Registrar, shall instruct the Depositary to increase theprincipal amount of the Regulation S Global Security or the Restricted GlobalSecurity, as the case may be, by the principal amount of the U.S. PhysicalSecurity to be so transferred, and to cancel or cause to be canceled such U.S.Physical Security.

###  

### (d)           Restricted Global Security or U.S.Physical Security to Regulation S Global Security After Two Years.  If the holder of a beneficial interest in aRestricted Global Security or U.S. Physical Security wishes at any time afterthe second anniversary of the date of original issuance of the Securities to(A) transfer such interest to a Person who wishes to take delivery thereof inthe form of a beneficial interest in the Regulation S Global Security or (B) toexchange such interest for a beneficial interest in a Regulation S GlobalSecurity, such transfer or exchange may be effected, subject to the ApplicableProcedures, only in accordance with this Section 3.07(d).  Upon receipt by the Trustee of (1) in thecase of a transfer or exchange of an interest in the Restricted Global Securityor a U.S. Physical Security, instructions given in accordance with the ApplicableProcedures from an Agent Member directing the Trustee to credit or cause to becredited to a beneficial interest in the Regulation S Global Security in anamount equal to that the beneficial interest in the Restricted Global Securityto be so transferred or exchanged, (2) a written order given in accordance withthe Applicable Procedures containing information regarding the participantaccount of the Depositary (and, if applicable, the CDS, Euroclear orClearstream account, as the case may be) to be credited with such beneficialinterest and (3) a certificate substantially in the form of Exhibit Ehereto given by the holder of such beneficial interest, the Trustee, asRegistrar, shall (i) in the case of a transfer or exchange of an interest inthe Restricted Global Security, instruct the Depositary to reduce the principalamount of the Restricted Global Security, and to increase the principal amountof the Regulation S Global Security, by the principal amount of the beneficialinterest in the Restricted Global Security to be so transferred or exchanged,and to credit or cause to be credited to the account of the Person specified insuch instructions a beneficial interest in the Regulation S Global Securityhaving a principal amount equal to the amount by which the principal amount ofthe Restricted Global Security was reduced upon such transfer or exchange or(ii) in the case of a transfer or exchange of a U.S. Physical Security, cancelsuch U.S. Physical Security and increase the principal amount of the RegulationS Global Security accordingly.

###  

### (e)           Private Placement Legend.  Upon the transfer, exchange or replacementof Securities not bearing the Private Placement Legend, the Registrar shalldeliver Securities that do not bear the Private Placement Legend.  Upon the transfer, exchange or replacement ofSecurities bearing the Private Placement Legend, the Registrar shall deliveronly Securities that bear the Private Placement Legend unless either(i) the circumstances contemplated by clauses (i) or (ii) or Section 2.02exist and the Company directs the Trustee pursuant to an Officers’ Certificateto remove such legend or (ii) there is delivered to the Registrar anOpinion of Counsel reasonably

 

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satisfactory to theCompany and the Trustee to the effect that neither such legend nor the relatedrestrictions on transfer are required in order to maintain compliance with theprovisions of the Securities Act.

###  

### (f)            General.  By its acceptance of any Security bearing thePrivate Placement Legend, each Holder of such a Security acknowledges therestrictions on transfer of such Security set forth in this Indenture and inthe Private Placement Legend and agrees that it will transfer such Securityonly as provided in this Indenture.

###  

The Registrar shallretain as required by law copies of all letters, notices and other writtencommunications received pursuant to Section 3.06 or thisSection 3.07.  The Company shallhave the right to inspect and make copies of all such letters, notices or otherwritten communications at any reasonable time upon the giving of reasonablewritten notice to the Registrar.

 

## **Section 3.08**         Mutilated, Destroyed, Lost andStolen Securities.

## ** **

If (i) any mutilatedSecurity is surrendered to the Trustee or the Registrar, or (ii) theCompany and the Trustee receive evidence to their satisfaction of thedestruction, loss or theft of any Security, and there is delivered to theCompany and the Trustee such security or indemnity as may be required by themto save each of them harmless, then, in the absence of notice to the Company orthe Trustee that such Security has been acquired by a bona fide purchaser, theCompany shall execute and upon Company Order the Trustee shall authenticate anddeliver, in exchange for any such mutilated Security or in lieu of any suchdestroyed, lost or stolen Security, a new Security of like tenor and principalamount, bearing a number not contemporaneously outstanding.

 

In case any suchmutilated, destroyed, lost or stolen Security has become or is about to becomedue and payable, the Company in its discretion may, instead of issuing a newSecurity, pay such Security.

 

Upon the issuance of anynew Security under this Section, the Company may require the payment of a sumsufficient to cover any tax or other governmental charge that may be imposed inrelation thereto and any other expenses (including the fees and expenses of theTrustee) connected therewith.

 

Every new Security issuedpursuant to this Section in lieu of any mutilated, destroyed, lost orstolen Security shall constitute an original additional contractual obligationof the Company, whether or not the mutilated, destroyed, lost or stolenSecurity shall be at any time enforceable by anyone, and shall be entitled toall benefits of this Indenture equally and proportionately with any and allother Securities duly issued hereunder.

 

The provisions of thisSection are exclusive and shall preclude (to the extent lawful) all otherrights and remedies with respect to the replacement or payment of mutilated,destroyed, lost or stolen Securities.

 

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## **Section 3.09**         Payment of Principal and Interest;Interest Rights Preserved.

## ** **

Interest on any Securitywhich is payable, and is punctually paid or duly provided for, on any InterestPayment Date shall be paid to the Person in whose name such Security (or one ormore Predecessor Securities) is registered at the close of business on theRegular Record Date for such interest at the office or agency of the Company inThe City of New York maintained for such purposes (which initially shall be theoffice of the Trustee located at One Liberty Plaza, 23rd Floor, NewYork, New York 10006) pursuant to Section 10.02 or, at the option of theCompany, principal (premium, if any, on) and interest may be paid by checkmailed to the address of the Person entitled thereto pursuant toSection 3.10 as such address appears in the Security Register; *provided*that all payments with respect to Global Securities, and Physical Securities,the Holders of which have given wire transfer instructions to the Trustee (orother Paying Agent) by the Regular Record Date shall be required to be made bywire transfer of immediately available funds to the accounts specified by the holdersthereof *providedfurther*, that principal paid in relation to any Security redeemed atthe option of the Company pursuant to Article XI, or paid at Maturity,shall be paid to the holder of such Security only upon presentation andsurrender of such Security to such office or agency referred to in thisSection 3.07.

 

Any interest on anySecurity which is payable, but is not punctually paid or duly provided for, onany Interest Payment Date shall forthwith cease to be payable to the Holder onthe relevant Regular Record Date by virtue of having been such Holder, and suchdefaulted interest and interest on such defaulted interest (to the extentlawful) at the rate borne by the Securities (such defaulted interest andinterest thereon herein collectively called “Defaulted Interest”) may be paidby the Company, at its election in each case, as provided in clause (a) or(b) below:

 

### (a)           The Company may elect to make paymentof any Defaulted Interest to the Persons in whose names the Securities (ortheir respective Predecessor Securities) are registered at the close ofbusiness on a Special Record Date for the payment of such Defaulted Interest,which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of DefaultedInterest proposed to be paid on each Security and the date of the proposedpayment, and at the same time the Company shall deposit with the Trustee anamount of money equal to the aggregate amount proposed to be paid in respect ofsuch Defaulted Interest or shall make arrangements satisfactory to the Trusteefor such deposit prior to the date of the proposed payment, such money whendeposited to be held in trust for the benefit of the Persons entitled to suchDefaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment ofsuch Defaulted Interest which shall be not more than 15 days and not less than10 days prior to the date of the proposed payment and not less than 10 daysafter the receipt by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify theCompany of such Special Record Date, and in the name and at the expense of theCompany, shall cause notice of the proposed payment of such Defaulted Interestand the Special Record Date therefor to be given in the manner provided for inSection 1.06, not less than 10 days prior to such Special

 

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Record Date.  Notice of the proposed payment of suchDefaulted Interest and the Special Record Date therefor having been so given,such Defaulted Interest shall be paid to the Persons in whose names theSecurities (or their respective Predecessor Securities) are registered at theclose of business on such Special Record Date and shall no longer be payablepursuant to the following clause (b).

###  

### (b)           The Company may make payment of anyDefaulted Interest in any other lawful manner not inconsistent with therequirements of any securities exchange on which the Securities may be listed,and upon such notice as may be required by such exchange, if, after noticegiven by the Company to the Trustee of the proposed payment pursuant to thisclause, such manner of payment shall be deemed practicable by the Trustee.

###  

Subject to the foregoingprovisions of this Section, each Security delivered under this Indenture uponregistration of transfer of or in exchange for or in lieu of any other Securityshall carry the rights to interest accrued and unpaid, and to accrue, whichwere carried by such other Security.

 

If the Company shall berequired to pay any additional interest pursuant to the terms of theRegistration Rights Agreement, it shall deliver an Officers’ Certificate to theTrustee setting forth the new interest rate and the period for which such rateis applicable.

 

## **Section 3.10**         Persons Deemed Owners.

## ** **

Prior to the duepresentment of a Security for registration of transfer, the Company, eachGuarantor, the Trustee and any agent of the Company, such Guarantor or theTrustee may treat the Person in whose name such Security is registered as theowner of such Security for the purpose of receiving payment of principal of(premium, if any) and (subject to Sections 3.05 and 3.09) interest on suchSecurity and for all other purposes whatsoever, whether or not such Security beoverdue, and none of the Company, the Guarantors, the Trustee or any agent ofthe Company, such Guarantor or the Trustee shall be affected by notice to thecontrary.

 

## **Section 3.11**         Cancellation.

## ** **

All Securitiessurrendered for payment, redemption, registration of transfer or exchangeshall, if surrendered to any Person other than the Trustee, be delivered to theTrustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation anySecurities previously authenticated and delivered hereunder which the Companymay have acquired in any manner whatsoever, and may deliver to the Trustee (orto any other Person for delivery to the Trustee) for cancellation anySecurities previously authenticated hereunder which the Company has not issuedand sold, and all Securities so delivered shall be promptly cancelled by theTrustee.  If the Company shall soacquire any of the Securities, however, then, unless provided otherwise in asupplemental indenture, such acquisition shall not operate as a redemption orsatisfaction of the indebtedness represented by such Securities unless and

 

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until the same aresurrendered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for anySecurities cancelled as provided in this Section, except as expressly permittedby this Indenture.  All cancelledSecurities held by the Trustee shall be disposed of by the Trustee in accordancewith its customary procedures and certification of their disposal delivered tothe Company unless by Company Order the Company shall direct that cancelledSecurities be returned to it.

 

## **Section 3.12**         Issuance of Additional Securities.

## ** **

The Company may, subjectto Article X of this Indenture issue Additional Securities havingidentical terms and conditions to the Securities offered hereby.  Any Additional Securities will be part ofthe same issue as the Securities offered hereby and will vote on all matterswith the Securities offered hereby.

 

## **Section 3.13**         CUSIP and CINS Numbers.

## ** **

The Company in issuingthe Securities may use “CUSIP” and “CINS” numbers (if then generally in use)and, if so, the Trustee shall use “CUSIP” and “CINS” numbers in notices of redemptionas a convenience to Holders; provided that any such notice may state that norepresentation is made as to the correctness of such numbers either as printedon the Securities or as contained in any notice of a redemption and thatreliance may be placed only on the other identification numbers printed on theSecurities, and any such redemption shall not be affected by any defect in oromission of such numbers.

 

## **Section 3.14**         Computation of Interest.

## ** **

Interest on theSecurities shall be computed on the basis of a 360-day year consisting oftwelve 30-day months.  For the purposesof disclosure under the *Interest Act* (Canada), the yearly rate ofinterest to which interest calculated under a Security for any period in anycalendar year (the “calculation period”) is equivalent, is the rate payableunder a Security in respect of the calculation period multiplied by a fractionthe numerator which is the actual number of days in such calendar year and thedenominator of which is the actual number of days in the calculation period.

 

# **ARTICLE IV**SATISFACTION AND DISCHARGE

# ** **

## **Section 4.01**         Satisfaction and Discharge ofIndenture.

## ** **

This Indenture and theCollateral Documents shall upon Company Request cease to be of further effect(except as to surviving rights of registration of transfer or exchange of theSecurities, as expressly provided for herein or pursuant hereto) and theTrustee, at the expense of the Company, shall execute proper instrumentsacknowledging satisfaction and discharge of this Indenture when

 

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### (a)           either

###  

#### (i)            all the Securities theretoforeauthenticated and delivered (other than mutilated, destroyed, lost or stolenSecurities that have been replaced or paid as provided in Section 3.08,Securities that have been subject to defeasance under Article XII andSecurities for which payment has theretofore been deposited in trust with theTrustee or any Paying Agent or segregated and held in Trust by the Company andthereafter repaid to the Company, as provided in Section 10.03 ordischarged from such trust) have been delivered to the Trustee forcancellation; or

####  

#### (ii)           all Securities not theretoforedelivered to the Trustee for cancellation

####  

(A)          have become due and payable,

 

(B)           will become due and payable at StatedMaturity within one year, or

 

(C)           are to be called for redemptionwithin one year under arrangements satisfactory to the Trustee for the givingof notice of redemption by the Trustee in the name, and at the expense, of theCompany,

 

and the Company, or theGuarantors, as the case may be, in the case of (A), (B) or (C) above, hasirrevocably deposited or caused to be deposited with the Trustee funds in trustfor the purpose in an amount sufficient to pay and discharge the entireIndebtedness on such Securities not theretofore delivered to the Trustee forcancellation, for principal (and premium, if any) and interest on theSecurities to the date of such deposit (in the case of Securities that havebecome due and payable) or to the Stated Maturity or Redemption Date, as thecase may be, together with irrevocable instructions directing the Trustee toapply the funds to the payment of the Securities at the Stated Maturity orRedemption Date, as the case may be;

 

### (b)           the Company or the Guarantors, as thecase may be, has paid or caused to be paid all sums payable hereunder by theCompany; and

###  

### (c)           the Company or the Guarantors, as thecase may be, has delivered to the Trustee an Officers’ Certificate and anOpinion of Counsel, each stating that all conditions precedent herein providedfor relating to the satisfaction and discharge of this Indenture have beencomplied with.

###  

Notwithstanding thesatisfaction and discharge of this Indenture, the obligations of the Company tothe Trustee under Section 6.06 and, if money shall have been depositedwith the Trustee pursuant to subclause (ii) of clause (a) of thisSection, the obligations of the Trustee under Section 4.02 and the lastparagraph of Section 10.03 shall survive.

 

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## **Section 4.02**         Application of Trust Money.

## ** **

Subject to the provisionsof the last paragraph of Section 10.03, all money deposited with theTrustee pursuant to Section 4.01 shall be held in trust and applied by it,in accordance with the provisions of the Securities and this Indenture, to thepayment, either directly or through any Paying Agent (including the Companyacting as its own Paying Agent) as the Trustee may determine, to the Personsentitled thereto, of the principal (premium, if any) and interest for whosepayment such money has been deposited with the Trustee; but such money need notbe segregated from other funds except to the extent required by law.

 

## **Section 4.03**         Discharge of Collateral Documents orGuarantees

## ** **

Upon the dissolution orwinding up of a Subsidiary who has executed a guarantee of the Mirror Note orany Additional Mirror Note or any Guarantee, and the transfer of suchSubsidiary’s assets to the Company, such Subsidiary’s guarantee or Guarantee,as applicable, will automatically be discharged and released and will cease tobe of further effect.

 

Further, upon thedissolution or winding up of all of the Company’s Restricted Subsidiaries(other than Baytex Marketing Ltd.) and the transfer of all of the Company’sRestricted Subsidiaries’ assets to the Company (other than the assets of BaytexMarketing Ltd.), all of the Collateral Documents will automatically bedischarged and released and will cease to be of further effect.

 

# **ARTICLE V**REMEDIES

# ** **

## **Section 5.01**         Events of Default.

## ** **

“Event of Default”,wherever used herein, means any one of the following events (whatever thereason for such Event of Default and whether it shall be voluntary orinvoluntary or be effected by operation of law or pursuant to any judgment,decree or order of any court or any order, rule or regulation of anyadministrative or governmental body unless such event is deleted or modified inor pursuant to a supplemental indenture executed in accordance with all of theterms of this Indenture):

 

### (a)           default in the payment of anyinterest on any Security when it becomes due and payable, and continuance ofsuch default for a period of 30 days (whether or not prohibited byArticle XIV of this Indenture);

###  

### (b)           default in the payment of theprincipal of (or premium, if any) on any Security when due;

###  

### (c)           failure to perform or comply with theprovisions described in Article VIII or to make or consummate a Change ofControl Offer or an Asset Sale Offer

 

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in accordance with theprovision of Section 10.12 and Section 10.13, respectively (whetheror not such payment shall be prohibited by Article XIV of this Indenture);

###  

### (d)           default in the observance orperformance, or breach, of any covenant or agreement of the Company or anyGuarantor contained in this Indenture or any Guarantee (other than ascontemplated by clauses (a), (b) and (c) above) and continuance of such defaultor breach for a period of 30 days after written notice has been given(x) to the Company by the Trustee or (y) to the Company and theTrustee by the Holders of at least 25% in aggregate principal amount of theSecurities then Outstanding;

###  

### (e)           the occurrence of an event of defaultunder any mortgage, bond, indenture, loan agreement or other document evidencingIndebtedness of the Company or any Restricted Subsidiary, which Indebtednesshas an aggregate outstanding principal amount of US$10,000,000 or more, andsuch default (i) results in the acceleration of such Indebtedness prior to itsStated Maturity or (ii) constitutes a failure to make any payment with respectto any such Indebtedness when due and payable after expiration of anyapplicable grace period;

###  

### (f)            failure by the Company or any of itsRestricted Subsidiaries to pay one or more final judgments the uninsuredportion of which exceeds in the aggregate US$10,000,000, which judgment orjudgments are not paid, discharged or stayed for a period of 60 days;

###  

### (g)           the occurrence of an event of defaultunder any of the Collateral Documents;

###  

### (h)           the Mirror Note, any AdditionalMirror Note, any guarantee of the Mirror Note, any Additional Mirror Note orthe Securities or any of the related Collateral Documents ceases to be in fullforce and effect or is declared null and void or the issuer of the Mirror Note,any Additional Mirror Note or any guarantor of the Mirror Note, any AdditionalMirror Note or the Securities denies that it has any further liability undersuch note or guarantee or the related Collateral Documents, or gives notice tosuch effect, except in the case of termination of this Indenture or thedischarge or release of any such note or guarantee in accordance withArticle IV or any other provision in this Indenture, and such conditionhas continued for a period of 30 days after written notice of such failurerequiring that such default be remedied has been given (x) to the Company bythe Trustee or (y) to the Company and the Trustee by the Holders of 25% inaggregate principal amount of the Securities then Outstanding;

###  

### (i)            other than in respect of theReorganization, an entry of a decree or order by a court having jurisdiction inthe premises adjudging the Company or any Significant Subsidiary a bankrupt orinsolvent, or approving as properly filed a petition seeking reorganization,arrangement, adjustments or composition of or in respect of the Company or anySignificant Subsidiary under any Bankruptcy Law or any other applicable UnitedStates or Canadian federal, state or provincial law, or appointing a Custodianof the Company or any Significant Subsidiary or of any substantial part of its

 

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property, or ordering thewinding up or liquidation of its affairs, and the continuance of any suchdecree or order unstayed and in effect for a period of 90 consecutive days; or

###  

### (j)            other than in respect of theReorganization, the institution by the Company or any Significant Subsidiary ofproceedings to be adjudicated a bankrupt or insolvent, or the consent by it tothe institution of bankruptcy or insolvency proceedings against it, or thefiling by it of a petition or answer or consent seeking reorganization orrelief under any Bankruptcy Law or the consent by it to the filing of any suchpetition or to the appointment of a Custodian of the Company or any SignificantSubsidiary or of any substantial part of its property, or the making by it ofan assignment for the benefit of creditors, or the admission by it in writingof its inability to pay its debts generally as they become due.

