**Exhibit 4.1**

** **

**ARTICLES OF AMALGAMATION**

 

**Business Corporations Act**

**(Alberta)**

Section 185

**1.****                       ****Name of AmalgamatedCorporation:**

 

**BAYTEX ENERGY LTD.**

 

**2.****                       ****The classes of shares, andany maximum number of shares that the Corporation is authorized to issue:**

 

SeeSchedule ”A” attached hereto

 

**3.****                       ****Restriction on sharetransfers, if any:**

 

None

 

**4.****                       ****Number, or minimum andmaximum number of directors:**

 

Minimumof three (3); Maximum of eleven (11)

 

**5.****                       ****If the corporation isrestricted FROM carrying on a certain business or restricted TO carrying on acertain business, specify the restriction(s):**

 

None

 

**6.****                       ****Other Provisions, if any:**

 

SeeSchedule ”B” attached hereto

 
| **7.**                   | **Name of  Amalgamating Corporations:** | **Corporate Access Number:** |
|--------------------------|-----------------------------------------|------------------------------|
| Baytex Energy Ltd.       | 209673466                               |
| Baytex Acquisition Corp. | 2010518252                              |

 

 
| Shannon  M. Gangl                          |   |                    |
|--------------------------------------------|--------|-------------------------|
| Name  of Person Authorizing (please print) |   | Signature               |
|                                       |   |                    |
| Solicitor                                  |   | September 2,  2003 |
| Title  (please print)                      |   | Date                    |

 

This information is beingcollected for purposes of corporate registry records in accordance with theBusiness Corporations Act.  Questions about the collection of thisinformation can be directed to the Freedom of Information and Protection ofPrivacy Co-ordinator for Alberta Registries, Research and Program Support, 3rdFloor, Commerce Place, 10155 – 102 Street, Edmonton, Alberta T5J 4L4, (780)422-7330.

 

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**SCHEDULE ”A”**

 

The Corporation isauthorized to issue:

 

(a)                                      an unlimited number ofCommon Shares without nominal or par value; and

 

(b)                                    an unlimited number ofExchangeable Shares without nominal or par value.

 

The right, privileges,restrictions and conditions attached to each class of shares are set forthbelow.

 

**PROVISIONSRELATING TO THE COMMON SHARES**

 

The unlimited number ofCommon Shares shall have attached thereto the following rights, privileges,restrictions and conditions:

 

1.                                       The holders of Common Shares shall beentitled to notice of, to attend and to one vote per share held at any meetingof the shareholders of the Corporation (other than meetings of a class orseries of shares of the Corporation other than the Common Shares as such);

 

2.                                       The holders of Common Shares shall beentitled to receive dividends as and when declared by Board of Directors of theCorporation on the Common Shares as a class, subject to prior satisfaction ofall preferential rights to dividends attached to all shares of other classes ofshares of the Corporation ranking in priority to the Common Shares in respectof dividends; and

 

3.                                       The holders of Common Shares shall beentitled in the event of any liquidation, dissolution or winding-up of theCorporation, whether voluntary or involuntary, or any other distribution of theassets of the Corporation among its shareholders for the purpose of winding-upits affairs, and subject to prior satisfaction of all preferential rights toreturn of capital on dissolution attached to all shares of other classes ofshares of the Corporation ranking in priority to the Common Shares in respectof return of capital on dissolution, to share rateably, together with theholders of the shares of any other class of shares of the Corporation rankingequally with the Common Shares in respect of return of capital on dissolution,in such assets of the Corporation as are available for distribution.

 

**PROVISIONSATTACHING TO THE EXCHANGEABLE SHARES**

 

The Exchangeable Sharesshall have the following rights, privileges, restrictions and conditions:

 

1.            **INTERPRETATION**

 

1.1          For the purposes of these share provisions:

 

“**Act**” means the*BusinessCorporations Act* (Alberta), as amended;

 

“**affiliate**” has the meaning given to that term in theSecurities Act;

 

“**Annual Redemption**” has the meaning given to that term inSection 5.1(d) of these share provisions;

 

“**Annual Redemption Date**” means any date that is within the first90 days of any calendar year commencing in 2004;

 

“**Automatic Redemption**” has the meaning given to that term inSection 5.1(a) of these share provisions;

 

“**Automatic Redemption Date**” means the date that is the tenthanniversary of the Effective Date;

 

“**Baytex ExchangeCo**” means Baytex ExchangeCo Ltd., a corporationincorporated under the Act;

 

“**Baytex Energy Trust**” means the Baytex Energy Trust, a trustestablished under the laws of Alberta;

 

“**Baytex Units**” means the trust units of Baytex Energy Trust asconstituted on the Effective Date;

 

“**Baytex Unitholders**” means holders of Baytex Units;

 

“**Board of Directors**” means the Board of Directors of theCorporation;

 

“**Business Day**” means any day on which commercial banks aregenerally open for business in Calgary, Alberta, other than a Saturday, aSunday or a day observed as a holiday in Calgary, Alberta under the laws of theProvince of Alberta or the federal laws of Canada;

 

“**Call Notice**” has the meaning given to that term inSection 4.3 of these share provisions;

 

“**Call Rights**” means the Liquidation Call Right, the RedemptionCall Right and the Retraction Call Right, collectively;

 

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“**Common Shares**” means the common shares in the capital of theCorporation;

 

“**Corporation**” means Baytex Acquisition Corp., a corporationincorporated under the Act;

 

“**Cumulative Dividend Amount Exchange Ratio**”, at any time, shallequal the Exchange Ratio at such time less one;

 

“**Current Market Price**” means, in respect of an Baytex Unit onany date, the weighted average trading price of an Baytex Unit on the TSX forthe 5 trading days preceding that date, or, if the Baytex Units are not thenlisted on the TSX, on such other stock exchange or automated quotation systemon which the Baytex Units are listed or quoted, as the case may be, as may beselected by the Board of Directors for such purpose; provided, however, that ifin the opinion of the Board of Directors the public distribution or tradingactivity of Baytex Units for that period does not result in a weighted averagetrading price which reflects the fair market value of an Baytex Unit, then theCurrent Market Price of an Baytex Unit shall be determined by the Board ofDirectors, in good faith and in its sole discretion, and provided further thatany such selection, opinion or determination by the Board of Directors shall beconclusive and binding;

 

“**De Minimus Redemption**” has the meaning given to that term inSection 5.1(c) of these share provisions;

 

“**De Minimus Redemption Date**” has the meaning given to that termin Section 5.1(c) of these share provisions;

 

“**Distribution**” means a distribution paid by Baytex Energy Trustin respect of the Baytex Units, expressed as an amount per Baytex Unit;

 

“**Distribution Payment Date**” means a date on which aDistribution is paid to Baytex Unitholders, generally being the 15thday of the month following any Distribution Record Date (or if such day is nota Business Day, on the next Business Day);

 

“**Distribution Record Date**” means the day on which BaytexUnitholders are identified for purposes of determining entitlement to aDistribution, generally being the last Business Day of each month;

 

“**Dividend Record Date**” has the meaning given to that term inSection 3.3 of these share provisions;

 

“**Effective Date**” means September 2, 2003 or such other dateas may be designated by the Board of Directors;

 

“**Exchange Ratio**”, at any time and in respect of eachExchangeable Share, shall be equal to 1.00000, as at the Effective Date, andshall be cumulatively adjusted thereafter by: (a) increasing the Exchange Ratioon each Distribution Payment Date between the Effective Date and the time as ofwhich the Exchange Ratio is calculated by an amount, rounded to the nearestfive decimal places, equal to a fraction having as its numerator theDistribution, expressed as an amount per Baytex Unit, paid on that DistributionPayment Date, multiplied by the Exchange Ratio immediately prior to theDistribution Record Date for such Distribution and having as its denominatorthe Current Market Price on the first Business Day following the DistributionRecord Date for such Distribution; and (b) decreasing the Exchange Ratio oneach Dividend Record Date between the Effective Date and the time as of whichthe Exchange Ratio is calculated by an amount, rounded to the nearest five decimalplaces, equal to a fraction having as its numerator the dividend declared onthat Dividend Record Date, expressed as an amount per Exchangeable Sharemultiplied by the Exchange Ratio immediately prior to that Dividend RecordDate, and having as its denominator the Current Market Price on the date thatis seven Business Days prior to that Dividend Record Date;

 

“**Exchange Rights**” has the meaning given to that term in theVoting and Exchange Trust Agreement;

 

