ARRANGEMENT AGREEMENT GRAN TIERRA ENERGY INC. AND SOLANA RESOURCES LIMITED AND GRAN TIERRA EXCHANGECO INC. DATED AS OF JULY 28, 2008
GRAN
TIERRA ENERGY INC.
AND
SOLANA
RESOURCES LIMITED
AND
GRAN
TIERRA EXCHANGECO INC.
DATED
AS OF JULY 28, 2008
Table
of Contents
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Page
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||
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ARTICLE
1 GENERAL
|
2
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|
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1.1
|
Plan
of Arrangement
|
2
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|
1.2
|
Adjustments
to Exchange Ratio
|
2
|
|
1.3
|
Dissenting
Shares
|
2
|
|
1.4
|
Joint
Proxy Statement; Registration Statement
|
3
|
|
1.5
|
Material
Adverse Effect or Material Adverse Change
|
4
|
|
1.6
|
Currency
|
4
|
|
1.7
|
Exhibits
|
5
|
|
ARTICLE
2 REPRESENTATIONS AND WARRANTIES OF SOLANA
|
5
|
|
|
2.1
|
Organization
and Standing
|
5
|
|
2.2
|
Agreement
Authorized and its Effect on Other Obligations
|
6
|
|
2.3
|
Governmental
and Third Party Consents
|
7
|
|
2.4
|
Capitalization
|
7
|
|
2.5
|
Securities
Reports and Financial Statements
|
8
|
|
2.6
|
Liabilities
|
8
|
|
2.7
|
Information
Supplied
|
9
|
|
2.8
|
No
Defaults
|
9
|
|
2.9
|
Litigation;
Investigations
|
9
|
|
2.10
|
Absence
of Certain Changes and Events
|
10
|
|
2.11
|
Additional
Solana Information
|
10
|
|
2.12
|
Certain
Agreements
|
11
|
|
2.13
|
Employee
Benefit Plans
|
12
|
|
2.14
|
Intellectual
Property
|
12
|
|
2.15
|
Title
to Properties
|
12
|
|
2.16
|
Environmental
Matters
|
13
|
|
2.17
|
Compliance
With Other Laws
|
14
|
|
2.18
|
Taxes
|
14
|
|
2.19
|
Insurance
|
15
|
|
2.20
|
Indebtedness
to and by Officers, Directors and Others
|
15
|
|
2.21
|
No
Limitation
|
15
|
|
2.22
|
Information
to Independent Engineer
|
15
|
|
2.23
|
No
Insider Rights
|
16
|
|
2.24
|
Petroleum
and Natural Gas Property Interests
|
16
|
|
2.25
|
Title
to Oil and Gas Properties
|
17
|
|
2.26
|
No
Encumbrances
|
17
|
|
2.27
|
Compliance
|
17
|
|
2.28
|
Areas
of Mutual Interest
|
17
|
|
2.29
|
Production
Related Contracts
|
17
|
|
2.30
|
Take
or Pay Obligations
|
18
|
|
2.31
|
No
Defaults Under Leases and Agreements
|
18
|
-i-
Table
of Contents
(continued)
|
Page
|
||
|
2.32
|
No
Reduction of Interests
|
18
|
|
2.33
|
Royalties,
Rentals and Taxes Paid
|
18
|
|
2.34
|
Production
Allowables and Production Penalties
|
19
|
|
2.35
|
Operation
and Condition of Xxxxx
|
19
|
|
2.36
|
Operation
and Condition of Tangibles
|
19
|
|
2.37
|
Outstanding
AFEs
|
20
|
|
2.38
|
Confidentiality
Agreements
|
20
|
|
2.39
|
Outstanding
Acquisitions
|
20
|
|
2.40
|
Foreign
Private Issuer
|
20
|
|
2.41
|
Investment
Company and PFIC
|
20
|
|
2.42
|
Off-Balance
Sheet Arrangements
|
21
|
|
2.43
|
Board
Approval
|
21
|
|
2.44
|
Brokers
and Finders
|
21
|
|
2.45
|
Fairness
Opinion
|
21
|
|
2.46
|
Restrictions
on Business Activities
|
21
|
|
2.47
|
Books
and Records
|
21
|
|
2.48
|
Minute
Books
|
22
|
|
2.49
|
Debt
|
22
|
|
2.50
|
No
Default Under Lending Agreements
|
22
|
|
2.51
|
Flow
Through Obligations
|
22
|
|
2.52
|
No
Shareholders' Rights Protection Plan
|
22
|
|
2.53
|
Transaction
Costs
|
22
|
|
2.54
|
No
Guarantees or Indemnities
|
23
|
|
2.55
|
Reporting
Issuer Status
|
23
|
|
2.56
|
No
Cease Trade Orders
|
23
|
|
2.57
|
Disclosure
|
23
|
|
ARTICLE
3 REPRESENTATIONS AND WARRANTIES OF GRAN TIERRA
|
24
|
|
|
3.1
|
Organization
and Standing
|
24
|
|
3.2
|
Agreement
Authorized and its Effect on Other Obligations
|
24
|
|
3.3
|
Governmental
and Third Party Consents
|
25
|
|
3.4
|
Capitalization
|
26
|
|
3.5
|
Securities
Reports and Financial Statements
|
26
|
|
3.6
|
Liabilities
|
27
|
|
3.7
|
Information
Supplied
|
27
|
|
3.8
|
No
Defaults
|
28
|
|
3.9
|
Litigation;
Investigations
|
28
|
|
3.10
|
Absence
of Certain Changes and Events
|
28
|
|
3.11
|
Additional
Gran Tierra Information
|
29
|
|
3.12
|
Certain
Agreements
|
30
|
|
3.13
|
Employee
Benefit Plans
|
30
|
|
3.14
|
Intellectual
Property
|
30
|
|
3.15
|
Title
to Properties
|
31
|
-ii-
Table
of Contents
(continued)
|
Page
|
||
|
3.16
|
Environmental
Matters
|
31
|
|
3.17
|
Compliance
With Other Laws
|
32
|
|
3.18
|
Taxes
|
32
|
|
3.19
|
Insurance
|
33
|
|
3.20
|
Indebtedness
to and By Officers, Directors and Others
|
33
|
|
3.21
|
No
Limitation
|
33
|
|
3.22
|
Information
to Independent Engineer
|
34
|
|
3.23
|
No
Insider Rights
|
34
|
|
3.24
|
Petroleum
and Natural Gas Property Interests
|
34
|
|
3.25
|
Title
to Oil and Gas Properties
|
35
|
|
3.26
|
No
Encumbrances
|
35
|
|
3.27
|
Compliance
|
35
|
|
3.28
|
Areas
of Mutual Interest
|
35
|
|
3.29
|
Production
Related Contracts
|
35
|
|
3.30
|
Take
or Pay Obligations
|
35
|
|
3.31
|
No
Defaults Under Leases and Agreements
|
35
|
|
3.32
|
No
Reduction of Interests
|
36
|
|
3.33
|
Royalties,
Rentals and Taxes Paid
|
36
|
|
3.34
|
Production
Allowables and Production Penalties
|
36
|
|
3.35
|
Operation
and Condition of Xxxxx
|
37
|
|
3.36
|
Operation
and Condition of Tangibles
|
37
|
|
3.37
|
Outstanding
AFEs
|
38
|
|
3.38
|
Confidentiality
Agreements
|
38
|
|
3.39
|
Outstanding
Acquisitions
|
38
|
|
3.40
|
Investment
Company
|
38
|
|
3.41
|
Off-Balance
Sheet Arrangements
|
38
|
|
3.42
|
Board
Approval
|
38
|
|
3.43
|
Brokers
and Finders
|
39
|
|
3.44
|
Fairness
Opinion
|
39
|
|
3.45
|
Restrictions
on Business Activities
|
39
|
|
3.46
|
Books
and Records
|
39
|
|
3.47
|
Minute
Books
|
39
|
|
3.48
|
Debt
|
39
|
|
3.49
|
No
Default Under Lending Agreements
|
39
|
|
3.50
|
No
Shareholders' Rights Protection Plan
|
40
|
|
3.51
|
Transaction
Costs
|
40
|
|
3.52
|
No
Guarantees or Indemnities
|
40
|
|
3.53
|
Reporting
Issuer Status
|
40
|
|
3.54
|
No
Cease Trade Orders
|
40
|
|
3.55
|
Disclosure
|
40
|
-iii-
Table
of Contents
(continued)
|
Page
|
||
|
ARTICLE
4 REPRESENTATIONS AND WARRANTIES OF GRAN TIERRA AND GRAN TIERRA
EXCHANGECO
|
41
|
|
|
4.1
|
Organization
and Standing
|
41
|
|
4.2
|
Agreement
Authorized and its Effect on Other Obligations
|
41
|
| ARTICLE 5 OBLIGATIONS PENDING EFFECTIVE DATE |
42
|
|
|
5.1
|
Agreements
of Gran Tierra and Solana
|
42
|
|
5.2
|
Additional
Agreements of Solana
|
43
|
|
5.3
|
Additional
Agreements of Gran Tierra
|
51
|
|
5.4
|
Public
Announcements
|
55
|
|
5.5
|
Comfort
Letters
|
56
|
|
ARTICLE
6 CONDITIONS PRECEDENT TO OBLIGATIONS
|
56
|
|
|
6.1
|
Conditions
Precedent to Obligations of Each Party
|
56
|
|
6.2
|
Conditions
Precedent to Obligations of Solana
|
58
|
|
6.3
|
Conditions
Precedent to Obligations of Gran Tierra
|
59
|
|
6.4
|
Satisfaction
of Conditions
|
60
|
|
ARTICLE
7 TERMINATION
|
60
|
|
|
7.1
|
Termination
|
60
|
|
7.2
|
Notice
of Termination
|
61
|
|
7.3
|
Effect
of Termination
|
61
|
|
7.4
|
Termination
Fee
|
62
|
|
ARTICLE
8 ADDITIONAL AGREEMENTS
|
63
|
|
|
8.1
|
Meetings
|
63
|
|
8.2
|
The
Closing
|
63
|
|
8.3
|
Ancillary
Documents/Reservation of Shares
|
63
|
|
8.4
|
Indemnification
and Related Matters
|
64
|
|
ARTICLE
9 AMENDMENT
|
65
|
|
|
9.1
|
Amendment
of Agreement
|
65
|
|
9.2
|
Amendment
of Plan of Arrangement
|
66
|
|
ARTICLE
10 PRIVACY MATTERS
|
66
|
|
|
10.1
|
Privacy
Issues
|
66
|
|
ARTICLE
11 MISCELLANEOUS
|
68
|
|
|
11.1
|
No
Survival of Representations and Warranties
|
68
|
|
11.2
|
Notices
|
68
|
-iv-
Table
of Contents
(continued)
|
Page
|
||
|
11.3
|
Interpretation
|
70
|
|
11.4
|
Severability
|
70
|
|
11.5
|
Counterparts
|
70
|
|
11.6
|
Miscellaneous
|
71
|
|
11.7
|
Governing
Law
|
71
|
|
11.8
|
Expenses
|
71
|
|
11.9
|
Further
Assurances
|
71
|
-v-
Key
to Location of Defined Terms
|
Page
|
|
|
“ABCA”
|
2
|
|
“Agreement”
|
1
|
|
“AIM”
|
8
|
|
“Applicable
Environmental Laws”
|
13
|
|
“Arrangement”
|
2
|
|
“Articles
of Arrangement”
|
2
|
|
“Closing”
|
63
|
|
“Commissions”
|
7
|
|
“Confidentiality
Agreement”
|
20
|
|
“Court”
|
1
|
|
“dollars”
or “$”
|
4
|
|
“Effective
Date”
|
2
|
|
“Effective
Time”
|
56
|
|
“Encumbrance”
|
6
|
|
“Exchangeable
Shares”
|
3
|
|
“Exchange
Act”
|
3
|
|
“Final
Order”
|
2
|
|
“Governmental
Entity”
|
7
|
|
“Gran
Tierra Comfort Letter”
|
56
|
|
“Gran
Tierra Common Stock”
|
26
|
|
"Gran
Tierra's Debt"
|
39
|
|
“Gran
Tierra Disclosure Letter”
|
24
|
|
“Gran
Tierra Employment Agreements”
|
29
|
|
“Gran
Tierra Exchangeco”
|
1
|
|
“Gran
Tierra Fairness Opinion”
|
39
|
|
“Gran
Tierra Intellectual Property”
|
30
|
|
"Gran
Tierra Interests"
|
34
|
|
"Gran
Tierra Permitted Encumbrances"
|
34
|
|
“Gran
Tierra Plans”
|
30
|
|
“Gran
Tierra Preferred Stock”
|
26
|
|
“Gran
Tierra Colombia Reserve Report”
|
34
|
|
“Gran
Tierra Securities Reports”
|
26
|
|
“Gran
Tierra Special Voting Stock”
|
26
|
|
“Gran
Tierra Stockholders Meeting”
|
3
|
|
“Gran
Tierra Subsidiaries”
|
24
|
|
“Gran
Tierra Warrants”
|
3
|
|
“Indemnified
Party”
|
64
|
|
“Interim
Order”
|
2
|
|
“Joint
Proxy Statement”
|
3
|
|
“Material
Adverse Change”
|
4
|
|
“Material
Adverse Effect”
|
4
|
|
“Personal
Information”
|
67
|
|
“Plan
of Arrangement”
|
2
|
|
“Pre-Closing
Period”
|
43
|
-i-
Key
to Location of Defined Terms
(continued)
|
Page
|
|
|
“Registration
Statement”
|
3
|
|
“SEC”
|
2
|
|
“SEC
Filings”
|
7
|
|
“Securities
Act”
|
3
|
|
“Solana”
|
1
|
|
“Solana
Acquisition Proposal”
|
48
|
|
“Solana
Columbia”
|
5
|
|
“Solana
Comfort Letter”
|
56
|
|
“Solana
Common Shares”
|
7
|
|
“Solana's
Debt
|
22
|
|
“Solana
Disclosure Letter”
|
5
|
|
"Solana
Documents of Title"
|
17
|
|
“Solana
Employment Agreements”
|
10
|
|
“Solana
Fairness Opinion”
|
21
|
|
“Solana
Intellectual Property”
|
12
|
|
"Solana
Interests"
|
16
|
|
“Solana
Options”
|
2
|
|
"Solana
Permitted Encumbrances"
|
16
|
|
“Solana
Plans”
|
12
|
|
“Solana
Representatives”
|
45
|
|
“Solana
Reserve Report”
|
15
|
|
“Solana
Shareholders”
|
1
|
|
“Solana
Securities Reports”
|
8
|
|
“Solana
Securityholders Meeting”
|
3
|
|
“Solana
Subsidiaries”
|
5
|
|
“Solana
Superior Proposal”
|
46
|
|
“Solana
Warrants”
|
2
|
|
61
|
|
|
“TSX”
|
7
|
-ii-
Gran
Tierra Energy Inc.,
a
Nevada corporation (hereinafter referred to as “Gran
Tierra”)
-
and
–
-
and
–
Gran
Tierra Exchangeco Inc.
(“Gran
Tierra Exchangeco”),
an
Alberta corporation and a wholly-owned subsidiary of Gran Tierra Callco
ULC
Recitals
Whereas:
A. The
respective boards of directors of Gran Tierra, Solana and Gran Tierra Exchangeco
each deem it advisable and in the best interests of their respective
stockholders and shareholders to combine their respective businesses by Gran
Tierra Exchangeco acquiring common shares of Solana pursuant to the Plan of
Arrangement (as hereinafter defined), subject to the terms and conditions
contained herein.
B. In
furtherance of such combination, the respective boards of directors of Gran
Tierra, Solana and Gran Tierra Exchangeco have approved the transactions
contemplated by this Agreement, the board of directors of Solana has agreed
to
submit the Plan of Arrangement and the other transactions contemplated hereby
to
its shareholders (the “Solana
Shareholders”),
warrantholders and optionholders (the warrantholders and optionholders, together
with the Solana Shareholders, “Solana Securityholders”)
and
the Court of Queen’s Bench of Alberta (the “Court”)
for
approval, and the board of directors of Gran Tierra has agreed to submit the
issuance of the shares of Gran Tierra Common Stock (as hereinafter defined)
issuable in connection with the transactions contemplated by this Agreement
and
the Plan of Arrangement, to its stockholders for approval.
Now,
Therefore,
in
consideration of the premises and of the representations, warranties, covenants
and agreements herein contained, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE
1
GENERAL
1.
1.1 Plan
of Arrangement
As
promptly as practicable after the preliminary Joint Proxy Statement (as
hereinafter defined) is cleared by the U.S. Securities and Exchange Commission
(the “SEC”),
Solana
will apply to the Court pursuant to Section 193 of the Business
Corporations Act
(Alberta), as amended, (the “ABCA”)
for an
interim order of the Court under Subsection 193(4) of the ABCA containing
declarations and directions with respect to the Arrangement (as hereinafter
defined), in form and substance reasonably satisfactory to Gran Tierra (such
order as it may be affirmed, amended or modified by the Court, the “Interim
Order”)
providing for, among other things, the calling and holding of the Solana
Securityholders Meeting (as hereinafter defined) for the purpose of considering
and, if deemed advisable, approving the arrangement (the “Arrangement”)
pursuant to Section 193 of the ABCA and pursuant to this Agreement and the
Plan
of Arrangement substantially in the form of Exhibit
A
(as
amended or supplemented from time to time in accordance with Article
6
thereof,
the “Plan
of Arrangement”).
If the
Solana Securityholders approve the Arrangement and all necessary approvals
of
Gran Tierra stockholders are obtained, Solana will take the necessary steps
to
submit the Arrangement to the Court and apply for a final order of the Court
approving the Arrangement pursuant to Subsection 193(9)(a) of the ABCA, in
form
and substance reasonably satisfactory to Gran Tierra (such order as it may
be
affirmed, amended or modified by the Court, (the “Final
Order”).
Upon
issuance of the Final Order and subject to satisfaction or waiver (in respect
of
those conditions that can be waived) of the conditions precedent in Article
6,
each of Gran Tierra and Gran Tierra Exchangeco on the one hand and Solana on
the
other hand shall execute and deliver such closing documents and instruments
and
forthwith proceed to file the articles of arrangement in respect of the
Arrangement required under Subsection 193(10) of the ABCA to be sent to the
Registrar after the Final Order has been granted (the date of such filing,
the
“Effective
Date”),
giving
effect to the Arrangement (the “Articles
of Arrangement”),
the
Final Order and such other documents as may be required to give effect to the
Arrangement with the Registrar pursuant to Subsection 193(9) of the ABCA,
whereupon the transactions comprising the Arrangement shall occur (the time
of
such filing, the “Effective
Time”)
and
shall be deemed to have occurred in the order set out therein without any
further act or formality.
1.2 Adjustments
to Exchange Ratio
The
Exchange Ratio (as defined in the Plan of Arrangement) shall be adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Gran
Tierra Common Stock or Solana Common Shares (as hereinafter defined)), merger,
reorganization, recapitalization or other like change with respect to Gran
Tierra Common Stock or Solana Common Shares occurring after the date hereof
and
prior to the Effective Time.
1.3 Dissenting
Shares
Holders
of Solana Common Shares will have rights of dissent with respect to such shares
in connection with the Arrangement pursuant to and in the manner set forth
in
Section 191 of the ABCA, as modified by Article 4 of the Plan of Arrangement.
Holders of options (“Solana
Options”)
and
warrants (“Solana
Warrants”)
to
acquire Solana Common Shares will not have rights of dissent with respect to
such securities in connection with the Arrangement. Solana shall give Gran
Tierra (i) prompt notice of any written demands of a right of dissent,
withdrawals of such demands, and any other instruments served pursuant to the
ABCA and received by Solana, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such rights. Without the prior
written consent of Gran Tierra, except as required by applicable law, Solana
shall not make any payment with respect to any such rights or offer to settle
or
settle any such rights.
2.
1.4 Joint
Proxy Statement; Registration Statement
a. As
promptly as practicable after execution of this Agreement, Gran Tierra and
Solana shall prepare and Gran Tierra shall file with the SEC a preliminary
joint
management information circular and proxy statement (the “Joint
Proxy Statement”),
together with any other documents required by the Securities Act of 1933, as
amended (the “Securities
Act”),
or the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
in
connection with the Arrangement and the other transactions contemplated hereby.
The Joint Proxy Statement shall constitute (i) the management information
circular of Solana with respect to the meeting of Solana Securityholders
relating to the Arrangement and the approval of certain matters in connection
therewith (the “Solana
Securityholders Meeting”),
and
(ii) the proxy statement of Gran Tierra with respect to the meeting of
stockholders of Gran Tierra with respect to the issuance of Gran Tierra Common
Stock from time to time after the Effective Time in connection with the
transactions contemplated by this Agreement and the Plan of Arrangement (the
“Gran
Tierra Stockholders Meeting”).
As
promptly as practicable after the preliminary Joint Proxy Statement is cleared
by the SEC and, if required by the SEC, after the Registration Statement is
declared effective and subject to receipt of the Interim Order, Gran Tierra
and
Solana shall cause the Joint Proxy Statement to be mailed to each company’s
respective securityholders entitled to vote, as the case may be. As promptly
as
practicable after execution of this Agreement, Gran Tierra shall file a
registration statement (the “Registration
Statement”)
with
the SEC to register the issuance of the Gran Tierra Common Stock to be issued
from time to time after the Effective Time upon the exchange of the exchangeable
shares to be issued by Gran Tierra Exchangeco as contemplated by the Plan of
Arrangement (the “Exchangeable
Shares”)
and the
exercise of the Solana Warrants which shall by their terms upon the Effective
Date become automatically exercisable into Gran Tierra Common Stock (the
“Gran
Tierra Warrants”),
if
such offering may be included on the Registration Statement. Gran Tierra and
Solana shall use their commercially reasonable efforts to cause the Registration
Statement to become effective. If the Registration Statement is filed and
becomes effective, Gran Tierra will use its commercially reasonable efforts
to
maintain the effectiveness of the Registration Statement for so long as any
Exchangeable Shares or Gran Tierra Warrants remain outstanding or until such
earlier time as Gran Tierra determines that the securities covered by such
Registration Statement have been sold, or may be sold without volume
restrictions pursuant to Rule 144, as determined by the counsel to Gran Tierra
pursuant to a written opinion letter to such effect, addressed and acceptable
to
Gran Tierra’s transfer agent.
b. Each
party shall promptly furnish to the other parties all information concerning
such party and its securityholders as may be reasonably required in connection
with any action contemplated by this Section 1.4. The Joint Proxy Statement
and
the Registration Statement shall comply in all material respects with all
applicable requirements of law. Each of Gran Tierra and Solana will notify
the
other promptly of the receipt of any comments from the SEC and of any request
by
the SEC for amendments or supplements to the Joint Proxy Statement or the
Registration Statement, or for additional information, and will supply the
other
with copies of all correspondence with the SEC with respect to the Joint Proxy
Statement or the Registration Statement. Whenever any event occurs which should
be set forth in an amendment or supplement to the Joint Proxy Statement or
the
Registration Statement, Gran Tierra or Solana, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC, and/or mailing to securityholders entitled to vote of Gran Tierra and
Solana, as may be applicable, such amendment or supplement.
3.
c. Gran
Tierra and Solana shall take any action required to be taken under any
applicable provincial or state securities laws (including “blue sky” laws) in
connection with the issuance of the Gran Tierra Common Stock and the
Arrangement; provided, however, that with respect to the blue sky and Canadian
provincial qualifications, neither Gran Tierra nor Solana shall be required
to
register or qualify as a foreign corporation or reporting issuer where any
such
entity is not now so registered or qualified except as to matters and
transactions arising solely from the offer and sale of the Gran Tierra Common
Stock or the issuance of the Exchangeable Shares.
1.5 Material
Adverse Effect or Material Adverse Change
In
this
Agreement, the term “Material
Adverse Effect”
or
“Material
Adverse Change”
used
with respect to any party means any matter or action that has an effect or
change that is, or could reasonably be expected to be, material and adverse
to
the business, operations, assets, capitalization, financial condition or
prospects of such party and subsidiaries, taken as a whole, but excluding any
matter, action, effect or change occurring after the date of this Agreement
relating to or resulting from: (i) general economic, financial, currency
exchange, securities or commodity prices in Canada, the United States or
elsewhere, (ii) conditions affecting the oil and gas exploration,
exploitation, development and production industry as a whole, and not
specifically relating to any party or its respective subsidiaries (in the case
of Solana, the “Solana
Subsidiaries”)
and
(in the case of Gran Tierra, the
“Gran
Tierra Subsidiaries”),
including changes in laws (including tax laws) and royalties, (iii) any decline
in crude oil or natural gas prices on a current or forward basis, (iv) any
matter which has been publicly disclosed or has been communicated in writing
to
the other party as of the date hereof,
(v)
the
results of any well commenced or completed by Gran Tierra or Solana, as the
case
may be, after the date hereof (it being the intention of the parties that a
determination that any one or more xxxxx completed or commenced after the date
hereof (provided that the capital expenditures relating to such xxxxx have
been
included in such party’s 2008 capital budget previously provided to the other
party) is not capable of commercial production shall not be considered to be
a
Material Adverse Change for the purposes of this Agreement or the Arrangement),
or (vi) matters permitted by this Agreement, the Solana Disclosure Letter (as
hereinafter defined), the Gran Tierra Disclosure Letter (as hereinafter defined)
or consented to or approved in writing by the other party.
1.6 Currency
Unless
otherwise specified, all references in this Agreement to “dollars”
or
“$”
shall
mean United States dollars.
4.
1.7 Exhibits
The
following Exhibits attached hereto are incorporated herein by
reference:
| a. |
Exhibit
A - Plan of Arrangement;
|
| b. |
Exhibit
B - Support Agreement;
|
| c. |
Exhibit
C - Voting and Exchange Trust Agreement; and
|
| d. |
Exhibit
D – Form of Non-Solicitation
Agreement.
|
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF SOLANA
Except
as
set forth in a letter dated the date of this Agreement and delivered by Solana
to Gran Tierra concurrently herewith (the “Solana
Disclosure Letter”),
Solana
hereby represents and warrants to, and agrees with, Gran Tierra
that:
2.1 Organization
and Standing
a. Solana
and each body corporate, partnership, joint venture, association or other
business entity of which more than 50% of the total voting power of shares
of
stock or units of ownership or beneficial interest entitled to vote in the
election of directors (or members of a comparable governing body) is owned
or
controlled, directly or indirectly, by Solana (the “Solana
Subsidiaries”),
is an
entity duly organized, validly existing and in good standing under the laws
of
the jurisdiction of its incorporation or organization, has full requisite power
and authority to carry on its business as it is currently conducted, and to
own,
lease and operate the properties currently owned, leased and operated by it,
and
is duly qualified or licensed to do business and is in good standing as a
foreign corporation or organization authorized to do business in all
jurisdictions in which the character of the properties owned or leased or the
nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not reasonably be expected to have a Material Adverse Effect on Solana.
The Solana Disclosure Letter sets forth a complete list, as at the date hereof,
of the Solana Subsidiaries and the percentage of each subsidiary’s outstanding
capital stock or other ownership interest owned by Solana or any Solana
Subsidiary. Except as set forth in the Solana Disclosure Letter, neither Solana
nor any Solana Subsidiary owns any debt or equity interests in any entity other
than the Solana Subsidiaries.
b. No
Solana
Subsidiary has total assets which constitute more than 5% of the consolidated
assets of Solana as at March 31, 2008, or the total revenues of which constitute
more than 5% of the consolidated revenues of Solana for the three month period
ended March 31, 2008, other than the Colombian branch of Solana Petroleum
Exploration (Colombia) Limited (“Solana
Colombia”).
As of
the date hereof, Solana is the beneficial direct or indirect owner of all of
the
outstanding shares, trust units and partnership units, as applicable, of the
Solana Subsidiaries with good title thereto free and clear of any and all
encumbrances. There are no options, warrants or other rights, shareholder or
unitholder rights plans, agreements or commitments of any character whatsoever
requiring the issuance, sale or transfer by any of the Solana Subsidiaries
of
any securities of the Solana Subsidiaries or any securities convertible into,
or
exchangeable or exercisable for, or otherwise evidencing a right to acquire,
any
securities of the Solana Subsidiaries. All outstanding securities of the Solana
Subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable and are not subject to, nor were they issued in violation of,
any
pre-emptive rights.
5.
2.2 Agreement
Authorized and its Effect on Other Obligations
a. Solana
has all requisite corporate power and authority to enter into this Agreement
and
to perform its obligations hereunder and, subject to approval of the Solana
Securityholders and the Court as provided in this Agreement, to consummate
the
Arrangement and the other transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Solana and, subject to approval
of
the Solana Securityholders and the Court as provided in this Agreement, the
consummation by Solana of the Arrangement and the other transactions
contemplated hereby have been unanimously approved by the Solana Board of
Directors and have been duly authorized by all other necessary corporate action
on the part of Solana. This Agreement has been duly executed and delivered
by
Solana and is a valid and binding obligation of Solana, enforceable in
accordance with its terms, except that such enforceability may be subject to
(i) bankruptcy, insolvency, reorganization or other similar laws affecting
or relating to enforcement of creditors’ rights generally, (ii) general
equitable principles, and (iii) that the consummation of the Arrangement is
subject to approval of the Solana Securityholders and the Court as provided
in
this Agreement.
b. Neither
the execution, delivery or performance of this Agreement or the Arrangement
by
Solana, nor the consummation of the transactions contemplated hereby or thereby
by Solana nor compliance with the provisions hereof or thereof by Solana will:
(i) conflict with, or result in any violations of, the articles of
incorporation or bylaws of Solana or any equivalent document of any of the
Solana Subsidiaries, (ii) result in any breach of or cause a default (with
or without notice or lapse of time, or both) under, (iii) give rise to a
right of termination, amendment, cancellation or acceleration of any obligation
contained in, or the loss of any material benefit or the incurrence of any
material cost (including, but not limited to, seismic data transfer fees) under,
or (iv) result in the creation of any lien, charge, mortgage, adverse claim,
hypothec, pledge, warrant, lease, sublease, encumbrance, right to possession,
security interest, option, preferential purchase right or other right or
interest of any other person (collectively, an “Encumbrance”)
upon
any of the material properties or assets of Solana or any of the Solana
Subsidiaries under, any term, condition or provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Solana
or any of the Solana Subsidiaries or their respective properties or assets,
other than any such breaches, defaults, rights, losses, or Encumbrances which,
individually or in the aggregate, would not reasonably be expected to have
a
Material Adverse Effect on Solana.
6.
2.3 Governmental
and Third Party Consents
a. No
consent, approval, order or authorization of, or registration, declaration
or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (each a “Governmental
Entity”),
is
required to be obtained by Solana or any of the Solana Subsidiaries in
connection with the execution and delivery of this Agreement or the Plan of
Arrangement or the consummation of the transactions contemplated hereby or
thereby, except for: (i) the filing with the applicable Canadian provincial
securities commissions or regulatory authorities (the “Commissions”)
and the
Court and the mailing to the Solana Securityholders of the Joint Proxy Statement
relating to the Solana Securityholders Meeting; (ii) the furnishing to the
SEC of such reports and information under the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby (the “SEC
Filings”);
(iii) approval by the Court of the Arrangement and the filings of the
articles of arrangement and other required arrangement or other documents as
required by the ABCA; (iv) such filings, authorizations, orders and
approvals as may be required under state “control share acquisition,”
“anti-takeover” or other similar statutes, any other applicable federal,
provincial or state securities laws and the rules of the AMEX, the Toronto
Stock
Exchange (“TSX”),
the
TSX Venture Exchange or the AIM; (v) such competition and foreign investment
notices and filings with any Governmental Entity as may be necessary, including,
under the Colombian merger control regime; and (vi) where the failure to obtain
such consents, approvals, etc., would not prevent or delay the consummation
of
the Arrangement or otherwise prevent Solana from performing its obligations
under this Agreement and would not reasonably be expected to have a Material
Adverse Effect on Solana.
b. Other
than as contemplated by Section 2.3 (a), no consents, assignments, waivers,
authorizations or other certificates are necessary in connection with the
transactions contemplated hereby to provide for the continuation in full force
and effect of all of Solana’s material contracts or leases or for Solana to
consummate the transactions contemplated hereby, except when the failure to
receive such consents or other certificates would not reasonably be expected
to
have a Material Adverse Effect on Solana.
2.4 Capitalization
7.
b. Other
than as set forth above, as of the date of this Agreement, there are no
outstanding subscriptions, options, warrants, convertible securities, calls,
commitments, agreements or rights (contingent or otherwise) of any character
to
purchase or otherwise acquire from Solana any shares of, or any securities
convertible into, the capital stock of Solana.
c. To
the
knowledge of Solana, neither Solana nor any of the Solana Subsidiaries or their
respective shareholders is a party to any unanimous shareholder agreement,
pooling agreement, voting trust or other similar type of arrangements in respect
of their outstanding securities.
2.5 Securities
Reports and Financial Statements
a. Solana
has filed, if required, all forms, reports, annual reports, business acquisition
reports and documents with the SEC pursuant to the Securities Act and the
Exchange Act and the rules and regulations thereunder and with the Commissions
pursuant to relevant Canadian securities statutes, regulations, policies and
rules and filed all forms, reports, annual reports, business acquisition reports
and documents with the Alternative Investment Market of the London Stock
Exchange plc (the “AIM”)
and the
TSX Venture Exchange required to be filed by it pursuant the relevant
regulations, policies and rules (collectively, the “Solana
Securities Reports”),
all of
which have complied in all material respects with all applicable requirements
of
such statutes, regulations, policies and rules. None of the Solana Securities
Reports, at the time filed or as subsequently amended, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary to make the statements made therein, in light of
the
circumstances under which they were made, not misleading. No subsidiary of
Solana is required to file any form, report or other document with the SEC
or
the Commissions. The financial statements of Solana contained in the Solana
Canadian Securities Reports complied in all material respects with the then
applicable accounting requirements and the published rules and regulations
of
the relevant Canadian securities statutes with respect thereto, were prepared
in
accordance with Canadian generally accepted accounting principles applied on
a
consistent basis during the periods involved (except as may have been indicated
in the notes thereto or, in the case of unaudited statements, as permitted
by
applicable laws, rules or regulations) and fairly present (subject, in the
case
of the unaudited statements, to normal, year-end audit adjustments) the
consolidated financial position of Solana and its consolidated Solana
Subsidiaries as at the respective dates thereof and the consolidated results
of
their operations and cash flows for the respective periods then
ended.
b. There
has
been no change in Solana’s accounting policies or the methods of making
accounting estimates or changes in estimates that are material to such financial
statements, except as described in the notes thereto.
2.6 Liabilities
Neither
Solana nor any Solana Subsidiary has, and none of Solana or any Solana
Subsidiary is or would reasonably be expected to become responsible for
performing or discharging, any accrued, contingent or other liabilities of
any
nature, either matured or unmatured, that are, individually or in the aggregate,
material to Solana or any Solana Subsidiary, except for: (a) liabilities
reflected or reserved against in financial statements contained in the Solana
Securities Reports; (b) normal and recurring current liabilities that have
been
incurred in the ordinary course of business and consistent with past practices
by Solana or any Solana Subsidiary since the date of the last filed Solana
Securities Report filed on SEDAR; (c) liabilities for performance of obligations
of Solana or any Solana Subsidiary under any contracts by Solana or any Solana
Subsidiary, to the extent such liabilities are readily ascertainable (in nature,
scope and amount) from the written terms of such contracts and such contracts
have been delivered to Gran Tierra; (d) liabilities described in part 2.6 of
the
Disclosure Letter; and (e) liabilities that would not, in the aggregate, have
a
Material Adverse Effect on Solana or any Solana Subsidiary.
8.
2.7 Information
Supplied
None
of
the information supplied or to be supplied by Solana for inclusion or
incorporation by reference in the Joint Proxy Statement (and, if filed, the
Registration Statement) will, at the time the Joint Proxy Statement is mailed
to
the securityholders of Solana and at the time of the Solana Securityholders
Meeting (and, if filed, at the time the Registration Statement is declared
effective), contain any untrue statement which, at the time and in light of
the
circumstances under which it is made, is false or misleading with respect to
any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not false or misleading
or
necessary to correct any statement in any earlier communication with respect
to
the solicitation of a proxy for the same meeting or subject matter which has
become false or misleading. The Joint Proxy Statement will comply as to form
in
all material respects with the provisions of the ABCA, applicable United States
and Canadian securities laws, the rules and policies of the TSX Venture Exchange
and the rules and regulations promulgated thereunder.
2.8 No
Defaults
Neither
Solana nor any Solana Subsidiary is, or has received notice that it would be
with the passage of time, in default or violation of any term, condition or
provision of (a) its articles or bylaws; (b) any judgment, decree or
order applicable to it; or (c) any loan or credit agreement, note, bond,
mortgage, indenture, contract, agreement, lease, license or other instrument
to
which Solana or any Solana Subsidiary is now a party or by which it or any
of
its properties or assets may be bound, except in the case of item (c) for
defaults and violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Solana.
2.9 Litigation;
Investigations
There
is
no claim, action, suit or proceeding pending, or to the knowledge of Solana
threatened against Solana or any of the Solana Subsidiaries, which would, if
adversely determined, individually or in the aggregate, have a Material Adverse
Effect on Solana, nor is there any judgment, decree, injunction, rule or order
of any Governmental Entity or arbitrator outstanding against Solana or any
of
the Solana Subsidiaries having, or which, insofar as reasonably can be foreseen,
in the future could have, any such effect. There is no investigation pending
or,
to the knowledge of Solana, threatened, against Solana or any of the Solana
Subsidiaries before any Governmental Entity which could have such
effect.
9.
