UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported):
November
14, 2008
GRAN
TIERRA ENERGY INC.
(Exact
name of Registrant as specified in its charter)
Nevada
|
98-0479924
|
(State
or other jurisdiction of incorporation)
|
(I.R.S.
Employer Identification
No.)
|
Commission
file number:
000-52594
300,
611
- 10th Avenue S.W.
Calgary,
Alberta, Canada T2R 0B2
(Address
of principal executive offices and zip code)
Registrant’s
telephone number, including area code:
(403)
265-3221
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement.
Voting
and Exchange Trust Agreement
In
connection with the completion of the combination of Gran Tierra Energy Inc.,
a
Nevada corporation (“
Gran
Tierra
”),
and
Solana Resources Limited (“
Solana
”),
an
oil and gas exploration and production company, as described further under
Item
2.01 below, on November 14, 2008, Gran Tierra, Gran Tierra Exchangeco Inc.,
a
Canadian subsidiary of Gran Tierra (“
Exchangeco
”),
and
Computershare Trust Company of Canada, as trustee (the “
Trustee
”),
entered into a Voting and Exchange Trust Agreement (the “
Exchange
Agreement
”).
Pursuant to the Exchange Agreement, Gran Tierra issued a share of special voting
stock (the “
Special
B Voting Stock
”)
to the
Trustee to be held for and on behalf of the registered holders of shares of
the
common stock of Exchangeco (such shares referred to herein as the “
GTE-Solana
Exchangeable Shares
”
and
such registered holders thereof referred to herein as the “
Beneficiaries
”
and
each a “
Beneficiary
”).
The
Trustee, for the use and benefit of the Beneficiaries, is entitled to all of
the
voting rights of the Special B Voting Stock, including the right to vote in
person or by proxy Gran Tierra’s Special B Voting Stock on any matters,
questions, proposals or propositions that may properly come before the
stockholders of Gran Tierra at a meeting of the stockholders of Gran Tierra
or
in connection with a consent of the stockholders of Gran Tierra (the
“
Voting
Rights
”).
The
Voting Rights will be exercised by the Trustee on the basis of instructions
received from the Beneficiaries entitled to instruct the Trustee with respect
to
a meeting or consent of the stockholders of Gran Tierra. Each Beneficiary is
entitled to instruct the Trustee to cast and exercise one of the votes
comprising the Voting Rights for each GTE-Solana Exchangeable Share held as
of
the applicable record date. To the extent that no instructions are received
from
a Beneficiary, the Trustee may not exercise the Voting Rights with respect
to
such GTE-Solana Exchangeable Shares. Gran Tierra will communicate to the Trustee
and each of the Beneficiaries in the same manner as Gran Tierra communicates
to
holders of Gran Tierra’s common stock, par value $0.001, with respect to a
meeting or consent of the stockholders of Gran Tierra, and will deliver to
the
Trustee and each Beneficiary all proxy materials, information statements and
other written communications that are distributed from time to time to holders
of Gran Tierra’s common stock. Each Beneficiary is also entitled to attend any
meeting of the stockholders of Gran Tierra and personally exercise the Voting
Rights to which such Beneficiary is entitled.
The
Exchange Agreement grants the Trustee, for the use and benefit of the
Beneficiaries, the right (the “
Exchange
Right
”)
to
require Gran Tierra to purchase from such Beneficiary all or any part of the
GTE-Solana Exchangeable Shares held by such Beneficiary upon the occurrence
and
during the continuance of an Insolvency Event (defined generally as the
institution of a proceeding to have Exchangeco adjudicated as bankrupt,
insolvent or to be wound up, and the failure by the Exchangeco to contest in
good faith any such proceeding within 30 days of becoming aware thereof). The
purchase price payable for each GTE-Solana Exchangeable Share purchased by
Gran
Tierra under the Exchange Right equals the market price of a share of Gran
Tierra’s common stock on the business day before the purchase of such GTE-Solana
Exchangeable Share, plus the full amount of all declared and unpaid dividends
on
such Exchangeable Share (the “
Exchangeable
Share Purchase Price
”).
The
Exchangeable Share Purchase Price is payable only by Gran Tierra delivering
or
causing to be delivered to the relevant Beneficiary one share of Gran Tierra’s
common stock for each GTE-Solana Exchangeable Share purchased plus a cash amount
equal to the amount of all accrued and unpaid dividends on such GTE-Solana
Exchangeable Share (the “
Exchange
Consideration
”).
The
Trustee may only exercise the Exchange Right on the basis of instructions
received from Beneficiaries entitled to instruct the Trustee as to the exercise
thereof and only upon receipt of the GTE-Solana Exchangeable Shares to be
exchanged by each Beneficiary. To the extent that no instructions are received
from a Beneficiary with respect to the Exchange Right, the Trustee will not
exercise or permit the exercise of the Exchange Right.
The
Exchange Agreement also grants the Trustee, for the use and benefit of the
Beneficiaries, an automatic right (the “
Automatic
Exchange Right
”)
to
exchange the GTE-Solana Exchangeable Shares for shares of Gran Tierra’s common
stock upon the occurrence of a Liquidation Event (defined generally as a
voluntary liquidation, dissolution or winding up of Gran Tierra or a threatened
or instituted proceeding to effect the same). Under the Automatic Exchange
Right, Gran Tierra will purchase, immediately prior to the effective date of
a
Liquidation Event, all of the then outstanding GTE-Solana Exchangeable Shares
at
the Exchangeable Share Purchase Price payable in the Exchange
Consideration.
The
above
description is qualified in its entirety by reference to the Exchange Agreement,
which is attached hereto as Exhibit 10.1.
Support
Agreement
In
addition to the Exchange Agreement, and in connection with the combination
of
Gran Tierra and Solana, as described further under Item 2.01 below, on November
14, 2008, Gran Tierra, Gran Tierra Callco ULC (“
Callco
”)
and
Exchangeco entered into a Support Agreement (the “
Support
Agreement
”).
Pursuant to the Support Agreement, Gran Tierra made the following covenants
for
so long as any GTE-Solana Exchangeable Shares not owned by Gran Tierra remain
outstanding: (i) Gran Tierra will not declare or pay any dividends on Gran
Tierra’s common stock unless Exchangeco is able to declare and pay and
simultaneously declares or pays, as the case may be, an equivalent dividend
on
the GTE-Solana Exchangeable Shares; (ii) Gran Tierra will advise Exchangeco
in
advance of the declaration of any dividend on Gran Tierra’s common stock and
ensure that the declaration date, record date and payment date for dividends
on
the GTE-Solana Exchangeable Shares are the same as those for Gran Tierra’s
common stock; (iii) Gran Tierra will ensure that the record date for any
dividend declared on Gran Tierra’s common stock is not less than 10 days after
the declaration date of such dividend; (iv) Gran Tierra will take all actions
and do all things reasonably necessary or desirable to enable and permit
Exchangeco to make any required payments to the holders of and to perform its
obligations with respect to the GTE-Solana Exchangeable Shares; (v) Gran Tierra
will take all actions and do all things reasonably necessary or desirable to
enable and permit Callco to perform its obligations with respect to the
GTE-Solana Exchangeable Shares, including the reservation of the requisite
number of Gran Tierra common shares; and (vi) Gran Tierra will not exercise
its
vote as a stockholder of Exchangeco to initiate the voluntary liquidation,
dissolution or winding up of Exchangeco nor take any action that is designed
to
result in the liquidation, dissolution or winding up of Exchangeco.
Under
the
terms of the Support Agreement, upon notice from Exchangco or Callco of an
event
requiring the delivery of Gran Tierra common shares to any holder of GTE-Solana
Exchangeable Shares, Gran Tierra will deliver the requisite number of common
shares as Exchangeco or Callco shall direct and such common shares will be
fully
paid and non-assessable, free and clear of any lien, claim or encumbrance,
when
issued. Gran Tierra will further ensure that any applicable registration or
qualification requirements are satisfied before the common shares are issued
and
delivered by Gran Tierra, such that the common shares may be freely traded
thereafter, and will use reasonable best efforts to ensure that the common
shares so delivered remain duly registered, qualified or approved under United
States or Canadian law, as applicable, and remain listed for trading on all
stock exchanges on which outstanding shares of Gran Tierra common stock are
listed for trading at such time.
The
Support Agreement further provides that, without the prior approval of
Exchangeco and the holders of GTE-Solana Exchangeable Shares, Gran Tierra will
not issue or distribute: (i) additional shares of Gran Tierra’s common stock by
way of a stock dividend or other distribution, subject to certain exceptions;
(ii) rights, options or warrants or other rights to subscribe for or to purchase
Gran Tierra’s common stock, or securities exchangeable for or convertible into
or carrying rights to acquire Gran Tierra’s common stock; (iii) any class of
securities of Gran Tierra other than its common stock (other than shares
convertible into or exchangeable for carrying rights to acquire Gran Tierra’s
common stock); (iv) rights, options or warrants to acquire securities of Gran
Tierra other than its common stock; (v) evidences of indebtedness of Gran
Tierra; or (vi) other assets of Gran Tierra, to all or substantially all holders
of Gran Tierra’s common stock, nor change Gran Tierra’s common stock (a) into a
lesser number of shares by subdivision; (b) into a greater number of shares
by
consolidation; or (c) to otherwise reclassify or change such common shares
or to
effect a change of control transaction affecting the common shares (each a
“
Change
”),
unless the same or an economically equivalent distribution on or Change to
the
GTE-Solana Exchangeable Shares (or in the rights of the holders thereof) is
made
simultaneously on a per share basis.
Tender
Offers
Pursuant
to the Support Agreement, in the event of any proposed tender offer, share
exchange offer, issuer bid, take-over bid or similar transaction with respect
to
Gran Tierra’s common stock which is proposed by or to Gran Tierra or its
stockholders and is recommended by Gran Tierra’s board of directors, or is
otherwise effected or to be effected with the consent or approval of Gran
Tierra’s board of directors, and in connection with which the GTE-Solana
Exchangeable Shares are not redeemed by Exchangeco or purchased by Callco or
Gran Tierra, Gran Tierra will use reasonable best efforts to enable holders
of
GTE-Solana Exchangeable Shares to participate in such transaction to the same
extent and on an economically equivalent basis as the holders of Gran Tierra’s
common stock, and to ensure that holders of GTE-Solana Exchangeable Shares
may
participate in such transaction without being required to exchange their
GTE-Solana Exchangeable Shares for common stock of Gran Tierra, or if such
exchange is required, to ensure that such exchange is only effective upon the
closing of such transaction.
Prior
Relationship of the Parties
Gran
Tierra and Solana have had prior relations as described in Item 2.01
below.
The
above
description is qualified in its entirety by reference to the Support Agreement,
which is attached hereto as Exhibit 10.2.
Item
2.01 Completion of Acquisition or Disposition of Assets.
The
Closing
On
November 14, 2008 (the “
Closing
Date
”),
Gran
Tierra completed its acquisition of all of the outstanding shares of common
stock of Solana pursuant to the terms and conditions of the previously filed
Arrangement Agreement, dated July 28, 2008, as amended by Amendment No. 1 to
the
Arrangement Agreement, dated September 5, 2008, and Amendment No. 2 to the
Arrangement Agreement, dated October 9, 2008 (the “
Arrangement
Agreement
”),
by
and among Gran Tierra, Exchangeco, and Solana (such acquisition referred to
herein as the “
Arrangement
”).
The
transactions contemplated by the Arrangement Agreement were effected through
a
court-approved plan of arrangement in Canada (the “
Plan
of Arrangement
”).
The
Court of Queen’s Bench of Alberta issued its Final Order approving the Plan of
Arrangement on the Closing Date.
Stockholder
Approval
The
Arrangement Agreement and the Plan of Arrangement were adopted and approved
in a
special meeting of the shareholders of Solana on November 14, 2008 (the
“
Solana
Special Meeting
”),
and
proposals for, among other things, the issuance of common stock to be issued
in
connection with the Arrangement and an amendment to the articles of
incorporation in furtherance of the Arrangement, were approved at a special
meeting of Gran Tierra’s stockholders held on November 14, 2008 (the
“
Gran
Tierra Special Meeting
”).
Consideration
to Solana Shareholders
Under
the
terms of the Arrangement Agreement, Solana shareholders received either (i)
0.9527918 of a share of Gran Tierra common stock or (ii) 0.9527918 of a
GTE-Solana Exchangeable Share, which may be exchanged for one share of Gran
Tierra common stock at the election of the holder for a period of five years
following the Closing Date, after which it will automatically convert into
a
share of Gran Tierra common stock. Solana optionholders received either: (i)
Solana common shares pursuant to a cashless exercise of their options, which
were then exchanged pursuant to the Arrangement Agreement for either Gran Tierra
common stock or GTE-Solana Exchangeable Shares, as applicable, or (ii) cash
payments; in both cases based on the exchange ratio of 0.9527918. In addition,
Solana options held by a Solana employee, officer, director or consultant
continuing with Gran Tierra in such capacity were, if so elected by such Solana
optionholder, exchanged for options to purchase shares of Gran Tierra common
stock, and holders of Solana warrants elected to continue to hold their
warrants, which became exercisable for shares of Gran Tierra common stock
pursuant to the terms of the warrants. The amount of consideration provided
to
Solana’s shareholders pursuant to the Arrangement was determined through arm’s
length negotiations between Gran Tierra and Solana.
Prior
Relationship of the Parties
Prior
to
and until the completion of the Arrangement, Gran Tierra and Solana have been
joint partners in two Colombian blocks (Guayuyaco and Chaza) and one well in
the
Santana block (Inchiyaco) pursuant to certain joint operating agreements. Gran
Tierra and Solana each hold a 35% working interest in the Guayuyaco block and
each hold a 50% working interest in the Chaza block. Solana has had a 9.17%
working interest in the Inchiyaco well, while Gran Tierra has held a 35% working
interest. Gran Tierra has been the operator of all three properties, and as
operator has billed Solana for its share of expenses related to each block.
Oil
produced from the Inchiyaco well and Guayuyaco block has been sold by Gran
Tierra to Ecopetrol S.A., a Colombian government agency, and Gran Tierra has
paid Solana its share of sales. For the Chaza block, Gran Tierra and Solana
have
each sold their own share of the oil produced separately.
Other
than as described in the preceding paragraph, there has been no other material
relationship between Gran Tierra and Solana, other than in respect of the
Arrangement.
The
description of the Arrangement Agreement contained in this current report is
qualified in its entirety by reference to the text of the Arrangement Agreement,
which is incorporated by reference as Exhibit 2.1 hereto. The description of
the
Plan of Arrangement contained in this current report is qualified in its
entirety by reference to Amendment No. 2 to Arrangement Agreement, which
supersedes Amendment No. 1 thereto and includes the Plan of Arrangement, with
appendices, and is incorporated by reference as Exhibit 2.2 hereto.
Item
3.02 Unregistered Sales of Equity Securities.
Reference
is made to the description set forth under Item 2.01 above with respect to
the
Arrangement and related agreements, which is incorporated into this Item 3.02
by
reference.
On
the
Closing Date, Gran Tierra issued, pursuant to the terms of the Arrangement
Agreement and Plan of Arrangement, and in exchange for all of the outstanding
shares of Solana common stock, 51,516,332 shares of Gran Tierra common stock,
par value $0.001, and 69,104,635 GTE-Solana Exchangeable Shares.
In
addition, on the Closing Date and pursuant to the terms of the Arrangement
Agreement and Plan of Arrangement, Gran Tierra assumed Solana warrants now
exercisable for 7,145,938 shares of Gran Tierra common stock at an exercise
price of CDN$2.10 per share, in accordance with the terms thereof, and granted
stock options to purchase 466,869 shares of Gran Tierra common stock,
exercisable pursuant to the formula set forth in the Plan of Arrangement, to
replace Solana stock options held by Solana employees, officers, directors
or
consultants who made the proper election and who are continuing in such capacity
with Gran Tierra following the completion of the Arrangement.
The
Gran
Tierra common shares were issued, Solana warrants assumed and Gran Tierra
options granted in reliance on the registration exemption provided under Section
3(a)(10) of the Securities Act of 1933, as the Arrangement was effected through
an exchange of all of Solana’s securities, outstanding immediately prior to the
effectiveness of the Arrangement, for securities of Gran Tierra or Exchangeco,
as applicable, and was approved by the Court of Queen’s Bench of
Alberta.
Item
3.03 Material Modification to Rights of Security Holders.
Reference
is made to the description set forth under Item 1.01 above with respect to
the
Support Agreement, which is incorporated into this Item 3.03 by reference.
Item
5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Stockholder
Approval of Amendments to the 2007 Equity Incentive Plan
At
the
November 14, 2008 Gran Tierra Special Meeting, Gran Tierra’s stockholders, upon
the recommendation of Gran Tierra’s board of directors (the “
Board
”),
approved, among other items, an amendment to the Gran Tierra 2007 Equity
Incentive Plan, as amended and restated (the “
2007
Plan
”),
to
increase the number of shares authorized for issuance thereunder from 9,000,000
to 18,000,000 to ensure that Gran Tierra has a sufficient reserve of common
stock available under the 2007 Plan to continue to grant stock options and
other
awards following the substantial increase in the size of Gran Tierra as a result
of the Arrangement, described further under Item 2.01 above.
The
2007
Plan provides for the grant of stock options, restricted stock awards, stock
appreciation rights, restricted stock units and other stock awards (collectively
referred to as “
Awards
”).
The
2007 Plan is administered by the Board, which has the power to delegate
administration of the 2007 Plan to a committee of no fewer than two Board
members. An aggregate of 18,000,000 shares of common stock is reserved for
issuance under the 2007 Plan; if Awards granted under the 2007 Plan expire
or
terminate without being exercised, the shares of common stock not acquired
pursuant to such Awards become available again for issuance under the 2007
Plan.
Employees (including officers), directors, and consultants of both Gran Tierra
and its affiliates are eligible to receive all types of awards under the 2007
Plan. Under the 2007 Plan, no person may be granted awards exercisable for
more
than 1,000,000 shares of common stock during any calendar year.
In
the
event of certain specified changes in our capital structure, such as a merger,
consolidation, reorganization, stock dividend or stock split, the class(es)
and
maximum number of shares of common stock subject to the 2007 Plan, and the
class(es), number of shares and price per share of common stock subject to
outstanding Awards, will be appropriately adjusted.
In
the
event of certain corporate transactions, outstanding Awards under the 2007
Plan
may be assumed, continued or substituted for similar awards by any surviving
entity. If the surviving entity does not assume, continue or substitute similar
awards, the vesting of such Awards held by persons whose service with Gran
Tierra has not terminated generally will be accelerated in full and such Awards
will terminate if not exercised at or prior to the effective date of the
corporate transaction and Gran Teirra’s repurchase rights will generally lapse.
Additionally, in the event of certain change of control events, any outstanding
Awards may be subject to additional acceleration of vesting and exercisability
upon such change in control event if such acceleration is provided for in the
individual holder’s Award agreement.
The
Board
may suspend or terminate the 2007 Plan at any time.
A
more
detailed description of the 2007 Plan, and the amendment thereto, is contained
in the Joint Management Information Circular and Proxy Statement, filed with
the
U.S. Securities and Exchange Commission (the “
SEC
”)
on
October 14, 2008 (the “
Proxy
Statement
”)
under
the heading “Proposal 5 – Approval of the Gran Tierra 2007 Equity Incentive
Plan, as Amended and Restated, to Increase the Number of Shares Issuable
Pursuant to the Plan from 9,000,000 to 18,000,000.”
The
above
description is qualified in its entirety by reference to the 2007 Plan, which
is
attached hereto as Exhibit 10.3.
Election
of Directors
On
November 3, 2008, the Board approved an increase to the size of the Board from
five to seven members, effective November 14, 2008, subject to the completion
of
the Arrangement. To fill the vacancies created by the increase, the Board
elected J. Scott Price and Ray Antony to serve as new Board members, effective
November 14, 2008, also subject to the completion of the Arrangement. As
described further under Item 2.01 above, the completion of the Arrangement
occurred on November 14, 2008.
Pursuant
to the terms of the Arrangement Agreement, Gran Tierra agreed that, following
the completion of the Arrangement, the size of the Board would be increased
by
two members and that two designees of Solana would be elected to the Board.
Solana
designated Mr. Price and Mr. Antony to serve on Gran Tierra’s Board. Immediately
prior to the completion of the Arrangement,
Mr.
Price
was Solana’s President, Chief Executive Officer and a member of Solana’s board
of directors, and Mr. Antony was the Chairman of Solana’s board of directors.
Item
9.01 Financial Statements and Exhibits.
(a)
Financial Statements of Business Acquired
The
financial statements required by this Item, with respect to the Arrangement
described in Item 2.01 herein, will be filed as soon as practicable, and in
any
event not later than 71 days after the date on which this current report is
required to be filed pursuant to Item 2.01.
(b)
Pro Forma Financial Information
The
pro
forma financial information required by this Item, with respect to the
Arrangement described in Item 2.01 herein, will be filed as soon as practicable,
and in any event not later than 71 days after the date on which this current
report is required to be filed pursuant to Item 2.01.
(d)
Exhibits
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
Arrangement
Agreement, dated as of July 28, 2008, by and among Gran Tierra Energy
Inc., Solana Resources Limited and Gran Tierra Exchangeco Inc.
(incorporated by reference to Exhibit 2.1 to the Current Report on
Form
8-K, filed with the SEC on August 1, 2008).
|
|
|
|
2.2
|
|
Amendment
No. 2 to Arrangement Agreement, includes the Plan of Arrangement,
including appendices (incorporated by reference to Exhibit 2.2 to
the
Registration Statement on Form S-3 (Reg. No. 333-153376), filed with
the
SEC on October 10, 2008).
|
|
|
|
10.1
|
|
Voting
and Exchange Trust Agreement, dated as of November 14, 2008, between
Gran
Tierra Energy Inc., Gran Tierra Exchangeco Inc. and Computershare
Trust
Company of Canada.
|
|
|
|
10.2
|
|
Support
Agreement, dated as of November 14, 2008, between Gran Tierra Energy
Inc.,
Gran Tierra Callco ULC and Gran Tierra Exchangeco Inc.
|
|
|
|
10.3
|
|
2007
Equity Incentive Plan, as amended and
restated.
|
SIGNATURE
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 hereunto
duly authorized.
Dated:
November 14, 2008
|
GRAN
TIERRA ENERGY INC
|
|
|
|
|
By:
|
/s/
Martin H. Eden
|
|
|
Martin
H. Eden
|
|
|
Chief
Financial Officer
|
EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
Arrangement
Agreement, dated as of July 28, 2008, by and among Gran Tierra Energy
Inc., Solana Resources Limited and Gran Tierra Exchangeco Inc.
