Exhibit 10.1


 


BAYTEX ACQUISITION CORP.


 


 


NOTE INDENTURE


 


 


September 2, 2003


 


 


Providing for the
issue of 12% Unsecured, Subordinated


 


Promissory Notes of
Baytex Acquisition Corp.


 

















 


TABLE OF CONTENTS


 


	
  Article 1
  INTERPRETATION

  	
   

  
	
  1.1

  	
  Definitions

  	
   

  
	
  1.2

  	
  Meaning of “Outstanding”

  	
   

  
	
  1.3

  	
  Headings

  	
   

  
	
  1.4

  	
  Gender and Number

  	
   

  
	
  1.5

  	
  Currency

  	
   

  
	
  1.6

  	
  Governing Law

  	
   

  
	
  1.7

  	
  Day Not a Business Day

  	
   

  
	
  1.8

  	
  Invalidity, Etc.

  	
   

  
	
  1.9

  	
  Accounting Principles

  	
   

  
	
  1.10

  	
  Per Annum Calculations

  	
   

  
	
  1.11

  	
  Interest Calculation

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 2 THE NOTES

  	
   

  
	
  2.1

  	
  Terms of Notes

  	
   

  
	
  2.2

  	
  Form and Signatures of
  Notes

  	
   

  
	
  2.3

  	
  Issue of Notes

  	
   

  
	
  2.4

  	
  Certification

  	
   

  
	
  2.5

  	
  Notes to Rank Pari Passu

  	
   

  
	
  2.6

  	
  Commencement of Interest

  	
   

  
	
  2.7

  	
  Registration and
  Transfer of Notes

  	
   

  
	
  2.8

  	
  Persons Entitled to Payment

  	
   

  
	
  2.9

  	
  Mutilation,
  Loss, Theft or Destruction

  	
   

  
	
  2.10

  	
  Exchanges of Notes

  	
   

  
	
  2.11

  	
  Transfer

  	
   

  
	
  2.12

  	
  Option of
  Holder as to Place of Payment

  	
   

  
	
  2.13

  	
  Trustee Not Bound
  to Make Enquiries

  	
   

  
	
  2.14

  	
  Extension

  	
   

  
	
  2.15

  	
  Redemption

  	
   

  
	
  2.16

  	
  Prepayment

  	
   

  
	
  2.17

  	
  No Other
  Prepayment, Repurchase or Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 3
  SUBORDINATION OF NOTES

  	
   

  
	
  3.1

  	
  Subordination

  	
   

  
	
  3.2

  	
  Definition

  	
   

  
	
  3.3

  	
  Distribution on
  Creditor Proceedings

  	
   

  
	
  3.4

  	
  No Payment
  to Noteholders In Certain Events

  	
   

  
	
  3.5

  	
  Payment of Notes Permitted

  	
   

  
	
  3.6

  	
  Subordination not to
  be Impaired

  	
   

  
	
  3.7

  	
  Authorization
  of Noteholders to Trustee to Effect Subordination

  	
   

  
	
  3.8

  	
  Notice of Default
  under Senior Debt

  	
   

  
	
  3.9

  	
  Inapplicability
  in Certain Circumstances

  	
   

  
	
  3.10

  	
  Actual Notice Required

  	
   

  
	
  3.11

  	
  No
  Impairment Between Corporation and Holders

  	
   

  
	
  3.12

  	
  Procedural Matters
  - Classification

  	
   

  
	
  3.13

  	
  Payment of Trustee’s
  Fees, etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 4
  COVENANTS OF THE CORPORATION

  	
   

  



 


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  4.1

  	
  Positive Covenants

  	
   

  
	
  4.2

  	
  Trustee May Perform
  Covenants

  	
   

  
	
  4.3

  	
  To Pay Trustee’s
  Remuneration

  	
   

  
	
  4.4

  	
  Negative Covenant

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 5 DEFAULT

  	
   

  
	
  5.1

  	
  Events of Default

  	
   

  
	
  5.2

  	
  Special Waiver by the Trust

  	
   

  
	
  5.3

  	
  Acceleration of Maturity

  	
   

  
	
  5.4

  	
  Remedies

  	
   

  
	
  5.5

  	
  Remedies not Exclusive

  	
   

  
	
  5.6

  	
  Costs

  	
   

  
	
  5.7

  	
  Delay

  	
   

  
	
  5.8

  	
  No Recourse Against
  Other Parties

  	
   

  
	
  5.9

  	
  Notice of Events of Default

  	
   

  
	
  5.10

  	
  Waiver of Default

  	
   

  
	
  5.11

  	
  Enforcement by the Trustee

  	
   

  
	
  5.12

  	
  No Suits by Holders

  	
   

  
	
  5.13

  	
  Application of Monies
  by Trustee

  	
   

  
	
  5.14

  	
  Distribution of Proceeds

  	
   

  
	
  5.15

  	
  Judgment Against the
  Corporation

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 6 SATISFACTION, DISCHARGE
  AND REDEMPTION

  	
   

  
	
  6.1

  	
  Payment of Principal Amount

  	
   

  
	
  6.2

  	
  Non-Presentation of Notes

  	
   

  
	
  6.3

  	
  Repayment of Unclaimed
  Monies

  	
   

  
	
  6.4

  	
  Discharge

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 7
  SUCCESSOR COMPANIES

  	
   

  
	
  7.1

  	
  Successor Companies

  	
   

  
	
  7.2

  	
  Vesting of
  Powers In Successor Corporation

  	
   

  
	
  7.3

  	
  Notice of
  Completion of Arrangement

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 8
  MEETINGS OF HOLDERS

  	
   

  
	
  8.1

  	
  Right to Convene Meeting

  	
   

  
	
  8.2

  	
  Notice of Meetings

  	
   

  
	
  8.3

  	
  Chairman

  	
   

  
	
  8.4

  	
  Quorum

  	
   

  
	
  8.5

  	
  Power to Adjourn

  	
   

  
	
  8.6

  	
  Show of Hands

  	
   

  
	
  8.7

  	
  Poll

  	
   

  
	
  8.8

  	
  Voting

  	
   

  
	
  8.9

  	
  Regulations

  	
   

  
	
  8.10

  	
  Persons Entitled to
  Attend Meetings

  	
   

  
	
  8.11

  	
  Powers
  Exercisable by Extraordinary Resolution

  	
   

  
	
  8.12

  	
  Meaning of
  “Extraordinary Resolution”

  	
   

  
	
  8.13

  	
  Powers Cumulative

  	
   

  
	
  8.14

  	
  Minutes

  	
   

  
	
  8.15

  	
  Instrument In Writing

  	
   

  
	
  8.16

  	
  Binding Effect of
  Resolutions

  	
   

  
	
  8.17

  	
  Evidence of Rights of
  Holders

  	
   

  



 


3

















 


	
  Article 9 NOTICES

  	
   

  
	
  9.1

  	
  Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 10
  CONCERNING THE TRUSTEE

  	
   

  
	
  10.1

  	
  No Conflict of Interest

  	
   

  
	
  10.2

  	
  Replacement of Trustee

  	
   

  
	
  10.3

  	
  Duties of Trustee

  	
   

  
	
  10.4

  	
  Reliance Upon Declarations

  	
   

  
	
  10.5

  	
  Evidence and
  Authority to Trustee

  	
   

  
	
  10.6

  	
  Certificate
  of the Corporation as Evidence

  	
   

  
	
  10.7

  	
  Experts, Advisers and
  Agents

  	
   

  
	
  10.8

  	
  Trustee May Deal In Notes

  	
   

  
	
  10.9

  	
  Investment of
  Monies Held by Trustee

  	
   

  
	
  10.10

  	
  Trustee Not Ordinarily
  Bound

  	
   

  
	
  10.11

  	
  Trustee Not
  Required to Give Security

  	
   

  
	
  10.12

  	
  Trustee Not to Be
  Appointed Receiver

  	
   

  
	
  10.13

  	
  Trustee
  Not Bound to Act

  	
   

  
	
  10.14

  	
  Conditions
  Precedent to Trustee’s Obligations to Act Hereunder

  	
   

  
	
  10.15

  	
  Survival
  of Indemnities

  	
   

  
	
  10.16

  	
  Authority to Carry on
  Business

  	
   

  
	
  10.17

  	
  Acceptance
  of Trust

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 11
  SUPPLEMENTAL INDENTURES

  	
   

  
	
  11.1

  	
  Supplemental Indentures

  	
   

  
	
  11.2

  	
  Indenture
  Confirming or Evidencing Subordination

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 12 FORM OF
  NOTE

  	
   

  
	
  12.1

  	
  Form of Note

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 13
  EXECUTION AND FORMAL DATE

  	
   

  
	
  13.1

  	
  Execution

  	
   

  
	
  13.2

  	
  Formal Date

  	
   

  



 


4

















 


NOTE INDENTURE


 


September 2, 2003


 


BETWEEN:


 


BAYTEX ACQUISITION CORP., a corporation incorporated pursuant to the Business Corporations Act (Alberta) with
an office in the City of Calgary, in the Province of Alberta (the “Corporation”)


 


AND:


 


VALIANT TRUST COMPANY, a trust company incorporated under the laws of the Province of
Alberta having an office in the City of Calgary, in the Province of Alberta
(the “Trustee”)


 


RECITALS:


 


A.                            The Corporation is duly authorized to create and issue the Notes as
herein provided;


 


B.                            All necessary corporate proceedings have been taken and conditions
complied with to make the creation and issue of the Notes proposed to be issued
hereunder and this Note Indenture legal, valid and binding on the Corporation
in accordance with the laws relating to the Corporation; and


 


C.                            The foregoing recitals are made as representations and statements of
fact by the Corporation and not by the Trustee.


 


NOW THEREFORE THIS NOTE INDENTURE WITNESSETH
and it is hereby covenanted, agreed and declared as set forth below:


 


ARTICLE 1

INTERPRETATION


 


1.1                                                                               Definitions


 


In this Note Indenture (including the
recitals hereto) and in the Notes, unless there is something in the subject
matter or context inconsistent therewith:


 


(a)                                  “Act” means the Business Corporations Act (Alberta) R.S.A.
2000, c. B-9, as amended, including the regulations thereunder;


 


(b)                                 “Arrangement” means the plan of arrangement
pursuant to Section 193 of the Act as provided for in an agreement dated
July 24, 2003, among Baytex Petroleum Ltd., Crew Energy Inc., the Corporation,
Baytex ExchangeCo Ltd., Baytex Exploration Ltd., Baytex Resources Ltd. and the
Trust;


 


(c)                                  “Bank
Borrowings” means the Corporation’s indebtedness, obligations and liabilities to
the Banks or any of them;


 

















 


(d)                                 “Banks” means any bank or financial
institution or any affiliate thereofwhich from time to time may be providing
loans, advances or other extensions of credit to the Corporation including,
without limitation, all obligations under or pursuant to any Swaps;


 


(e)                                  “Borrowed
Money”
means, in respect of any Person, all the Person’s indebtedness, obligations and
liabilities in respect of (i) borrowed money; (ii) bonds, debentures,
notes or other similar instruments; (iii) the purchase price of any
property or services which is not due within ninety (90) days of delivery or
installation of such property or delivery of an invoice or account in respect
of such services; (iv) reimbursement obligations with respect to letters
of credit, bankers’ acceptances or similar facilities issued for its account;
(v) Swaps; and (vi) guarantees, indemnities and other assurances in
respect of Borrowed Money (as hereinbefore defined);


 


(f)                                    “Business
Day”
means any day except Saturdays, Sundays, statutory holidays and days in Alberta
and other days when the principal offices of the Trustee in the City of Calgary
are not generally open to the public for the transaction of business;


 


(g)                                 “Certificate
of the Corporation”, “Order of the
Corporation”, “Request of the
Corporation”, “Written Direction of
the Corporation” and “Consent of
the Corporation” mean, respectively, a written Certificate, order,
request, direction and consent signed in the name of the Corporation by the
President or any other senior officer of the Corporation, and may consist of one
or more instruments so executed.  A
Certificate of the Corporation shall be in the form of a statutory declaration
if and when required under the provisions of this Note Indenture or by the
Trustee;


 


(h)                                 “Certified
Resolution” means a copy of a resolution of the Corporation certified by the
President or any other senior officer of the Corporation to have been duly
passed by the Directors and to be in full force and effect on the day of such
certification unless otherwise noted therein;


 


(i)                                     “Common Shares” means the common shares in
the capital of the Corporation, as such shares were constituted on the date of
execution and delivery of this Note Indenture or as subsequently consolidated
or subdivided or any other shares or securities resulting from a reclassification
or change of such common shares or as subsequently consolidated or subdivided
or any other shares or securities resulting from a reclassification or change
of such common shares;


 


(j)                                     “Corporation” means Baytex Acquisition
Corp., incorporated under the Act, and includes any successor company to or of
the Corporation provided that the provisions of Article 7 shall have been
complied with in respect thereof;


 


(k)                                  “Corporation’s
Auditors”
or “Auditors of the Corporation”
means an independent firm of chartered accountants duly appointed as auditors
of the Corporation;


 


(l)                                     “Counsel” means a barrister or
solicitor or firm of barristers or solicitors, who may be counsel for the
Corporation, retained, employed, engaged or appointed by the Trustee or retained,
employed, engaged or appointed by the Corporation and acceptable to the Trustee
where the context so indicates;


 


(m)                               “Creditor
Proceedings” means any dissolution, winding-up, total or partial liquidation,
adjustment or readjustment of debt, reorganization, compromise, arrangement
with creditors,


 


2

















 


plan of arrangement under the Bankruptcy and Insolvency Act (Canada),
the Companies’ Creditors Arrangement Act
(Canada) or arrangement provisions of applicable corporate law, or similar
proceedings of or with respect to the Corporation or its property or
liabilities, or any bankruptcy, insolvency, receivership, assignment for the
benefit of creditors, marshalling of assets and liabilities of the Corporation,
or any bulk sale of assets by the Corporation, or proceedings in relation to
any of the foregoing;


 


(n)                                 “Default” means any event or condition
which, with the giving of notice, lapse of time or upon a declaration or
determination being made (or any combination thereof), would constitute an
Event of Default;


 


(o)                                 “Director” means a member of the board
of directors of the Corporation for the time being and “Directors”, “Board of Directors” or “Board”
means the board of directors of the Corporation or, if duly constituted and
whenever duly elected or empowered, the executive committee of the Board of
Directors of the Corporation for the time being, and reference to “action by
the Directors” means action by the directors of the Corporation as a board or, whenever
duly empowered, action by the said executive committee as such committee;


 


(p)                                 “Early
Redemption Date” means the date that any Notes or portion thereof are
to be redeemed or prepaid pursuant to Section 2.14 or Section 2.15;


 


(q)                                 “Effective
Date”
means the date shown on the certificate or proof of filing to be issued by the
Registrar of Corporations pursuant to subsection 193(11) or subsection 193(12)
of the Act in respect of the Arrangement;


 


(r)                                    “Event of
Default”
means any of the events of default referred to in Section 5.1;


 


(s)                                  “Extraordinary
Resolution” has the meaning attributed thereof in Section 8.12;


 


(t)                                    “Fund Trustee” mean Valiant Trust Company,
the trustee under the Trust Indenture and such other persons which may become
trustee thereunder from time to time;


 


(u)                                 “Holders” means the person(s) from time
to time being entered in the Registers hereinafter mentioned as Holders of
Notes (which shall include any transferee of a Holder);


 


(v)                                 “Initial
Note”
has the meaning ascribed thereto in Section 2.3;


 


(w)                               “Interest
Payment Date” means the 10th day of the month following the month in which an
Interest Period ends, unless such day is not a Business Day, in which case it
shall be the next following Business Day;


 


(x)                                   “Interest
Period”
means (i) the period beginning on (and including) the Issue Date and
ending on (and including) September 31, 2003, and (ii) thereafter,
successive periods beginning on (and including) the first day of the calendar
month next following the end of each Interest Period and ending on (and
including) the last day of such calendar month, and the Maturity Date, provided
that in the event any Note shall be partially or totally redeemed at any time
other than on an Interest Payment Date, then the date upon which such partial or
total redemption occurs shall be an Interest Payment Date in respect of the
amount of such Note so redeemed;


 


3

















 


(y)                                 “Interest
Rate”
means twelve  percent (12%) per
annum;


 


(z)                                   “Issue Date” means, in respect of any
Notes, the date of issuance of such Notes;


 


(aa)                            “Maturity
Date”
means September 1, 2033, subject to extension pursuant to
Section 2.13;


 


(bb)                          “Non-Trust
Holders”
means Holders other than the Trust, provided that if at any time the Trust owns
all Notes other than those having an aggregate principal amount of Fifteen
Million ($15,000,000) Dollars or less, there shall be deemed conclusively for
all purposes to be no Non-Trust Holders;


 