###  

## **Section 5.02**         Acceleration of Maturity; Rescissionand Annulment.

## ** **

If an Event of Default(other than as specified in Section 5.01(i) or (j)) occurs and iscontinuing, the Trustee or the Holders of not less than 25% in aggregateprincipal amount of the Securities then Outstanding may, and the Trustee at therequest of such Holders shall, declare the principal of (and premium, if any)and accrued and unpaid interest on, all of the Outstanding Securitiesimmediately due and payable and, upon any such declaration, all such amounts willbecome due and payable immediately.  Ifan Event of Default specified in Section 5.01(i) or (j) above occurs andis continuing, then the principal (and premium, if any), and accrued and unpaidinterest on all of the Securities then Outstanding will *ipso facto* become and beimmediately due and payable without any declaration or other act on the part ofthe Trustee or any Holder of Securities. The Company shall deliver to the Trustee, within 10 days after theoccurrence thereof, notice of any default or acceleration referred to inSection 5.01(e).

 

At any time after adeclaration of acceleration, but before a judgment or decree for payment of themoney due has been obtained by the Trustee, the Holders of a majority inaggregate principal amount of the Outstanding Securities, by written notice tothe Company and the Trustee, may rescind such declaration and its consequencesif:

 

#### (i)            the Company or any Guarantor haspaid or deposited with the Trustee a sum sufficient to pay,

####  

(A)          all overdue interest on all Securities;

 

(B)           all unpaid principal of (and premium,if any) on any Outstanding Securities that has become due other than by suchdeclaration of acceleration and interest thereon at the rate borne by theSecurities;

 

(C)           to the extent that payment of such interestis lawful, interest on overdue interest and overdue principal at the rate borneby the Securities; and

 

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(D)          all sums paid or advanced by theTrustee hereunder and the reasonable compensation, expenses, disbursements andadvances of the Trustee, its agents and counsel; and

 

#### (ii)           all Events of Default, other than thenon-payment of amounts of principal of (and premium, if any) or interest on theSecurities that have become due solely by such declaration of acceleration,have been cured or waived as provided in Section 5.13.

####  

No such rescission shallaffect any subsequent Default or impair any right consequent thereon.

 

Notwithstanding thepreceding paragraph, in the event of a declaration of acceleration in respectof the Securities because an Event of Default specified in Section 5.01(e)shall have occurred and be continuing, such declaration of acceleration shallbe automatically annulled if the Indebtedness that is the subject of such Eventof Default has been discharged or the holders thereof have rescinded theirdeclaration of acceleration in respect of such Indebtedness, and written noticeof such discharge or rescission, as the case may be, shall have been given tothe Trustee by the Company and countersigned by the holders of suchIndebtedness or a trustee, fiduciary or agent for such holders, within 30 daysafter such declaration of acceleration in respect of the Securities, and noother Event of Default has occurred during such 30-day period which has notbeen cured or waived during such period.

 

## **Section 5.03**         Collection of Indebtedness and Suitsfor Enforcement by Trustee.

## ** **

The Company and each ofthe Guarantors, if any, covenants that if

 

### (a)           default is made in the payment of anyinstallment of interest on any Security when such interest becomes due andpayable and such default continues for a period of 30 days, or

###  

### (b)           default is made in the payment of theprincipal of (or premium, if any) on any Security at the Maturity thereof,

###  

the Company and eachGuarantor (if any) will, upon demand of the Trustee, pay to the Trustee for thebenefit of the Holders of such Securities, the whole amount then due andpayable on such Securities for principal (and premium, if any) and interest,and interest on any overdue principal (and premium, if any) and, to the extentthat payment of such interest shall be legally enforceable, upon any overdueinstallment of interest, at the rate borne by the Securities, and, in additionthereto, such further amount as shall be sufficient to cover the costs andexpenses of collection, including the reasonable compensation, expenses,disbursements and advances of the Trustee, its agents and counsel.

 

If the Company or anyGuarantor (if any), as the case may be, fails to pay such amounts forthwithupon such demand, the Trustee, in its own name as trustee of an

 

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express trust, mayinstitute a judicial proceeding for the collection of the sums so due andunpaid, may prosecute such proceeding to judgment or final decree and mayenforce the same against the Company, such Guarantor or any other obligor uponthe Securities and collect the moneys adjudged or decreed to be payable in themanner provided by law out of the property of the Company, such Guarantor orany other obligor upon the Securities, wherever situated.

 

If an Event of Defaultoccurs and is continuing, the Trustee may in its discretion proceed to protectand enforce its rights and the rights of the Holders by such appropriatejudicial proceedings as the Trustee shall deem most effectual to protect andenforce any such rights, whether for the specific enforcement of any covenantor agreement in this Indenture or in aid of the exercise of any power grantedherein, or to enforce any other proper remedy.

 

## **Section 5.04**         Trustee May File Proofs of Claim.

## ** **

In case of the pendencyof any receivership, insolvency, liquidation, bankruptcy, reorganization,arrangement, adjustment, composition or other judicial proceeding relative to theCompany and its debts or any other obligor upon the Securities (including theGuarantors, if any), and their debts or the property of the Company or of suchother obligor or their creditors, the Trustee (irrespective of whether theprincipal of the Securities shall then be due and payable as therein expressedor by declaration or otherwise and irrespective of whether the Trustee shallhave made any demand on the Company for the payment of overdue principal (andpremium, if any) or interest) shall be entitled and empowered, by interventionin such proceeding or otherwise,

 

### (a)           to file and prove a claim for thewhole amount of principal (and premium, if any) and interest owing and unpaidin respect of the Securities and to file such other papers or documents as maybe necessary or advisable in order to have the claims of the Trustee (includingany claim for the reasonable compensation, expenses, disbursements and advancesof the Trustee, its agents and counsel) and of the Holders allowed in suchjudicial proceeding, and

###  

### (b)           to collect and receive any moneys orother securities or property payable or deliverable upon the conversion orexchange of such securities or upon any such claims and to distribute the same;

###  

and any custodian,receiver, assignee, trustee, liquidator, sequestrator or similar official inany such judicial proceeding is hereby authorized by each Holder to make suchpayments to the Trustee and, in the event that the Trustee shall consent to themaking of such payments directly to the Holders, to pay the Trustee any amountdue it for the reasonable compensation, expenses, disbursements and advances ofthe Trustee, its agents and counsel, and any other amounts due the Trusteeunder Section 6.06.

 

Nothing herein containedshall be deemed to authorize the Trustee to authorize or consent to or acceptor adopt on behalf of any Holder any plan of reorganization, arrangement,adjustment or composition affecting the Securities or the

 

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rights of any Holderthereof, or to authorize the Trustee to vote in respect of the claim of anyHolder in any such proceeding.

 

## **Section 5.05**         Trustee May Enforce Claims WithoutPossession of Securities.

## ** **

All rights of action andclaims under this Indenture or the Securities may be prosecuted and enforced bythe Trustee without the possession of any of the Securities or the productionthereof in any proceeding relating thereto, and any such proceeding institutedby the Trustee shall be brought in its own name as trustee of an express trust,and any recovery of judgment shall, after provision for the payment of thereasonable compensation, expenses, disbursements and advances of the Trustee,its agents and counsel, be for the ratable benefit of the Holders of theSecurities in respect of which such judgment has been recovered.

 

## **Section 5.06**         Application of Money Collected.

## ** **

Any money collected bythe Trustee pursuant to this Article shall be applied in the followingorder, at the date or dates fixed by the Trustee and, in case of thedistribution of such money on account of principal (or premium, if any) orinterest, upon presentation of the Securities and the notation thereon of thepayment if only partially paid and upon surrender thereof if fully paid:

 

FIRST:  To the payment of all amounts due theTrustee under Section 6.06;

 

SECOND:  To the payment of the amounts then due andunpaid for principal of (premium, if any), and interest on the Securities inrespect of which or for the benefit of which such money has been collected,ratably, without preference or priority of any kind, according to the amountsdue and payable on such Securities for principal (premium, if any) andinterest, respectively; and

 

THIRD:  The balance, if any, to the Company and/orthe Guarantors, as the case may be.

 

## **Section 5.07**         Limitation on Suits.

## ** **

No Holder of anySecurities shall have any right to institute any proceeding, judicial orotherwise, with respect to this Indenture, or for the appointment of a receiveror trustee, or for any other remedy hereunder, unless

 

### (a)           such Holder has previously givenwritten notice to the Trustee of a continuing Event of Default;

###  

### (b)           the Holders of not less than 25% inprincipal amount of the Outstanding Securities shall have made written requestto the Trustee to institute proceedings in respect of such Event of Default inits own name as Trustee hereunder;

 

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### (c)           such Holder or Holders have offeredto the Trustee reasonable indemnity against the costs, expenses and liabilities(including fees and expenses of its agents and counsel) to be incurred incompliance with such request;

###  

### (d)           the Trustee for 60 days after itsreceipt of such notice, request and offer of indemnity has failed to instituteany such proceeding; and

###  

### (e)           no direction inconsistent with suchwritten request has been given to the Trustee during such 60-day period by theHolders of a majority or more in principal amount of the OutstandingSecurities;

###  

it being understood andintended that no one or more Holders shall have any right in any mannerwhatever by virtue of, or by availing of, any provision of this Indenture toaffect, disturb or prejudice the rights of any other Holders, or to obtain orto seek to obtain priority or preference over any other Holders or to enforceany right under this Indenture, except in the manner herein provided and forthe equal and ratable benefit of all the Holders.

 

## **Section 5.08**         Unconditional Right of Holders toReceive Principal, Premium and Interest.

## ** **

Notwithstanding any otherprovision in this Indenture, the Holder of any Security shall have the right,which is absolute and unconditional, to receive payment, as provided herein(including, if applicable, Article XII and Section 14.04) and in suchSecurity of the principal of (and premium, if any) and (subject toSection 3.09) interest on such Security on the respective StatedMaturities expressed in such Security (or, in the case of redemption, on theRedemption Date) and to institute suit for the enforcement of any such payment,and such rights shall not be impaired without the consent of such Holder.

 

## **Section 5.09**         Restoration of Rights and Remedies.

## ** **

If the Trustee or anyHolder has instituted any proceeding to enforce any right or remedy under thisIndenture and such proceeding has been discontinued or abandoned for anyreason, or has been determined adversely to the Trustee or to such Holder, thenand in every such case, subject to any determination in such proceeding, theCompany, the Guarantors (if any), the Trustee and the Holders shall be restoredseverally and respectively to their former positions hereunder and thereafterall rights and remedies of the Trustee and the Holders shall continue as thoughno such proceeding had been instituted.

 

## **Section 5.10**         **Rightsand Remedies Cumulative**.

## ** **

Except as otherwiseprovided with respect to the replacement or payment of mutilated, destroyed,lost or stolen Securities in the last paragraph of Section 3.08, no rightor remedy herein conferred upon or reserved to the Trustee or to the Holders isintended to be exclusive of any other right or remedy, and every right andremedy shall,

 

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to the extent permittedby law, be cumulative and in addition to every other right and remedy givenhereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right orremedy hereunder, or otherwise, shall not prevent the concurrent assertion oremployment of any other appropriate right or remedy.

 

## **Section 5.11**         Delay or Omission Not Waiver.

## ** **

No delay or omission ofthe Trustee or of any Holder of any Security to exercise any right or remedyaccruing upon any Event of Default shall impair any such right or remedy orconstitute a waiver of any such Event of Default or an acquiescencetherein.  Every right and remedy givenby this Article or by law to the Trustee or to the Holders may beexercised from time to time, and as often as may be deemed expedient, by theTrustee or by the Holders, as the case may be.

 

## **Section 5.12**         Control by Holders.

## ** **

The Holders of not lessthan a majority in principal amount of the Outstanding Securities shall havethe right to direct the time, method and place of conducting any proceeding forany remedy available to the Trustee, or exercising any trust or power conferredon the Trustee, *provided* that

 

### (a)           such direction shall not be inconflict with any rule of law or with this Indenture,

###  

### (b)           the Trustee may take any other actiondeemed proper by the Trustee which is not inconsistent with such direction, and

###  

### (c)           the Trustee need not take any actionwhich might involve it in personal liability or be unjustly prejudicial to theHolders not consenting.

###  

## **Section 5.13**         Waiver of Past Defaults.

## ** **

The Holders of not lessthan a majority in principal amount of the Outstanding Securities may, onbehalf of the Holders of all of the Securities, waive any past defaultshereunder, except a default

 

### (a)           in the payment of the principal of(premium, if any) or interest on any Security, or

###  

### (b)           in respect of a covenant or provisionhereof which under Article IX cannot be modified or amended without theconsent of the Holder of each Security Outstanding.

###  

Upon any such waiver,such default shall cease to exist, and any Event of Default arising therefromshall be deemed to have been cured, for every purpose of this Indenture; but nosuch waiver shall extend to any subsequent or other default or Event of Defaultor impair any right consequent thereon.

 

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## **Section 5.14**         Waiver of Stay or Extension Laws.

## ** **

The Company covenants (tothe extent that it may lawfully do so) that it will not at any time insistupon, or plead, or in any manner whatsoever claim or take the benefit oradvantage of, any stay or extension law wherever enacted, now or at any timehereafter in force, which may affect the covenants or the performance of thisIndenture; and the Company (to the extent that it may lawfully do so) herebyexpressly waives all benefit or advantage of any such law and covenants that itwill not hinder, delay or impede the execution of any power herein granted tothe Trustee, but will suffer and permit the execution of every such power asthough no such law had been enacted.

 

## **Section 5.15**         Undertaking for Costs.

## ** **

All parties to thisIndenture agree, and each Holder of any Security by his acceptance thereofshall be deemed to have agreed, that any court may in its discretion require,in any suit for the enforcement of any right or remedy under this Indenture, orin any suit against the Trustee for any action taken, suffered or omitted by itas Trustee, the filing by any party litigant in such suit of an undertaking topay the costs of such suit, and that such court may in its discretion assessreasonable costs, including reasonable attorney’s fees, against any partylitigant in such suit, having due regard to the merits and good faith of theclaims or defenses made by such party litigant; but the provisions of thisSection shall not apply to any suit instituted by the Trustee, to any suitinstituted by any Holder, or group of Holders, holding in the aggregate morethan 10% in principal amount of the Outstanding Securities, or to any suitinstituted by any Holder for the enforcement of the payment of the principal (premium,if any) or interest on any Security on or after the respective StatedMaturities expressed in such Security (or, in the case of redemption, on orafter the Redemption Date).

 

# **ARTICLE VI**THE TRUSTEE

# ** **

## **Section 6.01**         Notice of Defaults.

## ** **

If a Default or an Eventof Default occurs and is continuing and is known to the Trustee, the Trusteeshall mail to each Holder of the Securities in the manner and to the extentprovided in TIA Section 313(c) notice of the Default or Event of Defaultwithin 90 days after the occurrence thereof; *provided, however*, that,except in the case of a Default or an Event of Default in the payment ofprincipal of (premium, if any) or interest on any Securities, the Trustee maywithhold the notice to the Holders of the Securities if it in good faithdetermines that withholding such notice is in the interests of the Holders ofthe Securities.

 

## **Section 6.02**         Certain Rights of Trustee.

## ** **

Subject to the provisionsof TIA Sections 315(a) through 315(d):

 

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### (a)           the Trustee may conclusively rely andshall be protected in acting or refraining from acting, pursuant to the termsof this Indenture or otherwise, upon any resolution, certificate, statement,instrument, opinion, report, notice, request, direction, consent, order, bond,debenture, note, other evidence of indebtedness or other paper or documentbelieved by it to be genuine and to have been signed or presented by the properPerson or Persons;

###  

### (b)           any request or direction of theCompany mentioned herein shall be sufficiently evidenced by a Company Requestor Company Order and any resolution of the Board of Directors may besufficiently evidenced by a Board Resolution;

###  

### (c)           whenever in the administration ofthis Indenture the Trustee shall deem it desirable that a matter be proved orestablished prior to taking, suffering or omitting any action hereunder, theTrustee (unless other evidence be herein specifically prescribed) may, in theabsence of bad faith on its part, rely upon an Officers’ Certificate or anOpinion of Counsel;

###  

### (d)           the Trustee may consult with counseland the written advice of such counsel or any Opinion of Counsel shall be fulland complete authorization and protection in respect of any action taken,suffered or omitted by it hereunder in good faith and in reliance thereon;

###  

### (e)           the Trustee shall be under noobligation to exercise any of the rights or powers vested in it by thisIndenture at the request or direction of any of the Holders pursuant to thisIndenture, unless such Holders shall have offered to the Trustee reasonablesecurity or indemnity against the costs, expenses and liabilities (includingfees and expenses of its agents and counsel) which might be incurred by it incompliance with such request or direction;

###  

### (f)            the Trustee shall not be bound tomake any investigation into, and may conclusively rely upon, the facts ormatters stated in any resolution, certificate, statement, instrument, opinion,report, notice, request, direction, consent, order, bond, debenture, note,other evidence of indebtedness or other paper or document, but the Trustee, inits discretion, may make such further inquiry or investigation into such factsor matters as it may see fit, and, if the Trustee shall determine to make suchfurther inquiry or investigation, it shall be entitled to examine the books,records and premises of the Company, personally or by agent or attorney;

###  

### (g)           the Trustee may execute any of thetrusts or powers hereunder or perform any duties hereunder either directly orby or through agents or attorneys and the Trustee shall not be responsible forany misconduct or negligence on the part of any agent or attorney appointedwith due care by it hereunder;

###  

### (h)           the Trustee shall not be liable forany action taken, suffered or omitted by it in good faith and believed by it tobe authorized or within the discretion or rights or powers conferred upon it bythis Indenture; and

 

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### (i)            except during the continuance of anEvent of Default, the Trustee need perform only those duties as arespecifically set forth in this Indenture.

###  

The Trustee shall not berequired to expend or risk its own funds or otherwise incur any financialliability in the performance of any of its duties hereunder, or in the exerciseof any of its rights or powers if it shall have reasonable grounds forbelieving that repayment of such funds or adequate indemnity against such riskor liability is not reasonably assured to it.

 

In acting under theCollateral Documents and the Collateral Documents Subordination Agreement, theTrustee shall have the full benefit of the exculpatory and protectiveprovisions under this Indenture.

 

## **Section 6.03**         Trustee Not Responsible for Recitalsor Issuance of Securities.

## ** **

The recitals containedherein and in the Securities, except for the Trustee’s certificates ofauthentication, shall be taken as the statements of the Company, and theTrustee assumes no responsibility for their correctness.  The Trustee makes no representations as tothe validity or sufficiency of this Indenture, the Securities or any Guarantee,except that the Trustee represents that it is duly authorized to execute anddeliver this Indenture, authenticate the Securities and perform its obligationshereunder and, upon the effectiveness of the Registration Statement, that thestatements made by it in a Statement of Eligibility on Form T-1 suppliedto the Company will be true and accurate, subject to the qualifications setforth therein.  The Trustee shall not beaccountable for the use or application by the Company of Securities or theproceeds thereof.

 

## **Section 6.04**         May Hold Securities.

## ** **

The Trustee, any PayingAgent, any Registrar or any other agent of the Company or of the Trustee, inits individual or any other capacity, may become the owner or pledgee ofSecurities and, subject to TIA Sections 310(b) and 311, may otherwise dealwith the Company with the same rights it would have if it were not Trustee,Paying Agent, Registrar or such other agent.

 

## **Section 6.05**         Money Held in Trust.

## ** **

Money held by the Trusteein trust hereunder need not be segregated from other funds except to the extentrequired by law.  The Trustee shall beunder no liability for interest on any money received by it hereunder except asotherwise agreed with the Company or any Guarantor, as the case may be.

 

## **Section 6.06**         Compensation and Reimbursement.

## ** **

The Company agrees:

 

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### (a)           to pay to the Trustee (in itscapacity as Trustee, Paying Agent and Registrar) from time to time reasonablecompensation for all services rendered by it hereunder (which compensationshall not be limited by any provision of law in regard to the compensation of atrustee of an express trust);

###  

### (b)           except as otherwise expresslyprovided herein, to reimburse the Trustee upon its request for all reasonableexpenses, disbursements and advances incurred or made by the Trustee inaccordance with any provision of this Indenture, any Collateral Document or theCollateral Documents Subordination Agreement (including the reasonablecompensation and the expenses and disbursements of its agents and counsel),except any such expense, disbursement or advance as may be attributable to itsnegligence or bad faith; and

###  

### (c)           to indemnify the Trustee for, and tohold it harmless against, any loss, liability or expense incurred withoutwillful misconduct, negligence or bad faith on its part, arising out of or inconnection with the acceptance or administration of this trust, including thecosts and expenses of enforcing this Indenture against the Company or theGuarantors (including this Section 6.06) or any Collateral Document or theCollateral Documents Subordination Agreement against the relevant party theretoand of defending itself against any claim (whether asserted by any Holder orthe Company or any other party to any Collateral Document or the CollateralDocuments Subordination Agreement) or liability in connection with the exerciseor performance of any of its powers or duties hereunder or thereunder.

