Form 6-K Bellatrix Exploration For: Aug 09

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

___________________

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2016

 

Commission File Number: 001-35644

 

___________________

 

Bellatrix Exploration Ltd.

(Translation of registrant's name into English)

 

1920, 800 5^th Avenue SW

Calgary, Alberta  T2P 3T6

Canada

 (Address of principal executive offices)

___________________

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☐                                           Form 40-F ☒

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)  ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)  ☐

 

 

 

 

 

DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K

 

See the Exhibit Index hereto.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

	Bellatrix Exploration Ltd.
Date: August 9, 2016	By:	/s/ Charles R. Kraus
	Name:	Charles R. Kraus
	Title:	Vice President, General Counsel & Corporate Secretary

 

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit		Description
99.1		News Release Dated August 9, 2016 - News Release dated August 9, 2016 – Bellatrix Announces Closing of $80 million Bought Deal Financing
99.2		News Release dated August 9, 2016 - Bellatrix announces closing of the sale of a 35% interest in the Bellatrix Alder Flats plant
99.3		Subscription Receipt Agreement dated August 9, 2016
99.4		Debenture Indenture dated August 9, 2016

 

 

 Exhibit 99.1

 

 

 

For Immediate Release – Calgary, Alberta

TSX, NYSE: BXE

 

BELLATRIX ANNOUNCES CLOSING OF $80 MILLION BOUGHT DEAL FINANCING

 

CALGARY, ALBERTA (August 9, 2016) – Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") (TSX, NYSE: BXE) is pleased to announce that it has closed its previously announced bought deal financing (the "Offering") through a syndicate of underwriters (the “Underwriters”), pursuant to which the Company has issued and sold $50 million aggregate principal amount of 6.75% extendible unsecured subordinated convertible debentures (the “Debentures”) at a price of $1,000 per Debenture and 25,000,000 subscription receipts (the “Subscription Receipts”) at a price of $1.20 per Subscription Receipt for aggregate gross proceeds from the Offering of $80 million.

 

In connection with the Offering, Bellatrix also granted the Underwriters an option to purchase up to an additional 3,750,000 Subscription Receipts at a price of $1.20 per Subscription Receipt for aggregate gross proceeds of up to $4.5 million and $7.5 million aggregate principal amount of Debentures to cover over-allotments and for market stabilization purposes, exercisable in whole or in part at any time, and from time to time, until 30 days after the closing date of the Offering.

 

The gross proceeds from the sale of the Subscription Receipts and the Debentures (the "Escrowed Funds") will be held by Computershare Trust Company of Canada until the closing of the Company’s previously announced sale of a 35% minority interest in the Bellatrix O'Chiese Nees-Ohpawganu'ck deep-cut gas plant at Alder Flats to Keyera Partnership (the "Disposition"). Upon the closing of the Disposition, the Escrowed Funds (less the remaining portion of the fee payable to the Underwriters) will be released to Bellatrix. Bellatrix will utilize the Escrowed Funds to reduce the indebtedness under the Company's credit facilities. The Disposition is expected to close later today.

 

Upon closing of the Disposition, the holders of Subscription Receipts will automatically receive one common share in the capital of the Company for each Subscription Receipt held, without payment of additional consideration or further action on the part of such holder. In addition, upon closing of the Disposition prior to a Termination Event, the maturity date of the Debentures, which will be initially set at September 30, 2016 (or an earlier date under certain circumstances including if the agreement relating to the Disposition (the "Disposition Agreement") is terminated prior to September 30, 2016), will be automatically extended until September 30, 2021.

 

 

 

 

 

 

If: (i) at 5:00 p.m. (Calgary time) on September 30, 2016, or such later date as may be agreed between the Corporation and National Bank Financial Inc., on behalf of the Underwriters, provided in no event may such date be extended beyond November 11, 2016 (the "Deadline"), the Disposition has not closed; (ii) at any time prior to the Deadline, the Disposition Agreement is terminated in accordance with its terms; or (iii) at any time prior to the Deadline, Bellatrix has advised the Underwriters or announced to the public that the Company does not intend to proceed with the Disposition (any such event being a "Termination Event"), holders of Subscription Receipts and Debentures shall receive an amount equal to the full subscription price attributable to such holders' Subscription Receipts or Debentures, as applicable, plus their pro rata share of the interest earned on such amount up to and including the time of such Termination Event. In addition, upon the occurrence of a Termination Event, holders of Debentures will be entitled to receive from the Company, any additional amounts owing in excess of the portion of the Escrowed Funds released to such holders to account for interest accrued up to, but excluding, the Initial Maturity Date.

 

Additional details relating to the Subscription Receipts and the Debentures, including the terms relating to the conversion, redemption and maturity of the Debentures, can be found in the final short form prospectus of the Company dated August 2, 2016, which is available on SEDAR at www.sedar.com. In addition, copies of the agreement governing the terms of the Subscription Receipts and the indenture governing the terms of the Debentures will be available on SEDAR at www.sedar.com and through the United States Securities and Exchange Commission website at www.sec.gov.

 

Bellatrix Exploration Ltd. is a Western Canadian based growth oriented oil and gas company engaged in the exploration for, and the acquisition, development and production of oil and natural gas reserves in the provinces of Alberta, British Columbia and Saskatchewan. Common shares of Bellatrix trade on the Toronto Stock Exchange and on the New York Stock Exchange under the symbol BXE.

All amounts in this press release are in Canadian dollars unless otherwise identified.

The Subscription Receipts and Debentures offered, and the common shares issuable on conversion thereof, have not and will not be registered under the U.S. Securities Act of 1933, as amended (the “Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Act. This press release does not constitute an offer to sell or a solicitation of any offer to buy the Subscription Receipts, Debentures or common shares in the United States.

 

For further information, please contact:

Steve Toth, CFA, Vice President, Investor Relations (403) 750-1270

or

Troy Winsor, Investor Relations (800) 663-8072

 

 

 

 

Bellatrix Exploration Ltd.

1920, 800 – 5^th Avenue SW

Calgary, Alberta, Canada T2P 3T6

Phone: (403) 266-8670

Fax: (403) 264-8163

www.bellatrixexploration.com

  

 

Forward looking statements:

 

This press release contains forward-looking statements within the meaning of applicable securities laws. The use of any of the words “may”, “expects“ , “remain“, “intends”, “anticipates“, “ongoing“, “initiative“ and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward-looking statements concerning the expected timing for closing of the Disposition, and management’s intention to use the Escrowed Funds to partially repay indebtedness outstanding under its syndicated credit facilities.

 

Forward-looking statements necessarily involve risks, including, without limitation, risk that all necessary approvals for the closing of the Disposition are not received, other conditions the closing of the Disposition are not satisfied or any other events occur that delay or prevent the closing of the Disposition. Events or circumstances may cause actual results to differ materially from those predicted, as a result of the risk factors set out and other known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Bellatrix. In addition, forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect and which have been used to develop such statements and information in order to provide shareholders with a more complete perspective on Bellatrix’s future operations. Such information may prove to be incorrect and readers are cautioned that the information may not be appropriate for other purposes. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct.

 

In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: that all necessary approvals for the closing of the Disposition will be received, other conditions for the closing of the Disposition will be satisfied and no other events will occur that delay or prevent the closing of the Disposition. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Additional information on these and other factors that could affect Bellatrix’s operations and financial results are included in reports (including, without limitation, under the heading “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2015) on file with Canadian and US securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), through the SEC website (www.sec.gov), and at Bellatrix’s website (www.bellatrixexploration.com). Furthermore, the forward-looking statements contained herein are made as at the date hereof and Bellatrix does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 Exhibit 99.2

 

 

 

For Immediate Release – Calgary, Alberta

TSX, NYSE: BXE

 

 

BELLATRIX ANNOUNCES CLOSING OF THE SALE OF A 35% INTEREST IN THE BELLATRIX ALDER FLATS PLANT

 

CALGARY, ALBERTA (August 9, 2016) – Bellatrix Exploration Ltd. ("Bellatrix" or the "Company") (TSX, NYSE: BXE) is pleased to announce that it has today closed the previously announced sale of a 35% interest in the Bellatrix O'Chiese Nees-Ohpawganu'ck deep-cut gas plant at Alder Flats (the "Alder Flats Plant") to Keyera Partnership ("Keyera"), for total cash consideration of $112.5 million (the "Alder Flats Plant Sale").

 

As announced earlier today, Bellatrix, through a syndicate of underwriters (the "Underwriters"), also closed the issuance and sale of $50 million aggregate principal amount of extendible unsecured subordinated convertible debentures (the "Debentures") and 25,000,000 subscription receipts (the "Subscription Receipts") at a price of $1.20 per Subscription Receipts for gross proceeds from the sale of such Debentures and Subscription Receipts of $80 million (the "Offering”). As a result of the closing of the Alder Flats Plant Sale, the maturity date of the Debentures has automatically been extended to September 30, 2021 and common shares of the Company have been issued on the automatic conversion of the Subscription Receipts. The net proceeds from the Offering of approximately $76.0 million and the proceeds from the Alder Flats Plant Sale will be used to reduce the indebtedness under the Company’s Credit Facilities (as defined herein).

 

Subsequent to the end of the second quarter, Bellatrix completed its semi-annual borrowing base redetermination and the renewal of its syndicated credit facilities (the "Credit Facilities"). Effective July 15, 2016, total commitments under the Company's Credit Facilities were set at $365 million, comprised of a $210 million revolving facility (the "Revolving Facility") with an extendible maturity date currently set at July 1, 2017, and a $155 non-revolving facility (the "Term Facility") with a maturity date set at November 11, 2016. Following closing of the Alder Flats Plant Sale and the Offering and the application of the net proceeds therefrom, Bellatrix expects the Revolving Facility will be reduced to $160 million and the amount outstanding under the Term Facility will be reduced to approximately $13 million. The Company anticipates being able to fully repay all amounts owing under the Term Facility prior to the November 11, 2016 maturity date by utilizing cash received from its operations and the proceeds, if any, from the full or partial exercise of the over-allotment option granted in connection with the Offering. Alternatively, Bellatrix may undertake other transactions that would reduce outstanding indebtedness and repay the Term Facility in full prior to its maturity date. Bellatrix is also in active discussions with existing and new potential syndicate members about establishing a new long-term revolving credit facility prior to the next semi-annual redetermination and the maturity date of the Term Facility.

 

For additional details relating to the Offering, please see the press release issued by the Company earlier today.

 

 

Bellatrix Exploration Ltd. is a Western Canadian based growth oriented oil and gas company engaged in the exploration for, and the acquisition, development and production of oil and natural gas reserves in the provinces of Alberta, British Columbia and Saskatchewan. Common shares of Bellatrix trade on the Toronto Stock Exchange and on the New York Stock Exchange under the symbol BXE.

All amounts in this press release are in Canadian dollars unless otherwise identified.

The Subscription Receipts and Debentures offered, and the common shares issuable on conversion thereof, have not and will not be registered under the U.S. Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Act. This press release does not constitute an offer to sell or a solicitation of any offer to buy the Subscription Receipts, Debentures or common shares in the United States.

For further information, please contact:

Steve Toth, CFA, Vice President, Investor Relations (403) 750-1270

or

Troy Winsor, Investor Relations (800) 663-8072

 

 

 

 

Bellatrix Exploration Ltd.

1920, 800 – 5^th Avenue SW

Calgary, Alberta, Canada T2P 3T6

Phone: (403) 266-8670

Fax: (403) 264-8163

www.bellatrixexploration.com

 

 

Forward looking statements:

 

This press release contains forward-looking statements within the meaning of applicable securities laws. The use of any of the words "may", "expects" , "remain", "intends", "anticipates", "ongoing", "initiative" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward-looking statements concerning management's assessment of future plans and operations and the expectation that the Term Facility will be repaid prior to the November 11, 2016 maturity date utilizing cash received from its operations and potentially other sources of funds.

 

To the extent that any forward-looking statements contained herein constitute a financial outlook, they were approved by management on the date hereof and are included herein to provide readers with an understanding of the anticipated funds available to Bellatrix to fund its operations and readers are cautioned that the information may not be appropriate for other purposes. Forward-looking statements necessarily involve risks, including, without limitation, actions taken by the Company's lenders that reduce the Company's available credit, any inability to repay the Term Facility prior to November 11, 2016, any inability to satisfy the covenant in the Credit Facilities, any reduction in the borrowing base of the Credit Facilities below levels of the outstanding debt under such Credit Facilities, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals, the risk that Bellatrix is unable to complete acquisitions or dispositions as anticipated, and any inability to access sufficient capital from internal and external sources. Events or circumstances may cause actual results to differ materially from those predicted, as a result of the risk factors set out and other known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Bellatrix. In addition, forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect and which have been used to develop such statements and information in order to provide shareholders with a more complete perspective on Bellatrix's future operations. Such information may prove to be incorrect and readers are cautioned that the information may not be appropriate for other purposes. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct.

 

 

In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the continued availability of funds under the Credit Facilities; the ability to generate sufficient cash to repay the Term Facility; the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; the ability to complete acquisition and dispositions as currently anticipated; the ability to obtain the necessary funds through acquisition, disposition or financing activities in order to repay amounts outstanding under the Bellatrix's debt obligations when due; future commodity prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Additional information on these and other factors that could affect Bellatrix's operations and financial results are included in reports (including, without limitation, under the heading "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2015) on file with Canadian and US securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), through the SEC website (www.sec.gov), and at Bellatrix's website (www.bellatrixexploration.com). Furthermore, the forward-looking statements contained herein are made as at the date hereof and Bellatrix does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 Exhibit 99.3

 

 

 

 

 

 

 

 

 

 

 

DEBENTURE INDENTURE

between

BELLATRIX EXPLORATION LTD.

and

COMPUTERSHARE TRUST COMPANY OF CANADA

Providing for the Issue of Debentures

Dated as of August 9, 2016

 

 

 

 

 

 

TABLE OF CONTENTS

Article 1 INTERPRETATION	1
1.1   Definitions	1
1.2   Meaning of "Outstanding"	9
1.3   Interpretation	10
1.4   Headings, etc.	10
1.5   Time of Essence	10
1.6   Monetary References	10
1.7   Invalidity, etc.	10
1.8   Language	11
1.9   Successors and Assigns	11
1.10   Severability	11
1.11   Entire Agreement	11
1.12   Benefits of Indenture	11
1.13   Applicable Law and Attornment	11
1.14   Currency of Payment	11
1.15   Non-Business Days	11
1.16   Accounting Terms	12
1.17   Calculations	12
1.18   Schedules	12
Article 2 THE DEBENTURES	12
2.1   Limit of Debentures	12
2.2   Terms of Debentures of any Series	12
2.3   Form of Debentures	13
2.4   Form and Terms of Initial Debentures	14
2.5   Authentication and Delivery of Additional Debentures	24
2.6   Non-Certificated Deposit	24
2.7   Execution of Debenture Certificates	26
2.8   Authentication	26
2.9   Interim Debentures or Certificates	26
2.10   Mutilation, Loss, Theft or Destruction	27
2.11   Concerning Interest	27
2.12   Debentures to Rank Pari Passu	27
2.13   Payments of Amounts Due on Maturity	28
2.14   Payment of Interest	28
2.15   Withholding Tax	29
2.16   Right of Rescission	29
Article 3 REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP	29
3.1   Fully Registered Debentures	29
3.2   Transferee Entitled to Registration	30
3.3   No Notice of Trusts	30
3.4   Registers Open for Inspection	30
3.5   Exchanges of Debenture Certificates	30
3.6   Closing of Registers	31
3.7   Charges for Registration, Transfer and Exchange	31
3.8   Ownership of Debentures	32
Article 4 REDEMPTION AND PURCHASE OF DEBENTURES AND CERTAIN PAYMENTS ON MATURITY	32
4.1   Applicability of Article	32
4.2   Partial Redemption	32
4.3   Notice of Redemption	33
4.4   Debentures Due on Redemption Dates	33
4.5   Deposit of Redemption Monies or Common Shares	34
4.6   Right to Repay Principal Portion of Redemption Price in Common Shares	34
4.7   Failure to Surrender Debentures Called for Redemption	36
4.8   Cancellation of Debentures Redeemed	36
4.9   Purchase of Debentures by the Corporation	36

 

 

 

 

4.10   Right to Repay Principal Amount in Common Shares	37
Article 5 SUBORDINATION OF DEBENTURES	39
5.1   Applicability of Article	39
5.2   Order of Payment	39
5.3   Subrogation to Rights of Senior Creditors	40
5.4   Obligation to Pay Not Impaired	41
5.5   No Payment if Senior Indebtedness in Default	41
5.6   Payment on Debentures Permitted	41
5.7   Confirmation of Subordination	42
5.8   Knowledge of Trustee	42
5.9   Trustee May Hold Senior Indebtedness	42
5.10   Rights of Senior Creditors Not Impaired	42
5.11   Altering the Senior Indebtedness	42
5.12   Additional Indebtedness	42
5.13   Right of Debentureholder to Convert Not Impaired	42
5.14   Invalidated Payments	43
5.15   Contesting Security	43
5.16   Obligations Created by Article 5	43
5.17   Amendment to Indenture	43
5.18   Payment on Initial Maturity Date	43
Article 6 CONVERSION OF DEBENTURES	43
6.1   Applicability of Article	43
6.2   Notice of Expiry of Conversion Privilege	44
6.3   Revival of Right to Convert	44
6.4   Manner of Exercise of Right to Convert	44
6.5   Adjustment of Conversion Price	45
6.6   No Requirement to Issue Fractional Common Shares	50
6.7   Corporation to Reserve Common Shares	50
6.8   Cancellation of Converted Debentures	50
6.9   Certificate as to Adjustment	50
6.10   Notice of Special Matters	50
6.11   Protection of Trustee	51
6.12   Payment of Cash in Lieu of Common Shares	51
Article 7 COVENANTS OF THE CORPORATION	51
7.1   To Pay Principal, Premium (if any) and Interest	51
7.2   To Pay Trustee's Remuneration	51
7.3   To Give Notice of Default	51
7.4   Preservation of Existence, etc.	51
7.5   Keeping of Books	52
7.6   Annual Certificate of Compliance	52
7.7   Performance of Covenants by Trustee	52
7.8   SEC Notice	52
7.9   No Dividends on Common Shares if Event of Default	52
7.10   Maintain Listing	52
7.11   Restriction on Common Share Redemption Right and Common Share Repayment Right	52
Article 8 DEFAULT	53
8.1   Events of Default	53
8.2   Notice of Events of Default	54
8.3   Waiver of Default	55
8.4   Enforcement by the Trustee	55
8.5   No Suits by Debentureholders	56
8.6   Application of Monies by Trustee	56
8.7   Notice of Payment by Trustee	57
8.8   Trustee May Demand Production of Debentures	57
8.9   Remedies Cumulative	57
8.10   Judgment Against the Corporation	57
8.11   Immunity of Directors, Officers and Others	58
Article 9 SATISFACTION AND DISCHARGE	58

 

9.1   Cancellation and Destruction	58
9.2   Non-Presentation of Debentures	58
9.3   Repayment of Unclaimed Monies or Common Shares	58
9.4   Discharge	59
9.5   Satisfaction	59
9.6   Continuance of Rights, Duties and Obligations	60
Article 10 COMMON SHARE INTEREST PAYMENT ELECTION	61
10.1   Common Share Interest Payment Election	61
Article 11 SUCCESSORS	63
11.1   Corporation may Consolidate, etc., Only on Certain Terms	63
11.2   Successor Substituted	64
Article 12 COMPULSORY ACQUISITION	64
12.1   Definitions	64
12.2   Offer for Debentures	64
12.3   Offeror's Notice to Dissenting Shareholders	65
12.4   Delivery of Debenture Certificates	65
12.5   Payment of Consideration to Trustee	65
12.6   Consideration to be held in Trust	65
12.7   Completion of Transfer of Debentures to Offeror	65
12.8   Communication of Offer to Trust	66
Article 13 MEETINGS OF DEBENTUREHOLDERS	66
13.1   Right to Convene Meeting	66
13.2   Notice of Meetings	66
13.3   Chairman	67
13.4   Quorum	67
13.5   Power to Adjourn	68
13.6   Show of Hands	68
13.7   Poll	68
13.8   Voting	68
13.9   Proxies	68
13.10   Persons Entitled to Attend Meetings	69
13.11   Powers Exercisable by Extraordinary Resolution	69
13.12   Meaning of "Extraordinary Resolution"	70
13.13   Powers Cumulative	71
13.14   Minutes	71
13.15   Instruments in Writing	71
13.16   Binding Effect of Resolutions	72
13.17   Evidence of Rights Of Debentureholders	72
13.18   Concerning Serial Meetings	72
Article 14 NOTICES	72
14.1   Notice to Corporation	72
14.2   Notice to Debentureholders	72
14.3   Notice to Trustee	73
14.4   Mail Service Interruption	73
Article 15 CONCERNING THE TRUSTEE	73
15.1   No Conflict of Interest	73
15.2   Replacement of Trustee	73
15.3   Duties of Trustee	74
15.4   Reliance Upon Declarations, Opinions, etc.	74
15.5   Evidence and Authority to Trustee, Opinions, etc.	74
15.6   Officers' Certificates Evidence	75
15.7   Experts, Advisers and Agents	75
15.8   Trustee May Deal in Debentures	76
15.9   Investment of Monies Held by Trustee	76
15.10   Trustee Not Ordinarily Bound	76
15.11   Trustee Not Required to Give Security	76
15.12   Trustee Not Bound to Act on Corporation's Request	76
15.13   Conditions Precedent to Trustee's Obligations to Act Hereunder	76

 

15.14   Authority to Carry on Business	77
15.15   Compensation and Indemnity	77
15.16   Acceptance of Trust	77
15.17   Third Party Interests	78
15.18   Anti-Money Laundering	78
15.19   Privacy Laws	78
15.20   Force Majeure	78
Article 16 SUPPLEMENTAL INDENTURES	78
16.1   Supplemental Indentures	78
Article 17 EXECUTION AND FORMAL DATE	79
17.1   Execution	79
17.2   Formal Date	79

Schedule "B" - Form of Redemption Notice

Schedule "C" - Form of Maturity Notice

Schedule "D" - Form of Notice of Conversion

Schedule "E" - Form of Closing Notice

Schedule "F" – Form of Irrevocable Direction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

THIS INDENTURE made as of the 9^th day of August, 2016.

BETWEEN:

BELLATRIX EXPLORATION LTD., a corporation amalgamated under the laws of the Province of Alberta and having its head office in the City of Calgary, in the Province of Alberta (hereinafter called "Bellatrix" or the "Corporation")

AND

COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company incorporated under the federal laws of Canada (hereinafter called the "Trustee")

WITNESSETH THAT:

WHEREAS the Corporation wishes to create and issue the Debentures (as defined herein) in the manner and subject to the terms and conditions of this Indenture;

NOW THEREFORE THIS INDENTURE WITNESSES that in consideration of the respective covenants and agreements contained herein and for other good and valuable consideration (the receipt and sufficiency of which are acknowledged), the Corporation and the Trustee covenant and agree, for the benefit of each other and for the equal and rateable benefit of the holders, as follows:

Article 1
INTERPRETATION

1.1

Definitions

In this Indenture and in the Debentures, including the recitals, unless there is something in the subject matter or context inconsistent therewith, the expressions following shall have the following meanings, namely:

(a)

"1933 Act" means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder;

(b)

"90% Redemption Right" has the meaning ascribed thereto in Section 2.4(j)(vii);

(c)

"90% Redemption Right Notice" has the meaning ascribed thereto in Section 2.4(j)(vii);

(d)

"this Indenture", "this Convertible Debenture Indenture", "hereto", "herein", "hereby", "hereunder", "hereof" and similar expressions refer to this Indenture and not to any particular Article, Section, subsection, clause, subdivision or other portion hereof and include any and every instrument supplemental or ancillary hereto;

(e)

"Acceptance Notice" has the meaning ascribed thereto in Section 2.4(j)(iii);

(f)

"Additional Debentures" means Debentures of any one or more series, other than the first series of Debentures, being the Initial Debentures, issued under this Indenture;

(g)

"Applicable Period" means any period announced by the Board of Directors as a period of time for which a cash dividend or distribution will be declared and paid by the Corporation to the holders of all or substantially all of the outstanding Common Shares;

(h)

"Applicable Securities Legislation" means applicable securities laws (including rules, regulations, policies, blanket orders, rulings and instruments) in each of the applicable provinces of Canada;

 

 

(i)

"Auditors of the Corporation" means an independent firm of chartered accountants duly appointed as auditors of the Corporation;

(j)

"Authenticated" means: (i) with respect to the issuance of a Debenture Certificate, one which has been duly signed by the Corporation and certified by the manual signature of an authorized officer of the Trustee; (ii) with respect to the issuance of an Uncertificated Debenture, one in respect of which the Trustee has completed all Internal Procedures such that the particulars of such Uncertificated Debenture as required by Section 2.6 are entered in the register of holders of Debentures, "Authenticate" and "Authentication" have the appropriate correlative meanings;

(k)

"Base Shares" has the meaning ascribed thereto in Section 2.4(k)(iii);

(l)

"Bellatrix" or the "Corporation" means Bellatrix Exploration Ltd. and includes any successor to or of Bellatrix which shall have complied with the provisions of Article 11;

(m)

"Beneficial Owner" means any person who holds a beneficial interest in a Debenture that is represented by a Debenture Certificate or an Uncertificated Debenture registered in the name of CDS or its nominee, for the purposes of being held by or on behalf of CDS as custodian for Participants;

(n)

"Board of Directors" means the board of directors of the Corporation or any committee thereof;

(o)

"Business Day" means any day other than a Saturday, Sunday or statutory holiday in Calgary, Alberta or Toronto, Ontario;

(p)

"Cash Change of Control" means a Change of Control in which 10% or more of the consideration for the Common Shares in the transaction or transactions constituting a Change of Control consists of: (i) cash (other than cash payments for fractional Common Shares and cash payments made in respect of dissenter's appraisal rights); (ii) equity securities that are not traded or intended to be traded immediately following such transactions on a recognized stock exchange; or (iii) other property that is not traded or intended to be traded immediately following such transactions on a recognized stock exchange;

(q)

"Cash Change of Control Conversion Period" has the meaning ascribed thereto in Section 2.4(k)(i);

(r)

"Cash Offer Price" has the meaning ascribed thereto in Section 2.4(k)(ii);

(s)

"CDS" or the "Depository" means CDS Clearing and Depository Services Inc. and its successors in interest;

(t)

"Change of Control" means: (i) the acquisition by any Person, or group of Persons acting jointly or in concert (within the meaning of NI 62-104), of voting control or direction of an aggregate of 50% or more of the outstanding Common Shares; or (ii) the sale of all or substantially all of the assets of the Corporation, but shall not include a sale, merger, reorganization, arrangement, combination or other similar transaction if the previous holders of Common Shares hold at least 50% of the voting control or direction in such merged, reorganized, arranged, combined or other continuing entity (and in the case of a sale of all or substantially all of the assets, in the entity which has acquired such assets) immediately following completion of such transaction;

(u)

"Change of Control Purchase Date" has the meaning ascribed thereto in Section 2.4(j)(v);

(v)

"Closing Notice" means the joint notice to be executed by the Corporation and NBF, on behalf of the Underwriters, substantially in the form attached as Schedule "E" hereto, confirming to the Trustee that the Escrow Release Condition has been satisfied;

 

 

(w)

"Common Shares" means common shares in the capital of the Corporation, as such common shares are constituted on the date of execution and delivery of this Indenture; provided that in the event of a change or a subdivision, revision, reduction, combination or consolidation thereof, any reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, sale or conveyance or liquidation, dissolution or winding-up, or such successive changes, subdivisions, redivisions, reductions, combinations or consolidations, reclassifications, capital reorganizations, consolidations, amalgamations, arrangements, mergers, sales or conveyances or liquidations, dissolutions or windings-up, then, subject to adjustments, if any, having been made in accordance with the provisions of Section 6.5, "Common Shares" shall mean the shares or other securities or property resulting from such change, subdivision, redivision, reduction, combination or consolidation, reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, sale or conveyance or liquidation, dissolution or winding-up;

(x)

"Common Share Bid Request" means a request for bids to purchase Common Shares (to be issued by the Corporation on the Common Share Delivery Date) made by the Trustee in accordance with the Common Share Interest Payment Election Notice and which shall make the acceptance of any bid conditional upon the acceptance of sufficient bids to result in aggregate proceeds from such issue and sale of Common Shares which, together with the cash payments by the Corporation in lieu of fractional Common Shares, if any, equal the Interest Obligation;

(y)

"Common Share Delivery Date" means a date, not more than 90 days and not less than one Business Day prior to the applicable Interest Payment Date, upon which Common Shares are issued by the Corporation and delivered to the Trustee for sale pursuant to Common Share Purchase Agreements;

(z)

"Common Share Interest Payment Election" means an election to satisfy an Interest Obligation on the applicable Interest Payment Date in the manner described in the Common Share Interest Payment Election Notice;

(aa)

"Common Share Interest Payment Election Amount" means the sum of the amount of the aggregate proceeds resulting from the sale of Common Shares on the Common Share Delivery Date pursuant to acceptable bids obtained pursuant to the Common Share Bid Requests, together with any amount paid by the Corporation in respect of fractional Common Shares pursuant to Section 10.1(g), that is equal to the aggregate amount of the Interest Obligation in respect of which the Common Share Interest Payment Election Notice was delivered;

(bb)

"Common Share Interest Payment Election Notice" means a written notice made by the Corporation to the Trustee specifying:

(i)

the Interest Obligation to which the election relates;

(ii)

the Common Share Interest Payment Election Amount;

(iii)

the investment banks, brokers or dealers through which the Trustee shall seek bids to purchase the Common Shares and the conditions of such bids, which may include the minimum number of Common Shares, minimum price per Common Share, timing for closing for bids and such other matters as the Corporation may specify; and

(iv)

that the Trustee shall accept through the investment banks, brokers or dealers selected by the Corporation only those bids which comply with such notice;

(cc)

"Common Share Proceeds Investment" has the meaning attributed thereto in Section 10.1(h);

(dd)

"Common Share Purchase Agreement" means an agreement in customary form among the Corporation, the Trustee and the Persons making acceptable bids pursuant to a Common Share Bid Request, which complies with all applicable laws, including the Applicable Securities Legislation and the rules and regulations of any stock exchange on which the Debentures or Common Shares are then listed;

(ee)

"Common Share Redemption Right" has the meaning attributed thereto in Section 4.6(a);

(ff)

"Common Share Repayment Right" has the meaning attributed thereto in Section 4.10(a);

 

 

(gg)

"Conversion Price" means the dollar amount for which each Common Share may be issued from time to time upon the conversion of Debentures or any series of Debentures which are by their terms convertible in accordance with the provisions of Article 6;

(hh)

"Counsel" means a barrister or solicitor or firm of barristers or solicitors retained or employed by the Trustee or retained or employed by the Corporation and reasonably acceptable to the Trustee;

(ii)

"Current Market Price" means, generally, the VWAP, for the 20 consecutive trading days ending on the fifth trading day preceding the applicable date. If the Common Shares are not listed or quoted on the TSX or another securities exchange or market, "Current Market Price" shall be the fair value of a Common Share as reasonably determined by the Board of Directors;

(jj)

"Date of Conversion" has the meaning ascribed thereto in Section 6.4(g);

(kk)

"Deadline" means 5:00 p.m. (Calgary time) on September 30, 2016 or such later date as may be agreed to by the Corporation and NBF, on behalf of the Underwriters, and communicated in writing to the Trustee, provided in no event may such deadline be extended beyond November 11, 2016;

(ll)

"Debenture Certificate" means a certificate evidencing Debentures substantially in the form attached as Schedule "A" hereto;

(mm)

"Debenture Liabilities" has the meaning ascribed thereto in Section 5.1;

(nn)

"Debentureholders" or "holders" means the Persons for the time being entered in the register for Debentures as registered holders of Debentures or any transferees of such Persons by endorsement or delivery;

(oo)

"Debenture Offer" has the meaning ascribed thereto in Section 2.4(j)(i);

(pp)

"Debentures" means the debentures, notes or other evidences of indebtedness of the Corporation issued and Authenticated hereunder, or deemed to be issued and Authenticated hereunder, including, without limitation, the Initial Debentures, and for the time being outstanding, whether in definitive, uncertificated or interim form;

(qq)

"Defeased Debentures" has the meaning ascribed thereto in Section 9.6(b);

(rr)

"Disposition" means the proposed disposition by the Corporation, pursuant to the terms of the Disposition Agreement, of an undivided 35% interest in the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder Flats to Keyera Partnership (or such other party as may purchase such assets on substantially the same terms as set out in the disposition agreement dated effective July 4, 2016 between the Corporation and Keyera Partnership on exercise of a right of first refusal or other similar right or agreement);

(ss)

"Disposition Agreement" means the disposition agreement dated effective July 4, 2016 between the Corporation and Keyera Partnership providing for the Disposition, as it may be amended, or such other agreement as may be entered into between the Corporation and such other party as may purchase the undivided 35% interest in the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder Flats on substantially the same terms as set out in the disposition agreement dated effective July 4, 2016 between the Corporation and Keyera Partnership on exercise of a right of first refusal or other similar right or agreement;

(tt)

"Disposition Closing" means the closing of the Disposition in all material respects in accordance with the terms of the Disposition Agreement without amendment or waiver in either case materially adverse to the Corporation, unless the consent of NBF, on behalf of the Underwriters, is given to such amendment or waiver;

(uu)

"Disposition Date" means the date, if any, upon which the Disposition Closing takes place, and "Disposition Time" means the time on the Disposition Date at which the Disposition Closing occurs;

 

 

(vv)

"Earned Interest" means any interest or other income actually earned on the investment of the Escrowed Funds between the date hereof and the earlier to occur of the Disposition Date and the Initial Maturity Date;

(ww)

"Effective Date" has the meaning ascribed thereto in Section 2.4(k)(ii);

(xx)

"Escrowed Funds" means the Proceeds and any Earned Interest;

(yy)

"Escrow Release Condition" mean that the Disposition Closing has occurred;

(zz)

"Event of Default" has the meaning ascribed thereto in Section 8.1;

(aaa)

"Ex-Dividend Date" means, with respect to any dividend, distribution or issuance on the Common Shares, the first date on which the Common Shares trade on the applicable exchange or in the applicable market without the right to receive such dividend, distribution or issuance;

(bbb)

"Expiry Date" has the meaning ascribed thereto in Section 2.4(j)(ii);

(ccc)

"Expiry Time" has the meaning ascribed thereto in Section 2.4(j)(ii);

(ddd)

"Extraordinary Resolution" has the meaning ascribed thereto in Section 13.12;

(eee)

"Freely Tradeable" means, in respect of shares of capital of any class of any corporation, shares which: (i) are issuable without the necessity of filing a prospectus or any other similar offering document (other than such prospectus or similar offering document that has already been filed) under Applicable Securities Legislation and such issue does not constitute a distribution (other than a distribution already qualified by prospectus or similar offering document or that is otherwise exempt from the prospectus requirements) under Applicable Securities Legislation; and (ii) can be traded by the holder thereof without any restriction under Applicable Securities Legislation, such as hold periods, restricted periods or seasoning periods, except in the case of a control distribution (as defined in National Instrument 45-102 – Resale of Securities), or a transaction or series of transactions incidental to a control distribution;

(fff)

"Final Maturity Date" means September 30, 2021;

(ggg)

"Fully Registered Debentures" means Debentures registered as to both principal and interest;

(hhh)

"generally accepted accounting principles" or "GAAP" means generally accepted accounting principles from time to time approved by the Chartered Professional Accountants of Canada (including as further described in Section 1.16) applicable to the Corporation;

(iii)

"Government Obligations" means securities issued or guaranteed by the Government of Canada or any province thereof;

(jjj)

"Guarantees" means any guarantee, undertaking to assume, endorse, contingently agree to purchase, or to provide funds for the payment of, or otherwise become liable in respect of, any indebtedness, liability or obligation of any Person;

(kkk)

"Initial Debentures" means the Debentures designated as "6.75% Extendible Convertible Unsecured Subordinated Debentures" and described in Section 2.4;

(lll)

"Initial Debenture Offering" means the offering of the Offered Initial Debentures and the Over-Allotment Initial Debentures pursuant to the Prospectus;

(mmm)

"Initial Debenture Subscription Price" means the sum of $1,000 per $1,000 principal amount of Initial Debenture;

 

 

(nnn)

"Initial Maturity Date" means the earlier of (i) September 30, 2016, and (ii) the date that is two (2) Business Days after the Termination Date;

(ooo)

"Interest Account" has the meaning ascribed thereto in Section 10.1(h);

(ppp)

"Interest Obligation" means the obligation of the Corporation to pay interest on the Debentures, as and when the same becomes due;

(qqq)

"Interest Payment Date" means a date specified in a Debenture as the date on which interest on such Debenture shall become due and payable;

(rrr)

"Internal Procedures" means in respect of the making of any one or more entries to, changes in or deletions of any one or more entries in the register of Debentureholders at any time (including without limitation, original issuance or registration of transfer of ownership) the minimum number of the Trustee's internal procedures customary at such time for the entry, change or deletion made to be complete under the operating procedures followed at the time by the Trustee, it being understood that neither preparation and issuance shall constitute part of such procedures for any purpose of this definition;

(sss)

"Irrevocable Direction" means the written irrevocable direction to be delivered by the Corporation to the Trustee substantially in the form of Schedule "F" hereto authorizing and directing the Trustee to release the Escrowed Funds in accordance with Sections 2.4(l)(ii) and 2.4(l)(iii);

(ttt)

"Make Whole Premium" has the meaning ascribed thereto in Section 2.4(k)(i);

(uuu)

"Make Whole Premium Shares" has the meaning ascribed thereto in Section 2.4(k)(ii);

(vvv)

"Material Subsidiary" means any Subsidiary of the Corporation which has consolidated assets equal to or greater than 10.0% of the consolidated assets of the Corporation and its Subsidiaries;

(www)

"Maturity Account" means an account or accounts required to be established by the Corporation (and which shall be maintained by and subject to the control of the Trustee) for each series of Debentures issued pursuant to and in accordance with this Indenture;

(xxx)

"Maturity Date" means the date specified for maturity of any Debentures;

(yyy)

"Maturity Notice" has the meaning ascribed thereto in Section 2.4(g);

(zzz)

"NBF" or the "Lead Underwriter" means National Bank Financial Inc.;

(aaaa)

"NI 62-104" means National Instrument 62-104 – Take-Over Bids and Issuer Bids;

(bbbb)

"Non-Recourse Debt" means any indebtedness, liabilities or other obligations (including purchase money obligations), and guarantees, indemnities, endorsements (other than endorsements for collection in the ordinary course of business) or other contingent obligations in respect of obligations of another person and, in each case, incurred to finance the creation, development, construction or acquisition of real and tangible personal property (including fixtures) and any increases in or extensions, renewals or refunding of any such indebtedness, liabilities and obligations, provided that the recourse of the lender thereof or any agent, trustee, receiver or other person acting on behalf of the lender in respect of such indebtedness, liabilities and obligations or any judgment in respect thereof is limited in all circumstances to the real and tangible personal property (including fixtures) created, developed, constructed or acquired in respect of which such indebtedness, liabilities and obligations have been incurred and to any receivables, inventory, equipment, chattel paper, intangibles and other rights or collateral arising from or connected with such property (and, for certainty, shall include the shares or other ownership interests of a Subsidiary of the Corporation which holds only such property and other rights and collateral arising from or connected therewith) and to which the lender has recourse;

(cccc)

"NYSE" means the New York Stock Exchange;

 

 

(dddd)

"Offered Initial Debentures" means the $50,000,000 principal amount of Initial Debentures offered pursuant to the Prospectus in connection with the Initial Debenture Offering, but, for greater certainty, does not include the Over-Allotment Initial Debentures;

(eeee)

"Offer Price" has the meaning ascribed thereto in Section 2.4(j)(i);

(ffff)

"Offeror's Notice" has the meaning ascribed thereto in Section 12.3;

(gggg)

"Officers' Certificate" means a certificate of the Corporation signed by any two authorized officers or directors of the Corporation, in their capacities as officers or directors of the Corporation, and not in their personal capacities;

(hhhh)

"Original Purchasers" has the meaning ascribed thereto in Section 2.16;

(iiii)

"Over-Allotment Option" means the over-allotment option granted by the Corporation to the Underwriters to purchase up to $7,500,000 principal amount of Over-Allotment Initial Debentures pursuant to the Underwriting Agreement;

(jjjj)

"Over-Allotment Initial Debentures" means the Initial Debentures purchased by the Underwriters upon exercise of the Over-Allotment Option, if any;

(kkkk)

"Participant" means a Person recognized by CDS as a participant in the non-certificated inventory system administered by CDS;

(llll)

"Periodic Offering" means an offering of Debentures of a series from time to time, the specific terms of which Debentures, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Corporation upon the issuance of such Debentures from time to time;

(mmmm)

"Permitted Investment" has the meaning given to such term in Section 2.4(l)(vii);

(nnnn)

"Person" includes an individual, corporation, company, partnership, joint venture, association, trust, trustee, unincorporated organization or government or any agency or political subdivision thereof (and for the purposes of the definition of "Change of Control", in addition to the foregoing, "Person" shall include any syndicate or group that would be deemed to be a "Person" under NI 62-104);

(oooo)

"Privacy Laws" has the meaning ascribed thereto in Section 15.19;

(pppp)

"Proceeds" means the aggregate gross proceeds of the Offered Initial Debentures and, in the event that any Over-Allotment Initial Debentures are issued and sold prior to the Disposition Time, includes the gross proceeds from the issuance of such Over-Allotment Initial Debentures;

(qqqq)

"Prospectus" means the (final) short form prospectus of the Corporation dated August 2, 2016 relating to the distribution in each of the Provinces of Canada, except Québec, of the Offered Initial Debentures and the Over-Allotment Initial Debentures and subscription receipts of the Corporation, and unless the context otherwise requires, includes all documents incorporated therein by reference and any amendments thereto;

(rrrr)

"Released Amount" has the meaning given to such term in Section 2.4(l)(ii);

(ssss)

"Redemption Date" has the meaning ascribed thereto in Section 4.3;

(tttt)

"Redemption Notice" has the meaning ascribed thereto in Section 4.3;

(uuuu)

"Redemption Price" means, in respect of a Debenture, the amount, including accrued and unpaid interest up to (but excluding) the Redemption Date fixed for such Debenture, payable on the Redemption Date, the principal portion of which may be payable by the issuance of Freely Tradeable Common Shares as provided for in Section 4.6;

 

 

(vvvv)

"Senior Creditor" means a holder or holders of Senior Indebtedness and includes any representative or representatives, agent or agents or trustee or trustees of any such holder or holders;

(wwww)

"Senior Indebtedness" means all existing and future obligations, liabilities and indebtedness of the Corporation which would, in accordance with GAAP, be classified upon a consolidated balance sheet of the Corporation as liabilities of the Corporation and, whether or not so classified, shall include (without duplication) all existing and future: (i) indebtedness of the Corporation or its Subsidiaries for borrowed money; (ii) obligations of the Corporation or its Subsidiaries evidenced by bonds, debentures, notes or other similar instruments; (iii) obligations of the Corporation or its Subsidiaries arising pursuant to or in relation to bankers' acceptances, letters of credit and letters of guarantee (including payment and reimbursement obligations in respect thereof) or indemnities issued in connection therewith; (iv) obligations of the Corporation or its Subsidiaries under any swap, hedging or other similar contracts or arrangements; (v) obligations of the Corporation or its Subsidiaries under Guarantees, indemnities, assurances, legally binding comfort letters or other contingent obligations relating to the Senior Indebtedness or other obligations of any other person which would otherwise constitute Senior Indebtedness within the meaning of this definition; (vi) all indebtedness of the Corporation or its Subsidiaries representing the deferred purchase price of any property including, without limitation, purchase money mortgages; (vii) accounts payable to trade creditors of the Corporation or its Subsidiaries; (viii) all renewals, extensions and refinancing of any of the foregoing; (ix) all accrued and unpaid interest, fees and other amounts in respect of any of the foregoing; and (x) all costs and expenses incurred by or on behalf of the holder of any Senior Indebtedness in enforcing payment or collection of any such Senior Indebtedness, including enforcing any security interest securing the same. "Senior Indebtedness" shall not include any indebtedness that would otherwise be Senior Indebtedness if it is expressly stated to be subordinate to or rank pari passu with the Debentures;

(xxxx)

"Senior Security" means all mortgages, liens, pledges, charges (whether fixed or floating), security interests or other encumbrances of any kind, contingent or absolute, held by or on behalf of any Senior Creditor and in any manner securing any Senior Indebtedness;

(yyyy)

"Serial Meeting" has the meaning ascribed thereto in Section 13.2(b)(i);

(zzzz)

"Subsidiary" has the meaning ascribed thereto in the Securities Act (Alberta);

(aaaaa)

"Tax Act" means the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended, including the regulations promulgated thereunder, each as amended from time to time;

(bbbbb)

"Termination Date" means the date, if any, on which the Termination Time occurs;

(ccccc)

"Termination Time" means, the earliest of any of the following times:

(i)

the Deadline, if the Disposition Closing has not occurred;

(ii)

the time, if prior to the Deadline, the Disposition Agreement is terminated in accordance with its terms; and

(iii)

the time, if prior to the Deadline, the Corporation has advised the Trustee and the Lead Underwriter, on behalf of the Underwriters, or has announced to the public that it does not intend to proceed with the Disposition;

(ddddd)

"Time of Expiry" means the time of expiry of certain rights with respect to the conversion of Debentures under Article 6 which is to be set forth separately in the form and terms for each series of Debentures which by their terms are to be convertible;

(eeeee)

"trading day" means, with respect to the TSX or other market for securities, any day on which such exchange or market is open for trading or quotation;

 

 

(fffff)

"Transaction Instruction" means a written order signed by the holder or the Depository entitled to request that one or more actions be taken, or such other form as may be reasonably acceptable to the Trustee, requesting one or more such actions to be taken in respect of an Uncertificated Debenture;

(ggggg)

"Trustee" means Computershare Trust Company of Canada, or its successor or successors for the time being as trustee hereunder;

(hhhhh)

"TSX" means the Toronto Stock Exchange or its successors;

(iiiii)

"Uncertificated Debenture" means any Debenture which is not issued as part of a Debenture Certificate;

(jjjjj)

"Unclaimed Funds Return Date" has the meaning ascribed thereto in Section 2.4(j)(xii);

(kkkkk)

"Underwriters" means, collectively, NBF, RBC Dominion Securities Inc., Scotia Capital Inc., Canaccord Genuity Corp., CIBC World Markets Inc., BMO Nesbitt Burns Inc. and Dundee Securities Ltd.;

(lllll)

"Underwriting Agreement" means the agreement dated as of July 19, 2016 among the Corporation and the Underwriters in respect of the Initial Debenture Offering and the offering of subscription receipts of the Corporation;

(mmmmm)

"Underwriters' Fee" means a fee of $40.00 per $1,000 principal amount of Initial Debenture payable pursuant to and in accordance with the Underwriting Agreement;

(nnnnn)

"United States" or "U.S." means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;

(ooooo)

"U.S. Exchange Act" means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

(ppppp)

"VWAP" means the volume weighted average trading price of the Common Shares for the applicable period (which must be calculated utilizing days in which the Common Shares actually trade) on the TSX (or if the Common Shares are no longer traded on the TSX, on such other exchange as the Common Shares are then traded); and

(qqqqq)

"Written Direction of the Corporation" means an instrument in writing signed by any one officer or director of the Corporation.

1.2

Meaning of "Outstanding"

Every Debenture Authenticated and delivered by the Trustee shall be deemed to be outstanding until it is cancelled, converted or redeemed or delivered to the Trustee for cancellation, conversion or redemption or monies and/or Common Shares, as the case may be, for the payment thereof shall have been set aside under Section 9.2, provided that:

(a)

Debentures which have been partially redeemed, purchased or converted shall be deemed to be outstanding only to the extent of the unredeemed, unpurchased or unconverted part of the principal amount thereof;

(b)

when a new Debenture has been issued in substitution for a Debenture which has been lost, stolen or destroyed, only one of such Debentures shall be counted for the purpose of determining the aggregate principal amount of Debentures outstanding; and

(c)

for the purposes of any provision of this Indenture entitling holders of outstanding Debentures to vote, sign consents, requisitions or other instruments or take any other action under this Indenture, or to constitute a quorum of any meeting of Debentureholders, Debentures owned directly or indirectly, legally or equitably, by the Corporation or a Subsidiary of the Corporation shall be disregarded except that:

 

 

(i)

for the purpose of determining whether the Trustee shall be protected in relying on any such vote, consent, requisition or other instrument or action, or on the holders of Debentures present or represented at any meeting of Debentureholders, only the Debentures which the Trustee knows are so owned shall be so disregarded; and

(ii)

Debentures so owned which have been pledged in good faith other than to the Corporation or a Subsidiary of the Corporation shall not be so disregarded if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures, sign consents, requisitions or other instruments or take such other actions in his discretion free from the control of the Corporation or a Subsidiary of the Corporation.

