Unassociated Document
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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Filed
by the Registrant
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x
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Filed
by a Party other than the Registrant
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Check
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appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to
§ 240.14a-12
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(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box)
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1.
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Title
of each class of securities to which transaction
applies:
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2.
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Aggregate
number of securities to which transaction
applies:
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3.
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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4.
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Proposed
maximum aggregate value of
transaction:
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Fee
paid previously with preliminary
materials.
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box if any part of the fee is offset as provided by Exchange Act
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previously. Identify the previous filing by registration statement
number,
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filing.
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6.
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Amount
Previously Paid:
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7.
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Form,
Schedule or Registration Statement
No.:
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Gran
Tierra Energy Inc.
300,
611-10th Avenue
S.W.
Calgary,
Alberta T2R 0B2 Canada
(403) 265-3221
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held On October 10, 2007
Dear Stockholder:
You
are
cordially invited to attend the Annual Meeting of Stockholders of
GRAN TIERRA ENERGY INC., a Nevada corporation.
The meeting will be held on Wednesday, October 10,
2007 at 10:00 a.m. local time at 300,
611-10th Avenue S.W., Calgary, Alberta T2R 0B2 Canada for the
following purposes:
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1.
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To
elect five directors
to serve for the ensuing year and until their successors are elected.
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2.
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To
approve our 2007 Equity Incentive Plan, as an amendment and restatement
of
our 2005 Equity Incentive Plan, including an increase in the aggregate
number of shares of common stock authorized for issuance under
the plan
from 2,000,000 to 9,000,000 shares.
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3.
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To
ratify the selection by the Audit Committee of the Board of Directors
of
Deloitte & Touche LLP as independent auditors of Gran Tierra for its
fiscal year ending December 31, 2007.
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4.
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To
conduct any other business properly brought before the
meeting.
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These
items of business are more fully described in the Proxy Statement accompanying
this Notice.
The
record date for the Annual Meeting is August 13, 2007. Only stockholders
of
record at the close of business on that date may vote at the meeting or any
adjournment thereof.
By
Order
of the Board of Directors
/s/
Martin Eden
Martin
Eden
Secretary
You
are cordially invited to attend the meeting in person. Whether or not you
expect
to attend the meeting, please complete, date, sign and return the enclosed
proxy, or vote over the Internet as instructed in these materials, as promptly
as possible in order to ensure your representation at the meeting. A return
envelope (which is postage prepaid if mailed in the United States) is enclosed
for your convenience. Even if you have voted by proxy, you may still vote
in
person if you attend the meeting. Please note, however, that if your shares
are
held of record by a broker, bank or other nominee and you wish to vote at
the
meeting, you must obtain a proxy issued in your name from that record holder.
Gran
Tierra Energy Inc.
300,
611-10th Avenue
S.W.
Calgary,
Alberta T2R 0B2 Canada
(403) 265-3221
PROXY
STATEMENT
FOR
THE 2007 ANNUAL MEETING OF STOCKHOLDERS
October
10, 2007
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why
am I receiving these materials?
We
have
sent you this proxy statement and the enclosed proxy card because the Board
of
Directors of Gran Tierra Energy Inc. (“Gran Tierra”) is
soliciting your proxy to vote at the 2007
Annual
Meeting of Stockholders. You are invited to attend the annual meeting to
vote on
the proposals described in this proxy statement. However, you do not need
to
attend the meeting to vote your shares. Instead, you may simply complete,
sign
and return the enclosed proxy card, or follow the instructions below to submit
your proxy over the Internet.
We
intend
to mail this proxy statement and accompanying proxy card on or about September
17, 2007 to all stockholders of record entitled to vote at the annual meeting.
Who
can vote at the annual meeting?
Only
stockholders of record at the close of business on August 13, 2007 will be
entitled to vote at the annual meeting.
On this
record date, there were 79,198,221 shares
of
common stock outstanding and entitled to vote, and one share of Special Voting
Stock. On
the
record date, the
share
of Special Voting Stock was entitled to 15,476,189 votes, which equals the
number of shares of common stock issuable upon exchange of exchangeable shares
(the “Exchangeable
Shares”)
of
Gran Tierra Goldstrike Inc. that were issued in connection with the transaction
between the former shareholders of Gran Tierra Energy Inc., a privately-held
Alberta corporation, which we refer to as “Gran Tierra Canada,” and Goldstrike,
Inc.
Stockholder
of Record: Shares Registered in Your Name
If
on
August 13, 2007 your shares were registered directly in your name with Gran
Tierra’s transfer agent, Island Stock Transfer, then you are a stockholder of
record. As a stockholder of record, you may vote in person at the meeting
or
vote by proxy. Whether or not you plan to attend the meeting, we urge you
to
fill out and return the enclosed proxy card or vote by proxy over the Internet
as instructed below to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If
on
August 13, 2007 your
shares were held, not in your name, but rather in an account at a brokerage
firm, bank, dealer, or other similar organization, then you are the beneficial
owner of shares held in “street name” and these proxy materials are being
forwarded to you by that organization. The organization holding your account
is
considered to be the stockholder of record for purposes of voting at the
annual
meeting. As a beneficial owner, you have the right to direct your broker
or
other agent regarding how to vote the shares in your account. You are also
invited to attend the annual meeting. However, since you are not the stockholder
of record, you may not vote your shares in person at the meeting unless you
request and obtain a valid proxy from your broker or other agent.
Stockholders
Holding Exchangeable Shares
Holders
of Exchangeable Shares are entitled to instruct Olympia Trust Company (the
“Trustee”)
as to
how to vote their exchangeable shares. The Trustee holds the one outstanding
share of our Special Voting Stock, which is entitled to as many votes as
there
are outstanding Exchangeable Shares on the record date, and may only vote
the
share of Special Voting Stock as directed by the holders of Exchangeable
Shares.
Holders of Exchangeable Shares who do not hold their Exchangeable Shares
in
their own name are not entitled to instruct the Trustee as to how to exercise
voting rights at the annual meeting. Only holders of Exchangeable Shares
whose
names appear on the records of Gran Tierra as the registered holders of
Exchangeable Shares are entitled to instruct the Trustee as to how to exercise
voting rights in respect of their Exchangeable Shares at the annual meeting.
Holders of Exchangeable Shares may also obtain a proxy from the Trustee to
vote
their Exchangeable Shares at the annual meeting. Holders of Exchangeable
Shares
should follow the instructions sent to them by the Trustee in order to exercise
their voting rights.
What
am I voting on?
There
are
three matters scheduled for a vote:
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Election
of five directors;
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Approval
of proposed 2007 Equity Incentive Plan, an amendment and restatement
of
our 2005 Equity Incentive Plan, which includes an increase in the
number
of shares of common stock authorized for issuance under our 2007
Equity
Incentive Plan; and
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·
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Ratification
of Deloitte & Touche LLP as our independent auditors for the fiscal
year ending December 31, 2007.
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How
do I vote?
You
may
either vote “For” all the nominees to the Board of Directors or you may
“Withhold” your vote for any nominee you specify. For
each
of the other matters to be voted on, you may vote “For” or “Against” or abstain
from voting. The
procedures for voting are fairly simple:
Stockholder
of Record: Shares Registered in Your Name
If
you
are a stockholder of record, you may vote in person at the annual meeting,
vote
by proxy using the enclosed proxy card or vote by proxy on the
Internet. Whether
or not you plan to attend the meeting, we urge you to vote by proxy to ensure
your vote is counted. You
may
still attend the meeting and vote in person even if you have already voted
by
proxy.
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To
vote in person, come to the annual meeting and we will give you
a ballot
when you arrive.
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To
vote using the proxy card, simply complete, sign and date the enclosed
proxy card and return it promptly in the envelope provided. If
you return your signed proxy card to us before the annual meeting,
we will
vote your shares as you direct.
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To
vote on the Internet, go to http://www.proxyvote.com to complete
an
electronic proxy card. You
will be asked to provide the company number and control number
from the
enclosed proxy card. Your
vote must be received by 11:59 p.m. on October 9, 2007 to be
counted.
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Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If
you
are a beneficial owner of shares registered in the name of your broker, bank,
or
other agent, you should have received a proxy card and voting instructions
with
these proxy materials from that organization rather than from Gran Tierra.
Simply complete and mail the proxy card to ensure that your vote is counted.
Alternatively, you may vote over the Internet as instructed by your broker
or
bank. To
vote
in person at the annual meeting, you must obtain a valid proxy from your
broker,
bank, or other agent. Follow the instructions from your broker or bank included
with these proxy materials, or contact your broker or bank to request a proxy
form.
Beneficial
Owner: Exchangeable Shares
If
you
are a holder of Exchangeable
Shares,
you
should have received voting instructions with these proxy materials from
the
Trustee, which is the holder of the share of Special Voting Stock. Follow
the
instructions from the Trustee, or contact the Trustee for further information.
Instruments
of proxy must be received by Olympia Trust Company, 2300, 125 - 9th
Avenue
S.E., Calgary, Alberta, T2G OP6, not less than 48 hours before the time for
the holding of the annual meeting or any adjournment thereof.
We
provide Internet proxy voting to allow you to vote your shares on-line, with
procedures designed to ensure the authenticity and correctness of your proxy
vote instructions. However, please be aware that you must bear any costs
associated with your Internet access, such as usage charges from Internet
access
providers.
How
many votes do I have?