(incorporated by reference to Exhibit 2.1 to the Current Report on
Form
8-K, filed with the SEC on August 1, 2008).
|
2.2
|
|
Amendment
No. 2 to Arrangement Agreement, which includes the Plan of Arrangement,
including appendices (incorporated by reference to Exhibit 2.2 to
the
Registration Statement on Form S-3 (Reg. No. 333-153376), filed with
the
SEC on October 10, 2008).
|
|
|
|
10.1
|
|
Voting
and Exchange Trust Agreement, dated as of November 14, 2008, between
Gran
Tierra Energy Inc., Gran Tierra Exchangeco Inc. and Computershare
Trust
Company of Canada.
|
|
|
|
10.2
|
|
Support
Agreement, dated as of November 14, 2008, between Gran Tierra Energy
Inc.,
Gran Tierra Callco ULC and Gran Tierra Exchangeco Inc.
|
|
|
|
10.3
|
|
2007
Equity Incentive Plan, as amended and
restated.
|
Exhibit
10.1
VOTING
AND EXCHANGE TRUST AGREEMENT
VOTING
AND EXCHANGE AGREEMENT
(the
“
Agreement
”)
made
as of the 14
th
day of
November, 2008.
AMONG:
GRAN
TIERRA ENERGY INC.
,
a
corporation existing under the laws of the State of Nevada (hereinafter referred
to as “
Acquiror
”),
-
and
-
GRAN
TIERRA EXCHANGECO INC.
,
a
corporation existing under the laws of Alberta (hereinafter referred to as
“
ExchangeCo
”),
-
and
-
COMPUTERSHARE
TRUST COMPANY OF CANADA
,
a
Canadian trust company incorporated under the laws of Canada (hereinafter
referred to as the “
Trustee
”),
WHEREAS
,
in
connection with the Arrangement Agreement, ExchangeCo may be required to issue
Exchangeable Shares to certain holders of common shares in the capital of
Target, a corporation existing under the laws of Alberta, pursuant to the Plan
of Arrangement contemplated in the Arrangement Agreement;
AND
WHEREAS
,
pursuant to the Arrangement Agreement, Acquiror, ExchangeCo and Trustee have
agreed to execute a voting and exchange trust agreement substantially in the
form of this Agreement;
NOW,
THEREFORE
,
in
consideration of the respective covenants and agreements provided in this
Agreement and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties hereto covenant
and
agree as follows:
ARTICLE
1
INTERPRETATION
1.1
Definitions
In
this
Agreement, unless the context otherwise requires, the following terms shall
have
the following meanings respectively:
“
ABCA
”
means
the
Business
Corporations Act
(Alberta)
as the same has been and may hereafter from time to time be
amended;
“
Acquiror
Common Shares
”
means
the shares of common stock, no par value per share, in the capital of
Acquiror;
“
Acquiror
Control Transaction
”
has
the
meaning ascribed thereto in the Exchangeable Share Provisions;
“
Acquiror
Consent
”
has
the
meaning ascribed thereto in Section 4.2;
“
Acquiror
Meeting
”
has
the
meaning ascribed thereto in Section 4.2;
“
Acquiror
Special Voting Stock
”
means
one share of preferred stock of Acquiror to which that number of voting rights
attach (each such voting right to be equal to the voting rights attached to
one
Acquiror Common Share) equal to the number of outstanding Exchangeable Shares
held by Beneficiaries;
“
Acquiror
Successor
”
has
the
meaning ascribed thereto in Subsection 10.1(a);
“
Affiliate
”
has
the
meaning ascribed thereto in the Securities Act, unless otherwise expressly
stated herein;
“
Arrangement
”
means
the arrangement under section 193 of the ABCA on the terms and subject to the
conditions set out in the Plan of Arrangement, subject to any amendments or
variations thereto made in accordance with Article 6 of the Plan of Arrangement
and Section 9.2 of the Arrangement Agreement or made at the direction of the
Court;
“
Arrangement
Agreement
”
means
the arrangement agreement made as of July 28, 2008 among Acquiror, ExchangeCo
and Target, as amended, supplemented and/or restated in accordance therewith
prior to the date hereof, providing for, among other things, the
Arrangement;
“
Automatic
Exchange Rights
”
means
the benefit of the obligation of Acquiror to effect the automatic exchange
of
Exchangeable Shares for Acquiror Common Shares pursuant to Section
5.12;
“
Beneficiaries
”
means
the registered holders from time to time of Exchangeable Shares, other than
Acquiror and its Affiliates;
“
Beneficiary
Votes
”
has
the
meaning ascribed thereto in Section 4.2;
“
Business
Day
”
means
any day on which commercial banks are generally open for business in Calgary,
Alberta, other than a Saturday, a Sunday or a day observed as a holiday in
Calgary, Alberta under the laws of the Province of Alberta or the federal laws
of Canada;
“
Callco
”
means
Gran Tierra Callco ULC, a corporation existing under the laws of the Province
of
Alberta;
“
Change
of Law Call Right
”
has
the
meaning ascribed thereto in the Plan of Arrangement;
“
Court
”
has
the
meaning ascribed thereto in the Plan of Arrangement;
“
Effective
Date
”
means
the date the Arrangement is effective under the ABCA;
“
Equivalent
Vote
Amount
”
means,
with respect to any matter, proposition or question on which holders of Acquiror
Common Shares are entitled to vote, consent or otherwise act, the number of
votes to which a holder of one Acquiror Common Share is entitled with respect
to
such matter, proposition or question;
“
Exchange
Right
”
has
the
meaning ascribed thereto in Section 5.1;
“
Exchangeable
Shares
”
means
the non-voting exchangeable shares in the capital of ExchangeCo, having
substantially the rights, privileges, restrictions and conditions set out in
Schedule “A” to the Plan of Arrangement;
“
Exchangeable
Share Consideration
”
has
the
meaning ascribed thereto in the Exchangeable Share Provisions;
“
Exchangeable
Share Price
”
has
the
meaning ascribed thereto in the Exchangeable Share Provisions;
“
Exchangeable
Share Provisions
”
means
the rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares;
“
Final
Order
”
means
the final order of the Court approving the Arrangement as such order may be
amended by the Court at any time prior to the date hereof or, if appealed,
then,
unless such appeal is withdrawn or denied, as affirmed;
“
Indemnified
Parties
”
has
the
meaning ascribed thereto in Section 8.1;
“
Insolvency
Event
”
means:
(i) the institution by ExchangeCo of any proceeding to be adjudicated a bankrupt
or insolvent or to be wound up, or the consent of ExchangeCo to the institution
of bankruptcy, insolvency or winding-up proceedings against it; or (ii) the
filing of a petition, answer or consent seeking dissolution or winding-up under
any bankruptcy, insolvency or analogous laws, including the
Companies
Creditors’ Arrangement Act
(Canada)
and the
Bankruptcy
and Insolvency Act
(Canada), and the failure by ExchangeCo to contest in good faith any such
proceedings commenced in respect of ExchangeCo within 30 days of becoming aware
thereof, or the consent by ExchangeCo to the filing of any such petition or
to
the appointment of a receiver; or (iii) the making by ExchangeCo of a general
assignment for the benefit of creditors, or the admission in writing by
ExchangeCo of its inability to pay its debts generally as they become due;
or
(iv) ExchangeCo not being permitted, pursuant to solvency requirements of
applicable law, to redeem any Retracted Shares pursuant to Section 6.6 of the
Exchangeable Share Provisions;
“
Liquidation
Call Right
”
has
the
meaning ascribed thereto in the Plan of Arrangement;
“
Liquidation
Event
”
has
the
meaning ascribed thereto in Subsection 5.12(b);
“
Liquidation
Event Effective Time
”
has
the
meaning ascribed thereto in Subsection 5.12(c);
“
List
”
has
the
meaning ascribed thereto in Section 4.6;
“
Officer’s
Certificate
”
means,
with respect to Acquiror or ExchangeCo, as the case may be, a certificate signed
by any one of the authorized signatories of Acquiror or ExchangeCo, as the
case
may be;
“
Person
”
includes any individual, firm, partnership, joint venture, venture capital
fund,
limited liability company, unlimited liability company, association, trust,
trustee, executor, administrator, legal personal representative, estate, group,
body corporate, corporation, unincorporated association or organization,
government body, syndicate or other entity, whether or not having legal
status;
“
Plan
of Arrangement
”
means
the plan of arrangement substantially in the form and content of Exhibit A
annexed to the Arrangement Agreement and any amendments or variations thereto
made in accordance with Section 9.2 of the Arrangement Agreement or Article
6 of
the Plan of Arrangement or made at the direction of the Court in the Final
Order;
“
Redemption
Call
Right
”
has
the
meaning ascribed thereto in the Plan of Arrangement;
“
Redemption
Date
”
has
the
meaning ascribed thereto in the Exchangeable Share Provisions;
“
Retracted
Shares
”
has
the
meaning ascribed thereto in Section 5.7;
“
Retraction
Call Right
”
has
the
meaning ascribed thereto in the Exchangeable Share Provisions;
“
Securities
Act
”
means
the
Securities
Act
(Alberta) and the rules, regulations and policies made thereunder, as now in
effect and as they may be amended from time to time prior to the Effective
Date;
“
Support
Agreement
”
means
that certain support agreement made as of even date herewith among ExchangeCo,
Callco and Acquiror substantially in the form and content of Exhibit B to the
Arrangement Agreement, with such changes thereto as the parties to the
Arrangement Agreement, acting reasonably, may agree;
“
Target
”
means
Solana Resources Limited, a corporation existing under the laws of
Alberta;
“
Trust
”
means
the trust created by this Agreement;
“
Trust
Estate
”
means
the Acquiror Special Voting Stock, any other securities, the Exchange Right,
the
Automatic Exchange Rights and any money or other property which may be held
by
the Trustee from time to time pursuant to this Agreement; and
“
Voting
Rights
”
means
the voting rights of the Acquiror Special Voting Stock held by the Trustee
in
respect of which the Beneficiaries are, in accordance with this Agreement,
entitled to instruct the Trustee to vote.
1.2
Interpretation
Not Affected by Headings, etc
.
The
division of this Agreement into articles, sections, subsections and other
portions and the insertion of headings are for convenience of reference only
and
should not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an “Article”, “Section” or “Subsection” followed by
a number refer to the specified Article, Section or Subsection of this
Agreement. The terms “this Agreement,” “hereof,” “herein” and “hereunder” and
similar expressions refer to this Agreement and not to any particular Article,
Section, Subsection or other portion hereof.
1.3
Rules
of Construction
Unless
otherwise specifically indicated or the context otherwise requires: (a) all
references to “dollars” or “$” mean United States dollars; (b) words importing
the singular shall include the plural and vice versa and words importing any
gender shall include all genders; and (c) “include,” “includes” and “including”
shall be deemed to be followed by the words “without limitation.”
1.4
Date
for any Action
In
the
event that any date on which any action is required to be taken hereunder by
any
of the parties hereto is not a Business Day, such action shall be required
to be
taken on the next succeeding day that is a Business Day.
1.5
Payments
All
payments to be made hereunder will be made without interest and less any tax
required by Canadian law to be deducted or withheld.
ARTICLE
2
PURPOSE
OF AGREEMENT
2.1
Establishment
of Trust
The
purpose of this Agreement is to create the Trust for the benefit of the
Beneficiaries and Acquiror, as herein provided. The Trustee will hold the
Acquiror Special Voting Stock in order to enable the Trustee to exercise the
Voting Rights and will hold the Exchange Right and the Automatic Exchange Rights
in order to enable the Trustee to exercise such rights, in each case as trustee
for and on behalf of the Beneficiaries as provided in this Agreement. The
Trustee will hold the Acquiror Special Voting Stock for and on behalf of
Acquiror for all other rights associated with such Acquiror Special Voting
Stock
other than the Voting Rights.
ARTICLE
3
ACQUIROR
SPECIAL VOTING STOCK
3.1
Issue
and Ownership of the Acquiror
Special
Voting Stock
Acquiror
hereby agrees to issue to, and deposit with, the Trustee the Acquiror Special
Voting Stock to be hereafter held of record by the Trustee as trustee for and
on
behalf of, and for the use and benefit of, the Beneficiaries and in accordance
with the provisions of this Agreement. Acquiror hereby acknowledges receipt
from
the Trustee as trustee for and on behalf of the Beneficiaries of good and
valuable consideration (and the adequacy thereof) for the issuance of the
Acquiror Special Voting Stock by Acquiror to the Trustee. During the term of
the
Trust and subject to the terms and conditions of this Agreement, the Trustee
shall possess and be vested with full legal ownership of such Acquiror Special
Voting Stock and shall be entitled to exercise all of the rights and powers
of
an owner with respect to such Acquiror Special Voting Stock provided that the
Trustee shall:
|
(a)
|
hold
such Acquiror Special Voting Stock and the legal title thereto as
trustee
solely for the use and benefit of the Beneficiaries in accordance
with the
provisions of this Agreement; and
|
|
(b)
|
except
as specifically authorized by this Agreement, have no power or authority
to sell, transfer, vote or otherwise deal in or with such Acquiror
Special
Voting Stock and such Acquiror Special Voting Stock shall not be
used or
disposed of by the Trustee for any purpose other than the purposes
for
which this Trust is created pursuant to this
Agreement.
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3.2
Legended
Share Certificates
ExchangeCo
will cause each certificate representing Exchangeable Shares to bear an
appropriate legend notifying the Beneficiaries of their right to instruct the
Trustee with respect to the exercise of the portion of the Voting Rights in
respect of the Exchangeable Shares held by the Beneficiaries.
3.3
Safe
Keeping of Certificate
The
physical certificates representing the Acquiror Special Voting Stock are held
by
the Trust, such certificates shall at all times be held in safe keeping by
the
Trustee or its duly authorized agent.
ARTICLE
4
EXERCISE
OF VOTING RIGHTS
4.1
Voting
Rights
The
Trustee, as the holder of record of the Acquiror Special Voting Stock forming
part of the Trust Estate, shall be entitled to all of the Voting Rights,
including the right to vote in person or by proxy the Acquiror Special Voting
Stock held by the Trustee on any matter, question, proposal or proposition
whatsoever that may properly come before the shareholders of Acquiror at a
Acquiror Meeting or in connection with a Acquiror Consent. The Voting Rights
shall be and remain vested in and exercised by the Trustee. Subject to Section
6.15:
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(a)
|
the
Trustee shall exercise the Voting Rights only on the basis of instructions
received pursuant to this Article 4 from Beneficiaries entitled to
instruct the Trustee as to the voting thereof at the time at which
the
Acquiror Meeting is held or a Acquiror Consent is sought;
and
|
|
(b)
|
to
the extent that no instructions are received from a Beneficiary with
respect to the Voting Rights to which such Beneficiary is entitled,
the
Trustee shall not exercise or permit the exercise of such Voting
Rights.
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4.2
Number
of Votes
With
respect to all meetings of shareholders of Acquiror at which holders of Acquiror
Common Shares are entitled to vote (each, a “
Acquiror
Meeting
”)
and
with respect to all written consents sought from Acquiror’s shareholders,
including the holders of Acquiror Common Shares (each, a “
Acquiror
Consent
”),
each
Beneficiary shall be entitled to instruct the Trustee to cast and exercise,
in
the manner instructed, a number of votes equal to the Equivalent Vote Amount
for
each Exchangeable Share owned of record by such Beneficiary on the record date
established by Acquiror or by applicable law for such Acquiror Meeting or
Acquiror Consent, as the case may be (collectively, the “
Beneficiary
Votes
”),
in
respect of each matter, question, proposal or proposition to be voted on at
such
Acquiror Meeting or consented to in connection with such Acquiror
Consent.
4.3
Mailings
to Shareholders
With
respect to each Acquiror Meeting and Acquiror Consent, the Trustee will use
its
reasonable commercial efforts promptly to mail or cause to be mailed (or
otherwise communicate in the same manner as Acquiror utilizes in communications
to holders of Acquiror Common Shares subject to applicable regulatory
requirements and provided such manner of communications is reasonably available
to the Trustee) to each of the Beneficiaries named in the List, such mailing
or
communication to commence on the same day as the mailing or notice (or other
communication) with respect thereto is commenced by Acquiror to its
shareholders:
|
(a)
|
a
copy of such notice, together with any related materials, including
any
proxy or information statement, to be provided to shareholders of
Acquiror;
|
|
(b)
|
a
statement that such Beneficiary is entitled to instruct the Trustee
as to
the exercise of the Beneficiary Votes with respect to such Acquiror
Meeting or Acquiror Consent or, pursuant to Section 4.7, to attend
such
Acquiror Meeting and to exercise personally thereat the Beneficiary
Votes
of such Beneficiary;
|
|
(c)
|
a
statement as to the manner in which such instructions may be given
to the
Trustee, including an express indication that instructions may be
given to
the Trustee to give:
|
|
(i)
|
a
proxy to such Beneficiary or its designee to exercise personally
the
Beneficiary Votes; or
|
|
(ii)
|
a
proxy to a designated agent or other representative of the management
of
Acquiror to exercise such Beneficiary
Votes;
|
|
(d)
|
a
statement that if no such instructions are received from the Beneficiary,
the Beneficiary Votes to which such Beneficiary is entitled will
not be
exercised;
|
|
(e)
|
a
form of direction whereby the Beneficiary may so direct and instruct
the
Trustee as contemplated herein; and
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|
(f)
|
a
statement of the time and date by which such instructions must be
received
by the Trustee in order to be binding upon it, which in the case
of a
Acquiror Meeting shall not be earlier than the close of business
on the
Business Day immediately prior to the date by which the Corporation
has
required proxies be deposited for such meeting, and of the method
for
revoking or amending such
instructions.
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For
the
purpose of determining Beneficiary Votes to which a Beneficiary is entitled
in
respect of any Acquiror Meeting or Acquiror Consent, the number of Exchangeable
Shares owned of record by the Beneficiary shall be determined at the close
of
business on the record date established by Acquiror or by applicable law for
purposes of determining shareholders entitled to vote at such Acquiror Meeting
or to give written consent in connection with such Acquiror Consent. Acquiror
will notify the Trustee of any decision of the Board of Directors of Acquiror
with respect to the calling of any Acquiror Meeting or the seeking of any
Acquiror Consent and shall provide all necessary information and materials
to
the Trustee in each case promptly and in any event in sufficient time to enable
the Trustee to perform its obligations contemplated by this Section
4.3.
The
materials referred to in this Section 4.3 are to be provided to the Trustee
by
Acquiror and the materials referred to in Subsections 4.3(c), 4.3(e) and 4.3(f)
shall be subject to reasonable comment by the Trustee in a timely manner.
Acquiror shall ensure that the materials to be provided to the Trustee are
provided in sufficient time to permit the Trustee to comment as aforesaid and
to
send all materials to each Beneficiary at the same time as such materials are
first sent to holders of Acquiror Common Shares. Acquiror agrees not to
communicate with holders of Acquiror Common Shares with respect to the materials
referred to in this Section 4.3 otherwise than by mail unless such method of
communication is also reasonably available to the Trustee for communication
with
the Beneficiaries. Notwithstanding the foregoing, Acquiror may at its option
exercise the duties of the Trustee to deliver copies of all materials to each
Beneficiary as required by this Section 4.3 so long as in each case Acquiror
delivers a certificate to the Trustee stating that Acquiror has undertaken
to
perform the obligations of the Trustee set forth in this Section
4.3.
4.4
Copies
of Shareholder Information
Acquiror
will deliver to the Trustee copies of all proxy materials (including notices
of
Acquiror Meetings but excluding proxies to vote Acquiror Common Shares, and
in
lieu of such proxies, Acquiror shall deliver to the Trustee a voting information
form in form satisfactory to the Trustee, acting reasonably), information
statements, reports (including all interim and annual financial statements)
and
other written communications that, in each case, are to be distributed from
time
to time to holders of Acquiror Common Shares in sufficient quantities and in
sufficient time so as to enable the Trustee to send those materials to each
Beneficiary, to the extent possible, at the same time as such materials are
first sent to holders of Acquiror Common Shares. The Trustee will mail or
otherwise send to each Beneficiary, at the expense of Acquiror, copies of all
such materials (and all materials specifically directed to the Beneficiaries
or
to the Trustee for the benefit of the Beneficiaries by Acquiror) received by
the
Trustee from Acquiror, to the extent possible, at the same time as such
materials are sent to holders of Acquiror Common Shares. The Trustee will make
copies of all such materials available for inspection by any Beneficiary at
the
Trustee’s principal office in Calgary, Alberta. Notwithstanding the foregoing,
Acquiror at its option may exercise the duties of the Trustee to deliver copies
of all materials to each Beneficiary as required by this Section 4.4 so long
as
in each case Acquiror delivers a certificate to the Trustee stating that
Acquiror has undertaken to perform the obligations set forth in this Section
4.4.
4.5
Other
Materials
As
soon
as reasonably practicable after receipt by Acquiror or holders of Acquiror
Common Shares (if such receipt is known by Acquiror) of any material sent or
given by or on behalf of a third party to holders of Acquiror Common Shares
generally, including dissident proxy and information circulars (and related
information and material) and tender and exchange offer circulars (and related
information and material), Acquiror shall use its reasonable best efforts to
obtain and deliver to the Trustee copies thereof in sufficient quantities so
as
to enable the Trustee to forward such material (unless the same has been
provided directly to Beneficiaries by such third party) to each Beneficiary
as
soon as possible thereafter. As soon as reasonably practicable after receipt
thereof, the Trustee will mail or otherwise send to each Beneficiary, at the
expense of Acquiror, copies of all such materials received by the Trustee from
Acquiror. The Trustee will also make available for inspection by any Beneficiary
at the Trustee’s principal office in Calgary, Alberta copies of all such
materials. Notwithstanding the foregoing, Acquiror at its option may exercise
the duties of the Trustee to deliver copies of all such materials to each
Beneficiary as required by this Section 4.5 so long as in each case Acquiror
delivers a certificate to the Trustee stating that Acquiror has undertaken
to
perform the obligations set forth in this Section 4.5.