“**Exchangeable Shares**” mean the non-voting exchangeable sharesin the capital of the Corporation, having the rights, privileges, restrictionsand conditions set forth herein;

 

“**Governmental Entity**” means any (a) multinational, federal,provincial, state, regional, municipal, local or other government, governmentalor public department, central bank, court, tribunal, arbitral body, commission,board, bureau or agency, domestic or foreign, (b) any subdivision, agent,commission, board, or authority of any of the foregoing, or (c) anyquasi-governmental or private body exercising any regulatory, expropriation ortaxing authority under or for the account of any of the foregoing;

 

“**holder**” means, when used with reference to the ExchangeableShares, the holders of Exchangeable Shares shown from time to time in theregister maintained by or on behalf of the Corporation in respect of theExchangeable Shares;

 

“**LCR Exercising Party**” has the meaning given to that term inSection 6.5 of these share provisions;

 

“**Liquidation Amount**” has the meaning given to that term inSection 6.1 of these share provisions;

 

“**Liquidation Call Right**” has the meaning ascribed thereto inSection 6.5 of these share provisions;

 

“**Liquidation Date**” has the meaning given to that term inSection 6.1 of these share provisions;

 

“**Liquidation Offer**” has the meaning given to that term inSection 6.5 of these share provisions;

 

“**Optional Redemption**” has the meaning given to that term inSection 5.1(b) of these share provisions;

 

“**Optional Redemption Date**” means any date that is after thesecond anniversary of the Effective Date;

 

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“**Person**” includes any individual, firm, partnership, jointventure, venture capital fund, limited liability company, unlimited liabilitycompany, association, trust, trustee, executor, administrator, legal personalrepresentative, estate, group, body corporate, corporation, unincorporatedassociation or organization, Governmental Entity, syndicate or other entity,whether or not having legal status;

 

**“PromissoryNote”**means thepromissory note of the Corporation in favour of Baytex Energy Trust dated theEffective Date;

 

“**Purchase Price**” has the meaning given to that term inSection 4.3 of these share provisions;

 

“**RCR Exercising Party**”, for the purpose of Article 4 ofthese share provisions, has the meaning given to the term in Section 4.3of these share provisions and, for the purpose of Article 5 of these shareprovisions, has the meaning given to that term in Section 5.5 of theseshare provisions;

 

“**Redemption Call Right**” has the meaning given to that term inSection 5.5 of these share provisions;

 

“**Redemption Date**” means any of the Automatic Redemption Date,the Optional Redemption Date, the De Minimus Redemption Date or the AnnualRedemption Date, as the context requires;

 

“**Redemption Offer**” has the meaning given to that term inSection 5.5 of these share provisions;

 

“**Redemption Price**” means a price per Exchangeable Share equalto the amount determined by multiplying the Exchange Ratio on the last BusinessDay prior to the applicable Redemption Date by the Current Market Price of aBaytex Unit on the last Business Day prior to such Redemption Date;

 

“**Regulation S**” means Regulation S under the U.S.Securities Act;

 

“**Retracted Shares**” has the meaning given to that term inSection 4.1(a) of these share provisions;

 

“**Retraction Call Right**” has the meaning given to that term inSection 4.1(b) of these share provisions;

 

“**Retraction Date**” means the date that is three Business Daysafter the date on which the Corporation or the Transfer Agent receives aRetraction Request in respect of the Retracted Shares;

 

“**Retraction Offer**” has the meaning given to that term inSection 4.1(b) of these share provisions;

 

“**Retraction Price**” has the meaning given to that term inSection 4.1 of these share provisions;

 

“**Retraction Request**” has the meaning given to that term inSection 4.1 of these share provisions;

 

“**Securities Act**” means the *SecuritiesAct* (Alberta) and the rules, regulations and policies madethereunder, as now in effect and as they may be amended from time to time priorto the Effective Date;

 

“**Support Agreement**” means the agreement made among BaytexEnergy Trust, Baytex ExchangeCo, the Corporation and the Trustee and dated asof the Effective Date;

 

“**TSX**” means the Toronto Stock Exchange;

 

“**Transfer Agent**” means Valiant Trust Company or such otherPerson as may from time to time be appointed by the Corporation as theregistrar and transfer agent for the Exchangeable Shares;

 

“**Trustee**” means the trustee chosen by Baytex Energy Trust toact as trustee under the Voting and Exchange Trust Agreement, being acorporation organized and existing under the laws of Canada and authorized tocarry on the business of a trust company in all the provinces of Canada, andany successor trustee appointed under the Voting and Exchange Trust Agreement;

 

“**U.S. Person**” means a U.S. Person as defined inRule 902(k) under Regulation S;

 

“**U.S. Securities Act**” means the *United States Securities Act of 1933*, as amended;

 

“**United States**” or “**U.S.**”means the United States of America, its territories and possessions, any Stateof the United States and the District of Columbia; and

 

“**Voting and Exchange Trust Agreement**” means the agreement madeamong Baytex Energy Trust, Baytex ExchangeCo, the Corporation and the Trusteeand dated as of the Effective Date.

 

2.            **AUTHORIZED NUMBER OF EXCHANGEABLE SHARES AND RANKING OF EXCHANGEABLE SHARES**

 

2.1                                                                                 The Corporation is authorized to issue anunlimited number of Exchangeable Shares without nominal or par value.

 

2.2                                                                                 The Exchangeable Shares shall, subject to thefollowing, be entitled to a preference over the Common Shares and any othershares ranking junior to the Exchangeable Shares with respect to the payment ofdividends and the distribution of

 

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assets in the event of theliquidation, dissolution or winding-up of the Corporation, whether voluntary orinvoluntary, or any other distribution of the assets of the Corporation amongits shareholders for the purpose of winding up its affairs; provided thatnotwithstanding such ranking the Corporation shall not be restricted in any wayfrom repaying indebtedness of the Corporation to Baytex Energy Trust from timeto time, including without limitation, the indebtedness evidenced by thePromissory Note.

 

3.            **DIVIDENDS**

 

3.1                                                                                 The holders of Exchangeable Shares, inpriority to the Common Shares and any class of shares of the Corporationranking junior to the Exchangeable Shares with respect to the payment ofdividends, shall be entitled to receive, and the Corporation shall pay on eachExchangeable Share, if, as and when declared by the Board of Directors in itssole discretion from time to time out of the money, assets or property of theCorporation properly applicable to the payment of dividends, (which may includeBaytex Units), cumulative preferential cash dividends in an amount perExchangeable Share as set out in this Section 3.1.  The accruedamount of such preferential cumulative dividend with respect to an ExchangeableShare on any date from time to time shall be the Cumulative Dividend AmountExchange Ratio in effect on the last Business Date prior to such datemultiplied by the Current Market Price on the last Business Day prior to suchdate.  Such dividends, whether or not declared, shall accrue and shall becumulative from the Effective Date.

 

3.2                                                                                 Cheques of the Corporation payable at par atany branch of the bankers of the Corporation shall be issued in respect of anycash dividends by the sending of such a cheque to each holder of anExchangeable Share, which shall satisfy the cash dividend represented therebyunless the cheque is not paid on presentation. Certificates registered in thename of the registered holder of Exchangeable Shares shall be issued ortransferred in respect of any stock dividends by the sending of such acertificate to each holder of an Exchangeable Share, which shall satisfy thestock dividend represented thereby. Such other type and amount of property inrespect of any dividends shall be issued, distributed or transferred by theCorporation in such manner as it shall determine and the issuance, distributionor transfer thereof by the Corporation to each holder of an Exchangeable Shareshall satisfy the dividend represented thereby. No holder of an ExchangeableShare shall be entitled to recover by action or other legal process against theCorporation any dividend that is represented by a cheque that has not been dulypresented to the Corporation’s bankers for payment or that otherwise remainsunclaimed for a period of six years from the date on which such dividend waspayable.

 

3.3                                                                                 The record date (a “Dividend Record Date”)for the determination of the holders of Exchangeable Shares entitled to receivepayment of, and the payment date for, any dividend declared on the ExchangeableShares under Section 3.1 of these share provisions and whether any suchdividend is in fact declared shall be determined in the sole discretion of theBoard of Directors.

 

3.4                                                                                 If on any payment date for any dividendsdeclared on the Exchangeable Shares under Section 3.1 of these shareprovisions the dividends are not paid in full on all of the Exchangeable Sharesthen outstanding, any such dividends that remain unpaid shall be paid on asubsequent date or dates determined by the Board of Directors on which theCorporation shall have sufficient moneys, assets or property properlyapplicable to the payment of such dividends.