On
each
matter to be voted upon, you have one vote for each share of common stock
you
own as of August 13, 2007, and one vote for each Exchangeable Share held
as of
August 13, 2007, all of which are represented by the one share of Special
Voting
Stock of Gran Tierra. Holders of Exchangeable Shares should follow the
instructions sent to them by the Trustee in order to exercise their voting
rights.
What
if I return a proxy card but do not make specific choices?
If
you
return a signed and dated proxy card without marking any voting selections,
your
shares will be voted “For” the election of all five nominees for director, “For”
the approval of the 2007 Equity Incentive Plan, and “For” the ratification of
the selection of Deloitte & Touche LLP as the independent auditors for the
fiscal year 2007. If any other matter is properly presented at the meeting,
your
proxyholder (one of the individuals named on your proxy card) will vote your
shares using his or her best judgment.
Who
is paying for this proxy solicitation?
We
will
pay for the entire cost of soliciting proxies. In
addition to these mailed proxy materials, our directors and employees and
The
Altman Group, Inc. may also solicit proxies in person, by telephone, or by
other
means of communication. Directors
and employees will not be paid any additional compensation for soliciting
proxies, but The Altman Group, Inc. will be paid its customary fee of
approximately $5,500 plus out-of-pocket expenses if it solicits
proxies. We
may
also reimburse brokerage firms, banks and other agents for the cost of
forwarding proxy materials to beneficial owners.
What
does it mean if I receive more than one proxy card?
If
you
receive more than one proxy card, your shares are registered in more than
one
name or are registered in different accounts. Please
complete, sign and return each
proxy
card to ensure that all of your shares are voted.
Can
I change my vote after submitting my proxy?
Yes. You
can
revoke your proxy at any time before the final vote at the meeting. If
you
are the record holder of your shares, you may revoke your proxy in any one
of
three ways:
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You
may submit another properly completed proxy card with a later
date.
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You
may send a timely written notice that you are revoking your proxy
to Gran
Tierra’s Secretary at 300,
611-10th
Avenue, S.W., Calgary, Alberta, Canada, T2R
0B2.
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You
may attend the annual meeting and vote in person. Simply
attending the meeting will not, by itself, revoke your
proxy.
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If
your
shares are held by your broker or bank as a nominee or agent, you should
follow
the instructions provided by your broker or bank.
If
you
are a holder of Exchangeable Shares, you should follow the instructions provided
by the Trustee.
When
are stockholder proposals due for next year’s annual
meeting?
To
be
considered for inclusion in next year’s proxy materials, your proposal must be
submitted in writing by May 20, 2008, to Martin Eden at 300,
611-10th
Avenue,
S.W., Calgary, Alberta, Canada, T2R 0B2; provided,
however,
that if
our 2008 annual meeting of stockholders is not held between September 10
and
November 9, 2008, then the deadline is a reasonable amount of time prior
to the
date we begin to print and mail our proxy statement for the 2008 annual meeting
of stockholders. If
you
wish to submit a proposal that is not to be included in next year’s proxy
materials or nominate a director, you must do so by between August 11, 2008
and
July 12, 2008, unless our 2008 annual meeting of stockholders is not held
between September 10, 2008 and December 9, 2008, in which case notice must
be
received between 60 and 90 days prior to the meeting or no later than the
date
ten days after notice of the meeting is first published by Gran
Tierra. You
are
also advised to review our Bylaws, which contain additional requirements
about
advance notice of stockholder proposals and director nominations.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the meeting, who
will
separately count “For” and “Withhold” and, with respect to proposals other than
the election of directors, “Against” votes, abstentions and broker
non-votes. Broker
non-votes and abstentions have no effect and will not be counted towards
the
vote total for any proposal.
What
are “broker non-votes”?
Broker
non-votes occur when a beneficial owner of shares held in “street name” does not
give instructions to the broker or nominee holding the shares as
to how
to vote on matters deemed “non-routine.” Generally, if shares are held in street
name, the beneficial owner of the shares is entitled to give voting instructions
to the broker or nominee holding the shares. If
the
beneficial owner does not provide voting instructions, the broker or
nominee can
still
vote the shares with respect to matters that are considered to be “routine,” but
not with respect to “non-routine” matters. Under the rules and interpretations
of the New York Stock Exchange (“NYSE”), “non-routine” matters are generally
those involving a contest or a matter that may substantially affect the rights
or privileges of shareholders, such as mergers or shareholder
proposals.
How
many votes are needed to approve each proposal?
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For
the election of directors, the five nominees
receiving the most “For” votes (form the holders of votes of shares
present in person or represented by proxy and entitled to vote
on the
election of directors) will be elected. Only
votes “For” or “Withheld” will affect the outcome.
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To
be approved, Proposal No. 2, the approval of the 2007 Equity Incentive
Plan, an amendment and restatement of the 2005 Equity Incentive
Plan, must
receive more ”For” votes than “Against” votes. Broker non-votes and
abstentions will have no effect.
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To
be approved, Proposal No. 3, the ratification of the selection
by the
Audit Committee of the Board of Directors of Deloitte & Touche LLP as
the independent auditors for the fiscal year ending 2007 must receive
more
“For” votes than “Against” votes.
Broker
non-votes and abstentions will have no effect.
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What
is the quorum requirement?
A
quorum
of stockholders is necessary to hold a valid meeting. A
quorum
will be present if stockholders holding
at least a majority of the outstanding shares are present at the meeting
in
person or represented by proxy. On
the
record date, there were 94,674,410 common
shares (including 15,476,189 shares of common stock issuable upon exchange
of
the Exchangeable Shares and therefore entitled to vote through the one share
of
Special Voting Stock) outstanding and entitled to vote. Thus, the holders
of
47,337,206 shares of common stock (including the Exchangeable Shares) must
be
present in person or represented by proxy at the meeting or by proxy to have
a
quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy
(or
one is submitted on your behalf by your broker, bank or other nominee) or
if you
vote in person at the meeting. Abstentions
and broker non-votes will be counted towards the quorum requirement. If
there
is no quorum, the Chairman of the meeting or the holders of a majority of
shares
present at the meeting in person or represented by proxy may adjourn the
meeting
to another date.
How
can I find out the results of the voting at the annual
meeting?
Preliminary
voting results will be announced at the annual meeting. Final
voting results will be published in our annual report on Form 10-K for the
year
ended December 31, 2007.
Gran
Tierra Energy Inc.’s Board of Directors consists of six directors. Effective
on the date of the Annual Meeting, the Board of Directors will be reduced
to
five directors. There are five nominees for director this year. Each
director to be elected will hold office until the next annual meeting of
stockholders and until his or her successor is elected, or, if sooner, until
the
director’s death, resignation or removal. Each
of
the nominees listed below is currently a director of Gran Tierra. Dana Coffield,
Jeffrey Scott, Walter Dawson, and Verne Johnson were founding shareholders
of
Gran Tierra Energy Inc., the Canadian corporation. Nadine Smith was recommended
by the Board of Directors of Gran Tierra. It is Gran Tierra’s policy to invite
nominees for directors to attend the Annual Meeting.
Directors
are elected by a plurality of the votes of the holders of shares present
in
person or represented by proxy and entitled to vote on the election of
directors. The
five
nominees receiving the highest number of affirmative votes will be elected.
Shares represented by executed proxies will be voted, if authority to do
so is
not withheld, for the election of the five nominees
named below. If
any
nominee becomes unavailable for election as a result of an unexpected
occurrence, your shares will be voted for the election of a substitute nominee
proposed by Gran Tierra Energy Inc. Each person nominated for election has
agreed to serve if elected. Our
management has no reason to believe that any nominee will be unable to
serve.
The
following is a brief biography of each director and each nominee for director
as
of August 13, 2007.
Executive
Officers and Directors
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Name
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Age
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Position
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Dana
Coffield
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49
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President
and Chief Executive Officer; Director
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Jeffrey
Scott
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45
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Chairman
of the Board of Directors
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Walter
Dawson
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67
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Director
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Verne
Johnson
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63
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Director
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Nadine
C. Smith
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50
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Director
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James
Hart*
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53
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Director
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*
James
Hart is not running for reelection to the Board of Directors.
Dana
Coffield, President, Chief Executive Officer and Director.
Before
joining Gran Tierra as President, Chief Executive Officer and a Director
in May
2005, Mr. Coffield led the Middle East Business Unit for EnCana Corporation,
North America’s largest independent oil and gas company, from 2003 through 2005.
His responsibilities included business development, exploration operations,
commercial evaluations, government and partner relations, planning and
budgeting, environment/health/safety, security and management of several
overseas operating offices. From 1998 through 2003, he was New Ventures Manager
for EnCana’s predecessor — AEC International — where he expanded activities into
five new countries on three continents. Mr. Coffield was previously with
ARCO
International for ten years, where he participated in exploration and production
operations in North Africa, SE Asia and Alaska. He began his career as a
mud-logger in the Texas Gulf Coast and later as a Research Assistant with
the
Earth Sciences and Resources Institute where he conducted geoscience research
in
North Africa, the Middle East and Latin America. Mr. Coffield has participated
in the discovery of over 130,000,000 barrels of oil equivalent reserves.
Mr.
Coffield graduated from the University of South Carolina with a Masters of
Science degree and a doctorate (PhD) in Geology, based on research conducted
in
the Oman Mountains in Arabia and Gulf of Suez in Egypt, respectively. He
has a
Bachelor of Science degree in Geological Engineering from the Colorado School
of
Mines. Mr. Coffield is a member of the AAPG and the CSPG, and is a Fellow
of the
Explorers Club.