2.10 Absence
of Certain Changes and Events
a. Since
March 31, 2008, there has not been:
i. Any
Material Adverse Effect on Solana;
ii. Any
material damage, destruction, or loss to the business or properties of Solana
and the Solana Subsidiaries, taken as a whole, not covered by
insurance;
iii. Any
declaration, setting aside or payment of any dividend or other distribution
in
respect of the capital stock of Solana, or any direct or indirect redemption,
purchase or any other acquisition by Solana of any such stock;
iv. Any
material labor dispute or charge of unfair labor practice (other than routine
individual grievances) or, to the knowledge of Solana, any activity or
proceeding by a labor organizer or union or by a representative thereof to
organize any employees of Solana or any Solana Subsidiary or any campaign being
conducted to solicit authorization from employees to be represented by such
labor union; or
v. Any
other
event or condition known to Solana particularly pertaining to and adversely
affecting the operations, assets or business of Solana or any of the Solana
Subsidiaries (other than events or conditions which are of a general or
industry-wide nature and of general public knowledge) which would constitute
a
Material Adverse Effect on Solana.
b. Since
July 1, 2008, there has not been any change in the capital stock or in the
number of shares or classes of Solana’s authorized or outstanding capital stock
as described in Section 2.4 (other than as a result of exercises of Solana
Options and Solana Warrants described in Section 2.4 (a)).
2.11 Additional
Solana Information
The
Solana Disclosure Letter contains true, complete and correct lists of the
following items with respect to Solana and each of the Solana Subsidiaries,
and
Solana has previously furnished or made available to Gran Tierra true, complete
and correct copies of all documents referred to in such lists:
a. All
contracts which involve, or may involve, aggregate payments by any party thereto
of $1,000,000 or more, which payments or obligations are to be performed in
whole or in part after the Effective Time and which are not cancellable or
terminable by Solana without payment or penalty in excess of
$500,000;
b. All
option, bonus, incentive compensation, deferred compensation, employment
agreements, profit-sharing, retirement, pension, welfare, group insurance,
death
benefit, or other fringe benefit plans, arrangements or trust agreements
(collectively, “Solana
Employment Agreements”);
c. All
material patents, trademarks, copyrights and other intellectual property rights
owned, licensed or used and all applications therefor;
10.
d. All
material trade names and fictitious names used or held, whether and where such
names are registered and where used;
e. All
obligations or liabilities, direct or indirect, vested or contingent in respect
of any rate swap transactions, basis swaps, forward rate transactions, commodity
swaps, xxxxxx, commodity options, equity or equity index swaps, equity or equity
index options, bond options, interest rate options, foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transactions, currency
options, production sales transactions having terms greater than 90 days or
any
other similar transactions (including any option with respect to any of such
transactions) or any combination of such transactions;
f. All
material long-term and short-term promissory notes, installment contracts,
loan
agreements, credit agreements, operating and finance leases, and any other
material agreements relating thereto or with respect to collateral securing
the
same;
g. All
material indebtedness, liabilities and commitments of third parties (other
than
Solana Subsidiaries) and as to which it is a guarantor, endorser, co-maker,
surety or accommodation maker, or is contingently liable therefor (excluding
liabilities as an endorser of cheques and the like in the ordinary course of
business) or has otherwise provided any form of financial assistance and all
letters of credit in excess of $300,000, whether stand-by or documentary, issued
by any third party; and
h. All
Encumbrances.
2.12 Certain
Agreements
Except
for the Solana employment agreements disclosed under Section 2.11 (b), neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (a) result in any payment (including
severance, unemployment compensation, parachute payment, bonus, retention,
termination or otherwise) becoming due to any director, employee or independent
contractor of Solana or any of the Solana Subsidiaries under any Solana Plan
(as
defined in Section 2.13) or otherwise; (b) materially increase any benefits
otherwise payable under any Solana Plan or otherwise; or (c) result in the
acceleration of the time of payment or vesting of any such benefits. Upon
completion of the Arrangement, the aggregate amount payable pursuant to (a)
above will not exceed $1.5 million.
11.
2.13 Employee
Benefit Plans
2.14 Intellectual
Property
Solana
or
the Solana Subsidiaries own or possess licenses to use all patents, patent
applications, trademarks and service marks (including registrations and
applications therefor), trade names, copyrights and written know-how, trade
secrets and all other similar proprietary data and the goodwill associated
therewith (collectively, the “Solana
Intellectual Property”)
that
are either material to the business of Solana or any Solana Subsidiary or that
are necessary for the manufacture, use, license or sale of any services or
products manufactured, used, licensed or sold by Solana and the Solana
Subsidiaries. The Solana Intellectual Property is owned or licensed by Solana
or
the Solana Subsidiaries free and clear of any Encumbrance other than such
Encumbrances that would not reasonably be expected to have a Material Adverse
Effect on Solana. Except in the ordinary course of business, neither Solana
nor
any of the Solana Subsidiaries has granted to any other person any license
or
sublicense to use any Solana Intellectual Property. Neither Solana nor any
of
the Solana Subsidiaries has received any notice of infringement,
misappropriation or conflict with, the intellectual property rights of others
in
connection with the use by Solana and the Solana Subsidiaries of the Solana
Intellectual Property.
2.15 Title
to Properties
Except
for the Solana Interests (as hereinafter defined) and for goods and other
property sold, used or otherwise disposed of since March 31, 2008 in the
ordinary course of business for fair value, Solana has good and defensible
title
to all its properties, interests in properties and assets, real and personal,
reflected in its March 31, 2008, financial statements, free and clear of any
Encumbrance, except: (a) Encumbrances reflected in the balance sheet of
Solana as of March 31, 2008 and listed in the Disclosure Letter; (b) liens
for current taxes not yet due and payable; and (c) such imperfections of
title, easements and Encumbrances as would not reasonably be expected to have
a
Material Adverse Effect on Solana. All leases pursuant to which Solana or any
Solana Subsidiary leases (whether as lessee or lessor) any real or personal
property are in good standing, valid, and effective; and there is not, under
any
such leases, any existing or prospective default or event of default or event
which with notice or lapse of time, or both, would constitute a default by
Solana or any Solana Subsidiary which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Solana and in
respect to which Solana or a Solana Subsidiary has not taken adequate steps
to
prevent a default from occurring. The buildings and premises of Solana and
each
of the Solana Subsidiaries that are used in its business are in good operating
condition and repair, subject only to ordinary wear and tear. All major items
of
operating equipment of Solana and the Solana Subsidiaries are in good operating
condition and in a state of reasonable maintenance and repair, ordinary wear
and
tear excepted, and are free from any known defects except as may be repaired
by
routine maintenance and such minor defects as do not substantially interfere
with the continued use thereof in the conduct of normal operations.
12.
2.16 Environmental
Matters
a. There
are
no environmental conditions or circumstances, such as the presence or release
of
any hazardous substance, on any property presently or, to the knowledge of
Solana, previously owned or leased by Solana or any of the Solana Subsidiaries
that could reasonably be expected to result in a Material Adverse Effect on
Solana;
b. Solana
and the Solana Subsidiaries have in full force and effect all material
environmental permits, licenses, approvals and other authorizations required
to
conduct their operations and are operating in material compliance
thereunder;
c. Solana’s
and the Solana Subsidiaries’ operations and the use of their assets do not
violate any applicable Canadian or Colombian federal, provincial or local law,
statute, ordinance, rule, regulation, order or notice requirement pertaining
to
(i) the condition or protection of air, groundwater, surface water, soil,
or other environmental media, (ii) the environment, including natural
resources or any activity which affects the environment or (iii) the
regulation of any pollutants, contaminants, waste or other substances (whether
or not hazardous or toxic), including their use, storage, treatment,
transportation and disposition (collectively the “Applicable
Environmental Laws”),
except
for violations which, either singly or in the aggregate, would not reasonably
be
expected to result in a Material Adverse Effect on Solana;
d. To
the
knowledge of Solana, none of the operations or assets of Solana or any Solana
Subsidiary has ever been conducted or used by Solana or any Solana Subsidiary
in
such a manner as to constitute a violation of any of the Applicable
Environmental Laws, except for violations which, either singly or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect on Solana or have been rectified;
e. No
written notice has been served on Solana or any Solana Subsidiary from any
entity, governmental agency or individual regarding any existing, pending or
threatened investigation or inquiry related to alleged violations under any
Applicable Environmental Laws, or regarding any claims for remedial obligations
or contribution under any Applicable Environmental Laws, or which may require
any material work, repairs, construction or expenditures, other than any of
the
foregoing which, either singly or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on Solana; and
f. Solana
does not know of any reason that would preclude it from renewing or obtaining
a
reissuance of the material permits, licenses or other authorizations required
pursuant to any Applicable Environmental Laws to operate and use any of Solana’s
or the Solana Subsidiaries’ assets for their current purposes and
uses.
13.
2.17 Compliance
With Other Laws
Neither
Solana nor any Solana Subsidiary is in violation of or in default with respect
to, or in alleged violation of or alleged default with respect to any other
applicable law or any applicable rule or regulation, or any writ or decree
of
any court or any Governmental Entity or delinquent with respect to any report
required to be filed with any Governmental Entity, except for violations,
defaults and delinquencies which, either singly or in the aggregate, do not
and
would not reasonably be expected to result in a Material Adverse Effect on
Solana.
2.18 Taxes
a. Except
with respect to failures which, in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on Solana, proper and accurate
federal, provincial, state and local income, capital, withholding, value added,
sales, use, franchise, gross revenue, turnover, excise, payroll, property,
employment, customs duties and any and all other tax returns, reports, and
estimates have been filed with appropriate governmental agencies, domestic
and
foreign, by Solana and each of the Solana Subsidiaries for each period for
which
any returns, reports, or estimates were due (taking into account any extensions
of time to file before the date hereof); all taxes shown by such returns to
be
payable and any other taxes due and payable have been paid other than those
being contested in good faith by Solana or a Solana Subsidiary; and the tax
provision reflected in Solana’s financial statements is adequate, in accordance
with Canadian or United States (if applicable) generally accepted accounting
principles, to cover liabilities of Solana and the Solana Subsidiaries for
all
taxes, including any interest, penalties and additions to taxes of any character
whatsoever applicable to Solana and the Solana Subsidiaries or their assets
or
businesses.
b. No
waiver
of any statute of limitations executed by Solana or a Solana Subsidiary with
respect to any tax is in effect for any period.
c. Neither
Solana nor any Solana Subsidiary has received any notice of reassessment from
the Canada Revenue Agency or the Alberta Tax and Revenue Administration, or
any
tax authority in Colombia, the Cayman Islands or any other jurisdiction that
could reasonably be expected to result in a Material Adverse Effect on Solana.
d. There
are
no tax liens on any assets of Solana or the Solana Subsidiaries except for
taxes
not yet currently due and those which could not reasonably be expected to result
in a Material Adverse Effect on Solana.
e. Solana
and the Solana Subsidiaries have withheld from each payment made to any of
its
present or former employees, officers and directors, and to all persons who
are
non-residents of Canada for the purposes of the Tax Act, all amounts required
by
law or as required in accordance with published administrative practice of
the
Canada Revenue Agency and will continue to do so until the Effective Time and
have remitted withheld amounts within the prescribed periods to the appropriate
governmental agencies. All Canada Pension Plan contributions, Employment
Insurance premiums, employer health taxes and other taxes payable by Solana
and
the Solana Subsidiaries in respect of employees have been or will be paid to
the
proper governmental agencies within the time required by law. Solana and the
Solana Subsidiaries have charged, collected and remitted on a timely basis
all
taxes as required by applicable law on any sale, supply or delivery whatsoever
made by them.
14.
f. None
of
sections 78, 80, 80.01, 80.02, 80.03 or 80.04 of the Tax Act, or any equivalent
provision of the tax legislation of any province or any other jurisdiction,
have
applied or will apply to Solana or the Solana Subsidiaries at any time up to
and
including the Effective Time.
g. No
meetings of the Solana Colombia Board of Directors have ever occurred in Canada.
At no time since the incorporation of Solana Colombia have the majority of
its
directors been Canadian resident, nor have any written resolutions of its Board
of Directors been executed by a majority of the signatories in Canada. The
business and operations of Solana Colombia have been managed, since its
incorporation, from outside of Canada.
2.19 Insurance
Policies
of insurance are in force as of the date hereof naming Solana as an insured
that
adequately cover all risks as are customarily covered by oil and gas producers
in the industry in which Solana operates. All such policies shall remain in
force and effect and shall not be cancelled or otherwise terminated as a result
of the transactions contemplated by this Agreement.
2.20 Indebtedness
to and by Officers, Directors and Others
Solana
is
not indebted to any of the directors, officers, employees or consultants or
any
of their respective associates or affiliates or other parties not at arm’s
length to Solana, except for amounts due as normal compensation or reimbursement
of ordinary business expenses, nor is there any indebtedness owing by any such
parties to Solana.
2.21 No
Limitation
There
is
no non-competition, exclusivity or other similar agreement, commitment or
understanding in place to which Solana is a party or by which it is otherwise
bound that would now or hereafter in any way limit the business or operations
of
Solana in a particular manner or to a particular locality or geographic region
or for a limited period of time (including, for greater certainty, following
the
completion of the Arrangement), and the execution, delivery and performance
of
this Agreement does not and will not result in the restriction of Solana from
engaging in this business or from competing with any person or in any geographic
area.
2.22 Information
to Independent Engineer
Solana
has no reason to believe that the report prepared by XxXxxxxx and XxxXxxxxxxx
Canada Limited dated April 10, 2008 and effective as at December 31, 2007,
evaluating the crude oil, natural gas liquids and natural gas reserves and
future net production revenues attributable to the properties of Solana as
of
December 31, 2007 (the “Solana
Reserve Report”)
and, if
applicable, any updates to such report or any other reserve evaluation reports
which may be, or be deemed to be, included or incorporated by reference in
the
Solana Joint Proxy Statement, whether in addition to or as a replacement to
the
Solana Reserve Report, was not accurate in all material respects as at the
effective date of such report and, except for any impact of changes in commodity
prices, which may or may not be material, Solana has no knowledge of a Material
Adverse Change in the production, costs, price, reserves, estimates of future
net production revenues or other relevant information from that disclosed in
that report. Solana has provided to XxXxxxxx and XxxXxxxxxxx Canada Limited
all
material information concerning land descriptions, well data, facilities and
infrastructure, ownership and operations, future development plans and
historical technical and operating data respecting the principal oil and gas
assets of Solana, in each case as at the effective dates of such reports and,
in
particular, all material information respecting the interests of Solana in
its
principal oil and gas assets and royalty burdens and net profits interest
burdens thereon and such information was accurate and correct in all material
respects as at the respective dates thereof and did not omit any information
necessary to make any such information provided not misleading as at the
respective dates thereof and there has been no Material Adverse Change in any
of
the material information so provided since the date thereof.
15.
2.23 No
Insider Rights
No
director, officer, insider or other party not at arm’s length to Solana has any
right, title or interest in (or the right to acquire any right, title or
interest in) any royalty interest, participation interest or any other interest
whatsoever, in any properties of Solana.
2.24 Petroleum
and Natural Gas Property Interests
Other
than Solana Permitted Encumbrances (as hereinafter defined) and security
obligations with respect to its bank indebtedness, all of the interests of
each
of Solana and each of the Solana Subsidiaries in its petroleum and natural
gas
rights and leases and all related tangibles, equipment, facilities and
miscellaneous interests (collectively, the "Solana
Interests")
are
free and clear of Encumbrances created by, through or under Solana or the Solana
Subsidiaries, except as disclosed in the Solana Financial Statements or those
arising in the ordinary course of business and that would not reasonably
be expected to have
a
Material Adverse Effect on Solana and, to its knowledge, each of Solana and
each
of the Solana Subsidiaries holds the Solana Interests under valid and subsisting
licenses, leases, permits, concessions, concession agreements, contracts,
subleases, reservations or other agreements except where the failure to so
hold
the Solana Interests would not reasonably be expected to have a Material Adverse
Effect on Solana. "Solana
Permitted Encumbrances"
means:
(a) the terms and conditions of the Solana Documents of Title (as hereinafter
defined), including the following: (i) any overriding royalties, net profits
interests or other encumbrances applicable to the Solana Interests, (ii) any
existing potential alteration of the Solana Interests because of a payout
conversion or farm-in, farm-out or other such agreement, and (iii) any penalty
or forfeiture that applies to the Solana Interests at the date hereof because
of
Solana's election not to participate in a particular operation; (b) easements,
rights of way, servitudes or other similar rights, including, without
limitation, rights of way for highways, railways, sewers, drains, gas or oil
pipelines, gas or water mains, electric light, power, telephone or cable
television towers, poles, and wires; (c) the regulations and any rights reserved
to or vested in any municipality or governmental, statutory or public authority
to levy taxes or to control or regulate any of Solana's assets in any manner,
including, without limitation, the right to control or regulate production
rates
and the conduct of operations; (d) statutory exceptions to title and the
reservations, limitations and conditions in any grants or transfers from the
Crown of any of the Solana Interests or interests therein; (e) undetermined
or
inchoate liens incurred or created in the ordinary course of business as
security for Solana's share of the costs and expenses of the development or
operation of any of its assets, which costs and expenses are not delinquent
as
of the Effective Time; (f) undetermined or inchoate mechanics' liens and similar
liens for which payment for services rendered or goods supplied is not
delinquent as of the Effective Time; and (g) liens granted in the ordinary
course of business to a public entity, municipality or governmental authority
respecting operations pertaining to any of Solana's assets. "Solana
Documents of Title"
means,
collectively, any and all certificates of title, leases, permits, licences,
unit
agreements, assignments, trust declarations, royalty agreements, operating
agreements or procedures, participation agreements, farm-in and farm-out
agreements, sale and purchase agreements, pooling agreements and other
agreements by virtue of which Solana's or any of the Solana Subsidiary's title
to and interest in its oil and gas assets are derived.
16.
2.25 Title
to Oil and Gas Properties
Although
it does not warrant title, other than Solana Permitted Encumbrances, Solana
is
not aware of any defects, failures or impairments to the title to the Solana
Interests, whether or not an action, suit, proceeding or inquiry is pending
or
threatened and whether or not discovered by any third party, which taken
together, could reasonably be expected to have a Material Adverse Effect on:
(a)
the quantity and pre-tax present worth values of its oil and gas reserves;
(b)
the current production attributable to its properties; or (c) the current cash
flow from such properties.
2.26 No
Encumbrances
Other
than Solana Permitted Encumbrances, neither Solana nor any of the Solana
Subsidiaries has encumbered or alienated its respective interest in the Solana
Interests or agreed to do so and such assets are free and clear of all
encumbrances except for or pursuant to: (i) encumbrances securing Solana's
current credit facility and derivative transactions with the lenders (and other
affiliates) thereunder; or (ii) encumbrances arising in the ordinary course
of
business, which are not material in the aggregate.
2.27 Compliance
To
Solana's knowledge, neither Solana nor any Solana Subsidiary has failed to
comply with, perform, observe or satisfy any term, condition, obligation or
liability which has heretofore arisen under the provisions of any of title
or
operating documents or any other agreements and documents to which the Solana
Interests are subject.
2.28 Areas
of Mutual Interest
Neither
Solana nor any Solana Subsidiary is bound by or subject to active area of mutual
interest covenants.
2.29 Production
Related Contracts
Neither
Solana nor any Solana Subsidiary is a party to or is otherwise bound or affected
by any material: (i) production sales contracts that cannot be terminated on
notice of 31 days or less (without an early termination penalty or other cost);
(ii) gas balancing or similar agreements; (iii) agreements for transportation,
processing or disposal; (iv) agreements for the contract operation by a third
party of any of its assets; and (v) agreements to provide transportation,
processing or disposal capacity or service to any third party which, for (ii)
to
(iv) above, cannot be terminated on notice of 60 days or less.
17.
2.30 Take
or Pay Obligations
Neither
Solana nor any Solana Subsidiary has any take or pay obligations.
2.31 No
Defaults Under Leases and Agreements
a. Solana
has not received notice of any default under any of the leases and other title
and operating documents or any other agreement or instrument pertaining to
the
Solana Interests to which Solana is a party or by or to which Solana or the
Solana Interests are bound or subject except to the extent that such defaults
would not reasonably be expected, in the aggregate, to have a Material Adverse
Effect on Solana.
b. To
Solana’s knowledge:
i. each
of
Solana and the Solana Subsidiaries is in good standing under all, and is not
in
default under any; and
ii. there
is
no existing condition, circumstance or matter which constitutes or which, with
the passage of time or the giving of notice, would constitute a default under
any,
leases
and other title and operating documents or any other agreements and instruments
pertaining to the Solana Interests to which it is a party or by or to which
it
or the Solana Interests are bound or subject and, to their knowledge, all such
leases, title and operating documents and other agreements and instruments
are
in good standing and in full force and effect and none of the counterparties
to
such leases, title and operating documents and other agreements and instruments
is in default thereunder except to the extent that such defaults would not
reasonably be expected, in the aggregate, to have a Material Adverse Effect
on
Solana.
2.32 No
Reduction of Interests
Except
as
is reflected in the Solana Reserve Report, none of the Solana Interests are
subject to reduction by reference to payout of or production penalty on any
well
or otherwise or to change to an interest of any other size or nature by virtue
of or through any right or interest granted by, through or under Solana or
the
Solana Subsidiaries except to the extent that such reduction or change to an
interest would not reasonably be expected, in the aggregate, to have a Material
Adverse Effect on Solana.
2.33 Royalties,
Rentals and Taxes Paid
All
royalties and rentals payable on or before the date hereof under the leases
and
other title and operating documents pertaining to the Solana Interests and
all
ad
valorem,
property, production, severance and similar taxes and assessments based upon
or
measured by the ownership of such assets or the production of petroleum
substances derived therefrom or allocated thereto or the proceeds of sales
thereof payable on or before the date hereof have been properly paid in full
and
in a timely manner except to the extent that such non-payment would not
reasonably be expected, in the aggregate, to have a Material Adverse Effect
on
Solana.
18.
2.34 Production
Allowables and Production Penalties
a. None
of
the xxxxx in which Solana or any Solana Subsidiary holds an interest has
produced in excess of applicable production allowables imposed by any applicable
law or any Governmental Entity and Solana has no knowledge of any impending
change in production allowables imposed by any applicable law or any
Governmental Entity that may be applicable to any of the xxxxx in which it
holds
an interest, other than changes of general application in the jurisdiction
in
which such xxxxx are situated except to the extent that such non-compliance
or
changes would not reasonably be expected, in the aggregate, to have a Material
Adverse Effect on Solana.
b. Neither
Solana nor any of the Solana Subsidiaries has received notice of any production
penalty or similar production restriction of any nature imposed or to be imposed
by any Governmental Entity, including gas-oil ratio, off-target and
overproduction penalties imposed by any Governmental Entity with jurisdiction,
and, to Solana’s knowledge, none of the xxxxx in which it holds an interest is
subject to any such penalty or restriction except to the extent that any such
penalty or restriction would not reasonably be expected, in the aggregate,
to
have a Material Adverse Effect on Solana.
2.35 Operation
and Condition of Xxxxx
All
xxxxx
in which Solana or an Solana Subsidiary holds an interest:
a. for
which
Solana or an Solana Subsidiary was or is operator, were or have been drilled
and, if and as applicable, completed, operated and abandoned in accordance
with
good and prudent oil and gas industry practices in Colombia and all applicable
laws; and
b. for
which
Solana or an Solana Subsidiary was not or is not operator, to Solana’s
knowledge, were or have been drilled and, if and as applicable, completed,
operated and abandoned in accordance with good and prudent oil and gas industry
practices in Colombia and all applicable laws;
except
that, in either case, to the extent that such non-compliance with prudent oil
and gas industry practices or applicable laws would not reasonably be expected,
in the aggregate, to have a Material Adverse Effect on Solana.
2.36 Operation
and Condition of Tangibles
Solana’s
and the Solana Subsidiaries’ tangible depreciable property used or intended for
use in connection with its oil and gas assets:
a. for
which
Solana or an Solana Subsidiary was or is operator, was or has been constructed,
operated and maintained in accordance with good and prudent oil and gas industry
practices in Colombia and all applicable laws during all periods in which Solana
or an Solana Subsidiary was operator thereof and is in good condition and
repair, ordinary wear and tear excepted, and is useable in the ordinary course
of business; and
19.
b. for
which
Solana or an Solana Subsidiary was not or is not operator, to Solana’s
knowledge, was or has been constructed, operated and maintained in accordance
with good and prudent oil and gas industry practices in Colombia and all
applicable laws during all periods in which Solana or an Solana Subsidiary
was
not operator thereof and is in good condition and repair, ordinary wear and
tear
excepted, and is useable in the ordinary course of business;
except
to the
extent that such non-compliance with such prudent oil and gas industry practices
or applicable law would not reasonably be expected, in the aggregate, to have
a
Material Adverse Effect on Solana.
2.37 Outstanding
AFEs
There
are
no outstanding authorizations for expenditure pertaining to any of the Solana
Interests or any other commitments, approvals or authorizations pursuant to
which an expenditure may be required to be made in respect of such assets after
the date of the most recent Solana Financial Statements in excess of $500,000
for each such commitment, approval or authorization other than pursuant to
the
2008 capital budget disclosed in writing to Gran Tierra prior to the date
hereof.
2.38 Confidentiality
Agreements
All
agreements entered into by Solana with persons other than Gran Tierra regarding
the confidentiality of information provided to such persons or reviewed by
such
persons with respect to the sale of Solana or a substantial portion of its
assets or any other business combination or similar transaction with another
party are in substantially the form of the Confidentiality Agreement between
Gran Tierra and Solana dated July 26, 2007 (the “Confidentiality
Agreement”)
and
Solana has not waived the standstill or other provisions of any of such
agreements.
2.39 Outstanding
Acquisitions
Other
than as disclosed in the Solana Disclosure Letter, Solana has no rights to
purchase assets, properties or undertakings of third parties under any
agreements to purchase that have not closed in excess of $500,000 individually
or $2,000,000 in the aggregate, other than pursuant to the 2008 capital budget
disclosed in writing to Gran Tierra prior to the date hereof.
2.40 Foreign
Private Issuer
Solana
is
a “foreign private issuer” within the meaning of Rule 405 of Regulation C
adopted by the SEC under the U.S. Securities Act.
2.41 Investment
Company and PFIC
Solana
is
not registered and, to the best of its knowledge, is not required to be
registered as an investment company pursuant to the U.S. Investment
Company Act of 1940, as
amended, and Solana was not in 2007 a “passive foreign investment company” for
the purposes of U.S. tax laws.
20.
2.42 Off-Balance
Sheet Arrangements
Solana
does not have any “off-balance sheet arrangements” as such term is defined in
Form 40-F adopted by the SEC.
2.43 Board
Approval
Subject
to the delivery of the Solana Fairness Opinion (as hereinafter defined), the
Solana Board of Directors has unanimously approved the Arrangement and approved
this Agreement, has unanimously determined that the Arrangement and this
Agreement are in the best interests of Solana and the Solana Securityholders,
and has unanimously determined that the Arrangement is fair to Solana
Securityholders.
2.44 Brokers
and Finders
Other
than Tristone Capital Inc. in accordance with the terms of its engagement letter
dated May 30, 2008, a copy of which has been provided to Gran Tierra, none
of
Solana or any of the Solana Subsidiaries nor any of their respective directors,
officers or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
similar payments in connection with the transactions contemplated by this
Agreement. The Solana Disclosure Letter includes a description of all of the
fees and other financial obligations and commitments of Solana’s engagement
arrangement with such firm.
2.45 Fairness
Opinion
The
Solana Board of Directors has received a verbal opinion as of July 28, 2008
(and
have been advised that they will receive a written opinion) from Tristone
Capital Inc. that the Plan of Arrangement is fair from a financial point of
view
to the Solana Securityholders (the “Solana
Fairness Opinion”).
2.46 Restrictions
on Business Activities
There
is
no material agreement, judgment, injunction, order or court decree binding
upon
Solana or any Solana Subsidiary that has or could reasonably be expected to
have
the effect of prohibiting or materially impairing any current business practice
of Solana or any Solana Subsidiary, any acquisition of property by Solana or
any
Solana Subsidiary or the conduct of any current business by Solana or any Solana
Subsidiary.
2.47 Books
and Records
The
books, records and accounts of Solana and the Solana Subsidiaries (a) have
been maintained in accordance with good business practices on a basis consistent
with prior years, (b) are stated in reasonable detail and accurately and
fairly reflect the transactions and dispositions of the assets of Solana and
the
Solana Subsidiaries, and (c) accurately and fairly reflect the basis for
the Solana financial statements. Solana has devised and maintains a system
of
internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management’s general or
specific authorization; and (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in conformity with
Canadian generally accepted accounting principles or any other criteria
applicable to such statements, and (ii) to maintain accountability for
assets.
21.
2.48 Minute
Books
The
corporate records and minute books of Solana and each of the Solana Subsidiaries
as provided to Gran Tierra's legal counsel have been maintained in accordance
with all applicable statutory requirements and are complete and up-to-date
in
all material respects.
2.49 Debt
As
at the
time of execution and delivery of this Agreement by Solana to Gran Tierra,
Solana’s Debt (as defined below) is $nil. “Solana's
Debt”
means
total consolidated indebtedness, including long-term debt, bank debt and working
capital deficiency, but excluding hedging obligations, future taxes and
abandonment and reclamation obligations.
2.50 No
Default Under Lending Agreements
No
event
of default or breach of any material covenant has occurred and is continuing
under Solana's existing banking and lending agreements.
2.51 Flow
Through Obligations
Neither
Solana nor any of the Solana Subsidiaries has entered into any agreements or
made any covenants with any parties with respect to the issuance of shares
which
are "flow-through shares" for the purposes of the Income
Tax Act
(Canada)
or the incurring and renunciation of Canadian exploration expense or Canadian
development expense, which amounts have not been fully expended and renounced
as
required thereunder, without the written approval of Gran Tierra.
2.52 No
Shareholders' Rights Protection Plan
Solana
is
not a party to, and prior to the Effective Time, Solana will not implement,
a
shareholder rights plan or any other form of plan, agreement, contract or
instrument that will trigger any rights to acquire Solana Common Shares or
other
securities of Solana or rights, entitlements or privileges in favour of any
person upon the entering into of this Agreement or the consummation of the
Arrangement, without the approval of Gran Tierra.
2.53 Transaction
Costs
Solana's
aggregate transaction costs related to the transaction contemplated hereby
(including all financial advisory (inclusive of the amounts contemplated by
Section 2.44), legal, accounting or engineering payments, and any and all other
costs and expenses of Solana relating to the transaction contemplated hereby),
but exclusive of the costs contemplated by Section 2.12, shall not exceed $5
million. No such costs (other than costs contemplated by Section 2.12) will
be
incurred by any Solana Subsidiary.
22.
2.54 No
Guarantees or Indemnities
Neither
Solana nor any Solana Subsidiary is a party to or bound by any agreement of
guarantee, indemnification (other than an indemnification of directors and
officers in accordance with the by-laws of each of Solana and the Solana
Subsidiaries and applicable law and other than standard indemnities in favour
of
purchasers of assets in purchase and sale agreements and underwriters and agents
in connection with offerings of securities, the financial advisor engaged by
Solana for purposes of the transactions contemplated hereby, Solana's registrar
and transfer agent, indemnities and guarantees in favour of Solana's bankers
and
indemnities to support Solana's obligations pursuant to agreements entered
into
in the ordinary course of business), or any other like commitment of the
obligations, liabilities (contingent or otherwise) or indebtedness of any other
person.
2.55 Reporting
Issuer Status
Solana
is
a reporting issuer in the provinces of British Columbia, Alberta and Ontario
and
is in material compliance with all applicable Canadian securities laws therein.
The Solana Common Shares are listed and posted for trading on the TSX Venture
Exchange and the AIM and Solana is in material compliance with the rules of
the
TSX Venture Exchange and the AIM.
2.56 No
Cease Trade Orders
No
securities commission or similar regulatory authority has issued any order
preventing or suspending trading of any securities of Solana or any of the
Solana Subsidiaries and neither Solana nor any Solana Subsidiary is in default
of any requirement of applicable law that would reasonably be expected to have
a
Material Adverse Effect on the transactions contemplated by this
Agreement.
2.57 Disclosure
No
representation or warranty made by Solana in this Agreement or the Solana
Disclosure Letter, nor any document, written information, statement, financial
statement, certificate or Exhibit prepared and furnished or to be prepared
and
furnished by Solana or its representatives pursuant hereto or in connection
with
the transactions contemplated hereby, when taken together, contains or contained
(as of the date made) any untrue statement of a material fact when made, or
omits or omitted (as of the date made) to state a material fact necessary to
make the statements or facts contained herein or therein not misleading, in
any
material way, in light of the circumstances under which they were
made.
23.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF GRAN TIERRA
Except
as
set forth in a letter dated the date of this Agreement and delivered by Gran
Tierra to Solana concurrently herewith (the “Gran
Tierra Disclosure Letter”),
Gran
Tierra hereby represents and warrants to, and agrees with, Solana
that:
3.1 Organization
and Standing
a. Gran
Tierra and each body corporate, partnership, joint venture, association or
other
business entity of which more than 50% of the total voting power of shares
of
stock or units of ownership or beneficial interest entitled to vote in the
election of directors (or members of a comparable governing body) is owned
or
controlled, directly or indirectly, by Gran Tierra (the “Gran
Tierra Subsidiaries”),
is an
entity duly organized, validly existing and in good standing under the laws
of
the jurisdiction of its incorporation or organization, has full requisite power
and authority to carry on its business as it is currently conducted, and to
own,
lease and operate the properties currently owned, leased and operated by it,
and
is duly qualified or licensed to do business and is in good standing as a
foreign corporation or organization authorized to do business in all
jurisdictions in which the character of the properties owned or leased or the
nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not reasonably be expected to have a Material Adverse Effect on Gran
Tierra. The Gran Tierra Disclosure Letter sets forth a complete list, as at
the
date hereof, of the Gran Tierra Subsidiaries and the percentage of each
subsidiary’s outstanding capital stock or other ownership interest owned by Gran
Tierra or another Gran Tierra Subsidiary. Except as set forth in the Gran Tierra
Disclosure Letter, neither Gran Tierra nor any Gran Tierra Subsidiary owns
any
debt or equity interests in any entity other than the Gran Tierra
Subsidiaries.
b. No
Gran
Tierra Subsidiary has total assets which constitute more than 5% of the
consolidated assets of Gran Tierra as at March 31, 2008, or the total revenues
of which constitute more than 5% of the consolidated revenues of Gran Tierra
for
the three month period ended March 31, 2008. As of the date hereof, Gran Tierra
is the beneficial direct or indirect owner of all of the outstanding shares,
trust units and partnership units, as applicable, of the Gran Tierra
Subsidiaries with good title thereto free and clear of any and all encumbrances.
There are no options, warrants or other rights, shareholder or unitholder rights
plans, agreements or commitments of any character whatsoever requiring the
issuance, sale or transfer by any of the Gran Tierra Subsidiaries of any
securities of the Gran Tierra Subsidiaries or any securities convertible into,
or exchangeable or exercisable for, or otherwise evidencing a right to acquire,
any securities of the Gran Tierra Subsidiaries. All outstanding securities
of
the Gran Tierra Subsidiaries have been duly authorized and validly issued,
are
fully paid and non-assessable and are not subject to, nor were they issued
in
violation of, any pre-emptive rights.
3.2 Agreement
Authorized and its Effect on Other Obligations
a. Gran
Tierra has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and, subject to approval
of
Gran Tierra’s stockholders as provided in this Agreement, to consummate the
Arrangement and the other transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Gran Tierra and, subject to approval
of Gran Tierra’s stockholders as provided in this Agreement, the consummation by
Gran Tierra of the Arrangement and the other transactions contemplated hereby
have been unanimously approved by the Gran Tierra Board of Directors and have
been duly authorized by all other necessary corporate action on the part of
Gran
Tierra. This Agreement has been duly executed and delivered by Gran Tierra
and
is a valid and binding obligation of Gran Tierra, enforceable in accordance
with
its terms, except that such enforceability may be subject to:
(i) bankruptcy, insolvency, reorganization or other similar laws affecting
or relating to enforcement of creditors’ rights generally; (ii) general
equitable principles; and (iii) that the consummation of the Arrangement is
subject to approval of Gran Tierra’s stockholders as provided in this
Agreement.
24.
b. Neither
the execution, delivery or performance of this Agreement or the Arrangement
by
Gran Tierra, nor the consummation of the transactions contemplated hereby or
thereby by Gran Tierra nor compliance with the provisions hereof or thereof
by
Gran Tierra will: (i) conflict with, or result in any violations of, the
Articles of Incorporation or bylaws of Gran Tierra or any equivalent document
of
any of the Gran Tierra Subsidiaries, (ii) result in any breach of or cause
a default (with or without notice or lapse of time, or both) under,
(iii) give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material benefit
or incurrence of any material cost (including, but not limited to, seismic
data
transfer fees) under, or (iv) result in the creation of any Encumbrance upon
any
of the material properties or assets of Gran Tierra or any of the Gran Tierra
Subsidiaries under, any term, condition or provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Gran
Tierra or any of the Gran Tierra Subsidiaries or their respective properties
or
assets, other than any such breaches, defaults, rights, losses, or Encumbrances
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Gran Tierra.
3.3 Governmental
and Third Party Consents
a. No
consent, approval, order or authorization of, or registration, declaration
or
filing with, any Governmental Entity, is required to be obtained by Gran Tierra
or any of the Gran Tierra Subsidiaries in connection with the execution and
delivery of this Agreement or the Plan of Arrangement or the consummation of
the
transactions contemplated hereby or thereby, except for: (i) the filing
with the Commissions and the SEC and the mailing to stockholders of Gran Tierra
of the Joint Proxy Statement relating to the Gran Tierra Stockholders Meeting,
(ii) the furnishing to the SEC of the SEC Filings; (iii) approval by
the Court of the Arrangement and the filings of the articles of arrangement
and
other required arrangement or other documents as required by the ABCA;
(iv) such filings, authorizations, orders and approvals as may be required
under applicable federal, provincial or state securities laws and the rules
of
the AMEX or TSX; (v) such competition and foreign investment notices and filings
with any Governmental Entity as may be necessary, including, under the Colombian
merger control regime; (vi) such notice, filings, orders and approvals as may
be
necessary under the Public Utilities Board Act (Alberta), Gas Utilities Act
(Alberta) or similar legislation in other applicable provinces; and (vii) where
the failure to obtain such consents, approvals, etc., would not prevent or
delay
the consummation of the Arrangement or otherwise prevent Gran Tierra from
performing its obligations under this Agreement and would not reasonably be
expected to have a Material Adverse Effect on Gran Tierra.
