Document:

Exhibit 10.3

 

Execution
Copy

 

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

 

RECITALS OF THE COMPANY

 

The
Company has duly authorized the creation of and issue of 95/8% Senior Subordinated Notes due 2010 (herein called the “Initial
Securities”), and 95/8% Senior Series B
Subordinated Notes due 2010 (the “Exchange Securities” and, together with the
Initial Securities, the “Securities”) of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture.

 

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

 

The
Company has also duly authorized the issuance of an unlimited amount of
additional Securities to be issued from time to time having identical terms and
conditions to the Securities offered hereby.

 

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

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

For
and in consideration of the premises and the purchase of the Securities by the
Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Securities, as follows:

 

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION

 

Section 1.01        
Definitions.

 

For
all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:

 

 

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

 

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

 

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

 

“Acquired
Indebtedness” means Indebtedness of a Person or any of its Subsidiaries
(a) existing at the time such Person is amalgamated, merged with or into
the Company or becomes a Restricted Subsidiary or (b) assumed in connection
with the acquisition of assets from such Person; provided that any Indebtedness of such Person that is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transaction by which such Person is merged with or
into the Company, becomes a Restricted Subsidiary or such assets are acquired
from such Person shall not be Acquired Indebtedness.

 

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

 

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

 

“Additional
Amounts” has the meaning set forth in Section 10.23.

 

“Additional
Securities” has the meaning set forth in Section 3.01.

 

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

 

“Adjusted
Consolidated Net Tangible Assets” means, without duplication, as of the date of
determination:

 

(i)           
the sum of (a) discounted future net cash flows from the proved oil and
gas reserves of the Company and its Restricted Subsidiaries calculated in
accordance with Commission guidelines but before any federal, state, provincial
or foreign income taxes, as estimated by the Company and confirmed by a Canadian
nationally recognized firm of independent petroleum engineers in a reserve
report prepared as of the end of the Company’s most recently completed fiscal
year for which

 

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audited
financial statements are available, increased and/or decreased, as the case may
be, as described in clause (b), and determined without including as an
encumbrance the Net Profits Interest, (b) the capitalized costs that are
attributable to the oil and gas properties of the Company and its Restricted
Subsidiaries to which no proved oil and gas reserves are attributable, based on
the Company’s books and records as of a date no earlier than the date of the
Company’s latest annual or quarterly financial statements, (c) the Net Working
Capital on a date no earlier than the date of the Company’s latest annual or
quarterly financial statements and (d) the greater of:

 

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

 

(2)          
appraised value, as estimated by independent appraisers, of other tangible
assets of the Company and its Restricted Subsidiaries, including, without
duplication, Investments in unconsolidated Restricted Subsidiaries, as of the
date no earlier than the date of the Company’s latest audited financial
statements,

 

(ii)          
minus the sum of

 

(a)          
minority interests,

 

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

 

(c)          
to the extent included in the clause (i)(a) above, the discounted future net
cash flows, calculated in accordance with Commission guidelines but before any
federal, state, provincial or foreign income taxes and utilizing the prices
utilized in the Company’s and its Restricted Subsidiaries’ year-end reserve
report, attributable to reserves which are required to be delivered to third
parties to fully satisfy the obligations of the Company and its Restricted
Subsidiaries with respect to Volumetric Production Payments on the schedules
specified with respect thereto.

 

(d)          
the discounted future net cash flows, calculated in accordance with Commission
guidelines but before any federal, state, provincial or foreign income taxes,
attributable to reserves subject to Dollar-Denominated Production Payments
which, based on the estimates of production and price assumptions included in
determining the discounted future cash flows specified in clause (i)(a) above,
would be necessary to fully satisfy payment obligations of the Company and its
Restricted Subsidiaries with respect to Dollar-Denominated Production payments
on the schedules specified with respect thereto.

 

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

 

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

 

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

 

(iii)         
estimated proved oil and gas reserves produced or disposed of since such
year-end, and

 

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

 

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

 

“Affected
Obligor” has the meaning set forth in Section 14.02.

 

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

 

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

 

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

 

4

 

“Applicable
Procedures” means applicable procedures of the Depositary, CDS, Euroclear
System or Clearstream Banking, as the case may be.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

“Borrowing
Base” means the borrowing base under the Senior Credit Facilities, which may
include any other covenant in such Senior Credit Facilities which limits the
amount of Indebtedness the Company may incur or have outstanding.

 

“Business
Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in New York or Calgary, Alberta, Canada
are authorized or obligated by law, regulation or executive order to close.

 

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

 

“Canadian
Securities Commissions” shall mean the securities commission or other
appropriate regulatory authority in each of the Relevant Provinces.

 

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

 

“Capital
Stock” of any Person means any and all shares, partnership interests, trust
units, participations, rights in or other equivalents of, or interests in, the
equity of such Person, including each class of common stock and Preferred
Stock, but excluding any debt securities convertible into such equity.

 

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

 

“CDS”
means The Canadian Depository for Securities Limited

 

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

 

6

 

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

 

(b)          
subsequent to the Reorganization, any Person or “group” (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person will be deemed to have “beneficial ownership” of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the voting power of all classes of the Voting Stock of the
Company’s direct parent Baytex Energy Trust,

 

(c)          
during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with
any new directors whose election to such Board of Directors, or whose
nomination for election by the stockholders of the Company, was approved by a
vote of at least a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or

 

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

 

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

 

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

 

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

 

“Closing
Date” means the date on which the Initial Securities are originally issued
under this Indenture.

 

“Collateral
Documents” means the Mirror Note, along with all guarantees of the Mirror Note
(including the Guarantee and Indemnity from each of Baytex Resources Ltd. and
Baytex Exploration Ltd.), the Mirror Note Assignment from Baytex Energy Ltd. in
favor of the Trustee, the Baytex Energy Partnership Consent and Acknowledgment,
the Baytex Resources Ltd. Consent and Acknowledgment, the Baytex Exploration
Ltd. Consent and Acknowledgment and all other related documents pledging such
note and guarantees to the Trustee for the benefit of the Holders, and any
Additional

 

7

 

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

 

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

 

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

 

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

 

“Company
Request” or “Company Order” means a written request or order signed in the name
of the Company by its Chairman, its Chief Executive Officer, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.

 

“Consolidated
Cash Flow from Operations” means, for any period, the sum of, without
duplication, Consolidated Net Income for such period, plus (or, in the case of
clause (3) below, plus or minus) the following items to the extent included in
computing Consolidated Net Income for such period:

 

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

 

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

 

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

 

provided that income tax expense, depletion, depreciation
and amortization expense and non-cash charges and credits of a Restricted
Subsidiary will be included in Consolidated

 

8

 

Cash Flow from Operations
only to the extent, and in the same proportion, that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income for
such period.

 

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

 

“Consolidated
EBITDA” means, for any period, the sum of, without duplication, Consolidated
Net Income for such period, plus (or, in the case of clauses (d) and (e) below,
plus or minus) the following items to the extent included in computing
Consolidated Net Income for such period (a) Fixed Charges for such period, plus
(b) the federal, provincial, state, local and foreign income tax expense of the
Company and its Restricted Subsidiaries for such period paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), plus (c) the
depletion, depreciation and amortization expense of the Company and its
Restricted Subsidiaries for such period, plus (d) site restoration costs,
plus (e) any other non-cash charges for such period (including any
non-cash charges related to a ceiling test write-down required under GAAP) and
minus non-cash credits for such period, other than non-cash charges or credits
resulting from changes in prepaid assets or accrued liabilities in the ordinary
course of business; provided that
income tax expense, depletion, depreciation and amortization expense and
non-cash charges and credits of a Restricted Subsidiary shall be included in
Consolidated EBITDA only to the extent (and in the same proportion) that the
net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income for such period.

 

“Consolidated
Net Income” means, for any period, the net income (or net loss) of the Company
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, adjusted to the extent included in calculating
such net income or loss by excluding (a) any net after-tax extraordinary gains
or losses (less all fees and expenses relating thereto), (b) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to Asset
Sales, (c) the net income (but not the net loss) of any Person (other than the
Company or a Restricted Subsidiary), in which the Company or any Restricted
Subsidiary has an equity interest, except that the aggregate amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period will be included in such Consolidated Net
Income, (d) the net income (or loss) of any Person acquired by the Company or
any Restricted Subsidiary in a “pooling of interests” transaction attributable
to any period prior to the date of such acquisition, (e) the net income (but
not the net loss) of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of such net income is at the date of

 

9

 

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

 

“Consolidated
Net Worth” means, at any date of determination, the shareholders’ equity as set
forth on the most recently available quarterly or annual consolidated balance
sheet of the Company and its Restricted Subsidiaries, less any amounts
attributable to Disqualified Stock or any equity security convertible into or
exchangeable for Indebtedness, the cost of treasury stock and the principal
amount of any promissory notes receivable from the sale of the Capital Stock of
the Company and less, to the extent included in calculating such shareholders’
equity of the Company and its Restricted Subsidiaries, the shareholders’ equity
attributable to Unrestricted Subsidiaries, each item to be determined in
conformity with GAAP.

 

“Corporate
Trust Office” means the principal corporate trust office of the Trustee, at
which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is
located at One Liberty Plaza, New York, New York 10006, except that with
respect to presentation of Securities for payment or for registration of
transfer or exchange, such term shall mean the office or agency of the Trustee
at which, at any particular time, its corporate trust and agency business shall
be conducted.

 

“Currency
Agreements” means, with respect to any Person, any spot or forward foreign
exchange agreements and currency swap, currency option or other similar
financial agreements or arrangements entered into by such Person or any of its
Restricted Subsidiaries in the ordinary course of business and designed to
protect against or manage exposure to fluctuations in foreign currency exchange
rates.

 

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

 

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

 

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

 

“Defaulted
Interest” has the meaning specified in Section 3.09.

 

10

 

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

 

“Designated
Senior Indebtedness” means (i) all Senior Indebtedness under the Senior Credit
Facilities and (ii) any other issue of Senior Indebtedness or refinancing
thereof permitted by the definition of Senior Indebtedness, having a principal
amount of at least US$20.0 million.

 

“Disinterested
Director” means, with respect to any transaction or series of transactions in
respect of which the Board of Directors is required to deliver a resolution of
the Board of Directors, to make a finding or otherwise take action under this
Indenture, a member of the Board of Directors who does not have any material
direct or indirect financial interest in or with respect to such transaction or
series of transactions.

 

“Disqualified
Stock” means any class or series of Capital Stock that, either by its terms, or
by the terms of any security into which it is convertible or exchangeable or by
contract or otherwise (a) is, or upon the happening of an event or passage of
time would be, required to be redeemed on or prior to the final Stated Maturity
of the Securities, (b) is redeemable at the option of the holder thereof at any
time on or prior to such final Stated Maturity or (c) at the option of the
holder thereof, is convertible into or exchangeable for debt securities at any
time on or prior to such final Stated Maturity; provided that any Capital Stock that would not constitute
Disqualified Stock but for provisions therein giving holders thereof the right
to cause the issuer thereof to repurchase or redeem such Capital Stock upon the
occurrence of an “asset sale” or “change of control” occurring prior to the
Stated Maturity of the Securities will not constitute Disqualified Stock if the
“asset sale” or “change of control” provisions applicable to such Capital Stock
are no more favorable to the holders of such Capital Stock than the provisions
contained in Sections 10.12 and 10.13 and such Capital Stock specifically
provides that the issuer will not repurchase or redeem any of such stock
pursuant to such provision prior to the Company’s repurchase of such of the
Securities as are required to be repurchased pursuant to Sections 10.12 and
10.13.

 

“Dollar-Denominated
Production Payments” means production payment obligations of the Company or a
Restricted Subsidiary recorded as liabilities in accordance with GAAP, together
with all undertakings and obligations in connection therewith.

 

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

 

“Event
of Default” has the meaning specified in Section 5.01.

 

“Excess
Proceeds” has the meaning set forth in Section 10.13.

 

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

 

11

 

“Exchange
Offer” means the exchange offer that may be effected pursuant to the
Registration Rights Agreement.

 

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

 

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

 

“Exchanged
Properties” means properties or assets used or useful in the Oil and Gas
Business received by the Company or a Restricted Subsidiary, whether directly
or indirectly through the acquisition of the Capital Stock of a Person holding
such assets so that such Person becomes a Wholly Owned Restricted Subsidiary of
the Company, in trade or as a portion of the total consideration for such other
properties or assets.

 

“Excluded
Holder” has the meaning specified in Section 10.25.

 

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

 

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

 

“Fixed
Charges” means, for any period, without duplication, the sum of (a) the amount
that, in conformity with GAAP, would be set forth opposite the caption
“interest expense” (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount,
(ii) the net cost of Interest Rate Agreements (including amortization of
discounts), (iii) the interest portion of any deferred payment obligation,
(iv) amortization of debt issuance costs and (v) the interest
component of Capital Lease Obligations, plus (b) cash dividends paid on
Preferred Stock and Disqualified Stock by the Company and any Restricted
Subsidiary to any Person other than the Company and its Restricted Subsidiaries,
plus (c) all interest on any Indebtedness of any Person guaranteed by the
Company or any of its Restricted Subsidiaries; provided,
however, that Fixed Charges shall
not include (i) any gain or loss from extinguishment of debt, including
the write-off of debt issuance costs and (ii) the fixed charges of a
Restricted Subsidiary to the extent (and in the same proportion) that the net
income of such Subsidiary was excluded in calculating Consolidated Net Income
pursuant to clause (e) of

 

12

 

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

 

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

 

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

 

“Funding
Guarantor” has the meaning set forth in Section 13.02.

 

“Generally
Accepted Accounting Principles” or “GAAP” means generally accepted accounting
principles in Canada, consistently applied, that are in effect on the date of
this Indenture.

 

“Global
Security” shall have the meaning specified in Section 2.01.

 

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

 

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

 

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

 

“Guarantor
Senior Indebtedness” means, as to any Guarantor, the principal of (premium, if
any) and interest on (including interest accruing after the filing of a
petition initiating any proceeding pursuant to any bankruptcy law, whether or
not allowed) and other amounts due on or in connection with any Indebtedness of
such Guarantor (other than the Guarantee made by such Guarantor or Pari Passu
Indebtedness), whether outstanding on the Closing Date or thereafter incurred,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness will be subordinate in right of payment to the
Guarantees by such Guarantor.  Without limiting the generality of the
foregoing, “Guarantor Senior Indebtedness” includes the principal of (premium,
if any) and interest (including interest accruing after the

 

13

 

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

 

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

 

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

 

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

 

14

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

 

“Indenture” means this
instrument as originally executed and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.

 

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

 

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

 

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

 

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

 

“Interest Rate
Agreements” means any interest rate protection agreements and other types of
interest rate hedging agreements including, without limitation, interest rate
swaps, caps, floors, collars and similar agreements and other related
agreements entered into in the ordinary course of business and designed to
protect against or manage exposure to fluctuations in interest rates.

 

“Investment” in any
Person means (a) any direct or indirect advance, loan or other extension
of credit (including, without limitation, a guarantee) or capital contribution
(by means of any transfer of cash or other property to others or any payment
for property or services for the account or use of others) to, or any purchase,
acquisition or ownership of, any Capital Stock, Indebtedness or other
securities issued by such Person, the acquisition (by purchase or otherwise) of
all or substantially all of the business or assets of such Person, or the
making of any investment of cash or other property in such Person, (b) the
designation of any Restricted Subsidiary as an Unrestricted Subsidiary,
(c) the transfer of any assets or properties from the Company or a
Restricted Subsidiary to an Unrestricted Subsidiary, other than the transfer of
assets or properties made in the ordinary course of business and (d) the
fair market value of the Capital Stock (or any other Investment), held by the
Company or any of its Restricted Subsidiaries, of (or in) any Person that has
ceased to be a Restricted Subsidiary. 
Investments exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.

 

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

 

15

 

lease in the nature
thereof, but excluding a title retention agreement to the extent it constitutes
an operating lease under Canadian law.

 

“Liquid Securities” means
securities of an issuer that is not an Affiliate of the Company, and that are
publicly traded on the New York Stock Exchange, the American Stock Exchange,
the Toronto Stock Exchange, the London Stock Exchange, the Nasdaq National
Market or the Canadian Venture Exchange. 
Securities meeting the requirements of the preceding sentence shall be
treated as Liquid Securities from the date of receipt thereof until and only
until the earlier of:  (a) the date
on which such securities, or securities exchangeable for, or convertible into,
such securities, are sold or exchanged for cash or Cash Equivalents, and (b) 180
days following the date of receipt of such securities.  If such securities, or securities
exchangeable for, or convertible into, such securities, are not sold or
exchanged for cash or Cash Equivalents within 180 days of receipt thereof, for
purposes of determining whether the transaction pursuant to which the Company
or its Restricted Subsidiary received the securities was in compliance with the
provisions of Section 10.13, such securities shall not be deemed to have
been Liquid Securities until 181 days following the date of receipt of such securities.

 

“Material Change” means
an increase or decrease, excluding changes that result solely from changes in
prices, of more than 30% during a fiscal quarter in the estimated discounted
future net cash flows from proved oil and gas reserves of the Company and its
Restricted Subsidiaries, calculated in accordance with clause (i) of the
definition of Adjusted Consolidated Net Tangible Assets; provided, however,
that the following will be excluded from the calculation of Material Change:
(a) any acquisitions during the quarter of oil and gas reserves that have
been estimated by a Canadian nationally recognized firm of independent
petroleum engineers and on which a report or reports exist, and (b) any
disposition of properties held at the beginning of such quarter that have been
disposed of as provided in the covenant described under Section 10.13.

 

“Maturity”, when used
with respect to any Security, means the date on which the principal of such
Security or an installment of principal becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, notice of redemption or otherwise.

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

“Non-Guarantors” means
Subsidiaries which are not Guarantors.