(cc)                            “Note
Indenture”, “Indenture”, “hereto”, “herein”,
“hereby”, “hereunder”, “hereof” and similar expressions refer to this Note Indenture
and not to any particular Article, Section, subsection, clause, subdivision or
other portion hereof and include any and every instrument supplemental or
ancillary hereto;


 


(dd)                          “Noteholders’
Request”
means:


 


(i)                                     an instrument signed in one or
more counterparts either:


 


(A)                              at any time when there are no
Non-Trust Holders, or there are Non-Trust Holders but the Trust is the holder
of at least Ninety percent (90%) of the principal amount of the Notes then
outstanding, by the Trust; or


 


(B)                                at any time when (A) does not
apply, by Holder(s) holding in the aggregate at least Fifty percent (50%) of
the principal amount of the Notes outstanding,


 


or


 


(ii)                                  a resolution of the Holders
passed at a meeting of the Holders at any time when there are Non-Trust Holders
but the Trust is not the holder of at least Ninety percent (90%) of the
principal amount of the Notes then outstanding, by Holder(s) holding in the
aggregate at leas Fifty percent (50%) of the principal amount of the Notes
outstanding which are represented at the meeting;


 


requesting the Trustee to take some action or
proceeding which this Note Indenture authorizes to be taken by a Noteholders’
Request or resolution, provided that, in either (i) or (ii) where the approval
of the Trust is required, the taking of such action or proceeding has been
approved as required by the Trust Indenture;


 


(ee)                            “Notes” means the 12% unsecured,
subordinated, promissory notes maturing on the Maturity Date, issued or to be
issued hereunder and entitled to the benefits hereof;


 


(ff)                                “Outstanding” has the meaning ascribed
thereto in Section 1.2;


 


(gg)                          “Person” means an individual, firm,
trust, trustee, syndicate, company, partnership, association, government or
governmental agency;


 


(hh)                          “Register” has the meaning ascribed
thereto in Section 2.6;


 


4

















 


(ii)                                  “Security
Documents” shall mean and include any and all collateral or security documents
securing the Corporation’s indebtedness, obligations and liabilities for or in
respect of Senior Debt;


 


(jj)                                  “Senior Debt”
means
(a) all indebtedness, obligations and liabilities of the Corporation in
respect of Borrowed Money excluding (i) the indebtedness, obligations or liability
created under or evidenced by the Notes or this Note Indenture; and
(ii) any indebtedness that by its terms or by the terms of the instrument
evidencing or creating it ranks or in respect of which the holders thereof have
agreed that it shall rank pari passu with or subordinate to the Notes; and
(b) from and after the commencement of, and during the continuance of, any
Creditor Proceedings, all indebtedness, obligations and liabilities of the
Corporation other than indebtedness obligations and liabilities to the Holders
of Notes; for certainty, Senior Debt shall at all times include all
indebtedness, obligations and liabilities of the Corporation in respect of Bank
Borrowings, including all indebtedness, obligations and liabilities of the
Corporation under the Senior Debt Documents and Swaps and under the 9 5/8% U.S.
Dollar Senior Subordinated Notes due in 2010 and the 10 1⁄2% U.S. Dollar Senior
Subordinated Notes due 2011;


 


(kk)                            “Senior Debt
Default”
shall mean and include any event of default under any Senior Debt and any event
or circumstance which, with the passage of time or the giving of notice, or
both, would constitute an event of default under Senior Debt;


 


(ll)                                  “Senior Debt
Documents” means and includes all documents, instruments and agreements,
including all Security Documents, evidencing, creating, authorizing,
guaranteeing or securing Senior Debt outstanding under or pursuant to the Bank
Borrowings and including any Subordination Agreements;


 


(mm)                      “Swaps” swap, hedging, derivatives
transactions and other arrangements made by the Corporation (including any
assumed by the Corporation by contract, operation of law or otherwise), from
time to time, in respect of commodity prices, interest rates or rates of
exchange of currencies the purpose of which is to mitigate or eliminate
exposure to fluctuations in prices of commodities, interest rates, rates of
exchange of one currency for another and includes guarantees, either direct or
indirect, by the Corporation of any swap, hedging and other arrangements made
by Persons wholly-owned, directly or indirectly, by the Corporation or the
Trust;


 


(nn)                          “Subordination
Agreement” has the meaning attributed to it in Section 3.7(a);


 


(oo)                          “Shareholders” means holders of common
shares of Baytex Energy Ltd.;


 


(pp)                          “Subsidiary” or “Subsidiary Company” means any company or partnership of which
more than Fifty percent (50%) of the outstanding Voting Shares or (in the case
of a partnership) capital or income interests are beneficially owned, directly
or indirectly, by or for the Corporation or one or more Subsidiaries or the
Corporation and one or more Subsidiaries; provided that the ownership of such
shares or partnership interests confers the right to elect at least a majority
of the board of directors of such company or partnership, or Persons managing
the business and affairs of such company or partnership, and includes any
company or partnership in like relation to a Subsidiary;


 


5

















 


(qq)                          “successor
company” has
the meaning attributed to it in Section 7.1;


 


(rr)                                “Time of
Expiry”
means 4:30 p.m. (Calgary time) on the Maturity Date;


 


(ss)                            “Transfer” means a transfer in the form
and substance of the transfer attached to the Notes;


 


(tt)                                “Trust” means Baytex Energy Trust, an
unincorporated, open-ended, unit and mutual fund trust established under the
laws of the Province of Alberta;


 


(uu)                          “Trust
Indenture” means the amended and restated trust indenture dated as of September
2, 2003 constituting the Trust and made between the Fund Trustee and Baytex
Energy Ltd., as may be amended from time to time;


 


(vv)                          “Trust Units” means a unit of the Trust,
each such unit representing an equal undivided beneficial interest therein;


 


(ww)                      “Trustee” means Valiant Trust Company
or its successor or successors for the time being in the trusts created
hereunder;


 


(xx)                              “Trustee
Expenses”
means, at any time and from time to time, any fees or expense reimbursements
then due and payable by the Trust or the Corporation to the Trustee with
respect to the performance and discharge of its duties pursuant to this Note
Indenture or the Trust Indenture, and any fees or expenses which have accrued
at that time pursuant to such services rendered in the performance of such
duties since the last regularly scheduled billing of such fees or expenses by
the Trustee but which have not at such time been billed or collected.  For clarification, such fees shall not
include fees and expenses incurred by the Trustee, for itself or in its
capacity as the Trustee under this Note Indenture or the Trust Indenture in
connection with the realization or enforcement of any of the rights and
remedies afforded the Trustee under such indentures; and


 


(yy)                          “Voting
Shares”
means shares of the capital stock of any class of any company carrying voting
rights under all circumstances, provided that, for the purposes of such
definition, shares which only carry the right to vote conditionally on the
happening of an event shall not be considered Voting Shares, whether or not
such event shall have occurred, nor shall any shares be deemed to cease to be
Voting Shares solely by reason of a right to vote accruing to shares of another
class or classes by reason of the happening of any such event.


 


1.2                                                                               Meaning of “Outstanding”


 


(a)                                  Every Note certified and
delivered by the Trustee hereunder shall be deemed to be outstanding until:


 


(i)                                     it shall be cancelled; or


 


(ii)                                  it shall be delivered to the
Trustee for cancellation; or


 


(iii)                               monies or securities
(including equity shares), as the case may be for the payment of Notes shall
have been set aside by the Corporation and held by the Trustee for that purpose
in accordance with the provisions of Section 6.1 of this Note Indenture.


 


6

















 


(b)                                 Notes which have been
partially redeemed or purchased by the Corporation shall be deemed to be
outstanding only to the extent of the unredeemed or unpurchased part of the
principal amount thereof.


 


(c)                                  When a new Note has been
issued in substitution for a Note pursuant to Section 2.8, only one of
such Notes shall be counted for the purpose of determining the aggregate
principal amount of Notes outstanding.


 


(d)                                 For the purposes of any
provision of this Note Indenture entitling Holders of outstanding Notes to
vote, sign consents, requisitions or other instruments or to take any other
action under this Note Indenture, Notes owned directly or indirectly, legally
or equitably, by the Corporation or any Subsidiary shall be disregarded except
that:


 


(i)                                     for the purpose of determining
whether the Trustee shall be protected in relying on any such vote, consent,
requisition, instrument or other action only the Notes which the Trustee, after
reasonable inquiry, knows are so owned shall be so disregarded; and


 


(ii)                                  Notes so owned which have been
pledged in good faith other than to the Corporation or a Subsidiary shall not
be so disregarded if the pledgee shall establish to the satisfaction of the
Trustee the pledgee’s right to vote such Notes in its discretion free from the
control of the Corporation or any Subsidiary.


 


1.3                                                                               Headings


 


The division of this Note Indenture into
Articles and Sections and the insertion of headings are for the convenience of
reference only and shall not affect the construction or interpretation of this
Note Indenture or the Notes.  Unless
something in the subject matter or context is inconsistent therewith,
references herein to Articles or Sections are to Articles or Sections of this
Note Indenture.


 


1.4                                                                               Gender and Number


 


In this Note Indenture and in the Notes, words
importing the singular number only shall include the plural and vice versa,
words importing the masculine gender shall include the feminine and neuter
genders and vice versa and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations and vice versa.


 


1.5                                                                               Currency


 


All payments contemplated herein and in the
Notes shall be paid in Canadian funds, in cash, by bankers’ draft or by cheque
and all references herein and in the Notes to dollar amounts are references to
dollars in the lawful currency of Canada.


 


1.6                                                                               Governing Law


 


This Note Indenture and the Notes shall be
governed by and construed in accordance with the laws of the Province of
Alberta and the federal laws of Canada applicable therein and shall be treated
in all respects as Alberta contracts.


 


7

















 


1.7                                                                               Day Not a Business Day


 


In the event that any day on or before which
any action is required to be taken hereunder is not a Business Day, then such
action shall be required to be taken on or before the requisite time on the
next succeeding day that is a Business Day.


 


1.8                                                                               Invalidity, Etc.


 


Any provision hereof which is prohibited or
unenforceable shall be ineffective only to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof.


 


1.9                                                                               Accounting Principles


 


Wherever in this Agreement reference is made
to “generally accepted accounting principles”, such reference shall be deemed
to be to the recommendations at the relevant time of the Canadian Institute of
Chartered Accountants, or any successor institute, applicable on a consolidated
basis (unless otherwise specifically provided or contemplated herein to be
applicable on an unconsolidated basis) as at the date on which such calculation
is made or required to be made in accordance with generally accepted accounting
principles.  Where the character or
amount of any asset or liability or item of revenue or expense or amount of
equity is required to be determined, or any consolidation or other accounting
computation is required to be made for the purpose of this Note Indenture, such
determination or calculation shall, to the extent applicable and except as
otherwise specified herein or as otherwise agreed in writing by the parties, be
made in accordance with generally accepted accounting principles applied on a
consistent basis.


 


1.10                                                                        Per Annum Calculations


 


Unless otherwise stated, whenever in this
Note Indenture reference is made to a rate “per annum” or a similar expression
is used, such rate shall be calculated on the basis of calendar year of three
hundred and sixty-five (365) days or three hundred and sixty-six (366) days, as
the case may be.


 


1.11                                                                        Interest Calculation


 


Interest payable in respect of any Interest
Period shall be deemed to have accrued from day to day for the number of days
comprising the Interest Period.


 


ARTICLE 2

THE NOTES


 


2.1                                                                               Terms of Notes


 


(a)                                  The aggregate principal amount
of Notes authorized to be issued under this Note Indenture shall be limited to
One Billion and Five Hundred Million ($1,500,000,000) Dollars in lawful money
of Canada. 


 


(b)                                 The Notes shall be designated
the “12% Unsecured, Subordinated Promissory
Notes” of the Corporation; shall be dated as of their respective
Issue Dates; shall mature at the Time of Expiry; shall rank equally in right of
payment without discrimination or preference in the case of any Creditor
Proceedings; and shall bear interest from and including their respective Issue
Dates at the Interest Rate, payable after as well as before maturity and after
as well as before default and


 


8

















 


judgment, with interest on amounts in
default at the same rate, on each Interest Payment Date for the applicable
Interest Period.  The record date for
determining the Holders to receive payments of interest on any Interest Payment
Date shall be the last day of the month in which such Interest Payment Date
occurs (unless such day is not a Business Day, in which case the record date
shall be the next following Business Day except that, if such Business Day is
in the next succeeding calendar year, then such record date shall be the
immediately preceding Business Day).


 


2.2                                                                               Form and Signatures of Notes


 


(a)                                  The Notes shall be issued only
as fully registered Notes in the minimum denomination of One Hundred ($100)
Dollars and for amounts above such minimum only in integral multiples of One
($1.00) Dollar.  The Notes (including
the Certificate of the Trustee endorsed thereon) shall be, substantially in the
form set forth in Schedule “A” hereto. 
The Notes shall bear such distinguishing letters and numbers as the
Trustee may approve and may include a translation into the French language.


 


(b)                                 The Notes may be typewritten,
electronically reproduced, engraved, printed or lithographed, or partly in one
form and partly in another, as the Corporation may determine.


 


(c)                                  The Notes shall be under the
seal of the Corporation (or a reproduction thereof which shall be deemed to be
the seal of the Corporation) and shall be signed (either manually or by
facsimile signature) by the Chairman of the Board or the President.  A facsimile signature upon any of the Notes
shall for all purposes of this Note Indenture be deemed to be the signature of
the person whose signature it purports to be and to have been signed at the
time such facsimile signature is reproduced; provided, however, that the
certification of the Trustee shall not be by facsimile signature.  Notwithstanding that any person whose
signature, either manual or in facsimile, may appear on the Notes is no longer,
at the date of this Note Indenture or at the date of the Notes or at the date
of the certification and delivery thereof, the holder of the office indicated,
any such Note shall be valid and binding upon the Corporation and entitled to
the benefits of this Note Indenture.


 


2.3                                                                               Issue of Notes


 


Notes in an aggregate principal amount of One
Billion and Five Hundred Million ($1,500,000,000) Dollars may be executed by
the Corporation from time to time and, forthwith after such execution, shall be
delivered to the Trustee and shall be certified by the Trustee and delivered to
or to the order of the Corporation pursuant to a written direction of the
Corporation.  It is acknowledged that
the first Notes to be issued hereunder (the “Initial
Note”) shall be issued pursuant to the Arrangement to the Trust and
to former Shareholders.  Notes issued to
former Shareholders are to be transferred pursuant to the Arrangement by such
holders to the Trust in exchange for Trust Units.  The Initial Note certificates will be issued to the Trustee in
trust for the Trust and the Shareholders. 
The Trustee shall then on behalf of such Shareholders record the
transfer of the Notes represented by such Initial Note certificates to the
Trust pursuant to the Arrangement, without recourse to the Trust, and shall
receive certificates representing Trust Units for delivery to such
Shareholders, all as contemplated by the Arrangement.  Upon receipt of the certificates representing the Trust Units,
the Trustee shall provide a receipt and distribute such certificates to such
Shareholders, in accordance with Article 5 of the Arrangement.


 


9

















 


2.4                                                                               Certification


 


(a)                                  No Note shall be issued or, if
issued, shall be obligatory or shall entitle the Holder to the benefits of this
Note Indenture, until it has been certified by or on behalf of the Trustee
substantially in the form set out in Schedule “A” hereto (or in some other form
approved by the Trustee).  Such
certification on any Note shall be conclusive evidence that such Note is duly
issued, is a valid obligation of the Corporation and the Holder is entitled to
the benefits hereof.


 


(b)                                 The Certificate of the Trustee
signed on the Notes shall not be construed as a representation or warranty by
the Trustee as to the validity of this Note Indenture or of the Notes or as to
the issuance of the Notes and the Trustee shall in no respect be liable or
answerable for the use made of the Notes or any of them or the proceeds
thereof.  The Certificate of the Trustee
signed on the Notes shall, however, be a representation and warranty by the
Trustee that the Notes have been duly certified by or on behalf of the Trustee
pursuant to the provisions of this Note Indenture.


 


2.5                                                                               Notes to Rank Pari Passu


 


The Notes may be issued in such amounts, to
such persons and on such terms not inconsistent with the provisions of this
Note Indenture as the Corporation by written direction directs, pursuant to
Section 2.3, at par.  Each Note as
soon as issued or negotiated, subject to the terms hereof, shall rank pari passu and shall be equally and
proportionately entitled to the benefits hereof, without discrimination,
preference or priority whatever, as if all of the Notes had been issued and
negotiated simultaneously.


 


2.6                                                                               Commencement of Interest


 


All Notes issued hereunder shall, if issued
or exchanged before the first Interest Payment Date, bear interest form their
original issue date or, if issued after the first Interest Payment Date, bear
interest from the last Interest Payment Date on which interest shall have been
paid or made available for payment on the outstanding Notes.


