Unassociated Document


     

    
      
        EXHIBIT
4.2


      

      


      BAYTEX
ENERGY TRUST

       

      TRUST
UNIT RIGHTS INCENTIVE PLAN

       

      This
document sets out the terms and conditions of the Trust Unit Rights Incentive
Plan (the "Plan") of
Baytex Energy Trust (the "Trust").  The Plan
was approved by the board of directors (the "Board") of Baytex Energy Ltd.
("Baytex") on
March 9, 2009, subject to approval by the unitholders of the Trust ("Unitholders") on May 20,
2009 (the "Effective
Date").  Certain amendments to Sections 9 and 10 and the
addition of Section 20 were approved by the Board on November 16,
2009.

      


      
        	
                1.

              	
                The
      purpose of the Plan is to provide directors, officers, consultants,
      employees and other service providers, as designated from time to time by
      the Board of Baytex (all of which are hereinafter called "Service Providers"), of
      the Trust and any of its subsidiaries, including Baytex, with an
      opportunity to acquire rights ("Rights") to acquire
      trust units of the Trust ("Units").  This
      will provide an increased incentive for these Service Providers to
      contribute to the future success of the
Trust.

              


      

       

      
        	
                2.

              	
                The
      Plan shall come into effect on the Effective Date and shall be approved by
      Unitholders every three years
thereafter.

              


      

       

      
        	
                3.

              	
                Unless
      otherwise approved by the Toronto Stock Exchange ("TSX") and Unitholders,
      the Trust will set aside and reserve for issuance under the Plan up to 10%
      of the aggregate number of issued and outstanding Units plus the number of
      Units which may be issued on the exchange of all outstanding exchangeable
      shares of any subsidiary of the Trust (collectively, the "Total
      Units").  Any increase in the issued and outstanding
      Total Units will result in an increase in the available number of Units
      issuable under the Plan, and any exercises of Rights will create an
      equivalent number of Units available under the
  Plan.

              


      

       

      
        	
                4.

              	
                In
      accordance with the rules of the TSX, the number of Units: (a) issued to
      Insiders within a one year period; and (b) issuable to Insiders, at any
      time under the Plan, or when combined with all other securities based
      compensation arrangements of the Trust, cannot exceed 10% of the Total
      Units.  The following restrictions will apply to the
      participation of non-management directors under the Plan: (i) the
      aggregate number of Units issuable to non-management directors, at any
      time under the Plan, cannot exceed 1% of the Total Units; and
      (ii) the value of the Rights granted to any one non-management
      director during a calendar year, as calculated at the Grant Date (as
      defined below), cannot exceed
$100,000.

              


      

       

      
        	
                5.

              	
                Rights
      shall be granted by the Board from time to time, at its sole discretion,
      to Service Providers, provided that the aggregate number of Rights held by
      any single holder of Rights at any given time cannot exceed 1% of the
      Total Units.  No Service Provider shall have any entitlement to
      be granted Rights hereunder, except as may be specifically granted by the
      Board.

              


      

       

      
        	
                6.

              	
                Rights
      granted under the Plan may not be assigned or transferred by a holder
      thereof.

              


      

       

      
        	
                7.

              	
                The
      Plan is subject to the approval of the TSX and no Rights which may be
      granted prior to the receipt of such approval may be exercised until such
      approval has been received.

              


      

       

      
        	
                8.

              	
                Subject
      to the restrictions on exercise set out in paragraph 7 above and subject
      to paragraphs 12, 13, 14 and 16 below, Rights granted under the Plan may
      be exercised during a period (the "Exercise Period") not
      exceeding five (5) years from the date upon which the Rights were granted
      (the "Grant
      Date"), pursuant to vesting schedules determined by the Board in
      its sole discretion.  At the expiration of the Exercise Period
      (the "Expiry
      Date"), any Rights which have not been exercised shall expire and
      become null and void.  If the Expiry Date of any Rights falls
      within any Blackout Period (as defined below) or within ten business days
      (being a day other than a Saturday, Sunday or any other day when banks are
      generally not open in the City of Calgary for the transaction of business)
      following the end of any Blackout Period (the "Restricted Rights"),
      then the Expiry Date of such Restricted Rights shall, without any further
      action, be extended to the date that is ten business days, following the
      end such Blackout Period.  The foregoing extension applies to
      all Rights whatever the Grant Date and shall not be considered an
      extension of the term of the Rights as referred to in paragraph 12
      hereof.  Unless approved by the Board, no Rights may be
      exercised by a holder during a Blackout Period which is applicable to such
      holder.

              


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                9.