 

“Non-Recourse Purchase
Money Indebtedness” means:  (a) the
Company’s and any Restricted Subsidiary’s Indebtedness, other than Capital
Lease Obligations, incurred in connection with the acquisition by the Company
or such Restricted Subsidiary in the ordinary course of business of fixed
assets used in the Oil and Gas Business, including office buildings and other
real property used the Company or such Restricted Subsidiary in conducting the
Company’s or such Restricted Subsidiary’s operations, and (b) any renewals
and refinancings of such Indebtedness. 
For Indebtedness described in the clauses (a) and (b) to qualify as
Non-Recourse Purchase Money Indebtedness, the holders of such Indebtedness must
agree that they will look solely to the fixed assets so acquired and the
proceeds thereof which secure such Indebtedness, subject to customary
exceptions such as indemnifications for environmental, title, fraud and other
matters, and neither the Company nor any Restricted Subsidiary may:  (x) be directly or indirectly liable
for such Indebtedness, or (y) provide credit support, including any
undertaking, guarantee, agreement or instrument that would constitute
Indebtedness, other than the grant of a Lien on such acquired fixed assets and
the proceeds therefrom.

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)           Securities, except to the extent
provided in Sections 12.02 and 12.03, with respect to which the Company
has effected defeasance and/or covenant defeasance as provided in
Article XII; and

 

18

 

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

 

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

 

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

 

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

 

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

 

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

 

“Permitted Indebtedness”
means, without duplication:

 

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

 

(ii)           Indebtedness of the Company or any
Restricted Subsidiary outstanding on the Closing Date, reduced by the amount of
any scheduled amortization

 

19

 

payments or mandatory
prepayments when actually paid or permanent reductions thereon, other than
Indebtedness described under clause (i) above;

 

(iii)          Indebtedness owed by the Company to
any Wholly-Owned Restricted Subsidiary or owed by any Restricted Subsidiary to
the Company or a Wholly-Owned Restricted Subsidiary, provided, however,
that if the Company is the obligor on such Indebtedness, such Indebtedness in
unsecured; and provided, further, however, that if any such Wholly-Owned
Restricted Subsidiary ceases to be (for any reason) a Wholly-Owned Restricted
Subsidiary, then this clause (iii) shall no longer be applicable to
Indebtedness owed by the Company or any Restricted Subsidiary to such
Restricted Subsidiary that was formerly a Wholly-Owned Restricted Subsidiary;

 

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

 

(v)           Indebtedness of the Company or any
Restricted Subsidiary in respect of Hedging Obligations incurred in the
ordinary course of business; provided that, with respect to Interest
Rate Agreements, the notional amount of any such Interest Rate Agreement does
not exceed the principal amount of the Indebtedness to which the Interest Rate
Agreement relates;

 

(vi)          Capital Lease Obligations of the
Company or any Restricted Subsidiary, provided that the aggregate amount of
Indebtedness under this clause (vi) does not exceed US$5,000,000 at any one
time outstanding;

 

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

 

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

 

(ix)           in-kind obligations relating to net
gas balancing positions arising in the ordinary course of business and
consistent with past practice;

 

(x)            Non-Recourse Purchase Money
Indebtedness;

 

(xi)           Indebtedness pursuant to any of the
Collateral Documents;

 

(xii)          Deeply Subordinated Inter-company
Debt;

 

20

 

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

 

(xiv)        Indebtedness not otherwise permitted by
the first paragraph of Section 10.10 and any other clause of this
definition, in an aggregate principal amount not to exceed US$20.0 million at
any one time outstanding.

 

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

 

“Permitted Investments”
means any of the following:

 

(a)           Investments in Cash Equivalents.

 

(b)           Investments by the Company or any
Restricted Subsidiary in another Person, if as a result of such Investment such
other Person (i) becomes a Wholly-Owned Restricted Subsidiary or (ii) is
merged, amalgamated or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, the Company or a Wholly-Owned Restricted
Subsidiary.

 

21

 

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

 

(d)           Investments existing on the Closing
Date.

 

(e)           Investments made as a result of the
receipt of non-cash consideration in an Asset Sale permitted under
Section 10.13.

 

(f)            Investments consisting of loans and
advances to officers and employees of the Company for reasonable travel,
relocation and business expenses in the ordinary course of business for bona
fide business purposes not in excess of US$1,000,000 at any one time
outstanding.

 

(g)           Investments the payment for which
consists exclusively of Capital Stock (exclusive of Disqualified Stock) of the
Company.

 

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

 

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

 

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

 

“Person” means any
individual, corporation, limited or general partnership, limited liability
company,  joint venture, association,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.

 

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

 

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

 

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

 

22

 

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

 

“Private Placement
Legend” has the meaning specified in Section 2.02.

 

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

 

“Qualified Equity
Interest” means any Qualified Stock and all warrants, options or other rights
to acquire Qualified Stock (but excluding any debt security that is convertible
into or exchangeable for Capital Stock).

 

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

 

“QIB” means a “Qualified
Institutional Buyer” under Rule 144A.

 

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

 

“Redemption Price”, when
used with respect to any Security to be redeemed, means the price at which it
is to be redeemed pursuant to this Indenture.

 

“Registrar” means The
Bank of Nova Scotia Trust Company of New York and any successor authorized by
the Company to act as Registrar.

 

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

 

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

 

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

 

“Regulation S” means
Regulation S under the Securities Act.

 

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

 

“Relevant Provinces”
shall mean any of the provinces of Canada in which purchases of Initial
Securities were made pursuant to applicable exceptions from prospectus
requirements.

 

“Reorganization” means
the transactions contemplated by the Company’s plan of reorganization, which
transactions include, without limitation, the formation of a new oil and gas
trust and the transfer, directly and indirectly, of 100% of the Company’s

 

23

 

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

 

“Restricted Global
Security” has the meaning specified in Section 2.01.

 

“Restricted Payment” means
any of the following:

 

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

 

(b)           the purchase, redemption or other
acquisition or retirement for value, directly or indirectly of any shares of
Capital Stock (or any options, warrants or other rights to acquire shares of
Capital Stock) of (i) the Company or any Unrestricted Subsidiary or (ii) any
Restricted Subsidiary held by any Affiliate of the Company (other than, in
either case, any such Capital Stock owned by the Company or any of its
Restricted Subsidiaries);

 

(c)           the making of any principal payment
on, or the repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to any scheduled principal payment, sinking fund
payment or maturity, of any Pari Passu Indebtedness or any Subordinated
Indebtedness;

 

(d)           the making of any Investment (other
than a Permitted Investment) in any Person;

 

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

 

(f)            the making of any payment or
distribution on the Net Profits Interest.

 

“Restricted Period” has
the meaning set forth in Section 3.06.

 

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

 

24

 

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

 

“Securities” has the
meaning stated in the first recital of this Indenture and more particularly
means any Securities authenticated and delivered under this Indenture.  For all purposes of this Indenture, the term
“Securities” shall include any Exchange Securities to be issued and exchanged
for any Initial Securities in accordance with the Exchange Offer as provided
for in the Registration Rights Agreement and this Indenture.  From and after the issuance of any
Additional Securities pursuant to Section 3.12 (but, not for purposes of
determining whether such issuance is permitted hereunder), “Securities” shall
include such Additional Securities for purposes of this Indenture, and all
Initial Securities, Exchange Securities and Additional Securities shall vote
together as one series of Securities under this Indenture.

 

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

 

“Securities Payment” has
the meaning set forth in Section 14.02.

 

“Security Register” has
the meaning set forth in Section 3.05.

 

“Senior Credit
Facilities” means the credit agreement made as of July 9, 2003, among the Company, the Banks and The
Toronto-Dominion Bank, as agent, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), as the credit agreement or such other documents may be amended,
renewed, extended, substituted, assigned by the agent or any lender, restated,
refinanced, restructured, supplemented or otherwise modified from time to time
(including, without limitation, any successive amendments, renewals,
extensions, substitutions, assignments, restatements, refinancings,
restructuring, supplements or other modifications of the foregoing (including
increasing the amount of available borrowings thereunder, provided that such increase
in borrowings is permitted by Section 10.10, or adding Restricted
Subsidiaries as additional borrowers or guarantors thereunder)) of all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders).

 

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

 

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

 

25

 

premium, if any) and
interest (including interest accruing after the occurrence of an event of
default or after the filing of a petition initiating any proceeding pursuant to
any bankruptcy law, whether or not allowed) on and all other amounts owing in
respect of (i) all obligations of every nature of the Company from time to
time owed to the Banks and the Senior Credit Facilities Agent under the Senior
Credit Facilities, provided, however, that any Indebtedness under any
refinancing, refunding or replacement of the Senior Credit Facilities shall not
constitute Senior Indebtedness to the extent that the Indebtedness thereunder
is by its express terms subordinate to any other Indebtedness of the Company
and (ii) all Hedging Obligations. 
Notwithstanding the foregoing, “Senior Indebtedness” shall not include
(a) Indebtedness that is represented by Disqualified Stock, (b) any
trade payables, (c) Indebtedness of or amounts owed by the Company for
compensation to employees or for services rendered to the Company, (d) any
liability for foreign, federal, provincial, state, local or other taxes owed or
owing by the Company, (e) Indebtedness of the Company to a Subsidiary of
the Company or any other Affiliate of the Company or any of such Affiliate’s
Subsidiaries, (f) that portion of any Indebtedness that, at the time of
the incurrence, is incurred by the Company in violation of this Indenture and
(g) amounts owing under leases (other than Capital Lease Obligations).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26

 

“Subordinated
Indebtedness” means Indebtedness of the Company or a Guarantor that is
subordinated in right of payment to the Securities or the Guarantee issued by
such Guarantor (if any), as the case may be.

 

“Subsidiary” means any
Person a majority of the equity ownership or Voting Stock (including, without
limitation, partnership interests) of which is at the time owned, directly or
indirectly, by the Company and/or one or more Subsidiaries of the Company.

 

“Surviving Entity” has
the meaning specified in Section 8.01.

 

“Taxes” has the meaning
specified in Section 10.23.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Volumetric Production
Payments” means production payment obligations of the Company or its Restricted
Subsidiaries recorded as deferred revenue in accordance with GAAP, together
with all undertakings and obligations in connection therewith.

 

27

 

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

 

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

 

Section 1.02         Compliance Certificates and Opinions.

 

Upon any application or
request by the Company or any Guarantor, if any, to the Trustee to take any
action under any provision of this Indenture, the Company or such Guarantor, as
the case may be, shall furnish to the Trustee an Officers’ Certificate stating
that all conditions precedent, if any, provided for in this Indenture
(including any covenant compliance with which constitutes a condition
precedent) relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.

 

Every certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Indenture (other than pursuant to Section 10.08(a)) shall
include:

 

(a)           a statement that each individual
signing such certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;

 

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

 

(c)           a statement that, in the opinion of
each such individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or not
such covenant or condition has been complied with; and

 

(d)           a statement as to whether, in the
opinion of each such individual, such condition or covenant has been complied
with.

 

28

 

Section 1.03         Form of Documents Delivered to Trustee.

 

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

 

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

 

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

 

Section 1.04         Acts of Holders.

 

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

 

(b)           The fact and date of the execution by
any Person of any such instrument or writing may be proved by the affidavit of
a witness of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof.  Where such execution is by a
signer

 

29

 

acting in a capacity
other than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of authority. 
The fact and date of the execution of any such instrument or writing, or
the authority of the Person executing the same, may also be proved in any other
manner that the Trustee deems sufficient and in accordance with such reasonable
rules as the Trustee may determine; and the Trustee may in any instance require
further reasonable proof with respect to any of the matters referred to in this
Section.

 

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

 

(d)           If the Company or any Guarantor, if
any, shall solicit from the Holders of Securities any request, demand, authorization,
direction, notice, consent, waiver or other Act, the Company or any such
Guarantor (as the case may be) may, at its option, by or pursuant to a Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company or any such Guarantor (as the
case may be) shall have no obligation to do so.  Notwithstanding TIA Section 316(c), such record date shall
be the record date specified in or pursuant to such Board Resolution, which
shall be a date not earlier than the date 30 days prior to the first
solicitation of Holders generally in connection therewith and not later than
the date such solicitation is completed. 
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for the purposes of determining
whether Holders of the requisite proportion of Outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that purpose the Outstanding
Securitiesshall be computed as of such record date; provided that no such
authorization, agreement or consent by the Holders on such record date shall be
deemed effective unless it shall become effective pursuant to the provisions of
this Indenture not later than eleven months after the record date.

 

(e)           Any request, demand, authorization,
direction, notice, consent, waiver or other Act of the Holder of any Security  shall
bind every future Holder of the same Security  and the Holder of every Security  issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company and/or the Guarantors in reliance thereon, whether or
not notation of such action is made upon such Security.

 

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

 

30

 

Section 1.05         Notices, etc., to Trustee, Company
or Guarantors.

 

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

 

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

 

(b)           the Company by the Trustee, any
Holder or any Guarantor shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to the Company, addressed to it at 205 –5th Avenue S.W., Suite
2200, Calgary, Alberta, Canada T2P 2V7, Attention:  Chief Financial Officer, or sent by
facsimile to the Company at (403) 205-3845 with receipt confirmed by telephone
at (403) 269-4282 (or at any other address or facsimile number previously
furnished in writing to the Trustee by the Company); or

 

(c)           any Guarantor by the Company, any
other Guarantor, the Trustee or any Holder shall be sufficient for any purpose
hereunder (unless otherwise herein expressly provided) if in writing, and
mailed, first class postage prepaid, to such Guarantor addressed to it at c/o
Baytex Energy Ltd., 205 –5th Avenue S.W., Suite 2200, Calgary, Alberta, Canada
T2P 2V7, Attention:  Chief
Financial Officer, or sent by facsimile to such Guarantor at (403) 205-3845
(with receipt confirmed by telephone at (403) 269-4282), or at any other
address or facsimile number previously furnished in writing to the Trustee by
such Guarantor.

 

Section 1.06         Notice to Holders, Waiver.

 

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

 

31

 

In case, by reason of the
suspension of or irregularities in regular mail service or by reason of any
other cause, it shall be impracticable to mail notice of any event to Holders
when such notice is required to be given pursuant to any provision of this
Indenture, then any manner of giving such notice as shall be directed by the
Company and reasonably satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.

 

Section 1.07         Conflict of any Provision of
Indenture with Trust Indenture Act.

 

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

 

Section 1.08         Effect of Headings and Table of
Contents.

 

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

 

Section 1.09         Successors and Assigns.

 

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

 

Section 1.10         Severability Clause.

 

In case any provision in
this Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.

 

Section 1.11         Benefits of Indenture.

 

Nothing in this Indenture
or in the Securities, express or implied, shall give to any Person, other than
the parties hereto, any Paying Agent, any Securities  Registrar and their
successors hereunder, the Holders and any holder of Senior Indebtedness with
respect to Article XIV, any benefit or any legal or equitable right,
remedy or claim under this Indenture.

 

Section 1.12         Governing Law.

 

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

 

32

 

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

 

Section 1.13         Legal Holidays.

 

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

 

Section 1.14         Rules of Construction.

 

Unless the context
otherwise requires:

 

(1)           a term has the meaning assigned to
it;

 

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

 

(3)           “or” is not exclusive;

 

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

 

(5)           provisions apply to successive events
and transactions;

 

33

 

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

 

Section 1.15         Agent for Service; Submission to
Jurisdiction; Waiver of Immunities.

 

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

 

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

 

Section 1.16         Judgment Currency.

 

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

 

34

 

ARTICLE II

SECURITY FORMS

 

Section 2.01         Forms Generally.

 

The Securities and the
Trustee’s certificate of authentication shall be in substantially the form
annexed hereto as Exhibit A, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities.  Any
portion of the text of any Security may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Security.

 

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

 

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

 

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

 

Initial Securities
offered and sold in reliance on Regulation S shall be issued initially in
the form of one or more permanent global Securities in fully registered form
without interest coupons substantially in the form set forth in Exhibit A
(collectively, the “Regulation S Global Security” and, together with the
Restricted Global Security, the “Global Securities” or each individually, a
“Global Security”) deposited with, or on behalf of the Depository or with the
Trustee, as custodian for the Depositary. 
Interests in the Regulation S Global Security may be held through the
accounts of CDS, Euroclear and Clearstream, which are indirect participants in
DTC, duly executed by the Company and authenticated by the Trustee as
hereinafter provided.  The aggregate
principal amount of the Regulation S Global Security may from time to time be
increased

 

35

 

or decreased by
adjustments made on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.

 

If DTC is at any time
unwilling or unable to continue as a depositary, the Company will issue
certificates for the Securities in definitive, fully registered, non-global
form without interest coupons in exchange for the Regulation S Global
Security or Restricted Global Security, as the case may be. In all cases,
certificates for Securities delivered in exchange for any Global Security or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by DTC.

 

In the case of
certificates for Securities in non-global form issued in exchange for the
Regulation S Global Security or Restricted Global Security, such
certificates will bear the first legend appearing under Section 2.02 of this
Indenture (unless the Company determines otherwise in accordance with
applicable law). The holder of a Security in non-global form may transfer such
Security, subject to compliance with the provisions of such legend, by
surrendering it at the office or agency maintained by the Company for such
purpose in the Borough of Manhattan, The City of New York, which initially will
be the office of the Trustee.

 

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

 

Section 2.02         Restrictive Legends.

 

Unless and until an
Initial Security is sold under an effective Registration Statement, exchanged
for an Exchange Security in connection with an effective Registration Statement
or exchanged pursuant to a Canadian Final Prospectus for which receipts have
been issued by each of the Canadian Securities Commissions in the Relevant
Provinces, in each case pursuant to the Registration Rights Agreement, each
certificate representing a Security shall contain a legend substantially to the
following effect (the “Private Placement Legend”) on the face thereof:

 

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

 

36

 

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

 

and, if issued to holders resident in Canada:

 

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

 

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

 

UNLESS THIS CERTIFICATE
IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER,

 

37

 

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

 

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

 

ARTICLE III

THE SECURITIES

 

Section 3.01         Title and Terms.

 

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

 

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

 

38

 

duly provided for, to the
Person in whose name the Security (or any predecessor Security) is registered
at the close of business on the January 1 or July 1 next preceding
such Interest Payment Date.