###  

The obligations of theCompany under this Section to compensate the Trustee, to pay or reimbursethe Trustee for expenses, disbursements and advances and to indemnify and holdharmless the Trustee shall constitute additional indebtedness hereunder andshall survive the satisfaction and discharge of this Indenture and anytermination under any bankruptcy law. As security for the performance of such obligations of the Company, theTrustee shall have a claim prior to the Securities upon all property and fundsheld or collected by the Trustee as such, except funds held in trust for thepayment of principal of (premium, if any) or interest on particular Securities.

 

When the Trustee incursexpenses or renders services in connection with an Event of Default specifiedin Section 5.01(i) or (j), the expenses (including the reasonable chargesand expenses of its counsel) of and the compensation for such services areintended to constitute expenses of administration under any applicablebankruptcy, insolvency or other similar law.

 

The provisions of thisSection shall survive the termination of this Indenture.

 

## **Section 6.07**         Corporate Trustee Required;Eligibility.

## ** **

There shall be at alltimes a Trustee hereunder which shall be eligible to act as Trustee under TIASection 310(a)(1) and shall have a combined capital and surplus (togetherwith its parent) of at least US$50,000,000. If such corporation publishes reports

 

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of condition at leastannually, pursuant to law or to the requirements of United States federal,state, territorial or District of Columbia supervising or examining authority,then for the purposes of this Section, the combined capital and surplus of suchcorporation shall be deemed to be its combined capital and surplus as set forthin its most recent report of condition so published.  If at any time the Trustee shall cease to be eligible inaccordance with the provisions of this Section, it shall resign immediately inthe manner and with the effect hereinafter specified in this Article.

 

## **Section 6.08**         Resignation and Removal; Appointmentof Successor.

## ** **

### (a)           No resignation or removal of theTrustee and no appointment of a successor Trustee pursuant to thisArticle shall become effective until the acceptance of appointment by thesuccessor Trustee in accordance with the applicable requirements ofSection 6.09.

###  

### (b)           The Trustee may resign at any time bygiving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required bySection 6.09 shall not have been delivered to the Trustee within 30 daysafter the giving of such notice of resignation, the resigning Trustee maypetition any court of competent jurisdiction for the appointment of a successorTrustee.

###  

### (c)           The Trustee may be removed at anytime by Act of the Holders of not less than a majority in principal amount ofthe Outstanding Securities, delivered to the Trustee and to the Company.

###  

### (d)           If at any time:

###  

##### (1)           the Trustee shall fail to comply withthe provisions of TIA Section 310(b) after written request therefor by theCompany or by any Holder who has been a bona fide Holder of a Security for atleast six months, except when the Trustee’s duty to resign is stayed inaccordance with the provisions of TIA Section 310(b), or

#####  

##### (2)           the Trustee shall cease to beeligible under Section 6.07 and shall fail to resign after written requesttherefor by the Company or by any Holder who has been a bona fide Holder of aSecurity for at least six months, or

#####  

##### (3)           the Trustee shall become incapable ofacting or shall be adjudged a bankrupt or insolvent or a receiver of theTrustee or of its property shall be appointed or any public officer shall takecharge or control of the Trustee or of its property or affairs for the purposeof rehabilitation, conservation or liquidation,

#####  

then, in any such case,(i) the Company, by a Board Resolution, may remove the Trustee, or(ii) subject to TIA Section 315(e), any Holder who has been a bonafide Holder of a Security for at least six months may, on behalf of himself andall others similarly

 

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situated, petition anycourt of competent jurisdiction for the removal of the Trustee and theappointment of a successor Trustee.

 

### (e)           If the Trustee shall resign, beremoved or become incapable of acting, or if a vacancy shall occur in theoffice of Trustee for any cause, the Company, by a Board Resolution, shallpromptly appoint a successor Trustee.  If,within one year after such resignation, removal or incapability, or theoccurrence of such vacancy, a successor Trustee shall be appointed by Act ofthe Holders of a majority in principal amount of the Outstanding Securitiesdelivered to the Company and the retiring Trustee, the successor Trustee soappointed shall, forthwith upon its acceptance of such appointment, become thesuccessor Trustee and to that extent supersede the successor Trustee appointedby the Company.  If no successor Trusteeshall have been so appointed by the Company or the Holders and acceptedappointment in the manner hereinafter provided subject to TIASection 315(e), any Holder who has been a bona fide Holder of a Securityfor at least six months may, on behalf of himself and all others similarlysituated, petition any court of competent jurisdiction for the appointment of asuccessor Trustee.

###  

### (f)            The Company shall give notice ofeach resignation and each removal of the Trustee and each appointment of asuccessor Trustee to the Holders of Securities in the manner provided for inSection 1.06.  Each notice shallinclude the name of the successor Trustee and the address of its CorporateTrust Office.

###  

## **Section 6.09**         Acceptance of Appointment bySuccessor.

## ** **

Every successor Trusteeappointed hereunder shall execute, acknowledge and deliver to the Company andto the retiring Trustee an instrument accepting such appointment, and thereuponthe resignation or removal of the retiring Trustee shall become effective andsuch successor Trustee, without any further act, deed or conveyance, shallbecome vested with all the rights, powers, trusts and duties of the retiringTrustee; but, on request of the Company or the successor Trustee, such retiringTrustee shall, upon payment of its charges, execute and deliver an instrumenttransferring to such successor Trustee all the rights, powers and trusts of theretiring Trustee and shall duly assign, transfer and deliver to such successorTrustee all property and money held by such retiring Trustee hereunder subjectto the retiring Trustee’s rights as provided under the last sentence ofSection 6.06.  Upon request of anysuch successor Trustee, the Company shall execute any and all instruments formore fully and certainly vesting in and confirming to such successor Trusteeall such rights, powers and trusts.

 

No successor Trusteeshall accept its appointment unless at the time of such acceptance suchsuccessor Trustee shall be qualified and eligible under this Article.

 

## **Section 6.10**         Merger, Conversion, Consolidation orSuccession to Business.

## ** **

Any corporation intowhich the Trustee may be merged or converted or with which it may beconsolidated, or any corporation resulting from any merger, conversion orconsolidation to which the Trustee shall be a party, or any corporation

 

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succeeding to all orsubstantially all of the corporate trust business of the Trustee, shall be thesuccessor of the Trustee hereunder, provided such corporation shall beotherwise qualified and eligible under this Article, without the execution orfiling of any paper or any further act on the part of any of the partieshereto.  In case any Securities shallhave been authenticated, but not delivered, by the Trustee then in office, anysuccessor by merger, conversion or consolidation to such authenticating Trusteemay adopt such authentication and deliver the Securities so authenticated withthe same effect as if such successor Trustee had itself authenticated suchSecurities.  In case at that time any ofthe Securities shall not have been authenticated, any successor Trustee mayauthenticate such Securities either in the name of any predecessor hereunder orin the name of the successor Trustee. In all such cases such certificates shall have the full force and effectwhich this Indenture provides that the certificate of authentication of theTrustee shall have; *provided, however*, that the right to adoptthe certificate of authentication of any predecessor Trustee or to authenticateSecurities in the name of any predecessor Trustee shall apply only to itssuccessor or successors by merger, conversion or consolidation.

 

# **ARTICLE VII**HOLDERS’ LISTS AND REPORTS BY TRUSTEE

# ** **

## **Section 7.01**         Corporation to Furnish Trustee Namesand Addresses of Holders.

## ** **

The Company will furnishor cause to be furnished to the Trustee (1) not more than 15 days aftereach Regular Record Date a list, in such form as the Trustee may reasonablyrequire, of the names and addresses of Holders as of such Regular Record Date; *provided,however*, that the Company shall not be obligated to furnish or causeto be furnished such list at any time that the list shall not differ in anyrespect from the most recent list furnished to the Trustee by the Company andat such times as the Trustee is acting as Registrar for the Securities and(2) at such other times as the Trustee may request in writing within 30days after the receipt by the Company of any such request, a list of similarform and content as of a date not more than 15 days prior to the time such listis furnished.

 

## **Section 7.02**         Preservation of List of Names andAddresses of Holders.

## ** **

### (a)           The Trustee shall preserve, in ascurrent a form as is reasonably practicable, all information as to the namesand addresses of the Holders contained in the most recent list furnished to itas provided in Section 7.01 and as to the names and addresses of Holdersreceived by the Trustee in its capacity as Registrar for the Securities (ifacting in such capacity).

###  

### (b)           The Trustee may destroy any listfurnished to it as provided in Section 7.01 upon receipt of a new list sofurnished.

 

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### (c)           Holders may communicate as providedin TIA Section 312(b) with other Holders with respect to their rightsunder this Indenture or under the Securities.

###  

## **Section 7.03**         Disclosure of Names and Addresses ofHolders.

## ** **

Every Holder ofSecurities, by receiving and holding the same, agrees with the Company and theTrustee that none of the Company or the Trustee or any agent of either of themshall be held accountable by reason of the disclosure of any such informationas to the names and addresses of the Holders in accordance with TIASection 312, regardless of the source from which such information wasderived, and that the Trustee shall not be held accountable by reason ofmailing any material pursuant to a request made under TIA Section 312(b).

 

## **Section 7.04**         Reports by Trustee.

## ** **

### (a)           Within 60 days after July 1 ofeach year commencing with the first July 1 after the first issuance ofSecurities, the Trustee shall transmit to the Holders, in the manner and to theextent provided in TIA Section 313(c), a brief report dated as of suchJuly 1 if required by TIA Section 313(a).

###  

### (b)           The Trustee shall comply withSections 313(b) and 313(c) of the Trust Indenture Act.

###  

### (c)           A copy of such report shall, at thetime of such transmission to the Holders, be filed by the Trustee with theCompany (Attention: Chief Financial Officer), with each securities exchangeupon which any of the Securities are listed (if so listed) and also with theCommission.  The Company agrees tonotify the Trustee when the Securities become listed on any stock exchange.

###  

# **ARTICLE VIII**CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

# ** **

## **Section 8.01**         Company May Consolidate, etc., Onlyon Certain Terms.

## ** **

Except in connection withthe Reorganization, the Company shall not amalgamate, consolidate or merge withor into any other Person (whether or not the Company is the surviving Person),or directly or indirectly sell, assign, convey, transfer, lease or otherwisedispose of all or substantially all of its properties or assets (determined ona consolidated basis for the Company and its Subsidiaries taken as a whole) toany Person or Persons, in one transaction or a series of related transactions,unless each of the following conditions is satisfied:

 

### (a)           either (i) the Company is thesurviving corporation or (ii) the Person (if other than the Company)formed by such amalgamation or consolidation or into which the Company ismerged or the Person that acquires by sale, assignment,

 

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### conveyance, transfer, lease or other disposition ofall or substantially all of the properties and assets of the Company and itsRestricted Subsidiaries on a consolidated basis (the “Surviving Entity”) (A) isa corporation, partnership, limited liability company or trust duly organizedand validly existing under the laws of Canada or any province thereof or theUnited States, any state thereof or the District of Columbia and (B) expresslyassumes, by a supplemental indenture in form reasonably satisfactory to theTrustee, all the obligations of the Company under this Indenture and theSecurities;

###  

### (b)           immediately after giving effect tosuch transaction or series of transactions on a pro forma basis, no Default orEvent of Default has occurred and is continuing;

###  

### (c)           immediately after giving effect tosuch transaction or series of transactions on a pro forma basis (includinggiving effect to any Indebtedness and Acquired Indebtedness incurred oranticipated to be incurred in connection with such transaction or series oftransactions), the Consolidated Net Worth of the Company (or of the SurvivingEntity if the Company is not the continuing obligor under this Indenture) isequal to or greater than the Consolidated Net Worth of the Company immediatelyprior to such transaction or series of transactions;

###  

### (d)           immediately after giving effect tosuch transaction or series of transactions on a pro forma basis (on theassumption that the transaction or series of transactions occurred at thebeginning of the most recently ended four-full-fiscal-quarter period), theCompany (or the Surviving Entity if the Company is not the continuing obligorunder this Indenture) could incur at least US$1.00 of additional Indebtedness(other than Permitted Indebtedness) pursuant to the first paragraph ofSection 10.10;

###  

### (e)           in the event any of the property ofthe Company or its Restricted Subsidiaries would become subject to any Lien asa result of the transaction or series of transactions, the provisions ofSection 10.17 are complied with;

###  

### (f)            the transaction or series oftransactions will not result in the Company (or the Surviving Entity if theCompany is not the continuing obligor under this Indenture) being required tomake any deduction or withholding on account of taxes described underSection 10.25, from any payment under or in respect of the Securities thatthe Company would not have been required to make had such transaction or seriesof transactions not occurred; and

###  

### (g)           the Company (or the Surviving Entityif the Company is not the continuing obligor under this Indenture) delivers, orcauses to be delivered, to the Trustee, in form and substance reasonablysatisfactory to the Trustee, an Officers’ Certificate and an Opinion ofCounsel, each stating that such transaction or series of transactions complieswith the requirements of this Indenture.

###  

For purposes of theforegoing, the transfer (by lease, assignment, sale or otherwise, in a singletransaction or series of related transactions) of all or substantially all ofthe properties or assets of one or more Restricted Subsidiaries thatconstitutes all or

 

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substantially all of theproperties and assets of the Company on a consolidated basis, shall be deemedto be the transfer of all or substantially all of the properties and assets ofthe Company.

 

## **Section 8.02**         Successor Substituted.

## ** **

In the event of anytransaction or series of related transactions described in and complying withthe conditions listed in the first paragraph of Section 8.01 in which theCompany is not the continuing obligor under this Indenture, the SurvivingEntity shall succeed to, and be substituted for, and may exercise every rightand power of, the Company under this Indenture with the same effect as if suchSurviving Entity had been named as the Company herein, and thereafter theCompany shall, except in the case of a transfer by lease, be discharged of allits obligations and covenants under this Indenture and the Securities.

 

# **ARTICLE IX**SUPPLEMENTS AND AMENDMENTS TO INDENTURE, GUARANTEES, COLLATERAL DOCUMENTS ANDCOLLATERAL DOCUMENT SUBORDINATION AGREEMENT

# ** **

## **Section 9.01**         Without Consent of Holders.

## ** **

Without the consent ofany Holders, the Company and any affected Guarantor, each when authorized by orpursuant to a Board Resolution, and the Trustee, at any time and from time totime, may enter into one or more indentures supplemental hereto, for any of thefollowing purposes:

 

### (a)           to evidence the succession of anotherPerson to the Company or any Guarantor and the assumption by any such successorof the covenants of the Company contained herein and in the Securities or toadd any Guarantors of the Securities; or

###  

### (b)           to add to the covenants of theCompany for the benefit of the Holders or to surrender any right or powerherein conferred upon the Company; or

###  

### (c)           to add any additional Events ofDefault; or

###  

### (d)           to provide for uncertificatedSecurities in addition to or in place of the certificated Securities; or

###  

### (e)           to evidence and provide for theacceptance of appointment hereunder by a successor Trustee pursuant to therequirements of Section 6.09; or

###  

### (f)            to secure the Securities or anyGuarantee; or

###  

### (g)           to cure any ambiguity, to correct orsupplement any provision in this Indenture which may be defective orinconsistent with any other provision herein, or

 

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### to make any other provisions with respect to mattersor questions arising under this Indenture, *provided* that such action shall notadversely affect the interests of the Holders; or

###  

### (h)           to comply with any requirement of theCommission or any Canadian regulatory authority in order to effect or maintainthe qualification of this Indenture under the Trust Indenture Act or anyCanadian regulation.

###  

Upon the request of theCompany accompanied by a Board Resolution authorizing the execution of any suchamended or supplemental Indenture, Security or Guarantee, and upon receipt bythe Trustee of the documents described in Section 6.02 hereof, the Trusteeshall join with the Company in the execution of any amended or supplementalIndenture or Guarantee authorized or permitted by the terms of this Indentureand to make any further appropriate agreements and stipulations that may betherein contained, but the Trustee shall not be obligated to enter into suchamended or supplemental Indenture or Guarantee that affects its own rights,duties or immunities under this Indenture or otherwise.

 

## **Section 9.02**         With Consent of Holders.

## ** **

With the consent of theHolders of not less than a majority in aggregate principal amount of theOutstanding Securities, by Act of said Holders delivered to the Company, anyaffected Guarantor and the Trustee, the Company and the Guarantors, each whenauthorized by or pursuant to a Board Resolution, and the Trustee may enter intoone or more indentures supplemental hereto or other agreement for the purposeof modifying in any manner this Indenture, any Guarantee, any CollateralDocument or the Collateral Documents Subordination Agreement;*provided,however,* that no such indenture supplemental or other agreement may,without the consent of the Holder of each Outstanding Security affectedthereby:

 

### (a)           change the Stated Maturity of theprincipal of, or any installment of interest on, any Security, or reduce theprincipal amount thereof or the rate of interest thereon or any premium payableupon the redemption thereof, or change the place of payment where, or the coinor currency in which any Security or any premium or the interest thereon ispayable, or impair the right to institute suit for the enforcement of any suchpayment after the Stated Maturity thereof (or, in the case of redemption, on orafter the Redemption Date); or

###  

### (b)           reduce the percentage in aggregateprincipal amount of the Outstanding Securities required to consent to anyamendment of, or waiver of compliance with, any provision of or defaults underthis Indenture; or

###  

### (c)           waive a Default or Event of Defaultin the payment of principal of (or premium, if any) or interest on theSecurities (except a rescission of acceleration of Securities by the Holders ofat least a majority in aggregate principal amount of the then OutstandingSecurities (including Additional Securities issued under this Indenture, ifany)); or

 

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### (d)           release any party to the CollateralDocuments, or release the issuer or guarantor of the Mirror Note, any issuer orguarantor of any Additional Mirror Note or any Guarantor from any of itsobligations under the Mirror Note, Additional Mirror Note, guarantee orGuarantee, as applicable, except in accordance with the terms of thisIndenture, including, without limitation, the discharge and release describedunder Section 4.03; or

###  

### (e)           amend, change or modify any of theprovisions of this Indenture relating to the subordination of the Securities,the Guarantees, the Mirror Note, any Additional Mirror Note, any guarantee ofthe Mirror Note, any guarantee of any Additional Mirror Notes, any otherCollateral Documents or the Collateral Documents Subordination Agreement, in amanner adverse to the Holders; or

###  

### (f)            amend, change or modify theobligation of the Company to make and consummate a Change of Control Offer orAsset Sale Offer in accordance with the provisions of Section 10.12 onSection 10.13, respectively; or

###  

### (g)           amend, change or modify any of theprovisions in Article XIII or XIV in a manner adverse to the Holders; or

###  

### (h)           make any change that would adverselyaffect the rights of Holders to receive Additional Amounts; or

###  

### (i)            amend, change or modify any of theprovisions in this Section 9.02.

###  

It shall not be necessaryfor any Act of Holders under this Section to approve the particular formof any proposed supplemental indenture, but it shall be sufficient if such Actshall approve the substance thereof.

 

## **Section 9.03**         Execution of Supplemental Indentures.

## ** **

In executing, oraccepting the additional trusts created by, any supplemental indenture permittedby this Article or the modifications thereby of the trusts created by thisIndenture, the Trustee shall be entitled to receive, and shall be fullyprotected in relying upon, an Opinion of Counsel stating that the execution ofsuch supplemental indenture is authorized or permitted by this Indenture andthat such supplemental indenture constitutes the legal, valid and bindingobligation of the Company and the Guarantors (if any) subject to the customaryexceptions.  The Trustee may, but shallnot be obligated to, enter into any such supplemental indenture which affectsthe Trustee’s own rights, duties or immunities under this Indenture orotherwise.

 

## **Section 9.04**         Effect of Supplemental Indentures.

## ** **

Upon the execution of anysupplemental indenture under this Article, this Indenture shall be modified inaccordance therewith, and such supplemental indenture shall form a part of thisIndenture for all purposes; and every Holder of Securities theretofore orthereafter authenticated and delivered hereunder shall be bound thereby.

 

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## **Section 9.05**         Conformity with Trust Indenture Act.

## ** **

Every supplementalindenture executed pursuant to this Article shall conform to therequirements of the Trust Indenture Act as then in effect.