Jeffrey
Scott, Chairman of the Board of Directors.
Mr.
Scott
has served as Chairman of our board of directors since January 2005. Since
2001,
Mr. Scott has served as President of Postell Energy Co. Ltd., a privately
held
oil and gas producing company. He has extensive oil and gas management
experience, beginning as a production manager of Postell Energy Co. Ltd in
1985
advancing to President in 2001. Mr. Scott is also currently a Director of
Saxon
Energy Services, Inc., Suroco Energy, Inc., VGS Seismic Canada Inc., and
Essential Energy Services Trust, all of which are publicly traded companies.
Mr.
Scott holds a Bachelor of Arts degree from the University of Calgary, and
a
Masters of Business Administration from California Coast
University.
Walter
Dawson, Director.
Mr.
Dawson has served as a director since January 2005. Mr. Dawson is the founder
of
Saxon Energy Services, a publicly traded company since 2001, and currently
serves as Chairman of the Board of Directors of Saxon, which is an international
oilfield services company. Before his time at Saxon, Mr. Dawson served for
19
years as President, Chief Executive Officer and a director and founded what
became known as Computalog Gearhart Ltd., which is now an operating division
of
Precision Drilling Corp. Computalog’s primary businesses are oil and gas
logging, perforating, directional drilling and fishing tools. Mr. Dawson
instituted a technology center at Computalog, located in Fort Worth, Texas,
a
developer of electronics designed to develop wellbore logging tools. In 1993
Mr.
Dawson founded what became known as Enserco Energy Services Company Inc.,
formerly Bonus Resource Services Corp. Enserco entered the well servicing
businesses through the acquisition of 26 independent Canadian service rig
operators. Mr. Dawson is currently a director of VGS Seismic Canada Inc.,
Suroco
Energy Inc. and Action Energy Inc. (formerly High Plains Energy Inc.), all
of
which are publicly traded companies.
Verne
Johnson, Director.
Mr.
Johnson has served as a director since April 2005. Starting with Imperial
Oil in
1966, he has spent his entire career in the petroleum industry, primarily
in
western Canada, contributing to the growth of oil and gas companies of various
sizes. He worked with Imperial Oil Limited until 1981 (including two years
with
Exxon Corporation in New York from 1977 to 1979). From 1981 to 2000, Mr.
Johnson
served in senior capacities with companies such as Paragon Petroleum Ltd.,
ELAN
Energy Inc., Ziff Energy Group and Enerplus Resources Group. He was President
and Chief Executive Officer of ELAN Energy Inc., President of Paragon Petroleum
and Senior Vice President of Enerplus Resources Group until February 2002.
Mr.
Johnson retired in February 2002. Mr. Johnson is a director of Fort Chicago
Energy Partners LP, Harvest Energy Trust, Suroco Energy Inc. and Builders
Energy
Services Trust, all publicly traded companies. Mr. Johnson received a Bachelor
of Science degree in Mechanical Engineering from the University of Manitoba
in
1966. He is currently president of his private family company, KristErin
Resources Ltd.
Nadine
C.
Smith, Director.
Ms.
Smith
has served as a director since January 10, 2006. She has served as a director
of
Patterson-UTI, which is traded on NASDAQ,
May
2001 to June 2007, and served as a director of UTI from 1995 to May 2001.
From
August 2000 to December 2001, Ms. Smith was President of Final Arrangements,
LLC, a company providing software and web-based internet services to the
funeral
industry. From April 2000 to August 2000, she served as the President of
Aegis
Asset Management, Inc., an asset management company. From 1997 to April 2000,
Ms. Smith was President and Chief Executive Officer of Enidan Capital Corp.,
an
investment company. Previously, Ms. Smith was an investment banker and principal
with NC Smith & Co. and The First Boston Corporation and a management
consultant with McKinsey & Co. Ms. Smith holds a Bachelor of Science degree
in Economics from Smith College and a Masters of Business Administration
from
Yale University.
James
Hart, Director.
Mr.
Hart
has served as a director since May 2005 and as Vice President Finance and
Chief
Financial Officer from May, 2005 to December 2006. Mr. Hart is not running
for
reelection to the Board of Directors. Previously, Mr. Hart was an internal
consultant with EnCana Corporation, from 2001 through April 2005, providing
specialized business analyses, ideas and advice for international and corporate
clients. Previously, from 1994 to 2001, he was Treasurer of Gulfstream
Resources, an international oil and gas company active in Qatar, Oman and
Madagascar (eventually acquired by Anadarko). Mr. Hart’s prior experience
includes a varied tenure at Nexen (formerly Canadian Occidental Petroleum)
from
1984 to 1994, as Manager of the company’s worldwide Treasury activities and as
Senior Advisor responsible for corporate acquisitions. He began his career
with
the Alberta Petroleum Marketing Commission, providing policy advice to the
Provincial Government. Mr. Hart graduated from the University of Manitoba
with a
Masters in Natural Resources Management (Economics specialization) and a
Bachelor of Science degree in Geology.
Our
above-listed officers and directors have neither been convicted in any criminal
proceeding during the past five years nor been parties to any judicial or
administrative proceeding during the past five years that resulted in a
judgment, decree or final order enjoining them from future violations of,
or
prohibiting activities subject to, federal or state securities laws or a
finding
of any violation of federal or state securities law or commodities law.
Similarly, no bankruptcy petitions have been filed by or against any business
or
property of any of our directors or officers, nor has any bankruptcy petition
been filed against a partnership or business association in which these persons
were general partners or executive officers.
The
Board Of Directors Recommends
A
Vote In Favor Of Each Named Nominee.
INFORMATION
REGARDING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
INDEPENDENCE
OF THE BOARD OF DIRECTORS
Gran
Tierra follows the NASDAQ
Stock
Market (“NASDAQ”)
listing standards even though its common stock is not listed on NASDAQ.
As
required under the NASDAQ
listing
standards, a majority of the members of a listed company’s Board of Directors
must qualify as “independent,” as affirmatively determined by the Board of
Directors. The Board consults with Gran Tierra’s counsel to ensure that the
Board’s determinations are consistent with relevant securities and other laws
and regulations regarding the definition of “independent,” including those set
forth in pertinent listing standards of the NASDAQ,
as in
effect time to time.
Consistent
with these considerations, after review of all relevant transactions or
relationships between each director, or any of his or her family members,
and
Gran Tierra, its senior management and its independent auditors, the Board
has
affirmatively determined that the following four of our six directors are
independent directors within the meaning of Rule
4350(d)(2)(A)(i) and (ii) of the NASDAQ
listing
standards:
Messrs.
Scott, Johnson and Dawson and Ms. Smith. In
making
this determination, the Board found that none of the these
directors or nominees for director had a material or other disqualifying
relationship with Gran Tierra. Dana
Coffield, Gran Tierra’s President and Chief Executive Officer is not an
independent director by virtue of his employment with Gran Tierra. James
Hart is
not an independent director by virtue of his former position as Chief Financial
Officer of Gran Tierra, a position which he held until late 2006.
MEETINGS
OF THE BOARD OF DIRECTORS
The
Board
of Directors met 13 times
during the last fiscal year. Each
Board member attended 75% or more of the aggregate of the meetings of the
Board
and of the committees on which he/she served,
held during the period for which he/she was
a
director or committee member.
INFORMATION
REGARDING COMMITTEES OF THE BOARD OF DIRECTORS
The
Board
has four committees: an
Audit
Committee, a Compensation Committee, a Nominating and Corporate Governance
Committee, and a Reserves Committee. Two of the Committees were not formed
until
after the end of the 2006 fiscal year: The Nominating and Corporate Governance
Committee was formed on June 25, 2007, and the Reserves Committee was formed
on
April 19, 2007. The following table provides membership and meeting information
for fiscal 2006 for each of the Board committees:
|
Name
|
|
Audit
|
|
Compensation
|
|
Dana
Coffield
|
|
|
|
|
|
Jeffrey
Scott
|
|
X
|
|
X
|
|
Walter
Dawson
|
|
|
|
X
|
|
Verne
Johnson
|
|
X
|
|
X*
|
|
Nadine
C. Smith
|
|
X*
|
|
|
|
James
Hart
|
|
|
|
|
|
Total
meetings in fiscal 2006
|
|
7
|
|
1
|
* Committee
Chairperson
Below
is
a description of each committee of the Board of Directors. Each
of
the committees has authority to engage legal counsel or other experts or
consultants, as it deems appropriate to carry out its
responsibilities.
Audit
Committee
The
Audit
Committee of the Board of Directors was established in accordance with Section
3(a)(58)(A)
of
the
Securities Exchange Act of 1934 to oversee management’s conduct of our
accounting and financial reporting processes and audits of its financial
statements. For
this
purpose, the Audit Committee performs several functions. The
Audit
Committee reviews our financial reports and other financial information
disclosed to the public, the government and various regulatory bodies, our
system of internal accounting, our financial controls, and the annual
independent audit of our financial statements. The
Audit
Committee evaluates the performance of and assesses the qualifications of
the
independent auditors; determines and approves the engagement of the independent
auditors; determines whether to retain or terminate the existing independent
auditors or to appoint and engage new independent auditors; reviews and approves
the retention of the independent auditors to perform any proposed permissible
non-audit services; monitors the rotation of partners of the independent
auditors on Gran Tierra’s audit engagement team as required by law; review and
approves or rejects transactions between the company and any related persons;
confers with management and the independent auditors regarding the effectiveness
of internal controls over financial reporting; establishes procedures, as
required under applicable law, for the receipt, retention and treatment of
complaints received by Gran Tierra regarding accounting, internal accounting
controls or auditing matters and the confidential and anonymous submission
by
employees of concerns regarding questionable accounting or auditing matters;
and
meets to review our annual audited financial statements and quarterly financial
statements with management and the independent auditor, including reviewing
our
disclosures under “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.” The
Audit
Committee is composed of three directors. Currently, the Audit Committee
members
are Messrs. Scott, Messrs. Johnson and Ms. Smith. Ms. Smith serves as Chair
of
the Audit Committee. The Audit Committee met seven times during the fiscal
year.