 

4.            **RETRACTION OF EXCHANGEABLE SHARES BY HOLDER**

 

4.1                                 Subject to applicable law, and providedneither Baytex Energy Trust nor Baytex ExchangeCo has exercised the RetractionCall Right, a holder of Exchangeable Shares shall be entitled at any time, uponcompliance with the provisions of this Article 4, to require theCorporation to redeem any or all of the Exchangeable Shares registered in thename of such holder for an amount per share (the “Retraction Price”) equal tothe amount determined by multiplying the Exchange Ratio on the last BusinessDay prior to the Retraction Date by the Current Market Price of a Baytex Uniton the last Business Day prior to the Retraction Date, which payment of theRetraction Price shall be satisfied in full by the Corporation delivering orcausing to be delivered to such holder that number of Baytex Units equal to theExchange Ratio as at the last Business Day prior to Retraction Date in accordancewith Section 4.2 of these share provisions, for each Exchangeable Sharepresented and surrendered by the holder. To effect such redemption, the holdershall present and surrender to the Corporation at the principal office of theTransfer Agent in Toronto or Calgary or at such other address as may bespecified by the Corporation by notice to the holders of Exchangeable Sharesfrom time to time the certificate or certificates representing the ExchangeableShares which the holder desires to have the Corporation redeem, together withsuch other documents and instruments as may be required to effect a transfer ofExchangeable Shares under the Act and the by-laws of the Corporation and suchadditional documents and instruments as the Transfer Agent and the Corporationmay reasonably require, and together with a duly executed statement (the“Retraction Request”) in the form of Schedule A hereto or in such otherform as may be acceptable to the Corporation:

 

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(a)                                  specifying that the holder desires to haveall or any number specified therein of the Exchangeable Shares represented bysuch certificate or certificates (the “Retracted Shares”) redeemed by theCorporation; and

 

(b)                                 appointing the Corporation as its agent forthe purpose of offering its Retracted Shares for sale to Baytex Energy Trustand Baytex ExchangeCo (the “Retraction Offer”) on the terms and conditions setout in Section 4.3 below  (Baytex Energy Trust’s and BaytexExchangeCo’s right to accept the Retraction Offer and to complete the purchaseof the Retracted Shares pursuant to the Retraction Offer is referred to as the“Retraction Call Right”).

 

4.2                                 Subject to the exercise by Baytex EnergyTrust or Baytex ExchangeCo of the Retraction Call Right, upon receipt by theCorporation or the Transfer Agent in the manner specified in Section 4.1hereof of documents including, without limitation, a certificate orcertificates representing the number of Retracted Shares, together with aRetraction Request, and provided that the Retraction Request is not revoked bythe holder in the manner specified in Section 4.7, the Corporation shallredeem the Retracted Shares effective at the close of business on theRetraction Date and shall cause to be delivered to such holder the RetractionPrice. If only a part of the Exchangeable Shares represented by any certificateis redeemed (or purchased by Baytex Energy Trust or Baytex ExchangeCo pursuantto the Retraction Call Right), a new certificate for the balance of suchExchangeable Shares shall be issued to the holder at the expense of theCorporation.

 

4.3                                 Baytex ExchangeCo shall only be entitled toexercise its Retraction Call Right with respect to those Exchangeable Shares,if any, in respect of which Baytex Energy Trust has not exercised itsRetraction Call Right.  Upon receipt by the Corporation of a RetractionRequest, the Corporation shall immediately provide to Baytex Energy Trust andBaytex ExchangeCo a copy of the Retraction Request and, as agent for the holderwho submitted the Retraction Request, shall be deemed to have made theRetraction Offer to Baytex Energy Trust and Baytex ExchangeCo in respect of theholder’s Retracted Shares by providing to Baytex Energy Trust and BaytexExchangeCo a copy of the Retraction Request as aforesaid.  In order toexercise the Retraction Call Right and accept the Retraction Offer, BaytexEnergy Trust or Baytex ExchangeCo must notify the Corporation of itsdetermination to do so (the “Call Notice”) on or before 4:30 p.m. (Calgarytime) on the date of notification to Baytex Energy Trust and Baytex ExchangeCoby the Corporation of the receipt by the Corporation of the RetractionRequest.  If Baytex Energy Trust or Baytex ExchangeCo does not so notifythe Corporation on or before 4:30 p.m. (Calgary time) on the date of notificationby the Corporation of the receipt by the Corporation of the Retraction Request,the Corporation will notify the holder as soon as possible thereafter thatneither Baytex Energy Trust nor Baytex ExchangeCo will exercise the RetractionCall Right and accept the Retraction Offer.  If Baytex Energy Trust orBaytex ExchangeCo delivers the Call Notice on or before 4:30 p.m. (Calgarytime) on the date of notification by the Corporation of the receipt by theCorporation of the Retraction Request and provided that the Retraction Offer isnot revoked by the holder in the manner specified in Section 4.7, theRetraction Request shall thereupon be considered only the Retraction Offer bythe holder to sell the Retracted Shares to Baytex Energy Trust or Baytex ExchangeCo,as applicable (in this Article 4, the “RCR Exercising Party”), and allother aspects of the Retraction Request will be null and void. In such event,the Corporation shall not redeem the Retracted Shares and the RCR ExercisingParty shall purchase from such holder and such holder shall sell to the RCRExercising Party on the Retraction Date the Retracted Shares for an amount pershare (the “Purchase Price”) equal to the Retraction Price, which payment ofthe Purchase Price shall be satisfied in full by the RCR Exercising Partydelivering or causing to be delivered to such holder that number of BaytexUnits equal to the Exchange Ratio as at the last Business Day prior to theRetraction Date for each Retracted Share.  To the extent that the RCRExercising Party pays the Purchase Price in respect of the Retracted Shares,the Corporation shall no longer be obligated to pay any amount in respect ofthe Retraction Price for such Retracted Shares.  Provided that the RCRExercising Party has complied with Section 4.4, the closing of thepurchase and sale of the Retracted Shares pursuant to the Retraction Call Rightshall be deemed to have occurred as at the close of business on the RetractionDate and, for greater certainty, no redemption by the Corporation of such RetractedShares shall take place on the Retraction Date. In the event that neitherBaytex Energy Trust nor Baytex ExchangeCo delivers a Call Notice within thetime required for the exercise of the Retraction Call Right as set forth above,and provided that the Retraction Request is not revoked by the holder in themanner specified in Section 4.7, the Corporation shall redeem theRetracted Shares on the Retraction Date and in the manner otherwisecontemplated in this Article 4.

 

4.4                                 The Corporation, Baytex Energy Trust orBaytex ExchangeCo, as the case may be, shall deliver or cause the TransferAgent to deliver to the relevant holder, at the address of the holder recordedin the register of shareholders of the Corporation for the Exchangeable Sharesor at the address specified in the holder’s Retraction Request, or by holdingfor pick-up by the holder at the office of the Transfer Agent specified in theholder’s Retraction Request, certificates representing the Baytex Units (whichsecurities shall be duly issued as fully paid and non-assessable and shall befree and clear of any lien, claim or encumbrance) registered in the name of theholder or in such other name as the holder may request in payment of the totalRetraction Price or the total Purchase Price, as the case may be, in each caseless any amounts withheld on account of tax required to be deducted andwithheld therefrom, and such delivery of such certificates by or on behalf ofthe Corporation, Baytex Energy Trust or Baytex ExchangeCo, as the case may be,or by the Transfer Agent shall be deemed to be payment of and shall satisfy anddischarge all liability for the total Retraction Price or the total PurchasePrice, as the case may be, to the extent that the same is represented by suchcertificates (plus any tax deducted and withheld therefrom and remitted to theproper tax authority).

 

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4.5                                 On and after the close of business on theRetraction Date, the holder of the Retracted Shares shall cease to be a holderof such Retracted Shares and shall not be entitled to exercise any of therights of a holder in respect thereof, other than:  (i) the right toreceive his proportionate part of the total Retraction Price or the totalPurchase Price, as the case may be, unless upon presentation and surrender ofcertificates in accordance with the foregoing provisions, payment of the totalRetraction Price or the total Purchase Price, as the case may be, shall not bemade as provided in Section 4.4, in which case the rights of such holdershall remain unaffected until the total Retraction Price or the total PurchasePrice, as the case may be, has been paid in the manner hereinbefore provided;and (ii) the right to receive any declared and unpaid dividends on theRetracted Shares.  On and after the close of business on the RetractionDate, provided that presentation and surrender of certificates and payment ofthe total Retraction Price or the total Purchase Price, as the case may be, hasbeen made in accordance with the foregoing provisions, the holder of theRetracted Shares so redeemed by the Corporation or purchased by Baytex EnergyTrust or Baytex ExchangeCo shall thereafter be considered and deemed for allpurposes to be a holder of the Baytex Units delivered to it.