25.
b. Other
than as contemplated by Section 3.3 (a), no consents, assignments, waivers,
authorizations or other certificates are necessary in connection with the
transactions contemplated hereby to provide for the continuation in full force
and effect of all of Gran Tierra’s material contracts or leases or for Gran
Tierra to consummate the transactions contemplated hereby, except when the
failure to receive such consents or other certificates would not reasonably
be
expected to have a Material Adverse Effect on Gran Tierra.
3.4 Capitalization
a. The
authorized capital stock of Gran Tierra consists of 300,000,000 shares of common
stock, $0.001 par value (“Gran
Tierra Common Stock”),
25,000,000 shares of preferred stock, par value $0.001 per share, issuable
in
series (“Gran
Tierra Preferred Stock”),
and
one (1) share of special voting stock (“Gran
Tierra Special Voting Stock”).
As of
June 30, 2008, 99,582,314 shares of Gran Tierra Common Stock were issued and
outstanding, no shares of Gran Tierra Preferred Stock were issued and
outstanding, and one (1) share of Gran
Tierra Special Voting Stock
was
issued and outstanding. As of June 30, 2008, 5,630,000 shares of Gran Tierra
Common Stock were allocated for issuance upon the exercise of stock options
then
outstanding under Gran Tierra’s stock option plans, 18,418,867 shares of Gran
Tierra Common Stock were allocated for issuance upon the exercise of warrants
to
purchase shares of Gran Tierra Common Stock, and 11,192,856 shares of Gran
Tierra Common Stock were allocated for issuance upon exchange of exchangeable
shares outstanding and exchangeable for shares of Gran Tierra Common Stock.
All
of the issued and outstanding shares of Gran Tierra Common Stock have been
duly
authorized and validly issued, are fully paid and nonassessable, were not issued
in violation of the terms of any agreement or other understanding binding upon
Gran Tierra and were issued in compliance with all applicable charter documents
of Gran Tierra and all applicable federal, state and foreign securities laws,
rules and regulations. There are, and have been, no preemptive rights with
respect to the issuance of the shares of Gran Tierra Common Stock or any other
capital stock of Gran Tierra.
b. Other
than as set forth above, as of the date of this Agreement, there are no
outstanding subscriptions, options, warrants, convertible securities, calls,
commitments, agreements or rights (contingent or otherwise) of any character
to
purchase or otherwise acquire from Gran Tierra any shares of, or any securities
convertible into, the capital stock of Gran Tierra.
c. To
the
knowledge of Gran Tierra, neither Gran Tierra nor any of the Gran Tierra
Subsidiaries or their respective shareholders is a party to any unanimous
shareholder agreement, pooling agreement, voting trust or other similar type
of
arrangements in respect of their outstanding securities.
3.5 Securities
Reports and Financial Statements
a. Gran
Tierra has filed all forms, reports, annual reports and documents required
to be
filed by it with the SEC pursuant to the Securities Act and the Exchange Act
and
the rules thereunder and all forms, reports, annual reports and documents
required to be filed by it with the Commissions and AMEX and the TSX
(collectively, the “Gran
Tierra Securities Reports”),
all of
which have complied in all material respects with all applicable requirements
of
such statutes, regulations, policies and rules. None of the Gran Tierra
Securities Reports, at the time filed or as subsequently amended, contained
any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading. No subsidiary
of Gran Tierra is required to file any form, report or other document with
the
SEC or the Commissions. The financial statements of Gran Tierra contained in
the
Gran Tierra Securities Reports complied in all material respects with the then
applicable accounting requirements and the published rules and regulations
of
the relevant United States securities statutes with respect thereto, were
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except
as
may have been indicated in the notes thereto or, in the case of unaudited
statements, as permitted by applicable laws, rules or regulations) and fairly
present (subject, in the case of the unaudited statements, to normal, year-end
audit adjustments) the consolidated financial position of Gran Tierra and its
consolidated Gran Tierra Subsidiaries as at the respective dates thereof and
the
consolidated results of their operations and cash flows for the respective
periods then ended.
26.
b. There
has
been no change in Gran Tierra’s accounting policies or the methods of making
accounting estimates or changes in estimates that are material to such financial
statements, except as described in the notes thereto.
3.6 Liabilities
Neither
Gran Tierra nor any Gran Tierra Subsidiary has, and none of Gran Tierra or
any
Gran Tierra Subsidiary is or would reasonably be expected to become responsible
for performing or discharging, any accrued, contingent or other liabilities
of
any nature, either matured or unmatured, that are, individually or in the
aggregate, material to Gran Tierra or any Gran Tierra Subsidiary, except for:
(a) liabilities reflected or reserved against in financial statements contained
in the Gran Tierra Securities Reports; (b) normal and recurring current
liabilities that have been incurred in the ordinary course of business and
consistent with past practices by Gran Tierra or any Gran Tierra Subsidiary
since the date of the last filed Gran Tierra Securities Report filed with the
SEC; (c) liabilities for performance of obligations of Gran Tierra or any Gran
Tierra Subsidiary under any contracts by Gran Tierra or any Gran Tierra
Subsidiary, to the extent such liabilities are readily ascertainable (in nature,
scope and amount) from the written terms of such contracts and such contracts
have been delivered to Solana; (d) liabilities described in part 3.6 of the
Disclosure Letter; and (e) liabilities that would not, in the aggregate, have a
Material Adverse Effect on Gran Tierra or any Gran Tierra
Subsidiary.
3.7 Information
Supplied
None
of
the information supplied or to be supplied by Gran Tierra for inclusion or
incorporation by reference in the Joint Proxy Statement (and, if filed, the
Registration Statement) will, at the time the Joint Proxy Statement is mailed
to
the Securityholders of Gran Tierra and at the time of the Gran Tierra
Stockholders Meeting (and, if filed, at the time the Registration Statement
is
declared effective), contain any untrue statement which, at the time and in
light of the circumstances under which it is made, is false or misleading with
respect to any material fact or omit to state any material fact required to
be
stated therein or necessary in order to make the statements therein not false
or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of a proxy for the same meeting or subject
matter which has become false or misleading. The Joint Proxy Statement will
comply as to form in all material respects with the provisions of the ABCA
and
applicable United States and Canadian securities laws and the rules and
regulations promulgated thereunder.
27.
3.8 No
Defaults
Neither
Gran Tierra nor any Gran Tierra Subsidiary is, or has received notice that
it
would be with the passage of time, in default or violation of any term,
condition or provision of (a) its Articles of Incorporation or bylaws;
(b) any judgment, decree or order applicable to it; or (c) any loan or
credit agreement, note, bond, mortgage, indenture, contract, agreement, lease,
license or other instrument to which Gran Tierra or any Gran Tierra Subsidiary
is now a party or by which it or any of its properties or assets may be bound,
except in the case of item (c) for defaults and violations which, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Gran Tierra.
3.9 Litigation;
Investigations
There
is
no claim, action, suit or proceeding pending, or to the knowledge of Gran Tierra
threatened against Gran Tierra or any of the Gran Tierra Subsidiaries, which
would, if adversely determined, individually or in the aggregate, have a
Material Adverse Effect on Gran Tierra, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Gran Tierra or any of the Gran Tierra Subsidiaries having, or which,
insofar as reasonably can be foreseen, in the future could have, any such
effect. There is no investigation pending or, to the knowledge of Gran Tierra,
threatened, against Gran Tierra or any of the Gran Tierra Subsidiaries before
any Governmental Entity which could have such effect.
3.10 Absence
of Certain Changes and Events
a. Since
March 31, 2008, there has not been:
i. Any
Material Adverse Effect on Gran Tierra;
ii. Any
material damage, destruction, or loss to the business or properties of Gran
Tierra and the Gran Tierra Subsidiaries, taken as a whole, not covered by
insurance;
iii. Any
declaration, setting aside or payment of any dividend or other distribution
in
respect of the capital stock of Gran Tierra, or any direct or indirect
redemption, purchase or any other acquisition by Gran Tierra of any such
stock;
iv. Any
material labor dispute or charge of unfair labor practice (other than routine
individual grievances) or, to the knowledge of Gran Tierra, any activity or
proceeding by a labor on or by a representative thereof to organize any
employees of Gran Tierra or any Gran Tierra Subsidiary or any campaign being
conducted to solicit authorization from employees to be represented by such
labor union; or
v. Any
other
event or condition known to Gran Tierra particularly pertaining to and adversely
affecting the operations, assets or business of Gran Tierra or any of the Gran
Tierra Subsidiaries (other than events or conditions which are of a general
or
industry-wide nature and of general public knowledge) which would constitute
a
Material Adverse Effect on Gran Tierra.
28.
b. Since
July 1, 2008, there has not been any change in the capital stock or in the
number of shares or classes of Gran Tierra’s authorized or outstanding capital
stock as described in Section 3.4 (other than as a result of exercises of Gran
Tierra stock options and warrants described in Section 3.4 (a)).
3.11 Additional
Gran Tierra Information
The
Gran
Tierra Disclosure Letter contains true, complete and correct lists of the
following items with respect to Gran Tierra and each of the Gran Tierra
Subsidiaries, and Gran Tierra has furnished or made available to Solana true,
complete and correct copies of all documents referred to in such
lists:
a. All
contracts which involve, or may involve, aggregate payments by any party thereto
of $1,000,000 or more, which payments or obligations are to be performed in
whole or in part after the Effective Time and which are not cancellable or
terminable by Gran Tierra without payment or penalty in excess of
$500,000;
b. All
material option, bonus, incentive compensation, deferred compensation,
employment agreements, profit-sharing, retirement, pension, welfare, group
insurance, death benefit, or other fringe benefit plans, arrangements or trust
agreements (collectively, “Gran
Tierra Employment Agreements”);
c. All
material patents, trademarks, copyrights and other intellectual property rights
owned, licensed or used and all applications therefor;
d. All
material trade names and fictitious names used or held, whether and where such
names are registered and where used;
e. All
obligations or liabilities, direct or indirect, vested or contingent in respect
of any rate swap transactions, basis swaps, forward rate transactions, commodity
swaps, commodity options, equity or equity index swaps, equity or equity index
options, bond options, interest rate options, foreign exchange transactions,
cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options,
production sales transactions having terms greater than 90 days or any other
similar transactions (including any option with respect to any of such
transactions) or any combination of such transactions;
f. All
material long-term and short-term promissory notes, installment contracts,
loan
agreements, credit agreements, operating and finance leases, and any other
material agreements relating thereto or with respect to collateral securing
the
same; and
All
material indebtedness, liabilities and commitments of third parties (other
than
Gran Tierra Subsidiaries) and as to which it is a guarantor, endorser, co-maker,
surety or accommodation maker, or is contingently liable therefor (excluding
liabilities as an endorser of checks and the like in the ordinary course of
business) or has otherwise provided any form of financial assistance and all
letters of credit in excess of $300,000, whether stand-by or documentary, issued
by any third party.
29.
3.12 Certain
Agreements
Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (a) result in any payment (including
severance, unemployment compensation, parachute payment, bonus, retention,
termination or otherwise) becoming due to any director, employee or independent
contractor of Gran Tierra or any of the Gran Tierra Subsidiaries under any
Gran
Tierra Plan (as defined in Section 3.13) or otherwise; (b) materially
increase any benefits otherwise payable under any Gran Tierra Plan or otherwise;
or (c) result in the acceleration of the time of payment or vesting of any
such benefits.
3.13 Employee
Benefit Plans
3.14 Intellectual
Property
Gran
Tierra or the Gran Tierra Subsidiaries own or possess licenses to use all
patents, patent applications, trademarks and service marks (including
registrations and applications therefor), trade names, copyrights and written
know-how, trade secrets and all other similar proprietary data and the goodwill
associated therewith (collectively, the “Gran
Tierra Intellectual Property”)
that
are either material to the business of Gran Tierra or any Gran Tierra Subsidiary
or that are necessary for the manufacture, use, license or sale of any services
or products manufactured, used, licensed or sold by Gran Tierra and the Gran
Tierra Subsidiaries. The Gran Tierra Intellectual Property is owned or licensed
by Gran Tierra or the Gran Tierra Subsidiaries free and clear of any Encumbrance
other than such Encumbrances that would not reasonably be expected to have
a
Material Adverse Effect on Gran Tierra. Except in the ordinary course of
business, neither Gran Tierra nor any of the Gran Tierra Subsidiaries has
granted to any other person any license to use any Gran Tierra Intellectual
Property. Neither Gran Tierra nor any of the Gran Tierra Subsidiaries has
received any notice of infringement, misappropriation or conflict with, the
intellectual property rights of others in connection with the use by Gran Tierra
and the Gran Tierra Subsidiaries of the Gran Tierra Intellectual
Property.
30.
3.15 Title
to Properties
Except
for the Gran Tierra Interests (as hereinafter defined) and for goods and other
property sold, used or otherwise disposed of since March 31, 2008 in the
ordinary course of business for fair value, Gran Tierra has good and defensible
title to all its properties, interests in properties and assets, real and
personal, reflected in its March 31, 2008, financial statements, free and clear
of any Encumbrance, except: (a) Encumbrances reflected in the balance sheet
of Gran Tierra as of March 31, 2008; (b) liens for current taxes not yet
due and payable; and (c) such imperfections of title, easements and
Encumbrances as would not reasonably be expected to have a Material Adverse
Effect on Gran Tierra. All leases pursuant to which Gran Tierra or any Gran
Tierra Subsidiary leases (whether as lessee or lessor) any real or personal
property are in good standing, valid, and effective; and there is not, under
any
such leases, any existing or prospective default or event of default or event
which with notice or lapse of time, or both, would constitute a default by
Gran
Tierra or any Gran Tierra Subsidiary which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Gran Tierra
and in respect to which Gran Tierra or a Gran Tierra Subsidiary has not taken
adequate steps to prevent a default from occurring. The buildings and premises
of Gran Tierra and each of the Gran Tierra Subsidiaries that are used in its
business are in good operating condition and repair, subject only to ordinary
wear and tear. All major items of operating equipment of Gran Tierra and the
Gran Tierra Subsidiaries are in good operating condition and in a state of
reasonable maintenance and repair, ordinary wear and tear excepted, and are
free
from any known defects except as may be repaired by routine maintenance and
such
minor defects as do not substantially interfere with the continued use thereof
in the conduct of normal operations.
3.16 Environmental
Matters
a. There
are
no environmental conditions or circumstances, such as the presence or release
of
any hazardous substance, on any property presently or, to the knowledge of
Gran
Tierra, previously owned or leased by Gran Tierra or any of the Gran Tierra
Subsidiaries that could reasonably be expected to result in a Material Adverse
Effect on Gran Tierra;
b. Gran
Tierra and the Gran Tierra Subsidiaries have in full force and effect all
material environmental permits, licenses, approvals and other authorizations
required to conduct their operations and are operating in material compliance
thereunder;
c. Gran
Tierra’s and the Gran Tierra Subsidiaries’ operations and the use of their
assets do not violate any applicable Canadian or Colombian federal, provincial
or local law, statute, ordinance, rule, regulation, order or notice requirement
pertaining to Applicable Environmental Laws, except for violations which, either
singly or in the aggregate, would not reasonably be expected to result in a
Material Adverse Effect on Gran Tierra;
31.
d. To
the
knowledge of Gran Tierra, none of the operations or assets of Gran Tierra or
any
Gran Tierra Subsidiary has ever been conducted or used by Gran Tierra or any
Gran Tierra Subsidiary in such a manner as to constitute a violation of any
of
the Applicable Environmental Laws, except for violations which, either singly
or
in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect on Gran Tierra or have been rectified;
e. No
written notice has been served on Gran Tierra or any Gran Tierra Subsidiary
from
any entity, governmental agency or individual regarding any existing, pending
or
threatened investigation or inquiry related to alleged violations under any
Applicable Environmental Laws, or regarding any claims for remedial obligations
or contribution under any Applicable Environmental Laws, or which may require
any material work, repairs, construction or expenditures, other than any of
the
foregoing which, either singly or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on Gran Tierra; and
f. Gran
Tierra does not know of any reason that would preclude it from renewing or
obtaining a reissuance of the material permits, licenses or other authorizations
required pursuant to any Applicable Environmental Laws to operate and use any
of
Gran Tierra’s or the Gran Tierra Subsidiaries’ assets for their current purposes
and uses.
3.17 Compliance
With Other Laws
Neither
Gran Tierra nor any Gran Tierra Subsidiary is in violation of or in default
with
respect to, or in alleged violation of or alleged default with respect to any
other applicable law or any applicable rule or regulation, or any it or decree
of any court or any Governmental Entity, or delinquent with respect to any
report required to be filed with any Governmental Entity, except for violations,
defaults and delinquencies which, either singly or in the aggregate, do not
and
would not reasonably be expected to result in a Material Adverse Effect on
Gran
Tierra.
3.18 Taxes
a. Except
with respect to failures which, in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on Gran Tierra, proper and
accurate federal, provincial, state and local income, capital, withholding,
value added, sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns, reports,
and estimates have been filed with appropriate governmental agencies, domestic
and foreign, by Gran Tierra and each of the Gran Tierra Subsidiaries for each
period for which any returns, reports, or estimates were due (taking into
account any extensions of time to file before the date hereof); all taxes shown
by such returns to be payable and any other taxes due and payable have been
paid
other than those being contested in good faith by Gran Tierra or a Gran Tierra
Subsidiary; and the tax provision reflected in Gran Tierra’s financial
statements is adequate, in accordance with United States or Canadian (if
applicable) generally accepted accounting principles, to cover liabilities
of
Gran Tierra and the Gran Tierra Subsidiaries for all taxes, including any
interest, penalties and additions to taxes of any character whatsoever
applicable to Gran Tierra and the Gran Tierra Subsidiaries or their assets
or
businesses. No waiver of any statute of limitations executed by Gran Tierra
or a
Gran Tierra Subsidiary with respect to any tax is in effect for any period.
Neither Gran Tierra nor any Gran Tierra Subsidiary has received any notice
of
reassessment from the U.S. Internal Revenue Service or any applicable state
tax
authority, Revenue Canada or Alberta Corporate Tax Administration, or any tax
authority in Colombia, Peru or Argentina, that could reasonably be expected
to
result in a Material Adverse Effect on Gran Tierra. There are no tax liens
on
any assets of Gran Tierra or the Gran Tierra Subsidiaries except for taxes
not
yet currently due and those which could not reasonably be expected to result
in
a Material Adverse Effect on Gran Tierra.
32.
b. No
meetings of the Gran Tierra Energy Cayman Islands Inc. Board of Directors
or the
Gran Tierra Energy (C.I.) Inc. Board of Directors have occurred in Canada
or the
U.S. Gran Tierra Energy Cayman Islands Inc. and Gran Tierra Energy (C.I.)
Inc.
are in the process of being legally formed. Both corporations are inactive,
have
never conducted operations or business, and hold no material assets. At no
time
since the incorporation of either corporation has the majority of the respective
members of the Board of Directors of either corporation been U.S.
residents.
3.19 Insurance
Policies
of insurance are in force as of the date hereof naming Gran Tierra as an insured
that adequately cover all risks as are customarily covered by oil and gas
producers in the industry in which Gran Tierra operates. All such policies
shall
remain in force and effect and shall not be cancelled or otherwise terminated
as
a result of the transactions contemplated by this Agreement.
3.20 Indebtedness
to and By Officers, Directors and Others
Gran
Tierra is not indebted to any of the directors, officers, employees or
consultants or any of their respective associates or affiliates or other parties
not at arm’s length to Gran Tierra, except for amounts due as normal
compensation or reimbursement of ordinary business expenses, nor is there any
indebtedness owing by any such parties to Gran Tierra.
3.21 No
Limitation
There
is
no non-competition, exclusivity or other similar agreement, commitment or
understanding in place to which Gran Tierra is a party or by which it is
otherwise bound that would now or hereafter in any way limit the business or
operations of Gran Tierra in a particular manner or to a particular locality
or
geographic region or for a limited period of time (including, for greater
certainty, following the completion of the Arrangement), and the execution,
delivery and performance of this Agreement does not and will not result in
the
restriction of Gran Tierra from engaging in this business or from competing
with
any person or in any geographic area.
33.
3.22 Information
to Independent Engineer
Gran
Tierra has no reason to believe that (i) the report prepared by Xxxxxxx, Xxxxx
& Associates, dated February 15, 2008, and effective as at December 31,
2007, evaluating the crude oil, natural gas liquids and natural gas reserves
and
future net production revenues attributable to the properties of Gran Tierra
in
Colombia as of December 31, 2007 (the “Gran
Tierra Colombia Reserve Report”)
and
(ii) the report prepared by Xxxxxxx, Xxxxx & Associates, dated February 15,
2008, and effective as at December 31, 2007, evaluating the crude oil, natural
gas liquids and natural gas reserves and future net production revenues
attributable to the properties of Gran Tierra in Argentina as of December 31,
2007 (the “Gran
Tierra Argentina Reserve Report,”
and
together with the Gran Tierra Colombia Reserve Report, the “Gran
Tierra Reserve Reports”)
and,
if applicable, any updates to such reports or any other reserve evaluation
reports which may be, or be deemed to be, included or incorporated by reference
in the Gran Tierra Joint Proxy Statement, whether in addition to or as a
replacement to the Gran Tierra Reserve Reports, were not accurate in all
material respects as at the effective date of such reports and, except for
any
impact of changes in commodity prices, which may or may not be material, Gran
Tierra has no knowledge of a Material Adverse Change in the production, costs,
price, reserves, estimates of future net production revenues or other relevant
information from that disclosed in those reports. Gran Tierra has provided
to
Xxxxxxx, Xxxxx & Associates, all material information concerning land
descriptions, well data, facilities and infrastructure, ownership and
operations, future development plans and historical technical and operating
data
respecting the principal oil and gas assets of Gran Tierra, in each case as
at
the effective dates of such reports and, in particular, all material information
respecting the interests of Gran Tierra in its principal oil and gas assets
and
royalty burdens and net profits interest burdens thereon and such information
was accurate and correct in all material respects as at the respective dates
thereof and did not omit any information necessary to make any such information
provided not misleading as at the respective dates thereof and there has been
no
Material Adverse Change in any of the material information so provided since
the
date thereof.
3.23 No
Insider Rights
No
director, officer, insider or other party not at arm’s length to Gran Tierra has
any right, title or interest in (or the right to acquire any right, title or
interest in) any royalty interest, participation interest or any other interest
whatsoever, in any properties of Gran Tierra.
3.24 Petroleum
and Natural Gas Property Interests
Other
than Gran Tierra Permitted Encumbrances (as hereinafter defined) and security
obligations with respect to its bank indebtedness, all of the interests of
each
of Gran Tierra and each of the Gran Tierra Subsidiaries in its petroleum and
natural gas rights and leases and all related tangibles, equipment, facilities
and miscellaneous interests (collectively, the "Gran
Tierra Interests")
are
free and clear of Encumbrances created by, through or under Gran Tierra or
the
Gran Tierra Subsidiaries, except as disclosed in the Gran Tierra Financial
Statements or those arising in the ordinary course of business and that would
not reasonably be expected to have a Material Adverse Effect on Gran Tierra
and,
to its knowledge, each of Gran Tierra and each of the Gran Tierra Subsidiaries
holds the Gran Tierra Interests under valid and subsisting licenses, leases,
permits, concessions, concession agreements, contracts, subleases, reservations
or other agreements except where the failure to so hold the Gran Tierra
Interests would not reasonably be expected to have a Material Adverse Effect
on
Gran Tierra. "Gran
Tierra Permitted
Encumbrances"
used in
this Section 3.24 have the same meaning as set forth in Section 2.24, but
replacing each instance of “Solana” with “Gran Tierra” in such definition
(including the definition of Solana Documents of Title).
34.
3.25 Title
to Oil and Gas Properties
Although
it does not warrant title, other than Gran Tierra Permitted Encumbrances, Gran
Tierra is not aware of any defects, failures or impairments to the title to
the
Gran Tierra Interests, whether or not an action, suit, proceeding or inquiry
is
pending or threatened and whether or not discovered by any third party, which
taken together, could reasonably be expected to have a Material Adverse Effect
on: (a) the quantity and pre-tax present worth values of its oil and gas
reserves; (b) the current production attributable to its properties; or (c)
the
current cash flow from such properties.
3.26 No
Encumbrances
Other
than Gran Tierra Permitted Encumbrances, neither Gran Tierra nor any of the
Gran
Tierra Subsidiaries has encumbered or alienated its respective interest in
the
Gran Tierra Interests or agreed to do so and such assets are free and clear
of
all encumbrances except for or pursuant to: (i) encumbrances securing Gran
Tierra's current credit facility with Standard Bank plc and derivative
transactions with the lenders (and other affiliates) thereunder; or (ii)
encumbrances arising in the ordinary course of business, which are not material
in the aggregate.
3.27 Compliance
To
Gran
Tierra's knowledge, neither Gran Tierra nor any Gran Tierra Subsidiary has
failed to comply with, perform, observe or satisfy any term, condition,
obligation or liability which has heretofore arisen under the provisions of
any
of title or operating documents or any other agreements and documents to which
the Gran Tierra Interests are subject.
3.28 Areas
of Mutual Interest
Neither
Gran Tierra nor any Gran Tierra Subsidiary is bound by or subject to active
area
of mutual interest covenants.
3.29 Production
Related Contracts
Neither
Gran Tierra nor any Gran Tierra Subsidiary is a party to or is otherwise bound
or affected by any material: (i) production sales contracts that cannot be
terminated on notice of 31 days or less (without an early termination penalty
or
other cost); (ii) gas balancing or similar agreements; (iii) agreements for
transportation, processing or disposal; (iv) agreements for the contract
operation by a third party of any of its assets; and (v) agreements to provide
transportation, processing or disposal capacity or service to any third party
which, for (ii) to (iv) above, cannot be terminated on notice of 60 days or
less.
3.30 Take
or Pay Obligations
Neither
Gran Tierra nor any Gran Tierra Subsidiary has any take or pay
obligations.
3.31 No
Defaults Under Leases and Agreements
a. Gran
Tierra has not received notice of any default under any of the leases and other
title and operating documents or any other agreement or instrument pertaining
to
the Gran Tierra Interests to which Gran Tierra is a party or by or to which
Gran
Tierra or the Gran Tierra Interests are bound or subject except to the extent
that such defaults would not reasonably be expected, in the aggregate, to have
a
Material Adverse Effect on Gran Tierra.
35.
b. To
Gran
Tierra’s knowledge:
i. Each
of
Gran Tierra and the Gran Tierra Subsidiaries is in good standing under all,
and
is not in default under any; and
ii. there
is
no existing condition, circumstance or matter which constitutes or which, with
the passage of time or the giving of notice, would constitute a default under
any,
leases
and other title and operating documents or any other agreements and instruments
pertaining to the Gran Tierra Interests to which it is a party or by or to
which
it or the Gran Tierra Interests are bound or subject and, to their knowledge,
all such leases, title and operating documents and other agreements and
instruments are in good standing and in full force and effect and none of the
counterparties to such leases, title and operating documents and other
agreements and instruments is in default thereunder except to the extent that
such defaults would not reasonably be expected, in the aggregate, to have a
Material Adverse Effect on Gran Tierra.
3.32 No
Reduction of Interests
Except
as
is reflected in the Gran Tierra Reserve Report, none of the Gran Tierra
Interests are subject to reduction by reference to payout of or production
penalty on any well or otherwise or to change to an interest of any other size
or nature by virtue of or through any right or interest granted by, through
or
under Gran Tierra or the Gran Tierra Subsidiaries except to the extent that
such
reduction or change to an interest would not reasonably be expected, in the
aggregate, to have a Material Adverse Effect on Gran Tierra.
3.33 Royalties,
Rentals and Taxes Paid
All
royalties and rentals payable on or before the date hereof under the leases
and
other title and operating documents pertaining to the Gran Tierra Interests
and
all ad valorem, property, production, severance and similar taxes and
assessments based upon or measured by the ownership of such assets or the
production of petroleum substances derived therefrom or allocated thereto or
the
proceeds of sales thereof payable on or before the date hereof have been
properly paid in full and in a timely manner except to the extent that such
non-payment would not reasonably be expected, in the aggregate, to have a
Material Adverse Effect on Gran Tierra.
3.34 Production
Allowables and Production Penalties
a. None
of
the xxxxx in which Gran Tierra or any Gran Tierra Subsidiary holds an interest
has been produced in excess of applicable production allowables imposed by
any
applicable law or any Governmental Entity and Gran Tierra has no knowledge
of
any impending change in production allowables imposed by any applicable law
or
any Governmental Entity that may be applicable to any of the xxxxx in which
it
holds an interest, other than changes of general application in the jurisdiction
in which such xxxxx are situate except to the extent that such non-compliance
or
changes would not reasonably be expected, in the aggregate, to have a Material
Adverse Effect on Gran Tierra.
36.
b. Neither
Gran Tierra nor any of the Gran Tierra Subsidiaries has received notice of
any
production penalty or similar production restriction of any nature imposed
or to
be imposed by any Governmental Entity, including gas-oil ratio, off-target
and
overproduction penalties imposed by any Governmental Entity with jurisdiction,
and, to its knowledge, none of the xxxxx in which it holds an interest is
subject to any such penalty or restriction except to the extent that any such
penalty or restriction would not reasonably be expected, in the aggregate,
to
have a Material Adverse Effect on Gran Tierra.
3.35 Operation
and Condition of Xxxxx
All
xxxxx
in which Gran Tierra or any Gran Tierra Subsidiary holds an
interest:
a. for
which
Gran Tierra or an Gran Tierra Subsidiary was or is operator, were or have been
drilled and, if and as applicable, completed, operated and abandoned in
accordance with good and prudent oil and gas industry practices in Peru,
Colombia and Argentina, as the case may be, and all applicable laws;
and
b. for
which
Gran Tierra or an Gran Tierra Subsidiary was not or is not operator, to its
knowledge, were or have been drilled and, if and as applicable, completed,
operated and abandoned in accordance with good and prudent oil and gas industry
practices in Peru, Colombia and Argentina, as the case may be, and all
applicable laws;
except,
in either case, to the extent that such non-compliance with such prudent oil
and
gas industry practices or applicable laws would not reasonably be expected,
in
the aggregate, to have a Material Adverse Effect on Gran Tierra.
3.36 Operation
and Condition of Tangibles
Gran
Tierra’s and the Gran Tierra Subsidiaries’ tangible depreciable property used or
intended for use in connection with its oil and gas assets:
a. for
which
Gran Tierra or an Gran Tierra Subsidiary was or is operator, was or has been
constructed, operated and maintained in accordance with good and prudent oil
and
gas industry practices in Peru, Colombia and Argentina, as the case may be,
and
all applicable laws during all periods in which Gran Tierra or an Gran Tierra
Subsidiary was operator thereof and is in good condition and repair, ordinary
wear and tear excepted, and is useable in the ordinary course of business;
and
b. for
which
Gran Tierra or an Gran Tierra Subsidiary was not or is not operator, to its
knowledge, was or has been constructed, operated and maintained in accordance
with good and prudent oil and gas industry practices in Peru, Colombia and
Argentina and all applicable laws during all periods in which Gran Tierra or
an
Gran Tierra Subsidiary was not operator thereof and is in good condition and
repair, ordinary wear and tear excepted, and is useable in the ordinary course
of business;
except
to
the extent that such non-compliance with such prudent oil and gas industry
practices or applicable law would not reasonably be expected, in the aggregate,
to have a Material Adverse Effect on Gran Tierra.
37.
3.37 Outstanding
AFEs
There
are
no outstanding authorizations for expenditure pertaining to any of Gran Tierra’s
oil and gas assets or any other commitments, approvals or authorizations
pursuant to which an expenditure may be required to be made in respect of such
assets after the date of the most recent Gran Tierra Financial Statements in
excess of $500,000 for each such commitment, approval or authorization other
than pursuant to the 2008 capital budget disclosed in writing to Solana prior
to
the date hereof.
3.38 Confidentiality
Agreements
All
agreements entered into by Gran Tierra with persons other than Solana regarding
the confidentiality of information provided to such persons or reviewed by
such
persons with respect to the sale of Gran Tierra or a substantial portion of
its
assets or any other business combination or similar transaction with another
party are in substantially the form of the Confidentiality Agreement and Gran
Tierra has not waived the standstill or other provisions of any of such
agreements.
3.39 Outstanding
Acquisitions
Other
than as disclosed in the Gran Tierra Disclosure Letter, Gran Tierra has no
rights to purchase assets, properties or undertakings of third parties under
any
agreements to purchase that have not closed in excess of $500,000 individually
or $2,000,000 in the aggregate, other than pursuant to the 2008 capital budget
disclosed in writing to Solana prior to the date hereof.
3.40 Investment
Company
Gran
Tierra is not registered and, to the best of its knowledge, is not required
to
be registered as an investment company pursuant to the U.S. Investment
Company Act of 1940,
as
amended.
3.41 Off-Balance
Sheet Arrangements
Gran
Tierra does not have any “off-balance sheet arrangements” as such term is
defined in Form 40-F adopted by the SEC.
3.42 Board
Approval
Subject
to the delivery of the Gran Tierra Fairness Opinion (as hereinafter defined),
the Gran Tierra Board of Directors has unanimously approved the issuance of
the
shares of Gran Tierra Common Stock, issuable in connection with the transactions
contemplated by this Agreement and the Plan of Arrangement, and has unanimously
determined that the Arrangement and this Agreement are in the best interests
of
Gran Tierra and the Gran Tierra stockholders.
38.
3.43 Brokers
and Finders
Other
than Blackmont
Capital Inc.,
none of
Gran Tierra or any of the Gran Tierra Subsidiaries nor any of their respective
directors, officers or employees has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions
or
similar payments in connection with the transactions contemplated by this
Agreement.
3.44 Fairness
Opinion
The
Gran
Tierra Board of Directors has received a verbal opinion, as of July 28, 2008
(and have been advised that they will receive a written opinion) from Blackmont
Capital Inc. that the Exchange Ratio is fair from a financial point of view
to
Gran Tierra (the “Gran
Tierra Fairness Opinion”).
3.45 Restrictions
on Business Activities
There
is
no material agreement, judgment, injunction, order or court decree binding
upon
Gran Tierra or any Gran Tierra Subsidiary that has or could reasonably be
expected to have the effect of prohibiting or materially impairing any current
business practice of Gran Tierra or any Gran Tierra Subsidiary, any acquisition
of property by Gran Tierra or any Gran Tierra Subsidiary or the conduct of
any
current business by Gran Tierra or any Gran Tierra Subsidiary.
3.46 Books
and Records
The
books, records and accounts of Gran Tierra and the Gran Tierra Subsidiaries
(a) have been maintained in accordance with good business practices on a
basis consistent with prior years, (b) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of the assets
of
Gran Tierra and the Gran Tierra Subsidiaries, and (c) accurately and fairly
reflect the basis for the Gran Tierra financial statements. Gran Tierra has
devised and maintains a system of internal accounting controls sufficient to
provide reasonable assurances that: (a) transactions are executed in
accordance with management’s general or specific authorization; and
(b) transactions are recorded as necessary (i) to permit preparation
of financial statements in conformity with United States generally accepted
accounting principles or any other criteria applicable to such statements,
and
(ii) to maintain accountability for assets.
3.47 Minute
Books
The
corporate records and minute books of Gran Tierra and each of the Gran Tierra
Subsidiaries as provided to Solana's legal counsel have been maintained in
accordance with all applicable statutory requirements and are complete and
up-to-date in all material respects.
3.48 Debt
As
at the
time of execution and delivery of this Agreement by Gran Tierra to Solana,
Gran
Tierra's Debt is $nil. "Gran
Tierra's Debt"
means
total consolidated indebtedness, including long-term debt, bank debt and working
capital deficiency, but excluding hedging obligations, future taxes and
abandonment and reclamation obligations
3.49 No
Default Under Lending Agreements
No
event
of default or breach of any material covenant has occurred and is continuing
under Gran Tierra's existing banking and lending agreements.
39.
3.50 No
Shareholders' Rights Protection Plan
Gran
Tierra is not a party to, and prior to the Effective Time, Gran Tierra will
not
implement, a shareholder rights plan or any other form of plan, agreement,
contract or instrument that will trigger any rights to acquire Gran Tierra
Common Stock or other securities of Gran Tierra or rights, entitlements or
privileges in favour of any person upon the entering into of this Agreement
or
the consummation of the Arrangement.
3.51 Transaction
Costs
Gran
Tierra's aggregate transaction costs related to the transaction contemplated
hereby (including all financial advisory (inclusive of the amounts contemplated
by Section 3.43), legal, accounting, engineering, severance or termination
payments of management and all other employees, change of control or bonus
payments, and any and all other costs and expenses of Gran Tierra relating
to
the transaction contemplated hereby) shall not exceed $5 million.
3.52 No
Guarantees or Indemnities
Neither
Gran Tierra nor any Gran Tierra Subsidiary is a party to or bound by any
agreement of guarantee, indemnification (other than an indemnification of
directors and officers in accordance with the by-laws of each of Gran Tierra
and
the Gran Tierra Subsidiaries and applicable law and other than standard
indemnities in favour of purchasers of assets in purchase and sale agreements
and underwriters and agents in connection with offerings of securities, the
financial advisor engaged by Gran Tierra for purposes of the transactions
contemplated hereby, Gran Tierra's registrar and transfer agent, indemnities
and
guarantees in favour of Gran Tierra's bankers and indemnities to support Gran
Tierra's obligations pursuant to agreements entered into in the ordinary course
of business), or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other person.
3.53 Reporting
Issuer Status
Gran
Tierra is a SEC registrant and is in material compliance with all applicable
United States securities laws. The Gran Tierra Common Stock are listed for
trading on AMEX and the TSX and Gran Tierra is in material compliance with
the
rules of AMEX and the TSX.
3.54 No
Cease Trade Orders
No
securities commission or similar regulatory authority has issued any order
preventing or suspending trading of any securities of Gran Tierra or any of
the
Gran Tierra Subsidiaries and neither Gran Tierra nor any Gran Tierra Subsidiary
is in default of any requirement of applicable law that would reasonably be
expected to have a Material Adverse Effect on the transactions contemplated
by
this Agreement.