 

## **Section 9.06**         Reference in Securities toSupplemental Indentures.

## ** **

Securities authenticatedand delivered after the execution of any supplemental indenture pursuant tothis Article may, and shall if required by the Trustee, bear a notation inform approved by the Trustee as to any matter provided for in such supplementalindenture.  If the Company shall sodetermine, new Securities so modified as to conform, in the opinion of theTrustee and the Company, to any such supplemental indenture may be prepared andexecuted by the Company and authenticated and delivered by the Trustee inexchange for Outstanding Securities.

 

## **Section 9.07**         Notice of Supplemental Indentures.

## ** **

Promptly after theexecution by the Company, any affected Guarantor and the Trustee of anysupplemental indenture pursuant to the provisions of Section 9.02, theCompany shall give notice thereof to the Holders of each Outstanding Securityaffected, in the manner provided for in Section 1.06, setting forth ingeneral terms the substance of such supplemental indenture.

 

# **ARTICLE X**COVENANTS

# ** **

## **Section 10.01**       Payment of Principal, Premium, If Any,and Interest.

## ** **

The Company covenants andagrees for the benefit of the Holders that it will duly and punctually pay theprincipal of (premium, if any) and interest on the Securities in accordancewith the terms of the Securities and this Indenture.  Principal and interest shall be considered paid on the date dueif on such date the Trustee or the Paying Agent holds in accordance with thisIndenture money sufficient to pay all principal and interest then due and theTrustee or the Paying Agent, as the case may be, is not prohibited from payingsuch money to the Securityholders on that date pursuant to the terms of thisIndenture.

 

The Company shall payinterest on overdue principal at the rate specified therefor in the Securities,and it shall pay interest on overdue installments of interest at the same rateto the extent lawful.

 

## **Section 10.02**       Maintenance of Office or Agency.

## ** **

The Company will maintainin The City of New York, an office or agency where Securities may bepresented or surrendered for payment, where Securities may be surrendered forregistration of transfer or exchange and where notices and demands to or

 

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upon the Company inrespect of the Securities or any Guarantor in respect of the Guarantees andthis Indenture may be served.  TheCorporate Trust Office located at One Liberty Plaza, 23rd Floor, NewYork, New York 10006 of the Trustee shall be such office or agency of theCompany, unless the Company shall designate and maintain some other office oragency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any changein the location of any such office or agency. If at any time the Company shall fail to maintain any such requiredoffice or agency or shall fail to furnish the Trustee with the address thereof,such presentations, surrenders, notices and demands may be made or served atthe Corporate Trust Office of the Trustee and the Company hereby appoints theTrustee as its agent to receive all such presentations, surrenders, notices anddemands.

 

The Company may also fromtime to time designate one or more other offices or agencies (in or outside ofThe City of New York) where the Securities may be presented or surrenderedfor any or all such purposes and may from time to time rescind any suchdesignation;*provided, however*, that no such designation or rescission shall inany manner relieve the Company of its obligation to maintain an office oragency in The City of New York for such purposes.  The Company will give prompt written noticeto the Trustee of any such designation or rescission and any change in thelocation of any such other office or agency.

 

## **Section 10.03**       Money for Security Payments to Be Heldin Trust.

## ** **

If the Company shall atany time act as its own Paying Agent, it will, on or before each due date ofthe principal of (or premium, if any) or interest on any of the Securities,segregate and hold in trust for the benefit of the Persons entitled thereto asum sufficient to pay the principal of (or premium, if any) or interest sobecoming due until such sums shall be paid to such Persons or otherwisedisposed of as herein provided and will promptly notify the Trustee of itsaction or failure so to act.

 

Whenever the Companyshall have one or more Paying Agents for the Securities, it will, on or beforeeach due date of the principal of (premium, if any) or interest on anySecurities, deposit with a Paying Agent a sum sufficient to pay the principal(premium, if any) or interest so becoming due, such sum to be held in trust forthe benefit of the Persons entitled to such principal (premium, if any) orinterest, and (unless such Paying Agent is the Trustee) the Company willpromptly notify the Trustee of such action or any failure so to act.

 

The Company will causeeach Paying Agent (other than the Trustee) to execute and deliver to theTrustee an instrument in which such Paying Agent shall agree with the Trustee,subject to the provisions of this Section, that such Paying Agent will:

 

### (a)           hold all sums held by it for thepayment of the principal of (premium, if any) or interest on Securities intrust for the benefit of the Persons entitled thereto until such sums shall bepaid to such Persons or otherwise disposed of as herein provided;

 

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### (b)           give the Trustee notice of anydefault by the Company (or any other obligor upon the Securities) in the makingof any payment of principal (premium, if any) or interest; and

###  

### (c)           at any time during the continuance ofany such default, upon the written request of the Trustee, forthwith pay to theTrustee all sums so held in trust by such Paying Agent.

###  

The Company may at anytime, for the purpose of obtaining the satisfaction and discharge of thisIndenture or for any other purpose, pay, or by Company Order direct any PayingAgent to pay, to the Trustee all sums held in trust by the Company or such PayingAgent, such sums to be held by the Trustee upon the same trusts as those uponwhich such sums were held by the Company or such Paying Agent; and, upon suchpayment by any Paying Agent to the Trustee, such Paying Agent shall be releasedfrom all further liability with respect to such sums.

 

Any money deposited withthe Trustee or any Paying Agent, or then held by the Company, in trust for thepayment of the principal of (premium, if any) or interest on any Security andremaining unclaimed for two years after such principal (and premium, if any) orinterest has become due and payable shall be paid to the Company on CompanyRequest, or (if then held by the Company) shall be discharged from such trust;and the Holder of such Security shall thereafter, as an unsecured generalcreditor, look only to the Company for payment thereof, and all liability ofthe Trustee or such Paying Agent with respect to such trust money, and allliability of the Company as trustee thereof, shall thereupon cease; *provided,however,*that the Trustee or such Paying Agent, before beingrequired to make any such repayment, may at the expense of the Company cause tobe published once, in a newspaper published in the English language,customarily published on each Business Day and of general circulation in theBorough of Manhattan, The City of New York, notice that such money remainsunclaimed and that, after a date specified therein, which shall not be lessthan 30 days from the date of such publication, any unclaimed balance of suchmoney then remaining will be repaid to the Company.

 

## **Section 10.04**       Corporate Existence.

## ** **

Subject toArticle VIII, the Company will do or cause to be done all things necessaryto preserve and keep in full force and effect the corporate existence andcorporate power (or, in the case of Baytex Energy Partnership, partnershipexistence and power) of the Company and each Restricted Subsidiary; *provided*,*however*,that the Company shall not be required to preserve any such corporate existenceand corporate power (or, in the case of Baytex Energy Partnership, partnershipexistence and power) (i) if the Board of Directors shall determine thatthe preservation thereof is no longer desirable in the conduct of the businessof the Company and its Restricted Subsidiaries taken as a whole and that theloss thereof is not disadvantageous in any material respect to the Holders, or(ii) in connection with the Reorganization.

 

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## **Section 10.05**       Payment of Taxes and Other Claims.

## ** **

The Company will pay ordischarge or cause to be paid or discharged, before the same shall becomedelinquent, (a) all taxes, assessments and governmental charges levied orimposed upon the Company or any Restricted Subsidiary or upon the income, profitsor property of the Company or any Restricted Subsidiary and (b) lawfulclaims for labor, materials and supplies, which, if unpaid, might by law becomea lien upon the property of the Company or any Restricted Subsidiary; *provided*,*however*,that the Company shall not be required to pay or discharge or cause to be paidor discharged any such tax, assessment, charge or claim whose amount,applicability or validity is being contested in good faith by appropriateproceedings.

 

## **Section 10.06**       Maintenance of Properties.

## ** **

The Company will causeall properties owned by the Company or any Restricted Subsidiary or used orheld for use in the conduct of its business or the business of any RestrictedSubsidiary to be maintained and kept in good condition, repair and working orderand supplied with all necessary equipment and will cause to be made allnecessary repairs, renewals, replacements, betterments and improvementsthereof, all as in the judgment of the Company may be necessary so that thebusiness carried on in connection therewith may be properly and advantageouslyconducted at all times; *provided, however,* that nothing in thisSection shall prevent the Company from discontinuing the maintenance ofany of such properties if such discontinuance is, in the judgment of theCompany, desirable in the conduct of its business or the business of anyRestricted Subsidiary and not disadvantageous in any material respect to theHolders.

 

## **Section 10.07**       Insurance.

## ** **

The Company will at alltimes keep all of its and its Restricted Subsidiaries’ properties which are ofan insurable nature insured with insurers, believed by the Company to beresponsible, against loss or damage to the extent that property of similarcharacter is usually so insured by corporations similarly situated and owninglike properties and conducting the same business as the Company.

 

## **Section 10.08**       Statement by Officers As to Default.

## ** **

### (a)           The Company will deliver to theTrustee, within 120 days after the end of each fiscal year, a brief certificatefrom the principal executive officer, principal financial officer or principalaccounting officer as to his or her knowledge of compliance by the Company andthe Restricted Subsidiaries with all conditions and covenants under thisIndenture.  For purposes of thisSection 10.08(a), such compliance shall be determined without regard toany period of grace or requirement of notice under this Indenture.

###  

### (b)           When any Default has occurred and iscontinuing under this Indenture, or if the trustee for or the holder of anyother evidence of Indebtedness of the Company or any Restricted Subsidiarygives any notice or takes any other action with

 

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### respect to a claimed default, the Company shalldeliver to the Trustee by registered or certified mail or by facsimiletransmission an Officers’ Certificate, specifying such event, notice or otheraction within ten Business Days of its occurrence.

###  

## **Section 10.09**       Provision of Reports and FinancialStatements.

## ** **

The Company will filewith the Trustee and provide the Holders, within 15 days after the filingthereof with the Commission, copies of all documents that the Company isrequired to file with the Commission pursuant to Section 13(a) or 15(d) ofthe Exchange Act.  If the Company is notsubject to Section 13(a) or 15(d) of the Exchange Act, the Company willfurnish to the Holders and the Trustee:

 

### (a)           within 120 days after the end of eachfiscal year, audited year-end consolidated financial statements (including abalance sheet, income statement and statement of cash flows) prepared inaccordance with GAAP, with a reconciliation of such financial statements toaccounting principles generally accepted in the United States, and

###  

### (b)           within 60 days after the end of eachof the first three fiscal quarters of each fiscal year, unaudited quarterlyconsolidated financial statements (including a balance sheet, income statementand statement of cash flows) prepared in accordance with GAAP, which,regardless of applicable requirements, shall, at a minimum, contain “theManagement’s Discussion and Analysis of Financial Condition and Results ofOperations” that the Company’s parent trust distributes to its unitholderspursuant to applicable Canadian securities law requirements.

###  

The Company shall for solong as any Securities remain outstanding, furnish to the Holders upon theirrequest, the information required to be delivered pursuant to Rule 144A(d)(4)under the Securities Act.

 

## **Section 10.10**       Limitation on Incurrence ofIndebtedness and Issuance of Disqualified Stock.

## ** **

The Company shall not,and shall not permit any Restricted Subsidiary to, create, issue, assume,guarantee or otherwise become directly or indirectly liable for the payment of,or otherwise incur (collectively, “incur”), any Indebtedness (includingAcquired Indebtedness), other than Permitted Indebtedness, or issue anyDisqualified Stock, other than Disqualified Stock issued in connection with theReorganization, except that the Company or a Restricted Subsidiary may incurIndebtedness or issue Disqualified Stock if, at the time of such incurrence orissuance, the Fixed Charge Coverage Ratio for the four full fiscal quarters(taken as one accounting period) immediately preceding the incurrence of suchIndebtedness or the issuance of such Disqualified Stock for which internalfinancial statements are available would have been greater than 2.5 to 1.0.

 

In making the foregoingcalculation, pro forma effect will be given to:  (i) the incurrence of such Indebtedness and the applicationof the net proceeds from the incurrence of Indebtedness, including to refinanceother Indebtedness, since the first day

 

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of such four-quarterperiod as if such Indebtedness was incurred and the application of such proceedsoccurred at the beginning of such four-quarter period, (ii) theincurrence, repayment or retirement of any other Indebtedness by the Company orits Restricted Subsidiaries since the first day of such four-quarter period asif such Indebtedness was incurred, repaid or retired at the beginning of suchfour-quarter period, and (iii) the acquisition (whether by purchase,merger or otherwise) or disposition (whether by sale, merger or otherwise) ofany other company, entity, business or assets acquired or disposed of by theCompany or any Restricted Subsidiary, as the case may be, since the first dayof such four-quarter period, as if such acquisition or disposition (includingthe incurrence, assumption or liability for any such Acquired Indebtedness) occurredat the beginning of such four-quarter period. In making a computation under the foregoing clause (i) or (ii),(A) interest on Indebtedness bearing a floating interest rate shall becomputed as if the rate in effect on the dated of computation had been theapplicable rate for the entire period (taking into account any HedgingObligations applicable to such Indebtedness if such Hedging Obligations have aremaining term at the date of determination in excess of 12 months),(B) if such Indebtedness bears, at the option of the Company, a fixed orfloating rate of interest, interest thereon will be computed by applying, atthe option of the Company, either the fixed or floating rate and (C) theamount of any Indebtedness under a revolving credit facility (including theSenior Credit Facilities to the extent they constitute a revolving creditfacility) will be computed based on the average daily balance of suchIndebtedness during such four-quarter period.

 

## **Section 10.11**       Limitation on Restricted Payments.

## ** **

### (a)           The Company shall not, and shall notpermit any Restricted Subsidiary to, directly or indirectly, make anyRestricted Payment unless at the time of, and immediately after giving effectto, the proposed Restricted Payment, no Default or Event of Default hasoccurred and is continuing, and either:

###  

#### (i)            (A) the Company could incur at leastUS$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuantto the first paragraph of Section 10.10; (B) the ratio of ConsolidatedDebt to Consolidated Cash Flow from Operations does not exceed 3.0 to 1.0; and(C) the aggregate amount of all Restricted Payments declared or made after theClosing Date pursuant to this clause (i) does not exceed the sum of:

####  

##### (1)           80% of Consolidated Cash Flow fromOperations accrued on a cumulative basis from the Closing Date, *plus*

#####  

##### (2)           100% of the aggregate net cashproceeds received by the Company after the Closing Date from (i) the issuanceby the Company of Deeply Subordinated Inter-company Debt, or (ii) capitalcontributions in respect of Qualified Equity Interests that the Companyreceives from any Person that owns, directly or indirectly, 100% of theCompany’s outstanding Voting Stock; *plus*

 

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##### (3)           the aggregate net proceeds, includingthe fair market value of property other than cash (as determined by theCompany’s Board of Directors, whose good faith determination will beconclusive), received by the Company after the Closing Date from any Person,other than a Subsidiary, from the issuance or sale of debt securities orDisqualified Stock that have been converted into or exchanged for QualifiedStock of the Company, plus the aggregate net cash proceeds received by theCompany at the time of such conversion or exchange; *or*

#####  

#### (ii)           The aggregate amount of allRestricted Payments declared or made after the Closing Date pursuant to thisclause (ii) does not exceed the sum of Unpaid Restricted Payment Funds notpreviously expended under this clause (ii), *plus* US$30,000,000.

####  

### (b)           Notwithstanding paragraph (a)above, the following will be permitted under this Indenture:

###  

#### (i)            the payment of any dividend within60 days after the date of declaration thereof, if at the declaration date suchpayment would not have been prohibited by the foregoing provision; *provided*no Default or Event of Default has occurred and is continuing or would occur asa result of the actions or payments set forth in this clause (i);

####  

#### (ii)           the purchase, redemption or otheracquisition or retirement for value of any shares of Capital Stock of theCompany, in exchange for, or out of the net cash proceeds of a substantiallyconcurrent issuance and sale (other than to a Subsidiary) of, Qualified EquityInterests of the Company; *provided* no Default or Event of Default hasoccurred and is continuing or would occur as a result of the actions orpayments set forth in this clause (ii);

####  

#### (iii)          the purchase, redemption, defeasanceor other acquisition or retirement for value of any Pari Passu Indebtedness orSubordinated Indebtedness in exchange for, or out of the net cash proceeds of asubstantially concurrent issuance and sale (other than to a Subsidiary) of,Qualified Equity Interests of the Company;

####  

#### (iv)          the purchase, redemption, defeasanceor other acquisition or retirement for value of Pari Passu Indebtedness orSubordinated Indebtedness in exchange for, or out of the net cash proceeds of asubstantially concurrent issuance or sale (other than to a Subsidiary) of, newSubordinated Indebtedness, so long as the Company or a Restricted Subsidiarywould be permitted to refinance such original Subordinated Indebtedness withsuch new Subordinated Indebtedness pursuant to clause (xiii) of thedefinition of Permitted Indebtedness;

####  

#### (v)           provided no Default or Event ofDefault has occurred and is continuing or would result from the actions orpayments set forth in this clause (v), the repurchase of any SubordinatedIndebtedness at a purchase price not greater than 101% of the principal amountof such Subordinated Indebtedness in the event of a “change of

 

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#### control” in accordance with provisions similar to theprovisions of Section 10.12; *provided*that, prior to or simultaneouslywith such repurchase, the Company has made the Change of Control Offer asprovided in that covenant with respect to the Securities and has repurchasedall Securities validly tendered for payment in connection with such Change ofControl Offer;

####  

#### (vi)          provided no Default or Event ofDefault has occurred and is continuing or would result from the actions orpayments set forth in this clause (vi), the repurchase, redemption or otheracquisition or retirement for value of Capital Stock (or options therefor) fromdirectors, officers or employees of the Company pursuant to any agreement uponthe death, disability or termination of employment of such directors, officersor employees, in an amount not to exceed US$500,000 in any calendar year orUS$2,000,000 in the aggregate;

####  

#### (vii)         payments or distributions in connectionwith an amalgamation, consolidation, merger, including by way of takeover bid,exchange offer or tender offer, or transfer of assets that complies with theconditions set forth in Section 8.01; and

####  

#### (viii)        payments or distributions in connectionwith the Reorganization.

####  

In determining theaggregate amount of Restricted Payments made subsequent to the Closing Date inaccordance with Section 10.11(a)(i) or Section 10.11(a)(ii), asapplicable, amounts expended pursuant to clauses (i), (ii), (iii), (v) and (vi)of Section 10.11(b) shall be included in such calculation, unless expendedin connection with the Reorganization.

 

### (c)           For the purpose of making anyRestricted Payment calculations under this Indenture (i) if a RestrictedSubsidiary is designated an Unrestricted Subsidiary, the Company shall bedeemed to have made an Investment in an amount equal to the greater of fairmarket value or net book value of the net assets of such Restricted Subsidiaryat the time of such designation as determined by the Board of Directors of theCompany, whose good faith determination will be conclusive, (ii) anyproperty transferred to or from an Unrestricted Subsidiary will be valued atfair market value at the time of such transfer, as determined by the Board ofDirectors of the Company, whose good faith determination will be conclusive and(iii) subject to the foregoing, the amount of any Restricted Payment, if otherthan cash, will be determined by the Board of Directors of the Company, whosegood faith determination will be conclusive.

###  

If the aggregate amountof all Restricted Payments calculated under paragraph (a)(i) of thisSection 10.11 includes an Investment in an Unrestricted Subsidiary orother Person that thereafter becomes a Restricted Subsidiary, the aggregateamount of all Restricted Payments calculated under Section 10.11(a)(i)shall be reduced by the lesser of (x) the net asset value of suchSubsidiary at the time it becomes a Restricted Subsidiary and (y) theinitial amount of such Investment.

 

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If an Investment resultedin the making of a Restricted Payment, the aggregate amount of all RestrictedPayments calculated under this Section 10.11 shall be reduced by theamount of any net reduction in such Investment (resulting from the payment ofinterest or dividends, loan repayment, transfer of assets or otherwise), to theextent such net reduction is not included in the Company’s Consolidated NetIncome; *provided*that the total amount by which the aggregate amount of all Restricted Paymentsmay be reduced shall not exceed the lesser of (x) the cash proceedsreceived by the Company and its Restricted Subsidiaries in connection with suchnet reduction and (y) the initial amount of such Investment.

 

In computing theConsolidated Net Income of the Company for purposes of clause (i) ofparagraph (a) of this Section 10.11, (i) the Company may useaudited financial statements for the portions of the relevant period for whichaudited financial statements are available on the date of determination andunaudited financial statements and (ii) the Company will be permitted torely in good faith on the financial statements that are available on the dateof determination.  If the Company makesa Restricted Payment that, at the time of the making of such RestrictedPayment, would in the good faith determination of the Company be permittedunder the requirements of this Indenture, such Restricted Payment shall bedeemed to have been made in compliance with this Indenture notwithstanding anysubsequent adjustments made in good faith to the Company’s financial statementsaffecting Consolidated Net Income of the Company for any period.