4.6
List
of Persons Entitled to Vote
ExchangeCo
shall: (a) prior to each annual and special Acquiror Meeting or the seeking
of
any Acquiror Consent; and (b) forthwith upon each request made at any time
by
the Trustee in writing, prepare or cause to be prepared a list (a “
List
”)
of the
names and addresses of the Beneficiaries arranged in alphabetical order and
showing the number of Exchangeable Shares held of record by each such
Beneficiary, in each case at the close of business on the date specified by
the
Trustee in such request or, in the case of a List prepared in connection with
a
Acquiror Meeting or a Acquiror Consent, at the close of business on the record
date established by Acquiror or pursuant to applicable law for determining
the
holders of Acquiror Common Shares entitled to receive notice of and/or to vote
at such Acquiror Meeting or to give consent in connection with such Acquiror
Consent. Each such List shall be delivered to the Trustee promptly after receipt
by ExchangeCo of such request or the record date for such meeting or seeking
of
consent, as the case may be, and in any event within sufficient time as to
permit the Trustee to perform its obligations under this Agreement. Acquiror
agrees to give ExchangeCo notice (with a copy to the Trustee) of the calling
of
any Acquiror Meeting or the seeking of any Acquiror Consent by Acquiror or
its
management, together with the record dates therefor, sufficiently prior to
the
date of the calling of such meeting or seeking of such consent so as to enable
ExchangeCo to perform its obligations under this Section 4.6.
4.7
Entitlement
to Direct Votes
Any
Beneficiary named in a List prepared in connection with any Acquiror Meeting
or
Acquiror Consent will be entitled: (a) to instruct the Trustee in the manner
described in Section 4.3 with respect to the exercise of the Beneficiary Votes
to which such Beneficiary is entitled; or (b) to attend such meeting and
personally exercise thereat (or to personally exercise with respect to any
Acquiror Consent), as the proxy of the Trustee, the Beneficiary Votes to which
such Beneficiary is entitled.
4.8
Voting
by Trustee and Attendance of Trustee Representative at
Meeting
|
(a)
|
In
connection with each Acquiror Meeting and Acquiror Consent, the Trustee
shall exercise, either in person or by proxy, in accordance with
the
instructions received from a Beneficiary pursuant to Section 4.3,
the
Beneficiary Votes as to which such Beneficiary is entitled to direct
the
vote (or any lesser number thereof as may be set forth in the
instructions); provided, however, that such written instructions
are
received by the Trustee from the Beneficiary prior to the time and
date
fixed by the Trustee for receipt of such instruction in the notice
given
by the Trustee to the Beneficiary pursuant to Section
4.3.
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|
(b)
|
The
Trustee shall cause a representative who is empowered by it to sign
and
deliver, on behalf of the Trustee, proxies for Voting Rights to attend
each Acquiror Meeting. Upon submission by a Beneficiary (or its designee)
of identification satisfactory to the Trustee’s representative, and at the
Beneficiary’s request, such representative shall sign and deliver to such
Beneficiary (or its designee) a proxy to exercise personally the
Beneficiary Votes as to which such Beneficiary is otherwise entitled
hereunder to direct the vote, if such Beneficiary either: (i) has
not
previously given the Trustee instructions pursuant to Section 4.3
in
respect of such meeting; or (ii) submits to such representative written
revocation of any such previous instructions. At such meeting, upon
receipt of a proxy from the Trustee’s representative, the Beneficiary
exercising such Beneficiary Votes shall have the same rights as the
Trustee to speak at the meeting in respect of any matter, question,
proposal or proposition, to vote by way of ballot at the meeting
in
respect of any matter, question, proposal or proposition, and to
vote at
such meeting by way of a show of hands in respect of any matter,
question
or proposition.
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4.9
Distribution
of Written Materials
Any
written materials distributed by or on behalf of the Trustee pursuant to this
Agreement shall be sent by mail (or otherwise communicated in the same manner
as
Acquiror utilizes in communications to holders of Acquiror Common Shares,
subject to applicable regulatory requirements and provided such manner of
communications is reasonably available to the Trustee) to each Beneficiary
at
its address as shown on the books of ExchangeCo. Acquiror agrees not to
communicate with holders of Acquiror Common Shares with respect to such written
material otherwise than by mail unless such method of communication is also
reasonably available to the Trustee for communication with the Beneficiaries.
ExchangeCo shall provide or cause to be provided to the Trustee for purposes
of
communication, on a timely basis and without charge or other
expense:
|
(b)
|
upon
the request of the Trustee, mailing labels to enable the Trustee
to carry
out its duties under this
Agreement.
|
ExchangeCo’s
obligations under this Section 4.9 shall be deemed satisfied to the extent
Acquiror exercises its option to perform the duties of the Trustee to deliver
copies of materials to each Beneficiary and ExchangeCo provides the required
information and materials to Acquiror.
4.10
Termination
of Voting Rights
Except
as
otherwise provided herein or in the Exchangeable Share Provisions, all of the
rights of a Beneficiary with respect to the Beneficiary Votes exercisable in
respect of the Exchangeable Shares held by such Beneficiary, including the
right
to instruct the Trustee as to the voting of or to vote personally such
Beneficiary Votes, shall be deemed to be surrendered by the Beneficiary to
Acquiror or Callco, as the case may be, and such Beneficiary Votes and the
Voting Rights represented thereby shall cease and be terminated immediately,
upon the delivery by such Beneficiary to the Trustee of the certificates
representing such Exchangeable Shares in connection with the exercise by the
Beneficiary of the Exchange Right or upon the occurrence of the automatic
exchange of Exchangeable Shares for Acquiror Common Shares, as specified in
Article 5 (unless, in either case, Acquiror shall not have delivered the
Exchangeable Share Consideration deliverable in exchange therefor to the Trustee
for delivery to the Beneficiaries), or upon the redemption of Exchangeable
Shares pursuant to Article 6 or Article 7 of the Exchangeable Share Provisions,
or upon the effective date of the liquidation, dissolution or winding-up of
ExchangeCo pursuant to Article 5 of the Exchangeable Share Provisions, or the
purchase of Exchangeable Shares from the holder thereof by Callco pursuant
to
the exercise by Callco of the Retraction Call Right, the Redemption Call Right
or the Liquidation Call Right, or upon the purchase of Exchangeable Shares
from
the holders thereof by Acquiror or Callco pursuant to the exercise by Acquiror
or Callco of the Change of Law Call Right.
ARTICLE
5
EXCHANGE
RIGHT AND AUTOMATIC EXCHANGE
5.1
Grant
and Ownership of the Exchange Right
Acquiror
hereby grants to the Trustee as trustee for and on behalf of, and for the use
and benefit of, the Beneficiaries the right (the “
Exchange
Right
”),
upon
the occurrence and during the continuance of an Insolvency Event, to require
Acquiror to purchase from each or any Beneficiary all or any part of the
Exchangeable Shares held by such Beneficiary and the Automatic Exchange Rights,
all in accordance with the provisions of this Agreement. Acquiror hereby
acknowledges receipt from the Trustee as trustee for and on behalf of the
Beneficiaries of good and valuable consideration (and the adequacy thereof)
for
the grant of the Exchange Right and the Automatic Exchange Rights by Acquiror
to
the Trustee. During the term of the Trust and subject to the terms and
conditions of this Agreement, the Trustee shall possess and be vested with
full
legal ownership of the Exchange Right and the Automatic Exchange Rights and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Exchange Right and the Automatic Exchange Rights, provided that
the Trustee shall:
|
(a)
|
hold
the Exchange Right and the Automatic Exchange Rights and the legal
title
thereto as trustee solely for the use and benefit of the Beneficiaries
in
accordance with the provisions of this Agreement;
and
|
|
(b)
|
except
as specifically authorized by this Agreement, have no power or authority
to exercise or otherwise deal in or with the Exchange Right or the
Automatic Exchange Rights, and the Trustee shall not exercise any
such
rights for any purpose other than the purposes for which the Trust
is
created pursuant to this Agreement.
|
5.2
Legended
Share Certificates
ExchangeCo
will cause each certificate representing Exchangeable Shares to bear an
appropriate legend notifying the Beneficiaries of:
|
(a)
|
their
right to instruct the Trustee with respect to the exercise of the
Exchange
Right in respect of the Exchangeable Shares held by a Beneficiary;
and
|
|
(b)
|
the
Automatic Exchange Rights.
|
5.3
General
Exercise of Exchange Right
The
Exchange Right shall be and remain vested in and exercisable by the Trustee.
Subject to Section
6.15
,
the
Trustee shall exercise the Exchange Right only on the basis of instructions
received pursuant to this
Article
5
from
Beneficiaries entitled to instruct the Trustee as to the exercise thereof.
To
the extent that no instructions are received from a Beneficiary with respect
to
the Exchange Right, the Trustee shall not exercise or permit the exercise of
the
Exchange Right.
5.4
Purchase
Price
The
purchase price payable by Acquiror for each Exchangeable Share to be purchased
by Acquiror under the Exchange Right shall be an amount per share equal to
the
Exchangeable Share Price on the last Business Day prior to the day of closing
of
the purchase and sale of such Exchangeable Share under the Exchange Right.
In
connection with each exercise of the Exchange Right, Acquiror shall provide
to
the Trustee an Officer’s Certificate setting forth the calculation of the
Exchangeable Share Price for each Exchangeable Share. The Exchangeable Share
Price for each such Exchangeable Share so purchased may be satisfied only by
Acquiror delivering or causing to be delivered to the Trustee, on behalf of
the
relevant Beneficiary, the Exchangeable Share Consideration representing the
total Exchangeable Share Price. Upon payment by Acquiror of such purchase price
to the Trustee for the benefit of the Beneficiary, the relevant Beneficiary
shall cease to have any right to be paid any amount in respect of declared
and
unpaid dividends on each such Exchangeable Share by ExchangeCo.
5.5
Exercise
Instructions
Subject
to the terms and conditions herein set forth, a Beneficiary shall be entitled,
upon the occurrence and during the continuance of an Insolvency Event, to
instruct the Trustee to exercise the Exchange Right with respect to all or
any
part of the Exchangeable Shares registered in the name of such Beneficiary
on
the books of ExchangeCo. To cause the exercise of the Exchange Right by the
Trustee, the Beneficiary shall deliver to the Trustee, in person or by certified
or registered mail, at its principal office in Calgary, Alberta or at such
other
places as the Trustee may from time to time designate by written notice to
the
Beneficiaries, the certificates representing the Exchangeable Shares which
such
Beneficiary desires Acquiror to purchase, duly endorsed in blank for transfer,
and accompanied by such other documents and instruments as may be required
to
effect a transfer of Exchangeable Shares under the ABCA and the by-laws of
ExchangeCo and such additional documents and instruments as the Trustee,
ExchangeCo and Acquiror may reasonably require together with: (a) a duly
completed form of notice of exercise of the Exchange Right, contained on the
reverse of or attached to the Exchangeable Share certificates, stating: (i)
that
the Beneficiary thereby instructs the Trustee to exercise the Exchange Right
so
as to require Acquiror to purchase from the Beneficiary the number of
Exchangeable Shares specified therein: (ii) that such Beneficiary has good
title
to and owns all such Exchangeable Shares to be acquired by Acquiror free and
clear of all liens, claims, security interests and encumbrances; (iii) the
names
in which the certificates representing Acquiror Common Shares issuable in
connection with the exercise of the Exchange Right are to be issued; and (iv)
the names and addresses of the persons to whom such new certificates should
be
delivered; and (b) payment (or evidence satisfactory to the Trustee, ExchangeCo
and Acquiror of payment) of the taxes (if any) payable as contemplated by
Section
5.8
of this
Agreement. If only a part of the Exchangeable Shares represented by any
certificate or certificates delivered to the Trustee are to be purchased by
Acquiror under the Exchange Right, a new certificate for the balance of such
Exchangeable Shares shall be issued to the holder at the expense of
ExchangeCo.
5.6
Delivery
of Acquiror Common Shares; Effect of Exercise
Promptly
after the receipt by the Trustee of the certificates representing the
Exchangeable Shares which the Beneficiary desires Acquiror to purchase under
the
Exchange Right, together with such documents and instruments of transfer and
a
duly completed form of notice of exercise of the Exchange Right (and payment
of
taxes, if any payable as contemplated by Section
5.8
or
evidence thereof), duly endorsed for transfer to Acquiror, the Trustee shall
notify Acquiror and ExchangeCo of its receipt of the same, which notice to
Acquiror and ExchangeCo shall constitute exercise of the Exchange Right by
the
Trustee on behalf of the Beneficiary in respect of such Exchangeable Shares,
and
Acquiror shall promptly thereafter deliver or cause to be delivered to the
Trustee, for delivery to the Beneficiary in respect of such Exchangeable Shares
(or to such other persons, if any, properly designated by such Beneficiary)
the
Exchangeable Share Consideration deliverable in connection with the exercise
of
the Exchange Right; provided, however, that no such delivery shall be made
unless and until the Beneficiary requesting the same shall have paid (or
provided evidence satisfactory to the Trustee, ExchangeCo and Acquiror of the
payment of) the taxes (if any) payable as contemplated by Section
5.8
of this
Agreement. Immediately upon the giving of notice by the Trustee to Acquiror
and
ExchangeCo of the exercise of the Exchange Right, as provided in this Section
5.6
,
the
closing of the transaction of purchase and sale contemplated by the Exchange
Right shall be deemed to have occurred, and the Beneficiary of such Exchangeable
Shares shall be deemed to have transferred to Acquiror all of such Beneficiary’s
right, title and interest in and to such Exchangeable Shares and in the related
interest in the Trust Estate and shall cease to be a holder of such Exchangeable
Shares and shall not be entitled to exercise any of the rights of a holder
in
respect thereof, other than the right to receive his proportionate part of
the
total purchase price therefor, unless such Exchangeable Share Consideration
is
not delivered by Acquiror to the Trustee for delivery to such Beneficiary (or
to
such other person, if any, properly designated by such Beneficiary) within
five
Business Days of the date of the giving of such notice by the Trustee, in which
case the rights of the Beneficiary shall remain unaffected until such
Exchangeable Share Consideration is delivered by Acquiror and any cheque
included therein is paid. Upon delivery of such Exchangeable Share Consideration
by Acquiror to the Trustee, the Trustee shall deliver such Exchangeable Share
Consideration to such Beneficiary (or to such other person, if any, properly
designated by such Beneficiary). Concurrently with such Beneficiary ceasing
to
be a holder of Exchangeable Shares, the Beneficiary shall be considered and
deemed for all purposes to be the holder of the Acquiror Common Shares delivered
to it pursuant to the Exchange Right.
5.7
Exercise
of Exchange Right Subsequent to Retraction
In
the
event that a Beneficiary has exercised its right under Article 6 of the
Exchangeable Share Provisions to require ExchangeCo to redeem any or all of
the
Exchangeable Shares held by the Beneficiary (the “
Retracted
Shares
”)
and is
notified by ExchangeCo pursuant to Section 6.6 of the Exchangeable Share
Provisions that ExchangeCo will not be permitted as a result of solvency
requirements of applicable law to redeem all such Retracted Shares, and provided
that Callco shall not have exercised the Retraction Call Right with respect
to
the Retracted Shares and that the Beneficiary has not revoked the retraction
request delivered by the Beneficiary to ExchangeCo pursuant to Section 6.7
of
the Exchangeable Share Provisions, and provided further that the Trustee has
received written notice of same from ExchangeCo or Acquiror, the retraction
request will constitute and will be deemed to constitute notice from the
Beneficiary to the Trustee instructing the Trustee to exercise the Exchange
Right with respect to those Retracted Shares that ExchangeCo is unable to
redeem. In any such event, ExchangeCo hereby agrees with the Trustee and in
favour of the Beneficiary promptly to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Beneficiary to ExchangeCo or
to
the transfer agent of the Exchangeable Shares (including a copy of the
retraction request delivered pursuant to Section 6.1 of the Exchangeable Share
Provisions) in connection with such proposed redemption of the Retracted Shares
and the Trustee will thereupon exercise the Exchange Right with respect to
the
Retracted Shares that ExchangeCo is not permitted to redeem and will require
Acquiror to purchase such shares in accordance with the provisions of this
Article
5
.
5.8
Stamp
or Other Transfer Taxes
Upon
any
sale of Exchangeable Shares to Acquiror pursuant to the Exchange Right or the
Automatic Exchange Rights, the share certificate or certificates representing
Acquiror Common Shares to be delivered in connection with the payment of the
purchase price therefor shall be issued in the name of the Beneficiary in
respect of the Exchangeable Shares so sold or in such names as such Beneficiary
may otherwise direct in writing without charge to the holder of the Exchangeable
Shares so sold; provided, however, that such Beneficiary shall pay (and none
of
Acquiror, ExchangeCo or the Trustee shall be required to pay) any documentary,
stamp, transfer or other taxes that may be payable in respect of any transfer
involved in the issuance or delivery of such shares to a person other than
such
Beneficiary.
5.9
Notice
of Insolvency Event
As
soon
as practicable following the occurrence of an Insolvency Event or any event
that
with the giving of notice or the passage of time or both would be an Insolvency
Event, ExchangeCo and Acquiror shall give written notice thereof to the Trustee.
As soon as practicable following the receipt of notice from ExchangeCo and
Acquiror of the occurrence of an Insolvency Event, or upon the Trustee becoming
aware of an Insolvency Event, the Trustee will mail to each Beneficiary, at
the
expense of Acquiror (such funds to be received in advance), a notice of such
Insolvency Event in the form provided by Acquiror, which notice shall contain
a
brief statement of the rights of the Beneficiaries with respect to the Exchange
Right.
5.10
Qualification
of Acquiror Common Shares
Acquiror
covenants that if any Acquiror Common Shares issuable pursuant to the Exchange
Right or the Automatic Exchange Rights require registration or qualification
with or approval of or the filing of any document, including any prospectus
or
similar document, or the taking of any proceeding with or the obtaining of
any
order, ruling or consent from any governmental or regulatory authority under
any
Canadian or United States federal, provincial, territorial or state law or
regulation or pursuant to the rules and regulations of any regulatory authority
or the fulfillment of any other Canadian or United States federal, provincial,
territorial or state legal requirement before such shares may be issued and
delivered by Acquiror to the initial holder thereof or in order that such shares
may be freely traded thereafter (other than any restrictions of general
application on transfer by reason of a holder being a “control person” of
Acquiror for purposes of Canadian provincial securities law or an “affiliate” of
Acquiror for purposes of United States federal or state securities law),
Acquiror will in good faith take all such actions and do all such things as
are
necessary or desirable to cause such Acquiror Common Shares to be and remain
duly registered, qualified or approved under United States and/or Canadian
law,
as the case may be, to the extent expressly provided in the Arrangement
Agreement. Acquiror will use its reasonable best efforts and in good faith
expeditiously take all such actions and do all such things as are reasonably
necessary or desirable to cause all Acquiror Common Shares to be delivered
pursuant to the Exchange Right or the Automatic Exchange Rights to be listed,
quoted or posted for trading on all stock exchanges and quotation systems on
which outstanding Acquiror Common Shares are listed, quoted or posted for
trading at such time.
5.11
Acquiror
Common Shares
Acquiror
hereby represents, warrants and covenants that the Acquiror Common Shares
issuable to Beneficiaries as described herein will be duly authorized and
validly issued, fully paid and non-assessable and shall be free and clear of
any
lien, claim or encumbrance.
5.12
Automatic
Exchange on Liquidation of
Acquiror
|
(a)
|
Acquiror
will give the Trustee written notice of each of the following events
at
the time set forth below:
|
|
(i)
|
in
the event of any determination by the Board of Directors of Acquiror
to
institute voluntary liquidation, dissolution or winding-up proceedings
with respect to Acquiror or to effect any other distribution of assets
of
Acquiror among its shareholders for the purpose of winding-up its
affairs,
at least 60 days prior to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution;
and
|
|
(ii)
|
promptly
following the earlier of: (A) receipt by Acquiror of notice of; and
(B)
Acquiror otherwise becoming aware of, any threatened or instituted
claim,
suit, petition or other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of Acquiror or to effect any
other
distribution of assets of Acquiror among its shareholders for the
purpose
of winding-up its affairs, in each case where Acquiror has failed
to
contest in good faith any such proceeding commenced in respect of
Acquiror
within 30 days of becoming aware thereof.
|
|
(b)
|
Promptly
following receipt by the Trustee from Acquiror of notice of any event
(a
“
Liquidation
Event
”)
contemplated by Subsection
5.12(a)
,
the Trustee will give notice or cause such notice to be given thereof
to
the Beneficiaries. Such notice shall be provided to the Trustee by
Acquiror and shall include a brief description of rights of the
Beneficiaries with respect to the Automatic Exchange Rights provided
for
in Subsection
5.12(c)
.
|
|
(c)
|
In
order that the Beneficiaries will be able to participate on a pro
rata
basis with the holders of Acquiror Common Shares in the distribution
of
assets of Acquiror in connection with a Liquidation Event, immediately
prior to the effective time (the “
Liquidation
Event Effective Time
”)
of a Liquidation Event all of the then outstanding Exchangeable Shares
shall be automatically exchanged for Acquiror Common Shares. To effect
such automatic exchange, Acquiror shall purchase each Exchangeable
Share
outstanding immediately prior to the Liquidation Event Effective
Time and
held by Beneficiaries, and each Beneficiary shall sell the Exchangeable
Shares held by such Beneficiary at such time, for a purchase price
per
share equal to the Exchangeable Share Price applicable at that time.