1.3

Interpretation

In this Indenture:

(a)

words importing the singular number or masculine gender shall include the plural number or the feminine or neuter genders, and vice versa;

(b)

all references to Articles and Schedules refer, unless otherwise specified, to articles of and schedules to this Indenture;

(c)

all references to Sections refer, unless otherwise specified, to Sections, subsections or clauses of this Indenture;

(d)

words and terms denoting inclusiveness (such as "include" or "includes" or "including"), whether or not so stated, are not limited by and do not imply limitation of their context or the words or phrases which precede or succeed them;

(e)

reference to any agreement or other instrument in writing means such agreement or other instrument in writing as amended, modified, replaced or supplemented from time to time;

(f)

unless otherwise indicated, reference to a statute shall be deemed to be a reference to such statute as amended, re-enacted or replaced from time to time; and

(g)

unless otherwise indicated, time periods within which a payment is to be made or any other action is to be taken hereunder shall be calculated by including the day on which the period commences and excluding the day on which the period ends.

1.4

Headings, etc.

The division of this Indenture into Articles and Sections, the provision of a Table of Contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Indenture or of the Debentures.

1.5

Time of Essence

Time shall be of the essence of this Indenture.

1.6

Monetary References

Whenever any amounts of money are referred to herein, such amounts shall be deemed to be in lawful money of Canada unless otherwise expressed.

1.7

Invalidity, etc.

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

 

 

1.8

Language

Each of the parties hereto hereby acknowledges that it has consented to and requested that this Indenture and all documents relating thereto, including, without limiting the generality of the foregoing, the form of Debenture attached hereto as Schedule "A", be drawn up in the English language only.

1.9

Successors and Assigns

All covenants and agreements of the Corporation in this Indenture and the Debentures shall bind its successors and assigns, whether so expressed or not. All covenants and agreements of the Trustee in this Indenture shall bind its successors.

1.10

Severability

In case any provision in this Indenture or in the Debentures shall be invalid, illegal or unenforceable, such provision shall be deemed to be severed herefrom or therefrom and the validity, legality and enforceability of the remaining provisions shall not in any way be affected, prejudiced or impaired thereby.

1.11

Entire Agreement

This Indenture and all supplemental indentures and Schedules hereto and thereto, and the Debentures issued hereunder and thereunder, together constitute the entire agreement between the parties hereto with respect to the indebtedness created hereunder and thereunder and under the Debentures and supersedes as of the date hereof all prior memoranda, agreements, negotiations, discussions and term sheets, whether oral or written, with respect to the indebtedness created hereunder or thereunder and under the Debentures.

1.12

Benefits of Indenture

Nothing in this Indenture or in the Debentures, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any paying agent, the holders of Debentures, the Senior Creditors (to the extent provided in Article 5 only), and (to the extent provided in Section 8.11) the holders of Common Shares, any benefit or any legal or equitable right, remedy or claim under this Indenture.

1.13

Applicable Law and Attornment

This Indenture, any supplemental indenture and the Debentures shall be governed by and interpreted in accordance with the laws of the Province of Alberta and the federal laws of Canada applicable therein and shall be treated in all respects as Alberta contracts. With respect to any suit, action or proceedings relating to this Indenture, any supplemental indenture or any Debenture, the Corporation, the Trustee and each holder irrevocably submit and attorn to the exclusive jurisdiction of the courts of the Province of Alberta.

1.14

Currency of Payment

Unless otherwise indicated in a supplemental indenture with respect to any particular series of Debentures, all payments to be made under this Indenture or a supplemental indenture shall be made in Canadian dollars.

1.15

Non-Business Days

Whenever any payment to be made hereunder shall be due, any period of time would begin or end, any calculation is to be made or any other action is to be taken on, or as of, or from a period ending on, a day other than a Business Day, such payment shall be made, such period of time shall begin or end, such calculation shall be made and such other action shall be taken, as the case may be, unless otherwise specifically provided herein, on or as of the next succeeding Business Day without any additional interest, cost or charge to the Corporation.

 

 

1.16

Accounting Terms

Except as hereinafter provided or as otherwise indicated in this Indenture, all calculations required or permitted to be made hereunder pursuant to the terms of this Indenture shall be made in accordance with GAAP. For greater certainty, GAAP shall include any accounting standards, including International Financial Reporting Standards, that may from time to time be approved for general application by the Chartered Professional Accountants of Canada.

1.17

Calculations

The Corporation shall be responsible for making all calculations called for hereunder including, without limitation, calculations of Current Market Price and calculations under Sections 2.4(j) and 2.4(k). The Corporation shall make such calculations in good faith exercising reasonable care, diligence and skill and, absent manifest error, the Corporation's calculations shall be final and binding on holders and the Trustee. The Corporation will provide a schedule of its calculations to the Trustee and the Trustee shall be entitled to rely conclusively on the accuracy of such calculations without independent verification.

1.18

Schedules

The following Schedules are incorporated into and form part of this Indenture:

Schedule "A" - Form of Debenture

Schedule "B" - Form of Redemption Notice

Schedule "C" - Form of Maturity Notice

Schedule "D" - Form of Notice of Conversion

Schedule "E" - Form of Closing Notice

Schedule "F" - Form of Irrevocable Direction

In the event of any inconsistency between the provisions of any Section of this Indenture and the provisions of the Schedules which form a part hereof, the provisions of this Indenture shall prevail to the extent of the inconsistency.

Article 2
THE DEBENTURES

2.1

Limit of Debentures

Subject to the limitation in respect of the Initial Debentures set out in Section 2.4(a), the aggregate principal amount of Debentures authorized to be issued under this Indenture is unlimited, but Debentures may be issued only upon and subject to the conditions and limitations herein set forth.

2.2

Terms of Debentures of any Series

The Debentures may be issued in one or more series. There shall be established herein or in or pursuant to one or more indentures supplemental hereto, prior to the initial issuance of Debentures of any particular series (other than Initial Debentures, which are provided for in Section 2.4):

(a)

the designation of the Debentures of the series (which need not include the term "Debentures"), which shall distinguish the Debentures of the series from the Debentures of all other series;

(b)

any limit upon the aggregate principal amount of the Debentures of the series that may be Authenticated and delivered under this Indenture (except for Debentures Authenticated and delivered upon registration of, transfer of, amendment of, or in exchange for, or in lieu of, other Debentures of the series pursuant to Sections 2.9, 2.10, 3.1, 3.2 and 3.5 and Article 4 and Article 6);

(c)

the date or dates on which the principal of the Debentures of the series is payable;

 

 

(d)

the rate or rates at which the Debentures of the series shall bear interest, if any, the date or dates from which such interest shall accrue, on which such interest shall be payable and on which record date, if any, shall be taken for the determination of holders to whom such interest shall be payable and/or the method or methods by which such rate or rates or date or dates shall be determined;

(e)

the place or places where the principal of and any interest on Debentures of the series shall be payable or where any Debentures of the series may be surrendered for registration of transfer or exchange;

(f)

the right, if any, of the Corporation to redeem Debentures of the series, in whole or in part, at its option and the period or periods within which, the price or prices at which and any terms and conditions upon which, Debentures of the series may be so redeemed;

(g)

the obligation, if any, of the Corporation to redeem, purchase or repay Debentures of the series pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a holder thereof and the price or prices at which, the period or periods within which, the date or dates on which, and any terms and conditions upon which, Debentures of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligations;

(h)

if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Debentures of the series shall be issuable;

(i)

subject to the provisions of this Indenture, any trustee, Depositories, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Debentures of the series;

(j)

any other events of default or covenants with respect to the Debentures of the series;

(k)

whether and under what circumstances the Debentures of the series will be convertible into or exchangeable for securities of any Person;

(l)

the form and terms of the Debentures of the series;

(m)

if applicable, that the Debentures of the series shall be issuable in certificated or uncertificated form;

(n)

if other than Canadian currency, the currency in which the Debentures of the series are issuable; and

(o)

any other terms of the Debentures of the series (which terms shall not be inconsistent with the provisions of this Indenture).

All Debentures of any one series shall be substantially identical, except as may otherwise be established herein or by or pursuant to a resolution of the Board of Directors, Officers' Certificate or in an indenture supplemental hereto. All Debentures of any one series need not be issued at the same time and may be issued from time to time, including pursuant to a Periodic Offering, consistent with the terms of this Indenture, if so provided herein, by or pursuant to such resolution of the Board of Directors, Officers' Certificate or in an indenture supplemental hereto.

2.3

Form of Debentures

Except in respect of the Initial Debentures, the form of which is provided for herein, the Debentures of each series shall be substantially in such form or forms (not inconsistent with this Indenture) as shall be established herein or by or pursuant to one or more resolutions of the Board of Directors (or to the extent established pursuant to, rather than set forth in, a resolution of the Board of Directors, in an Officers' Certificate detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto or with any rules or regulations of any securities exchange or securities regulatory authority or to conform to general usage, all as may be determined by the directors or officers of the Corporation executing such Debentures on behalf of the Corporation, as conclusively evidenced by their execution of such Debentures.

 

 

2.4

Form and Terms of Initial Debentures

(a)

The first series of Debentures (the "Initial Debentures") authorized for issue immediately is limited to an aggregate principal amount of up to $57,500,000 with $50,000,000 to be issued upon the execution hereof with a further principal amount of $7,500,000 issuable when, and if, the Over-Allotment Option is exercised. The Initial Debentures shall be designated as "6.75% Extendible Convertible Unsecured Subordinated Debentures".

(b)

The Initial Debentures shall be dated as at the date of the initial closing of the Initial Debenture Offering, regardless of the actual date of issue, and shall mature on the Initial Maturity Date; provided that if the Disposition Closing occurs prior to the Termination Time, the maturity date of the Initial Debentures will automatically be extended to the Final Maturity Date.

(c)

The Initial Debentures shall bear interest from the date of the Initial Debentures at the rate of 6.75% per annum, payable semi-annually in arrears on September 30 and March 31 in each year (computed on the basis of a 365-day year and payable in equal semi-annual amounts; except that interest in respect of any period that is longer or shorter than a full semi-annual interest period will be computed on the basis of a 365 day year and the actual number of days elapsed in the relevant period and will accrue from day to day), the first such payment to fall due on September 30, 2016 (unless the Initial Maturity Date occurs prior to such date in which case the first interest payment shall fall due on the Initial Maturity Date) and, assuming maturity of the Initial Debentures is extended to the Final Maturity Date, the last such payment (representing interest payable from the Interest Payment Date immediately prior to the Final Maturity Date to, but excluding, the Final Maturity Date of the Initial Debentures) to fall due on September 30, 2021, payable after as well as before maturity and after as well as before default, with interest on amounts in default at the same rate, compounded semi-annually. For certainty, the first interest payment will include interest accrued from and including the date of closing of the Initial Debenture Offering to, but excluding, September 30, 2016, which will be equal to $9.62 for each $1,000 principal amount of Initial Debentures; provided that if the Maturity Date of the Initial Debentures is not extended to the Final Maturity Date and the Initial Maturity Date occurs prior to September 30, 2016 the first interest payment will include interest accrued from the closing of the Initial Debenture Offering to, but excluding, the Initial Maturity Date. Any payment required to be made on any day that is not a Business Day will be made on the next succeeding Business Day. The record dates for the payment of interest on the Initial Debentures will be March 15 and September 15 in each year (or the first Business Day prior to such date if not a Business Day).

(d)

The Initial Debentures will be redeemable in accordance with the terms of Article 4, provided that the Initial Debentures will not be redeemable before September 30, 2019, except in the event of the satisfaction of certain conditions after a Change of Control has occurred as outlined herein. On and after September 30, 2019 and at any time prior to September 30, 2020, provided that the Current Market Price at the time of the Redemption Notice is at least 125% of the Conversion Price, the Initial Debentures may be redeemed at the option of the Corporation in whole or in part from time to time on notice as provided for in Section 4.3 at a Redemption Price equal to their principal amount plus accrued and unpaid interest thereon up to (but excluding) the Redemption Date. On or after September 30, 2020 and prior to the Final Maturity Date, the Initial Debentures may be redeemed by the Corporation, in whole or in part from time to time, at the option of the Corporation on notice as provided for in Section 4.3 at a Redemption Price equal to their principal amount plus accrued and unpaid interest thereon up to (but excluding) the Redemption Date. The Redemption Notice for the Initial Debentures shall be substantially in the form of Schedule "B". In connection with the redemption of the Initial Debentures, the Corporation may, at its option and subject to the provisions of Section 4.6 and subject to regulatory approval, elect to satisfy its obligation to pay all or a portion of the aggregate principal portion of the Redemption Price of the Initial Debentures to be redeemed by issuing and delivering to the holders of such Initial Debentures, such number of Freely Tradeable Common Shares as is obtained by dividing the aggregate principal portion of the Redemption Price by 95% of the Current Market Price in effect on the Redemption Date. If the Corporation elects to exercise such option, it shall so specify and provide details in the Redemption Notice. Any accrued and unpaid interest will be paid in cash.

 

 

(e)

The Initial Debentures will be direct, unsecured obligations of the Corporation and will be subordinated to all existing and future Senior Indebtedness of the Corporation in accordance with the provisions of Article 5. In accordance with Section 2.12, the Initial Debentures will rank pari passu with one another and with each other series of Debentures issued under this Indenture or under indentures supplemental to this Indenture (regardless of their actual date or terms of issue) and, except as prescribed by law, with all other existing and future subordinated unsecured indebtedness of the Corporation other than, for certainty, Senior Indebtedness, to the extent that such other existing and future subordinated unsecured indebtedness of the Corporation is subordinated on the same terms.

(f)

Upon and subject to the provisions and conditions of Article 6 and Section 3.6, the holder of each Initial Debenture shall have the right at such holder's option, at any time following the Disposition Closing and prior to 5:00 p.m. (Calgary time) on the earliest of (i) the Business Day immediately preceding the Final Maturity Date; (ii) if the Initial Debentures are called for redemption, on the Business Day immediately preceding the date specified by the Corporation for redemption of the Initial Debentures; (iii) if called for repurchase pursuant to the exercise by the Corporation of the 90% Redemption Right, on the Business Day immediately preceding the payment date; or (iv) if subject to compulsory acquisition as provided for in Article 12, on the Business Day immediately prior to the day on which such acquisition becomes effective, subject to the satisfaction of certain conditions, by notice to the holders of Initial Debentures in accordance with Sections 2.4(d), 4.3 and 12.3, as applicable (the earliest of which will be the "Time of Expiry" for the purposes of Article 6 in respect of the Initial Debentures), to convert any part, being $1,000 or an integral multiple thereof, of the principal amount of a Debenture into Common Shares at the Conversion Price in effect on the Date of Conversion. To the extent a redemption is a redemption in part only of the Initial Debentures, such right to convert, if not exercised prior to the applicable Time of Expiry, shall survive as to any Initial Debentures not redeemed or converted and be applicable to the next succeeding Time of Expiry.

The Conversion Price in effect on the date hereof for each Common Share to be issued upon the conversion of Initial Debentures shall be equal to $1.62 such that approximately 617.2840 Common Shares shall be issued for each $1,000 principal amount of Initial Debentures so converted, subject to the terms of Article 6. Except as provided below, no adjustment in the number of Common Shares to be issued upon conversion will be made for dividends or distributions on Common Shares issuable upon conversion, the record date for the payment of which precedes the date upon which the holder becomes a holder of Common Shares in accordance with Article 6, or for interest accrued on Initial Debentures surrendered. No fractional Common Shares will be issued, and holders will receive a cash payment in satisfaction of any fractional interest based on the Current Market Price as of the Date of Conversion. The Conversion Price applicable to, and the Common Shares, securities or other property receivable on the conversion of, the Initial Debentures is subject to adjustment pursuant to the provisions of Section 2.4(k) and Section 6.5.

Holders converting their Initial Debentures will receive, in addition to the applicable number of Common Shares, accrued and unpaid interest (less any taxes required to be deducted) in respect of the Initial Debentures surrendered for conversion up to but excluding the Date of Conversion from, and including, the most recent Interest Payment Date in accordance with Section 6.4(j). For clarity, payment of such interest, whether in cash or by delivery of Freely Tradeable Common Shares pursuant to the exercise of the Common Share Interest Payment Election, may, at the option of the Corporation, be paid on the next regularly scheduled Interest Payment Date following the Date of Conversion.

Holders of Initial Debentures surrendered for conversion during the period from the close of business on any regular record date for the payment of interest on the Initial Debentures to the opening of business on the next succeeding Interest Payment Date will receive the semi-annual interest payable on such Initial Debentures on the corresponding Interest Payment Date notwithstanding the conversion. In the event that a holder of Debentures exercises their conversion right following a Redemption Notice by the Corporation, such holder will be entitled to receive accrued and unpaid interest, in addition to the applicable number of Common Shares to be received on conversion, for the period from the last Interest Payment Date to (but excluding) the Date of Conversion.

The Conversion Price will not be adjusted for accrued interest.

 

Notwithstanding any other provisions of this Indenture, if a Debenture is surrendered for conversion on an Interest Payment Date or during the five preceding Business Days, the person or persons entitled to receive Common Shares in respect of the Debenture so surrendered for conversion shall not become the holder or holders of record of such Common Shares until the Business Day following such Interest Payment Date.

A Debenture in respect of which a holder has accepted a notice in respect of a Debenture Offer pursuant to the provisions of Section 2.4(j) may be surrendered for conversion only if such notice is withdrawn in accordance with this Indenture.

(g)

Provided that the maturity of the Initial Debentures is extended to the Final Maturity Date, on redemption or maturity of the Initial Debentures, the Corporation may, at its option and subject to the provisions of Section 4.6 and Section 4.10, as applicable, and subject to regulatory approval, elect to satisfy its obligation to pay all or a portion of the aggregate principal amount of the Initial Debentures due on redemption or maturity by issuing and delivering to such holders of Initial Debentures Freely Tradeable Common Shares pursuant to the provisions of Sections 4.6 and 4.10, as applicable. If the Corporation elects to exercise such option, it shall provide details in the Redemption Notice or deliver a maturity notice (the "Maturity Notice") to the holders of the Initial Debentures in substantially the form of Schedule "C" and provide the necessary details. Any accrued and unpaid interest will be paid in cash.

(h)

The Initial Debentures shall be issued in denominations of $1,000 and integral multiples of $1,000 and the Trustee is hereby appointed as registrar and transfer agent for the Initial Debentures at its offices in Calgary, Alberta or Toronto, Ontario. Each Initial Debenture issued as a Debenture Certificate and the certificate of the Trustee endorsed thereon shall be issued in substantially the form set out in Schedule "A", with such insertions, omissions, substitutions or other variations as shall be required or permitted by this Indenture, and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto or with any rules or regulations of any securities exchange or securities regulatory authority or to conform with general usage, all as may be determined by the director or officer of the Corporation executing such Initial Debenture in accordance with Section 2.7 hereof, as conclusively evidenced by their execution of an Initial Debenture. Each Initial Debenture issued as a Debenture Certificate shall additionally bear such distinguishing letters and numbers as the Trustee shall approve. Notwithstanding the foregoing, an Initial Debenture may be in such other form or forms as may, from time to time, be approved by a resolution of the Board of Directors, or as specified in an Officers' Certificate. The Initial Debentures may be engraved, lithographed, printed, mimeographed or typewritten or partly in one form and partly in another, including non-certificated electronic form.

The Initial Debentures issued pursuant to the Initial Debenture Offering shall initially be issued as Uncertificated Debentures.

(i)

Upon and subject to the provisions of Article 10, the Corporation may elect, from time to time, to satisfy its Interest Obligation on the Initial Debentures on any Interest Payment Date occurring after the Disposition Closing (including, for greater certainty, following conversion or upon maturity or redemption) by delivering: (i) cash; (ii) Freely Tradeable Common Shares; or (iii) a combination of (i) and (ii) to the Trustee pursuant to the Common Share Interest Payment Election.

(j)

Within 30 days following the occurrence of a Change of Control, the Corporation shall be obligated to offer to purchase all Initial Debentures then outstanding. The terms and conditions of such obligation (in addition to complying with Applicable Securities Legislation) are set forth below:

(i)

Within 30 days following the occurrence of a Change of Control, the Corporation shall deliver to the Trustee a notice in writing stating that there has been a Change of Control and specifying the date on which such Change of Control occurred and the circumstances or events giving rise to such Change of Control together with a cash offer in writing (the "Debenture Offer") to purchase all (or any portion actually tendered to such offer) of the Initial Debentures then outstanding from the holders thereof at a price per Initial Debenture equal to 100% of the principal amount thereof together with accrued and unpaid interest thereon up to but excluding the Change of Control Purchase Date (as defined below) (the "Offer Price"). The Trustee will promptly thereafter deliver, by prepaid courier or mail, the Debenture Offer to the holders of all Initial Debentures then outstanding, at their addresses appearing in the registers of holders of Initial Debentures maintained by the Trustee.

 

 

(ii)

The Debenture Offer shall specify the date (the "Expiry Date") and time (the "Expiry Time") on which the Debenture Offer shall expire which date and time shall not, unless otherwise required by Applicable Securities Legislation, be earlier than the close of business on the 35th day and not later than the close of business on the 60th day following the date on which such Debenture Offer is made.

(iii)

The Debenture Offer shall specify that the Debenture Offer may be accepted by the holders of Initial Debentures by tendering the Initial Debentures so held by them to the Trustee at its offices in Calgary, Alberta or Toronto, Ontario at or before the Expiry Time together with an acceptance notice (the "Acceptance Notice") in form and substance acceptable to the Trustee.

(iv)

The Debenture Offer shall state that holders of Initial Debentures may accept the Debenture Offer in respect of all or a portion (in a minimum amount of $1,000 principal amount and multiples thereof) of their Initial Debentures.

(v)

The Debenture Offer shall specify a date (the "Change of Control Purchase Date") no later than the third Business Day following the Expiry Date on which the Corporation shall take up and pay for all Initial Debentures duly tendered in acceptance of the Debenture Offer.

(vi)

The Corporation shall, on or before 11:00 a.m. (Calgary time), on the Business Day immediately prior to the Change of Control Purchase Date pay to the Trustee by wire transfer or such other means as may be acceptable to the Trustee, an amount of money sufficient to pay the aggregate Offer Price in respect of all Initial Debentures duly tendered to the Debenture Offer (less any tax required by law to be deducted). The Trustee, on behalf of the Corporation, will pay the Offer Price to the holders of Initial Debentures in the respective amounts to which they are entitled in accordance with the Debenture Offer as aforesaid.

(vii)

If holders of 90% or more of the aggregate principal amount of Initial Debentures outstanding on the date the Corporation delivers the Debenture Offer to the Trustee (other than Initial Debentures held at such date by or on behalf of the Corporation, associates or affiliates of the Corporation or anyone acting jointly or in concert with the Corporation) accept the Debenture Offer, the Corporation shall have the right (the "90% Redemption Right"), upon written notice (the "90% Redemption Right Notice") provided to the Trustee within ten Business Days following the Expiry Date, to redeem on the purchase date specified in the 90% Redemption Right Notice all the Initial Debentures remaining outstanding at the Offer Price and on the other terms and conditions provided herein. Upon receipt of such notice by the Trustee, the Trustee shall promptly provide written notice to each holder of outstanding Initial Debentures (other than those that have accepted the Debenture Offer) that:

(A)

the Corporation has exercised the 90% Redemption Right and is purchasing all outstanding Initial Debentures effective as at the Change of Control Purchase Date at the Offer Price;

(B)

such holder must surrender its Initial Debentures to the Trustee on the same terms as those holders that accepted the Debenture Offer within ten days after the sending of such notice; and

(C)

the rights of such holder under the terms of the Initial Debentures and this Indenture shall cease to be effective as of the Change of Control Purchase Date provided the Corporation has, on or before the date on which the Corporation delivers the 90% Redemption Right Notice to the Trustee, paid the aggregate Offer Price to, or to the order of, the Trustee and thereafter such holder's Initial Debentures shall not be considered to be outstanding and such holder shall not have any rights hereunder except to receive such Offer Price to which such holder is entitled upon surrender and delivery of such holder's Initial Debentures in accordance with the Indenture.

 

 

(viii)

The Corporation shall on or before 11:00 a.m. (Calgary time) on the Business Day immediately prior to the date on which the Corporation delivers the 90% Redemption Right Notice pay to the Trustee by wire transfer or such other means as may be acceptable to the Trustee an amount of money sufficient to pay the aggregate Offer Price in respect of all Initial Debentures to be redeemed pursuant to the 90% Redemption Right (less any tax required by law to be deducted). The Trustee, on behalf of the Corporation, will pay the Offer Price to the holders of Initial Debentures in the respective amounts to which they are entitled in accordance with the exercise of the 90% Redemption Right as aforesaid upon surrender and delivery of such holders' Initial Debentures.

(ix)

The Initial Debentures in respect of which the Corporation has made payment to the Trustee in accordance with the terms of this Section 2.4(j) (or the portion thereof tendered in acceptance of the Debenture Offer) shall thereafter no longer be considered to be outstanding under this Indenture. The Corporation shall also deposit with the Trustee a sum of money sufficient to pay any charges or expenses which may be incurred by the Trustee in connection with the Debenture Offer and the exercise of the 90% Redemption Right, if applicable. All Initial Debentures in respect of which payment of the Offer Price has been so made shall be cancelled by the Trustee.

(x)

In the event only a portion of the principal amount of an Initial Debenture is tendered by a holder thereof in acceptance of the Debenture Offer, the Corporation shall execute and deliver to the Trustee and the Trustee shall certify and deliver to the holder, without charge to such holder, a certificate (if applicable) or such other evidence of ownership representing the principal amount of the Initial Debenture not so tendered in acceptance of the Debenture Offer.

(xi)

Initial Debentures for which holders have accepted the Debenture Offer and Initial Debentures which the Corporation has elected to redeem in accordance with this Section 2.4(j) shall become due and payable at the Offer Price on the Change of Control Purchase Date, in the same manner and with the same effect as if it were the date of maturity specified in such Initial Debentures, anything therein or herein to the contrary notwithstanding, and from and after the Change of Control Purchase Date, if the money necessary to purchase or redeem, or the Common Shares necessary to purchase or redeem, the Initial Debentures shall have been deposited as provided in this Section 2.4(j) and affidavits or other proofs satisfactory to the Trustee as to the publication and/or mailing of such notices shall have been lodged with it, interest on the Initial Debentures shall cease. If any question shall arise as to whether any notice has been given as above provided and such deposit made, such question shall be decided by the Trustee whose decision shall be final and binding upon all parties in interest.

(xii)

In case the holder of any Initial Debenture to be purchased or redeemed in accordance with this Section 2.4(j) shall fail on or before the Change of Control Purchase Date to so surrender such holder's Initial Debenture or shall not within such time accept payment of the monies payable, to take delivery of such Common Shares issuable in respect thereof, or give such receipt therefor, if any, as the Trustee may require, such monies may be set aside in trust, or such Common Shares may be held in trust, without interest, either in the deposit department of the Trustee or in a chartered bank, and such setting aside shall for all purposes be deemed a payment to the Debentureholder of the sum or the Common Shares so set aside and the Debentureholder shall have no other right except to receive payment of the monies so paid and deposited, or take delivery of the Common Shares so deposited, or both, upon surrender and delivery of such holder's Initial Debenture. In the event that any money or Common Shares required to be deposited hereunder with the Trustee or any depository or paying agent on account of principal, premium, if any, or interest, if any, on Initial Debentures issued hereunder shall remain so deposited for a period of three years less a day from the Change of Control Purchase Date (the "Unclaimed Funds Return Date"), then such monies, or Common Shares, together with any accumulated interest thereon, or any distributions paid thereon, shall at the end of such period be paid over or delivered over by the Trustee or such depository or paying agent to the Corporation and the Trustee shall not be responsible to Debentureholders for any amounts owing to them.

  

(xiii)

Subject to the provisions above related to Initial Debentures purchased in part, all Initial Debentures redeemed and paid under this Section 2.4(j) shall forthwith be delivered to the Trustee and cancelled and no Initial Debentures shall be issued in substitution therefor.

(k)

In addition to the requirements of Section 2.4(j) in respect of a Change of Control and subject to regulatory approval, the following provisions shall apply in respect of the occurrence of a Cash Change of Control occurring on or before the Final Maturity Date:

(i)

During the period beginning ten trading days before the anticipated date on which the Cash Change of Control becomes effective and ending on the date that is 30 days after the Debenture Offer is delivered to holders of Initial Debentures in accordance with Section 2.4(j)(i) (the "Cash Change of Control Conversion Period"), holders of Initial Debentures will be entitled to convert their Initial Debentures, in whole or in part, and receive, in addition to the number of Common Shares (or cash or other property or securities in substitution therefor) they would otherwise be entitled to receive in accordance with the provisions and conditions of Section 2.4(f) and Article 6, an additional number of Common Shares (or cash or other property or securities in substitution therefor) per $1,000 principal amount of Initial Debentures as set forth in this Section 2.4(k) (the "Make Whole Premium").

(ii)

The number of additional Common Shares per $1,000 principal amount of Initial Debentures constituting the Make Whole Premium (the "Make Whole Premium Shares") will be determined by reference to the table following subsection 2.4(k)(iii) and is based on the date on which the Cash Change of Control becomes effective (the "Effective Date") and the price (the "Cash Offer Price") paid per Common Share in the transaction constituting the Change of Control. If holders of Common Shares receive (or are entitled and able in all circumstances to receive) only cash in the transaction constituting the Change of Control, the Cash Offer Price shall be the cash amount paid per Share. Otherwise, the Cash Offer Price shall be equal to the Current Market Price of the Common Shares on the day immediately preceding the Effective Date; provided that for the purposes of this Section 2.4(k)(ii) and the determination of the Current Market Price, the applicable period shall be calculated based on the 20 consecutive trading days ending five trading days preceding the applicable date. Notwithstanding the foregoing, in no circumstances can the effective Conversion Price (calculated by dividing $1,000 by the number of Common Shares issuable upon conversion, including the maximum number of Make Whole Premium Shares hereunder) be less than the maximum permitted discounted price permitted by the TSX (or such other recognized exchange on which the Debentures are then listed) at the time of announcement of the Initial Debenture Offering, prior to any adjustments that may be made to the Cash Offer Price to correspond to an adjustment to the Conversion Price under this Indenture.

(iii)

The following table shows the number of Make Whole Premium Shares for each hypothetical Cash Offer Price and Effective Date set forth below, expressed as additional Common Shares per $1,000 principal amount of Initial Debentures. For the avoidance of doubt, the Corporation shall not be obliged to pay the Make Whole Premium otherwise than by issuance of the applicable number of Common Shares in excess of the number of Common Shares to which holders would otherwise have been entitled at the Conversion Price (the "Base Shares") upon conversion of the Initial Debentures in accordance with the provisions and conditions of Section 2.4(f) and Article 6.

 

 

Make-Whole Premium Upon a Change of Control
(Number of Additional Common Shares per $1,000 Debenture)

	Effective Date
Offer Price	Aug 09/16	Sep 30/16	Sep 30/17	Sep 30/18	Oct 01/19	Sep 30/20
$1.20	216.05	216.05	216.05	216.05	216.05	216.05
$1.25	202.84	200.60	183.06	182.72	182.72	182.72
$1.30	190.86	188.80	170.34	151.95	151.95	151.95
$1.35	180.22	177.97	159.01	137.15	123.46	123.46
$1.40	170.52	168.03	148.68	126.04	103.62	97.00
$1.45	161.58	159.24	139.40	115.77	91.78	72.37
$1.50	153.50	151.22	131.11	106.70	80.99	49.38
$1.55	146.16	143.73	123.47	98.70	71.61	29.53
$1.60	139.40	136.87	116.53	91.25	62.71	20.94
$1.65	133.09	130.70	110.25	84.64	54.98	14.46
$1.70	127.34	125.02	104.53	78.82	47.86	9.57
$1.75	122.05	119.66	99.22	73.37	41.25	6.24
$2.00	100.68	98.34	78.60	53.14	17.59	0.43
$3.00	58.70	56.88	41.92	23.13	0.00	0.00
$4.00	41.71	40.34	29.01	15.45	0.00	0.00
$6.00	26.85	25.96	18.59	9.98	0.00	0.00
$8.00	19.97	19.30	13.85	7.47	0.00	0.00
$10.00	15.93	15.40	11.06	5.98	0.00	0.00
$15.00	10.61	10.25	7.37	3.98	0.00	0.00
$20.00	7.95	7.69	5.53	2.99	0.00	0.00
$25.00	6.36	6.15	4.42	2.39	0.00	0.00
$30.00	5.30	5.13	3.69	1.99	0.00	0.00
$40.00	3.98	3.84	2.76	1.49	0.00	0.00

(iv)

The actual Cash Offer Price and Effective Date may not be set forth on the table above, in which case:

(A)

if the actual Cash Offer Price on the Effective Date is between two Cash Offer Prices on the table and/or the actual Effective Date is between two Effective Dates on the table, the number of Make Whole Premium Shares will be determined by a straight-line interpolation between the Make Whole Premium set forth for the two Cash Offer Prices and/or the two Effective Dates on the table based on a 365-day year, as applicable;

(B)

if the Cash Offer Price on the Effective Date exceeds $40.00 per Common Share, subject to adjustment as described below, the Make Whole Premium and the number of Make Whole Premium Shares to be issued will be zero; and

(C)

if the Cash Offer Price on the Effective Date is less than $1.20 per Common Share, subject to adjustment as described below, the Make Whole Premium and the number of Make Whole Premium Shares to be issued will be zero.

 

 

(v)

The Cash Offer Prices set forth in the table above will be adjusted as of any date on which the Conversion Price of the Initial Debentures is adjusted. The adjusted Cash Offer Prices will equal the Cash Offer Prices applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Price as so adjusted and the denominator of which is the Conversion Price immediately prior to the adjustment giving rise to the Cash Offer Price adjustment. The number of Make Whole Premium Shares set forth in the table above will be adjusted in the manner that is inversely proportional to the adjustment of the Conversion Price as set forth under Section 6.5, other than as a result of an adjustment to the Conversion Price by adding the Make Whole Premium as described above. The provisions of Section 6.11 shall be applicable in connection with determinations under this Section 2.4(k).

(vi)

Notwithstanding the foregoing, if the Date of Conversion of any Initial Debentures occurs during the period beginning on the tenth trading day prior to the Effective Date and ending at the close of business on the Effective Date, the holders of such Initial Debentures shall, on conversion of their Initial Debentures, only be entitled to receive that number of Make Whole Premium Shares as may be adjusted pursuant to Section 6.5 on the Business Day immediately following the Effective Date and, for greater certainty, only if the Change of Control occurs. The Base Shares shall be issued in accordance with the terms of this Indenture applicable to a conversion of Initial Debentures otherwise than during the Cash Change of Control Conversion Period, including at the then applicable Conversion Price.

(vii)

The Make Whole Premium Shares shall be deemed to have been issued upon conversion of Initial Debentures on the Business Day immediately following the Effective Date. Section 6.5 shall apply to such conversion and, for greater certainty, the former holders of Initial Debentures in respect of which the Make Whole Premium Shares are issuable shall be entitled to receive and shall accept, in lieu of the Make Whole Premium Shares, the number of shares or other securities or property of the Corporation or of the Person or other entity resulting from the transaction that constitutes the Cash Change of Control that such holders would have been entitled to receive if such holders had been the registered holders of the applicable number of Make Whole Premium Shares on the Effective Date.

(viii)

Except as otherwise provided in this Section 2.4(k), all other provisions of this Indenture applicable to a conversion of Initial Debentures shall apply to a conversion of Initial Debentures during the Cash Change of Control Conversion Period.

(l)

The Trustee hereby acknowledges receipt from NBF of a wire transfer of funds in the aggregate amount of $50,000,000 and confirms that such funds have been deposited in a segregated account in the name of the Corporation designated as the "Bellatrix Exploration Ltd. – Initial Debentures", or as otherwise directed by the Corporation and the Lead Underwriter. The Corporation hereby acknowledges that the amount received by the Trustee pursuant to this Subsection 2.4(l) represents payment in full by the Underwriters of the Proceeds for $50,000,000 principal amount of Initial Debentures. The Corporation hereby irrevocably directs the Trustee to, and the Trustee will, retain and pay and release the amounts received by the Trustee pursuant to this Subsection 2.4(l) (and any funds received in respect of any Over-Allotment Debentures issued on any exercise of the Over-Allotment Option) in accordance with the following provisions:

(i)

if the Escrow Release Condition is satisfied prior to the Termination Time the Corporation shall (A) deliver to NBF, on behalf of the Underwriters, an officer's certificate signed on behalf of the Corporation by the President and Chief Executive Officer and the Executive Vice-President, Finance and Chief Financial Officer of the Corporation or such other officers of the Corporation satisfactory to NBF, on behalf of the Underwriters, acting reasonably, certifying, on behalf of the Corporation and without personal liability, that the Disposition Time has occurred and that the Disposition Agreement has not been amended nor have any terms and conditions thereof been waived, other than as disclosed in writing to NBF, on behalf of the Underwriters; (B) shall cause a Closing Notice executed by the Corporation to be delivered to the Trustee and NBF, on behalf of the Underwriters; (C) shall concurrently deliver the Irrevocable Direction to the Trustee executed by the Corporation, to make the payments as provided for herein; and (D) after the Disposition Time, issue a press release setting out the Disposition Date and indicating that the Maturity Date of the Initial Debentures has been extended from the Initial Maturity Date to the Final Maturity Date.

 

 

(ii)

Upon receipt of the Closing Notice executed by the Corporation and NBF, on behalf of the Underwriters, and the Irrevocable Direction executed by the Corporation, the Corporation shall be entitled to receive from the Trustee the Escrowed Funds, less the amount payable to NBF on behalf of the Underwriters pursuant to Section 2.4(l)(iii) (the "Released Amount"). The Trustee shall deliver the Released Amount to the Corporation, or to such other party as the Corporation directs in writing, as soon as reasonably practicable after the delivery of the Closing Notice executed by the Corporation and NBF, on behalf of the Underwriters, and the Irrevocable Direction executed by the Corporation.

(iii)

The Trustee shall pay or cause to be paid out of the Escrowed Funds to NBF on behalf of the Underwriters, in accordance with the Underwriting Agreement, an amount equal to fifty percent (50%) of the Underwriters' Fee payable in respect of the Offered Debentures and in respect of any Over-Allotment Debentures issued prior to the delivery of the Closing Notice and the Irrevocable Direction, being an aggregate of $1,000,000 (plus an amount of $20.00 per Over-Allotment Debenture for any Over-Allotment Debenture issued) plus any Earned Interest thereon, forthwith upon receipt of the Closing Notice executed by the Corporation and NBF, on behalf of the Underwriters, and the Irrevocable Direction executed by the Corporation.

(iv)

If the Termination Time occurs, the Corporation shall forthwith notify the Trustee thereof in writing and shall issue a press release setting forth the Initial Maturity Date.

(v)

If the Termination Time occurs, at the Initial Maturity Date the holders of the Initial Debentures shall be entitled to receive the principal amount of the Debentures at par together with all accrued and unpaid interest thereon up to, but excluding, the Initial Maturity Date, which will be satisfied by:

(A)

the payment by the Trustee out of the Escrowed Funds of the aggregate amount of the Initial Debenture Subscription Price in respect of each such holder's Initial Debentures (to be satisfied by the Proceeds) plus such holder's pro rata share of the Earned Interest (without regard to the date of issue of such Initial Debentures) (to be satisfied by the Earned Interest); and

(B)

the payment by the Corporation, of any additional amounts owing in excess of the payment to be made by the Trustee pursuant to Subsection 2.4(l)(v)(A) to account for interest accrued and unpaid on the Debentures up to, but excluding the Initial Maturity Date.

(vi)

The obligation to make the payment of the amounts specified in Subsection 2.4(l)(v) shall be satisfied in accordance with Section 2.13 provided that the Corporation shall only be obligated to deliver to the Trustee a certified cheque or wire transfer for deposit in the applicable Maturity Account in an amount sufficient to the amount as set out in Section 2.4(l)(v)(B). The amount set out in Section 2.4(l)(v)(A) and held by the Trustee and the amount transferred to the Trustee in accordance with this Subsection 2.4(l)(v)(B) shall be deposited to the Maturity Account of the Initial Debentures. Immediately upon the occurrence of the Termination Time the Corporation will hold the amount as set out in Subsection 2.4(l)(v)(B) in trust for the holders of the Initial Debentures until such amount is paid to the Trustee in accordance with this Section 2.4(l)(vi) and Section 2.13. Upon the occurrence of the Termination Time, the Trustee will hold the amount set out in Subsection 2.4(l)(v)(A) and any amount received from the Corporation in respect of Subsection 2.4(l)(v)(B) in trust for the holders of the Initial Debentures.

(vii)

Pending disbursement of the Escrowed Funds, the Trustee shall hold, invest and reinvest such amount in Permitted Investments as directed in writing by the Corporation and the Lead Underwriter. "Permitted Investments" for the Escrowed Funds shall be: (A) Government Obligations having a maturity date of not later than the Deadline, (B) term deposits or bankers' acceptances of a Canadian chartered bank having a maturity date of not later than the Deadline; and (C) such other investments approved by the Corporation and the Lead Underwriter in writing. Such written direction to the Trustee shall be provided no later than 9:00 a.m. (Calgary time) on the day on which the investment is to be made. Any written direction received by the Trustee after 9:00 a.m. (Calgary time) or on a day which is not a Business Day, shall be deemed to have been given prior to 9:00 a.m. (Calgary time) on the next succeeding Business Day.

 

 

(viii)

If at any time the Escrowed Funds includes an amount that is not invested in Permitted Investments and the Corporation and the Lead Underwriter have not provided written directions to the Trustee to invest such amount, such uninvested amount will be held in an interest bearing account at a Canadian chartered bank until the Trustee has been directed in writing to so invest and the Trustee shall pay interest on such Escrowed Funds at an annual rate which is equal to 2.50 percent less than the prime rate of interest announced from time to time by The Bank of Nova Scotia on Canadian dollar loans made to its most credit worthy customers in Canada. Such payment obligation shall be calculated daily and paid to the account(s) within three (3) Business Days of each month-end. The Trustee may receive investment earnings in excess of, or less than, the interest payable pursuant to this Section 2.4(l)(viii), such earnings being for the Trustee's benefit or at its risk, as applicable.

(ix)

All earnings received from the investment of the Escrowed Funds shall be credited to, and shall become a part of, the Escrowed Funds. Any bank charges and similar fees as well as losses, if any, on such investments shall be deducted from the Earned Interest provided that if the aggregate amount of such bank charges and similar fees as well as losses are in excess of Earned Interest such excess amount shall be paid by the Corporation and deposited with the Trustee.

(x)

Up and until such time as the Corporation and NBF, as applicable, deliver the Closing Notice and Irrevocable Direction to the Trustee, all amounts held by the Trustee pursuant to Sections 2.4(l)(vii), 2.4(l)(viii), 2.4(l)(ix), 2.4(l)(x) and 2.4(l)(xi) shall be held in escrow by the Trustee for the holders of the Initial Debentures and the delivery of the Escrowed Funds to the Trustee shall not give rise to a debtor creditor or other similar relationship between the Trustee and the Receiptholders. Following delivery of the Closing Notice and Irrevocable Direction to the Trustee by the Corporation and NBF, on behalf of the Underwriters, as applicable, all amounts held by the Trustee pursuant to Sections 2.4(l)(vii), 2.4(l)(viii), 2.4(l)(ix), 2.4(l)(x) and 2.4(l)(xi) shall be held in escrow by the Trustee for the benefit of the Corporation and the Underwriters, as applicable, in accordance with their entitlements hereunder as set out in Subsections 2.4(l)(ii) and 2.4(l)(iii). Except in respect of the interest earned as contemplated in Section 2.4(l)(viii), the amounts held by the Trustee pursuant to Sections 2.4(l)(vii), 2.4(l)(viii), 2.4(l)(ix), 2.4(l)(x) and 2.4(l)(xi) are the sole risk of the Corporation and holders of the Initial Debentures. Except in respect of interest earned as contemplated in Section 2.4(l)(viii), the Trustee shall have no responsibility or liability for any diminution of the Escrowed Funds which may result from any Permitted Investments made pursuant to Section 2.4(l)(vii), including any losses on any investment required to be liquidated prior to maturity in order to make a payment required hereunder.

(xi)

The Escrowed Funds received by the Trustee and any securities or other instruments received by the Trustee upon the investment or reinvestment of such Escrowed Funds, shall be received as agent and in trust for, and shall be segregated and kept apart by the Trustee as agent for (A) up and until such time as the Corporation and NBF, on behalf of the Underwriters, as applicable, deliver the Closing Notice and Irrevocable Direction, the holders of the Initial Debentures, (B) following delivery of the Closing Notice and Irrevocable Direction to the Trustee by the Corporation and NBF, on behalf of the Underwriters, as applicable, the Underwriters and the Corporation, as applicable, in accordance with their entitlements hereunder as set out in Subsections 2.4(l)(ii) and 2.4(l)(iii).

(m)

The Trustee shall be provided with the documents and instruments referred to in Sections 2.5(b), 2.5(c) and 2.5(d) with respect to the Initial Debentures prior to the issuance of the Initial Debentures.

 

 

2.5

Authentication and Delivery of Additional Debentures

The Corporation may from time to time request the Trustee to Authenticate and deliver Additional Debentures of any series by delivering to the Trustee the documents referred to below in this Section 2.5 whereupon the Trustee shall Authenticate such Debentures and cause the same to be delivered in accordance with the Written Direction of the Corporation referred to below or pursuant to such procedures acceptable to the Trustee as may be specified from time to time by a Written Direction of the Corporation. The maturity date, issue date, interest rate (if any) and any other terms of the Debentures of such series shall be set forth in or determined by or pursuant to such Written Direction of the Corporation and procedures. In Authenticating such Debentures, the Trustee shall be entitled to receive and shall be fully protected in relying upon, unless and until such documents have been superseded or revoked:

(a)

an Officers' Certificate and/or executed supplemental indenture by or pursuant to which the form and terms of such Additional Debentures were established;

(b)

a Written Direction of the Corporation requesting Authentication and delivery of such Additional Debentures and setting forth delivery instructions, provided that, with respect to Debentures of a series subject to a Periodic Offering:

(i)

such Written Direction of the Corporation may be delivered by the Corporation to the Trustee prior to the delivery to the Trustee of such Additional Debentures of such series for Authentication and delivery;

(ii)

the Trustee shall Authenticate and deliver Additional Debentures of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount, if any, established for such series, pursuant to a Written Direction of the Corporation or pursuant to procedures acceptable to the Trustee as may be specified from time to time by a Written Direction of the Corporation;

(iii)

the maturity date or dates, issue date or dates, interest rate or rates (if any) and any other terms of Additional Debentures of such series shall be determined by an executed supplemental indenture or by Written Direction of the Corporation or pursuant to such procedures; and

(iv)

if provided for in such procedures, such Written Direction of the Corporation may authorize Authentication and delivery pursuant to oral or electronic instructions from the Corporation which oral or electronic instructions shall be promptly confirmed in writing;

(c)

an opinion of Counsel, in form and substance satisfactory to the Trustee, acting reasonably, to the effect that all requirements imposed by this Indenture and by law in connection with the proposed issue of Additional Debentures have been complied with, subject to the delivery of certain documents or instruments specified in such opinion; and

(d)

an Officers' Certificate (which Officers' Certificate shall be in such form that satisfies all applicable laws) certifying that the Corporation is not in default under this Indenture, that the terms and conditions for the certification and delivery of Additional Debentures (including those set forth in Section 15.5), have been complied with subject to the delivery of any documents or instruments specified in such Officers' Certificate and that no Event of Default exists or will exist upon such Authentication and delivery.

2.6

Non-Certificated Deposit

(a)

Subject to the provisions hereof, at the Corporation's option, Debentures may be issued and registered in the name of CDS or its nominee and:

(i)

the deposit of which may be confirmed electronically by the Trustee to a particular Participant through CDS; and

 

 

(ii)

shall be identified by a specific CUSIP/ISIN as requested by the Corporation from CDS to identify each specific series of Debentures and the Initial Debentures shall be identified by CUSIP - 78314AE1/ISIN - CA078314AE11.

(b)

If the Corporation issues Debentures in a non-certificated format, Beneficial Owners of such Debentures registered and deposited with CDS shall not receive Debenture Certificates in definitive form and shall not be considered owners or holders thereof under this Indenture or any supplemental indenture. Beneficial interests in Debentures registered and deposited with CDS will be represented only through the non-certificated inventory system administered by CDS. Transfers of Debentures registered and deposited with CDS between Participants shall occur in accordance with the rules and procedures of CDS. Neither the Corporation nor the Trustee shall have any responsibility or liability for any aspects of the records relating to or payments made by CDS or its nominee, on account of the beneficial interests in Debentures registered and deposited with CDS. Nothing herein shall prevent the Beneficial Owners of Debentures registered and deposited with CDS from voting such Debentures using duly executed proxies or voting instruction forms.