 


2.7                                                                               Registration and
Transfer of Notes


 


(a)                                  The Corporation shall, at all
times while any Notes are outstanding, cause to be kept by the Trustee or other
registrars at the principal office of the Trustee in the City of Calgary and in
such other place or places and by the Trustee or such other registrars, if any,
as the Corporation with the approval of the Trustee may designate, registers (“Register(s)”) in which shall be entered
the names and addresses of the Holders and particulars of the Notes held by
them respectively and of all transfers of Notes.  No transfer of a Note shall be valid unless made by the Holder or
his executors or administrators or other legal representatives or his or their
attorney duly appointed by an instrument in writing in form and execution
satisfactory to the Trustee, upon compliance with such requirements as the
Trustee may prescribe, and unless such transfer shall have been duly entered on
one of the appropriate Registers or noted on such Note by the Trustee or other
registrar.


 


(b)                                 The Registers hereinbefore
referred to shall at all reasonable times be open for inspection by the
Corporation, the Trustee or any Holder. 
Every registrar (including the Trustee) shall from time to time when
requested to do so by the Corporation or the Trustee furnish the Corporation or
Trustee with a list of the names and addresses of Holders entered on the
Register or Registers kept by


 


10

















 


such registrar and showing the principal
amount and Certificate numbers of the Notes held by each such Holder.


 


(c)                                  The Holder of a Note may at
any time and from time to time have such Note transferred at any of the places
at which a Register is kept pursuant to the provisions of this Section, in
accordance with such reasonable requirements as the Trustee and/or other
registrar may prescribe and subject to payment of the costs referred to in
Section 2.9(b) hereof.  Neither the
Corporation nor the Trustee shall be required (i) to transfer or exchange any
Notes on any Interest Payment Date or during a period of ten Business Days
immediately preceding any such date; or (ii) to transfer or exchange any Notes
on the day of any selection by the Trustee of any Notes to be redeemed or
purchased or during the fifteen Business Days immediately preceding such date
or thereafter until after the mailing of any notice of redemption or purchase;
or (iii) to transfer or exchange any Notes selected or called for redemption in
whole or in part unless upon due presentation thereof such Notes or part
thereof called redemption shall not be redeemed.


 


(d)                                 Neither the Trustee nor any
other registrar or the Corporation shall be charged with notice of or be bound
to see to the execution of any trust, whether expressed, implied or
constructive, with respect to any Note, and the Trustee or any other registrar or
the Corporation may transfer any Note on the direction of the Holder thereof,
whether named as trustee or otherwise, as though that person were the
beneficial owner thereof.


 


(e)                                  Except in the case of the
Register required to be kept at the Trustee’s principal office in the City of
Calgary, the Corporation, with the approval of the Trustee, may at any time
close any Register upon which the registration of any Note appears and transfer
the records thereof to another existing Register or to a new Register and
thereafter such Notes shall be deemed to be registered on such existing or new
Register, as the case may be.  Notice of
such transfer shall be given to the Holders of such Notes prior to such
transfer.


 


2.8                                                                               Persons Entitled to Payment


 


(a)                                  The Person in whose name any
Note shall be registered shall be deemed and regarded as the owner thereof for
all purposes of this Note Indenture and payment of or on account of the
principal of such Note shall be made only to or upon the order in writing of
such Holder thereof and such payment shall be a good and sufficient discharge
to the Trustee and any registrar and to the Corporation and any paying agent
for the amounts so paid.


 


(b)                                 As interest becomes due on the
Notes, the Corporation shall cause to be sent by prepaid ordinary mail a cheque
or by other transfer of funds by such means as may be considered appropriate by
the Trustee for such interest (less any tax required by law to be withheld
therefrom) payable to the order of the Holder and addressed to it at its last
address or account, as the case may be, appearing on the Register, unless the
Holder otherwise directs.  In the case
of joint Holders, the cheque or other such transfer of funds, as the case may
be, shall be payable or issued to the order of all such joint Holders and
addressed to them at the last address or account, as the case may be, appearing
on the Register, unless such joint Holders otherwise direct.  If more than one address or account appears
on the Register in respect of such joint Holders, the cheque or other such
transfer of funds, as the case may be, shall be mailed or delivered, as the
case may be, to the first address or account so appearing.  In the event of non-receipt of any cheque or
funds for interest by the Holder, the Corporation will cause to be issued to
the Holder a replacement cheque or


 


11

















 


replacement transfer of funds for like
amount upon being furnished with such evidence of non-receipt as it shall
reasonably require and upon being indemnified to its satisfaction, acting
reasonably.


 


(c)                                  The Holder for the time being
of any Note shall be entitled to the principal monies, and interest evidenced
by such Note, free from all equities or rights of set-off or counterclaim
between the Corporation and the original or any intermediate Holder thereof and
all persons may act accordingly and a transferee of a Note shall, after an
appropriate form of Transfer is lodged with the Trustee or other registrar and
upon compliance with all other conditions in that behalf required by this Note
Indenture or by any conditions contained in such Note or by law, be entitled to
be entered on any of the appropriate Registers as the owner of such Note free
from all equities or rights of set-off or counterclaim between the Corporation
and his transferor or any previous Holder thereof, save with respect to
equities of which the Corporation is required to take notice by statute or by
order of a court of competent jurisdiction.


 


(d)                                 Delivery to the Trustee by a
Holder of a Note or the receipt of such Holder for the principal monies and
interest evidenced by such Note shall be a good discharge to the Corporation,
which shall not be bound to enquire into the title of such Holder, save as
ordered by a court of competent jurisdiction or as required by statute.  Neither the Corporation, the Trustee nor any
registrar shall be bound to see to the execution of any trust affecting the
ownership of any Note nor be affected by notice of any equity that may be
subsisting with respect thereto.


 


(e)                                  In the case of the death of
one or more joint Holders, the principal monies of, and interest on any Notes
may be paid or delivered to the survivor or survivors of such Holders whose
receipt thereof shall constitute a valid discharge to the Trustee, any
registrar, the Corporation and any paying agent.


 


2.9                                                                               Mutilation, Loss,
Theft or Destruction


 


In case any of the Notes issued hereunder
shall be mutilated, lost, stolen or destroyed, the Corporation, upon being
furnished with the mutilated Note or evidence of such event (as applicable) and
indemnity as hereinafter provided, shall issue, and thereupon the Trustee shall
certify, a new Note upon surrender and cancellation of the mutilated Note, or
in the case of a lost, stolen or destroyed Note, in lieu of and in substitution
for the same, and the substituted Note shall be in a form approved by the
Trustee and shall be entitled to the benefits of this Note Indenture equally
with all other Notes issued or to be issued thereunder without preference or
priority one over another.  In case of
loss, theft or destruction the applicant for a substituted Note shall furnish
to the Corporation and the Trustee such evidence of such loss, theft or
destruction as shall be satisfactory to them in their discretion and shall also
furnish indemnity and security satisfactory to them in their discretion.  The applicant shall pay all expenses
incidental to the issuance of any substituted Note.


 


2.10                                                                        Exchanges of Notes


 


(a)                                  Notes of any denomination may
be exchanged for Notes of any other authorized denomination or denominations,
any such exchange to be for Notes of an equivalent aggregate principal
amount.  Any exchange of Notes may be
made at the offices of the Trustee or at the offices of any registrar where
Registers are maintained for the Notes pursuant to the provisions of
Section 2.6. Any


 


12

















 


Notes tendered for exchange shall be
surrendered to the Trustee or appropriate registrar and shall be cancelled.


 


(b)                                 Notes issued in exchange for
Notes which at the time of such issue have been selected or called for
redemption at a later date shall be deemed to have been selected or called for
redemption in the same manner and shall have noted thereon a statement to that
effect.


 


(c)                                  Except as herein otherwise
provided, upon any exchange of Notes of any denomination for other Notes and
upon any transfer of Notes, the Trustee or other registrar may make a
sufficient charge to reimburse it for any stamp or security transfer taxes or
other governmental charge required to be paid and, in addition, a reasonable
charge for its services and payment of the said charge shall be made by the
party requesting such exchange or transfer as a condition precedent thereto.


 


2.11                                                                        Transfer


 


The Notes may be resold, distributed or
transferred by the Holder at any time prior to the Maturity Date subject always
to the provisions contained in the Notes and any applicable laws and required
regulatory approvals, including, without limitation, applicable securities laws
which restrict the sale and distribution of the Notes.


 


2.12                                                                        Option of Holder as
to Place of Payment


 


Except as herein otherwise provided, all sums
which may at any time become payable, whether at maturity or on a declaration
or otherwise, on account of any Note or any interest shall be payable at the
option of the Holder at any of the places at which the principal of and
interest on such Note are payable.


 


2.13                                                                        Trustee Not Bound to
Make Enquiries


 


The Trustee, prior to the certification and
delivery of any Notes, under any of the provisions of this Article 2, shall not
be bound to make any enquiry or investigation as to the correctness of the
matters set out in any of the resolutions, opinions, certificates or other
documents required by the provisions of this Note Indenture, but shall be
entitled to accept and act upon the said resolutions, opinions, certificates
and other documents.  The Trustee may
nevertheless, in its discretion, require further proof in cases where it deems
further proof desirable.


 


2.14                                                                        Extension


 


On or about June 30, 2033, the Board of
Directors of the Corporation shall review the Corporation’s business and the
Corporation’s business prospects. If this review, in the opinion of the Board
of Directors of the Corporation, indicates that it is likely that the
indebtedness of the Corporation evidenced by all but not less than all the
Notes could be refinanced upon the Maturity Date on the same terms and
conditions as herein contained, other than the interest rate to be applicable,
for the period from September 2, 2033 to September 1, 2043 (the “Extension Term”), then provided such
extension is requested by the Corporation and, if there are then any Non-Trust
Holders, such extension and the interest rate to be applicable for the
Extension Term (the “Renewal Rate”)
are approved by a resolution of the Holders on or before June 30, 2033, the
Maturity Date shall be extended to September 1, 2043 and the interest rate
applicable to the Notes for the Extension Term shall be adjusted to the Renewal
Rate, failing which the Maturity Date shall not be so extended. If the Maturity
Date is to be so extended, the Trustee and the


 


13

















 


Corporation shall make arrangements to
exchange Notes which are outstanding for Notes bearing the new Maturity Date
and the interest rate applicable.


 


2.15                                                                        Redemption


 


Subject to the terms and conditions of any
Senior Debt Documents, from time to time and in any event not less frequently
than each second anniversary of the date hereof, the board of directors of the
Corporation shall review the Corporation’s business and business prospects. If
this review, in the opinion of the Board of Directors of the Corporation,
indicates that it is unlikely that the indebtedness of the Corporation
evidenced by the Notes could be refinanced upon maturity of the Notes, then the
Corporation may, provided there are then any Non-Trust Holders, such prepayment
is approved by a resolution of the Holders, commence principal repayments on
the Notes such that, in the opinion of the board of directors of the
Corporation, the Notes will be fully repaid on or before the Maturity Date. In
the events described in the preceding sentence, the Corporation’s available
cash shall be utilized to the extent required to fund such repayments in lieu
of dividends, redemptions, reduction of capital or other distributions on or in
respect of the Common Shares or any other shares of the Corporation. Accrued
and unpaid interest shall be paid on any Notes concurrently with any principal
repayments pursuant to this Section 2.14. In the event that the Corporation is
to commence principal repayments on the Notes pursuant to this Section 2.14 and
there is more than one holder thereof, the Notes shall be redeemed as near as
may be pro rata as between the Holders and without discrimination or
preference, based upon the aggregate principal amount of Notes held by them
(rounded, if necessary, to the nearest One ($1.00) Dollar).


 


2.16                                                                        Prepayment


 


Subject to the terms and conditions of any
Senior Debt Documents, from time to time the Corporation may prepay all or any
portion of the Notes and in that case the Corporation shall pay any accrued and
unpaid interest on the Notes to be prepaid to the date of prepayment. In the event
that the Corporation is to commence principal repayments on the Notes pursuant
to this Section 2.15 and there is more than one Holder thereof, the Notes shall
be prepaid as near as may be pro rata as between the Holders without
discrimination or preference, based upon the aggregate principal amount of
Notes held by them (rounded, if necessary, to the nearest One ($1.00) Dollar).


 


2.17                                                                        No Other
Prepayment, Repurchase or Redemption


 


Except as provided in this Article 2, or upon
the occurrence of an Event of Default, the Notes will not be purchased by the
Corporation, repaid or redeemable at the option of the Corporation or by the
Holders thereof prior to the Maturity Date.


 


ARTICLE 3

SUBORDINATION OF NOTES


 


3.1                                                                               Subordination


 


Each of the the Corporation and the Trustee
covenants and agrees, and each Holder of a Note, by such Holder’s acceptance
thereof, likewise covenants and agrees, that the payment of the principal of,
any interest on, and all other indebtedness, obligations and liabilities
evidenced by each and all of the Notes and all other obligations of the
Corporation hereunder (other than ordinary and regularly scheduled fees and
out-of-pocket expenses of the Trustee) shall be and is hereby expressly
subordinated, to the extent


 


14

















 


and in the manner hereinafter set forth, in
right of payment to the prior indefeasible payment in full and in cash of all
Senior Debt now outstanding or hereafter incurred and whether or not such
subordination is specifically evidenced by a subordination agreement entered
into by the Trustee on behalf of the Holders; provided that the Corporation
shall not be precluded hereby from paying regularly scheduled interest on the
Notes as long as at the relevant Interest Payment Date and immediately after
the making of such payment no Senior Debt Default has occurred and is
continuing.  In the event that,
notwithstanding the foregoing, and provided the Trustee has received actual
notice thereof, including pursuant to Section 3.8, any payment or distribution
of assets of the Corporation of any kind or character, whether in cash,
property or securities, is paid or distributed by the Corporation under the
terms hereof after the occurrence of and during the continuance of a Senior
Debt Default and before all Senior Debt is indefeasibly paid in full and in
cash, such payment or distribution will be held in trust for the benefit of and
will be paid over to the holders of such Senior Debt or their agent or other
representative or to the trustee under any indenture under which any
instruments evidencing any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all Senior
Debt remaining unpaid until (taking into account any concurrent payment or
distribution to the holders of such Senior Debt) all such Senior Debt has been
paid indefeasibly in full and in cash. The provisions of this Article
3 are intended to be enforceable directly by each Person from time to time
entitled to enforce any Senior Debt. The Corporation hereby declares itself to
hold the benefits of this Article 3 in trust for each Person entitled to
enforce any Senior Debt from time to time and will do and execute all such
documents and things as may be necessary to enable any such Person to enforce
the provisions of this Article 3.


 


3.2                                                                               Definition


 


For purposes of this Article 3:


 


(a)                                  the words “cash, property or securities” will be
deemed to include shares of the Corporation as reorganized or readjusted, or
securities of the Corporation or any other corporation provided for by a plan
of reorganization, arrangement or readjustment of indebtedness; and


 


(b)                                 any reference to the “indefeasible payment in full and in cash”
(or words to like effect) of Senior Debt means receipt by the holders of Senior
Debt of indefeasible payment in cash of the full amount of such Senior Debt and
all obligations of the Corporation in respect thereof; provided that if the
holders of Senior Debt are entitled to and do receive any property or securities
by virtue of the provisions hereof then, to the extent that they are able to
dispose of such property or securities in a reasonable period after receipt (if
the same are readily marketable) and do so in their discretion, the net
proceeds of such disposition shall be considered (as between the holders of
such Senior Debt and the Holders) to have been paid by the Holders hereunder to
such holders of Senior Debt and to reduce the amount of such Senior Debt.


 


3.3                                                                               Distribution on
Creditor Proceedings


 


(a)                                  In the event of any Creditor
Proceedings:


 


(i)                                     the holders of all Senior Debt
will be entitled to receive payment in full in cash of the principal thereof,
premium (if any), interest due thereon and all other indebtedness, obligations
and liabilities relating thereto or comprising Senior Debt before the Trustee
or the Holders of Notes will be entitled to receive any payment hereunder or
upon or in respect of the Notes or distribution of any kind or character,
whether in cash, property or


 


15

















 


securities, that may be payable or
deliverable in any such event hereunder or in respect of any of the Notes;


 


(ii)                                  any payment or distribution of
assets of the Corporation of any kind or character, whether in cash, property
or securities, to which the Holders of Notes or the Trustee would be entitled,
except for the provisions of this Article 3, will be paid by the liquidating
trustee or agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly
to the holders of Senior Debt or their agent or other representative or to the
trustee under any indenture under which any instruments evidencing any of such
Senior Debt may have been issued, as their respective interests may appear, to
the extent necessary to indefeasibly pay in full and in cash all Senior Debt
remaining unpaid after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt; and


 


(iii)                               in the event that,
notwithstanding the foregoing, any payment or distribution of assets of the
Corporation of any kind or character, whether in cash, property or securities
is received by the Trustee or the Holders of Notes during the continuance of a
Senior Debt Default and before all Senior Debt is indefeasibly paid in full and
in cash, such payment or distribution will be held in trust for the benefit of
and will be paid over to the holders of such Senior Debt or their agent or
other representative or to the trustee under any indenture under which any
instruments evidencing any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all Senior
Debt remaining unpaid until (taking into account any concurrent payment or
distribution to the holders of such Senior Debt) all such Senior Debt has been
indefeasibly paid in full and in cash after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt.