Acquiror shall provide the Trustee with an Officer’s Certificate in
connection with any automatic exchange setting forth the calculation
of
the Exchangeable Share Price for each Exchangeable
Share.
|
|
(d)
|
The
closing of the transaction of purchase and sale contemplated by the
automatic exchange of Exchangeable Shares for Acquiror Common Shares
shall
be deemed to have occurred immediately prior to the Liquidation Event
Effective Time, and each Beneficiary shall be deemed to have transferred
to Acquiror all of the Beneficiary’s right, title and interest in and to
such Beneficiary’s Exchangeable Shares and the related interest in the
Trust Estate. Any right of each such Beneficiary to receive declared
and
unpaid dividends from ExchangeCo shall be deemed to be satisfied
and
discharged and each such Beneficiary shall cease to be a holder of
such
Exchangeable Shares and Acquiror shall deliver to the Beneficiary
the
Exchangeable Share Consideration deliverable upon the automatic exchange
of Exchangeable Shares. Concurrently with such Beneficiary ceasing
to be a
holder of Exchangeable Shares, the Beneficiary shall be considered
and
deemed for all purposes to be the holder of the Acquiror Common Shares
issued pursuant to the automatic exchange of Exchangeable Shares
for
Acquiror Common Shares and the certificates held by the Beneficiary
previously representing the Exchangeable Shares exchanged by the
Beneficiary with Acquiror pursuant to such automatic exchange shall
thereafter be deemed to represent Acquiror Common Shares issued to
the
Beneficiary by Acquiror pursuant to such automatic exchange. Upon
the
request of a Beneficiary and the surrender by the Beneficiary of
Exchangeable Share certificates deemed to represent Acquiror Common
Shares, duly endorsed in blank and accompanied by such instruments
of
transfer as Acquiror may reasonably require, Acquiror shall deliver
or
cause to be delivered to the Beneficiary certificates representing
Acquiror Common Shares of which the Beneficiary is the
holder.
|
5.13
Withholding
Rights
Acquiror,
ExchangeCo and the Trustee shall be entitled to deduct and withhold from any
consideration otherwise payable under this Agreement to any holder of
Exchangeable Shares or Acquiror Common Shares such amounts as Acquiror,
ExchangeCo or the Trustee is required to deduct and withhold with respect to
such payment under the
Income
Tax Act
(Canada), the
United
States Internal Revenue Code of 1986
or any
provision of federal, provincial, state, local or foreign tax law, in each
case
as amended or succeeded. The Trustee may act on the advice of counsel with
respect to such matters. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes as having been paid to the
holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required to
be
deducted or withheld from any payment to a holder exceeds the cash portion
of
the consideration otherwise payable to the holder, Acquiror, ExchangeCo and
the
Trustee are hereby authorized to sell or otherwise dispose of such portion
of
the consideration as is necessary to provide sufficient funds to Acquiror,
ExchangeCo or the Trustee, as the case may be, to enable it to comply with
such
deduction or withholding requirement and Acquiror, ExchangeCo or the Trustee
shall notify the holder thereof and remit to such holder any unapplied balance
of the net proceeds of such sale.
ARTICLE
6
CONCERNING
THE TRUSTEE
6.1
Powers
and Duties of the Trustee
The
rights, powers, duties and authorities of the Trustee under this Agreement,
in
its capacity as trustee of the Trust, shall include:
|
(a)
|
receipt
and deposit of Acquiror Special Voting Stock from Acquiror as trustee
for
and on behalf of the Beneficiaries and Acquiror in accordance with
the
provisions of this Agreement;
|
|
(b)
|
granting
proxies and distributing materials to Beneficiaries as provided in
this
Agreement;
|
|
(c)
|
casting
and exercising the Beneficiary Votes in accordance with the provisions
of
this Agreement;
|
|
(d)
|
receiving
the grant of the Exchange Right and the Automatic Exchange Rights
from
Acquiror as trustee for and on behalf of the Beneficiaries in accordance
with the provisions of this
Agreement;
|
|
(e)
|
exercising
the Exchange Right and enforcing the benefit of the Automatic Exchange
Rights, in each case in accordance with the provisions of this Agreement,
and in connection therewith receiving from Beneficiaries Exchangeable
Shares and other requisite documents and distributing to such
Beneficiaries Acquiror Common Shares and cheques, if any, to which
such
Beneficiaries are entitled upon the exercise of the Exchange Right
or
pursuant to the Automatic Exchange Rights, as the case may
be;
|
|
(f)
|
holding
title to the Trust Estate;
|
|
(g)
|
investing
any moneys forming, from time to time, a part of the Trust Estate
as
provided in this Agreement;
|
|
(h)
|
taking
action on its own initiative or at the direction of a Beneficiary
or
Beneficiaries to enforce the obligations of Acquiror and ExchangeCo
under
this Agreement; and
|
|
(i)
|
taking
such other actions and doing such other things as are specifically
provided in this Agreement.
|
In
the
exercise of such rights, powers, duties and authorities, the Trustee shall
have
(and is granted) such incidental and additional rights, powers, duties and
authority not in conflict with any of the provisions of this Agreement as the
Trustee, acting in good faith and in the reasonable exercise of its discretion,
may deem necessary, appropriate or desirable to effect the purpose of the Trust.
Any exercise of such discretionary rights, powers, duties and authorities by
the
Trustee shall be final, conclusive and binding upon all persons.
The
Trustee in exercising its rights, powers, duties and authorities hereunder
shall
act honestly and in good faith and with a view to the best interests of the
Beneficiaries and shall exercise the care, diligence and skill that a reasonably
prudent trustee would exercise in comparable circumstances.
The
Trustee shall not be bound to give notice or do or take any act, action or
proceeding by virtue of the powers conferred on it hereby unless and until
it
shall be specifically required to do so under the terms hereof, nor shall the
Trustee be required to take any notice of, or to do, or to take any act, action
or proceeding as a result of any default or breach of any provision hereunder,
unless and until notified in writing of such default or breach, which notices
shall distinctly specify the default or breach desired to be brought to the
attention of the Trustee, and in the absence of such notice the Trustee may
for
all purposes of this Agreement conclusively assume that no default or breach
has
been made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
6.2
No
Conflict of Interest
The
Trustee represents to Acquiror and ExchangeCo that at the date of execution
and
delivery of this Agreement there exists no material conflict of interest in
the
role of the Trustee as a fiduciary hereunder and the role of the Trustee in
any
other capacity. The Trustee shall, within 90 days after it becomes aware that
such material conflict of interest exists, either eliminate such material
conflict of interest or resign in the manner and with the effect specified
in
Article
9
.
If,
notwithstanding the foregoing provisions of this Section
6.2
,
the
Trustee has such a material conflict of interest, the validity and
enforceability of this Agreement shall not be affected in any manner whatsoever
by reason only of the existence of such material conflict of interest. If the
Trustee contravenes the foregoing provisions of this Section
6.2
,
any
interested party may apply to the Court for an order that the Trustee be
replaced as trustee hereunder.
6.3
Dealings
with Transfer Agents, Registrars, etc
.
Acquiror
and ExchangeCo irrevocably authorize the Trustee, from time to time,
to:
|
(a)
|
consult,
communicate and otherwise deal with the respective registrars and
transfer
agents, and with any such subsequent registrar or transfer agent,
of the
Exchangeable Shares and Acquiror Common Shares;
and
|
|
(b)
|
requisition,
from time to time: (i) from any such registrar or transfer agent
any
information readily available from the records maintained by it which
the
Trustee may reasonably require for the discharge of its duties and
responsibilities under this Agreement; and (ii) from the transfer
agent of
Acquiror Common Shares, and any subsequent transfer agent of such
shares,
the share certificates issuable upon the exercise from time to time
of the
Exchange Right and pursuant to the Automatic Exchange
Rights.
|
Acquiror
and ExchangeCo shall irrevocably authorize their respective registrars and
transfer agents to comply with all such requests and confirm to the Trustee
that
such irrevocable authorization has been given. Acquiror covenants that it will
supply, in a timely manner, its transfer agents with duly executed share
certificates for the purpose of completing the exercise from time to time of
the
Exchange Right and the Automatic Exchange Rights.
6.4
Books
and Records
The
Trustee shall keep available for inspection by Acquiror and ExchangeCo at the
Trustee’s principal office in Calgary, Alberta correct and complete books and
records of account relating to the Trust created by this Agreement, including
all relevant data relating to mailings and instructions to and from
Beneficiaries and all transactions pursuant to the Exchange Right and the
Automatic Exchange Rights. On or before January 31 in every year, so long as
any
Acquiror Common Shares are on deposit with the Trustee, the Trustee shall
transmit to Acquiror and ExchangeCo a brief report, dated as of the preceding
December 31, with respect to:
|
(a)
|
the
property and funds comprising the Trust Estate as of that
date;
|
|
(b)
|
the
number of exercises of the Exchange Right, if any, and the aggregate
number of Exchangeable Shares received by the Trustee on behalf of
Beneficiaries in consideration of the issuance by Acquiror of Acquiror
Common Shares and any other Exchangeable Share Consideration in connection
with the Exchange Right, during the calendar year ended on such December
31; and
|
|
(c)
|
any
action taken by the Trustee in the performance of its duties under
this
Agreement which it had not previously reported and which, in the
Trustee’s
opinion, materially affects the Trust
Estate.
|
6.5
Income
Tax Returns and Reports
The
Trustee shall, to the extent necessary, prepare and file on behalf of the Trust
appropriate United States and Canadian income tax returns and any other returns
or reports as may be required by applicable law or pursuant to the rules and
regulations of any securities exchange or other trading system through which
the
Exchangeable Shares are traded; provided that, the Trustee will not be
responsible for preparing United States tax returns unless specifically directed
by Acquiror and Acquiror will indemnify the Trustee for any costs or damages
to
the Trustee as a result of Acquiror failing to so direct the preparation of
a
United States tax return. In connection therewith, the Trustee may obtain the
advice and assistance of such experts or advisors as the Trustee reasonably
considers necessary or advisable (who may be experts or advisors to Acquiror
or
ExchangeCo). If requested by the Trustee, Acquiror or ExchangeCo shall retain,
at their expense, qualified experts or advisors for the purpose of providing
such tax advice or assistance.
6.6
Indemnification
Prior to Certain Actions by Trustee
The
Trustee shall exercise any or all of the rights, duties, powers or authorities
vested in it by this Agreement at the request, order or direction of any
Beneficiary upon such Beneficiary furnishing to the Trustee reasonable funding,
security or indemnity against the costs, expenses and liabilities which may
be
incurred by the Trustee therein or thereby, provided that no Beneficiary shall
be obligated to furnish to the Trustee any such security or indemnity in
connection with the exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to the Acquiror Common Shares held by the Trustee
pursuant to
Article
4
,
subject
to Section
6.15
,
with
respect to the Exchange Right pursuant to
Article
5
,
subject
to Section
6.15
,
and
with respect to the Automatic Exchange Rights pursuant to
Article
5
,
subject
to Section
6.15
.
None
of
the provisions contained in this Agreement shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the exercise
of
any of its rights, powers, duties, or authorities unless funded, given security
or indemnified as aforesaid.
6.7
Action
of Beneficiaries
No
Beneficiary shall have the right to institute any action, suit or proceeding
or
to exercise any other remedy authorized by this Agreement for the purpose of
enforcing any of its rights or for the execution of any trust or power hereunder
unless the Beneficiary has requested the Trustee to take or institute such
action, suit or proceeding and furnished the Trustee with the funding, security
or indemnity referred to in Section
6.6
and the
Trustee shall have failed to act within a reasonable time thereafter. In such
case, but not otherwise, the Beneficiary shall be entitled to take proceedings
in any court of competent jurisdiction such as the Trustee might have taken;
it
being understood and intended that no one or more Beneficiaries shall have
any
right in any manner whatsoever to affect, disturb or prejudice the rights hereby
created by any such action, or to enforce any right hereunder or the Voting
Rights, the Exchange Rights or the Automatic Exchange Rights except subject
to
the conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted,
had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Beneficiaries.
6.8
Reliance
Upon Declarations
The
Trustee shall not be considered to be in contravention of any of its rights,
powers, duties and authorities hereunder if, when required, it acts and relies
in good faith upon statutory declarations, certificates, opinions, Lists,
reports or other papers or documents furnished pursuant to the provisions hereof
or required by the Trustee to be furnished to it in the exercise of its rights,
powers, duties and authorities hereunder if such statutory declarations,
certificates, opinions, Lists, reports or other papers or documents comply
with
the provisions of Section
6.9
,
if
applicable, and with any other applicable provisions of this
Agreement.
6.9
Evidence
and Authority to Trustee
Acquiror
and/or ExchangeCo shall furnish to the Trustee evidence of compliance with
the
conditions provided for in this Agreement relating to any action or step
required or permitted to be taken by Acquiror and/or ExchangeCo or the Trustee
under this Agreement or as a result of any obligation imposed under this
Agreement, including in respect of the Voting Rights or the Exchange Right
or
the Automatic Exchange Rights and the taking of any other action to be taken
by
the Trustee at the request of or on the application of Acquiror and/or
ExchangeCo promptly if and when:
|
(a)
|
such
evidence is required by any other section of this Agreement to be
furnished to the Trustee in accordance with the terms of this Section
6.9
;
or
|
|
(b)
|
the
Trustee, in the exercise of its rights, powers, duties and authorities
under this Agreement, gives Acquiror and/or ExchangeCo 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 an Officer’s Certificate of Acquiror and/or ExchangeCo
or a statutory declaration or a certificate made by persons entitled to sign
an
Officer’s Certificate stating that any such condition has been complied with in
accordance with the terms of this Agreement.
Whenever
such evidence relates to a matter other than the Voting Rights or the Exchange
Right or the Automatic Exchange Rights or the taking of any other action to
be
taken by the Trustee at the request or on the application of Acquiror and/or
ExchangeCo, and except as otherwise specifically provided herein, such evidence
may consist of a report or opinion of any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert 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
Acquiror and/or ExchangeCo it shall be in the form of an Officer’s Certificate
or a statutory declaration.
Each
statutory declaration, Officer’s Certificate, opinion or report furnished to the
Trustee as evidence of compliance with a condition provided for in this
Agreement shall include a statement by the person giving the
evidence:
|
(c)
|
declaring
that such person has read and understands the provisions of this
Agreement
relating to the condition in
question;
|
|
(d)
|
describing
the nature and scope of the examination or investigation upon which
such
person based the statutory declaration, certificate, statement or
opinion;
and
|
|
(e)
|
declaring
that such person has made such examination or investigation as such
person
believes is necessary to enable such person to make the statements
or give
the opinions contained or expressed
therein.
|
6.10
Experts,
Advisers and Agents
The
Trustee may:
|
(a)
|
in
relation to these presents act and rely on the opinion or advice
of or
information obtained from any solicitor, attorney, auditor, accountant,
appraiser, valuer, engineer or other expert, whether retained by
the
Trustee or by Acquiror and/or ExchangeCo or otherwise, and may retain
or
employ such assistants as may be necessary to the proper discharge
of its
powers and duties and determination of its rights hereunder and may
pay
proper and reasonable compensation for all such legal and other advice
or
assistance as aforesaid; and
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|
(b)
|
employ
such agents and other assistants as it may reasonably require for
the
proper determination and discharge of its powers and 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
Trust.
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6.11
Investment
of Moneys Held by Trustee
Unless
otherwise provided in this Agreement, any moneys held by or on behalf of the
Trustee which under the terms of this Agreement 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 trust for Acquiror, in securities in which, under the laws of the
Province of Alberta, trustees are authorized to invest trust moneys, provided
that such securities are stated to mature within two years after their purchase
by the Trustee, and the Trustee shall so invest such moneys on the written
direction of ExchangeCo. Pending the investment of any moneys as hereinbefore
provided, such moneys may be deposited in the name of the Trustee in any
chartered bank in Canada or, with the consent of ExchangeCo, in the deposit
department of the Trustee or any other loan or trust company authorized to
accept deposits under the laws of Canada or any province thereof at the rate
of
interest then current on similar deposits.
6.12
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, rights, duties, powers and authorities of this
Agreement or otherwise in respect of the premises.
6.13
Trustee
Not Bound to Act on Request
Except
as
in this Agreement otherwise specifically provided, the Trustee shall not be
bound to act in accordance with any direction or request of Acquiror and/or
ExchangeCo or of the directors thereof 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 and rely
upon any such copy purporting to be authenticated and believed by the Trustee
to
be genuine. 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, determines that such
act
might cause it to be in non-compliance with any applicable anti-money laundering
or anti-terrorist legislation, regulation or guideline. Further, should the
Trustee, in its sole judgment, determine at any time that its acting under
this
Agreement 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 ten days written notice to the other
parties to this Agreement, provided that: (a) the Trustee’s written notice shall
describe the circumstances of such non-compliance; and (b) if such circumstances
are rectified to the Trustee’s satisfaction within such 10 day period, then such
resignation shall not be effective.
6.14
Authority
to Carry on Business
The
Trustee represents to Acquiror and ExchangeCo that at the date of execution
and
delivery by it of this Agreement 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
6.14
,
it
ceases to be so authorized to carry on business, the validity and enforceability
of this Agreement and the Voting Rights, the Exchange Right and the Automatic
Exchange Rights 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 province of Canada, either
become so authorized or resign in the manner and with the effect specified
in
Article
9
.
6.15
Conflicting
Claims
If
conflicting claims or demands are made or asserted with respect to any interest
of any Beneficiary in any Exchangeable Shares, including any disagreement
between the heirs, representatives, successors or assigns succeeding to all
or
any part of the interest of any Beneficiary in any Exchangeable Shares,
resulting in conflicting claims or demands being made in connection with such
interest, then the Trustee shall be entitled, at its sole discretion, to refuse
to recognize or to comply with any such claims or demands. In so refusing,
the
Trustee may elect not to exercise any Voting Rights, Exchange Right or Automatic
Exchange Rights subject to such conflicting claims or demands and, in so doing,
the Trustee shall not be or become liable to any person on account of such
election or its failure or refusal to comply with any such conflicting claims
or
demands. The Trustee shall be entitled to continue to refrain from acting and
to
refuse to act until:
|
(a)
|
the
rights of all adverse claimants with respect to the Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such conflicting
claims or demands have been adjudicated by a final judgment of a
court of
competent jurisdiction and all rights of appeal have expired;
or
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|
(b)
|
all
differences with respect to the Voting Rights, Exchange Right or
Automatic
Exchange Rights subject to such conflicting claims or demands have
been
conclusively settled by a valid written agreement binding on all
such
adverse claimants, and the Trustee shall have been furnished with
an
executed copy of such agreement certified to be in full force and
effect.
|
If
the
Trustee elects to recognize any claim or comply with any demand made by any
such
adverse claimant, it may in its discretion require such claimant to furnish
such
surety bond or other security satisfactory to the Trustee as it shall deem
appropriate to fully indemnify it as between all conflicting claims or
demands.
6.16
Acceptance
of Trust
The
Trustee hereby accepts the Trust created and provided for by and in this
Agreement 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
Beneficiaries, subject to all the terms and conditions herein set
forth.
6.17
Maintenance
of Office or Agency
Acquiror
will maintain in Calgary, Alberta an office or agency where certificates
representing Exchangeable Shares may be presented or surrendered for exchange
by
Beneficiaries and where notices and demands to or upon Acquiror or ExchangeCo
in
respect of the Exchangeable Shares may be served. Acquiror will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time Acquiror shall fail to maintain any
such office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be served
at
the Corporate Trust Office of the Trustee, and Acquiror and ExchangeCo hereby
appoint the Trustee as their agent to receive all such presentations,
surrenders, notices and demands. Furthermore, copies of all Acquiror proxy
materials will be made available for inspection by any Beneficiary at such
office or agency.
6.18
Third
Party Interests
Each
party to this Agreement hereby represents to the Trustee that any account to
be
opened by, or interest to held by the Trustee in connection with this Agreement,
for or to the credit of such 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 party hereto agrees to complete and execute
forthwith a declaration in the Trustee’s prescribed form as to the particulars
of such third party.
6.19
Privacy
The
parties acknowledge that Canadian federal and/or provincial legislation that
addresses the protection of individuals’ personal information (collectively,
“
Privacy
Laws
”)
applies to obligations and activities under this Agreement. Despite any other
provision of this Agreement, no party shall take or direct any action that
would
contravene, or cause the others to contravene, applicable Privacy Laws. The
parties 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 Agreement and not to use
it
for any other purpose except with the consent of or direction from the other
parties or the individual involved; (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.
ARTICLE
7
COMPENSATION
7.1
Fees
and Expenses of the Trustee
Acquiror
and ExchangeCo jointly and severally agree to pay the Trustee reasonable
compensation for all of the services rendered by it under this Agreement and
will reimburse the Trustee for all reasonable expenses (including taxes other
than taxes based on the net income of the Trustee, fees paid to legal counsel
and other experts and advisors and travel expenses) and disbursements, including
the cost and expense of any suit or litigation of any character and any
proceedings before any governmental agency reasonably incurred by the Trustee
in
connection with its duties under this Agreement; provided that Acquiror and
ExchangeCo shall have no obligation to reimburse the Trustee for any expenses
or
disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith or
with
gross negligence, recklessness or willful misconduct.
ARTICLE
8
INDEMNIFICATION
AND LIMITATION OF LIABILITY
8.1
Indemnification
of the Trustee
Acquiror
and ExchangeCo jointly and severally agree to indemnify and hold harmless the
Trustee and each of its directors, officers, employees and agents appointed
and
acting in accordance with this Agreement (collectively, the “
Indemnified
Parties
”)
against all claims, losses, damages, reasonable costs, penalties, fines and
reasonable expenses (including reasonable expenses of the Trustee’s legal
counsel) which, without fraud, gross negligence, recklessness, willful
misconduct or bad faith on the part of such Indemnified Party, may be paid,
incurred or suffered by the Indemnified Party by reason or as a result of the
Trustee’s acceptance or administration of the Trust, its compliance with its
duties set forth in this Agreement, or any written or oral instruction delivered
to the Trustee by Acquiror or ExchangeCo pursuant hereto.
In
no
case shall Acquiror or ExchangeCo be liable under this indemnity for any claim
against any of the Indemnified Parties unless Acquiror and ExchangeCo shall
be
notified by the Trustee of the written assertion of a claim or of any action
commenced against the Indemnified Parties, promptly after any of the Indemnified
Parties shall have received any such written assertion of a claim or shall
have
been served with a summons or other first legal process giving information
as to
the nature and basis of the claim. Subject to (ii) below, Acquiror and
ExchangeCo shall be entitled to participate at their own expense in the defense
and, if Acquiror and ExchangeCo so elect at any time after receipt of such
notice, either of them may assume the defense of any suit brought to enforce
any
such claim. The Trustee shall have the right to employ separate counsel in
any
such suit and participate in the defense thereof, but the fees and expenses
of
such counsel shall be at the expense of the Trustee unless: (i) the employment
of such counsel has been authorized by Acquiror or ExchangeCo; or (ii) the
named
parties to any such suit include both the Trustee and Acquiror or ExchangeCo
and
the Trustee shall have been advised by counsel acceptable to Acquiror or
ExchangeCo that there may be one or more legal defenses available to the Trustee
that are different from or in addition to those available to Acquiror or
ExchangeCo and that, in the judgment of such counsel, would present a conflict
of interest were a joint representation to be undertaken (in which case Acquiror
and ExchangeCo shall not have the right to assume the defense of such suit
on
behalf of the Trustee but shall be liable to pay the reasonable fees and
expenses of counsel for the Trustee). This indemnity shall survive the
termination of this Agreement and the resignation or removal of the
Trustee.