(c)

All references herein to actions by, notices given or payments made to Debentures shall, where Debentures are held through CDS, refer to actions taken by, or notices given or payments made to, CDS upon instruction from the Participants in accordance with its rules and procedures. For the purposes of any provision hereof requiring or permitting actions with the consent of or at the direction of Debentureholders evidencing a specified percentage of the aggregate Debentures outstanding, such direction or consent may be given by Beneficial Owners acting through CDS and the Participants owning Debentures evidencing the requisite percentage of the Debentures. The rights of a Beneficial Owner whose Debentures are held through CDS shall be exercised only through CDS and the Participants and shall be limited to those established by law and agreements between such holders and CDS and the Participants upon instructions from the Participants. Each of the Trustee and the Corporation may deal with CDS for all purposes (including the making of payments) as the authorized representative of the respective Debentures and such dealing with CDS shall constitute satisfaction or performance, as applicable, of their respective obligations hereunder.

(d)

For so long as Debentures are held through CDS, if any notice or other communication is required to be given to Debentureholders, the Trustee will give such notices and communications to CDS.

(e)

If CDS resigns or is removed from its responsibility as Depository and the Trustee is unable or does not wish to locate a qualified successor, CDS shall provide the Trustee with instructions for registration of Debentures in the names and in the amounts specified by CDS and the Corporation shall issue and the Trustee shall Authenticate and deliver the aggregate number of Debentures then outstanding in the form of definitive Debentures Certificates representing such Debentures.

(f)

The rights of Beneficial Owners who hold securities entitlements in respect of the Debentures through the non-certificated inventory system administered by CDS shall be limited to those established by applicable law and agreements between the Depository and the Participants and between such Participants and the Beneficial Owners who hold securities entitlements in respect of the Debentures through the non-certificated inventory system administered by CDS, and such rights must be exercised through a Participant in accordance with the rules and procedures of the Depository.

(g)

Notwithstanding anything herein to the contrary, none of the Corporation nor the Trustee nor any agent thereof shall have any responsibility or liability for:

(i)

the electronic records maintained by the Depository relating to any ownership interests or any other interests in the Debentures or the depository system maintained by the Depository, or payments made on account of any ownership interest or any other interest of any Person in any Debenture represented by an electronic position in the non-certificated inventory system administered by CDS (other than the Depository or its nominee);

(ii)

for maintaining, supervising or reviewing any records of the Depository or any Participant relating to any such interest; or

(iii)

any advice or representation made or given by the Depository or those contained herein that relate to the rules and regulations of the Depository or any action to be taken by the Depository on its own direction or at the direction of any Participant.

(h)

The Corporation may terminate the application of this Section 2.6 in its sole discretion in which case all Debentures shall be evidenced by Debenture Certificates registered in the name of a Person other than the Depository.

2.7

Execution of Debenture Certificates

All Debenture Certificates shall be signed (either manually, by facsimile signature, scanned or other electronic copy) by any one authorized director or officer of the Corporation holding office at the time of signing. A facsimile, scanned or other electronic signature upon a Debenture Certificate shall for all purposes of this Indenture be deemed to be the signature of the person whose signature it purports to be. Notwithstanding that any person whose signature, either manual or in facsimile, scan or other electronic form, appears on a Debenture Certificate as a director or officer may no longer hold such office at the date of the Debenture Certificate or at the date of the Authentication and delivery thereof, such Debenture Certificate shall be valid and binding upon the Corporation and entitled to the benefits of this Indenture.

2.8

Authentication

(a)

No Debenture shall be issued or, if issued, shall be obligatory or shall entitle the holder to the benefits of this Indenture, until it has been Authenticated by or on behalf of the Trustee substantially in the form set out in this Indenture, in the relevant supplemental indenture, or in some other form approved by the Trustee. Such Authentication on any Debenture shall be conclusive evidence that such Debenture is duly issued, is a valid obligation of the Corporation and the holder is entitled to the benefits hereof.

(b)

The Authentication of the Trustee signed on the Debentures, or interim Debentures hereinafter mentioned, shall not be construed as a representation or warranty by the Trustee as to the validity of this Indenture or of the Debentures or interim Debentures or as to the issuance of the Debentures or interim Debentures and the Trustee shall in no respect be liable or answerable for the use made of the Debentures or interim Debentures or any of them or the proceeds thereof. The Authentication of the Trustee on the Debentures or interim Debentures shall, however, be a representation and warranty by the Trustee that the Debentures or interim Debentures have been duly Authenticated by or on behalf of the Trustee pursuant to the provisions of this Indenture.

(c)

The Trustee shall Authenticate Uncertificated Debentures (whether upon original issuance, exchange, registration of transfer or otherwise) by completing its Internal Procedures and the Corporation shall, and hereby acknowledges that it shall, thereupon be deemed to have duly and validly issued such Uncertificated Debentures under this Indenture. Such Authentication shall be conclusive evidence that such Uncertificated Debentures have been duly issued hereunder and that the holder or holders are entitled to the benefits of this Indenture. The register shall be final and conclusive evidence as to all matters relating to Uncertificated Debentures with respect to which this Indenture requires the Trustee to maintain records or accounts. In case of differences between the register at any time and any other time the register at the later time shall be controlling, absent manifest error and such Uncertificated Debentures are binding on the Corporation.

2.9

Interim Debentures or Certificates

Pending the delivery of definitive Debentures of any series to the Trustee, the Corporation may issue and the Trustee may Authenticate in lieu thereof interim Debentures in such forms and in such denominations and signed in such manner as provided herein, entitling the holders thereof to definitive Debentures of the series when the same are ready for delivery; or the Corporation may execute and the Trustee may Authenticate a temporary Debenture for the whole principal amount of Debentures of the series then authorized to be issued hereunder and deliver the same to the Trustee and thereupon the Trustee may issue its own interim certificates in such form and in such amounts, not exceeding in the aggregate the principal amount of the temporary Debenture so delivered to it, as the Corporation and the Trustee may approve entitling the holders thereof to definitive

Debentures of the series when the same are ready for delivery; and, when so issued and Authenticated, such interim or temporary Debentures or interim certificates shall, for all purposes but without duplication, rank in respect of this Indenture equally with Debentures duly issued hereunder and, pending the exchange thereof for definitive Debentures, the holders of the interim or temporary Debentures or interim certificates shall be deemed without duplication to be Debentureholders and entitled to the benefit of this Indenture to the same extent and in the same manner as though the said exchange had actually been made. Forthwith after the Corporation shall have delivered the definitive Debentures to the Trustee, the Trustee shall cancel such temporary Debentures, if any, and shall call in for exchange all interim Debentures or certificates that shall have been issued and forthwith after such exchange shall cancel the same. No charge shall be made by the Corporation or the Trustee to the holders of such interim or temporary Debentures or interim certificates for the exchange thereof. All interest paid upon interim or temporary Debentures or interim certificates shall be noted thereon as a condition precedent to such payment unless paid by cheque to the registered holders thereof.

 

2.10

Mutilation, Loss, Theft or Destruction

In case any of the Debentures issued hereunder shall become mutilated or be lost, stolen or destroyed, the Corporation, in its discretion, may issue, and thereupon the Trustee shall Authenticate and deliver, a new Debenture upon surrender and cancellation of the mutilated Debenture, or in the case of a lost, stolen or destroyed Debenture, in lieu of and in substitution for the same, and the substituted Debenture shall be in a form approved by the Trustee and shall be entitled to the benefits of this Indenture and rank equally in accordance with its terms with all other Debentures issued or to be issued hereunder. In case of loss, theft or destruction the applicant for a substituted Debenture shall furnish to the Corporation and to the Trustee such evidence of the loss, theft or destruction of the Debenture as shall be satisfactory to them in their discretion and shall also furnish an indemnity and surety bond satisfactory to them in their discretion. The applicant shall pay all reasonable expenses incidental to the issuance of any substituted Debenture.

2.11

Concerning Interest

(a)

Except as may otherwise be provided in this Indenture or in any supplemental indenture or in a Written Direction of the Corporation in respect of a series of Debentures and subject to Section 2.4(c) with respect to the calculation of interest in respect of the initial interest payment to be paid on the Initial Debentures, all Debentures issued hereunder, whether originally or upon exchange or in substitution for previously issued Debentures which are interest bearing, shall bear interest (i) from and including their issue date, or (ii) from and including the last Interest Payment Date to which interest shall have been paid or made available for payment on the outstanding Debentures of that series, whichever shall be the later, or, in respect of Debentures subject to a Periodic Offering, from and including their issue date or from and including the last Interest Payment Date to which interest shall have been paid or made available for payment on such Debentures, in all cases, to and excluding the next Interest Payment Date.

(b)

Unless otherwise specifically provided in the terms of the Debentures of any series, interest shall be computed on the basis of a year of 365 days and shall be based on the actual number of days in the applicable period. With respect to any series of Debentures, whenever interest is computed on the basis of a year (the "deemed year") which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

2.12

Debentures to Rank Pari Passu

The Debentures will be direct unsecured subordinated obligations of the Corporation. Each Debenture of the same series of Debentures will rank pari passu with each other Debenture of the same series (regardless of their actual date or terms of issue) and, subject to statutory preferred exceptions, with all other present and future subordinated and unsecured indebtedness of the Corporation, other than, for certainty, Senior Indebtedness, to the extent that such other existing and future subordinated unsecured indebtedness of the Corporation is subordinated on the same terms.

 

 

2.13

Payments of Amounts Due on Maturity

Except as may otherwise be provided herein or in any supplemental indenture in respect of any series of Debentures and subject to Section 4.10, payments of amounts due upon maturity of the Debentures will be made in the following manner. The Corporation will establish and maintain with the Trustee a Maturity Account for each series of Debentures. Each such Maturity Account shall be maintained by and be subject to the control of the Trustee for the purposes of this Indenture. On or before 11:00 a.m. (Calgary time) on the Business Day immediately prior to each Maturity Date for Debentures outstanding from time to time under this Indenture, the Corporation will deliver to the Trustee a certified cheque or wire transfer for deposit in the applicable Maturity Account in an amount sufficient to pay the cash amount payable in respect of such Debentures (including the principal amount together with any accrued and unpaid interest thereon less any tax required by law to be deducted), provided the Corporation may elect to satisfy this requirement by providing the Trustee with a cheque or with funds by electronic transfer for such amounts required under this Section 2.13 post-dated to the applicable Maturity Date. The Trustee, on behalf of the Corporation, will pay to each holder entitled to receive payment the principal amount of and premium (if any) and accrued and unpaid interest on the Debenture, upon surrender of the Debenture at any branch of the Trustee designated for such purpose from time to time by the Corporation and the Trustee. The delivery of such funds to the Trustee for deposit to the applicable Maturity Account will satisfy and discharge the liability of the Corporation for the Debentures to which the delivery of funds relates to the extent of the amount delivered (plus the amount of any tax deducted as aforesaid and remitted to the appropriate governmental authority) and such Debentures will thereafter to that extent not be considered as outstanding under this Indenture and such holder will have no other right in regard thereto other than to receive out of the money so delivered or made available the amount to which it is entitled.

2.14

Payment of Interest

The following provisions shall apply to Debentures, except as otherwise provided in Section 2.4(c) or specified in a resolution of the Board of Directors, an Officers' Certificate or a supplemental indenture relating to a particular series of Additional Debentures:

(a)

As interest becomes due on each Debenture (except, subject to certain exceptions set forth herein including in Section 2.4(c), on conversion or on redemption, when interest may at the option of the Corporation be paid upon surrender of such Debenture), the Corporation, either directly or through the Trustee or any agent of the Trustee, shall send or forward by prepaid ordinary mail, electronic transfer of funds or such other means as may be agreed to by the Trustee, payment of such interest (less any tax required to be withheld therefrom) to the order of the registered holder of such Debenture appearing on the registers maintained by the Trustee at the close of business on the fifth Business Day prior to the applicable Interest Payment Date and addressed to the holder at the holder's last address appearing on the register, unless such holder otherwise directs. If payment is made by cheque, such cheque shall be forwarded at least three days prior to each date on which interest becomes due and if payment is made by other means (such as electronic transfer of funds, provided the Trustee must receive confirmation of receipt of funds one Business Day prior to being able to wire funds to holders), such payment shall be made in a manner whereby the holder receives credit for such payment on the date such interest on such Debenture becomes due. The mailing of such cheque or the making of such payment by other means shall, to the extent of the sum represented thereby, plus the amount of any tax withheld and remitted to the appropriate governmental authority as aforesaid, satisfy and discharge all liability for interest on such Debenture, unless in the case of payment by cheque, such cheque is not paid at par on presentation. In the event of non-receipt of any cheque for or other payment of interest by the person to whom it is so sent as aforesaid, the Corporation will issue to such person a replacement cheque or other payment for a like amount upon being furnished with such evidence of non-receipt as it shall reasonably require and upon being indemnified to its satisfaction. Notwithstanding the foregoing, if the Corporation is prevented by circumstances beyond its control (including, without limitation, any interruption in mail service) from making payment of any interest due on each Debenture in the manner provided above, the Corporation may make payment of such interest or make such interest available for payment in any other manner acceptable to the Trustee with the same effect as though payment had been made in the manner provided above.

 

 

(b)

All payments of interest on the Uncertificated Debenture shall be made by electronic funds transfer or certified cheque made payable to the Depository or its nominee on the day interest is payable for subsequent payment to Beneficial Owners of the applicable Uncertificated Debenture, unless the Corporation and the Depository otherwise agree. On or before 11:00 a.m. (Calgary time) on the Business Day immediately prior to each Interest Payment Date for Uncertificated Debentures outstanding from time to time under this Indenture, the Corporation will deliver to the Trustee a certified cheque or wire transfer in an amount sufficient to pay the cash amount payable in respect of interest on such Uncertificated Debentures on such Interest Payment Date, provided the Corporation may elect to satisfy this requirement by providing the Trustee with a cheque for such amounts required under this Section 2.14(b) post-dated to the applicable Interest Payment Date. None of the Corporation, the Trustee or any agent of the Trustee for any Debenture issued as an Uncertificated Debenture will be liable or responsible to any person for any aspect of the records related to or payments made on account of beneficial interests in any Uncertificated Debenture or for maintaining, reviewing, or supervising any records relating to such beneficial interests.

2.15

Withholding Tax

The Corporation will be entitled to deduct and withhold any applicable taxes or similar charges (including interest, penalties or similar amounts in respect thereof) imposed or levied by or on behalf of the Canadian government or of any Province or territory thereof or any authority or agency therein or thereof having power to tax, including pursuant to the Tax Act, from any payment to be made on or in connection with the Debentures and, provided that the Corporation forthwith remits such withheld amount to such government, authority or agency and files all required forms in respect thereof and, at the same time, provides copies of such remittance and filing to the Trustee and the relevant Debentureholder, the amount of any such deduction or withholding will be considered an amount paid in satisfaction of the Corporation's obligations under the Debentures and there is no obligation on the Corporation to gross-up amounts paid to a holder in respect of such deductions or withholdings. The Corporation shall provide the Trustee and the relevant Debentureholder with copies of receipts or other communications relating to the remittance of such withheld amount or the filing of such forms received from such government, authority or agency promptly after receipt thereof.

The Trustee shall have no obligation to verify any payments under the Tax Act or any provision of provincial, state, local or foreign tax law. The Trustee shall at all times be indemnified and held harmless by the Corporation from and against any personal liabilities of the Trustee incurred in connection with the failure of the Corporation or its agents, to report, remit or withhold taxes as required by the Tax Act or otherwise failing to comply with the Tax Act. This indemnification shall survive the resignation or removal of the Trustee and the termination of this Indenture solely to the extent that such liabilities have been incurred in connection with taxation years occurring during the term of this Indenture.

2.16

Right of Rescission

(a)

Upon the conversion of the principal amount of an Initial Debenture into Common Shares pursuant to Article 6 hereof, original purchasers of Initial Debentures under the Initial Debenture Offering (the "Original Purchasers") shall have a right of action against the Corporation for rescission to receive the purchase price of the Initial Debentures, exercisable on notice given to the Corporation not more than 180 days subsequent to the date hereof, if the Prospectus, together with any amendment thereto, contains a misrepresentation (as such term is defined in the Securities Act (Alberta)). The foregoing right of action for rescission is only available to an Original Purchaser while he or she is a holder of the Common Shares issued upon the conversion of Initial Debentures pursuant to Article 6 hereof.

(b)

In no event shall the Corporation be liable under this Section 2.16 if the Original Purchaser purchased the Initial Debentures with knowledge of the misrepresentation.

Article 3
REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP

3.1

Fully Registered Debentures

 

 

(a)

With respect to each series of Debentures issuable as Fully Registered Debentures, the Corporation shall cause to be kept by and at the principal office of the Trustee in Calgary, Alberta and Toronto, Ontario and by the Trustee or such other registrar as the Corporation, with the approval of the Trustee, may appoint at such other place or places, if any, as may be specified in the Debentures of such series or as the Corporation may designate with the approval of the Trustee, a register in which shall be entered the names and addresses of the holders of Fully Registered Debentures and particulars of the Debentures held by them respectively and of all transfers of Fully Registered Debentures. Such registration shall be noted on the Debentures by the Trustee or other registrar unless a new Debenture shall be issued upon such transfer.

(b)

No transfer of a Fully Registered Debenture shall be valid unless made on such register referred to in Section 3.1(a) by the registered holder or such holder's executors, administrators or other legal representatives or an attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the Trustee or other registrar upon surrender of the Debentures together with a duly executed form of transfer acceptable to the Trustee and upon compliance with such other reasonable requirements as the Trustee or other registrar may prescribe, or unless the name of the transferee shall have been noted on the Debenture by the Trustee or other registrar.

(c)

Fully Registered Debentures and the Common Shares issuable upon conversion thereof have not been and will not be registered under the 1933 Act and may only be transferred pursuant to an exemption or exclusion from the registration requirements of the 1933 Act and applicable state securities laws.

3.2

Transferee Entitled to Registration

The transferee of a Debenture shall be entitled, after the appropriate form of transfer is lodged with the Trustee or other registrar and upon compliance with all other conditions in that behalf required by this Indenture or by law, to be entered on the register as the owner of such Debenture free from all equities or rights of set-off or counterclaim between the Corporation and the transferor or any previous holder of such Debenture, save in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction. Upon surrender for registration of transfer of Debentures, the Corporation shall issue and thereupon the Trustee shall Authenticate and deliver a new Debenture Certificate or confirm the electronic deposit of Uncertificated Debentures of like tenor in the name of the designated transferee and register such transfer in accordance with Section 3.1. If less than all the Debentures evidenced by the Debenture Certificate(s) or Uncertificated Debentures so surrendered are transferred, the transferor shall be entitled to receive, in the same manner, a new Debenture Certificate or electronically deposited Uncertificated Debentures registered in his name evidencing the Debentures not transferred.

3.3

No Notice of Trusts

Neither the Corporation nor the Trustee nor any registrar shall be bound to take notice of or see to the execution of any trust (other than that created by this Indenture) whether express, implied or constructive, in respect of any Debenture, and may transfer the same on the direction of the person registered as the holder thereof, whether named as trustee or otherwise, as though that person were the beneficial owner thereof.

3.4

Registers Open for Inspection

The registers referred to in Section 3.1 shall at all reasonable times be open for inspection by the Corporation, the Trustee or any Debentureholder. Every registrar, including the Trustee, shall from time to time when requested so to do by the Corporation or by the Trustee, in writing, furnish the Corporation or the Trustee, as the case may be, with a list of names and addresses of holders of registered Debentures entered on the register kept by them and showing the principal amount and serial numbers of the Debentures held by each such holder, provided the Trustee shall be entitled to charge a reasonable fee to provide such a list.

3.5

Exchanges of Debenture Certificates

(a)

Subject to Section 3.6, Debentures in any authorized form or denomination, other than Uncertificated Debentures, may be exchanged for Debentures in any other authorized form or denomination, of the same series and date of maturity, bearing the same interest rate and of the same aggregate principal amount as the Debentures so exchanged.

 

(b)

In respect of exchanges of Debentures permitted by Section 3.5(a), Debentures of any series may be exchanged only at the principal offices of the Trustee in the cities of Calgary, Alberta and Toronto, Ontario or at such other place or places, if any, as may be specified in the Debentures of such series and at such other place or places as may from time to time be designated by the Corporation with the approval of the Trustee. Any Debentures tendered for exchange shall be surrendered to the Trustee. The Corporation shall execute and the Trustee shall Authenticate all Debentures necessary to carry out exchanges as aforesaid. All Debentures surrendered for exchange shall be cancelled.

(c)

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

3.6

Closing of Registers

(a)

Neither the Corporation nor the Trustee nor any registrar shall be required to:

(i)

make transfers or exchanges or convert any of Fully Registered Debentures on any Interest Payment Date for such Debentures or during the five preceding Business Days;

(ii)

make transfers or exchanges of, or convert any Debentures on the day of any selection by the Trustee of Debentures to be redeemed or during the five preceding Business Days; or

(iii)

make exchanges of any Debentures which will have been selected or called for redemption unless upon due presentation thereof for redemption such Debentures shall not be redeemed.

(b)

Subject to any restriction herein provided, the Corporation with the approval of the Trustee may at any time close any register for any series of Debentures, other than those kept at the principal offices of the Trustee in Calgary, Alberta and Toronto, Ontario, and transfer the registration of any Debentures registered thereon to another register (which may be an existing register) and thereafter such Debentures shall be deemed to be registered on such other register. Notice of such transfer shall be given to the holders of such Debentures.

3.7

Charges for Registration, Transfer and Exchange

For each Debenture exchanged, registered, transferred or discharged from registration, the Trustee or other registrar, except as otherwise herein provided, may make a reasonable charge for its services and in addition may charge a reasonable sum for each new Debenture issued (such amounts to be agreed upon from time to time by the Trustee and the Corporation), and payment of such charges and reimbursement of the Trustee or other registrar for any stamp taxes or governmental or other charges required to be paid shall be made by the party requesting such exchange, registration, transfer or discharge from registration as a condition precedent thereto. Notwithstanding the foregoing provisions, no charge shall be made to a Debentureholder hereunder:

(a)

for any exchange, registration, transfer or discharge from registration of any Debenture applied for within a period of two months from the date of the first delivery of Debentures of that series or, with respect to Debentures subject to a Periodic Offering, within a period of two months from the date of delivery of any such Debenture;

(b)

for any exchange of any interim or temporary Debenture or interim certificate that has been issued under Section 2.9 for a definitive Debenture;

(c)

for any exchange of an Uncertificated Debenture as contemplated in Section 3.1;

(d)

for any exchange of any Debenture resulting from a partial redemption under Section 4.2;

(e)

for any exchange of any Debenture resulting from a partial conversion under Section 6.4(i); or

(f)

for any exchange of any Debenture resulting from a partial purchase under Section 2.4(j).

 

3.8

Ownership of Debentures

(a)

Unless otherwise required by law, the person in whose name any registered Debenture is registered shall for all purposes of this Indenture be and be deemed to be the owner thereof and payment of or on account of the principal of and premium, if any, on such Debenture and interest thereon shall be made to such registered holder.

(b)

The registered holder for the time being of any registered Debenture shall be entitled to the principal, premium, if any, and/or interest evidenced by such instruments, respectively, free from all equities or rights of set-off or counterclaim between the Corporation and the original or any intermediate holder thereof and all persons may act accordingly and the receipt of any such registered holder for any such principal, premium or interest shall be a good discharge to the Trustee, any registrar and to the Corporation for the same and none shall be bound to inquire into the title of any such registered holder.

(c)

Where Debentures are registered in more than one name, the principal, premium, if any, and interest from time to time payable in respect thereof may be paid to the order of all such holders, failing written instructions from them to the contrary, and the receipt of any one of such holders therefor shall be a valid discharge, to the Trustee, any registrar and to the Corporation.

(d)

In the case of the death of one or more joint holders of any Debenture the principal, premium, if any, and interest from time to time payable thereon may be paid to the order of the survivor or survivors of such registered holders and the receipt of any such survivor or survivors therefor shall be a valid discharge to the Trustee and any registrar and to the Corporation.

Article 4
REDEMPTION AND PURCHASE OF DEBENTURES
AND CERTAIN PAYMENTS ON MATURITY

4.1

Applicability of Article

Subject to regulatory approval, Sections 2.4(d), 7.11, Article 5, and the provisions relating to any particular series of Debentures, the Corporation shall have the right at its option to redeem, either in whole at any time or in part from time to time before maturity, either by payment of money, by issuance of Freely Tradeable Common Shares as provided in Section 4.6 or any combination thereof, any Debentures issued hereunder of any series which by their terms are made so redeemable (subject, however, to any applicable restriction on the redemption of Debentures of such series) at such rate or rates of premium, if any, and on such date or dates and in accordance with such other provisions as shall have been determined at the time of issue of such Debentures and as shall have been expressed in this Indenture, in the Debentures, in an Officers' Certificate, or in a supplemental indenture authorizing or providing for the issue thereof, or in the case of Additional Debentures issued pursuant to a Periodic Offering, in the Written Direction of the Corporation requesting the Authentication and delivery thereof.

Subject to regulatory approval and Article 5, the Corporation shall also have the right at its option to repay, either in whole or in part, on redemption or at maturity, either by payment of money in accordance with Section 2.13, by issuance of Freely Tradeable Common Shares as provided in Sections 4.6 and 4.10 or any combination thereof, the principal amount of any Debentures issued hereunder of any series which by their terms are made so repayable on maturity (subject however, to any applicable restriction on the repayment of the principal amount of the Debentures of such series) at such rate or rates of premium, if any, and on such date or dates and in accordance with such other provisions as shall have been determined at the time of issue of such Debenture and shall have been expressed in this Indenture, in the Debentures, in an Officers' Certificate, or in a supplemental indenture authorizing or providing for the issue thereof, or in the case of Additional Debentures issued pursuant to a Periodic Offering, in the Written Direction of the Corporation requesting the Authentication and delivery thereof.

4.2

Partial Redemption

If less than all the Debentures of any series for the time being outstanding are at any time to be redeemed, or if a portion of the Debentures being redeemed are being redeemed for cash and a portion of such Debentures are being redeemed by the payment of Freely Tradeable Common Shares pursuant to Section 4.6, the

Debentures to be so redeemed shall be selected by the Trustee on a pro rata basis to the nearest multiple of $1,000 in accordance with the principal amount of the Debentures registered in the name of each holder or in such other manner as the Trustee deems equitable, subject to the approval of the TSX (or such other exchange on which the Debentures are then listed), as may be required from time to time. Unless otherwise specifically provided in the terms of any series of Debentures, no Debenture shall be redeemed in part unless the principal amount redeemed is $1,000 or a multiple thereof. For this purpose, the Trustee may make, and from time to time vary, regulations with respect to the manner in which such Debentures may be drawn for redemption and regulations so made shall be valid and binding upon all holders of such Debentures notwithstanding that as a result thereof one or more of such Debentures may become subject to redemption in part only or for cash only. In the event that one or more of such Debentures becomes subject to redemption in part only, upon surrender of any such Debentures for payment of the Redemption Price, together with interest accrued to but excluding the Redemption Date, the Corporation shall execute and the Trustee shall Authenticate and deliver without charge to the holder thereof or upon the holder's order one or more new Debentures for the unredeemed part of the principal amount of the Debenture or Debentures so surrendered or, with respect to an Uncertificated Debenture, registration and surrender of interests in the Debentures will be made only through the Depository's non-certificated system. Unless the context otherwise requires, the terms "Debenture" or "Debentures" as used in this Article 4 shall be deemed to mean or include any part of the principal amount of any Debenture which in accordance with the foregoing provisions has become subject to redemption.

 

4.3

Notice of Redemption

Notice of redemption (the "Redemption Notice") of any series of Debentures shall be given to the holders of the Debentures so to be redeemed not more than 60 days nor less than 30 days prior to the date fixed for redemption (the "Redemption Date") in the manner provided in Section 14.2. Every such notice shall specify the aggregate principal amount of Debentures called for redemption, the Redemption Date, the Redemption Price and, if applicable, the portion to be redeemed for cash and the portion to be redeemed by issuing Freely Tradeable Common Shares and the places of payment and shall state that interest upon the principal amount of Debentures called for redemption shall cease to be payable from and after the Redemption Date. In addition, unless all the outstanding Debentures are to be redeemed, the Redemption Notice shall specify:

(a)

the distinguishing letters and numbers of the registered Debentures which are to be redeemed (or of such thereof as are registered in the name of such Debentureholder);

(b)

in the case of a published notice, the distinguishing letters and numbers of the Debentures which are to be redeemed or, if such Debentures are selected pro rata or other similar system, such particulars as may be sufficient to identify the Debentures so selected;

(c)

in the case of an Uncertificated Debenture, that the redemption will take place in such manner as may be agreed upon by the Depository, the Trustee and the Corporation; and

(d)

in all cases, the principal amounts of such Debentures or, if any such Debenture is to be redeemed in part only, the principal amount of such part.

In the event that all Debentures to be redeemed are registered Debentures, publication shall not be required.

4.4

Debentures Due on Redemption Dates

Notice having been given as aforesaid, all the Debentures so called for redemption shall thereupon be and become due and payable at the Redemption Price on the Redemption Date specified in such notice, in the same manner and with the same effect as if it were the date of maturity specified in such Debentures, anything therein or herein to the contrary notwithstanding, and from and after such Redemption Date, if the monies necessary to redeem, or the Common Shares to be issued to redeem, such Debentures shall have been deposited as provided in Section 4.5 and affidavits or other proof satisfactory to the Trustee as to the publication and/or mailing of such notices shall have been lodged with it, interest upon the Debentures shall cease. If any question shall arise as to whether any notice has been given as above provided and such deposit made, such question shall be decided by the Trustee whose decision shall be final and binding upon all parties in interest.

  

4.5

Deposit of Redemption Monies or Common Shares

Redemption of Debentures shall be provided for by the Corporation depositing with the Trustee or any paying agent to the order of the Trustee, on or before 11:00 a.m. (Calgary time) on the Business Day immediately prior to the Redemption Date specified in such notice, such sums of money, or such Common Shares, or both as the case may be, as may be sufficient to pay the Redemption Price of the Debentures so called for redemption, provided the Corporation may elect to satisfy this requirement by providing the Trustee with a certified cheque or wire transfer for such amounts required under this Section 4.5 post-dated to the Redemption Date or by providing the Trustee with such funds through electronic transfer of funds on the Business Day immediately prior to the Redemption Date. The Corporation shall also deposit with the Trustee a sum of money sufficient to pay any charges or expenses which may be incurred by the Trustee in connection with such redemption. Every such deposit shall be irrevocable. From the sums so deposited, or Common Shares so deposited, or both, the Trustee shall pay or cause to be paid, or issue or cause to be issued, to the holders of such Debentures so called for redemption, upon surrender of such Debentures, the principal, premium (if any) and interest (if any) to which they are respectively entitled on redemption.

4.6

Right to Repay Principal Portion of Redemption Price in Common Shares

(a)

Subject to the receipt of any required regulatory approvals, the provisions governing any series of Debentures and the other provisions of this Section 4.6, the Corporation may, at its option, in exchange for or in lieu of paying the principal portion of the Redemption Price in money, elect to satisfy its obligation to pay all or any portion of the principal portion of the Redemption Price by issuing and delivering to holders on the Redemption Date that number of Freely Tradeable Common Shares obtained by dividing the principal portion of Redemption Price (or applicable portion thereof to be satisfied by the issuance and delivery of Freely Tradeable Common Shares) by 95% of the then Current Market Price of the Common Shares (which will be calculated based on the 20 consecutive trading days ending five days before the Redemption Date) (the "Common Share Redemption Right").

(b)

The Corporation shall exercise the Common Share Redemption Right by so specifying in the Redemption Notice and shall also specify the aggregate principal amount of Debentures in respect of which it is exercising the Common Share Redemption Right in such notice; provided that if the Corporation elects to exercise the Common Share Redemption Right, the Redemption Notice shall be given to holders of the Debentures so to be redeemed not more than 60 days nor less than 40 days prior to the Redemption Date.

(c)

The Corporation's right to exercise the Common Share Redemption Right shall be conditional upon the following conditions being met on the Business Day preceding the Redemption Date:

(i)

the issuance of the Common Shares on the exercise of the Common Share Redemption Right shall be made in accordance with Applicable Securities Legislation and such Common Shares shall be issued as Freely Tradeable Common Shares;

(ii)

the Common Shares shall be listed on the TSX or such other recognized stock exchange and such additional Freely Tradeable Common Shares shall be listed on each stock exchange on which the Common Shares are then listed;

(iii)

the Corporation shall be a reporting issuer in good standing under Applicable Securities Legislation where the distribution of such Freely Tradeable Common Shares occurs;

(iv)

the Corporation shall be in compliance with Section 7.11;

(v)

no Event of Default shall have occurred and be continuing;

(vi)

the Trustee shall have received an Officers' Certificate stating that conditions (i), (ii), (iii), (iv) and (v) above have been satisfied and setting forth the number of Common Shares to be delivered for each $1,000 principal amount of Debentures and the Current Market Price of the Common Shares on the Redemption Date; and

 

 

(vii)

the Trustee shall have received an opinion of Counsel to the effect that such Common Shares have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Redemption Price, will be validly issued as fully paid and non-assessable, that conditions (i) and (ii) above have been satisfied and that, relying exclusively on lists of issuers in default maintained by the relevant securities authorities, condition (iii) above is satisfied, except that the opinion in respect of condition (iii) need not be expressed with respect to those provinces where such lists are not maintained.

If the foregoing conditions are not satisfied prior to the close of business on the Business Day preceding the Redemption Date, the Corporation shall pay the Redemption Price entirely in cash in accordance with Section 4.5 unless the Debentureholder waives the conditions which are not satisfied. The Corporation may not change the form of components or percentage of consideration to be paid for the Debentures except as described in the preceding sentence. When the Corporation determines the actual number of the Common Shares to be issued pursuant to the Corporation's exercise of its Common Share Redemption Right, it will issue a press release on a national newswire disclosing the Current Market Price and such actual number of Common Shares.

(d)

In the event that the Corporation duly exercises its Common Share Redemption Right, upon presentation and surrender of the Debentures for payment on the Redemption Date, at any place where a register is maintained pursuant to Article 3 or any other place specified in the Redemption Notice, the Corporation shall on or before 11:00 a.m. (Calgary time) on the Business Day immediately prior to the Redemption Date make the delivery to the Trustee for delivery to and on account of the holders, of certificates representing the Freely Tradeable Common Shares to which such holders are entitled.

(e)

No fractional Freely Tradeable Common Shares shall be delivered upon the exercise of the Common Share Redemption Right but, in lieu thereof, the Corporation shall pay to the Trustee for the account of the holders, at the time contemplated in Section 4.6(d), the cash equivalent thereof determined on the basis of the Current Market Price of the Common Shares on the Redemption Date (less any tax required to be deducted, if any).

(f)

A holder shall be treated as the shareholder of record of the Freely Tradeable Common Shares issued on due exercise by the Corporation of its Common Share Redemption Right effective immediately after the close of business on the Redemption Date, and shall be entitled to all substitutions therefor, all income earned thereon or accretions thereto and all dividends or distributions (including distributions and dividends in kind) thereon and arising thereafter, and in the event that the Trustee receives the same, it shall hold the same in trust for the benefit of such holder.

(g)

If the Corporation exercises its Common Share Redemption Right, the Corporation shall at all times reserve and keep available out of its authorized Common Shares (if the number thereof is or becomes limited), solely for the purpose of issue and delivery upon the exercise of the Corporation's Common Share Redemption Right as provided herein, and shall issue to Debentureholders to whom Freely Tradeable Common Shares will be issued pursuant to exercise of the Common Share Redemption Right, such number of Freely Tradeable Common Shares as shall be issuable in such event. All Freely Tradeable Common Shares which shall be so issuable shall be duly and validly issued as fully paid and non-assessable.

(h)

The Corporation shall comply with all Applicable Securities Legislation regulating the issue and delivery of Freely Tradeable Common Shares upon exercise of the Common Share Redemption Right and shall cause to be listed and posted for trading such Common Shares on each stock exchange on which the Common Shares are then listed.

(i)

The Corporation shall from time to time promptly pay, or make provision satisfactory to the Trustee for the payment of, all taxes and charges which may be imposed by the laws of Canada or any province thereof (except income tax, withholding tax or security transfer tax, if any) which shall be payable with respect to the issuance or delivery of Freely Tradeable Common Shares to holders upon exercise of the Common Share Redemption Right pursuant to the terms of the Debentures and of this Indenture.

 

 

(j)

If the Corporation elects to satisfy its obligation to pay all or any portion of the Redemption Price by issuing Freely Tradeable Common Shares in accordance with this Section 4.6 and if the Redemption Price (or any portion thereof) to which a holder is entitled is subject to withholding taxes and the amount of the cash payment of the Redemption Price, if any, is insufficient to satisfy such withholding taxes, the Trustee, on the Written Direction of the Corporation but for the account of the holder, shall sell, through the investment banks, brokers or dealers selected by the Corporation, out of the Freely Tradeable Common Shares issued by the Corporation for this purpose, such number of Freely Tradeable Common Shares that together with the cash payment of the Redemption Price, if any, is sufficient to yield net proceeds (after payment of all costs) to cover the amount of taxes required to be withheld, and shall remit same on behalf of the Corporation to the proper tax authorities within the period of time prescribed for this purpose under applicable laws. Any amount of net proceeds (after payment of all costs) in excess of the amount required to cover applicable tax required by applicable law to be withheld will be remitted to the Debentureholder.

(k)

Interest accrued and unpaid on the Debentures on the Redemption Date will be paid, less applicable withholding taxes, if any, to holders of Debentures, in cash, in the manner contemplated in Section 2.14 subject to the ability of the Corporation to issue Common Shares as provided for in Article 10.

4.7

Failure to Surrender Debentures Called for Redemption

In case the holder of any Debenture so called for redemption shall fail on or before the Redemption Date to so surrender such holder's Debenture, or shall not within such time accept payment of the redemption monies payable, or take delivery of Common Shares issuable in respect thereof, or give such receipt therefor, if any, as the Trustee may require, such redemption monies may be set aside in trust, or such Common Shares may be held in trust without interest, either in the deposit department of the Trustee or in a chartered bank, and such setting aside shall for all purposes be deemed a payment to the Debentureholder of the sum or Common Shares so set aside and, to that extent, the Debenture shall thereafter not be considered as outstanding hereunder and the Debentureholder shall have no other right except to receive payment out of the monies so paid and deposited, or take delivery of the Common Shares so deposited, or both, upon surrender and delivery of such holder's Debenture of the Redemption Price, as the case may be, of such Debenture. In the event that any money, or Common Shares, required to be deposited hereunder with the Trustee or any depository or paying agent on account of principal, premium, if any, or interest, if any, on Debentures issued hereunder shall remain so deposited for a period of three years less one day from the Redemption Date, then such monies or Common Shares, together with any accumulated interest thereon or any distribution paid thereon, shall at the end of such period be paid over or delivered over by the Trustee or such depository or paying agent to the Corporation on its demand, and thereupon the Trustee shall not be responsible to Debentureholders for any amounts owing to them and subject to applicable law, thereafter the holder of a Debenture in respect of which such money was so repaid to the Corporation shall have no rights in respect thereof except to obtain payment of the money or Common Shares due from the Corporation, subject to any limitation period provided by the laws of Alberta. Notwithstanding the foregoing, the Trustee will pay any remaining funds prior to the expiry of three years less one day after the Redemption Date to the Corporation upon receipt from the Corporation, of an unconditional letter of credit from a Canadian chartered bank in an amount equal to or in excess of the amount of the remaining funds. If the remaining funds are paid to the Corporation prior to the expiry of three years less one day after the Redemption Date, the Corporation shall reimburse the Trustee for any amounts required to be paid by the Trustee to a holder of a Debenture pursuant to the redemption after the date of such payment of the remaining funds to the Corporation but prior to three years less one day after the redemption.

4.8

Cancellation of Debentures Redeemed

Subject to the provisions of Sections 4.2 and 4.9 as to Debentures redeemed or purchased in part, all Debentures redeemed and paid under this Article 4 shall forthwith be delivered to the Trustee and cancelled and no Debentures shall be issued in substitution therefore.

4.9

Purchase of Debentures by the Corporation

Subject to Applicable Securities Legislation and unless otherwise specifically provided with respect to a particular series of Debentures, the Corporation may, if it is not at the time in default hereunder, at any time and from time to time, purchase Debentures in the market (which shall include purchases from or through an investment dealer or a firm holding membership on a recognized stock exchange) or by tender or by private contract, at any price. All Debentures so purchased will be delivered to the Trustee and shall be cancelled and no Debentures shall be issued in substitution therefor.

 

 

If, upon an invitation for tenders, more Debentures are tendered at the same lowest price that the Corporation is prepared to accept, the Debentures to be purchased by the Corporation shall be selected by the Trustee on a pro rata basis or in such other manner as consented to by the TSX (or such other exchange on which the Debentures are then listed which the Trustee considers appropriate), from the Debentures tendered by each tendering Debentureholder who tendered at such lowest price. For this purpose the Trustee may make, and from time to time amend, regulations with respect to the manner in which Debentures may be so selected, and regulations so made shall be valid and binding upon all Debentureholders, notwithstanding the fact that as a result thereof one or more of such Debentures become subject to purchase in part only. The holder of a Debenture Certificate of which a part only is purchased, upon surrender of such Debenture for payment, shall be entitled to receive, without expense to such holder, one or more new Debenture Certificates for the unpurchased part so surrendered, and the Trustee shall Authenticate and deliver such new Debenture Certificate(s) upon receipt of the Debenture so surrendered or, with respect to Uncertificated Debentures, the Depository shall electronically deposit the unpurchased part so surrendered.

4.10                                    Right to Repay Principal Amount in Common Shares

(a)

Subject to the receipt of any required regulatory approvals, the provisions governing any series of Debentures and the other provisions of this Section 4.10, the Corporation may, at its option, in exchange for or in lieu of repaying the principal amount of the Debentures in money, elect to satisfy its obligation to repay all or any portion of the principal amount of the Debentures outstanding by issuing and delivering to holders on the Maturity Date of such Debentures that number of Freely Tradeable Common Shares obtained by dividing the principal amount of the Debentures (or applicable portion thereof to be satisfied by the issuance and delivery of Freely Tradeable Common Shares) by 95% of the then Current Market Price of the Common Shares (which will be calculated based on the 20 consecutive trading days ending five trading days before the Maturity Date) (the "Common Share Repayment Right").

(b)

The Corporation shall exercise the Common Share Repayment Right by so specifying in the Maturity Notice, which shall be delivered to the Trustee and the holders of Debentures not more than 60 days and not less than 40 days prior to the Maturity Date, and which shall also specify the aggregate principal amount of Debentures in respect of which it is exercising the Common Share Repayment Right on the Maturity Date.

(c)

The Corporation's right to exercise the Common Share Repayment Right shall be conditional upon the following conditions being met on the Business Day preceding the Maturity Date:

(i)

the issuance of the Common Shares on the exercise of the Common Share Repayment Right shall be made in accordance with Applicable Securities Legislation and such Common Shares shall be issued as Freely Tradeable Common Shares;

(ii)

the Common Shares shall be listed on the TSX or such other recognized stock exchange and such additional Freely Tradeable Common Shares shall be listed on each stock exchange on which the Common Shares are then listed;

(iii)

the Corporation shall be a reporting issuer in good standing under Applicable Securities Legislation where the distribution of such Freely Tradeable Common Shares occurs;

(iv)

no Event of Default shall have occurred and be continuing;

(v)

the Corporation shall be in compliance with Section 7.11;

(vi)

the Trustee shall have received an Officers' Certificate stating that conditions (i), (ii), (iii), (iv) and (v) above have been satisfied and setting forth the number of Common Shares to be delivered for each $1,000 principal amount of Debentures and the Current Market Price of the Common Shares on the Maturity Date; and

 

(vii)

the Trustee shall have received an opinion of Counsel to the effect that such Common Shares have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the principal amount of the Debentures outstanding will be validly issued as fully paid and non-assessable, that conditions (i) and (ii) above have been satisfied and that, relying exclusively on lists of issuers in default maintained by the relevant securities authorities, condition (iii) above is satisfied, except that the opinion in respect of condition (iii) need not be expressed with respect to those provinces where such lists are not maintained.

If the foregoing conditions are not satisfied prior to the close of business on the Business Day preceding the Maturity Date, the Corporation shall pay the principal amount of the Debentures outstanding entirely in cash in accordance with Section 2.13, unless the Debentureholder waives the conditions which are not satisfied. The Corporation may not change the form of components or percentages of consideration to be paid for the Debentures once it has given the notice required to be given to Debentureholders hereunder, except as described in the preceding sentence. When the Corporation determines the actual number of Common Shares to be issued pursuant to the exercise of its Common Share Repayment Right, it will issue a press release on a national newswire disclosing the Current Market Price and such actual number of Common Shares.

(d)

In the event that the Corporation duly exercises its Common Share Repayment Right, upon presentation and surrender of the Debentures for payment on the Maturity Date, at any place where a register is maintained pursuant to Article 3 or any other place specified in the Maturity Notice, the Corporation shall on or before 11:00 a.m. (Calgary time) on the Business Day immediately prior to the Maturity Date make the delivery to the Trustee for delivery to and on account of the holders, of the Freely Tradeable Common Shares to which such holders are entitled. The Corporation shall also deposit with the Trustee a sum of money sufficient to pay all accrued and unpaid interest on the Debentures and any charges or expenses which may be incurred by the Trustee in connection with the Common Share Repayment Right. Every such deposit shall be irrevocable. From the Common Shares so deposited in addition to amounts payable by the Trustee pursuant to Section 2.13, the Trustee shall pay or cause to be paid, to the holders of such Debentures, upon surrender of such Debentures, the principal amount of and premium (if any) on the Debentures to which they are respectively entitled on maturity and deliver to such holders the Common Shares to which such holders are entitled. The delivery of such shares to the Trustee will satisfy and discharge the liability of the Corporation for the Debentures to which the delivery of shares relates to the extent of the amount delivered (plus the amount of any shares sold to pay applicable taxes in accordance with this Section 4.10) and such Debentures will thereafter to that extent not be considered as outstanding under this Indenture and such holder will have no other right in regard thereto other than to receive out of the shares so delivered, the share(s) to which it is entitled.

(e)

No fractional Freely Tradeable Common Shares shall be delivered upon the exercise of the Common Share Repayment Right but, in lieu thereof, the Corporation shall pay to the Trustee for the account of the holders, at the time contemplated in Section 4.10(d), the cash equivalent thereof determined on the basis of the Current Market Price of the Common Shares on the Maturity Date (less any tax required to be deducted, if any).

(f)

A holder shall be treated as the shareholder of record of the Freely Tradeable Common Shares issued on due exercise by the Corporation of its Common Share Repayment Right effective immediately after the close of business on the Maturity Date, and shall be entitled to all substitutions therefor, all income earned thereon or accretions thereto and all dividends or distributions (including distributions and dividends in kind) thereon and arising thereafter, and in the event that the Trustee receives the same, it shall hold the same in trust for the benefit of such holder.

(g)

If the Corporation exercises the Common Share Repayment Right, the Corporation shall at all times reserve and keep available out of its authorized Common Shares (if the number thereof is or becomes limited), solely for the purpose of issue and delivery upon the exercise of the Corporation's Common Share Repayment Right as provided herein, and shall issue to Debentureholders to whom Freely Tradeable Common Shares will be issued pursuant to exercise of the Common Share Repayment Right, such number of Freely Tradeable Common Shares as shall be issuable in such event. All Freely Tradeable Common Shares which shall be so issuable shall be duly and validly issued as fully paid and non-assessable.

 

 

(h)

The Corporation shall comply with all Applicable Securities Legislation regulating the issue and delivery of Freely Tradeable Common Shares upon exercise of the Common Share Repayment Right and shall cause to be listed and posted for trading such Freely Tradeable Common Shares on each stock exchange on which the Common Shares are then listed.

(i)

The Corporation shall from time to time promptly pay, or make provision satisfactory to the Trustee for the payment of, all taxes and charges which may be imposed by the laws of Canada or any province thereof (except income tax, withholding tax or security transfer tax, if any) which shall be payable with respect to the issuance or delivery of Freely Tradeable Common Shares to holders upon exercise of the Common Share Repayment Right pursuant to the terms of the Debentures and of this Indenture.