 

4.6                                 Notwithstanding any other provision of this Article 4,the Corporation shall not be obligated to redeem Retracted Shares specified bya holder in a Retraction Request to the extent that such redemption ofRetracted Shares would be contrary to solvency requirements or other provisionsof applicable law. If the Corporation believes that on any Retraction Date itwould not be permitted by any of such provisions to redeem the Retracted Sharestendered for redemption on such date, and provided that neither Baytex EnergyTrust nor Baytex ExchangeCo shall have exercised the Retraction Call Right withrespect to the Retracted Shares, the Corporation shall only be obligated toredeem Retracted Shares specified by a holder in a Retraction Request to theextent of the maximum number that may be so redeemed (rounded down to a wholenumber of shares) as would not be contrary to such provisions and shall notifythe holder and the Trustee at least two Business Days prior to the RetractionDate as to the number of Retracted Shares which will not be redeemed by the Corporation.In any case in which the redemption by the Corporation of Retracted Shareswould be contrary to solvency requirements or other provisions of applicablelaw, the Corporation shall redeem Retracted Shares in accordance withSection 4.2 of these share provisions on a pro rata basis and shall issueto each holder of Retracted Shares a new certificate, at the expense of theCorporation, representing the Retracted Shares not redeemed by the Corporationpursuant to Section 4.2 hereof. Provided that the Retraction Request isnot revoked by the holder in the manner specified in Section 4.7, theholder of any such Retracted Shares not redeemed by the Corporation pursuant toSection 4.2 of these share provisions as a result of solvency requirementsor other provisions of applicable law shall be deemed by giving the RetractionRequest to have exercised the Exchange Rights so as to require Baytex EnergyTrust or Baytex ExchangeCo to purchase such Retracted Shares from such holderon the Retraction Date or as soon as practicable thereafter on payment byBaytex Energy Trust or Baytex ExchangeCo to such holder of the Purchase Pricefor each such Retracted Share, all as more specifically provided in the Votingand Exchange Trust Agreement.

 

4.7                                 A holder of Retracted Shares may, by noticein writing given by the holder to the Corporation before the close of businesson the Business Day immediately preceding the Retraction Date, revoke itsRetraction Request or Retraction Offer, as applicable, in which event suchRetraction Request or Retraction Offer shall be null and void

 

5.            **REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION**

 

5.1                                 Subject to applicable law, and providedneither Baytex Energy Trust nor Baytex ExchangeCo has exercised the RedemptionCall Right, the Corporation:

 

(a)                                  shall, on the Automatic Redemption Date,redeem all but not less than all of the then outstanding Exchangeable Sharesfor the Redemption Price (such redemption being an “Automatic Redemption”);

 

(b)                                 may, on any Optional Redemption Date, redeemall but not less than all of the then outstanding Exchangeable Shares (suchredemption being an “Optional Redemption”);

 

(c)                                  may, on any date when the aggregate number ofissued and outstanding Exchangeable Shares is less than 1,000,000 (suchredemption date being the “De Minimus Redemption Date”), redeem all but notless than all of the then outstanding Exchangeable Shares for the RedemptionPrice (such redemption being a “De Minimus Redemption”); and

 

(d)                                 may, on any Annual Redemption Date, redeem upto that number of Exchangeable Shares equal to 40% of the Exchangeable Sharesoutstanding on the Effective Date (such redemption being an “AnnualRedemption”);

 

such payment of theRedemption Price per Exchangeable Share to be satisfied in full in all cases bythe Corporation delivering or causing to be delivered, at the election of theCorporation, either that number of Baytex Units equal to the Exchange Ratio asat the last Business Day prior to the applicable Redemption Date or an amountin cash equal to the Redemption Price, in accordance with Section 5.3 ofthese share provisions.  In case only part of the then outstandingExchangeable Shares are at any time to be redeemed pursuant to an AnnualRedemption, the Exchangeable Shares to be redeemed shall be redeemed pro rata,excluding

 

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fractions, from the holdingsof all shareholders of Exchangeable Shares, other than the Baytex Energy Trustand Baytex ExchangeCo, or in such other manner as the Board of Directors deemsreasonable.

 

5.2                                 In any case of a redemption of ExchangeableShares under this Article 5, the Corporation shall, at least 90 daysbefore the applicable Redemption Date, send or cause to be sent to each holderof Exchangeable Shares a notice in writing of the redemption by the Corporationor the purchase by Baytex Energy Trust or Baytex ExchangeCo under theRedemption Call Right, as the case may be, of the Exchangeable Shares held bysuch holder.  Such notice shall set out the formula for determining theRedemption Price, the Redemption Date and, if applicable, particulars of theRedemption Call Right and/or Annual Redemption.  The accidental failure oromission to give any notice of redemption under this Section 5.2 to lessthan 10% of the holders of Exchangeable Shares (other than Baytex Energy Trustand Baytex ExchangeCo) shall not affect the validity of any redemption ofExchangeable Shares pursuant to such notice.

 

5.3                                 On or after the applicable Redemption Dateand subject to the exercise by Baytex Energy Trust or Baytex ExchangeCo of theRedemption Call Right, the Corporation shall deliver or cause to be deliveredto the holders of the Exchangeable Shares to be redeemed the Redemption Pricefor each such Exchangeable Share upon presentation and surrender of thecertificates representing such Exchangeable Shares, together with such otherdocuments and instruments as may be required to effect a transfer ofExchangeable Shares under the Act and the by-laws of the Corporation and suchadditional documents and instruments as the Transfer Agent and the Corporationmay reasonably require, at the registered office of the Corporation or at anyoffice of the Transfer Agent as may be specified by the Corporation in suchnotice. Payment of the total Redemption Price for such Exchangeable Shares,shall be made by delivery to each holder, at the address of the holder recordedin the register of holders of the Exchangeable Shares maintained by or onbehalf of the Corporation or by holding for pick-up by the holder at theregistered office of the Corporation or at any office of the Transfer Agent asmay be specified by the Corporation in such notice, on behalf of theCorporation, of certificates representing Baytex Units (which securities shallbe duly issued as fully paid and non-assessable and shall be free and clear ofany lien, claim or encumbrance), or, if applicable, a cheque of the Corporationpayable at par at any branch of the bankers of the Corporation, in each caseless any amounts withheld on account of tax required to be deducted and withheldtherefrom. On and after the applicable Redemption Date, the holders of theExchangeable Shares called for redemption shall cease to be holders of suchExchangeable Shares and shall not be entitled to exercise any of the rights ofholders in respect thereof, other than:  (i) the right to receive theirproportionate part of the total Redemption Price, unless payment of the totalRedemption Price for such Exchangeable Shares shall not be made uponpresentation and surrender of certificates in accordance with the foregoingprovisions, in which case the rights of the holders shall remain unaffecteduntil the total Redemption Price has been paid in the manner hereinbeforeprovided; and (ii) the right to receive any declared and unpaid dividends onsuch Exchangeable Shares.  If only part of the Exchangeable Sharesrepresented by any certificate are to be redeemed, a new certificate for thebalance shall be issued at the expense of the Corporation.

 

5.4                                 The Corporation shall have the right at anytime after the sending of notice of its intention to redeem the ExchangeableShares as aforesaid to deposit or cause to be deposited the total RedemptionPrice for the Exchangeable Shares so called for redemption, or of such of thesaid Exchangeable Shares represented by certificates that have not at the dateof such deposit been surrendered by the holders thereof in connection with suchredemption, in a custodial account with any chartered bank or trust company inCanada named in such notice, less any amounts withheld on account of taxrequired to be deducted and withheld therefrom. Upon the later of such depositbeing made and the applicable Redemption Date, the Exchangeable Shares inrespect whereof such deposit shall have been made shall be redeemed and therights of the holders thereof after such deposit or that Redemption Date, asthe case may be, shall be limited to:  (i) receiving their proportionatepart of the total Redemption Price (in each case less any amounts withheld onaccount of tax required to be deducted or withheld therefrom) for suchExchangeable Shares so deposited, against presentation and surrender of thesaid certificates held by them, respectively, in accordance with the foregoingprovisions; and (ii) receiving any declared and unpaid dividends on suchExchangeable Shares. Upon such payment or deposit of the total RedemptionPrice, the holders of the Exchangeable Shares that have been so redeemed shallthereafter be considered and deemed for all purposes to be holders of theBaytex Units or to have had cash delivered to them or the custodian on theirbehalf; as applicable.