 

## **Section 10.12**       Purchase of Securities upon a Changeof Control.

## ** **

Except for any Change ofControl in connection with the Reorganization, if a Change of Control occurs atany time, then each Holder shall have the right to require that the Companypurchase such Holder’s Securities, in whole or in part, at a purchase price incash equal to 101% of the principal amount of such Securities, plus accrued andunpaid interest, if any, to the date of purchase, pursuant to the offerdescribed below (the “Change of Control Offer”) and the other procedures setforth in this Indenture.

 

Within 30 days followingthe date on which a Change of Control occurs, the Company shall notify theTrustee and give written notice of such Change of Control to each holder ofSecurities by first-class mail, postage prepaid, at its address appearing inthe Security Register, stating, among other things, (i) the purchase priceand the purchase date, which will be a Business Day no earlier than 30 days norlater than 60 days from the date such notice is mailed or such later date as isnecessary to comply with requirements under the Exchange Act; (ii) thatany Security not tendered will continue to accrue interest; (iii) that,unless the Company defaults in the payment of the purchase price, anySecurities accepted for payment pursuant to the Change of Control Offer willcease to accrue interest after the Change of Control purchase date; (iv) thatHolders electing to have any Securities purchased pursuant to a Change ofControl Offer shall be required to surrender the Securities, with the formentitled “Option of Holder to Elect Purchase” on the reverse of the Securitiescompleted, to the Paying Agent at the address specified in the notice prior tothe close of business on the third Business Day preceding

 

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the purchase date (the“Change of Control Payment Date”); (v) that Holders shall be entitled towithdraw their election if the Paying Agent receives, not later than the closeof business on the second Business Day preceding the Change of Control PaymentDate, a facsimile transmission or letter setting forth the name of the Holder,the principal amount of Securities delivered for purchase, and a statement thatsuch Holder is withdrawing his election to have such Securities purchased; (vi)that Holders whose Securities are being purchased only in part shall be issuednew Securities equal in principal amount to the unpurchased portion of theSecurities surrendered, which unpurchased portion must be equal to US$1,000 inprincipal amount or an integral multiple thereof; (vii) the instructions thatthe Holders of Securities must follow in order to tender their Securities; and(viii) the circumstances and relevant facts regarding such Change of Control.

 

The Company shall complywith any applicable tender offer rules including Rule 14e-1 under the ExchangeAct, and any other applicable securities laws and regulations in connectionwith a Change of Control Offer.

 

## **Section 10.13**       Limitation on Certain Asset Sales.

## ** **

### (a)           The Company shall not, and shall notpermit any Restricted Subsidiary to, engage in any Asset Sale unless(i) the consideration received by the Company or such RestrictedSubsidiary for such Asset Sale is at least equal to the fair market value ofthe assets and properties sold or otherwise disposed of (as determined by theBoard of Directors of the Company, whose good faith determination will beconclusive, and evidenced by a resolution of the Board of Directors) and(ii) the consideration received by the Company or the relevant RestrictedSubsidiary in respect of such Asset Sale is either (x) cash, Cash Equivalents,Liquid Securities or Exchanged Properties (collectively, “PermittedConsideration”) or (y) the property or assets received that do notconstitute Permitted Consideration have an aggregate fair market value of nomore than 10% of the Company’s Adjusted Consolidated Net Tangible Assets.

###  

### (b)           If the Company or any RestrictedSubsidiary engages in an Asset Sale, the Company may, at its option, within 365days after such Asset Sale, (i) apply all or a portion of the Net CashProceeds to the permanent reduction of amounts outstanding under the SeniorCredit Facilities, or to the repayment of other Senior Indebtedness of theCompany or a Restricted Subsidiary, (ii) invest all or a portion of suchNet Cash Proceeds in properties and assets that will be used by the Company orits Restricted Subsidiaries in the Oil and Gas Business, or (iii) make an AssetSale Offer pursuant to clause (c) below. The amount of Net Cash Proceeds from all Asset Sales after the ClosingDate not used for one of the purposes described in clause (i) or (ii) willconstitute “Excess Proceeds.”  If at anytime any non-cash consideration received by the Company or any RestrictedSubsidiary in connection with any Asset Sale is converted into or sold orotherwise disposed of for cash (other than interest received with respect toany such non-cash consideration), then such conversion or disposition shall bedeemed to constitute an Asset Sale for purposes of this Section 10.13 andthe Net Cash Proceeds thereof shall be applied in accordance with thisSection 10.13.

 

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### (c)           On any day when the aggregate amountof Excess Proceeds exceeds US$10,000,000, the Company shall, within 30 daysthereafter, make an offer to purchase (an “Asset Sale Offer”) from all Holdersof Securities, on a pro rata basis, in accordance with the procedures set forthin paragraph (d) below, the maximum principal amount (expressed as a multipleof US$1,000) of Securities that may be purchased with the Excess Proceeds.  The offer price as to each Security will bepayable in cash in an amount equal to 100% of the principal amount of suchSecurity plus in each case accrued and unpaid interest, if any, to the date ofrepurchase.  To the extent that theaggregate principal amount of Securities validly tendered and not withdrawnpursuant to an Asset Sale Offer is less than the Excess Proceeds, the Companymay use the portion of the Excess Proceeds not required to be used torepurchase the Securities for any other purpose not prohibited by thisIndenture.  If the aggregate principalamount of Securities validly tendered and not withdrawn by holders thereofexceeds the Excess Proceeds, the Securities to be purchased will be selected bythe Trustee on a pro rata basis (based upon the principal amount ofSecurities).  Upon completion of suchAsset Sale Offer, the amount of Excess Proceeds will be reset to zero.

###  

### (d)           Within the time period described inparagraph (c) above for making an Asset Sale Offer, the Company shall mail anotice to each Holder in the manner provided in Section 1.06 stating:  (1) that the Asset Sale Offer is beingmade pursuant to the provisions of Section 10.13 of this Indenture andthat all Securities duly and timely tendered shall be accepted for payment(except, as provided above, if the aggregate principal amount as the case maybe, of the Securities exceeds the amount of Excess Proceeds); (2) thepurchase price and the purchase date (the “Asset Sale Purchase Date”), whichdate shall be no earlier than 30 days nor later than 60 days from the date suchnotice is mailed (or as otherwise required by the Exchange Act); (3) that anySecurities not tendered shall continue to accrue interest; (4) that, unless theCompany defaults in the payment of the purchase price, all Securities acceptedfor payment pursuant to the Asset Sale Offer shall cease to accrue interestafter the Asset Sale Purchase Date; (5) that Holders electing to have anySecurities purchased pursuant to an Asset Sale Offer shall be required tosurrender the Securities, with the form entitled “Option of Holder to ElectPurchase” on the reverse of the Securities completed, to the Paying Agent atthe address specified in the notice prior to the close of business on the thirdBusiness Day preceding the Asset Sale Purchase Date; (6) that Holders shall beentitled to withdraw their election if the Paying Agent receives, not laterthan the close of business on the second Business Day preceding the Asset SalePurchase Date, a facsimile transmission or letter setting forth the name of theHolder, the principal amount of Securities delivered for purchase, and astatement that such Holder is withdrawing his election to have such Securitiespurchased; (7) that Holders whose Securities are being purchased only in partshall be issued new Securities equal in principal amount to the unpurchasedportion of the Securities surrendered, which unpurchased portion must be equalto US$1,000 in principal amount or an integral multiple thereof; (8) any otherprocedures that the Holders of Securities must follow in order to tender theirSecurities; and (9) the circumstances and relevant facts regarding such AssetSale.

 

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## **Section 10.14**       Limitation on Transactions withAffiliates.

## ** **

The Company shall not,and shall not permit any Restricted Subsidiary to, directly or indirectly,enter into or suffer to exist any transaction or series of related transactionswith, or for the benefit of, any Affiliate of the Company or any of itsRestricted Subsidiaries unless (a) such transaction or series of relatedtransactions is on terms that are no less favorable to the Company or suchRestricted Subsidiary, as the case may be, than those that could have beenobtained in an arm’s length transaction with a Person that is not an Affiliateof the Company or its Restricted Subsidiaries and (b) either (i) with respectto any transaction or series of related transactions involving aggregatepayments in excess of US$2,500,000, but less than US$10,000,000, the Companydelivers to the Trustee a resolution of the Board of Directors of the Companyset forth in an Officers’ Certificate certifying that such transaction orseries of related transactions comply with clause (a) above and that such transactionor transactions have been approved by the Board of Directors (including amajority of the Disinterested Directors) of the Company or (ii) with respect toa transaction or series of related transactions involving aggregate paymentsequal to or greater than US$10,000,000, the Company delivers to the Trustee (x)an Officers’ Certificate certifying that such transaction or series of relatedtransactions have been approved by the Board of Directors (including a majorityof the Disinterested Directors) of the Company and (y) a written opinion from anationally recognized investment banking firm to the effect that suchtransaction or series of related transactions are fair to the Company or suchRestricted Subsidiary from a financial point of view.

 

The foregoing covenantshall not restrict any of the following:

 

(A)          transactions exclusively among theCompany and/or its Restricted Subsidiaries provided such transactions are nototherwise prohibited under this Indenture;

 

(B)           the Company from paying reasonableand customary regular compensation or fees to, or executing customary expensereimbursement, indemnification or similar arrangements with, directors orexecutive officers of the Company or any Restricted Subsidiary made in theordinary course of business;

 

(C)           transactions permitted by theprovisions of Section 10.11;

 

(D)          the issuance of the Mirror Note, theguarantees of the Mirror Note and transactions permitted by Section 10.21and Section 10.22;

 

(E)           transactions in connection with theReorganization; and

 

(F)           the incurrence by the Company or anyRestricted Subsidiary of Deeply Subordinated Inter-company Debt.

 

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## **Section 10.15**       Limitation on Dividends and OtherPayment Restrictions Affecting Restricted Subsidiaries.

## ** **

The Company shall not,and shall not permit any Restricted Subsidiary to, directly or indirectly,create or otherwise cause or suffer to exist or become effective anyencumbrance or restriction of any kind on the ability of any Restricted Subsidiaryto (a) pay dividends, in cash or otherwise, or make any otherdistributions on or in respect of its Capital Stock, (b) pay anyIndebtedness or other obligation owed to the Company or any other RestrictedSubsidiary, (c) make loans or advances to the Company or any otherRestricted Subsidiary, or (d) transfer any of its properties or assets tothe Company or any other Restricted Subsidiary, except for such encumbrances orrestrictions existing under or by reason of any of the following:

 

#### (i)            this Indenture, the CollateralDocuments, any Guarantee, the Securities, the Senior Credit Facilities, asoriginally executed, and any other agreement in effect on the Closing Date;

####  

#### (ii)           applicable law;

####  

#### (iii)          customary non-assignment provisions ofany lease governing a leasehold interest, or of any contract, of the Company orany Restricted Subsidiary, relating to the property covered thereby and enteredinto in the ordinary course of business;

####  

#### (iv)          any agreement or other instrument of aPerson acquired by the Company or any Restricted Subsidiary in existence at thetime of such acquisition (but not created in contemplation thereof), whichencumbrance or restriction is not applicable to any Person, or the propertiesor assets of any Person, other than the Person, or the property or assets ofthe Person, so acquired;

####  

#### (v)           any encumbrance or restrictioncontained in contracts for sales of assets permitted by Section 10.13 withrespect to assets to be sold pursuant to such contract;

####  

#### (vi)          any encumbrance or restrictionexisting under any agreement that extends, renews, refinances or replaces theagreements containing the encumbrances or restrictions in the foregoing clauses(i) and (iv); *provided* that the terms and conditions of any suchencumbrances or restrictions are not less favorable in any material respect tothe Holders of Securities than those under or pursuant to the agreement soextended, renewed, refinanced or replaced.

####  

## **Section 10.16**       Limitation on Issuances and Sales ofCapital Stock of Restricted Subsidiaries.

## ** **

The Company shall not,and shall not permit any Restricted Subsidiary, directly or indirectly, toconvey, sell, assign, transfer, lease or otherwise dispose of any shares ofCapital Stock of a Restricted Subsidiary (including options, warrants or other

 

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rights to purchase sharesof such Capital Stock) except (a) to the Company or a Wholly-OwnedRestricted Subsidiary, (b) in a transaction or series of relatedtransactions consisting of a sale, *provided* that immediately after givingeffect to such sale, neither the Company nor any of its Subsidiaries owns anyshares of Capital Stock of such Restricted Subsidiary (including options,warrants or other rights to purchase shares of such Capital Stock) and suchsale complies with the provisions of Section 10.13 or (c) inconnection with the Reorganization.

 

The Company shall notpermit any Restricted Subsidiary to issue Preferred Stock (other than to theCompany or its Wholly-Owned Restricted Subsidiary) or permit any Person (otherthan the Company or its Wholly-Owned Restricted Subsidiaries) to own anyPreferred Stock of any of the Company’s Restricted Subsidiaries.

 

## **Section 10.17**       Limitation on Liens.

## ** **

The Company shall not,and shall not permit any Restricted Subsidiary to, create, incur, affirm orsuffer to exist any Lien of any kind securing any Pari Passu Indebtedness orSubordinated Indebtedness (including any assumption, guarantee or otherliability with respect thereto by any Restricted Subsidiary) upon any propertyor assets (including any intercompany notes) of the Company or any RestrictedSubsidiary now owned or acquired after the Closing Date, or any income orprofits therefrom, unless the Securities are directly secured equally andratably with (or prior to in the case of Subordinated Indebtedness) theobligation or liability secured by such Lien, and except for any Lien securingAcquired Indebtedness created prior to the incurrence of such Indebtedness bythe Company or any Restricted Subsidiary, *provided* that any such Lien only extendsto the assets that were subject to such Lien securing such AcquiredIndebtedness prior to the related acquisition by the Company or the RestrictedSubsidiary.  Notwithstanding the foregoing,nothing in the Indenture shall prohibit the creation or incurrence of a Lienunder any of the Collateral Documents or any guarantee issued pursuant toSection 10.21 or Section 10.22.

 

## **Section 10.18**       Unrestricted Subsidiaries.

## ** **

### (a)           The Board of Directors of the Companymay designate any Subsidiary (including any newly acquired or newly formedSubsidiary) an Unrestricted Subsidiary so long as (i) neither the Company norany Restricted Subsidiary is directly or indirectly liable for any Indebtednessof such Subsidiary, (ii) no default with respect to any Indebtedness of suchSubsidiary would permit (upon notice, lapse of time or otherwise) any holder ofany other Indebtedness of the Company or any Restricted Subsidiary to declare adefault on such other Indebtedness or cause the payment thereof to beaccelerated or payable prior to its Stated Maturity, (iii) any Investment insuch Subsidiary made as a result of designating such Subsidiary an UnrestrictedSubsidiary will not violate the provisions of Section 10.11, (iv) neither theCompany nor any Restricted Subsidiary has a contract, agreement, arrangement,understanding or obligation of any kind, whether written or oral, with suchSubsidiary other than those that might be obtained at the time from Persons whoare not Affiliates of the Company and (v) neither the Company nor anyRestricted Subsidiary has any obligation to subscribe for

 

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### additional shares of Capital Stock or other equityinterest in such Subsidiary, or to maintain or preserve such Subsidiary’sfinancial condition or to cause such Subsidiary to achieve certain levels ofoperating results.

###  

### (b)           The Board of Directors of the Companymay designate any Unrestricted Subsidiary as a Restricted Subsidiary; *provided,*that(i) no Default or Event of Default has occurred and is continuing followingsuch designation, (ii) the Company could incur at least US$1.00 of additionalIndebtedness (except for Permitted Indebtedness) pursuant to the firstparagraph of Section 10.10 (treating any Indebtedness of such UnrestrictedSubsidiary as the incurrence of Indebtedness by a Restricted Subsidiary), and(iii) such designation is evidenced by a Board Resolution, which is filed withthe Trustee, together with an Officer’s Certificate certifying that suchdesignation complied with the provisions of this paragraph (b).

###  

## **Section 10.19**       Limitation on Layering Indebtedness.

## ** **

The Company and eachRestricted Subsidiary shall not, directly or indirectly, incur or otherwisepermit to exist any Indebtedness that is subordinate in right of payment to anyIndebtedness of the Company or such Restricted Subsidiary, as the case may be,unless such Indebtedness is also pari passu with, or subordinate in right ofpayment to, the Securities or the Collateral Documents, as the case may be.

 

## **Section 10.20**       Guarantees of Indebtedness byRestricted Subsidiaries.

## ** **

The Company shall notpermit any Restricted Subsidiary (other than Baytex Marketing Ltd.) that is nota Guarantor, directly or indirectly, to guarantee, assume or in any othermanner become liable for the payment of any Indebtedness of the Company or anyother Restricted Subsidiary, unless (a) if such Restricted Subsidiary isnot the issuer or a guarantor of the Mirror Note or any Additional Mirror Note,and is not a Guarantor, such Restricted Subsidiary simultaneously executes anddelivers a guarantee of the Mirror Note or a Guarantee, as applicable; and (b)with respect to any guarantee of Subordinated Indebtedness by a RestrictedSubsidiary, any such guarantee is subordinated to such Restricted Subsidiary’sMirror Note, Additional Mirror Note, guarantee of the Mirror Note or AdditionalMirror Note or Guarantee, as applicable, at least to the same extent as suchSubordinated Indebtedness is subordinated to the Securities, *provided*thatthe foregoing provision shall not be applicable to any guarantee by BaytexMarketing Ltd. or any Restricted Subsidiary that existed at the time suchPerson became a Restricted Subsidiary and was not incurred in connection with,or in contemplation of, such Person becoming a Restricted Subsidiary.

 

## **Section 10.21**       Additional Subsidiaries to become aParty to Collateral Documents or to Guarantee the Notes.

## ** **

### (a)           So long as the Mirror Note and anyAdditional Mirror Notes remain outstanding, if the Company or any of itsRestricted Subsidiaries transfer or cause to be transferred, in one transactionor a series of related transactions, property having an aggregate net bookvalue in excess of US$500,000 to any Restricted Subsidiary that is

 

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### not the issuer or a guarantor of the Mirror Note andany Additional Mirror Note (except in connection with the Reorganization), orif the Company or any of its Restricted Subsidiaries shall organize, acquire orotherwise invest in another Restricted Subsidiary having total assets with anet book value in excess of US$500,000 or if all Restricted Subsidiaries thatare not the issuer or guarantors of the Mirror Note and any Additional MirrorNotes have total assets with a net book value aggregating US$2,000,000 or more,then such transferee, transferees or acquired Restricted Subsidiary or otherRestricted Subsidiary or Restricted Subsidiaries (other than Baytex MarketingLtd.) shall execute and deliver to the Trustee to be pledged for the benefit ofthe Holders a guarantee of the Mirror Note and any Additional Mirror Notes, inform and substance similar to the guarantees of the Mirror Note and guaranteesof the Additional Mirror Notes previously executed.

###  

### (b)           At any point after the CollateralDocuments have been released and discharged in accordance with the terms ofthis Indenture, if the Company or any of its Restricted Subsidiaries transferor cause to be transferred, in one transaction or a series of relatedtransactions, property having an aggregate net book value in excess ofUS$500,000 to any Restricted Subsidiary (except in connection with theReorganization), or if the Company or any of its Restricted Subsidiaries shallorganize, acquire or otherwise invest in another Restricted Subsidiary havingtotal assets with a net book value in excess of US$500,000 or if all RestrictedSubsidiaries that are not Guarantors of the Securities have total assets with anet book value aggregating US$2,000,000 or more, then such transferee,transferees or acquired Restricted Subsidiary or other Restricted Subsidiary orRestricted Subsidiaries (other than Baytex Marketing Ltd.) shall execute anddeliver to the Trustee for the benefit of the Holders a guarantee of the notes,in form and substance substantially similar to the guarantee set forth inArticle XIII of this Indenture.

###  

## **Section 10.22**       Additional Collateral Documents andGuarantees upon Issuance of Additional Securities.

## ** **

In the event that theCompany issues Additional Securities pursuant to Section 3.12 of thisIndenture after the Closing Date, and there are Restricted Subsidiaries inexistence at the time of such issuance of Additional Securities, the Companywill simultaneously therewith either:

 

### (a)           if the Collateral Documents are stillin effect at such time, cause Baytex Energy Partnership or another one of itsRestricted Subsidiaries (other than Baytex Marketing Ltd.) to issue acorresponding Additional Mirror Note, which note shall be guaranteed by all ofthe Company’s Restricted Subsidiaries (other than Baytex Marketing Ltd.)existing at such time, such guarantee to be in form and substance substantiallysimilar to the guarantee set forth in Article XIII of this Indenture; *or*

###  

### (b)           if the Collateral Documents have beenreleased and discharged at such time, cause all of its Restricted Subsidiaries(other than Baytex Marketing Ltd.) to issue guarantees of the Securities inform and substance substantially similar to the guarantee set forth inArticle XIII of this Indenture.