(j)

If the Corporation elects to satisfy its obligation to pay all or any portion of the principal amount of Debentures due on maturity by issuing Freely Tradeable Common Shares in accordance with this Section 4.10 and if the amount (or any portion thereof) to which a holder is entitled is subject to withholding taxes and the amount of the cash payment of the amount due on maturity, if any, is insufficient to satisfy such withholding taxes, the Trustee, on the Written Direction of the Corporation but for the account of the holder, shall sell, through the investment banks, brokers or dealers selected by the Corporation, out of the Freely Tradeable Common Shares issued by the Corporation for this purpose, such number of Freely Tradeable Common Shares that together with the cash component of the amount due on maturity is sufficient to yield net proceeds (after payment of all costs) to cover the amount of taxes required to be withheld, and shall remit same on behalf of the Corporation to the proper tax authorities within the period of time prescribed for this purpose under applicable laws. Any amount of net proceeds (after payment of all costs) in excess of the amount required to cover applicable tax required by applicable law to be withheld will be remitted to the Debentureholder.

(k)

Interest accrued and unpaid on the Debentures on the applicable Maturity Date will be paid, less applicable withholding taxes, if any, to holders of Debentures, in cash, in the manner contemplated in Section 2.14 subject to the ability of the Corporation to issue Common Shares as provided in Article 10.

Article 5
SUBORDINATION OF DEBENTURES

5.1

Applicability of Article

The indebtedness, liabilities and obligations of the Corporation hereunder (except as provided in Section 15.15) and under the Debentures, whether on account of principal, premium, if any, interest or otherwise (but excluding the issuance of Common Shares upon any conversion pursuant to Article 6, upon any redemption pursuant to Article 4 and at maturity pursuant to Article 4 and also excluding payment of the Escrowed Funds and other amounts to holders of the Initial Debentures on the Initial Maturity Date in accordance with Sections 2.4(l)(v) and 2.4(l)(vi)) (collectively, the "Debenture Liabilities"), shall be subordinated and postponed and subject in right of payment, to the extent and in the manner hereinafter set forth in the following Sections of this Article 5 and in Section 2.4(e), to the prior full and final payment of all Senior Indebtedness, and each holder of any such Debenture by his acceptance thereof, whether directly or on the holder's behalf, agrees to and shall be bound by the provisions of this Article 5.

5.2

Order of Payment

In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings relative to the Corporation, or to its property or assets, or in the event of any proceedings for voluntary liquidation, dissolution or voluntary winding-up of the Corporation, whether or not involving insolvency or bankruptcy, or any marshalling of the assets and liabilities of the Corporation or otherwise:

(a)

all Senior Indebtedness shall first be paid in full, or provision made for such payment, in cash before any payment is made on account of Debenture Liabilities;

 

 

(b)

any payment or distribution of assets of the Corporation, whether in cash, property or securities, to which the holders of the Debentures or the Trustee on behalf of such holders would be entitled except for the provisions of this Article 5, shall be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors, or other liquidating agent making such payment or distribution, directly to the Senior Creditors, to the extent necessary to pay all Senior Indebtedness in full after giving effect to any concurrent payment or distribution, or provision therefor, to the Senior Creditors; and

(c)

the Senior Creditors or a receiver or a receiver-manager of the Corporation or of all or part of its assets or any other enforcement agent may sell, mortgage, or otherwise dispose of the Corporation's assets in whole or in part, free and clear of all Debenture Liabilities and without the approval of the Debentureholders or the Trustee or any requirement to account to the Trustee or the Debentureholders.

The rights and priority of the Senior Indebtedness and the subordination pursuant hereto shall not be affected by:

(i)

whether or not the Senior Indebtedness is secured;

(ii)

the time, sequence or order of creating, granting, executing, delivering of, or registering, perfecting or failing to register or perfect any security notice, caveat, financing statement or other notice in respect of the Senior Security;

(iii)

the time or order of the attachment, perfection or crystallization of any security constituted by the Senior Security;

(iv)

the taking of any collection, enforcement or realization proceedings pursuant to the Senior Security;

(v)

the date of obtaining of any judgment or order of any bankruptcy court or any court administering bankruptcy, insolvency or similar proceedings as to the entitlement of the Senior Creditors, or any of them or the Debentureholders or any of them to any money or property of the Corporation;

(vi)

the failure to exercise any power or remedy reserved to the Senior Creditors under the Senior Security or to insist upon a strict compliance with any terms thereof;

(vii)

whether any Senior Security is now perfected, hereafter ceases to be perfected, is avoidable by any trustee in bankruptcy or like official or is otherwise set aside, invalidated or lapses;

(viii)

the date of giving or failing to give notice to or making demand upon the Corporation;

(ix)

any amendment, modification, increase, extension, renewal, replacement of any Senior Indebtedness or Senior Security; or

(x)

any other matter whatsoever.

5.3

Subrogation to Rights of Senior Creditors

Subject to the prior payment in full of all Senior Indebtedness, the holders of the Debentures shall be subrogated to the rights of the Senior Creditors to receive payments or distributions of assets of the Corporation to the extent of the application thereto of such payments or other assets which would have been received by the holders of the Debentures but for the provisions hereof until the principal of, premium, if any, and interest on the Debentures shall be paid in full, and no such payments or distributions to the holders of the Debentures of cash, property or securities, which otherwise would be payable or distributable to the Senior Creditors, shall, as between the Corporation, its creditors other than the Senior Creditors, and the holders of Debentures, be deemed to be a payment by the Corporation to the Senior Creditors or on account of the Senior Indebtedness, it being understood that the provisions of this Article 5 are and are intended solely for the purpose of defining the relative rights of the holders of the Debentures, on the one hand, and the Senior Creditors, on the other hand.

 

The Trustee, for itself and on behalf of each of the Debentureholders, hereby waives any and all rights to require a Senior Creditor to pursue or exhaust any rights or remedies with respect to the Corporation or any property and assets subject to any Senior Security or in any other manner to require the marshalling or other orderly disposition of property, assets or security in connection with the exercise by the Senior Creditors of any rights, remedies or recourses available to them.

5.4

Obligation to Pay Not Impaired

Nothing contained in this Article 5 or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Corporation, its creditors other than the Senior Creditors, and the holders of the Debentures, the obligation of the Corporation, which is absolute and unconditional, to pay to the holders of the Debentures the principal of, premium, if any, and interest on the Debentures, as and when the same shall become due and payable in accordance with their terms, or affect the relative rights of the holders of the Debentures and creditors of the Corporation other than the Senior Creditors, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 5 of the Senior Creditors.

5.5

No Payment if Senior Indebtedness in Default

Upon the maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, or any other enforcement of any Senior Indebtedness, then all such Senior Indebtedness shall first be paid in full, or shall first have been duly provided for, before any payment is made on account of the Debenture Liabilities.

In case of a circumstance constituting a default or event of default with respect to any Senior Indebtedness permitting (whether at that time or upon notice, lapse of time, or satisfaction of any other condition precedent) a Senior Creditor to demand payment or accelerate the maturity thereof where the notice of such default or event of default has been given by or on behalf of the Senior Creditors to the Corporation or the Corporation otherwise has knowledge thereof, unless and until such default or event of default shall have been cured or waived or shall have ceased to exist, no payment (by purchase of Debentures or otherwise) shall be made by the Corporation with respect to the Debenture Liabilities and neither the Trustee nor the holders of Debentures shall be entitled to demand, accelerate, institute proceedings for the collection of (which shall, for certainty include, without limitation, proceedings related to an adjudication or declaration as to the insolvency or bankruptcy of the Corporation and other similar creditor proceedings), or receive any payment or benefit (including without limitation by set-off, combination of accounts or otherwise in any manner whatsoever) on account of the Debentures after the happening of such a default or event of default (except as provided in Section 5.8), and unless and until such default or event of default shall have been cured or waived or shall have ceased to exist, such payments shall be held in trust for the benefit of, and, if and when such Senior Indebtedness shall have become due and payable, shall be paid over to the Senior Creditors until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution to the Senior Creditors; provided, however, that, subject to the priorities and rights of the Senior Creditors under this Article 5, the foregoing shall in no way prohibit, restrict or prevent the Trustee from taking such actions as may be necessary to preserve claims of the Trustee and/or the holders of the Debentures under this Indenture in any bankruptcy, reorganization or insolvency proceeding (including, without limitation, the filing of proofs of claim in any such bankruptcy, reorganization or insolvency proceedings by or against the Corporation or its Subsidiaries and exercising its rights to vote as an unsecured creditor under any such bankruptcy, reorganization or insolvency proceedings commenced by or against the Corporation or its Subsidiaries).

The fact that any payment hereunder is prohibited by this Section 5.5 shall not prevent the failure to make such payment from being an Event of Default hereunder.

5.6

Payment on Debentures Permitted

Nothing contained in this Article 5 or elsewhere in this Indenture, or in any of the Debentures, shall affect the obligation of the Corporation to make, or prevent the Corporation from making, at any time except as prohibited by Section 5.2 or 5.5, any payment of principal of or, premium, if any, or interest on the Debentures as the same may become due. The fact that any such payment is prohibited by Section 5.2 or 5.5 shall not prevent the failure to make such payment from being an Event of Default hereunder. Nothing contained in this Article 5 or elsewhere in this Indenture, or in any of the Debentures, shall prevent the conversion of the Debentures or, except as prohibited by Sections 5.2 and 5.5, the application by the Trustee of any monies deposited with the Trustee hereunder for such purpose, to the payment of or on account of the Debenture Liabilities.

 

 

5.7

Confirmation of Subordination

Each holder of Debentures by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effect the subordination as provided in this Article 5 and appoints the Trustee his attorney-in-fact for any and all such purposes. Upon request of the Corporation, and upon being furnished an Officers' Certificate stating that one or more named Persons are Senior Creditors and specifying the amount and nature of the Senior Indebtedness of such Senior Creditor, the Trustee shall enter into a written agreement or agreements with the Corporation and the Person or Persons named in such Officers' Certificate providing that such Person or Persons are entitled to all the rights and benefits of this Article 5 as a Senior Creditor and for such other matters, as the Senior Creditor may reasonably request, including, without limitation, those items set out in Section 5.17. Such agreement shall be conclusive evidence that the indebtedness specified therein is Senior Indebtedness, however, nothing herein shall impair the rights of any Senior Creditor who has not entered into such an agreement.

5.8

Knowledge of Trustee

Notwithstanding the provisions of this Article 5 or any provision in this Indenture or in the Debentures contained, the Trustee will not be charged with knowledge of any default in the payment of any Senior Indebtedness, or of the existence of any Event of Default or any other fact that would prohibit the making of any payment of monies to or by the Trustee, or the taking of any other action by the Trustee, unless and until the Trustee has received written notice thereof from the Corporation, any Debentureholder or any Senior Creditor. The Trustee will notify holders of Debentures of such notice as soon as reasonably practicable after receipt thereof.

5.9

Trustee May Hold Senior Indebtedness

The Trustee is entitled to all the rights set forth in this Article 5 with respect to any Senior Indebtedness at the time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture deprives the Trustee of any of its rights as such holder.

5.10

Rights of Senior Creditors Not Impaired

No right of any present or future Senior Creditor to enforce the subordination herein will at any time or in any way be prejudiced or impaired by any act or failure to act on the part of the Corporation or by any non-compliance by the Corporation with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such Senior Creditor may have or be otherwise charged with.

5.11

Altering the Senior Indebtedness

The Senior Creditors have the right to extend, renew, revise, restate, modify or amend the terms of the Senior Indebtedness (including, without limitation, increasing the principal amount of the Senior Indebtedness) or any Senior Security and to release, sell or exchange such security and otherwise to deal freely with the Corporation and its Subsidiaries, all without notice to or consent of the Debentureholders or the Trustee and without affecting the liabilities and obligations of the parties to this Indenture or the Debentureholders.

5.12

Additional Indebtedness

This Indenture does not restrict the Corporation or any Subsidiary of the Corporation from incurring additional indebtedness for borrowed money or other obligations or liabilities (including, without limitation, Senior Indebtedness) or mortgaging, pledging or charging its properties to secure any indebtedness or obligations or liabilities.

5.13

Right of Debentureholder to Convert Not Impaired

The subordination of the Debenture Liabilities to the Senior Indebtedness and the provisions of this Article 5 do not impair in any way the right of a Debentureholder to convert its Debentures pursuant to Article 6.

 

 

5.14

Invalidated Payments

In the event that any of the Senior Indebtedness shall be paid in full and subsequently, for whatever reason, such formerly paid or satisfied Senior Indebtedness becomes unpaid or unsatisfied, the terms and conditions of this Article 5 shall be reinstated and the provisions of this Article shall again be operative until all Senior Indebtedness is repaid in full, provided that such reinstatement shall not give the Senior Creditors any rights or recourses against the Trustee or the Debentureholders for amounts paid to the Debentureholders subsequent to such payment or satisfaction in full and prior to such reinstatement.

5.15

Contesting Security

The Trustee, for itself and on behalf of the Debentureholders, agrees that it shall not contest or bring into question the validity, perfection or enforceability of any of the Senior Indebtedness, the Senior Security, or the relative priority of the Senior Security.

5.16

Obligations Created by Article 5

The Corporation and the Trustee, in its capacity as trustee hereunder and not in its corporate or personal capacity, agree, and each holder by its acceptance of a Debenture, whether directly or on the holder's behalf, likewise agrees, that:

(a)

the provisions of this Article 5 are an inducement and consideration to each Senior Creditor to give or continue credit to the Corporation, the Corporation's Subsidiaries or others or to acquire Senior Indebtedness; and

(b)

each Senior Creditor may accept the benefit of this Article 5 on the terms and conditions set forth in this Article 5 by giving or continuing credit to the Corporation, the Corporation's Subsidiaries or others or by having outstanding or acquiring Senior Indebtedness, in each case without notice to the Trustee and without establishing actual reliance on this Article 5.

5.17

Amendment to Indenture

Each of the Corporation and the Trustee (relying on the opinion of Counsel) agrees, and each holder of a Debenture, by his acceptance thereof, whether directly or on the holder's behalf, likewise agrees, not to make any changes to this Indenture or the Debentures which prejudice the rights of the Senior Creditors under this Article 5, and without limiting the generality of the foregoing, not amend, terminate or otherwise alter: (i) any of the provisions of this Article 5 nor any of the defined terms used therein; (ii) provisions to reduce the maturity date of the Debentures; (iii) provisions to increase the interest rate or change the interest payment dates of the Debentures; or (iv) the provisions that would result in an earlier date for any scheduled or mandatory payment, redemption or repurchase of principal under the Initial Debentures or create any new scheduled or mandatory payment, redemption or repurchase of principal under the Initial Debentures.

5.18

Payment on Initial Maturity Date

Notwithstanding anything to the contrary in this Article 5 or in any other provision of this Debenture including Section 2.4(e), until the Escrow Release Condition has been satisfied, this Article 5 shall not apply to the Escrowed Funds or otherwise restrict payment to the holders of the Initial Debentures on the Initial Maturity Date in accordance with Sections 2.4(l)(v) and 2.4(l)(vi) of the principal amount of the Debentures at par together with all accrued and unpaid interest thereon up to, but excluding, the Initial Maturity Date.

Article 6
CONVERSION OF DEBENTURES

6.1

Applicability of Article

 

 

Any Debentures issued hereunder of any series which by their terms are convertible (subject, however, to any applicable restriction of the conversion of Debentures of such series) will be convertible into Common Shares or other securities of the Corporation, at such conversion rate or rates, and on such date or dates and in accordance with such other provisions as shall have been determined at the time of issue of such Debentures and shall have been expressed in this Indenture (including Sections 2.4(f), 2.4(k) and 3.6 hereof), in such Debentures, in an Officers' Certificate, or in a supplemental indenture authorizing or providing for the issue thereof.

Such right of conversion shall extend only to the maximum number of whole Common Shares into which the aggregate principal amount of the Debenture or Debentures surrendered for conversion at any one time by the holder thereof may be converted. Fractional interests in Common Shares shall be adjusted for in the manner provided in Section 6.6.

6.2

Notice of Expiry of Conversion Privilege

Notice of the expiry of the conversion privileges of the Debentures shall be given by or on behalf of the Corporation, not more than 60 days and not less than 40 days prior to the date fixed for the Time of Expiry, in the manner provided in Section 14.2.

6.3

Revival of Right to Convert

If the redemption of any Debenture called for redemption by the Corporation is not made or the payment of the purchase price of any Debenture which has been tendered in acceptance of an offer by the Corporation to purchase Debentures for cancellation is not made, in the case of a redemption upon due surrender of such Debenture or in the case of a purchase on the date on which such purchase is required to be made, as the case may be, then, provided the Time of Expiry has not passed, the right to convert such Debentures shall revive and continue as if such Debenture had not been called for redemption or tendered in acceptance of the Corporation's offer, respectively.

6.4

Manner of Exercise of Right to Convert

(a)

The holder of a Debenture desiring to convert such Debenture in whole or in part into Common Shares shall surrender such Debenture to the Trustee at either of its principal offices in the City of Calgary, Alberta or the City of Toronto, Ontario together with the conversion notice attached hereto as Schedule "D" or any other written notice in a form satisfactory to the Trustee, in either case duly executed by the holder or his executors or administrators or other legal representatives or his or their attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the Trustee, exercising his right to convert such Debenture in accordance with the provisions of this Article; provided that with respect to an Uncertificated Debenture, registration and surrender of interests in the Debentures will be made only through the Depositary's non-certificated system. Thereupon such Debentureholder or, subject to payment of all applicable stamp or security transfer taxes or other governmental charges and compliance with all reasonable requirements of the Trustee, his nominee(s) or assignee(s) shall be entitled to be entered in the books of the Corporation as at the Date of Conversion (or such later date as is specified in Section 6.4(g)) as the holder of the number of Common Shares into which such Debenture is convertible in accordance with the provisions of this Article and, as soon as practicable thereafter, the Corporation shall deliver to such Debentureholder or, subject as aforesaid, his nominee(s) or assignee(s), a certificate or certificates for such Common Shares or deposit such Common Shares through the Depository's non-certificated system and make or cause to be made any payment of interest to which such holder is entitled in accordance with Section 6.4(j) hereof.

(b)

A Beneficial Owner may exercise the right evidenced by a Debenture to receive Common Shares by causing a Participant to deliver to the Depository on behalf of the Beneficial Owner, a notice of such Beneficial Owner's intention to convert the Debentures in a manner acceptable to the Depository. Forthwith upon receipt by the Depository of such notice, the Depository shall deliver to the Trustee a Transaction Instruction confirming its intention to convert Debentures in a manner acceptable to the Trustee, including by electronic means through the non-certificated inventory system.

(c)

A notice in form acceptable to the Participant from such Beneficial Owner should be provided to the Participant sufficiently in advance so as to permit the Participant to deliver notice to the Depository and for the Depository in turn to deliver notice to the Trustee prior to the Time of Expiry. The Depository will initiate the exercise by way of the Transaction Instruction and the Trustee will execute the exercise by issuing to the Depository through the non-certificated inventory system the Common Shares to which the exercising Debentureholder is entitled pursuant to the conversion.

 

 

(d)

By causing a Participant to deliver notice to the Depository, a Debentureholder shall be deemed to have irrevocably surrendered his or her Debentures so exercised and appointed such Participant to act as his or her exclusive settlement agent with respect to the conversion and the receipt of Common Shares in connection with the obligations arising from such conversion.

(e)

Any notice which the Depository determines to be incomplete, not in proper form, or not duly-executed shall for all purposes be void and of no effect and the exercise to which it relates shall be considered for all purposes not to have been exercised thereby. A failure by a Participant to exercise or to give effect to the settlement thereof in accordance with the Debentureholder's instructions will not give rise to any obligations or liability on the part of the Corporation or Trustee to the Participant or the Debentureholder.

(f)

Any Transaction Instruction referred to in this Section 6.4 shall be signed by the registered Debentureholder, or its executors or administrators or other legal representatives or an attorney of the registered Debentureholder, duly appointed by an instrument in writing satisfactory to the Trustee but such exercise form need not be executed by the Depository.

(g)

For the purposes of this Article, a Debenture shall be deemed to be surrendered for conversion on the date on which it is so surrendered when the register of the Trustee is open and in accordance with the provisions of this Article or, in the case of Uncertificated Debentures which the Trustee received notice of and all necessary documentation in respect of the exercise of the conversion rights and, in the case of a Debenture so surrendered by post or other means of transmission, on the date on which it is received by the Trustee at one of its offices specified in Section 6.4(a); provided that if a Debenture is surrendered for conversion on a day on which the register of Common Shares is closed, the person or persons entitled to receive Common Shares shall become the holder or holders of record of such Common Shares as at the date on which such registers are next reopened (in each case, called the "Date of Conversion").

(h)

Any part, being $1,000 or an integral multiple thereof, of a Debenture in a denomination in excess of $1,000 may be converted as provided in this Article and all references in this Indenture to conversion of Debentures shall be deemed to include conversion of such parts.

(i)

The holder of any Debenture of which only a part is converted shall, upon the exercise of his right of conversion surrender such Debenture to the Trustee in accordance with Section 6.4(a), and the Trustee shall cancel the same and shall without charge forthwith Authenticate and deliver to the holder a new Debenture or Debentures in an aggregate principal amount equal to the unconverted part of the principal amount of the Debenture so surrendered or, with respect to a Uncertificated Debenture, registration and surrender of interests in the Debentures will be made only through the Depositary's non-certificated system.

(j)

The holder of a Debenture surrendered for conversion in accordance with this Section 6.4 shall be entitled (subject to any applicable restriction on the right to receive interest on conversion of Debentures of any series) to receive accrued and unpaid interest in respect thereof, in cash, up to but excluding the Date of Conversion and the Common Shares issued upon such conversion shall rank only in respect of distributions or dividends declared in favour of shareholders of record on and after the Date of Conversion or such later date as such holder shall become the holder of record of such Common Shares pursuant to Section 6.4(g), from which applicable date they will for all purposes be and be deemed to be issued and outstanding as fully paid and non-assessable Common Shares.

6.5

Adjustment of Conversion Price

Subject to the requirements of the TSX (or such other recognized exchange on which the Debentures are then listed), the Conversion Price in effect at any date shall be subject to adjustment from time to time as set forth below.

 

 

(a)

If and whenever at any time prior to the Time of Expiry the Corporation shall: (i) subdivide or redivide the outstanding Common Shares into a greater number of shares; (ii) reduce, combine or consolidate the outstanding Common Shares into a smaller number of shares; or (iii) issue Common Shares to the holders of all or substantially all of the outstanding Common Shares by way of a dividend or distribution (other than the issue of Common Shares to holders of Common Shares who have elected to receive dividends or distributions in the form of Common Shares in lieu of cash dividends or cash distributions paid in the ordinary course on the Common Shares), the Conversion Price in effect on the effective date of such subdivision, redivision, reduction, combination or consolidation or on the record date for such issue of Common Shares by way of a dividend or distribution, as the case may be, shall in the case of any of the events referred to in (i) and (iii) above be decreased in proportion to the number of outstanding Common Shares resulting from such subdivision, redivision, dividend or distribution, or shall, in the case of any of the events referred to in (ii) above, be increased in proportion to the number of outstanding Common Shares resulting from such reduction, combination or consolidation. Such adjustment shall be made successively whenever any event referred to in this Section 6.5(a) shall occur. Any such issue of Common Shares by way of a dividend or distribution shall be deemed to have been made on the record date for the dividend or distribution for the purpose of calculating the number of outstanding Common Shares under subsections (b) and (c) of this Section 6.5.

(b)

If and whenever at any time prior to the Time of Expiry the Corporation shall fix a record date for the issuance of options, rights or warrants to all or substantially all the holders of its outstanding Common Shares (other than for the issue of Common Shares to holders of Common Shares who have elected to receive dividends or distributions in the form of Common Shares in lieu of cash dividends or cash distributions paid in the ordinary course on the Common Shares) entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible into Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price of a Share on such record date (other than pursuant to a distribution reinvestment plan of the Corporation), the Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the quotient obtained by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible securities so offered) by such Current Market Price per Share, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such options, rights or warrants are not so issued or any such options, rights or warrants are not exercised prior to the expiration thereof, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect if only the number of Common Shares (or securities convertible into Common Shares) actually issued upon the exercise of such options, rights or warrants were included in such fraction, as the case may be.

(c)

If and whenever at any time prior to the Time of Expiry the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of: (i) shares of any class other than Common Shares and other than shares distributed to holders of Common Shares who have elected to receive dividends or distributions in the form of such shares in lieu of dividends or distributions paid in the ordinary course; (ii) rights, options or warrants (excluding rights, options or warrants for which any adjustment was made pursuant to Section 6.5(b) and rights, options or warrants entitling the holders thereof for a period of not more than 45 days to subscribe for or purchase Common Shares or securities convertible into Common Shares); (iii) evidences of its indebtedness; or (iv) assets (excluding dividends or distributions paid in the ordinary course) then, in each such case, the Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price per Share on such record date, less the fair market value (as determined by the Directors, subject to TSX approval and with the approval of the Trustee, which determination shall be conclusive) of such shares or rights, options or warrants or evidences of indebtedness or assets so distributed, and of which the denominator shall be the total

number of Common Shares outstanding on such record date multiplied by such Current Market Price per Share. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that such distribution is not so made, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect based upon such shares or rights, options or warrants or evidences of indebtedness or assets actually distributed, as the case may be. In clause (iv) of this subsection (c) the term "dividends or distributions paid in the ordinary course" shall include the value of any securities or other property or assets distributed in lieu of cash dividends or distributions paid in the ordinary course at the option of shareholders. Notwithstanding the foregoing, if the securities distributed by the Corporation to all holders of its Common Shares consist of capital stock of, or similar equity interests in, a Subsidiary or other business of the Corporation (the "Spinoff Securities"), the Conversion Price shall be adjusted, unless the Corporation makes an equivalent distribution to the holders of Debentures, so that the same shall be equal to the rate determined by multiplying the Conversion Price in effect on the record date fixed for the determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the sum of (A) the weighted average trading price of one Common Share over the 20 consecutive trading day period (the "Spinoff Valuation Period") commencing on and including the fifth trading day after the Ex-Dividend Date and (B) the product of (i) the weighted average trading price (calculated in substantially the same way as the Current Market Price is calculated for the Common Shares) over the Spinoff Valuation Period of one Spinoff Security or, if no such prices are available, the fair market value of one Spinoff Security as reasonably determined by the Board of Directors, subject to TSX approval (which determination shall be conclusive and shall be evidenced by an Officers' Certificate delivered to the Trustee) multiplied by (ii) the number of Spinoff Securities distributed in respect of one Common Share and the numerator of which shall be the weighted average trading price of one Common Share over the Spinoff Valuation Period, such adjustment to become effective immediately preceding the opening of business on the 25th trading day after the date on which ex-dividend trading commences; provided, however, that the Corporation may in lieu of the foregoing adjustment elect to make adequate provision so that each holder of Debentures shall have the right to receive upon conversion thereof the amount of such Spinoff Securities that such holder of Debentures would have received if such Debentures had been converted on the record date with respect to such distribution. In respect of any conversion during the Spinoff Valuation Period, references to consecutive trading days shall be deemed to be replaced with such lesser number of trading days as have elapsed between the Commencement of the Spinoff Valuation Period and the relevant conversion date.

(d)

If and whenever at any time prior to the Time of Expiry, there is a reclassification of the Common Shares or a capital reorganization or change of the Common Shares other than as described in Section 6.5(a) or a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other person or other entity; or a sale, transfer or other disposition of the property and assets of the Corporation as an entirety or substantially as an entirety to any other person or other entity or a liquidation, dissolution or winding-up of the Corporation, any holder of a Debenture who has not exercised its right of conversion prior to the effective date of such reclassification, capital reorganization, change, consolidation, amalgamation, arrangement or merger, sale, transfer, disposition or liquidation, dissolution or winding-up, upon the exercise of such right thereafter, shall be entitled to receive and shall accept, in lieu of the number of Common Shares then sought to be acquired by it, the number of shares or other securities or property of the Corporation or of the person or other entity resulting from such reclassification, capital reorganization, change, consolidation, amalgamation, arrangement or merger, or to which such sale, transfer, disposition may be made or which holders of Common Shares receive pursuant to such liquidation, dissolution or winding-up, as the case may be, that such holder of a Debenture would have been entitled to receive on such reclassification, capital reorganization, change, consolidation, amalgamation, arrangement or merger, sale, transfer, dispositions or liquidation, dissolution or winding-up, if, on the record date or the effective date thereof, as the case may be, the holder had been the registered holder of the number of Common Shares sought to be acquired by it and to which it was entitled to acquire upon the exercise of the conversion right. If determined appropriate by the Directors to give effect to or to evidence the provisions of this Section 6.5(d), the Corporation, its successor, or such purchasing person or other entity, as the case may be, shall, prior to or contemporaneously with any such reclassification, capital reorganization, change, consolidation, amalgamation, arrangement, merger, sale, transfer, dispositions or liquidation, dissolution or winding-up or other similar transaction, enter into an indenture which shall provide, to the extent possible, for the application of the provisions set forth in this Indenture with respect to the rights and interests thereafter of the holder of Debentures to the end that the provisions set forth in this Indenture

shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any shares or other securities or property to which a holder of Debentures is entitled on the exercise of its conversion rights thereafter. Any indenture entered into between the Corporation and the Trustee pursuant to the provisions of this Section 6.5(d) shall be a supplemental indenture entered into pursuant to the provisions of Article 16. Any indenture entered into between the Corporation, any successor to the Corporation or such purchasing person or other entity and the Trustee shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section 6.5(d) and which shall apply to successive reclassifications, capital reorganizations, changes, consolidations, amalgamations, mergers, sales, transfers, dispositions and to any successive liquidation, dissolution or winding up or other similar transaction. For greater certainty, nothing in this Section 6.5(d) shall affect or reduce the requirement for any person to make a Debenture Offer or to pay the Make Whole Premium in accordance with Section 2.4, and notice of any transaction to which this Section 6.5(d) applies shall be given in accordance with Section 6.10.

(e)

If and whenever at any time prior to the Time of Expiry the Corporation shall fix a record date for the payment of a cash dividend or distribution to the holders of all or substantially all of the outstanding Common Shares in respect of any Applicable Period, the Conversion Price shall be adjusted immediately after such record date so that it shall be equal to the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the denominator shall be the Current Market Price per Share on such record date and of which the numerator shall be the Current Market Price per Share on such record date minus the amount in cash per Share distributed to holders of Common Shares. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such cash dividend or distribution is not paid, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed. For the avoidance of doubt, if and to the extent any adjustment pursuant to Sections 6.5(a), 6.5(b) and 6.5(c) is made, no adjustment to the Conversion Price pursuant to this Section 6.5(e) shall also be made. In this subsection (e) the term "dividends" or "distributions" shall include the value of any securities or other property or assets distributed in lieu of cash dividends or distributions paid in the ordinary course at the option of shareholders.

(f)

If any issuer bid (other than a normal course issuer bid made through the facilities of the TSX or such other exchange the Common Shares are listed and posted for trading on) made by the Corporation or any of its Subsidiaries for all or any portion of the Common Shares shall expire, then, if the issuer bid shall require the payment to shareholders who accept such bid of consideration per Common Share having a fair market value (determined as provided below) that exceeds the Current Market Price per Common Share on the last date (the "Expiration Date") tenders could have been made pursuant to such issuer bid (as it may be amended) (the last time at which such tenders could have been made on the Expiration Date is hereinafter sometimes called the "Expiration Time"), the Conversion Price in respect of the Debentures shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately preceding the close of business on the Expiration Date by a fraction of which (i) the numerator of which shall be the product of the number of Common Shares outstanding (including Purchased Common Shares (as defined below) but excluding any Common Shares held in the treasury of the Corporation) at the Expiration Time multiplied by the Current Market Price per Common Share on the Expiration Date; and (ii) the denominator shall be the sum of (A) the fair market value of the aggregate consideration (the fair market value being as determined by the directors of the Corporation, subject to TSX approval, if applicable, which determination shall be conclusive) payable to shareholders based on the acceptance (up to any maximum specified in the terms of the issuer bid) of all Common Shares validly tendered to the issuer bid and not withdrawn as of the Expiration Time (the Common Shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Common Shares"), and (B) the product of the number of Common Shares outstanding (less any Purchased Common Shares and excluding any Common Shares held in the treasury of the Corporation) at the Expiration Time and the Current Market Price per Common Share on the Expiration Date, such adjustment to be effective immediately preceding the opening of business on the day following the Expiration Date. In the event that the Corporation is obligated to purchase Common Shares pursuant to any such issuer bid, but the Corporation is permanently prevented by applicable law from effecting any or all such purchases or any or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would have been in effect based upon the number of Common Shares actually purchased, if any. If the application of this Section 6.5(f) to any issuer bid would result in an increase in the Conversion Price, no adjustment shall be made for such issuer bid pursuant hereto.

For purposes of this Section 6.5(f), the term "issuer bid" shall mean an issuer bid (other than an issuer bid which is exempt from the requirements of Part 2 of NI 62-104) under Applicable Securities Legislation or a take-over bid (other than a take-over bid which is exempt from the requirements of Part 2 of NI 62-104) under Applicable Securities Legislation by a Subsidiary of the Corporation for the Common Shares and all references to "purchases" of Common Shares in issuer bids (and all similar references) shall mean and include the purchase of Common Shares in issuer bids and all references to "tendered Common Shares" (and all similar references) shall mean and include Common Shares tendered in issuer bids.

(g)

In any case in which this Section 6.5 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the holder of any Debenture converted after such record date and before the occurrence of such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder's right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the Date of Conversion or such later date as such holder would, but for the provisions of this Section 6.5(g), have become the holder of record of such additional Common Shares pursuant to Section 6.4(h).

(h)

The adjustments provided for in this Section 6.5 are cumulative and shall apply to successive subdivisions, redivisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section, provided that, notwithstanding any other provision of this Section, no adjustment of the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided however, that any adjustments which by reason of this Section 6.5(h) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

(i)

For the purpose of calculating the number of Common Shares outstanding, Common Shares owned by or for the benefit of the Corporation shall not be counted.

(j)

In the event of any question arising with respect to the adjustments provided in this Section 6.5, such question shall be conclusively determined by a firm of nationally recognized chartered professional accountants appointed by the Corporation and acceptable to the Trustee (who may be the auditors of the Corporation); such accountants shall have access to all necessary records of the Corporation and such determination shall be binding upon the Corporation, the Trustee, and the Debentureholders.

(k)

In case the Corporation shall take any action affecting the Common Shares other than action described in this Section 6.5, which in the opinion of the Directors, would materially affect the rights of Debentureholders, the Conversion Price shall be adjusted in such manner and at such time, by action of the Directors, subject to the prior written consent of the TSX (or, if the Debentures are not listed thereon, on such other exchange on which the Debentures are then listed), as the Directors in their sole discretion may determine to be equitable in the circumstances. Failure of the Directors to make such an adjustment shall be conclusive evidence that they have determined that it is equitable to make no adjustment in the circumstances.

(l)

Subject to the prior written consent of the TSX or such other exchange on which the Debentures are then listed, no adjustment in the Conversion Price shall be made in respect of any event described in Sections 6.5(a), 6.5(b) or 6.5(c) other than the events described in Sections 6.5(a)(i) or 6.5(a)(ii) if the holders of the Debentures are entitled to participate in such event on the same terms mutatis mutandis as if they had converted their Debentures prior to the effective date or record date, as the case may be, of such event.

(m)

Except as stated above in this Section 6.5, no adjustment will be made in the Conversion Price for any Debentures as a result of the issuance of Common Shares at less than the Current Market Price for such Common Shares on the date of issuance or the then applicable Conversion Price.

  

6.6

No Requirement to Issue Fractional Common Shares

The Corporation shall not be required to issue fractional Common Shares upon the conversion of Debentures pursuant to this Article. If more than one Debenture shall be surrendered for conversion at one time by the same holder, the number of whole Common Shares issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of such Debentures to be converted. If any fractional interest in a Common Share would, except for the provisions of this Section, be deliverable upon the conversion of any principal amount of Debentures, the Corporation shall, in lieu of delivering any certificate or electronic deposit representing such fractional interest, make a cash payment to the holder of such Debenture of an amount equal to the fractional interest which would have been issuable multiplied by the Current Market Price.

6.7

Corporation to Reserve Common Shares

The Corporation covenants with the Trustee that it will at all times reserve and keep available out of its authorized Common Shares (if the number thereof is or becomes limited), solely for the purpose of issue upon conversion of Debentures as in this Article provided, and conditionally allot to Debentureholders who may exercise their conversion rights hereunder, such number of Common Shares as shall then be issuable upon the conversion of all outstanding Debentures. The Corporation covenants with the Trustee that all Common Shares which shall be so issuable shall be duly and validly issued as fully-paid and non-assessable and, in the case of Common Shares issued upon the conversion of Debentures distributed pursuant to the Initial Debenture Offering, shall be Freely Tradeable.

6.8

Cancellation of Converted Debentures

Subject to the provisions of Section 6.4 as to Debentures converted in part, all Debentures converted in whole or in part under the provisions of this Article shall be forthwith delivered to and cancelled by the Trustee and no Debenture shall be issued in substitution for those converted.

6.9

Certificate as to Adjustment

The Corporation shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 6.5, deliver an Officers' Certificate to the Trustee specifying the nature of the event requiring the same and the amount of the adjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate and the amount of the adjustment specified therein shall be verified by an opinion of a firm of nationally recognized chartered accountants appointed by the Corporation and acceptable to the Trustee (who may be the Auditors of the Corporation) and shall be conclusive and binding on all parties in interest. When so approved, the Corporation shall, except in respect of any subdivision, redivision, reduction, combination or consolidation of the Common Shares, forthwith give notice to the Debentureholders in the manner provided in Section 14.2 specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Conversion Price.

6.10

Notice of Special Matters

The Corporation covenants with the Trustee that so long as any Debenture remains outstanding, it will give notice to the Trustee, and to the Debentureholders in the manner provided in Section 14.2, of its intention to fix a record date for any event referred to in Section 6.5(a), 6.5(b), 6.5(c) or 6.5(e) (other than the subdivision, redivision, reduction, combination or consolidation of its Common Shares) which may give rise to an adjustment in the Conversion Price, and, in each case, such notice shall specify the particulars of such event and the record date and the effective date for such event; provided that the Corporation shall only be required to specify in such notice such particulars of such event as shall have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than 14 days in each case prior to such applicable record date.

In addition, the Corporation covenants with the Trustee that so long as any Debenture remains outstanding, it will give notice to the Trustee, and to the Debentureholders in the manner provided in Section 14.2, at least 30 days prior to the (i) effective date of any transaction referred to in Section 6.5(d) stating the consideration into which the Debentures will be convertible after the effective date of such transaction, and (ii) the Expiration Date of any transaction referred to in Section 6.5(f) stating the consideration paid per Common Share in such transaction.

 

6.11

Protection of Trustee

Subject to Section 15.3, the Trustee:

(a)

shall not at any time be under any duty or responsibility to any Debentureholder to determine whether any facts exist which may require any adjustment in the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;

(b)

shall not be accountable with respect to the validity or value (or the kind or amount) of any Common Shares or of any shares or other securities or property which may at any time be issued or delivered upon the conversion of any Debenture; and

(c)

shall not be responsible for any failure of the Corporation to make any cash payment or to issue, transfer or deliver Common Shares or share certificates upon the surrender of any Debenture for the purpose of conversion, or to comply with any of the covenants contained in this Article.

6.12

Payment of Cash in Lieu of Common Shares

Upon conversion, the Corporation may offer and the converting holder may agree to the delivery of cash for all or a portion of the Debentures surrendered in lieu of Common Shares, the cash equivalent thereto to be determined on the basis of the Current Market Price of the Common Shares to be received upon conversion on the Date of Conversion (less applicable withholding taxes, if any).

Article 7
COVENANTS OF THE CORPORATION

The Corporation hereby covenants and agrees with the Trustee for the benefit of the Trustee and the Debentureholders, that so long as any Debentures remain outstanding:

7.1

To Pay Principal, Premium (if any) and Interest

The Corporation will duly and punctually pay or cause to be paid to every Debentureholder the principal of, premium (if any) and interest accrued on the Debentures of which it is the holder on the dates, at the places and in the manner mentioned herein and in the Debentures.

7.2

To Pay Trustee's Remuneration

The Corporation will pay the Trustee reasonable remuneration for its services as Trustee hereunder and will repay to the Trustee on demand all monies which shall have been paid by the Trustee in connection with the execution of the trusts hereby created and such monies including the Trustee's remuneration, shall be payable out of any funds coming into the possession of the Trustee in priority to payment of any principal of the Debentures or interest or premium thereon. Such remuneration shall continue to be payable until the trusts hereof be finally wound up and whether or not the trusts of this Indenture shall be in the course of administration by or under the direction of a court of competent jurisdiction.

7.3

To Give Notice of Default

The Corporation shall notify the Trustee immediately upon obtaining knowledge of any Event of Default hereunder.

7.4

Preservation of Existence, etc.

Subject to the express provisions hereof, the Corporation will carry on and conduct its activities, and cause its Subsidiaries to carry on and conduct their businesses, in a business-like manner and in accordance with good business practices; and, subject to the express provisions hereof, it will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and rights.

 

7.5

Keeping of Books

The Corporation will keep or cause to be kept proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Corporation in accordance with generally accepted accounting principles.

7.6

Annual Certificate of Compliance

The Corporation shall deliver to the Trustee, within 120 days after the end of each calendar year, (and at any reasonable time upon demand by the Trustee) an Officers' Certificate as to the knowledge of such officers of the Corporation who execute the Officers' Certificate of the Corporation's compliance with all conditions and covenants in this Indenture certifying that after reasonable investigation and inquiry, the Corporation has complied with all covenants, conditions or other requirements contained in this Indenture, the non-compliance with which could, with the giving of notice, lapse of time or otherwise, constitute an Event of Default hereunder, or if such is not the case, setting forth with reasonable particulars the circumstances of any failure to comply and steps taken or proposed to be taken to eliminate such circumstances and remedy such Event of Default, as the case may be.

7.7

Performance of Covenants by Trustee

If the Corporation shall fail to perform any of its covenants contained in this Indenture, the Trustee may notify the Debentureholders of such failure on the part of the Corporation or may itself perform any of the covenants capable of being performed by it, but shall be under no obligation to do so or to notify the Debentureholders. All sums so expended or advanced by the Trustee shall be repayable as provided in Section 7.2. No such performance, expenditure or advance by the Trustee shall be deemed to relieve the Corporation of any default hereunder.

7.8

SEC Notice

The Corporation confirms that it has a class of securities registered pursuant to Section 12 of the U.S. Exchange Act. The Corporation covenants that in the event that such registration shall be terminated by the Corporation in accordance with the U.S. Exchange Act, the Corporation shall promptly notify the Trustee of such termination and such other information as the Trustee may require at such time. The Corporation acknowledges that the Trustee is relying upon the foregoing representation and covenants in order to meet certain United States Securities and Exchange Commission obligations applicable to the Trustee.

7.9

No Dividends on Common Shares if Event of Default

The Corporation shall not declare or pay any dividend to the holders of its issued and outstanding Common Shares after the occurrence of an Event of Default unless and until such default shall have been cured or waived or shall have ceased to exist.

7.10

Maintain Listing

The Corporation will use reasonable commercial efforts to maintain the listing of the Common Shares and the Debentures on the TSX and the NYSE, and to maintain the Corporation's status as a "reporting issuer" not in default of the requirements of the Applicable Securities Legislation; provided that the foregoing covenant shall not prevent or restrict the Corporation from carrying out a transaction to which Article 11 would apply if carried out in compliance with Article 11 even if as a result of such transaction the Corporation ceases to be a "reporting issuer" in all or any of the provinces of Canada or the Common Shares or Debentures cease to be listed on the TSX or any other stock exchange.

7.11

Restriction on Common Share Redemption Right and Common Share Repayment Right

The Corporation shall not, directly or indirectly (through a Subsidiary or otherwise) undertake or announce any rights offering, issuance of securities, subdivision of the Common Shares, dividend or other distribution on the Common Shares or any other securities, capital reorganization, reclassification or any similar type of transaction in which:

 

 

(a)

the number of securities to be issued;

(b)

the price at which securities are to be issued, converted or exchanged; or

(c)

any property or cash that is to be distributed or allocated,

is in whole or in part based upon, determined in reference to, related to or a function of, directly or indirectly, (i) the exercise or potential exercise of the Common Share Redemption Right or the Common Share Repayment Right, or (ii) the Current Market Price determined in connection with the exercise or potential exercise of the Common Share Redemption Right or the Common Share Repayment Right.

Article 8
DEFAULT

8.1

Events of Default

Each of the following events constitutes, and is herein referred to as, an "Event of Default":

(a)

failure for 30 days to pay interest on the Debentures when due;

(b)

failure to pay principal or premium (whether by way of payment of cash or delivery of Common Shares), if any, when due on the Debentures whether at maturity, upon redemption or a Change of Control, by declaration or otherwise;

(c)

default in the delivery, when due, of any Common Shares or other consideration, including any Make Whole Premium, payable on conversion with respect to the Debentures, which default continues for 30 days;

(d)

default in the observance or performance of any covenant or condition of the Indenture by the Corporation and the failure to cure (or obtain a waiver for) such default for a period of 30 days after notice in writing has been given by the Trustee or from holders of not less than 25% in aggregate principal amount of the Debentures to the Corporation specifying such default and requiring the Corporation to rectify such default or obtain a waiver for same;

(e)

if a decree or order of a Court having jurisdiction is entered adjudging the Corporation or any Material Subsidiary a bankrupt or insolvent under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or issuing sequestration or process of execution against, or against any substantial part of, the property of the Corporation or any Material Subsidiary, or appointing a receiver of, or of any substantial part of, the property of the Corporation or any Material Subsidiary or ordering the winding-up or liquidation of its affairs, and any such decree or order continues unstayed and in effect for a period of 60 days;

(f)

if the Corporation or any Material Subsidiary institutes proceedings to be adjudicated a bankrupt or insolvent, or consents to the institution of bankruptcy or insolvency proceedings against it under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or consents to the filing of any such petition or to the appointment of a receiver of, or of any substantial part of, the property of the Corporation or any Material Subsidiary or makes a general assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due;

(g)

if a resolution is passed for the winding-up or liquidation of the Corporation except in the course of carrying out or pursuant to a transaction in respect of which the conditions of Section 11.1 are duly observed and performed;

 

 

(h)

if, after the date of this Indenture, any proceedings with respect to the Corporation or any Material Subsidiary are taken with respect to a compromise or arrangement, with respect to creditors of the Corporation or any Material Subsidiary generally, under the applicable legislation of any jurisdiction; or

(i)

if an event of default occurs or exists under any indenture, agreement or other instrument evidencing or governing indebtedness for borrowed money (other than Non-Recourse Debt) of the Corporation or any Material Subsidiary and as a result of such event of default (i) indebtedness for borrowed money thereunder in excess of $10,000,000 (or the equivalent amount in any other currency) has become due and payable before the date it would otherwise have been due and payable and (ii) the holders of such indebtedness are entitled to commence, and have commenced, the enforcement of security they hold for such indebtedness (if any) or the exercise of any other creditors' remedies to collect such indebtedness;

then: (x) in each and every such event listed above, the Trustee may, in its discretion, but subject to the provisions of this section, and shall, upon receipt of a request in writing signed by the holders of not less than 25% in principal amount of the Debentures then outstanding (or if the Event of Default shall exist only in respect of one or more series of the Debentures then outstanding, then upon receipt of a request in writing signed by the holders of not less than 25% in principal amount of the Debentures of such series then outstanding), subject to the provisions of Section 8.3, by notice in writing to the Corporation declare the principal of and interest and premium, if any, on all Debentures then outstanding (and, where such a declaration is based upon a voluntary winding-up or liquidation of the Corporation, the premium, if any, on the Debentures then outstanding which would have been payable upon the redemption thereof by the Corporation on the date of such declaration) and all other monies outstanding hereunder to be due and payable and the same shall thereupon forthwith become immediately due and payable (or, if the Event of Default shall exist only in respect of one or more series of the Debentures then outstanding, then the Trustee may declare due and payable the principal and interest and premium, if any, only with respect to such Debentures in respect of which there is an Event of Default) to the Trustee, and (y) on the occurrence of an Event of Default under Section 8.1(e), 8.1(f), 8.1(g), 8.1(h) (if such proceedings are initiated by the Corporation or any Material Subsidiary) or 8.1(i), the principal of and interest and premium, if any, on all Debentures then outstanding hereunder and all other monies outstanding hereunder, shall automatically without any declaration or other act on the part of the Trustee or any Debentureholder become immediately due and payable to the Trustee and, in either case, upon such amounts becoming due and payable in either (x) or (y) above, the Corporation shall forthwith pay to the Trustee for the benefit of the Debentureholders such principal, accrued and unpaid interest and premium, if any, and interest on amounts in default on such Debenture and all other monies outstanding hereunder, together with subsequent interest at the rate borne by the Debentures on such principal, interest, premium and such other monies from the date of such declaration or event until payment is received by the Trustee, such subsequent interest to be payable at the times and places and in the manner mentioned in and according to the tenor of the Debentures. Such payment when made shall be deemed to have been made in discharge of the Corporation's obligations hereunder and any monies so received by the Trustee shall be applied in the manner provided in Section 8.6.