 

5.5                                 Subject to the limitations set forth inSection 5.6 of these share provisions, the Corporation is appointed asagent for the holders of Exchangeable Shares for the purpose of offering toBaytex Energy Trust and Baytex ExchangeCo (the “Redemption Offer”) theoverriding right (Baytex Energy Trust’s and Baytex ExchangeCo’s right to acceptthe Redemption Offer and complete the purchase of the Exchangeable Shares isreferred to as the “Redemption Call Right”), in the event of any proposedredemption of Exchangeable Shares by the Corporation pursuant to thisArticle 5, to purchase from all but not less than all of the holders ofExchangeable Shares (other than Baytex Energy Trust or Baytex ExchangeCo) onthe applicable Redemption Date all but not less than all of the ExchangeableShares held by each such holder, in the case of an Automatic Redemption, anOptional Redemption or a De Minimus Redemption, or to purchase from all but notless than all of the holders of Exchangeable Shares (other than Baytex EnergyTrust or Baytex ExchangeCo) on the applicable Redemption Date the designatedpercentage of the Exchangeable Shares held by each such holder, in the case ofan Annual Redemption, on payment by whichever of Baytex Energy Trust or BaytexExchangeCo is exercising such right (in this Article 5, the “RCRExercising Party”) to each such holder of an

 

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amount per ExchangeableShare equal to the Redemption Price, which payment of the Redemption Priceshall be satisfied in full by the RCR Exercising Party delivering or causing tobe delivered to such holder, at the election of the RCR Exercising Party,either that number of Baytex Units equal to the Exchange Ratio as at the lastBusiness Day prior to the applicable Redemption Date or an amount in cash equalto the Redemption Price, in accordance with Section 5.7 of these shareprovisions.  In the case of a redemption of Exchangeable Shares under thisArticle 5, the Corporation, as agent for the holders of ExchangeableShares, shall make the Redemption Offer to Baytex Energy Trust and BaytexExchangeCo by sending or causing to be sent to Baytex Energy Trust and BaytexExchangeCo a notice in writing of the redemption by the Corporation of theExchangeable Shares.  In the event of the exercise of the Redemption CallRight and the acceptance of the Redemption Offer, each holder of ExchangeableShares shall be obligated to sell all of the Exchangeable Shares held by thatholder to the RCR Exercising Party on the applicable Redemption Date on paymentby the RCR Exercising Party to such holder of the Redemption Price for eachsuch share, and the Corporation shall have no obligation to redeem, or to payany amount in respect of, such shares so purchased by the RCR Exercising Party.

 

5.6                                 Baytex ExchangeCo shall only be entitled toexercise its Redemption Call Right with respect to those Exchangeable Shares,if any, in respect of which Baytex Energy Trust has not exercised itsRedemption Call Right.  To exercise the Redemption Call Right and acceptthe Redemption Offer, the RCR Exercising Party must notify the Transfer Agent,as agent for the holders of Exchangeable Shares, and the Corporation of itsintention to exercise such right (and accept such offer) at least 60 daysbefore the applicable Redemption Date.  The Corporation shall cause theTransfer Agent to notify the holders of the Exchangeable Shares as to whetheror not Baytex Energy Trust or Baytex ExchangeCo has exercised the Redemption CallRight forthwith after the expiry of the period during which such right may beexercised. If an RCR Exercising Party exercises its Redemption Call Right, suchRCR Exercising Party shall on the applicable Redemption Date purchase, and eachof the holders of Exchangeable Shares will sell, all of the Exchangeable Sharesthen outstanding for a price per Exchangeable Share equal to the RedemptionPrice.

 

5.7                                 For the purposes of completing the purchaseof the Exchangeable Shares pursuant to the Redemption Call Right, the RCRExercising Party shall deposit with the Transfer Agent, on or before theapplicable Redemption Date, certificates representing the aggregate number ofBaytex Units deliverable by the RCR Exercising Party (which securities shall beduly issued as fully paid and non-assessable and shall be free and clear of anylien, claim or encumbrance) or, if applicable, a cheque of the RCR ExercisingParty payable at par at any branch of the bankers of the RCR Exercising Partyin payment of the total Redemption Price, in each case less any amountswithheld on account of tax required to be deducted and withheldtherefrom.  Provided that the total Redemption Price has been so depositedwith the Transfer Agent, on and after the applicable Redemption Date the rightsof each holder of Exchangeable Shares (other than Baytex Energy Trust andBaytex ExchangeCo) shall be limited to:  (i) receiving such holder’sproportionate part of the total Redemption Price payable by the RCR ExercisingParty upon presentation and surrender by the holder of certificatesrepresenting the Exchangeable Shares held by such holder and the holder shallon and after that Redemption Date be considered and deemed for all purposes tobe the holder of the Baytex Units to which it is entitled; and (ii) receivingany declared and unpaid dividends on such Exchangeable Shares.  Uponsurrender to the Transfer Agent of a certificate or certificates representingExchangeable Shares, together with such other documents and instruments as maybe required to effect a transfer of Exchangeable Shares under the Act and theby-laws of the Corporation and such additional documents and instruments as theTransfer Agent and the Corporation may reasonably require, the holder of suchsurrendered certificate or certificates shall be entitled to receive inexchange therefor, and the Corporation shall cause the Transfer Agent on behalfof the RCR Exercising Party to deliver to such holder, certificatesrepresenting the Baytex Units to which the holder is entitled or a cheque ofthe RCR Exercising Party payable at par at any branch of the bankers of the RCRExercising Party, of the total Redemption Price, less any amounts withheld onaccount of tax required to be deducted and withheld therefrom.  If neitherBaytex Energy Trust nor Baytex ExchangeCo exercises the Redemption Call Rightin the manner described above, on the applicable Redemption Date the holders ofthe Exchangeable Shares shall be entitled to receive in exchange therefor theRedemption Price otherwise payable by the Corporation in connection with theredemption of the Exchangeable Shares pursuant to Section 5.1 of theseshare provisions.

 

6.            **DISTRIBUTION ON LIQUIDATION**

 

6.1                                 In the event of the liquidation, dissolutionor winding-up of the Corporation or any other distribution of the assets of theCorporation among its shareholders for the purpose of winding up its affairs, aholder of Exchangeable Shares shall be entitled, subject to applicable law, toreceive from the assets of the Corporation in respect of each ExchangeableShare held by such holder on the effective date (the “Liquidation Date”) ofsuch liquidation, dissolution or winding-up, before any distribution of anypart of the assets of the Corporation among the holders of the Common Shares orany other shares ranking junior to the Exchangeable Shares, an amount per share(the “Liquidation Amount”) equal to the amount determined by multiplying theExchange Ratio on the last Business Day prior to the Liquidation Date by theCurrent Market Price of an Baytex Unit on the last Business Day prior to theLiquidation Date, which payment of the Liquidation Amount shall be satisfied infull by the Corporation

 

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delivering or causing to bedelivered to such holder that number of Baytex Units equal to the ExchangeRatio as at the last Business Day prior to the Liquidation Date, in accordancewith Section 6.2 of these share provisions.

 

6.2                                 On or promptly after the Liquidation Date,and subject to the exercise by Baytex Energy Trust or Baytex ExchangeCo of theLiquidation Call Right, the Corporation shall deliver or cause to be deliveredto the holders of the Exchangeable Shares the Liquidation Amount for each suchExchangeable Share upon presentation and surrender of the certificatesrepresenting such Exchangeable Shares, together with such other documents andinstruments as may be required to effect a transfer of Exchangeable Sharesunder the Act and the by-laws of the Corporation and such additional documentsand instruments as the Transfer Agent and the Corporation may reasonablyrequire, at the registered office of the Corporation or at any office of theTransfer Agent as may be specified by the Corporation by notice to the holdersof the Exchangeable Shares. Payment of the total Liquidation Amount for suchExchangeable Shares shall be made by delivery to each holder, at the address ofthe holder recorded in the register of holders of the Exchangeable Sharesmaintained by or on behalf of the Corporation or by holding for pick-up by theholder at the registered office of the Corporation or at any office of theTransfer Agent as may be specified by the Corporation by notice to the holdersof Exchangeable Shares, on behalf of the Corporation, of certificatesrepresenting Baytex Units (which securities shall be duly issued as fully paidand non-assessable and shall be free and clear of any lien, claim orencumbrance), less any amounts withheld on account of tax required to bededucted and withheld therefrom. On and after the Liquidation Date, the holdersof the Exchangeable Shares shall cease to be holders of such ExchangeableShares and shall not be entitled to exercise any of the rights of holders inrespect thereof, other than:  (i) the right to receive their proportionatepart of the total Liquidation Amount, unless payment of the total LiquidationAmount for such Exchangeable Shares shall not be made upon presentation andsurrender of certificates in accordance with the foregoing provisions, in whichcase the rights of the holders shall remain unaffected until the totalLiquidation Amount has been paid in the manner hereinbefore provided; and (ii)the right to receive any declared and unpaid dividends on such ExchangeableShares.