The Audit Committee has adopted a written charter that is available to
stockholders on our website at www.grantierra.com.
The
Audit
Committee was established, and the members of the Audit Committee were
appointed, on March 9, 2006.
The
Board
of Directors reviews the NASDAQ
listing
standards definition of independence for Audit Committee members and has
determined that all members of our Audit Committee are independent (as
independence is currently defined in Rule 4350(d)(2)(A)(i) and (ii) of the
NASDAQ
listing
standards). Additionally, each audit committee member has met the criteria
for
audit committee independence set forth in Rule 10A-3 promulgated pursuant
to the
Securities Exchange Act of 1934, as amended. The board of directors has
determined that Nadine Smith, an independent director, qualifies as an “audit
committee financial expert” within the meaning of Item 407(d)(5) of Regulation
S-K promulgated by the SEC, based on her experience overseeing and assessing
the
performance of companies with respect to the preparation and evaluation of
financial statements. The audit committee selects the independent accountants
to
audit our books and financial records, and considers and acts upon accounting
matters as they arise.
Report
of the Audit Committee of the Board of Directors1
The
Audit
Committee has reviewed and discussed the audited financial statements for
the
fiscal year end December 31, 2006 with
our
management. The
Audit
Committee has discussed with the independent auditors the matters required
to be
discussed by the Statement on Auditing Standards No. 61, as amended (AICPA,
Professional
Standards,
Vol. 1.
AU section 380), as adopted by the Public Company Accounting Oversight Board
(“PCAOB”) in Rule 3200T. The
Audit
Committee has also received the written disclosures and the letter from the
independent accountants required by the Independence Standards Board Standard
No. 1, (Independence
Discussions with Audit Committees),
as
adopted by the PCAOB in Rule 3600T and has discussed with the independent
accountants the independent accountant’s independence. Based
on
the foregoing, the Audit Committee has recommended to the Board of Directors
that the audited financial statements be included in our Annual Report in
Form 10-KSB for the fiscal year ended December 31, 2006.
Nadine
Smith, Chair
Verne
Johnson
Jeffrey
Scott
Compensation
Committee
The
Compensation Committee is composed
of three directors: Verne Johnson (Chair), Walter Dawson, and Jeffrey Scott.
All
members of our Compensation Committee are independent (as independence
is
currently defined in Rule 4200(a)(15) of the NASDAQ listing
standards). The Compensation Committee met one time
during the fiscal year. The Compensation Committee has adopted a written
charter that is available to stockholders on our website at
www.grantierra.com.
The
Compensation Committee of the Board of Directors acts on behalf of the Board
to
review, recommend for adoption and oversee Gran Tierra’s compensation strategy,
policies, plans and programs, including:
| |
·
|
establishment
of corporate and individual performance objectives relevant to
the
compensation of our directors, executive officers and other senior
management, as appropriate, and evaluation of performance
in light of these stated objectives;
|
| |
·
|
establishing
policies with respect to equity compensation
arrangements;
|
| |
·
|
review
and approval of the compensation and other terms of employment
or service,
including severance and change-in-control arrangements, of our
Chief
Executive Officer and the other executive officers;
and
|
| |
·
|
review
and recommendation to the Board for approval, modification or termination
of Gran
Tierra’s equity compensation plans, pension and profit-sharing
plans, deferred
compensation plans and other similar plan and programs, as well
as
administration of such plans and
programs
|
Commencing
this year, the Compensation Committee also began to review with management
the
our Compensation Discussion and Analysis and to consider whether to recommend
that it be included in proxy
statements and other filings.
|
1
|
The
material in this report is not “soliciting material” is not deemed "filed"
with the Commission and is not to be incorporated by reference
in any
filing of the Company under the Securities Act or the Exchange
Act,
whether made before or after the date hereof and irrespective
of any
general incorporation language in any such filing.
|
Compensation
Committee Processes and Procedures
Typically,
the Compensation Committee meets at least one time annually and with greater
frequency if necessary. The
agenda for each meeting is usually developed by the Chair of the Compensation
Committee, in consultation with the Chief Executive Officer. The Compensation
Committee meets regularly in executive session. However,
from time to time, various members of management and other employees as well
as
outside advisors or consultants may
be
invited by the Compensation Committee to make presentations,
provide financial or other background
information or advice or otherwise participate in Compensation Committee
meetings. The
Chief
Executive Officer may not participate in or be present during any deliberations
or determinations of the Compensation Committee regarding his compensation
or
individual performance objectives. The charter of the Compensation Committee
grants the Compensation Committee full access to all books, records, facilities
and personnel of Gran Tierra, as well as authority to obtain, at the expense
of
Gran Tierra, advice and assistance from internal and external legal, accounting
or other advisors and consultants and other external resources that the
Compensation Committee considers necessary or appropriate in the performance
of
its duties. In
particular, the Compensation Committee has the sole authority to retain
compensation consultants to assist in its evaluation of executive and
director compensation, including the authority to approve the consultant’s
reasonable fees and other retention terms.
Under
its
charter, the Compensation Committee may form, and delegate authority to,
subcommittees, as appropriate. In
2006,
the Compensation Committee did not form any subcommittees.
The
Compensation Committee makes adjustments to annual compensation, recommends
bonus and equity awards and establishes new performance objectives at one
or
more meetings held during the first quarter of the year. Generally, the
Compensation Committee’s process comprises two related elements: the
recommendation of compensation levels and the establishment of performance
objectives for the current year. In the case of the Chief Executive Officer,
the
evaluation of his performance is conducted by the Compensation Committee,
which
determines any adjustments to his compensation as
well
as awards to be granted. For all executives and directors, as part of its
deliberations, the Compensation Committee may review and consider, as
appropriate, materials
such as financial reports and projections, operational data, tax and accounting
information, tally sheets that set forth the total compensation that may
become
payable to executives in various hypothetical scenarios, executive and director
stock ownership information, company stock performance data, analyses of
historical executive compensation levels, and current company-wide compensation
levels, and independent compensation surveys for the petroleum industry in
Canada for peer groupings within the industry.
The
specific determinations of the Compensation Committee with respect to executive
compensation for fiscal 2006 are described in greater detail in the Compensation
Discussion and Analysis section of this proxy statement.
Compensation
Committee Interlocks and Insider Participation
Our
Compensation Committee currently consists of Mr. Johnson, Mr. Scott
and Mr. Dawson. None of the members of our Compensation Committee has at
any time been an officer or employee of Gran Tierra. No member of our Board
or
our Compensation Committee served as an executive officer of another entity
that
had one or more of our executive officers serving as a member of that entity’s
board or compensation committee.
Compensation
Committee Report2
The
Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis (“CD&A”) contained in this proxy
statement. Based
on
this review and discussion, the Compensation Committee has recommended to
the
Board of directors that the CD&A be included in this proxy statement and
incorporated into our Annual Report on Form 10-KSB for the fiscal year ended
2006.
Verne
Johnson
Walter
Scott
Jeffrey
Dawson
| 2 |
The
material in this report is not “soliciting material,” is furnished to, but
not deemed "filed" with, the Commission and is not deemed to
be
incorporated by reference in any filing of the Company under
the
Securities Act or the Exchange Act, other than the Company’s Annual Report
on Form 10-K, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
|
Nominating
and Corporate Governance Committee
As
of the
end of the fiscal year ended December 31, 2006, Gran Tierra did not have
a
Nominating and Corporate Governance Committee. We created a Nominating and
Corporate Governance Committee on June 25, 2007. Prior to the formation of
the
Nominating and Corporate Governance Committee, the Board of Directors took
any
necessary actions of the type that are currently delegated to the Nominating
and
Corporate Governance Committee.
The
Nominating and Corporate Governance Committee of the Board of Directors is
responsible for identifying, reviewing and evaluating candidates to serve
as
directors of Gran Tierra (consistent with criteria approved by the Board),
reviewing and evaluating incumbent directors, recommending to the board for
selection candidates for election to the Board of Directors, making
recommendations to the Board regarding corporate governance issues, assessing
the performance of the Board and management,
and developing a set of corporate governance principles for Gran Tierra.
The
Nominating and Corporate Governance Committee is
composed of three directors:
Walter Dawson (Chair), Verne Johnson, and Jeffrey Scott. All members of the
Nominating and Corporate Governance Committee are independent (as independence
is currently defined in Rule 4200(a)(15) of the NASDAQ
listing
standards). The Nominating and Corporate Governance Committee did not meet
during the fiscal year ended December 31, 2006, as the Committee was formed
in
2007. The Nominating and Corporate Governance Committee has adopted a written
charter that is available to stockholders on our website at www.grantierra.com.