For greater certainty, for the purposes of this Section 8.1, a series of Debentures shall be in default in respect of an Event of Default if such Event of Default relates to a default in the payment of principal, premium, if any, or interest on the Debentures of such series in which case references to Debentures in this Section 8.1 refer to Debentures of that particular series.

For purposes of this Article 8, where the Event of Default refers to an Event of Default with respect to a particular series of Debentures as described in this Section 8.1, then this Article 8 shall apply mutatis mutandis to the Debentures of such series and references in this Article 8 to the Debentures shall mean Debentures of the particular series and references to the Debentureholders shall refer to the Debentureholders of the particular series, as applicable.

8.2

Notice of Events of Default

If an Event of Default shall occur and be continuing the Trustee shall, within 30 days after it receives written notice of the occurrence of such Event of Default, give notice of such Event of Default to the Debentureholders in the manner provided in Section 14.2, provided that notwithstanding the foregoing, unless the Trustee shall have been requested to do so by the holders of at least 25% of the principal amount of the Debentures then outstanding, the Trustee shall not be required to give such notice if the Trustee in good faith shall have determined that the withholding of such notice is in the best interests of the Debentureholders and shall have so advised the Corporation in writing.

 

 

When notice of the occurrence of an Event of Default has been given and the Event of Default is thereafter cured, notice that the Event of Default is no longer continuing shall be given by the Trustee to the Debentureholders within 15 days after the Trustee becomes aware the Event of Default has been cured.

8.3

Waiver of Default

Upon the happening of any Event of Default hereunder:

(a)

the holders of the Debentures shall have the power (in addition to the powers exercisable by Extraordinary Resolution as hereinafter provided) by requisition in writing by the holders of more than 50% of the principal amount of Debentures then outstanding, to instruct the Trustee to waive any Event of Default and to cancel any declaration made by the Trustee pursuant to Section 8.1 and the Trustee shall thereupon waive the Event of Default and cancel such declaration, or either, upon such terms and conditions as shall be prescribed in such requisition; provided that notwithstanding the foregoing if the Event of Default has occurred by reason of the non-observance or non-performance by the Corporation of any covenant applicable only to one or more series of Debentures, then the holders of more than 50% of the principal amount of the outstanding Debentures of that series shall be entitled to exercise the foregoing power and the Trustee shall so act and it shall not be necessary to obtain a waiver from the holders of any other series of Debentures; and

(b)

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

No such act or omission either of the Trustee or of the Debentureholders shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default or the rights resulting therefrom.

8.4

Enforcement by the Trustee

Subject to the provisions of Section 8.3 and to the provisions of any Extraordinary Resolution that may be passed by the Debentureholders, if the Corporation shall fail to pay to the Trustee, forthwith after the same shall have been declared to be due and payable under Section 8.1, the principal of and premium (if any) and interest on all Debentures then outstanding, together with any other amounts due hereunder, the Trustee may in its discretion and shall upon receipt of a request in writing signed by the holders of not less than 25% in principal amount of the Debentures then outstanding and upon being funded and indemnified to its reasonable satisfaction against all costs, expenses and liabilities to be incurred, proceed in its name as trustee hereunder to obtain or enforce payment of such principal of and premium (if any) and interest on all the Debentures then outstanding together with any other amounts due hereunder by such proceedings authorized by this Indenture or by law or equity as the Trustee in such request shall have been directed to take, or if such request contains no such direction, or if the Trustee shall act without such request, then by such proceedings authorized by this Indenture or by suit at law or in equity as the Trustee shall deem expedient.

The Trustee shall be entitled and empowered, either in its own name or as Trustee of an express trust, or as attorney-in-fact for the holders of the Debentures, or in any one or more of such capacities, to file such proof of debt, amendment of proof of debt, claim, petition or other document as may be necessary or advisable in order to have the claims of the Trustee and of the holders of the Debentures allowed in any insolvency, bankruptcy, liquidation or other judicial proceedings relative to the Corporation or its creditors or relative to or affecting its property. The Trustee is hereby irrevocably appointed (and the successive respective holders of the Debentures by taking and holding the same shall be conclusively deemed to have so appointed the Trustee) the true and lawful attorney-in-fact of the respective holders of the Debentures with authority to make and file in the respective names of the holders of the Debentures or on behalf of the holders of the Debentures as a class, subject to deduction from any such claims of the amounts of any claims filed by any of the holders of the Debentures themselves, any proof of debt, amendment of proof of debt, claim, petition or other document in any such proceedings and to receive payment of any sums becoming distributable on account thereof, and to execute any such other papers and

 

documents and to do and perform any and all such acts and things for and on behalf of such holders of the Debentures, as may be necessary or advisable in the opinion of the Trustee, in order to have the respective claims of the Trustee and of the holders of the Debentures against the Corporation or its property allowed in any such proceeding, and to receive payment of or on account of such claims; provided, however, that subject to Section 8.3, nothing contained in this Indenture shall be deemed to give to the Trustee, unless so authorized by Extraordinary Resolution, any right to accept or consent to any plan of reorganization or otherwise by action of any character in such proceeding to waive or change in any way any right of any Debentureholder.

The Trustee shall also have the power at any time and from time to time to institute and to maintain such suits and proceedings as it may be advised shall be necessary or advisable to preserve and protect its interests and the interests of the Debentureholders.

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

8.5

No Suits by Debentureholders

No holder of any Debenture shall have any right to institute any action, suit or proceeding at law or in equity for the purpose of enforcing payment of the principal of, premium (if any) or interest on the Debentures or for the execution of any trust or power hereunder or for the appointment of a liquidator or receiver or for a receiving order under the Bankruptcy and Insolvency Act (Canada) or to have the Corporation wound up or to file or prove a claim in any liquidation or bankruptcy proceeding or for any other remedy hereunder, unless: (a) such holder shall previously have given to the Trustee written notice of the happening of an Event of Default hereunder; and (b) the Debentureholders by Extraordinary Resolution or by written instrument signed by the holders of at least 25% in principal amount of the Debentures then outstanding shall have made a request to the Trustee and the Trustee shall have been afforded reasonable opportunity either itself to proceed to exercise the powers hereinbefore granted or to institute an action, suit or proceeding in its name for such purpose; and (c) the Debentureholders or any of them shall have furnished to the Trustee, when so requested by the Trustee, sufficient funds and security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby; and (d) the Trustee shall have failed to act within a reasonable time after such notification, request and offer of indemnity and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to any such proceeding or for any other remedy hereunder by or on behalf of the holder of any Debentures.

8.6

Application of Monies by Trustee

(a)

Except as herein otherwise expressly provided, any monies received by the Trustee from the Corporation pursuant to the foregoing provisions of this Article 8, or as a result of legal or other proceedings or from any trustee in bankruptcy or liquidator of the Corporation, shall be applied, together with any other monies in the hands of the Trustee available for such purpose, as follows:

(i)

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

(ii)

second, but subject as hereinafter in this Section 8.6 provided, in payment, rateably and proportionately to the holders of Debentures, of the principal of and premium (if any) and accrued and unpaid interest and interest on amounts in default on the Debentures which shall then be outstanding in the priority of principal first and then premium and then accrued and unpaid interest and interest on amounts in default unless otherwise directed by Extraordinary Resolution and in that case in such order or priority as between principal, premium (if any) and interest as may be directed by such resolution; and

 

 

(iii)

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

provided, however, that no payment shall be made pursuant to clause (ii) above in respect of the principal, premium or interest on any Debenture held, directly or indirectly, by or for the benefit of the Corporation or any Subsidiary (other than any Debenture pledged for value and in good faith to a person other than the Corporation or any Subsidiary but only to the extent of such person's interest therein) except subject to the prior payment in full of the principal, premium (if any) and interest (if any) on all Debentures which are not so held.

(b)

The Trustee shall not be bound to apply or make any partial or interim payment of any monies coming into its hands if the amount so received by it, after reserving thereout such amount as the Trustee may think necessary to provide for the payments mentioned in Section 8.6(a), is insufficient to make a distribution of at least 2% of the aggregate principal amount of the outstanding Debentures, but it may retain the money so received by it and invest or deposit the same as provided in Section 15.9 until the money or the investments representing the same, with the income derived therefrom, together with any other monies for the time being under its control shall be sufficient for the said purpose or until it shall consider it advisable to apply the same in the manner hereinbefore set forth. The foregoing shall, however, not apply to a final payment in distribution hereunder.

8.7

Notice of Payment by Trustee

Not less than 15 days' notice shall be given in the manner provided in Section 14.2 by the Trustee to the Debentureholders of any payment to be made under this Article 8. Such notice shall state the time when and place where such payment is to be made and also the liability under this Indenture to which it is to be applied. After the day so fixed, unless payment shall have been duly demanded and have been refused, the Debentureholders will be entitled to interest only on the balance (if any) of the principal monies, premium (if any) and interest due (if any) to them, respectively, on the Debentures, after deduction of the respective amounts payable in respect thereof on the day so fixed.

8.8

Trustee May Demand Production of Debentures

The Trustee shall have the right to demand production of the Debentures in respect of which any payment of principal, interest or premium required by this Article 8 is made and may cause to be endorsed on the same a memorandum of the amount so paid and the date of payment, but the Trustee may, in its discretion, dispense with such production and endorsement, upon such indemnity being given to it and to the Corporation as the Trustee shall deem sufficient.

8.9

Remedies Cumulative

No remedy herein conferred upon or reserved to the Trustee, or upon or to the holders of Debentures is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now existing or hereafter to exist by law or by statute.

8.10

Judgment Against the Corporation

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

 

 

8.11

Immunity of Directors, Officers and Others

The Debentureholders and the Trustee hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future officer, director or employee of the Corporation or holder of Common Shares of the Corporation or of any successor for the payment of the principal of or premium or interest on any of the Debentures or on any covenant, agreement, representation or warranty by the Corporation contained herein or in the Debentures.

Article 9
SATISFACTION AND DISCHARGE

9.1

Cancellation and Destruction

All Debentures shall forthwith after payment thereof be delivered to the Trustee and cancelled by it. All Debentures Certificates cancelled or required to be cancelled under this or any other provision of this Indenture shall be destroyed by the Trustee and, if required by the Corporation, the Trustee shall furnish to it a destruction certificate setting out the designating numbers of the Debentures so destroyed.

9.2

Non-Presentation of Debentures

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

(a)

the Corporation shall be entitled to pay or deliver to the Trustee and direct it to set aside; or

(b)

in respect of monies or Common Shares in the hands of the Trustee which may or should be applied to the payment of the Debentures, the Corporation shall be entitled to direct the Trustee to set aside; or

(c)

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

the monies or Common Shares, as the case may be, in trust to be paid to the holder of such Debenture upon due presentation or surrender thereof in accordance with the provisions of this Indenture; and thereupon the principal of, premium (if any) or the interest payable on or represented by each Debenture in respect whereof such monies or Common Shares, if applicable, have been set aside shall be deemed to have been paid and the holder thereof shall thereafter have no right in respect thereof except that of receiving delivery and payment of the monies or Common Shares, if applicable, so set aside by the Trustee upon due presentation and surrender thereof, subject always to the provisions of Section 9.3.

9.3

Repayment of Unclaimed Monies or Common Shares

Subject to applicable law, any monies or Common Shares, if applicable, set aside under Section 9.2 and not claimed by and paid to holders of Debentures as provided in Section 9.2 within three years less one day after the date of such setting aside shall be repaid and delivered to the Corporation by the Trustee and thereupon the Trustee shall be released from all further liability with respect to such monies or Common Shares, if applicable, and thereafter the holders of the Debentures in respect of which such monies or Common Shares, if applicable, were so repaid to the Corporation shall have no rights in respect thereof except to obtain payment and delivery of the monies or Common Shares, if applicable, from the Corporation subject to any limitation provided by the laws of the Province of Alberta. Notwithstanding the foregoing, the Trustee will pay any remaining funds prior to the expiry of three years less one day after the setting aside described in Section 9.2 to the Corporation upon receipt from the Corporation, of an unconditional letter of credit from a Canadian chartered bank in an amount equal to or in excess of the amount of the remaining funds. If the remaining funds are paid to the Corporation prior to the expiry of three years less one day after such setting aside, the Corporation shall reimburse the Trustee for any amounts so set aside which are required to be paid by the Trustee to a holder of a Debenture after the date of such payment of the remaining funds to the Corporation but prior to three years less one day after such setting aside.

 

 

9.4

Discharge

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

9.5

Satisfaction

(a)

The Corporation shall be deemed to have fully paid, satisfied and discharged all of the outstanding Debentures of any series and the Trustee, at the expense of the Corporation, shall execute and deliver proper instruments acknowledging the full payment, satisfaction and discharge of such Debentures, when, with respect to all of the outstanding Debentures or all of the outstanding Debentures of any series, as applicable:

(i)

the Corporation has deposited or caused to be deposited with the Trustee as trust funds or property in trust for the purpose of making payment on such Debentures, an amount in money or Common Shares, if applicable, sufficient to pay, satisfy and discharge the entire amount of principal of, premium, if any, and interest, if any, to maturity, or any repayment date or Redemption Date, or any Change of Control Purchase Date, or upon conversion or otherwise as the case may be, of such Debentures (including the maximum number of Common Shares that may be issuable as Make Whole Premium Shares);

(ii)

the Corporation has deposited or caused to be deposited with the Trustee as trust property in trust for the purpose of making payment on such Debentures:

(A)

if the Debentures are issued in Canadian dollars, such amount in Canadian dollars of direct obligations of, or obligations the principal and interest of which are guaranteed by, the Government of Canada or Common Shares, if applicable; or

(B)

if the Debentures are issued in a currency or currency unit other than Canadian dollars, cash in the currency or currency unit in which the Debentures are payable and/or such amount in such currency or currency unit of direct obligations of, or obligations the principal and interest of which are guaranteed by, the Government of Canada or the government that issued the currency or currency unit in which the Debentures are payable or Common Shares, if applicable;

as will be sufficient to pay and discharge the entire amount of principal of, premium, if any (including the maximum amount that may be payable as a Make Whole Premium) on, and accrued and unpaid interest to maturity or any repayment date, as the case may be, of all such Debentures; or

(iii)

all Debentures authenticated and delivered (other than (A) Debentures which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9 and (B) Debentures for whose payment has been deposited in trust and thereafter repaid to the Corporation as provided in Section 9.3) have been delivered to the Trustee for cancellation;

so long as in any such event:

(iv)

the Corporation has paid, caused to be paid or made provisions to the satisfaction of the Trustee for the payment of all other sums payable or which may be payable (including the maximum number of Common Shares that may be issuable as Make Whole Premium Shares) with respect to all of such Debentures (together with all applicable expenses of the Trustee in connection with the payment of such Debentures); and

 

 

(v)

the Corporation has delivered to the Trustee an Officers' Certificate stating that all conditions precedent herein provided relating to the payment, satisfaction and discharge of all such Debentures have been complied with.

Any deposits with the Trustee referred to in this Section 9.5 shall be irrevocable, subject to Section 9.6, and shall be made under the terms of an escrow and/or trust agreement in form and substance satisfactory to the Trustee and which provides for the due and punctual payment of the principal of, premium, if any, and interest on the Debentures being satisfied.

(b)

Upon the satisfaction of the conditions set forth in this Section 9.5 with respect to all the outstanding Debentures, or all the outstanding Debentures of any series, as applicable, the terms and conditions of the Debentures, including the terms and conditions with respect thereto set forth in this Indenture (other than those contained in Article 2, Article 4 and Article 6 and the provisions of Article 1 pertaining to Article 2, Article 4 and Article 6) shall no longer be binding upon or applicable to the Corporation.

(c)

Any funds or obligations deposited with the Trustee pursuant to this Section 9.5 shall be denominated in the currency or denomination of the Debentures in respect of which such deposit is made.

(d)

If the Trustee is unable to apply any money or securities in accordance with this Section 9.5 by reason of any legal proceeding or any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Corporation's obligations under this Indenture and the affected Debentures shall be revived and reinstated as though no money or securities had been deposited pursuant to this Section 9.5 until such time as the Trustee is permitted to apply all such money or securities in accordance with this Section 9.5, provided that if the Corporation has made any payment in respect of principal of, premium, if any, or interest on Debentures or, as applicable, other amounts because of the reinstatement of its obligations, the Corporation shall be subrogated to the rights of the holders of such Debentures to receive such payment from the money or securities held by the Trustee.

9.6

Continuance of Rights, Duties and Obligations

(a)

Where trust funds or trust property have been deposited pursuant to Section 9.5, the holders of Debentures and the Corporation shall continue to have and be subject to their respective rights, duties and obligations under Article 2, Article 4 and Article 6 and the provisions of Article 1 pertaining to the foregoing provisions, as may be applicable.

(b)

In the event that, after the deposit of trust funds or trust property pursuant to Section 9.5 in respect of a series of Debentures (the "Defeased Debentures"), any holder of any of the Defeased Debentures from time to time converts its Debentures to Common Shares or other securities of the Corporation in accordance with Subsections 2.4(f) and, if applicable, 2.4(k) (in both cases in respect of Initial Debentures or the comparable provisions of any other series of Debentures), Article 6 or any other provision of this Indenture, the Trustee shall upon receipt of a Written Direction of the Corporation return to the Corporation from time to time the proportionate amount of the trust funds or other trust property deposited with the Trustee pursuant to Section 9.5 in respect of the Defeased Debentures which is applicable to the Defeased Debentures so converted (which amount shall be based on the applicable principal amount of the Defeased Debentures being converted in relation to the aggregate outstanding principal amount of all the Defeased Debentures).

(c)

In the event that, after the deposit of trust funds or trust property pursuant to Section 9.5, the Corporation is required to make a Debenture Offer to purchase any outstanding Debentures pursuant to Subsection 2.4(j) (in respect of Initial Debentures or the comparable provision of any other series of Debentures), in relation to Initial Debentures or to make an offer to purchase Debentures pursuant to any other similar provisions relating to any other series of Debentures, the Corporation shall be entitled to use any trust money or trust property deposited with the Trustee pursuant to Section 9.5 for the purpose of paying to any holders of Defeased Debentures who have accepted any such offer of the Corporation the Offer Price payable to such holders in respect of such Debenture Offer in respect of Initial Debentures (or the total offer price payable in respect of an offer relating to any other series of Debentures). Upon receipt of a Written Direction from the Corporation, the Trustee shall be entitled to pay to such holder from such trust money or trust property deposited with the Trustee pursuant to Section 9.5 in respect of the Defeased Debentures which is applicable to the Defeased Debentures held by such holders who have accepted any such offer to the Corporation (which amount shall be based on the applicable principal amount of the Defeased Debentures held by accepting offerees in relation to the aggregate outstanding principal amount of all the Defeased Debentures).

 

 

Article 10
COMMON SHARE INTEREST PAYMENT ELECTION

10.1

Common Share Interest Payment Election

(a)

Subject to the provisions of any series of Debentures, and provided that no Event of Default has occurred and is continuing and that all applicable regulatory approvals have been obtained (including any required approval of any stock exchange on which the Debentures or Common Shares are then listed), the Corporation shall have the right, from time to time (including following conversion, at the time of redemption or at the time of maturity), to make a Common Share Interest Payment Election in respect of any Interest Obligation by delivering a Common Share Interest Payment Election Notice to the Trustee no later than the earlier of (i) the date required by applicable law or the rules of any stock exchange on which the Debentures or Common Shares are then listed, and (ii) the day which is 15 Business Days prior to the Interest Payment Date to which the Common Share Interest Payment Election relates. Such Common Share Interest Payment Election Notice shall provide that all or a portion of the Interest Obligation may be paid by the Corporation in Common Shares by the delivery of Common Shares to the Trustee and the subsequent sale of such Common Shares by the Trustee in accordance with this Section 10.1, and if only a portion of the Interest Obligation is to be paid in Common Shares, the Common Share Interest Payment Election shall state such portion to be paid in Common Shares and such portion to be paid in cash.

(b)

Upon receipt of a Common Share Interest Payment Election Notice, the Trustee shall, in accordance with this Article 10 and such Common Share Interest Payment Election Notice, deliver Common Share Bid Requests to the investment banks, brokers or dealers identified by the Corporation, in its absolute discretion, in the Common Share Interest Payment Election Notice. In connection with the Common Share Interest Payment Election, the Trustee shall have the power to: (i) accept delivery of the Common Shares from the Corporation and process the Common Shares in accordance with the Common Share Interest Payment Election Notice; (ii) accept bids with respect to, and consummate sales of, such Common Shares, each as the Corporation shall direct in its absolute discretion through the investment banks, brokers or dealers identified by the Corporation in the Common Share Interest Payment Election Notice; (iii) invest the proceeds of such sales on the direction of the Corporation in Government Obligations which mature prior to an applicable Interest Payment Date and use such proceeds to pay the Interest Obligation in respect of which the Common Share Interest Payment Election was made; (iv) deliver proceeds to holders of Debentures that together with the additional cash payments of the Corporation, if any, will satisfy all of the Corporation's Interest Obligations, as directed by the Corporation in the Common Share Interest Payment Election Notice, and (v) perform any other action necessarily incidental thereto as directed by the Corporation in its absolute discretion. The Common Share Interest Payment Election Notice shall direct the Trustee to solicit and accept only, and each Common Share Bid Request shall provide that the acceptance of any bid is conditional on the acceptance of, sufficient bids to result in aggregate proceeds from such issue and sale of Common Shares which, together with the cash payments by the Corporation in lieu of fractional Common Shares, if any, equal the Interest Obligation on the Common Share Delivery Date.

(c)

The Common Share Interest Payment Election Notice shall provide for, and all bids shall be subject to, the right of the Corporation, by delivering written notice to the Trustee at any time prior to the consummation of such delivery and sale of the Common Shares on the Common Share Delivery Date, to withdraw (in whole or in part) the Common Share Interest Payment Election (which shall have the effect of withdrawing each related Common Share Bid Request), whereupon the Corporation shall be obliged to pay in cash the Interest Obligation in respect of which the Common Share Interest Payment Election Notice has been delivered and subsequently withdrawn.

 

 

(d)

Any sale of Common Shares pursuant to this Article 10 may be made to one or more Persons whose bids are solicited, but all such sales with respect to a particular Common Share Interest Payment Election shall take place concurrently on the Common Share Delivery Date.

(e)

The amount received by a holder of a Debenture in respect of the Interest Obligation or the entitlement thereto will not be affected by whether or not the Corporation elects to satisfy the Interest Obligation pursuant to a Common Share Interest Payment Election.

(f)

The Trustee shall inform the Corporation promptly following receipt of any bid or bids for Common Shares solicited pursuant to the Common Share Bid Requests. The Trustee shall accept such bid or bids as the Corporation, in its absolute discretion, shall direct by Written Direction of the Corporation, provided that the aggregate proceeds of all sales of Common Shares resulting from the acceptance of such bids, together with the amount of any cash payment by the Corporation in lieu of any fractional Common Shares and other cash payments by the Corporation, on the Common Share Delivery Date, must be equal to the related Common Share Interest Payment Election Amount in connection with any bids so accepted, the Corporation, the Trustee (if required by the Corporation in its absolute discretion) and the applicable bidders shall, not later than the Common Share Delivery Date, enter into Common Share Purchase Agreements and shall comply with all Applicable Securities Legislation, including the securities rules and regulations of any stock exchange on which the Debentures or Common Shares are then listed. The Corporation shall pay all fees and expenses in connection with the Common Share Purchase Agreements including the fees and commissions charged by the investment banks, brokers and dealers and the fees of the Trustee.

(g)

Provided that: (i) all conditions specified in each Common Share Purchase Agreement to the closing of all sales thereunder have been satisfied, other than the delivery of the Common Shares to be sold thereunder against payment of the purchase price thereof; and (ii) the purchasers under each Common Share Purchase Agreement shall be ready, willing and able to perform thereunder, in each case on the Common Share Delivery Date, the Corporation shall, on the Common Share Delivery Date, deliver to the Trustee the Common Shares to be sold on such date, an amount in cash equal to the value of any fractional Common Shares and an Officers' Certificate to the effect that all conditions precedent to such sales, including those set forth in this Indenture and in each Common Share Purchase Agreement, have been satisfied. Upon such deliveries, the Trustee shall consummate such sales on such Common Share Delivery Date by the delivery of the Common Shares to such purchasers against payment to the Trustee in immediately available funds of the purchase price therefor in an aggregate amount equal to the Common Share Interest Payment Election Amount (less any amount attributable to any fractional Common Shares), whereupon the sole right of a holder of Debentures to receive such holder's portion of the Common Share Interest Payment Election Amount will be to receive same from the Trustee out of the proceeds of such sales of Common Shares plus any amount received by the Trustee from the Corporation attributable to any fractional Common Shares in full satisfaction of the Interest Obligation and the holder will have no further recourse to the Corporation in respect of the Interest Obligation.

(h)

The Trustee shall, on the Common Share Delivery Date, use the sale proceeds of the Common Shares (together with any cash received from the Corporation in lieu of any fractional Common Shares) to purchase, on the direction of the Corporation in writing, Government Obligations which mature prior to the applicable Interest Payment Date and which the Trustee is required to hold until maturity (the "Common Share Proceeds Investment") and shall, on such date, deposit the balance, if any, of such sale proceeds in an account established by the Corporation (and which shall be maintained by and subject to the control of the Trustee) (the "Interest Account") for such Debentures. The Trustee shall hold such Common Share Proceeds Investment (but not income earned thereon) under its exclusive control in an irrevocable trust for the benefit of the holders of the Debentures. At least one Business Day prior to the Interest Payment Date, the Trustee shall deposit amounts from the proceeds of the Common Share Proceeds Investment in the Interest Account to bring the balance of the Interest Account to the Common Share Interest Payment Election Amount. On the Interest Payment Date, the Trustee shall pay the funds held in the Interest Account, together with additional cash payments of the Corporation, if any, to the holders of record of the Debentures on the Interest Payment Date (less any tax required to be deducted, if any) and, provided that there is no Event of Default, shall remit amounts, if any, in respect of income earned on the Common Share Proceeds Investment or otherwise in excess of the Common Share Interest Payment Election Amount to the Corporation.

 

 

(i)

Neither the making of a Common Share Payment Election nor the consummation of sales of Common Shares on a Common Share Delivery Date shall (i) result in the holders of the Debentures not being entitled to receive on the applicable Interest Payment Date cash in an aggregate amount equal to the Interest Obligation payable on such date or (ii) entitle such holders to receive any Common Shares in satisfaction of such Interest Obligation.

(j)

No fractional Common Shares will be issued in satisfaction of interest but in lieu thereof the Corporation will satisfy such fractional interest by a cash payment equal to the market price of such fractional interest (less any tax required to be deducted, if any).

Article 11
SUCCESSORS

11.1

Corporation may Consolidate, etc., Only on Certain Terms

(a)

The Corporation may not, without the consent of the holders, consolidate with or amalgamate or merge with or into any Person (other than a directly or indirectly wholly-owned Subsidiary of the Corporation) or sell, convey, transfer or lease all or substantially all of the properties and assets of the Corporation to another Person (other than a directly or indirectly wholly-owned Subsidiary of the Corporation) unless:

(i)

the Person formed by such consolidation or into which the Corporation is amalgamated or merged, or the Person which acquires by sale, conveyance, transfer or lease all or substantially all of the properties and assets of the Corporation is a corporation, organized and existing under the laws of Canada or any province or territory thereof or the laws of the United States or any state thereof and such corporation (if other than the Corporation or the continuing corporation resulting from the amalgamation of the Corporation with another corporation under the laws of Canada or any province or territory thereof) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the obligations of the Corporation under the Debentures and this Indenture and the performance or observance of every covenant and provision of this Indenture and the Debentures required on the part of the Corporation to be performed or observed and the conversion rights shall be provided for in accordance with Article 4, by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the Person (if other than the Corporation or the continuing corporation resulting from the amalgamation of the Corporation with another corporation under the laws of Canada or any province or territory thereof) formed by such consolidation or into which the Corporation shall have been merged or by the Person which shall have acquired the Corporation's assets;

(ii)

after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and

(iii)

if the Corporation or the continuing corporation resulting from the amalgamation or merger of the Corporation with another Person under the laws of Canada or any province or territory thereof or the laws of the United States or any state thereof will not be the resulting, continuing or surviving corporation, the Corporation shall have, at or prior to the effective date of such consolidation, amalgamation, merger or sale, conveyance, transfer or lease, delivered to the Trustee an Officers' Certificate and an opinion of Counsel, each stating that such consolidation, merger or transfer complies with this Article and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with this Article, and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b)

For purposes of the foregoing, the sale, conveyance, transfer or lease (in a single transaction or a series of related transactions) of the properties or assets of one or more Subsidiaries of the Corporation (other than to the Corporation or another wholly-owned Subsidiary of the Corporation), which, if such properties or assets were directly owned by the Corporation, would constitute all or substantially all of the properties and assets of the Corporation and its Subsidiaries, taken as a whole, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the Corporation.

 

 

11.2

Successor Substituted

Upon any consolidation of the Corporation with, or amalgamation or merger of the Corporation into, any other Person or any sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the Corporation and its Subsidiaries, taken as a whole, in accordance with Section 11.1, the successor Person formed by such consolidation or into which the Corporation is amalgamated or merged or to which such sale, conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Corporation under this Indenture with the same effect as if such successor Person had been named as the Corporation herein, and thereafter, except in the case of a lease, and except for obligations the predecessor Person may have under a supplemental indenture entered into pursuant to Section 11.1(a)(iii), the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Debentures.

Article 12
COMPULSORY ACQUISITION

12.1

Definitions

In this Article:

(a)

"Affiliate" and "Associate" shall have their respective meanings set forth in the Securities Act (Alberta);

(b)

"Dissenting Debentureholders" means a Debentureholder who does not accept an Offer referred to in Section 12.2 and includes any assignee of the Debenture of a Debentureholder to whom such an Offer is made, whether or not such assignee is recognized under this Indenture;

(c)

"Offer" means an offer to acquire outstanding Debentures where, as of the date of the offer to acquire, the Debentures that are subject to the offer to acquire, together with the Offeror's Debentures, constitute in the aggregate 20% or more of the outstanding principal amount of the Debentures;

(d)

"offer to acquire" includes an acceptance of an offer to sell;

(e)

"Offeror" means a person, or two or more persons acting jointly or in concert, who make an Offer to acquire Debentures;

(f)

"Offeror's Debentures" means Debentures beneficially owned, or over which control or direction is exercised, on the date of an Offer by the Offeror, any Affiliate or Associate of the Offeror or any person or company acting jointly or in concert (as such term is defined in NI 62-104) with the Offeror; and

(g)

"Offeror's Notice" means the notice described in Section 12.3.

12.2

Offer for Debentures

If an Offer for all of the outstanding Debentures (other than the Offeror's Debentures) is made and:

(a)

within the time provided in the Offer for its acceptance or within 120 days after the date the Offer is made, whichever period is the shorter, the Offer is accepted by Debentureholders representing at least 90% of the outstanding principal amount of the Debentures, other than the Offeror's Debentures;

(b)

the Offeror is bound to take up and pay for, or has taken up and paid for the Debentures of the Debentureholders who accepted the Offer; and

(c)

the Offeror complies with Sections 12.3 and 12.5;

the Offeror is entitled to acquire, and the Dissenting Debentureholders are required to sell to the Offeror, the Debentures held by the Dissenting Debentureholder for the same consideration per Debenture payable or paid, as the case may be, under the Offer.

 

 

12.3                                    Offeror's Notice to Dissenting Shareholders

Where an Offeror is entitled to acquire Debentures held by Dissenting Debentureholders pursuant to Section 12.2 and the Offeror wishes to exercise such right, the Offeror shall send by registered mail within 30 days after the date of termination of the Offer a notice (the "Offeror's Notice") to each Dissenting Debentureholder stating that:

(a)

Debentureholders holding at least 90% of the principal amount of all outstanding Debentures, other than Offeror's Debentures, have accepted the Offer;

(b)

the Offeror is bound to take up and pay for, or has taken up and paid for, the Debentures of the Debentureholders who accepted the Offer;

(c)

Dissenting Debentureholders must transfer their respective Debentures to the Offeror on the terms on which the Offeror acquired the Debentures of the Debentureholders who accepted the Offer within 21 days after the date of the sending of the Offeror's Notice; and

(d)

Dissenting Debentureholders must send their respective Debenture certificate(s) to the Trustee within 21 days after the date of the sending of the Offeror's Notice.

12.4

Delivery of Debenture Certificates

A Dissenting Debentureholder to whom an Offeror's Notice is sent pursuant to Section 12.3 shall, within 21 days after the sending of the Offeror's Notice, send his or her Debenture certificate(s) to the Trustee duly endorsed for transfer.

12.5

Payment of Consideration to Trustee

Within 21 days after the Offeror sends an Offeror's Notice pursuant to Section 12.3, the Offeror shall pay or transfer to the Trustee, or to such other person as the Trustee may direct, the cash or other consideration that is payable to Dissenting Debentureholders pursuant to Section 12.2. The acquisition by the Offeror of all Debentures held by all Dissenting Debentureholders shall be effective as of the time of such payment or transfer.

12.6

Consideration to be held in Trust

The Trustee, or the person directed by the Trustee, shall hold in trust for the Dissenting Debentureholders the cash or other consideration they or it receives under Section 12.5. The Trustee, or such persons, shall deposit cash in a separate account in a Canadian chartered bank, or other body corporate, any of whose deposits are insured by the Canada Deposit Insurance Corporation, and shall place other consideration in the custody of a Canadian chartered bank or such other body corporate.

12.7

Completion of Transfer of Debentures to Offeror

Within 30 days after the date of the sending of an Offeror's Notice pursuant to Section 12.3, the Trustee, if the Offeror has complied with Section 12.5, shall:

(a)

do all acts and things and execute and cause to be executed all instruments as in the Trustee's opinion may be necessary or desirable to cause the transfer of the Debentures of the Dissenting Debentureholders to the Offeror;

(b)

send to each Dissenting Debentureholder who has complied with Section 12.4 the consideration to which such Dissenting Debentureholder is entitled under this Article 12; and

(c)

send to each Dissenting Debentureholder who has not complied with Section 12.4 a notice stating that:

(i)

his or her Debentures have been transferred to the Offeror;

 

 

(ii)

the Trustee or some other person designated in such notice are holding in trust the consideration for such Debentures; and

(iii)

the Trustee, or such other person, will send the consideration to such Dissenting Debentureholder as soon as possible after receiving such Dissenting Debentureholder's Debenture certificate(s) or such other documents as the Trustee or such other person may require in lieu thereof;

and the Trustee is hereby appointed the agent and attorney of the Dissenting Debentureholders for the purposes of giving effect to the foregoing provisions.

12.8

Communication of Offer to Trust

An Offeror cannot make an Offer for Debentures unless, concurrent with the communication of the Offer to any Debentureholder, a copy of the Offer is provided to the Corporation.

Article 13
MEETINGS OF DEBENTUREHOLDERS

13.1

Right to Convene Meeting

The Trustee or the Corporation may at any time and from time to time, and the Trustee shall, on receipt of a Written Direction of the Corporation or a written request signed by the holders of not less than 25% of the principal amount of the Debentures then outstanding and upon receiving funding and being indemnified to its reasonable satisfaction by the Corporation or by the Debentureholders signing such request against the costs which may be incurred in connection with the calling and holding of such meeting, convene a meeting of the Debentureholders. In the event of the Trustee failing, within 30 days after receipt of any such request and such funding of indemnity, to give notice convening a meeting, the Corporation or such Debentureholders, as the case may be, may convene such meeting. Every such meeting shall be held in the City of Calgary or at such other place as may be approved or determined by the Trustee.

13.2

Notice of Meetings

(a)

At least 21 days' notice of any meeting shall be given to the Debentureholders in the manner provided in Section 14.2 and a copy of such notice shall be sent by post to the Trustee, unless the meeting has been called by it. Such notice shall state the time when and the place where the meeting is to be held and shall state briefly the general nature of the business to be transacted thereat and it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Article. The accidental omission to give notice of a meeting to any holder of Debentures shall not invalidate any resolution passed at any such meeting. A holder may waive notice of a meeting either before or after the meeting.

(b)

If the business to be transacted at any meeting by Extraordinary Resolution or otherwise, or any action to be taken or power exercised by instrument in writing under Section 13.15, especially affects the rights of holders of Debentures of one or more series in a manner or to an extent differing in any material way from that in or to which the rights of holders of Debentures of any other series are affected (determined as provided in Sections 13.2(c) and (d)), then:

(i)

a reference to such fact, indicating each series of Debentures in the opinion of the Trustee so especially affected (hereinafter referred to as the "especially affected series") shall be made in the notice of such meeting, and in any such case the meeting shall be and be deemed to be and is herein referred to as a "Serial Meeting"; and

(ii)

the holders of Debentures of an especially affected series shall not be bound by any action taken at a Serial Meeting or by instrument in writing under Section 13.15 unless in addition to compliance with the other provisions of this Article 13:

 

 

(A)

at such Serial Meeting: (I) there are Debentureholders present in person or by proxy and representing at least 25% in principal amount of the Debentures then outstanding of such series, subject to the provisions of this Article 13 as to quorum at adjourned meetings; and (II) the resolution is passed by the affirmative vote of the holders of more than 50% (or in the case of an Extraordinary Resolution not less than 66 2/3%) of the principal amount of the Debentures of such series then outstanding voted on the resolution; or

(B)

in the case of action taken or power exercised by instrument in writing under Section 13.15, such instrument is signed in one or more counterparts by the holders of not less than 66 2/3% in principal amount of the Debentures of such series then outstanding.

(c)

Subject to Section 13.2(d), the determination as to whether any business to be transacted at a meeting of Debentureholders, or any action to be taken or power to be exercised by instrument in writing under Section 13.15, especially affects the rights of the Debentureholders of one or more series in a manner or to an extent differing in any material way from that in or to which it affects the rights of Debentureholders of any other series (and is therefore an especially affected series) shall be determined by an opinion of Counsel, which shall be binding on all Debentureholders, the Trustee and the Corporation for all purposes hereof.

(d)

A proposal:

(i)

to extend the maturity of Debentures of any particular series or to reduce the principal amount thereof, the rate of interest or redemption premium thereon or to impair any conversion right thereof;

(ii)

to modify or terminate any covenant or agreement which by its terms is effective only so long as Debentures of a particular series are outstanding; or

(iii)

to reduce with respect to Debentureholders of any particular series any percentage stated in this Section 13.2 or Sections 13.4, 13.12 and 13.15;

shall be deemed to especially affect the rights of the Debentureholders of such series in a manner differing in a material way from that in which it affects the rights of holders of Debentures of any other series, whether or not a similar extension, reduction, modification or termination is proposed with respect to Debentures of any or all other series.

13.3

Chairman

Some person, who need not be a Debentureholder, nominated in writing by the Corporation (in case it convenes the meeting) or by the Trustee (in any other case) shall be chairman of the meeting and if no person is so nominated, or if the person so nominated is not present within 15 minutes from the time fixed for the holding of the meeting, a majority of the Debentureholders present in person or by proxy shall choose some person present to be chairman.

13.4

Quorum

Subject to the provisions of Section 13.12, at any meeting of the Debentureholders a quorum shall consist of Debentureholders present in person or by proxy and representing at least 25% in principal amount of the outstanding Debentures and, if the meeting is a Serial Meeting, at least 25% of the Debentures then outstanding of each especially affected series. If a quorum of the Debentureholders shall not be present within 30 minutes from the time fixed for holding any meeting, the meeting, if summoned by the Debentureholders or pursuant to a request of the Debentureholders, shall be dissolved, but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day in which case it shall be adjourned to the next following Business Day thereafter) at the same time and place and no notice shall be required to be given in respect of such adjourned meeting. At the adjourned meeting, the Debentureholders present in person or by proxy shall, subject to the provisions of Section 13.12, constitute a quorum and may transact the business for which the meeting was originally convened notwithstanding that they may not represent 25% of the principal amount of the outstanding Debentures or of the Debentures then outstanding of each especially affected series. Any business may be brought before or dealt with at an adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling the same. No business shall be transacted at any meeting unless the required quorum is present at the commencement of business.

 

 

13.5

Power to Adjourn

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

13.6

Show of Hands

Every question submitted to a meeting shall, subject to Section 13.7, be decided in the first place by a majority of the votes given on a show of hands except that votes on Extraordinary Resolutions shall be given in the manner hereinafter provided. At any such meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact. The chairman of any meeting shall be entitled, both on a show of hands and on a poll, to vote in respect of the Debentures, if any, held by him.

13.7

Poll

On every Extraordinary Resolution, and on any other question submitted to a meeting when demanded by the chairman or by one or more Debentureholders or proxies for Debentureholders, a poll shall be taken in such manner and either at once or after an adjournment as the chairman shall direct. Questions other than Extraordinary Resolutions shall, if a poll be taken, be decided by the votes of the holders of a majority in principal amount of the Debentures and of each especially affected series, if applicable, represented at the meeting and voted on the poll.

13.8

Voting

On a show of hands every person who is present and entitled to vote, whether as a Debentureholder or as proxy for one or more Debentureholders or both, shall have one vote. On a poll each Debentureholder present in person or represented by a proxy duly appointed by an instrument in writing shall be entitled to one vote in respect of each $1,000 principal amount of Debentures of which he shall then be the holder. In the case of any Debenture denominated in a currency or currency unit other than Canadian dollars, the principal amount thereof for these purposes shall be computed in Canadian dollars on the basis of the conversion of the principal amount thereof at the applicable spot buying rate of exchange for such other currency or currency unit as reported by the Bank of Canada at the close of business on the Business Day next preceding the meeting. Any fractional amounts resulting from such conversion shall be rounded to the nearest $100. A proxy need not be a Debentureholder. In the case of joint holders of a Debenture, any one of them present in person or by proxy at the meeting may vote in the absence of the other or others but in case more than one of them be present in person or by proxy, they shall vote together in respect of the Debentures of which they are joint holders.

13.9

Proxies

A Debentureholder may be present and vote at any meeting of Debentureholders by an authorized representative. The Corporation (in case it convenes the meeting) or the Trustee (in any other case) for the purpose of enabling the Debentureholders to be present and vote at any meeting without producing their Debentures, and of enabling them to be present and vote at any such meeting by proxy and of lodging instruments appointing such proxies at some place other than the place where the meeting is to be held, may from time to time make and vary such regulations as it shall think fit providing for and governing any or all of the following matters:

(a)

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

 

 

(b)

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

(c)

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

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

13.10

Persons Entitled to Attend Meetings

The Corporation and the Trustee, by their respective officers and directors, the Auditors of the Corporation and the legal advisors of the Corporation, the Trustee or any Debentureholder may attend any meeting of the Debentureholders, but shall have no vote as such.

13.11

Powers Exercisable by Extraordinary Resolution

In addition to the powers conferred upon them by any other provisions of this Indenture or by law, a meeting of the Debentureholders shall have the following powers exercisable from time to time by Extraordinary Resolution, subject in the case of the matters in paragraphs (a), (b), (c), (d) and (l) to receipt of the prior approval of the TSX (or such other exchange on which the Debentures are then listed):

(a)

power to authorize the Trustee to grant extensions of time for payment of any principal, premium or interest on the Debentures, whether or not the principal, premium, or interest, the payment of which is extended, is at the time due or overdue;

(b)

power to sanction any modification, abrogation, alteration, compromise or arrangement of the rights of the Debentureholders or the Trustee against the Corporation, or against its property, whether such rights arise under this Indenture or the Debentures or otherwise provided that such sanctioned actions are not prejudicial to the Trustee;

(c)

power to assent to any modification of or change in or addition to or omission from the provisions contained in this Indenture or any Debenture which shall be agreed to by the Corporation and to authorize the Trustee to concur in and execute any indenture supplemental hereto embodying any modification, change, addition or omission;

(d)

power to sanction any scheme for the reconstruction, reorganization or recapitalization of the Corporation or for the consolidation, amalgamation, arrangement, combination or merger of the Corporation with any other Person or for the sale, leasing, transfer or other disposition of all or substantially all of the undertaking, property and assets of the Corporation or any part thereof, provided that no such sanction shall be necessary in respect of any such transaction if the provisions of Section 11.1 shall have been complied with;

(e)

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

 

 

(f)

power to waive, and direct the Trustee to waive, any default hereunder and/or cancel any declaration made by the Trustee pursuant to Section 8.1 either unconditionally or upon any condition specified in such Extraordinary Resolution;

(g)

power to restrain any Debentureholder from taking or instituting any suit, action or proceeding for the purpose of enforcing payment of the principal, premium or interest on the Debentures, or for the execution of any trust or power hereunder;

(h)

power to direct any Debentureholder who, as such, has brought any action, suit or proceeding to stay or discontinue or otherwise deal with the same upon payment, if the taking of such suit, action or proceeding shall have been permitted by Section 8.5, of the costs, charges and expenses reasonably and properly incurred by such Debentureholder in connection therewith;

(i)

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

(j)

power to appoint a committee with power and authority (subject to such limitations, if any, as may be prescribed in the resolution) to exercise, and to direct the Trustee to exercise, on behalf of the Debentureholders, such of the powers of the Debentureholders as are exercisable by Extraordinary Resolution or other resolution as shall be included in the resolution appointing the committee. The resolution making such appointment may provide for payment of the expenses and disbursements of and compensation to such committee. Such committee shall consist of such number of persons as shall be prescribed in the resolution appointing it and the members need not be themselves Debentureholders. Every such committee may elect its chairman and may make regulations respecting its quorum, the calling of its meetings and the filling of vacancies occurring in its number and its procedure generally. Such regulations may provide that the committee may act at a meeting at which a quorum is present or may act by minutes signed by the number of members thereof necessary to constitute a quorum. All acts of any such committee within the authority delegated to it shall be binding upon all Debentureholders. Neither the committee nor any member thereof shall be liable for any loss arising from or in connection with any action taken or omitted to be taken by them in good faith;

(k)

power to remove the Trustee from office and to appoint a new Trustee or Trustees provided that no such removal shall be effective unless and until a new Trustee or Trustees shall have become bound by this Indenture;

(l)

power to sanction the exchange of the Debentures for or the conversion thereof into shares, bonds, debentures or other securities or obligations of the Corporation or of any other Person formed or to be formed;

(m)

power to authorize the distribution in specie of any shares or securities received pursuant to a transaction authorized under the provisions of Section 13.11(l); and

(n)

power to amend, alter or repeal any Extraordinary Resolution previously passed or sanctioned by the Debentureholders or by any committee appointed pursuant to Section 13.11(j).

Notwithstanding the foregoing provisions of this Section 13.11 none of such provisions shall in any manner allow or permit any amendment, modification, abrogation or addition to the provisions of Article 5 which could reasonably be expected to detrimentally affect the rights, remedies or recourse of the priority of the Senior Creditors.

13.12

Meaning of "Extraordinary Resolution"

(a)

The expression "Extraordinary Resolution" when used in this Indenture means, subject as hereinafter in this Article provided, a resolution proposed to be passed as an Extraordinary Resolution at a meeting of Debentureholders (including an adjourned meeting) duly convened for the purpose and held in accordance with the provisions of this Article at which the holders of not less than 25% of the principal amount of the

 

Debentures then outstanding, and if the meeting is a Serial Meeting, at which holders of not less than 25% of the principal amount of the Debentures then outstanding of each especially affected series, are present in person or by proxy and passed by the favourable votes of the holders of not less than 66 2/3% of the principal amount of the Debentures, and if the meeting is a Serial Meeting by the affirmative vote of the holders of not less than 66 2/3% of each especially affected series, in each case present or represented by proxy at the meeting and voted upon on a poll on such resolution.

(b)

If, at any such meeting, the holders of not less than 25% of the principal amount of the Debentures then outstanding and, if the meeting is a Serial Meeting, 25% of the principal amount of the Debentures then outstanding of each especially affected series, in each case are not present in person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by or on the requisition of Debentureholders, shall be dissolved but in any other case it shall stand adjourned to such date, being not less than 14 nor more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 10 days' notice shall be given of the time and place of such adjourned meeting in the manner provided in Section 14.2. Such notice shall state that at the adjourned meeting the Debentureholders present in person or by proxy shall form a quorum. At the adjourned meeting the Debentureholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at such adjourned meeting and passed thereat by the affirmative vote of holders of not less than 66 2/3% of the principal amount of the Debentures and, if the meeting is a Serial Meeting, by the affirmative vote of the holders of not less than 66 2/3% of the principal amount of the Debentures of each especially affected series, in each case present or represented by proxy at the meeting voted upon on a poll shall be an Extraordinary Resolution within the meaning of this Indenture, notwithstanding that the holders of not less than 25% in principal amount of the Debentures then outstanding, and if the meeting is a Serial Meeting, holders of not less than 25% of the principal amount of the Debentures then outstanding of each especially affected series, are not present in person or by proxy at such adjourned meeting.