 

6.3                                 The Corporation shall have the right at anytime after the Liquidation Date to deposit or cause to be deposited the totalLiquidation Amount in respect of the Exchangeable Shares represented bycertificates that have not at the Liquidation Date been surrendered by theholders thereof in a custodial account with any chartered bank or trust companyin Canada, less any amounts withheld on account of tax required to be deductedor withheld therefrom. Upon such deposit being made, the rights of the holdersof Exchangeable Shares after such deposit shall be limited to:  (i)receiving their proportionate part of the total Liquidation Amount (less anyamounts withheld on account of tax required to be deducted and withheldtherefrom) for such Exchangeable Shares so deposited, against presentation andsurrender of the said certificates held by them, respectively, in accordancewith the foregoing provisions; and (ii) receiving any declared and unpaiddividends on such Exchangeable Shares. Upon such payment or deposit of thetotal Liquidation Amount, the holders of the Exchangeable Shares shall thereafterbe considered and deemed for all purposes to be holders of the Baytex Unitsdelivered to them or the custodian on their behalf.

 

6.4                                 After the Corporation has satisfied itsobligations to pay the holders of the Exchangeable Shares the LiquidationAmount per Exchangeable Share pursuant to Section 6.1 of these shareprovisions, such holders shall not be entitled to share in any furtherdistribution of the assets of the Corporation.

 

6.5                                 Subject to the limitations set forth inSection 6.6 of these share provisions, the Corporation is appointed asagent for the holders of Exchangeable Shares for the purpose of offering toBaytex Energy Trust and Baytex ExchangeCo (the “Liquidation Offer”) theoverriding right (Baytex Energy Trust’s and Baytex ExchangeCo’s right to acceptthe Liquidation Offer and complete the purchase of the Exchangeable Shares isreferred to as the “Liquidation Call Right”), in the event of andnotwithstanding any proposed liquidation, dissolution or winding-up of theCorporation or any other distribution of the assets of the Corporation amongits shareholders for the purpose of winding up its affairs, to purchase fromall but not less than all of the holders of Exchangeable Shares (other thanBaytex Energy Trust or Baytex ExchangeCo) on the Liquidation Date all but notless than all of the Exchangeable Shares held by each such holder, on paymentby whichever of Baytex Energy Trust or Baytex ExchangeCo is exercising suchright (in this Article 6, the “LCR Exercising Party”) to each such holderof an amount per Exchangeable Share equal to the Liquidation Amount, whichshall be satisfied in full by the LCR Exercising Party delivering or causing tobe delivered to such holder that number of Baytex Units equal to the ExchangeRatio as at the last Business Day prior to the Liquidation Date, in accordancewith Section 6.7 of these share provisions.  In the event of theexercise of the Liquidation Call Right and the acceptance of the LiquidationOffer, each holder of Exchangeable Shares shall be obligated to sell all of theExchangeable Shares held by that holder to the LCR Exercising Party on theLiquidation Date on payment by the LCR Exercising Party to such holder of theLiquidation Amount for each such share, and the Corporation shall have no obligationto pay any amount on account of the Liquidation Amount in respect of suchshares so purchased by the LCR Exercising Party.

 

6.6                                 Baytex ExchangeCo shall only be entitled toexercise its Liquidation Call Right with respect to those Exchangeable Shares,if any, in respect of which Baytex Energy Trust has not exercised itsLiquidation Call Right.  In the event of any proposed liquidation,dissolution or winding-up of the Corporation or any other distribution of theassets of the Corporation among its shareholders for the purpose of winding-upits affairs, the Corporation, as agent for the holders of Exchangeable Shares,shall make the Liquidation Offer by sending or causing to be sent to BaytexEnergy Trust and Baytex ExchangeCo a notice in

 

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writing of the LiquidationOffer.  To exercise the Liquidation Call Right and accept the LiquidationOffer, the LCR Exercising Party must notify the Transfer Agent, as agent forthe holders of Exchangeable Shares, and the Corporation of its intention to exercisesuch right (and accept such offer) at least 30 days before the LiquidationDate, in the case of a voluntary liquidation, dissolution or winding-up of theCorporation, and at least five Business Days before the Liquidation Date, inthe case of an involuntary liquidation, dissolution or winding-up of theCorporation.  The Corporation shall cause the Transfer Agent to notify theholders of the Exchangeable Shares as to whether or not Baytex Energy Trust orBaytex ExchangeCo has exercised the Liquidation Call Right forthwith after theexpiry of the period during which such right may be exercised. If an LCRExercising Party exercises its Liquidation Call Right, such LCR ExercisingParty will on the Liquidation Date purchase, and each of the holders of ExchangeableShares will sell, all of the Exchangeable Shares then outstanding for a priceper Exchangeable Share equal to the Liquidation Amount.

 

6.7                                 For the purposes of completing the purchaseof the Exchangeable Shares pursuant to the Liquidation Call Right, the LCRExercising Party shall deposit with the Transfer Agent, on or before theLiquidation Date, certificates representing the aggregate number of BaytexUnits deliverable by the LCR Exercising Party (which securities shall be dulyissued as fully paid and non-assessable and shall be free and clear of anylien, claim or encumbrance), in payment of the total Liquidation Amount, lessany amounts withheld on account of tax required to be deducted and withheldtherefrom.  Provided that the total Liquidation Amount has been sodeposited with the Transfer Agent, on and after the Liquidation Date the rightsof each holder of Exchangeable Shares (other than Baytex Energy Trust andBaytex ExchangeCo) shall be limited to:  (i) receiving such holder’sproportionate share of the total Liquidation Amount payable by the LCRExercising Party upon presentation and surrender by the holder of certificatesrepresenting the Exchangeable Shares held by such holder and the holder shallon and after the Liquidation Date be considered and deemed for all purposes tobe the holder of the Baytex Units to which it is entitled; and (ii) receivingany declared and unpaid dividends on such Exchangeable Shares.  Uponsurrender to the Transfer Agent of a certificate or certificates representingExchangeable Shares, together with such other documents and instruments as maybe required to effect a transfer of Exchangeable Shares under the Act and theby-laws of the Corporation and such additional documents and instruments as theTransfer Agent may reasonably require, the holder of such surrenderedcertificate or certificates shall be entitled to receive in exchange therefor,and the Corporation shall cause the Transfer Agent on behalf of the LCRExercising Party to deliver to such holder, certificates representing theBaytex Units to which the holder is entitled, less any amounts withheld onaccount of tax required to be deducted and withheld therefrom.  If neitherBaytex Energy Trust nor Baytex ExchangeCo exercises the Liquidation Call Rightin the manner described above, on the Liquidation Date the holders of theExchangeable Shares shall be entitled to receive in exchange therefor theLiquidation Amount otherwise payable by the Corporation in connection with theliquidation, dissolution or winding-up of the Corporation pursuant toSection 6.1 of these share provisions.

 

7.            **CERTAIN RESTRICTIONS**

 

7.1                                 So long as any of the Exchangeable Shares areoutstanding, the Corporation shall not at any time without, but may at any timewith, the approval of the holders of the Exchangeable Shares given as specifiedin Section 10.2 of these share provisions:

 

(a)                                  pay any dividends on the Common Shares or anyother shares ranking junior to the Exchangeable Shares, other than stockdividends payable in Common Shares or any such other shares ranking junior tothe Exchangeable Shares, as the case may be;

 

(b)                                 redeem or purchase or make any capitaldistribution in respect of the Common Shares or any other shares ranking juniorto the Exchangeable Shares;

 

(c)                                  redeem or purchase any other shares of theCorporation ranking equally with the Exchangeable Shares with respect to thepayment of dividends or on any liquidation distribution; or

 

(d)                                 issue any shares, other than ExchangeableShares or Common Shares, which rank superior to the Exchangeable Shares withrespect to the payment of dividends or on any liquidation distribution.