              	
                The
      grant price ("Grant
      Price") per Right granted hereunder shall be not less than the
      closing price of the Units on the TSX (or, in the case of Service
      Providers working in the United States, the New York Stock Exchange (the
      "NYSE")) on the
      trading day immediately preceding the Grant Date (or, if the Units are not
      then listed and posted for trading on the TSX or the NYSE, such price as
      required by such stock exchange on which such Units are listed and posted
      for trading as may be selected for such purpose by the
      Board).  In the event that the Units are not listed and posted
      for trading on any stock exchange, the Grant Price shall be determined by
      the Board in its sole discretion.  Notwithstanding the
      foregoing, in certain circumstances, such as when a Right is offered to an
      individual as an inducement to secure employment, the Grant Price may be
      otherwise determined, but only with the prior consent of all stock
      exchanges on which the Units are at that time
  listed.

              


      

       

      
        
          	
                  
                    10.

                  

                	
                  
                    (a)

                  

                	
                  For
      Service Providers that are subject to income taxes in the United States,
      the exercise price ("Exercise Price") per
      Right granted hereunder shall be equal to the Grant
  Price.

                


        

         

      

      
        	
                 
      

              	
                (b)

              	
                For
      Service Providers that are not subject to income taxes in the United
      States, the Exercise Price per Right granted hereunder shall be calculated
      by deducting from the Grant Price all monthly distributions (whether
      payable in cash, in securities or in any other assets of the Trust, but
      excluding a distribution of Units pursuant to the Trust's trust indenture
      that is followed by a consolidation of the Units pursuant to the trust
      indenture), on a per Unit basis, made by the Trust after the Grant Date
      where the aggregate amount of all such monthly distributions represent a
      return of more than 0.833% of the Trust's recorded cost of oil and natural
      gas properties less accumulated depreciation and depletion and any future
      income tax liability associated with such oil and natural gas properties
      at the end of that month.  For greater certainty, where a Grant
      Date falls other than on the first day of a calendar month, the per Unit
      amount of the distribution deducted from the Grant Price for that calendar
      month shall be pro-rated from the Grant Date to the end of such calendar
      month.  The reduction of the Exercise Price of any outstanding
      Rights pursuant to this paragraph shall not be considered a reduction for
      purposes of paragraph 12 hereof.  The Board may establish a
      minimum Grant Price and/or Exercise Price, provided that in no event shall
      the Exercise Price be less than
$1.00.

              


      

       

      
        	
                11.

              	
                The
      Plan shall be administered by the Board.  However,
      notwithstanding the foregoing or anything else contained in this Plan (and
      subject to compliance with applicable laws): (a) the Board may delegate
      the administration of the Plan (or any part thereof) to a committee of
      directors (a "Committee") appointed
      from time to time by the Board; and (b) the Board (or the Committee as its
      delegatee) may delegate the administration of the Plan (or any part
      thereof) to the Chief Executive Officer of Baytex (the "CEO") pursuant to rules
      of procedure fixed by the Board or the Committee, as
      applicable.  If the administration of the Plan is delegated (in
      whole or in part) to a Committee or to the CEO, references herein to the
      "Board" shall be
      to such Committee or CEO, where
applicable.

              


      

       

      
        	
                12.

              	
                The
      Plan and any outstanding Rights granted pursuant to the Plan may be
      amended, modified or terminated by the Board without approval of
      Unitholders subject to any required approval of the
      TSX.  Notwithstanding the foregoing, the Plan or any Rights
      granted pursuant to the Plan may not be amended without approval of
      Unitholders to: (a) increase the percentage of Units issuable on
      exercise of outstanding Rights at any time pursuant to paragraph 3
      hereof; (b) reduce the Exercise Price of any outstanding Rights or
      cancel and re-issue any Rights granted pursuant to the Plan;
      (c) extend the Expiry Date of any outstanding Rights; (d) permit
      a holder to transfer or assign Rights to a new beneficial holder other
      than for estate settlement purposes; (e) increase the number of Units
      that may be issued to Insiders above the restriction contained in
      paragraph 4; (f) increase the restrictions contained in
      paragraph 4 regarding the participation of non-management directors
      under the Plan; or (g) amend this paragraph 12.  If
      after the Effective Date, non-management directors cease to be eligible to
      participate in the Plan, any amendment to the Plan to re-introduce their
      participation must be approved by Unitholders.  In addition, no
      amendment to the Plan or Rights granted pursuant to the Plan may be made
      without the consent of the holder, if it adversely alters or impairs any
      Right previously granted to such holder under the
  Plan.

              


      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                13.