(c)

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

13.13

Powers Cumulative

Any one or more of the powers in this Indenture stated to be exercisable by the Debentureholders by Extraordinary Resolution or otherwise may be exercised from time to time and the exercise of any one or more of such powers from time to time shall not be deemed to exhaust the rights of the Debentureholders to exercise the same or any other such power or powers thereafter from time to time.

13.14

Minutes

Minutes of all resolutions and proceedings at every meeting as aforesaid shall be made and duly entered in books to be from time to time provided for that purpose by the Trustee at the expense of the Corporation, and any such minutes as aforesaid, if signed by the chairman of the meeting at which such resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Debentureholders, shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every such meeting, in respect of the proceedings of which minutes shall have been made, shall be deemed to have been duly held and convened, and all resolutions passed thereat or proceedings taken thereat to have been duly passed and taken.

13.15

Instruments in Writing

All actions which may be taken and all powers that may be exercised by the Debentureholders at a meeting held as hereinbefore in this Article provided may also be taken and exercised by the holders of 66 2/3% of the principal amount of all the outstanding Debentures and, if the meeting at which such actions might be taken would be a Serial Meeting, by the holders of 66 2/3% of the principal amount of the Debentures then outstanding of each especially affected series, by an instrument in writing signed in one or more counterparts and the expression "Extraordinary Resolution" when used in this Indenture shall include an instrument so signed.

 

 

13.16

Binding Effect of Resolutions

Every resolution and every Extraordinary Resolution passed in accordance with the provisions of this Article at a meeting of Debentureholders shall be binding upon all the Debentureholders, whether present at or absent from such meeting, and every instrument in writing signed by Debentureholders in accordance with Section 13.15 shall be binding upon all the Debentureholders, whether signatories thereto or not, and each and every Debentureholder and the Trustee (subject to the provisions for its indemnity herein contained) shall be bound to give effect accordingly to every such resolution, Extraordinary Resolution and instrument in writing.

13.17

Evidence of Rights Of Debentureholders

(a)

Any request, direction, notice, consent or other instrument which this Indenture may require or permit to be signed or executed by the Debentureholders may be in any number of concurrent instruments of similar tenor signed or executed by such Debentureholders.

(b)

The Trustee may, in its discretion, require proof of execution in cases where it deems proof desirable and may accept such proof as it shall consider proper.

13.18

Concerning Serial Meetings

If in the opinion of Counsel any business to be transacted at any meeting, or any action to be taken or power to be exercised by instrument in writing under Section 13.15, does not adversely affect the rights of the holders of Debentures of one or more series, the provisions of this Article 13 shall apply as if the Debentures of such series were not outstanding and no notice of any such meeting need be given to the holders of Debentures of such series. Without limiting the generality of the foregoing, a proposal to modify or terminate any covenant or agreement which is effective only so long as Debentures of a particular series are outstanding shall be deemed not to adversely affect the rights of the holders of Debentures of any other series.

Article 14
NOTICES

14.1

Notice to Corporation

Any notice to the Corporation under the provisions of this Indenture shall be valid and effective if delivered to the Corporation at: Suite 1920, 800 5^th Avenue SW, Calgary, Alberta, T2P T2G, Attention: Executive Vice President, Finance and Chief Financial Officer, and a copy delivered to Burnet Duckworth & Palmer LLP, Executive Suite, 2400, 525 – 8^th Avenue SW, Calgary, Alberta, T2P 1G1, Attention: Edward (Ted) Brown, or if given by registered letter, postage prepaid, to such offices and so addressed and if mailed, shall be deemed to have been effectively given three days following the mailing thereof. The Corporation may from time to time notify the Trustee in writing of a change of address which thereafter, until changed by like notice, shall be the address of the Corporation for all purposes of this Indenture.

14.2

Notice to Debentureholders

Subject to Section 2.6, all notices to be given hereunder with respect to the Debentures shall be deemed to be validly given to the holders thereof if sent by first class mail, postage prepaid, by letter or circular addressed to such holders at their post office addresses appearing in any of the registers hereinbefore mentioned and shall be deemed to have been effectively given three days following the day of mailing; provided that any for any Debentures held through CDS or other Depository, if any notice or other communication is required to be given to Debentureholders, the Trustee or the Corporation may give such notices and communications to CDS or such other Depository by e-mail or facsimile (at such e-mail or facsimile number as is given by CDS or the Depository, as applicable, for such purpose from time to time) or in such other manner as is acceptable to CDS or the Depository, as applicable, and notice will deemed to have been effective/given on the date of delivery. Accidental error or omission in giving notice or accidental failure to mail notice to any Debentureholder or the inability of the Corporation to give or mail any notice due to anything beyond the reasonable control of the Corporation shall not invalidate any action or proceeding founded thereon. Accidental error or omission in giving notice or accidental failure to mail notice to any Debentureholder or the inability of the Corporation to give or mail any notice due to anything beyond the reasonable control of the Corporation shall not invalidate any action or proceeding founded thereon.

 

 

If any notice given in accordance with the foregoing paragraph would be unlikely to reach the Debentureholders to whom it is addressed in the ordinary course of post by reason of an interruption in mail service, whether at the place of dispatch or receipt or both, the Corporation shall give such notice by publication at least once in the cities of Calgary and Toronto (or in such of those cities as, in the opinion of the Trustee, is sufficient in the particular circumstances), each such publication to be made in a daily newspaper of general circulation in the designated city.

Any notice given to Debentureholders by publication shall be deemed to have been given on the day on which publication shall have been effected at least once in each of the newspapers in which publication was required.

All notices with respect to any Debenture may be given to whichever one of the holders thereof (if more than one) is named first in the registers hereinbefore mentioned, and any notice so given shall be sufficient notice to all holders of any persons interested in such Debenture.

14.3

Notice to Trustee

Any notice to the Trustee under the provisions of this Indenture shall be valid and effective if delivered to the Trustee at its principal office in the City of Calgary, at #600, 530 – 8^th Avenue S.W., Calgary, Alberta T2P 3S8, Attention: Manager, Corporate Trust, Facsimile No: 403-267-6598 or if given by registered letter, postage prepaid, to such office and so addressed and, if mailed, shall be deemed to have been effectively given three days following the mailing thereof.

14.4

Mail Service Interruption

If by reason of any interruption of mail service, actual or threatened, any notice to be given to the Trustee would reasonably be unlikely to reach its destination by the time notice by mail is deemed to have been given pursuant to Section 14.3, such notice shall be valid and effective only if delivered at the appropriate address in accordance with Section 14.3.

Article 15
CONCERNING THE TRUSTEE

15.1

No Conflict of Interest

The Trustee represents to the Corporation that at the date of execution and delivery by it of this Indenture there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder but if, notwithstanding the provisions of this Section 15.1, such a material conflict of interest exists, or hereafter arises, the validity and enforceability of this Indenture, and the Debentures issued hereunder, shall not be affected in any manner whatsoever by reason only that such material conflict of interest exists or arises but the Trustee shall, within 30 days after ascertaining that it has a material conflict of interest, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Section 15.2.

15.2

Replacement of Trustee

The Trustee may resign its trust and be discharged from all further duties and liabilities hereunder by giving to the Corporation 90 days' notice in writing or such shorter notice as the Corporation may accept as sufficient. If at any time a material conflict of interest exists in the Trustee's role as a fiduciary hereunder the Trustee shall, within 30 days after ascertaining that such a material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner and with the effect specified in this Section 15.2. The validity and enforceability of this Indenture and of the Debentures issued hereunder shall not be affected in any manner whatsoever by reason only that such a material conflict of interest exists. In the event of the Trustee resigning or being removed or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Corporation shall forthwith appoint a new Trustee unless a new Trustee has already been appointed by the Debentureholders. Failing such appointment by the Corporation, the retiring Trustee or any

 

Debentureholder may apply to a Judge of the Court of Queen's Bench of Alberta, on such notice as such Judge may direct at the Corporation's expense, for the appointment of a new Trustee but any new Trustee so appointed by the Corporation or by the Court shall be subject to removal as aforesaid by the Debentureholders and the appointment of such new Trustee shall be effective only upon such new Trustee becoming bound by this Indenture. Any new Trustee appointed under any provision of this Section 15.2 shall be a corporation authorized to carry on the business of a trust company in all of the Provinces of Canada. On any new appointment the new Trustee shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Trustee.

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

15.3

Duties of Trustee

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

15.4

Reliance Upon Declarations, Opinions, etc.

In the exercise of its rights, duties and obligations hereunder the Trustee may, if acting in good faith, rely, as to the truth of the statements and accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports or certificates furnished pursuant to any covenant, condition or requirement of this Indenture or required by the Trustee to be furnished to it in the exercise of its rights and duties hereunder, if the Trustee examines such statutory declarations, opinions, reports or certificates and determines that they comply with Section 15.5, if applicable, and with any other applicable requirements of this Indenture. The Trustee may nevertheless, in its discretion, require further proof in cases where it deems further proof desirable. Without restricting the foregoing, the Trustee may rely on an opinion of Counsel satisfactory to the Trustee notwithstanding that it is delivered by a solicitor or firm which acts as solicitors for the Corporation.

15.5

Evidence and Authority to Trustee, Opinions, etc.

The Corporation shall furnish to the Trustee evidence of compliance with the conditions precedent provided for in this Indenture relating to any action or step required or permitted to be taken by the Corporation or the Trustee under this Indenture or as a result of any obligation imposed under this Indenture, including without limitation, the Authentication and delivery of Debentures hereunder, the satisfaction and discharge of this Indenture and the taking of any other action to be taken by the Trustee at the request of or on the application of the Corporation, forthwith if and when (a) such evidence is required by any other Section of this Indenture to be furnished to the Trustee in accordance with the terms of this Section 15.5, or (b) the Trustee, in the exercise of its rights and duties under this Indenture, gives the Corporation written notice requiring it to furnish such evidence in relation to any particular action or obligation specified in such notice.

Such evidence shall consist of:

(a)

a certificate made by any two officers or directors of the Corporation, stating that any such condition precedent has been complied with in accordance with the terms of this Indenture;

 

 

(b)

in the case of a condition precedent compliance with which is, by the terms of this Indenture, made subject to review or examination by a solicitor, an opinion of Counsel that such condition precedent has been complied with in accordance with the terms of this Indenture; and

(c)

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

Whenever such evidence relates to a matter other than the Authentication and delivery of Debentures and the satisfaction and discharge of this Indenture, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, auditor, accountant, engineer or appraiser or any other person whose qualifications give authority to a statement made by him, provided that if such report or opinion is furnished by a director, officer or employee of the Corporation it shall be in the form of a statutory declaration. Such evidence shall be, so far as appropriate, in accordance with the immediately preceding paragraph of this Section.

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

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

15.6

Officers' Certificates Evidence

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

15.7

Experts, Advisers and Agents

The Trustee may:

(a)

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

(b)

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

 

 

15.8

Trustee May Deal in Debentures

Subject to Sections 15.1 and 15.3, the Trustee may, in its personal or other capacity, buy, sell, lend upon and deal in the Debentures and generally contract and enter into financial transactions with the Corporation or otherwise, without being liable to account for any profits made thereby.

15.9

Investment of Monies Held by Trustee

Unless otherwise provided in this Indenture, any monies held by the Trustee, which, under the trusts of this Indenture, may or ought to be invested or which may be on deposit with the Trustee or which may be in the hands of the Trustee, may be invested and reinvested in the name or under the control of the Trustee in securities in which, under the laws of the Province of Alberta, trustees are authorized to invest trust monies, provided that such securities are expressed to mature within two years or such shorter period selected to facilitate any payments expected to be made under this Indenture, after their purchase by the Trustee, and unless and until the Trustee shall have declared the principal of and interest on the Debentures to be due and payable, the Trustee shall so invest such monies at the Written Direction of the Corporation given in a reasonably timely manner. Pending the investment of any monies as hereinbefore provided, such monies may be deposited in the name of the Trustee in any chartered bank of Canada or, with the consent of the Corporation, in the deposit department of the Trustee or any other loan or trust company authorized to accept deposits under the laws of Canada or any Province thereof at the rate of interest, if any, then current on similar deposits.

Unless and until the Trustee shall have declared the principal of and interest on the Debentures to be due and payable, the Trustee shall pay over to the Corporation all interest received by the Trustee in respect of any investments or deposits made pursuant to the provisions of this Section.

15.10

Trustee Not Ordinarily Bound

Except as provided in Section 8.2 and as otherwise specifically provided herein, the Trustee shall not, subject to Section 15.3, be bound to give notice to any person of the execution hereof, nor to do, observe or perform or see to the observance or performance by the Corporation of any of the obligations herein imposed upon the Corporation or of the covenants on the part of the Corporation herein contained, nor in any way to supervise or interfere with the conduct of the Corporation's business, unless the Trustee shall have been required to do so in writing by the holders of not less than 25% of the aggregate principal amount of the Debentures then outstanding or by any Extraordinary Resolution of the Debentureholders passed in accordance with the provisions contained in Article 13, and then only after it shall have been funded and indemnified to its satisfaction against all actions, proceedings, claims and demands to which it may render itself liable and all costs, charges, damages and expenses which it may incur by so doing.

15.11

Trustee Not Required to Give Security

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

15.12

Trustee Not Bound to Act on Corporation's Request

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

15.13

Conditions Precedent to Trustee's Obligations to Act Hereunder

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

 

 

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

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

15.14

Authority to Carry on Business

The Trustee represents to the Corporation that at the date of execution and delivery by it of this Indenture it is authorized to carry on the business of a trust company in each of the provinces of Canada but if, notwithstanding the provisions of this Section 15.14, it ceases to be so authorized to carry on business, the validity and enforceability of this Indenture and the securities issued hereunder shall not be affected in any manner whatsoever by reason only of such event but the Trustee shall, within 90 days after ceasing to be authorized to carry on the business of a trust company in any of the provinces of Canada, either become so authorized or resign in the manner and with the effect specified in Section 15.2.

15.15

Compensation and Indemnity

(a)

The Corporation shall pay to the Trustee from time to time compensation for its services hereunder as agreed separately by the Corporation and the Trustee, and shall pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in the administration or execution of its duties under this Indenture (including the reasonable and documented compensation and disbursements of its Counsel and all other advisers and assistants not regularly in its employ), both before any default hereunder and thereafter until all duties of the Trustee under this Indenture shall be finally and fully performed. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust.

(b)

The Corporation hereby indemnifies and saves harmless the Trustee and its directors, officers and employees from and against any and all loss, damages, charges, expenses, claims, demands, actions or liability whatsoever which may be brought against the Trustee or which it may suffer or incur as a result of or arising out of the performance of its duties and obligations hereunder save only in the event of the negligence, wilful misconduct or bad faith of the Trustee. This indemnity will survive the termination or discharge of this Indenture and the resignation or removal of the Trustee. The Trustee shall notify the Corporation promptly of any claim for which it may seek indemnity. The Corporation shall defend the claim and the Trustee shall co-operate in the defence. The Trustee may have separate Counsel and the Corporation shall pay the reasonable fees and expenses of such Counsel. The Corporation need not pay for any settlement made without its consent, which consent must not be unreasonably withheld. This indemnity shall survive the resignation or removal of the Trustee or the discharge of this Indenture.

(c)

The Corporation need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith or breach of the Trustee's duties hereunder.

15.16

Acceptance of Trust

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

 

 

15.17

Third Party Interests

Each party to this Indenture (in this paragraph referred to as a "representing party") hereby represents to the Trustee that any account to be opened by, or interest to held by, the Trustee in connection with this Indenture, for or to the credit of such representing party, either (i) is not intended to be used by or on behalf of any third party; or (ii) is intended to be used by or on behalf of a third party, in which case such representing party hereby agrees to complete, execute and deliver forthwith to the Trustee a declaration, in the Trustee's prescribed form or in such other form as may be satisfactory to it, as to the particulars of such third party.

15.18

Anti-Money Laundering

The Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Trustee, in its sole judgment, acting reasonably, determines that such act might cause it to be in noncompliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline. Further, should the Trustee, in its sole judgment, acting reasonably, determine at any time that its acting under this Indenture has resulted in its being in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 10 days' prior written notice sent to the Corporation provided that (i) the Trustee's written notice shall describe the circumstances of such non-compliance; and (ii) if such circumstances are rectified to the Trustee's satisfaction within such 10-day period, then such resignation shall not be effective.

15.19

Privacy Laws

The parties acknowledge that federal and/or provincial legislation that addresses the protection of individuals' personal information (collectively, "Privacy Laws") applies to certain obligations and activities under this Indenture. Notwithstanding any other provision of this Indenture, neither party shall take or direct any action that would contravene, or cause the other to contravene, applicable Privacy Laws. The Corporation shall, prior to transferring or causing to be transferred personal information to the Trustee, obtain and retain required consents of the relevant individuals to the collection, use and disclosure of their personal information, or shall have determined that such consents either have previously been given upon which the parties can rely or are not required under the Privacy Laws. The Trustee shall use commercially reasonable efforts to ensure that its services hereunder comply with Privacy Laws. Specifically, the Trustee agrees: (a) to have a designated chief privacy officer; (b) to maintain policies and procedures to protect personal information and to receive and respond to any privacy complaint or inquiry; (c) to use personal information solely for the purposes of providing its services under or ancillary to this Indenture and to comply with applicable laws and not to use it for any other purpose except with the consent of or direction from the Corporation or the individual involved or as permitted by Privacy Laws; (d) not to sell or otherwise improperly disclose personal information to any third party; and (e) to employ administrative, physical and technological safeguards to reasonably secure and protect personal information against loss, theft, or unauthorized access, use or modification.

15.20

Force Majeure

Except for the payment of conversion obligations of the Corporation contained herein, neither party shall be liable to the other, or held in breach of this Indenture, if prevented, hindered, or delayed in the performance or observance of any provision contained herein by reason of force majeure such as act of God, riots, terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, economic sanctions, or any other similar causes (including, but not limited to, general mechanical, electronic or communication interruptions, disruptions or failures). Performance times under this Indenture shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this Section 15.20.

Article 16
SUPPLEMENTAL INDENTURES

16.1

Supplemental Indentures

Subject to the approval of the TSX (or such other exchange on which the Debentures are then listed), from time to time the Trustee and, when authorized by a resolution of the directors of Corporation, the Corporation, may, and they shall when required by this Indenture, execute, acknowledge and deliver by their proper officers deeds or indentures supplemental hereto which thereafter shall form part hereof, for any one or more of the following purposes:

 

 

(a)

providing for the issuance of Additional Debentures under this Indenture;

(b)

adding to the covenants of the Corporation herein contained for the protection or benefit of the Debentureholders, or of the Debentures of any series, or providing for events of default, in addition to those herein specified;

(c)

making such provisions not inconsistent with this Indenture as may be necessary or desirable with respect to matters or questions arising hereunder, including the making of any modifications in the form of the Debentures which do not affect the substance thereof and which in the opinion of the Trustee relying on an opinion of Counsel will not be prejudicial to the interests of the Debentureholders;

(d)

evidencing the succession, or successive successions, of others to the Corporation and the covenants of and obligations assumed by any such successor in accordance with the provisions of this Indenture;

(e)

giving effect to any Extraordinary Resolution passed as provided in Article 13; and

(f)

for any other purpose not inconsistent with the terms of this Indenture.

Unless the supplemental indenture requires the consent or concurrence of Debentureholders or the holders of a particular series of Debentures, as the case may be, by Extraordinary Resolution, the consent or concurrence of Debentureholders or the holders of a particular series of Debentures, as the case may be, shall not be required in connection with the execution, acknowledgement or delivery of a supplemental indenture. The Corporation and the Trustee may amend any of the provisions of this Indenture related to matters of United States law or the issuance of Debentures into the United States in order to ensure that such issuances can be made in accordance with applicable law in the United States without the consent or approval of the Debentureholders provided that, in the opinion of the Trustee (relying on an opinion of Counsel), the rights of the Debentureholders are in no way prejudiced thereby. The Trustee will have the right to request a legal opinion regarding matters of United States law on the issuance of Debentures into the United States prior to or concurrently with making such amendments. Further, the Corporation and the Trustee may without the consent or concurrence of the Debentureholders or the holders of a particular series of Debentures, as the case may be, by supplemental indenture or otherwise, make any changes or corrections in this Indenture which it shall have been advised by Counsel are required for the purpose of curing or correcting any ambiguity or defective or inconsistent provisions or clerical omissions or mistakes or manifest errors contained herein or in any indenture supplemental hereto or any Written Direction of the Corporation provided for the issue of Debentures, providing that in the opinion of the Trustee (relying upon an opinion of Counsel) the rights of the Debentureholders are in no way prejudiced thereby.

Article 17
EXECUTION AND FORMAL DATE

17.1

Execution

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

17.2

Formal Date

For the purpose of convenience this Indenture may be referred to as bearing the formal date of August 9, 2016 irrespective of the actual date of execution hereof.

 

 

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

			BELLATRIX EXPLORATION LTD.
			By:	(signed) "Raymond G. Smith"
				Raymond G. Smith
				President and Chief Executive Officer
			By:	(signed) "Edward J. Brown"
				Edward J. Brown
				Executive Vice President, Finance and Chief Financial Officer

 

			COMPUTERSHARE TRUST COMPANY OF CANADA
			By:	(signed) "Beatriz Fedozzi"
				Name: Beatriz Fedozzi
				Title: Corporate Trust Officer
			By:	(signed) "Laura Leong"
				Name: Laura Leong
				Title: Corporate Trust Officer

SCHEDULE "A"

TO THE DEBENTURE INDENTURE BETWEEN

BELLATRIX EXPLORATION LTD.

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

FORM OF INITIAL DEBENTURE

 

	CUSIP 078314AE1 ISIN CA078314AE11
No. l	$l

BELLATRIX EXPLORATION LTD.

(A corporation incorporated under the laws of Alberta)

6.75% Extendible CONVERTIBLE UNSECURED SUBORDINATED DEBENTURE

Bellatrix Exploration Ltd. (the "Corporation" or the "Issuer") for value received hereby acknowledges itself indebted and, subject to the provisions of the debenture indenture (the "Indenture") dated as of August 9, 2016 between the Corporation and Computershare Trust Company of Canada (the "Trustee"), promises to pay to the registered holder hereof on the Initial Maturity Date or the Final Maturity Date, as applicable, or on such earlier date as the principal amount hereof may become due in accordance with the provisions of the Indenture the principal sum of · Dollars ($ · ) in lawful money of Canada on presentation and surrender of this Initial Debenture at the main branch of the Trustee in Calgary, Alberta or in Toronto, Ontario in accordance with the terms of the Indenture and, subject as hereinafter provided, to pay interest on the principal amount hereof from the date hereof, or from the last Interest Payment Date to which interest shall have been paid or made available for payment hereon, whichever is later, at the rate of 6.75% per annum (based on a year of 365 days), in like money, in arrears in (with the exception of the first interest payment which will include interest from August 9, 2016 as set forth below) semi-annual installments (less any tax required by law to be deducted) on March 31 and September 30 in each year commencing on September 30, 2016 (unless the Initial Maturity Date occurs prior to such date in which case the first interest payment shall fall due on the Initial Maturity Date) and, assuming maturity of the Initial Debentures is extended to the Final Maturity Date, the last payment (representing interest payable from the Interest Payment Date immediately prior to the Final Maturity Date to, but excluding, the Final Maturity Date) to fall due on the Final Maturity Date and, should the Corporation at any time make default in the payment of any principal, premium, if any, or interest, to pay interest on the amount in default at the same rate, in like money and on the same dates. For certainty, the first interest payment will include interest accrued from and including the date of closing of the Initial Debenture Offering to, but excluding, September 30, 2016, which will be equal to $ · for each $1,000 principal amount of Initial Debentures; provided that if the Maturity Date of the Initial Debentures is not extended to the Final Maturity Date and the Initial Maturity Date occurs prior to September 30, 2016 the first interest payment will include interest accrued from the closing of the Initial Debenture Offering to, but excluding, the Initial Maturity Date. Any payment required to be made on any day that is not a Business Day will be made on the next succeeding Business Day.

The Corporation may elect, from time to time, to satisfy interest hereon by delivering: (i) cash; (ii) freely tradeable Common Shares; or (iii) a combination of (i) and (ii), to the Trustee pursuant to the Common Share Interest Payment Election and delivery of such cash or freely tradeable Common Shares, or any combination thereof less the amount of any tax required to be withheld, shall satisfy and discharge all liability for interest on this Initial Debenture to the extent of the sum represented thereby plus any tax withheld as aforesaid.

 

 

This Initial Debenture is one of the 6.75% Extendible Convertible Unsecured Subordinated Debentures (referred to herein as the "Initial Debentures") of the Corporation issued or issuable in one or more series under the provisions of the Indenture. The Initial Debentures authorized for issue immediately are limited to an aggregate principal amount of $57,500,000 in lawful money of Canada. Reference is hereby expressly made to the Indenture for a description of the terms and conditions upon which the Initial Debentures are or are to be issued and held and the rights and remedies of the holders of the Initial Debentures and of the Corporation and of the Trustee, all to the same effect as if the provisions of the Indenture were herein set forth to all of which provisions the holder of this Initial Debenture by acceptance hereof assents.

The Initial Debentures are issuable only in denominations of $1,000 and integral multiples thereof. Upon compliance with the provisions of the Indenture, Debentures of any denomination may be exchanged for an equal aggregate principal amount of Debentures in any other authorized denomination or denominations.

Any part, being $1,000 or an integral multiple thereof, of the principal of this Initial Debenture, provided that the principal amount of this Initial Debenture is in a denomination in excess of $1,000, is convertible, at the option of the holder hereof, upon surrender of this Initial Debenture at the principal office of the Trustee in Calgary, Alberta or in Toronto, Ontario, at any time following the Disposition Closing and prior to the close of business on the last Business Day immediately preceding the Maturity Date or, if this Initial Debenture is called for redemption on or prior to such date, then, to the extent so called for redemption, up to but not after the close of business on the last Business Day immediately preceding the date specified for redemption of this Initial Debenture or, if called for repurchase pursuant to the 90% Redemption Right on the Business Day immediately prior to the payment date, or, if subject to compulsory acquisition as provided for in the Indenture, on the Business Day immediately prior to the day on which such acquisition becomes effective, into Common Shares (without adjustment for interest accrued hereon or for dividends or distributions on Common Shares issuable upon conversion) at a conversion price of $1.62 (the "Conversion Price") per Common Share, being a rate of approximately 617.2840 Common Shares for each $1,000 principal amount of Initial Debentures, all subject to the terms and conditions and in the manner set forth in the Indenture. No Initial Debentures may be converted during the five Business Days preceding and including March 31 and September 30 in each year, commencing September 30, 2016, as the registers of the Trustee will be closed during such periods. The Indenture makes provision for the adjustment of the Conversion Price in the events therein specified. No fractional Common Shares will be issued on any conversion but in lieu thereof, the Corporation will satisfy such fractional interest by a cash payment equal to the market price of such fractional interest determined in accordance with the Indenture. Holders converting their Debentures will receive accrued and unpaid interest thereon. If a Debenture is surrendered for conversion on an Interest Payment Date or during the five preceding Business Days, the person or persons entitled to receive Common Shares in respect of the Debentures so surrendered for conversion shall not become the holder or holders of record of such Common Shares until the Business Day following such Interest Payment Date.

This Initial Debenture may be redeemed at the option of the Corporation on the terms and conditions set out in the Indenture at the Redemption Price therein and herein set out provided that this Initial Debenture is not redeemable before September 30, 2019, except in the event of the satisfaction of certain conditions after a Change of Control has occurred. On and after September 30, 2019 and prior to September 30, 2020, and provided that the Current Market Price of the Common Shares is at least 125% of the Conversion Price of the Initial Debentures, the Initial Debentures are redeemable at the option of the Corporation at a price equal to $1,000 per Initial Debenture (the "Redemption Price") plus accrued and unpaid interest and otherwise on the terms and conditions described in the Indenture. On or after September 30, 2020 and prior to the Maturity Date, the Debentures may be redeemed by the Corporation, in whole or in part, from time to time at the Redemption Price plus accrued and unpaid interest and otherwise on the terms and conditions described in the Indenture. The Corporation may, on notice as provided in the Indenture, at its option and subject to any applicable regulatory approval, elect to satisfy its obligation to pay all or any portion of the applicable principal portion of the Redemption Price by the issue of that number of Common Shares obtained by dividing the applicable principal portion of the Redemption Price by 95% of the volume weighted average trading price of the Common Shares on the TSX (or such other stock exchange on which the Initial Debentures may be listed) for the 20 consecutive trading days ending five trading days before the Redemption Date.

Upon the occurrence of a Change of Control of the Corporation, the Corporation is required to make an offer to purchase all of the Initial Debentures at a price equal to 100% of the principal amount of such Initial Debentures plus accrued and unpaid interest (if any) up to, but excluding, the date the Initial Debentures are so repurchased (the "Debenture Offer"). If 90% or more of the principal amount of all Debentures outstanding on the date the Corporation provides notice of the Change of Control to the Trustee have been tendered for purchase pursuant to the Debenture Offer, the Corporation has the right to redeem all the remaining outstanding Initial Debentures on the same date and at the same price.

 

 

In addition to the requirement for the Corporation to make a Debenture Offer in the event of a Change of Control, if 10% or more of the consideration for the Common Shares in the transaction or transactions constituting the Change of Control consists of:

(i)

cash, other than cash payments for fractional Common Shares and cash payments made in respect of dissenter's appraisal rights;

(ii)

equity securities that are not traded or intended to be traded immediately following such transactions on a recognized stock exchange; or

(iii)

other property that is not traded or intended to be traded immediately following such transactions on a recognized stock exchange,

then subject to regulatory approvals, during the period beginning 10 trading days before the anticipated date on which the Change of Control becomes effective and ending 30 days after the Debenture Offer is delivered, holders of Debentures will be entitled to convert their Debentures, subject to certain limitations, and receive, in addition to the number of Common Shares they would otherwise be entitled to receive, an additional number of Common Shares per $1,000 principal amount of Debentures calculated in accordance with the terms of the Indenture.

If an Offer for all of the outstanding Initial Debentures (other than the Offeror's Debentures) is made and 90% or more of the principal amount of all the Initial Debentures (other than Initial Debentures held at the date of the offer by or on behalf of the Offeror, associates or affiliates of the Offeror or anyone acting jointly or in concert with the Offeror) are taken up and paid for by the Offeror, the Offeror will be entitled to acquire the Initial Debentures of those holders who did not accept the offer on the same terms as the Offeror acquired the first 90% of the principal amount of the Initial Debentures.

Subject to the receipt of any required regulatory approvals and to the restrictions on the Common Share Redemption Right and the Common Share Repayment Right, the Corporation may, on notice as provided in the Indenture, at its option and subject to any applicable regulatory approval, elect to satisfy the obligation to repay all or any portion of the principal amount of this Initial Debenture due on the Final Maturity by the issue of that number of Freely Tradeable Common Shares obtained by dividing the principal amount of this Initial Debenture (or that portion to be paid for in Common Shares pursuant to the exercise by the Corporation of the Common Share Repayment Right) by 95% of the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange (or such other exchange on which the Debentures are then listed) for the 20 consecutive trading days ending five trading days before the Final Maturity Date. The Corporation will not be entitled to issue Common Shares to satisfy our payment obligations on the Initial Maturity Date.

The Corporation shall not, directly or indirectly (through a Subsidiary or otherwise) undertake or announce any rights offering, issuance of securities, subdivision of the Common Shares, dividend or other distribution on the Common Shares or any other securities, capital reorganization, reclassification or any similar type of transaction in which:

(a) the number of securities to be issued;

(b) the price at which securities are to be issued, converted or exchanged; or

(c) any property or cash that is to be distributed or allocated,

is in whole or in part based upon, determined in reference to, related to or a function of, directly or indirectly, (i) the exercise or potential exercise of the Common Share Redemption Right or the Common Share Repayment Right, or (ii) the Current Market Price determined in connection with the exercise or potential exercise of the Common Share Redemption Right or the Common Share Repayment Right.

 

 

The indebtedness evidenced by this Initial Debenture, and by all other Initial Debentures now or hereafter certified and delivered under the Indenture, is a direct unsecured obligation of the Corporation, and is subordinated in right of payment, to the extent and in the manner provided in the Indenture, to the prior payment in full of all Senior Indebtedness, whether outstanding at the date of the Indenture or thereafter created, incurred, assumed or guaranteed.

The principal hereof may become or be declared due and payable before the stated maturity in the events, in the manner, with the effect and at the times provided in the Indenture.

The Indenture contains provisions making binding upon all holders of Debentures outstanding thereunder (or in certain circumstances specific series of Debentures) resolutions passed at meetings of such holders held in accordance with such provisions and instruments signed by the holders of a specified majority of Debentures outstanding (or specific series), which resolutions or instruments may have the effect of amending the terms of this Initial Debenture or the Indenture.

The Indenture contains provisions disclaiming any personal liability on the part of holders of Common Shares and officers, directors and employees of the Corporation in respect of any obligation or claim arising out of the Indenture or this Debenture.

This Initial Debenture may only be transferred, upon compliance with the conditions prescribed in the Indenture, in one of the registers to be kept at the principal office of the Trustee in the City of Calgary or the City of Toronto and in such other place or places and/or by such other registrars (if any) as the Corporation with the approval of the Trustee may designate. No transfer of this Initial Debenture shall be valid unless made on the register by the registered holder hereof or his executors or administrators or other legal representatives, or his or their attorney duly appointed by an instrument in form and substance satisfactory to the Trustee or other registrar, and upon compliance with such reasonable requirements as the Trustee and/or other registrar may prescribe and upon surrender of this Initial Debenture for cancellation. Thereupon a new Initial Debenture or Initial Debentures in the same aggregate principal amount shall be issued to the transferee in exchange hereof.

This Initial Debenture shall not become obligatory for any purpose until it shall have been certified by the Trustee under the Indenture.

If any of the provisions of this Initial Debenture are inconsistent with the provisions of the Indenture, the provisions of the Indenture shall take precedence and shall govern. Capitalized words or expressions used in this Initial Debenture shall, unless otherwise defined herein, have the meaning ascribed thereto in the Indenture.

The Indenture and this Debenture shall be governed by, and construed in accordance with, the laws of the Province of Alberta and the federal laws of Canada applicable therein.

IN WITNESS WHEREOF BELLATRIX EXPLORATION LTD. has caused this Debenture to be signed by its authorized representatives as of the 9^th day of August, 2016.

			BELLATRIX EXPLORATION LTD.
			By:

 

(FORM OF TRUSTEE'S CERTIFICATE)

This Initial Debenture is one of the 6.75% Extendible Convertible Unsecured Subordinated Debentures referred to in the Indenture within mentioned.

COMPUTERSHARE TRUST COMPANY OF CANADA
By:
	(Authorized Officer)

(FORM OF REGISTRATION PANEL)

(No writing hereon except by Trustee or other registrar)

Date of Registration	In Whose Name Registered	Signature of Trustee or Registrar

 

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto________________________________, whose address and social insurance number, if applicable, are set forth below, this Initial Debenture (or $_______________________ principal amount hereof*) of BELLATRIX EXPLORATION LTD. standing in the name(s) of the undersigned in the register maintained by the Corporation with respect to such Initial Debenture and does hereby irrevocably authorize and direct the Trustee to transfer such Initial Debenture in such register, with full power of substitution in the premises.

Dated:
Address of Transferee
	(Street Address, City, Province and Postal Code)
Social Insurance Number of Transferee, if applicable:

*If less than the full principal amount of the within Initial Debenture is to be transferred, indicate in the space provided the principal amount (which must be $1,000 or an integral multiple thereof, unless you hold an Initial Debenture in a non-integral multiple of $1,000 by reason of your having exercised your right to exchange upon the making of a Debenture Offer, in which case such Initial Debenture is transferable only in its entirety) to be transferred.

1.

The signature(s) to this assignment must correspond with the name(s) as written upon the face of this Initial Debenture in every particular without alteration or any change whatsoever. The signature(s) must be guaranteed by a Canadian chartered bank or trust company or by a member of an acceptable Medallion Guarantee Program. Notarized or witnessed signatures are not acceptable as guaranteed signatures. The Guarantor must affix a stamp bearing the actual words: "SIGNATURE GUARANTEED".

2.

The registered holder of this Initial Debenture is responsible for the payment of any documentary, stamp or other transfer taxes that may be payable in respect of the transfer of this Debenture.

Signature of Guarantor:

Authorized Officer			Signature of transferring registered holder
Name of Institution

 

EXHIBIT "1"

Bellatrix EXPLORATION LTD.

6.75% Extendible CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES

Initial Principal Amount:  $ ·

CUSIP 078314AE1 ISIN CA078314AE11

 

Authorization: ______________________________________

ADJUSTMENTS

Date	Amount of Increase	Amount of Decrease	New Principal Amount	Authorization

SCHEDULE "B"

TO THE DEBENTURE INDENTURE BETWEEN

BELLATRIX EXPLORATION LTD.

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

 

REDEMPTION NOTICE

To:

Holders of 6.75% Extendible Convertible Unsecured Subordinated Debentures (the "Debentures") of Bellatrix Exploration Ltd. (the "Corporation")

Note:

All capitalized terms used herein have the meaning ascribed thereto in the Indenture mentioned below, unless otherwise indicated.

Notice is hereby given pursuant to Section 4.3 of the debenture indenture (the "Indenture") dated as of August 9, 2016 between the Corporation and Computershare Trust Company of Canada (the "Trustee"), that the aggregate principal amount of $l of the $l of Debentures outstanding will be redeemed as of l (the "Redemption Date"), upon payment of a redemption amount of $lfor each $1,000 principal amount of Debentures, being equal to the aggregate of (i) $1,000; and (ii) all accrued and unpaid interest hereon to but excluding the Redemption Date (collectively, the "Redemption Price").

The Redemption Price will be payable upon presentation and surrender of the Debentures called for redemption at the following corporate trust office:

Computershare Trust Company of Canada

600, 530 - 8th Avenue S.W

Calgary, Alberta T2P 3S8

Facsimile: (403) 267-6598

Attention: Manager, Corporate Trust

The interest upon the principal amount of Debentures called for redemption shall cease to be payable from and after the Redemption Date, unless payment of the Redemption Price shall not be made on presentation for surrender of such Debentures at the above-mentioned corporate trust office on or after the Redemption Date or prior to the setting aside of the Redemption Price pursuant to the Indenture.

Pursuant to Section 4.6 of the Indenture, the Corporation hereby irrevocably elects to satisfy its obligation to pay [all/$l] of the principal portion of the Redemption Price payable to holders of Debentures in accordance with this notice by issuing and delivering to the holders that number of Freely Tradeable Common Shares obtained by dividing the Redemption Price by 95% of the Current Market Price of the Common Shares.

No fractional Common Shares shall be delivered upon the exercise by the Corporation of the above-mentioned redemption right but, in lieu thereof, the Corporation shall pay the cash equivalent thereof determined on the basis of the Current Market Price of the Common Shares on the Redemption Date (less any tax required to be deducted, if any).

In this connection, upon presentation and surrender of the Debentures for payment on the Redemption Date, the Corporation shall, on the Redemption Date, make the delivery to the Trustee, at the above-mentioned corporate trust office, for delivery to and on account of the holders, of certificates representing the Freely Tradeable Common Shares to which holders are entitled together with the cash equivalent in lieu of fractional Common Shares, cash for all accrued and unpaid interest up to, but excluding, the Redemption Date, and, if only a portion of the principal portion of the Debentures is to be redeemed by issuing Freely Tradeable Common Shares, cash representing the balance of the principal portion of the Redemption Price.

DATED:

BELLATRIX EXPLORATION LTD.
By:
	(Authorized Director or Officer of Bellatrix Exploration Ltd.)

SCHEDULE "C"

TO THE DEBENTURE INDENTURE BETWEEN

BELLATRIX EXPLORATION LTD.

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

MATURITY NOTICE

To:

Holders of 6.75% Extendible Convertible Unsecured Subordinated Debentures (the "Debentures") of Bellatrix Exploration Ltd. (the "Corporation")

Note:

All capitalized terms used herein have the meaning ascribed thereto in the Indenture mentioned below, unless otherwise indicated.

Notice is hereby given pursuant to Section 4.10(b) of the debenture indenture (the "Indenture") dated as of August 9, 2016 between the Corporation and Computershare Trust Company of Canada, as trustee (the "Trustee"), that the Debentures are due and payable as of September 30, 2021 (the "Maturity Date") and the Corporation elects to satisfy its obligation to repay to holders of Debentures [all/$l] of the principal amount of the Debentures outstanding on the Maturity Date by issuing and delivering to the holders that number of Freely Tradeable Common Shares equal to the number obtained by dividing such principal amount of the Debentures and accrued and unpaid interest thereon by 95% of the Current Market Price of the Common Shares on the Maturity Date.

No fractional Common Shares shall be delivered on exercise by the Corporation of the above mentioned repayment right but, in lieu thereof, the Corporation shall pay the cash equivalent thereof determined on the basis of the Current Market Price of the Common Shares on the Maturity Date (less any tax required to be deducted, if any).

In this connection, upon presentation and surrender of the Debentures for payment on the Maturity Date, the Corporation shall, on the Maturity Date, make delivery to the Trustee, at its principal trust office in Calgary, Alberta or in Toronto, Ontario, for delivery to and on account of the holders, of certificates representing the Freely Tradeable Common Shares to which holders are entitled, together with cash representing accrued and unpaid interest due on the Maturity Date, together with the cash equivalent in lieu of fractional Common Shares, and if only a portion of the Debentures is to be repaid by issuing Freely Tradeable Common Shares, cash representing the balance of the principal amount, premium (if any) and interest due on the Maturity Date.

DATED:

BELLATRIX EXPLORATION LTD.
By:
	(Authorized Director or Officer of Bellatrix Exploration Ltd.)

SCHEDULE "D"

TO THE DEBENTURE INDENTURE BETWEEN

BELLATRIX EXPLORATION LTD.

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

CONVERSION NOTICE

TO: BELLATRIX EXPLORATION LTD.

Note:

All capitalized terms used herein have the meaning ascribed thereto in the Indenture mentioned below, unless otherwise indicated.

The undersigned registered holder of 6.75% Extendible Convertible Unsecured Subordinated Debentures irrevocably elects to convert such Debentures (or $l principal amount thereof*) in accordance with the terms of the Indenture referred to in such Debentures and tenders herewith the Debentures, and, if applicable, directs that the Common Shares of Bellatrix Exploration Ltd. issuable upon a conversion be issued and delivered to the person indicated below. (If Common Shares are to be issued in the name of a person other than the holder, all requisite transfer taxes must be tendered by the undersigned).

Dated:
			(Signature of Registered Holder)

*

If less than the full principal amount of the Debentures, indicate in the space provided the principal amount (which must be $1,000 or integral multiples thereof).

NOTE:

If Common Shares are to be issued in the name of a person other than the holder, the signature must be guaranteed by a chartered bank, a trust company or by a member of an acceptable Medallion Guarantee Program. The Guarantor must affix a stamp bearing the actual words: "SIGNATURE GUARANTEED".

(Print name in which Common Shares are to be issued, delivered and registered) Name:

Name:
(Address)
(City, Province and Postal Code)
Name of guarantor:
Authorized signature:

SCHEDULE "E"

TO THE DEBENTURE INDENTURE BETWEEN

BELLATRIX EXPLORATION LTD.

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

Closing Notice

TO:	COMPUTERSHARE TRUST COMPANY OF CANADA

This Closing Notice is being provided pursuant to Subsection 2.4(l)(i) of the debenture indenture (the "Indenture") dated August 9, 2016 between Bellatrix Exploration Ltd. (the "Corporation") and Computershare Trust Company of Canada (the "Trustee").

Capitalized terms used in the Indenture have the same meaning herein as therein, unless otherwise defined.

The Trustee is hereby notified by the Corporation and NBF, on behalf of the Underwriters, that the Escrow Release Condition has been satisfied.

DATED at Calgary, Alberta, this _____ day of __________________, 2016.

 

BELLATRIX EXPLORATION LTD.
Per:
	Authorized Signatory

 

NATIONAL BANK FINANCIAL INC. on its own behalf and on behalf of the other Underwriters
Per:
	Authorized Signatory

 

SCHEDULE "F"

TO THE DEBENTURE INDENTURE BETWEEN

BELLATRIX EXPLORATION LTD.

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

IRREVOCABLE DIRECTION

TO:	COMPUTERSHARE TRUST COMPANY OF CANADA

This Irrevocable Direction is being provided pursuant to Subsection 2.4(l)(i) of the debenture indenture (the "Indenture") dated August 9, 2016 between Bellatrix Exploration Ltd. (the "Corporation") and Computershare Trust Company of Canada (the "Trustee").

Capitalized terms used in the Indenture have the same meaning herein as therein, unless otherwise defined.

The Trustee is hereby irrevocably directed and authorized, in its capacity as trustee under the Indenture:

 

(a)

to release to, or as directed in writing by, the Corporation, the Released Amount; and

(b)

to release to National Bank Financial Inc., on behalf of the Underwriters, the sum of $[1,000,000/1,150,000] plus Earned Interest thereon; and

DATED at Calgary, Alberta, this _____ day of __________________, 2016.

 

BELLATRIX EXPLORATION LTD.
Per:
	Authorized Signatory

 

 

 

 

 Exhibit 99.4

 

 

 

 

 

 

 

 

 

BELLATRIX EXPLORATION LTD.

- and -

NATIONAL BANK FINANCIAL INC.

- and -

COMPUTERSHARE TRUST COMPANY OF CANADA

 

 

 

 

 

SUBSCRIPTION RECEIPT AGREEMENT

 

Providing for the Issue of
Subscription Receipts

 

Dated August 9, 2016

TABLE OF CONTENTS

Page

Article 1 INTERPRETATION	2
1.1   Definitions	2
1.2   Headings	6
1.3   References	6
1.4   Certain Rules of Interpretation	6
1.5   Day Not a Business Day	6
1.6   Applicable Law	6
1.7   Conflict	6
1.8   Currency	6
1.9   Severability	6
Article 2 ISSUE OF SUBSCRIPTION RECEIPTS	7
2.1   Payment Acknowledgement	7
2.2   Terms and Issue of Subscription Receipts	7
2.3   Fractional Subscription Receipts	8
2.4   Register for Subscription Receipts	8
2.5   Registers Open for Inspection	8
2.6   Receiptholder not a Shareholder	8
2.7   Subscription Receipts to Rank Pari Passu	8
2.8   Electronic Deposit of Subscription Receipts	8
2.9   Signing of Subscription Receipt Certificates	10
2.10   Certification by the Subscription Receipt Agent	10
2.11   Issue in Substitution for Subscription Receipt Certificates Lost, etc.	11
2.12   Exchange of Subscription Receipt Certificates	11
2.13   Charges for Exchange	11
2.14   Transfer and Ownership of Subscription Receipts	12
2.15   Listing of Subscription Receipts	12
2.16   Right of Rescission	13
2.17   U.S. Subscription Receipts	13
2.18   Reliance by Subscription Receipt Agent	13
Article 3 SATISFACTION OF ISSUANCE RIGHT OR TERMINATION PAYMENT RIGHT	14
3.1   Notice of the Disposition	14
3.2   Release of Funds on the Disposition Date	14
3.3   Issue of Common Shares and Payments thereon	14
3.4   Payment on Termination	15
3.5   Cancellation of Surrendered Subscription Receipt	16
Article 4 INVESTMENT OF PROCEEDS AND PAYMENT OF INTEREST	16
4.1   Investment of Proceeds	16
4.2   Segregation of Proceeds	17
Article 5 RIGHTS OF THE CORPORATION AND COVENANTS	17
5.1   Optional Purchases by the Corporation	17
5.2   General Covenants	17
5.3   Subscription Receipt Agent's Remuneration, Expenses and Indemnification	19
5.4   Performance of Covenants by Subscription Receipt Agent	20

 

5.5   Accounting	20
5.6   Payments by Subscription Receipt Agent	20
5.7   Regulatory Matters	20
Article 6 ENFORCEMENT	20
6.1   Suits by Receiptholders	20
6.2   Immunity of Shareholders, etc.	21
6.3   Limitation of Liability	21
Article 7 MEETINGS OF RECEIPTHOLDERS	21
7.1   Right to Convene Meetings	21
7.2   Notice	21
7.3   Chairman	22
7.4   Quorum	22
7.5   Power to Adjourn	22
7.6   Show of Hands	22
7.7   Poll and Voting	22
7.8   Regulations	23
7.9   Corporation and Subscription Receipt Agent may be Represented	23
7.10   Powers Exercisable by Extraordinary Resolution	24
7.11   Meaning of Extraordinary Resolution	25
7.12   Powers Cumulative	25
7.13   Minutes	26
7.14   Instruments in Writing	26
7.15   Binding Effect of Resolutions	26
7.16   Holdings by Corporation Disregarded	27
Article 8 SUPPLEMENTAL AGREEMENTS	27
8.1   Provision for Supplemental Agreements for Certain Purposes	27
Article 9 CONCERNING THE SUBSCRIPTION RECEIPT AGENT	28
9.1   Rights and Duties of Subscription Receipt Agent	28
9.2   Evidence, Experts and Advisers	29
9.3   Documents, Monies, etc. Held by Subscription Receipt Agent	29
9.4   Actions by Subscription Receipt Agent to Protect Interest	29
9.5   Subscription Receipt Agent not Required to Give Security	30
9.6   Protection of Subscription Receipt Agent	30
9.7   Replacement of Subscription Receipt Agent; Successor by Merger	30
9.8   Conflict of Interest	31
9.9   Acceptance of Appointment	32
9.10   Subscription Receipt Agent Not to be Appointed Receiver	32
9.11   Anti-Money Laundering and Anti-Terrorist Legislation	32
9.12   Privacy Laws	32
9.13   Force Majeure	33
Article 10 GENERAL	33
10.1   Notice to the Corporation, Subscription Receipt Agent and the Lead Underwriter	33
10.2   Notice to Receiptholders	34
10.3   Ownership and Transfer of Subscription Receipts	34
10.4   Evidence of Ownership	34
10.5   Satisfaction and Discharge of Agreement	35

 

 

 

10.6   Provisions of Agreement and Subscription Receipts for the Sole Benefit of Parties and Receiptholders	35
10.7   Subscription Receipts Owned by the Corporation or its Subsidiaries - Certificate to be Provided	35
10.8   Effect of Execution	36
10.9   Time of Essence	36
10.10   Counterparts	36
10.11   Third Party Interests	36

 

 

SUBSCRIPTION RECEIPT AGREEMENT

THIS SUBSCRIPTION RECEIPT AGREEMENT made as of the 9^th day of August, 2016.