 

The principal of
(premium, if any) and interest on the Securities shall be payable, and the
Securities shall be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes, (which
initially shall be the office of the Trustee located at One Liberty Plaza, 23rd
Floor, New York, New York 10006) or, at the option of the Company, interest may
be paid by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security Register; provided that all payments
with respect to the U.S. Global Securities, as well as Physical Securities the
Holders of which have given wire transfer instructions to the Trustee (or other
Paying Agent) by the Regular Record Date for such payment, will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof.

 

Securities that remain
outstanding after the consummation of the Exchange Offer and Exchange
Securities issued in connection with the Exchange Offer will be treated as a
single class of securities under this Indenture.

 

The Securities shall be
redeemable as provided in Article XI.

 

Section 3.02         Denominations.

 

The Securities shall be
issuable only in registered form without coupons and only in denominations of
US$1,000 and any integral multiple thereof.

 

Section 3.03         Execution, Authentication, Delivery
and Dating.

 

The Securities shall be
executed on behalf of the Company by its Chairman, its President or a Vice
President.  The signature of any of
these officers on the Securities may be manual or facsimile signatures of the
present or any future such authorized officer and may be imprinted or otherwise
reproduced on the Securities.

 

Securities bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.

 

At any time and from time
to time after the execution and delivery of this Indenture, the Company may
deliver Initial Securities executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Initial Securities directing the Trustee to authenticate the
Securities and certifying that all conditions precedent to the issuance of
Securities contained herein have been fully complied with, and the Trustee in
accordance with such Company Order shall authenticate and deliver such Initial
Securities.  On Company Order, the
Trustee shall

 

39

 

authenticate for original
issue Exchange Securities in an aggregate principal amount not to exceed
US$179,699,000 plus the aggregate principal amount of any Additional Securities
issued; provided
that such Exchange Securities shall be issuable only upon the valid surrender
for cancellation of Initial Securities of a like aggregate principal amount in
accordance with an Exchange Offer pursuant to the Registration Rights Agreement
and a Company Order for the authentication of such securities certifying that
all conditions precedent to the issuance have been complied with (including the
effectiveness of a registration statement related thereto).  In each case, the Trustee shall be entitled
to receive an Officers’ Certificate and an Opinion of Counsel of the Company
that it may reasonably request in connection with such authentication of
Securities.  Such order shall specify
the amount of Securities to be authenticated and the date on which the original
issue of Initial Securities or Exchange Securities is to be authenticated.

 

Each Security shall be
dated the date of its authentication.

 

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

 

In case the Company,
pursuant to Article VIII, shall be amalgamated, consolidated or merged
with or into any other Person or shall convey, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any
Person, and the successor Person resulting from such amalgamation,
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article VIII, any of the
Securities authenticated or delivered prior to such amalgamation,
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Securities executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of like
principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange.  If
Securities shall at any time be authenticated and delivered in any new name of
a successor Person pursuant to this Section in exchange or substitution
for or upon registration of transfer of any Securities, such successor Person,
at the option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.

 

40

 

Section 3.04         Temporary Securities.

 

Pending the preparation
of definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive
Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities.

 

If temporary Securities
are issued, the Company will cause definitive Securities to be prepared without
unreasonable delay.  After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 10.02, without charge to the Holder.  Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations.  Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.

 

Section 3.05         Registration, Registration of
Transfer and Exchange.

 

The Company shall cause
to be kept at the Corporate Trust Office of the Trustee a register (the
register maintained in such office and in any other office or agency designated
pursuant to Section 10.02 being herein sometimes referred to as the
“Security Register”) in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Securities and of
transfers of Securities.  The Security
Register shall be in written form or any other form capable of being converted
into written form within a reasonable time. 
At all reasonable times, the Security Register shall be open to
inspection by the Trustee.  The Trustee
is hereby initially appointed as “Registrar” for the purpose of registering
Securities and transfers of Securities as herein provided.   The Company shall have the right to remove
and replace from time to time the Registrar; provided, that,
no such removal or replacement shall be effective until a successor Registrar
with respect to such Securities shall have been appointed by the Company and
shall have accepted such appointment by the Company.  In the event that the Trustee shall not be or shall cease to be
the Registrar with respect to the Securities, it shall have the right to
examine the Security Register at any reasonable times.  There shall be the one Security Register for
such Securities.

 

Upon surrender for
registration of transfer of any Security at the office or agency of the Company
designated pursuant to Section 10.02, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denomination or denominations of a like aggregate principal amount.

 

41

 

At the option of the
Holder, Securities may be exchanged for other Securities of any authorized
denomination and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at such office or agency.  Whenever any Securities are so surrendered for exchange
(including an exchange of Initial Securities for Exchange Securities), the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities, which the Holder making the exchange is entitled to receive; provided
that no exchange of Initial Securities for Exchange Securities shall occur
until an Exchange Offer Registration Statement shall have been declared
effective by the Commission or receipts for a Canadian Final Prospectus have
been issued by the Canadian Securities Commissions in each of the Relevant
Provinces, as applicable, and that the Initial Securities to be exchanged for
the Exchange Securities shall be cancelled by the Trustee.

 

Whenever any Securities
are so surrendered for exchange, the Company shall execute and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
election is entitled to receive.

 

Notwithstanding the
foregoing, except as otherwise specified as contemplated by Section 2.01,
any permanent global Security shall be exchangeable only as provided in this
paragraph and the immediately following paragraph.  If any beneficial owner of an interest in a permanent global
Security is entitled to exchange such interest for Securities of such series
and of like tenor and principal amount of another authorized form and
denomination, as contemplated by Section 3.01 and provided that any
applicable notice provided in the permanent global Security shall have been
given, then without unnecessary delay but in any event not later than the
earliest date on which such interest may be so exchanged, the Company shall
deliver to the Trustee definitive Securities in aggregate principal amount
equal to the principal amount of such beneficial owner’s interest in such
permanent global Security, executed by the Company.  On or after the earliest date on which such interests may be so
exchanged, such permanent global Security shall be surrendered by DTC or such
other depository as shall be specified in the Company Order with respect
thereto to the Trustee, as the Company’s agent for such purpose, to be
exchanged, in whole or from time to time in part, for definitive Securities
without charge, and the Trustee shall authenticate and deliver, in exchange for
each portion of such permanent global Security, an equal aggregate principal
amount of definitive Securities of the same series of authorized denominations
and of like tenor as the portion of such permanent global Security to be
exchanged, which shall be in the form of definitive Securities, provided,
however, that no such exchanges may occur during a period beginning
at the opening of business 15 days before any selection of Securities to be
redeemed and ending on the relevant Redemption Date if the Security for which
exchange is requested may be among those selected for redemption.  If a Security is issued in exchange for any
portion of a permanent global Security after the close of business at the
office or agency where such exchange occurs on (i) any Regular Record Date and
before the opening of business at such office or agency on the relevant
Interest Payment Date, or (ii) any special date for payment of Defaulted
Interest, interest or Defaulted Interest, as the case may be, will not be
payable on such Interest Payment Date or proposed date for payment, as the case
may be, in respect of such

 

42

 

Security, but will be
payable on such Interest Payment Date or proposed date for payment, as the case
may be, only to the Person to whom interest in respect of such portion of such
permanent global Security is payable in accordance with the provisions of this
Indenture.

 

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

 

All Securities issued
upon any registration of transfer or exchange of Securities shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon such
registration of transfer or exchange.

 

Every Security presented
or surrendered for registration of transfer or for exchange shall (if so
required by the Company or the Registrar) be duly endorsed, or be accompanied
by a written instrument of transfer, in form satisfactory to the Company and the
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.

 

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

 

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

 

Notwithstanding anything
to the contrary contained herein, the Trustee shall have no duty whatsoever to
monitor Federal or State securities laws.

 

Section 3.06         Book-Entry Provisions for Restricted
Global Security.

 

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

 

43

 

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

 

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

 

Unless (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
depositary for a Global Security or ceases to be a “Clearing Agency” registered
under the Exchange Act or announces an intention permanently to cease business
or does in fact do so and a successor Depositary is not appointed by the
Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing with respect to a Global Security, owners of
beneficial interests in a Global Security will not be entitled to have any
portions of such Global Security registered in their names, will not receive or
be entitled to receive physical delivery of Securities in definitive form and
will not be considered the owners or holders of the Global Security.

 

(c)           Securities issued in exchange for a
Global Security or any portion thereof pursuant to the last sentence of
subsection (b) of this Section shall be issued in definitive, fully
registered form, without interest coupons, shall have an aggregate principal
amount equal to that of such Global Security or portion thereof to be so
exchanged, shall be registered in such names and be in such authorized
denominations as the Depositary shall designate and shall bear any legends
required hereunder.  Any Global Security
to be exchanged in whole shall be surrendered by the Depositary to the Trustee,
as Registrar.  With regard to any Global
Security to be exchanged in part, either such Global Security shall be so surrendered
for exchange or, if the Trustee is acting as custodian for the Depositary or
its nominee with respect to such Global Security, the principal amount thereof
shall be reduced, by an amount equal to the portion thereof to be so exchanged,
by means of an appropriate adjustment made on the records of the Trustee.

 

44

 

Upon any such surrender
or adjustment, the Trustee shall authenticate and make available for delivery
the Security issuable on such exchange to or upon the order of the Depositary
or an authorized representative thereof. 
In the event of the occurrence of any of the events specified in the
last sentence of subsection (b) of this Section 3.06, the Company
will promptly make available to the Trustee a reasonable supply of certificated
Securities in definitive form.

 

(d)           Except as otherwise set forth in this
Indenture or a Global Security, owners of beneficial interests in the
Securities evidenced by a Global Security will not be entitled to any rights
under this Indenture with respect to such Global Security, and the Depositary
or its nominee may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the owner and Holder of such Global Security for all
purposes whatsoever.  None of the
Company, the Trustee, any Paying Agent or the Registrar will have any
responsibility or liability for any aspect of the records relating to
beneficial ownership interest of a Security in global form or for maintaining
any records relating to such beneficial ownership interests.  Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any such agent from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or its nominee or impair, as between the Depositary or its
nominee and such owners of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary or its nominee
as Holder of any Security.

 

Section 3.07         Special Transfer Provisions.

 

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

 

(a)           Restricted Global Security to
Regulation S Global Security.  If,
at any time, an owner of a beneficial interest in a Restricted Global Security
deposited with the Depositary (or the Trustee as custodian for the Depositary)
wishes to transfer its interest in such Restricted Global Security to a Person
who is required or permitted to take delivery thereof in the form of an
interest in a Regulation S Global Security, such owner shall, subject to the
Applicable Procedures, exchange or cause the exchange of such interest for an
equivalent beneficial interest in a Regulation S Global Security as provided in
this Section 3.07(a).  Upon receipt
by the Trustee of (1) instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Trustee to credit or cause to be
credited a beneficial interest in the Regulation S Global Security in an amount
equal to the beneficial interest in the applicable Restricted Global Security
to be exchanged, (2) a written order given in accordance with the Applicable Procedures
containing information regarding the participant account of the Depositary and
the CDS, Euroclear or Clearstream account (if applicable) to be credited with
such increase, and (3) a certificate substantially in the form of
Exhibit B hereto given by the owner of such beneficial interest, the
Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be
reduced the aggregate principal amount of the applicable Restricted Global
Security and to increase or cause to be increased the aggregate principal
amount of the

 

45

 

applicable Regulation S
Global Security by the principal amount of the beneficial interest in the
Restricted Global Security to be exchanged, to credit or cause to be credited
to the account of the Person specified in such instructions a beneficial
interest in the Regulation S Global Security equal to the reduction in the
aggregate principal amount of the applicable Restricted Global Security, and to
debit, or cause to be debited, from the account of the Person making such
exchange or transfer the beneficial interest in the Restricted Global Security
that is being exchanged or transferred.

 

(b)           Regulation S Global Security to
Restricted Global Security.  If, at
any time, an owner of a beneficial interest in a Regulation S Global Security
deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes to transfer its interest in such Regulation S Global Security
to a Person who is required or permitted to take delivery thereof in the form
of an interest in a Restricted Global Security, such owner shall, subject to
the Applicable Procedures, exchange or cause the exchange of such interest for
an equivalent beneficial interest in a Restricted Global Security, as provided
in this Section 3.07(b).  Upon
receipt by the Trustee of (1) instructions given in accordance with the
Applicable Procedures from an Agent Member, directing the Trustee, as
Registrar, to credit or cause to be credited a beneficial interest in the
Restricted Global Security equal to the beneficial interest in the Regulation S
Global Security to be exchanged, (2) a written order given in accordance with
the Applicable Procedures containing information regarding the participant
account of the Depositary to be credited with such increase and (3) if such
transfer is requested prior to the expiration of the Restricted Period, a
certificate in the form of Exhibit C attached hereto given by the owner of
such beneficial interest, the Trustee, as Registrar, shall instruct the
Depositary to reduce or cause to be reduced the aggregate principal amount of
such Regulation S Global Security and to increase or cause to be increased the
aggregate principal amount of the applicable Restricted Global Security by the
principal amount of the beneficial interest in the Regulation S Global Security
to be exchanged, and the Trustee, as Registrar, shall instruct the Depositary,
concurrently with such reduction, to credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest in
the applicable Restricted Global Security equal to the reduction in the
aggregate principal amount of such Regulation S Global Security and to debit or
cause to be debited from the account of the Person making such transfer the
beneficial interest in the Regulation S Global Security that is being
transferred.  After the expiration of
the Restricted Period, the certificate described in clause (3) above shall no
longer be required to effect transfers pursuant to this Section 3.07(b).

 

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

 

46

 

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

 

(d)           Restricted Global Security or U.S.
Physical Security to Regulation S Global Security After Two Years.  If the holder of a beneficial interest in a
Restricted Global Security or U.S. Physical Security wishes at any time after
the second anniversary of the date of original issuance of the Securities to
(A) transfer such interest to a Person who wishes to take delivery thereof in
the form of a beneficial interest in the Regulation S Global Security or (B) to
exchange such interest for a beneficial interest in a Regulation S Global
Security, such transfer or exchange may be effected, subject to the Applicable
Procedures, only in accordance with this Section 3.07(d).  Upon receipt by the Trustee of (1) in the
case of a transfer or exchange of an interest in the Restricted Global Security
or a U.S. Physical Security, instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Trustee to credit or cause to be
credited to a beneficial interest in the Regulation S Global Security in an
amount equal to that the beneficial interest in the Restricted Global Security
to be so transferred or exchanged, (2) a written order given in accordance with
the Applicable Procedures containing information regarding the participant
account of the Depositary (and, if applicable, the CDS, Euroclear or
Clearstream account, as the case may be) to be credited with such beneficial
interest and (3) a certificate substantially in the form of Exhibit E
hereto given by the holder of such beneficial interest, the Trustee, as
Registrar, shall (i) in the case of a transfer or exchange of an interest in
the Restricted Global Security, instruct the Depositary to reduce the principal
amount of the Restricted Global Security, and to increase the principal amount
of the Regulation S Global Security, by the principal amount of the beneficial
interest in the Restricted Global Security to be so transferred or exchanged,
and to credit or cause to be credited to the account of the Person specified in
such instructions a beneficial interest in the Regulation S Global Security
having a principal amount equal to the amount by which the principal amount of
the Restricted Global Security was reduced upon such transfer or exchange or
(ii) in the case of a transfer or exchange of a U.S. Physical Security, cancel
such U.S. Physical Security and increase the principal amount of the Regulation
S Global Security accordingly.

 

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

 

47

 

satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.

 

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

 

The Registrar shall
retain as required by law copies of all letters, notices and other written
communications received pursuant to Section 3.06 or this
Section 3.07.  The Company shall
have the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Registrar.

 

Section 3.08         Mutilated, Destroyed, Lost and
Stolen Securities.

 

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

 

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

 

Upon the issuance of any
new Security under this Section, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.

 

Every new Security issued
pursuant to this Section in lieu of any mutilated, destroyed, lost or
stolen Security shall constitute an original additional contractual obligation
of the Company, whether or not the mutilated, destroyed, lost or stolen
Security shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.

 

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

 

48

 

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

 

Interest on any Security
which is payable, and is punctually paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose name such Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest at the office or agency of the Company in
The City of New York maintained for such purposes (which initially shall be the
office of the Trustee located at One Liberty Plaza, 23rd Floor, New
York, New York 10006) pursuant to Section 10.02 or, at the option of the
Company, principal (premium, if any, on) and interest may be paid by check
mailed to the address of the Person entitled thereto pursuant to
Section 3.10 as such address appears in the Security Register; provided
that all payments with respect to Global Securities, and Physical Securities,
the Holders of which have given wire transfer instructions to the Trustee (or
other Paying Agent) by the Regular Record Date shall be required to be made by
wire transfer of immediately available funds to the accounts specified by the holders
thereof provided
further, that principal paid in relation to any Security redeemed at
the option of the Company pursuant to Article XI, or paid at Maturity,
shall be paid to the holder of such Security only upon presentation and
surrender of such Security to such office or agency referred to in this
Section 3.07.

 

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

 

(a)           The Company may elect to make payment
of any Defaulted Interest to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest,
which shall be fixed in the following manner. 
The Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. 
Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days and not less than
10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the
Company of such Special Record Date, and in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be given in the manner provided for in
Section 1.06, not less than 10 days prior to such Special

 

49

 

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

 

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

 

Subject to the foregoing
provisions of this Section, each Security delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Security.

 

If the Company shall be
required to pay any additional interest pursuant to the terms of the
Registration Rights Agreement, it shall deliver an Officers’ Certificate to the
Trustee setting forth the new interest rate and the period for which such rate
is applicable.

 

Section 3.10         Persons Deemed Owners.

 

Prior to the due
presentment of a Security for registration of transfer, the Company, each
Guarantor, the Trustee and any agent of the Company, such Guarantor or the
Trustee may treat the Person in whose name such Security is registered as the
owner of such Security for the purpose of receiving payment of principal of
(premium, if any) and (subject to Sections 3.05 and 3.09) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and none of the Company, the Guarantors, the Trustee or any agent of
the Company, such Guarantor or the Trustee shall be affected by notice to the
contrary.

 

Section 3.11         Cancellation.