3.55 Disclosure
No
representation or warranty made by Gran Tierra in this Agreement or the Gran
Tierra Disclosure Letter, nor any document, written information, statement,
financial statement, certificate or Exhibit prepared and furnished or to be
prepared and furnished by Gran Tierra or its representatives pursuant hereto
or
in connection with the transactions contemplated hereby, when taken together,
contains or contained (as of the date made) any untrue statement of a material
fact when made, or omits or omitted (as of the date made) to state a material
fact necessary to make the statements or facts contained herein or therein
not
misleading, in any material way, in light of the circumstances under which
they
were made.
40.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF GRAN
TIERRA AND GRAN TIERRA EXCHANGECO
Each
of
Gran Tierra and Gran Tierra Exchangeco hereby represents and warrants to, and
agrees with, Solana that:
4.1 Organization
and Standing
a. Gran
Tierra Exchangeco is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, has full requisite power and authority to carry on its business
as
it is currently conducted, and to own, lease and operate the properties
currently owned, leased and operated by it, and is duly qualified or licensed
to
do business and is in good standing as a foreign corporation or organization
authorized to do business in all jurisdictions in which the character of the
properties owned or leased or the nature of the business conducted by it would
make such qualification or licensing necessary, except where the failure to
be
so qualified or licensed would not reasonably be expected to have a Material
Adverse Effect on Gran Tierra Exchangeco. Gran Tierra Exchangeco does not own
any capital stock or other ownership interest in any other entity.
b. All
shares of capital stock of Gran Tierra Exchangeco are owned by Gran Tierra.
There are no options, warrants or other rights, shareholder or unitholder rights
plans, agreements or commitments of any character whatsoever requiring the
issuance, sale or transfer by any capital stock of Gran Tierra
Exchangeco.
4.2 Agreement
Authorized and its Effect on Other Obligations
a. Gran
Tierra Exchangeco has all requisite corporate power and authority to enter
into
this Agreement and to perform its obligations hereunder and to consummate the
Arrangement and the other transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Gran Tierra Exchangeco and the
consummation by Gran Tierra Exchangeco of the Arrangement and the other
transactions contemplated hereby have been unanimously approved by the board
of
directors of Gran Tierra Exchangeco and have been duly authorized by all other
necessary corporate action on the part of Gran Tierra Exchangeco. This Agreement
has been duly executed and delivered by Gran Tierra Exchangeco and is a valid
and binding obligation of Gran Tierra Exchangeco, enforceable in accordance
with
its terms, except that such enforceability may be subject to:
(i) bankruptcy, insolvency, reorganization or other similar laws affecting
or relating to enforcement of creditors’ rights generally; and (ii) general
equitable principles.
41.
b. Neither
the execution, delivery or performance of this Agreement or the Arrangement
by
Gran Tierra Exchangeco, nor the consummation of the transactions contemplated
hereby or thereby by Gran Tierra Exchangeco nor compliance with the provisions
hereof or thereof by Gran Tierra Exchangeco will: (i) conflict with, or
result in any violations of, the Articles of Incorporation or bylaws of Gran
Tierra Exchangeco, (ii) result in any breach of or cause a default (with or
without notice or lapse of time, or both) under, (iii) give rise to a right
of termination, amendment, cancellation or acceleration of any obligation
contained in, or the loss of any material benefit or incurrence of any material
cost (including, but not limited to, seismic data transfer fees) under, or
(iv)
result in the creation of any Encumbrance upon any of the material properties
or
assets of Gran Tierra Exchangeco under, any term, condition or provision of
any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Gran Tierra Exchangeco or any of its properties or
assets.
ARTICLE
5
OBLIGATIONS
PENDING EFFECTIVE DATE
5.1 Agreements
of Gran Tierra and Solana
Gran
Tierra and Solana agree to take the following actions after the date
hereof:
a. Each
party will promptly execute and file or join in the execution and filing of
any
application or other document that may be necessary to obtain the authorization,
approval or consent of any Governmental Entity which may be reasonably required,
or which the other party may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Each party
will
use its commercially reasonable efforts to promptly obtain such authorizations,
approvals and consents. Without limiting the generality of the foregoing, as
promptly as practicable after the execution of this Agreement, each party shall
make such filings as are necessary under the Colombian merger control
regime;
b. Each
party will allow the other and its agents reasonable access to the files, books,
records, offices and officers of itself and its subsidiaries, including any
and
all information relating to such party’s tax matters, contracts, leases,
licenses and real, personal and intangible property and financial condition.
Each party will cause its accountants to cooperate with the other in making
available to the other party all financial information reasonably requested,
including the right to examine all working papers pertaining to tax matters
and
financial statements prepared or audited by such accountants. Notwithstanding
the foregoing, except as expressly provided for herein, neither party shall
be
obligated to make available to the other any of their respective board of
directors’ materials relating to the assessment or evaluation of the
transactions contemplated hereby or any alternative transactions nor any
information supplied by any of their respective officers, directors, employees,
financial advisors, legal advisors, representatives and agents in connection
therewith.
c. Gran
Tierra and Solana shall cooperate in the preparation and prompt filing by Gran
Tierra of the Joint Proxy Statement and the Registration Statement with the
SEC;
42.
d. Each
of
Gran Tierra and Solana will promptly notify the other in writing: (i) of
any event occurring subsequent to the date of this Agreement which would render
any representation and warranty of such party contained in this Agreement untrue
or inaccurate in any material respect; (ii) of any event, change or effect
having, or likely to have, a Material Adverse Effect on such party; and
(iii) of any breach by such party of any material covenant or agreement
contained in this Agreement; and
e. Each
of
Gran Tierra and Solana will use its commercially reasonable efforts to satisfy
or cause to be satisfied as soon as reasonably practicable all the conditions
precedent that are set forth in Article 6 hereof, and each of Gran Tierra and
Solana will use its commercially reasonable efforts to cause the Arrangement
and
the other transactions contemplated by this Agreement to be consummated as
soon
as reasonably practicable.
5.2 Additional
Agreements of Solana
Solana
agrees that, except as expressly contemplated by this Agreement or as otherwise
agreed to in writing by Gran Tierra, from the date hereof to the earlier of
the
Effective Date or the termination of this Agreement pursuant to Article 7 (the
“Pre-Closing
Period”),
it
will, and will cause each of the Solana Subsidiaries, to:
a. Other
than as contemplated by this Agreement, operate its business only in the usual,
regular and ordinary manner and, to the extent consistent with such operation,
use all commercially reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees,
and preserve its relationships with customers, suppliers, distributors and
others having business dealings with it;
b. Maintain
all of its property and assets in customary repair, order, and condition,
reasonable wear and use and damage by fire or unavoidable casualty
excepted;
c. Maintain
its books of account and records in the usual, regular and ordinary manner,
in
accordance with generally accepted accounting principles applied on a consistent
basis;
d. Duly
comply in all material respects with all laws applicable to it and to the
conduct of its business;
e. Not:
(i) enter into any contracts of employment which: (A) cannot be
terminated on notice of 60 days or less; (B) provide for any severance
payments or benefits covering a period beyond the termination date of such
employment contract, except as may be required by law; (C) increase the
compensation of any officer of Solana; or (D) make any payment to any officer,
director or employee of Solana outside of the ordinary course of business;
or
(ii) amend or make any contributions to any employee benefit plan or stock
option plan, except as may be required for compliance with this Agreement or
applicable law;
43.
f. Not,
directly or indirectly, do or permit to occur any of the following: (i) sell,
pledge, dispose of or encumber any assets, except for production in the ordinary
course, for consideration in excess of $500,000 individually or $2,000,000
in
the aggregate; (ii) expend or commit to expend more than $500,000 individually
or $2,000,000 in the aggregate with respect to any capital expenditures except
to the extent that such expenditures are set forth in the capital budget of
Solana disclosed to Gran Tierra prior to the date hereof; (iii) expend or commit
to expend any amounts with respect to any operating expenses other than in
the
ordinary course of business or pursuant to the Arrangement; (iv) reorganize,
amalgamate, merge or otherwise combine Solana or any of the Solana Subsidiaries
with any other person; (v) acquire (by merger, amalgamation, consolidation
or
acquisition of shares or assets) any corporation, trust, partnership or other
business organization or division thereof which is not a Solana Subsidiary
or
affiliate of Solana, or make any investment therein either by purchase of shares
or securities, contributions of capital or property transfer; (vi) acquire
any
assets with an acquisition cost in excess of $500,000 individually or $2,000,000
in the aggregate; (vii) incur any indebtedness for borrowed money in excess
of
existing credit facilities, or any other material liability or obligation or
issue any debt securities or assume, guarantee, endorse or otherwise become
responsible for, the obligations of any other individual or entity, or make
any
loans or advances, other than in respect of fees payable to legal, financial
and
other advisors in the ordinary course of business or in respect of the
Arrangement; (viii) authorize, recommend or propose any release or
relinquishment of any material contract right; (ix) waive, release, grant or
transfer any material rights of value or modify or change in any material
respect any existing material license, lease, contract, production sharing
agreement, government land concession or other material document; (x) pay,
discharge or satisfy any material claims, liabilities or obligations other
than
as reflected or reserved against in the Solana Canadian Securities Reports
or
otherwise in the ordinary course of business; (xi) enter into or terminate
any
xxxxxx, swaps or other financial instruments or like transactions; (xii) enter
into any agreements for the sale of production having a term of more than thirty
(30) days; (xiii) enter into any material consulting or contract operating
agreement that cannot be terminated on thirty (30) days or less notice without
penalty; or (xiv) authorize or propose any of the foregoing, or enter into
or
modify any contract, agreement, commitment or arrangement to do any of the
foregoing;
g. Not
sell,
dispose of, or encumber, any property or assets, except for sales, dispositions
or Encumbrances in the ordinary course of business consistent with prior
practice;
h. Not
amend
its charter documents or bylaws or other organizational documents or merge
or
consolidate with or into any other entity or change in any manner the rights
of
its capital stock or the character of its business;
i. Not
issue
or sell (except upon the exercise of outstanding Solana Options and Solana
Warrants), or issue options or rights to subscribe to, or enter into any
contract or commitment to issue or sell, any shares of its capital stock or
subdivide or in any way reclassify any shares of its capital stock, or acquire,
or agree to acquire, any shares of its capital stock;
j. Not,
directly or indirectly, do or permit to occur any of the following: (i) redeem,
purchase or otherwise acquire any of the outstanding Solana or Solana
Subsidiaries’ common shares or other securities; (ii) split, combine or
reclassify any of the Solana or Solana Subsidiaries’ common shares or other
securities; (iii) adopt a plan of liquidation or resolutions providing for
Solana or any Solana Subsidiary’s liquidation, dissolution, merger,
consolidation or reorganization; or (iv) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
44.
k. Not
declare or pay any dividend on shares of its capital stock or make any other
distribution of assets to the holders thereof;
l. Promptly
notify Gran Tierra of any event or circumstance that could reasonably be
expected to result in a Material Adverse Effect on Solana;
m. Use
its
reasonable commercial efforts to organize its internal control over financial
reporting and disclosure controls and procedures so as to enable Gran Tierra
to
comply with the applicable provisions of the Xxxxxxxx-Xxxxx
Act of 2002;
n. Deliver
to Gran Tierra, within 40 days after the end of each fiscal quarter of Solana
beginning June 30, 2008, and through the Effective Date, unaudited consolidated
balance sheets and related unaudited statements of income and changes in
financial position as of the end of each fiscal quarter of Solana, and as of
the
corresponding fiscal quarter of the previous fiscal year. Solana hereby
represents and warrants that such unaudited consolidated financial statements
shall (i) be complete in all material respects except for the omission of
notes and schedules contained in audited financial statements, (ii) present
fairly in all material respects the financial condition of Solana as at the
dates indicated and the results of operations for the respective periods
indicated, (iii) shall have been prepared in accordance with Canadian
generally accepted accounting principles applied on a consistent basis, except
as noted therein, and (iv) shall contain all adjustments which Solana considers
necessary for a fair presentation of its results for each respective fiscal
period;
o. Not
take
any action or permit any action to be taken, inconsistent with this Agreement,
which might directly or indirectly interfere or affect the consummation of
the
Arrangement, and Solana shall take all commercially reasonable actions to give
effect to the transactions contemplated by this Agreement and the Arrangement;
p. Take
all
actions required, including by the Solana’s Board of Directors calling the
Solana Securityholders Meeting and recommending that Solana Securityholders
approve this Agreement and the Arrangement;
q. Immediately
cease and cause to be terminated all existing discussions and negotiations
(including, without limitation, through any of its officers, directors,
employees, advisors, representatives and agents (“Solana
Representatives”)
on its
behalf), if any, with any other person initiated before the date of this
Agreement with respect to any Solana Acquisition Proposal (as hereinafter
defined) and shall immediately request the return or destruction of all
information provided to any third parties which have entered into a
confidentiality agreement with Solana relating to an Solana Acquisition Proposal
and shall use all reasonable commercial efforts to ensure that such requests
are
honoured;
r. Not,
directly or indirectly, do or authorize or permit any of the Solana
Representatives to do, any of the following:
i. solicit,
facilitate, initiate or encourage or take any action to solicit, facilitate
or
encourage any Solana Acquisition Proposal;
45.
ii. enter
into or participate in any negotiations or initiate any discussion regarding
an
Solana Acquisition Proposal, or furnish to any other person any information
with
respect to its business, properties, operations, prospects or conditions
(financial or otherwise) in connection with an Solana Acquisition Proposal
or
otherwise cooperate in any way with, or assist or participate in, facilitate
or
encourage, any effort or attempt of any other person to do or seek to do any
of
the foregoing;
iii. waive,
or
otherwise forbear in the enforcement of, or enter into or participate in any
discussions, negotiations or agreements to waive or otherwise forbear in respect
of, any rights or other benefits under confidential information agreements,
including, without limitation, any “standstill provisions” thereunder;
or
iv. accept,
recommend, approve or enter into an agreement to implement an Solana Acquisition
Proposal;
provided,
however, that notwithstanding any other provision hereof, Solana and the Solana
Representatives may, except in the case of Subsection (vi), Solana and the
Solana Representatives shall:
v. enter
into or participate in any negotiations or discussions with a third party who
(without any solicitation, initiation or encouragement, directly or indirectly,
after the date of this Agreement, by Solana or any of the Solana
Representatives) seeks to engage in such negotiations or discussions and,
subject to execution of a confidentiality agreement and standstill agreement
having terms and provisions substantially similar to the Confidentiality
Agreement (provided
that such confidentiality agreement shall provide for disclosure thereof (along
with all information provided thereunder) to Gran Tierra as set out below),
may
furnish to such third party information concerning Solana and its business,
properties and assets, in each case if, and only to the extent
that:
(A) the
third
party has first made a written bona
fide
Solana
Acquisition Proposal which the Solana Board of Directors determines in good
faith: (i) is funded, in that funds or other consideration necessary for the
Solana Acquisition Proposal are or are likely to be available; (ii) after
consultation with its financial advisor would, if consummated in accordance
with
its terms, result in a transaction financially superior for the Solana
Securityholders than the Arrangement (in its then current form) and can be
carried out in a reasonable timeframe; and (iii) after receiving the advice
of outside counsel, as reflected in minutes of the Solana Board of Directors
that the taking of such action is necessary for the Solana Board of Directors
to
discharge its fiduciary duties under applicable law (an “Solana
Superior Proposal”)
(and
for the purposes of this Agreement, a Solana Acquisition Proposal may include
a
Solana Acquisition Proposal made to Solana by a third party who has entered
into
an agreement with Solana that contains “standstill provisions”, provided that
such Solana Acquisition Proposal has not been solicited, initiated or encouraged
by Solana); and
(B) prior
to
furnishing such information to or entering into or participating in any such
negotiations or discussions with such third party, Solana provides prompt notice
to Gran Tierra to the effect that it is furnishing information to or entering
into or participating in discussions or negotiations with such third party,
together with an executed copy of the confidentiality agreement referenced
above, and if not previously provided to Gran Tierra, copies of all information
provided to such third party concurrently with the provision of such information
to such third party, and provided further that, Solana shall notify Gran Tierra
orally and in writing of any inquiries, offers or proposals with respect to
a
Solana Acquisition Proposal (which written notice shall include, without
limitation, a copy of such proposal (and any amendments or supplements thereto),
the identity of the person making it, if not previously provided to Gran Tierra,
copies of all information provided to such third party and all other information
reasonably requested by Gran Tierra), within 24 hours of the receipt thereof,
shall keep Gran Tierra informed of the status and details of any such inquiry,
offer or proposal and answer any questions of Gran Tierra with respect
thereto;
46.
vi. comply
with Multilateral Instrument 62-104 Take-Over
Bids and Issuer Bids
and
similar provisions under applicable Canadian securities laws; and
vii. accept,
recommend, approve or enter into an agreement to implement a Solana Superior
Proposal from a third party, but only if prior to such acceptance,
recommendation, approval or implementation, the Solana Board of Directors shall
have concluded in good faith, after considering all proposals to adjust the
terms and conditions of this Agreement as contemplated by Subsection (s) below
and after receiving the advice of outside counsel as reflected in the minutes
of
the board of directors of Solana, that the taking of such action is necessary
for the board of directors in discharge of its fiduciary duties under applicable
law and Solana complies with its obligations set forth in Subsection (iii)
below
and terminates this Agreement in accordance with Subsection 7.4(c) and
concurrently therewith pays the fee to Gran Tierra in accordance with Subsection
7.4(c).
s. Give
Gran
Tierra, if Solana receives a Solana Superior Proposal, orally and in writing,
at
least 72 hours advance notice of any decision by the Solana Board of Directors
to accept, recommend, approve or enter into an agreement to implement a Solana
Superior Proposal, which notice shall include a summary of the details of the
Solana Superior Proposal, including the identity of the third party making
the
Solana Superior Proposal. During such 72 hour period, Solana agrees not to
accept, recommend, approve or enter into any agreement to implement such Solana
Superior Proposal and not to release any the party making the Solana Superior
Proposal from any standstill provisions and shall not withdraw, redefine, modify
or change its recommendation in respect of the Arrangement. In addition, during
such 72 hour period, Solana shall and shall cause its financial and legal
advisors to, negotiate in good faith with Gran Tierra and its financial and
legal advisors to make such adjustments in the terms and conditions of this
Agreement and the Arrangement as would enable Solana to proceed with the
Arrangement as amended rather than the Solana Superior Proposal. In the event
Gran Tierra proposes to amend this Agreement and the Arrangement to provide
that
the Solana Securityholders shall receive a value per Solana Common Share equal
to or greater than the value per Solana Common Share provided in the Solana
Superior Proposal and so advises the Solana Board of Directors prior to the
expiry of such 72 hour period, the Solana Board
of
Directors
shall
not accept, recommend, approve or enter into any agreement to implement such
Solana Superior Proposal and shall not withdraw, redefine, modify or change
its
recommendation in respect of the Arrangement.
47.
For
the
purposes of this Agreement, “Solana
Acquisition Proposal”
means,
with respect to Solana, the making of any proposal or offer in writing to Solana
or the Solana Shareholders from any person or group of persons “acting jointly
or in concert” (within the meaning of the Securities
Act
(Alberta)) which constitutes, or may reasonably be expected to lead to (in
either case whether in one transaction or a series of transactions): (i) an
acquisition from Solana or the Solana Securityholders of 50% or more of the
voting securities of Solana; (ii) any acquisition of substantially all of the
assets of Solana; (iii) an amalgamation, arrangement, merger or consolidation
involving Solana; (iv) any take-over bid, issuer bid, exchange offer,
recapitalization, liquidation, dissolution, reorganization, business combination
or similar transaction involving Solana; or (v) any other transaction, the
consummation of which would or could reasonably be expected to impede, interfere
with, prevent or delay the transactions contemplated by this Agreement or the
Arrangement or which would or could reasonably be expected to materially reduce
the benefits to Gran Tierra under this Agreement or the Arrangement;
t. Use
its
reasonable commercial efforts to cause its current insurance (or re-insurance)
policies not to be cancelled or terminated or any of the coverage thereunder
to
lapse, unless simultaneously with such termination, cancellation or lapse,
replacement policies underwritten by insurance or re-insurance companies of
nationally recognized standing providing coverage equal to or greater than
the
coverage under the cancelled, terminated or lapsed policies for substantially
similar premiums are in full force and effect, and Solana will pay all premiums
in respect of such insurance policies that become due after the date
hereof;
u. Not
take
any action that would render, or may reasonably be expected to render, any
representation or warranty made by it in this Agreement untrue in any material
respect at any time prior to completion of the Arrangement or termination of
this Agreement, whichever first occurs;
v. Promptly
notify Gran Tierra in writing of any Material Adverse Change, or of any change
in any representation or warranty provided by Solana in this Agreement which
change is or may be of such a nature to render any representation or warranty
misleading or untrue in any material respect and Solana shall in good faith
discuss with Gran Tierra any change in circumstances (actual, anticipated,
contemplated, or to the knowledge of Solana, threatened) which is of such a
nature that there may be a reasonable question as to whether notice need to
be
given to Gran Tierra pursuant to this provision;
w. Ensure
that it has available funds under its lines of credit or other bank facilities
to permit the payment of the maximum amount which may be required by Section
7.4
having regard to its other liabilities and obligations, and shall take all
such
actions as may be necessary to ensure that it maintains such availability to
ensure that it is able to pay such amount when required;
x. Except
as
disclosed in the Solana Disclosure Letter, use its reasonable commercial efforts
to obtain the consent of its bankers (if required) and any other third party
consents required for the transactions contemplated hereby and provide the
same
to Gran Tierra on or prior to the Effective Date;
48.
y. Provide
notice to Gran Tierra of the Solana Securityholders Meeting and allow Gran
Tierra’s representatives to attend such meeting;
z. Ensure
that the Joint Proxy Statement provides Solana Securityholders with information
in sufficient detail to permit them to form a reasoned judgment concerning
the
matters before them, and shall include or incorporate by reference, without
limitation: (i) any financial statements in respect of prior acquisitions made
by Solana that are required to be included therein in accordance with applicable
law; (ii) the unanimous determination of the Solana Board of Directors that
the
Arrangement is fair to Solana Securityholders and is in the best interests
of
Solana Securityholders, and include the unanimous recommendation of the Solana
Board of Directors that the Solana Securityholders vote in favour of the
Arrangement; and (iii) the fairness opinion of Solana’s financial advisor dated
as of the date of the Joint Proxy Statement that the consideration to be
received by the Solana Securityholders under the Arrangement is fair, from
a
financial point of view, to Solana Securityholders; provided that,
notwithstanding the covenants of Solana in this subsection, prior to the
completion of the Arrangement, the Solana Board of Directors may withdraw,
modify or change the recommendation regarding the Arrangement if, in the opinion
of the Solana Board of Directors acting reasonably, having received the advice
of its outside legal counsel which is reflected in minutes of the meeting of
the
Solana Board of Directors, such withdrawal, modification or change is necessary
for the Solana Board of Directors to discharge its fiduciary duties under
applicable law and, if applicable, provided the Solana Board of Directors shall
have complied with the provisions of Subsections 5.2(r) and (s) and Section
7.4;
aa. Indemnify
and save harmless Gran Tierra and the directors, officers and agents of Gran
Tierra, as applicable, from and against any and all liabilities, claims,
demands, losses, costs, damages and expenses (excluding any loss of profits
or
consequential damages) to which Gran Tierra, or any director, officer or agent
thereof, may be subject or which Gran Tierra, or any director, officer or agent
thereof may suffer, whether under the provisions of any statute or otherwise,
in
any way caused by, or arising, directly or indirectly, from or in consequence
of:
i. any
misrepresentation or alleged misrepresentation in the Joint Proxy Statement
respecting Solana or in any material filed by Solana in compliance or intended
compliance with any applicable laws;
ii. any
order
made or any inquiry, investigation or proceeding by any securities commission
or
other competent authority based upon any untrue statement or omission or alleged
untrue statement or omission of a material fact or any misrepresentation or
any
alleged misrepresentation in the Joint Proxy Statement respecting Solana or
in
any material filed by or on behalf of Solana in compliance or intended
compliance with applicable Canadian and United States securities laws, which
prevents or restricts the trading in the Solana Common Shares; and
iii. Solana
not complying with any requirement of applicable law in connection with the
transactions contemplated by this Agreement;
except
that Solana shall not be liable in any such case to the extent that any such
liabilities, claims, demands, losses, costs, damages and expenses arise out
of
or are based upon any misrepresentation or alleged misrepresentation of a
material fact based solely on the information respecting Gran Tierra provided
by
Gran Tierra and included in the Joint Proxy Statement or the negligence of
Gran
Tierra;
49.
bb. Except
for proxies and other non-substantive communications with securityholders,
furnish promptly to Gran Tierra or Gran Tierra’s counsel, a copy of each notice,
report, schedule or other document delivered, filed or received by Solana in
connection with: (i) the Arrangement; (ii) the Solana Securityholders Meeting;
(iii) any filings under applicable law in connection with the transactions
contemplated hereby; and (iv) any dealings with Governmental Entities in
connection with the transactions contemplated hereby;
cc. Solicit
proxies to be voted at the Solana Securityholders Meeting in favour of matters
to be considered at the Solana Securityholders Meeting, including the
Arrangement, provided that Solana may, but shall not be required to, engage
a
proxy solicitation agent for such purpose;
dd. Conduct
the Solana Securityholders Meeting in accordance with the articles, by-laws,
and
other constating documents of Solana and any instrument governing the Solana
Securityholders Meeting (including, without limitation, the Interim Order),
as
applicable, and as otherwise required by applicable law;
ee. Make
all
necessary filings and applications under applicable law, including applicable
Canadian securities laws and U.S. securities laws, required to be made on the
part of Solana in connection with the transactions contemplated herein and
shall
take all reasonable action necessary to be in compliance with such applicable
law;
ff. Promptly
advise Gran Tierra in the event that dissent rights are given to Solana
Securityholders under the terms of the Interim Order, of the number of Solana
Securities for which Solana receives notices of dissent or written objections
to
the Arrangement and provide Gran Tierra with copies of such notices and written
objections;
gg. Cooperate
prior to the Effective Date with Gran Tierra in making application to list
the
Gran Tierra Shares issuable pursuant to the Arrangement on the TSX and on the
AMEX;
hh. Not
take
any action or permit any action to be taken, inconsistent with this Agreement,
which might reasonably be expected to directly or indirectly interfere or affect
the consummation of the Arrangement, and take all commercially reasonable
actions to give effect to the transactions contemplated by this Agreement and
the Arrangement;
ii. On
or
before the Effective Date, amend or terminate any Solana savings plan in a
manner satisfactory to Gran Tierra, acting reasonably, such that there shall
be
no continuing obligations to issue Solana Common Shares; and
jj. Take
such
actions as are reasonably necessary to reorganize their respective capital,
assets and structure as Gran Tierra may reasonably require, to the extent such
planning or structuring proposed by Gran Tierra does not cause prejudice or
result in any material additional costs (unless such costs are paid by Gran
Tierra) to Solana or a Solana Subsidiary; provided in no circumstances shall
Gran Tierra be required to take any action under this Section 5.2 (jj) if the
Gran Tierra Board of Directors, in its opinion, acting in good faith, after
consulting with outside legal counsel, determines that taking such action would
be in breach of applicable laws or would reasonably be likely to result in
the
board being in breach of its fiduciary obligations under all applicable
laws.
50.
5.3 Additional
Agreements of Gran Tierra
Gran
Tierra agrees that, except as expressly contemplated by this Agreement or as
otherwise agreed to in writing by Solana, during the Pre-Closing Period, it
will, and will cause each of the Gran Tierra Subsidiaries to:
a. Other
than as contemplated by this Agreement, operate its business only in the usual,
regular and ordinary manner and, to the extent consistent with such operation,
use all commercially reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees,
and preserve its relationships with customers, suppliers, distributors and
others having business dealings with it;
b. Maintain
all of its property and assets in customary repair, order, and condition,
reasonable wear and use, damage by fire or unavoidable casualty
excepted;
c. Maintain
its books of account and records in the usual, regular and ordinary manner,
in
accordance with generally accepted accounting principles applied on a consistent
basis;
d. Duly
comply in all material respects with all laws applicable to it and to the
conduct of its business;
e. Not:
(i) enter into any contracts of employment which: (A) cannot be
terminated on notice of 60 days or less; (B) provide for any severance
payments or benefits covering a period beyond the termination date of such
employment contract, except as may be required by law; (C) increase the
compensation of any officer of Gran Tierra; or (D) make any payment to any
officer, director or employee of Gran Tierra outside of the ordinary course
of
business; or (ii) amend or make any contributions to any employee benefit
plan or stock option plan, except as may be required for compliance with this
Agreement or applicable law;
f. Not,
directly or indirectly, do or permit to occur any of the following: (i) sell,
pledge, dispose of or encumber any assets, except for production in the ordinary
course, for consideration in excess of $500,000 individually or $2,000,000
in
the aggregate; (ii) expend or commit to expend more than $500,000 individually
or $2,000,000 in the aggregate with respect to any capital expenditures except
to the extent that such expenditures are set forth in the capital budget of
Gran
Tierra disclosed to Solana prior to the date hereof; (iii) expend or commit
to
expend any amounts with respect to any operating expenses other than in the
ordinary course of business or pursuant to the Arrangement; (iv) reorganize,
amalgamate, merge or otherwise combine Gran Tierra or any of the Gran Tierra
Subsidiaries with any other person; (v) acquire (by merger, amalgamation,
consolidation or acquisition of shares or assets) any corporation, trust,
partnership or other business organization or division thereof which is not
a
Gran Tierra Subsidiary or affiliate of Gran Tierra, or make any investment
therein either by purchase of shares or securities, contributions of capital
or
property transfer; (vi) acquire any assets with an acquisition cost in excess
of
$500,000 individually or $2,000,000 in the aggregate; (vii) incur any
indebtedness for borrowed money in excess of existing credit facilities, or
any
other material liability or obligation or issue any debt securities or assume,
guarantee, endorse or otherwise become responsible for, the obligations of
any
other individual or entity, or make any loans or advances, other than in respect
of fees payable to legal, financial and other advisors in the ordinary course
of
business or in respect of the Arrangement; (viii) authorize, recommend or
propose any release or relinquishment of any material contract right; (ix)
waive, release, grant or transfer any material rights of value or modify or
change in any material respect any existing material license, lease, contract,
production sharing agreement, government land concession or other material
document; (x) pay, discharge or satisfy any material claims, liabilities or
obligations other than as reflected or reserved against in the Gran Tierra
Securities Reports or otherwise in the ordinary course of business; (xi) enter
into or terminate any xxxxxx, swaps or other financial instruments or like
transactions; (xii) enter into any agreements for the sale of production having
a term of more than thirty (30) days; (xiii) enter into any material consulting
or contract operating agreement that cannot be terminated on thirty (30) days
or
less notice without penalty; or (xiv) authorize or propose any of the foregoing,
or enter into or modify any contract, agreement, commitment or arrangement
to do
any of the foregoing;
51.
g. Not
sell,
dispose of, or encumber, any property or assets, except for sales, dispositions
or Encumbrances in the ordinary course of business consistent with prior
practice;
h. Not
amend
its charter documents or bylaws or other organizational documents or merge
or
consolidate with or into any other entity or change in any manner the rights
of
its capital stock or the character of its business;
i. Not
issue
or sell (except upon the exercise of outstanding Gran Tierra Options and Gran
Tierra Warrants or exchange of exchangeable shares outstanding), or issue
options or rights to subscribe to, or enter into any contract or commitment
to
issue or sell, any shares of its capital stock or subdivide or in any way
reclassify any shares of its capital stock, or acquire, or agree to acquire,
any
shares of its capital stock;
j. Not,
directly or indirectly, do or permit to occur any of the following: (i) redeem,
purchase or otherwise acquire any of the outstanding Gran Tierra or Gran Tierra
Subsidiaries’ common shares or other securities; (ii) split, combine or
reclassify any of the Gran Tierra or Gran Tierra Subsidiaries’ common shares or
other securities; (iii) adopt a plan of liquidation or resolutions providing
for
Gran Tierra or any Gran Tierra Subsidiary’s liquidation, dissolution, merger,
consolidation or reorganization; or (iv) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
k. Not
declare or pay any dividend on shares of its capital stock or make any other
distribution of assets to the holders thereof;
l. Promptly
notify Solana of any event or circumstance that could reasonably be expected
to
result in a Material Adverse Effect on Gran Tierra;
52.
m. Deliver
to Solana, within 40 days after the end of each fiscal quarter of Gran Tierra
beginning June 30, 2008, and through the Effective Date, unaudited consolidated
balance sheets and related unaudited statements of income and changes in
financial position as of the end of each fiscal quarter of Gran Tierra, and
as
of the corresponding fiscal quarter of the previous fiscal year. Gran Tierra
hereby represents and warrants that such unaudited consolidated financial
statements shall (i) be complete in all material respects except for the
omission of notes and schedules contained in audited financial statements,
(ii) present fairly in all material respects the financial condition of
Gran Tierra as at the dates indicated and the results of operations for the
respective periods indicated, (iii) shall have been prepared in accordance
with U.S. generally accepted accounting principles applied on a consistent
basis, except as noted therein, and (iv) shall contain all adjustments which
Gran Tierra considers necessary for a fair presentation of its results for
each
respective fiscal period;
n. Not
take
any action or permit any action to be taken, inconsistent with this Agreement,
which might directly or indirectly interfere or affect the consummation of
the
Arrangement, and Gran Tierra shall take all commercially reasonable actions
to
give effect to the transactions contemplated by this Agreement and the
Arrangement;
o. Take
all
actions required, including by the Gran Tierra Board of Directors calling the
Gran Tierra Stockholders Meeting and recommending that Gran Tierra Stockholders
vote in favor of a proposal to approve the issuance of Gran Tierra’s Common
Stock issuable as contemplated in the Arrangement;
p. Use
its
reasonable commercial efforts to cause its current insurance (or re-insurance)
policies not to be cancelled or terminated or any of the coverage thereunder
to
lapse, unless simultaneously with such termination, cancellation or lapse,
replacement policies underwritten by insurance or re-insurance companies of
nationally recognized standing providing coverage equal to or greater than
the
coverage under the cancelled, terminated or lapsed policies for substantially
similar premiums are in full force and effect, and Gran Tierra will pay all
premiums in respect of such insurance policies that become due after the date
hereof;
q. Not
take
any action that would render, or may reasonably be expected to render, any
representation or warranty made by it in this Agreement untrue in any material
respect at any time prior to completion of the Arrangement or termination of
this Agreement, whichever first occurs;
r. Promptly
notify Solana in writing of any Material Adverse Change or of any change in
any
representation or warranty provided by Gran Tierra in this Agreement which
change is or may be of such a nature to render any representation or warranty
misleading or untrue in any material respect and Gran Tierra shall in good
faith
discuss with Solana any change in circumstances (actual, anticipated,
contemplated, or to the knowledge of Gran Tierra, threatened) which is of such
a
nature that there may be a reasonable question as to whether notice need to
be
given to Solana pursuant to this provision;
s. Ensure
that it has available funds under its lines of credit or other bank facilities
to permit the payment of the maximum amount which may be required by Section
7.4
having regard to its other liabilities and obligations, and shall take all
such
actions as may be necessary to ensure that it maintains such availability to
ensure that it is able to pay such amount when required;
53.
t. Except
as
disclosed in the Gran Tierra Disclosure Letter, use its reasonable commercial
efforts to obtain the consent of its bankers (if required) and any other third
party consents required for the transactions contemplated hereby and provide
the
same to Solana on or prior to the Effective Date;
u. Provide
notice to Solana of the Gran Tierra Stockholders Meeting and allow Solana’s
representatives to attend such meeting;
v. Ensure
that the Joint Proxy Statement provides Gran Tierra Stockholders with
information in sufficient detail to permit them to form a reasoned judgment
concerning the matters before them, and shall include or incorporate by
reference, without limitation: (i) any financial statements in respect of prior
acquisitions made by Gran Tierra that are required to be included therein in
accordance with applicable law; (ii) the unanimous determination of the Gran
Tierra Board of Directors that the issuance of the shares of Gran Tierra Common
Stock, issuable in connection with the transactions contemplated by this
Agreement and the Plan of Arrangement, is in the best interests of Gran Tierra
Stockholders, and include the unanimous recommendation of the Gran Tierra Board
of Directors that the Gran Tierra Stockholders vote in favor of a proposal
to
approve the issuance of Gran Tierra’s Common Stock issuable as contemplated by
the Arrangement; and (iii) the fairness opinion of Gran Tierra’s financial
advisor dated as of the date of the Joint Proxy Statement;
w. Indemnify
and save harmless Solana and the directors, officers and agents of Solana,
as
applicable, from and against any and all liabilities, claims, demands, losses,
costs, damages and expenses (excluding any loss of profits or consequential
damages) to which Solana, or any director, officer or agent thereof, may be
subject or which Solana, or any director, officer or agent thereof may suffer,
whether under the provisions of any statute or otherwise, in any way caused
by,
or arising, directly or indirectly, from or in consequence of:
i. any
misrepresentation or alleged misrepresentation in the Joint Proxy Circular
respecting Gran Tierra or in any material filed by Gran Tierra in compliance
or
intended compliance with any applicable laws;
ii. any
order
made or any inquiry, investigation or proceeding by any securities commission
or
other competent authority based upon any untrue statement or omission or alleged
untrue statement or omission of a material fact or any misrepresentation or
any
alleged misrepresentation in the Joint Proxy Statement respecting Gran Tierra
or
in any material filed by or on behalf of Gran Tierra in compliance or intended
compliance with applicable Canadian and United States securities laws, which
prevents or restricts the trading in the Gran Tierra Common Stock;
and
iii. Gran
Tierra not complying with any requirement of applicable law in connection with
the transactions contemplated by this Agreement;
except
that Gran Tierra shall not be liable in any such case to the extent that any
such liabilities, claims, demands, losses, costs, damages and expenses arise
out
of or are based upon any misrepresentation or alleged misrepresentation of
a
material fact based solely on the information respecting Solana provided by
Solana and included in the Joint Proxy Statement or the negligence of
Solana;
54.
x. Except
for proxies and other non-substantive communications with securityholders,
Gran
Tierra will furnish promptly to Solana or Solana’s counsel, a copy of each
notice, report, schedule or other document delivered, filed or received by
Gran
Tierra in connection with: (i) the Arrangement; (ii) the Gran Tierra
Stockholders Meeting; (iii) any filings under applicable law in connection
with
the transactions contemplated hereby; and (iv) any dealings with Governmental
Entities in connection with the transactions contemplated hereby;
y. Solicit
proxies to be voted at the Gran Tierra Stockholders Meeting in favour of matters
to be considered at the Gran Tierra Stockholders Meeting, including the issuance
of the shares of Gran Tierra Common Stock, issuable in connection with the
transactions contemplated by this Agreement and the Plan of Arrangement,
provided that Gran Tierra may, but shall not be required to, engage a proxy
solicitation agent for such purpose;
z. Conduct
the Gran Tierra Stockholders Meeting in accordance with the articles, by-laws,
and other constating documents of Gran Tierra and any instrument governing
the
Gran Tierra Stockholders Meeting, as applicable, and as otherwise required
by
applicable law;
aa. Make
all
necessary filings and applications under applicable law, including applicable
Canadian securities laws and U.S. securities laws, required to be made on the
part of Gran Tierra in connection with the transactions contemplated herein
and
shall take all reasonable action necessary to be in compliance with such
applicable law;
bb. Prior
to
the Effective Date, make application to list the Gran Tierra Shares issuable
pursuant to the Arrangement on the TSX and on the AMEX;
cc. Take
all
actions required, including by the Gran Tierra Board of Directors, to ensure
that following the Effective Time the Gran Tierra Board of Directors shall
be
increased by two members, and that two designees of Solana are elected to the
Gran Tierra Board of Directors;
dd. Not
take
any action or permit any action to be taken, inconsistent with this Agreement,
which might reasonably be expected to directly or indirectly interfere or affect
the consummation of the Arrangement, and Solana shall take all commercially
reasonable actions to give effect to the transactions contemplated by this
Agreement and the Arrangement; and
ee. Keep
all
information that Gran Tierra receives from Solana with respect to any Solana
Superior Proposal pursuant hereto confidential and shall not be disclosed or
used except to the extent required by applicable law or to enforce its rights
under this Agreement in legal proceedings and ensure that the Solana
Representatives are aware of this obligation.