 

The restrictions inSections 7.1(a), (b) and (c) above shall only be applicable if dividendswhich have been declared on the outstanding Exchangeable Shares have not beenpaid as provided for herein.

 

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8.            **PURCHASE FOR CANCELLATION**

 

8.1                                 Subject to applicable law and notwithstandingSection 8.2 and Section 8.3, the Corporation may at any time and fromtime to time purchase for cancellation all or any part of the ExchangeableShares by private agreement with any holder of Exchangeable Shares forconsideration consisting of cash .

 

8.2                                 Subject to applicable law, the Corporationmay at any time and from time to time purchase for cancellation all or any partof the outstanding Exchangeable Shares at any price by tender to all theholders of record of Exchangeable Shares then outstanding or through thefacilities of any stock exchange on which the Exchangeable Shares are listed orquoted at any price per share. If in response to an invitation for tendersunder the provisions of this Section 8.2, more Exchangeable Shares aretendered at a price or prices acceptable to the Corporation than theCorporation is prepared to purchase, the Exchangeable Shares to be purchased bythe Corporation shall be purchased as nearly as may be pro rata according tothe number of shares tendered by each holder who submits a tender to theCorporation, provided that when shares are tendered at different prices, thepro rating shall be effected (disregarding fractions) only with respect to theshares tendered at the price at which more shares were tendered than theCorporation is prepared to purchase after the Corporation has purchased all theshares tendered at lower prices.  If part only of the Exchangeable Sharesrepresented by any certificate shall be purchased, a new certificate for thebalance of such shares shall be issued at the expense of the Corporation.

 

8.3                                 Subject to applicable law, the Corporation bynotice from time to time to Baytex Energy Trust or Baytex ExchangeCo, asapplicable, shall be entitled at any time to redeem all or any part of theExchangeable Shares held by Baytex Energy Trust or Baytex ExchangeCo which wereacquired by them pursuant to the Call Rights, the Exchange Rights or theAutomatic Exchange Rights (as defined in the Voting and Exchange TrustAgreement) in exchange for the delivery of Baytex Units (the “Delivered BaytexUnits”) to or for the account of a holder(s) of Exchangeable Shares.  TheExchangeable Shares to be redeemed as set forth in this Section 8.3 shallbe acquired by the Corporation in exchange for the issue by the Corporation toBaytex Energy Trust or Baytex ExchangeCo, as applicable of a promissory note inthe principal amount equal to the fair market value of the Delivered BaytexUnits (where the fair market value of the Delivered Baytex Units is determinedby multiplying the number of Delivered Baytex Units by the weighted averagetrading price of an Baytex Unit on the TSX for the ten trading days precedingthe date of purchase by Baytex Energy Trust or Baytex ExchangeCo, as applicableof such Delivered Baytex Units).  All Exchangeable Shares which areredeemed as set forth in this Section 8.3 shall be cancelled by theCorporation.

 

9.            **VOTING RIGHTS**

 

9.1                                 Except as required by applicable law and byArticle 10 hereof, the holders of the Exchangeable Shares shall not beentitled as such to receive notice of or to attend any meeting of the shareholdersof the Corporation or to vote at any such meeting.

 

10.          **AMENDMENT AND APPROVAL**

 

10.1                        The rights, privileges, restrictions and conditions attaching to theExchangeable Shares may be added to, changed or removed but only with theapproval of the holders of the Exchangeable Shares given as hereinafterspecified.

 

10.2                        Any approval given by the holders of the Exchangeable Shares to add to, changeor remove any right, privilege, restriction or condition attaching to theExchangeable Shares or any other matter requiring the approval or consent ofthe holders of the Exchangeable Shares shall be deemed to have beensufficiently given if it shall have been given in accordance with applicablelaw subject to a minimum requirement that such approval be evidenced byresolution passed by not less than two-thirds of the votes cast on suchresolution (other than the Exchangeable Shares held by Baytex Energy Trust,Baytex ExchangeCo or any of their respective subsidiaries and other affiliates)at a meeting of holders of Exchangeable Shares duly called and held at whichthe holders of at least 10% of the outstanding Exchangeable Shares (other thanthe Exchangeable Shares held by Baytex Energy Trust, Baytex ExchangeCo or anyof their respective subsidiaries and other affiliates) at that time are presentor represented by proxy; provided that if at any such meeting holders of atleast 10% of such outstanding Exchangeable Shares at that time are not presentor represented by proxy within one-half hour after the time appointed for suchmeeting, then the meeting shall be adjourned to such place and time (not lessthan ten days later) as may be designated by the Chairman of such meeting. Atsuch adjourned meeting the holders of Exchangeable Shares present orrepresented by proxy thereat may transact the business for which the meetingwas originally called and a resolution passed thereat by the affirmative voteof not less than two-thirds of the votes cast on such resolution at suchmeeting shall constitute the approval or consent of the holders of theExchangeable Shares.

 

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11.          **RECIPROCAL CHANGES, ETC. IN RESPECT OF BAYTEX UNITS**

 

11.1                        Each holder of an Exchangeable Share acknowledges that the Support Agreementprovides, in part, that the number of Baytex Units for which the ExchangeableShares are exchangeable shall, in addition to being adjusted from time to timeto conform to the Exchange Ratio, be simultaneously adjusted on an economicallyequivalent basis if Baytex Energy Trust:

 

(a)                                  issues or distributes Baytex Units (orsecurities exchangeable for or convertible into or carrying rights to acquireBaytex Units) to the holders of all or substantially all of the thenoutstanding Baytex Units by way of stock distribution or other distribution,other than an issue of Baytex Units (or securities exchangeable for orconvertible into or carrying rights to acquire Baytex Units) to holders ofBaytex Units who exercise an option to receive distributions in Baytex Units(or securities exchangeable for or convertible into or carrying rights toacquire Baytex Units) in lieu of receiving cash distributions;

 

(b)                                 issues or distributes rights, options orwarrants to the holders of all or substantially all of the then outstandingBaytex Units entitling them to subscribe for or to purchase Baytex Units (orsecurities exchangeable for or convertible into or carrying rights to acquireBaytex Units); or

 

(c)                                  issues or distributes to the holders of allor substantially all of the then outstanding Baytex Units:

 

(i)                                     securities of Baytex Energy Trust of anyclass other than Baytex Units (other than securities convertible into orexchangeable for or carrying rights to acquire Baytex Units);

 

(ii)                                  rights, options or warrants other than thosereferred to in Section 11.1(b) above;

 

(iii)                               evidences of indebtedness of Baytex EnergyTrust; or

 

(iv)                              assets of Baytex Energy Trust other thanDistributions which result in an adjustment to the Exchange Ratio,

 

(d)                                 subdivides, redivides or changes the thenoutstanding Baytex Units into a greater number of Baytex Units;

 

(e)                                  reduces, combines, consolidates or changesthe then outstanding Baytex Units into a lesser number of Baytex Units; or

 

(f)                                    reclassifies or otherwise changes the BaytexUnits or effects an amalgamation, merger, reorganization or other transactionaffecting the Baytex Units.

 

The Support Agreementfurther provides, in part, that the aforesaid provisions of the SupportAgreement shall not be changed without the approval of the holders of theExchangeable Shares given in accordance with Section 10.2 of these shareprovisions.

 

12.          **ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT**

 

12.1                        The Corporation shall take all such actions and do all such things as shall benecessary or advisable to perform and comply with and to ensure performance andcompliance by the Corporation, Baytex Energy Trust and Baytex ExchangeCo withall provisions of the Support Agreement applicable to the Corporation, BaytexEnergy Trust and Baytex ExchangeCo, respectively, in accordance with the termsthereof including, without limitation, taking all such actions and doing allsuch things as shall be necessary or advisable to enforce to the fullest extentpossible for the direct benefit of the Corporation all rights and benefits infavour of the Corporation under or pursuant to such agreement.