 

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

 

50

 

until the same are
surrendered to the Trustee for cancellation. 
No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section, except as expressly permitted
by this Indenture.  All cancelled
Securities held by the Trustee shall be disposed of by the Trustee in accordance
with its customary procedures and certification of their disposal delivered to
the Company unless by Company Order the Company shall direct that cancelled
Securities be returned to it.

 

Section 3.12         Issuance of Additional Securities.

 

The Company may, subject
to Article X of this Indenture issue Additional Securities having
identical terms and conditions to the Securities offered hereby.  Any Additional Securities will be part of
the same issue as the Securities offered hereby and will vote on all matters
with the Securities offered hereby.

 

Section 3.13         CUSIP and CINS Numbers.

 

The Company in issuing
the Securities may use “CUSIP” and “CINS” numbers (if then generally in use)
and, if so, the Trustee shall use “CUSIP” and “CINS” numbers in notices of redemption
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.

 

Section 3.14         Computation of Interest.

 

Interest on the
Securities shall be computed on the basis of a 360-day year consisting of
twelve 30-day months.  For the purposes
of disclosure under the Interest Act (Canada), the yearly rate of
interest to which interest calculated under a Security for any period in any
calendar year (the “calculation period”) is equivalent, is the rate payable
under a Security in respect of the calculation period multiplied by a fraction
the numerator which is the actual number of days in such calendar year and the
denominator of which is the actual number of days in the calculation period.

 

ARTICLE IV

SATISFACTION AND DISCHARGE

 

Section 4.01         Satisfaction and Discharge of
Indenture.

 

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

 

51

 

(a)           either

 

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

 

(ii)           all Securities not theretofore
delivered to the Trustee for cancellation

 

(A)          have become due and payable,

 

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

 

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

 

and the Company, or the
Guarantors, as the case may be, in the case of (A), (B) or (C) above, has
irrevocably deposited or caused to be deposited with the Trustee funds in trust
for the purpose in an amount sufficient to pay and discharge the entire
Indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest on the
Securities to the date of such deposit (in the case of Securities that have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be, together with irrevocable instructions directing the Trustee to
apply the funds to the payment of the Securities at the Stated Maturity or
Redemption Date, as the case may be;

 

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

 

(c)           the Company or the Guarantors, as the
case may be, has delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with.

 

Notwithstanding the
satisfaction and discharge of this Indenture, the obligations of the Company to
the Trustee under Section 6.06 and, if money shall have been deposited
with the Trustee pursuant to subclause (ii) of clause (a) of this
Section, the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.

 

52

 

Section 4.02         Application of Trust Money.

 

Subject to the provisions
of the last paragraph of Section 10.03, all money deposited with the
Trustee pursuant to Section 4.01 shall be held in trust and applied by it,
in accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (premium, if any) and interest for whose
payment such money has been deposited with the Trustee; but such money need not
be segregated from other funds except to the extent required by law.

 

Section 4.03         Discharge of Collateral Documents or
Guarantees

 

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

 

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

 

ARTICLE V

REMEDIES

 

Section 5.01         Events of Default.

 

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

 

(a)           default in the payment of any
interest on any Security when it becomes due and payable, and continuance of
such default for a period of 30 days (whether or not prohibited by
Article XIV of this Indenture);

 

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

 

(c)           failure to perform or comply with the
provisions described in Article VIII or to make or consummate a Change of
Control Offer or an Asset Sale Offer

 

53

 

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

 

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

 

(e)           the occurrence of an event of default
under any mortgage, bond, indenture, loan agreement or other document evidencing
Indebtedness of the Company or any Restricted Subsidiary, which Indebtedness
has an aggregate outstanding principal amount of US$10,000,000 or more, and
such default (i) results in the acceleration of such Indebtedness prior to its
Stated Maturity or (ii) constitutes a failure to make any payment with respect
to any such Indebtedness when due and payable after expiration of any
applicable grace period;

 

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

 

(g)           the occurrence of an event of default
under any of the Collateral Documents;

 

(h)           the Mirror Note, any Additional
Mirror Note, any guarantee of the Mirror Note, any Additional Mirror Note or
the Securities or any of the related Collateral Documents ceases to be in full
force and effect or is declared null and void or the issuer of the Mirror Note,
any Additional Mirror Note or any guarantor of the Mirror Note, any Additional
Mirror Note or the Securities denies that it has any further liability under
such note or guarantee or the related Collateral Documents, or gives notice to
such effect, except in the case of termination of this Indenture or the
discharge or release of any such note or guarantee in accordance with
Article IV or any other provision in this Indenture, and such condition
has continued for a period of 30 days after written notice of such failure
requiring that such default be remedied has been given (x) to the Company by
the Trustee or (y) to the Company and the Trustee by the Holders of 25% in
aggregate principal amount of the Securities then Outstanding;

 

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

 

54

 

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

 

(j)            other than in respect of the
Reorganization, the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or
relief under any Bankruptcy Law or the consent by it to the filing of any such
petition or to the appointment of a Custodian of the Company or any Significant
Subsidiary or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due.

 

Section 5.02         Acceleration of Maturity; Rescission
and Annulment.

 

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

 

At any time after a
declaration of acceleration, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Securities, by written notice to
the Company and the Trustee, may rescind such declaration and its consequences
if:

 

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

 

(A)          all overdue interest on all Securities;

 

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

 

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

 

55

 

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

 

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

 

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

 

Notwithstanding the
preceding paragraph, in the event of a declaration of acceleration in respect
of the Securities because an Event of Default specified in Section 5.01(e)
shall have occurred and be continuing, such declaration of acceleration shall
be automatically annulled if the Indebtedness that is the subject of such Event
of Default has been discharged or the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness, and written notice
of such discharge or rescission, as the case may be, shall have been given to
the Trustee by the Company and countersigned by the holders of such
Indebtedness or a trustee, fiduciary or agent for such holders, within 30 days
after such declaration of acceleration in respect of the Securities, and no
other Event of Default has occurred during such 30-day period which has not
been cured or waived during such period.

 

Section 5.03         Collection of Indebtedness and Suits
for Enforcement by Trustee.

 

The Company and each of
the Guarantors, if any, covenants that if

 

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

 

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

 

the Company and each
Guarantor (if any) will, upon demand of the Trustee, pay to the Trustee for the
benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest,
and interest on any overdue principal (and premium, if any) and, to the extent
that payment of such interest shall be legally enforceable, upon any overdue
installment of interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

 

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

 

56

 

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

 

If an Event of Default
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant
or agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.

 

Section 5.04         Trustee May File Proofs of Claim.

 

In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to the
Company and its debts or any other obligor upon the Securities (including the
Guarantors, if any), and their debts or the property of the Company or of such
other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal (and
premium, if any) or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,

 

(a)           to file and prove a claim for the
whole amount of principal (and premium, if any) and interest owing and unpaid
in respect of the Securities and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and

 

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

 

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

 

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

 

57

 

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

 

Section 5.05         Trustee May Enforce Claims Without
Possession of Securities.

 

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

 

Section 5.06         Application of Money Collected.

 

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

 

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

 

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

 

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

 

Section 5.07         Limitation on Suits.

 

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

 

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

 

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

 

58

 

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

 

(d)           the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has failed to institute
any such proceeding; and

 

(e)           no direction inconsistent with such
written request has been given to the Trustee during such 60-day period by the
Holders of a majority or more in principal amount of the Outstanding
Securities;

 

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

 

Section 5.08         Unconditional Right of Holders to
Receive Principal, Premium and Interest.

 

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

 

Section 5.09         Restoration of Rights and Remedies.

 

If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Guarantors (if any), the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.

 

Section 5.10         Rights
and Remedies Cumulative.

 

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

 

59

 

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

 

Section 5.11         Delay or Omission Not Waiver.

 

No delay or omission of
the Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence
therein.  Every right and remedy given
by this Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.

 

Section 5.12         Control by Holders.

 

The Holders of not less
than a majority in principal amount of the Outstanding Securities shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee, provided that

 

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

 

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

 

(c)           the Trustee need not take any action
which might involve it in personal liability or be unjustly prejudicial to the
Holders not consenting.

 

Section 5.13         Waiver of Past Defaults.

 

The Holders of not less
than a majority in principal amount of the Outstanding Securities may, on
behalf of the Holders of all of the Securities, waive any past defaults
hereunder, except a default

 

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

 

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

 

Upon any such waiver,
such default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.

 

60

 

Section 5.14         Waiver of Stay or Extension Laws.

 

The Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.

 

Section 5.15         Undertaking for Costs.

 

All parties to this
Indenture agree, and each Holder of any Security by his acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken, suffered or omitted by it
as Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorney’s fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities, or to any suit
instituted by any Holder for the enforcement of the payment of the principal (premium,
if any) or interest on any Security on or after the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).

 

ARTICLE VI

THE TRUSTEE

 

Section 6.01         Notice of Defaults.

 

If a Default or an Event
of Default occurs and is continuing and is known to the Trustee, the Trustee
shall mail to each Holder of the Securities in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default
within 90 days after the occurrence thereof; provided, however, that,
except in the case of a Default or an Event of Default in the payment of
principal of (premium, if any) or interest on any Securities, the Trustee may
withhold the notice to the Holders of the Securities if it in good faith
determines that withholding such notice is in the interests of the Holders of
the Securities.

 

Section 6.02         Certain Rights of Trustee.

 

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

 

61

 

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

 

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

 

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

 

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

 

(e)           the Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities (including
fees and expenses of its agents and counsel) which might be incurred by it in
compliance with such request or direction;

 

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

 

(g)           the Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or
by or through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder;

 

(h)           the Trustee shall not be liable for
any action taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred upon it by
this Indenture; and

 

62

 

(i)            except during the continuance of an
Event of Default, the Trustee need perform only those duties as are
specifically set forth in this Indenture.

 

The Trustee shall not be
required to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.

 

In acting under the
Collateral Documents and the Collateral Documents Subordination Agreement, the
Trustee shall have the full benefit of the exculpatory and protective
provisions under this Indenture.

 

Section 6.03         Trustee Not Responsible for Recitals
or Issuance of Securities.

 

The recitals contained
herein and in the Securities, except for the Trustee’s certificates of
authentication, shall be taken as the statements of the Company, and the
Trustee assumes no responsibility for their correctness.  The Trustee makes no representations as to
the validity or sufficiency of this Indenture, the Securities or any Guarantee,
except that the Trustee represents that it is duly authorized to execute and
deliver this Indenture, authenticate the Securities and perform its obligations
hereunder and, upon the effectiveness of the Registration Statement, that the
statements made by it in a Statement of Eligibility on Form T-1 supplied
to the Company will be true and accurate, subject to the qualifications set
forth therein.  The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.

 

Section 6.04         May Hold Securities.

 

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

 

Section 6.05         Money Held in Trust.

 

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

 

Section 6.06         Compensation and Reimbursement.

 

The Company agrees:

 

63

 

(a)           to pay to the Trustee (in its
capacity as Trustee, Paying Agent and Registrar) from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);

 

(b)           except as otherwise expressly
provided herein, to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture, any Collateral Document or the
Collateral Documents Subordination Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and

 

(c)           to indemnify the Trustee for, and to
hold it harmless against, any loss, liability or expense incurred without
willful misconduct, negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust, including the
costs and expenses of enforcing this Indenture against the Company or the
Guarantors (including this Section 6.06) or any Collateral Document or the
Collateral Documents Subordination Agreement against the relevant party thereto
and of defending itself against any claim (whether asserted by any Holder or
the Company or any other party to any Collateral Document or the Collateral
Documents Subordination Agreement) or liability in connection with the exercise
or performance of any of its powers or duties hereunder or thereunder.

 

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

 

When the Trustee incurs
expenses or renders services in connection with an Event of Default specified
in Section 5.01(i) or (j), the expenses (including the reasonable charges
and expenses of its counsel) of and the compensation for such services are
intended to constitute expenses of administration under any applicable
bankruptcy, insolvency or other similar law.

 

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

 

Section 6.07         Corporate Trustee Required;
Eligibility.

 

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

 

64

 

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

 

Section 6.08         Resignation and Removal; Appointment
of Successor.

 

(a)           No resignation or removal of the
Trustee and no appointment of a successor Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements of
Section 6.09.

 

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

 

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

 

(d)           If at any time:

 

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

 

(2)           the Trustee shall cease to be
eligible under Section 6.07 and shall fail to resign after written request
therefor by the Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or

 

(3)           the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation,

 

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

 

65

 

situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.

 

(e)           If the Trustee shall resign, be
removed or become incapable of acting, or if a vacancy shall occur in the
office of Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee.  If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and to that extent supersede the successor Trustee appointed
by the Company.  If no successor Trustee
shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided subject to TIA
Section 315(e), any Holder who has been a bona fide Holder of a Security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.

 

(f)            The Company shall give notice of
each resignation and each removal of the Trustee and each appointment of a
successor Trustee to the Holders of Securities in the manner provided for in
Section 1.06.  Each notice shall
include the name of the successor Trustee and the address of its Corporate
Trust Office.

 

Section 6.09         Acceptance of Appointment by
Successor.

 

Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to the Company and
to the retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee; but, on request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder subject
to the retiring Trustee’s rights as provided under the last sentence of
Section 6.06.  Upon request of any
such successor Trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts.

 

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

 

Section 6.10         Merger, Conversion, Consolidation or
Succession to Business.

 

Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation

 

66

 

succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto.  In case any Securities shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Securities.  In case at that time any of
the Securities shall not have been authenticated, any successor Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor Trustee. 
In all such cases such certificates shall have the full force and effect
which this Indenture provides that the certificate of authentication of the
Trustee shall have; provided, however, that the right to adopt
the certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.

 

ARTICLE VII

HOLDERS’ LISTS AND REPORTS BY TRUSTEE

 

Section 7.01         Corporation to Furnish Trustee Names
and Addresses of Holders.

 

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

 

Section 7.02         Preservation of List of Names and
Addresses of Holders.

 

(a)           The Trustee shall preserve, in as
current a form as is reasonably practicable, all information as to the names
and addresses of the Holders contained in the most recent list furnished to it
as provided in Section 7.01 and as to the names and addresses of Holders
received by the Trustee in its capacity as Registrar for the Securities (if
acting in such capacity).

 

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

 

67

 

(c)           Holders may communicate as provided
in TIA Section 312(b) with other Holders with respect to their rights
under this Indenture or under the Securities.

 

Section 7.03         Disclosure of Names and Addresses of
Holders.

 

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

 

Section 7.04         Reports by Trustee.

 

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

 

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

 

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

 

ARTICLE VIII

CONSOLIDATION, MERGER, CONVEYANCE, 

TRANSFER OR LEASE

 

Section 8.01         Company May Consolidate, etc., Only
on Certain Terms.

 

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

 

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

 

68

 

conveyance, transfer, lease or other disposition of
all or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a consolidated basis (the “Surviving Entity”) (A) is
a corporation, partnership, limited liability company or trust duly organized
and validly existing under the laws of Canada or any province thereof or the
United States, any state thereof or the District of Columbia and (B) expressly
assumes, by a supplemental indenture in form reasonably satisfactory to the
Trustee, all the obligations of the Company under this Indenture and the
Securities;

 

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

 

(c)           immediately after giving effect to
such transaction or series of transactions on a pro forma basis (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with such transaction or series of
transactions), the Consolidated Net Worth of the Company (or of the Surviving
Entity if the Company is not the continuing obligor under this Indenture) is
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction or series of transactions;

 

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

 

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

 

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

 

(g)           the Company (or the Surviving Entity
if the Company is not the continuing obligor under this Indenture) delivers, or
causes to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers’ Certificate and an Opinion of
Counsel, each stating that such transaction or series of transactions complies
with the requirements of this Indenture.

 

For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of related transactions) of all or substantially all of
the properties or assets of one or more Restricted Subsidiaries that
constitutes all or

 

69

 

substantially all of the
properties and assets of the Company on a consolidated basis, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.

 

Section 8.02         Successor Substituted.

 

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

 

ARTICLE IX

SUPPLEMENTS AND AMENDMENTS TO INDENTURE, GUARANTEES, COLLATERAL DOCUMENTS AND
COLLATERAL DOCUMENT SUBORDINATION AGREEMENT

 

Section 9.01         Without Consent of Holders.

 

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

 

(a)           to evidence the succession of another
Person to the Company or any Guarantor and the assumption by any such successor
of the covenants of the Company contained herein and in the Securities or to
add any Guarantors of the Securities; or

 

(b)           to add to the covenants of the
Company for the benefit of the Holders or to surrender any right or power
herein conferred upon the Company; or

 

(c)           to add any additional Events of
Default; or

 

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

 

(e)           to evidence and provide for the
acceptance of appointment hereunder by a successor Trustee pursuant to the
requirements of Section 6.09; or

 

(f)            to secure the Securities or any
Guarantee; or

 

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

 

70

 

to make any other provisions with respect to matters
or questions arising under this Indenture, provided that such action shall not
adversely affect the interests of the Holders; or

 

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

 

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

 

Section 9.02         With Consent of Holders.

 

With the consent of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities, by Act of said Holders delivered to the Company, any
affected Guarantor and the Trustee, the Company and the Guarantors, each when
authorized by or pursuant to a Board Resolution, and the Trustee may enter into
one or more indentures supplemental hereto or other agreement for the purpose
of modifying in any manner this Indenture, any Guarantee, any Collateral
Document or the Collateral Documents Subordination Agreement; provided,
however, that no such indenture supplemental or other agreement may,
without the consent of the Holder of each Outstanding Security affected
thereby:

 

(a)           change the Stated Maturity of the
principal of, or any installment of interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the place of payment where, or the coin
or currency in which any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date); or

 

(b)           reduce the percentage in aggregate
principal amount of the Outstanding Securities required to consent to any
amendment of, or waiver of compliance with, any provision of or defaults under
this Indenture; or

 

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

 

71

 

(d)           release any party to the Collateral
Documents, or release the issuer or guarantor of the Mirror Note, any issuer or
guarantor of any Additional Mirror Note or any Guarantor from any of its
obligations under the Mirror Note, Additional Mirror Note, guarantee or
Guarantee, as applicable, except in accordance with the terms of this
Indenture, including, without limitation, the discharge and release described
under Section 4.03; or

 

(e)           amend, change or modify any of the
provisions of this Indenture relating to the subordination of the Securities,
the Guarantees, the Mirror Note, any Additional Mirror Note, any guarantee of
the Mirror Note, any guarantee of any Additional Mirror Notes, any other
Collateral Documents or the Collateral Documents Subordination Agreement, in a
manner adverse to the Holders; or

 

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

 

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

 

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

 

(i)            amend, change or modify any of the
provisions in this Section 9.02.