5.4 Public
Announcements
Neither
Gran Tierra nor Solana, nor any of their respective affiliates, shall issue
or
cause the publication of any press release or other public announcement with
respect to this Agreement, the Arrangement or the other transactions
contemplated hereby without the prior notice to and the opportunity for review
by the other party, except as may be required by law or by any listing agreement
with a U.S. national securities exchange, the AIM or a Canadian stock exchange.
55.
5.5 Comfort
Letters
a. Upon
request of Gran Tierra, Solana shall use its commercially reasonable efforts
to
cause to be delivered to Gran Tierra a letter (the “Solana
Comfort Letter”)
of
Deloitte & Touche LLP, Chartered Accountants, addressed to Gran Tierra and
dated as of a date within five days before the earlier of (i) the date the
Joint Proxy Statement is first mailed to each company’s respective
securityholders; and (ii) if a Registration Statement is required, the date
on which the Registration Statement shall become effective, in form and
substance reasonably satisfactory to Gran Tierra and customary in scope and
substance for “comfort” letters delivered by independent public accountants in
connection with proxy statements and registration statements similar to the
Joint Proxy Statement and the Registration Statement.
b. Upon
request of Solana, Gran Tierra shall use its commercially reasonable efforts
to
cause to be delivered to Solana a letter (the “Gran
Tierra Comfort Letter”)
of
Deloitte & Touche LLP, Chartered Accountants, addressed to Solana and dated
as of a date within five days before the earlier of (i) the date the Joint
Proxy Statement is first mailed to each company’s respective securityholders;
and (ii) if a Registration Statement is required, the date on which the
Registration Statement shall become effective, in form and substance reasonably
satisfactory to Solana and customary in scope and substance for “comfort”
letters delivered by independent public accountants in connection with proxy
statements and registration statements similar to the Joint Proxy Statement
and
the Registration Statement.
ARTICLE
6
CONDITIONS
PRECEDENT TO OBLIGATIONS
6.1 Conditions
Precedent to Obligations of Each Party
The
obligations of each party to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction or waiver at or before the
Closing (as defined below) of the following conditions:
a. Interim
Order.
The
Interim Order shall have been granted in form and substance satisfactory to
each
of Gran Tierra and Solana, acting reasonably, and such order shall not have
been
set aside or modified in a manner unacceptable to Gran Tierra and Solana, acting
reasonably, on appeal or otherwise;
b. Securityholder
Approval.
The
Arrangement and the other transactions contemplated hereby shall have been
approved and adopted on or prior to the Termination Date (as defined below)
by
the Solana Securityholders in accordance with applicable law and the Interim
Order, and Solana shall not have received on or prior to the time on the
Effective Date when the Arrangement becomes effective (the “Effective
Time”)
notice
from the holders of more than 5% of the issued and outstanding Solana Common
Shares, in aggregate, of their intention to exercise their rights of dissent
under section 191 of the ABCA, as modified by the Interim Order, which notices
have not been withdrawn as of the Effective Time. In addition, the matters
referred to in Section 8.1 shall have been approved by the holders of shares
of
the Gran Tierra Common Stock in accordance with the rules of the AMEX and TSX,
applicable law and Gran Tierra’s Articles of Incorporation and
bylaws;
56.
c. No
Legal Action.
No act,
action, suit, proceeding, objection or opposition shall have been threatened
or
taken before or by any domestic or foreign court, tribunal or Governmental
Entity or other regulatory or administrative agency or commission by any elected
or appointed public official, whether or not having the force of law, and no
law, regulation, policy, judgment, decision, order, ruling or directive (whether
or not having the force of law) shall have been proposed, enacted, promulgated,
amended or applied, which in the judgment of Gran Tierra or Solana (as
applicable), acting reasonably, in either case has had or, if the Arrangement
was consummated, would result in a Material Adverse Change in the affairs,
operations or business of Solana or Gran Tierra, respectively, or would prevent
the parties from completing the Arrangement;
d. Court
Approval.
The
Court shall have issued the Final Order in form and substance reasonably
satisfactory to Gran Tierra and Solana (such approvals not to be unreasonably
withheld or delayed by Gran Tierra or Solana) and reflecting the terms
hereof;
e. Regulatory
Approvals and Exchange Compliance. All
required domestic and foreign regulatory, governmental (including, without
limitation and to the extent required, approval by the Superintendency of
Industry and Commerce, the Colombian antitrust authority, pursuant to the
Colombian merger control regime) and third party approvals and consents in
respect of the completion of the Arrangement shall have been obtained, or
required notices given, on terms and conditions satisfactory to Gran Tierra
and
Solana, each acting reasonably, including, without limitation conditional
approval to the listing of the Gran Tierra Common Stock issuable pursuant to
the
Arrangement on the TSX and the AMEX, and the approval of the TSX Venture
Exchange, to the extent required, and all applicable domestic and foreign
statutory and regulatory waiting periods shall have expired or have been
terminated and no unresolved material objection or opposition shall have been
filed, initiated or made during any applicable statutory or regulatory
period;
f. SEC
Matters.
The
Registration Statement shall have been declared effective under the Securities
Act and, on the Effective Date, the Registration Statement shall not be the
subject of any stop-order or proceedings seeking a stop-order, and the Joint
Proxy Statement shall, at the Effective Time, not be subject to any similar
proceedings commenced or threatened by the SEC or the Commissions;
g. Articles
of Arrangement.
The
Articles of Arrangement to be filed with the Registrar in accordance with the
Arrangement shall be in form and substance satisfactory to each of Gran Tierra
and Solana, acting reasonably;
h. Outside
Date.
The
Arrangement shall have become effective on or prior to the Termination
Date;
57.
i. Lender
Approval.
If
required, the Arrangement, and the consummation thereof, shall have been
approved by Gran Tierra’s and Solana’s lenders on a basis acceptable to Gran
Tierra and Solana, each acting reasonably;
The
foregoing conditions are for the mutual benefit of Gran Tierra and Solana and
may be asserted by Gran Tierra or Solana regardless of the circumstances and
may
be waived by Gran Tierra and Solana (with respect to such party) in their sole
discretion, in whole or in part, at any time and from time to time without
prejudice to any other rights which Gran Tierra or Solana may have.
6.2 Conditions
Precedent to Obligations of Solana
The
obligations of Solana to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction or waiver at or before the
Closing of the following conditions:
a. Resolutions.
Gran
Tierra shall have furnished Solana with:
i. certified
copies of the resolutions duly passed by the Gran Tierra Board of Directors
and
the Gran Tierra Exchangeco Board of Directors approving this Agreement and
the
consummation of the transactions contemplated hereby; and
ii. certified
copies of the resolutions of Gran Tierra Stockholders duly passed at the Gran
Tierra Stockholder Meeting, approving the issuance of the shares of Gran Tierra
Common Stock, issuable in connection with the transactions contemplated by
this
Agreement and the Plan of Arrangement;
b. Representations
and Warranties. The
representations and warranties made by Gran Tierra in this Agreement shall
be
true and correct as of the Effective Date as if made on and as of such date
(without giving effect to any materiality qualifiers contained therein) (except
to the extent such representations and warranties speak as of an earlier date,
in which case such representations and warranties shall have been true and
correct as of that earlier date, or except as affected by transactions permitted
by this Agreement), except where the failure of such representations and
warranties to be true and correct, individually or in the aggregate, would
not
result or would not reasonably be expected to result in a Material Adverse
Change in respect of Gran Tierra or would not, or would not reasonably be
expected to, materially impede completion of the Arrangement, and Gran Tierra
shall have provided to Solana a certificate of two senior officers certifying
such accuracy on the Effective Date;
c. No
Material Adverse Change. No
Material Adverse Change shall have occurred in the business, operations, assets,
capitalization or prospects of Gran Tierra from and after the date hereof and
prior to the Effective Date, and no Material Adverse Change in the financial
condition of Gran Tierra shall have occurred after the date hereof and prior
to
the Effective Date from that reflected in the Gran Tierra financial statements
reflected in the Gran Tierra Form 10-Q for the quarter ended March 31, 2008
or
otherwise disclosed in the Gran Tierra Disclosure Letter;
58.
d. Compliance
with Covenants. Gran
Tierra shall have complied in all material respects with its covenants herein,
and Gran Tierra shall have provided to Solana a certificate of two senior
officers certifying compliance with such covenants; and
e. Debt
Threshold. At
the
Effective Time, Gran Tierra’s Debt is $nil.
The
conditions in this Section 6.2 are for the exclusive benefit of Solana and
may
be asserted by Solana regardless of the circumstances or may be waived by Solana
in its sole discretion, in whole or in part, at any time and from time to time
without prejudice to any other rights which Solana may have.
6.3 Conditions
Precedent to Obligations of Gran Tierra
The
obligations of Gran Tierra to consummate and effect the transactions
contemplated hereunder shall be subject to the satisfaction or waiver on or
before the Effective Date of the following conditions:
a. Resolutions.
Solana
shall have furnished Gran Tierra with:
i. certified
copies of the resolutions duly passed by the Solana Board of Directors approving
this Agreement and the consummation of the transactions contemplated hereby;
and
ii. certified
copies of the resolutions of Solana Securityholders duly passed at the Solana
Securityholder Meeting, approving the Arrangement;
b. Representations
and Warranties. The
representations and warranties made by Solana in this Agreement shall be true
and correct as of the Effective Date as if made on and as of such date (without
giving effect to any materiality qualifiers contained therein) (except to the
extent such representations and warranties speak as of an earlier date, in
which
case such representations and warranties shall have been true and correct as
of
that earlier date, or except as affected by transactions contemplated or
permitted by this Agreement), except where the failure of such representations
and warranties to be true and correct, individually or in the aggregate, would
not result or would not reasonably be expected to result in a Material Adverse
Change in respect of Solana or would not, or would not reasonably be expected
to, materially impede completion of the Arrangement, and Solana shall have
provided to Gran Tierra a certificate of two senior officers certifying such
accuracy on the Effective Date;
c. No
Material Adverse Change. No
Material Adverse Change shall have occurred in the business, operations, assets,
capitalization or prospects of Solana from and after the date hereof and prior
to the Effective Date, and no Material Adverse Change in the financial condition
of Solana shall have occurred from and after the date hereof and prior to the
Effective Date from that reflected in the Solana financial statements contained
in the Solana Canadian Securities Reports with respect to the quarter ended
March 31, 2008 or otherwise disclosed in the Solana Disclosure
Letter;
59.
d. Compliance
with Covenants. Solana
shall have complied in all material respects with its covenants herein, and
Solana shall have provided to Gran Tierra a certificate of two senior officers
certifying compliance with such covenants;
e. Debt
Threshold. At
the
Effective Time, Solana’s Debt is $nil;
f. Solana
Options and Solana Warrants. All
of
the outstanding Solana Options and Solana Warrants shall have been exercised,
exchanged or converted or shall terminate in accordance with the provisions
of
Section 3.1 of the Plan of Arrangement or otherwise shall have been dealt with
on a basis acceptable to Gran Tierra;
g. Loans.
All
outstanding Solana loans owing to Solana by any director or officer of Solana
shall have been repaid in full;
h. Resignations
and Releases. Gran
Tierra shall have received resignations and releases effective as of the
Effective Time, in form satisfactory to Gran Tierra, from all of the directors
and officers of Solana; and
i. Non-Solicitation
Agreements. Gran
Tierra shall have received executed copies of the Non-Solicitation Agreement,
on
or before the Effective Date, substantially in the form attached hereto as
Exhibit D, from Xxxxx Xxx Xxxxxx and Xxxxxxx Xxxxxx.
The
conditions in this Section 6.3 are for the exclusive benefit of Gran Tierra
and
may be asserted by Gran Tierra regardless of the circumstances or may be waived
by Gran Tierra in its sole discretion, in whole or in part, at any time and
from
time to time without prejudice to any other rights which Gran Tierra may
have.
6.4 Satisfaction
of Conditions
The
conditions set out in this Article 6 are conclusively deemed to have been
satisfied, waived or released when, with the agreement of the parties, Articles
of Arrangement are filed under the ABCA to give effect to the
Arrangement.
ARTICLE
7
TERMINATION
7.1 Termination
This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after approval of the transactions contemplated hereby by the
securityholders entitled to vote of Gran Tierra or Solana, as
follows:
a. by
mutual
agreement of Solana and Gran Tierra;
b. by
Solana, if Gran Tierra fails to satisfy the condition set forth in Section
6.2(b) of the Agreement;
60.
c. by
Gran
Tierra, if Solana fails to satisfy the condition set forth in Section 6.3(b)
of
the Agreement;
d. by
either
party, if all the conditions for Closing the Arrangement for the benefit of
such
party shall not have been satisfied or waived on or before 5:00 p.m., Calgary,
Alberta time on November 15, 2008 (the “Termination
Date”);
e. by
either
party: (i) if the securityholders of Solana do not approve the Arrangement
(and the other matters to be approved at such meeting as provided in Section
8.1
hereof) at the Solana Securityholders Meeting; or (ii) if the stockholders
of Gran Tierra do not approve at the Gran Tierra Stockholders Meeting the
issuance of Gran Tierra Common Stock issuable as contemplated by the Arrangement
at the Gran Tierra Stockholders Meeting;
f. by
either
party if a final and non-appealable order shall have been entered in any action
or proceeding before any Governmental Entity that prevents or makes illegal
the
consummation of the Arrangement;
g. by
Solana
if the Gran Tierra Board of Directors or any committee of the Gran Tierra Board
of Directors shall withdraw or modify in any adverse manner its approval or
recommendation of this Agreement, the Arrangement and the other transactions
contemplated hereby;
h. by
Gran
Tierra if the Solana Board of Directors or any committee of the Solana Board
of
Directors shall (i) withdraw or modify in any adverse manner its approval
or recommendation in respect of this Agreement, the Arrangement and the other
transactions contemplated hereby or (ii) fails to reaffirm its approval or
recommendation upon request, from time to time, by Gran Tierra to do so or
upon
an Solana Acquisition Proposal in respect of Solana being publicly announced
or
is proposed, offered or made to the Solana Securityholders or to Solana (such
reaffirmation to be made within 10 days of such request being made or such
Solana Acquisition Proposal being publicly announced, proposed, offered or
made
or immediately prior to the meeting of Solana Securityholders, whichever occurs
first);
i. by
Solana, prior to the approval of this Agreement and the Arrangement and the
other transactions contemplated hereby by the Solana Securityholders if, as
a
result of a Solana Superior Proposal by a party other than Gran Tierra or any
of
its affiliates, Solana’s board of directors determines in accordance with
Section 5.2(s) to accept, recommend, approve or implement such Solana Superior
Proposal and has otherwise complied with the provisions of Section 5.2(s) and
Section 7.4.
7.2 Notice
of Termination
Any
termination of this Agreement under subsections 7.1(b) through (i) above will
be
effected by the delivery of written notice by the terminating party to the
other
party hereto.
7.3 Effect
of Termination
Subject
to Section 7.4, in the event of termination of this Agreement by either Solana
or Gran Tierra pursuant to Section 7.1, this Agreement shall forthwith become
void and have no effect, and there shall be no liability or obligation on the
part of Gran Tierra or Solana or their respective officers or directors, except
that: (i) the provisions of Section 7.4 shall survive such termination;
(ii) the provisions of the Confidentiality Agreement, shall survive any
such termination; and (iii) no party shall be released or relieved from any
liability arising from the breach by such party of any of its representations,
warranties, covenants or agreements as set forth in this Agreement.
61.
7.4 Termination
Fee
a. If
this
Agreement is terminated by Solana pursuant to Section 7.1(b), then Gran Tierra
shall pay to Solana a cash termination fee equal to Solana’s transaction costs
(including the fees and costs of professional advisors) incurred in connection
with negotiation and performance of the Arrangement and related transactions,
subject to a maximum expense reimbursement of $1.5 million, at the time of
such
termination.
b. If
this
Agreement is terminated by Gran Tierra pursuant to Section 7.1(c), then Solana
shall pay to Gran Tierra a cash termination fee equal to the Gran Tierra’s
transaction costs (including the fees and costs of professional advisors)
incurred in connection with negotiation and performance of the Arrangement
and
related transactions, subject to a maximum expense reimbursement of $1.5
million, at the time of such termination.
c. If
this
Agreement is terminated (x) by Solana pursuant to Section 7.1(i), or (y) by
Gran
Tierra pursuant to Section 7.1(h), then
Solana shall pay to Gran Tierra a cash termination fee of $21 million, payable
immediately upon written notice of termination of this Agreement being
provided.
d. If
this
Agreement is terminated by Solana pursuant to Section 7.1(g), then Gran Tierra
shall pay to Solana a cash termination fee of $21 million, payable immediately
upon written notice of termination of this Agreement being provided.
e.
Gran
Tierra and Solana each agree that the agreements contained in Sections 7.4(a)
through 7.4(d) are an integral part of the transactions contemplated by this
Agreement. If either party fails to promptly pay the other party any fee due
under such Sections 7.4(a) through 7.4(d), it shall pay the other party’s costs
and expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Canadian Imperial Bank of Commerce from the date such
fee was first due.
Each
of
the Parties acknowledges and agrees that all of the payment amounts set out
in
this Article 7 are payments of liquidated damages which are a genuine
pre-estimate of the damages that the other party will suffer or incur as a
result of the event giving rise to such damages and resultant termination of
this Agreement and are not penalties. Each party irrevocably waives any right
it
may have to raise as a defense that any such liquidated damages are excessive
or
punitive. For greater certainty, each of the parties agrees that the payment
of
the applicable amount pursuant to Sections 7.4(a), (b), (c) or (d) is the sole
monetary remedy of each party under this Agreement. Nothing herein shall
preclude a party from seeking injunctive relief to restrain any breach or
threatened breach of the covenants or agreements set forth in this Agreement
or
the Confidentiality Agreement or otherwise to obtain specific performance of
any
of such act, covenants or agreements, without the necessity of posting bond
or
security in connection therewith. For clarity, if a party is required to pay
a
termination fee pursuant to subsections (c) or (d) of Section 7.4 above, no
party shall be obligated to pay more than $21 million (and any additional
amounts required under Section 7.4(e)) pursuant to this Article 7.
62.
ARTICLE
8
ADDITIONAL
AGREEMENTS
Gran
Tierra and Solana each agree to take the following actions after the execution
of this Agreement.
8.1 Meetings
Solana
and Gran Tierra shall each duly call a meeting of its securityholders entitled
to vote to be held within 20 business days of the filing of the definitive
Joint
Proxy Statement with the SEC for the purpose of (a) in the case of Solana,
voting upon the Plan of Arrangement and the transactions contemplated hereby
and
thereby, and (b) in the case of Gran Tierra, voting upon a proposal to
approve the issuance of such number of shares of Gran Tierra Common Stock as
are
necessary to consummate the Arrangement including those issuable on the exchange
of the Exchangeable Shares, and each shall, through its board of directors,
recommend to its securityholders in the Joint Proxy Statement approval of such
matters and shall coordinate and cooperate with respect to the timing of such
meetings. Each party may only change such recommendation in the event that
the
board of directors of such party concludes, in good faith, after receiving
the
written advice of outside counsel that such action is necessary for the board
of
directors to act in a manner consistent with its fiduciary duty. The meetings
of
securityholders of Solana and Gran Tierra will be called for the same day at
such times as will result in the completion of the Gran Tierra Stockholders
Meeting prior to the commencement of the Solana Securityholders
Meeting.
8.2 The
Closing
Subject
to the termination of this Agreement as provided in Article 6, the Closing
of
the transactions contemplated by this Agreement (the “Closing”)
will
take place at the offices of Gran Tierra on the Effective Date and at a time
to
be mutually agreed upon by the parties, which date shall be no later than the
first business day after all conditions to Closing set forth herein shall have
been satisfied or waived, unless another place, time and date is mutually
selected by Solana and Gran Tierra. Concurrently with the Closing, the Plan
of
Arrangement will be filed with the Registrar under the ABCA.
8.3 Ancillary
Documents/Reservation of Shares
a. Provided
all other conditions of this Agreement have been satisfied or waived, Solana
shall, on the Effective Date, file Articles of Arrangement pursuant to Section
193 of the ABCA to give effect to the Plan of Arrangement, such Articles of
Arrangement to contain share conditions for Exchangeable Shares substantially
in
the form of those contained in Exhibit A.
63.
b. On
the
Effective Date:
i. Gran
Tierra shall (and shall cause Gran Tierra Callco ULC and Gran Tierra Exchangeco)
execute and deliver a Support Agreement containing substantially the same terms
and conditions set forth in Exhibit
B,
together with such other terms and conditions as may be agreed to by the parties
hereto acting reasonably; and
ii. Gran
Tierra, Gran Tierra Exchangeco and a Canadian trust company to be mutually
agreeable to Gran Tierra and Solana, acting reasonably, shall execute and
deliver a Voting and Exchange Trust Agreement containing substantially the
same
terms and conditions set forth in Exhibit
C,
together with such other terms and conditions as may be agreed to by the parties
hereto acting reasonably.
c. On
or
before the Effective Date, Gran Tierra will reserve for issuance such number
of
shares of Gran Tierra Common Stock as shall be necessary to give effect to
the
exchanges and assumptions or exchanges of Solana Options and Solana Warrants
contemplated hereby.
8.4 Indemnification
and Related Matters
a. Gran
Tierra agrees that all rights to indemnification existing in favor of the
present or former directors and officers of Solana (as such) or any of the
Solana Subsidiaries or present or former directors and officers (as such) of
Solana or any of the Solana Subsidiaries serving or who served at Solana’s or
any of the Solana Subsidiaries’ request as a director, officer, employee, agent
or representative of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (each such present or former director
or officer of Solana or any of the Solana Subsidiaries, an “Indemnified
Party”),
as
provided by contract or in Solana’s charter or bylaws or similar documents of
any of the Solana Subsidiaries in effect as of the date hereof (copies of all
of
which have been provided to Gran Tierra) with respect to matters occurring
prior
to the Effective Time, shall survive and shall continue in full force and effect
and without modification for a period of not less than the statutes of
limitations applicable to such matters.
b. From
and
after the Effective Time, Gran Tierra shall cause Solana to indemnify and hold
harmless to the fullest extent permitted under the ABCA, each Indemnified Party
against any costs and expenses (including reasonable attorney’s fees),
judgments, fines, losses, claims and damages and liabilities, and amounts paid
in settlement thereof with the consent of the indemnifying party, such consent
not to be unreasonably withheld, in connection with any actual or threatened
claim, action, suit, proceeding or investigation that is based on, or arises
out
of, the fact that such person is or was a director or officer of Solana or
any
Solana Subsidiary (including without limitation with respect to any of the
transactions contemplated hereby or the Arrangement) or who is serving or who
served at Solana’s or any of the Solana Subsidiaries’ request as a director,
officer, employee, agent or representative of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. In the event
of
any such claim, action, suit, proceeding or investigation, Gran Tierra shall
cause Solana to pay the reasonable fees and expenses of counsel in advance
of
the final disposition of any such claim, action, suit, proceeding or
investigation to the fullest extent permitted by law subject to the limitations
imposed by the ABCA. Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Parties, (i) the Indemnified Parties may retain counsel
reasonably satisfactory to Gran Tierra and, subject to limitations imposed
by
the ABCA, Solana shall (or Gran Tierra shall cause Solana to) pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; and (ii) Gran Tierra will use all
reasonable efforts to assist in the defense of such matter; provided, however,
that neither Solana nor Gran Tierra shall be liable for any settlement effected
without its prior written consent which shall not be unreasonably withheld.
Any
Indemnified Party wishing to claim indemnification under this Section 8.4(b),
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify Gran Tierra (but the failure to so notify shall not relieve a
party
from any liability which it may have under this Section 8.4 (b) unless such
failure results in actual prejudice to such party and then only to the extent
of
such prejudice). The Indemnified Parties as a group may retain only one law
firm
in any jurisdiction to represent them with respect to each such matter unless
such counsel determines that there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Indemnified Parties, in which event additional counsel may
be
required to be retained by the Indemnified Parties.
64.
c. Subject
to limitations imposed by the ABCA, provided the Arrangement becomes effective,
Solana shall (or Gran Tierra shall cause Solana to) pay all expenses, including
reasonable attorney’s fees, as the same may be incurred by any Indemnified
Parties in any action by any Indemnified Party or parties seeking to enforce
the
indemnity or other obligations provided for in this Section 8.4; provided,
however, that Solana will be entitled to reimbursement for any advances made
under this Section 8.4 to any Indemnified Party who ultimately proves
unsuccessful in enforcing the indemnity as finally determined by a
non-appealable judgment in a court of competent jurisdiction, and payment of
such expenses in advance of the final disposition of the action shall be made
only upon receipt of any undertaking by the Indemnified Party to reimburse
all
amounts advanced if such action ultimately proves unsuccessful.
d. Provided
the Arrangement becomes effective, for a period of five (5) years after the
Effective Date, Gran Tierra shall continue in effect director and officer
liability insurance for the benefit of the Indemnified Parties in such amounts,
and with such deductibles, retained amounts, coverages and exclusions as Solana
provides for its own directors and officers at the date hereof.
e. This
Section 8.4, which shall survive the consummation of this Agreement and the
Arrangement, is intended to benefit each person or entity indemnified
hereunder.
ARTICLE
9
AMENDMENT
9.1 Amendment
of Agreement
This
Agreement (excluding the Plan of Arrangement) may at any time and from time
to
time before or after the holding of the Solana Securityholders Meeting be
amended by written agreement of the parties without, subject to applicable
law,
further notice to or authorization on the part of the Solana Securityholders
and
any such amendment may, without limitation:
65.
a. change
the time for performance of any of the obligations or acts of the
Parties;
b. waive
any
inaccuracies or modify any representation or warranty contained herein or in
any
document delivered pursuant hereto;
c. waive
compliance with or modify any of the covenants herein contained and waive or
modify performance of any of the obligations of the parties; or
d. waive
compliance with or modify any other conditions precedent contained
herein;
provided
that no such amendment which is agreed to after the parties are granted the
Interim Order by the Court may reduce or materially adversely affect the
consideration to be received by Solana Securityholders without approval by
the
Solana Securityholders given in the same manner as required for the approval
of
the Arrangement or as may be ordered by the Court.
9.2 Amendment
of Plan of Arrangement
a. The
parties may agree to amend the Plan of Arrangement at any time and from time
to
time prior to the Effective Time, provided that each such amendment must be:
(i)
set out in writing; (ii) filed with the Court and, if made following the Solana
Securityholders Meeting, approved by the Court; and (iii) communicated to
holders of Solana Securities if and as required by the Court.
b. Any
amendment to the Plan of Arrangement agreed to by the parties at any time prior
to or at the Solana Securityholders Meeting, which is proposed and accepted
by
the holders of Solana Securities voting at the Solana Securityholders Meeting,
shall become part of the Plan of Arrangement for all purposes.
c. Any
amendment to the Plan of Arrangement that is approved by the Court following
the
Solana Securityholders Meeting shall be effective only if it is consented to
by
each of the parties.
ARTICLE
10
PRIVACY
MATTERS
10.1 Privacy
Issues
a. For
the
purposes of this Section 10.1, the following definitions shall
apply:
66.
b. The
parties acknowledge that they are responsible for compliance at all times with
applicable privacy laws which govern the collection, use and disclosure of
Disclosed Personal Information acquired by or disclosed to the other party
pursuant to or in connection with this Agreement (the “Disclosed Personal
Information”).
c. Neither
party shall use the Disclosed Personal Information for any purposes other than
those related to the performance of this Agreement and the completion of the
Arrangement.
d. Each
party acknowledges and confirms that the disclosure of Disclosed Personal
Information is necessary for the purposes of determining if the parties shall
proceed with the Arrangement, and that the disclosure of Personal Information
relates solely to the carrying on of the business and the completion of the
Arrangement.
e. Each
party acknowledges and confirms that it has and shall continue to employ
appropriate technology and procedures in accordance with applicable law to
prevent accidental loss or corruption of the Disclosed Personal Information,
unauthorized input or access to the Disclosed Personal Information, or
unauthorized or unlawful collection, storage, disclosure, recording, copying,
alteration, removal, deletion, use or other processing of such Disclosed
Personal Information.
f. Each
party shall at all times keep strictly confidential all Disclosed Personal
Information provided to it, and shall instruct those employees or advisors
responsible for processing such Disclosed Personal Information to protect the
confidentiality of such information in a manner consistent with the parties’
obligations hereunder. Each party shall ensure that access to the Disclosed
Personal Information shall be restricted to those employees or advisors of
the
respective party who have a bona fide need to access such information in order
to complete the Arrangement.
67.
g. Each
party shall promptly notify the other party to this Agreement of all inquiries,
complaints, requests for access, and claims of which the party is made aware
in
connection with the Disclosed Personal Information, subject to any limitations
imposed by applicable laws. The parties shall fully co-operate with one another,
with the persons to whom the Personal Information relates, and any authorized
authority charged with enforcement of applicable privacy laws, in responding
to
such inquiries, complaints, requests for access, and claims, subject to any
limitations imposed by applicable laws.
h. Upon
the
expiry or termination of this Agreement, or otherwise upon the reasonable
request of either party, the counterparty shall forthwith cease all use of
the
Personal Information acquired by the counterparty in connection with this
Agreement and will return to the party or, at the party’s request, destroy in a
secure manner, the Disclosed Personal Information (and any copies).
ARTICLE
11
MISCELLANEOUS
11.1 No
Survival of Representations and Warranties
All
representations and warranties of the parties contained in this Agreement will
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of the parties to this Agreement, until the earlier of
the
valid termination of this Agreement or the Effective Date, whereupon such
representations and warranties will expire and be of no further force or effect.
All agreements and covenants of the parties shall survive the Effective Date,
except as otherwise set forth in this Agreement. This Section 11.1 will not
limit any covenant or agreement of any of the parties which, by its terms,
contemplates performance after the Effective Time or the date on which this
Agreement is terminated, as the case may be.
11.2 Notices
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by recognized overnight courier, by
facsimile (receipt confirmed) or mailed by certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party. as shall be specified by like notice):
a. if
to
Gran Tierra or Gran Tierra Exchangeco to:
Gran
Tierra
Energy
Inc.
300,
000
00xx Xxx XX
Xxxxxxx,
XX Xxxxxx X0X 0X0
Attention:
Xxxx Xxxxxxxx,
President
and Chief Executive Officer
Facsimile
No. 000-000-0000
68.
with
required copies to
Cooley
Godward Kronish LLP
5
Palo
Alto Square
0000
Xx
Xxxxxx Xxxx
Xxxx
Xxxx, XX 00000
Attention:
Xxxxx X. Xxxxxx, Esq.
Facsimile
No. 000-000-0000
69.
Xxxxx
Xxxxxxx & Xxxxxxx LLP
855 –
0xx
Xxxxxx
X.X.
Suite
3500, Bankers Hall East Tower
Calgary
AB T2P4J8
Canada
Attention:
Xxxxx Xxxxxxx, Esq.
Facsimile
No. 403-260-9700
b. if
to
Solana to:
Solana
Resources Limited
Suite
100, 522 – 11th
Avenue
S.W.
Calgary,
AB T2R 0C8
Attention:
J. Xxxxx Xxxxx
President
& CEO
Facsimile
No. 000-000-0000
with
required copies to
Xxxxx
LLP
250
–
0xx
Xxxxxx
X.X.
Suite
1000, Xxxxxxxxxx Place
Calgary,
AB T2P 0C1
Attention:
Xxx Xxxxxx, Esq.
Facsimile
No. 000-000-0000
11.3 Interpretation
When
a
reference is made in this Agreement to Sections or Exhibits, such reference
shall be to a Section or Exhibit to this Agreement unless otherwise indicated.
The words “include,”
“includes”
and
“including”
when
used therein shall be deemed in each case to be followed by the words
“without
limitation.”
Any
references in this Agreement to “the
date hereof”
refers
to the date of execution of this Agreement. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.4 Severability
If
any
provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable in any jurisdiction, the remainder
hereof, and the application of such provision to such person or circumstance
in
any other jurisdiction or to other persons or circumstances in any jurisdiction,
shall not be affected thereby, and to this end the provisions of this Agreement
shall be severable.
11.5 Counterparts
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to
each
of the other parties, it being understood that all parties need not sign the
same counterpart.
70.
11.6 Miscellaneous
This
Agreement, which includes the Solana Disclosure Letter, the Gran Tierra
Disclosure Letter and the Exhibits hereto, and the Confidentiality Agreement
dated July 26, 2007 between Gran Tierra and Solana, and any other documents
referred to herein or contemplated hereby (a) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof; (b) are not intended
to confer upon any other person any rights or remedies hereunder (except that
Section 8.4 is for the benefit of Solana’s directors and officers and is
intended to confer rights on such persons); and (c) shall not be assigned
by operation of law or otherwise except as otherwise specifically
provided.
11.7 Governing
Law
This
Agreement shall be governed by and construed in accordance with the laws of
the
Province of Alberta (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including without
limitation validity, construction, effect, performance and
remedies.
11.8 Expenses
Except
as
otherwise provided herein, each party will bear its respective expenses and
legal fees incurred with respect to this Agreement and the transactions
contemplated hereby.
11.9 Further
Assurances
Each
of
the parties hereto will from time to time execute and deliver all such further
documents and instruments and do all such acts and things as the other parties
may reasonably require to effectively carry out or better evidence or perfect
the terms and provisions of this Agreement.
71.
In
Witness Whereof,
the
parties have caused this Agreement to be signed by their respective officers
thereunder duly authorized, all as of the date first written above.
|
Gran
Tierra Energy Inc.
|
|
|
/s/
Xxxx Xxxxxxxx
|
|
|
By:
|
Xxxx
Xxxxxxxx
|
|
President
and Chief Executive Officer
|
|
|
Solana
Resources Limited
|
|
|
/s/
Xxxxx Xxxxx
|
|
|
By:
|
Xxxxx
Xxxxx
|
|
President
and Chief Executive Officer
|
|
|
Gran
Tierra Exchangeco Inc.
|
|
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/s/
Xxxx Xxxxxxxx
|
|
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Xxxx
Xxxxxxxx
|
|
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President
and Chief Executive
Officer
|
|
Arrangement
Agreement Signature Page
Exhibit
A
PLAN
OF ARRANGEMENT
under
Section 193 of the
Business
Corporations Act
(Alberta)
ARTICLE 1
INTERPRETATION
|
1.1
|
In
this Plan of Arrangement, the following terms have the following
meanings:
|
|
(a)
|
"ABCA"
means the Business
Corporations Act,
R.S.A. 2000, c. B-9, as amended, including the regulations
promulgated
thereunder.
|
|
(b)
|
"Acquiror"
means Gran Tierra Energy Inc., a corporation existing pursuant
to the laws
of the State of Nevada.
|
|
(c)
|
"Acquiror
Control Transaction"
has the meaning provided in the Exchangeable Share
Provisions.
|
|
(d)
|
"Acquiror
Option"
means an option to purchase Acquiror Shares granted pursuant
to the
Acquiror Option Plan.
|
|
(e)
|
"Acquiror
Option Plan"
means the stock option plan of Acquiror, including all amendments
thereto.
|
|
(f)
|
"Acquiror
Share"
means a common share in the capital of Acquiror as constituted
on the date
hereof.
|
|
(g)
|
"Arrangement",
"herein",
"hereof",
"hereto",
"hereunder"
and similar expressions mean and refer to the arrangement pursuant
to
Section 193 of the ABCA set forth in this Plan of Arrangement as
supplemented, modified or amended, and not to any particular
article,
section or other portion hereof.
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|
(h)
|
"Arrangement
Agreement"
means the arrangement agreement dated as of July 28, 2008 among
Acquiror,
ExchangeCo and Target with respect to the Arrangement and all
amendments
thereto.
|
|
(i)
|
"Articles
of Arrangement"
means the articles of arrangement in respect of the Arrangement
required
under subsection 193(10) of the ABCA to be filed with the Registrar
after
the Final Order has been granted giving effect to the
Arrangement.
|
|
(j)
|
"Business
Day"
means a day, other than a Saturday, Sunday or statutory holiday,
when
banks are generally open in the City of Calgary, in the Province
of
Alberta, for the transaction of banking
business.
|
|
(k)
|
"Callco"
means Gran Tierra Callco ULC, a corporation existing under
the laws of the
Province of Alberta.
|
|
(l)
|
"Certificate"
means the certificate which may be issued by the Registrar
pursuant to
subsection 193(11) of the ABCA or, if no certificate is to be issued,
the proof of filing in respect of the
Arrangement.