8.2
Limitation
of Liability
The
Trustee shall not be held liable for any loss which may occur by reason of
depreciation of the value of any part of the Trust Estate or any loss incurred
on any investment of funds pursuant to this Agreement, except to the extent
that
such loss is attributable to the fraud, gross negligence, recklessness, willful
misconduct or bad faith on the part of the Trustee.
ARTICLE
9
CHANGE
OF TRUSTEE
9.1
Resignation
The
Trustee, or any trustee hereafter appointed, may at any time resign by giving
written notice of such resignation to Acquiror and ExchangeCo specifying the
date on which it desires to resign, provided that such notice shall not be
given
less than 30 days before such desired resignation date unless Acquiror and
ExchangeCo otherwise agree and provided further that such resignation shall
not
take effect until the date of the appointment of a successor trustee and the
acceptance of such appointment by the successor trustee. Upon receiving such
notice of resignation, Acquiror and ExchangeCo shall promptly appoint a
successor trustee, which shall be a corporation organized and existing under
the
laws of Canada or any Province thereof, by written instrument in duplicate,
one
copy of which shall be delivered to the resigning trustee and one copy to the
successor trustee. Failing the appointment and acceptance of a successor
trustee, a successor trustee may be appointed by order of a court of competent
jurisdiction upon application of one or more of the parties to this Agreement.
If the retiring trustee is the party initiating an application for the
appointment of a successor trustee by order of a court of competent
jurisdiction, Acquiror and ExchangeCo shall be jointly and severally liable
to
reimburse the retiring trustee for its legal costs and expenses in connection
with same.
9.2
Removal
The
Trustee, or any trustee hereafter appointed, may (provided a successor trustee
is appointed) be removed at any time on not less than 30 days’ prior notice by
written instrument executed by Acquiror and ExchangeCo, in duplicate, one copy
of which shall be delivered to the trustee so removed and one copy to the
successor trustee.
9.3
Successor
Trustee
Any
successor trustee appointed as provided under this Agreement shall execute,
acknowledge and deliver to Acquiror and ExchangeCo and to its predecessor
trustee an instrument accepting such appointment. Thereupon the resignation
or
removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor under this
Agreement, with the like effect as if originally named as trustee in this
Agreement. However, on the written request of Acquiror and ExchangeCo or of
the
successor trustee, the trustee ceasing to act shall, upon payment of any amounts
then due it pursuant to the provisions of this Agreement, execute and deliver
an
instrument transferring to such successor trustee all the rights and powers
of
the trustee so ceasing to act. Upon the request of any such successor trustee,
Acquiror, ExchangeCo and such predecessor trustee shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming
to
such successor trustee all such rights and powers.
9.4
Notice
of Successor Trustee
Upon
acceptance of appointment by a successor trustee as provided herein, Acquiror
and ExchangeCo shall cause to be mailed notice of the succession of such trustee
hereunder to each Beneficiary specified in a List. If Acquiror or ExchangeCo
shall fail to cause such notice to be mailed within ten days after acceptance
of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of Acquiror and ExchangeCo.
ARTICLE
10
ACQUIROR
SUCCESSORS
10.1
Certain
Requirements in Respect of Combination, etc
.
Acquiror
shall not consummate any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other person or, in the case of a merger, of the
continuing corporation resulting therefrom unless, but may do so if:
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(a)
|
such
other person or continuing corporation (herein called the “
Acquiror
Successor
”),
by operation of law, becomes, without more, bound by the terms and
provisions of this Agreement or, if not so bound, executes, prior
to or
contemporaneously with the consummation of such transaction, a trust
agreement supplemental hereto and such other instruments (if any)
as are
satisfactory to the Trustee, acting reasonably, and in the opinion
of
legal counsel to the Trustee are reasonably necessary or advisable
to
evidence the assumption by the Acquiror Successor of liability for
all
moneys payable and property deliverable hereunder and the covenant
of such
Acquiror Successor to pay and deliver or cause to be delivered the
same
and its agreement to observe and perform all the covenants and obligations
of Acquiror under this Agreement;
and
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|
(b)
|
such
transaction shall be upon such terms and conditions as substantially
to
preserve and not to impair in any material respect any of the rights,
duties, powers and authorities of the Trustee or of the Beneficiaries
hereunder.
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10.2
Vesting
of Powers in Successor
Whenever
the conditions of Section
10.1
have
been duly observed and performed, the Trustee, Acquiror Successor and ExchangeCo
shall, if required by Section
10.1
,
execute
and deliver the supplemental trust agreement provided for in
Article
11
and
thereupon Acquiror Successor shall possess and from time to time may exercise
each and every right and power of Acquiror under this Agreement in the name
of
Acquiror or otherwise and any act or proceeding by any provision of this
Agreement required to be done or performed by the Board of Directors of Acquiror
or any officers of Acquiror may be done and performed with like force and effect
by the directors or officers of such Acquiror Successor.
10.3
Wholly-Owned
Subsidiaries
Nothing
herein shall be construed as preventing the amalgamation or merger of any
wholly-owned direct or indirect subsidiary of Acquiror with or into Acquiror
or
the winding-up, liquidation or dissolution of any wholly-owned subsidiary of
Acquiror provided that all of the assets of such subsidiary are transferred
to
Acquiror or another wholly-owned direct or indirect subsidiary of Acquiror
and
any such transactions are expressly permitted by this
Article
10
.
10.4
Successor
Transaction
Notwithstanding
the foregoing provisions of this Article 10, in the event of an Acquiror Control
Transaction:
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(a)
|
in
which Acquiror merges or amalgamates with, or in which all or
substantially all of the then outstanding Acquiror Common Shares
are
acquired by, one or more other corporations to which Acquiror is,
immediately before such merger, amalgamation or acquisition, “related’’
within the meaning of the
Income
Tax Act
(Canada) (otherwise than by virtue of a right referred to in paragraph
251(5)(b) thereof);
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|
(b)
|
which
does not result in an acceleration of the Redemption Date in accordance
with paragraph (b) of that definition; and
|
|
(c)
|
in
which all or substantially all of the then outstanding Acquiror Common
Shares are converted into or exchanged for shares or rights to receive
such shares (the “
Other
Shares
”)
of another corporation (the “
Other
Corporation
”)
that, immediately after such Acquiror Control Transaction, owns or
controls, directly or indirectly,
Acquiror,
|
then:
(i)
all references herein to “Acquiror” shall thereafter be and be deemed to be
references to “Other Corporation’’ and all references herein to “Acquiror
Shares’’ shall thereafter be and be deemed to be references to “Other Shares’’
(with appropriate adjustments, if any, as are required to result in a holder
of
Exchangeable Shares on the exchange, redemption or retraction of such shares
pursuant to the Exchangeable Share Provisions or Article 8 of the Plan of
Arrangement or exchange of such shares pursuant to this Agreement immediately
subsequent to the Acquiror Control Transaction being entitled to receive that
number of Other Shares equal to the number of Other Shares such holder of
Exchangeable Shares would have received if the exchange, redemption or
retraction of such shares pursuant to the Exchangeable Share Provisions or
Article 8 of the Plan of Arrangement, or exchange of such shares pursuant to
this Agreement had occurred immediately prior to the Acquiror Control
Transaction and the Acquiror Control Transaction was completed) without any
need
to amend the terms and conditions of this Agreement and without any further
action required; and (ii) Acquiror shall cause the Other Corporation to deposit
one or more voting securities of such Other Corporation to allow Beneficiaries
to exercise voting rights in respect of the Other Corporation substantially
similar to those provided for in this Agreement.
ARTICLE
11
AMENDMENTS
AND SUPPLEMENTAL TRUST AGREEMENTS
11.1
Amendments,
Modifications, etc
.
This
Agreement may not be amended or modified except by an agreement in writing
executed by Acquiror, ExchangeCo and the Trustee and approved by the
Beneficiaries in accordance with Section 10.2 of the Exchangeable Share
Provisions.
11.2
Ministerial
Amendments
Notwithstanding
the provisions of Section
11.1
,
the
parties to this Agreement may in writing, at any time and from time to time,
without the approval of the Beneficiaries, amend or modify this Agreement for
the purposes of
|
(a)
|
adding
to the covenants of any or all parties hereto for the protection
of the
Beneficiaries hereunder provided that the Board of Directors of each
of
ExchangeCo and Acquiror shall be of the good faith opinion that such
additions will not be prejudicial to the rights or interests of the
Beneficiaries;
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|
(b)
|
making
such amendments or modifications not inconsistent with this Agreement
as
may be necessary or desirable with respect to matters or questions
which,
in the good faith opinion of the Board of Directors of each of Acquiror
and ExchangeCo and in the opinion of the Trustee, having in mind
the best
interests of the Beneficiaries it may be expedient to make, provided
that
such Boards of Directors and the Trustee, acting on the advice of
counsel,
shall be of the opinion that such amendments and modifications will
not be
prejudicial to the interests of the Beneficiaries;
or
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|
(c)
|
making
such changes or corrections which, on the advice of counsel to Acquiror,
ExchangeCo and the Trustee, are required for the purpose of curing
or
correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error, provided that the Trustee,
acting
on the advice of counsel, and the Board of Directors of each of Acquiror
and ExchangeCo shall be of the opinion that such changes or corrections
will not be prejudicial to the rights and interests of the
Beneficiaries.
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11.3
Meeting
to Consider Amendments
ExchangeCo,
at the request of Acquiror, shall call a meeting or meetings of the
Beneficiaries for the purpose of considering any proposed amendment or
modification requiring approval pursuant hereto. Any such meeting or meetings
shall be called and held in accordance with the by-laws of ExchangeCo, the
Exchangeable Share Provisions and all applicable laws; provided that any such
meeting shall only be called for a bona fide business purpose and not for the
principle purpose of causing a Redemption Date (as defined in the Exchangeable
Share Provisions) to occur or transpire.
11.4
Changes
in Capital of Acquiror and ExchangeCo
At
all
times after the occurrence of any event contemplated pursuant to Sections 2.7
or
2.8 of the Support Agreement or otherwise, as a result of which either Acquiror
Common Shares or the Exchangeable Shares or both are in any way changed, this
Agreement shall forthwith be deemed amended and modified as necessary in order
that it shall apply with full force and effect,
mutatis
mutandis
,
to all
new securities into which Acquiror Common Shares or the Exchangeable Shares
or
both are so changed.
11.5
Execution
of Supplemental Trust Agreements
No
amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto. From time to time ExchangeCo,
Acquiror and the Trustee may, subject to the provisions of these presents,
and
they shall, when so directed by these presents, execute and deliver by their
proper officers, trust agreements or other instruments supplemental hereto,
which thereafter shall form part hereof, for any one or more of the following
purposes:
|
(a)
|
evidencing
the succession of Acquiror Successors and the covenants of and obligations
assumed by each such Acquiror Successor in accordance with the provisions
of
Article
10
and the successors of any successor trustee in accordance with the
provisions of
Article
9
;
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|
(b)
|
making
any additions to, deletions from or alterations of the provisions
of this
Agreement or the Voting Rights, the Exchange Right or the Automatic
Exchange Rights which, in the opinion of the Trustee, will not be
prejudicial to the interests of the Beneficiaries or are, in the
opinion
of counsel to the Trustee, necessary or advisable in order to incorporate,
reflect or comply with any legislation the provisions of which apply
to
Acquiror, ExchangeCo, the Trustee or this Agreement;
and
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|
(c)
|
for
any other purposes not inconsistent with the provisions of this Agreement,
including to make or evidence any amendment or modification to this
Agreement as contemplated hereby, provided that, in the opinion of
the
Trustee, the rights of the Trustee and Beneficiaries will not be
prejudiced thereby.
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ARTICLE
12
TERMINATION
12.1
Term
The
Trust
created by this Agreement shall continue until the earliest to occur of the
following events:
|
(a)
|
no
outstanding Exchangeable Shares are held by a
Beneficiary;
|
|
(b)
|
each
of Acquiror and ExchangeCo elects in writing to terminate the Trust
and
such termination is approved by the Beneficiaries in accordance with
Section 10.2 of the Exchangeable Share Provisions;
and
|
|
(c)
|
21
years after the death of the last survivor of the descendants of
His
Majesty King George VI of Canada and the United Kingdom of Great
Britain
and Northern Ireland living on the date of the creation of the
Trust.
|
12.2
Survival
of Agreement
This
Agreement shall survive any termination of the Trust and shall continue until
there are no Exchangeable Shares outstanding held by a Beneficiary; provided,
however, that the provisions of
Article
7
and
Article
8
shall
survive any such termination of this Agreement.
ARTICLE
13
GENERAL
13.1
Severability
If
any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
13.2
Assignment
No
party
hereto may assign this Agreement or any of its rights, interests or obligations
under this Agreement (whether by operation of law or otherwise) except that
ExchangeCo may assign in its sole discretion, any or all of its rights,
interests and obligations hereunder to any wholly-owned subsidiary of
Acquiror.
13.3
Binding
Effect
Subject
to Section
13.2
,
this
Agreement and the Arrangement shall be binding upon, enure to the benefit of
and
be enforceable by the parties hereto and their respective successors and assigns
and to the benefit of the Beneficiaries.
13.4
Notices
to Parties
All
notices and other communications hereunder shall be in writing and shall be
deemed given when delivered personally, telecopied (which is confirmed) or
dispatched (postage prepaid) to a nationally recognized overnight courier
service with overnight delivery instructions, in each case addressed to the
particular party at:
|
(a)
|
if
to Acquiror or ExchangeCo, at:
|
Gran
Tierra Energy Inc.
#300,
611 – 10
th
Avenue
S.W.
Calgary,
Alberta T2R 0B2
Attention:
Dana
Coffield, Ph.D., President & Chief Executive Officer
Facsimile
Number:
(403)
265-3242
|
(b)
|
if
to the Trustee, at:
|
Computershare
Trust Company of Canada
#600,
530
– 8
th
Avenue
S.W.
Calgary,
Alberta T2P 3S8
Attention:
Manager,
Corporate Trusts
Facsimile
Number:
(403)
267-6598
or
at
such other address of which any party may, from time to time, advise the other
parties by notice in writing given in accordance with the
foregoing.
13.5
Notice
to Beneficiaries
Any
and
all notices to be given and any documents to be sent to any Beneficiaries may
be
given or sent to the address of such Beneficiary shown on the register of
holders of Exchangeable Shares in any manner permitted by the by-laws of
ExchangeCo from time to time in force in respect of notices to shareholders
and
shall be deemed to be received (if given or sent in such manner) at the time
specified in such by-laws, the provisions of which by-laws shall apply
mutatis
mutandis
to
notices or documents as aforesaid sent to such Beneficiaries.
13.6
Counterparts
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original but all of which together shall constitute one and the same
instrument.
13.7
Governing
Laws; Consent to Jurisdiction
This
Agreement shall be governed by and construed in accordance with the laws of
Alberta. Each party hereby irrevocably attorns to the jurisdiction of the courts
of Alberta in respect of all matters arising under or in relation to this
Agreement.
13.8
United
States Tax Characterization
The
parties hereto recognize and intend that, for United States federal, state
and
local income, franchise and similar tax purposes, the Trust will be disregarded
as an entity separate from Acquiror pursuant to Treas. Reg. 301.7701-3(b),
and
no party shall take any position on any tax return or otherwise that is
inconsistent with such treatment.
IN
WITNESS WHEREOF
the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.
GRAN
TIERRA ENERGY INC.
|
|
|
By:
|
/s/
Dana Coffield
|
|
Name:
Dana Coffield, Ph.D.
|
|
Title:
President and Chief Executive Officer
|
|
|
GRAN
TIERRA EXCHANGECO INC.
|
|
|
|
By:
|
/s/
Dana Coffield
|
|
Name: Dana
Coffield, Ph.D.
|
|
Title:
President and Chief Executive Officer
|
|
|
COMPUTERSHARE
TRUST COMPANY OF CANADA
|
|
|
|
By:
|
/s/
Dan Sander
|
|
Name:
Dan Sander
|
|
Title:
Professional, Corporate Trust
|
|
|
By:
|
/s/
Karen Biscope
|
|
Name:
Karen Biscope
|
|
Title:
Manager, Corporate Trust
|
Exhibit
10.2
SUPPORT
AGREEMENT
SUPPORT
AGREEMENT
(the
“
Agreement
”)
made
as of the 14
th
day of
November, 2008.
AMONG:
GRAN
TIERRA ENERGY INC.
,
a
corporation existing under the laws of the State of Nevada (hereinafter referred
to as “
Acquiror
”),
-
and
-
GRAN
TIERRA CALLCO ULC
,
a
corporation existing under the laws of the Province of Alberta (hereinafter
referred to as “
Callco
”),
-
and
-
GRAN
TIERRA EXCHANGECO INC.
,
an
indirect wholly-owned subsidiary of Acquiror, existing under the laws of the
Province of Alberta (hereinafter referred to as “
ExchangeCo
”),
WHEREAS
,
in
connection with an arrangement agreement (the “
Arrangement
Agreement
”)
made
as of July 28, 2008 among Acquiror, ExchangeCo and Solana Resources Limited,
a
corporation existing under the laws of Alberta (“
Target
”),
ExchangeCo is to issue exchangeable shares (the “
Exchangeable
Shares
”)
to
certain holders of common shares in the capital of Target (“
Target
Common Shares
”)
pursuant to the plan of arrangement (the “
Arrangement
”)
contemplated by the Arrangement Agreement;
AND
WHEREAS
,
pursuant to the Arrangement Agreement, Acquiror and ExchangeCo have agreed
to
execute a support agreement substantially in the form of this Agreement on
the
Effective Date (as defined in the Arrangement Agreement);
NOW
THEREFORE
,
in
consideration of the respective covenants and agreements provided in this
Agreement and for other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties hereto covenant
and
agree as follows:
ARTICLE
1
INTERPRETATION
1.1
Defined
Terms
Each
term
denoted herein by initial capital letters and not otherwise defined herein
shall
have the meaning ascribed thereto in the rights, privileges, restrictions and
conditions (collectively, the “
Exchangeable
Share Provisions
”)
attaching to the Exchangeable Shares which are attached as Schedule “A” to the
Plan of Arrangement which is attached as Exhibit A to the Arrangement Agreement
and as set out in the Articles of Arrangement of Target, unless the context
requires otherwise.
1.2
Interpretation
Not Affected by Headings
The
division of this agreement into articles, sections, subsections and other
portions and the insertion of headings are for convenience of reference only
and
shall not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an “Article”, “Section” or “Subsection” followed by
a number refer to the specified Article, Section or Subsection of this
Agreement. The terms “this Agreement,” “hereof,” “herein” and “hereunder” and
similar expressions refer to this Agreement and not to any particular Article,
Section, Subsection or other portion hereof.
1.3
Rules
of Construction
Unless
otherwise specifically indicated or the context otherwise requires: (a) all
references to “dollars” or “$” mean United States dollars; (b) words importing
the singular shall include the plural and vice versa and words importing any
gender shall include all genders; and (c) “include,” “includes” and “including”
shall be deemed to be followed by the words “without limitation.”
1.4
Date
for any Action
If
the
event that any date on which any action is required to be taken hereunder by
any
of the parties hereto is not a Business Day, such action shall be required
to be
taken on the next succeeding day that is a Business Day.
ARTICLE
2
COVENANTS
OF ACQUIROR AND EXCHANGECO
2.1
Covenants
Regarding Exchangeable Shares
So
long
as any Exchangeable Shares not owned by Acquiror or its Affiliates are
outstanding, Acquiror will:
|
(a)
|
not
declare or pay any dividend on common shares in the capital of Acquiror
(“
Acquiror
Common Shares
”)
unless: (i) ExchangeCo shall: (a) simultaneously declare or pay,
as the
case may be, an equivalent dividend or other distribution economically
equivalent thereto (as provided for in the Exchangeable Share Provisions)
on the Exchangeable Shares (an “
Equivalent
Dividend
”);
and (b) ExchangeCo shall have sufficient money or other assets or
authorized but unissued securities available to enable the due declaration
and the due and punctual payment, in accordance with applicable law,
of
any such Equivalent Dividend; or (ii) if the dividend or other
distribution is a stock dividend or distribution of stock, in lieu
of such
dividend ExchangeCo shall: (a) effect a corresponding, contemporaneous
and
economically equivalent subdivision of the Exchangeable Shares (as
provided for in the Exchangeable Share Provisions) (an “
Equivalent
Stock Subdivision
”);
and (b) have sufficient authorized but unissued securities available
to
enable the Equivalent Stock
Subdivision;
|
|
(b)
|
advise
ExchangeCo sufficiently in advance of the declaration by Acquiror
of any
dividend on Acquiror Common Shares and take all such other actions
as are
reasonably necessary, in cooperation with ExchangeCo, to ensure that:
(i)
the respective declaration date, record date and payment date for
an
Equivalent Dividend on the Exchangeable Shares shall be the same
as the
declaration date, record date and payment date for the corresponding
dividend on the Acquiror Common Shares; or (ii) the record date and
effective date for an Equivalent Stock Subdivision shall be the same
as
the record date and payment date for the stock dividend on the Acquiror
Common Shares and that such dividend on the Exchangeable Shares will
correspond with any requirement of the principal stock exchange on
which
the Exchangeable Shares are listed;
|
|
(c)
|
ensure
that the record date for any dividend declared on Acquiror Common
Shares
is not less than 10 Business Days after the declaration date of such
dividend;
|
|
(d)
|
take
all such actions and do all such things as are reasonably necessary
or
desirable to enable and permit ExchangeCo, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to
the
satisfaction of the Liquidation Amount, the Retraction Price or the
Redemption Price in respect of each issued and outstanding Exchangeable
Share (other than Exchangeable Shares owned by Acquiror or its Affiliates)
upon the liquidation, dissolution or winding-up of ExchangeCo or
any other
distribution of the assets of ExchangeCo among its shareholders for
the
purpose of winding-up its affairs, the delivery of a Retraction Request
by
a holder of Exchangeable Shares or a redemption of Exchangeable Shares
by
ExchangeCo, as the case may be, including all such actions and all
such
things as are necessary or desirable to enable and permit ExchangeCo
to
cause to be delivered Acquiror Common Shares to the holders of
Exchangeable Shares in accordance with the provisions of Articles
5, 6 and
7 of the Exchangeable Share Provisions, as the case may be, of the
Exchangeable Share Provisions and cash in respect of declared and
unpaid
dividends;
|
|
(e)
|
take
all such actions and do all such things as are reasonably necessary
or
desirable to enable and permit Callco, in accordance with applicable
law,
to perform its obligations arising upon the exercise by it of the
Liquidation Call Right, the Retraction Call Right or the Redemption
Call
Right, including all such actions and all such things as are necessary
or
desirable to enable and permit Callco to cause to be delivered Acquiror
Common Shares to the holders of Exchangeable Shares in accordance
with the
provisions of the Liquidation Call Right, the Retraction Call Right
or the
Redemption Call Right, as the case may be
,
and cash in respect of declared and unpaid dividends;
and
|
|
(f)
|
not
(and will ensure that Callco or any of its Affiliates does not) exercise
its vote as a shareholder to initiate the voluntary liquidation,
dissolution or winding-up of ExchangeCo or any other distribution
of the
assets of ExchangeCo among its shareholders for the purpose of winding
up
its affairs nor take any action or omit to take any action (and Acquiror
will not permit Callco or any of its Affiliates to take any action
or omit
to take any action) that is designed to result in the liquidation,
dissolution or winding up of ExchangeCo or any other distribution
of the
assets of ExchangeCo among its shareholders for the purpose of winding
up
its affairs.
|
2.2
Segregation
of Funds
Acquiror
will cause ExchangeCo to deposit a sufficient amount of funds in a separate
account of ExchangeCo and segregate a sufficient amount of such other assets
and
property as is necessary to enable ExchangeCo to pay dividends when due and
to
pay or otherwise satisfy its respective obligations under Articles 5, 6 and
7 of
the Exchangeable Share Provisions or, if required, to pay the purchase price
for
Acquiror Common Shares as contemplated by Section 2.5, as
applicable.