 

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

 

Section 9.03         Execution of Supplemental Indentures.

 

In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture and
that such supplemental indenture constitutes the legal, valid and binding
obligation of the Company and the Guarantors (if any) subject to the customary
exceptions.  The Trustee may, but shall
not be obligated to, enter into any such supplemental indenture which affects
the Trustee’s own rights, duties or immunities under this Indenture or
otherwise.

 

Section 9.04         Effect of Supplemental Indentures.

 

Upon the execution of any
supplemental indenture under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.

 

72

 

Section 9.05         Conformity with Trust Indenture Act.

 

Every supplemental
indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.

 

Section 9.06         Reference in Securities to
Supplemental Indentures.

 

Securities authenticated
and delivered after the execution of any supplemental indenture pursuant to
this Article may, and shall if required by the Trustee, bear a notation in
form approved by the Trustee as to any matter provided for in such supplemental
indenture.  If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.

 

Section 9.07         Notice of Supplemental Indentures.

 

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

 

ARTICLE X

COVENANTS

 

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

 

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

 

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

 

Section 10.02       Maintenance of Office or Agency.

 

The Company will maintain
in The City of New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or

 

73

 

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

 

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

 

Section 10.03       Money for Security Payments to Be Held
in Trust.

 

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

 

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

 

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

 

(a)           hold all sums held by it for the
payment of the principal of (premium, if any) or interest on Securities in
trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;

 

74

 

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

 

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

 

The Company may at any
time, for the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the Company or such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by the Company or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such sums.

 

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

 

Section 10.04       Corporate Existence.

 

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

 

75

 

Section 10.05       Payment of Taxes and Other Claims.

 

The Company will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Restricted Subsidiary or upon the income, profits
or property of the Company or any Restricted Subsidiary and (b) lawful
claims for labor, materials and supplies, which, if unpaid, might by law become
a lien upon the property of the Company or any Restricted Subsidiary; provided,
however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.

 

Section 10.06       Maintenance of Properties.

 

The Company will cause
all properties owned by the Company or any Restricted Subsidiary or used or
held for use in the conduct of its business or the business of any Restricted
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from discontinuing the maintenance of
any of such properties if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its business or the business of any
Restricted Subsidiary and not disadvantageous in any material respect to the
Holders.

 

Section 10.07       Insurance.

 

The Company will at all
times keep all of its and its Restricted Subsidiaries’ properties which are of
an insurable nature insured with insurers, believed by the Company to be
responsible, against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated and owning
like properties and conducting the same business as the Company.

 

Section 10.08       Statement by Officers As to Default.

 

(a)           The Company will deliver to the
Trustee, within 120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of compliance by the Company and
the Restricted Subsidiaries with all conditions and covenants under this
Indenture.  For purposes of this
Section 10.08(a), such compliance shall be determined without regard to
any period of grace or requirement of notice under this Indenture.

 

(b)           When any Default has occurred and is
continuing under this Indenture, or if the trustee for or the holder of any
other evidence of Indebtedness of the Company or any Restricted Subsidiary
gives any notice or takes any other action with

 

76

 

respect to a claimed default, the Company shall
deliver to the Trustee by registered or certified mail or by facsimile
transmission an Officers’ Certificate, specifying such event, notice or other
action within ten Business Days of its occurrence.

 

Section 10.09       Provision of Reports and Financial
Statements.

 

The Company will file
with the Trustee and provide the Holders, within 15 days after the filing
thereof with the Commission, copies of all documents that the Company is
required to file with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act.  If the Company is not
subject to Section 13(a) or 15(d) of the Exchange Act, the Company will
furnish to the Holders and the Trustee:

 

(a)           within 120 days after the end of each
fiscal year, audited year-end consolidated financial statements (including a
balance sheet, income statement and statement of cash flows) prepared in
accordance with GAAP, with a reconciliation of such financial statements to
accounting principles generally accepted in the United States, and

 

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

 

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

 

Section 10.10       Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock.

 

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

 

In making the foregoing
calculation, pro forma effect will be given to:  (i) the incurrence of such Indebtedness and the application
of the net proceeds from the incurrence of Indebtedness, including to refinance
other Indebtedness, since the first day

 

77

 

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

 

Section 10.11       Limitation on Restricted Payments.

 

(a)           The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, make any
Restricted Payment unless at the time of, and immediately after giving effect
to, the proposed Restricted Payment, no Default or Event of Default has
occurred and is continuing, and either:

 

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

 

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

 

(2)           100% of the aggregate net cash
proceeds received by the Company after the Closing Date from (i) the issuance
by the Company of Deeply Subordinated Inter-company Debt, or (ii) capital
contributions in respect of Qualified Equity Interests that the Company
receives from any Person that owns, directly or indirectly, 100% of the
Company’s outstanding Voting Stock; plus

 

78

 

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

 

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

 

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

 

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

 

(ii)           the purchase, redemption or other
acquisition or retirement for value of any shares of Capital Stock of the
Company, in exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to a Subsidiary) of, Qualified Equity
Interests of the Company; provided no Default or Event of Default has
occurred and is continuing or would occur as a result of the actions or
payments set forth in this clause (ii);

 

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

 

(iv)          the purchase, redemption, defeasance
or other acquisition or retirement for value of Pari Passu Indebtedness or
Subordinated Indebtedness in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance or sale (other than to a Subsidiary) of, new
Subordinated Indebtedness, so long as the Company or a Restricted Subsidiary
would be permitted to refinance such original Subordinated Indebtedness with
such new Subordinated Indebtedness pursuant to clause (xiii) of the
definition of Permitted Indebtedness;

 

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

 

79

 

control” in accordance with provisions similar to the
provisions of Section 10.12; provided that, prior to or simultaneously
with such repurchase, the Company has made the Change of Control Offer as
provided in that covenant with respect to the Securities and has repurchased
all Securities validly tendered for payment in connection with such Change of
Control Offer;

 

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

 

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

 

(viii)        payments or distributions in connection
with the Reorganization.

 

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

 

(c)           For the purpose of making any
Restricted Payment calculations under this Indenture (i) if a Restricted
Subsidiary is designated an Unrestricted Subsidiary, the Company shall be
deemed to have made an Investment in an amount equal to the greater of fair
market value or net book value of the net assets of such Restricted Subsidiary
at the time of such designation as determined by the Board of Directors of the
Company, whose good faith determination will be conclusive, (ii) any
property transferred to or from an Unrestricted Subsidiary will be valued at
fair market value at the time of such transfer, as determined by the Board of
Directors of the Company, whose good faith determination will be conclusive and
(iii) subject to the foregoing, the amount of any Restricted Payment, if other
than cash, will be determined by the Board of Directors of the Company, whose
good faith determination will be conclusive.

 

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

 

80

 

If an Investment resulted
in the making of a Restricted Payment, the aggregate amount of all Restricted
Payments calculated under this Section 10.11 shall be reduced by the
amount of any net reduction in such Investment (resulting from the payment of
interest or dividends, loan repayment, transfer of assets or otherwise), to the
extent such net reduction is not included in the Company’s Consolidated Net
Income; provided
that the total amount by which the aggregate amount of all Restricted Payments
may be reduced shall not exceed the lesser of (x) the cash proceeds
received by the Company and its Restricted Subsidiaries in connection with such
net reduction and (y) the initial amount of such Investment.

 

In computing the
Consolidated Net Income of the Company for purposes of clause (i) of
paragraph (a) of this Section 10.11, (i) the Company may use
audited financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination and
unaudited financial statements and (ii) the Company will be permitted to
rely in good faith on the financial statements that are available on the date
of determination.  If the Company makes
a Restricted Payment that, at the time of the making of such Restricted
Payment, would in the good faith determination of the Company be permitted
under the requirements of this Indenture, such Restricted Payment shall be
deemed to have been made in compliance with this Indenture notwithstanding any
subsequent adjustments made in good faith to the Company’s financial statements
affecting Consolidated Net Income of the Company for any period.

 

Section 10.12       Purchase of Securities upon a Change
of Control.

 

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

 

Within 30 days following
the date on which a Change of Control occurs, the Company shall notify the
Trustee and give written notice of such Change of Control to each holder of
Securities by first-class mail, postage prepaid, at its address appearing in
the Security Register, stating, among other things, (i) the purchase price
and the purchase date, which will be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that
any Security not tendered will continue to accrue interest; (iii) that,
unless the Company defaults in the payment of the purchase price, any
Securities accepted for payment pursuant to the Change of Control Offer will
cease to accrue interest after the Change of Control purchase date; (iv) that
Holders electing to have any Securities purchased pursuant to a Change of
Control Offer shall be required to surrender the Securities, with the form
entitled “Option of Holder to Elect Purchase” on the reverse of the Securities
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding

 

81

 

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

 

The Company shall comply
with any applicable tender offer rules including Rule 14e-1 under the Exchange
Act, and any other applicable securities laws and regulations in connection
with a Change of Control Offer.

 

Section 10.13       Limitation on Certain Asset Sales.

 

(a)           The Company shall not, and shall not
permit any Restricted Subsidiary to, engage in any Asset Sale unless
(i) the consideration received by the Company or such Restricted
Subsidiary for such Asset Sale is at least equal to the fair market value of
the assets and properties sold or otherwise disposed of (as determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive, and evidenced by a resolution of the Board of Directors) and
(ii) the consideration received by the Company or the relevant Restricted
Subsidiary in respect of such Asset Sale is either (x) cash, Cash Equivalents,
Liquid Securities or Exchanged Properties (collectively, “Permitted
Consideration”) or (y) the property or assets received that do not
constitute Permitted Consideration have an aggregate fair market value of no
more than 10% of the Company’s Adjusted Consolidated Net Tangible Assets.

 

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

 

82

 

(c)           On any day when the aggregate amount
of Excess Proceeds exceeds US$10,000,000, the Company shall, within 30 days
thereafter, make an offer to purchase (an “Asset Sale Offer”) from all Holders
of Securities, on a pro rata basis, in accordance with the procedures set forth
in paragraph (d) below, the maximum principal amount (expressed as a multiple
of US$1,000) of Securities that may be purchased with the Excess Proceeds.  The offer price as to each Security will be
payable in cash in an amount equal to 100% of the principal amount of such
Security plus in each case accrued and unpaid interest, if any, to the date of
repurchase.  To the extent that the
aggregate principal amount of Securities validly tendered and not withdrawn
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use the portion of the Excess Proceeds not required to be used to
repurchase the Securities for any other purpose not prohibited by this
Indenture.  If the aggregate principal
amount of Securities validly tendered and not withdrawn by holders thereof
exceeds the Excess Proceeds, the Securities to be purchased will be selected by
the Trustee on a pro rata basis (based upon the principal amount of
Securities).  Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds will be reset to zero.

 

(d)           Within the time period described in
paragraph (c) above for making an Asset Sale Offer, the Company shall mail a
notice to each Holder in the manner provided in Section 1.06 stating:  (1) that the Asset Sale Offer is being
made pursuant to the provisions of Section 10.13 of this Indenture and
that all Securities duly and timely tendered shall be accepted for payment
(except, as provided above, if the aggregate principal amount as the case may
be, of the Securities exceeds the amount of Excess Proceeds); (2) the
purchase price and the purchase date (the “Asset Sale Purchase Date”), which
date shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed (or as otherwise required by the Exchange Act); (3) that any
Securities not tendered shall continue to accrue interest; (4) that, unless the
Company defaults in the payment of the purchase price, all Securities accepted
for payment pursuant to the Asset Sale Offer shall cease to accrue interest
after the Asset Sale Purchase Date; (5) that Holders electing to have any
Securities purchased pursuant to an Asset Sale Offer shall be required to
surrender the Securities, with the form entitled “Option of Holder to Elect
Purchase” on the reverse of the Securities completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
Business Day preceding the Asset Sale Purchase Date; (6) that Holders shall be
entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the second Business Day preceding the Asset Sale
Purchase Date, a facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Securities delivered for purchase, and a
statement that such Holder is withdrawing his election to have such Securities
purchased; (7) that Holders whose Securities are being purchased only in part
shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered, which unpurchased portion must be equal
to US$1,000 in principal amount or an integral multiple thereof; (8) any other
procedures that the Holders of Securities must follow in order to tender their
Securities; and (9) the circumstances and relevant facts regarding such Asset
Sale.

 

83

 

Section 10.14       Limitation on Transactions with
Affiliates.

 

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

 

The foregoing covenant
shall not restrict any of the following:

 

(A)          transactions exclusively among the
Company and/or its Restricted Subsidiaries provided such transactions are not
otherwise prohibited under this Indenture;

 

(B)           the Company from paying reasonable
and customary regular compensation or fees to, or executing customary expense
reimbursement, indemnification or similar arrangements with, directors or
executive officers of the Company or any Restricted Subsidiary made in the
ordinary course of business;

 

(C)           transactions permitted by the
provisions of Section 10.11;

 

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

 

(E)           transactions in connection with the
Reorganization; and

 

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

 

84

 

Section 10.15       Limitation on Dividends and Other
Payment Restrictions Affecting Restricted Subsidiaries.

 

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

 

(i)            this Indenture, the Collateral
Documents, any Guarantee, the Securities, the Senior Credit Facilities, as
originally executed, and any other agreement in effect on the Closing Date;

 

(ii)           applicable law;

 

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

 

(iv)          any agreement or other instrument of a
Person acquired by the Company or any Restricted Subsidiary in existence at the
time of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property or assets of
the Person, so acquired;

 

(v)           any encumbrance or restriction
contained in contracts for sales of assets permitted by Section 10.13 with
respect to assets to be sold pursuant to such contract;

 

(vi)          any encumbrance or restriction
existing under any agreement that extends, renews, refinances or replaces the
agreements containing the encumbrances or restrictions in the foregoing clauses
(i) and (iv); provided that the terms and conditions of any such
encumbrances or restrictions are not less favorable in any material respect to
the Holders of Securities than those under or pursuant to the agreement so
extended, renewed, refinanced or replaced.

 

Section 10.16       Limitation on Issuances and Sales of
Capital Stock of Restricted Subsidiaries.

 

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

 

85

 

rights to purchase shares
of such Capital Stock) except (a) to the Company or a Wholly-Owned
Restricted Subsidiary, (b) in a transaction or series of related
transactions consisting of a sale, provided that immediately after giving
effect to such sale, neither the Company nor any of its Subsidiaries owns any
shares of Capital Stock of such Restricted Subsidiary (including options,
warrants or other rights to purchase shares of such Capital Stock) and such
sale complies with the provisions of Section 10.13 or (c) in
connection with the Reorganization.

 

The Company shall not
permit any Restricted Subsidiary to issue Preferred Stock (other than to the
Company or its Wholly-Owned Restricted Subsidiary) or permit any Person (other
than the Company or its Wholly-Owned Restricted Subsidiaries) to own any
Preferred Stock of any of the Company’s Restricted Subsidiaries.

 

Section 10.17       Limitation on Liens.

 

The Company shall not,
and shall not permit any Restricted Subsidiary to, create, incur, affirm or
suffer to exist any Lien of any kind securing any Pari Passu Indebtedness or
Subordinated Indebtedness (including any assumption, guarantee or other
liability with respect thereto by any Restricted Subsidiary) upon any property
or assets (including any intercompany notes) of the Company or any Restricted
Subsidiary now owned or acquired after the Closing Date, or any income or
profits therefrom, unless the Securities are directly secured equally and
ratably with (or prior to in the case of Subordinated Indebtedness) the
obligation or liability secured by such Lien, and except for any Lien securing
Acquired Indebtedness created prior to the incurrence of such Indebtedness by
the Company or any Restricted Subsidiary, provided that any such Lien only extends
to the assets that were subject to such Lien securing such Acquired
Indebtedness prior to the related acquisition by the Company or the Restricted
Subsidiary.  Notwithstanding the foregoing,
nothing in the Indenture shall prohibit the creation or incurrence of a Lien
under any of the Collateral Documents or any guarantee issued pursuant to
Section 10.21 or Section 10.22.

 

Section 10.18       Unrestricted Subsidiaries.

 

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

 

86

 

additional shares of Capital Stock or other equity
interest in such Subsidiary, or to maintain or preserve such Subsidiary’s
financial condition or to cause such Subsidiary to achieve certain levels of
operating results.

 

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

 

Section 10.19       Limitation on Layering Indebtedness.

 

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

 

Section 10.20       Guarantees of Indebtedness by
Restricted Subsidiaries.

 

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

 

Section 10.21       Additional Subsidiaries to become a
Party to Collateral Documents or to Guarantee the Notes.

 

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

 

87

 

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

 

(b)           At any point after the Collateral
Documents have been released and discharged in accordance with the terms of
this Indenture, if the Company or any of its Restricted Subsidiaries transfer
or cause to be transferred, in one transaction or a series of related
transactions, property having an aggregate net book value in excess of
US$500,000 to any Restricted Subsidiary (except in connection with the
Reorganization), or if the Company or any of its Restricted Subsidiaries shall
organize, acquire or otherwise invest in another Restricted Subsidiary having
total assets with a net book value in excess of US$500,000 or if all Restricted
Subsidiaries that are not Guarantors of the Securities have total assets with a
net book value aggregating US$2,000,000 or more, then such transferee,
transferees or acquired Restricted Subsidiary or other Restricted Subsidiary or
Restricted Subsidiaries (other than Baytex Marketing Ltd.) shall execute and
deliver to the Trustee for the benefit of the Holders a guarantee of the notes,
in form and substance substantially similar to the guarantee set forth in
Article XIII of this Indenture.

 

Section 10.22       Additional Collateral Documents and
Guarantees upon Issuance of Additional Securities.