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|
(m)
|
"Change
of Law"
means any amendment to the Tax Act and other applicable provincial
income
tax laws that permits holders of Exchangeable Shares who are
resident in
Canada, hold the Exchangeable Shares as capital property and
deal at arm's
length with Acquiror and ExchangeCo (all for the purposes of
the Tax Act
and other applicable provincial income tax laws) to exchange
their
Exchangeable Shares for Acquiror Shares on a basis that will
not require
such holders to recognize any gain or loss or any actual or
deemed
dividend in respect of such exchange for the purposes of the
Tax Act or
applicable provincial income tax
laws.
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|
(n)
|
"Change
of Law Call Date"
has the meaning provided in Subsection 8.1(b).
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|
(o)
|
"Change
of Law Call Purchase Price"
has the meaning provided in Subsection 8.1(a).
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|
(p)
|
"Change
of Law Call Right"
has the meaning provided in Subsection 8.1(a).
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(q)
|
"Continuing
Optionholder"
means a Target Optionholder who will, immediately subsequent
to the
Effective Time, be at least one of a director, officer, employee
or
consultant of Acquiror and/or an affiliate of Acquiror, as
agreed by
Acquiror.
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(r)
|
"Court"
means the Court of Queen's Bench of
Alberta.
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(s)
|
"Depositary"
means Computershare Trust Company of Canada, or such other
Person as may
be designated by Acquiror and
Target.
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(t)
|
"Dissenting
Securityholders"
means registered holders of Target Shares
who validly exercise the rights of dissent with respect to
the Arrangement
provided to them under the Interim Order and whose dissent
rights remain
valid immediately before the Effective
Time.
|
|
(u)
|
"Effective
Date"
means the date the Arrangement is effective under the
ABCA.
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(v)
|
"Effective
Time"
means the time at which the Articles of Arrangement are filed
with the
Registrar on the Effective Date.
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(w)
|
"Eligible
Shareholder"
means a Target Shareholder that is not an Ineligible
Shareholder.
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(x)
|
"ExchangeCo"
means Gran Tierra Exchangeco Inc., a corporation incorporated
under the
ABCA.
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(y)
|
"Exchange
Ratio"
means 0.9527918.
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(z)
|
"Exchangeable
Share Consideration"
has the meaning provided in the Exchangeable Share
Provisions.
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(aa)
|
"Exchangeable
Share Price"
has the meaning provided in the Exchangeable Share
Provisions.
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(bb)
|
"Exchangeable
Share Provisions"
means the rights, privileges, restrictions and conditions attaching
to the
Exchangeable Shares, which rights, privileges, restrictions
and conditions
shall be substantially as set forth in Schedule "A"
hereto.
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(cc)
|
"Exchangeable
Shares"
means the exchangeable shares in the capital of ExchangeCo
as constituted
on the date hereof.
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(dd)
|
"Exchange
Options"
has the meaning provided in Subsection 3.1(d).
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(ee)
|
"Exchange
Warrants"
has the meaning provided in Subsection 3.1(g).
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(ff)
|
"Final
Order"
means the final order of the Court approving the Arrangement
pursuant to
subsection 193(9) of the ABCA to be applied for following the
Meeting, as
such order may be affirmed, amended or modified by any court
of competent
jurisdiction.
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(gg)
|
"Imputed
Transaction Value"
shall be equal to the product obtained when the five trading
day volume
weighted trading price on the TSX of an Acquiror Share ending
on the
seventh trading day prior to the Effective Date is multiplied
by the
Exchange Ratio.
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(hh)
|
"Ineligible
Shareholder"
means a Target Shareholder who is: (i) not resident in Canada
for purposes
of the Tax Act; (ii) a partnership that is not a Canadian partnership
for
the purposes of the Tax Act; or (iii) exempt from tax under
Part I of the
Tax Act.
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(ii)
|
"Interim
Order"
means an interim order of the Court under subsection 193(4)
of the ABCA
containing declarations and directions with respect to the
Arrangement, as
such order may be affirmed, amended or modified by any court
of competent
jurisdiction.
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(jj)
|
"Letter
of Transmittal"
means the letter of transmittal to be sent to the holders of
Target Shares
pursuant to which holders of Target Shares are required to
deliver
certificates representing their Target Shares to receive the
Exchangeable
Shares, Acquiror Shares and/or Cash Consideration, as applicable,
issuable
or payable to them pursuant to the
Arrangement.
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(kk)
|
"Liquidation
Amount"
has the meaning provided in the Exchangeable Share
Provisions.
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(ll)
|
"Liquidation
Call Purchase Price"
has the meaning provided in Subsection 8.2(a).
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|
(mm)
|
"Liquidation
Call Right"
has the meaning provided in Subsection 8.2(a).
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(nn)
|
"Liquidation
Date"
has the meaning provided in the Exchangeable Share
Provisions.
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|
(oo)
|
"Meeting"
means the special meeting of holders of Target Shareholders
to be held to
consider, among other things, the Arrangement and related matters,
and any
adjournment thereof.
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(pp)
|
"Optionholder
Election Form"
means the duly completed written election of an Optionholder,
in form
satisfactory to Acquiror, irrevocably electing that: (i) in
the case of a
Continuing Optionholder, certain of the Target Options held
by such
Continuing Optionholder are to be exchanged for Acquiror Options
in
accordance with the provisions of Subsection 3.1(k);
and/or (ii) certain of the Target Options held by such Optionholder
are to
be exchanged for Target Shares in accordance with the provisions
of
Subsection 3.1(d).
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(qq)
|
"Person"
means an individual, partnership, association, body corporate,
trust,
unincorporated organization, government, regulatory authority,
or other
entity.
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(rr)
|
"Redemption
Call Purchase Price"
has the meaning provided in Subsection 8.3(a).
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(ss)
|
"Redemption
Call Right"
has the meaning provided in Subsection 8.3(a).
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(tt)
|
"Redemption
Date"
has the meaning provided in the Exchangeable Share
Provisions.
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(uu)
|
"Redemption
Price"
has the meaning provided in the Exchangeable Share
Provisions.
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(vv)
|
"Registrar"
means the Registrar appointed under section 263 of the
ABCA.
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(ww)
|
"Rollover
Options"
has the meaning provided in Subsection 3.1(k).
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(xx)
|
"Target"
means Solana Resources Limited, a corporation incorporated
under the
ABCA.
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(yy)
|
"Target
Option Differential"
means the amount by which the Imputed Transaction Value exceeds
the
exercise price of a particular Target
Option.
|
|
(zz)
|
"Target
Optionholders"
means the holders from time to time of the Target
Options.
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|
(aaa)
|
"Target
Option Plan"
means the stock option plan of
Target.
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|
(bbb)
|
"Target
Options"
means the options to purchase Target Shares granted pursuant
to the Target
Option Plan.
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|
(ccc)
|
"Target
Securities"
means, collectively, the Target Shares, the Target Options
and the Target
Warrants.
|
|
(ddd)
|
"Target
Securityholders"
means, collectively, the Target Shareholders, the Target Optionholders
and
the Target Warrantholders.
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|
(eee)
|
"Target
Share"
means a common share in the capital of Target as constituted
on the date
hereof.
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|
(fff)
|
"Target
Shareholders"
means the holders from time to time of the Target
Shares.
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|
(ggg)
|
"Target
Warrant Differential"
means the amount by which the Imputed Transaction Value exceeds
$2.00.
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|
(hhh)
|
"Target Warrantholders"
means the holders from time to time of the Target
Warrants.
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|
(iii)
|
"Target
Warrants"
means the 7,500,000 warrants of Target issued on October 1,
2006.
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(jjj)
|
"Tax
Act"
means the Income
Tax Act
(Canada), as the same may be amended, including the regulations
promulgated thereunder.
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(kkk)
|
"Transfer
Agent"
means Computershare Trust Company of Canada or such other Person
as may
from time to time be appointed by ExchangeCo as the registrar
and transfer
agent for the Exchangeable Shares.
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|
(lll)
|
"TSX"
means the Toronto Stock Exchange.
|
|
(mmm)
|
"Voting
and Exchange Trust Agreement"
means the agreement so entitled among Acquiror, ExchangeCo
and the Trustee
named therein to be dated as of the Effective Date and provided
for in the
Arrangement Agreement.
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(nnn)
|
"Warrantholder
Election Form"
means the duly completed written election of a Target Warrantholder,
in
form satisfactory to Acquiror, irrevocably electing that certain
of the
Target Warrants held by such Target Warrantholder are to be
exchanged for:
(i) Target Shares in accordance with the provisions of Subsection
3.1(f);
and/or (ii) cash in accordance with the provisions of Subsection
3.1(g).
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1.2
|
The
division of this Plan of Arrangement into articles and sections
and the
insertion of headings are for convenience of reference only
and shall not
affect the construction or interpretation of this Plan of
Arrangement.
|
|
1.3
|
Unless
reference is specifically made to some other document or instrument,
all
references herein to articles and sections are to articles
and sections of
this Plan of Arrangement.
|
|
1.4
|
Unless
the context otherwise requires, words importing the singular
number shall
include the plural and vice
versa;
and words importing any gender shall include all
genders.
|
|
1.5
|
In
the event that the date on which any action is required to
be taken
hereunder by any of the parties is not a Business Day in the
place where
the action is required to be taken, such action shall be required
to be
taken on the next succeeding day which is a Business Day in
such
place.
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1.6
|
References
in this Plan of Arrangement to any statute or sections thereof
shall
include such statute as amended or substituted and any regulations
promulgated thereunder from time to time in
effect.
|
|
1.7
|
All
dollar amounts referred to in this Plan of Arrangement are
in Canadian
funds, unless otherwise indicated
herein.
|
ARTICLE 2
|
2.1
|
This
Plan of Arrangement is made pursuant to the Arrangement
Agreement.
|
|
2.2
|
This
Plan of Arrangement, upon the filing of the Articles of Arrangement
and
the issue of the Certificate, if any, shall become effective
on, and be
binding on and after, the Effective Time on: (i) the Target
Securityholders; (ii) Target; (iii) ExchangeCo; and (iv)
Acquiror.
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2.3
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The
Articles of Arrangement and Certificate shall be filed and
issued,
respectively, with respect to this Arrangement in its entirety.
The
Certificate shall be conclusive evidence that the Arrangement
has become
effective and that each of the provisions of Article 3
has become effective in the sequence set out therein. If no
Certificate is
required to be issued by the Registrar pursuant to subsection 193(11)
of the ABCA, the Arrangement shall become effective on the
date the
Articles of Arrangement are filed with the Registrar pursuant
to
subsection 193(10) of the
ABCA.
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ARTICLE 3
ARRANGEMENT
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3.1
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Commencing
at the Effective Time, each of the events set out below shall
occur and
shall be deemed to occur in the following order without any
further act or
formality except as otherwise provided
herein:
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Vesting
of Target Options and Target Warrants
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(a)
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each
Target Option outstanding immediately prior to the Effective
Time,
notwithstanding any contingent vesting provisions to which
it might
otherwise have been subject, shall be deemed to be fully
vested;
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(b)
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each
Target Warrant outstanding immediately prior to the Effective
Time,
notwithstanding any contingent vesting provisions to which
it might
otherwise have been subject, shall be deemed to be fully
vested;
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Dissenting
Securityholders
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(c)
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the
Target Shares held by Dissenting Securityholders shall be deemed
to have
been transferred to Acquiror (free of any claims) and cancelled
and such
Dissenting Securityholders shall cease to have any rights as
Target
Shareholders other than the right to be paid the fair value
of their
Target Shares in accordance with Article
4;
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Exchange
of Target Options (No Rollover Election)
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(d)
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if
a Target Optionholder provides to Acquiror, on or before the
date which is
three Business Days prior to the Effective Date, a duly completed
and
executed Optionholder Election Form and therein designates
that certain
Target Options held by such Target Optionholder are subject
to an exchange
election ("Exchange
Options"),
each such Exchange Option will be deemed to be surrendered
to Target in
exchange for such number of Target Shares as is equal to the
quotient
obtained when the Target Option Differential applicable to
such Exchange
Option is divided by the Imputed Transaction Value;
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(e)
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each
Target Option held by a Target Optionholder which is not the
subject of a
properly delivered Optionholder Election Form in
accordance with Subsection 3.1(d)
or
Subsection 3.1(k)
shall be deemed to be surrendered to Target in exchange for
a cash payment
from Target equal to the product obtained when one (1) is multiplied
by
the Target Option Differential applicable to such Target
Option;
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Exchange
or Conversion of Target Warrants
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(f)
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if
a Target Warrantholder provides to Acquiror, on or before the
date which
is three Business Days prior to the Effective Date, a duly
completed and
executed Warrantholder Election Form and therein designates
that certain
Target Warrants held by such Target Warrantholder are subject
to an
exchange election ("Exchange
Warrants"),
each such Exchange Warrant shall be deemed to be surrendered
to Target in
exchange for such number of Target Shares as is equal to the
quotient
obtained when the Target Warrant Differential is divided by
the Imputed
Transaction Value;
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(g)
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if
a Target Warrantholder provides to Acquiror, on or before the
date which
is three Business Days prior to the Effective Date, a duly
completed and
executed Warrantholder Election Form and therein designates
that certain
Target Warrants will be exchanged for cash, each such Target
Warrant shall
be deemed to be surrendered to Target in exchange for a cash
payment from
Target equal to the product obtained when one (1) is multiplied
by the
Target Warrant Differential;
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(h)
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any
Target Warrants held by a Target Warrantholder which are not
the subject
of a properly delivered Warrantholder Election Form in accordance
with
Subsections 3.1(f)
or 3.1(g)
will entitle the Target Warrantholder to purchase Acquiror
Shares in
accordance with the terms and conditions of the Target
Warrants;
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Exchange
of Target Shares by Target Shareholders who are Eligible
Shareholders
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(i)
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the
Target Shares held by Target Shareholders who are Eligible
Shareholders
(other than those previously held by Dissenting Securityholders
but
including those received in accordance with Subsections 3.1(d)
and 3.1(f))
shall be sold, assigned and transferred to ExchangeCo (free
and clear of
all liens, claims and encumbrances) in exchange for such number
of
Exchangeable Shares as is equal to the number of Target Shares
so
exchanged, multiplied by the Exchange Ratio;
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Exchange
of Target Shares by Target Shareholders who are Ineligible
Shareholders
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(j)
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the
Target Shares held by Target Shareholders who are Ineligible
Shareholders
(other than those previously held by Dissenting Securityholders
but
including those received in accordance with Subsections 3.1(d)
and 3.1(f))
shall be sold, assigned and transferred to ExchangeCo (free
and clear of
all liens, claims and encumbrances) in exchange for such number
of
Acquiror Shares as is equal to the number of Target Shares
so exchanged,
multiplied by the Exchange Ratio;
and
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Exchange
of Target Options by Continuing Optionholders pursuant to Rollover
Elections
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(k)
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if
a Continuing Optionholder provides to Acquiror, on or before
the date
which is three Business Days prior to the Effective Date, a
duly completed
and executed Optionholder Election Form and therein designates
that
certain Target Options held by such Continuing Optionholder
are subject to
a rollover election ("Rollover
Options"),
each such Rollover Option will be exchanged and cancelled in
exchange for
that number of Acquiror Options equal to the product obtained
when one (1)
is multiplied by the Exchange Ratio; the difference between
the exercise
price for each such Acquiror Option and the last closing trading
price on
the TSX of an Acquiror Share before the Effective Time will
be equal to
the difference between the exercise price of each corresponding
Rollover
Option exchanged and the last closing trading price on the
TSX of a Target
Share before the Effective Time; and the expiry date of such
Target Option
will be the same as for each corresponding Rollover Option.
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| 3.2 | (a) |
An
Eligible Shareholder who has transferred Target Shares to ExchangeCo
as
contemplated under Subsection 3.1(i)
shall be considered to have received any of the ancillary rights
and
benefits associated with the Exchangeable Shares in consideration
for the
grant by the Eligible Shareholder to ExchangeCo and Callco
of certain
rights and benefits as against the Eligible Shareholder in
respect of the
Exchangeable Shares. To the extent that the value of the ancillary
rights
and benefits received by the Eligible Shareholder exceeds the
value of the
rights and benefits given up by the Eligible Shareholder to
ExchangeCo and
Callco, the Eligible Shareholder shall be considered to have
disposed of a
portion of its Target Shares in consideration for such excess
ancillary
rights and benefits, and to have disposed of the remaining
portion (the
"share
portion")
of its Target Shares solely in consideration for Exchangeable
Shares. The
share portion (expressed as a number) shall be equal to the
number of
Target Shares obtained when the total number of Target Shares
transferred
by the Eligible Shareholder to ExchangeCo is multiplied by
the aggregate
fair market value of the Exchangeable Shares received by the
Eligible
Shareholder divided by the sum of such aggregate fair market
value and the
amount, if any, by which the aggregate fair market value of
the ancillary
rights and benefits received by the Eligible Shareholder exceeds
the
aggregate fair market value of the rights and benefits granted
by the
Eligible Shareholder to ExchangeCo and Callco in respect of
the
Exchangeable Shares.
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(b)
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Eligible
Holders will be entitled to make an income tax election pursuant
to
section 85 of the Tax Act (and any applicable provincial legislation)
with
respect to the transfer of their Target Shares to ExchangeCo
by providing
two signed copies of the necessary election forms to ExchangeCo
within 90
days following the Effective Date, duly completed with the
details of the
number of Target Shares transferred and the applicable agreed
amounts for
the purposes of such elections. Thereafter, subject to the
election forms
complying with the provisions of the Tax Act (and any applicable
provincial legislation), the forms will be signed by ExchangeCo
and
returned to such holders of Target Shares for filing with the
Canada
Revenue Agency (and any applicable provincial taxation
authority).
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3.3
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With
respect to each holder of Target Securities (other than Dissenting
Securityholders), as the case may be, at the Effective
Time:
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(a)
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upon
the exchange of Target Options for Target Shares pursuant to
Subsection
3.1(d):
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(i)
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each
former Target Optionholder shall cease to be the holder of
the Target
Options so exchanged and the name of each such Target Optionholder
shall
be removed from the register of holders of Target Options;
and
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(ii)
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each
such former Target Optionholder shall become a holder of the
Target Shares
so exchanged and shall be added to the register of holders
of Target
Shares;
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(b)
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upon
the exchange of Target Options for cash pursuant to Subsection
3.1(e),
each former Target Optionholder shall cease to be the holder
of the Target
Options so exchanged and the name of each such Target Optionholder
shall
be removed from the register of holders of Target
Options;
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(c)
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upon
the conversion of Target Warrants into Acquiror Warrants pursuant
to
Subsection 3.1(h):
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(i)
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each
former Target Warrantholder shall cease to be the holder of
the Target
Warrants so converted and the name of each such Target Warrantholder
shall
be removed from the register of holders of Target Warrants;
and
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(ii)
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each
such former Target Warrantholder shall become a holder of the
Acquiror
Warrants so converted and shall be added to the register of
holders of
Acquiror Warrants;
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(d)
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upon
the exchange of Target Warrants for Target Shares pursuant
to Subsection
3.1(f):
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(i)
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each
former Target Warrantholder shall cease to be the holder of
the Target
Warrants so exchanged and the name of each such Target Warrantholder
shall
be removed from the register of holders of Target Warrants;
and
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(ii)
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each
such former Target Warrantholder shall become a holder of the
Target
Shares so exchanged and shall be added to the register of holders
of
Target Shares;
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(e)
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upon
the exchange of Target Warrants for cash pursuant to Subsection
3.1(g),
each former Target Warrantholder shall cease to be the holder
of the
Target Warrants so exchanged and the name of each such Target
Warrantholder shall be removed from the register of holders
of Target
Warrants;
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(f)
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upon
the exchange of Target Shares for Exchangeable Shares pursuant
to
Subsection 3.1(i):
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(i)
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each
former Target Shareholder shall cease to be the holder of the
Target
Shares so exchanged and the name of each such Target Shareholder
shall be
removed from the register of holders of Target
Shares;
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(ii)
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each
such former Target Shareholder shall become a holder of the
Exchangeable
Shares so exchanged and shall be added to the register of holders
of
Exchangeable Shares; and
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(iii)
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ExchangeCo
shall become the holder of the Target Shares so exchanged and
shall be
added to the register of holders of Target Shares in respect
thereof;
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(g)
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upon
the exchange of Target Shares for Acquiror Shares pursuant
to Subsection
3.1(j):
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(i)
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each
former Target Shareholder shall cease to be the holder of the
Target
Shares so exchanged and the name of each such Target Shareholder
shall be
removed from the register of holders of Target
Shares;
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(ii)
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each
such former Target Shareholder shall become a holder of the
Acquiror
Shares so exchanged and shall be added to the register of holders
of
Acquiror Shares; and
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(iii)
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Acquiror
shall become the holder of the Target Shares so exchanged and
shall be
added to the register of holders of Target Shares in respect
thereof;
and
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(h)
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upon
the exchange of Target Options for Acquiror Options pursuant
to Subsection
3.1(k):
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(i)
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each
former Target Optionholder shall cease to be the holder of
the Target
Options so exchanged and the name of each such Target Optionholder
shall
be removed from the register of holders of Target Options;
and
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(ii)
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each
such former Target Optionholder shall become a holder of the
Acquiror
Options so exchanged and shall be added to the register of
holders of
Acquiror Options.
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ARTICLE 4
DISSENTING
SHAREHOLDERS
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4.1
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Each
registered holder of Target Shares shall have the right to
dissent with
respect to the Arrangement in accordance with the Interim Order.
A
Dissenting Securityholder shall, at the Effective Time, cease
to have any
rights as a holder of Target Shares and shall only be entitled
to be paid
the fair value of the holder's Target Shares by Acquiror. A
Dissenting
Securityholder who is paid the fair value of the holder's Target
Shares
shall be deemed to have transferred the holder's Target Shares
to
Acquiror, notwithstanding the provisions of Section 191 of
the ABCA. A
Dissenting Securityholder who for any reason is not entitled
to be paid
the fair value of the holder's Target Shares shall be treated
as if the
holder had participated in the Arrangement on the same basis
as a
non-dissenting holder of Target Shares notwithstanding the
provisions of
Section 191 of the ABCA. The fair value of the Target Shares shall
be
determined as of the close of business on the last Business
Day before the
day on which the Arrangement is approved by the holders of
Target Shares
at the Meeting; but in no event shall Acquiror or Target be
required to
recognize such Dissenting Shareholder as a securityholder of
Acquiror,
Target or ExchangeCo after the Effective Time and the name
of such holder
shall be removed from the applicable register as at the Effective
Time.
For greater certainty, in addition to any other restrictions
in
section 191 of the ABCA, no Person who has voted in favour of the
Arrangement shall be entitled to dissent with respect to the
Arrangement.
In addition, a Target Shareholder may only exercise dissent
rights in
respect of all, and not less than all, of its Target
Shares.
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ARTICLE 5
OUTSTANDING
CERTIFICATES AND FRACTIONAL SECURITIES
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5.1
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From
and after the Effective Time, certificates formerly representing
Target
Securities that were exchanged under Section 3.1
shall represent only the right to receive the consideration
to which the
holders are entitled under the Arrangement, or as to those
held by
Dissenting Securityholders, other than those Dissenting Securityholders
deemed to have participated in the Arrangement pursuant to
Section
3.1,
to receive the fair value of the Target Shares represented
by such
certificates.
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5.2
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Subject
to the provisions of the Letter of Transmittal, Acquiror shall,
as soon as
practicable following the later of the Effective Date and the
date of
deposit by a former Target Shareholder of a duly completed
Letter of
Transmittal and the certificates representing such Target Shares,
either:
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(a)
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forward
or cause to be forwarded by first class mail (postage prepaid)
to such
former holder at the address specified in the Letter of Transmittal;
or
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(b)
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if
requested by such holder in the Letter of Transmittal, make
available or
cause to be made available at the Depositary for pickup by
such
holder,
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certificates
representing the number of Exchangeable Shares and/or Acquiror Shares
issued to
such holder under the Arrangement.
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5.3
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If
any certificate which immediately prior to the Effective Time
represented
an interest in outstanding Target Shares that were exchanged
pursuant to
Section 3.1
has been lost, stolen or destroyed, upon the making of an affidavit
of
that fact by the Person claiming such certificate to have been
lost,
stolen or destroyed, the Depositary will issue and deliver
in exchange for
such lost stolen or destroyed certificate the consideration
to which the
holder is entitled pursuant to the Arrangement (and any dividends
or
distributions with respect thereto) as determined in accordance
with the
Arrangement. The Person who is entitled to receive such consideration
shall, as a condition precedent to the receipt thereof, give
a bond to
each of Target and Acquiror and their respective transfer agents,
which
bond is in form and substance satisfactory to each of the Target
and
Acquiror and their respective transfer agents, or shall, to
the extent
agreed by Acquiror and Target, otherwise indemnify Target and
Acquiror and
their respective transfer agents against any claim that may
be made
against any of them with respect to the certificate alleged
to have been
lost, stolen or destroyed.
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5.4
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All
dividends or other distributions, if any, made with respect
to any Target
Shares allotted and issued pursuant to this Arrangement but
for which a
certificate has not been issued shall be paid or delivered
to the
Depositary to be held by the Depositary, in trust, for the
registered
holder thereof. Subject to Section 5.5,
the Depositary shall pay and deliver to any such registered
holder, as
soon as reasonably practicable after application therefor is
made by the
registered holder to the Depositary in such form as the Depositary
may
reasonably require, such dividends and distributions to which
such holder
is entitled, net of applicable withholding and other
taxes.
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5.5
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Any
certificate formerly representing Target Shares that is not
deposited with
all other documents as required by this Plan of Arrangement
on or before
the sixth anniversary of the Effective Date shall cease to
represent a
right or claim of any kind or nature including the right of
the holder of
such shares to receive Exchangeable Shares (and any dividend
and
distributions thereon), Acquiror Shares (and any dividend and
distributions thereon) and/or Cash Consideration, as applicable.
In such
case, such Exchangeable Shares (and any dividend and distributions
thereon), Acquiror Shares (together with all dividends and
distributions
thereon) and Cash Consideration shall be returned to ExchangeCo
or
Acquiror, as applicable, and such Exchangeable Shares and Acquiror
Shares
shall be cancelled.
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5.6
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No
certificates representing fractional Exchangeable Shares, Acquiror
Shares
or Target Shares shall be issued under this Arrangement. In
lieu of any
fractional shares: (a) each registered holder of Target Shares
otherwise
entitled to a fractional interest in an Exchangeable Share
or Acquiror
Share will receive the nearest whole number of Exchangeable
Shares or
Acquiror Shares, respectively (with fractions equal to exactly
0.5 being
rounded up); (b) each registered holder of Target Options otherwise
entitled to a fractional interest in a Target Share will receive
the
nearest whole number of Target Shares (with all fractions being
rounded
down); and (c) each registered holder of Target Warrants otherwise
entitled to a fractional interest in a Target Share will receive
the
nearest whole number of Target Shares (with fractions equal
to exactly 0.5
being rounded up).
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ARTICLE 6
AMENDMENTS
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6.1
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Acquiror
or Target may amend this Plan of Arrangement at any time and
from time to
time prior to the Effective Time, provided that each such amendment
must
be: (i) set out in writing; (ii) approved by the other party;
(iii) filed
with the Court and, if made following the Meeting, approved
by the Court;
and (iv) communicated to holders of Target Securities, if and
as required
by the Court.
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6.2
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Any
amendment to this Plan of Arrangement may be proposed by Acquiror
or
Target at any time prior to or at the Meeting (provided that
the other
party shall have consented thereto) with or without any other
prior notice
or communication, and if so proposed and accepted by the Target
Shareholders voting at the Meeting (other than as may be required
under
the Interim Order), shall become part of this Plan of Arrangement
for all
purposes.
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6.3
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Acquiror
and Target may amend, modify and/or supplement this Plan of
Arrangement at
any time and from time to time after the Meeting and prior
to the
Effective Time with the approval of the
Court.
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6.4
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Any
amendment, modification or supplement to this Plan of Arrangement
may be
made prior to or following the Effective Time by Acquiror and
Target;
provided that, it concerns a matter which, in the reasonable
opinion of
Acquiror and Target, is of an administrative nature required
to better
give effect to the implementation of this Plan of Arrangement
and is not
adverse to the financial or economic interests of any former
holder of
Target Shares.
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ARTICLE 7
WITHHOLDING
RIGHTS
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7.1
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Acquiror,
Target, Callco and ExchangeCo and the Depositary shall be entitled
to
deduct and withhold from any consideration otherwise payable
to any Target
Securityholders or holders of Exchangeable Shares such amounts
as
Acquiror, Target, Callco and ExchangeCo or the Depositary determines,
acting reasonably, are required or permitted pursuant to the
Tax Act, the
United
States Internal Revenue Code of 1986,
or any provision of federal, provincial, territorial, state,
local or
foreign tax law, in each case, as amended. To the extent that
amounts are
so withheld, such withheld amounts shall be treated for all
purposes
hereof as having been paid to the Target Securityholder in
respect of
which such deduction and withholding was made; provided that,
such
withheld amounts are actually remitted to the appropriate taxing
authority.
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ARTICLE 8
CERTAIN
RIGHTS OF ACQUIROR TO ACQUIRE EXCHANGEABLE SHARES
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8.1
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Change
of Law Call Right
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(a)
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Acquiror
shall have the overriding right (the "Change
of Law Call Right"),
in the event of a Change of Law, to purchase (or to cause Callco
to
purchase) from all but not less than all of the holders of
Exchangeable
Shares (other than any holder of Exchangeable Shares which
is an affiliate
of Acquiror) all but not less than all of the Exchangeable
Shares held by
each such holder upon payment by Acquiror or Callco, as the
case may be,
of an amount per share (the "Change
of Law Call Purchase Price")
equal to the Exchangeable Share Price applicable on the last
Business Day
prior to the Change of Law Call Date, in accordance with Subsection
8.1(c).
In the event of the exercise of the Change of Law Call Right
by Acquiror
or Callco, as the case may be, each holder of Exchangeable
Shares shall be
obligated to sell all the Exchangeable Shares held by such
holder to
Acquiror or Callco, as the case may be, on the Change of Law
Call Date
upon payment by Acquiror to such holder of the Change of Law
Call Purchase
Price for each such Exchangeable
Share.
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(b)
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To
exercise the Change of Law Call Right, Acquiror or Callco must
notify the
Transfer Agent of its intention to exercise such right at least
45 days
before the date on which Acquiror or Callco intends to acquire
the
Exchangeable Shares (the "Change
of Law Call Date").
If Acquiror or Callco exercises the Change of Law Call Right,
then, on the
Change of Law Call Date, Acquiror or Callco, as the case may
be, will
purchase and the holders of Exchangeable Shares will sell all
of the
Exchangeable Shares then outstanding for a price per share
equal to the
Change of Law Call Purchase Price.
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(c)
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For
the purposes of completing the purchase of the Exchangeable
Shares
pursuant to the exercise of the Change of Law Call Right, Acquiror
or
Callco, as the case may be, shall deposit or cause to be deposited
with
the Transfer Agent, on or before the Change of Law Call Date,
the
Exchangeable Share Consideration representing the total Change
of Law Call
Purchase Price. Provided that such Exchangeable Share Consideration
has
been so deposited with the Transfer Agent, on and after the
Change of Law
Call Date the holders of the Exchangeable Shares shall cease
to be holders
of the Exchangeable Shares and shall not be entitled to exercise
any of
the rights of holders in respect thereof (including any rights
under the
Voting and Exchange Trust Agreement), other than the right
to receive
their proportionate part of the total Change of Law Purchase
Price payable
by Acquiror or Callco, as the case may be, without interest,
upon
presentation and surrender by the holder of certificates representing
the
Exchangeable Shares held by such holder and the holder shall
on and after
the Change of Law Call Date be considered and deemed for all
purposes to
be the holder of Acquiror Shares to which such holder is entitled.
Upon
surrender to the Transfer Agent of a certificate or certificates
representing Exchangeable Shares, together with 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 Transfer Agent may reasonably require,
the holder
of such surrendered certificate or certificates shall be entitled
to
receive in exchange therefor, and the Transfer Agent on behalf
of Acquiror
or Callco, as the case may be, shall deliver to such holder,
the
Exchangeable Share Consideration to which such holder is
entitled.
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8.2
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Callco
Liquidation Call Right
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(a)
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Callco
shall have the overriding right (the "Liquidation
Call Right"),
in the event of and notwithstanding the proposed 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, pursuant to Article 5 of the Exchangeable Share Provisions,
to
purchase from all but not less than all of the holders of Exchangeable
Shares (other than any holder of Exchangeable Shares which
is an affiliate
of Acquiror) on the Liquidation Date all but not less than
all of the
Exchangeable Shares held by each such holder upon payment by
Callco to
each such holder of the Exchangeable Share Price applicable
on the last
Business Day prior to the Liquidation Date (the "Liquidation
Call Purchase Price")
in accordance with Subsection 8.2(c).
In the event of the exercise of the Liquidation Call Right
by Callco, each
holder shall be obligated to sell all the Exchangeable Shares
held by such
holder to Callco on the Liquidation Date upon payment by Callco
to such
holder of the Liquidation Call Purchase Price for each such
Exchangeable
Share, whereupon Canco shall have no obligation to pay any
Liquidation
Amount to the holders of such shares so purchased by
Callco.
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(b)
|
To
exercise the Liquidation Call Right, Callco must notify ExchangeCo
and the
Transfer Agent of Callco's intention to exercise such right
at least 45
days before the Liquidation Date, in the case of a voluntary
liquidation,
dissolution or winding-up of ExchangeCo or any other voluntary
distribution of the assets of ExchangeCo among its shareholders
for the
purpose of winding-up its affairs, and at least five Business
Days before
the Liquidation Date, in the case of an involuntary liquidation,
dissolution or winding-up of ExchangeCo or any other involuntary
distribution of the assets of ExchangeCo among its shareholders
for the
purpose of winding up its affairs. The Transfer Agent will
notify the
holders of Exchangeable Shares as to whether Callco has exercised
the
Liquidation Call Right forthwith after the expiry of the period
during
which the same may be exercised by Callco. If Callco exercises
the
Liquidation Call Right, then on the Liquidation Date, Callco
will purchase
and the holders of Exchangeable Shares will sell all of the
Exchangeable
Shares then outstanding for a price per share equal to the
Liquidation
Call Purchase Price.
|
|
(c)
|
For
the purposes of completing the purchase of the Exchangeable
Shares
pursuant to the Liquidation Call Right, Callco shall deposit
or cause to
be deposited with the Transfer Agent, on or before the Liquidation
Date,
the Exchangeable Share Consideration representing the total
Liquidation
Call Purchase Price. Provided that such Exchangeable Share
Consideration
has been so deposited with the Transfer Agent, on and after
the
Liquidation Date, the holders of the Exchangeable Shares shall
cease to be
holders of the Exchangeable Shares and shall not be entitled
to exercise
any of the rights of holders in respect thereof (including
any rights
under the Voting and Exchange Trust Agreement ), other than
the right to
receive their proportionate part of the total Liquidation Call
Purchase
Price payable by Callco, without interest, upon presentation
and surrender
by the holder of certificates representing the Exchangeable
Shares held by
such holder and the holder shall on and after the Liquidation
Date be
considered and deemed for all purposes to be the holder of
Acquiror Shares
to which such holder is entitled. Upon surrender to the Transfer
Agent of
a certificate or certificates representing Exchangeable Shares,
together
with 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 Transfer
Agent may reasonably require, the holder of such surrendered
certificate
or certificates shall be entitled to receive in exchange therefor,
and the
Transfer Agent on behalf of Callco shall deliver to such holder,
the
Exchangeable Share Consideration to which such holder is entitled.
If
Callco does not exercise the Liquidation Call Right in the
manner
described above, on the Liquidation Date the holders of the
Exchangeable
Shares will be entitled to receive in exchange therefor the
Liquidation
Amount otherwise payable by ExchangeCo in connection with the
liquidation,
dissolution or winding-up of ExchangeCo pursuant to Article
5 of the
Exchangeable Share Provisions.
|
|
8.3
|
Callco
Redemption Call Right
|
In
addition to Callco's rights contained in the Exchangeable Share Provisions,
including the Retraction Call Right (as defined in the Exchangeable Share
Provisions), Callco shall have the following rights in respect of the
Exchangeable Shares:
|
(a)
|
Callco
shall have the overriding right (the "Redemption
Call Right"),
in the event of and notwithstanding the proposed redemption
of the
Exchangeable Shares by ExchangeCo pursuant to Article 7 of
the
Exchangeable Share Provisions, to purchase from all but not
less than all
of the holders of Exchangeable Shares (other than any holder
of
Exchangeable Shares which is an affiliate of Acquiror) on the
Redemption
Date all but not less than all of the Exchangeable Shares held
by each
such holder upon payment by Callco to each such holder of the
Exchangeable
Share Price applicable on the last Business Day prior to the
Redemption
Date (the "Redemption
Call Purchase Price")
in accordance with Subsection 8.3(c).
In the event of the exercise of the Redemption Call Right by
Callco, each
holder of Exchangeable Shares shall be obligated to sell all
the
Exchangeable Shares held by such holder to Callco on the Redemption
Date
upon payment by Callco to such holder of the Redemption Call
Purchase
Price for each such Exchangeable Share, whereupon Canco shall
have no
obligation to redeem, or to pay the Redemption Price in respect
of, such
shares so purchased by Callco.
|
|
(b)
|
To
exercise the Redemption Call Right, Callco must notify the
Transfer Agent
of Callco's intention to exercise such right at least 60 days
before the
Redemption Date, except in the case of a redemption occurring
as a result
of an Acquiror Control Transaction, an Exchangeable Share Voting
Event or
an Exempt Exchangeable Share Voting Event (each as defined
in the
Exchangeable Share Provisions), in which case Callco shall
so notify the
Transfer Agent and Canco on or before the Redemption Date.
The Transfer
Agent will notify the holders of the Exchangeable Shares as
to whether
Callco has exercised the Redemption Call Right forthwith after
the expiry
of the period during which the same may be exercised by Callco.