 

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## **Section 10.23**       Limitation on Conduct of Business.

## ** **

The Company shall not,and shall not permit any of its Restricted Subsidiaries to, conduct anybusiness other than the Oil and Gas Business.

 

## **Section 10.24**       Limitation on Incurrence ofIndebtedness, Liens and Conduct of Business for Baytex Marketing Ltd.

## ** **

### (a)           The Company shall not permit BaytexMarketing Ltd. to create, issue, assume, guarantee or otherwise become directlyor indirectly liable for the payment of, or otherwise incur (collectively,“incur”), any Indebtedness (including Acquired Indebtedness), except asrequired or permitted under the Baytex Marketing Agreement or the FrontierAgreement (collectively, the “Frontier Agreements”), each as in effect on thedate of this Indenture, or in connection with the incurrence of SeniorIndebtedness or Guarantor Senior Indebtedness.

###  

### (b)           The Company shall not permit BaytexMarketing Ltd. to create, incur, affirm or suffer to exist any Lien of any kindupon any property or assets of Baytex Marketing Ltd. or any income or profitstherefrom, unless the Securities are directly secured equally and ratably withthe obligation or liability secured by such Lien and except as required orpermitted under the Frontier Agreements, as in effect on the date of thisIndenture, or in connection with the incurrence of Senior Indebtedness orGuarantor Senior Indebtedness. Notwithstanding the foregoing, nothing in the Indenture shall prohibitthe creation or incurrence of a Lien under any of the Collateral Documents orany guarantee issued pursuant to Section 10.21 or Section 10.22

###  

### (c)           The Company shall not permit BaytexMarketing Ltd. to conduct any business other than that connected with theFrontier Agreements, as in effect on the date of this Indenture.

###  

### (d)           The Company shall cause BaytexMarketing Ltd. to (i) immediately pay to the Company any amounts that are dueor are to become due to the Company under the Baytex Marketing Agreement assoon as Baytex Marketing Ltd. receives payment from Frontier Oil and RefiningCompany or its successor under the Frontier Agreement, as in effect on the dateof this Indenture, including any amounts received as liquidated damages underArticle 15 of the Frontier Agreement, and (ii) immediately deliver toFrontier all crude oil that is to be delivered to Frontier under the FrontierAgreement as soon as crude oil is received by Baytex Marketing Ltd. from theCompany under the Baytex Agreement.

###  

## **Section 10.25**       Payment of Additional Amounts.

## ** **

### (a)           All payments made by or on behalf ofthe Company with respect to the Securities will be made free and clear of andwithout withholding or deduction for or on account of any present or futuretax, duty, levy, impost, assessment or other governmental charge (includingpenalties, interest and other liabilities related thereto) imposed or levied byor on behalf of the Government of Canada or of any province or

 

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### territory thereof or by any authority or agencytherein or thereof having power to tax (hereinafter “Taxes”), unless theCompany is required to withhold or deduct Taxes by law or by the interpretationor administration thereof by the relevant government authority or agency.  If the Company is so required to withhold ordeduct any amount for or on account of Taxes from any payment made under orwith respect to the Securities, the Company will pay such additional amounts(“Additional Amounts”) as may be necessary so that the net amount received byeach Holder (including Additional Amounts) after such withholding or deductionwill not be less than the amount the Holder would have received if such Taxeshad not been withheld or deducted; *provided*,*however*, that no AdditionalAmounts will be payable with respect to a payment made to a Holder (an“Excluded Holder”) in respect of a beneficial owner (i) with which the Companydoes not deal at arm’s length (for the purposes of the Income Tax Act (Canada))at the time of the making of such payment or (ii) which is subject to suchTaxes by reason of its being connected with Canada or any province or territorythereof otherwise than by the mere holding of Securities or the receipt ofpayments thereunder.  The Company willalso make such withholding or deduction and remit the full amount deducted orwithheld to the relevant authority as and when required in accordance withapplicable law.  The Company willfurnish to the Holders of the Securities, within 30 days after the date thepayment of any Taxes is due pursuant to applicable law, official receipts ofthe relevant governmental authorities for all amounts deducted or withheld orif such receipts are not obtainable, other evidence of such payment by theCompany.

###  

### (b)           The Company will indemnify and holdharmless each Holder on the date of the withholding or deduction (other than anExcluded Holder) and will upon written request of each Holder (other than anExcluded Holder), reimburse each such Holder for the amount of (i) any Taxes solevied or imposed and paid by such Holder as a result of payments made under orwith respect to the Securities and (ii) any Taxes so levied or imposed withrespect to any reimbursement under the foregoing clause (i), but excluding anysuch Taxes on such Holder’s net income, so that the net amount received by suchHolder after such reimbursement will not be less than the net amount the Holderwould have received if Taxes (other than such Taxes on such Holder’s netincome) on such reimbursement had not been imposed.

###  

### (c)           At least 15 days prior to each dateon which Additional Amounts are payable, the Company will deliver to theTrustee and Paying Agent an Officers’ Certificate instructing the Trustee andPaying Agent whether such payment on the Securities shall be made without deductionor withholding for or on account of any tax, assessment or other governmentalcharge.  In the absence of any suchcertificate the Trustee and Paying Agent may assume that no such deduction orwithholding shall be required.

###  

### (d)           At least 15 days prior to each dateon which any payment under or with respect to the Securities is due andpayable, if the Company will be obligated to pay Additional Amounts withrespect to such payment, the Company will deliver to the Trustee and the PayingAgent an Officers’ Certificate stating the fact that such Additional Amountswill be payable and will set forth such other information necessary to enablethe

 

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### Trustee and the Paying Agent to pay such AdditionalAmounts to Holders on the payment date.

###  

### (e)           Whenever in this Indenture there ismentioned, in any context, the payment of amounts based upon the principal,(premium, if any, interest), purchase prices in connection with a repurchase ofSecurities or any other amount payable under or with respect to any Security,such mention shall be deemed to include mention of the payment of AdditionalAmounts provided for in this Section 10.23, to the extent that, in suchcontext, Additional Amounts are, were or would be payable in respect thereofpursuant to the provisions of this Section 10.23.

###  

## **Section 10.26**       Waiver of Certain Covenants.

## ** **

The Company or anyRestricted Subsidiary may omit in any particular instance to comply with anyterm, provision or condition set forth in Sections 10.06 through 10.11,inclusive, and 10.13 through 10.24, inclusive, if before or after the time forsuch compliance the Holders of at least a majority in principal amount of theOutstanding Securities, by Act of such Holders, waive such compliance in suchinstance with such term, provision or condition, but no such waiver shallextend to or affect such term, provision or condition except to the extent soexpressly waived, and, until such waiver shall become effective, theobligations of the Company and the duties of the Trustee in respect of any suchterm, provision or condition shall remain in full force and effect.

 

# **ARTICLE XI**REDEMPTION OF SECURITIES

# ** **

## **Section 11.01**       Right of Redemption.

## ** **

### (a)           The Securities may be redeemed at theoption of the Company, as a whole or from time to time in part, at any time onor after July 15, 2007, subject to the conditions and at the RedemptionPrices specified in the form of Security attached hereto as Exhibit A, togetherwith accrued interest to the Redemption Date.

###  

### (b)           If the Company becomes obligated topay Additional Amounts as a result of a change in the laws or regulations ofCanada or any Canadian taxing authority or a change in any official positionregarding the application or interpretation thereof, which is publiclyannounced or becomes effective on or after the Closing Date, the Company may,at its option, redeem the Securities, in whole but not in part, at a redemptionprice equal to 100% of the principal amount thereof, plus accrued and unpaidinterest, if any, to the Redemption Date.

 

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## **Section 11.02**       Applicability of Article.

## ** **

Redemption of Securitiesat the election of the Company or otherwise, as permitted or required by anyprovision of this Indenture, shall be made in accordance with such provisionand this Article.

 

## **Section 11.03**       Election to Redeem; Notice to Trustee.

## ** **

The election of theCompany to redeem any Securities pursuant to Section 11.01 shall beevidenced by a Board Resolution.  Incase of any redemption at the election of the Company, the Company shall, atleast 60 days prior to the Redemption Date fixed by the Company (unless ashorter notice shall be satisfactory to the Trustee), notify the Trustee ofsuch Redemption Date and of the principal amount of Securities to be redeemedand shall deliver to the Trustee such documentation and records as shall enablethe Trustee to select the Securities to be redeemed pursuant toSection 11.04.

 

## **Section 11.04**       Selection by Trustee of Securities toBe Redeemed.

## ** **

If less than all theSecurities are to be redeemed, the particular Securities to be redeemed shallbe selected not more than 60 days prior to the Redemption Date by the Trustee,from the Outstanding Securities not previously called for redemption, on a prorata basis or such method as the Trustee shall deem fair and appropriate andwhich may provide for the selection for redemption of portions of the principalof Securities; *provided, however*, that no such partial redemption shallreduce the portion of the principal amount of a Security not redeemed to lessthan US$1,000.

 

The Trustee shallpromptly notify the Company and the Registrar (if other than the Company) inwriting of the Securities selected for redemption and, in the case of anySecurities selected for partial redemption, the principal amount thereof to beredeemed.

 

For all purposes of thisIndenture, unless the context otherwise requires, all provisions relating toredemption of Securities shall relate, in the case of any Security redeemed orto be redeemed only in part, to the portion of the principal amount of suchSecurity which has been or is to be redeemed.

 

## **Section 11.05**       Notice of Redemption.

## ** **

Notice of redemptionshall be given in the manner provided for in Section 1.06 not less than 30nor more than 60 days prior to the Redemption Date (or, in the case of aredemption pursuant to Section 11.01 (c), not less than 15 nor more than30 days prior to the Redemption Date), to each Holder of Securities to beredeemed.

 

All notices of redemptionshall state:

 

#### (i)            the Redemption Date,

 

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#### (ii)           the Redemption Price and the amountof accrued interest to the Redemption Date payable as provided inSection 11.07, if any,

####  

#### (iii)          if less than all OutstandingSecurities are to be redeemed, the identification (and, in the case of apartial redemption, the principal amounts) of the particular Securities to beredeemed,

####  

#### (iv)          in case any Security is to be redeemedin part only, the notice which relates to such Security shall state that on andafter the Redemption Date, upon surrender of such Security, the holder willreceive, without charge, a new Security or Securities of authorizeddenominations for the principal amount thereof remaining unredeemed,

####  

#### (v)           that on the Redemption Date, theRedemption Price (and accrued interest, if any, to the Redemption Date payableas provided in Section 11.07) will become due and payable upon each suchSecurity, or the portion thereof, to be redeemed, and that interest thereonwill cease to accrue on and after said date,

####  

#### (vi)          the place or places where suchSecurities are to be surrendered for payment of the Redemption Price andaccrued interest, if any, and

####  

#### (vii)         the CUSIP or CINS number, as the casemay be.

####  

Notice of redemption ofSecurities to be redeemed at the election of the Company shall be given by theCompany or, at the Company’s request, by the Trustee in the name and at theexpense of the Company.

 

## **Section 11.06**       Deposit of Redemption Price.

## ** **

On or prior to 10:00 a.m.(New York City time) on any Redemption Date, the Company shall deposit with theTrustee or with a Paying Agent in immediately available funds or, if theCompany is acting as its own Paying Agent, segregate and hold in trust asprovided in Section 10.03) an amount of money sufficient to pay theRedemption Price of, and accrued interest on, all the Securities which are tobe redeemed on that date.

 

## **Section 11.07**       Securities Payable on Redemption Date.

## ** **

Notice of redemptionhaving been given as aforesaid, the Securities so to be redeemed shall, on theRedemption Date, become due and payable at the Redemption Price thereinspecified (together with accrued interest, if any, to the Redemption Date), andfrom and after such date (unless the Company shall default in the payment ofthe Redemption Price and accrued interest, if any) such Securities shall ceaseto bear interest.  Upon surrender of anysuch Security for redemption in accordance with said notice, such Securityshall be paid by the Company at the Redemption Price, together with accruedinterest, if any, to the Redemption Date; *provided*, *however*, that installmentsof interest whose Stated Maturity is on or prior to the Redemption Date shallbe payable to the

 

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Holders of suchSecurities, or one or more Predecessor Securities, registered as such at theclose of business on the relevant Record Dates according to their terms and theprovisions of Section 3.09.

 

If any Security calledfor redemption shall not be so paid upon surrender thereof for redemption, theprincipal (and premium, if any) shall, until paid, bear interest from theRedemption Date at the rate borne by the Securities.

 

## **Section 11.08**       Securities Redeemed in Part.

## ** **

Any Security which is tobe redeemed only in part shall be surrendered at the office or agency of theCompany maintained for such purpose pursuant to Section 10.02 (with, ifthe Company or the Trustee so requires, due endorsement by, or a writteninstrument of transfer in form satisfactory to the Company and the Trustee dulyexecuted by, the Holder thereof or such Holder’s attorney duly authorized inwriting), and the Company shall execute, and the Trustee shall authenticate anddeliver to the Holder of such Security without service charge, a new Securityor Securities, of any authorized denomination as requested by such Holder, inaggregate principal amount equal to and in exchange for the unredeemed portionof the principal of the Security so surrendered.

 

# **ARTICLE XII**DEFEASANCE AND COVENANT DEFEASANCE

# ** **

## **Section 12.01**       Company Option to Effect Defeasance orCovenant Defeasance.

## ** **

The Company may, at itsoption by Board Resolution at any time, with respect to the Securities, electto have either Section 12.02 or Section 12.03 be applied to allOutstanding Securities upon compliance with the conditions set forth below inthis Article XII.

 

## **Section 12.02**       Defeasance and Discharge.

## ** **

Upon the Company’sexercise under Section 12.01 of the option applicable to thisSection 12.02, the Company, the Guarantors and all parties to theCollateral Documents shall be deemed to have been discharged from theirobligations with respect to all Outstanding Securities, Guarantees andCollateral Documents on the date the conditions set forth in Section 12.04are satisfied (hereinafter, “defeasance”). For this purpose, such defeasance means that the Company shall be deemedto have paid and discharged the entire indebtedness represented by theOutstanding Securities, which shall thereafter be deemed to be “Outstanding”only for the purposes of Section 12.05 and the other Sections of thisIndenture referred to in (A) and (B) below, and to have satisfied all its otherobligations under such Securities and this Indenture insofar as such Securitiesare concerned (and the Trustee, at the expense of the Company, shall executeproper instruments acknowledging the same), and that all Collateral Documentswill be

 

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deemed to have beenreleased and discharged, except for the following which shall survive untilotherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receivepayments in respect of the principal of (premium, if any) and interest on suchSecurities when such payments are due, (B) the Company’s obligations withrespect to such Securities under Sections 3.04, 3.05, 3.08, 10.02 and 10.03,(C) the rights, powers, trusts, duties and immunities of the Trusteehereunder and the Company’s obligations under Section 6.06, (D) thisArticle XII and (E) the Company’s obligation to pay Additional Amountsunder Section 10.23.  Subject tocompliance with this Article XII, the Company may exercise its optionunder this Section 12.02 notwithstanding the prior exercise of its option underSection 12.03 with respect to the Securities.

 

## **Section 12.03**       Covenant Defeasance.

## ** **

Upon the Company’sexercise under Section 12.01 of the option applicable to thisSection 12.03, each of the Company and the Restricted Subsidiaries shallbe released from its obligations under any covenant contained inSection 8.01 and in Sections 10.04 through 10.26 (other thanSection 10.08) with respect to the Outstanding Securities on and after thedate the conditions set forth below are satisfied (hereinafter, “covenantdefeasance”), and the Securities shall thereafter be deemed not to be“Outstanding” for the purposes of any direction, waiver, consent or declarationor Act of Holders (and the consequences of any thereof) in connection with suchcovenants, but shall continue to be deemed “Outstanding” for all other purposeshereunder.  For this purpose, suchcovenant defeasance means that, with respect to the Outstanding Securities, theCompany and any Restricted Subsidiary may omit to comply with and shall have noliability in respect of any term, condition or limitation set forth in any suchcovenant, whether directly or indirectly, by reason of any reference elsewhereherein to any such covenant or by reason of any reference in any such covenantto any other provision herein or in any other document and such omission tocomply shall not constitute a Default or an Event of Default underSections 5.01(c), 5.01(d), 5.01(e) and 5.01(f) but, except as specifiedabove, the remainder of this Indenture and such Securities shall be unaffectedthereby.

 

## **Section 12.04**       Conditions to Defeasance or CovenantDefeasance.

## ** **

The following shall bethe conditions to application of either Section 12.02 orSection 12.03 to the Outstanding Securities:

 

### (a)           The Company shall irrevocably havedeposited with the Trustee (or another trustee satisfying the requirements ofSection 6.07 who shall agree to comply with the provisions of thisArticle XII applicable to it) as trust funds in trust, for the benefit ofthe Holders of such Securities, (A) money in an amount, or (B) U.S.Government Obligations (as defined herein) that through the scheduled paymentof principal and interest thereon will provide money in an amount, or(C) a combination thereof, sufficient, in the opinion of a nationallyrecognized firm of independent public accountants, to pay anddischarge the principal of (premium, if any) and interest on theOutstanding Securities on the Stated Maturity (or upon Redemption Date, ifapplicable)

 

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### of such principal (and premium, if any) or installmentof interest;*provided* that the Trustee shall have been irrevocably instructed toapply such money or the proceeds of such U.S. Government Obligations to saidpayments with respect to the Securities. Before such a deposit, the Company may give to the Trustee, inaccordance with Section 11.03 hereof, a notice of its election to redeemall of the Outstanding Securities at a future date in accordance withArticle XI hereof, which notice shall be irrevocable.  Such irrevocable redemption notice, ifgiven, shall be given effect in applying the foregoing.  For this purpose, “U.S. GovernmentObligations” means securities that are (x) direct obligations of theUnited States for the timely payment of which its full faith and credit ispledged or (y) obligations of a Person controlled or supervised by andacting as an agency or instrumentality of the United States the timely paymentof which is unconditionally guaranteed as a full faith and credit obligation bythe United States, which, in either case, are not callable or redeemable at theoption of the issuer thereof, and shall also include a depository receiptissued by a bank (as defined in Section 3(a)(2) of the Securities Act), ascustodian with respect to any such U.S. Government Obligation or a specificpayment of principal of or interest on any such U.S. Government Obligation heldby such custodian for the account of the holder of such depository receipt,provided that (except as required by law) such custodian is not authorized tomake any deduction from the amount payable to the holder of such depositoryreceipt from any amount received by the custodian in respect of the U.S.Government Obligation or the specific payment of principal of or interest onthe U.S. Government Obligation evidenced by such depository receipt.

###  

### (b)           No Default or Event of Default withrespect to the Securities shall have occurred and be continuing on the date ofsuch deposit or, insofar as paragraphs (i) and (j) of Section 5.01 hereofare concerned, at any time during the period ending on the 91st day after thedate of such deposit (it being understood that this condition shall not bedeemed satisfied until the expiration of such period).

###  

### (c)           Such defeasance or covenant defeasanceshall not result in a breach or violation of, or constitute a default under,this Indenture or any other material agreement or instrument to which theCompany or any Guarantor is a party or by which the Company or any Guarantor isbound.

###  

### (d)           In the case of an election underSection 12.02, the Company shall have delivered to the Trustee an Opinionof Counsel stating that (i) the Company has received from, or there hasbeen published by, the Internal Revenue Service a ruling, or (ii) sincethe date of this Indenture, there has been a change in the applicable UnitedStates federal income tax law, in either case to the effect that, and basedthereon such opinion shall confirm that, the Holders of the OutstandingSecurities will not recognize income, gain or loss for United States federalincome tax purposes as a result of such defeasance and will be subject toUnited States federal income tax on the same amounts, in the same manner and atthe same times as would have been the case if such defeasance had not occurred.