 

In the event that the
Company issues Additional Securities pursuant to Section 3.12 of this
Indenture after the Closing Date, and there are Restricted Subsidiaries in
existence at the time of such issuance of Additional Securities, the Company
will simultaneously therewith either:

 

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

 

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

 

88

 

Section 10.23       Limitation on Conduct of Business.

 

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

 

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

 

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

 

(b)           The Company shall not permit Baytex
Marketing Ltd. to create, incur, affirm or suffer to exist any Lien of any kind
upon any property or assets of Baytex Marketing Ltd. or any income or profits
therefrom, unless the Securities are directly secured equally and ratably with
the obligation or liability secured by such Lien and except as required or
permitted under the Frontier Agreements, as in effect on the date of this
Indenture, or in connection with the incurrence of Senior Indebtedness or
Guarantor Senior Indebtedness. 
Notwithstanding the foregoing, nothing in the Indenture shall prohibit
the creation or incurrence of a Lien under any of the Collateral Documents or
any guarantee issued pursuant to Section 10.21 or Section 10.22

 

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

 

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

 

Section 10.25       Payment of Additional Amounts.

 

(a)           All payments made by or on behalf of
the Company with respect to the Securities will be made free and clear of and
without withholding or deduction for or on account of any present or future
tax, duty, levy, impost, assessment or other governmental charge (including
penalties, interest and other liabilities related thereto) imposed or levied by
or on behalf of the Government of Canada or of any province or

 

89

 

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

 

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

 

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

 

(d)           At least 15 days prior to each date
on which any payment under or with respect to the Securities is due and
payable, if the Company will be obligated to pay Additional Amounts with
respect to such payment, the Company will deliver to the Trustee and the Paying
Agent an Officers’ Certificate stating the fact that such Additional Amounts
will be payable and will set forth such other information necessary to enable
the

 

90

 

Trustee and the Paying Agent to pay such Additional
Amounts to Holders on the payment date.

 

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

 

Section 10.26       Waiver of Certain Covenants.

 

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

 

ARTICLE XI

REDEMPTION OF SECURITIES

 

Section 11.01       Right of Redemption.

 

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

 

(b)           If the Company becomes obligated to
pay Additional Amounts as a result of a change in the laws or regulations of
Canada or any Canadian taxing authority or a change in any official position
regarding the application or interpretation thereof, which is publicly
announced or becomes effective on or after the Closing Date, the Company may,
at its option, redeem the Securities, in whole but not in part, at a redemption
price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the Redemption Date.

 

91

 

Section 11.02       Applicability of Article.

 

Redemption of Securities
at the election of the Company or otherwise, as permitted or required by any
provision of this Indenture, shall be made in accordance with such provision
and this Article.

 

Section 11.03       Election to Redeem; Notice to Trustee.

 

The election of the
Company to redeem any Securities pursuant to Section 11.01 shall be
evidenced by a Board Resolution.  In
case of any redemption at the election of the Company, the Company shall, at
least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Securities to be redeemed
and shall deliver to the Trustee such documentation and records as shall enable
the Trustee to select the Securities to be redeemed pursuant to
Section 11.04.

 

Section 11.04       Selection by Trustee of Securities to
Be Redeemed.

 

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

 

The Trustee shall
promptly notify the Company and the Registrar (if other than the Company) in
writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.

 

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

 

Section 11.05       Notice of Redemption.

 

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

 

All notices of redemption
shall state:

 

(i)            the Redemption Date,

 

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(ii)           the Redemption Price and the amount
of accrued interest to the Redemption Date payable as provided in
Section 11.07, if any,

 

(iii)          if less than all Outstanding
Securities are to be redeemed, the identification (and, in the case of a
partial redemption, the principal amounts) of the particular Securities to be
redeemed,

 

(iv)          in case any Security is to be redeemed
in part only, the notice which relates to such Security shall state that on and
after the Redemption Date, upon surrender of such Security, the holder will
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,

 

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

 

(vi)          the place or places where such
Securities are to be surrendered for payment of the Redemption Price and
accrued interest, if any, and

 

(vii)         the CUSIP or CINS number, as the case
may be.

 

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

 

Section 11.06       Deposit of Redemption Price.

 

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

 

Section 11.07       Securities Payable on Redemption Date.

 

Notice of redemption
having been given as aforesaid, the Securities so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified (together with accrued interest, if any, to the Redemption Date), and
from and after such date (unless the Company shall default in the payment of
the Redemption Price and accrued interest, if any) such Securities shall cease
to bear interest.  Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the

 

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

 

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

 

Section 11.08       Securities Redeemed in Part.

 

Any Security which is to
be redeemed only in part shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 10.02 (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder’s attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security
or Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Security so surrendered.

 

ARTICLE XII

DEFEASANCE AND COVENANT DEFEASANCE

 

Section 12.01       Company Option to Effect Defeasance or
Covenant Defeasance.

 

The Company may, at its
option by Board Resolution at any time, with respect to the Securities, elect
to have either Section 12.02 or Section 12.03 be applied to all
Outstanding Securities upon compliance with the conditions set forth below in
this Article XII.

 

Section 12.02       Defeasance and Discharge.

 

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

 

94

 

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

 

Section 12.03       Covenant Defeasance.

 

Upon the Company’s
exercise under Section 12.01 of the option applicable to this
Section 12.03, each of the Company and the Restricted Subsidiaries shall
be released from its obligations under any covenant contained in
Section 8.01 and in Sections 10.04 through 10.26 (other than
Section 10.08) with respect to the Outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, “covenant
defeasance”), and the Securities shall thereafter be deemed not to be
“Outstanding” for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed “Outstanding” for all other purposes
hereunder.  For this purpose, such
covenant defeasance means that, with respect to the Outstanding Securities, the
Company and any Restricted Subsidiary may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under
Sections 5.01(c), 5.01(d), 5.01(e) and 5.01(f) but, except as specified
above, the remainder of this Indenture and such Securities shall be unaffected
thereby.

 

Section 12.04       Conditions to Defeasance or Covenant
Defeasance.

 

The following shall be
the conditions to application of either Section 12.02 or
Section 12.03 to the Outstanding Securities:

 

(a)           The Company shall irrevocably have
deposited with the Trustee (or another trustee satisfying the requirements of
Section 6.07 who shall agree to comply with the provisions of this
Article XII applicable to it) as trust funds in trust, for the benefit of
the Holders of such Securities, (A) money in an amount, or (B) U.S.
Government Obligations (as defined herein) that through the scheduled payment
of principal and interest thereon will provide money in an amount, or
(C) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay and
discharge the principal of (premium, if any) and interest on the
Outstanding Securities on the Stated Maturity (or upon Redemption Date, if
applicable)

 

95

 

of such principal (and premium, if any) or installment
of interest;
provided that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such U.S. Government Obligations to said
payments with respect to the Securities. 
Before such a deposit, the Company may give to the Trustee, in
accordance with Section 11.03 hereof, a notice of its election to redeem
all of the Outstanding Securities at a future date in accordance with
Article XI hereof, which notice shall be irrevocable.  Such irrevocable redemption notice, if
given, shall be given effect in applying the foregoing.  For this purpose, “U.S. Government
Obligations” means securities that are (x) direct obligations of the
United States for the timely payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States the timely payment
of which is unconditionally guaranteed as a full faith and credit obligation by
the United States, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as
custodian with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government Obligation held
by such custodian for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest on
the U.S. Government Obligation evidenced by such depository receipt.

 

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

 

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

 

(d)           In the case of an election under
Section 12.02, the Company shall have delivered to the Trustee an Opinion
of Counsel stating that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or (ii) since
the date of this Indenture, there has been a change in the applicable United
States federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding
Securities will not recognize income, gain or loss for United States federal
income tax purposes as a result of such defeasance and will be subject to
United States federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance had not occurred.

 

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

 

96

 

ruling from Revenue Canada, Taxation to the effect
that Holders of the Securities who are not resident in Canada will not
recognize income, gain or loss for Canadian federal, provincial or territorial
income tax or other tax purposes as a result of such deposit and defeasance and
will be subject to any Canadian federal or provincial income tax and other tax
on the same amounts in the same manner and at the same times as would have been
the case had such deposit and defeasance not occurred.

 

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

 

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

 

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

 

Section 12.05       Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other Miscellaneous Provisions.

 

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

 

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

 

Anything in this
Article XII to the contrary notwithstanding, the Trustee shall deliver or
pay to the Company from time to time upon Company Request any

 

97

 

money or U.S. Government
Obligations (or other property and any proceeds therefrom) held by it as
provided in Section 12.04 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance, as applicable, in accordance with this Article.

 

Section 12.06       Reinstatement.

 

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

 

ARTICLE XIII

GUARANTEE

 

Section 13.01       Application of Article XIII

 

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

 

Section 13.02       Guarantees.

 

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

 

98

 

relating to any failure by Company to unconditionally
and irrevocably pay in full or fully perform the Indenture Obligations as and
when due provided that the amount of such indemnification shall not exceed the
amount of such Indenture Obligations as described in the preceding sentence.  Without limiting the generality of the
foregoing, each Guarantor’s liability shall extend to all amounts that
constitute part of the Indenture Obligations and would be owed by the Company
to such Holder or the Trustee under the Securities or this Indenture but for
the fact that they are unenforceable, reduced, limited, suspended or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Company.

 

(b)           Each Guarantor and by its acceptance
hereof each Holder hereby confirms that it is the intention of all such parties
that the guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act of any
similar United States or Canadian federal, provincial or state law or the
provisions of its local law relating to fraudulent transfer or conveyance.  To effectuate the foregoing intention, the
Holders and each Guarantor hereby irrevocably agree that the obligations of
such Guarantor under its Guarantee shall be limited to the maximum amount as
shall, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to paragraph (c) of this
Section 13.01, result in the obligations of such Guarantor under its Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal
or state law.

 

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

 

Section 13.03       Guaranty Absolute.

 

Each Guarantor guarantees
that the Securities shall be paid or performed strictly in accordance with the
terms of the Securities and this Indenture, regardless of

 

99

 

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

 

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

 

(b)           any change in the time, manner or
place of payment of, or in any other term of, all or any of the Indenture
Obligations, or any other amendment or waiver of or any consent to departure
from this Indenture, including any increase in the Indenture Obligations resulting
from the extension of additional credit to the Company or otherwise;

 

(c)           the failure to give notice to the
Guarantor of the occurrence of a Default under the provisions of this Indenture
or the Securities;

 

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

 

(e)           any failure, omission, delay by or
inability on the part of the Trustee or the Holders to assert or exercise any
right, power or remedy conferred on the Trustee or the Holders in this
Indenture or the Securities;

 

(f)            any change in the corporate
structure, or termination, dissolution, amalgamation, consolidation or merger
of the Company or any Guarantor with or into any other Person, the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all the assets of the Company or any Guarantor, the marshalling
of the assets and liabilities of the Company or any Guarantor, the
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with the creditors, or readjustment
of, or other similar proceedings affecting the Company or any Guarantor, or any
of the assets of any of them;

 

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

 

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

 

100

 

the Company or a Guarantor, other than payment in full
of the Indenture Obligations; it being the intent of each Guarantor that its
obligations hereunder shall not be discharged except by payment of all amounts
owing pursuant to this Indenture or the Securities.

 

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

 

Section 13.04       Waivers.

 

(a)           Each Guarantor hereby expressly
waives (to the extent permitted by law) notice of the acceptance of its
Guarantee and notice of the existence, renewal, extension or the
non-performance, non-payment, or non-observance on the part of the Company of
any of the terms, covenants, conditions and provisions of this Indenture or the
Securities or any other notice whatsoever to or upon the Company or such
Guarantor with respect to the Indenture Obligations.  Each Guarantor hereby acknowledges communication to it of the
terms of this Indenture and the Securities and all of the provisions herein
contained and consents to and approves the same.  Each Guarantor hereby expressly waives (to the extent permitted
by law) diligence, presentment and protest.

 

(b)           Without prejudice to any of the
rights or recourse which the Trustee or the Holders may have against the
Company, each Guarantor hereby expressly waives (to the extent permitted by
law) any right to require the Trustee or the Holders to:

 

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

 

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

 

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

 

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

 

101

 

Section 13.05       Subrogation.

 

Each Guarantor shall not
exercise any rights that it may acquire by way of subrogation under this
Guarantee, by any payment made hereunder or otherwise, until all the Indenture
Obligations shall have been paid in full. 
If any amount shall be paid to any Guarantor on account of any such
subrogation rights at any time when all the Indenture Obligations shall not
have been paid in full, such amount shall be held in trust for the benefit of
the Holders and the Trustees and shall forthwith be paid to the Trustee, on
behalf of the Holders, to be credited and applied to the Indenture Obligations,
whether matured or unmatured.

 

Section 13.06       No Waiver; Remedies.

 

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

 

Section 13.07       Continuing Guaranty; No Right of
Set-Off; Independent Obligation.

 

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

 

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

 

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

 

(d)           Each Guarantor’s liability to pay or
perform or cause the performance of the Indenture Obligations under this
Guarantee shall arise forthwith after demand for payment or performance by the
Trustee has been given to such Guarantor in the manner prescribed in this
Indenture.

 

Section 13.08       Guarantors May Consolidate, Etc., on
Certain Terms.

 

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

 

102

 

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

 

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

 

Section 13.09       Releases.

 

(a)           In the event of (i) a conveyance,
sale, assignment, transfer or other disposition of all of the Capital Stock of
a Guarantor to any Person (by way of amalgamation, merger, consolidation or
otherwise) or all or substantially all of the assets of a Subsidiary Guarantor
to any Person (by way of amalgamation, merger, consolidation or otherwise),
(ii) the designation of such Subsidiary Guarantor as an Unrestricted Subsidiary
in accordance with the terms of this Indenture, (iii) the release or discharge
of the guarantee that resulted in the creation of the Guarantee pursuant to
Section 10.20, except a discharge or release by or as a result of payment
under such guarantee, or (iv) a release and discharge of the Guarantor’s
Guarantee pursuant to Section 4.03, then such Guarantor (or Person
acquiring such assets in the event of a sale or other disposition of all of the
assets of such Guarantor) shall be deemed automatically and unconditionally
released from and discharged from all of its obligations under this
Article XIII and its Guarantee without any further action required on the
part of the Trustee or any Holder; provided that, in the event such
transaction constitutes an Asset Sale, the Net Cash Proceeds of such
conveyance, sale, assignment, transfer or other disposition are applied in
accordance with Section 10.13 hereof.

 

(b)           Any Guarantor that is designated by
the Board of Directors of the Company as an Unrestricted Subsidiary, or ceases
to be a Subsidiary of the Company in accordance with the terms of this
Indenture may, at such time, at the option of the Board of Directors, be
released and relieved of its obligations under its Guarantee.

 

103

 

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

 

(d)           The Trustee shall deliver an
appropriate instrument evidencing such release upon receipt of a Company
Request accompanied by an Officers’ Certificate certifying as to the compliance
with this Section 13.09.  Any
Guarantor not so released shall remain liable for the full amount of principal
of and interest on the Securities as provided in its Guarantee.

 

Section 13.10       Severability.

 

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

 

ARTICLE XIV

SUBORDINATION OF SECURITIES AND GUARANTEES

 

Section 14.01       Securities and Guarantees Subordinate
to Senior Indebtedness.

 

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

 

(b)           The Company further covenants and
agrees that it will cause each Guarantor (if any), upon such Guarantor’s
issuance of a Guarantee, to covenant and agree, and each Holder of a Security,
by his acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article XIV, the
indebtedness represented by the Guarantee of such Guarantor is expressly made
subordinate and subject in right of payment to the prior payment in full of all
Guarantor Senior Indebtedness of such Guarantor.

 

Section 14.02       Payment Over of Proceeds Upon
Dissolution, Etc.

 

In the event of any
payment or distribution of assets of the Company or any Guarantor to creditors
upon any liquidation, dissolution, winding-up, reorganization, assignment for
the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or
similar proceedings, whether voluntary or not (except in connection with a
consolidation or merger or liquidation or dissolution following the conveyance,
transfer

 

104

 

or lease of the assets
and properties of the Company substantially as an entirety upon the terms and
conditions described under Section 8.01) (each such event, if any, is
herein sometimes referred to as a “Proceeding”), of the Company or any
Guarantor (the Company or such Guarantor being the “Affected Obligor”), then
(i) if the Affected Obligor is the Company, the holders of Senior Indebtedness
shall first be entitled to receive payment in full, in cash or Cash
Equivalents, of all amounts due or to become due on or in respect of such
Senior Indebtedness (including interest accruing after the commencement of any
such Proceeding at the rate specified therein whether or not such interest is
an allowed claim in such proceeding) before the Holders of the Securities are
entitled to receive any payment of principal of (premium, if any) and interest
on the Securities or on account of the purchase or redemption or other acquisition
of Securities by the Company or any Subsidiary of the Company and (ii) if the
Affected Obligor is a Guarantor, the holders of Guarantor Senior Indebtedness
of such Guarantor shall first be entitled to receive payment in full, in cash
or Cash Equivalents, of all amounts due or to become due on or in respect of
such Guarantor Senior Indebtedness (including interest accruing after the
commencement of any such Proceeding at the rate specified therein whether or
not such interest in an allowed claim in such proceeding) before the Holders of
the Securities are entitled to receive any payment or distribution of any kind
with respect to the Guarantee of such Guarantor (any payment on or purchase,
redemption or acquisition of the Securities, referred to in clause (i), and any
payment on a Guarantee, referred to in clause (ii), being, individually and
collectively, a “Securities Payment”), and, to that end, if the Affected
Obligor is the Company, the holders of Senior Indebtedness and, if the Affected
Obligor is a Guarantor, the holders of Guarantor Senior Indebtedness of such
Guarantor (such Senior Indebtedness or Guarantor Senior Indebtedness, as the
case may be, being “Affected Obligor Senior Indebtedness” of such Affected
Obligor) shall be entitled to receive, for application to the payment thereof,
any payment or distribution of any kind or character, whether in cash, property
or securities which may be payable or deliverable in respect of the Securities
in any such Proceeding.