AMONG:

BELLATRIX EXPLORATION LTD., a corporation amalgamated under the laws of province of Alberta (hereinafter referred to as the "Corporation")

AND

NATIONAL BANK FINANCIAL INC. (hereinafter referred to as "NBF" or the "Lead Underwriter")

AND

COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company incorporated under the federal laws of Canada having an office in the City of Calgary, in the Province of Alberta, hereinafter referred to as the "Subscription Receipt Agent")

 

WHEREAS the Corporation is proposing to issue and sell Subscription Receipts (as defined herein), each Subscription Receipt representing the right to receive, for no additional consideration, one Common Share (as defined herein) in certain circumstances described herein;

AND WHEREAS the Corporation and the Lead Underwriter, on behalf of the Underwriters (as defined herein), have agreed that:

(a)

the Proceeds (as defined herein) are to be delivered to and held by the Subscription Receipt Agent and invested on behalf of the holders of Subscription Receipts, the Underwriters and the Corporation, as applicable, in the manner set forth herein;

(b)

if the Escrow Release Condition (as defined herein) has been satisfied and the Closing Notice (as defined herein) and the Irrevocable Direction (as defined herein) have been delivered prior to the Termination Time (as defined herein): (i) each holder of Subscription Receipts shall receive, without payment of additional consideration or further action on the part of the holder thereof, one Common Share for each Subscription Receipt held; (ii) the Proceeds plus any Earned Interest (as defined herein) thereon (less the remaining one-half of the Underwriters' Fee (as defined herein) and any Earned Interest thereon) shall be released to the Corporation; and (iii) the remaining one-half of the Underwriters' Fee and any Earned Interest thereon will be released to NBF on behalf of the Underwriters; and

(c)

if the Escrow Release Condition is not satisfied prior to the Termination Time, the subscription for Common Shares represented by each Subscription Receipt shall be automatically terminated and cancelled and each holder of Subscription Receipts shall receive from the Corporation an amount equal to the Subscription Price (as defined herein) in respect of each Subscription Receipt held together with such holder's pro rata share of any Earned Interest thereon, less any applicable withholding taxes, all of which shall be paid out of the Escrowed Funds (as defined herein), subject to the terms set forth herein;

 

 

AND WHEREAS all things necessary have been done and performed to make the Subscription Receipts, when certified by the Subscription Receipt Agent and issued as provided in this Agreement, legal, valid and binding obligations of the Corporation with the benefits of and subject to the terms of this Agreement;

AND WHEREAS the foregoing recitals are made by the Corporation and the Lead Underwriter, on behalf of the Underwriters, as the context provides, and not by the Subscription Receipt Agent;

NOW THEREFORE THIS AGREEMENT WITNESSES that for good and valuable consideration mutually given and received, the receipt and sufficiency of which is hereby acknowledged, it is hereby agreed and declared as follows:

Article 1
INTERPRETATION

1.1

Definitions

In this Agreement and the recitals, unless there is something in the subject matter or context inconsistent therewith or unless otherwise expressly provided, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:

(a)

"1933 Act" means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder;

(b)

"1934 Act" means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

(c)

"Agreement" means this agreement, as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof;

(d)

"Beneficial Owners" has the meaning given to such term in Section 2.8(b);

(e)

"Business Day" means a day which is not Saturday or Sunday or a holiday in Calgary, Alberta or Toronto, Ontario;

(f)

"CDS" or the "Depository" means CDS Clearing and Depository Services Inc. and its successors in interest;

(g)

"Closing Notice" means the joint notice to be executed by the Corporation and NBF, on behalf of the Underwriters, substantially in the form attached as Schedule "C" hereto, confirming to the Subscription Receipt Agent that the Escrow Release Condition has been satisfied;

(h)

"Common Shares" means the common shares in the capital of the Corporation;

(i)

"Corporation" means Bellatrix Exploration Ltd.;

(j)

"Deadline" means 5:00 p.m. (Calgary time) on September 30, 2016 or such later date as may be agreed to by the Corporation and the Lead Underwriter, on behalf of the Underwriters, and communicated in writing to the Subscription Receipt Agent, provided in no event may such deadline be extended beyond November 11, 2016;

 

 

(k)

"Designated Offices" means the principal offices of the Subscription Receipt Agent from time to time in the cities of Calgary, Alberta and Toronto, Ontario;

(l)

"Disposition" means the proposed disposition by the Corporation, pursuant to the terms of the Disposition Agreement, of an undivided 35% interest in the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder Flats to Keyera Partnership (or such other party as may purchase such assets on substantially the same terms as set out in the disposition agreement dated effective July 4, 2016 between the Corporation and Keyera Partnership on exercise of a right of first refusal or other similar right or agreement);

(m)

"Disposition Agreement" means the disposition agreement dated effective July 4, 2016 between the Corporation and Keyera Partnership providing for the Disposition, as it may be amended, or such other agreement as may be entered into between the Corporation and such other party as may purchase the undivided 35% interest in the Bellatrix O’Chiese Nees-Ohpawganu’ck deep-cut gas plant at Alder Flats on substantially the same terms as set out in the disposition agreement dated effective July 4, 2016 between the Corporation and Keyera Partnership on exercise of a right of first refusal or other similar right or agreement;

(n)

"Disposition Closing" means the closing of the Disposition in all material respects in accordance with the terms of the Disposition Agreement without amendment or waiver in either case materially adverse to the Corporation, unless the consent of NBF, on behalf of the Underwriters, is given to such amendment or waiver;

(o)

"Disposition Date" means the date, if any, upon which the Disposition Closing takes place, and "Disposition Time" means the time on the Disposition Date at which the Disposition Closing occurs;

(p)

"Earned Interest" means any interest or other income actually earned on the investment of the Escrowed Funds between the date hereof and the earlier to occur of the Disposition Date and the Termination Date;

(q)

"Escrowed Funds" means the Proceeds and any Earned Interest;

(r)

"Escrow Release Condition" means that the Disposition Closing has occurred;

(s)

"Extraordinary Resolution" has the meaning given to such term in Section 7.11;

(t)

"Irrevocable Direction" means the written irrevocable direction to be delivered by the Corporation to the Subscription Receipt Agent authorizing and directing the Subscription Receipt Agent, as the transfer agent of the Corporation, to issue the Common Shares issuable pursuant to the Subscription Receipts substantially in the form of Schedule "B" hereto;

(u)

"NBF" or the "Lead Underwriter" means National Bank Financial Inc.;

(v)

"NYSE" means the New York Stock Exchange;

 

 

(w)

"Offered Subscription Receipts" means the 25,000,000 Subscription Receipts offered pursuant to the Prospectus in connection with the Subscription Receipt Offering, but, for greater certainty, does not include the Over-Allotment Subscription Receipts;

(x)

"Original Purchasers" has the meaning given to such term in Section 2.16(a);

(y)

"Over-Allotment Option" means the over-allotment option granted by the Corporation to the Underwriters to purchase, amongst other securities of the Corporation, up to 3,750,000 Over-Allotment Subscription Receipts (or up to 3,750,000 Common Shares if the Over-Allotment Option is exercised after the Disposition Time) pursuant to the Underwriting Agreement;

(z)

"Over-Allotment Subscription Receipts" means the Subscription Receipts purchased by the Underwriters upon exercise of the Over-Allotment Option, if any;

(aa)

"Participant" means a Person recognized by CDS as a participant in the non-certificated inventory system administered by CDS;

(bb)

"Permitted Investment" has the meaning given to such term in Section 4.1;

(cc)

"Person" includes an individual, corporation, company, partnership, joint venture, association, trust, trustee, unincorporated organization or government or any agency or political subdivision thereof;

(dd)

"Proceeds" means the aggregate gross proceeds from the issuance of the Offered Subscription Receipts and, in the event that any Over-Allotment Subscription Receipts are issued and sold prior to the Disposition Time, includes the gross proceeds from the issuance of such Over-Allotment Subscription Receipts;

(ee)

"Prospectus" means the (final) short form prospectus of the Corporation dated August 2, 2016 relating to the distribution in each of the Provinces of Canada, except Québec, of the Offered Subscription Receipts and the Over-Allotment Subscription Receipts or Common Shares, as applicable, issuable upon exercise of the Over-Allotment Option, and extendible convertible unsecured subordinated debentures of the Corporation, and unless the context otherwise requires, includes all documents incorporated therein by reference and any amendments thereto;

(ff)

"Receiptholders" or "holders" means the registered holders from time to time of Subscription Receipts;

(gg)

"Receiptholders' Request" means an instrument signed in one or more counterparts by Receiptholders entitled to acquire in the aggregate not less than twenty-five percent (25%) of the then outstanding Subscription Receipts, requesting the Subscription Receipt Agent to take some action or proceeding specified therein;

(hh)

"Released Amount" has the meaning given to such term in Section 3.2;

(ii)

"SEC" means the United States Securities and Exchange Commission;

(jj)

"Shareholders" means the registered holders from time to time of Common Shares;

(kk)

"Subscription Price" means the sum of $1.20 per Subscription Receipt;

 

 

(ll)

"Subscription Receipt Agent" means Computershare Trust Company of Canada or its successors from time to time under this Agreement, in its capacity hereunder and including as registrar and transfer agent of the Subscription Receipts;

(mm)

"Subscription Receipt Certificate" means a certificate evidencing Subscription Receipts in the form attached as Schedule "A" hereto;

(nn)

"Subscription Receipt Offering" means the offering of the Offered Subscription Receipts and the Over-Allotment Subscription Receipts pursuant to the Prospectus;

(oo)

"Subscription Receipts" means the subscription receipts issued hereunder and from time to time outstanding (including, for greater certainty, the Offered Subscription Receipts and the Over-Allotment Subscription Receipts), each Subscription Receipt evidencing the rights set out in Subsection 2.2(a);

(pp)

"Termination Date" means the date, if any, on which the Termination Time occurs;

(qq)

"Termination Time" means, the earliest of any of the following times:

(i)

the Deadline, if the Disposition Closing has not occurred;

(ii)

the time, if prior to the Deadline, the Disposition Agreement is terminated in accordance with its terms; and

(iii)

the time, if prior to the Deadline, the Corporation has advised the Subscription Receipt Agent and the Lead Underwriter, on behalf of the Underwriters, or has announced to the public, that it does not intend to proceed with the Disposition;

(rr)

"TSX" means the Toronto Stock Exchange;

(ss)

"Uncertificated Subscription Receipts" means, collectively, all Subscription Receipts which are not issued as part of a Subscription Receipt Certificate;

(tt)

"Underwriters" means, collectively, NBF, RBC Dominion Securities Inc., Scotia Capital Inc., Canaccord Genuity Corp., CIBC World Markets Inc., BMO Nesbitt Burns Inc. and Dundee Securities Ltd.;

(uu)

"Underwriting Agreement" means the agreement dated as of July 19, 2016 among the Corporation and the Underwriters in respect of the Subscription Receipt Offering and the offering to extendible convertible unsecured subordinated debentures of the Corporation;

(vv)

"Underwriters' Fee" means a fee of $0.06 per Subscription Receipt payable pursuant to and in accordance with the Underwriting Agreement;

(ww)

"U.S. Offered Securities" has the meaning given to such term in Section 2.17; and

(xx)

"U.S. Private Placement Memorandum" means the final U.S. private placement memorandum prepared for use in connection with the offer and sale of the Subscription Receipts in the United States.

 

 

1.2

Headings

The headings, the table of contents and the division of this Agreement into Articles and Sections are for convenience of reference only and shall not affect the interpretation of this Agreement.

1.3

References

Unless otherwise specified in this Agreement:

(a)

references to Articles, Sections, and Schedules are to Articles, Sections, and Schedules in this Agreement; and

(b)

"hereto", "herein", "hereby", "hereunder", "hereof " and similar expressions, without reference to a particular provision, refer to this Agreement.

1.4

Certain Rules of Interpretation

Unless otherwise specified in this Agreement:

(a)

the singular includes the plural and vice versa; and

(b)

references to any gender shall include references to all genders.

1.5

Day Not a Business Day

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

1.6

Applicable Law

This Agreement and the Subscription Receipts shall be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein.

1.7

Conflict

In the event of a conflict or inconsistency between a provision in the body of this Agreement and in any Subscription Receipt Certificate issued hereunder, the provision in the body of this Agreement shall prevail to the extent of the inconsistency.

1.8

Currency

All dollars amounts expressed in this Agreement and in the Subscription Receipts are in lawful money of Canada and all payments required to be made hereunder or thereunder shall be made in Canadian dollars.

1.9

Severability

Each of the provisions in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any of the other provisions hereof.

 

 

Article 2
ISSUE OF SUBSCRIPTION RECEIPTS

2.1

Payment Acknowledgement

(a)

The Subscription Receipt Agent hereby acknowledges receipt from NBF of a wire transfer of funds in the aggregate amount of $30,000,000 and confirms that such funds have been deposited in a segregated account in the name of the Corporation designated as "Bellatrix Exploration Ltd. – Subscription Receipts", or as otherwise directed by the Corporation and the Lead Underwriter, and the Subscription Receipt Agent will retain such amount in accordance with the terms of this Agreement pending payment of such amount in accordance with the terms of this Agreement.

(b)

The Corporation hereby acknowledges that the amount received by the Subscription Receipt Agent pursuant to Subsection 2.1(a) represents payment in full by the Underwriters of the Subscription Price for 25,000,000 Subscription Receipts and irrevocably directs the Subscription Receipt Agent to retain such amounts in accordance with the terms of this Agreement pending payment of such amount in accordance with the terms of this Agreement.

2.2

Terms and Issue of Subscription Receipts

(a)

Each Subscription Receipt shall evidence the right of each holder to receive, without payment of additional consideration or further action on part of the holder:

(i)

if the Escrow Release Condition is satisfied and the Disposition Notice and the Irrevocable Direction are delivered to the Subscription Receipt Agent prior to the Termination Time, one fully paid and non-assessable Common Share; or

(ii)

if, the Termination Time occurs, an amount per Subscription Receipt equal to the Subscription Price, together with such holder's pro rata share of any Earned Interest thereon (without regard to the date of issue of such Subscription Receipts), less any applicable withholding taxes.

(b)

A maximum of 28,750,000 Subscription Receipts (comprised of 25,000,000 Offered Subscription Receipts and 3,750,000 Over-Allotment Subscription Receipts) are hereby created and authorized to be issued.

(c)

The Subscription Receipt Agent is hereby directed, immediately following the execution and delivery of this Agreement, to deliver to NBF, or deposit at the direction of NBF, on behalf of the Underwriters 25,000,000 Uncertificated Subscription Receipts registered in the name of "CDS & Co" NCI Account bearing ISIN CA0783141199 / CUSIP 078314119, 25 The Esplanade, P.O. Box 1038 Stn. A, Toronto, Ontario, M5W 1G5.

(d)

Upon any exercise of the Over-Allotment Option, NBF, on behalf of the Underwriters, shall deliver to the Subscription Receipt Agent an amount equal to $1.20 per Over-Allotment Subscription Receipt to be issued and sold pursuant to such exercise of the Over-Allotment Option by wire transfer, certified cheque or bank draft (or such other form of payment that is acceptable to the Corporation and the Subscription Receipt Agent, acting reasonably) and the Corporation shall deliver a direction to the Subscription Receipt Agent to issue and deliver the Over-Allotment Subscription Receipts to be sold pursuant to such exercise of the Over-Allotment Option. The Corporation and NBF, on behalf of the Underwriters, irrevocably direct the Subscription Receipt Agent to retain any amounts received pursuant to any exercise of the Over-Allotment Option in accordance with the terms of this Agreement pending payment of such amount in accordance with the terms of this Agreement.

 

 

2.3

Fractional Subscription Receipts

No fractional Subscription Receipts shall be issued or otherwise provided for hereunder.

2.4

Register for Subscription Receipts

The Corporation hereby appoints the Subscription Receipt Agent as registrar of the Subscription Receipts, and the Corporation shall cause to be kept by the Subscription Receipt Agent at the Designated Offices, a securities register in which shall be entered the names and addresses of holders of Subscription Receipts and the other particulars, prescribed by law, of the Subscription Receipts held by them. The Corporation shall also cause to be kept by the Subscription Receipt Agent at the Designated Offices the register of transfers, and may also cause to be kept by the Subscription Receipt Agent, branch registers of transfers in which shall be recorded the particulars of the transfers of Subscription Receipts registered in that branch register of transfers.

2.5

Registers Open for Inspection

The registers hereinbefore referred to shall be open at all reasonable times during regular business hours of the Subscription Receipt Agent on a Business Day for inspection by the Corporation, the Subscription Receipt Agent or any Receiptholder. The Subscription Receipt Agent shall, from time to time when requested so to do by the Corporation, furnish the Corporation with a list of the names and addresses of Receiptholders entered in the registers kept by the Subscription Receipt Agent and showing the number of Subscription Receipts held by each such holder.

2.6

Receiptholder not a Shareholder

Nothing in this Agreement or in the holding of a Subscription Receipt evidenced by a Subscription Receipt Certificate, an Uncertificated Subscription Receipt or otherwise, shall confer or be construed as conferring upon a Receiptholder any right or interest whatsoever as a Shareholder, including, but not limited to, the right to vote at, to receive notice of, or to attend meetings of Shareholders, or the right to receive dividends or any continuous disclosure materials of the Corporation. Receiptholders are entitled to exercise the rights expressly provided for in the Subscription Receipts and this Agreement on the terms and conditions set forth therein and herein.

2.7

Subscription Receipts to Rank Pari Passu

All Subscription Receipts shall rank pari passu, whatever may be the actual date of issue of same.

2.8

Electronic Deposit of Subscription Receipts

(a)

Subject to the provisions hereof, at the Lead Underwriter's option, Subscription Receipts will be issued on an uncertificated basis and registered in the name of and deposited electronically with CDS or its nominee.

 

 

(b)

If the Corporation issues Subscription Receipts in an uncertificated format, owners of the beneficial interests in the Subscription Receipts ("Beneficial Owner") shall not receive Subscription Receipt Certificates in definitive form and shall not be considered registered owners or holders thereof under this Agreement or any supplemental agreement. Beneficial interests in the Subscription Receipts registered and deposited with CDS will be represented only through the non-certificated inventory system administered by CDS. Transfers of Subscription Receipts registered and deposited with CDS between Participants shall occur in accordance with the rules and procedures of CDS. Neither the Corporation, the Underwriters nor the Subscription Receipt Agent shall have any responsibility or liability for any aspects of the records relating to or payments made by CDS, or its nominee, on account of the Beneficial Owners in the Subscription Receipts registered and deposited with CDS. Nothing herein shall prevent the Beneficial Owners in the Subscription Receipts from voting such Subscription Receipts registered and deposited with CDS using duly executed proxies or voting instruction forms.

(c)

All references herein to actions by, notices given or payments made to Receiptholders shall, where Subscription Receipts are held through CDS, refer to actions taken by, or notices given or payments made to, CDS upon instruction from the Participants in accordance with its rules and procedures. For the purposes of any provision hereof requiring or permitting actions with the consent of or at the direction of Receiptholders evidencing a specified percentage of the aggregate Subscription Receipts outstanding, such direction or consent may be given by holders of Subscription Receipts acting through CDS and the Participants owning Subscription Receipts evidencing the requisite percentage of the Subscription Receipts. The rights of a Receiptholder whose Subscription Receipts are held through CDS shall be exercised only through CDS and the Participants and shall be limited to those established by law and agreements between such holders and CDS and the Participants upon instructions from the Participants. Each of the Subscription Receipt Agent and the Corporation may deal with CDS for all purposes (including the making of payments) as the authorized representative of the respective Receiptholders and such dealing with CDS shall constitute satisfaction or performance, as applicable, of their respective obligations hereunder.

(d)

For so long as Subscription Receipts are held through CDS, if any notice or other communication is required to be given to Receiptholders who hold Subscription Receipts, the Subscription Receipt Agent will give such notices and communications to CDS.

(e)

If CDS resigns or is removed from its responsibility as depository and the Subscription Receipt Agent is unable or does not wish to locate a qualified successor, CDS shall surrender the Subscription Receipts to the Subscription Receipt Agent with instructions for registration of Subscription Receipts in the name and in the amount specified by CDS and the Corporation shall issue and the Subscription Receipt Agent shall certify and deliver the aggregate number of Subscription Receipts then outstanding in the form of definitive Subscription Receipt Certificates representing such Subscription Receipts.

(f)

The rights of Receiptholders who hold securities entitlements in respect of the Subscription Receipts through the non-certificated inventory system administered by CDS shall be limited to those established by applicable law and agreements between the Depository and the Participants and between such Participants and the Receiptholders who hold securities entitlements in respect of the Subscription Receipts through the non-certificated inventory system administered by CDS, and such rights must be exercised through a Participant in accordance with the rules and procedures of the Depository.

(g)

Notwithstanding anything herein to the contrary, none of the Corporation, the Lead Underwriter nor the Subscription Receipt Agent nor any agent thereof shall have any responsibility or liability for:

 

 

(i)

the electronic records maintained by the Depository relating to any ownership interests or any other interests in the Subscription Receipts or the depository system maintained by the Depository, or payments made on account of any ownership interest or any other interest of any person in any Subscription Receipt represented by an electronic position in the non-certificated inventory system administered by CDS;

(ii)

for maintaining, supervising or reviewing any records of the Depository or any Participant relating to any such interest; or

(iii)

any advice or representation made or given by the Depository or those contained herein that relate to the rules and regulations of the Depository or any action to be taken by the Depository on its own direction or at the direction of any Participant.

(h)

The Corporation may terminate the application of this Section 2.8 subject to the consent of NBF, on behalf of the Underwriters, such consent not to be unreasonably withheld, in which case all Subscription Receipts shall be evidenced by Subscription Receipt Certificates registered in the name of a person other than the Depository.

(i)

Notwithstanding the foregoing, upon request of the Beneficial Owner, through the Depository, the Subscription Receipt Agent shall issue a Subscription Receipt Certificate in respect of the interest of such Beneficial Owner, in which case the Uncertificated Subscription Receipt representing such Subscription Receipts shall be reduced accordingly and such Subscription Receipts shall be duly registered as directed by the Depository.

2.9

Signing of Subscription Receipt Certificates

Subscription Receipt Certificates, if issued, shall be signed by any one officer of the Corporation. The signature of such officer may be mechanically reproduced in facsimile or electronic means and Subscription Receipt Certificates bearing such electronic signature shall, subject to Section 2.10, be binding upon the Corporation as if they had been manually signed by such officer. Notwithstanding that the person whose manual or electronic signature appears on any Subscription Receipt Certificate as such officer may no longer hold such position at the date of such Subscription Receipt Certificate or at the date of certification or delivery thereof, any Subscription Receipt Certificate signed as aforesaid shall, subject to Section 2.10, be valid and binding upon the Corporation and the holder thereof shall be entitled to the benefits of this Agreement.

2.10

Certification by the Subscription Receipt Agent

(a)

No Subscription Receipt shall be issued or, if issued, shall be valid for any purpose or entitle the Receiptholder to the benefit hereof until:

(i)

in the case of an Uncertificated Subscription Receipt, the deposit by the Subscription Receipt Agent in accordance with Section 2.8; or

(ii)

in the case of a Subscription Receipt Certificate, the Subscription Receipt Certificate has been certified by manual signature by or on behalf of the Subscription Receipt Agent, and such certification by the Subscription Receipt Agent upon any Subscription Receipt Certificate shall be conclusive evidence as against the Corporation that the Subscription Receipt Certificate so certified has been duly issued hereunder and that the holder is entitled to the benefits hereof.

 

 

(b)

The certification of the Subscription Receipt Agent of a Subscription Receipt issued hereunder shall not be construed as a representation or warranty by the Subscription Receipt Agent as to the validity of this Agreement or the Subscription Receipt Certificates or Uncertificated Subscription Receipts, as applicable, (except the due certification thereof) and the Subscription Receipt Agent shall in no respect be liable or answerable for the use made of the Subscription Receipt Certificates or Uncertificated Subscription Receipts or any of them or of the consideration therefor except as otherwise specified herein. The certification by or on behalf of the Subscription Receipt Agent on Subscription Receipt Certificates shall constitute a representation and warranty by the Subscription Receipt Agent that the said Subscription Receipt Certificates have been duly certified by or on behalf of the Subscription Receipt Agent pursuant to the provisions of this Agreement.

2.11

Issue in Substitution for Subscription Receipt Certificates Lost, etc.

(a)

In case any Subscription Receipt Certificate issued pursuant to this Agreement shall become mutilated or be lost, destroyed or stolen, the Corporation, subject to applicable law and compliance with paragraph (b) below, shall issue and thereupon the Subscription Receipt Agent shall certify and deliver, a new Subscription Receipt Certificate of like tenor as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of such mutilated Subscription Receipt Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Subscription Receipt Certificate, and the substituted Subscription Receipt Certificate shall be in a form approved by the Subscription Receipt Agent and shall be entitled to the benefits hereof and shall rank equally in accordance with its terms with all other Subscription Receipt Certificates issued or to be issued hereunder.

(b)

The applicant for the issue of a new Subscription Receipt Certificate pursuant to this Section 2.11 shall bear the cost of the issue thereof and in case of loss, destruction or theft shall, as a condition precedent to the issue thereof, furnish to the Corporation and to the Subscription Receipt Agent such evidence of ownership and of the loss, destruction or theft of the Subscription Receipt Certificate so lost, destroyed or stolen as shall be satisfactory to the Corporation and to the Subscription Receipt Agent, each in their sole discretion, and such applicant shall also be required to furnish an indemnity and surety bond in amount and form satisfactory to the Corporation and the Subscription Receipt Agent, each in their sole discretion, and shall pay the reasonable charges of the Corporation and the Subscription Receipt Agent in connection therewith.

2.12

Exchange of Subscription Receipt Certificates

(a)

Subscription Receipt Certificates may, upon compliance with the reasonable requirements of the Subscription Receipt Agent, be exchanged for another Subscription Receipt Certificate or Subscription Receipt Certificates entitling the Receiptholder thereof to, in the aggregate, the same number of Subscription Receipts as represented by the Subscription Receipt Certificates so exchanged.

(b)

Subscription Receipt Certificates may be surrendered for exchange only at the Designated Offices during regular business hours of the Subscription Receipt Agent.

2.13

Charges for Exchange

Except as otherwise herein provided, the Subscription Receipt Agent may charge to the holder requesting an exchange a reasonable sum for each new Subscription Receipt Certificate issued in exchange for Subscription Receipt Certificate(s). Payment of such charges and reimbursement of the Subscription Receipt Agent or the Corporation for any and all stamp taxes or governmental or other charges required to be paid shall be made by such holder as a condition precedent to such exchange.

 

 

2.14

Transfer and Ownership of Subscription Receipts

(a)

There are no restrictions on the transfer of the Subscription Receipts. However, the Subscription Receipts may only be transferred on the register kept at one of the Designated Offices by the Receiptholder or his legal representatives or his attorney duly appointed by an instrument in writing. Upon surrender for registration of transfer of Subscription Receipts at one of the Designated Offices and upon compliance with this Section 2.14, the Corporation shall issue and thereupon the Subscription Receipt Agent shall certify and deliver a new Subscription Receipt Certificate or confirm the electronic deposit of Uncertificated Subscription Receipts of like tenor in the name of the designated transferee. If less than all the Subscription Receipts evidenced by the Subscription Receipt Certificate(s) or Uncertificated Subscription Receipts so surrendered are transferred, the transferor shall be entitled to receive, in the same manner, a new Subscription Receipt Certificate or electronically deposited Uncertificated Subscription Receipts registered in his name evidencing the Subscription Receipts not transferred. However, notwithstanding the foregoing, Subscription Receipts shall only be transferred upon:

(i)

payment to the Subscription Receipt Agent of a reasonable sum for each new Subscription Receipt Certificate issued upon such transfer, and reimbursement of the Subscription Receipt Agent or the Corporation for any and all stamp taxes or governmental or other charges required to be paid in respect of such transfer; and

(ii)

such reasonable requirements as the Subscription Receipt Agent may prescribe,

and all such transfers shall be duly noted in such register by the Subscription Receipt Agent.

(b)

The Corporation and the Subscription Receipt Agent shall deem and treat the registered owner of any Subscription Receipt as the Beneficial Owner thereof for all purposes and neither the Corporation nor the Subscription Receipt Agent shall be affected by any notice to the contrary.

(c)

The transfer register in respect of Subscription Receipts shall be closed at the Designated Offices, on the earlier to occur of the Disposition Date and the Termination Date (subject to settlement).

(d)

Subject to the provisions of this Agreement and applicable law, a Receiptholder shall be entitled to the rights and privileges attaching to the Subscription Receipts. Either the issue and delivery of Common Shares or the payment of the Subscription Price and the holder's pro rata entitlement of Earned Interest, less applicable withholding taxes, as provided in Subsection 3.4(b), all in accordance with the terms and conditions herein contained, shall discharge all responsibilities of the Corporation and the Subscription Receipt Agent with respect to such Subscription Receipts and neither the Corporation nor the Subscription Receipt Agent shall be bound to inquire into the title of a Receiptholder or a transferee of Subscription Receipts who surrenders a Subscription Receipt Certificate or Uncertificated Subscription Receipt.

2.15

Listing of Subscription Receipts

The Corporation confirms that the Subscription Receipts will be listed for trading on the TSX under the symbol "BXE.R".

 

 

2.16

Right of Rescission

(a)

If the Prospectus, together with any amendment thereto, is not delivered or contains a misrepresentation (as such term is defined in the Securities Act (Alberta)) and it was a misrepresentation on the date hereof, purchasers of Subscription Receipts who were the original purchasers of the Subscription Receipts (the "Original Purchasers") shall have and are hereby granted a contractual right of action against the Corporation for rescission to receive the Subscription Price exercisable on notice given to the Corporation not more than 180 days subsequent to the date hereof. The right of action for rescission is only available to an Original Purchaser following issuance of the Common Shares issuable upon surrender of such Subscription Receipts.

(b)

In no event shall the Corporation be liable under this Section 2.16 if the Original Purchaser purchased the Subscription Receipts with knowledge of the misrepresentation.

2.17

U.S. Subscription Receipts

The parties hereto hereby acknowledge and agree that: (i) neither the Subscription Receipts nor the Common Shares issuable pursuant thereto have been registered under the 1933 Act or the securities laws of any state of the United States; (ii) the Subscription Receipts originally offered and sold pursuant to Section 4(a)(2) under the 1933 Act (the "U.S. Offered Securities") and the Common Shares issuable pursuant to such Subscription Receipts are and will be "restricted securities" within the meaning of Rule 144 under the 1933 Act and, accordingly, may not be offered, resold, pledged or otherwise transferred, directly or indirectly, except (A) to the Corporation; (B) outside the United States in accordance with Rule 904 of Regulation S under the 1933 Act and in accordance with local laws and regulations; (C) pursuant to an exemption or exclusion from the registration requirements of the 1933 Act; or (D) pursuant to a registration statement that has been declared effective under the 1933 Act, and in each case in compliance with any applicable state securities laws; and (iii) notwithstanding any other provision of this Agreement, if required by applicable law, any U.S. Offered Securities (and any Common Shares issuable pursuant thereto) may be delivered in the form of definitive Subscription Receipt Certificates (or a definitive share certificate representing the Common Shares issuable pursuant thereto, where applicable) registered in the name of the holder of such U.S. Offered Securities or Common Shares and reflecting any legends required by applicable securities laws.

2.18

Reliance by Subscription Receipt Agent

The Subscription Receipt Agent shall have no obligation to ensure or verify compliance with any applicable laws or regulatory requirements on the issue, conversion or transfer of any Subscription Receipts or any Common Shares issuable upon the exercise thereof provided such issue, conversion or transfer, as the case may be, is effected in accordance with the terms of the Subscription Receipts and this Agreement. The Subscription Receipt Agent may assume for the purposes of this Agreement that any address on the register is the holder's actual address and is also determinative as to residency and that the address of any transferee to whom any Subscription Receipts or Common Shares, as applicable, are to be registered, as shown on the transfer document, is the transferee's residency.

 

Article 3
SATISFACTION OF ISSUANCE RIGHT
OR TERMINATION PAYMENT RIGHT

3.1

Notice of the Disposition

If the Escrow Release Condition is satisfied prior to the Termination Time the Corporation shall: (a) deliver to NBF, on behalf of the Underwriters, an officers' certificate signed on behalf of the Corporation by the President and Chief Executive Officer and the Vice-President, Finance and Chief Financial Officer of the Corporation or such other officers of the Corporation satisfactory to NBF, on behalf of the Underwriters, acting reasonably, certifying, on behalf of the Corporation and without personal liability, that the Disposition Time has occurred and that the Disposition Agreement has not been amended nor have any terms and conditions thereof been waived, other than as disclosed in writing to the Underwriters; (b) cause a Closing Notice executed by the Corporation, substantially in the form attached as Schedule "C" hereto to be delivered to the Subscription Receipt Agent and to NBF on behalf of the Underwriters; (c) concurrently deliver the Irrevocable Direction to the Subscription Receipt Agent, substantially in the form attached as Schedule "B" hereto, executed by the Corporation, to issue and deliver the Common Shares issuable pursuant to the Subscription Receipts and make the payments as provided for herein; and (d) shall, after the Disposition Time, issue a press release setting out the Disposition Date and that the Common Shares will be issued effective as at the Disposition Time. Upon receipt of the abovementioned officers' certificate, NBF will promptly execute the Closing Notice and deliver the Closing Notice to the Corporation and the Subscription Receipt Agent.

3.2

Release of Funds on the Disposition Date

(a)

Upon the delivery of the Closing Notice and the Irrevocable Direction in accordance with Section 3.1 hereof, the Corporation shall be entitled to receive from the Subscription Receipt Agent the Escrowed Funds, less the amount payable to NBF on behalf of the Underwriters pursuant to Section 3.2(b) (the "Released Amount"). The Subscription Receipt Agent shall deliver the Released Amount to the Corporation, or to such other party as the Corporation directs in writing, as soon as reasonably practicable after the delivery of the Closing Notice and the Irrevocable Direction referred to in Section 3.1.

(b)

The Subscription Receipt Agent shall pay or cause to be paid to NBF on behalf of the Underwriters, in accordance with the Underwriting Agreement, an amount equal to fifty percent (50%) of the Underwriters' Fee payable in respect of the Offered Subscription Receipts and in respect of any Over-Allotment Subscription Receipts issued prior to the delivery of the Closing Notice and the Irrevocable Direction, being an aggregate of $750,000 (plus an amount of $0.03 per Over-Allotment Subscription Receipt for any Over-Allotment Subscription Receipts issued) plus any Earned Interest thereon, forthwith upon delivery of the documents set forth in Section 3.1.

3.3

Issue of Common Shares and Payments thereon

(a)

If the Disposition Time occurs prior to the Termination Time, the Common Shares shall be and shall be deemed to be issued to the Receiptholders in accordance with the right of such holder as described in Subsection 2.2(a)(i) hereof (which right shall be and shall be deemed to be exercised upon the occurrence of the Disposition Time) and such Common Shares shall be deemed to be issued pursuant to the Corporation's constating documents at the Disposition Time, notwithstanding that a customer confirmation therefor may not yet have been issued, and the persons to whom such Common Shares are to be issued in accordance with the provisions of this Agreement shall be deemed to have become the holders of record of such Common Shares at the Disposition Time.

 

 

(b)

If the Disposition Time occurs prior to the Termination Time, the holder shall be entitled from and after the Disposition Time, to a customer confirmation representing the applicable number of Common Shares issuable pursuant to such holder's Subscription Receipts.

(c)

Upon the issuance or deemed issuance of Common Shares pursuant to the Subscription Receipts represented by Uncertificated Subscription Receipts, the Corporation or the Subscription Receipt Agent shall direct CDS to cause to be entered and issued, as the case may be, to the person or persons in whose name or names such Common Shares have been issued, a customer confirmation.

(d)

Upon the issuance or deemed issuance of Common Shares pursuant to the Subscription Receipts not represented by Uncertificated Subscription Receipts, the Subscription Receipt Agent shall issue and mail or deliver to holders of such Subscription Receipts at their registered addresses share certificates representing the Common Shares to which they are entitled not later than the second Business Day following the Disposition Date.

(e)

If any of the Common Shares are to be issued to a person or persons other than the Receiptholder, the Receiptholder shall comply with such reasonable requirements as the Corporation may prescribe and pay to the Corporation or the Subscription Receipt Agent on behalf of the Corporation, all applicable transfer or similar taxes or fees and the Corporation shall not be required to issue or deliver certificates evidencing the Common Shares unless such Receiptholder shall have paid the amount of such tax or fee or shall have established to the satisfaction of the Corporation that such fee or tax has been paid or that no fee or tax is due.

(f)

Effective immediately after the Common Shares have been deemed to be issued as contemplated in Subsection 3.3(a), the Subscription Receipts relating thereto shall be void and of no value or effect.

3.4

Payment on Termination

(a)

If the Termination Time occurs, the Corporation shall forthwith notify the Subscription Receipt Agent thereof in writing and shall issue a press release setting forth the Termination Date.

(b)

If the Termination Time occurs, the subscription evidenced by each Subscription Receipt shall be automatically terminated and cancelled and each Receiptholder (or a transferee thereof if all applicable transfer requirements, other than registration, have been satisfied) shall be entitled (subject to Subsection 3.4(d)) from and after the Termination Time, to payment in the aggregate amount of (i) the Subscription Price in respect of each of such holder's Subscription Receipts; and (ii) such holder's pro rata share of the Earned Interest (without regard to the date of issue of such Subscription Receipts), less applicable withholding taxes. The amount paid to each Receiptholder under (i) shall be satisfied by the Proceeds and the amount in (ii), if any, shall be satisfied by the Earned Interest.

(c)

If the Disposition Time does not occur prior to the Termination Time, registers shall be closed at the close of business on the Termination Date.

(d)

The obligation to make the payment of the amount specified in Subsection 3.4(b) shall be satisfied by mailing or delivering payment by cheque or wire transfer to the registered holder of the Subscription Receipt at its registered address by no later than the second Business Day following the Termination Date.

 

 

(e)

Upon the mailing or delivery of any cheque or wire transfer as provided in Subsection 3.4(d) (and provided such cheque has been honoured for payment, if presented for payment within six months of the date thereof or, if sent by wire transfer, with receipt confirmed) all rights evidenced by the Subscription Receipts relating thereto shall be satisfied and such Subscription Receipts shall be void and of no value or effect.

3.5

Cancellation of Surrendered Subscription Receipt

All Subscription Receipts surrendered to the Subscription Receipt Agent shall be returned to or received by the Subscription Receipt Agent for cancellation and, if required by the Corporation, the Subscription Receipt Agent shall furnish the Corporation with a cancellation certificate identifying the Subscription Receipt Certificates and/or Uncertificated Subscription Receipts so cancelled and the number of Subscription Receipts evidenced thereby.

Article 4
INVESTMENT OF PROCEEDS
AND PAYMENT OF INTEREST

4.1

Investment of Proceeds

(a)

Pending disbursement of the Escrowed Funds, the Subscription Receipt Agent shall hold, invest and reinvest such amount in Permitted Investments as directed in writing by the Corporation and the Lead Underwriter. "Permitted Investments" for the Escrowed Funds shall be: (i) obligations issued or fully guaranteed by the Government of Canada having a maturity date of not later than the Deadline, (ii) obligations issued or fully guaranteed by the government of any province of Canada having a maturity date of not later than the Deadline, (iii) term deposits or bankers' acceptances of a Canadian chartered bank having a maturity date of not later than the Deadline; and (iv) such other investments approved by the Corporation and the Lead Underwriter in writing. Such written direction to the Subscription Receipt Agent shall be provided no later than 9:00 a.m. (Calgary time) on the day on which the investment is to be made. Any written direction received by the Subscription Receipt Agent after 9:00 a.m. (Calgary time) or on a day which is not a Business Day, shall be deemed to have been given prior to 9:00 a.m. (Calgary time) on the next succeeding Business Day.

(b)

If at any time the Escrowed Funds includes an amount that is not invested in Permitted Investments and the Corporation and the Lead Underwriter have not provided written directions to the Subscription Receipt Agent to invest such amount, such uninvested amount will be held in an interest bearing account until the Subscription Receipt Agent has been directed in writing to so invest and the Subscription Receipt Agent shall pay interest on such Escrowed Funds at an annual rate which is equal to 2.50 percent less than the prime rate of interest announced from time to time by The Bank of Nova Scotia on Canadian dollar loans made to its most credit worthy customers in Canada. Such payment obligation shall be calculated daily and paid to the account(s) within three (3) Business Days of each month-end. The Subscription Receipt Agent may receive investment earnings in excess of, or less than, the interest payable pursuant to this Section 4.1(b), such earnings being for the Subscription Receipt Agent's benefit or at its risk, as applicable.

 

(c)

All earnings received from the investment of the Escrowed Funds shall be credited to, and shall become a part of, the Escrowed Funds. Any bank charges and similar fees as well as losses, if any, on such investments shall be deducted from the Earned Interest provided that if the aggregate amount of such bank charges and similar fees as well as losses are in excess of Earned Interest such excess amount shall be paid by the Corporation and deposited with the Subscription Receipt Agent.

(d)

Up and until such time as the Corporation delivers the Closing Notice and the Irrevocable Direction in accordance with Section 3.2, all amounts held by the Subscription Receipt Agent pursuant to this Agreement shall be held in escrow by the Subscription Receipt Agent for the benefit of the Receiptholders and the delivery of the Escrowed Funds to the Subscription Receipt Agent shall not give rise to a debtor-creditor or other similar relationship between the Subscription Receipt Agent and the Receiptholders. Following delivery of the Closing Notice and the Irrevocable Direction in accordance with Section 3.2, all amounts held by the Subscription Receipt Agent pursuant to this Agreement shall be held in escrow by the Subscription Receipt Agent for the benefit of the Corporation and the Lead Underwriter, on behalf of the Underwriters, as applicable, in accordance with their entitlements hereunder as set out in Section 3.2. Except in respect of the interest earned as contemplated by Section 4.1(b), the amounts held by the Subscription Receipt Agent pursuant to this Agreement are the sole risk of the Corporation, the Underwriters and Receiptholders. Except in respect of the interest earned as contemplated by Section 4.1(b), the Subscription Receipt Agent shall have no responsibility or liability for any diminution of the Escrowed Funds which may result from any Permitted Investments made pursuant to this Section 4.1, including any losses on any investment required to be liquidated prior to maturity in order to make a payment required hereunder.

4.2

Segregation of Proceeds

The Escrowed Funds received by the Subscription Receipt Agent and any securities or other instruments received by the Subscription Receipt Agent upon the investment or reinvestment of such Escrowed Funds, shall be received as agent and in trust for, and shall be segregated and kept apart by the Subscription Receipt Agent as agent for, (a) up and until such time as the Corporation delivers the Closing Notice and the Irrevocable Direction in accordance with Section 3.2, the Receiptholders, (b) following delivery of the Closing Notice and the Irrevocable Direction in accordance with Section 3.2, the Underwriters and the Corporation, as applicable, in accordance with their entitlements hereunder as set out in Section 3.2.

Article 5
RIGHTS OF THE CORPORATION AND COVENANTS

5.1

Optional Purchases by the Corporation

Subject to applicable law, the Corporation may from time to time purchase by private contract or otherwise any of the Subscription Receipts.

5.2

General Covenants

(a)

The Corporation covenants with the Subscription Receipt Agent and the Lead Underwriter, on behalf of the Underwriters, that so long as any Subscription Receipts remain outstanding:

(i)

it will use its best efforts to maintain its existence;

 

 

(ii)

it will make all requisite filings under applicable Canadian securities legislation including those necessary to remain a reporting issuer not in default in each of the Provinces of Canada;

(iii)

it will announce by press release the occurrence of the Disposition Time or the Termination Time, as the case may be, in accordance with Section 3.1 or Subsection 3.4(a), as the case may be;

(iv)

it will perform and carry out all of the acts or things to be done by it as provided in this Agreement;

(v)

prior to the earlier of the Disposition Date and the Termination Date, it will not sell the properties or assets of the Corporation as, or substantially as, an entirety, to, any other entity other than a wholly-owned subsidiary of the Corporation;

(vi)

it will reserve and keep available a sufficient number of Common Shares for the purpose of enabling it to satisfy its obligations to issue Common Shares pursuant to the Subscription Receipts;

(vii)

it will cause the Common Shares issued pursuant to the Subscription Receipts to be duly issued as fully paid and non-assessable Common Shares and delivered in accordance with the Subscription Receipts and the terms hereof;

(viii)

it will use its best efforts to ensure that (until the earlier of the Disposition Date and the Termination Date) the Subscription Receipts and the Common Shares continue to be or are listed and posted for trading on the TSX. Further, it will use its reasonable commercial efforts to ensure that (until the earlier of the Disposition Date and the Termination Date) the Common Shares continue to be listed and posted for trading on the NYSE;

(ix)

with respect to any notice to be given or other acts to be performed or which may be given by the Corporation to the Lead Underwriter under or pursuant to this Agreement (including under Section 3.1 hereof), the Corporation shall provide to the Lead Underwriter, in a timely manner, all such information and documents as the Lead Underwriter may reasonably request and is within the knowledge and control of the Corporation in order to verify the factual circumstances relating to such notices or acts;

(x)

it will promptly advise the Subscription Receipt Agent, the Underwriters and the holders of Subscription Receipts in writing of any default under the terms of this Agreement;

(xi)

as at the date of execution of this Agreement, its Common Shares are a class of securities registered pursuant to Section 12 of the 1934 Act; and

(xii)

in the event that the registration of its Common Shares under the 1934 Act shall be terminated by the Corporation in accordance with the 1934 Act, the Corporation shall promptly deliver to the Subscription Receipt Agent an officers' certificate (in a form provided by the Subscription Receipt Agent) notifying the Subscription Receipt Agent of such termination and such other information as the Subscription Receipt Agent may require at such time. The Corporation acknowledges that the Subscription Receipt Agent is relying upon the forgoing representation and covenants in order to meet certain obligations imposed by the SEC upon it with respect to clients of the Subscription Receipt Agent that are subject to reporting obligations under the 1934 Act.

 

 

(b)

The Corporation further covenants with the Subscription Receipt Agent and the Lead Underwriter, on behalf of the Underwriters, that, from the date hereof to the earlier of the Termination Date and the Disposition Date, it will not do any of the following:

(i)

subdivide or redivide the outstanding Common Shares into a greater number of Common Shares;

(ii)

reduce, combine or consolidate the outstanding Common Shares into a smaller number of Common Shares;

(iii)

issue Common Shares to holders of all or substantially all of the outstanding Common Shares by way of a dividend or distribution;

(iv)

fix a record date for the making of, or make, distribute or pay, to all or substantially all the holders of its outstanding Common Shares of: (A) shares of any class other than Common Shares; (B) rights, option or warrants entitling the holders to subscribe for, purchase or acquire Common Shares or securities exchangeable for or convertible into Common Shares or property or assets of the Corporation; (C) evidences of its indebtedness; or (D) assets;

(v)

declare or pay any dividend or other distribution to all or substantially all of the holders of Common Shares of any kind or nature; or

(vi)

reclassify the Common Shares or undertake a reorganization of the Corporation or a consolidation, amalgamation, arrangement or merger of the Corporation with any other Person or other entity; or a sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other Person or entity or a liquidation, dissolution or winding-up of the Corporation.