###  

### (e)           In the case of an election underSection 12.02, the Company shall have delivered to the Trustee an Opinionof Counsel qualified to practice in Canada or a

 

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### ruling from Revenue Canada, Taxation to the effectthat Holders of the Securities who are not resident in Canada will notrecognize income, gain or loss for Canadian federal, provincial or territorialincome tax or other tax purposes as a result of such deposit and defeasance andwill be subject to any Canadian federal or provincial income tax and other taxon the same amounts in the same manner and at the same times as would have beenthe case had such deposit and defeasance not occurred.

###  

### (f)            In the case of an election underSection 12.03, the Company shall have delivered to the Trustee an Opinionof Counsel to the effect that the Holders of the Securities Outstanding willnot recognize income, gain or loss for federal income tax purposes as a resultof such covenant defeasance and will be subject to federal income tax on thesame amounts, in the same manner and at the same times as would have been thecase if such covenant defeasance had not occurred.

###  

### (g)           The Company shall have delivered tothe Trustee an Officers’ Certificate and an Opinion of Counsel, each statingthat all conditions precedent provided for relating to either the defeasanceunder Section 12.02 or the covenant defeasance under Section 12.03,as the case may be, have been complied with.

###  

### (h)           The Company shall have delivered tothe Trustee an Officer’s Certificate stating that the deposit pursuant toSection 12.04 was not made with the intent of preferring the Holders overany other creditors of the Company or the Guarantors or with the intent ofdefeating, hindering, delaying or defrauding any other creditors of theCompany, the Guarantors, if any, or any other Person.

###  

## **Section 12.05**       Deposited Money and U.S. GovernmentObligations to Be Held in Trust; Other Miscellaneous Provisions.

## ** **

Subject to the provisionsof the last paragraph of Section 10.03, all money and U.S. GovernmentObligations (including the proceeds thereof) deposited with the Trustee (orother qualifying trustee, collectively for purposes of this Section 12.05,the “Trustee”) pursuant to Section 12.04 in respect of the OutstandingSecurities shall be held in trust and applied by the Trustee, in accordancewith the provisions of such Securities and this Indenture, to the payment,either directly or through any Paying Agent (including the Company acting asits own Paying Agent) as the Trustee may determine, to the Holders of suchSecurities of all sums due and to become due thereon in respect of principal(and premium, if any) and interest, but such money need not be segregated fromother funds except to the extent required by law.

 

The Company shall pay andindemnify the Trustee against any tax, fee or other charge imposed on orassessed against the U.S. Governmental Obligations deposited pursuant toSection 12.04 or the principal and interest received in respect thereofother than any such tax, fee or other charge which by law is for the account ofthe Holders of the Outstanding Securities.

 

Anything in thisArticle XII to the contrary notwithstanding, the Trustee shall deliver orpay to the Company from time to time upon Company Request any

 

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money or U.S. GovernmentObligations (or other property and any proceeds therefrom) held by it asprovided in Section 12.04 which, in the opinion of a nationally recognizedfirm of independent public accountants expressed in a written certificationthereof delivered to the Trustee, are in excess of the amount thereof whichwould then be required to be deposited to effect an equivalent defeasance orcovenant defeasance, as applicable, in accordance with this Article.

 

## **Section 12.06**       Reinstatement.

## ** **

If the Trustee or anyPaying Agent is unable to apply any money in accordance with Section 12.05by reason of any order or judgment of any court or governmental authorityenjoining, restraining or otherwise prohibiting such application, then theCompany obligations under this Indenture and the Securities shall be revivedand reinstated as though no deposit had occurred pursuant to Section 12.02or 12.03, as the case may be, until such time as the Trustee or Paying Agent ispermitted to apply all such money in accordance with Section 12.05; *provided,however*, that if the Company makes any payment of principal of(premium, if any) or interest on any Security following the reinstatement ofits obligations, the Company shall be subrogated to the rights of the Holdersof such Securities to receive such payment from the money held by the Trusteeor Paying Agent.

 

# **ARTICLE XIII**GUARANTEE

# ** **

## **Section 13.01**       Application of Article XIII

## ** **

The provisions of thisguarantee shall apply to each Restricted Subsidiary that is required to issue aGuarantee of the Securities after the Closing Date pursuant toSection 10.21(b) or Section 10.22(b), and shall not apply in anyother circumstance.  A Restricted Subsidiarythat is required pursuant to Section 10.21(b) or Section 10.22(b) toissue a Guarantee in form and substance substantially similar to the guaranteeset forth in this Article XIII may elect to be bound by this guarantee inArticle XIII and the subordination provisions in Article XIV byexecuting a supplemental indenture.

 

## **Section 13.02**       Guarantees.

## ** **

### (a)           Each Guarantor hereby jointly andseverally, fully, absolutely, unconditionally and irrevocably guarantees toeach Holder of a Security authenticated and delivered by the Trustee, and tothe Trustee in its individual capacity and on behalf of each Holder, thepunctual payment and performance when due of all Indenture Obligations which,for purposes of its Guarantee, shall also be deemed to include all commissions,fees, charges, costs and other expenses (including reasonable legal fees anddisbursements of counsel) arising out of or incurred by the Trustee or theHolders in connection with the enforcement of any Guarantee and agrees toindemnify and hold harmless each Holder and the Trustee from all losses,damages, costs, expenses and liabilities suffered or incurred by the Holdersand the Trustee resulting or arising from or

 

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### relating to any failure by Company to unconditionallyand irrevocably pay in full or fully perform the Indenture Obligations as andwhen due provided that the amount of such indemnification shall not exceed theamount of such Indenture Obligations as described in the preceding sentence.  Without limiting the generality of theforegoing, each Guarantor’s liability shall extend to all amounts thatconstitute part of the Indenture Obligations and would be owed by the Companyto such Holder or the Trustee under the Securities or this Indenture but forthe fact that they are unenforceable, reduced, limited, suspended or notallowable due to the existence of a bankruptcy, reorganization or similarproceeding involving the Company.

###  

### (b)           Each Guarantor and by its acceptancehereof each Holder hereby confirms that it is the intention of all such partiesthat the guarantee by such Guarantor pursuant to its Guarantee not constitute afraudulent transfer or conveyance for purposes of any Bankruptcy Law, theUniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act of anysimilar United States or Canadian federal, provincial or state law or theprovisions of its local law relating to fraudulent transfer or conveyance.  To effectuate the foregoing intention, theHolders and each Guarantor hereby irrevocably agree that the obligations ofsuch Guarantor under its Guarantee shall be limited to the maximum amount asshall, after giving effect to all other contingent and fixed liabilities ofsuch Guarantor and after giving effect to any collections from or payments madeby or on behalf of any other Guarantor in respect of the obligations of suchother Guarantor under its Guarantee or pursuant to paragraph (c) of thisSection 13.01, result in the obligations of such Guarantor under its Guaranteenot constituting a fraudulent conveyance or fraudulent transfer under federalor state law.

###  

### (c)           In order to provide for just andequitable contribution among the Guarantors, the Guarantors agree, *inter se*,that in the event any payment or distribution is made by any Guarantor (a“Funding Guarantor”) under its Guarantee, such Funding Guarantor shall beentitled to a contribution from each other Guarantor (if any) in a pro rataamount based on the Adjusted Net Assets of each Guarantor (including the FundingGuarantor) for all payments, damages and expenses incurred by the FundingGuarantor in discharging the Indenture Obligations of the Company or any otherGuarantor’s obligations with respect to its Guarantee.  “Adjusted Net Assets” of such Guarantor atany date shall mean the lesser of (x) the amount by which the fair value of theproperty of such Guarantor exceeds the total amount of liabilities, including,without limitation, contingent liabilities (after giving effect to all otherfixed and contingent liabilities incurred or assumed on such date), butexcluding liabilities under the Guarantee of such Guarantor at such date and(y) the amount by which the present fair salable value of the assets of suchGuarantor at such date exceeds the amount that shall be required to pay theprobable liability of such Guarantor on its debts (after giving effect to allother fixed and contingent liabilities incurred or assumed on such date),excluding debt in respect of the Guarantee, as they become absolute and matured.

###  

## **Section 13.03**       Guaranty Absolute.

## ** **

Each Guarantor guaranteesthat the Securities shall be paid or performed strictly in accordance with theterms of the Securities and this Indenture, regardless of

 

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any law, regulation ororder now or hereafter in effect in any jurisdiction affecting any of suchterms or the rights of any Holder with respect thereto.  The obligations of each Guarantor under itsGuarantee are independent of the obligations of the Company under theSecurities and this Indenture, and a separate action or actions may be broughtand prosecuted against such Guarantor to enforce its Guarantee, irrespective ofwhether any action is brought against the Company or any other Guarantor orwhether the Company or any other Guarantor is joined in any such action oractions.  The liability of eachGuarantor under its Guarantee shall be absolute and unconditional and theliability and obligations of such Guarantor hereunder shall not be released,discharged, mitigated, waived, impaired or affected in whole or in part by:

 

### (a)           any lack of validity orenforceability of this Indenture or the Securities with respect to the Companyor any Guarantor or any agreement or instrument relating thereto;

###  

### (b)           any change in the time, manner orplace of payment of, or in any other term of, all or any of the IndentureObligations, or any other amendment or waiver of or any consent to departurefrom this Indenture, including any increase in the Indenture Obligations resultingfrom the extension of additional credit to the Company or otherwise;

###  

### (c)           the failure to give notice to theGuarantor of the occurrence of a Default under the provisions of this Indentureor the Securities;

###  

### (d)           any taking, release or amendment orwaiver of or consent to departure from any other guarantee, for all or any ofthe Indenture Obligations;

###  

### (e)           any failure, omission, delay by orinability on the part of the Trustee or the Holders to assert or exercise anyright, power or remedy conferred on the Trustee or the Holders in thisIndenture or the Securities;

###  

### (f)            any change in the corporatestructure, or termination, dissolution, amalgamation, consolidation or mergerof the Company or any Guarantor with or into any other Person, the voluntary orinvoluntary liquidation, dissolution, sale or other disposition of all orsubstantially all the assets of the Company or any Guarantor, the marshallingof the assets and liabilities of the Company or any Guarantor, thereceivership, insolvency, bankruptcy, assignment for the benefit of creditors,reorganization, arrangement, composition with the creditors, or readjustmentof, or other similar proceedings affecting the Company or any Guarantor, or anyof the assets of any of them;

###  

### (g)           the assignment of any right, title orinterest of the Trustee or any Holder in this Indenture or the Securities toany other Person; or

###  

### (h)           any other event or circumstance(including any statute of limitations), whether foreseen or unforeseen andwhether similar or dissimilar to any of the foregoing, that might otherwiseconstitute a defense available to, or a discharge of,

 

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### the Company or a Guarantor, other than payment in fullof the Indenture Obligations; it being the intent of each Guarantor that itsobligations hereunder shall not be discharged except by payment of all amountsowing pursuant to this Indenture or the Securities.

###  

The Guarantee of eachGuarantor shall continue to be effective or be reinstated, as the case may be,if at any time any payment of any of the Indenture Obligations is rescinded ormust otherwise be returned by any Holder or the Trustee upon the insolvency,bankruptcy or reorganization of the Company or otherwise, all as though suchpayment had not been made.  EachGuarantor further agrees, to the fullest extent that it may lawfully do so,that, as between such Guarantor, on the one hand, and the Holders and theTrustee, on the other hand, (i) the maturity of the obligations guaranteedhereby may be accelerated as provided in Article V of this Indenture forthe purposes of this Guarantee, notwithstanding any stay, injunction or otherprohibition preventing such acceleration in respect of the obligationsguaranteed hereby, and (ii) in the event of any acceleration of suchobligations as provided in Article V of this Indenture, such obligations(whether or not due and payable) shall forthwith become due and payable by theGuarantor for the purpose of this Guarantee.

 

## **Section 13.04**       Waivers.

## ** **

### (a)           Each Guarantor hereby expresslywaives (to the extent permitted by law) notice of the acceptance of itsGuarantee and notice of the existence, renewal, extension or thenon-performance, non-payment, or non-observance on the part of the Company ofany of the terms, covenants, conditions and provisions of this Indenture or theSecurities or any other notice whatsoever to or upon the Company or suchGuarantor with respect to the Indenture Obligations.  Each Guarantor hereby acknowledges communication to it of theterms of this Indenture and the Securities and all of the provisions hereincontained and consents to and approves the same.  Each Guarantor hereby expressly waives (to the extent permittedby law) diligence, presentment and protest.

###  

### (b)           Without prejudice to any of therights or recourse which the Trustee or the Holders may have against theCompany, each Guarantor hereby expressly waives (to the extent permitted bylaw) any right to require the Trustee or the Holders to:

###  

##### (1)           initiate or exhaust any rights,remedies or recourse against the Company, any Guarantor or any other Person;

#####  

##### (2)           value, realize upon, or dispose ofany security of the Company or any other Person held by the Trustee or theHolders; or

#####  

##### (3)           initiate or exhaust any other remedywhich the Trustee or the Holders may have in law or equity;

#####  

before requiring,becoming entitled to or demanding payment from such Guarantor under thisGuarantee.

 

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## **Section 13.05**       Subrogation.

## ** **

Each Guarantor shall notexercise any rights that it may acquire by way of subrogation under thisGuarantee, by any payment made hereunder or otherwise, until all the IndentureObligations shall have been paid in full. If any amount shall be paid to any Guarantor on account of any suchsubrogation rights at any time when all the Indenture Obligations shall nothave been paid in full, such amount shall be held in trust for the benefit ofthe Holders and the Trustees and shall forthwith be paid to the Trustee, onbehalf of the Holders, to be credited and applied to the Indenture Obligations,whether matured or unmatured.

 

## **Section 13.06**       No Waiver; Remedies.

## ** **

No failure on the part ofany Holder or the Trustee to exercise, and no delay in exercising, any righthereunder shall operate as a waiver thereof; nor shall any single or partialexercise of any right hereunder preclude any other or further exercise thereofor the exercise of any other right.  Theremedies herein provided are cumulative and not exclusive of any remediesprovided by law.

 

## **Section 13.07**       Continuing Guaranty; No Right ofSet-Off; Independent Obligation.

## ** **

### (a)           This Guarantee is a continuingguarantee of the payment and performance of all Indenture Obligations and shallremain in full force and effect until the payment in full of all of theIndenture Obligations and all other amounts payable under this Guarantee andshall apply to and secure any ultimate balance due or remaining unpaid to theTrustee or the Holders under this Indenture or the Securities; and thisGuarantee shall not be considered as wholly or partially satisfied by thepayment or liquidation at any time or from time to time of any sum of money forthe time being due or remaining unpaid to the Trustee or the Holders.

###  

### (b)           Each Guarantor hereby guarantees thatthe Indenture Obligations shall be paid to the Trustee without set-off orcounterclaim or other reduction whatsoever (whether for taxes, withholding orotherwise) in lawful currency of the United States.

###  

### (c)           Each Guarantor guarantees that theIndenture Obligations shall be paid strictly in accordance with their termsregardless of any lack of validity or enforceability of any of such terms orthe rights of the Holders with respect thereto.

###  

### (d)           Each Guarantor’s liability to pay orperform or cause the performance of the Indenture Obligations under thisGuarantee shall arise forthwith after demand for payment or performance by theTrustee has been given to such Guarantor in the manner prescribed in thisIndenture.

###  

## **Section 13.08**       Guarantors May Consolidate, Etc., onCertain Terms.

## ** **

### (a)           Nothing contained in this Indentureor in any of the Securities shall prevent any amalgamation, consolidation ormerger of a Guarantor with or into the

 

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### Company or another Guarantor or shall prevent any saleor conveyance of the property of a Guarantor as an entirety or substantially asan entirety to the Company or another Guarantor, which amalgamation,consolidation, merger, sale or conveyance is otherwise in accordance with theterms of this Indenture.

###  

### (b)           Other than as set forth in paragraph(a) of this Section, no Guarantor may amalgamate, consolidate with or mergewith or into (whether or not such Guarantor is the surviving Person) anotherPerson or convey, sell, assign, transfer, lease or otherwise dispose of itsproperties or assets substantially as an entirety to any other Person whetheror not affiliated with such Guarantor unless: (i) subject to the provisions of Section 13.09, the Person formedby or surviving such consolidation or merger (if other than such Guarantor) orto which such properties and assets are transferred assumes all of theobligations of such Guarantor under this Indenture and its Guarantee, pursuantto a supplemental indenture in form and substance satisfactory to the Trusteeand is a corporation, partnership, limited liability company or trust dulyorganized and validly existing under the laws of Canada or any province thereofor the United States, any state thereof, or the District of Columbia, (b)immediately after giving effect to such transaction, no Default or Event ofDefault shall have occurred and be continuing and (c) immediately after givingeffect to such transaction, the Person formed by or surviving suchamalgamation, consolidation or merger (if other than such Guarantor) or towhich such properties and assets are transferred could incur at least US$1.00of additional Indebtedness (other than Permitted Indebtedness) pursuant to thefirst paragraph of Section 10.10.

###  

## **Section 13.09**       Releases.

## ** **

### (a)           In the event of (i) a conveyance,sale, assignment, transfer or other disposition of all of the Capital Stock ofa Guarantor to any Person (by way of amalgamation, merger, consolidation orotherwise) or all or substantially all of the assets of a Subsidiary Guarantorto any Person (by way of amalgamation, merger, consolidation or otherwise),(ii) the designation of such Subsidiary Guarantor as an Unrestricted Subsidiaryin accordance with the terms of this Indenture, (iii) the release or dischargeof the guarantee that resulted in the creation of the Guarantee pursuant toSection 10.20, except a discharge or release by or as a result of paymentunder such guarantee, or (iv) a release and discharge of the Guarantor’sGuarantee pursuant to Section 4.03, then such Guarantor (or Personacquiring such assets in the event of a sale or other disposition of all of theassets of such Guarantor) shall be deemed automatically and unconditionallyreleased from and discharged from all of its obligations under thisArticle XIII and its Guarantee without any further action required on thepart of the Trustee or any Holder; *provided* that, in the event suchtransaction constitutes an Asset Sale, the Net Cash Proceeds of suchconveyance, sale, assignment, transfer or other disposition are applied inaccordance with Section 10.13 hereof.

###  

### (b)           Any Guarantor that is designated bythe Board of Directors of the Company as an Unrestricted Subsidiary, or ceasesto be a Subsidiary of the Company in accordance with the terms of thisIndenture may, at such time, at the option of the Board of Directors, bereleased and relieved of its obligations under its Guarantee.

 

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### (c)           Concurrently with the defeasance ofthe Securities under Section 12.02 hereof, the covenant defeasance of theSecurities under Section 12.03 hereof, or the release and discharge ofthis Indenture under Article IV hereof, the Guarantors shall be releasedfrom all their obligations under their Guarantees under this Article XIII.

###  

### (d)           The Trustee shall deliver anappropriate instrument evidencing such release upon receipt of a CompanyRequest accompanied by an Officers’ Certificate certifying as to the compliancewith this Section 13.09.  AnyGuarantor not so released shall remain liable for the full amount of principalof and interest on the Securities as provided in its Guarantee.

###  

## **Section 13.10**       Severability.

## ** **

In case any provision ofthis Guarantee shall be invalid, illegal or unenforceable, the validity, legality,and enforceability of the remaining provisions shall not in any way be affectedor impaired thereby.

 

# **ARTICLE XIV**SUBORDINATION OF SECURITIES AND GUARANTEES

# ** **

## **Section 14.01**       Securities and Guarantees Subordinateto Senior Indebtedness.

## ** **

### (a)           The Company covenants and agrees, andeach Holder of a Security, by his acceptance thereof, likewise covenants andagrees, that, to the extent and in the manner hereinafter set forth in thisArticle XIV, the indebtedness represented by the Securities and the paymentof the principal of (premium, if any) and interest on each and all of theSecurities (but not amounts owing to the Trustee by the Company pursuant toSection 6.06 hereof) are hereby expressly made subordinate and subject inright of payment to the prior payment in full of all Senior Indebtedness.

###  

### (b)           The Company further covenants andagrees that it will cause each Guarantor (if any), upon such Guarantor’sissuance of a Guarantee, to covenant and agree, and each Holder of a Security,by his acceptance thereof, likewise covenants and agrees, that, to the extentand in the manner hereinafter set forth in this Article XIV, theindebtedness represented by the Guarantee of such Guarantor is expressly madesubordinate and subject in right of payment to the prior payment in full of allGuarantor Senior Indebtedness of such Guarantor.