 

In the event that,
notwithstanding the foregoing provisions of this Section 14.02, the
Trustee or the Holder of any Security shall have received any payment or
distribution of assets of an Affected Obligor of any kind or character, whether
in cash, property or securities, before all Affected Obligor Senior
Indebtedness is paid in full, and if such fact shall, at or prior to the time
of such payment, have been known to the Trustee or the Holder, as the case may
be, then such payment or distribution, except for amounts subject to the claim
granted to the Trustee in Section 6.06 hereof, shall be held in trust for
the holders of Affected Obligor Senior Indebtedness and shall be paid over or
delivered forthwith to the trustee in bankruptcy or other Person making payment
or distribution of assets of the Affected Obligor for application to the
payment of all Affected Obligor Senior Indebtedness remaining unpaid, to the
extent necessary to pay all Affected Obligor Senior Indebtedness in full, after
giving effect to any concurrent payment or distribution to or for the holders
of the Affected Obligor Senior Indebtedness.

 

For purposes of this
Article XIV only, the words “any payment or distribution of any kind or
character, cash, property or securities” shall not be deemed to include a
payment or distribution of equity or subordinated securities of the Affected

 

105

 

Obligor provided for by a
plan of reorganization or readjustment that, in the case of subordinated
securities, are subordinated in right of payment to all then outstanding
Affected Obligor Senior Indebtedness to at least the same extent as the
Securities or Guarantees, as the case may be, are so subordinated as provided
in this Article XIV.

 

Section 14.03       No Payment When Certain Senior Indebtedness
in Default.

 

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

 

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

 

106

 

otherwise become due and
payable, other than a Senior Payment Default. 
Notwithstanding the foregoing, the Company and the Guarantors may make
Securities Payments without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from the Senior Credit
Facility Agent or an authorized representative on behalf of any representative
of each holder of Designated Senior Indebtedness affected by such Senior
Payment Default or Senior Nonmonetary Default.

 

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

 

Section 14.04       Payment Permitted If No Default.

 

Nothing contained in this
Article XIV or elsewhere in this Indenture or in any of the Securities
shall, at any time except during the pendency of any Proceeding referred to in
Section 14.02 or under the conditions described in Section 14.03,
prevent (a) the Company or any Guarantor from making Securities Payments, or
(b) the application by the Trustee of any money deposited with it hereunder to
Securities Payments or the retention of such payment by the Holders.

 

Section 14.05       Subrogation to Rights of Holders of
Senior Indebtedness.

 

Subject to the payment in
full of all Senior Indebtedness, the Holders of the Securities shall be
subrogated to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of (premium, if any) and interest on
the Securities shall be paid in full. 
Subject to the payment in full of all Guarantor Senior Indebtedness, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Guarantor Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to such Guarantor Senior Indebtedness
until the principal of (premium, if any) and interest on the Securities shall
be paid in full.  For purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness or Guarantor Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article XIV, and no payments
over pursuant to the provisions of this Article XIV to the holders of
Senior Indebtedness or Guarantor Senior Indebtedness by Holders of the Securities
or the Trustee, shall, as among the Company, the Guarantors, their respective
creditors (other than holders of Senior Indebtedness and the Guarantor Senior
Indebtedness and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness).  Neither the Holders of the Securities nor
the Trustee shall have any claim against the holders of the Senior Indebtedness
or the

 

107

 

Guarantor Senior
Indebtedness or the Senior Credit Facilities Agent for any impairment of the
subrogation rights herein granted arising out of any release of Liens securing
the Senior Indebtedness or the Guarantor Senior Indebtedness.

 

Section 14.06       Provisions Solely to Define Relative
Rights.

 

The provisions of this
Article XIV are and are intended solely for the purpose of defining the
relative rights of the Holders on the one hand and the holders of Senior
Indebtedness and Guarantor Senior Indebtedness on the other hand.  Nothing contained in this Article XIV
or elsewhere in this Indenture or in the Securities is intended to or shall (a)
impair, as among the Company, its creditors (other than holders of Senior
Indebtedness) and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under
this Article XIV of the holders of Senior Indebtedness, is intended to
rank equally with all other general obligations of the Company) to pay to the Holders
of the Securities the principal of (premium, if any) and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) impair, as among the Guarantors, their creditors (other
than holders of Guarantor Senior Indebtedness) and the Holders of the
Securities, the obligation of the Guarantors, which is absolute and
unconditional (and which, subject to the rights under this Article XIV of
the holders of Guarantor Senior Indebtedness, is intended to rank equally with
all other general obligations of the Guarantors) to pay to the Holders of the
Securities the principal of (premium, if any) and interest on the Securities as
and when the same shall become due and payable in accordance with their terms;
or (c) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company (other than the holders of Senior
Indebtedness) or the relative rights against the Guarantors of the Holders of
the Securities and creditors of the Guarantors (other than the Holders of
Guarantor Senior Indebtedness); or (d) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XIV of the holders of Senior Indebtedness and Guarantor Senior
Indebtedness to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder. 
The holders of the Senior Indebtedness and the Senior Credit Facilities
Agent, as the case may be, shall be entitled to enforce the provisions of this
Article XIV against the Company, the Guarantors, the Holders of the
Securities and the Trustee.

 

Section 14.07       Trustee to Effectuate Subordination.

 

Each Holder of a Security
by his acceptance thereof authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article XIV and appoints the Trustee his
attorney-in-fact for any and all such purposes.

 

Section 14.08       No Waiver of Subordination Provisions.

 

No right of any present
or future holder of any Senior Indebtedness or Guarantor Senior Indebtedness to
enforce subordination as herein provided shall at any

 

108

 

time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or any Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company or any Guarantor with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.

 

Without in any way
limiting the generality of the foregoing paragraph, the holders of Senior
Indebtedness or Guarantor Senior Indebtedness, as the case may be, may, at any
time and from time to time, without the consent of or notice to the Trustee or
the Holders of the Securities, without incurring responsibility to the Trustee
or the Holders of the Securities and without impairing or releasing the
subordination provided in this Article XIV or the obligations hereunder of
the Holders of the Securities to the holders of Senior Indebtedness or
Guarantor Senior Indebtedness, as the case may be, do any one or more of the
following:  (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or Guarantor Senior Indebtedness, as the case may be, or otherwise
amend or supplement in any manner Senior Indebtedness or Guarantor Senior
Indebtedness, as the case may be, or any instrument evidencing the same or any
agreement under which Senior Indebtedness or Guarantor Senior Indebtedness, as
the case may be, is outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Indebtedness
or any Guarantor Senior Indebtedness, as the case may be; (iii) release
any Person liable in any manner for the collection of Senior Indebtedness or
any Guarantor Senior Indebtedness, as the case may be; and (iv) exercise or
refrain from exercising any rights against the Company or any Guarantor and any
other Person.

 

Section 14.09       Notice to Trustee; Holders of Senior
Indebtedness.

 

The Company and each
Guarantor shall give prompt written notice to the Trustee of any fact known to
the Company which would prohibit the making of any payment to or by the Trustee
in respect of the Securities and of any subsequent cure or waiver thereof.  Notwithstanding the provisions of this
Article XIV or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received written notice
thereof from the Company or a holder of Senior Indebtedness or a holder of
Guarantor Senior Indebtedness or from any trustee or agent therefor; and, prior
to the receipt of any such written notice, the Trustee, shall be entitled in
all respects to assume that no such facts exist, provided, however,
that if the Trustee shall not have received the notice provided for in this
Section at least two Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (premium, if any) or interest on
any Security), then, anything herein contained in this Section 14.09 to
the contrary notwithstanding but subject always to Section 14.03, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within two
Business Days prior to such date.

 

109

 

The Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness or a holder of
Guarantor Senior Indebtedness (or a trustee or agent therefor) to establish
that such notice has been given by a holder of Senior Indebtedness or a holder
of Guarantor Senior Indebtedness (or a trustee or agent therefor).  In the event that the Trustee determines in
good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness or a holder of Guarantor Senior
Indebtedness, as the case may be, to participate in any payment or distribution
pursuant to this Article XIV, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness or Guarantor Senior Indebtedness, as the case may be,
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article XIV, and if such evidence is not furnished,
the Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.

 

The Company will promptly
notify each holder of Senior Indebtedness if payment of the Securities is
accelerated pursuant to Section 5.02 as a result of an Event of Default.

 

Section 14.10       Reliance on Judicial Order or
Certificate of Liquidation Agent.

 

Upon any payment or
distribution of assets of the Company or any Guarantor referred to in this
Article XIV, the Trustee and the Holders of the Securities shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in a Proceeding, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of
creditors, agent or other Person making such payment or distribution, delivered
to the Trustee or to the Holders of Securities, for the purpose of ascertaining
the Persons entitled to participate in such payment or distribution, the
holders of the Senior Indebtedness, Guarantor Senior Indebtedness and other
indebtedness of the Company and the Guarantors, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XIV.

 

Section 14.11       Trustee Not Fiduciary for Holders of
Senior Indebtedness.

 

The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness or
Guarantor Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness or Guarantor Senior Indebtedness shall be
entitled by virtue of this Article XIV or otherwise.

 

110

 

Section 14.12       Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee’s Rights.

 

The Trustee in its
individual capacity shall be entitled to all the rights set forth in this
Article XIV with respect to any Senior Indebtedness or Guarantor Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness or Guarantor Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.

 

Nothing in this
Article XIV shall apply to claims of, or payments to, the Trustee under or
pursuant to Section 6.06.

 

Section 14.13       Applicability to Paying Agents.

 

In case at any time any
Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term “Trustee” as used in this
Article XIV shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within its meaning as
fully for all intents and purposes as if such Paying Agent were named in this
Article XIV in addition to or in place of the Trustee; provided, however,
that this Section 14.13 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.

 

Section 14.14       Defeasance of this Article XIV.

 

The subordination of the
Securities and the Guarantees provided by this Article XIV is expressly
made subject to the provisions for defeasance or covenant defeasance in Article XII
hereof and, anything herein to the contrary notwithstanding, upon the
effectiveness of any such defeasance or covenant defeasance, the Securities and
the Guarantees then outstanding shall thereupon cease to be subordinated
pursuant to this Article XIV.

 

Section 14.15       Subordination Provisions Controlling.

 

Notwithstanding anything
to the contrary contained in this Indenture, to the extent that any provision
contained in Articles I (other than Sections 1.01 and 1.07) through XIII of
this Indenture conflicts with any provision contained in Article XIV
(including the definitions of certain terms used in Article XIV) of this
Indenture, the provisions contained in Article XIV of this Indenture shall
govern and control.

 

Section 14.16       Subordination of Collateral Documents

 

The Trustee is hereby
authorized and directed to enter into the Collateral Documents Subordination
Agreement and the Collateral Documents to which it is stated to be a party.

 

* * *

 

111

 

This Indenture may be
signed in any number of counterparts each of which so executed shall be deemed
to be an original, but all such counterparts shall together constitute but one
and the same Indenture.

 

112

 

IN WITNESS WHEREOF, the
parties hereto have caused this Indenture to be duly executed as of the day and
year first above written.

 

 

	
   

  	
  BAYTEX ENERGY LTD

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NOVA SCOTIA
  TRUST COMPANY OF NEW YORK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
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113<PAGE>

                                                                     EXHIBIT 4.3

THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN
PROVIDED.

VOID AFTER 5:00 P.M. EASTERN TIME, _____ _____, 2009.

                                     FORM OF
                                 PURCHASE OPTION

                            FOR THE PURCHASE OF UP TO

                         120,000 SHARES OF COMMON STOCK

                                     AND/OR

                     120,000 COMMON STOCK PURCHASE WARRANTS

                                       OF

                              GIGABEAM CORPORATION

                            (A DELAWARE CORPORATION)

1.       Purchase Option.

         THIS CERTIFIES THAT, in consideration of $100.00 duly paid by or on
behalf of ____________________________ ("Holder"), as registered owner of this
Purchase Option, to GigaBeam Corporation ("Company"), Holder is entitled, at any
time or from time to time at or after _____ ____, 2005 ("Commencement Date"),
and at or before 5:00 p.m., Eastern Time, _____ ____, 2009 ("Expiration Date"),
but not thereafter, to subscribe for, purchase and receive, in whole or in part,
up to One Hundred and Twenty Thousand (120,000) shares of Common Stock of the
Company, $.001 par value ("Common Stock") and/or One Hundred and Twenty Thousand
(120,000) Redeemable Common Stock Purchase Warrants, each to purchase one share
of Common Stock ("Warrants"). Each Warrant is the same as the Redeemable Common
Stock Purchase Warrants ("Public Warrants") that have been registered by the
Company for sale to the public pursuant to the Registration Statement on Form
SB-2 (No.333-116020) ("Registration Statement"), which was declared effective on
______, 2004 ("Effective Date"). The shares of Common Stock and Warrants are
sometimes collectively referred to herein as the "Securities." The Holder can
purchase, upon exercise of the Purchase Option, either shares of Common Stock or
Warrants or both. If the Expiration Date is a day on which banking institutions
are authorized by law to close, then this Purchase Option may be exercised on
the next succeeding day that is not such a day in accordance with the terms
herein. This Purchase Option is initially exercisable at $5.555 per share of
Common Stock and $0.055 per Warrant purchased; provided, however, that upon the
occurrence of any of the events specified in Section 6 hereof, the rights
granted by this Purchase Option, including the exercise price and the number of
shares of Common Stock and Warrants to be received upon such exercise, shall be
adjusted as therein specified. The term "Exercise Price" shall mean the initial
exercise price or the adjusted exercise price, depending on the context of a
share of Common Stock or a Warrant.

<PAGE>

2.       Exercise.

         2.1 Exercise Form. In order to exercise this Purchase Option, the
exercise form attached hereto must be duly executed and completed and delivered
to the Company, together with this Purchase Option and payment of the Exercise
Price in cash or by certified check or official bank check for the Securities
being purchased. If the subscription rights represented hereby shall not be
exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this
Purchase Option shall become and be void without further force or effect, and
all rights represented hereby shall cease and expire.

         2.2 Legend. Each certificate for Securities purchased under this
Purchase Option shall bear a legend as follows (or a substantially similar
legend) unless such Securities have been registered under the Securities Act of
1933, as amended:

             "The securities represented by this certificate have not been
             registered under the Securities Act of 1933, as amended ("Act") or
             applicable state law. The securities may not be offered for sale,
             sold or otherwise transferred except pursuant to an effective
             registration statement under the Act, or pursuant to an exemption
             from registration under the Act and applicable state law."

         2.3 Conversion Right.

         2.3.1 Determination of Amount. In lieu of the payment of the Exercise
Price in the manner required by Section 2.1, the Holder shall have the right
(but not the obligation) to convert any exercisable but unexercised portion of
this Purchase Option into Common Stock and/or Warrants ("Conversion Right") as
provided in this Section 2 below. Notwithstanding anything to the contrary
contained in this Agreement, this Conversion Right shall only be exercisable
with respect to the Warrants after the first anniversary hereof and only if a
registration statement under the Act respecting the Warrants (and the Common
Stock underlying the Warrants)is not then effective.

         2.3.2 Common Stock. Upon exercise of the Conversion Right, the Company
shall deliver to the Holder (without payment by the Holder of any of the
Exercise Price in cash) that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the "Stock Value" (as defined below), at the
close of trading on the next to last trading day immediately preceding the
exercise of the Conversion Right, of the portion of the Purchase Option being
converted by (y) the Market Price at that same time. The "Stock Value" of the
portion of the Purchase Option being converted shall equal the remainder derived
from subtracting (a) the Exercise Price multiplied by the number of shares of
Common Stock underlying that portion of the Purchase Option being converted from
(b) the Market Price of the Common Stock multiplied by the number of shares of
Common Stock underlying that portion of the Purchase Option being converted. As
used in this Section 2.3.2, the term "Market Price" at any date shall be deemed
to be the average of the last reported sale price of the Common Stock for the
three consecutive trading days ending on such date, as officially reported by
the principal securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or if any such exchange on which the
Common Stock is listed is not its principal trading market, the last reported
sale price for the three consecutive trading days ending on such date as
furnished by the NASD through the Nasdaq National Market or SmallCap Market, or,
if applicable, the OTC Bulletin Board, or if the Common Stock is not listed or
admitted to trading on any of the foregoing markets, or similar organization, as
determined in good faith by resolution of the Board of Directors of the Company,
based on the best information available to it.

                                       2
<PAGE>

         2.3.3 Warrants. Upon exercise of the Conversion Right the Company shall
deliver to the Holder (without payment by the Holder of any of the Exercise
Price in cash) that number of Warrants equal to the quotient obtained by
dividing (x) the "Warrant Value" (as defined below), at the close of trading on
the next to last trading day immediately preceding the exercise of the
Conversion Right, of the portion of the Purchase Option being converted by (y)
the Market Price at that same time. The "Warrant Value" of the portion of the
Purchase Option being converted shall equal the remainder derived from
subtracting (a) the Exercise Price multiplied by the number of Warrants
underlying that portion of the Purchase Option being converted from (b) the
Market Price of the Warrants multiplied by the number of Warrants underlying
that portion of the Purchase Option being converted. As used in this Section
2.3.3, the term "Market Price" at any date shall be deemed to be the last
reported sale price of the Warrants for the three consecutive trading days
ending on such date, or, in case no such reported sale takes place on such day,
the last reported sale price for the immediately preceding trading day, in
either case as officially reported by the principal securities exchange on which
the Warrants are listed or admitted to trading, or, if the Warrants are not
listed or admitted to trading on any national securities exchange or if any such
exchange on which the Warrants are listed is not its principal trading market,
the last reported sale price for the three consecutive trading days ending as
furnished by the NASD through the Nasdaq National Market or SmallCap Market, or,
if applicable, the OTC Bulletin Board, or if the Warrants are not then traded on
any of the foregoing markets, or similar organization, then the "Market Price"
shall equal the remainder derived from subtracting (a) the exercise price of the
underlying Warrant from (b) the "Market Price" of the Common Stock as determined
in Section 2.3.2.