2.3
Reservation
of Acquiror Common Shares
Acquiror
hereby represents, warrants and covenants in favour of ExchangeCo and Callco
that Acquiror has reserved for issuance and will, at all times while any
Exchangeable Shares (other than Exchangeable Shares held by Acquiror or its
Affiliates) are outstanding, keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of Acquiror
Common Shares (or other shares or securities into which Acquiror Common Shares
may be reclassified or changed as contemplated by Section 2.7): (a) as is equal
to the sum of: (i) the number of Exchangeable Shares issued and outstanding
from
time to time; and (ii) the number of Exchangeable Shares issuable upon the
exercise of all rights to acquire Exchangeable Shares outstanding from time
to
time; and (b) as are now and may hereafter be required to enable and permit
Acquiror to meet its obligations under the Voting and Exchange Trust Agreement
and under any other security or commitment pursuant to the Arrangement with
respect to which Acquiror may now or hereafter be required to issue Acquiror
Common Shares, to enable and permit Callco to meet its obligations arising
upon
exercise by it of each of the Liquidation Call Right, the Retraction Call Right,
the Redemption Call Right and the Change of Law Call Right (if Acquiror causes
Callco to exercise such right) and to enable and permit ExchangeCo to meet
its
obligations hereunder and under the Exchangeable Share Provisions.
2.4
Notification
of Certain Events
In
order
to assist Acquiror in compliance with its obligations hereunder and to permit
Callco to exercise the Liquidation Call Right, the Retraction Call Right, the
Redemption Call Right and the Change of Law Call Right (if Acquiror causes
Callco to exercise such right), ExchangeCo will notify Acquiror and Callco
of
each of the following events at the times set forth below:
|
(a)
|
in
the event of any determination by the Board of Directors of ExchangeCo
to
institute voluntary liquidation, dissolution or winding-up proceedings
with respect to ExchangeCo or to effect any other distribution of
the
assets of ExchangeCo among its shareholders for the purpose of winding-up
its affairs, at least 60 days prior to the proposed effective date
of such
liquidation, dissolution, winding-up or other
distribution;
|
|
(b)
|
promptly,
upon the earlier of receipt by ExchangeCo of notice of and ExchangeCo
otherwise becoming aware of any threatened or instituted claim, suit,
petition or other proceeding with respect to the involuntary liquidation,
dissolution or winding-up of ExchangeCo or to effect any other
distribution of the assets of ExchangeCo among its shareholders for
the
purpose of winding-up its affairs;
|
|
(c)
|
promptly,
upon receipt by ExchangeCo of a Retraction
Request;
|
|
(d)
|
promptly,
following the date on which notice of redemption is given to holders
of
Exchangeable Shares, upon the determination of a Redemption Date
in
accordance with the Exchangeable Share
Provisions;
|
|
(e)
|
promptly,
upon the issuance by ExchangeCo of any Exchangeable Shares or rights
to
acquire Exchangeable Shares (other than the issuance of Exchangeable
Shares and rights to acquire Exchangeable Shares in exchange for
outstanding Target Common Shares pursuant to the Arrangement);
and
|
|
(f)
|
promptly,
upon receiving notice of a Change of
Law.
|
2.5
Delivery
of Acquiror Common Shares to ExchangeCo and Callco
In
furtherance of its obligations under Subsections 2.1(d) and 2.1(e), upon notice
from ExchangeCo or Callco of any event that requires ExchangeCo or Callco to
cause to be delivered Acquiror Common Shares to any holder of Exchangeable
Shares, Acquiror shall forthwith issue and deliver the requisite number of
Acquiror Common Shares to be received by, and issued to or to the order of,
the
former holder of the surrendered Exchangeable Shares, as ExchangeCo or Callco
shall direct. All such Acquiror Common Shares shall be duly authorized, validly
issued and fully paid and non-assessable and shall be free and clear of any
lien, claim or encumbrance.
2.6
Qualification
of Acquiror Common Shares
Acquiror
covenants that if any Acquiror Common Shares (or other shares or securities
into
which Acquiror Common Shares may be reclassified or changed as contemplated
by
Section 2.7) (other than Acquiror Common Shares held by the Trustee) to be
issued and delivered hereunder (including for greater certainty, pursuant to
the
Exchangeable Share Provisions, or pursuant to the Change of Law Call Right,
Exchange Right or the Automatic Exchange Rights (all as defined in the Voting
and Exchange Trust Agreement)) require registration or qualification with,
or
approval of, or the filing of any document, including any prospectus or similar
document, the taking of any proceeding with, or the obtaining of any order,
ruling or consent from, any governmental or regulatory authority under any
Canadian or United States federal, provincial, territorial or state securities
or other law or regulation or pursuant to the rules and regulations of any
securities or other regulatory authority, or the fulfillment of any other United
States or Canadian legal requirement (collectively, the “
Applicable
Laws
”)
before
such shares (or other shares or securities into which Acquiror Common Shares
may
be reclassified or changed as contemplated by Section 2.7) may be issued and
delivered by Acquiror at the direction of ExchangeCo or Callco, if applicable,
to the holder of surrendered Exchangeable Shares or in order that such shares
(or other shares or securities into which Acquiror Common Shares may be
reclassified or changed as contemplated by Section 2.7) may be freely traded
thereafter (other than any restrictions of general application on transfer
by
reason of a holder being a “control person” of Acquiror for purposes of Canadian
provincial securities law or an “affiliate” of Acquiror for purposes of United
States federal or state securities law), Acquiror will use its reasonable best
efforts and in good faith expeditiously take all such actions and do all such
things as are necessary or desirable and within its power to cause such Acquiror
Common Shares (or other shares or securities into which Acquiror Common Shares
may be reclassified or changed as contemplated by Section 2.7) to be and remain
duly registered, qualified or approved under United States and/or Canadian
law,
as the case may be, to the extent expressly provided in the Arrangement
Agreement. Acquiror will use its reasonable best efforts and in good faith
expeditiously take all such actions and do all such things as are reasonably
necessary or desirable to cause all Acquiror Common Shares (or other shares
or
securities into which Acquiror Common Shares may be reclassified or changed
as
contemplated by Section 2.7) (other than Acquiror Common Shares held by the
Trustee) to be delivered hereunder to be listed, quoted or posted for trading
on
all stock exchanges and quotation systems on which outstanding Acquiror Common
Shares (or other shares or securities into which Acquiror Common Shares may
be
reclassified or changed as contemplated by Section 2.7) are listed and are
quoted or posted for trading at such time.
2.7
Economic
Equivalence
So
long
as any Exchangeable Shares not owned by Acquiror or its Affiliates are
outstanding:
|
(a)
|
Acquiror
will not, without prior approval of ExchangeCo and the prior approval
of
the holders of the Exchangeable Shares given in accordance with Section
10.2 of the Exchangeable Share
Provisions:
|
|
(i)
|
issue
or distribute Acquiror Common Shares (or securities exchangeable
for or
convertible into or carrying rights to acquire Acquiror Common Shares)
to
the holders of all or substantially all of the then outstanding Acquiror
Common Shares by way of stock dividend or other distribution, other
than
an issue of Acquiror Common Shares (or securities exchangeable for
or
convertible into or carrying rights to acquire Acquiror Common Shares)
to
holders of Acquiror Common Shares who: (A) exercise an option to
receive
dividends in Acquiror Common Shares (or securities exchangeable for
or
convertible into or carrying rights to acquire Acquiror Common Shares)
in
lieu of receiving cash dividends; or (B)
pursuant
to any dividend reinvestment plan or scrip dividend;
or
|
|
(ii)
|
issue
or distribute rights, options or warrants to the holders of all or
substantially all of the then outstanding Acquiror Common Shares
entitling
them to subscribe for or to purchase Acquiror Common Shares (or securities
exchangeable for or convertible into or carrying rights to acquire
Acquiror Common Shares); or
|
|
(iii)
|
issue
or distribute to the holders of all or substantially all of the then
outstanding Acquiror Common Shares: (A) shares or securities of Acquiror
of any class other than Acquiror Common Shares (other than shares
convertible into or exchangeable for or carrying rights to acquire
Acquiror Common Shares); (B) rights, options or warrants other than
those
referred to in Subsection 2.7(a)(ii); (C)
evidences
of indebtedness of Acquiror; or (D)
assets
of Acquiror,
|
unless
the economic equivalent on a per share basis of such rights, options, warrants,
securities, shares, evidences of indebtedness or other assets is issued or
distributed simultaneously to holders of the Exchangeable Shares; provided
that,
for greater certainty, the above restrictions shall not apply to any securities
issued or distributed by Acquiror in order to give effect to and to consummate
the transactions contemplated by, and in accordance with, the Arrangement
Agreement.
|
(b)
|
Acquiror
will not without the prior approval of ExchangeCo and the prior approval
of the holders of the Exchangeable Shares given in accordance with
Section
10.2 of the Exchangeable Share
Provisions:
|
|
(i)
|
subdivide,
redivide or change the then outstanding Acquiror Common Shares into
a
greater number of Acquiror Common Shares;
or
|
|
(ii)
|
reduce,
combine, consolidate or change the then outstanding Acquiror Common
Shares
into a lesser number of Acquiror Common Shares;
or
|
|
(iii)
|
reclassify
or otherwise change Acquiror Common Shares or effect an amalgamation,
merger, reorganization or other transaction affecting the Acquiror
Common
Shares,
|
unless
the same or an economically equivalent change shall simultaneously be made
to,
or in the rights of the holders of, the Exchangeable Shares; provided that,
for
greater certainty, the above restrictions shall not apply to any securities
issued or distributed by Acquiror in order to give effect to and to consummate
the transactions contemplated by, and in accordance with, the Arrangement
Agreement.
|
(c)
|
Acquiror
will ensure that the record date for any event referred to in Subsections
2.7(a) or 2.7(b), or (if no record date is applicable for such event)
the
effective date for any such event, is not less than five Business
Days
after the date on which such event is declared or announced by Acquiror
(with contemporaneous notification thereof by Acquiror to
ExchangeCo).
|
|
(d)
|
The
Board of Directors of ExchangeCo shall determine, in good faith and
in its
sole discretion, economic equivalence for the purposes of any event
referred to in Subsections 2.7(a) or 2.7(b) and each such determination
shall be conclusive and binding on Acquiror and the holders of the
Exchangeable Shares. In making each such determination, the following
factors shall, without excluding other factors determined by the
Board of
Directors of ExchangeCo to be relevant, be considered by the Board
of
Directors of ExchangeCo:
|
|
(i)
|
in
the case of any stock dividend or other distribution payable in Acquiror
Common Shares, the number of such shares issued in proportion to
the
number of Acquiror Common Shares previously
outstanding;
|
|
(ii)
|
in
the case of the issuance or distribution of any rights, options or
warrants to subscribe for or purchase Acquiror Common Shares (or
securities exchangeable for or convertible into or carrying rights
to
acquire Acquiror Common Shares), the relationship between the exercise
price of each such right, option or warrant and the Current Market
Price,
the volatility of the Acquiror Common Shares and the term of such
instrument;
|
|
(iii)
|
in
the case of the issuance or distribution of any other form of property
(including any shares or securities of Acquiror of any class other
than
Acquiror Common Shares, any rights, options or warrants other than
those
referred to in Subsection 2.7(d)(ii), any evidences of indebtedness
of
Acquiror or any assets of Acquiror), the relationship between the
fair
market value (as determined by the Board of Directors of ExchangeCo
in the
manner above contemplated) of such property to be issued or distributed
with respect to each outstanding Acquiror Common Share and the Current
Market Price;
|
|
(iv)
|
in
the case of any subdivision, redivision or change of the then outstanding
Acquiror Common Shares into a greater number of Acquiror Common Shares
or
the reduction, combination, consolidation or change of the then
outstanding Acquiror Common Shares into a lesser number of Acquiror
Common
Shares or any amalgamation, merger, reorganization or other transaction
affecting Acquiror Common Shares, the effect thereof upon the then
outstanding Acquiror Common Shares;
and
|
|
(v)
|
in
all such cases, the general taxation consequences of the relevant
event to
holders of Exchangeable Shares to the extent that such consequences
may
differ from the taxation consequences to holders of Acquiror Common
Shares
as a result of differences between taxation laws of Canada and the
United
States (except for any differing consequences arising as a result
of
differing marginal taxation rates and without regard to the individual
circumstances of holders of Exchangeable
Shares).
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(e)
|
ExchangeCo
agrees that, to the extent required, upon due notice from Acquiror,
ExchangeCo will use its best efforts to take or cause to be taken
such
steps as may be necessary for the purposes of ensuring that appropriate
dividends are paid or other distributions are made by ExchangeCo,
or
subdivisions, redivisions or changes are made to the Exchangeable
Shares,
in order to implement the required economic equivalent with respect
to the
Acquiror Common Shares and Exchangeable Shares as provided for in
this
Section 2.7.
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2.8
Tender
Offers
For
so
long as Exchangeable Shares remain outstanding (not including Exchangeable
Shares held by Acquiror and its Affiliates), in the event that a tender offer,
share exchange offer, issuer bid, take-over bid or similar transaction with
respect to Acquiror Common Shares (an “
Offer
”)
is
proposed by Acquiror or is proposed to Acquiror or its shareholders and is
recommended by the Board of Directors of Acquiror, or is otherwise effected
or
to be effected with the consent or approval of the Board of Directors of
Acquiror, and the Exchangeable Shares are not redeemed by ExchangeCo or
purchased by Callco pursuant to the Redemption Call Right, Acquiror will use
its
reasonable best efforts expeditiously and in good faith to take all such actions
and do all such things as are necessary or desirable to enable and permit
holders of Exchangeable Shares (other than Acquiror and its Affiliates) to
participate in such offer to the same extent and on an economically equivalent
basis as the holders of Acquiror Common Shares, without discrimination. Without
limiting the generality of the foregoing, Acquiror will use its reasonable
best
efforts expeditiously and in good faith to ensure that holders of Exchangeable
Shares may participate in each such offer without being required to retract
Exchangeable Shares as against ExchangeCo (or, if so required, to ensure that
any such retraction, shall be effective only upon, and shall be conditional
upon, the closing of such Offer and only to the extent necessary to tender
or
deposit to the Offer). Nothing herein shall affect the rights of ExchangeCo
to
redeem (or Callco to purchase pursuant to the Redemption Call Right)
Exchangeable Shares, as applicable, in the event of an Acquiror Control
Transaction.
2.9
Ownership
of Outstanding Shares
Without
the prior approval of ExchangeCo and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.2 of the Exchangeable
Share Provisions, Acquiror covenants and agrees in favour of ExchangeCo that,
as
long as any outstanding Exchangeable Shares are owned by any Person other than
Acquiror or any of its Affiliates, Acquiror will be and remain the direct or
indirect beneficial owner of all issued and outstanding voting shares in the
capital of ExchangeCo and Callco. Notwithstanding the foregoing, Acquiror shall
not be in violation of this Section 2.9 if any person or group of persons acting
jointly or in concert acquires all or substantially all of the assets of
Acquiror or the Acquiror Common Shares pursuant to any merger of Acquiror
pursuant to which Acquiror was not the surviving corporation.
2.10
Acquiror
and Affiliates Not to Vote Exchangeable Shares
Acquiror
and Callco each covenants and agrees that it will not, and will cause its
Affiliates not to, exercise any voting rights which may be exercisable by
holders of Exchangeable Shares from time to time pursuant to the Exchangeable
Share Provisions or pursuant to the provisions of the ABCA (or any successor
or
other corporate statute by which ExchangeCo may in the future be governed)
with
respect to any Exchangeable Shares held by it or by its Affiliates in respect
of
any matter considered at any meeting of holders of Exchangeable
Shares.
2.11
Rule
10b-18 Purchases
For
greater certainty, nothing contained in this Agreement, including the
obligations of Acquiror contained in Section 2.8, shall limit the ability of
Acquiror or ExchangeCo to make a “Rule 10b-18 purchase” of Acquiror Common
Shares pursuant to Rule 10b-18 of the United States
Securities
Exchange Act of 1934
,
as
amended, or any successor rule.
2.12
Stock
Exchange Listing
Acquiror
covenants and agrees in favour of ExchangeCo that, as long as any outstanding
Exchangeable Shares are owned by any Person other than Acquiror or any of its
Affiliates, Acquiror will use its reasonable best efforts to maintain a listing
for such Exchangeable Shares on a Canadian stock exchange which is a designated
stock exchange within the meaning of the
Income
Tax Act
(Canada)
(the “
Tax
Act
”)
and to
ensure that ExchangeCo remains a “public corporation” within the meaning of the
Tax Act and maintains a “substantial Canadian presence” within the meaning of
the Tax Act as in effect on the date of this Agreement.
ARTICLE
3
ACQUIROR
SUCCESSORS
3.1
Certain
Requirements in Respect of Combination, etc
.
Neither
Acquiror nor Callco shall consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease
or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other Person or, in the case of a
merger, of the continuing corporation resulting therefrom unless, but may do
so
if:
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(a)
|
such
other Person or continuing corporation (the “
Acquiror
Successor
”)
by operation of law, becomes, without more, bound by the terms and
provisions of this Agreement or, if not so bound, executes, prior
to or
contemporaneously with the consummation of such transaction, an agreement
supplemental hereto and such other instruments (if any) as are reasonably
necessary or advisable to evidence the assumption by the Acquiror
Successor of liability for all moneys payable and property deliverable
hereunder and the covenant of such Acquiror Successor to pay and
deliver
or cause to be delivered the same and its agreement to observe and
perform
all the covenants and obligations of Acquiror or Callco, as the case
may
be, under this Agreement;
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(b)
|
in
the event that the Acquiror Common Shares are reclassified or otherwise
changed as part of such transaction, the same or an economically
equivalent change is simultaneously made to, or in the rights of
the
holders of, the Exchangeable Shares; and
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|
(c)
|
such
transaction shall be upon such terms and conditions as substantially
to
preserve and not to impair in any material respect any of the rights,
duties, powers and authorities of the other parties hereunder or
the
holders of Exchangeable Shares.
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3.2
Vesting
of Powers in Successor
Whenever
the conditions of Section 3.1 have been duly observed and performed, the
parties, if required by Section 3.1, shall execute and deliver the supplemental
agreement provided for in Subsection 3.1(a) and thereupon the Acquiror Successor
shall possess and from time to time may exercise each and every right and power
of Acquiror or Callco, as the case may be, under this Agreement in the name
of
Acquiror or otherwise and any act or proceeding by any provision of this
Agreement required to be done or performed by the Board of Directors of Acquiror
or any officers of Acquiror may be done and performed with like force and effect
by the directors or officers of such Acquiror Successor.
3.3
Wholly-Owned
Subsidiaries
Nothing
herein shall be construed as preventing the amalgamation or merger of any
wholly-owned direct or indirect subsidiary of Acquiror (other than ExchangeCo
or
Callco) with or into Acquiror or the winding-up, liquidation or dissolution
of
any wholly-owned subsidiary of Acquiror provided that all of the assets of
such
subsidiary are transferred to Acquiror or another wholly-owned direct or
indirect subsidiary of Acquiror and any such transactions are expressly
permitted by this Article 3.
3.4
Successorship
Transaction
Notwithstanding
the foregoing provisions of Article 3, in the event of an Acquiror Control
Transaction:
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(a)
|
in
which Acquiror merges or amalgamates with, or in which all or
substantially all of the then outstanding Acquiror Common Shares
are
acquired by, one or more other corporations to which Acquiror is,
immediately before such merger, amalgamation or acquisition, “related’’
within the meaning of the Tax Act (otherwise than by virtue of a
right
referred to in paragraph 251(5)(b)
thereof);
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(b)
|
which
does not result in an acceleration of the Redemption Date in accordance
with paragraph (b) of that definition; and
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(c)
|
in
which all or substantially all of the then outstanding Acquiror Common
Shares are converted into or exchanged for shares or rights to receive
such shares (the “
Other
Shares
”)
or another corporation (the “
Other
Corporation
”)
that, immediately after such Acquiror Control Transaction, owns or
controls, directly or indirectly,
Acquiror,
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then
all
references herein to “Acquiror’’ shall thereafter be and be deemed to be
references to “Other Corporation’’ and all references herein to “Acquiror Common
Shares” shall thereafter be and be deemed to be references to “Other Shares’’
(with appropriate adjustments, if any, as are required to result in a holder
of
Exchangeable Shares on the exchange, redemption or retraction of such shares
pursuant to the Exchangeable Share Provisions or Article 8 of the Plan of
Arrangement or exchange of such shares pursuant to the Voting and Exchange
Trust
Agreement immediately subsequent to the Acquiror Control Transaction being
entitled to receive that number of Other Shares equal to the number of Other
Shares such holder of Exchangeable Shares would have received if the exchange,
redemption or retraction of such shares pursuant to the Exchangeable Share
Provisions or Article 8 of the Plan of Arrangement, or exchange of such shares
pursuant to the Voting and Exchange Trust Agreement had occurred immediately
prior to the Acquiror Control Transaction and the Acquiror Control Transaction
was completed) without any need to amend the terms and conditions of the
Exchangeable Shares and without any further action required.