              	
                Upon
      any holder of Rights ceasing to be a Service Provider for any reason
      whatsoever, other than the death of such holder of Rights, during the
      Exercise Period, all Rights which have not vested at such date shall
      terminate and become null and void, and such holder of Rights shall have
      until the earlier of:

              


      

       

      
        	
                 
      

              	
                (a)

              	
                30
      days from the date such holder of Rights ceased to be a Service Provider;
      or

              


      

       

      
        	
                 
      

              	
                (b)

              	
                the
      Expiry Date,

              


      

       

      
        to
exercise the portions of any outstanding Rights which have vested in such holder
of right pursuant to paragraph 8 above and, at the expiration of such 30
day period, any vested Rights which have not been so exercised shall terminate
and become null and void; provided that upon the termination of any employee for
cause, the Board may, in its sole discretion, determine that all vested Rights
which have not been exercised shall immediately terminate and become null and
void.

      

       

      
        	
                14.

              	
                Upon
      the death of any individual holder of Rights during the Exercise Period,
      all Rights which have not vested at such date shall terminate and become
      null and void, and the executor, administrator or personal representative
      of such holder of Rights shall have until the earlier
  of:

              


      

       

      
        	
                 
      

              	
                (a)

              	
                6
      months from
      the date of the death of such holder of Rights;
  or

              


      

       

      
        	
                 
      

              	
                (b)

              	
                the
      Expiry Date,

              


      

       

      to
exercise those outstanding Rights which had vested in such holder of right
pursuant to paragraph 8 above as at the date of death and, at the
expiration of such 6 month period, any vested Rights which have not been
exercised shall terminate and become null and void.

       

      
        	
                15.

              	
                Rights
      granted hereunder shall be exercisable by a holder of Rights by delivering
      written notice in the form attached as Schedule "A" hereto to the Trust
      specifying the number of Rights being exercised, accompanied by payment in
      full of the Exercise Price for the number of Rights for which such
      exercise is made.  The calculation of the Exercise Price shall
      be ratified and confirmed by the Chief Financial Officer of Baytex. (In
      the event of the exercise of Rights by the Chief Financial Officer, the
      calculation of the Exercise Price shall be ratified and confirmed by the
      Chief Executive Officer).  Upon receipt of such notice made in
      accordance with the terms and conditions of the Plan, the Trust shall
      cause to be issued, and deliver to such holder of Rights, a certificate
      representing the Units for which such Rights have been
      exercised.

              


      

       

      
        	
                16.

              	
                Notwithstanding
      any other provision in this Plan, if a Change of Control (as defined
      below) occurs during any Exercise Period of any Rights granted hereunder,
      Baytex shall give notice of such Change of Control to all Service
      Providers at least 14 days before the
      anticipated effective date of such Change of Control.  Each Service
      Provider shall have the right, whether or not such notice is given to it
      by Baytex, to exercise their unvested Rights and any vested Rights which
      have not previously been purchased conditional on the completion of the
      Change of Control (such Rights to be deemed to be exercised prior to the
      effective time of the Change of Control) (a "Conditional
      Exercise").  All Rights not exercised prior to the effective
      time of the Change of Control shall be and shall be deemed to have been
      cancelled immediately prior to the effective time of the Change of Control
      and shall be of no further force or effect.  If for any reason
      such Change of Control is not effected, the Conditional Exercise shall
      become null and void.

              


      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      For the
purposes of this clause, "Change of Control" means (and
shall be deemed to occur upon the effective date of the earlier of any of the
following events, provided that such event results in an actual Change of
Control of the Trust or Baytex):

       

      
        	
                 
      

              	
                (a)

              	
                a
      successful "take-over bid" (as defined in the Securities Act
      (Alberta)), as amended, or any successor legislation thereto, pursuant to
      which the "offeror" would as a result of such take-over bid, if
      successful, beneficially own in excess of 50% of the outstanding Total
      Units or common shares of Baytex;

              


      

       

      
        	
                 
      

              	
                (b)

              	
                the
      issuance to or acquisition by any person, or group of persons acting in
      concert, of Units which in the aggregate total 50% or more of the then
      issued and outstanding Total Units;

              


      

       

      
        	
                 
      

              	
                (c)

              	
                the
      sale of all or substantially all of the assets of Baytex;
    and

              


      

       

      
        	
                 
      

              	
                (d)

              	
                the
      termination of the Trust,

              


      

       

      provided
that notwithstanding the application of any of the foregoing, a change of
control shall be deemed to not have occurred:

       

      
        	
                 
      

              	
                (e)

              	
                pursuant
      to an arrangement, merger or other from of reorganization of the Trust
      where the holders of the outstanding voting securities or interests of the
      Trust immediately prior to the completion of the reorganization will hold
      more than 90% of the outstanding voting securities or interests of the
      continuing entity upon completion of the reorganization;
  or

              


      

       

      
        	
                 
      

              	
                (f)

              	
                if
      a majority of the Board determines that in substance the arrangement,
      merger or reorganization are such that a change of control should be
      deemed to not have occurred and any such determination shall be binding
      and conclusive for all purposes of the
Plan.