         2.3.4 Mechanics of Conversion. The Conversion Right may be exercised by
the Holder on any business day on or after the Commencement Date and not later
than the Expiration Date by delivering the Purchase Option with a duly executed
exercise form attached hereto with the conversion right section completed to the
Company, exercising the Conversion Right and specifying the total number of
shares of Common Stock and/or Warrants that the Holder will purchase pursuant to
such Conversion Right.

3.       Transfer.

         3.1 General Restrictions. The registered Holder of this Purchase
Option, by its acceptance hereof, agrees that it will not sell, transfer or
assign or hypothecate this Purchase Option prior to the Commencement Date to
anyone other than (i) an officer or partner of such Holder, (ii) an officer of
HCFP/Brenner Securities LLC ("Underwriter") or an officer or partner of any
Selected Dealer or member of the underwriting syndicate in connection with the
Company's public offering with respect to which this Purchase Option has been
issued, or (iii) any Selected Dealer or member of the underwriting syndicate. On
and after the Commencement Date, transfers to others may be made subject to
compliance with or exemptions from applicable securities laws. In order to make
any permitted assignment, the Holder must deliver to the Company the assignment
form attached hereto duly executed and completed, together with the Purchase
Option and payment of all transfer taxes, if any, payable in connection
therewith. The Company shall immediately transfer this Purchase Option on the
books of the Company and shall execute and deliver a new Purchase Option or
Purchase Options of like tenor to the appropriate assignee(s) expressly
evidencing the right to purchase the aggregate number of shares of Common Stock
and Warrants purchasable hereunder or such portion of such number as shall be
contemplated by any such assignment.

         3.2 Restrictions Imposed by the Act. This Purchase Option and the
Securities underlying this Purchase Option shall not be transferred unless and
until (i) the Company has received the opinion of counsel for the Holder that
this Purchase Option or the Securities, as the case may be, may be transferred
pursuant to an exemption from registration under the Act and applicable state
law, the availability of which is established to the reasonable satisfaction of
the Company (the Company hereby agreeing that an opinion of Graubard Miller in
form and substance reasonably satisfactory to the Company or its counsel shall
be deemed satisfactory evidence of the availability of an exemption), or (ii) a
registration statement relating to such Purchase Option or Securities, as the
case may be, has been filed by the Company and declared effective by the
Securities and Exchange Commission and compliance with applicable state law.

                                       3
<PAGE>

4.       New Purchase Options to be Issued.

         4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Purchase Option may be exercised or assigned in whole or
in part. In the event of the exercise or assignment hereof in part only, upon
surrender of this Purchase Option for cancellation, together with the duly
executed exercise or assignment form and funds sufficient to pay any Exercise
Price and/or transfer tax, the Company shall cause to be delivered to the Holder
without charge a new Purchase Option of like tenor to this Purchase Option in
the name of the Holder evidencing the right of the Holder to purchase the
aggregate number of shares of Common Stock and Warrants purchasable hereunder as
to which this Purchase Option has not been exercised or assigned.

         4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Option and of reasonably satisfactory indemnification, the Company
shall execute and deliver a new Purchase Option of like tenor and date. Any such
new Purchase Option executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation
on the part of the Company.

5.       Registration Rights.

         5.1 Demand Registration.

             5.1.1 Grant of Right. The Company, upon written demand ("Initial
Demand Notice") of the Holder(s) of at least 51% of the Purchase Options and/or
the underlying shares of Common Stock and Warrants ("Majority Holders"), agrees
to register on one occasion, all of the Securities underlying such Purchase
Options, including the Common Stock, the Warrants and the Common Stock
underlying the Warrants (collectively the "Registrable Securities"). On such
occasion, the Company will file a registration statement covering the
Registrable Securities within sixty (60) days after receipt of the Initial
Demand Notice and use its reasonable best efforts to have the registration
statement declared effective promptly thereafter. If the Company fails to comply
with the provisions of this Section 5.1.1, the Company shall, in addition to any
other equitable or other relief available to the Holder(s), be liable for any
and all incidental, special and consequential damages sustained by the
Holder(s). The demand for registration may be made at any time during a period
of four years beginning one year from the Effective Date; provided that the
Registrable Securities are not already covered by an effective registration
statement. The Company covenants and agrees to give written notice of its
receipt of any Initial Demand Notice by any Holder(s) to all other registered
Holders of the Purchase Options and/or the Registrable Securities within ten
days from the date of the receipt of any such Initial Demand Notice.

                                       4
<PAGE>

             5.1.2 Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities, but the Holders shall pay any and all
underwriting and brokerage commissions discounts and fees, the expenses of any
legal counsel selected by the Holders to represent them in connection with the
sale of the Registrable Securities. The Company agrees to use its reasonable
best efforts to cause the filing required herein to become effective promptly
and to qualify or register the Registrable Securities in such States as are
reasonably requested by the Holder(s); provided, however, that in no event shall
the Company be required to register the Registrable Securities in a State in
which such registration would cause (i) the Company to be obligated to register
or license to do business in such State or submit to general service of process
in such State, or (ii) the principal stockholders of the Company to be obligated
to escrow their shares of capital stock of the Company. The Company shall cause
any registration statement filed pursuant to the demand right granted under
Section 5.1.1 to remain effective for a period of at least twelve consecutive
months from the date that the Holders of the Registrable Securities covered by
such registration statement are first given the opportunity to sell all of such
securities.

         5.2 "Piggy-Back" Registration.

             5.2.1 Grant of Right. In addition to the demand right of
registration, the Holders of the Purchase Options shall have the right for a
period of six (6) years commencing one year from the Effective Date, to include
the Registrable Securities as part of any other registration of securities filed
by the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act or pursuant to Form S-8 or any equivalent
form); provided, however, that if, in the determination of the Company's
managing underwriter or underwriters, if any, for such offering, the inclusion
of the Registrable Securities, when added to the securities being registered by
the Company or the selling stockholder(s), will exceed the maximum amount of the
Company's securities which can be marketed (i) at a price reasonably related to
their then current market value, or (ii) without adversely affecting the entire
offering, the Company shall not be obligated to register such Registrable
Securities.

             5.2.2 Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities, but the Holders shall pay any and all
underwriting and brokerage commissions, discounts and fees and the expenses of
any legal counsel and other experts selected by the Holders to represent them in
connection with the sale of the Registrable Securities. In the event of such a
proposed registration, the Company shall furnish the then Holders of outstanding
Registrable Securities with not less than ten (10) days written notice prior to
the proposed date of filing of such registration statement. Such notice to the
Holders shall continue to be given for each registration statement filed by the
Company until such time as the Holder has sold all of the Registrable
Securities. The holders of the Registrable Securities shall exercise the
"piggy-back" rights provided for herein by giving written notice, within ten
(10) days of the receipt of the Company's notice of its intention to file a
registration statement.

                                       5
<PAGE>

         5.3 General Terms.

             5.3.1 Indemnification. The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holders within the meaning
of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement but only to the same
extent and with the same effect as the provisions pursuant to which the Company
has agreed to indemnify the Underwriter contained in Section 5 of the
Underwriting Agreement between the Underwriter and the Company, dated the
Effective Date (but not with respect to information furnished (or not furnished
in the case of an omission) by the Holders). The Holder(s) of the Registrable
Securities to be sold pursuant to such registration statement, and their
successors and assigns, shall severally, and not jointly, indemnify the Company,
against all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished (or not furnished in the case of an omission or alleged omission) by
or on behalf of such Holders, or their successors or assigns, in writing, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 5 of the Underwriting
Agreement pursuant to which the Underwriter has agreed to indemnify the Company.

             5.3.2 Exercise of Warrants. Nothing contained in this Purchase
Option shall be construed as requiring the Holder(s) to exercise their Purchase
Options or Warrants prior to or after the initial filing of any registration
statement or the effectiveness thereof.

             5.3.3 Documents Delivered to Holders. Subject to the execution of
appropriate confidentiality agreements, the Company shall deliver promptly to
each Holder participating in the offering requesting the correspondence and
memoranda described below and to the managing underwriter copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit each Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the
National Association of Securities Dealers, Inc. ("NASD"). Such investigation
shall include access to books, records and properties and opportunities to
discuss the business of the Company with its officers and independent auditors,
all to such reasonable extent and at such reasonable times as any such Holder
shall reasonably request, provided that all such persons sign a confidentiality
agreement.

                                       6
<PAGE>

             5.3.4 Documents to be Delivered by Holder(s). Each of the Holder(s)
participating in any of the foregoing offerings shall furnish to the Company a
completed and executed questionnaire provided by the Company requesting
information customarily sought of selling securityholders as a condition to the
inclusion of such Holder's Registrable Securities in any registration statement.

6. Adjustments.

         6.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of shares of Common Stock underlying the Purchase
Option and underlying the Warrants underlying the Purchase Option shall be
subject to adjustment from time to time as hereinafter set forth:

             6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If after the date hereof, and subject to the provisions of Section
6.3 below, the number of outstanding shares of Common Stock is increased by a
stock dividend payable in shares of Common Stock or by a split-up,
recapitalization or reclassification of shares of Common Stock or other similar
event, then, on the effective date thereof, the number of shares of Common Stock
issuable on exercise of the Purchase Option and the Warrants underlying the
Purchase Option shall be increased in proportion to such increase in outstanding
shares; provided, however, that nothing in this Section 6.1 is intended to
provide for an adjustment with respect to the Warrants beyond that provided for
in the Warrant Agreement between the Company and Continental Stock Transfer &
Trust Company. For example, if the Company declares a two-for-one stock dividend
and at the time of such dividend the Purchase Option is for the purchase of
1,000 shares of Common Stock at $5.555 per share and 1,000 Warrants at $0.055
per Warrant (each Warrant exercisable for $5.05 per share), upon effectiveness
of the dividend, the Purchase Option will be adjusted (disregarding for purposes
of this example that adjustments shall be rounded to the nearest cent, as
provided in Section 6.1.3) to allow for the purchase of 2,000 shares at $2.7775
per share and 2,000 Warrants at $0.0275 (each Warrant exercisable for $2.525 per
share).

             6.1.2 Aggregation of Shares. If after the date hereof, and subject
to the provisions of Section 6.3, the number of outstanding shares of Common
Stock is decreased by a consolidation, combination or reclassification of shares
of Common Stock or other similar event, then, upon the effective date thereof,
the number of shares of Common Stock issuable on exercise of the Purchase Option
and the Warrants underlying the Purchase Option shall be decreased in proportion
to such decrease in outstanding shares.

                                       7
<PAGE>

             6.1.3 Adjustments in Exercise Price. Whenever the number of shares
of Common Stock purchasable upon the exercise of this Purchase Option is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Purchase Option
immediately prior to such adjustment, and (y) the denominator of which shall be
the number of shares of Common Stock so purchasable immediately thereafter. If
it is determined that such Exercise Price and number of shares of Common Stock
must be adjusted, then the Exercise Price of the Purchase Option with respect to
the underlying Warrants and the number of Warrants purchasable hereunder shall
also be similarly adjusted.

             6.1.4 Replacement of Securities upon Reorganization, etc. In case
of any reclassification or reorganization of the outstanding shares of Common
Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Purchase Option shall have the right thereafter
(until the expiration of the right of exercise of this Purchase Option) to
receive upon the exercise hereof, for the same aggregate Exercise Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such
reclassification, reorganization, merger or consolidation, or upon a dissolution
following any such sale or other transfer, by a Holder of the number of shares
of Common Stock of the Company obtainable upon exercise of this Purchase Option
immediately prior to such event; and if any reclassification also results in a
change in shares of Common Stock covered by Section 6.1.1, then such adjustment
shall be made pursuant to Sections 6.1.1, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.

             6.1.5 Changes in Form of Purchase Option. This form of Purchase
Option need not be changed because of any change pursuant to this Section, and
Purchase Options issued after such change may state the same Exercise Price and
the same number of shares of Common Stock and Warrants as are stated in the
Purchase Options initially issued pursuant to this Agreement. The acceptance by
any Holder of the issuance of new Purchase Options reflecting a required or
permissive change shall not be deemed to waive any rights to a prior adjustment
or the computation thereof.

         6.2 [Intentionally Omitted]

         6.3 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
or Warrants upon the exercise or transfer of the Purchase Option, nor shall it
be required to issue scrip or pay cash in lieu of any fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up or down to the nearest whole number of
Warrants, shares of Common Stock or other securities, properties or rights.

                                       8
<PAGE>

7. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon exercise of the Purchase Options or the Warrants, such number
of shares of Common Stock or other securities, properties or rights as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Purchase Options and payment of the Exercise Price therefor, all
shares of Common Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid and non-assessable and not subject to
preemptive rights of any stockholder. The Company further covenants and agrees
that upon exercise of the Warrants underlying the Purchase Options and payment
of the respective Warrant exercise price therefor, all shares of Common Stock
and other securities issuable upon such exercises shall be duly and validly
issued, fully paid and non-assessable and not subject to preemptive rights of
any stockholder. As long as the Purchase Options shall be outstanding, the
Company shall use its reasonable best efforts to cause all (i) shares of Common
Stock issuable upon exercise of the Purchase Options and the Warrants, and (ii)
the Warrants underlying the Purchase Options to be listed (subject to official
notice of issuance) on all securities exchanges (or, if applicable on Nasdaq) on
which the Common Stock or the Public Warrants issued to the public in connection
herewith are then listed and/or quoted.

8. Certain Notice Requirements.

             8.1 Holder's Right to Receive Notice. Nothing herein shall be
construed as conferring upon the Holders the right to vote or consent or to
receive notice as a stockholder for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Purchase Options and their
exercise, any of the events described in Section 8.2 shall occur, then, in one
or more of said events, the Company shall give written notice of such event at
least ten (10) days prior to the date fixed as a record date or the date of
closing the transfer books for the determination of the stockholders entitled to
such dividend, distribution, conversion or exchange of securities or
subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date or
the date of the closing of the transfer books, as the case may be.

             8.2 Events Requiring Notice. The Company shall be required to give
the notice described in this Section 8 upon one or more of the following events:
(i) if the Company shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company, or (ii)
the Company shall offer to all the holders of its Common Stock any additional
shares of capital stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the Company, or any option, right or
warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up
of the Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business shall be
proposed.

                                       9
<PAGE>

         8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.

         8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be
deemed to have been duly made on the date of delivery if delivered personally or
sent by overnight courier, with acknowledgement of receipt to the party to which
notice is given, or on the fifth day after mailing if mailed to the party to
whom notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of the Purchase Option, to the address of such Holder as shown
on the books of the Company, or (ii) if to the Company, to its principal
executive office.

9. Miscellaneous.

         9.1 Amendments. The Company and the Underwriter may from time to time
supplement or amend this Purchase Option without the approval of any of the
Holders in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem shall not
adversely affect the interest of the Holders. All other modifications or
amendments shall require the written consent of the party against whom
enforcement of the modification or amendment is sought.

         9.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Purchase Option.

         9.3 Entire Agreement. This Purchase Option (together with the other
agreements and documents being delivered pursuant to or in connection with this
Purchase Option) constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.

                                       10
<PAGE>

         9.4 Binding Effect. This Purchase Option shall inure solely to the
benefit of and shall be binding upon, the Holder and the Company and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Purchase Option or any provisions
herein contained.

         9.5 Governing Law; Submission to Jurisdiction. This Purchase Option
shall be governed by and construed and enforced in accordance with the laws of
the State of New York, without giving effect to conflict of laws. The Company
hereby agrees that any action, proceeding or claim against it arising out of, or
relating in any way to this Purchase Option shall be brought and enforced in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
8 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The Company and the
Holder, by acceptance hereof, agree that the prevailing party(ies) in any such
action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.

         9.6 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Purchase Option shall not be deemed
or construed to be a waiver of any such provision, nor to in any way affect the
validity of this Purchase Option or any provision hereof or the right of the
Company or any Holder to thereafter enforce each and every provision of this
Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of
any of the provisions of this Purchase Option shall be effective unless set
forth in a written instrument executed by the party or parties against whom or
which enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of
any other or subsequent breach, non-compliance or non-fulfillment.

                                       11
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Purchase Option to be
signed by its duly authorized officer as of the ____ day of _____, 2004.

                                           GIGABEAM CORPORATION

                                           By:__________________________________
                                                 Louis S. Slaughter
                                                 Chief Executive Officer

                                       12
<PAGE>

Form to be used to exercise Purchase Option:

GigaBeam Corporation

Date:_________________, 200__

         The undersigned hereby elects irrevocably to exercise the within
Purchase Option and to purchase ____ shares of Common Stock and/or Warrants to
purchase ______ shares of Common Stock of GigaBeam Corporation and hereby makes
payment of $____________ (at the rate of $_________ per share of Common Stock
and $____________ per Warrant) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock and Warrants as to which this Purchase
Option is exercised in accordance with the instructions given below.

                                       or

         The undersigned hereby elects irrevocably to exercise the within
Purchase Option and to purchase _________ shares of Common Stock by surrender of
the unexercised portion of the within Purchase Option (with a "Stock Value" of
$_______ based on a "Market Price" of $__________. Please issue the Common Stock
as to which this Purchase Option is exercised in accordance with the
instructions given below.

                                           ------------------------------
                                           Signature

         NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.

                   INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name     ________________________________________________________
                           (Print in Block Letters)

Address  ________________________________________________________

                                       13
<PAGE>

Form to be used to assign Purchase Option:

                                   ASSIGNMENT

         (To be executed by the registered Holder to effect a transfer of the
within Purchase Option):

         FOR VALUE RECEIVED,__________________________________ does hereby sell,
assign and transfer unto _______________________ the right to purchase
_______________________ shares of Common Stock and/or Warrants to purchase
______ shares of Common Stock of GigaBeam Corporation ("Company") evidenced by
the within Purchase Option and does hereby authorize the Company to transfer
such right on the books of the Company.

Dated:___________________, 200_

                                           ------------------------------
                                           Signature

------------------------------
Signature Guaranteed

         NOTICE: THE SIGNATURE TO THIS FORM MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE WITHIN PURCHASE OPTION IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
BANK, OTHER THAN A SAVINGS BANK, OR BY A TRUST COMPANY OR BY A FIRM HAVING
MEMBERSHIP ON A REGISTERED NATIONAL SECURITIES EXCHANGE.

                                       14

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