ARTICLE
4
GENERAL
4.1
Term
This
Agreement shall come into force and be effective as of the date hereof and
shall
terminate and be of no further force and effect at such time as no Exchangeable
Shares (or securities or rights convertible into or exchangeable for or carrying
rights to acquire Exchangeable Shares) are held by any Person other than
Acquiror and any of its Affiliates.
4.2
Changes
in Capital of Acquiror and ExchangeCo
At
all
times after the occurrence of any event contemplated pursuant to Sections 2.7
and 2.8 hereof or otherwise, as a result of which either Acquiror Common Shares
or the Exchangeable Shares or both are in any way changed, this Agreement shall
forthwith be deemed amended and modified as necessary in order that it shall
apply with full force and effect,
mutatis
mutandis
,
to all
new securities into which Acquiror Common Shares or the Exchangeable Shares
or
both are so changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
4.3
Notices
to Parties
All
notices and other communications hereunder shall be in writing and shall be
deemed given when delivered personally, telecopied (which is confirmed) or
dispatched (postage prepaid) to a nationally recognized overnight courier
service with overnight delivery instructions, in each case addressed to the
particular party at:
Gran
Tierra Energy Inc.
#300,
611 – 10
th
Avenue
S.W.
Calgary,
Alberta T2R 0B2
Attention:
Dana
Coffield, Ph. D., President & Chief Executive Officer
Facsimile
Number:
(403)
265-3242
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(b)
|
If
to ExchangeCo, at:
|
Gran
Tierra Exchangeco Inc.
#300,
611 – 10
th
Avenue
S.W.
Calgary,
Alberta T2R 0B2
Attention:
Dana
Coffield, Ph. D., President & Chief Executive Officer
Facsimile
Number:
(403)
265-3242
Gran
Tierra Callco ULC
#300,
611 – 10
th
Avenue
S.W.
Calgary,
Alberta T2R 0B2
Attention:
Dana
Coffield, Ph. D., President & Chief Executive Officer
Facsimile
Number:
(403)
265-3242
or
at
such other address of which any party may, from time to time, advise the other
parties by notice in writing given in accordance with the
foregoing.
4.4
Assignment
No
party
hereto may assign this Agreement or any of its rights, interests or obligations
under this Agreement or the Arrangement (whether by operation of law or
otherwise) except that ExchangeCo may assign in its sole discretion, any or
all
of its rights, interests and obligations hereunder to any wholly-owned
subsidiary of Acquiror.
4.5
Binding
Effect
Subject
to Section 4.4, this Agreement and the Arrangement shall be binding upon, enure
to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
4.6
Amendments,
Modifications
Subject
to Sections 4.2, 4.7 and 4.11, this Agreement may not be amended or modified
except by an agreement in writing executed by ExchangeCo, Callco and Acquiror
and approved by the holders of the Exchangeable Shares in accordance with
Section 10.2 of the Exchangeable Share Provisions.
4.7
Ministerial
Amendments
Notwithstanding
the provisions of Section 4.6, the parties to this Agreement may in writing
at
any time and from time to time, without the approval of the holders of the
Exchangeable Shares, amend or modify this Agreement for the purposes
of:
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(a)
|
adding
to the covenants of any or all parties provided that the board of
directors of each of ExchangeCo, Callco and Acquiror shall be of
the good
faith opinion that such additions will not be prejudicial to the
rights or
interests of the holders of the Exchangeable
Shares;
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|
(b)
|
making
such amendments or modifications not inconsistent with this Agreement
as
may be necessary or desirable with respect to matters or questions
which,
in the good faith opinion of the board of directors of each of ExchangeCo,
Callco and Acquiror, it may be expedient to make, provided that each
such
board of directors shall be of the good faith opinion that such amendments
or modifications will not be prejudicial to the rights or interests
of the
holders of the Exchangeable Shares;
or
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(c)
|
making
such changes or corrections which, on the advice of counsel to ExchangeCo,
Callco and Acquiror, are required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision or clerical omission
or
mistake or manifest error, provided that the board of directors of
each of
ExchangeCo, Callco and Acquiror shall be of the good faith opinion
that
such changes or corrections will not be prejudicial to the rights
or
interests of the holders of the Exchangeable
Shares.
|
4.8
Meeting
to Consider Amendments
ExchangeCo,
at the request of Acquiror, shall call a meeting or meetings of the holders
of
the Exchangeable Shares for the purpose of considering any proposed amendment
or
modification requiring approval pursuant to Section 4.6. Any such meeting or
meetings shall be called and held in accordance with the bylaws of ExchangeCo,
the Exchangeable Share Provisions and all applicable laws.
4.9
Amendments
Only in Writing
No
amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto.
4.10
Governing
Laws; Consent to Jurisdiction
This
Agreement shall be governed by and construed in accordance with the laws of
the
Province of Alberta and the laws of Canada applicable therein and shall be
treated in all respects as an Alberta contract. Each party hereby irrevocably
attorns to the jurisdiction of the courts of the Province of Alberta in respect
of all matters arising under or in relation to this Agreement.
4.11
Severability
If
any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
4.12
Counterparts
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original but all of which together shall constitute one and the same
instrument.
IN
WITNESS WHEREOF
,
the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.
GRAN
TIERRA ENERGY INC.
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|
|
By:
|
/s/
Dana Coffield
|
Name:
|
Dana
Coffield, Ph. D.
|
Title:
|
President
and Chief Executive Officer
|
|
|
GRAN
TIERRA EXCHANGECO INC.
|
|
|
By:
|
/s/
Dana Coffield
|
Name:
|
Dana
Coffield, Ph. D.
|
Title:
|
President
and Chief Executive Officer
|
|
|
GRAN
TIERRA CALLCO ULC
|
|
|
By:
|
/s/
Dana Coffield
|
Name:
|
Dana
Coffield, Ph. D.
|
Title:
|
President
and Chief Executive Officer
|
Exhibit
10.3
Gran
Tierra Energy Inc.
2007
Equity Incentive Plan
Adopted:
August 9, 2007
Approved
By Stockholders: October 10, 2007
Amended
by the Board: December 20, 2007
Amended
by the Board: January 14, 2008
Amended
by the Board: October 9, 2008
Approved
by the Stockholders: November 14, 2008
(a)
Amendment
and Restatement.
The Plan
is intended as a complete amendment and restatement of the Company’s 2005 Equity
Incentive Plan (the “
Prior
Plan
”).
All
outstanding stock awards granted under the Prior Plan shall remain subject
to
the terms of the Prior Plan. All Stock Awards granted subsequent to the
effective date of this Plan shall be subject to the terms of this Plan.
(b)
Eligible
Stock Award Recipients.
The
persons eligible to receive Stock Awards are Employees, Directors and
Consultants.
(c)
Available
Stock Awards.
The
purpose of the Plan is to provide a means by which eligible recipients of Stock
Awards may be given an opportunity to benefit from increases in value of the
Common Stock through the granting of the following Stock Awards: (i) Options,
(ii) Restricted Stock Awards, (iii) Stock Appreciation Rights, (iv) Restricted
Stock Units and (v) Other Stock Awards.
(d)
General
Purpose.
The
Company, by means of the Plan, seeks to retain the services of the group of
persons eligible to receive Stock Awards, to secure and retain the services
of
new members of this group and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
(a)
“
Affiliate
”
means
any
“parent corporation” or “subsidiary corporation” of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Code. The Board shall have the authority to determine
the
time or times at which “parent corporation” or “subsidiary corporation” status
is determined within the foregoing definition.
(b)
“
Board
”
means
the
Board of Directors of the Company.
(c)
“
Capitalization
Adjustment
”
has
the
meaning ascribed to that term in Section 11(a).
(d)
“
Change
in Control
”
means
the
occurrence, in a single transaction or in a series of related transactions,
of
any one or more of the following events:
(i)
any
Exchange Act Person becomes the Owner, directly or indirectly, of securities
of
the Company representing more than fifty percent (50%) of the combined voting
power of the Company’s then outstanding securities other than by virtue of a
merger, consolidation or similar transaction. Notwithstanding the foregoing,
a
Change in Control shall not be deemed to occur (A) on account of the acquisition
of securities of the Company by an institutional investor, any affiliate thereof
or any other Exchange Act Person that acquires the Company’s securities in a
transaction or series of related transactions that are primarily a private
financing transaction for the Company or (B) solely because the level of
Ownership held by any Exchange Act Person (the “
Subject
Person
”)
exceeds the designated percentage threshold of the outstanding voting securities
as a result of a repurchase or other acquisition of voting securities by the
Company reducing the number of shares outstanding, provided that if a Change
in
Control would occur (but for the operation of this sentence) as a result of
the
acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by
the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;
(ii)
there
is
consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company if, immediately after the consummation of such
merger, consolidation or similar transaction, the stockholders of the Company
immediately prior thereto do not Own, directly or indirectly, either (A)
outstanding voting securities representing more than fifty percent (50%) of
the
combined outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction or (B) more than fifty percent (50%) of
the
combined outstanding voting power of the parent of the surviving Entity in
such
merger, consolidation or similar transaction;
(iii)
there
is
consummated a sale, lease, license or other disposition of all or substantially
all of the consolidated assets of the Company and its Subsidiaries, other than
a
sale, lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an Entity, more
than
fifty percent (50%) of the combined voting power of the voting securities of
which are Owned by stockholders of the Company in substantially the same
proportion as their Ownership of the Company immediately prior to such sale,
lease, license or other disposition; or
(iv)
individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “
Incumbent
Board
”)
cease
for any reason to constitute at least a majority of the members of the Board;
provided,
however,
that if
the appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan,
be
considered as a member of the Incumbent Board).
The
term
Change in Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of
the
Company.
Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change
in
Control (or any analogous term) in an individual written agreement between
the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Stock Awards subject to such agreement (it being
understood, however, that if no definition of Change in Control or any analogous
term is set forth in such an individual written agreement, the foregoing
definition shall apply).
(e)
“Code”
means
the United States Internal Revenue Code of 1986, as amended.
(f)
“Committee”
means a
committee of one or more members of the Board appointed by the Board in
accordance with Section 3(c).
(g)
“Common
Stock”
means
the common stock of the Company.
(h)
“Company”
means
Gran Tierra Energy Inc., a Nevada corporation.
(i)
“Consultant”
means
any person, including an advisor, (i) engaged by the Company or an Affiliate
to
render consulting or advisory services and who is compensated for such services
or (ii) serving as a member of the Board of Directors of an Affiliate and who
is
compensated for such services. However, the term “Consultant” shall not include
Directors who are not compensated by the Company for their services as
Directors, and the payment of a director’s fee by the Company for services as a
Director shall not cause a Director to be considered a “Consultant” for purposes
of the Plan.
(j)
“Continuous
Service”
means
that the Participant’s service with the Company or an Affiliate, whether as an
Employee, Director or Consultant, is not interrupted or terminated. A change
in
the capacity in which the Participant renders service to the Company or an
Affiliate as an Employee, Consultant or Director or a change in the entity
for
which the Participant renders such service, provided that there is no
interruption or termination of the Participant’s service with the Company or an
Affiliate, shall not terminate a Participant’s Continuous Service;
provided,
however,
if
the
Entity for which a Participant is rendering services ceases to qualify as an
Affiliate, as determined by the Board in its sole discretion, such Participant’s
Continuous Service shall be considered to have terminated on the date such
Entity ceases to qualify as an Affiliate. For example, a change in status from
an employee of the Company to a consultant to an Affiliate or to a Director
shall not constitute an interruption of Continuous Service. To the extent
permitted by law, the Board or the chief executive officer of the Company,
in
that party’s sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
Notwithstanding the foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in a Stock Award only to such extent as may
be
provided in the Company’s leave of absence policy or in the written terms of the
Participant’s leave of absence.
(k)
“Corporate
Transaction”
means
the occurrence, in a single transaction or in a series of related transactions,
of any one or more of the following events:
(i)
the
consummation of a sale
or
other
disposition of all or substantially all, as determined by the Board in its
discretion, of the consolidated assets of the Company and its
Subsidiaries;
(ii)
the
consummation of a sale or other disposition of at least fifty percent (50%)
of
the outstanding securities of the Company;
(iii)
the
consummation of a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or
(iv)
the
consummation of a merger, consolidation or similar transaction following which
the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger, consolidation
or
similar transaction into other property, whether in the form of securities,
cash
or otherwise.
(l)
“Covered
Employee”
shall
have the meaning provided in Section 162(m)(3) of the Code.
(m)
“Director”
means a
member of the Board.
(n)
“Disability”
means
the permanent and total disability of a person within the meaning of Section
22(e)(3) of the Code.
(o)
“Disinterested
Stockholders”
means
all of the stockholders of the Company except Insiders of the Company who are
eligible to receive Stock Awards, and such Insiders’ associates.
(p)
“Employee”
means
any person employed by the Company or an Affiliate. Service as a Director or
payment of a director’s fee by the Company for such service or for service as a
member of the Board of Directors of an Affiliate shall not be sufficient to
constitute “employment” by the Company or an Affiliate.
(q)
“Entity”
means a
corporation, partnership, limited liability company or other
entity.
(r)
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
(s)
“Exchange
Act Person”
means
any natural person, Entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(A) the Company or any Subsidiary of the Company, (B) any employee benefit
plan
of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or
any Subsidiary of the Company, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (D) an Entity Owned, directly
or
indirectly, by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company.
(t)
“Fair
Market Value”
means,
as of any date, the value of the Common Stock determined as
follows:
(i)
If
the
Common Stock is listed on any established stock exchange or traded on the Nasdaq
Global Select Market, Nasdaq Global Market or the Nasdaq Capital Market, the
Fair Market Value of a share of Common Stock, unless otherwise determined by
the
Board, shall be the closing sales price for such stock (or the closing bid,
if
no sales were reported) as quoted on such exchange or market (or the exchange
or
market with the greatest volume of trading in the Common Stock) on the day
of
determination (or if such day of determination does not fall on a market trading
day, then the last market trading day prior to the day of determination), as
reported in a source the Board deems reliable.
(ii)
In
the
absence of such markets for the Common Stock, the Fair Market Value shall be
determined in good faith by the Board and in a manner that complies with
Sections 409A and 422 of the Code.
(u)
“Insider”
means an
“insider” as defined under the policies of the Toronto Stock Exchange, as
amended from time to time, which includes, among others, Directors and TSX
Officers of the Company.
(v)
“Non-Employee
Director”
means a
Director who either (i) is not currently an employee or officer of the Company
or its parent or a subsidiary, does not receive compensation, either directly
or
indirectly, from the Company or its parent or a subsidiary, for services
rendered as a consultant or in any capacity other than as a Director (except
for
an amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)),
does not possess an interest in any other transaction for which disclosure
would
be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship for which disclosure would be required pursuant to
Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
“non-employee director” for purposes of Rule 16b-3.
(w)
“Officer”
means a
person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder.
(x)
“Option”
means a
stock option granted pursuant to the Plan that is not intended to qualify as
an
“incentive stock option” within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(y)
“Option
Agreement”
means a
written agreement between the Company and an Optionholder evidencing the terms
and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan.
(z)
“Optionholder”
means a
person to whom an Option is granted pursuant to the Plan or, if applicable,
such
other person who holds an outstanding Option.
(aa)
“Other
Stock Award”
means an
award based in whole or in part by reference to the Common Stock which is
granted pursuant to the terms and conditions of Section 7(d).
(bb)
“Outside
Director”
means a
Director who either (i) is not a current employee of the Company or an
“affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company
or an
“affiliated corporation” who receives compensation for prior services (other
than benefits under a tax qualified retirement plan) during the taxable year,
has not been an officer of the Company or an “affiliated corporation,” and does
not receive remuneration from the Company or an “affiliated corporation,” either
directly or indirectly, in any capacity other than as a Director or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the
Code.
(cc)
“Own,”
“Owned,”
“Owner,” “Ownership”
A person
or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to
have acquired “Ownership” of securities if such person or Entity, directly or
indirectly, through any contract, arrangement, understanding, relationship
or
otherwise, has or shares voting power, which includes the power to vote or
to
direct the voting, with respect to such securities.
(dd)
“Participant”
means a
person to whom a Stock Award is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Stock Award.
(ee)
“Plan”
means
this Gran Tierra Energy Inc. 2007 Equity Incentive Plan.
(ff)
“Restricted
Stock Award”
means an
award of shares of Common Stock which is granted pursuant to the terms and
conditions of Section 7(a).
(gg)
“Restricted
Stock Unit”
means a
right to receive shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(b).
(hh)
“Rule
16b-3”
means
Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3,
as
in effect from time to time.
(ii)
“Securities
Act”
means
the Securities Act of 1933, as amended.
(jj)
“Stock
Appreciation Right”
means a
right to receive the appreciation on Common Stock that is granted pursuant
to
the terms and conditions of Section 7(c).
(kk)
“Stock
Award”
means
any right granted under the Plan, including an Option, Restricted Stock Award,
Restricted Stock Unit, Stock Appreciation Right and Other Stock
Award.
(ll)
“Stock
Award Agreement”
means a
written agreement between the Company and a holder of a Stock Award evidencing
the terms and conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.
(mm)
“Subsidiary”
means,
with respect to the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power
to
elect a majority of the board of directors of such corporation (irrespective
of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the Company,
and
(ii) any partnership in which the Company has a direct or indirect interest
(whether in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%).
(nn)
“TSX
Officer”
means a
senior officer of the Company or any subsidiary and includes an issuer, all
of
the voting securities of which are owned by a TSX Officer.
(a)
Administration
by Board.
The
Board shall administer the Plan unless and until the Board delegates
administration to a Committee, as provided in Section 3(c).
(b)
Powers
of Board.
The
Board shall have the power, subject to, and within the limitations of, the
express provisions of the Plan:
(i)
To
determine from time to time which of the persons eligible under the Plan shall
be granted Stock Awards; when and how each Stock Award shall be granted; what
type or combination of types of Stock Award shall be granted; the provisions
of
each Stock Award granted (which need not be identical), including the time
or
times when a person shall be permitted to receive Common Stock pursuant to
a
Stock Award; and the number of shares of Common Stock with respect to which
a
Stock Award shall be granted to each such person.
(ii)
To
construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and
to
the extent it shall deem necessary or expedient to make the Plan or Stock Award
fully effective.
(iii)
To
settle
all controversies regarding the Plan and Stock Awards granted under
it.
(iv)
To
amend
the Plan or a Stock Award as provided in Section 12.
(v)
To
terminate or suspend the Plan as provided in Section 13.
(vi)
Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or
expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan or Stock Awards.
(vii)
To
adopt
such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees, Directors or Consultants who are located
in various local jurisdictions.
(c)
Delegation
to Committee.
(i)
General.
The
Board may delegate administration of the Plan to a Committee or Committees
of
one or more members of the Board, and the term “Committee” shall apply to any
person or persons to whom such authority has been delegated. If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan
to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the
Plan.
(ii)
Section
162(m) and Rule 16b-3 Compliance.
In the
discretion of the Board, the Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or solely of
two
or more Non-Employee Directors, in accordance with Rule 16b-3. In addition,
the
Board or the Committee may delegate to a committee of one or more members of
the
Board the authority to grant Stock Awards to eligible persons who are either
(a)
not then Covered Employees and are not expected to be Covered Employees at
the
time of recognition of income resulting from such Stock Award, (b) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code, or (c) not then subject to Section 16 of the Exchange Act.
(d)
Effect
of Board’s Decision.
All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.
4.
|
Shares
Subject To The Plan.
|
(a)
Share
Reserve.
Subject
to the provisions of Section 11(a) relating to Capitalization Adjustments,
the
Common Stock that may be issued pursuant to Stock Awards shall not exceed in
the
aggregate eighteen million (18,000,000) shares of Common Stock.
(b)
Reversion
of Shares to the Share Reserve
.
If any
Stock Award shall for any reason expire or otherwise terminate, in whole or
in
part, without having been exercised in full, the shares of Common Stock not
acquired under such Stock Award shall revert to and again become available
for
issuance under the Plan.
(c)
Source
of Shares.
The
shares of Common Stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(a)
Eligibility
for Specific Stock Awards
.
Stock
Awards may be granted to Employees, Directors and Consultants.
(b)
Section
162(m) Limitation on Annual Grants
.
Subject
to the provisions of Section 11(a) relating to Capitalization Adjustments,
no
Employee shall be eligible to be granted Options covering more than one million
(1,000,000) shares of Common Stock during any calendar year.
(c)
Consultants.
A
Consultant shall not be eligible for the grant of a Stock Award if, at the
time
of grant, a Form S-8 Registration Statement under the Securities Act
(“
Form
S-8
”)
is not
available to register either the offer or the sale of the Company’s securities
to such Consultant because of the nature of the services that the Consultant
is
providing to the Company, because the Consultant is not a natural person, or
because of any other rule governing the use of Form S-8.
Each
Option shall be in such form and shall contain such terms and conditions as
the
Board shall deem appropriate. The provisions of each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:
(a)
Term.
No
Option
shall be exercisable after the expiration of ten (10) years from the date on
which it was granted.
(b)
Exercise
Price of a Stock Option.
The
exercise price of each Option shall be not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence
if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Sections 409A and 424(a) of
the
Code;
provided,
however
,
that if the Common Stock is listed on the Toronto Stock Exchange, the
granting of the Option is approved by the Toronto Stock Exchange to the extent
necessary to satisfy the rules of the Toronto Stock Exchange.
(c)
Consideration.
The
purchase price of Common Stock acquired pursuant to an Option shall be paid,
to
the extent permitted by applicable statutes and regulations, either (i) in
cash
at the time the Option is exercised or (ii) at the discretion of the Board
at
the time of or subsequently to the grant of the Option (1) by delivery to the
Company of other Common Stock (whether by actual delivery or attestation),
(2)
according to a deferred payment or other similar arrangement with the
Optionholder or (3) by a “net exercise” of the Option (as further described
below) (4) pursuant to a program developed under Regulation T as promulgated
by
the Federal Reserve Board that, prior to the issuance of Common Stock, results
in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instruction to pay the aggregate exercise price to the Company
from
the sales proceeds or (5) in any other form of legal consideration that may
be
acceptable to the Board.
In
the
case of any deferred payment arrangement, interest shall be compounded at least
annually and shall be charged at the minimum rate of interest necessary to
avoid
(1) the imputation of interest income to the Company and compensation income
to
the Optionholder, under any applicable provisions of the Code and (2) the
classification of the Option as a liability for financial accounting purposes.