If Callco
exercises the Redemption Call Right, then, on the Redemption
Date, Callco
will purchase and the holders of Exchangeable Shares will sell
all of the
Exchangeable Shares then outstanding for a price per share
equal to the
Redemption Call Purchase Price.
|
|
(c)
|
For
the purposes of completing the purchase of the Exchangeable
Shares
pursuant to the exercise of the Redemption Call Right, Callco
shall
deposit or cause to be deposited with the Transfer Agent, on
or before the
Redemption Date, the Exchangeable Share Consideration representing
the
total Redemption Call Purchase Price. Provided that such Exchangeable
Share Consideration has been so deposited with the Transfer
Agent, on and
after the Redemption Date the holders of the Exchangeable Shares
shall
cease to be holders of the Exchangeable Shares and shall not
be entitled
to exercise any of the rights of holders in respect thereof
(including any
rights under the Voting and Exchange Trust Agreement), other
than the
right to receive their proportionate part of the total Redemption
Call
Purchase Price payable by Callco, without interest, upon presentation
and
surrender by the holder of certificates representing the Exchangeable
Shares held by such holder and the holder shall on and after
the
Redemption Date be considered and deemed for all purposes to
be the holder
of Acquiror Shares to which such holder is entitled. Upon surrender
to the
Transfer Agent of a certificate or certificates representing
Exchangeable
Shares, together with 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 Transfer Agent may reasonably require, the holder of such
surrendered
certificate or certificates shall be entitled to receive in
exchange
therefor, and the Transfer Agent on behalf of Callco shall
deliver to such
holder, the Exchangeable Share Consideration to which such
holder is
entitled. If Callco does not exercise the Redemption Call Right
in the
manner described above, on the Redemption Date the holders
of the
Exchangeable Shares will be entitled to receive in exchange
therefor the
Redemption Price otherwise payable by ExchangeCo in connection
with the
redemption of the Exchangeable Shares pursuant to Article 7
of the
Exchangeable Share Provisions.
|
ARTICLE 9
FURTHER
ASSURANCES
|
9.1
|
Notwithstanding
that the transactions and events set out herein shall occur
and be deemed
to occur in the order set out in this Plan of Arrangement without
any
further act or formality, each of the parties to the Arrangement
Agreement
shall make, do and execute, or cause to be made, done and executed,
all
such further acts, deeds, agreements, transfers, assurances,
instruments
or documents as may reasonably be required by any of them in
order further
to document or evidence any of the transactions or events set
out herein.
Target and Acquiror may agree not to implement this Plan of
Arrangement,
notwithstanding the passing of the resolution approving the
Arrangement by
the Target Shareholders and the receipt of the Final
Order.
|
SCHEDULE
"A"
PROVISIONS
ATTACHING TO THE
EXCHANGEABLE
SHARES OF GRAN TIERRA EXCHANGECO INC.
The
Exchangeable Shares shall have the following rights, privileges, restrictions
and conditions:
ARTICLE
1
INTERPRETATION
|
1.1
|
For
the purposes of these share
provisions:
|
"ABCA"
means
the Business
Corporations Act,
R.S.A.
2000, c. B-9, as amended, including the regulations promulgated
thereunder;
"Acquiror"
means
Gran Tierra Energy Inc., a corporation incorporated under the laws
of
Nevada;
"Acquiror
Control Transaction"
means
any merger, amalgamation, tender, offer, material sale of shares or
rights or
interests therein or thereto or similar transactions involving Acquiror,
or any
proposal to carry out the same;
"Acquiror
Dividend Declaration Date'';
means
the date on which the board of directors of Acquiror declares any dividend
on
the Acquiror Shares;
"Acquiror
Shares"
means
the shares in the common stock of Acquiror and any other securities
into which
such shares may be changed, exchanged or converted;
"Affiliate"
has the
meaning ascribed thereto in the Securities Act, unless otherwise expressly
stated herein;
"Arrangement
Agreement"
means
the arrangement agreement by and among Acquiror, the Corporation and
Target
dated July 28, 2008 amended and restated from time to time, providing
for, among
other things, the Arrangement;
"Arrangement"
means
an arrangement under section 193 of the ABCA on the terms and subject
to the
conditions, set out in the Plan of Arrangement to which plan these
share
provisions are attached as Schedule "A" and which Plan of Arrangement
is
attached to the Arrangement Agreement as Exhibit A, subject to any
amendments or
variations thereto made in accordance with Article 6 of the Plan of
Arrangement
or made at the direction of the Court in the Final Order;
"Automatic
Exchange Right"
has the
meaning ascribed thereto in the Voting and Exchange Trust
Agreement;
"Board
of Directors"
means
the board of directors of the Corporation;
"Business
Day"
means a
day, other than a Saturday, Sunday or statutory holiday, when banks
are
generally open in the City of Calgary, in the Province of Alberta,
for the
transaction of banking business;
"Callco"
means
Gran Tierra Callco ULC, a company existing under the laws of the Province
of
Alberta and a direct wholly-owned subsidiary of Acquiror;
"Callco
Call Notice"
has the
meaning ascribed thereto in Section 6.3;
"Canadian
Dollar Equivalent"
means
in respect of an amount expressed in a currency other than Canadian
dollars (the
"Foreign
Currency Amount")
at any
date the product obtained by multiplying:
|
(a)
|
the
Foreign Currency Amount, by
|
|
(b)
|
the
noon spot exchange rate on such date for such foreign currency
expressed
in Canadian dollars as reported by the Bank of Canada or,
in the event
such spot exchange rate is not available, such spot exchange
rate on such
date for such foreign currency expressed in Canadian dollars
as may be
deemed by the Board of Directors to be appropriate for such
purpose;
|
"Change
of Law Call Right"
has the
meaning ascribed thereto in the Plan of Arrangement;
"Common
Shares"
means
the common shares in the capital of the Corporation;
"Corporation"
means
Gran Tierra Exchangeco Inc., a corporation existing under the laws
of the
Province of Alberta;
"Court"
has the
meaning ascribed thereto in the Plan of Arrangement;
"Current
Market Price"
means,
in respect of an Acquiror Share on any date, the Canadian Dollar Equivalent
of
the average of the closing prices of Acquiror Shares during a period
of 20
consecutive trading days ending not more than three trading days before
such
date on the American Stock Exchange; or, if the Acquiror Shares are
not then
listed on the American Stock Exchange, on such other stock exchange
or automated
quotation system on which the Acquiror Shares are listed or quoted,
as the case
may be, as may be selected by the Board of Directors for such purpose;
provided,
however, that if in the opinion of the Board of Directors the public
distribution or trading activity of Acquiror Shares during such period
does not
create a market which reflects the fair market value of an Acquiror
Share, then
the Current Market Price of an Acquiror Share shall be determined by
the Board
of Directors, in good faith and in its sole discretion, and provided
further
that any such selection, opinion or determination by the Board of Directors
shall be conclusive and binding;
"Effective
Date"
means
the effective date of the Arrangement, being the date shown on the
certificate
of arrangement to be issued by the Registrar under the ABCA giving
effect to the
Arrangement;
"Exchange
Right"
has the
meaning ascribed thereto in the Voting and Exchange Trust
Agreement;
"Exchangeable
Shares"
mean
the non-voting exchangeable shares in the capital of the Corporation,
having the
rights, privileges, restrictions and conditions set forth herein;
-
2 -
"Exchangeable
Share Consideration"
means,
with respect to each Exchangeable Share, for any acquisition of, redemption
of
or distribution of assets of the Corporation in respect of such Exchangeable
Share, or purchase of such Exchangeable Share pursuant to these share
provisions, the Plan of Arrangement, the Support Agreement or the Voting
and
Exchange Trust Agreement:
|
(a)
|
the
Current Market Price of one Acquiror Share deliverable in
connection with
such action; plus
|
|
(b)
|
a
cheque or cheques payable at par at any branch of the bankers
of the payor
in the amount of all declared, payable and unpaid, and all
undeclared but
payable, cash dividends deliverable in connection with such
action;
plus
|
|
(c)
|
such
stock or other property constituting any declared and unpaid
non-cash
dividends deliverable in connection with such
action,
|
provided
that: (i) the part of the consideration which represent (a) above shall
be fully
paid and satisfied by the delivery of one Acquiror Share, such share
to be duly
issued, fully paid and non-assessable; (ii) the part of the consideration
which
represents (c) above shall be fully paid and satisfied by delivery
of such
non-cash items; (iii) any such consideration shall be delivered free
and clear
of any lien, claim, encumbrance, security interest or adverse claim
or interest;
and (iv) any such consideration shall be paid less any tax required
to be
deducted and withheld therefrom and without interest;
"Exchangeable
Share Price"
means,
for each Exchangeable Share, an amount equal to the aggregate of:
|
(a)
|
the
Current Market Price of one Acquiror Share;
plus
|
|
(b)
|
an
additional amount equal to the full amount of all cash dividends
declared,
payable and unpaid, on such Exchangeable Share;
plus
|
|
(c)
|
an
additional amount equal to the full amount of all dividends
declared and
payable or paid on Acquiror Shares which have not been declared
or paid on
Exchangeable Shares in accordance herewith;
plus
|
|
(d)
|
an
additional amount representing the full amount of all non-cash
dividends
declared, payable and unpaid, on such Exchangeable
Share;
|
"Exchangeable
Share Voting Event"
means
any matter in respect of which holders of Exchangeable Shares are entitled
to
vote as shareholders of the Corporation, other than an Exempt Exchangeable
Share
Voting Event, and, for greater certainty, excluding any matter in respect
of
which holders of Exchangeable Shares are entitled to vote (or instruct
the
Trustee to vote) in their capacity as Beneficiaries under (and as that
term is
defined in) the Voting and Exchange Trust Agreement;
"Exempt
Exchangeable Share Voting Event"
means
any matter in respect of which holders of Exchangeable Shares are entitled
to
vote as shareholders of the Corporation in order to approve or disapprove,
as
applicable, any change to, or in the rights of the holders of, the
Exchangeable
Shares, where the approval or disapproval, as applicable, of such change
would
be required to maintain the equivalence of the Exchangeable Shares
and the
Acquiror Shares;
-
3 -
"Final
Order"
has the
meaning ascribed thereto in the Plan of Arrangement;
"Governmental
Entity"
means
any:
|
(a)
|
multinational,
federal, provincial, territorial, state, regional, municipal,
local or
other government, governmental or public department, central
bank, court,
tribunal, arbitral body, commission, board, bureau or agency,
domestic or
foreign;
|
|
(b)
|
subdivision,
agent, commission, board, or authority of any of the foregoing;
or
|
|
(c)
|
quasi-governmental
or private body exercising any regulatory, expropriation
or taxing
authority under or for the account of any of the
foregoing;
|
"Holder"
means,
when used with reference to the Exchangeable Shares, the holders of
Exchangeable
Shares shown from time to time in the register maintained by or on
behalf of the
Corporation in respect of the Exchangeable Shares;
"Liquidation
Amount"
has the
meaning ascribed thereto in Section 5.1;
"Liquidation
Call Right"
has the
meaning ascribed thereto in the Plan of Arrangement;
"Liquidation
Date"
has the
meaning ascribed thereto in Section 5.1;
"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,
Governmental Entity, syndicate or other entity, whether or not having
legal
status;
"Plan
of Arrangement"
means
the plan of arrangement to which these share provisions are attached
as Schedule
"A";
"Purchase
Price"
has the
meaning ascribed thereto in Section 6.3;
"Redemption
Call Purchase Price"
has the
meaning ascribed thereto in the Plan of Arrangement;
"Redemption
Call Right"
has the
meaning ascribed thereto in the Plan of Arrangement;
"Redemption
Date"
means
the date, if any, established by the Board of Directors for the redemption
by
the Corporation of all but not less than all of the outstanding Exchangeable
Shares pursuant to Article
7,
which
date shall be no earlier than the fifth anniversary of the Effective
Date,
unless:
|
(a)
|
there
are less than 25,285,358 Exchangeable Shares issued and outstanding
(other
than Exchangeable Shares held by Acquiror and its
Affiliates);
|
|
(b)
|
an
Acquiror Control Transaction occurs, in which case, provided
that the
Board of Directors determines, in good faith and in its sole
discretion,
that it is not reasonably practicable to substantially replicate
the terms
and conditions of the Exchangeable Shares in connection with
such an
Acquiror Control Transaction and that the redemption of all
but not less
than all of the outstanding Exchangeable Shares is necessary
to enable the
completion of such Acquiror Control Transaction in accordance
with its
terms, the Board of Directors may accelerate such redemption
date to such
date prior to the fifth anniversary of the Effective Date
as it may
determine, upon such number of days prior written notice
to the registered
holders of the Exchangeable Shares and the Trustee as the
Board of
Directors may determine to be reasonably practicable in such
circumstances;
|
-
4 -
|
(c)
|
an
Exchangeable Share Voting Event is proposed, in which case,
provided that
the Board of Directors has determined, in good faith and
in its sole
discretion, that it is not reasonably practicable to accomplish
the
business purpose intended by the Exchangeable Share Voting
Event, which
business purpose must be bona fide and not for the primary
purpose of
causing the occurrence of a Redemption Date, the redemption
date shall be
the Business Day prior to the record date for any meeting
or vote of the
holders of the Exchangeable Shares to consider the Exchangeable
Share
Voting Event and the Board of Directors shall give such number
of days
prior written notice of such redemption to the registered
holders of the
Exchangeable Shares and the Trustee as the Board of Directors
may
determine to be reasonably practicable in such circumstances;
or
|
|
(d)
|
an
Exempt Exchangeable Share Voting Event is proposed and the
holders of the
Exchangeable Shares fail to take the necessary action at
a meeting or
other vote of holders of Exchangeable Shares, to approve
or disapprove, as
applicable, the Exempt Exchangeable Share Voting Event, in
which case the
redemption date shall be the Business Day following the day
on which the
holders of the Exchangeable Shares failed to take such
action,
|
provided,
however, that the accidental failure or omission to give any notice
of
redemption under clauses (a), (b) or (c) above to any of such holders
of
Exchangeable Shares shall not affect the validity of any such
redemption;
"Redemption
Price"
has the
meaning ascribed thereto in Section 7.1;
"Registrar"
means
the Registrar appointed pursuant to section 263 of the ABCA;
"Retracted
Shares"
has the
meaning ascribed thereto in Subsection 6.1(a);
"Retraction
Call Right"
has the
meaning ascribed thereto in Subsection 6.1(c);
"Retraction
Date"
has the
meaning ascribed thereto in Subsection 6.1(b);
"Retraction
Price"
has the
meaning ascribed thereto in Section 6.1;
"Retraction
Request"
has the
meaning ascribed thereto in Section 6.1;
"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
the agreement made among Acquiror, Callco and the Corporation substantially
in
the form and content of Exhibit B annexed to the Arrangement Agreement,
with
such changes thereto as the parties to the Arrangement Agreement; acting
reasonably, may agree;
-
5 -
"Target"
means
Solana Resources Limited, a
corporation existing under the laws of the Province of Alberta;
"Target
Shares"
means
the common shares in the capital of Target;
"Transfer
Agent"
means
Computershare Trust Company of Canada or such other Person as may from
time to
time be appointed by the Corporation as the registrar and transfer
agent for the
Exchangeable Shares;
"Trustee"
means
Computershare Trust Company of Canada or such other trustee as is chosen
by
Acquiror and Target, acting reasonably, to act as trustee under the
Voting and
Exchange Trust Agreement, being a corporation organized and existing
under the
laws of Canada, and any successor trustee appointed under the Voting
and
Exchange Trust Agreement; and
"Voting
and Exchange Trust Agreement"
means
the agreement made among Acquiror, the Corporation and the Trustee
in connection
with the Plan of Arrangement substantially in the form and content
of Exhibit C
annexed to the Arrangement Agreement with such changes thereto as the
parties to
the Arrangement Agreement, acting reasonably, may agree.
ARTICLE
2
RANKING
OF EXCHANGEABLE SHARES
|
2.1
|
The
Exchangeable Shares shall be entitled to a preference over
the Common
Shares and any other shares ranking junior to the Exchangeable
Shares with
respect to the payment of dividends and the distribution
of assets in the
event of the liquidation, dissolution or winding-up of the
Corporation,
whether voluntary or involuntary, or any other distribution
of the assets
of the Corporation, among its shareholders for the purpose
of winding-up
its affairs.
|
ARTICLE
3
DIVIDENDS
|
3.1
|
A
holder of an Exchangeable Share shall be entitled to receive
and the Board
of Directors shall, subject to applicable law, on each Acquiror
Dividend
Declaration Date, declare a dividend on each Exchangeable
Share:
|
|
(a)
|
in
the case of a cash dividend declared on the Acquiror Shares,
in an amount
in cash for each Exchangeable Share in U.S. dollars, or the
Canadian
Dollar Equivalent thereof on the Acquiror Dividend Declaration
Date, in
each case, corresponding to the cash dividend declared on
each Acquiror
Share;
|
|
(b)
|
in
the case of a stock dividend declared on the Acquiror Shares,
to be paid
in Acquiror Shares, subject to Section 3.2,
by the issue or transfer by the Corporation of such number
of Exchangeable
Shares for each Exchangeable Share as is equal to the number
of Acquiror
Shares to be paid on each Acquiror Share;
or
|
|
(c)
|
in
the case of a dividend declared on the Acquiror Shares in
property other
than cash or Acquiror Shares, in such type and amount of
property for each
Exchangeable Share as is the same as or economically equivalent
to (to be
determined by the Board of Directors as contemplated by Section
3.6)
the type and amount of property declared as a dividend on
each Acquiror
Share.
|
-
6 -
Such
dividends shall be paid out of money, assets or property of the Corporation
properly applicable to the payment of dividends, or out of authorized
but
unissued shares of the Corporation, as applicable.
|
3.2
|
In
the case of a stock dividend declared on the Acquiror Shares
to be paid in
Acquiror Shares, in lieu of declaring the stock dividend
contemplated by
Subsection 3.1(b)
on
the Exchangeable Shares, the Board of Directors may, in good
faith and in
its discretion and subject to applicable law and to obtaining
all required
regulatory approvals, subdivide, redivide or change (the
"Subdivision")
each issued and unissued Exchangeable Share on the basis
that each
Exchangeable Share before the subdivision becomes a number
of Exchangeable
Shares equal to the sum of: (i) one Acquiror Share; and (ii)
the number of
Acquiror Shares to be paid as a share dividend on each Acquiror
Share. In
making such Subdivision, the Board of Directors shall consider
the effect
thereof upon the then outstanding Exchangeable Shares and
the general
taxation consequences of the Subdivision to the holders of
the
Exchangeable Shares. In such instance, and notwithstanding
any other
provision hereof, such Subdivision, shall become effective
on the
effective date specified in Section 3.4
without any further act or formality on the part of the Board
of Directors
or of the holders of Exchangeable Shares. For greater certainty,
subject
to applicable law; no approval of the Holders to an amendment
to the
articles of the Corporation shall be required to give effect
to such
Subdivision.
|
|
3.3
|
Cheques
of the Corporation payable at par at any branch of the bankers
of the
Corporation shall be issued in respect of any cash, dividends
contemplated
by Subsection 3.1(a)
and the sending of such a cheque to each holder of an Exchangeable
Share
shall satisfy the cash dividend represented thereby unless
the cheque is
not paid on presentation. Subject to applicable law, certificates
registered in the name of the registered holder of Exchangeable
Shares
shall be issued or transferred in respect of any stock dividends
contemplated by Subsection 3.1(b)
or
any Subdivision contemplated by Section 3.2
and the sending of such a certificate to each holder of an
Exchangeable
Share shall satisfy the stock dividend represented thereby.
Such other
type and amount of property in respect of any dividends contemplated
by
Subsection 3.1(c)
shall be issued, distributed or transferred by the Corporation
in such
manner as it shall determine and the issuance, distribution
or transfer
thereof by the Corporation to each holder of an Exchangeable
Share shall
satisfy the dividend represented thereby. No holder of an
Exchangeable
Share shall be entitled to recover by action or other legal
process
against the Corporation any dividend that is represented
by a cheque that
has not been duly presented to the Corporation's bankers
for payment or
that otherwise remains unclaimed for a period of six years
from the date
on which such dividend was first
payable.
|
|
3.4
|
The
record date for the determination of the holders of Exchangeable
Shares
entitled to receive payment of, and the payment date for,
any dividend
declared on the Exchangeable Shares under Section 3.1
shall be the same dates as the record date and payment date,
respectively,
for the corresponding dividend declared on the Acquiror Shares.
The record
date for the determination of the holders of Exchangeable
Shares entitled
to receive Exchangeable Shares in connection with any Subdivision
of the
Exchangeable Shares under Section 3.2
and the effective date of such Subdivision shall be the same
dates as the
record date and payment date, respectively, for the corresponding
dividend
declared on the Acquiror Shares.
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3.5
|
If
on any payment date for any dividends declared on the Exchangeable
Shares
under Section 3.1
the dividends are not paid in full on all of the Exchangeable
Shares then
outstanding, any such dividends that remain unpaid shall
be paid on the
earliest subsequent date or dates determined by the Board
of Directors on
which the Corporation shall have sufficient moneys, assets
or property
properly applicable to the payment of such
dividends.
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7 -
|
3.6
|
The
Board of Directors shall determine, in good faith and in
its sole
discretion, economic equivalence for the purposes of Sections
3.1
and 3.2
and Article
11,
and each such determination shall be conclusive and binding
on the
Corporation and its shareholders. In making each such determination,
the
following factors shall, without excluding other factors
determined by the
Board of Directors to be relevant, be considered by the Board
of
Directors:
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|
(a)
|
in
the case of any stock dividend or other distribution payable
in Acquiror
Shares, the number of such shares issued in proportion to
the number of
Acquiror Shares previously
outstanding;
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|
(b)
|
in
the case of the issuance, or distribution of any rights,
options or
warrants to subscribe for or purchase Acquiror Shares (or
securities
exchangeable for or convertible into or carrying rights to
acquire
Acquiror Shares), the relationship between the exercise price
of each such
right, option or warrant and the Current Market Price, the
volatility of
the Acquiror Shares and the term of any such
instrument;
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|
(c)
|
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 Shares, any rights, options or warrants other than
those referred
to in Subsection 3.6(b),
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 in the manner above contemplated) of such property
to be issued
or distributed with respect to each outstanding Acquiror
Share and the
Current Market Price; and
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|
(d)
|
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
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 with regard to the
individual
circumstances of holders of Exchangeable
Shares).
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3.7
|
Except
as provided in this Article
3,
the holders of Exchangeable Shares shall not be entitled
to receive
dividends in respect thereof. Notwithstanding any provision
of this
Article
3
to
the contrary, if the Exchangeable Share Price is paid to
a holder of an
Exchangeable Share by Callco pursuant to the Retraction Call
Right, the
Redemption Call Right or the Liquidation Call Right or by
the Acquiror
pursuant to the Exchange Right or the Automatic Exchange
Right, the holder
of the Exchangeable Share shall cease to have any right to
be paid any
amount by the Corporation in respect of any unpaid dividends
on such
Exchangeable Shares.
|
ARTICLE
4
CERTAIN
RESTRICTIONS
|
4.1
|
So
long as any of the Exchangeable Shares are outstanding, the
Corporation
shall not at any time without, but may at any time with,
the approval of
the holders of the Exchangeable Shares given as specified
in Section
10.2
of
these share provisions:
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|
(a)
|
pay
any dividends on the Common Shares or any other shares ranking
junior to
the Exchangeable Shares with respect to the payment of dividends,
other
than stock dividends payable in Common Shares or any such
other shares
ranking junior to the Exchangeable Shares, as the case may
be;
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8 -
|
(b)
|
redeem
or purchase or make any capital distribution in respect of
Common Shares
or any other shares ranking junior to the Exchangeable Shares
with respect
to the payment of dividends or on any liquidation, dissolution
or
winding-up of the Corporation or any other distribution of
the assets of
the Corporation;
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|
(c)
|
redeem
or purchase or make any capital distribution in respect of
any other
shares of the Corporation ranking equally with the Exchangeable
Shares
with respect to the payment of dividends or on any liquidation,
dissolution or winding-up of the Corporation or any other
distribution of
the assets of the Corporation; or
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|
(d)
|
issue
any Exchangeable Shares or any other shares of the Corporation
ranking
equally with, or superior to, the Exchangeable Shares other
than by way of
stock dividends to the holders of such Exchangeable Shares,
|
provided
that the restrictions in Subsections 4.1(a),
4.1(b),
4.1(c)
and
4.1(d)
shall
not apply if all dividends on the outstanding Exchangeable Shares corresponding
to dividends declared and paid to date on the Acquiror Shares shall
have been
declared and paid on the Exchangeable Shares.
ARTICLE
5
DISTRIBUTION
ON LIQUIDATION
|
5.1
|
In
the event of the liquidation, dissolution or winding-up of
the Corporation
or any other distribution of the assets of the Corporation
among its
shareholders for the purpose of winding up its affairs, a
holder of
Exchangeable Shares shall be entitled, subject to applicable
law and to
the exercise by Callco of the Liquidation Call Right, to
receive from the
assets of the Corporation in respect of each Exchangeable
Share held by
such holder on the effective date (the "Liquidation
Date")
of such liquidation, dissolution, winding-up or distribution
of assets,
before any distribution of any part of the assets of the
Corporation among
the holders of the Common Shares or any other shares ranking
junior to the
Exchangeable Shares, an amount per share equal to the Exchangeable
Share
Price applicable on the last Business Day prior to the Liquidation
Date
(the "Liquidation
Amount").
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5.2
|
On
or promptly after the Liquidation Date, and subject to the
exercise by
Callco of the Liquidation Call Right, the Corporation shall
cause to be
delivered to the holders of the Exchangeable Shares the Liquidation
Amount
for each such Exchangeable Share upon presentation and surrender
of the
certificates representing such Exchangeable Shares, together
with such
other documents and instruments as may be required to effect
a transfer of
Exchangeable Shares under the ABCA and the articles and by-laws
of the
Corporation and such additional documents and instruments
as the Transfer
Agent and the Corporation may reasonably require at the registered
office
of the Corporation or at any office of the Transfer Agent
as may be
specified by the Corporation by notice to the holders of
the Exchangeable
Shares. Payment of the total Liquidation Amount for such
Exchangeable
Shares shall be made by delivery to each holder, at the address
of the
holder recorded in the register of the Corporation for the
Exchangeable
Shares or by holding for pick-up by the holder at the registered
office of
the Corporation or at any office of the Transfer Agent as
may be specified
by the Corporation by notice to the holders of Exchangeable
Shares, on
behalf of the Corporation of the Exchangeable Share Consideration
representing the total Liquidation Amount. On and after the
Liquidation
Date, the holders of the Exchangeable Shares shall cease
to be holders of
such Exchangeable Shares and shall not be entitled to exercise
any of the
rights of holders in respect thereof (including any rights
under the
Voting and Exchange Trust Agreement) other than the right
to receive their
proportionate part of the total Liquidation Amount, unless
payment of the
total Liquidation Amount for such Exchangeable Shares shall
not be made
upon presentation and surrender of share certificates in
accordance with
the foregoing provisions, in which case the rights of the
holders shall
remain unaffected until the total Liquidation Amount to which
such holders
are entitled shall have been paid to such holders in the
manner
hereinbefore provided. The Corporation shall have the right
at any time on
or before the Liquidation Date to deposit or cause to be
deposited the
Exchangeable Share Consideration in respect of the Exchangeable
Shares
represented by certificates that have not at the Liquidation
Date been
surrendered by the holders thereof in a custodial account
with any
chartered bank or trust company in Canada. Upon such deposit
being made,
the rights of the holders of Exchangeable Shares, after such
deposit,
shall be limited to receiving their proportionate part of
the total
Liquidation Amount for such Exchangeable Shares so deposited,
against
presentation and surrender of the said certificates held
by them,
respectively, in accordance with the foregoing provisions.
Upon such
payment or deposit of such Exchangeable Share Consideration,
the holders
of the Exchangeable Shares shall thereafter be considered
and deemed for
all purposes to be holders of the Acquiror Shares delivered
to them or the
custodian on their behalf.
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-
9 -
|
5.3
|
After
the Corporation has satisfied its obligations to pay the
holders of the
Exchangeable Shares the Liquidation Amount per Exchangeable
Share pursuant
to Section 5.1,
such holders shall not be entitled to share in any further
distribution of
the assets of the Corporation.
|
ARTICLE
6
RETRACTION
OF EXCHANGEABLE SHARES BY HOLDER
|
6.1
|
A
holder of Exchangeable Shares shall be entitled at any time,
subject to
the exercise by Callco of the Retraction Call Right and otherwise
upon
compliance with the provisions of this Article
6,
to require the Corporation to redeem any or all of the Exchangeable
Shares
registered in the name of such holder, for an amount per
share equal to
the Exchangeable Share Price applicable on the last Business
Day prior to
the Retraction Date (the "Retraction
Price"),
which shall be satisfied in full by the Corporation causing
to be
delivered to such holder the Exchangeable Share Consideration
representing
the Retraction Price. To effect such redemption, the holder
shall present
and surrender at the registered office of the Corporation
or at any office
of the Transfer Agent as may be specified by the Corporation
by notice to
the holders of Exchangeable Shares, the certificate or certificates
representing the Exchangeable Shares which the holder desires
to have the
Corporation redeem, together with such other documents and
instruments as
may be required to effect a transfer of Exchangeable Shares
under the ABCA
and the articles and bylaws of the Corporation and such additional
documents and instruments as the Transfer Agent and the Corporation
may
reasonably require, and together with a duly executed statement
(the
"Retraction
Request")
in the form of Schedule A hereto or in such other form as
may be
acceptable to the Corporation:
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|
(a)
|
specifying
that the holder desires to have all or any number specified
therein of the
Exchangeable Shares represented by such certificate or certificates
(the
"Retracted
Shares")
redeemed by the Corporation;
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|
(b)
|
stating
the Business Day on which the holder desires to have the
Corporation
redeem the Retracted Shares (the "Retraction
Date"),
provided that the Retraction Date shall be not less than
10 Business Days
nor more than 15 Business Days after the date on which the
Retraction
Request is received by the Corporation and further provided
that in the
event that no such Business Day is specified by the holder
in the
Retraction Request, the Retraction Date shall be deemed to
be the 15th
Business Day after the date on which the Retraction Request
is received by
the Corporation; and
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10 -
|
(c)
|
acknowledging
the overriding right (the "Retraction
Call Right")
of Callco to purchase all but not less than all the Retracted
Shares
directly from the holder and that the Retraction Request
shall be deemed
to be a revocable offer by the holder to sell the Retracted
Shares to
Callco in accordance with the Retraction Call Right on the
terms and
conditions set out in Section 6.3.
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|
6.2
|
Subject
to the exercise by Callco of the Retraction Call Right, upon
receipt by
the Corporation or the Transfer Agent in the manner specified
in Section
6.1
of
a certificate or certificates representing the number of
Retracted Shares,
together with a Retraction Request and such additional documents
and
instruments as the Transfer Agent and the Corporation may
reasonably
require, and provided that the Retraction Request is not
revoked by the
holder in the manner specified in Section 6.7,
the Corporation shall redeem the Retracted Shares effective
at the close
of business on the Retraction Date and shall cause to be
delivered to such
holder the total Retraction Price with respect to such shares
in
accordance with Section 6.4.
If only a part of the Exchangeable Shares represented by
any certificate
is redeemed (or purchased by Callco pursuant to the Retraction
Call
Right), a new certificate for the balance of such Exchangeable
Shares
shall be issued to the holder at the expense of the
Corporation.
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|
6.3
|
Upon
receipt by the Corporation of a Retraction Request, the Corporation
shall
immediately notify Callco thereof and shall provide to Callco
a copy of
the Retraction Request. In order to exercise the Retraction
Call Right,
Callco must notify the Corporation of its determination to
do so (the
"Callco
Call Notice")
within five Business Days of notification to Callco by the
Corporation of
the receipt by the Corporation of the Retraction Request.
If Callco does
not so notify the Corporation within such five Business Day
period, the
Corporation will notify the holder as soon as possible thereafter
that
Callco will not exercise the Retraction Call Right. If Callco
delivers the
Callco Call Notice within such five Business Day period,
and provided that
the Retraction Request is not revoked by the holder in the
manner
specified in Section 6.7,
the Retraction Request shall thereupon be considered only
to be an offer
by the holder to sell all but not less than all the Retracted
Shares to
Callco in accordance with the Retraction Call Right. In such
event, the
Corporation shall not redeem the Retracted Shares and Callco
shall
purchase from such holder and such holder shall sell to Callco
on the
Retraction Date all but not less than all the Retracted Shares
for a
purchase price (the "Purchase
Price")
per share equal to the Retraction Price, which, as set forth
in Section
6.4,
shall be fully paid and satisfied by the delivery by or on
behalf of
Callco, of the Exchangeable Share Consideration representing
the total
Purchase Price. For the purposes of completing a purchase
pursuant to the
Retraction Call Right, Callco shall deposit with the Transfer
Agent, on or
before the Retraction Date, the Exchangeable Share Consideration
representing the total Purchase Price. Provided that Callco
has complied
with Section 6.4,
the closing of the purchase and sale of the Retracted Shares
pursuant to
the Retraction Call Right shall be deemed to have occurred
as at the close
of business on the Retraction Date and, for greater certainty,
no
redemption by the Corporation of such Retracted Shares shall
take place on
the Retraction Date. In the event that Callco does not deliver
a Callco
Call Notice within such five Business Day period, and provided
that the
Retraction Request is not revoked by the holder in the manner
specified in
Section 6.7,
the Corporation shall redeem the Retracted Shares on the
Retraction Date
and in the manner otherwise contemplated in this Article
6.
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|
6.4
|
The
Corporation or Callco, as the case may be, shall deliver
or cause the
Transfer Agent to deliver to the relevant holder, at the
address of the
holder recorded in the register of the Corporation for the
Exchangeable
Shares or at the address specified in the holder's Retraction
Request or,
if specified in such Retraction Request, by holding for pick-up
by the
holder at the registered office of the Corporation or at
any office of the
Transfer Agent as may be specified by the Corporation by
notice to such
holder of Exchangeable Shares, the Exchangeable Share Consideration
representing the total Retraction Price or the total Purchase
Price, as
the case may be, and such delivery of such Exchangeable Share
Consideration to the Transfer Agent shall be deemed to be
payment of and
shall satisfy and discharge all liability for the total Retraction
Price
or total Purchase Price, as the case may be, to the extent
that the same
is represented by such Exchangeable Share
Consideration.
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11 -
|
6.5
|
On
and after the close of business on the Retraction Date, the
holder of the
Retracted Shares shall cease to be a holder of such Retracted
Shares and
shall not be entitled to exercise any of the rights of a
holder in respect
thereof, other than the right to receive the total Retraction
Price or
total Purchase Price, as the case may be, unless upon presentation
and
surrender of certificates in accordance with the foregoing
provisions,
payment of the total Retraction Price or the total Purchase
Price, as the
case may be, shall not be made as provided in Section 6.4,
in which case the rights of such holder shall remain unaffected
until the
total Retraction Price or the total Purchase Price, as the
case may be,
has been paid in the manner hereinbefore provided. On and
after the close
of business on the Retraction Date, provided that presentation
and
surrender of certificates and payment of the total Retraction
Price or the
total Purchase Price, as the case may be, has been made in
accordance with
the foregoing provisions, the holder of the Retracted Shares
so redeemed
by the Corporation or purchased by Callco shall thereafter
be considered
and deemed for all purposes to be the holder of the Acquiror
Shares
delivered to it.
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|
6.6
|
Notwithstanding
any other provision of this Article
6,
the Corporation shall not be obligated to redeem Retracted
Shares
specified by a holder in a Retraction Request to the extent
that such
redemption of Retracted Shares would be contrary to solvency
requirements
or other provisions of applicable law. If the Corporation
believes, acting
reasonably, that on any Retraction Date it would not be permitted
by any
of such provisions to redeem the Retracted Shares tendered
for redemption
on such date, and provided that Callco shall not have exercised
the
Retraction Call Right with respect to the Retracted Shares,
the
Corporation shall only be obligated to redeem Retracted Shares
specified
by a holder in a Retraction Request to the extent of the
maximum number
that may be so redeemed (rounded down to a whole number of
shares) as
would not be contrary to such provisions and shall notify
the holder at
least two Business Days prior to the Retraction Date as to
the number of
Retracted Shares which will not be redeemed by the Corporation.
In any
case in which the redemption by the Corporation of Retracted
Shares would
be contrary to solvency requirements or other provisions
of applicable
law, the Corporation shall redeem the maximum number of Exchangeable
Shares which the Board of Directors determines the Corporation
is
permitted to redeem as of the Retraction Date on a pro rata
basis and
shall issue to each holder of Retracted Shares a new certificate,
at the
expense of the Corporation, representing the Retracted Shares
not redeemed
by the Corporation pursuant to Section 6.2.
Provided that the Retraction Request is not revoked by the
holder in the
manner specified in Section 6.7
and Callco does not exercise the Retraction Call Right, the
holder of any
such Retracted Shares not redeemed by the Corporation pursuant
to Section
6.2
as
a result of solvency requirements or other provisions of
applicable law
shall be deemed by giving the Retraction Request to have
instructed the
Trustee to require Acquiror to purchase such, Retracted Shares
from such
holder on the Retraction Date or as soon as practicable thereafter
on
payment by Acquiror to such holder of the Retraction Price
for each such
Retracted Share, all as more specifically provided in the
Voting and
Exchange Trust Agreement.
|
|
6.7
|
A
holder of Retracted Shares may, by notice in writing given
by the holder
to the Corporation before the close of business on the Business
Day
immediately preceding the Retraction Date, withdraw its Retraction
Request, in which event such Retraction Request shall be
null and void
and, for greater certainty, the revocable offer constituted
by the
Retraction Request to sell the Retracted Shares to Callco
shall be deemed
to have been revoked.