The
Nominating and Corporate Governance Committee believes that candidates for
director should have certain minimum qualifications, including the ability
to
read and understand basic financial statements, and having the highest personal
integrity and ethics. The Nominating and Corporate Governance Committee also
intends to consider such factors as possessing relevant expertise upon which
to
be able to offer advice and guidance to management, having sufficient time
to
devote to the affairs of Gran Tierra, demonstrated excellence in his or her
field, having the ability to exercise sound business judgment and having
the
commitment to rigorously represent the long-term interests of our stockholders.
However, the Nominating and Corporate Governance Committee retains the right
to
modify these qualifications from time to time. Candidates for director nominees
will be reviewed in the context of the current composition of the Board,
the
operating requirements of Gran Tierra and the long-term interests of
stockholders. In conducting this assessment, the Nominating and Corporate
Governance Committee will consider diversity, age, skills, and such other
factors as it deems appropriate given the current needs of the Board and
Gran
Tierra, to maintain a balance of knowledge, experience and capability. In
the
case of incumbent directors whose terms of office are set to expire, the
Nominating and Corporate Governance Committee reviews these directors’ overall
service to Gran Tierra during their terms, including the number of meetings
attended, level of participation, quality of performance, and any other
relationships and transactions that might impair the directors’ independence. In
the case of new director candidates, the Nominating and Corporate Governance
Committee will also determine whether the nominee is independent
for NASDAQ purposes,
which determination is based upon applicable NASDAQ listing
standards, applicable SEC rules and regulations and the advice of counsel,
if
necessary. The Nominating and Corporate Governance Committee will conduct
any
appropriate and necessary inquiries into the backgrounds and qualifications
of
possible candidates after considering the function and needs of the Board.
The
Nominating and Corporate Governance Committee meets to discuss and consider
the
candidates’ qualifications and then selects a nominee for recommendation to the
Board by majority vote. In fiscal 2006, neither the Nominating and Corporate
Governance Committee nor the Board paid any fees to any third party to assist
in
the process of identifying or evaluating director candidates.
The
Nominating and Corporate Governance Committee will consider director candidates
recommended by stockholders. The Committee does not intend to alter the manner
in which it evaluates candidates, including the minimum criteria set forth
above, based on whether the candidate was recommended by a stockholder or
not.
Stockholders who wish to recommend individuals for consideration by the
Nominating and Corporate Governance Committee to become nominees for election
to
the Board may do so by delivering a written recommendation to the Nominating
and
Corporate Governance Committee at the following address: Gran Tierra Energy
Inc., 300,
611-10th
Avenue
S.W., Calgary, Alberta T2R 0B2 (Canada), Attention: Director
Nominations.
This
written recommendation must be delivered by at least May 13, 2008, the date
120
days prior to the anniversary date of the mailing of Gran
Tierra’s proxy
statement for the last Annual Meeting of Stockholders. Submissions must include
the full name of the proposed nominee, a description of the proposed nominee’s
business experience for at least the previous five years, complete biographical
information, a description of the proposed nominee’s qualifications as a
director and a representation that the nominating stockholder is a beneficial
or
record owner of Gran Tierra’s stock. Any such submission must be accompanied by
the written consent of the proposed nominee to be named as a nominee and
to
serve as a director if elected.
STOCKHOLDER
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The
Company’s Board has adopted a formal process by which stockholders may
communicate with the Board or any of its directors. This information is
available on the Company’s website at www.grantierra.com.
Gran
Tierra has adopted the Gran Tierra Energy Inc. Code of Business Conduct and
Ethics, or the Code of Ethics, that applies to all officers, directors and
employees. The Code of Ethics is available to stockholders on our website
at
www.grantierra.com. If
we
make any substantive amendments to the Code of Ethics or grant any waiver
from a
provision of the Code of Ethics to any executive officer or director, we
will
promptly disclose the nature of the amendment or waiver on our website.
APPROVAL
OF 2007 EQUITY INCENTIVE PLAN, AS AMENDED AND RESTATED FROM THE 2005
EQUITY
INCENTIVE PLAN
In
June
2007, the Board of Directors of Gran Tierra, or the Board, adopted Gran Tierra’s
2007 Equity Incentive Plan, or the Incentive Plan, subject to stockholder
approval, which is an amended, restated and retitled version of Gran Tierra’s
2005 Equity Incentive Plan, or the Prior Plan. There are 9,000,000 shares
of
Common Stock reserved for issuance under the Incentive Plan.
Under
the
Prior Plan, our board of directors is authorized to issue options or other
rights to acquire up to 2,000,000 shares of our common stock. On
November 8, 2006, our board of directors granted options to acquire
1,180,000 shares of common stock at an exercise price of $1.27 per share,
which
options cannot be exercised, and will be rescinded, if our stockholders do
not
approve an increase in the number of shares authorized under the Prior Plan
sufficient to permit the issuance of the shares issuable upon exercise of
these
additional stock options. These stock options are reflected in the table
below
under the heading “Equity Compensation Plan” as not being approved by security
holders. In addition, in 2007 through May 2, 2007, the Board granted
options to acquire an additional 850,000 shares of common stock at a weighted
average exercise price of $1.25 per share, which options cannot be exercised,
and will be rescinded, if our stockholders do not approve an increase in
the
number of shares authorized under the Prior Plan sufficient to permit the
issuance of the shares issuable upon exercise of these additional stock options.
We refer to these options to purchase, collectively, 2,030,000 shares, as
the
“Conditional Grants.” The Incentive Plan, subject to stockholder approval,
amends, restates and retitles the Prior Plan, including an increase in the
number of shares authorized under the Prior Plan to 9,000,000 shares under
the
Incentive Plan in order to issue the shares granted by the Board as described
above.
Under
the
Prior Plan, 2,000,000 shares of common stock were authorized for issuance.
The
Prior Plan limited to no more than 1,000,000 shares the shares reserved for
grants to the former senior management team of Gran Tierra Energy, Inc.,
the
Canadian corporation. The Conditional Grants exceed this limit; however,
the
Incentive Plan eliminates this limit on the number of shares available for
issuance to the former senior management team of the Canadian corporation.
The
Board determined that the elimination of this limit was in the best interests
of
Gran Tierra to retain the services of the senior management team.
The
Prior
Plan also provided that no more than 200,000 shares could be allocated in
the
aggregate to the awards that were granted to any individual under the plan
during any calendar year. One of the Conditional Grants, a grant to Martin
Eden,
our Chief Financial Officer, exceeds this limit; however, the Incentive Plan
eliminates this share limit. The Board determined that the elimination of
this
limit was in the best interests of Gran Tierra in order to give the Board
greater flexibility to grant awards under the Incentive Plan.
If
the
stockholders do not approve this Proposal 2, the Conditional Grants will
be
rescinded; if the stockholders approve this Proposal 2, the Conditional Grants
will no longer be subject to rescission for failure to obtain stockholder
approval.
Under
the
Prior Plan, the Prior Plan would terminate on November 10, 2015. If this
Proposal 2 is approved, the Incentive Plan will not have a set termination
date.
The
Prior
Plan also allowed the Board, or any committee of the Board authorized to
administer the Prior Plan, to grant options with a reload feature. The reload
feature under the Prior Plan allowed the holder of an option, contemporaneously
with the payment of the exercise price of the option in shares of common
stock,
to receive a reload option to purchase shares of common stock equal to the
sum
of the number of shares used to exercise the option and with respect to
nonqualified stock options, the number of shares used to satisfy applicable
withholding taxes. The Incentive Plan eliminates the ability of the Board
to
grant options with a reload feature. The Board determined it was in the best
interests of Gran Tierra to eliminate the reload feature.
Additionally,
the Incentive Plan, subject to stockholder approval, generally permits Gran
Tierra, under Section 162(m) of the Internal Revenue Code of 1986, as amended,
or the Code, to take a deduction for certain compensation expenses. This
provision is required for Gran Tierra to be able to continue to deduct as
a
business expense certain compensation attributable to the exercise of stock
options and stock appreciation rights granted under the Incentive Plan. Section
162(m) denies a deduction to any publicly held corporation for certain
compensation paid to specified employees in a taxable year to the extent
that
the compensation exceeds $1 million for any covered employee. See “U.S. Federal
Income Tax Information” below for a discussion of the application of Section
162(m). In light of the Section 162(m) requirements, the Board has approved
the
Incentive Plan, subject to stockholder approval, to include a limitation
providing that no person may be granted options and stock appreciation rights
under the Incentive Plan during a calendar year to purchase in excess of
1,000,000 shares of Common Stock. Previously, no such formal limitation was
placed on the number of shares of Common Stock available for grants to any
individual.
All
outstanding stock awards granted under the Prior Plan remain subject to the
terms of the Prior Plan. As of August 13, 2007, awards (net of canceled or
expired awards) covering an aggregate of 3,400,000 shares of our common stock
had been granted under the Prior Plan (which is in excess of the authorized
number of shares under the Prior Plan; provided,
however,
that
the Conditional Grants will be rescinded if our stockholders do not approve
this
Proposal 2). No shares of Common Stock remained available for future grant
under
the Prior Plan. The Incentive Plan will amend and restate the Prior
Plan.
Stockholders
are requested in this Proposal 2 to approve the 2007 Equity Incentive Plan,
as amended and restated from the 2005 Equity Incentive Plan, referred to
as the
Prior Plan. To be approved, the 2007 Equity Incentive Plan, as amended and
restated from the Prior Plan, must receive more “For” votes than “Against”
votes. For purposes of this vote abstentions and broker non-votes will not
be
counted for any purpose in determining whether this matter has been
approved.