 


(b)                                 Upon any distribution of
assets of the Corporation referred to in this Article 3, the Trustee and the
Holders of Notes will be entitled to rely upon a Certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders of the Notes for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of Senior Debt and other
indebtedness, obligations and liabilities of the Corporation, the amount
thereof or payable thereon, the amount paid or distributed thereon and all
other facts pertinent thereto or to this Article.


 


3.4                                                                               No Payment to
Noteholders In Certain Events


 


(a)                                  Upon the maturity of any
Senior Debt for any reason, including by lapse of time, acceleration or
otherwise, all principal of, premium (if any) and interest on, and all other
indebtedness, obligations and liabilities in respect of all such matured Senior
Debt will first be indefeasibly paid in full and in cash before any payment on
account of the Notes (whether principal, interest or otherwise) is made.


 


(b)                                 Upon the happening of a Senior
Debt Default, then, unless and until such Senior Debt Default has been cured or
waived or has ceased to exist, no payment (by purchase of Notes or otherwise)
will be made by the Corporation with respect to the principal of, any interest
on or other amount owing under or in respect of the Notes unless the Senior
Debt Default has been cured or waived as evidenced by a certificate of the
holder of the applicable Senior Debt or an agent or trustee


 


16

















 


thereof or the Senior Debt has been
indefeasibly paid in full and in cash. 
In the event that, notwithstanding the foregoing, the Corporation makes
any payment with respect to the Notes, then, unless and until such Senior Debt
Default has been cured or waived or has ceased to exist as evidenced by a
certificate of the holder of the applicable Senior Debt or an agent or trustee
thereof, such payments will be held in trust for the benefit of, and, if and
when such Senior Debt becomes due and payable, will be paid over to, the
holders of the Senior Debt or their agent or other representative or to the
trustee under any indenture under which any instruments evidencing any of the
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all Senior Debt remaining unpaid until all such
Senior Debt has been indefeasibly paid in full and in cash, after giving effect
to any concurrent payment or distribution to the holders of such Senior Debt.


 


(c)                                  The fact that any payment
hereunder is prohibited by this Section will not prevent the failure to make
such payment from being an Event of Default or Default hereunder.


 


(d)                                 If, pursuant to this Note
Indenture, the Trustee shall declare the principal and interest of all Notes at
any time outstanding to be due and payable because of the occurrence of an
Event of Default (under circumstances when the provisions of the foregoing
clauses (a) and (b) shall not be applicable) the Holders of the Notes shall be
entitled to payment only after there shall first have been indefeasibly paid in
full and in cash the Senior Debt outstanding at the time such Notes become due
and payable because of such Event of Default.


 


(e)                                  The Corporation shall not, so
long as any Senior Debt is outstanding, pay, prepay, redeem, purchase or
provide any cash, property or securities for any payment of or in respect of
any of the Notes or any interest therein except, so long as no Senior Debt
Default has occurred and is continuing, for regularly scheduled payments of
interest on the Notes and the repayment of principal at the Maturity Date.


 


3.5                                                                               Payment of Notes Permitted


 


If the Trustee:


 


(a)                                  receives a Certificate of the
Corporation certifying that the Corporation is entitled to make a payment with
respect to the Notes pursuant to the provisions hereof; and


 


(b)                                 has not received written
notice from or on behalf of any holder of any Senior Debt, notifying the
Trustee of the happening of a Senior Debt Default or of the existence of any
other facts that would result in the making of any payment with respect to
Notes in contravention of the provisions of this Article 3 or, if it has
received such written notice, it has subsequently received a certificate of such
holder of Senior Debt confirming that such Senior Debt Default has been cured
or waived or such facts no longer exist,


 


then the Trustee will be entitled to assume
that such payment may be made, that no such Senior Debt Default has occurred
and that no such facts exist and the Trustee may apply any money that may be
received by the Trustee at such time pursuant to any provisions of this Note
Indenture to the purposes for which the same were so received.  Notwithstanding the foregoing, any such
payment is subject to disgorgement if made contrary to this Article 3.


 


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3.6                                                                               Subordination not to be
Impaired


 


(a)                                  The provisions of this Article
3, including without limitation the subordination provided in this Article 3,
shall apply in all events and circumstances and notwithstanding any Creditor
Proceedings.


 


(b)                                 No right of any present or
future holder of any Senior Debt of the Corporation to enforce the
subordination as herein provided will at any time in any way be prejudiced or
impaired by any act or failure to act in good faith, by any such holder, or by
any non-compliance by the Corporation with the terms, provisions and covenants
of this Note Indenture, regardless of any knowledge thereof which any such holder
may have or be otherwise charged with.


 


3.7                                                                               Authorization of
Noteholders to Trustee to Effect Subordination


 


(a)                                  Each Holder of Notes by such
Holder’s acceptance thereof authorizes and directs the Trustee on such Holder’s
behalf to take such action as may be necessary or appropriate to enter into
contractual subordination agreements (“Subordination
Agreements”) with one or more holders of Senior Debt or a trustee or
agent for it or them which may include terms in implementation of and/or in
addition to the provisions of this Article 3, the grant of a power of attorney
to a holder of Senior Debt to be exercised in any Creditor Proceedings to
enforce the terms thereof, or provisions to bind any transferee of the Notes to
the terms thereof.


 


(b)                                 Without limiting or
restricting the provisions of Section 3.7(a), each Holder, by such
Holder’s acceptance of a Note or Notes (i) specifically authorizes and
directs the Trustee to, and specifically acknowledges, understands and agrees
that the Trustee may, execute and deliver Subordination Agreements between the
Trustee and the Banks; and (ii) acknowledges and agrees to be bound by the
provisions of the Subordination Agreements including, without limitation, the
Subordination Agreement to be dated September 3, 2003 between Baytex Energy
Ltd., Baytex Energy Trust, as the Holder of the Notes, and The Toronto-Domioion
Bank, notwithstanding the terms thereof are different from, and in addition to,
those herein, subject always to the limitation that no provision of any such
Subordination Agreement and no security interest therefor or judgment in
respect thereof may be exercised or enforced against any property of the Holder
other than any cash, property or securities distributed or paid to such Holder
contrary to the provisions hereof.


 


3.8                                                                               Notice of Default under
Senior Debt


 


The Corporation shall give the Trustee prompt
written notice of the happening of any Senior Debt Default, and of any cure,
waiver or withdrawal thereof, of which notice has been given to the Corporation.


 


3.9                                                                               Inapplicability
in Certain Circumstances


 


The provisions of this Article 3 shall not be
applicable to any cash, properties or securities received by the Trustee or the
Holder of any Note as a holder of Senior Debt or a trustee or agent for any
such Holder.


 


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3.10                                                                        Actual Notice Required


 


Notwithstanding the provisions of this
Article 3 or any other provisions of this Note Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would prohibit
the making of any payment of moneys to the Holders, or the application of such
moneys by the Trustee in accordance with the terms hereof, unless and until the
Trustee shall have received written notice thereof.


 


3.11                                                                        No Impairment
Between Corporation and Holders


 


Nothing herein shall impair, as between the
Corporation and the Holder of any Note, the obligation of the Corporation,
which is unconditional and absolute, to pay the Holder the principal, premium,
if any, and interest thereon in accordance with its terms, nor shall anything
therein or herein prevent the Trustee or the Holder of any Note from exercising
all the remedies otherwise permitted by applicable law or hereunder upon the
occurrence of any Event of Default hereunder, subject to any contrary
provisions of the Subordination Agreements and to the rights, if any, under
this Article 3 of holders of Senior Debt to receive cash, property or
securities otherwise payable or deliverable to the Trustee or the Holders of the
Notes, and subject to the provisions of Section 3.12.


 


3.12                                                                        Procedural Matters -
Classification


 


Notwithstanding anything to the contrary
herein or by applicable law provided, in the event of any classification of
creditors of the Corporation on the commencement of or during any Creditor
Proceedings, the indebtedness, obligations and liabilities represented by the
Notes shall not, whether for purposes of voting or other procedural matters or
distribution, be classified with any Senior Debt.  For these purposes, “voting”
includes any manner of expressing assent or dissent, including voting at a
meeting in person or by proxy, written resolution or consent instrument or
otherwise.


 


3.13                                                                        Payment of Trustee’s Fees,
etc.


 


Notwithstanding anything to the contrary
contained in this Article 3 or in any Subordination Agreement, the Trustee
shall be entitled to be paid by the Corporation or the Trust the Trustee
Expenses in priority to any Senior Debt and the Trustee shall be entitled to
retain out of any Current Proceeds held by the Trustee any Trustee Expenses
then due and owing prior to disbursing such funds in accordance with the terms
of this Note Indenture or the Trust Indenture.


 


ARTICLE 4

COVENANTS OF THE CORPORATION


 


4.1                                                                               Positive Covenants


 


The Corporation hereby covenants and agrees
with the Trustee for the benefit of the Trustee and the Holders that so long as
any Notes remain outstanding it will:


 


(a)                                  duly and punctually pay and
cause to be paid to the Holders (either directly or through the Trustee or an
agent of the Trustee) the principal and any interest accrued thereunder at the
dates and places, in the currency and in the manner prescribed herein and for
such purpose, where payment is made through the Trustee or an agent of the
Trustee, put the Trustee in funds adequate to effect such payments no later
than 10:00 a.m. (Calgary time) on the due date or three days prior thereto
where the Trustee is required to mail a cheque;


 


19

















 


(b)                                 maintain its corporate existence
and carry on and conduct its business in a proper, efficient and business-like
manner and in accordance with good business practice and will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and rights;


 


(c)                                  keep proper books of account
in accordance with generally accepted accounting principles;


 


(d)                                 furnish the Trustee with
copies of, and will provide directly to each Holder of Notes requesting same,
all interim financial statements and annual audited (consolidated, if
applicable) financial statements, and the report, if any, of the Corporation’s
auditors thereon;


 


(e)                                  notify the Trustee immediately
upon becoming aware of any Default or Event of Default hereunder;


 


(f)                                    give to the Trustee notice,
including reasonable particulars, of any action, suit or proceeding, to the
knowledge of the Corporation, pending against or affecting the Corporation
before any court or before any governmental department, commission or agency or
arbitrator in Canada or elsewhere, which could result in any material adverse
change in the business, or the operations, prospects or assets or in the
condition, financial or otherwise, of the Corporation; and


 


(g)                                 do, observe and perform or
cause to be done, observed or performed all of the material obligations of the
Corporation under all material agreements, leases, contracts and indentures and
all material matters necessary to be done, observed or performed whether under
any law or regulation of Canada, any province thereof, or any foreign country,
or any municipality therein, or otherwise, in each case where non-compliance
might give rise to a material adverse effect on the business or financial
condition of the Corporation.


 


4.2                                                                               Trustee May Perform
Covenants


 


If the Corporation fails to perform any
covenant on its part herein contained, the Trustee may in its discretion, but
(subject to Section 5.9) need not, notify the Holders of such failure or
itself may but need not perform any of said covenants capable of being
performed by it and, if any such covenant requires the payment or expenditure
of money, it may but need not make such payment or expenditure with its own
funds, or with money borrowed by or advanced to it for such purposes, but shall
be under no obligation to do so and all sums so expended or advanced shall be
repayable by the Corporation in the manner provided in Section 4.3, but no
such performance or payment by the Trustee shall be deemed to relieve the
Corporation from default hereunder.


 


4.3                                                                               To Pay Trustee’s Remuneration


 


The Corporation will, from time to time, pay
the Trustee’s reasonable remuneration for its services hereunder together with
all costs incurred by the Trustee pursuant to Section 10.7 and will repay
to the Trustee on demand all monies which shall have been paid by the Trustee
in and about the execution of the trusts hereby created including, without
limitation, legal fees and expenses on a solicitor and his own client basis and
all costs incurred by the Trustee in complying with any laws applicable to it
as a result of its duties as Trustee hereunder, with interest at a rate to be
agreed upon between the Trustee and the Corporation, from thirty (30) days
after the date of receipt of the invoice from the Trustee to the Corporation
with respect to such expenditure until repayment, and such monies and the
interest thereon,


 


20

















 


including the Trustee’s remuneration, shall
be payable out of any funds coming into the possession of the Trustee in priority
to any payment in respect of any of the Notes or interest thereon.  The said remuneration shall continue to be
payable until the trusts hereof shall be finally wound up and whether or not
the trusts of this Note Indenture shall be in the course of administration by
or under the direction of the court.


 


4.4                                                                               Negative Covenant


 


The Corporation shall not, nor shall it
permit any of its Subsidiaries to sell or dispose of all or substantially all
of its assets, except as permitted by and in compliance with Section 7.1 or
subsection 8.11(c).


 


ARTICLE 5

DEFAULT


 


5.1                                                                               Events of Default


 


It shall be an Event of Default if:


 


(a)                                  the Corporation makes default
in repayment of the principal amount of the Notes or of any Note due and
payable at maturity, upon acceleration or otherwise;


 


(b)                                 the Corporation makes default
in payment of any accrued and unpaid interest due on the Notes on an Interest
Payment Date and the Corporation has failed to pay all such accrued interest
(and interest thereon as set out in subsection 2.1(b)) in full within twelve
(12) months of such Interest Payment Date;


 


(c)                                  the Corporation makes default
and demand for payment has been made under the provisions of any instrument,
indenture or document evidencing Senior Debt having a principal amount
outstanding in excess of Five Hundred Million ($500,000,000) Dollars and fails
to remedy the same within the curative period provided for therein or discharge
the same or unless such default is waived and any acceleration is rescinded
before the acceleration of the Notes;


 


(d)                                 a decree or order of a court
having jurisdiction is entered adjudging the Corporation a bankrupt or
insolvent under the Bankruptcy and
Insolvency Act (Canada) or any other bankruptcy, insolvency or
analogous laws, or issuing sequestration or process of execution against, or
against any substantial part of the property of, the Corporation, or appointing
a receiver of, or of any substantial part of the property of, the Corporation
or ordering the winding-up or liquidation of its affairs, and any such decree
or order continues un-stayed and in effect for a period of thirty (30) days;


 


(e)                                  a resolution is passed for the
winding-up or liquidation of the Corporation or if the Corporation institutes
proceedings to be adjudicated a bankrupt or insolvent, or consents to the
institution of bankruptcy or insolvency proceedings against it under the Bankruptcy and Insolvency Act (Canada) or
any other bankruptcy, insolvency or analogous laws, or consents to the filing
of any such petition or to the appointment of a receiver of or of any
substantial part of the property of the Corporation or makes a general
assignment for the benefit of creditors;


 


21

















 


(f)                                    the Corporation shall neglect
to observe or perform any other covenant or condition herein contained on its
part to be observed or performed and, after notice in writing has been given by
the Trustee to the Corporation specifying such default and requiring the
Corporation to put an end to the same (which said notice may be given by the
Trustee, in its discretion, and shall be given by the Trustee upon receipt of a
Noteholders’ Request) the Corporation shall fail to make good such default
within a period of thirty (30) days, unless the Trustee (having regard to the
subject matter of the default) shall have agreed to a longer period, and in
such event, within the period agreed to by the Trustee;


 


(g)                                 any proceedings concerning the
Corporation are taken with respect to a compromise or arrangement under the Companies’ Creditors Arrangement Act (or
any act substituted therefor) or similar legislation of any other jurisdiction;
or


 


(h)                                 any encumbrancer takes
possession of property of the Corporation having a fair market value in excess
of $250,000,000 or if a distress or execution or any similar process is
enforced against such property and remains unsatisfied for so long as would
permit any part of such property to be sold thereunder, or if a custodian or
sequestrator or a receiver or receiver and manager or any other officer with
similar powers is appointed for the Corporation or for all or substantially all
of the Corporation’s property.


 


5.2                                                                               Special Waiver by the Trust


 


If, at any time when the Trust is the Holder
of all outstanding Notes, the Corporation is unable or unwilling to pay
interest or principal payment on all Notes as required by this Note Indenture,
the Corporation may request the Trust to delay immediate payment of all or part
of the interest or principal payable on the Notes held by the Trust. If the
Trust agrees to a delay, interest, principal and interest on overdue interest
and principal shall continue to accrue and shall be payable by the Corporation
five days after demand by the Trust. Failure to pay on or before the fifth day
shall constitute an Event of Default. The Trust shall have, in respect of any
delayed interest, principal or overdue interest and all other sums owed under
the Notes held by it, equal priority with all other holders of Notes in respect
of all sums owed under those Notes but for clarity shall have no preference or
priority for delayed interest, principal or overdue interest.