###  

## **Section 14.02**       Payment Over of Proceeds UponDissolution, Etc.

## ** **

In the event of anypayment or distribution of assets of the Company or any Guarantor to creditorsupon any liquidation, dissolution, winding-up, reorganization, assignment forthe benefit of creditors, marshaling of assets or any bankruptcy, insolvency orsimilar proceedings, whether voluntary or not (except in connection with aconsolidation or merger or liquidation or dissolution following the conveyance,transfer

 

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or lease of the assetsand properties of the Company substantially as an entirety upon the terms andconditions described under Section 8.01) (each such event, if any, isherein sometimes referred to as a “Proceeding”), of the Company or anyGuarantor (the Company or such Guarantor being the “Affected Obligor”), then(i) if the Affected Obligor is the Company, the holders of Senior Indebtednessshall first be entitled to receive payment in full, in cash or CashEquivalents, of all amounts due or to become due on or in respect of suchSenior Indebtedness (including interest accruing after the commencement of anysuch Proceeding at the rate specified therein whether or not such interest isan allowed claim in such proceeding) before the Holders of the Securities areentitled to receive any payment of principal of (premium, if any) and intereston the Securities or on account of the purchase or redemption or other acquisitionof Securities by the Company or any Subsidiary of the Company and (ii) if theAffected Obligor is a Guarantor, the holders of Guarantor Senior Indebtednessof such Guarantor shall first be entitled to receive payment in full, in cashor Cash Equivalents, of all amounts due or to become due on or in respect ofsuch Guarantor Senior Indebtedness (including interest accruing after thecommencement of any such Proceeding at the rate specified therein whether ornot such interest in an allowed claim in such proceeding) before the Holders ofthe Securities are entitled to receive any payment or distribution of any kindwith respect to the Guarantee of such Guarantor (any payment on or purchase,redemption or acquisition of the Securities, referred to in clause (i), and anypayment on a Guarantee, referred to in clause (ii), being, individually andcollectively, a “Securities Payment”), and, to that end, if the AffectedObligor is the Company, the holders of Senior Indebtedness and, if the AffectedObligor is a Guarantor, the holders of Guarantor Senior Indebtedness of suchGuarantor (such Senior Indebtedness or Guarantor Senior Indebtedness, as thecase may be, being “Affected Obligor Senior Indebtedness” of such AffectedObligor) shall be entitled to receive, for application to the payment thereof,any payment or distribution of any kind or character, whether in cash, propertyor securities which may be payable or deliverable in respect of the Securitiesin any such Proceeding.

 

In the event that,notwithstanding the foregoing provisions of this Section 14.02, theTrustee or the Holder of any Security shall have received any payment ordistribution of assets of an Affected Obligor of any kind or character, whetherin cash, property or securities, before all Affected Obligor SeniorIndebtedness is paid in full, and if such fact shall, at or prior to the timeof such payment, have been known to the Trustee or the Holder, as the case maybe, then such payment or distribution, except for amounts subject to the claimgranted to the Trustee in Section 6.06 hereof, shall be held in trust forthe holders of Affected Obligor Senior Indebtedness and shall be paid over ordelivered forthwith to the trustee in bankruptcy or other Person making paymentor distribution of assets of the Affected Obligor for application to thepayment of all Affected Obligor Senior Indebtedness remaining unpaid, to theextent necessary to pay all Affected Obligor Senior Indebtedness in full, aftergiving effect to any concurrent payment or distribution to or for the holdersof the Affected Obligor Senior Indebtedness.

 

For purposes of thisArticle XIV only, the words “any payment or distribution of any kind orcharacter, cash, property or securities” shall not be deemed to include apayment or distribution of equity or subordinated securities of the Affected

 

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Obligor provided for by aplan of reorganization or readjustment that, in the case of subordinatedsecurities, are subordinated in right of payment to all then outstandingAffected Obligor Senior Indebtedness to at least the same extent as theSecurities or Guarantees, as the case may be, are so subordinated as providedin this Article XIV.

 

## **Section 14.03**       No Payment When Certain Senior Indebtednessin Default.

## ** **

In the event that anySenior Payment Default (as defined below) shall have occurred and becontinuing, then no Securities Payment shall be made unless and until suchSenior Payment Default shall have been cured or waived or shall have ceased toexist or all amounts then due and payable in respect of the Designated SeniorIndebtedness or other obligations that are the subject of such Senior PaymentDefault shall have been paid in full. For purposes hereof, “Senior Payment Default” means any default in thepayment of principal of (premium, if any) or interest on, Designated SeniorIndebtedness or a default in the payment of any other obligation under theDesignated Senior Indebtedness, when due, whether at the Stated Maturity of anysuch payment or by declaration of acceleration, call for redemption orotherwise.

 

In the event that anySenior Nonmonetary Default (as defined below) shall have occurred and becontinuing, then, upon the receipt by the Company and the Trustee of written noticeof such Senior Nonmonetary Default from the Senior Credit Facilities Agent orfrom an authorized representative on behalf of any holder of Designated SeniorIndebtedness, no Securities Payment shall be made during the period (the“Payment Blockage Period”) commencing on the date of receipt of such writtennotice (the “Blockage Notice”) and ending on the earliest of (i) the 179th dayafter the date of such receipt of the Blockage Notice (the “Initial Period”)unless a Senior Payment Default has occurred and is continuing at the end ofsuch 179-day period,  (ii) the date, ifany, on which the Designated Senior Indebtedness to which such default relatesis discharged or such default is waived or otherwise cured and (iii) the date,if any, on which such Payment Blockage Period shall have been terminated bywritten notice to the Company or the Trustee from the Senior Credit FacilitiesAgent or from the Person who gave the Blockage Notice.  In any event, not more than one PaymentBlockage Period may be commenced during any period of 360 consecutive days, andthere must be a period of at least 181 consecutive days in each period of 360consecutive days when no Payment Blockage Period is in effect.  No Senior Nonmonetary Default that existedor was continuing on the date of commencement of any Payment Blockage Periodwith respect to the Designated Senior Indebtedness initiating such PaymentBlockage Period shall be, or can be, made the basis for the commencement of asubsequent Payment Blockage Period unless such Senior Nonmonetary Default shallhave been cured or waived for a period of not less than 90 consecutivedays.  For purposes hereof, “SeniorNonmonetary Default” means the occurrence or existence of any event, circumstance,condition or state of facts that, by the terms of any instrument pursuant towhich any Designated Senior Indebtedness is outstanding, permits one or moreholders of such Designated Senior Indebtedness (or a trustee or agent on behalfof the holders thereof) to declare such Designated Senior Indebtedness due andpayable prior to the date on which it would

 

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otherwise become due andpayable, other than a Senior Payment Default. Notwithstanding the foregoing, the Company and the Guarantors may makeSecurities Payments without regard to the foregoing if the Company and theTrustee receive written notice approving such payment from the Senior CreditFacility Agent or an authorized representative on behalf of any representativeof each holder of Designated Senior Indebtedness affected by such SeniorPayment Default or Senior Nonmonetary Default.

 

In the event that,notwithstanding the foregoing, the Company or any Guarantor shall make anypayment to the Trustee or any Holder prohibited by the foregoing provisions ofthis Section 14.03, and if such fact shall, at or prior to the time ofsuch payment, have been made known to the Trustee or the Holder as the case maybe, then such payment shall be held in trust for the holders of the AffectedObligor Senior Indebtedness and shall be paid over and delivered forthwith tothe holders of the Affected Obligor Senior Indebtedness remaining unpaid, tothe extent necessary to pay in full all the Affected Obligor SeniorIndebtedness.

 

## **Section 14.04**       Payment Permitted If No Default.

## ** **

Nothing contained in thisArticle XIV or elsewhere in this Indenture or in any of the Securitiesshall, at any time except during the pendency of any Proceeding referred to inSection 14.02 or under the conditions described in Section 14.03,prevent (a) the Company or any Guarantor from making Securities Payments, or(b) the application by the Trustee of any money deposited with it hereunder toSecurities Payments or the retention of such payment by the Holders.

 

## **Section 14.05**       Subrogation to Rights of Holders ofSenior Indebtedness.

## ** **

Subject to the payment infull of all Senior Indebtedness, the Holders of the Securities shall besubrogated to the rights of the holders of such Senior Indebtedness to receivepayments and distributions of cash, property and securities applicable to theSenior Indebtedness until the principal of (premium, if any) and interest onthe Securities shall be paid in full. Subject to the payment in full of all Guarantor Senior Indebtedness, theHolders of the Securities shall be subrogated to the rights of the holders ofsuch Guarantor Senior Indebtedness to receive payments and distributions ofcash, property and securities applicable to such Guarantor Senior Indebtednessuntil the principal of (premium, if any) and interest on the Securities shallbe paid in full.  For purposes of suchsubrogation, no payments or distributions to the holders of the SeniorIndebtedness or Guarantor Senior Indebtedness of any cash, property orsecurities to which the Holders of the Securities or the Trustee would beentitled except for the provisions of this Article XIV, and no paymentsover pursuant to the provisions of this Article XIV to the holders ofSenior Indebtedness or Guarantor Senior Indebtedness by Holders of the Securitiesor the Trustee, shall, as among the Company, the Guarantors, their respectivecreditors (other than holders of Senior Indebtedness and the Guarantor SeniorIndebtedness and the Holders of the Securities, be deemed to be a payment ordistribution by the Company to or on account of the Senior Indebtedness).  Neither the Holders of the Securities northe Trustee shall have any claim against the holders of the Senior Indebtednessor the

 

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Guarantor SeniorIndebtedness or the Senior Credit Facilities Agent for any impairment of thesubrogation rights herein granted arising out of any release of Liens securingthe Senior Indebtedness or the Guarantor Senior Indebtedness.

 

## **Section 14.06**       Provisions Solely to Define RelativeRights.

## ** **

The provisions of thisArticle XIV are and are intended solely for the purpose of defining therelative rights of the Holders on the one hand and the holders of SeniorIndebtedness and Guarantor Senior Indebtedness on the other hand.  Nothing contained in this Article XIVor elsewhere in this Indenture or in the Securities is intended to or shall (a)impair, as among the Company, its creditors (other than holders of SeniorIndebtedness) and the Holders of the Securities, the obligation of the Company,which is absolute and unconditional (and which, subject to the rights underthis Article XIV of the holders of Senior Indebtedness, is intended torank equally with all other general obligations of the Company) to pay to the Holdersof the Securities the principal of (premium, if any) and interest on theSecurities as and when the same shall become due and payable in accordance withtheir terms; or (b) impair, as among the Guarantors, their creditors (otherthan holders of Guarantor Senior Indebtedness) and the Holders of theSecurities, the obligation of the Guarantors, which is absolute andunconditional (and which, subject to the rights under this Article XIV ofthe holders of Guarantor Senior Indebtedness, is intended to rank equally withall other general obligations of the Guarantors) to pay to the Holders of theSecurities the principal of (premium, if any) and interest on the Securities asand when the same shall become due and payable in accordance with their terms;or (c) affect the relative rights against the Company of the Holders of theSecurities and creditors of the Company (other than the holders of SeniorIndebtedness) or the relative rights against the Guarantors of the Holders ofthe Securities and creditors of the Guarantors (other than the Holders ofGuarantor Senior Indebtedness); or (d) prevent the Trustee or the Holder of anySecurity from exercising all remedies otherwise permitted by applicable lawupon default under this Indenture, subject to the rights, if any, under thisArticle XIV of the holders of Senior Indebtedness and Guarantor SeniorIndebtedness to receive cash, property and securities otherwise payable ordeliverable to the Trustee or such Holder. The holders of the Senior Indebtedness and the Senior Credit FacilitiesAgent, as the case may be, shall be entitled to enforce the provisions of thisArticle XIV against the Company, the Guarantors, the Holders of theSecurities and the Trustee.

 

## **Section 14.07**       Trustee to Effectuate Subordination.

## ** **

Each Holder of a Securityby his acceptance thereof authorizes and directs the Trustee on his behalf totake such action as may be necessary or appropriate to effectuate thesubordination provided in this Article XIV and appoints the Trustee hisattorney-in-fact for any and all such purposes.

 

## **Section 14.08**       No Waiver of Subordination Provisions.

## ** **

No right of any presentor future holder of any Senior Indebtedness or Guarantor Senior Indebtedness toenforce subordination as herein provided shall at any

 

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time in any way beprejudiced or impaired by any act or failure to act on the part of the Companyor any Guarantor or by any act or failure to act, in good faith, by any suchholder, or by any noncompliance by the Company or any Guarantor with the terms,provisions and covenants of this Indenture, regardless of any knowledge thereofany such holder may have or be otherwise charged with.

 

Without in any waylimiting the generality of the foregoing paragraph, the holders of SeniorIndebtedness or Guarantor Senior Indebtedness, as the case may be, may, at anytime and from time to time, without the consent of or notice to the Trustee orthe Holders of the Securities, without incurring responsibility to the Trusteeor the Holders of the Securities and without impairing or releasing thesubordination provided in this Article XIV or the obligations hereunder ofthe Holders of the Securities to the holders of Senior Indebtedness orGuarantor Senior Indebtedness, as the case may be, do any one or more of thefollowing:  (i) change the manner, placeor terms of payment or extend the time of payment of, or renew or alter, SeniorIndebtedness or Guarantor Senior Indebtedness, as the case may be, or otherwiseamend or supplement in any manner Senior Indebtedness or Guarantor SeniorIndebtedness, as the case may be, or any instrument evidencing the same or anyagreement under which Senior Indebtedness or Guarantor Senior Indebtedness, asthe case may be, is outstanding; (ii) sell, exchange, release or otherwise dealwith any property pledged, mortgaged or otherwise securing Senior Indebtednessor any Guarantor Senior Indebtedness, as the case may be; (iii) releaseany Person liable in any manner for the collection of Senior Indebtedness orany Guarantor Senior Indebtedness, as the case may be; and (iv) exercise orrefrain from exercising any rights against the Company or any Guarantor and anyother Person.

 

## **Section 14.09**       Notice to Trustee; Holders of SeniorIndebtedness.

## ** **

The Company and eachGuarantor shall give prompt written notice to the Trustee of any fact known tothe Company which would prohibit the making of any payment to or by the Trusteein respect of the Securities and of any subsequent cure or waiver thereof.  Notwithstanding the provisions of thisArticle XIV or any other provision of this Indenture, the Trustee shallnot be charged with knowledge of the existence of any facts which wouldprohibit the making of any payment to or by the Trustee in respect of theSecurities, unless and until the Trustee shall have received written noticethereof from the Company or a holder of Senior Indebtedness or a holder ofGuarantor Senior Indebtedness or from any trustee or agent therefor; and, priorto the receipt of any such written notice, the Trustee, shall be entitled inall respects to assume that no such facts exist, *provided*, *however*,that if the Trustee shall not have received the notice provided for in thisSection at least two Business Days prior to the date upon which by the termshereof any money may become payable for any purpose (including, withoutlimitation, the payment of the principal of (premium, if any) or interest onany Security), then, anything herein contained in this Section 14.09 tothe contrary notwithstanding but subject always to Section 14.03, theTrustee shall have full power and authority to receive such money and to applythe same to the purpose for which such money was received and shall not beaffected by any notice to the contrary which may be received by it within twoBusiness Days prior to such date.

 

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The Trustee shall beentitled to rely on the delivery to it of a written notice by a Personrepresenting himself to be a holder of Senior Indebtedness or a holder ofGuarantor Senior Indebtedness (or a trustee or agent therefor) to establishthat such notice has been given by a holder of Senior Indebtedness or a holderof Guarantor Senior Indebtedness (or a trustee or agent therefor).  In the event that the Trustee determines ingood faith that further evidence is required with respect to the right of anyPerson as a holder of Senior Indebtedness or a holder of Guarantor SeniorIndebtedness, as the case may be, to participate in any payment or distributionpursuant to this Article XIV, the Trustee may request such Person tofurnish evidence to the reasonable satisfaction of the Trustee as to the amountof Senior Indebtedness or Guarantor Senior Indebtedness, as the case may be,held by such Person, the extent to which such Person is entitled to participatein such payment or distribution and any other facts pertinent to the rights ofsuch Person under this Article XIV, and if such evidence is not furnished,the Trustee may defer any payment to such Person pending judicial determinationas to the right of such Person to receive such payment.

 

The Company will promptlynotify each holder of Senior Indebtedness if payment of the Securities isaccelerated pursuant to Section 5.02 as a result of an Event of Default.

 

## **Section 14.10**       Reliance on Judicial Order orCertificate of Liquidation Agent.

## ** **

Upon any payment ordistribution of assets of the Company or any Guarantor referred to in thisArticle XIV, the Trustee and the Holders of the Securities shall beentitled to rely upon any order or decree entered by any court of competentjurisdiction in a Proceeding, or a certificate of the trustee in bankruptcy,receiver, liquidating trustee, custodian, assignee for the benefit ofcreditors, agent or other Person making such payment or distribution, deliveredto the Trustee or to the Holders of Securities, for the purpose of ascertainingthe Persons entitled to participate in such payment or distribution, theholders of the Senior Indebtedness, Guarantor Senior Indebtedness and otherindebtedness of the Company and the Guarantors, the amount thereof or payablethereon, the amount or amounts paid or distributed thereon and all other factspertinent thereto or to this Article XIV.

 

## **Section 14.11**       Trustee Not Fiduciary for Holders ofSenior Indebtedness.

## ** **

The Trustee shall not bedeemed to owe any fiduciary duty to the holders of Senior Indebtedness orGuarantor Senior Indebtedness and shall not be liable to any such holders if itshall in good faith mistakenly pay over or distribute to Holders of Securitiesor to the Company or to any other Person cash, property or securities to whichany holders of Senior Indebtedness or Guarantor Senior Indebtedness shall beentitled by virtue of this Article XIV or otherwise.

 

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## **Section 14.12**       Rights of Trustee as Holder of SeniorIndebtedness; Preservation of Trustee’s Rights.

## ** **

The Trustee in itsindividual capacity shall be entitled to all the rights set forth in thisArticle XIV with respect to any Senior Indebtedness or Guarantor SeniorIndebtedness which may at any time be held by it, to the same extent as anyother holder of Senior Indebtedness or Guarantor Senior Indebtedness, andnothing in this Indenture shall deprive the Trustee of any of its rights assuch holder.

 

Nothing in thisArticle XIV shall apply to claims of, or payments to, the Trustee under orpursuant to Section 6.06.

 

## **Section 14.13**       Applicability to Paying Agents.

## ** **

In case at any time anyPaying Agent other than the Trustee shall have been appointed by the Companyand be then acting hereunder, the term “Trustee” as used in thisArticle XIV shall in such case (unless the context otherwise requires) beconstrued as extending to and including such Paying Agent within its meaning asfully for all intents and purposes as if such Paying Agent were named in thisArticle XIV in addition to or in place of the Trustee; provided, however,that this Section 14.13 shall not apply to the Company or any Affiliate ofthe Company if it or such Affiliate acts as Paying Agent.

 

## **Section 14.14**       Defeasance of this Article XIV.

## ** **

The subordination of theSecurities and the Guarantees provided by this Article XIV is expresslymade subject to the provisions for defeasance or covenant defeasance in Article XIIhereof and, anything herein to the contrary notwithstanding, upon theeffectiveness of any such defeasance or covenant defeasance, the Securities andthe Guarantees then outstanding shall thereupon cease to be subordinatedpursuant to this Article XIV.

 

## **Section 14.15**       Subordination Provisions Controlling.

## ** **

Notwithstanding anythingto the contrary contained in this Indenture, to the extent that any provisioncontained in Articles I (other than Sections 1.01 and 1.07) through XIII ofthis Indenture conflicts with any provision contained in Article XIV(including the definitions of certain terms used in Article XIV) of thisIndenture, the provisions contained in Article XIV of this Indenture shallgovern and control.

 

## **Section 14.16**       Subordination of Collateral Documents

## ** **

The Trustee is herebyauthorized and directed to enter into the Collateral Documents SubordinationAgreement and the Collateral Documents to which it is stated to be a party.

 

* * *

 

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This Indenture may besigned in any number of counterparts each of which so executed shall be deemedto be an original, but all such counterparts shall together constitute but oneand the same Indenture.

 

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IN WITNESS WHEREOF, theparties hereto have caused this Indenture to be duly executed as of the day andyear first above written.

 

 
|   | BAYTEX ENERGY LTD                                  |
|--------|----------------------------------------------------|
|   |                                               |
|   |                                               |
|   | By:                                                |   |   |
|   |                                               | Name: |
|   |                                               | Title: |
|   |                                               |
|   |                                               |
|   | THE BANK OF NOVA SCOTIA  TRUST COMPANY OF NEW YORK |
|   |                                               |
|   |                                               |
|   | By:                                                |   |   |
|   |                                               | Name: |
|   |                                               | Title: |

 

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