5.3

Subscription Receipt Agent's Remuneration, Expenses and Indemnification

(a)

The Corporation covenants that it will pay to the Subscription Receipt Agent from time to time reasonable remuneration for its services hereunder and will pay or reimburse the Subscription Receipt Agent upon its request by way of an invoice for all reasonable expenses, disbursements and advances incurred or made by the Subscription Receipt Agent in the administration or execution of this Agreement (including the reasonable compensation and the disbursements of its counsel and all other advisers and assistants not regularly in its employ) both before any default hereunder and thereafter until all duties of the Subscription Receipt Agent hereunder shall be finally and fully performed, except any such expense, disbursement or advance as may arise out of or result from the Subscription Receipt Agent's negligence, wilful misconduct or fraud. Any amount owing hereunder and remaining unpaid after 30 days from the invoice date will bear interest at the then current rate charged by the Subscription Receipt Agent against unpaid invoices and shall be payable on demand.

(b)

The Corporation hereby indemnifies and saves harmless the Subscription Receipt Agent and its officers, directors, employees and agents from and against any and all liabilities, losses, costs, claims, actions or demands whatsoever which may be brought against the Subscription Receipt Agent or which it may suffer or incur as a result or arising out of the performance of its duties and obligations under this Agreement, save only in the event of the negligence, wilful misconduct or fraud of the Subscription Receipt Agent. It is understood and agreed that this indemnification shall survive the termination or the discharge of this Agreement or the resignation or replacement of the Subscription Receipt Agent.

 

 

5.4

Performance of Covenants by Subscription Receipt Agent

If the Corporation shall fail to perform any of its covenants contained in this Agreement, the Subscription Receipt Agent may notify the Receiptholders and the Lead Underwriter, on behalf of the Underwriters, of such failure on the part of the Corporation or may itself perform any of the said covenants capable of being performed by it, but shall be under no obligation to perform said covenants or to notify the Receiptholders of such performance by it. All sums expended or advanced by the Subscription Receipt Agent in so doing shall be repayable as provided in Section 5.3. No such performance, expenditure or advance by the Subscription Receipt Agent shall relieve the Corporation of any default hereunder or of its continuing obligations under the covenants contained herein.

5.5

Accounting

The Subscription Receipt Agent shall maintain accurate books, records and accounts of the transactions effected or controlled by the Subscription Receipt Agent hereunder and the receipt, investment, reinvestment and disbursement of the Escrowed Funds, and shall provide to the Corporation and the Lead Underwriter on behalf of the Underwriters records and statements thereof periodically upon written request. The Corporation shall have the right to audit any such books, records, accounts and statements.

5.6

Payments by Subscription Receipt Agent

In the event that any funds to be disbursed by the Subscription Receipt Agent in accordance herewith are received by the Subscription Receipt Agent in the form of an uncertified cheque or cheques, the Subscription Receipt Agent shall be entitled to delay the time for disbursement of such funds hereunder until such uncertified cheque or cheques have cleared in the ordinary course the financial institution upon which the same are drawn. The Subscription Receipt Agent will disburse monies according to this Agreement only to the extent that monies have been deposited with it.

5.7

Regulatory Matters

The Corporation shall file all such documents, notices and certificates and take such steps and do such things as may be necessary under applicable securities laws to permit the issuance of the Common Shares in the circumstances contemplated by Section 3.3 such that: (i) such issuance will comply with the prospectus and registration requirements of applicable securities laws; and (ii) the first trade in Common Shares issued pursuant to the Subscription Receipts will not be subject to, or will be exempt from, the prospectus requirements of applicable securities laws.

Article 6
ENFORCEMENT

6.1

Suits by Receiptholders

Subject to Section 7.10 hereof, all or any of the rights conferred upon any Receiptholder by any of the terms of the Subscription Receipt Certificates or of this Agreement, or of both, may be enforced by the Receiptholder by appropriate proceedings but without prejudice to the right which is hereby conferred upon the Subscription Receipt Agent to proceed in its own name to enforce each and all of the provisions contained herein for the benefit of the Receiptholders.

 

6.2

Immunity of Shareholders, etc.

The Subscription Receipt Agent and, by the acceptance of the Subscription Receipt Certificates or Uncertificated Subscription Receipts and as part of the consideration for the issue of the Subscription Receipts, the Receiptholders hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any settlor or any past, present or future Shareholder, director, officer, employee or agent of the Corporation or any successor entity for the issue of the Common Shares pursuant to any Subscription Receipt or on any covenant, agreement, representation or warranty by the Corporation contained herein or in the Subscription Receipt Certificate(s) or Uncertificated Subscription Receipts.

6.3

Limitation of Liability

The obligations hereunder are not personally binding upon, nor shall resort hereunder be had to, the private property of any of the past, present or future Shareholders or of any successor entity or any of the past, present or future directors, officers, employees or agents of the Corporation or of any successor entity, but only the property of the Corporation or any successor entity shall be bound in respect hereof.

Article 7
MEETINGS OF RECEIPTHOLDERS

7.1

Right to Convene Meetings

The Subscription Receipt Agent may at any time and from time to time, and shall on receipt of a written request of the Corporation or of a Receiptholders' Request and upon being funded and indemnified to its reasonable satisfaction by the Corporation or by the Receiptholders signing such Receiptholders' Request against the cost which may be incurred in connection with the calling and holding of such meeting, convene a meeting of the Receiptholders. In the event of the Subscription Receipt Agent failing to so convene a meeting within ten (10) days after receipt of such written request of the Corporation or such Receiptholders' Request and such funding and indemnity given as aforesaid, the Corporation or such Receiptholders, as the case may be, may convene such meeting. Every such meeting shall be held in Calgary, Alberta or at such other place as may be determined by the Subscription Receipt Agent and approved by the Corporation.

7.2

Notice

At least ten (10) days prior notice of any meeting of Receiptholders shall be given to the Receiptholders in the manner provided for in Section 10.2 and a copy of such notice shall be sent by mail to the Subscription Receipt Agent (unless the meeting has been called by the Subscription Receipt Agent) and to the Corporation (unless the meeting has been called by the Corporation). Such notice shall state the date (which shall be a Business Day) and time when, and the place where the meeting, is to be held, shall state briefly the general nature of the business to be transacted thereat and shall contain such information as is reasonably necessary to enable the Receiptholders to make a reasoned decision on the matter, but it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Article 7.

 

 

7.3

Chairman

An individual (who need not be a Receiptholder) designated in writing by the Subscription Receipt Agent shall be chairman of the meeting and if no individual is so designated, or if the individual so designated is not present within fifteen (15) minutes from the time fixed for the holding of the meeting, the Receiptholders present in person or by proxy shall choose some individual present to be chairman.

7.4

Quorum

Subject to the provisions of Section 7.11, at any meeting of the Receiptholders a quorum shall consist of not less than two (2) Receiptholders present in person or by proxy and holding at least ten percent (10%) of the then outstanding Subscription Receipts. If a quorum of the Receiptholders shall not be present within thirty (30) minutes from the time fixed for holding any meeting, the meeting, if summoned by the Receiptholders or on a Receiptholders' Request, shall be dissolved; but in any other case the meeting shall be adjourned to the same day in the next week at the same time and place and no notice of the adjournment need be given. Any business may be brought before or dealt with at an adjourned meeting which might have been dealt with at the original meeting in accordance with the notice calling the same. No business shall be transacted at any meeting unless a quorum is present at the commencement of business. At the adjourned meeting the Receiptholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened notwithstanding that they may not hold at least ten percent (10%) of the then outstanding Subscription Receipts.

7.5

Power to Adjourn

The chairman of any meeting at which a quorum of the Receiptholders is present may, with the consent of the meeting, adjourn any such meeting and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe.

7.6

Show of Hands

Every question submitted to a meeting shall be decided in the first place by a majority of the votes given on a show of hands except that votes on an Extraordinary Resolution shall be given in the manner hereinafter provided. At any such meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact.

7.7

Poll and Voting

On every Extraordinary Resolution, and on any other question submitted to a meeting and after a vote by show of hands when demanded by the chairman or by one or more of the Receiptholders acting in person or by proxy and holding at least five percent (5%) of the then outstanding Subscription Receipts, a poll shall be taken in such manner as the chairman shall direct. Questions other than those required to be determined by Extraordinary Resolution shall be decided by a majority of the votes cast on the poll.

On a show of hands, every person who is present and entitled to vote, whether as a Receiptholder or as proxy for one or more absent Receiptholders, or both, shall have one vote. On a poll, each Receiptholder present in person or represented by a proxy duly appointed by instrument in writing shall be entitled to one vote in respect of each Common Share he is entitled to receive pursuant to the Subscription Receipt(s) then held or represented by him. A proxy need not

 

be a Receiptholder. In the case of joint holders, any of them present in person or by proxy at the meeting may vote in the absence of the other or others; but in case more than one of them shall be present in person or by proxy, they shall vote together in respect of Subscription Receipts of which they are joint registered holders. The chairman of any meeting shall be entitled, both on a show of hands and on a poll, to vote in respect of the Subscription Receipts, if any, held or represented by him.

7.8

Regulations

The Subscription Receipt Agent, or the Corporation with the approval of the Subscription Receipt Agent, may from time to time make and from time to time vary such regulations as it shall think fit for:

(a)

the setting of the record date for a meeting of Receiptholders for the purpose of determining Receiptholders entitled to receive notice of and vote at such meeting;

(b)

the issue of voting certificates by any bank, trust company or other depositary satisfactory to the Subscription Receipt Agent stating that the Subscription Receipt Certificates specified therein have been deposited with it by a named person and will remain on deposit until after the meeting, which voting certificate shall entitle the persons named therein to be present and vote at any such meeting and at any adjournment thereof or to appoint a proxy or proxies to represent them and vote for them at any such meeting and at any adjournment thereof in the same manner and with the same effect as though the persons so named in such voting certificates were the actual holders of the Subscription Receipt Certificates specified therein;

(c)

the deposit of voting certificates and instruments appointing proxies at such place and time as the Subscription Receipt Agent, the Corporation or the Receiptholders, convening the meeting, as the case may be, may in the notice convening the meeting direct;

(d)

the deposit of voting certificates and instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be mailed, faxed or otherwise sent electronically before the meeting to the Corporation or to the Subscription Receipt Agent at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting;

(e)

the form of the instrument of proxy; and

(f)

generally for the calling of meetings of Receiptholders and the conduct of business thereat.

Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Save as such regulations may provide, the only persons who shall be recognized at any meeting as a Receiptholder, or be entitled to vote or be present at the meeting in respect thereof (subject to Section 7.9), shall be Receiptholders or their counsel, or proxies of Receiptholders.

7.9

Corporation and Subscription Receipt Agent may be Represented

The Corporation and the Subscription Receipt Agent, by their respective authorized agents, and the counsel for the Corporation and for the Subscription Receipt Agent may attend any meeting of the Receiptholders, but shall have no vote as such unless in their capacity as Receiptholder or a proxy holder.

 

 

7.10

Powers Exercisable by Extraordinary Resolution

In addition to all other powers conferred upon them by any other provisions of this Agreement or by law, the Receiptholders at a meeting shall, subject to the provisions of Section 7.11, have the power, subject to all applicable regulatory and exchange approvals, exercisable from time to time by Extraordinary Resolution:

(a)

to agree to any modification, abrogation, alteration, compromise or arrangement of the rights of Receiptholders or the Subscription Receipt Agent against the Corporation or against its undertaking, property and assets or any part thereof whether such rights arise under this Agreement or the Subscription Receipt Certificates or otherwise;

(b)

to amend, alter or repeal any Extraordinary Resolution previously passed or sanctioned by the Receiptholders;

(c)

to direct or to authorize the Subscription Receipt Agent to enforce any of the covenants on the part of the Corporation contained in this Agreement or the Subscription Receipt Certificates or to enforce any of the rights of the Receiptholders in any manner specified in such Extraordinary Resolution or to refrain from enforcing any such covenant or right;

(d)

to waive, and to direct the Subscription Receipt Agent to waive, any default on the part of the Corporation in complying with any provisions of this Agreement or the Subscription Receipt Certificates either unconditionally or upon any conditions specified in such Extraordinary Resolution;

(e)

to restrain any Receiptholder from taking or instituting any suit, action or proceeding against the Corporation for the enforcement of any of the covenants on the part of the Corporation in this Agreement or the Subscription Receipt Certificates or to enforce any of the rights of the Receiptholders;

(f)

to direct any Receiptholder who, as such, has brought any suit, action or proceeding to stay or to discontinue or otherwise to deal with the same upon payment of the costs, charges and expenses reasonably and properly incurred by such Receiptholder in connection therewith;

(g)

to assent to any modification of, change in or omission from the provisions contained in the Subscription Receipt Certificates and this Agreement or any ancillary or supplemental instrument which may be agreed to by the Corporation, and to authorize the Subscription Receipt Agent to concur in and execute any ancillary or supplemental agreement embodying the change or omission;

(h)

with the consent of the Corporation (such consent not to be unreasonably withheld), to remove the Subscription Receipt Agent or its successor in office and to appoint a new Subscription Receipt Agent to take the place of the Subscription Receipt Agent so removed;

(i)

to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any Common Shares or other securities of the Corporation; and

 

 

(j)

to assent to any modification of the Corporation's constating documents in circumstances where, had the Common Shares then been outstanding, an Extraordinary Resolution of the holders of Common Shares would have been required.

7.11

Meaning of Extraordinary Resolution

(a)

The expression "Extraordinary Resolution" when used in this Agreement means, subject as hereinafter provided in this Section 7.11 and in Section 7.14, a resolution proposed at a meeting of Receiptholders duly convened for that purpose and held in accordance with the provisions of this Article 7 at which there are present in person or by proxy at least two (2) Receiptholders holding more than twenty-five percent (25%) of the then outstanding Subscription Receipts and passed by the affirmative votes of Receiptholders holding not less than sixty-six and two-thirds percent (66 2/3%) of the then outstanding Subscription Receipts represented at the meeting in person or by proxy and voted on the poll upon such resolution.

(b)

If, at any meeting called for the purpose of passing an Extraordinary Resolution, at least two (2) Receiptholders holding more than twenty-five percent (25%) of the then outstanding Subscription Receipts are not present in person or by proxy within thirty (30) minutes after the time appointed for the meeting, then the meeting, if convened by Receiptholders or on a Receiptholders' Request, shall be dissolved; but in any other case it shall stand adjourned to such day, being not less than fourteen (14) or more than thirty (30) days later, and to such place and time as may be appointed by the chairman. Not less than seven (7) days prior notice shall be given of the time and place of such adjourned meeting in the manner provided for in Section 10.2. Such notice shall state that at the adjourned meeting the Receiptholders present in person or by proxy shall form a quorum but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting:

(i)

if the Extraordinary Resolution purports to exercise any of the powers conferred pursuant to Subsection 7.10 (a), (d), (g), (i) or (j) or purports to change the provisions of this Section 7.11 or of Section 7.14 or purports to amend, alter or repeal any Extraordinary Resolution previously passed or sanctioned by the Receiptholders in exercise of the powers referred to in this paragraph, a quorum for the transaction of business shall consist of Receiptholders holding more than twenty-five percent (25%) of the then outstanding Subscription Receipts present in person or by proxy; and

(ii)

in any other case, a quorum for the transaction of business shall consist of such Receiptholders as are present in person or by proxy.

(c)

At any such adjourned meeting, any resolution passed by the requisite votes as provided in Subsection 7.11(a) shall be an Extraordinary Resolution within the meaning of this Agreement notwithstanding that Receiptholders holding more than twenty-five percent (25%) of the then outstanding Subscription Receipts are not present in person or by proxy at such adjourned meeting.

(d)

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

7.12

Powers Cumulative

Any one or more of the powers or any combination of the powers in this Agreement stated to be exercisable by the Receiptholders by Extraordinary Resolution or otherwise may be exercised from time to time and the exercise of any one or more of such powers or any combination of powers from time to time shall not be deemed to exhaust the right of the Receiptholders to exercise such power or powers or combination of powers then or thereafter from time to time.

 

 

7.13

Minutes

Minutes of all resolutions and proceedings at every meeting of Receiptholders shall be made and duly entered in books of the Corporation to be provided from time to time for that purpose by the Subscription Receipt Agent at the expense of the Corporation, and any such minutes as aforesaid, if signed by the chairman or the secretary of the meeting at which such resolutions were passed or proceedings had or by the chairman or secretary of the next succeeding meeting held shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every such meeting in respect of the proceedings of which minutes shall have been made shall be deemed to have been duly convened and held, and all resolutions passed thereat or proceedings taken shall be deemed to have been duly passed and taken.

7.14

Instruments in Writing

All actions which may be taken and all powers that may be exercised by the Receiptholders at a meeting held as provided in this Article 7 may also be taken and exercised by an instrument in writing signed in one or more counterparts by such Receiptholders in person or by attorney duly appointed in writing, (a) holding at least a majority of then-outstanding Subscription Receipts with respect to a resolution that is not a Extraordinary Resolution, and the expression "resolution" when used not as part of "Extraordinary Resolution " in this Agreement shall include an instrument so signed, and (b) holding at least sixty-six and two-thirds percent (66 2/3%) of then outstanding Subscription Receipts with respect to an Extraordinary Resolution, and the expression "Extraordinary Resolution" when used in this Agreement shall include an instrument so signed.

7.15

Binding Effect of Resolutions

Every resolution and every Extraordinary Resolution passed in accordance with the provisions of this Article 7 at a meeting of Receiptholders shall be binding upon all the Receiptholders, whether present at or absent from such meeting, and every instrument in writing signed by Receiptholders in accordance with Section 7.14 shall be binding upon all the Receiptholders, whether signatories thereto or not, and each and every Receiptholder and the Subscription Receipt Agent (subject to the provisions for indemnity herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing.

 

 

7.16

Holdings by Corporation Disregarded

In determining whether Receiptholders holding the required number of Subscription Receipts are present at a meeting of Receiptholders for the purpose of determining a quorum or have concurred in any consent, waiver, Extraordinary Resolution, Receiptholders' Request or other action under this Agreement, Subscription Receipts owned legally or beneficially by the Corporation or any affiliated entity of the Corporation shall be disregarded in accordance with the provisions of Section 10.7.

Article 8
SUPPLEMENTAL AGREEMENTS

8.1

Provision for Supplemental Agreements for Certain Purposes

From time to time the Corporation, the Lead Underwriter, on behalf of the Underwriters, and the Subscription Receipt Agent may, subject to the provisions hereof and subject to any required stock exchange and regulatory approvals, and they shall, when so directed in accordance with the provisions hereof, execute and deliver by their proper officers, agreements supplemental hereto, which thereafter shall form part hereof, for any one or more or all of the following purposes:

(a)

adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of counsel, are necessary or advisable in the premises, provided that the same are not in the opinion of the Subscription Receipt Agent prejudicial to the interests of the Receiptholders;

(b)

giving effect to any Extraordinary Resolution passed as provided in Article 7;

(c)

making such provisions not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions arising hereunder, provided that such provisions are not, in the opinion of the Subscription Receipt Agent, prejudicial to the interests of the Receiptholders;

(d)

adding to or altering the provisions hereof in respect of the transfer of Subscription Receipts, making provision for the exchange of Subscription Receipt Certificates, and making any modification in the form of the Subscription Receipt Certificates which does not affect the substance thereof,

(e)

modifying any of the provisions of this Agreement, including relieving the Corporation from any of the obligations, conditions or restrictions herein contained, provided that such modification or relief shall be or become operative or effective only if, in the opinion of the Subscription Receipt Agent, such modification or relief in no way prejudices any of the rights of the Receiptholders or of the Subscription Receipt Agent, and provided further that the Subscription Receipt Agent may in its sole discretion decline to enter into any such supplemental agreement which in its opinion may not afford adequate protection to the Subscription Receipt Agent when the same shall become operative; and

(f)

for any other purpose not inconsistent with the terms of this Agreement, including the correction or rectification of any ambiguities, defective or inconsistent provisions, errors, mistakes or omissions herein, provided that in the opinion of the Subscription Receipt Agent the rights of the Subscription Receipt Agent and of the Receiptholders are in no way prejudiced thereby.

 

 

Article 9
CONCERNING THE SUBSCRIPTION RECEIPT AGENT

9.1

Rights and Duties of Subscription Receipt Agent

(a)

In the exercise of the rights and duties prescribed or conferred by the terms of this Agreement, the Subscription Receipt Agent shall exercise that degree of care, diligence and skill that a reasonably prudent Subscription Receipt Agent would exercise in comparable circumstances. No provision of this Agreement shall be construed to relieve the Subscription Receipt Agent from liability for its own negligence, wilful misconduct or fraud.

(b)

The obligation of the Subscription Receipt Agent to commence or continue any act, action or proceeding for the purpose of enforcing any rights of the Subscription Receipt Agent or the Receiptholders hereunder shall be conditional upon the Receiptholders furnishing, when required by notice by the Subscription Receipt Agent, sufficient funds to commence or to continue such act, action or proceeding and an indemnity reasonably satisfactory to the Subscription Receipt Agent to protect and to hold harmless the Subscription Receipt Agent against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Agreement shall require the Subscription Receipt Agent to expend or to risk its own funds or otherwise to incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified as aforesaid.

(c)

The Subscription Receipt Agent may, before commencing or at any time during the continuance of any such act, action or proceeding, require the Receiptholders at whose instance it is acting to deposit with the Subscription Receipt Agent the Subscription Receipts held by them, for which Subscription Receipts the Subscription Receipt Agent shall issue receipts.

(d)

Every provision of this Agreement that by its terms relieves the Subscription Receipt Agent of liability or entitles it to rely upon any evidence submitted to it is subject to the provisions of this Section 9.1 and of Section 9.2.

(e)

The Subscription Receipt Agent shall have no duties except those expressly set forth herein, and it shall not be bound by any notice of a claim or demand with respect to, or any waiver, modification, amendment, termination or rescission of, this Agreement, unless received by it in writing and signed by the other parties hereto and, if its duties herein are affected, unless it shall have given its prior written consent thereto.

(f)

The Subscription Receipt Agent shall not be responsible for ensuring that the Proceeds are used in the manner contemplated by the Prospectus.

(g)

The Subscription Receipt Agent shall retain the right not to act and shall not be held liable for refusing to act unless it has received clear and reasonable documentation which complies with the terms of this Agreement, which documentation does not require the exercise of any discretion or independent judgment.

(h)

The Subscription Receipt Agent shall incur no liability whatsoever with respect to the delivery or non-delivery of any certificates whether delivery by hand, mail or any other means.

(i)

The Subscription Receipt Agent shall not be responsible or liable in any manner whatsoever for the deficiency, correctness, genuineness or validity of any securities deposited with it.

 

 

9.2

Evidence, Experts and Advisers

(a)

In addition to the reports, certificates, opinions and other evidence required by this Agreement, the Corporation shall furnish to the Subscription Receipt Agent such additional evidence of compliance with any provision hereof, and in such form, as the Subscription Receipt Agent may reasonably require by written notice to the Corporation.

(b)

In the exercise of its rights and duties hereunder, the Subscription Receipt Agent may, if it is acting in good faith, rely as to the truth of the statements and the accuracy of the opinions expressed in statutory declarations, opinions, reports, written requests, consents, or orders of the Corporation, certificates of the Corporation or other evidence furnished to the Subscription Receipt Agent pursuant to any provision hereof or pursuant to a request of the Subscription Receipt Agent.

(c)

Whenever it is provided in this Agreement that the Corporation shall deposit with the Subscription Receipt Agent resolutions, certificates, reports, opinions, requests, orders or other documents, it is intended that the truth, accuracy and good faith on the effective date thereof and the facts and opinions stated in all such documents so deposited shall, in each and every such case, be conditions precedent to the right of the Corporation to have the Subscription Receipt Agent take the action to be based thereon.

(d)

Proof of the execution of an instrument in writing, including a Receiptholders' Request, by any Receiptholder may be made by the certificate of a notary public, or other officer with similar powers, that the person signing such instrument acknowledged to the officer the execution thereof, or by an affidavit of a witness to such execution or in any other manner which the Subscription Receipt Agent may consider adequate.

(e)

The Subscription Receipt Agent may employ or retain such counsel, accountants, appraisers or other experts or advisers as it may reasonably require for the purpose of discharging its duties hereunder and may pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any counsel, and shall not be responsible for any misconduct or negligence on the part of any such experts or advisers who have been appointed with due care by the Subscription Receipt Agent.

9.3

Documents, Monies, etc. Held by Subscription Receipt Agent

Any securities, documents of title or other instruments that may at any time be held by the Subscription Receipt Agent pursuant to this Agreement may be placed in the deposit vaults of the Subscription Receipt Agent or of any Canadian chartered bank or deposited for safekeeping with any such bank. If the Subscription Receipt Agent has not received a direction under Section 4.1, any monies so held pending the application or withdrawal thereof under any provisions of this Agreement may be deposited in the name of the Subscription Receipt Agent in any Canadian chartered bank, or in the deposit department of the Subscription Receipt Agent or any other loan or trust company authorized to accept deposits under the laws of Canada or a province thereof, at the rate of interest (if any) then current on similar deposits.

9.4

Actions by Subscription Receipt Agent to Protect Interest

The Subscription Receipt Agent shall have power to institute and to maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the Receiptholders.

 

 

9.5

Subscription Receipt Agent not Required to Give Security

The Subscription Receipt Agent shall not be required to give any bond or security in respect of the execution of this Agreement or otherwise in respect of the premises.

9.6

Protection of Subscription Receipt Agent

By way of supplement to the provisions of this Subscription Receipt Agreement or any law for the time being relating to trustees it is expressly declared and agreed as follows:

(a)

the Subscription Receipt Agent shall not be liable for or by reason of any statements of fact or recitals in this Agreement or in the Subscription Receipt Certificates (except the representation contained in Section 9.8 or in the certificate of the Subscription Receipt Agent on the Subscription Receipt Certificates) or be required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Corporation;

(b)

nothing herein contained shall impose any obligation on the Subscription Receipt Agent to see to or to require evidence of the registration or filing (or renewal thereof) of this Agreement or any instrument ancillary or supplemental hereto;

(c)

the Subscription Receipt Agent shall not be bound to give notice to any person or persons of the execution hereof;

(d)

the Subscription Receipt Agent shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Corporation of any of the covenants herein contained or of any acts of any directors, officers, employees, agents or servants of the Corporation;

(e)

the Subscription Receipt Agent shall be protected in acting upon any written notice, request, waiver, consent, certificate, receipt, statutory declaration or other paper or document furnished to it hereunder, not only as to its due execution and the validity and the effectiveness of its provisions but also as to the truth and acceptability of any information therein contained which it in good faith believes to be genuine and what it purports to be; and

(f)

without limiting any protection or indemnity of the Subscription Receipt Agent under any other provisions hereof, or otherwise at law, the Corporation agrees to indemnify and save harmless the Subscription Receipt Agent and each of its directors, officers, employees, shareholders and agents from and against any and all liabilities, losses, costs, claims, actions, or demands whatsoever which may be brought against the Subscription Receipt Agent or which it may suffer or incur as result of or arising out of the performance of its duties and obligations under this Agreement, save only in the event of the negligence, wilful misconduct or fraud of the Subscription Receipt Agent. It is understood and agreed that this indemnification shall survive the termination or discharge of this Agreement or the resignation of the Subscription Receipt Agent, as the case may be.

9.7

Replacement of Subscription Receipt Agent; Successor by Merger

(a)

The Subscription Receipt Agent may resign its appointment and be discharged from all other duties and liabilities hereunder, subject to this Section 9.7, by giving to the Corporation and Lead Underwriter not less than thirty (30) days prior notice in writing or such shorter prior notice as the Corporation may accept as sufficient. The Receiptholders by Extraordinary Resolution shall have power at any time to remove the existing Subscription

Receipt Agent and to appoint a new Subscription Receipt Agent. In the event of the Subscription Receipt Agent resigning or being removed as aforesaid or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Lead Underwriter, on behalf of the Underwriters, shall forthwith appoint a new Subscription Receipt Agent unless a new Subscription Receipt Agent has already been appointed by the Receiptholders; failing such appointment by the Lead Underwriter, on behalf of the Underwriters, the retiring Subscription Receipt Agent or any Receiptholder may apply to a justice of the Court of Queen's Bench (Alberta) on such notice as such justice may direct, for the appointment of a new Subscription Receipt Agent; but any new Subscription Receipt Agent so appointed by the Lead Underwriter, on behalf of the Underwriters, or by the Court shall be subject to removal as aforesaid by the Receiptholders. Any new Subscription Receipt Agent appointed under any provision of this Section 9.7 shall be a corporation authorized to carry on the business of a trust company in the Provinces of Alberta and Ontario and, if required by the applicable legislation for any other provinces, in such other provinces. On any such appointment the new Subscription Receipt Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Subscription Receipt Agent hereunder. At the request of the Corporation or the new Subscription Receipt Agent, the retiring Subscription Receipt Agent, upon payment of the amounts, if any, due to it pursuant to Section 5.3, shall duly assign, transfer and deliver to the new Subscription Receipt Agent all property and money held and all records kept by the retiring Subscription Receipt Agent hereunder or in connection herewith.

(b)

Upon the appointment of a successor Subscription Receipt Agent, the Corporation shall promptly notify the Receiptholders thereof in the manner provided for in Article 10.

(c)

Any corporation into or with which the Subscription Receipt Agent may be merged or consolidated or amalgamated, or any corporation resulting therefrom to which the Subscription Receipt Agent shall be a party, or any corporation succeeding to the corporate trust business of the Subscription Receipt Agent shall be the successor to the Subscription Receipt Agent hereunder without any further act on its part or any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Subscription Receipt Agent under Subsection 9.7(a).

(d)

Any Subscription Receipt Certificates certified but not delivered by a predecessor Subscription Receipt Agent may be delivered by the successor Subscription Receipt Agent in the name of the predecessor or successor Subscription Receipt Agent.

9.8

Conflict of Interest

(a)

The Subscription Receipt Agent represents to the Corporation and the Lead Underwriter, on behalf of the Underwriters, that at the time of execution and delivery hereof no material conflict of interest exists between its role as Subscription Receipt Agent hereunder and its role in any other capacity and agrees that in the event of a material conflict of interest arising hereafter it will, within thirty (30) days after ascertaining that it has such material conflict of interest, either eliminate the same or assign its appointment as Subscription Receipt Agent hereunder to a successor Subscription Receipt Agent approved by the Corporation and meeting the requirements set forth in Subsection 9.7(a). Notwithstanding the foregoing provisions of this Subsection 9.8(a), if any such material conflict of interest exists or hereafter shall exist, the validity and enforceability of this Agreement and the Subscription Receipt Certificates shall not be affected in any manner whatsoever by reason thereof.

 

 

(b)

Subject to Subsection 9.8(a), the Subscription Receipt Agent, in its personal or any other capacity, may buy, lend upon and deal in securities of the Corporation and generally may contract and enter into financial transactions with the Corporation or any affiliated entity of the Corporation without being liable to account for any profit made thereby.

9.9

Acceptance of Appointment

The Subscription Receipt Agent hereby accepts the appointment as Subscription Receipt Agent in this Agreement and agrees to perform its duties hereunder upon the terms and conditions herein set forth.

9.10

Subscription Receipt Agent Not to be Appointed Receiver

The Subscription Receipt Agent and any person related to the Subscription Receipt Agent shall not be appointed a receiver, a receiver and manager or liquidator of all or any part of the assets or undertaking of the Corporation.

9.11

Anti-Money Laundering and Anti-Terrorist Legislation

The Subscription Receipt Agent shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Subscription Receipt Agent, in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering, anti-terrorist or economic sanctions legislation, regulation or guideline. Further, should the Subscription Receipt Agent, in its sole judgment, acting reasonably, determine at any time that its acting under this Agreement has resulted in its being in non-compliance with any applicable anti-money laundering, anti-terrorist or economic sanctions legislation, regulation or guideline, then it shall have the right to resign on ten (10) days written notice to the other parties to this Agreement, provided (i) that the Subscription Receipt Agent's written notice shall describe the circumstances of such non-compliance; and (ii) that if such circumstances are rectified to the Subscription Receipt Agent's satisfaction within such ten (10) day period, then such resignation shall not be effective.

9.12

Privacy Laws

The Corporation acknowledges that the Subscription Receipt Agent may, in the course of providing services hereunder, collect or receive financial and other personal information about such parties and/or their representatives, as individuals, or about other individuals related to the subject matter hereof, and use such information for the following purposes: (a) to provide the services required under this Agreement and other services that may be requested from time to time; (b) to help the Subscription Receipt Agent manage its servicing relationships with such individuals; (c) to meet the Subscription Receipt's Agent legal and regulatory requirements; and (d) if Social Insurance Numbers are collected by the Subscription Receipt Agent, to perform tax reporting and to assist in verification of an individual's identity for security purposes.

The Corporation acknowledges and agrees that the Subscription Receipt Agent may receive, collect, use and disclose personal information provided to it or acquired by it in the course of its acting as agent hereunder for the purposes described above and, generally, in the manner and on the terms described in its privacy code, which the Subscription Receipt Agent shall make available on its website or upon request, including revisions thereto. Some of this personal information may be transferred to servicers in the United States for data processing and/or storage. Further, the Corporation agrees that it shall not provide or cause to be provided to the Subscription Receipt Agent any personal information relating to an individual who is not a party to this Indenture unless the Corporation has assured itself that such individual understands and has consented to the aforementioned uses and disclosures.

 

 

9.13

Force Majeure

No party shall be liable to the other, or held in breach of this Agreement, if prevented, hindered, or delayed in the performance or observance of any provision contained herein by reason of act of God, riots, terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, economic sanctions or any other similar causes (including, but not limited to, mechanical, electronic or communication interruptions, disruptions or failures). Performance times under this Agreement shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this Section.

Article 10
GENERAL

10.1

Notice to the Corporation, Subscription Receipt Agent and the Lead Underwriter

(a)

Unless herein otherwise expressly provided, any notice to be given hereunder to the Corporation, the Underwriters or the Subscription Receipt Agent shall be deemed to be validly given if delivered by hand courier or if transmitted by facsimile or e-mail:

(i)

if to the Corporation:

Bellatrix Exploration Ltd. Suite 1920, 800 –5th Avenue S.W. Calgary, Alberta T2P 3T6

Attention: Charles Kraus Facsimile: (403) 264-8163 E-mail: [email protected]

 

(ii)

if to the Underwriters:

National Bank Financial Inc. 1800, 311 – 6th Avenue SW Calgary, Alberta T2P 3H2

 

Attention: Blair C. Ward Facsimile: (403) 265-0543 E-mail: [email protected]

 

(iii)

if to the Subscription Receipt Agent:

 

Computershare Trust Company of Canada 600, 530 - 8th Avenue SW Calgary, Alberta T2P 3S8

 

Attention: Manager, Corporate Trust Facsimile: (403) 267-6598

 

and any such notice delivered in accordance with the foregoing shall be deemed to have been received on the date of delivery or, if telecopied or e-mailed on the day of transmission or, if such day is not a Business Day, on the first Business Day following the day of transmission.

(b)

The Corporation, the Lead Underwriter, on behalf of the Underwriters, or the Subscription Receipt Agent, as the case may be, may from time to time notify the other in the manner provided in Subsection 10.1(a) of a change of address which, from the effective date of such notice and until changed by like notice, shall be the address of the Corporation, the Lead Underwriter, on behalf of the Underwriters, or the Subscription Receipt Agent, as the case may be, for all purposes of this Agreement.

10.2

Notice to Receiptholders

(a)

Any notice to the Receiptholders under the provisions of this Agreement shall be valid and effective if delivered or sent by letter or circular through the ordinary post addressed to such holders at their post office addresses appearing on the register hereinbefore mentioned and shall be deemed to have been effectively given on the date of delivery or, if mailed, three (3) Business Days following actual posting of the notice.

(b)

If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Receiptholders hereunder could reasonably be considered unlikely to reach its destination, such notice shall be valid and effective only if it is delivered personally to such Receiptholders or if delivered to the address for such Receiptholders contained in the register of Subscription Receipts maintained by the Subscription Receipt Agent.

10.3

Ownership and Transfer of Subscription Receipts

The Corporation and the Subscription Receipt Agent may deem and treat the registered owner of any Subscription Receipt Certificate or Uncertificated Subscription Receipt or, in the case of a transferee who has surrendered a Subscription Receipt Certificate or Uncertificated Subscription Receipt in accordance with and as contemplated in Section 2.14, such transferee, as the absolute owner of the Subscription Receipt represented thereby for all purposes, and the Corporation and the Subscription Receipt Agent shall not be affected by any notice or knowledge to the contrary except where the Corporation or the Subscription Receipt Agent is required to take notice by statute or by order of a court of competent jurisdiction. A Receiptholder shall be entitled to the rights evidenced by such Subscription Receipt Certificate or Uncertificated Subscription Receipt free from all equities or rights of set off or counterclaim between the Corporation and the original or any intermediate holder thereof and all persons may act accordingly and the receipt of any such Receiptholder for the Common Shares which may be acquired pursuant thereto shall be a good discharge to the Corporation and the Subscription Receipt Agent for the same and neither the Corporation nor the Subscription Receipt Agent shall be bound to inquire into the title of any such holder except where the Corporation or the Subscription Receipt Agent is required to take notice by statute or by order of a court of competent jurisdiction.

10.4

Evidence of Ownership

(a)

Upon receipt of a certificate of any bank, trust company or other depositary satisfactory to the Subscription Receipt Agent stating that the Subscription Receipts specified therein have been deposited by a named person with such bank, trust company or other depositary and will remain so deposited until the expiry of the period specified therein, the Corporation and the Subscription Receipt Agent may treat the person so named as the owner, and such certificate as sufficient evidence of the ownership by such person of such Subscription Receipt during such period, for the purpose of any requisition, direction, consent, instrument or other document to be made, signed or given by the holder of the Subscription Receipt so deposited.

 

 

(b)

The Corporation and the Subscription Receipt Agent may accept as sufficient evidence of the fact and date of the signing of any requisition, direction, consent, instrument or other document by any person (i) the signature of any officer of any bank, trust company, or other depositary satisfactory to the Subscription Receipt Agent as witness of such execution, (ii) the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded at the place where such certificate is made that the person signing acknowledged to him the execution thereof, or (iii) a statutory declaration of a witness of such execution.

10.5

Satisfaction and Discharge of Agreement

Upon the earlier of:

(a)

the issue of certificates or customer confirmations representing Common Shares and the payment of all monies required as provided in Section 3.2; or

(b)

the payment of all monies required where the Termination Time occurs as provided in Section 3.4,

this Agreement shall cease to be of further effect and the Subscription Receipt Agent, on demand of and at the cost and expense of the Corporation and upon delivery to the Subscription Receipt Agent of a certificate of the Corporation stating that all conditions precedent to the satisfaction and discharge of this Agreement have been complied with, shall execute proper instruments acknowledging satisfaction of and discharging this Agreement. Notwithstanding the foregoing, the indemnities provided to the Subscription Receipt Agent by the Corporation hereunder shall remain in full force and effect and survive the termination of this Agreement.

10.6

Provisions of Agreement and Subscription Receipts for the Sole Benefit of Parties and Receiptholders

Nothing in this Agreement or in the Subscription Receipt Certificates, expressed or implied, shall give or be construed to give to any person other than the parties hereto, the Receiptholders and the transferees of Subscription Receipts as contemplated in Section 2.14, any legal or equitable right, remedy or claim under this Agreement, or under any covenant or provision herein or therein contained, all such covenants and provisions being for the sole benefit of the parties hereto, the Receiptholders and such transferees.

10.7

Subscription Receipts Owned by the Corporation or its Subsidiaries - Certificate to be Provided

For the purpose of disregarding any Subscription Receipts owned legally or beneficially by the Corporation or any affiliated entity of the Corporation in Section 7.16, the Corporation shall provide to the Subscription Receipt Agent, from time to time, a certificate of the Corporation setting forth as at the date of such certificate the number of Subscription Receipts owned legally or beneficially by the Corporation or any affiliated entity of the Corporation, and the Subscription Receipt Agent, in making the computations in Section 7.16, shall be entitled to rely on such certificate without requiring further evidence thereof.

 

 

10.8

Effect of Execution

Notwithstanding any provision of this Agreement, should any Subscription Receipt Certificates be issued and certified in accordance with the terms hereof prior to the actual time of execution of this Agreement by the Corporation and the Subscription Receipt Agent, any such Subscription Receipt Certificates shall be void and of no value and effect until such actual execution.

10.9

Time of Essence

Time is and shall remain of the essence of this Agreement.

10.10

Counterparts

This Agreement may be executed and delivered (including by facsimile transmission or portable document format (PDF)) in counterparts, each of which when so executed and delivered shall be deemed to be an original and such counterparts together shall constitute one and the same instrument and notwithstanding their date of execution they shall be deemed to be dated as of the date hereof.

10.11

Third Party Interests

The Corporation represents to the Subscription Receipt Agent that any account to be opened by, or interest to be held by the Subscription Receipt Agent in connection with this Agreement, for or to the credit of the Corporation, either (i) is not intended to be used by or on behalf of any third party; or (ii) is intended to be used by or on behalf of a third party, in which case the Corporation agrees to complete and execute forthwith a declaration in the Subscription Receipt Agent's prescribed form as to the particulars of such third party.

[Remainder of page intentionally left blank – signature page follows]

 

 

 

 

 

 

 

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

BELLATRIX EXPLORATION LTD.
Per:	(signed) "Charles R. Kraus"
	Authorized Signatory

 

NATIONAL BANK FINANCIAL INC. on its own behalf and on behalf of the other Underwriters
Per:	(signed) "Blair Ward"
	Authorized Signatory

 

COMPUTERSHARE TRUST COMPANY OF CANADA
Per:	(signed) "Beatriz Fedozzi"
	Authorized Signatory
Per:	(signed) "Laura Leong"
	Authorized Signatory

 

 

SCHEDULE "A"

FORM OF subscription receipt CERTIFICATE

 

Bellatrix Exploration Ltd.

(a corporation organized pursuant to the laws of the Province of Alberta)

Number: · CUSIP/ISIN: 078314119/CA0783141199

THIS CERTIFIES THAT · . (the "holder") is the registered holder of · Subscription Receipts represented hereby.

The Subscription Receipts represented by this Subscription Receipt certificate ("Certificate") are issued pursuant to a subscription receipt agreement (the "Agreement") dated August 9, 2016 among Bellatrix Exploration Ltd. (the "Corporation"), Computershare Trust Company of Canada (the "Subscription Receipt Agent") and National Bank Financial Inc., on its own behalf and on behalf of RBC Dominion Securities Inc., Scotia Capital Inc., Canaccord Genuity Corp., CIBC World Markets Inc., BMO Nesbitt Burns Inc. and Dundee Securities Ltd. (collectively, the "Underwriters").

Capitalized terms used in the Agreement have the same meaning herein as therein, unless otherwise defined.

Each Subscription Receipt entitles each holder, without payment of additional consideration or further action on the part of the holder, if the Disposition Time occurs on or before the Termination Time, to receive one Common Share for each Subscription Receipt held. If the Termination Time occurs, the subscription for Common Shares represented by each Subscription Receipt shall be automatically terminated and cancelled and each holder shall receive an amount per Subscription Receipt equal to the Subscription Price together with such holder's pro rata share of any Earned Interest thereon, less any applicable withholding taxes, all in the manner and on the terms and conditions set out in the Agreement.

The Subscription Receipts represented hereby are issued under and pursuant to the Agreement. Reference is hereby made to the Agreement and any and all other instruments supplemental or ancillary thereto for a full description of the rights of the holders of the Subscription Receipts and the terms and conditions upon which such Subscription Receipts are, or are to be, issued and held, all to the same effect as if the provisions of the Agreement and all instruments supplemental or ancillary thereto were herein set forth, and to all of which provisions the holder of these Subscription Receipts by acceptance hereof assents. In the event of a conflict or inconsistency between the terms of the Agreement and this Certificate, the terms of the Agreement shall prevail.

The holding of the Subscription Receipts evidenced by this Certificate shall not constitute the holder hereof a Shareholder or entitle such holder to any right or interest in respect thereof except as herein and in the Agreement expressly provided.

The Agreement contains provisions making binding upon all holders of Subscription Receipts outstanding thereunder resolutions passed at meetings of such holders held in accordance with such provisions and by instruments in writing signed by the holders of a specified majority of the outstanding Subscription Receipts.

The Subscription Receipts evidenced by this Certificate may be transferred on the register kept at the offices of the Subscription Receipt Agent by the registered holder hereof or his legal representatives or his attorney duly appointed by an instrument in writing in form and execution satisfactory to the Subscription Receipt Agent, only upon payment of the charges provided for in the Agreement and upon compliance with such reasonable requirements as the Subscription Receipt Agent may prescribe. The transfer register shall be closed at 5:00 p.m. (Calgary time) on the earlier to occur of the Disposition Date and the Termination Date (subject to settlement).

 

 

This Certificate shall not be valid for any purpose whatever unless and until it has been countersigned by or on behalf of the Subscription Receipt Agent.

Time shall be of the essence hereof. This Certificate is governed by the laws of Alberta and the laws of Canada applicable therein.

IN WITNESS WHEREOF the Corporation has caused this Certificate to be signed by a duly authorized representative of the Corporation as of · , 2016.

 

		BELLATRIX EXPLORATION LTD.
		Per:
Countersigned by: COMPUTERSHARE TRUST COMPANY OF CANADA
Per:

Dated: ________________________, 2016

SCHEDULE "B"

IRREVOCABLE DIRECTION

TO: COMPUTERSHARE TRUST COMPANY OF CANADA

 

This Irrevocable Direction is being provided pursuant to subparagraph 3.1 of a subscription receipt agreement (the "Agreement") dated August 9, 2016 among Bellatrix Exploration Ltd. (the "Corporation"), Computershare Trust Company of Canada (the "Subscription Receipt Agent") and National Bank Financial Inc., on its own behalf and on behalf of RBC Dominion Securities Inc., Scotia Capital Inc., Canaccord Genuity Corp., CIBC World Markets Inc., BMO Nesbitt Burns Inc. and Dundee Securities Ltd. (collectively, the "Underwriters").

 

Capitalized terms used in the Agreement have the same meaning herein as therein, unless otherwise defined.

 

The Subscription Receipt Agent is hereby irrevocably directed and authorized, in its capacity as registrar and transfer agent of the Common Shares and in its capacity as Subscription Receipt Agent under the Agreement:

 

(a)

to release to, or as directed in writing by, the Corporation, the Released Amount;

(b)

to release to National Bank Financial Inc., on behalf of the Underwriters, the sum of $[750,000/862,500] plus Earned Interest thereon; and

(c)

to issue on behalf of the Corporation, [25,000,000/28,750,000] paid and non-assessable Common Shares to the person or persons to whom such Common Shares are to be issued in accordance with and pursuant to the terms of the Subscription Receipt Agreement at the Disposition Time (which occurred on · , 2016). Such Common Shares shall be delivered to the Receiptholders through CDS in the case of Uncertificated Subscription Receipts.

DATED at Calgary, Alberta, this _____ day of __________________, 2016.

 

BELLATRIX EXPLORATION LTD.
Per:
	Authorized Signatory

SCHEDULE "C"

CLOSING NOTICE

 

TO: COMPUTERSHARE TRUST COMPANY OF CANADA

 

This Closing Notice is being provided pursuant to subparagraph 3.1 of the subscription receipt agreement (the "Agreement") dated August 9, 2016 among Bellatrix Exploration Ltd. (the "Corporation"), Computershare Trust Company of Canada (the "Subscription Receipt Agent") and National Bank Financial Inc. on its own behalf and on behalf of RBC Dominion Securities Inc., Scotia Capital Inc., Canaccord Genuity Corp., CIBC World Markets Inc., BMO Nesbitt Burns Inc. and Dundee Securities Ltd.

 

Capitalized terms used in the Agreement have the same meaning herein as therein, unless otherwise defined.

 

The Subscription Receipt Agent is hereby notified by the Corporation and the Lead Underwriter that the Escrow Release Condition has been satisfied.

 

DATED at Calgary, Alberta, this _____ day of __________________, 2016.

 

BELLATRIX EXPLORATION LTD.
Per:
	Authorized Signatory

 

 

NATIONAL BANK FINANCIAL INC., on its own behalf and on behalf of the Underwriters
Per:
	Authorized Signatory