 


5.3                                                                               Acceleration of Maturity


 


Upon the occurrence of an Event of Default,
the Trustee may in its discretion and shall upon receipt of a Noteholders’
Request, by notice in writing to the Corporation, declare the principal of and
interest on all Notes then outstanding and all other monies outstanding
thereunder to be due and payable and the same shall forthwith become
immediately due and payable to the Trustee provided, that, notwithstanding the
foregoing, upon the occurrence of an Event of Default described in subsections
5.1(d), 5.1(e) or 5.1(g), the principal and interest on all Notes then
outstanding shall forthwith become immediately due and payable to the Trustee,
anything therein or herein to the contrary notwithstanding and the Corporation
shall, subject (as between the Holders and the Trustee on the one hand and any
Persons entitled to enforce any Senior Debt on the other) to the terms of Article 3
hereof, forthwith pay to the Trustee for the benefit of the Holders such
principal, accrued and unpaid interest and all other monies outstanding
thereunder, together with interest at the Interest Rate on such principal,
interest and such other monies until payment is received by the Trustee.  Such payment when made shall be deemed to
have been made in discharge of


 


22

















 


the Corporation’s obligations under the Notes
and any monies so received by the Trustee shall be applied in the manner
provided in Section 5.13.


 


5.4                                                                               Remedies


 


Whenever an Event of Default has occurred the
Holder(s) may, by Noteholders’ Request, cause the Trustee to proceed to enforce
their rights by any action, suit, remedy or proceeding authorized or permitted
by law or by equity and to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have their claim lodged
in any winding-up or other proceedings relative to the Corporation, provided
however, that (as between the Holders and the Trustee on the one hand and any
Persons entitled to enforce any Senior Debt on the other) the Trustee’s right
to proceed may be limited by the provisions of any Subordination Agreement
entered into by the Trustee pursuant to Article 3 hereof.


 


5.5                                                                               Remedies not Exclusive


 


No remedy for the enforcement of rights of
the Holder(s) under this Article 5 shall be exclusive of or dependent on any
other such remedy but any one or more of such remedies may from time to time be
exercised independently or in combination.


 


5.6                                                                               Costs


 


The Corporation shall be liable to the
Trustee for all costs incurred by the Trustee in connection with the
enforcement of rights under this Note Indenture together with interest thereon,
at a rate agreed upon between the Trustee and the Corporation but not less than
the Interest Rate, from thirty (30) days after the date of receipt of the
invoice from the Trustee to the Corporation with respect to such costs until
the date payment thereof is received by the Trustee.


 


5.7                                                                               Delay


 


No delay or omission of the Trustee or any
Holder to exercise any remedy shall impair any such remedy or be construed to
be a waiver of default hereunder or acquiescence herein.


 


5.8                                                                               No Recourse Against
Other Parties


 


Neither the Trustee nor the Holder(s) shall
have any right, cause of action or remedy now or hereafter existing in any
jurisdiction against any past, present or future incorporator, shareholder,
director or officer of the Corporation for the payment of the principal or
interest under any or all of the Notes or on any covenant, agreement,
representation or warranty of the Corporation contained herein or in the Notes.


 


5.9                                                                               Notice of Events of Default


 


If an Event of Default shall occur and be
continuing, the Trustee shall, within five (5) days after it becomes aware of
the occurrence of such Event of Default give notice of such Event of Default to
the Holders in the manner provided in Section 9.1; provided that,
notwithstanding the foregoing, unless the Trustee shall have been requested to
do so by a Noteholders’ Request, the Trustee shall not be required to give such
notice if the Trustee in good faith shall have determined that the withholding
of such notice is in the best interests of the Holders and shall have so advised
the Corporation in writing.


 


23

















 


5.10                                                                        Waiver of Default


 


Upon the happening of any Event of Default
hereunder:


 


(a)                                  the Holders shall have the
power (in addition to the powers exercisable by Extraordinary Resolution as
hereinafter provided) by Noteholders’ Request, to instruct the Trustee to waive
any Event of Default and the Trustee shall thereupon waive the Event of Default
upon such terms and conditions as shall be prescribed in such requisition; and


 


(b)                                 the Trustee, so long as it has
not become bound to declare the principal and interest on the Notes outstanding
to be due and payable, or to obtain or enforce payment of the same, shall have
the power to waive any Event of Default if, in the Trustee’s reasonable
opinion, the same shall have been cured or adequate satisfaction made therefor,
and in such event to cancel any such declaration theretofore made by the
Trustee in the exercise of its discretion, upon such terms and conditions as
the Trustee may deem advisable;


 


provided that no act or omission either of
the Trustee or of the Holders shall extend to or be taken in any manner
whatsoever to affect any subsequent Event of Default or the rights resulting
therefrom.


 


5.11                                                                        Enforcement by the Trustee


 


(a)                                  Subject to the provisions of
Section 5.9 and to the provisions of any Extraordinary Resolution that may
be passed by the Holders, in the event the Corporation shall fail to pay to the
Trustee, forthwith after the same shall become due and payable in accordance
with Section 5.3, the principal and interest on all Notes outstanding,
together with any other amounts due hereunder, the Trustee, may, in its
discretion and shall upon receipt of a Noteholders’ Request, and upon being
indemnified to its reasonable satisfaction against all costs, expenses and
liabilities to be incurred, but subject (as between the Holders and the Trustee
on the one hand and any Persons entitled to enforce any Senior Debt on the
other), to Article 3, proceed in its name as Trustee hereunder to obtain
or enforce payment of the principal and interest on all Notes then outstanding
together with any other amounts due thereunder, by such proceedings authorized
by this Note Indenture or by law or equity as the Trustee in such request shall
have been directed to take, or if such request contains no such direction, or
if the Trustee shall act without such request, then by such proceedings
authorized by this Note Indenture or by suit at law or in equity as the Trustee
shall deem expedient.


 


(b)                                 The Trustee shall be entitled
and empowered, either in its own name or as trustee of an express trust, or as
attorney-in-fact for the Holders, or in any one or more of such capacities, but
subject (as between the Holders and the Trustee on the one hand and any Persons
entitled to enforce any Senior Debt on the other) to Article 3, to file
such proof of debt, amendment of proof of debt, claim, petition or other
document as may be necessary or advisable in order to have the claims of the
Trustee and of the Holders allowed in any Creditor Proceedings relative to the
Corporation or its creditors or relative to or affecting its property.  The Trustee is hereby irrevocably appointed
(and the successive respective Holders by taking and holding Notes shall be
conclusively deemed to have so appointed the Trustee), but subject (as between
the Holders and the Trustee on the one hand and any Persons entitled to enforce
any Senior Debt on the other) to Article 3, the true and lawful
attorney-in-fact of the respective Holders with authority to make and file in
the respective names of the Holders or on behalf of the Holders as a class,
subject to deduction from any such


 


24

















 


claims of the amounts of any claims filed
by any of the Holders themselves, any proof of debt, amendment of proof of
debt, claim, petition or other document in any such proceedings and to receive
payment of any sums becoming distributable on account thereof, and to execute
any such acts and things for and on behalf of such Holders, as may be necessary
or advisable in the opinion of the Trustee, in order to have the respective
claims of the Trustee and of the Holders against the Corporation or its
property allowed in any such proceeding, and to receive payment of or on
account of such claims, provided, however, that (i) nothing contained in
this Note Indenture shall be deemed to give to the Trustee, unless so
authorized by Extraordinary Resolution, any right to accept or consent to any
plan of reorganization or otherwise by action of any character in such
proceeding to waive or change in any way any right of the Holder, and
(ii) all such rights shall be subject to Article 3.


 


(c)                                  The Trustee shall also have
power at any time and from time to time, but subject (as between the Holders
and the Trustee on the one hand and any Persons entitled to enforce any Senior
Debt on the other) to Article 3, to institute and to maintain such suits
and proceedings as it may be advised shall be necessary or advisable to preserve
and protect its interests and the interests of the Holders.


 


(d)                                 All rights of action hereunder
may be enforced by the Trustee without the possession of any of the Notes or
the production thereof on the trial or other proceedings relative thereto.  Any such suit or proceeding instituted by
the Trustee shall be brought in the name of the Trustee as trustee of an
express trust, and any recovery of judgment shall be for the rateable benefit
of the Holders subject to the provisions of this Note Indenture.  In any proceeding brought by the Trustee
(and also any proceeding in which a declaratory judgment of a court may be
sought as to the interpretation or construction of any provision of this Note
Indenture, to which the Trustee shall be a party) the Trustee shall be held to
represent all of the Holders, and it shall not be necessary to make any Holders
party to any such proceeding.


 


5.12                                                                        No Suits by Holders


 


No Holder of any Note shall have any right to
institute any action, suit or proceeding at law or in equity for the purposes
of enforcing payment of the principal or interest on the Notes or for the
execution of any trust or power hereunder or for the appointment of a
liquidator or receiver or for a receiving order under the Bankruptcy and Insolvency Act (Canada) or
to have the Corporation wound up or to file or prove a claim in any Creditor
Proceeding or for any other remedy hereunder, unless: (i) such Holder
shall previously have given to the Trustee written notice of the happening of
an Event of Default hereunder; (ii) the Holders by Noteholders’ Request
shall have made a request to the Trustee and the Trustee shall have been
afforded reasonable opportunity either itself to proceed to exercise the powers
hereinbefore granted or to institute an action, suit or proceeding in its name
for such purpose; (iii) the Holders or any of them shall have furnished to
the Trustee, when so requested by the Trustee, sufficient funds or security
therefor and an indemnity satisfactory to the Trustee to cover the costs, expenses
and liabilities to be incurred therein or thereby; (iv) the Trustee shall
have failed to act within a reasonable time of receipt of such notification,
request and offer of indemnity; and such notification, request and offer of
indemnity are hereby declared in every such case, at the option of the Trustee,
to be conditions precedent to any such proceedings, and (v) the bringing
of any such action, suit or proceeding would not be contrary to Article 3.


 


25



















5.13                        Application of Monies by
Trustee


 


Except as herein otherwise expressly
provided, but subject (as between the Holders and the Trustee on the one hand
and any Persons entitled to enforce any Senior Debt on the other) to
Article 3, any money received by the Trustee from the Corporation pursuant
to the foregoing provisions of this Article 5, or as a result of legal or other
proceedings or from any trustee in bankruptcy or liquidator of the Corporation
or in any other manner, shall be applied, together with any other monies in the
hands of the Trustee available for such purpose as follows:


 


(a)           first, in payment or in reimbursement of
the Trustee of its compensation, costs, charges, expenses, borrowings, advances
or other monies furnished or provided by or at the instance of the Trustee in
or about the execution of its trusts under, or otherwise in lawful relation to,
this Note Indenture, with interest thereon as herein provided;


 


(b)           second, but subject as hereinafter in this
Section 5.13 provided, in payment, rateably and proportionately to the
Holders in the following priority namely: first, accrued and unpaid interest
and interest on amounts in default; thereafter, principal; unless otherwise
directed by Extraordinary Resolution and in that case in such order or priority
as between principal and interest as may be directed by such resolution; and


 


(c)           third, in payment of the surplus, if any,
of such monies to the Corporation or its assigns;


 


provided, however, that no payment shall be
made pursuant to subsection 5.13(b) above contrary to Article 3 or with
respect to the principal or interest of any Note held, directly or indirectly,
by or for the benefit of the Corporation or any Subsidiary (other than any Note
pledged for value and in good faith to a person other than the Corporation or
any Subsidiary but only to the extent of such person’s interest therein) except
subject to the prior payment in full of the principal and interest of all Notes
which are not so held.


 


5.14                        Distribution of Proceeds


 


Payments to Holders of Notes pursuant to
subsection 5.13(b) shall be made as follows:


 


(a)           at least fifteen (15) days’ notice of every
such payment shall be given in the manner provided in Section 9.1
specifying the time when and the place or places where the Notes are to be
presented and the amount of the payment and the application thereof as between
principal and interest;


 


(b)           payment of any Note shall be made upon
presentation thereof at any one of the places specified in such notice and any
such Note thereby paid in full shall be surrendered, otherwise a memorandum of
such payment shall be endorsed thereon; but the Trustee may in its discretion
dispense with presentation and surrender or endorsement in any special case
upon such indemnity being given to it as it shall deem sufficient;


 


(c)           from and after the date of payment
specified in the notice, interest shall accrue only on the amount owing on each
Note after giving credit for the amount of the payment specified in such notice
unless the Note with respect to which such amount is owing is duly presented on
or after the date so specified and payment of such amount is not made; and


 


26

















 


(d)           the Trustee shall not be bound to apply or
make any partial or interim payment of any monies coming into its hands if the
amount so received by it, after reserving thereout such amount as the Trustee
may think necessary to provide for the payments mentioned in
subsection 5.13(a), would be insufficient to make a distribution of at
least five percent (5%) of the aggregate principal amount of the outstanding
Notes, but it may retain the money so received by it and invest or deposit the
same as provided in Section 10.9 until the money or the investments
representing the same, with the income derived therefrom, together with any
other monies for the time being under its control shall be sufficient for the
said purpose or until it shall consider it advisable to apply the same in the
manner hereinbefore set forth.  The
foregoing shall not apply to a final payment or distribution hereunder.


 


5.15                        Judgment Against the
Corporation


 


The Corporation covenants and agrees with the
Trustee that, in case of any judicial or other proceedings to enforce the
rights of the Holders, judgment may be rendered against it in favour of the
Holders or in favour of the Trustee, as trustee for the Holders, for any amount
which may be proved to remain due with respect to the Notes and the interest
thereon and any other monies owing hereunder.


 


ARTICLE 6

SATISFACTION, DISCHARGE AND REDEMPTION


 


6.1                          Payment of Principal Amount


 


Subject to the provisions of Article 3, the
principal amount and any interest due upon maturity of any Note outstanding
shall be paid by the Corporation to the Trustee on the Maturity Date for
payment to the Holder upon presentation and surrender of the Note by the Holder
to the Trustee at the office of the Trustee in the City of Calgary.  Upon payment of the principal amount
together with any accrued and unpaid interest, the Note shall be cancelled by
the Trustee.


 


6.2                          Non-Presentation of Notes


 


In case the holder of any Note shall fail to
present the same for payment on the date on which the principal thereof or the
interest thereon or represented thereby becomes payable either at maturity or
otherwise or shall not accept payment on account thereof and give such receipt
therefor, if any, as the Trustee may require:


 


(a)           the Corporation shall be entitled to pay to
the Trustee and direct it to set aside; or


 


(b)           in respect of moneys in the hands of the
Trustee which may or should be applied to the payment of the Notes, the
Corporation shall be entitled to direct the Trustee to set aside; or


 


(c)           if the redemption was pursuant to notice
given by the Trustee, the Trustee may itself set aside;


 


the principal moneys or the interest, as the
case may be, in trust to be paid to the holder of such Note upon due
presentation or surrender thereof in accordance with the provisions of this
Note Indenture; and thereupon the principal moneys or the interest payable on
or represented by each Note in respect whereof such moneys have been set aside
shall be deemed to have been paid and the holder thereof shall thereafter have
no right in respect thereof except that of receiving delivery and payment of
the moneys so set aside


 


27

















 


by the Trustee upon due presentation and
surrender thereof, subject always to the provisions of Section 6.3.


 


6.3                          Repayment of Unclaimed
Monies


 


Any monies set aside under Section 6.2
and not claimed by and paid or delivered to Holders as provided in
Section 6.2 within six (6) years after the date of such setting aside
shall be repaid or returned to the Corporation by the Trustee on demand and
thereupon the Trustee shall be released from all further liability with respect
to such monies and thereafter the Holders with respect to which such monies
were so repaid to the Corporation shall have no rights with respect thereto
except to obtain payment or delivery of the monies due thereon from the
Corporation up to such time as the right to proceed against the Corporation for
recovery of such monies has become statute barred under the laws of the
Province of Alberta.


 


6.4                          Discharge


 


The Trustee shall at the request of the
Corporation release and discharge this Note Indenture and execute and deliver
such instruments as it shall be advised by Counsel are requisite for that
purpose and to release the Corporation from its covenants herein contained
(other than the provisions relating to the indemnification of the Trustee) upon
proof being given to the reasonable satisfaction of the Trustee that the
principal of and interest (including interest on amounts in default, if any) on
all the Notes and all other monies or other consideration payable hereunder have
been paid or satisfied or that, all the Notes having matured, payment of the
principal of and interest (including interest on amounts in default, if any) on
such Notes and on all other monies or other consideration payable hereunder has
been duly and effectually provided for in accordance with the provisions
hereof.