              


      

       

      
        
          	
                  17. 
      

                	
                  (a)

                	
                  In
      the event, during any Exercise Period of any Rights granted hereunder, of
      any consolidation, subdivision, re-division or change of the Units into a
      greater or lesser number of Units, then such outstanding Rights shall be
      deemed to be amended to be for such greater or lesser number of Units as
      would have resulted if the Units represented by such Rights had been
      issued and outstanding at the date of such consolidation, subdivision,
      re-division or change, and the Exercise Price shall be deemed to be
      adjusted on a pro rata basis.

                


        

         

      

      
        	
                 
      

              	
                (b)

              	
                In
      the event of any other capital reorganization of the Trust during any
      Exercise Period of any Rights granted hereunder not otherwise covered in
      subparagraph 17(a), or an amalgamation or merger (whether by plan of
      arrangement or otherwise) of the Trust and/or Baytex with or into any
      other entity or the sale of the properties and assets of the Trust (and
      the assets of its direct or indirect subsidiaries) as (or substantially
      as) an entirety to any other entity (and whether or not involving one or
      more third party entities) and provided that such event is not a Change of
      Control, each holder of Rights (if the holder has not exercised their
      Rights prior to the effective date of such capital reorganization,
      amalgamation, merger or sale) shall be entitled to receive and shall
      accept in exchange for the Rights then held by such holder, such number of
      rights or options (or similar securities) (the "New Securities") to
      acquire such number and type of securities of the entity resulting from
      such capital reorganization, amalgamation or merger or to which such sale
      may be made, as the case may be, (the "New Entity") and
      exercisable at such exercise price and terms of vesting, as is comparable
      to the Exercise Price and terms of vesting of the Rights, as the Board may
      determine in its absolute discretion, but subject in all cases to the
      receipt of any required regulatory and Unitholder
      approvals.  The New Securities will be subject to the terms of
      any incentive plan governing the New Securities implemented by the New
      Entity.  For greater certainty, the exchange of Rights for New
      Securities will be evidenced by the cancellation of the Rights and the
      grant of the New Securities.  Upon the issuance of such New
      Securities to the holder in exchange for its Rights, the obligation of the
      Trust to the holder in respect of the Rights so exchanged shall terminate
      and be at an end and the holder shall cease to have any further rights in
      respect thereof.

              


      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	
                18.

              	
                The
      granting of Rights hereunder to any holder of Rights shall not obligate
      such holder of Rights to exercise such Rights or any portion
      thereof.

              


      

       

      
        	
                19.

              	
                In
      this Plan the following terms shall have the meaning set forth
      below:

              


      

       

      
        	
                 
      

              	
                (a)

              	
                "Blackout Period" means a
      period of time imposed by the Board pursuant to the policies of Baytex
      upon certain holders during which those persons may not trade in any
      securities of the Trust; and

              


      

       

      
        	
                 
      

              	
                (b)

              	
                "Insider" has the meaning
      set forth in Company Manual of the
TSX.

              


      

       

      
        	
                20.

              	
                Notwithstanding
      any provision of the Plan to the contrary, the provisions of the Plan and
      Rights granted hereunder are intended to comply with or are exempt from
      Section 409A of the United States Internal Revenue Code of 1986, as
      amended, and its implementing regulations or guidance ("Section 409A"), and all
      provisions of the Plan and Rights granted hereunder shall be construed and
      interpreted in a manner consistent with the requirements of
      Section 409A, as applicable.

              


      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
"A"

       

      NOTICE
OF EXERCISE OF UNIT RIGHTS

       

      To:             Baytex
Energy Trust (the "Trust")

       

      The
undersigned holder of Rights hereby gives notice of intention to exercise Rights
to purchase ______________ Units of the Trust granted on
__________________________________, 20___, at the following Exercise
Price:

       

      
        
          	
                  Grant
      Price

                	
                  ($_________.___)

                
	 	 
	
                  Exercise
      Price

                	
                  ($_________.___)

                


        

      

       

      Payment
in full of the aggregate Exercise Price for the total number of Rights being
exercised is enclosed.

      


      
        	 
      	 
      	 
      
	
                Date

              	 
      	
                Signature
      of Holder of Rights

                 

                 

              
	 
      	 
      	
                Name
      (please print)

                 

                 

              
	 
      	 
      	
                Address

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                Please
      have my Unit certificate sent to me at:

              	 
      	
                ____above
      address

                ____c/o
      2200, 205 – 5th
      Avenue S.W.

                Calgary, Alberta

                T2P 2V7

              
	 
      	 
      	 
      
	
                RATIFIED
      AND CONFIRMED this

                 _____________
      day of _________, 20__

              	 
      	 
      
	
                BAYTEX
      ENERGY LTD.

                 

                 

                Per:______________________________