Baytex Energy Trust

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement to file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of a preliminary short form prospectus -- exemption granted to a successor issuer from the requirement to deliver personal information forms for individuals for whom the trust previously delivered personal information form -- exemptions granted in connection with a proposed internal reorganization pursuant to which its business operations will be conducted through a corporate entity -- the arrangement does not contemplate the acquisition of any additional interest in any operating assets or the disposition of any of the trust's existing interests in operating assets.

Applicable Legislative Provisions

National Instrument 44-101 Short Form Prospectus Distributions, s. 8.1.

Citation: Baytex Energy Trust, Re, 2010 ABASC 596

December 23, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BAYTEX ENERGY TRUST

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation):

(a) exempting Baytex Energy Corp. (New Baytex), which will be the successor issuer to the Filer as a result of the exchange of common shares of New Baytex (New Baytex Shares) for the units of the Filer (Trust Units), and the dissolution of the Filer into New Baytex pursuant to the terms of a plan of arrangement (the Arrangement) under the Business Corporations Act (Alberta) (the ABCA), from the requirement applicable to New Baytex contained in section 2.8 of National Instrument 44-101 Short Form Prospectus (NI 44-101) to file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of its first preliminary short form prospectus after the notice (the Prospectus Relief); and

(b) exempting New Baytex from the requirement under subsection 4.1(b) of NI 44-101 for New Baytex to file a Personal Information Form and Authorization to Collect, Use and Disclose Personal Information in the form attached as Appendix A to National Instrument 41-101 General Prospectus Requirements (NI 41-101) for each director and executive officer of New Baytex at the time of filing a preliminary short form prospectus for whom the Filer has previously delivered any of the documents described in paragraphs 4.1(b)(i)(E) through (G) of NI 44-101 at the time of filing such preliminary short-form prospectus (the PIF Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this Application;

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

The Filer, the Corporation, and New Baytex

The Filer

1. The Filer is open-ended investment trust established under the laws of Alberta pursuant to the third amended and restated trust indenture dated May 20, 2008, as amended from time to time. The principal office of the Filer is located in Calgary, Alberta.

2. The Filer is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada. The Filer is not in default of securities legislation in any jurisdiction of Canada.

3. The authorized capital of the Filer includes an unlimited number of Trust Units. As at December 10, 2010, there were 113,273,987 Trust Units issued and outstanding.

4. The Trust Units are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

5. The Filer has filed a "current AIF" and "current annual financial statements" (as such terms are defined in NI 44-101) for the financial year ended December 31, 2009.

The Corporation

6. Baytex Energy Ltd. (the Corporation) is a corporation amalgamated under the laws of Alberta. The principal office of the Corporation is located in Calgary, Alberta.

7. The Corporation is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada and is not in default of applicable securities legislation in any jurisdiction of Canada.

8. The authorized capital of the Corporation includes an unlimited number of common shares. All common shares of the Corporation are held by the Filer.

9. The common shares of the Corporation are not listed or posted for trading on any exchange or quotation and trade reporting system.

New Baytex

10. New Baytex is a corporation incorporated under the laws of Alberta. The principal office of New Baytex is located in Calgary, Alberta.

11. New Baytex is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada. Following completion of the Arrangement, New Baytex, as the successor issuer to the Filer, will be a reporting issuer in each of the provinces of Canada.

12. New Baytex is authorized to issue an unlimited number of New Baytex Shares. The Corporation is the sole holder of all the issued and outstanding New Baytex Shares.

13. None of the New Baytex Shares will be listed or posted for trading on any exchange or quotation system and trade reporting system. Applications will be made to have New Baytex Shares to be issued in connection with the Arrangement listed on the TSX and the NYSE.

Arrangement

14. As part of the Arrangement, (i) the Trust Units will be exchanged for New Baytex Shares on a one for one basis; (ii) the Filer will be dissolved into New Baytex; and (iii) New Baytex will own all of the assets of the Filer and assume all of the existing liabilities of the Filer.

15. Following the completion of the Arrangement: (i) the sole business of New Baytex will be the current business of the Filer; (ii) New Baytex will be a reporting issuer or the equivalent under the securities legislation in each of the provinces of Canada; and (iii) the New Baytex Shares will, subject to approval by the TSX and NYSE, be listed on the TSX and NYSE, respectively.