In
the
case of a “net exercise” of an Option, the Company will not require a payment of
the exercise price of the Option from the Optionholder but will reduce the
number of shares of Common Stock issued upon the exercise by the largest number
of whole shares that has a Fair Market Value that does not exceed the aggregate
exercise price. With respect to any remaining balance of the aggregate exercise
price, the Company shall accept a cash payment from the Optionholder. The shares
of Common Stock so used to pay the exercise price of an Option under a “net
exercise,” the shares actually delivered to the Optionholder, and any shares
withheld to satisfy tax withholding obligations will be considered to have
resulted from the exercise of the Option, and accordingly, the Option will
not
again be exercisable with respect to such shares.
(d)
Transferability
of an Option.
An
Option shall be transferable to the extent provided in the Option Agreement.
If
the Option does not provide for transferability, then the Option shall not
be
transferable except by will or by the laws of descent and distribution or
pursuant a domestic relations order and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. Notwithstanding the foregoing,
the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(e)
Vesting
Generally.
The
total number of shares of Common Stock subject to an Option may, but need not,
vest and therefore become exercisable in periodic installments that may, but
need not, be equal. The Option may be subject to such other terms and conditions
on the time or times when it may be exercised (which may be based on performance
or other criteria) as the Board may deem appropriate. The vesting provisions
of
individual Options may vary. The provisions of this Section 6(e) are subject
to
any Option provisions governing the minimum number of shares of Common Stock
as
to which an Option may be exercised.
(f)
Termination
of Continuous Service.
In the
event that an Optionholder’s Continuous Service terminates (other than upon the
Optionholder’s death or Disability), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination) but only within such period of time ending on
the
earlier of (i) the date three (3) months following the termination of the
Optionholder’s Continuous Service (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does
not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate.
(g)
Extension
of Termination Date.
An
Optionholder’s Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder’s Continuous Service (other
than upon the Optionholder’s death or Disability) would be prohibited at any
time solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in Section 6(a) or (ii) the expiration of a period of three (3) months
after the termination of the Optionholder’s Continuous Service during which the
exercise of the Option would not be in violation of such registration
requirements.
(h)
Disability
of Optionholder.
In the
event that an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such Option as of
the
date of termination), but only within such period of time ending on the earlier
of (i) the date twelve (12) months following such termination (or such longer
or
shorter period specified in the Option Agreement or (ii) the expiration of
the
term of the Option as set forth in the Option Agreement. If, after termination,
the Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(i)
Death
of Optionholder.
In the
event that (i) an Optionholder’s Continuous Service terminates as a result of
the Optionholder’s death or (ii) the Optionholder dies within the period (if
any) specified in the Option Agreement after the termination of the
Optionholder’s Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death pursuant
to Section 6(d), but only within the period ending on the earlier of (1) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement or (2) the expiration of the term
of
such Option as set forth in the Option Agreement. If, after death, the Option
is
not exercised within the time specified herein, the Option shall
terminate.
(j)
Early
Exercise.
The
Option may, but need not, include a provision whereby the Optionholder may
elect
at any time before the Optionholder’s Continuous Service terminates to exercise
the Option as to any part or all of the shares of Common Stock subject to the
Option prior to the full vesting of the Option. Any unvested shares of Common
Stock so purchased may be subject to a repurchase option in favor of the Company
or to any other restriction the Board determines to be appropriate. The Company
will not exercise its repurchase option until at least six (6) months (or such
longer or shorter period of time required to avoid classification of the Option
as a liability for financial accounting purposes) have elapsed following
exercise of the Option unless the Board otherwise specifically provides in
the
Option.
7.
|
Provisions
Of Stock Awards Other Than
Options.
|
(a)
Restricted
Stock Awards.
Each
Restricted Stock Award agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. To the extent
consistent with the Company’s Bylaws, at the Board’s election, shares of Common
Stock may be (x) held in book entry form subject to the Company’s instructions
until any restrictions relating to the Restricted Stock Award lapse; or
(y) evidenced by a certificate, which certificate shall be held in such
form and manner as determined by the Board. The terms and conditions of
Restricted Stock Award agreements may change from time to time, and the terms
and conditions of separate Restricted Stock Award agreements need not be
identical;
provided,
however,
that
each
Restricted Stock Award agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance
of
each of the following provisions:
(i)
Purchase
Price.
At the
time of the grant of a Restricted Stock Award, the Board will determine the
price to be paid by the Participant for each share subject to the Restricted
Stock Award. To the extent required by applicable law, the price to be paid
by
the Participant for each share of the Restricted Stock Award will not be less
than the par value of a share of Common Stock. A Restricted Stock Award may
be
awarded as a stock bonus (
i.e.
,
with no
cash purchase price to be paid) to the extent permissible under applicable
law.
(ii)
Consideration.
At the
time of the grant of a Restricted Stock Award, the Board will determine the
consideration permissible for the payment of the purchase price of the
Restricted Stock Award. The purchase price of Common Stock acquired pursuant
to
the Restricted Stock Award shall be paid in one of the following ways: (i)
in
cash at the time of purchase; (ii) at the discretion of the Board, according
to
a deferred payment or other similar arrangement with the Participant; (iii)
by
services rendered or to be rendered to the Company; or (iv) in any other form
of
legal consideration that may be acceptable to the Board;
provided,
however,
that
at
any time that the Company is incorporated in Nevada, the Common Stock’s “par
value,” as defined in the Nevada Revised Statutes, shall not be paid by deferred
payment and must be paid in a form of consideration that is permissible under
the Nevada Corporation Law.
(iii)
Vesting.
Shares
of Common Stock acquired under a Restricted Stock Award may, but need not,
be
subject to a share repurchase option in favor of the Company in accordance
with
a vesting schedule to be determined by the Board.
(iv)
Termination
of Participant’s Continuous Service.
In the
event that a Participant’s Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock
held
by the Participant that have not vested as of the date of termination under
the
terms of the Restricted Stock Award agreement. The Company will not exercise
its
repurchase option until at least six (6) months (or such longer or shorter
period of time required to avoid classification of the Restricted Stock Award as
a liability for financial accounting purposes) have elapsed following the
purchase of the restricted stock unless otherwise determined by the Board or
provided in the Restricted Stock Award agreement.
(v)
Transferability.
Rights
to purchase or receive shares of Common Stock granted under a Restricted Stock
Award shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Restricted Stock Award agreement, as the
Board shall determine in its discretion, and so long as Common Stock awarded
under the Restricted Stock Award remains subject to the terms of the Restricted
Stock Award agreement.
(b)
Restricted
Stock Units.
Each
Restricted Stock Unit agreement shall be in such form and shall contain such
terms and conditions as the Board shall determine. The terms and conditions
of
Restricted Stock Unit agreements may change from time to time, and the terms
and
conditions of separate Restricted Stock Unit agreements need not be identical;
provided,
however,
that
each
Restricted Stock Unit agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance
of
each of the following provisions:
(i)
Consideration.
At the
time of grant of a Restricted Stock Unit award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each
share
of Common Stock subject to the Restricted Stock Unit award. To the extent
required by applicable law, the consideration to be paid by the Participant
for
each share of Common Stock subject to a Restricted Stock Unit award will not
be
less than the par value of a share of Common Stock. Such consideration may
be
paid in any form permitted under applicable law.
(ii)
Vesting.
At
the
time of the grant of a Restricted Stock Unit award, the Board may impose such
restrictions or conditions to the vesting of the shares Restricted Stock Unit
as
it deems appropriate.
(iii)
Payment
.
A
Restricted Stock Unit award may be settled by the delivery of shares of Common
Stock, their cash equivalent, or any combination of the two, as the Board deems
appropriate.
(iv)
Additional
Restrictions.
At
the
time of the grant of a Restricted Stock Unit award, the Board, as it deems
appropriate, may impose such restrictions or conditions that delay the delivery
of the shares of Common Stock (or their cash equivalent) subject to a Restricted
Stock Unit award after the vesting of such Stock Award.
(v)
Dividend
Equivalents.
Dividend
equivalents may be credited in respect of Restricted Stock Units, as the Board
deems appropriate. Such dividend equivalents may be converted into additional
Restricted Stock Units by dividing (1) the aggregate amount or value of the
dividends paid with respect to that number of shares of Common Stock equal
to
the number of Restricted Stock Units then credited by (2) the Fair Market Value
per share of Common Stock on the payment date for such dividend. The additional
Restricted Stock Units credited by reason of such dividend equivalents will
be
subject to all the terms and conditions of the underlying Restricted Stock
Unit
award to which they relate.
(vi)
Termination
of Participant’s Continuous Service.
Except
as
otherwise provided in the applicable Stock Award Agreement, Restricted Stock
Units that have not vested will be forfeited upon the Participant’s termination
of Continuous Service for any reason.
(c)
Stock
Appreciation Rights.
Each
Stock Appreciation Right agreement shall be in such form and shall contain
such
terms and conditions as the Board shall deem appropriate. The terms and
conditions of Stock Appreciation Right agreements may change from time to time,
and the terms and conditions of separate Stock Appreciation Rights agreements
need not be identical, but each Stock Appreciation Right agreement shall include
(through incorporation of the provisions hereof by reference in the agreement
or
otherwise) the substance of each of the following provisions:
(i)
Calculation
of Appreciation.
Each
Stock Appreciation Right will be denominated in share of Common Stock
equivalents. The appreciation distribution payable on the exercise of a Stock
Appreciation Right will be not greater than an amount equal to the excess of
(A)
the aggregate Fair Market Value (on the date of the exercise of the Stock
Appreciation Right) of a number of shares of Common Stock equal to the number
of
share of Common Stock equivalents in which the Participant is vested under
such
Stock Appreciation Right and with respect to which the Participant is exercising
the Stock Appreciation Right on such date, over (B) an amount that will be
determined by the Committee at the time of grant of the Stock Appreciation
Right.
(ii)
Vesting.
At
the
time of the grant of a Stock Appreciation Right, the Board may impose such
restrictions or conditions to the vesting of such Right as it deems
appropriate.
(iii)
Exercise.
To
exercise any outstanding Stock Appreciation Right, the Participant must provide
written notice of exercise to the Company in compliance with the provisions
of
the Stock Appreciation Rights agreement evidencing such Right.
(iv)
Payment
.
The
appreciation distribution in respect of a Stock Appreciation Right may be paid
in Common Stock, in cash, or any combination of the two, as the Board deems
appropriate.
(v)
Termination
of Continuous Service.
If a
Participant’s Continuous Service terminates for any reason, any unvested Stock
Appreciation Rights shall be forfeited and any vested Stock Appreciation Rights
shall be automatically redeemed.
(d)
Other
Stock Awards
.
Other
forms of Stock Awards valued in whole or in part by reference to, or otherwise
based on, Common Stock may be granted either alone or in addition to Stock
Awards provided for under Section 6 and the preceding provisions of this Section
7. Subject to the provisions of the Plan, the Board shall have sole and complete
authority to determine the persons to whom and the time or times at which such
Other Stock Awards will be granted, the number of shares of Common Stock (or
the
cash equivalent thereof) to be granted pursuant to such Stock Awards and all
other terms and conditions of such Stock Awards.
8.
|
Covenants
Of The Company.
|
(a)
Availability
of Shares.
During
the terms of the Stock Awards, the Company shall keep available at all times
the
number of shares of Common Stock required to satisfy such Stock
Awards.
(b)
Securities
Law Compliance.
The
Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Stock
Awards and to issue and sell shares of Common Stock upon exercise of the Stock
Awards;
provided,
however,
that
this undertaking shall not require the Company to register under the Securities
Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant
to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of Common
Stock
under the Plan, the Company shall be relieved from any liability for failure
to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained. A Participant shall not be eligible for the grant
of
a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock
Award if such grant or issuance would be in violation of any applicable
securities law.
(c)
No
Obligation to Notify.
The
Company shall have no duty or obligation to any Participant to advise such
holder as to the time or manner of exercising such Stock Award. Furthermore,
the
Company shall have no duty or obligation to warn or otherwise advise such holder
of a pending termination or expiration of a Stock Award or a possible period
in
which the Stock Award may not be exercised. The Company has no duty or
obligation to minimize the tax consequences of a Stock Award to the holder
of
such Stock Award.
9.
|
Use
Of Proceeds From Stock.
|
Proceeds
from the sale of Common Stock pursuant to Stock Awards shall constitute general
funds of the Company.
(a)
Acceleration
of Exercisability and Vesting.
The
Board shall have the power to accelerate the time at which a Stock Award may
first be exercised or the time during which a Stock Award or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest
(b)
Corporate
Action Constituting Grant of Stock Awards.
Corporate action constituting a grant by the Company of a Stock Award to any
Participant shall be deemed completed as of the date of such corporate action,
unless otherwise determined by the Board, regardless of when the instrument,
certificate, or letter evidencing the Stock Award is communicated to, or
actually received or accepted by, the Participant.
(c)
Stockholder
Rights.
Subject
to the further limitations of Section 7(b)(iv) hereof, no Participant shall
be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Stock Award unless and
until (i) such Participant has satisfied all requirements for exercise of the
Stock Award pursuant to its terms, if applicable, and (ii) the issuance of
the
Common Stock subject to such Stock Award has been entered into the books and
records of the Company.
(d)
No
Employment or other Service Rights.
Nothing
in the Plan, and Stock Award Agreement or any other instrument executed
thereunder or in connection with any Stock Award granted pursuant thereto shall
confer upon any Participant any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the Stock Award was granted
or
shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause,
(ii)
the service of a Consultant pursuant to the terms of such Consultant’s agreement
with the Company or an Affiliate or (iii) the service of a Director pursuant
to
the Bylaws of the Company or an Affiliate, and any applicable provisions of
the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(e)
Investment
Assurances.
The
Company may require a Participant, as a condition of exercising or acquiring
Common Stock under any Stock Award, (i) to give written assurances satisfactory
to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock
Award for the Participant’s own account and not with any present intention of
selling or otherwise distributing the Common Stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative
if
(1) the issuance of the shares of Common Stock upon the exercise or acquisition
of Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or (2) as to any
particular requirement, a determination is made by counsel for the Company
that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.
(f)
Withholding
Obligations.
Unless
prohibited by the terms of a Stock Award Agreement, the Company may, in its
sole
discretion, satisfy any country, federal, state, provincial or local tax
withholding obligation relating to any Stock Award by any of the following
means
(in addition to the Company’s right to withhold from any compensation paid to
the Participant by the Company) or by a combination of such means: (i) causing
the Participant to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Stock Award; provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount
of
tax required to be withheld by law (or such lower amount as may be necessary
to
avoid classification of the Stock Award as a liability for financial accounting
purposes); (iii) withholding payment from any amounts otherwise payable to
the
Participant; (iv) withholding cash from a Stock Award settled in cash; or (v)
by
such other method as may be set forth in the Stock Award Agreement.
(g)
Electronic
Delivery
.
Any
reference herein to a “written” agreement or document shall include any
agreement or document delivered electronically or posted on the Company’s
intranet.
(h)
Compliance
with Section 409A.
To
the
extent that the Board determines that any Stock Award granted hereunder is
subject to Section 409A of the Code, the Stock Award Agreement evidencing such
Stock Award shall incorporate the terms and conditions necessary to avoid the
consequences specified in Section 409A(a)(1) of the Code. To the extent
applicable, the Plan and Stock Award Agreements shall be interpreted in
accordance with Section 409A of the Code, including without limitation any
applicable guidance that may be issued or amended after the Effective Date.
11.
|
Adjustments
Upon Changes In Stock.
|
(a)
Capitalization
Adjustments
.
If any
change is made in, or other event occurs with respect to, the Common Stock
subject to the Plan or subject to any Stock Award without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of
shares, change in corporate structure or similar transaction (each a
“
Capitalization
Adjustment
”),
the
Board shall appropriately and proportionately adjust: (i) the class(es) and
maximum number of securities subject to the Plan pursuant to Section 4(a),
(ii) the class(es) and maximum number of securities that may be awarded to
any person pursuant to Section 5(b), and (iii) the class(es) and number of
securities and price per share of stock subject to outstanding Stock Awards.
The
Board shall make such adjustments, and its determination shall be final, binding
and conclusive. The conversion of any convertible securities of the Company
shall not be treated as a Capitalization Adjustment.
(b)
Dissolution
or Liquidation
.
In the
event of a dissolution or liquidation of the Company, then all outstanding
Options shall terminate immediately prior to the completion of such dissolution
or liquidation, and shares of Common Stock subject to the Company’s repurchase
option may be repurchased by the Company notwithstanding the fact that the
holder of such stock is still in Continuous Service.
(c)
Corporate
Transaction
.
In the
event of a Corporate Transaction, any surviving corporation or acquiring
corporation may assume or continue any or all Stock Awards outstanding under
the
Plan or may substitute similar stock awards for Stock Awards outstanding under
the Plan (it being understood that similar stock awards include, but are not
limited to, awards to acquire the same consideration paid to the stockholders
or
the Company, as the case may be, pursuant to the Corporate Transaction), and
any
reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to Stock Awards may be assigned by the Company to the
successor of the Company (or the successor’s parent company), if any, in
connection with such Corporate Transaction. In the event that any surviving
corporation or acquiring corporation does not assume or continue any or all
such
outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have been not assumed,
continued or substituted and that are held by Participants whose Continuous
Service has not terminated prior to the effective time of the Corporate
Transaction, the vesting of such Stock Awards (and, if applicable, the time
at
which such Stock Awards may be exercised) shall (contingent upon the
effectiveness of the Corporate Transaction) be accelerated in full to a date
prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that
is
five (5) days prior to the effective time of the Corporate Transaction), the
Stock Awards shall terminate if not exercised (if applicable) at or prior to
such effective time, and any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards held by Participants whose Continuous
Service has not terminated shall (contingent upon the effectiveness of the
Corporate Transaction) lapse. With respect to any other Stock Awards outstanding
under the Plan that have not been assumed, continued or substituted, the vesting
of such Stock Awards (and, if applicable, the time at which such Stock Award
may
be exercised) shall not be accelerated, unless otherwise provided in a written
agreement between the Company or any Affiliate and the holder of such Stock
Award, and such Stock Awards shall terminate if not exercised (if applicable)
prior to the effective time of the Corporate Transaction.
(d)
Change
in Control.
A Stock
Award held by any Participant whose Continuous Service has not terminated prior
to the effective time of a Change in Control may be subject to additional
acceleration of vesting and exercisability upon or after such event as may
be
provided in the Stock Award Agreement for such Stock Award or as may be provided
in any other written agreement between the Company or any Affiliate and the
Participant, but in the absence of such provision, no such acceleration shall
occur.
12.
|
Amendment
Of The Plan And Stock
Awards.
|
(a)
Amendment
of Plan.
The
Board at any time, and from time to time, may amend the Plan. However, except
as
provided in Section 11(a) relating to Capitalization Adjustments and Section
12(f) relating to amendments without Stockholder Approval, no amendment shall
be
effective unless approved by the stockholders of the Company.
(b)
Stockholder
Approval.
The
Board, in its sole discretion, may submit any other amendment to the Plan for
stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to Covered
Employees.
(c)
No
Impairment of Rights.
Rights
under any Stock Award granted before amendment of the Plan shall not be impaired
by any amendment of the Plan unless (i) the Company requests the consent of
the
Participant and (ii) the Participant consents in writing.
(d)
Amendment
of Stock Awards.
The
Board at any time, and from time to time, may amend the terms of any one or
more
Stock Awards;
provided,
however,
that (i)
if the Common Stock is listed on the Toronto Stock Exchange any amendment is
approved by the stockholders to the extent necessary to satisfy the rules of
the
Toronto Stock Exchange, and (ii) that the rights under any Stock Award shall
not
be impaired by any such amendment unless (A) the Company requests the consent
of
the Participant and (B) the Participant consents in writing.
(e)
Insiders.
If
an
amendment reducing the Option exercise price or extending the term of the Option
is made to an Option held by an Insider, the amendment shall only be made
effective after the approval is received of Disinterested Stockholders at a
meeting of the stockholders of the Company.
(f)
Amendments
without Stockholder Approval.
Without
limiting the generality of the foregoing, or the other provisions hereof, the
Board shall have the authority: (a) to make amendments to the Plan or a Stock
Award of a housekeeping or administrative nature; (b) if the Common Stock is
listed on the Toronto Stock Exchange subject to any required approval of the
Toronto Stock Exchange, to change the vesting or termination provisions of
a
Stock Award or the Plan; (c) any amendment to reduce the option exercise
price of an Option held by a non-insider; (d) amendments necessary to
comply with provisions of applicable law or stock exchange requirements or
for
grants to qualify for favourable treatment under applicable laws; (e) the
addition of any form of financial assistance by the Company for the acquisition
by all or certain categories of Participants of Common Stock under the Plan,
and
the subsequent amendment of any such provisions; and (f) any other
amendment, fundamental or otherwise, not requiring stockholder approval under
the Code;
provided,
however,
that no
amendment shall be made without stockholder approval to the extent stockholder
approval is necessary to satisfy the requirements of Section 422 of the
Code
13.
|
Termination
Or Suspension Of The Plan.
|
(a)
Plan
Term.
The
Board may suspend or terminate the Plan at any time. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b)
No
Impairment of Rights.
Suspension or termination of the Plan shall not impair rights and obligations
under any Stock Award granted while the Plan is in effect except with the
written consent of the Participant.
14.
|
Effective
Date Of Plan.
|
The
Plan
shall become effective as determined by the Board, but no Stock Award shall
be
exercised (or, in the case of a stock bonus, shall be granted) unless and until
the Plan has been approved by the stockholders of the Company, which approval
shall be within twelve (12) months before or after the date the Plan is adopted
by the Board.
(a)
The
law
of the State of Nevada shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such state’s
conflict of laws rules.
16.
|
Limits
With Respect To Insiders.
|
(a)
The
maximum number of shares of Common Stock which may be reserved for issuance
to
Insiders
,
at any
time,
under
the Plan and any other share compensation arrangement of the Company shall
be
10% of the Common Stock issued and outstanding
.
(b)
The
maximum number of shares of Common Stock which may be issued to Insiders under
the Plan, at any time, and any other share compensation arrangement within
any
12-month period shall be 10% of the Common Stock outstanding.
(c)
The
maximum number of shares of Common Stock which may be issued to any one Insider
and such Insider’s associates under the Plan, at any time, within a 12-month
period shall be 5% of the Common Stock outstanding.
17.
|
Limits
With Respect To
Consultants.
|
(a)
Th
e
number
of Options granted to any one Consultant in any 12-month period under the Plan
shall not exceed 2% of the issued and outstanding shares of Common Stock at
the
time of grant.