 


ARTICLE 7

SUCCESSOR COMPANIES


 


7.1                          Successor Companies


 


The Corporation shall not, except as
sanctioned by subsection 8.11(c), enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, arrangement, amalgamation,
merger, transfer, sale, lease or otherwise), other than the Arrangement,
whereby all or substantially all of its undertaking, property and assets would
become the property of any other person or, in the case of such amalgamation or
merger, of the continuing company resulting therefrom unless:


 


(a)           such other person or continuing company is
a company (herein called the “successor
company”) incorporated under the laws of Canada or any province
thereof;


 


(b)           the successor company shall execute, prior
to, contemporaneously with or forthwith after the consummation of such
transaction, such instruments (if any) as are satisfactory to the Trustee and
in the opinion of Counsel are necessary or advisable to evidence the assumption
by the successor company of the liability for the due and punctual payment of
all the Notes and interest thereon and all other monies payable hereunder and
the covenant of the successor company to pay the same and its agreement to observe
and perform all the covenants and obligations of the Corporation under this
Note Indenture;


 


28

















 


(c)           such transaction shall, in the reasonable
opinion of the board of directors of the Corporation, be upon such terms as
substantially preserve and do not impair in any material respect the rights or
powers of the Trustee or the Holders hereunder and upon terms as are in no way
prejudicial to the interests of the Holders; and


 


(d)           no condition or state of facts shall exist
as to the Corporation or the successor company either after the consummation of
any such transaction and after giving full effect thereto or immediately after
the successor company complying with the provisions of subsection 7.1(b) above
which constitutes or would constitute, after notice or lapse of time or both,
an Event of Default.


 


7.2                          Vesting of Powers
In Successor Corporation


 


Whenever the conditions of Section 7.1
have been duly observed and performed, the successor company shall be bound by
the covenants and obligations of the Corporation under this Note Indenture and
shall possess and from time to time may exercise each and every right and power
of the Corporation under this Note Indenture in the name of the Corporation or
otherwise and any act or proceeding by any provision of this Note Indenture
required to be done or performed by any Directors or officers of the
Corporation may be done and performed with like force and effect by the
director’s or officers of such successor company.


 


7.3                          Notice of Completion
of Arrangement


 


Upon the completion of the Arrangement by the
filing of the court order approving the Arrangement and the articles of
arrangement with the Registrar of Corporations, the Corporation shall provide
notice in writing thereof to the Trustee confirming the completion of the
Arrangement.


 


ARTICLE 8

MEETINGS OF HOLDERS


 


8.1                          Right to Convene Meeting


 


The Trustee or the Corporation may at any
time and from time to time and the Trustee shall on receipt of a request of the
Corporation or a Noteholders’ Request and upon being indemnified to its
reasonable satisfaction by the Corporation or by the Holders signing such
request against the costs which may be incurred in connection with the calling
and holding of such meeting, convene a meeting of the Holders.  In the event of the Trustee failing within
ten (10) days after receipt of any such request and such indemnity to give
notice convening a meeting, the Corporation or such Holders, as the case may
be, may convene such meeting.  Every
such meeting shall be held in the City of Calgary, or at such other place as
may be approved or determined by the Trustee.


 


8.2                          Notice of Meetings


 


At least twenty-one (21) days’ notice of any
meeting shall be given to the Holders by the Corporation or the Trustee, as the
case may be, in the manner provided in Section 9.1 and a copy thereof
shall be sent by courier to the Trustee, unless the meeting has been called by
it.  Such notice shall state the time
and place the meeting is to be held and shall state briefly the general nature
of the business to be transacted thereat. 
The accidental omission to give notice of a meeting to any Holder shall
not invalidate any resolution passed at any such meeting.


 


29

















 


8.3                          Chairman


 


A person, who need not be a Holder, nominated
in writing by the Trustee shall be chairman of the meeting and if no person is
so nominated, or if the person so nominated is not present within fifteen (15)
minutes from the time fixed for the holding of the meeting, the Holders present
in person or by proxy shall choose a person present to be chairman.


 


8.4                          Quorum


 


Subject to the provisions of
Section 8.12, at any meeting of the Holders a quorum shall consist of
Holders present in person or by proxy and representing a majority in aggregate
principal amount of the Notes outstanding. 
If a quorum of the Holders shall not be present within thirty (30)
minutes from the time fixed for holding any meeting, the meeting, if summoned
pursuant to a Noteholders’ Request, shall be dissolved; but in any other case
the meeting shall be adjourned to the same day in the next week (unless such
day is not a Business Day in which case it shall be adjourned to the first
Business Day thereafter) at the same time and place and no notice shall be
required to be given with respect to such adjourned meeting.  At the adjourned meeting the Holders present
in person or by proxy shall form a quorum and may transact the business for which
the meeting was originally convened notwithstanding that they may not represent
a majority of the aggregate principal amount of the Notes outstanding.  Any business may be brought before or dealt
with at an adjourned meeting which might have been brought before or dealt with
at the original meeting in accordance with the notice calling the same.  No business shall be transacted at any
meeting other than an adjourned meeting unless the required quorum is present
at the commencement of business.


 


8.5                          Power to Adjourn


 


The chairman of any meeting at which a quorum
of the Holders is present may with the consent of the Holders of a majority in
aggregate principal amount of the Notes represented thereat adjourn any such
meeting and no notice of such adjournment need be given except such notice, if any,
as the meeting may prescribe.


 


8.6                          Show of Hands


 


Every question submitted to a meeting shall,
subject to Section 8.7, be decided in the first instance by a majority of
the votes given on a show of hands.  At
any such meeting, unless a poll is duly demanded as herein provided, a
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.  The chairman of any meeting shall be entitled, both on a show of
hands and on a poll, to vote with respect to the Notes, if any, held by him or
the Holder whose proxy he holds.


 


8.7                          Poll


 


On every Extraordinary Resolution, and on any
other question submitted to a meeting, when demanded by the chairman or by one
or more Holders or proxies for Holders, a poll shall be taken in such manner
and either at once or after an adjournment as the chairman shall direct.  Resolutions or matters other than those to
be decided by Extraordinary Resolution shall, if a poll is taken, be decided by
the votes of the Holders of a majority in aggregate principal amount of the
Notes represented at the meeting and voted on the poll.


 


30

















 


8.8                          Voting


 


On a show of hands every person who is
present and entitled to vote, whether as a Holder or as proxy for one or more
Holders or both, shall have one vote. 
On a poll each Holder present in person or represented by a proxy duly
appointed by an instrument in writing shall be entitled to one vote with
respect to each One ($1.00) Dollar principal amount of Notes of which he shall
then be the Holder.  A proxy need not be
a Holder.  In the case of joint
registered Holders, any one of them present in person or by proxy at the
meeting may vote in the absence of the other or others; but in case more than
one of them shall be present in person or by proxy, they shall vote together
with respect to the Notes of which they are joint registered Holders.


 


8.9                          Regulations


 


The Trustee, or the Corporation with the
approval of the Trustee, may from time to time make and from time to time vary
or revoke such regulations as it shall from time to time think fit providing
for and governing:


 


(a)           the form of the instrument appointing a proxy,
which shall be in writing, and the manner in which the same shall be executed
and for the production of the authority of any person signing on behalf of a
Holder;


 


(b)           the deposit of instruments appointing
proxies at such place as the Trustee, the Corporation or the Holder convening
the meeting, as the case may be, may, in the notice convening the meeting,
direct, and the time, if any, before the holding of the meeting or any
adjournment thereof by which the same shall be deposited; and


 


(c)           the deposit of instruments appointing
proxies at some approved place or places other than the place at which the
meeting is to be held and enabling particulars of such instruments appointing
proxies to be delivered, mailed or telecopied before the meeting to the Corporation
or to the Trustee at the place where the same is to be held and for the voting
of proxies so deposited as though the instruments themselves were produced at
the meeting.


 


Any regulations so made shall be binding and
effective and the votes given in accordance therewith shall be valid and shall
be counted.  Save as such regulations
may provide, the only persons who shall be recognized at any meeting as the
Holders, or as entitled to vote or be present at the meeting with respect
thereto, shall be Holders and persons whom Holders have by instrument in
writing duly appointed as their proxies.


 


8.10                        Persons Entitled to
Attend Meetings


 


The Corporation and the Trustee (by their
respective employees, officers and directors) and the legal advisers of the
Corporation, the Trustee and any Holder, and any other Person permitted by the
chairman to attend, may attend any meeting of the Holders, but such parties
shall, unless otherwise entitled to do so, not be entitled to vote at such
meeting.


 


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8.11                        Powers
Exercisable by Extraordinary Resolution


 


In addition to the powers conferred upon them
by any other provisions of this Note Indenture or by law, a meeting of the
Holders shall have the following powers exercisable from time to time only by
Extraordinary Resolution, and subject (where applicable) to Section 3.12:


 


(a)           power to consent to any modification,
abrogation, alteration, compromise or arrangement of the rights of the Holders
or the Trustee (with the prior written consent of the Trustee) against the
Corporation, or against its property, whether such rights arise under this Note
Indenture or the Notes or otherwise;


 


(b)           power to consent to any modification of or
change in or addition to or omission from the provisions contained in this Note
Indenture or any Note which shall be requested by or agreed to by the
Corporation and to authorize the Trustee to concur in and give effect to same
by executing an indenture supplemental hereto embodying any modification,
change, addition or omission;


 


(c)           power to sanction any scheme for the
reconstruction or reorganization of the Corporation or for the consolidation,
amalgamation or merger of the Corporation with any other company or for the
sale, lease, transfer or other disposition of the undertaking, property and
assets of the Corporation or any part thereof, provided that no such sanction
shall be necessary with respect to any such transaction if the provisions of
Section 7.1 shall have been complied with;


 


(d)           power to direct or authorize the Trustee to
exercise any power, right, remedy or authority given to it by this Note
Indenture in any manner specified in any such Extraordinary Resolution or to
refrain from exercising any such power, right, remedy or authority;


 


(e)           power to waive and direct the Trustee to
waive any Default or Event of Default hereunder or cancel any declaration made
by the Trustee pursuant to Section 5.2 either unconditionally or upon any
condition specified in such Extraordinary Resolution;


 


(f)            power to restrain any Holder from taking or
instituting any suit, action or proceeding for the purpose of enforcing payment
of the principal of or interest on the Notes, or for the execution of any trust
or power hereunder;


 


(g)           power to direct any Holder who has brought
any action, suit or proceeding to stay or discontinue or otherwise deal with
the same, upon payment of the costs, charges and expenses reasonably and
properly incurred by such Holder in connection therewith if the taking of such
suit, action or proceeding shall have been permitted by Section 5.11;


 


(h)           power to consent to any compromise or
arrangement with any creditor or creditors or any class or classes of
creditors, whether secured or otherwise, and with holders of any shares or
other securities of the Corporation;


 


(i)            power to appoint a committee with power and
authority (subject to such limitations, if any, as may be prescribed in any
such Extraordinary Resolution) to exercise, and to direct the Trustee to
exercise, on behalf of the Holders, such of the powers of the Holders as are
exercisable by extraordinary or other resolution as shall be included in the
resolution appointing the committee. 
The Extraordinary Resolution making such appointment may provide for
payment of the


 


32

















 


expenses and disbursements of and
compensation to such committee.  Such
committee shall consist of such number of persons as shall be prescribed in the
resolution appointing it and the members need not be Holders.  Every such committee may elect its chairman
and may make regulations respecting its quorum, the calling of its meetings,
the filling of vacancies occurring in its number and its procedure generally.  Such regulations may provide that the
committee may act at a meeting at which a quorum is present or may act by
minutes signed by the number of members thereof necessary to constitute a
quorum.  All acts of any such committee
within the authority delegated to it shall be binding upon all Holders.  Neither the committee nor any member thereof
shall be liable for any loss arising from or in connection with any action
taken or omitted to be taken by them in good faith;


 


(j)            power to authorize the distribution in
specie of any shares, bonds, notes or other securities or obligations or cash
or other consideration received hereunder or the use or disposal of the whole
or any part of such shares, bonds, notes or other securities or obligations or
cash or other consideration in such manner and for such purpose as may be
deemed advisable and specified in such Extraordinary Resolution;


 


(k)           power to authorize the Trustee or any other
person or persons to (i) bid at any sale of the Corporation’s properties
or assets or any part thereof, (ii) to borrow the monies required to make
any deposit at said sale or pay the balance of the purchase price and to
hypothecate, mortgage, pledge, charge, cede and transfer the property or assets
so purchased as security for the repayment of the monies so borrowed and
interest thereon, or itself, himself or themselves, as the case may be, to
advance such monies (in which event it, he or they shall have a lien upon the
property or assets so purchased for the amount so advanced and interest
thereon), (iii) to hold any property or assets so purchased (subject to
any hypothec, mortgage, pledge, charge or lien to secure any monies so borrowed
or advanced) in trust for all the Holders of the Notes outstanding at the time
of such sale pro rata in proportion to the amounts due to them thereon respectively
for principal and interest before such sale, and to sell, transfer and convey
the whole or any part or parts of the property or assets so purchased for such
consideration in cash or in the shares, bonds, notes or other securities or
obligations of any company formed or to be formed, or partly in cash and partly
in such securities or obligations, and upon such terms and conditions as may be
determined by such Extraordinary Resolutions of the Holders and, subject to
such terms and conditions, to dispose of such cash, shares, bonds, notes or
other securities or obligations not distributed pursuant to the provisions of
subsection 8.11(j), (iv) until the sale, transfer or conveyance of
the whole of such property or assets so purchased to maintain and operate such
part of said property and assets as has not been disposed of, and for such
purposes to borrow monies and to hypothecate, mortgage, pledge, charge, cede
and transfer the property or assets so purchased, or any part thereof, as
security for the repayment of the monies so borrowed and interest thereon, or
itself, himself or themselves, as the case may be, to advance such monies (in
which event it, he or they shall have a lien upon the property or assets so
purchased for the amount so advanced and interest thereon), and (v) 
otherwise deal with such property and assets and the proceeds of any sale,
transfer of conveyance thereof as the Holders may by such Extraordinary
Resolution direct;


 


(l)            power to remove the Trustee from office and
to appoint a new trustee or trustees;


 


(m)          power to sanction the exchange of the Notes
for or the conversion thereof into shares, bonds, notes or other securities or
obligations of the Corporation or of any company formed or to be formed;


 


33

















 


(n)           power to authorize the Corporation and the
Trustee to grant extensions of time for payment of interest on any of the Notes
whether or not the interest, the payment with respect to which is extended, is
at the time due or overdue; and


 


(o)           power to amend, alter or repeal any
Extraordinary Resolution previously passed or sanctioned by the Holders or by
any committee appointed pursuant to subsection 8.11(i).


 


8.12                        Meaning of
“Extraordinary Resolution”


 


(a)           The expression “Extraordinary Resolution” when used in this Note Indenture
means, subject as hereinafter in this Article provided, a resolution proposed
to be passed as an Extraordinary Resolution at a meeting of Holders (including
an adjourned meeting) duly convened for the purpose and held in accordance with
the provisions of this Article 8 at which the Holders of a majority in
principal amount of the Notes outstanding are present in person or by proxy and
passed by the affirmative votes of the Holders of not less than seventy-five percent
(75%) of the aggregate principal amount of Notes represented at the meeting and
voted on a poll upon such resolution.


 


(b)           If, at any meeting referred to in
subsection 8.12(a), the Holders of a majority in aggregate principal
amount of the Notes outstanding are not present in person or by proxy within
thirty (30) minutes after the time appointed for the meeting, then the meeting,
if summoned by a Noteholders’ Request, shall be dissolved; but in any other
case it shall stand adjourned to such date, being not less than ten (10) days
nor more than twenty (20) days later, and to such place and time, all as may be
determined by the chairman.  Not less
than five (5) days’ notice shall be given of the time and place of such
adjourned meeting to the Holders in the manner provided in Section 9.1.
Such notice shall state that at the adjourned meeting the Holders present in
person or by proxy shall form a quorum but it shall not be necessary to set
forth the purposes for which the meeting was originally called or any other
particulars.  At the adjourned meeting
the Holders present in person or by proxy shall form a quorum and may transact
the business for which the meeting was originally convened and a resolution
proposed at such adjourned meeting and passed by the requisite vote as provided
in subsection 8.12(a) shall be an Extraordinary Resolution within the
meaning of this Note Indenture.


 


(c)           Votes on an Extraordinary Resolution shall
always be given on a poll and no demand for a poll on an Extraordinary Resolution
shall be necessary.


 


8.13                        Powers Cumulative


 


It is hereby declared and agreed that any one
or more of the powers of this Note Indenture stated to be exercisable by the
Holders by Extraordinary Resolution or otherwise may be exercised from time to
time and the exercise of any one or more of such powers from time to time shall
not be deemed to exhaust the rights of the Holders to exercise the same or any
other such power or powers thereafter from time to time.