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12 -
Article
7
REDEMPTION
OF EXCHANGEABLE SHARES BY THE CORPORATION
|
7.1
|
Subject
to applicable law, and provided Callco has not exercised
the Redemption
Call Right, the Corporation shall on the Redemption Date
redeem all but
not less than all of the then outstanding Exchangeable Shares
for an
amount per share equal to the Exchangeable Share Price applicable
on the
last Business Day prior to the Redemption Date (the "Redemption
Price").
|
|
7.2
|
In
any case of a redemption of Exchangeable Shares under this
Article
7,
the Corporation shall, at least 45 days before the Redemption
Date (other
than a Redemption Date established in connection with an
Acquiror Control
Transaction, an Exchangeable Share Voting Event or an Exempt
Exchangeable
Share Voting Event), send or cause to be sent to each holder
of
Exchangeable Shares a notice in writing of the redemption
by the
Corporation or the purchase by Callco under the Redemption
Call Right, as
the case may be, of the Exchangeable Shares held by such
holder. In the
case of a Redemption Date established in connection with
an Acquiror
Control Transaction, an Exchangeable Share Voting Event or
an Exempt
Exchangeable Share Voting Event, the written notice of redemption
by the
Corporation or the purchase by Callco under the Redemption
Call Right will
be sent on or before the Redemption Date, on as many days
prior written
notice as may be determined by the Board of Directors to
be reasonably
practicable in the circumstances. In any such case, such
notice shall set
out the formula for determining the Redemption Price or the
Redemption
Call Purchase Price, as the case may be, the Redemption Date
and, if
applicable, particulars of the Redemption Call Right. In
the case of any
notice given in connection with a possible Redemption Date,
such notice
will be given contingently and will be withdrawn if the contingency
does
not occur.
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|
7.3
|
On
or after the Redemption Date and subject to the exercise
by Callco of the
Redemption Call Right, the Corporation shall cause to be
delivered to the
holders of the Exchangeable Shares to be redeemed the Redemption
Price for
each such Exchangeable Share upon presentation and surrender
at the
registered office of the Corporation or at any office of
the Transfer
Agent as may be specified by the Corporation in the notice
described in
Section 7.2
of
the certificates representing such Exchangeable Shares, together
with such
other documents and instruments as may be required to effect
a transfer of
Exchangeable Shares under the ABCA and the articles and by-laws
of the
Corporation and such additional documents and instruments
as the Transfer
Agent and the Corporation may reasonably require. Payment
of the total
Redemption Price for such Exchangeable Shares shall be made
by delivery to
each holder, at the address of the holder recorded in the
securities
register of the Corporation or by holding for pick-up by
the holder at the
registered office of the Corporation or at any office of
the Transfer
Agent as may be specified by the Corporation in such notice,
on behalf of
the Corporation of the Exchangeable Share Consideration representing
the
total Redemption Price. On and after the Redemption Date,
the holders of
the Exchangeable Shares called for redemption shall cease
to be holders of
such Exchangeable Shares and shall not be entitled to exercise
any of the
rights of holders in respect thereof, other than the right
to receive
their proportionate part of the total Redemption Price, unless
payment of
the total Redemption Price for such Exchangeable Shares shall
not be made
upon presentation and surrender of certificates in accordance
with the
foregoing provisions, in which case the rights of the holders
shall remain
unaffected until the total Redemption Price has been paid
in the manner
hereinbefore provided. The Corporation shall have the right
at any time
after the sending of notice of its intention to redeem the
Exchangeable
Shares as aforesaid to deposit or cause to be deposited the
Exchangeable
Share Consideration with respect to the Exchangeable Shares
so called for
redemption, or of such of the said Exchangeable Shares represented
by
certificates that have not at the date of such deposit been
surrendered by
the holders thereof in connection with such redemption, in
a custodial
account with any chartered bank or trust company in Canada
named in such
notice. Upon the later of such deposit being made and the
Redemption Date,
the Exchangeable Shares in respect whereof such deposit shall
have been
made shall be redeemed and the rights of the holders thereof
after such
deposit or Redemption Date, as the case may be, shall be
limited to
receiving their proportionate part of the total Redemption
Price for such
Exchangeable Shares so deposited, against presentation and
surrender of
the said certificates held by them, respectively, in accordance
with the
foregoing provisions. Upon such payment or deposit of such
Exchangeable
Share Consideration, the holders of the Exchangeable Shares
shall
thereafter be considered and deemed for all purposes to be
holders of
Acquiror Shares delivered to them or the custodian on their
behalf.
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13 -
Article
8
PURCHASE
FOR CANCELLATION
|
8.1
|
Subject
to applicable law and the articles of the Corporation and
notwithstanding
Section 8.2,
the Corporation may at any time and from time to time purchase
for
cancellation all or any part of the Exchangeable Shares by
private
agreement with any holder of Exchangeable
Shares.
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|
8.2
|
Subject
to applicable law and the articles of the Corporation, the
Corporation may
at any time and from time to time purchase for cancellation
all or any
part of the outstanding Exchangeable Shares by tender to
all the holders
of record of Exchangeable Shares then outstanding or through
the
facilities of any stock exchange on which the Exchangeable
Shares are
listed or quoted at any price per share together with an
amount equal to
all declared and unpaid dividends thereon for which the record
date has
occurred prior to the date of purchase. If in response to
an invitation
for tenders under the provisions of this Section 8.2,
more Exchangeable Shares are tendered at a price or prices
acceptable to
the Corporation than the Corporation is prepared to purchase,
the
Exchangeable Shares to be purchased by the Corporation shall
be purchased
as nearly as may be pro rata according to the number of shares
tendered by
each holder who submits a tender to the Corporation, provided
that when
shares are tendered at different prices, the pro rating shall
be effected
(disregarding fractions) only with respect to the shares
tendered at the
price at which more shares were tendered than the Corporation
is prepared
to purchase after the Corporation has purchased all the shares
tendered at
lower prices. If only part of the Exchangeable Shares represented
by any
certificate shall be purchased, a new certificate for the
balance of such
shares shall be issued at the expense of the
Corporation.
|
ARTICLE
9
VOTING
RIGHTS
|
9.1
|
Except
as required by applicable law and by Article
10,
Section 11.1
and Section 12.2,
the holders of the Exchangeable Shares shall not be entitled
as such to
receive notice of or to attend any meeting of the shareholders
of the
Corporation or to vote at any such
meeting.
|
ARTICLE
10
AMENDMENT
AND APPROVAL
|
10.1
|
The
rights, privileges, restrictions and conditions attaching
to the
Exchangeable Shares may be added to, changed or removed but
only with the
approval of the holders of the Exchangeable Shares given
as hereinafter
specified.
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14 -
|
10.2
|
Any
approval given by the holders of the Exchangeable Shares
to add to, change
or remove any right, privilege, restriction or condition
attaching to the
Exchangeable Shares or any other matter requiring the approval
or consent
of the holders of the Exchangeable Shares shall be deemed
to have been
sufficiently given if it shall have been given in accordance
with
applicable law subject to a minimum requirement that such
approval be
evidenced by resolution passed by not less than 66 2/3% of
the votes cast
on such resolution by holders (other than Acquiror and its
Affiliates)
represented in person or by proxy at a meeting of holders
of Exchangeable
Shares duly called and held on at least 21 days written notice,
provided
that if at any such meeting the holders of at least 25% of
the outstanding
Exchangeable Shares at that time are not present or represented
by proxy
within one-half hour after the time appointed for such meeting,
then the
meeting shall be adjourned to such date not less than five
days thereafter
and to such time and place as may be designated by the Chair
of such
meeting. At such adjourned meeting, the holders of Exchangeable
Shares
(other than Acquiror and its Affiliates), present or represented
by proxy
thereat may transact the business for which the meeting was
originally
called and a resolution passed thereat by the affirmative
vote of not less
than 66 2/3% of the votes cast on such resolution by holders
(other than
Acquiror and its Affiliates) represented in person or by
proxy at such
meeting shall constitute the approval or consent of the holders
of the
Exchangeable Shares. For purposes of this Section 10.2,
any spoiled votes, illegible votes, defective votes and abstentions
shall
be deemed to be votes not cast.
|
ARTICLE
11
RECIPROCAL
CHANGES IN RESPECT OF ACQUIROR SHARES
|
11.1
|
Each
holder of an Exchangeable Share acknowledges that the Support
Agreement
provides, in part, that Acquiror will not, without the prior
approval of
the Corporation and the prior approval of the holders of
the Exchangeable
Shares given in accordance with Section 10.2:
|
|
(a)
|
issue
or distribute Acquiror Shares (or securities exchangeable
for or
convertible into or carrying rights to acquire Acquiror Shares)
to the
holders of all or substantially all of the then outstanding
Acquiror
Shares by way of stock dividend or other distribution, other
than an issue
of Acquiror Shares (or securities exchangeable for or convertible
into or
carrying rights to acquire Acquiror Shares) to holders of
Acquiror
Shares:
|
|
(i)
|
who
exercise an option to receive dividends in Acquiror Shares
(or securities
exchangeable for or convertible into or carrying rights to
acquire
Acquiror Shares) in lieu of receiving cash dividends, or
|
|
(ii)
|
pursuant
to any dividend reinvestment plan or scrip
dividend;
|
|
(b)
|
issue
or distribute rights, options or warrants to the holders
of all or
substantially all of the then outstanding Acquiror Shares
entitling them
to subscribe for or to purchase Acquiror Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire
Acquiror Shares); or
|
|
(c)
|
issue
or distribute to the holders of all or substantially all
of the then
outstanding Acquiror Shares:
|
|
(i)
|
shares
or securities of Acquiror of any class other than Acquiror
Shares (other
than shares convertible into or exchangeable for or carrying
rights to
acquire Acquiror Shares);
|
-
15 -
|
(ii)
|
rights,
options or warrants other than those referred to in Subsection
11.1(b);
|
|
(iii)
|
evidences
of indebtedness of Acquiror; or
|
|
(iv)
|
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.
|
11.2
|
Each
holder of an Exchangeable Share acknowledges that the Support
Agreement
further provides, in part, that Acquiror will not, without
the prior
approval of the Corporation and the prior approval of the
holders of the
Exchangeable Shares given in accordance with Section 10.2:
|
|
(a)
|
subdivide,
redivide or change the then outstanding Acquiror Shares into
a greater
number of Acquiror Shares;
|
|
(b)
|
reduce,
combine, consolidate or change the then outstanding Acquiror
Shares into a
lesser number of Acquiror Shares;
or
|
|
(c)
|
reclassify
or otherwise change the Acquiror Shares or effect an amalgamation,
merger,
reorganization or other transaction affecting the Acquiror
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, and such change is permitted under applicable
law. The
Support Agreement further provides, in part, that the provisions of
the Support
Agreement described in Section 11.1
and this
Section 11.2
shall
not be changed without the approval of the holders of the Exchangeable
Shares
given in accordance with Section 10.2.
|
11.3
|
Notwithstanding
the foregoing provisions of this Article
11,
in the event of an Acquiror Control
Transaction:
|
|
(a)
|
in
which Acquiror merges or amalgamates with, or in which all
or
substantially all of the then outstanding Acquiror 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 virtue of a right referred to in
paragraph 251(5)
(b) thereof);
|
|
(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
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,
|
-
16 -
then
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 shares
pursuant
to these share provisions or Article 8 of the Plan of Arrangement or
exchange of
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, option or
retraction of
such shares pursuant to these 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
12
ACTIONS
BY THE CORPORATION UNDER OTHER AGREEMENTS
|
12.1
|
The
Corporation will take all such actions and do all such things
as shall be
necessary or advisable to perform and comply with and to
ensure
performance and compliance by Acquiror, Callco and the Corporation
with
all provisions of the Support Agreement and the Voting and
Exchange Trust
Agreement applicable to Acquiror, Callco and the Corporation,
respectively, in accordance with the terms thereof including
taking all
such actions and doing all such things as shall be necessary
or advisable
to enforce to the fullest extent possible for the direct
benefit of the
Corporation all rights and benefits in favour of the Corporation
under or
pursuant thereto.
|
|
12.2
|
The
Corporation shall not propose, agree to or otherwise give
effect to any
amendment to, or waiver or forgiveness of, its rights or
obligations under
the Support Agreement or the Voting and Exchange Trust Agreement
without
the approval of the holders of the Exchangeable Shares given
in accordance
with Section 10.2
other than such amendments, waivers and/or forgiveness as
may be necessary
or advisable for the purposes of:
|
|
(a)
|
adding
to the covenants of the other parties to such agreement for
the protection
of the Corporation or the holders of the Exchangeable Shares
thereunder,
|
|
(b)
|
making
such provisions or modifications not inconsistent with such
agreement as
may be necessary or desirable with respect to matters or
questions arising
thereunder which, in the good faith opinion of the Board
of Directors, it
may be expedient to make, provided that the Board of Directors
shall be of
the good faith opinion, after consultation with counsel,
that such
provisions and modifications will not be prejudicial to the
interests of
the holders of the Exchangeable Shares;
or
|
|
(c)
|
making
such changes in or corrections to such agreement which, on
the advice of
counsel to the Corporation, are required for the purpose
of curing or
correcting any ambiguity or defect or inconsistent provision
or clerical
omission or mistake or manifest error contained therein,
provided that the
Board of Directors shall be of the good faith opinion, after
consultation
with counsel, that such changes or corrections will not be
prejudicial to
the interests of the holders of the Exchangeable
Shares.
|
ARTICLE
13
LEGEND;
CALL RIGHTS; WITHHOLDING RIGHTS
|
13.1
|
The
certificates evidencing the Exchangeable Shares shall contain
or have
affixed thereto a legend in form and on terms approved by
the Board of
Directors, with respect to the Support Agreement, the provisions
of the
Plan of Arrangement relating to the Liquidation Call Right,
the Redemption
Call Right and the Change of Law Call Right, and the Voting
and Exchange
Trust Agreement (including the provisions with respect to
the voting,
exchange and automatic exchange rights thereunder) and the
Retraction Call
Right.
|
-
17 -
|
13.2
|
Each
holder of an Exchangeable Share, whether of record or beneficial,
by
virtue of becoming and being such a holder shall be deemed
to acknowledge
each of the Liquidation Call Right, the Retraction Call Right
and the
Redemption Call Right, in each case, in favour of Callco,
and the Change
of Law Call Right in favour of Acquiror and Callco and the
overriding
nature thereof in connection with the liquidation, dissolution
or
winding-up of the Corporation or any other distribution of
the assets of
the Corporation among its shareholders for the purpose of
winding-up its
affairs, or the retraction or redemption of Exchangeable
Shares, or a
Change of Law (as defined for purposes of the Change of Law
Call Right),
as the case may be, and to be bound thereby in favour of
Callco or
Acquiror, as the case may be, as therein
provided.
|
|
13.3
|
The
Corporation, Callco, Acquiror and the Transfer Agent shall
be entitled to
deduct and withhold from any dividend or consideration otherwise
payable
to any holder of Exchangeable Shares such amounts as the
Corporation,
Callco, Acquiror or the Transfer Agent 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 provincial, state, territorial, local or
foreign tax law,
in each case, as amended. To the extent that amounts are
so withheld, such
withheld amounts shall be treated for all purposes hereof
as having been
paid to the holder of the Exchangeable 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 or permitted to be deducted or
withheld from
any payment to a holder exceeds the cash portion of the consideration
otherwise payable to the holder, the Corporation, Callco,
Acquiror and the
Transfer Agent are hereby authorized to sell or otherwise
dispose of such
portion of the consideration as is necessary to provide sufficient
funds
to the Corporation, Callco, Acquiror or the Transfer Agent,
as the case
may be, to enable it to comply with such deduction or withholding
requirement and the Corporation, Callco, Acquiror or the
Transfer Agent
shall notify the holder thereof and remit any unapplied balance
of the net
proceeds of such sale.
|
ARTICLE
14
GENERAL
|
14.1
|
Any
notice, request or other communication to be given to the
Corporation by a
holder of Exchangeable Shares shall be in writing and shall
be valid and
effective if given by mail (postage prepaid) or by telecopy
or by delivery
to the registered office of the Corporation and addressed
to the attention
of the Secretary of the Corporation. Any such notice, request
or other
communication, if given by mail, telecopy or delivery, shall
only be
deemed to have been given and received upon actual receipt
thereof by the
Corporation.
|
|
14.2
|
Any
presentation and surrender by a holder of Exchangeable Shares
to the
Corporation or the Transfer Agent of certificates representing
Exchangeable Shares in connection with the liquidation, dissolution
or
winding-up of the Corporation or the retraction or redemption
of
Exchangeable Shares shall be made by registered mail (postage
prepaid) or
by delivery to the registered office of the Corporation or
to such office
of the Transfer Agent as may be specified by the Corporation,
in each
case, addressed to the attention of the Secretary of the
Corporation. Any
such presentation and surrender of certificates shall only
be deemed to
have been made and to be effective upon actual receipt thereof
by the
Corporation or the Transfer Agent, as the case may be. Any
such
presentation and surrender of certificates made by registered
mail shall
be at the sole risk of the holder mailing the
same.
|
-
18 -
|
14.3
|
Any
notice, request or other communication to be given to a holder
of
Exchangeable Shares by or on behalf of the Corporation shall
be in writing
and shall be valid and effective if given by mail (postage
prepaid) or by
delivery to the address of the holder recorded in the register
of the
Corporation or, in the event of the address of any such holder
not being
so recorded, then at the last address of such holder known
to the
Corporation. Any such notice, request or other communication,
if given by
mail, shall be deemed to have been given and received on
the third
Business Day following the date of mailing and, if given
by delivery,
shall be deemed to have been given and received on the date
of delivery.
Accidental failure or omission to give any notice, request
or other
communication to one or more holders of Exchangeable Shares
shall not
invalidate or otherwise alter or affect any action or proceeding
intended
to be taken by the Corporation pursuant
thereto.
|
|
14.4
|
If
the Corporation determines that mail service is or is threatened
to be
interrupted at the time when the Corporation is required
or elects to give
any notice to the holders of Exchangeable Shares hereunder,
the
Corporation shall, notwithstanding the provisions hereof,
give such notice
by means of publication in The
National Post,
national edition, or any other English language daily newspaper
or
newspapers of general circulation in Canada and in a French
language daily
newspaper of general circulation in the Province of Quebec
in each of two
successive weeks, and notice so published shall be deemed
to have been
given on the latest date on which the first publication has
taken place.
If, by reason of any actual or threatened interruption of
mail service due
to strike, lock-out or otherwise, any notice to be given
to the
Corporation would be unlikely to reach its destination in
a timely manner,
such notice shall be valid and effective only if delivered
personally to
the Corporation in accordance with Sections 14.1
or
14.2,
as the case may be.
|
-
19 -
Exhibit
B
SUPPORT
AGREEMENT
SUPPORT
AGREEMENT
(the
"Agreement")
made
as of the ● day of ●, 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;
|
-
2
-
|
(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.
-
3
-
|
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.
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4
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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
|
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5
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(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).
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6
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(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).
|
|
(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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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.
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8
-
|
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:
|
(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;
|
|
(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
|
|
(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.
|
|
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.
-
9
-
|
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:
|
(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);
|
|
(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")
or another corporation (the "Other
Corporation")
that, immediately after such Acquiror Control Transaction,
owns or
controls, directly or indirectly,
Acquiror,
|
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.
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10
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|
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:
|
(a)
|
If
to Acquiror, at:
|
Gran
Tierra Energy Inc.
#000,
000
– 00xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Xxxx
Xxxxxxxx, Ph. D., President & Chief Executive Officer
Facsimile
Number: (000)
000-0000
|
(b)
|
If
to ExchangeCo, at:
|
Gran
Tierra Exchangeco Inc.
#000,
000
– 00xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Xxxx
Xxxxxxxx, Ph. D., President & Chief Executive Officer
Facsimile
Number: (000)
000-0000
|
(c)
|
If
to Callco, at:
|
Gran
Tierra Callco ULC
#000,
000
– 00xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Xxxx
Xxxxxxxx, Ph. D., President & Chief Executive Officer
Facsimile
Number: (000)
000-0000
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.
-
11
-
|
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:
|
(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;
|
|
(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
|
|
(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.
-
12
-
|
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.
|
||
|
By:
|
||
|
Name:
|
Xxxx
Xxxxxxxx, Ph. D.
|
|
|
Title:
|
President
and Chief Executive Officer
|
|
|
GRAN
TIERRA EXCHANGECO INC.
|
||
|
By:
|
||
|
Name:
|
Xxxx
Xxxxxxxx, Ph. D.
|
|
|
Title:
|
President
and Chief Executive Officer
|
|
|
GRAN
TIERRA CALLCO ULC
|
||
|
By:
|
||
|
Name:
|
Xxxx
Xxxxxxxx, Ph. D.
|
|
|
Title:
|
President
and Chief Executive Officer
|
|
-
13 -
Exhibit
C
VOTING
AND EXCHANGE TRUST AGREEMENT
VOTING
AND EXCHANGE AGREEMENT
(the
"Agreement")
made
as of the ● day of ●, 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;
-
2
-
"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;
-
3
-
"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."
-
4
-
|
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.
|
-
5
-
|
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:
|
(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.
|
|
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.
-
6
-
|
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
|
|
(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.
|
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.
-
7
-
|
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.
-
8
-
|
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.
|
|
(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.
|
|
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:
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9
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(a)
|
a
current List; and
|
|
(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:
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10
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|
(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.
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11
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|
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.
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12
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|
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.
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13
-
|
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).
|
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14
-
|
(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.
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15
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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.
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16
-
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:
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17
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|
(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.
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18
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|
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.
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19
-
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
|
|
(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.
|
|
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.
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20
-
|
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
|
|
(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.
|
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21
-
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.
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22
-
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.
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23
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|
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.
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24
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|
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:
|
(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
|
|
(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.
|
|
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.
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25
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10.4
|
Successor
Transaction
|
Notwithstanding
the foregoing provisions of this Article 10, in the event of an Acquiror
Control
Transaction:
|
(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);
|
|
(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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26
-
|
(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
|
|
(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.
|
|
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;
|
-
27
-
|
(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
|
|
(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.
|
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 Xxxxxx 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.
-
28
-
|
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.
#000,
000
– 00xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention:
Xxxx
Xxxxxxxx, Ph.D., President & Chief Executive Officer
Facsimile
Number: (000)
000-0000
|
(b)
|
if
to the Trustee, at:
|
Computershare
Trust Company of Canada
#000,
000
– 0xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention:
Manager,
Corporate Trusts
Facsimile
Number: (000)
000-0000
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.
-
29
-
|
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:
|
||
|
|
Name:
Xxxx Xxxxxxxx, Ph.D.
|
|
|
Title:
President and Chief Executive Officer
|
||
|
GRAN
TIERRA EXCHANGECO INC.
|
||
|
By:
|
||
|
Name:
Xxxx Xxxxxxxx, Ph.D.
|
||
|
Title:
President and Chief Executive Officer
|
||
|
COMPUTERSHARE
TRUST COMPANY OF
CANADA
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
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30 -
Exhibit
D
NONSOLICITATION
AGREEMENT
This
Nonsolicitation Agreement is
being
executed and delivered as of __________ ,
2008
by _______________ (the
“Stockholder”)
in
favor of, and for the benefit of Gran Tierra Energy Inc., a Nevada
corporation
(the “Purchaser”)
and
Solana Resources Limited, an Alberta corporation and its successors and
assigns (the “Company”)
(as
hereinafter defined). Certain capitalized terms used in this Nonsolicitation
Agreement are defined in Section 18.
Recitals
A. As
a
stockholder and employee of the Company, the Stockholder has obtained
extensive
and valuable knowledge and confidential information concerning the
businesses of
the Company and its subsidiaries. (The Company and its subsidiaries
are referred
to collectively herein as the “Acquired Companies.”)
B. Pursuant
to a Arrangement Agreement dated as of July 28, 2008 among the Purchaser,
the
Company, and Gran Tierra Exchangeco Inc. (the “Arrangement
Agreement”),
the
Company’s stockholders are selling all of the outstanding stock of the Company
to the Purchaser contemporaneously with the execution and delivery
of this
Nonsolicitation Agreement. As a result of the Purchaser’s acquisition of all of
the outstanding stock of the Company, the Acquired Companies are
becoming
subsidiaries of the Purchaser.
Agreement
To
induce
the Purchaser to consummate the transactions contemplated by the
Arrangement
Agreement, and for other good and valuable consideration, the Stockholder
agrees
as follows:
1. No
Hiring or Solicitation of Employees. The
Stockholder, during the Nonsolicitation Period, shall not (a) hire any
Specified Employee, or (b) personally or through others, encourage,
induce,
attempt to induce, solicit or attempt to solicit (on the Stockholder’s own
behalf or on behalf of any other Person) any Specified Employee or
any other
employee to leave his or her employment with the Purchaser, any of
the Acquired
Companies or any of the Purchaser’s other subsidiaries. (For purposes of this
Section 1, “Specified Employee” shall mean any individual who (i) is or was an
employee of any of the Acquired Companies on the date of this Nonsolicitation
Agreement or during the 360-day period ending on the date of this
Nonsolicitation Agreement, and (ii) remains or becomes an employee
of the
Purchaser, any of the Acquired Companies or any of the Purchaser’s other
subsidiaries on the date of this Nonsolicitation Agreement or at
any time during
the Nonsolicitation Period.)
2. Confidentiality.
The
Stockholder shall hold all Confidential Information in strict confidence
and
shall not at any time (whether during or after the Nonsolicitation
Period):
(a) reveal, report, publish, disclose or transfer any Confidential
Information to any Person (other than the Purchaser or the Company);
(b) use any Confidential Information for any purpose; or (c) use any
Confidential Information for the benefit of any Person (other than
the Purchaser
or the Company); except as required for statutory, judicial, regulatory
or legal
purposes.
In
the
event that the Stockholder is requested or required for statutory,
judicial,
regulatory or legal reasons to disclose any Confidential Information,
it is
agreed that the Stockholder will provide the Purchaser or the Company
with
prompt notice of such request or requirement so that the Purchaser
or the
Company may, at its option and its own expense, seek an appropriate
protective
order or other remedy to assure that the Confidential Information
will be
accorded confidential treatment.
3. Representations
and Warranties. The
Stockholder represents and warrants, to and for the benefit of the
Indemnitees,
that: (a) he has full power and capacity to execute and deliver,
and to perform
all of his obligations under, this Nonsolicitation Agreement; and
(b) neither
the execution and delivery of this Nonsolicitation Agreement nor
the performance
of this Nonsolicitation Agreement will result directly or indirectly
in a
violation or breach of any agreement or obligation by which the Stockholder
or any of his Affiliates is or may be bound. The Stockholder’s representations
and warranties shall survive the expiration of the Nonsolicitation
Period as
required.
4. Specific
Performance. In
the
event of any breach or threatened breach by the Stockholder of any
covenant or
obligation contained in this Nonsolicitation Agreement, each of the
Purchaser,
the Company and the other Indemnitees shall be entitled (in addition
to any
other remedy that may be available to it, including monetary damages)
to seek
and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an
injunction restraining such breach or threatened breach. No Indemnitee
shall be
required to obtain, furnish or post any bond or similar instrument
in connection
with or as a condition to obtaining any remedy referred to in this
Section 4,
and the Stockholder irrevocably waives any right he may have to require
any
Indemnitee to obtain, furnish or post any such bond or similarly
instrument;
save and except that the Indemnitee shall still be required to provide
an
undertaking as to damages in the event of an Indemnitee applying
for injunctive
relief.
5. Indemnification.
Without
in any way limiting any of the rights or remedies otherwise available
to any of
the Indemnitees, the Stockholder shall indemnify and hold harmless
each
Indemnitee against and from any loss, damage, injury, harm, detriment,
lost
opportunity, liability, exposure, claim, demand, settlement, judgment,
award,
fine, penalty, tax, fee (including attorneys’ fees), charge or expense (whether
or not relating to any third-party claim) that is suffered or incurred
at any
time (whether during or after the Nonsolicitation Period) by such
Indemnitee, or
to which such Indemnitee otherwise becomes subject at any time (whether
during
or after the Nonsolicitation Period), and that arises out of or by
virtue of, or
relates to, (a) any inaccuracy in or breach of any representation or
warranty contained in this Nonsolicitation Agreement, or (b) any failure on
the part of the Stockholder to observe, perform or abide by, or any
other breach
of, any restriction, covenant, obligation or other provision contained
in this
Nonsolicitation Agreement.
2
6. Non-Exclusivity.
The
rights and remedies of the Purchaser, the Company and the other Indemnitees
under this Nonsolicitation Agreement are not exclusive of or limited
by any
other rights or remedies which they may have, whether at law, in
equity, by
contract or otherwise, all of which shall be cumulative (and not
alternative).
Without limiting the generality of the foregoing, the rights and
remedies of the
Purchaser, the Company and the other Indemnitees under this Nonsolicitation
Agreement, and the obligations and liabilities of the Stockholder
under this
Nonsolicitation Agreement, are in addition to their respective rights,
remedies,
obligations and liabilities under the law of unfair competition,
under laws
relating to misappropriation of trade secrets, under other laws and
common law
requirements and under all applicable rules and regulations. Nothing
in this
Nonsolicitation Agreement shall limit any of the Stockholder’s obligations, or
the rights or remedies of the Purchaser, the Company or any of the
other
Indemnitees, under the Arrangement Agreement; and nothing in the
Arrangement
Agreement shall limit any of the Stockholder’s obligations, or any of the rights
or remedies of the Purchaser, the Company, or any of the other Indemnitees,
under this Nonsolicitation Agreement.
7. Severability.
Any
term
or provision of this Nonsolicitation Agreement that is invalid or
unenforceable
in any situation in any jurisdiction shall not affect the validity
or
enforceability of the remaining terms and provisions hereof or the
validity or
enforceability of the offending term or provision in any other situation
or in
any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid
or
unenforceable, the parties hereto agree that the court making such
determination
shall have the power to limit the term or provision, to delete specific
words or
phrases, or to replace any invalid or unenforceable term or provision
with a
term or provision that is valid and enforceable and that comes closest
to
expressing the intention of the invalid or unenforceable term or
provision, and
this Nonsolicitation Agreement shall be enforceable as so modified.
In the event
such court does not exercise the power granted to it in the prior
sentence, the
parties hereto agree to replace such invalid or unenforceable term
or provision
with a mutually agreeable valid and enforceable term or provision
that will
achieve, to the extent possible, the economic, business and other
purposes of
such invalid or unenforceable term.
8. Governing
Law; Venue.
(a) This
Nonsolicitation Agreement shall be construed in accordance with,
and governed in
all respects by, the laws of the Province of Alberta, Canada (without
giving
effect to principles of conflicts of laws).
(b) Any
legal
action or other legal proceeding relating to this Nonsolicitation
Agreement or
the enforcement of any provision of this Nonsolicitation Agreement
may be
brought or otherwise commenced in a court of competent jurisdiction
in the
Province of Alberta. The Stockholder:
(i) expressly
and irrevocably consents and submits to the jurisdiction of each
court located
in the Province of Alberta (and each appellate court located in the
Province of
Alberta), in connection with any such legal proceeding;
(ii) agrees
that service of any process, summons, notice or document by mail
addressed to
him at the address set forth on the signature page of this Nonsolicitation
Agreement shall constitute effective service of such process, summons,
notice or
document for purposes of any such legal proceeding;
3
(iii) agrees
that each court located in the Province of Alberta shall be deemed
to be a
convenient forum; and
(iv) agrees
not to assert (by way of motion, as a defense or otherwise), in any
such legal
proceeding commenced in any court located in the Province of Alberta
any claim
that the Stockholder is not subject personally to the jurisdiction
of such
court, that such legal proceeding has been brought in an inconvenient
forum,
that the venue of such proceeding is improper or that this Nonsolicitation
Agreement or the subject matter of this Nonsolicitation Agreement
may not be
enforced in or by such court.
(c) THE
STOCKHOLDER IRREVOCABLY WAIVES THE RIGHT TO A JURY TRIAL IN CONNECTION
WITH ANY
LEGAL PROCEEDING RELATING TO THIS NONSOLICITATION AGREEMENT OR THE
ENFORCEMENT
OF ANY PROVISION OF THIS NONSOLICITATION AGREEMENT.
9. Waiver.
No
failure on the part of the Purchaser, the Company or any other Indemnitee
to
exercise any power, right, privilege or remedy under this Nonsolicitation
Agreement, and no delay on the part of the Purchaser, the Company
or any other
Indemnitee in exercising any power, right, privilege or remedy under
this
Nonsolicitation Agreement, shall operate as a waiver of such power,
right,
privilege or remedy; and no single or partial exercise of any such
power, right,
privilege or remedy shall preclude any other or further exercise
thereof or of
any other power, right, privilege or remedy. No Indemnitee shall
be deemed to
have waived any claim of such Indemnitee arising out of this Nonsolicitation
Agreement, or any power, right, privilege or remedy of such Indemnitee
under
this Nonsolicitation Agreement, unless the waiver of such claim,
power, right,
privilege or remedy is expressly set forth in a written instrument
duly executed
and delivered on behalf of such Indemnitee; and any such waiver shall
not be
applicable or have any effect except in the specific instance in
which it is
given.
10. Successors
and Assigns. Each
of
the Purchaser, the Company and the other Indemnitees may freely assign
any or
all of its rights under this Nonsolicitation Agreement, at any time,
in whole or
in part, to any successor in interest to the Purchaser, the Company
or any of
the Indemnitees without obtaining the consent or approval of the
Stockholder or
of any other Person. This Nonsolicitation Agreement shall be binding
upon the
Stockholder and his heirs, executors, estate, personal representatives,
successors and assigns, and shall inure to the benefit of the Purchaser,
the
Company and the other Indemnitees.
11. Further
Assurances. The
Stockholder shall (at the Indemnitee’s sole expense) execute and/or cause to be
delivered to each Indemnitee such instruments and other documents,
and shall (at
the Stockholder’s sole expense) take such other actions, as such Indemnitee may
reasonably request at any time (whether during or after the Nonsolicitation
Period) for the purpose of carrying out or evidencing any of the
provisions of
this Nonsolicitation Agreement.
12. Attorneys’
Fees. If
any
legal action or other legal proceeding relating to this Nonsolicitation
Agreement or the enforcement of any provision of this Nonsolicitation
Agreement
is brought against the Stockholder, the prevailing party shall be
entitled to
recover reasonable attorneys’ fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled).
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13. Captions.
The
captions contained in this Nonsolicitation Agreement are for convenience
of
reference only, shall not be deemed to be a part of this Nonsolicitation
Agreement and shall not be referred to in connection with the construction
or
interpretation of this Nonsolicitation Agreement.
14. Construction.
Whenever
required by the context, the singular number shall include the plural,
and vice
versa; the masculine gender shall include the feminine and neuter
genders; and
the neuter gender shall include the masculine and feminine genders.
Any rule of
construction to the effect that ambiguities are to be resolved against
the
drafting party shall not be applied in the construction or interpretation
of
this Nonsolicitation Agreement. Neither the drafting history nor
the negotiating
history of this Nonsolicitation Agreement shall be used or referred
to in
connection with the construction or interpretation of this Nonsolicitation
Agreement. As used in this Nonsolicitation Agreement, the words “include” and
“including,” and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words “without
limitation.” Except as otherwise indicated in this Nonsolicitation Agreement,
all references in this Nonsolicitation Agreement to “Sections” are intended to
refer to Sections of this Nonsolicitation Agreement.
15. Survival
of Obligations. Except
as
specifically provided herein, the obligations of the Stockholder
under Sections
2, 5 and 11 of this Nonsolicitation Agreement shall survive the expiration
of
the Nonsolicitation Period. The expiration of the Nonsolicitation
Period shall
not operate to relieve the Stockholder of any obligation or liability
arising
from any
prior
breach by the Stockholder of any provision of this Nonsolicitation
Agreement.
16. Amendment.
This
Nonsolicitation Agreement may not be amended, modified, altered or
supplemented
other than by means of a written instrument duly executed and delivered
on
behalf of the Stockholder, the Purchaser (or any successor to the
Purchaser) and
the Company (or any successor to the Company).
17. Defined
Terms. For
purposes of this Nonsolicitation Agreement:
(a) “Affiliate”
means,
with respect to any specified Person, any other Person that, directly
or
indirectly, through one or more intermediaries, controls, is controlled
by or is
under common control with such specified Person.
(b) “Confidential
Information”
means
any non-public information (whether or not in written form and whether
or not
expressly designated as confidential) relating directly or indirectly
to the
Purchaser, any of the Acquired Companies or any of the Purchaser’s other
subsidiaries or relating directly or indirectly to the business,
operations,
financial affairs, performance, assets, technology, processes, products,
contracts, customers, licensees, sublicensees, suppliers, personnel,
consultants
or plans of the Purchaser, any of the Acquired Companies or any of
the
Purchaser’s other subsidiaries (including any such information consisting of
or
otherwise relating to trade secrets, know-how, technology, inventions,
prototypes, designs, drawings, sketches, processes, license or sublicense
arrangements, formulae, proposals, research and development activities,
customer
lists or preferences, pricing lists, referral sources, marketing
or sales
techniques or plans, operations manuals, service manuals, financial
information,
projections, lists of consultants, lists of suppliers or lists of
distributors);
provided,
however, that
“Confidential Information” shall not be deemed to include information of the
Company that was already publicly known and in the public domain
prior to the
time of its initial disclosure to the Stockholder.
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(c) “Indemnitees”
shall
include: (i) the Purchaser; (ii) the Company; (iii) each Person who
is or
becomes an Affiliate of the Purchaser or the Company; and (iv) the
successors
and assigns of each of the Persons referred to in clauses “(i)”, “(ii)” and
“(iii)” of this sentence.
(d) “Nonsolicitation
Period”
shall
mean the period commencing on the date of this Nonsolicitation Agreement
and
ending on the second anniversary of the date of this Nonsolicitation
Agreement;
provided,
however,
that in
the event of any breach on the part of the Stockholder of any provision
of this
Nonsolicitation Agreement, the Nonsolicitation Period shall be automatically
extended by a number of days equal to the total number of days in
the period
from the date on which such breach shall have first occurred through
the date as
of which such breach shall have been fully cured.
(e) “Person”
means
any: (i) individual; (ii) corporation, general partnership, limited
partnership,
limited liability partnership, trust, company (including any limited
liability
company or joint stock company) or other organization or entity;
or (iii)
governmental body or authority.
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In
Witness Whereof,
the
Stockholder has duly executed and delivered this Nonsolicitation
Agreement as of
the date first above written.
|
[Name
of Stockholder]
Address:
________________________________________
Telephone
No.:( )_____________Facsimile:(
)______________
|
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