The
Board Of Directors Recommends
A
Vote In Favor Of Proposal 2.
The
essential features of the Incentive Plan are outlined below:
The
Incentive Plan provides for the grant of stock options, restricted stock
awards,
stock appreciation rights, restricted stock units and other stock awards
(collectively “awards”).
Stock
options granted under the Incentive Plan are not intended to qualify as
incentive stock options within the meaning of Section 422 of the United
States Internal Revenue Code of 1986, as amended, or the Code. Stock
appreciation rights granted under the Incentive Plan may be tandem rights,
concurrent rights or independent rights. See “U.S. Federal Income Tax
Information” for a discussion of the tax treatment of awards. To date, Gran
Tierra has granted only stock options under the Incentive Plan.
The
Board
adopted the Incentive Plan, which is an amendment and restatement of the
2005
Equity Incentive Plan, or the Prior Plan, to provide a means by which employees,
directors and consultants of Gran Tierra and its affiliates may be given
an
opportunity to purchase stock in Gran Tierra, to assist in retaining the
services of such persons, to secure and retain the services of persons capable
of filling such positions and to provide incentives for such persons to exert
maximum efforts for the success of Gran Tierra and its affiliates. All of
the
approximately 160 employees, directors and consultants of Gran Tierra and
its
affiliates are eligible to participate in the Incentive Plan.
The
Board
administers the Incentive Plan. Subject to the provisions of the Incentive
Plan,
the Board has the power to construe and interpret the Incentive Plan and
to
determine the persons to whom and the dates on which awards will be granted,
the
number of shares of Common Stock to be subject to each award, the time or
times
during the term of each award within which all or a portion of such award
may be
exercised, the exercise price, the type of consideration and other terms
of the
award.
The
Board
has the power to delegate administration of the Incentive Plan to a committee
composed of not fewer than two members of the Board. A committee may consist
solely of two or more outside directors in accordance with Section 162(m)
of the
Code or solely of two or more non-employee directors in accordance with Rule
16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
The
Board has delegated administration of the Incentive Plan to the Compensation
Committee of the Board. As used herein with respect to the Incentive Plan,
the
“Board” refers to any committee the Board appoints as well as to the Board
itself.
STOCK
SUBJECT TO THE INCENTIVE PLAN
Subject
to this Proposal, an aggregate of 9,000,000 shares of Common Stock is reserved
for issuance under the Incentive Plan. If awards granted under the Incentive
Plan expire or otherwise terminate without being exercised, the shares of
Common
Stock not acquired pursuant to such awards again become available for issuance
under the Incentive Plan. If Gran Tierra reacquires unvested stock issued
under
the Incentive Plan, the reacquired stock will not become available for
reissuance under the Incentive Plan.
Employees
(including officers), directors, and consultants of both Gran Tierra and
its
affiliates are eligible to receive all types of awards under the Incentive
Plan.
No person may be granted awards under the Incentive Plan exercisable for
more
than 1,000,000 shares of Common Stock during any calendar year (“Section
162(m) Limitation”).
The
following is a description of the permissible terms of options under the
Incentive Plan. Individual option grants may be more restrictive as to any
or
all of the permissible terms described below.
Exercise
Price; Payment. The
exercise price of options may not be less than 100% of the fair market value
of
the stock on the date of grant. If options were granted to covered executives
with exercise prices below fair market value, deductions for compensation
attributable to the exercise of such options could be limited by
Section 162(m) of the Code. See “U.S. Federal Income Tax Information.” The
closing price of Gran Tierra’s common stock as reported on the Over the Counter
Bulletin Board on August 13, 2007 was $1.75 per share.
The
exercise price of options granted under the Incentive Plan must be paid either
in cash at the time the option is exercised or at the discretion of the Board,
(i) by delivery of other Common Stock of Gran Tierra, (ii) pursuant to
a deferred payment arrangement or (iii) in any other form of legal
consideration acceptable to the Board.
Option
Exercise. Options
granted under the Incentive Plan may become exercisable in cumulative increments
(“vest”)
as
determined by the Board. Shares covered by currently outstanding options
under
the Incentive Plan typically vest at the rate of over three year period in
three
annual installments during the participant’s employment by, or service as a
director or consultant to, Gran Tierra or an affiliate (collectively,
“service”).
Shares covered by options granted in the future under the Incentive Plan
may be
subject to different vesting terms. The Board has the power to accelerate
the
time during which an option may vest or be exercised. In addition, options
granted under the Incentive Plan may permit exercise prior to vesting, but
in
such event the participant may be required to enter into an early exercise
stock
purchase agreement that allows Gran Tierra to repurchase unvested shares,
generally at their exercise price, should the participant’s service terminate
before vesting. To the extent provided by the terms of an option, a participant
may satisfy any federal, state or local tax withholding obligation relating
to
the exercise of such option by a cash payment upon exercise, by authorizing
Gran
Tierra to withhold a portion of the stock otherwise issuable to the participant,
by delivering already-owned common stock of Gran Tierra or by a combination
of
these means.
Term.
The
maximum term of options under the Incentive Plan is 10 years. Options under
the
Incentive Plan generally terminate three months after termination of the
participant’s service unless (i) such termination is due to the participant’s
permanent and total disability (as defined in the Code), in which case the
option may, but need not, provide that it may be exercised (to the extent
the
option was exercisable at the time of the termination of service) at any
time
within 12 months of such termination; (ii) the participant dies before the
participant’s service has terminated, or within three months after termination
of such service, in which case the option may, but need not, provide that
it may
be exercised (to the extent the option was exercisable at the time of the
participant’s death) within 18 months of the participant’s death by the person
or persons to whom the rights to such option pass by will or by the laws
of
descent and distribution; or (iii) the option by its terms specifically provides
otherwise. A participant may designate a beneficiary who may exercise the
option
following the participant’s death. Individual option grants by their terms may
provide for exercise within a longer period of time following termination
of
service.
The
option term generally may be extended in the event that exercise of the option
within these periods is prohibited. A participant’s option agreement may provide
that if the exercise of the option following the termination of the
participant’s service would be prohibited because the issuance of stock would
violate the registration requirements under the Securities Act of 1933, as
amended (the “Securities
Act”),
then
the option will terminate on the earlier of (i) the expiration of the term
of
the option or (ii) three months after the termination of the participant’s
service during which the exercise of the option would not be in violation
of
such registration requirements.
TERMS
OF RESTRICTED STOCK AWARDS AND PURCHASES OF RESTRICTED
STOCK
Payment.
The
Board
determines the purchase price under a restricted stock purchase agreement
but
the purchase price may not be less than 100% of the fair market value of
Gran
Tierra’s common stock on the date of purchase. The Board may award stock bonuses
in consideration of past services without a purchase payment.
The
purchase price of stock acquired pursuant to a restricted stock purchase
agreement under the Incentive Plan must be paid either in cash at the time
of
purchase or at the discretion of the Board, (i) by delivery of other common
stock of Gran Tierra, (ii) pursuant to a deferred payment arrangement or
(iii) in any other form of legal consideration acceptable to the
Board.
Vesting.
Shares
of
stock sold or awarded under the Incentive Plan may, but need not be, subject
to
a repurchase option in favor of Gran Tierra in accordance with a vesting
schedule as determined by the Board. The Board has the power to accelerate
the
vesting of stock acquired pursuant to a restricted stock purchase agreement
under the Incentive Plan.
Restrictions
on Transfer.
Rights
under a stock bonus or restricted stock bonus agreement may be transferred
only
upon the terms and conditions of the award agreement as the Board shall
determine in its discretion, except where such assignment is required by
law or
expressly authorized by the terms of the applicable stock bonus or restricted
stock purchase agreement.
STOCK
APPRECIATION RIGHTS
The
Incentive Plan authorizes the grant of stock appreciation rights.
Stock
appreciation rights entitle the participant to receive upon exercise an
appreciation distribution equal to the fair market value of that number of
shares equal to the number of share equivalents in which the participant
is
vested under the independent stock appreciation rights less the fair market
value of such number of shares of stock on the date of grant of the independent
stock appreciation rights. Appreciation distributions payable upon exercise
of
stock appreciation rights may, at the Board’s discretion, be made in cash, in
shares of stock or a combination thereof.
The
Board
may grant stock options that are transferable to the extent provided in the
stock option agreement. Shares subject to repurchase by Gran Tierra under
an
early exercise stock purchase agreement may be subject to restrictions on
transfer that the Board deems appropriate.
Transactions
not involving receipt of consideration by Gran Tierra, such as a merger,
consolidation, reorganization, stock dividend, or stock split, may change
the
type(s), class(es) and number of shares of common stock subject to the Incentive
Plan and outstanding awards. In that event, the Incentive Plan will be
appropriately adjusted as to the type(s), class(es) and the maximum number
of
shares of Common Stock subject to the Incentive Plan, and outstanding awards
will be adjusted as to the type(s), class(es), number of shares and price
per
share of Common Stock subject to such awards.