 


8.14                        Minutes


 


Minutes of all resolutions and proceedings at
every meeting as aforesaid shall be made and duly entered in books to be from
time to time provided for that purpose by the Trustee at the expense of the
Corporation, and any such minutes as aforesaid, if signed by the chairman of
the meeting at which such


 


34

















 


resolutions were passed or proceedings had,
or by the chairman of the next succeeding meeting of the Holders, shall be
prima facie evidence of the matters therein stated and, until the contrary is
proved, every such meeting, with respect to the proceedings of which minutes
shall have been made, shall be deemed to have been duly held and convened, and
all resolutions passed thereat or proceedings taken thereat to have been duly
passed and taken.


 


8.15                        Instrument In Writing


 


All actions which may be taken and all powers
that may be exercised by the Holders at a meeting held as hereinbefore in this
Article 8 provided may also be taken and exercised by the Holders of
seventy-five percent (75%) of the aggregate principal amount of all the
outstanding Notes, by an instrument in writing signed in one or more
counterparts and the expression “Extraordinary
Resolution” when used in this Note Indenture shall include an
instrument so signed.


 


8.16                        Binding Effect of
Resolutions


 


Every resolution and every Extraordinary
Resolution passed in accordance with the provisions of this Article 8 at a
meeting of Holders shall be binding upon all the Holders, whether present at or
absent from such meeting, and every instrument in writing signed by Holders in
accordance with Section 8.15 shall be binding upon all Holders, whether
signatories thereto or not, and each and every Holder and the Trustee (subject
to the provisions for its indemnity herein contained) shall be bound to give
effect accordingly to every such resolution, Extraordinary Resolution and
instrument in writing.


 


8.17                        Evidence of Rights of
Holders


 


Any request, direction, notice, consent or
other instrument which this Note Indenture may require or permit to be signed
or executed by the Holders may be in any number of concurrent instruments of
similar tenor and may be signed or executed by such Holders in person or by
attorney duly appointed in writing. 
Proof of the execution of any such request or other instrument or of a
writing appointing any such attorney or (subject to the provisions of this
Article 8 with regard to voting at meetings of Holders) of the holding by any
person of Notes shall be sufficient for any purpose of this Note Indenture if made
in the following manner, namely, the fact and date of execution by any person
of such request or other instrument or writing may be proved by the Certificate
of any notary public, or other officer authorized to take acknowledgments of
deeds to be recorded at the place where such Certificate is made that the
person signing such request or other instrument in writing acknowledged to him
the execution thereof or by affidavit of a witness of such execution or in any
other manner which the Trustee may consider adequate.


 


The Trustee may, nevertheless, in its
discretion require further proof in cases where it deems further proof
desirable or may accept such other proof as it shall consider proper.


 


ARTICLE 9

NOTICES


 


9.1                          Notice


 


Any notice required or permitted to be given
hereunder shall be in writing and given by delivering, by post or courier, or
by transmitting by telecopier (in the case of Corporation or the Trustee):


 


35

















 


(a)           to the Corporation, at:


 


2200, 205 -
5th Avenue S.W.


Calgary, Alberta  T2P 2V7 Canada


 


Attention: President and Chief Executive
Officer


Facsimile: (403) 205-3845


 


(b)           to the Holder at the address appearing on
the Register, and if, in the case of joint Holders, more than one address appears
in the Register in respect of such joint holding, notice shall be addressed to
the first address so appearing; or at the option of such party giving notice,
such notice may be given by publication twice in the Report on Business section
of the National Edition of the Globe and Mail or similar section of any
newspaper having national circulation in Canada; provided further that if there
is no newspaper having national circulation, then by publishing twice in the
business section of a newspaper in each city where the Register or Registers
are maintained;


 


(c)           to the Trustee at its principal office in
the City of Calgary at:


 


Valiant Trust Company


Suite 510, 550 – 6th Avenue S.W.


Calgary, Alberta  T2P 0S2


 


Attention: Manager, Corporate Trust
Department


Facsimile: (403) 233-2857


 


Any notice given as aforesaid shall be deemed
to have been given at the time delivered or telecopied (provided complete
transmission is confirmed) if delivered or facsimile to the recipient on a
Business Day (in the city in which the addressee is located) and before 4:30
p.m. (local time in the city in which the addressee is located) on such
Business Day, and otherwise shall be deemed to be given at 9:00 a.m. (local
time in the city in which the addressee is located) on the next following
Business Day (in the city in which the addressee is located) or, in the case of
notice being given by publication, on the next following Business Day, after
publishing such notice twice in the designated newspaper or newspapers.  Any party may change its address for notice
by notice to the other parties hereto given in the manner herein provided.


 


ARTICLE 10

CONCERNING THE TRUSTEE


 


10.1                        No Conflict of Interest


 


The Trustee represents to the Corporation
that at the date of execution and delivery by it of this Note Indenture there
exists no material conflict of interest in the role of the Trustee as a
fiduciary hereunder but if, notwithstanding the provisions of this
Section 10.1, such a material conflict of interest exists, the validity
and enforceability of this Note Indenture, and the Notes issued hereunder shall
not be affected in any manner whatsoever by reason only that such material
conflict of interest exists but the Trustee shall, within ninety (90) days
after ascertaining that it has a material conflict of interest, either
eliminate such material conflict of interest or resign in the manner and with
the effect specified in Section 10.2. 
However, the Corporation hereby acknowledges that a material conflict of
interest in the role of the Trustee as a fiduciary hereunder may arise in
connection with the Trustee’s role as a fiduciary under the Trust Indenture and
as the holder of the Notes as contemplated under the Arrangement.  In such


 


36

















 


circumstances, the Corporation confirms that
if the Trustee, acting reasonably, determines that such a material conflict of
interest exists that prevents the Trustee from fulfilling its obligations
hereunder or that such a conflict of interest is imminent, the Trustee shall be
entitled to resign in the manner and with the effect specified in Section 10.2
by giving to the Corporation seven (7) days’ notice in writing, such notice to
be accepted by the Corporation as sufficient notice pursuant to Section 10.2
hereof.


 


10.2                        Replacement of Trustee


 


(a)           The Trustee may resign its trust and be
discharged from all further duties and liabilities hereunder by giving to the
Corporation three (3) months’ notice in writing or such shorter notice as the
Corporation may accept as sufficient. 
In the event of the Trustee resigning or being removed or being
dissolved, becoming bankrupt, going into liquidation or otherwise becoming
incapable of acting hereunder, the Corporation shall forthwith appoint a new
Trustee unless a new trustee has already been appointed by the Holders; failing
such appointment by the Corporation, the retiring Trustee or any Holder may
apply to a justice of the Court of Queen’s Bench of Alberta, on such notice as
such Justice may direct for the appointment of a new Trustee; but any new
trustee so appointed by the Corporation or by the Court shall be subject to
removal as herein provided by the Holders. 
Any new Trustee appointed under any provision of this Section shall be a
company authorized to carry on the business of a trust company in all Provinces
of Canada.  On any new appointment the
new trustee shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as Trustee.


 


(b)           Any company into which the Trustee may be
merged or with which it may be consolidated or amalgamated or any company
resulting from any merger, consolidation or amalgamation to which the Trustee
shall be a party, shall be the successor Trustee under this Note Indenture
without the execution of any instrument or any further act.  Nevertheless, upon the written request of
the successor Trustee or of the Corporation, the Trustee ceasing to act shall
execute and deliver an instrument assigning and transferring to such successor
Trustee, upon the trusts herein expressed, all the rights, powers and trusts of
the Trustee so ceasing to act, and shall duly assign, transfer and deliver all
property and money held by such Trustee to the successor Trustee so appointed
in its place.  Should any deed, conveyance
or instrument in writing from the Corporation be required by any new trustee
for more fully and effectively vesting in and confirming to it such estates,
properties, rights, powers and trusts, then any and all such deeds, conveyances
and instruments in writing shall on request of said new trustee, be made,
executed, acknowledged and delivered by the Corporation.


 


10.3                        Duties of Trustee


 


(a)           In the exercise of the rights, duties and
obligations prescribed or conferred by the terms of this Note Indenture, the
Trustee shall exercise that degree of care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances.


 


(b)           In addition to all other duties of the
Trustee set forth herein, at all times while any Notes are outstanding, the
Trustee shall, in addition, have the following responsibilities hereunder:


 


(i)            to keep the Corporation’s Note ledgers,
Registers and branch Registers of transfers and unissued Notes and, subject to
such general and particular instructions as may from time


 


37

















 


to time be given to it by or under the
authority of the Board of Directors (which shall be in the form of a Written
Direction of the Corporation), the Trustee shall:


 


(A)          record the particulars of all transfers of
Notes upon the appropriate Register of transfers or branch Register(s) of
transfers;


 


(B)           certify and issue Notes to the Holders
entitled thereto, representing Notes held by or transferred to them,
respectively;


 


(C)           maintain the Registers of Holders and make
such entries from time to time in the Registers as may be necessary in order
that the account of each Holder of the Corporation may be properly and
accurately maintained; and


 


(D)          furnish to the Corporation, but at the Corporation’s
expense, at any time such statements, lists, entries, information and material
concerning transfers and other matters prepared and undertaken by it as
Trustee, including all documents, papers, information and material as it may
have and the Corporation may require;


 


(ii)           forthwith upon receipt of sufficient monies
from the Corporation, to forward cheques or other transfer of funds by such
means as considered appropriate by the Trustee representing payments of
interest upon the Notes to the Holders thereof in accordance with the
provisions of subsection 2.1(c) hereof;


 


(iii)          upon receipt of sufficient monies upon the
stated or accelerated maturity of the Notes, and subject to Article 3, to make
all payments of principal or interest on the Notes to the Holders thereof as
provided in this Note Indenture; and


 


(iv)          promptly as and when due to make such
recordings and filings as may be required to satisfy any statutory or
regulatory duty imposed upon the Trustee and to provide the Holders with any
such statements and records as they may require to comply with any statutory or
regulatory duties imposed upon the Holders in their capacity as Holders.


 


(c)           All Notes shall be effectively and
interchangeably transferable on the appropriate principal Register of transfers
or on any appropriate branch Register(s) of transfers, regardless of where or
when the Notes shall have been issued, and entry of the transfer of any Notes
in the appropriate Register of transfers or in any one appropriate branch
Register of transfers shall for all purposes be a complete and valid transfer.


 


(d)           The Trustee may use its own judgment in the
performance of its duties as trustee for the Corporation, but at any time it
may apply to the Board of Directors of the Corporation or an officer of the
Corporation or to such Counsel as the Corporation may from time to time
determine at the expense of the Corporation, for instructions or advice, and
the Corporation will fully protect and hold the Trustee harmless from all
liability for any action taken, or not taken, by the Trustee in accordance with
or pursuant to such instructions or advice that may be given to it.


 


(e)           Subject to subsection 10.3(a) and the
provisions of any applicable laws, except for its acts or omissions
constituting fraud, gross negligence or wilful misconduct, the Trustee shall
not be liable for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or


 


38

















 


law and the Corporation agrees, at all
times, to indemnify and save harmless the Trustee and its agents from and
against all liability, claims, demands, action, suits or other proceedings by
whomsoever made, prosecuted or brought and from all loss, costs, damages and
expenses in any manner based upon, occasioned by or attributable to any act of
the Trustee in the execution of its duties hereunder.


 


(f)            The Trustee shall not incur any liability
by refusing in good faith to effect any transfer of any Notes which, in its
judgment is improper or unauthorized.


 


(g)           The Trustee agrees to faithfully carry out
and perform its duties hereunder and, on termination hereof and upon payment by
the Corporation to the Trustee of all monies owing to the Trustee hereunder, to
deliver over to the Corporation the Registers and branch Registers maintained
by it and any documents connected therewith or with the Corporation transacted
hereunder, and a receipt signed by an officer of the Corporation shall be a
valid discharge of the Trustee.


 


10.4                        Reliance Upon Declarations


 


In the exercise of its rights, duties and
obligations hereunder the Trustee may, if acting in good faith, rely, as to the
truth of the statements and accuracy of the opinions expressed therein, upon
statutory declarations, opinions, reports or certificates furnished pursuant to
and in accordance with any covenants, conditions and requirements of this Note
Indenture.  The Trustee shall not be
liable for or by reason of any statements of fact or recitals in this Note
Indenture or in the Notes (except in the Certificate of the Trustee thereon) or
be required to verify the same, but all such statements or recitals are and
shall be deemed to be made by the Corporation. 
The Trustee shall not in any way be responsible for the consequence of
any breach on the part of the Corporation or any of the Corporation’s covenants
contained herein.


 


10.5                        Evidence and Authority to
Trustee


 


(a)           The Corporation shall furnish to the
Trustee evidence of compliance with the conditions precedent provided for in
this Note Indenture relating to any action or step required or permitted to be
taken by the Corporation or the Trustee under this Note Indenture or as a
result of any obligation imposed under this Note Indenture, including without
limitation, the certification and delivery of Notes hereunder, the satisfaction
and discharge of this Note Indenture and the taking of any other action to be
taken by the Trustee at the request of or on the application of the
Corporation, forthwith if and when: (i) such evidence is required by any
other Section of this Note Indenture to be furnished by the Trustee in
accordance with the terms of this Section 10.5; or (ii) the Trustee,
in the exercise of its rights and duties under this Note Indenture, gives the
Corporation written notice requiring it to furnish such evidence in relation to
any particular action or obligation specified in such notice.


 


(b)           Such evidence shall consist of:


 


(i)            a Certificate of the Corporation stating
that any such condition precedent has been complied with in accordance with the
terms of this Note Indenture;


 


(ii)           in the case of a condition precedent for
which compliance with is, by the terms of this Note Indenture, made subject to
review or examination by a solicitor, an opinion of


 


39

















 


Counsel that such condition precedent has
been complied with in accordance with the terms of this Note Indenture; and


 


(iii)          in the case of any such condition precedent
for which compliance is subject to review or examination by auditors or
accountants, an opinion or report of the auditors of the Corporation whom the
Trustee for such purposes hereby approves, that such condition precedent has
been complied with in accordance with the terms of this Note Indenture.


 


(c)           Whenever such evidence relates to a matter
other than the certification and delivery of Notes and the satisfaction and
discharge of this Note Indenture, and except as otherwise specifically provided
herein, such evidence may consist of a report or opinion of any solicitor,
auditor, accountant, valuator, engineer, surveyor, appraiser or other expert
whose qualifications give authority to a statement made by him, provided that
if such report or opinion is furnished by a director, officer or employee of
the Corporation it shall be in the form of a statutory declaration.


 


(d)           Each statutory declaration, Certificate,
opinion or report with respect to compliance with a condition precedent
provided for in this Note Indenture shall include: (i) a statement by the
person giving the evidence that he has read and is familiar with those
provisions of this Note Indenture relating to the condition precedent in
question; (ii) a brief statement of the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such evidence are based; (iii) a statement that in the belief of the
person giving such evidence, he has made such examination or investigation as
is necessary to enable him to make the statements or give the opinions
contained or expressed therein; and (iv) a statement whether in the
opinion of such person the conditions precedent in question have been complied
with or satisfied.


 


(e)           The Corporation shall furnish to the
Trustee annually, on the anniversary date of this Note Indenture and at any
other reasonable time if the Trustee so requires, its Certificate that the
Corporation has complied with all covenants, conditions or other requirements
contained in this Note Indenture, the non-compliance with which would, with the
giving of notice or the lapse of time, or both, or otherwise, constitute an
Event of Default, or if such is not the case, specifying the covenant,
condition or other requirement which has not been complied with and giving
particulars of such non-compliance.  The
Corporation shall, whenever the Trustee so requires, furnish the Trustee with
evidence by way of statutory declaration, opinion, report or Certificate as
specified by the Trustee as to any action or step required or permitted to be
taken by the Corporation or as a result of any obligation imposed by this Note
Indenture.


 


10.6                        Certificate of the
Corporation as Evidence


 


Except as otherwise specifically provided or
prescribed by this Note Indenture, whenever in the administration of the
provisions of this Note Indenture the Trustee shall deem it necessary or
desirable that a matter be proved or established prior to taking or omitting
any action hereunder, the Trustee, if acting in good faith, may rely upon a
Certificate of the Corporation.


 


40

















 


10.7                        Experts, Advisers and Agents


 


The Trustee may:


 


(a)           in relation to this Note Indenture, employ
or retain and act on the opinion or advice of or information obtained from any
solicitor, auditor, accountant, valuator, engineer, surveyor, appraiser or
other expert, whether obtained by the Trustee or by the Corporation, or
otherwise, and shall not be liable for acting in good faith on any such opinion
and advice and may pay proper and reasonable compensation for all such legal
and other advice or assistance as aforesaid; and


 


(b)           employ such agents and other assistants as
it may reasonably require for the proper discharge of its duties hereunder, and
may pay reasonable remuneration for all services performed for it (and shall be
entitled to receive reasonable remuneration for all services performed by it)
in the discharge of the trusts hereof and compensation for all disbursements,
costs and expenses made or incurred by it in the discharge of its duties
hereunder and in the management of the trusts hereof.  Any solicitors employed or consulted by the Trustee as Counsel
may be, but need not be, solicitors for the Corporation.