 

12.2                        The Corporation shall not propose, agree to or otherwise give effect to anyamendment to, or waiver or forgiveness of its rights or obligations under, theSupport Agreement without the approval of the holders of the ExchangeableShares given in accordance with Section 10.2 of these share provisionsother than such amendments, waivers and/or forgiveness as may be necessary oradvisable for the purposes of:

 

(a)                                  adding to the covenants of the other partiesto such agreement for the protection of the Corporation or the holders of theExchangeable Shares thereunder;

 

(b)                                 making such provisions or modifications notinconsistent with such agreement as may be necessary or desirable with respectto matters or questions arising thereunder which, in the good faith opinion ofthe Board of Directors, it may be expedient to make, provided that the Board ofDirectors shall be of the good faith opinion, after consultation with counsel,

 

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thatsuch provisions and modifications shall not be prejudicial to the interests ofthe holders of the Exchangeable Shares; or

 

(c)                                  making such changes in or corrections to suchagreement which, on the advice of counsel to the Corporation, are required forthe purpose of curing or correcting any ambiguity or defect or inconsistentprovision or clerical omission or mistake or manifest error contained therein,provided that the Board of Directors shall be of the good faith opinion, afterconsultation with counsel, that such changes or corrections shall not beprejudicial to the interests of the holders of the Exchangeable Shares.

 

13.          **LEGEND; CALL RIGHTS; WITHHOLDING RIGHTS**

 

13.1                        The certificates evidencing the Exchangeable Shares shall contain or haveaffixed thereto a legend in form and on terms approved by the Board ofDirectors, with respect to the Support Agreement, the Call Rights and the Votingand Exchange Trust Agreement (including the provisions with respect to thevoting rights and exchange rights thereunder).

 

13.2                        Each holder of an Exchangeable Share, whether of record or beneficial, byvirtue of becoming and being such a holder shall be deemed to acknowledge eachof the Liquidation Call Right, the Retraction Call Right and the RedemptionCall Right, in each case, in favour of Baytex Energy Trust and BaytexExchangeCo, and the overriding nature thereof in connection with theliquidation, dissolution or winding-up of the Corporation or the retraction orredemption of Exchangeable Shares, as the case may be, and to be bound therebyin favour of Baytex Energy Trust and Baytex ExchangeCo as therein provided.

 

13.3                        The Corporation, Baytex Energy Trust, Baytex ExchangeCo and the Transfer Agentshall be entitled to deduct and withhold from any dividend or considerationotherwise payable to any holder of Exchangeable Shares such amounts as the Corporation,Baytex Energy Trust, Baytex ExchangeCo or the Transfer Agent is required todeduct and withhold with respect to such payment under the *Income Tax Act* (Canada) or any provisionof provincial, local or foreign tax law, in each case, as amended.  To theextent that amounts are so withheld, such withheld amounts shall be treated forall purposes hereof as having been paid to the holder of the ExchangeableShares in respect of which such deduction and withholding was made, providedthat such withheld amounts are actually remitted to the appropriate taxingauthority.  To the extent that the amount so required or permitted to bededucted or withheld from any payment to a holder exceeds the cashconsideration otherwise, if any, payable to the holder, the Corporation, BaytexEnergy Trust, Baytex ExchangeCo and the Transfer Agent are hereby authorized tosell or otherwise dispose of such portion of the consideration as is necessaryto provide sufficient funds to the Corporation, Baytex Energy Trust, Baytex ExchangeCoor the Transfer Agent, as the case may be, to enable it to comply with suchdeduction or withholding requirement and the Corporation, Baytex Energy Trust,Baytex ExchangeCo or the Transfer Agent shall notify the holder thereof andremit any unapplied balance of the net proceeds of such sale.

 

14.          **NON-RESIDENT HOLDERS**

 

14.1                        Notwithstanding anything contained in these share provisions the obligation ofthe Corporation, Baytex Energy Trust or Baytex ExchangeCo to pay the RetractionPrice, Purchase Price, Liquidation Price or Redemption Price, other than incircumstances where the Corporation, Baytex Energy Trust or Baytex ExchangeCoelects to pay the Redemption Price in cash, in respect of Exchangeable Sharesheld by a person whom the Transfer Agent believes is a U.S. Person or aresident of any foreign country, shall be satisfied by delivering the BaytexUnits which would have been received by the affected holder to the TransferAgent who shall sell such Baytex Units on the stock exchange on which theBaytex Units are then listed and, upon such sale, the rights of the affectedholder shall be limited to receiving the net proceeds of sale (net ofapplicable taxes) upon surrender of the certificates representing such ExchangeableShares.

 

15.          **SPECIFIED AMOUNT**

 

15.1                        The amount specified in respect of each Exchangeable Share for the purposes ofsubsection 191(4) of the *Income Tax Act*(Canada) shall be an amount equal to the fair market value of oneBaytex Unit on the Effective Date.

 

16.          **NO FRACTIONAL ENTITLEMENTS**

 

16.1                        Notwithstanding anything contained in this Agreement including, withoutlimitation, Articles 4, 5 or 6, no holder of an Exchangeable Share shall beentitled to and neither the Corporation, Baytex Energy Trust, Baytex ExchangeConor the Trustee shall deliver fractions of Baytex Units.  Where theapplication of the provisions of this Agreement, including, without

 

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limitation, Articles 4, 5and 6 would otherwise result in a holder of Exchangeable Shares receiving afraction of an Baytex Unit, such holder of Exchangeable Shares shall only beentitled to receive the nearest whole number of Baytex Units.

 

17.          **NOTICES**

 

17.1                        Any notice, request or other communication to be given to the Corporation by aholder of Exchangeable Shares shall be in writing and shall be valid andeffective if given by mail (postage prepaid) or by telecopy or by delivery tothe registered office of the Corporation and addressed to the attention of thePresident of the Corporation. Any such notice, request or other communication,if given by mail, telecopy or delivery, shall only be deemed to have been givenand received upon actual receipt thereof by the Corporation.

 

17.2                        Any presentation and surrender by a holder of Exchangeable Shares to theCorporation or the Transfer Agent of certificates representing ExchangeableShares in connection with the liquidation, dissolution or winding-up of theCorporation or the retraction or redemption of Exchangeable Shares shall bemade by registered mail (postage prepaid) or by delivery to the registeredoffice of the Corporation or to such office of the Transfer Agent as may bespecified by the Corporation, in each case, addressed to the attention of thePresident of the Corporation. Any such presentation and surrender ofcertificates shall only be deemed to have been made and to be effective uponactual receipt thereof by the Corporation or the Transfer Agent, as the casemay be. Any such presentation and surrender of certificates made by registeredmail shall be at the sole risk of the holder mailing the same.

 

17.3                        Any notice, request or other communication to be given to a holder ofExchangeable Shares by or on behalf of the Corporation shall be in writing andshall be valid and effective if given by mail (postage prepaid) or by deliveryto the address of the holder recorded in the register of shareholders of theCorporation or, in the event of the address of any such holder not being sorecorded, then at the last known address of such holder. Any such notice,request or other communication, if given by mail, shall be deemed to have beengiven and received on the third Business Day following the date of mailing and,if given by delivery, shall be deemed to have been given and received on thedate of delivery. Accidental failure or omission to give any notice, request orother communication to one or more holders of Exchangeable Shares shall notinvalidate or otherwise alter or affect any action or proceeding to be taken bythe Corporation pursuant thereto.

 

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**SCHEDULE ”B”**

 

a.                                       The directors of the corporation may, withoutauthorization of the shareholders:

 

i.                                          borrow money on the credit of theCorporation;

 

ii.                                       issue, reissue, sell or pledge debtobligations of the Corporation;

 

iii.                                    subject to the *Business Corporations Act* (Alberta), give a guarantee onbehalf of the Corporation to secure performance of an obligation of any person;and

 

iv.                                   mortgage, hypothecate, pledge or otherwisecreate a security interest in all or any property of the Corporation, owned orsubsequently acquired, to secure any obligation of the Corporation.

 

b.                                      The directors may, by resolution, delegatethe powers referred to in subsection (c) hereof to a director, a committeeof directors or an officer.

 

c.                                       The directors may, between annual generalmeetings, appoint one or more additional directors of the Corporation to serveuntil the next annual general meeting, but the number of additional directorsshall not at any time exceed 1/3 of the number of directors who held office atthe expiration of the last annual meeting of the Corporation.

 

d.                                      Meetings of the shareholders may be held:

 

i.                                          at any place within Alberta that thedirectors determine from time to time; and

 

ii.                                       at any place outside Alberta that thedirectors determine from time to time, including, without limitation, thefollowing cities:  Vancouver, British Columbia; Victoria, BritishColumbia; Winnipeg, Manitoba; Toronto, Ontario; Ottawa, Ontario; Montreal,Quebec; or Halifax, Nova Scotia.

 

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