EFFECT
OF CERTAIN CORPORATE TRANSACTIONS
In
the
event of (i) the sale, lease, license or other disposition of all or
substantially all of the assets of Gran Tierra, (ii) the sale or other
disposition of all or substantially all of the outstanding securities of
Gran
Tierra, or (iii) certain specified types of merger, consolidation or similar
transactions (collectively, “corporate
transaction”),
any
surviving or acquiring corporation may continue or assume awards outstanding
under the Incentive Plan or may substitute similar awards. If any surviving
or
acquiring corporation does not assume such awards or to substitute similar
awards, then with respect to awards held by participants whose service with
Gran
Tierra or an affiliate has not terminated as of the effective date of the
corporate transaction, the vesting of such awards (and, if applicable, the
time
during which such awards may be exercised) will be accelerated in full and
the
awards will terminate if not exercised (if applicable) at or prior to such
effective date.
The
Incentive Plan provides, that in the event of certain change of control events,
any outstanding stock awards may be subject to additional acceleration of
vesting and exercisability upon or after such change of control event, if
such
acceleration is provided for in the individual award holder’s stock award
agreement
The
acceleration of an award in the event of a corporate transaction or a change
in
control event may be viewed as an anti-takeover provision, which may have
the
effect of discouraging a proposal to acquire or otherwise obtain control
of Gran
Tierra.
DURATION,
AMENDMENT AND TERMINATION
The
Board
may suspend or terminate the Incentive Plan without stockholder approval
or
ratification at any time or from time to time.
The
Board
may also amend the Incentive Plan at any time or from time to time. However,
no
amendment will be effective unless approved by the stockholders of Gran Tierra
within 12 months before or after its adoption by the Board to the extent
such
approval is necessary to satisfy the requirements of Section 422 of the Code.
The Board may submit any other amendment to the Incentive Plan for stockholder
approval.
U.S.
FEDERAL INCOME TAX INFORMATION
Stock
Options, Restricted Stock Purchase Awards and Stock
Bonuses.
Stock
options, restricted stock purchase awards and stock bonuses granted under
the
Incentive Plan generally have the following federal income tax
consequences.
There
are
no tax consequences to the participant or Gran Tierra by reason of the grant.
Upon acquisition of the stock, the participant normally will recognize taxable
ordinary income equal to the excess, if any, of the stock’s fair market value on
the acquisition date over the purchase price. However, to the extent the
stock
is subject to certain types of vesting restrictions, the taxable event will
be
delayed until the vesting restrictions lapse unless the participant elects
to be
taxed on receipt of the stock. With respect to employees, Gran Tierra is
generally required to withhold from regular wages or supplemental wage payments
an amount based on the ordinary income recognized. Subject to the requirement
of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, Gran Tierra will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the participant.
Upon
disposition of the stock, the participant will recognize a capital gain or
loss
equal to the difference between the selling price and the sum of the amount
paid
for such stock plus any amount recognized as ordinary income upon acquisition
(or vesting) of the stock. Such gain or loss will be long-term or short-term
depending on whether the stock was held for more than one year. Slightly
different rules may apply to participants who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange
Act.
Stock
Appreciation Rights.
No
taxable income is realized upon the receipt of a stock appreciation right,
but
upon exercise of the stock appreciation right the fair market value of the
shares (or cash in lieu of shares) received must be treated as compensation
taxable as ordinary income to the participant in the year of such exercise.
Generally, with respect to employees, Gran Tierra is required to withhold
from
the payment made on exercise of the stock appreciation right or from regular
wages or supplemental wage payments an amount based on the ordinary income
recognized. Subject to the requirement of reasonableness, Section 162(m) of
the Code and the satisfaction of a reporting obligation, Gran Tierra will
be
entitled to a business expense deduction equal to the taxable ordinary income
recognized by the participant.
Potential
Limitation on Company Deductions.
Section 162(m)
of the Code denies a deduction to any publicly held corporation for compensation
paid to certain “covered employees” in a taxable year to the extent that
compensation to such covered employee exceeds $1 million. It is possible
that
compensation attributable to awards, when combined with all other types of
compensation received by a covered employee from Gran Tierra, may cause this
limitation to be exceeded in any particular year.
Certain
kinds of compensation, including qualified “performance-based compensation,” are
disregarded for purposes of the deduction limitation. In accordance with
Treasury Regulations issued under Section 162(m), compensation attributable
to stock options and stock appreciation rights will qualify as performance-based
compensation if the award is granted by a compensation committee comprised
solely of “outside directors” and either (i) the plan contains a per-employee
limitation on the number of shares for which such awards may be granted during
a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the award is no less than the fair market value
of the
stock on the date of grant, or (ii) the award is granted (or exercisable)
only
upon the achievement (as certified in writing by the compensation committee)
of
an objective performance goal established in writing by the compensation
committee while the outcome is substantially uncertain, and the award is
approved by stockholders.
Awards
to
purchase restricted stock and stock bonus awards will qualify as
performance-based compensation under the Treasury Regulations only if (i)
the
award is granted by a compensation committee comprised solely of “outside
directors,” (ii) the award is granted (or exercisable) only upon the achievement
of an objective performance goal established in writing by the compensation
committee while the outcome is substantially uncertain, (iii) the compensation
committee certifies in writing prior to the granting (or exercisability)
of the
award that the performance goal has been satisfied and (iv) prior to the
granting (or exercisability) of the award, stockholders have approved the
material terms of the award (including the class of employees eligible for
such
award, the business criteria on which the performance goal is based, and
the
maximum amount — or formula used to calculate the amount — payable
upon attainment of the performance goal).
The
following table presents certain information with respect to options granted
under the Incentive Plan as of August 13, 2007, subject to the stockholders’
approval of the increase in the number of shares authorized for issuance
from
the 2005 Equity Incentive Plan, to (i) our Chief Executive Officer and our
four
other most highly compensated executive officers at December 31, 2006 (the
“Named
Executive Officers”),
(ii)
all executive officers as a group, and (iii) all non-executive officer employees
as a group.
NEW
PLAN BENEFITS
2007
EQUITY INCENTIVE PLAN
|
NAME
AND POSITION (1)
|
NUMBER
OF SHARES UNDERLYING OPTIONS GRANTED
|
|
Dana
Coffield,
President
and Chief Executive Officer(2)
|
200,000
|
|
James
Hart,
Former
Vice President, Finance and Chief Financial Officer
|
125,000
|
|
Rafael
Orunesu,
President,
Gran Tierra Argentina
|
100,000
|
|
Max
Wei,
Vice
President, Operations
|
100,000
|
|
Edgar
Dyes,
President,
Argosy Energy/Gran
Tierra Energy Columbia
|
100,000
|
|
All
Executive Officers as a Group (3)
|
850,000
|
|
All
Non-Employee Directors as a Group (4)
|
250,000
|
|
All
Non-Executive Officer Employees as a Group
|
930,000
|
(1) Each
of
the option grants in this table are Conditional Grants that will be rescinded
in
the event that Proposal 2 is not approved.
(2) These
options also exceed the 1,000,000 share limit for grants to former executive
officers of our predecessor Canadian corporation, which provision is eliminated
if this Proposal 2 is adopted, also enabling this grant to not be
rescinded.
(3) These
options include an option held by Martin Eden, our Chief Financial Officer,
to
purchase 225,000 shares, which option is in excess of the 200,000 share limit
for grants to any one person during a year, which provision is eliminated if
Proposal 2 is adopted.
(4) Does
not
include the grant to Mr. Hart, who is now a non-employee director but appears
in
our Summary Compensation Table, and is therefore listed separately above.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The
following table provides certain information with respect to all of Gran
Tierra’s equity compensation plans in effect as of the end of December 31,
2006.
EQUITY
COMPENSATION PLAN
Securities
authorized for issuance under equity compensation plans as of December 31,
2006 are as follows:
| |
|
Number of
|
|
Weighted
|
|
Number of securities
|
|
| |
|
securities to be issued |
|
average exercise
|
|
remaining available
|
|
| |
|
upon
|
|
price of
|
|
for future
|
|
|
Plan category
|
|
exercise of options
|
|
outstanding options
|
|
Issuance
|
|
|
Equity
compensation plans approved by security holders
|
|
|
1,520,000
|
|
$
|
1.12
|
|
|
480,000
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
1,180,000
|
|
$
|
1.27
|
|
|
—
|
|
|
Total
|
|
|
2,700,000
|
|
|
|
|
|
480,000
|
|
The
only
equity compensation plan approved by our stockholders is our 2005 Equity
Incentive Plan, under which our board of directors is authorized to issue
options or other rights to acquire up to 2,000,000 shares of our common stock.
On November 8, 2006, our board of directors granted options to acquire
1,180,000 shares of common stock at an exercise price of $1.27 per share, which
options cannot be exercised, and will be rescinded, if our stockholders do
not
approve an increase in the number of shares authorized under the 2005 Equity
Incentive Plan sufficient to permit the issuance of the shares issuable upon
exercise of these additional stock options. These stock options are reflected
in
the table above as not being approved by security holders. In addition, in
2007
through May 2, 2007, the Board granted options to acquire an additional
850,000 shares of common stock at a weighted average exercise price of $1.25
per
share, which options cannot be exercised, and will be rescinded, if our
stockholders do not approve an increase in the number of shares authorized
under
the 2005 Equity Incentive Plan sufficient to permit the issuance of the shares
issuable upon exercise of these additional stock options.
PROPOSAL
3
RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
The
Audit
Committee of the Board of Directors has selected Deloitte & Touche LLP as
our independent auditors for the fiscal year ending December 31, 2007 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Deloitte &
Touche LLP has audited our financial statements since inception in
2005.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Neither
our Bylaws nor other governing documents or law require stockholder ratification
of the selection of Deloitte & Touche LLP as our independent auditors.