 


10.8                        Trustee May Deal In Notes


 


Subject to Section 10.1, the Trustee
may, in its personal or other capacity, buy, sell, lend upon and deal in the
Notes and generally contract and enter into financial transactions with the
Corporation or otherwise, without being liable to account for any profits made
thereby.


 


10.9                        Investment of Monies
Held by Trustee


 


(a)           Any securities, documents of title or other
instruments that may at any time be held by the Trustee subject to the trusts
hereof may be placed in the deposit vaults of the Trustee or of any Canadian
chartered bank listed in Schedule I of the Bank
Act (Canada) or deposited for safekeeping with any such bank.


 


(b)           Unless otherwise provided in this Note
Indenture, any monies held by the Trustee which under the trusts of this Note
Indenture may or ought to be invested or which may be on deposit with the
Trustee or which may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in securities issued
or guaranteed by the Government of Canada or a province thereof, any Canadian
chartered bank listed in Schedule I of the Bank
Act (Canada) or the Trustee, provided that the security shall not
have a maturity date of more than sixty (60) days from the date of
investment.  Unless the Corporation
shall be in default hereunder or unless otherwise specifically provided herein,
all interest or other income received by the Trustee in respect of such
deposits and investments shall belong to the Corporation.  Unless and until the Trustee shall have
declared the principal of and interest on the Notes to be due and payable, the
Trustee shall so invest such monies at the request of the Corporation.


 


(c)           Pending the investment of any monies as
hereinbefore provided, such monies may be deposited in the name of the Trustee
in any chartered bank of Canada or, with the written consent of the Corporation,
in the deposit department of the Trustee or any other loan or trust company
authorized to accept deposits under the laws of Canada or any province thereof
at the rate of interest then current on similar deposits.


 


(d)           Unless and until the Trustee shall have
declared the principal of and interest on the Notes to be due and payable, and
subject to Article 3, the Trustee shall pay over to the Corporation all
interest


 


41

















 


received by the Trustee with respect to any
investments or deposits made pursuant to the provisions of this Section.


 


10.10                      Trustee Not Ordinarily Bound


 


Except as provided in Section 5.9 and as
otherwise specifically provided herein, the Trustee shall not, subject to
Section 10.3, be bound to give notice to any person of the execution
hereof, nor to do, observe or perform or see to the observance or performance
by the Corporation of any of the obligations herein imposed upon the
Corporation or of the covenants on the part of the Corporation herein
contained, nor in any way to supervise or interfere with the conduct of the
Corporation’s business, unless the Trustee shall have been required to do so by
a Noteholders’ Request or by an Extraordinary Resolution of the Holders passed
in accordance with the provisions contained in Article 8, and then only after
it shall have been indemnified to its satisfaction against all actions,
proceedings, claims and demands to which it may render itself liable and all
costs, charges, damages and expenses which it may incur by so doing, nor in any
way or at any time or on any conditions to supervise or interfere with the
conduct of the Corporation’s business.


 


10.11                      Trustee Not Required
to Give Security


 


The Trustee shall not be required to give any
bonds or security with respect to the execution of the trusts and powers of
this Note Indenture or otherwise in respect of this Note Indenture.


 


10.12                      Trustee Not to Be
Appointed Receiver


 


The Trustee and any person related to the
Trustee shall not be appointed a receiver or receiver and manager or liquidator
of all or any part of the assets or undertakings of the Corporation.


 


10.13                      Trustee Not Bound to Act


 


Except as in this Note Indenture otherwise
specifically provided, the Trustee shall not be bound to act in accordance with
any direction or request of the Corporation or of the Directors until a duly
authenticated copy of the instrument or resolution containing such direction or
request shall have been delivered to the Trustee, and the Trustee shall be
empowered to act upon any such copy purporting to be authenticated and believed
by the Trustee to be genuine.


 


10.14                      Conditions
Precedent to Trustee’s Obligations to Act Hereunder


 


(a)           The obligation of the Trustee to commence
or continue any act, action or proceeding for the purpose of enforcing the
rights of the Trustee and of the Holders hereunder shall be conditional upon
the Holders furnishing, when required by notice in writing by the Trustee,
sufficient funds to commence or continue such act, action or proceeding and an
indemnity reasonably satisfactory to the Trustee to protect and hold harmless
the Trustee against the costs, charges and expenses and liabilities to be
incurred thereby and any loss and damage it may suffer by reason thereof.


 


(b)           None of the provisions contained in this
Note Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers unless indemnified as aforesaid.


 


42

















 


(c)           The Trustee may, before commencing or at
any time during the continuance of any such act, action or proceeding require
the Holders at whose instance it is acting to deposit with the Trustee the
Notes held by them for which Notes the Trustee shall issue receipts.


 


10.15                      Survival of Indemnities


 


All indemnities, all limitations of liability
and all other provisions for the protection of the Trustee provided for in this
Note Indenture shall survive the removal or resignation of the Trustee under
Article 10 and the termination of this Note Indenture.


 


10.16                      Authority to Carry on
Business


 


The Trustee represents to the Corporation
that at the date of execution and delivery by it of this Note Indenture it is
authorized to carry on the business of a trust company in the Province of
Alberta.  If the Trustee ceases to be so
authorized to carry on business, the validity and enforceability of this Note
Indenture and the Notes shall not be affected in any manner whatsoever by
reason only of such event but the Trustee shall, within ninety (90) days after
ceasing to be authorized to carry on the business of a trust company in the
Province of Alberta either become so authorized or resign in the manner and with
the effect specified in Section 10.2.


 


10.17                      Acceptance of Trust


 


The Trustee hereby accepts the trusts in this
Note Indenture declared and provided for and agrees to perform the same upon
the terms and conditions herein set forth and to hold all rights, privileges
and benefits conferred hereby and by law in trust for the various persons who
shall from time to time be Holders, subject to all the terms and conditions
herein set forth.


 


ARTICLE 11

SUPPLEMENTAL INDENTURES


 


11.1                        Supplemental Indentures


 


From time to time the Trustee and, when
authorized by a resolution of the Directors, the Corporation, may, and they
shall when required by this Note Indenture, but subject to obtaining any
consent which may be required under the terms of any agreement (including any
Subordination Agreement referred to in Section 3.7), execute, acknowledge and
deliver by their proper officers, deeds or indentures supplemental hereto,
which thereafter shall form part hereof, for any one or more of the following
purposes:


 


(a)           adding to the covenants of the Corporation
herein contained for the protection of the Holders or providing for Events of
Default in addition to those herein specified;


 


(b)           making such provisions not inconsistent
with this Note Indenture as may be necessary or desirable with respect to
matters or questions arising hereunder, including the making of any
modifications in the form of the Notes which do not affect the substance
thereof, provided that the Trustee shall be of the opinion that such provisions
and modifications will not be prejudicial to the interests of the Holders;


 


(c)           giving effect to any Extraordinary
Resolution passed as provided in Article 8, and where any such Extraordinary
Resolution relates to an amendment of this Note Indenture, such amendment shall


 


43

















 


not be effective or binding until the
supplemental indenture giving effect thereto has been executed and delivered by
both the Corporation and the Trustee;


 


(d)           giving effect to an extension of the
Maturity Date pursuant to Section 2.13; and


 


(e)           for any other purpose not inconsistent with
the terms of this Note Indenture.


 


The Trustee may also, without the consent or
concurrence of the Holders, by supplemental indenture or otherwise, concur with
the Corporation in making any changes or corrections in this Note Indenture
which it shall have been advised by Counsel are required for the purpose of
curing or correcting any ambiguity or defective or inconsistent provisions or
clerical omissions or mistakes or manifest errors contained herein or in any
deed or indenture supplemental or ancillary hereto, provided that in the
opinion of Counsel the rights of the Trustee and the Holders are in no way
prejudiced thereby.


 


11.2                        Indenture
Confirming or Evidencing Subordination


 


From time to time the Trustee may, and shall
when requested by a Holder of Senior Debt, execute, acknowledge and deliver by
its proper officers, such deeds, documents, instruments or indentures as may be
reasonably required by such Holder of Senior Debt, to confirm, evidence or give
effect to any of the provisions of Article 3 or to ensure that any Holders of
Senior Debt receive the full benefit of Article 3 including, without limiting
the generality of the foregoing, the provision of proxies by the Trustee to a
Holder of Senior Debt for the purposes of Section 3.12.


 


ARTICLE 12

FORM OF NOTE


 


12.1                        Form of Note


 


The form for all Notes to be issued pursuant
to the Arrangement, the Certificate of the Trustee in respect thereof and the
transfer panel thereon shall be as set forth in Schedule “A”.


 


ARTICLE 13

EXECUTION AND FORMAL DATE


 


13.1                        Execution


 


This Note Indenture may be simultaneously
executed in several counterparts, each of which when so executed shall be
deemed to be an original and such counterparts together shall constitute one
and the same instrument.


 


44

















 


13.2                        Formal Date


 


For the purpose of convenience this Note
Indenture may be referred to as bearing formal date as set out on the first
page hereof irrespective of the actual date of execution hereof.


 


IN WITNESS WHEREOF the parties hereto have
executed these presents under their respective corporate seals and the hands of
their proper officers in that behalf.


 


	
   

  	
  BAYTEX ACQUISITION
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
  (signed) “Raymond
  T. Chan”

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  (signed) “Shannon
  M. Gangl”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VALIANT TRUST
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  (signed)  “Jenny Hart”

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
  (signed) “Cheryl Dahlager”

  



 


45

















 


SCHEDULE “A”


 


FORM OF NOTE


 


The form for the Notes, the Certificate of
the Trustee and the registration and transfer panel thereon shall be in the
English language substantially as follows:


 


(Form of Note)


 


Baytex Acquisition Corp.


 


(incorporated pursuant to the laws of the
Province of Alberta)


 


12% UNSECURED, SUBORDINATED
PROMISSORY NOTE


 


	
  Certificate
  Number:                             

  	
   

  	
  $                               

  



 


DUE: 
September 1, 2033


 


Baytex Acquisition Corp. (herein referred to
as the “Corporation”), for value
received, hereby promises to pay to the registered holder
hereof,       ,


 


on September 1, 2033, or on such earlier
date as the principal amount hereof may become payable in accordance with the
conditions herein set out and with the provisions of the Note Indenture
hereinafter mentioned, on presentation and surrender of this Note, the sum of
$                  
in lawful money of Canada, at the corporate trust office of the Trustee in
Calgary, Alberta at the option of the registered holder, and to pay interest
thereon from and including the Issue Date at the Interest Rate, payable after
as well as before maturity and after as well as before default and judgment,
with interest on amounts in default at the same rate, on each Interest Payment
Date.


 


As interest becomes due on this Note, but
subject to the subordination provisions of the Note Indenture hereinafter
described, the Corporation shall cause to be sent by prepaid ordinary mail a
cheque or by other transfer of funds by such means as may be considered
appropriate by the Trustee for such interest (less any tax required by law to
be withheld therefrom) payable to the order of the Holder and addressed to it
at its last address or account, as the case may be, appearing on the Register,
unless the Holder otherwise directs.  In
the case of joint Holders, the cheque or other transfer of funds, as the case
may be, shall be payable or issued to the order of all such joint Holders and
addressed to them at the last address or account, as the case may be, appearing
on the Register, unless such joint Holders otherwise direct.  If more than one address or account appears
on the Register in respect of such joint Holders, the cheque or other transfer
of funds, as the case may be, shall be mailed or delivered, as the case may be,
to the first address or account so appearing. 
In the event of non-receipt of any cheque or funds for interest by the
Holder, the Corporation will cause to be issued to the Holder a replacement
cheque or replacement transfer of funds for like amount upon being furnished
with such evidence of non-receipt as it shall reasonably require and upon being
indemnified to its satisfaction, acting reasonably.


 


46

















 


This Note is one of the Notes in lawful money
of Canada issued under a Note Indenture (herein referred to as the “Note Indenture”) dated as of
September 2, 2003 between the Corporation and Valiant Trust Company, as
Trustee.  The aggregate principal amount
of Notes which may be authorized under the Note Indenture is limited to One
Billion and Five Hundred Million ($1,500,000,000) Dollars. Reference is hereby
made to the Note Indenture and any instruments supplemental thereto for a
statement and description of the terms and conditions upon which this Note is
issued and the rights and remedies of the Holders of any of the Notes, the
Corporation and the Trustee with respect thereto, all to the same effect as if
the provisions of the Note Indenture and of any instruments supplemental
thereto were herein set forth, to all of which provisions the registered Holder
of this Note, by acceptance hereof, assents.


 


The Notes are issuable as fully registered
Notes in a minimum dominations of One Hundred ($100) Dollars and integral
multiples of One ($1.00) Dollar thereafter. 
Upon compliance with the provisions of the Note Indenture, Notes of any
authorized denomination may be exchanged for an equal aggregate principal
amount of Notes in any other authorized denomination or denominations.


 


All Notes issued under the Note Indenture
rank equally and rateably without priority or preference.  This Note is a direct obligation of the
Corporation but is not secured by any mortgage, hypothec, charge or pledge.


 


All Notes issued under the Note Indenture are
subordinated to Senior Debt on the terms and conditions set forth in the Note
Indenture and the terms and conditions of any Subordination Agreement referred
to in the Note Indenture.


 


Except to the limited extent set forth in the
Note Indenture, the Corporation may not redeem, purchase or prepay this
Note.  The Holder hereof does not have
the right to require the Corporation to redeem this Note at any time.


 


The principal amount hereof may become or be
declared due before stated maturity on the conditions, in the manner, with the
effect and at the times set forth in the Note Indenture.


 


This Note may only be transferred upon
compliance with the conditions prescribed in the Note Indenture on the
Registers to be kept at the principal office of the Trustee in the City of
Calgary, and in such other place or places (if any) and/or by such other
registrar or registrars (if any) as the Corporation with the approval of the
Trustee and Trustee may designate, by the registered holder hereof or his
executors or administrators or other legal representatives, or his or their
attorney duly appointed by an instrument in writing in form and execution
satisfactory to the Trustee and/or other registrar (it any) and upon compliance
with such reasonable requirements as the Trustee and/or other registrar may
prescribe, and then, only if such transfer shall have been duly entered on one
of the appropriate Registers or noted on this Note by a proper registrar.


 


The Note Indenture contains provisions making
binding upon all Holders of Notes outstanding thereunder resolutions passed at
meetings of such Holders held in accordance with such provisions and
instruments in writing signed by the Holders of a specified percentage of the
aggregate principal amount of the Notes outstanding.


 


This Note shall not become obligatory for any
purpose until it shall have been certified by the Trustee for the time being
under the Note Indenture.


 


47

















 


Unless otherwise defined, all initially
capitalized terms used herein shall have the meanings ascribed to such terms in
the Note Indenture.


 


In witness whereof Baytex Acquisition Corp.
has caused this Note to be signed by its duly authorized officers as of the
         day of
                        ,
20   .


 


	
   

  	
  BAYTEX ACQUISITION
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   

  



 


 


THIS NOTE IS NOT VALID UNTIL
CERTIFIED BY THE TRUSTEE.


 


TRUSTEE’S CERTIFICATE


 


This Note is one of the Notes referred to in
the Note Indenture within mentioned.


 


	
   

  	
  VALIANT TRUST
  COMPANY, Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  (Authorized Signature)

  



 


48

















 


(Form of Transfer
Panel)


 


Transfer Form


 


FOR VALUE RECEIVED the undersigned sells,
assigns and transfers, without recourse, unto:


 


(Please print or typewrite name and address
of assignee)


 


the within Note of Baytex Acquisition Corp.
and hereby irrevocably constitutes and appoints
                               
as the attorney of the undersigned to transfer the said Note on the Registers
of the Notes due of the said Corporation, with full power of substitution in
the premises.


 


	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature of
  Transferor)

  
	
   

  	
   

  
	
   

  	
  The signature of the Transferor must
  correspond with the name written upon the face of this Certificate in every
  particular without alteration or enlargement or change whatsoever.

  



 


The signature of the registered holder of the
within Note to the foregoing assignment must be guaranteed by a Schedule I
major chartered bank, or trust company, or a member of an acceptable medallion
guarantee program.  The guarantor must
affix a stamp bearing the actual words “Signature Guaranteed”.


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature of
  Guarantor)

  



 


 


Name of Assignee:


 


Address of Assignee:


 


Social Insurance No. of Assignee:


 


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