16. The Arrangement does not contemplate the acquisition of any additional operating assets or the disposition of any existing operating assets and will not result in a change in the ultimate beneficial ownership of the assets and liabilities of the Filer. The Arrangement will be an internal reorganization undertaken without dilution to the holders of Trust Units (Unitholders) or additional debt or interest expense.

17. Pursuant to the interim order of the Court of Queen's Bench of Alberta (the Interim Order) dated October 26, 2010 issued under subsection 193(4) of the ABCA, the Unitholders were required to approve the Arrangement at a special meeting of the Unitholders (the Meeting). The Arrangement was required to be approved by not less than two-thirds of the votes cast by Unitholders at the Meeting. The Meeting took place December 9, 2010 and the Arrangement was approved by the requisite majority of Unitholders pursuant to the Interim Order.

18. The Arrangement is being undertaken to reorganize the Filer following the enactment by the federal government of rules in respect of the tax treatment of specified investment flow-through trusts. Pursuant to the Arrangement, the Filer will be reorganized into New Baytex, a public company, which together with its subsidiaries, will carry on the business presently carried on by the Filer through its subsidiaries, and will own, directly or indirectly, all of the existing assets and assume all of the existing liabilities of the Filer.

19. The rights of the Unitholders in respect of New Baytex following the Arrangement will be substantively equivalent to the rights the Unitholders currently have in respect of the Filer and their relative interest in and to the business carried on by New Baytex will not be affected by the Arrangement.

20. The only securities that will be distributed to the Unitholders pursuant to the Arrangement will be New Baytex Shares.

Prospectus Relief

21. The Filer is qualified to file a prospectus in the form of a short form prospectus pursuant to subsection 2.2 of NI 44-101 and is deemed to have filed a notice of intention to be qualified to file a short form prospectus under subsection 2.8(4) of NI 44-101.

22. The Filer anticipates that New Baytex may wish to file a preliminary short form prospectus following the completion of the Arrangement, relating to the offering or potential offering of securities (including New Baytex Shares or other securities) of New Baytex.

23. Pursuant to the qualification criteria set forth in section 2.2 of NI 44-101, following the Arrangement, New Baytex will be qualified to file a short form prospectus pursuant to NI 44-101.

24. Notwithstanding section 2.2 of NI 44-101, subsection 2.8(1) of NI 44-101 provides that an issuer is not qualified to file a short form prospectus unless it has filed a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the issuer filing its first preliminary short form prospectus.

25. In anticipation of the filing of a preliminary short form prospectus, and assuming the Arrangement has been completed, New Baytex intends to file a notice of intention to be qualified to file a short form prospectus (the Notice of Intention) following completion of the Arrangement. In the absence of the Prospectus Relief, New Baytex will not be qualified to file a preliminary short form prospectus until ten business days from the date upon which the Notice of Intention is filed.

26. The short form prospectus of New Baytex will incorporate by reference the documents that would be required to be incorporated by reference under item 11 of Form 44-101F1 in a short form prospectus of New Baytex.

PIF Relief

27. Prior to July 28, 2009, the date of the most recently filed preliminary short form prospectus by the Filer, the Filer had previously delivered the documents described in subparagraphs 4.1(b)(i)(E) through (G) of NI 44-101 for each individual acting in the capacity of director or executive officer of the Corporation, the administrator of the Filer, at such time (each a Filer PIF).

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that:

(a) the Prospectus Relief is granted, provided that at the time New Baytex files its Notice of Intention, New Baytex meets the requirements of section 2.2 of NI 44-101; and

(b) the PIF Relief is granted, provided that:

(i) each individual who is a director or executive officer of New Baytex at the time of a prospectus filing by New Baytex and for whom the Filer has previously delivered a Filer PIF authorizes the Decision Makers, in respect of a prospectus filing by New Baytex, to collect, use and disclose the personal information that was previously provided in the Filer PIF;

(ii) New Baytex, if requested by the Decision Maker, promptly delivers such further information from each individual referred to in paragraph (i) above as the Decision Maker may require; and

(iii) the PIF Relief will terminate in any jurisdiction in which the decision is in effect on the effective date of any change to subsection 4.1(b)(i) of NI 44-101.