However, the Audit Committee of the Board is submitting the selection of
Deloitte & Touche LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection,
the
Audit Committee of the Board will reconsider whether or not to retain that
firm.
Even if the selection is ratified, the Audit Committee of the Board in its
discretion may direct the appointment of different independent auditors at
any
time during the year if they determine that such a change would be in the best
interests of Gran Tierra and its stockholders.
The
affirmative vote of the holders of a majority of the shares present in person
or
represented by proxy and voting at the annual meeting will be required to ratify
the selection of Deloitte & Touche LLP.
Broker
non-votes and abstentions are counted towards a quorum, but are not counted
for
any purpose in determining whether this matter has been approved.
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Set
forth
below is a summary of fees paid to Deloitte & Touche LLP, our independent
registered Chartered Accountants, for services in the fiscal periods ended
December 31, 2005 and December 31, 2006. In determining the independence of
Deloitte & Touche LLP, the Audit Committee considered whether the provision
of non-audit services is compatible with maintaining Deloitte & Touche LLP’s
independence.
| |
|
2005
|
|
2006
|
|
| |
|
Deloitte & Touche
LLP
|
|
Deloitte & Touche
LLP
|
|
|
Audit
Fees
|
|
$
|
111,195
|
|
$
|
478,719
|
|
|
Audit
Related
|
|
|
—
|
|
$
|
35,394
|
|
|
Tax
Preparation
|
|
|
15,412
|
|
|
73,694
|
|
|
All
Other Fees
|
|
|
22,155
|
|
|
—
|
|
|
Total
|
|
|
148,762
|
|
$
|
587,807
|
|
Audit
Fees
The
total
audit fees and reimbursement of expenses paid to Deloitte & Touche LLP were
for audits, reviews of the quarterly financial statements, and the preparation
of comfort letters and consents. As well, an audit was performed on the nine
months ended September 30, 2006 to facilitate the application to register the
common shares issued in June 2006.
Audit
Related
Miscellaneous
advisory services, related to the acquisitions and share registration activities
of the company during the year.
Tax
Fees
Tax
preparation fees, including reimbursement of expenses, paid to Deloitte &
Touche LLP in fiscal 2006 were for the preparation of our US, Canadian,
Colombian and Argentinean tax returns for 2005.
PRE-APPROVAL
POLICIES AND PROCEDURES.
Before
we
engage an independent public accountant to render audit or non-audit services,
the engagement is approved by our audit committee or the engagement to render
services is entered into pursuant to pre-approval policies and procedures
established by the audit committee. The pre-approval policy adopted by our
audit
committee on March 9, 2006 to permit pre-approval of non-audit services is
attached as Schedule A to the charter of the audit committee, which was filed
as
Exhibit 99.1 to our Annual Report on Form 10-KSB for 2005. This policy requires
that the audit committee consider, prior to pre-approving any non-audit
services, multiple factors taken as a whole, including whether the services
are
prohibited pursuant to SEC rules, whether the auditors are best positioned
to
provide the services, and the percentage of total services the non-audit
services will comprise. Requests for non-audit services will be made in writing
to our independent auditor specifying the services requested and the reasons
therefor, and the chairperson of the audit committee will be copied on the
communication. Then our independent auditor must respond to our with a
description of the services, the fees that it will charge, and a request for
pre-approval of the services plus pre-approval of 10% over the amount. The
chairperson of the audit committee will then make a determination based on
all
of the relevant factors, and if approved report back to the audit committee
at
the next audit committee meeting for ratification.
The
Audit
Committee has determined that the rendering of the services other than audit
services by Deloitte & Touche LLP is compatible with maintaining the
principal accountant’s independence.
THE
BOARD OF DIRECTORS RECOMMENDS
A
VOTE IN FAVOR OF PROPOSAL 3.
SECURITY
OWNERSHIP OF
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL
OWNERSHIP OF OUR COMMON STOCK BY OUR DIRECTORS, OFFICERS AND HOLDERS OF 5%
OF
OUR COMMON STOCK
The
following table sets forth information regarding the beneficial ownership of
our
common stock as of August 13, 2007 by (1) each person who, to our
knowledge, beneficially owns more than 5% of the outstanding shares of the
common stock; (2) each of our directors and officers; and (3) all of
our executive officers and directors as a group. Unless otherwise indicated
in
the footnotes to the following table, each person named in the table has sole
voting and investment power and that person’s address is 300, 611-10th
Avenue,
S.W., Calgary, Alberta, Canada, T2R 0B2. Shares of common stock subject to
options or warrants currently exercisable or exercisable within 60 days
following August 13, 2007 are deemed outstanding for computing the share
ownership and percentage of the person holding such options and warrants, but
are not deemed outstanding for computing the percentage of any other person.
All
share numbers and ownership percentage calculations below assume that all
Exchangeable
Shares
of
Goldstrike Exchange Co. have been converted on a one-for-one basis into
corresponding shares of our common stock.
|
Name and Address of Beneficial Owner (1)
|
|
Amount and Nature of
Beneficial Ownership
|
|
Percentage of Class
|
|
|
Dana
Coffield (2)
|
|
|
1,888,829
|
|
|
1.99
|
%
|
|
James
Hart (3)
|
|
|
1,743,850
|
|
|
1.84
|
%
|
|
Max
Wei (4)
|
|
|
1,783,834
|
|
|
1.88
|
%
|
|
Rafael
Orunesu (5)
|
|
|
1,863,850
|
|
|
1.97
|
%
|
|
Edgar
Dyes
|
|
|
-
|
|
|
-
|
|
|
Jeffrey
Scott (6)
|
|
|
2,563,861
|
|
|
2.70
|
%
|
|
Walter
Dawson (7)
|
|
|
3,005,952
|
|
|
3.16
|
%
|
|
Verne
Johnson (8)
|
|
|
1,662,884
|
|
|
1.75
|
%
|
|
Nadine
C. Smith (9)
|
|
|
2,099,094
|
|
|
2.21
|
%
|
|
Greywolf
Capital Management LP (10)
|
|
|
10,142,001
|
|
|
10.35
|
%
|
|
Millennium
Global Investments Limited (11)
|
|
|
5,002,500
|
|
|
5.19
|
%
|
|
US
Global Investors, Inc. (12)
|
|
|
5,858,675
|
|
|
6.08
|
%
|
|
Directors
and officers as a group (total of 10 persons) (13)
|
|
|
16,612,154
|
|
|
17.26
|
%
|
(1) Beneficial
ownership is calculated based on 94,674,410
shares
of common stock issued and outstanding as of August 13, 2007,
which
number includes shares of common stock issuable upon the exchange of the
exchangeable shares of Goldstrike Exchange Co. issued to certain former holders
of Gran Tierra Canada’s common stock. Beneficial ownership is determined in
accordance with Rule 13d-3 of the SEC. The number of shares beneficially
owned by a person includes shares of common stock underlying options or warrants
held by that person that are currently exercisable or exercisable within
60 days of August 13, 2007. The shares issuable pursuant to the exercise of
those options or warrants are deemed outstanding for computing the percentage
ownership of the person holding those options and warrants but are not deemed
outstanding for the purposes of computing the percentage ownership of any other
person. Unless otherwise indicated, the persons and entities named in the table
have sole voting and sole investment power with respect to the shares set forth
opposite that person’s name, subject to community property laws, where
applicable.
(2) The
number of shares beneficially owned includes an option to acquire 54,167 shares
of common stock exercisable within 60 days of August 13, 2007, and shares
issuable upon exercise
of
warrants to acquire 48,328 shares of common stock exercisable within
60 days of August 13, 2007. The number of shares beneficially owned also
includes 1,689,683 exchangeable shares.
(3) The
number of shares beneficially owned includes an option to acquire 54,167 shares
of common stock exercisable within 60 days of August 13, 2007. All other
shares beneficially owned by such stockholder are exchangeable
shares.
(4) The
number of shares beneficially owned includes an option to acquire 54,167 shares
of common stock exerciseable within 60 days of August 13, 2007, and shares
issuable upon exercise of a warrant to acquire 13,328 shares of common stock
exercisable within 60 days of August 13, 2007. The number of shares beneficially
owned also includes 1,689,683 exchangeable shares.
(5) The
number of shares beneficially owned includes an option to acquire 54,167 shares
of common stock exerciseable within 60 days of August 13, 2007, and shares
issuable upon exercise of a warrant to acquire 40,000 shares of common stock
exercisable within 60 days of August 13, 2007. The number of shares beneficially
owned also includes 1,689,683 exchangeable shares.
(6) The
number of shares beneficially owned includes an option to acquire 50,000 shares
of common stock exercisable within 60 days of August 13, 2007, and shares
issuable upon exercise of warrants to acquire 274,991 shares of common stock
exercisable within 60 days of August 13, 2007. The number of shares
beneficially owned also includes 1,688,889 exchangeable shares.
(7) The
number of shares beneficially owned includes an option to acquire 33,333 shares
of common stock exercisable within 60 days of August 13, 2007. The number
beneficially owned also includes shares issuable upon exercise of warrants
to
acquire 375,000 shares of common stock exercisable within 60 days of August
13, 2007, of which warrants to acquire 275,000 shares are held by Perfco
Investments Ltd. (“Perfco”). The number of shares beneficially owned also
includes 550,000 shares of common stock directly owned by Perfco and 158,730
shares of common stock directly owned by Mr. Dawson’s spouse. The number of
shares beneficially owned includes 1,688,889 exchangeable shares, of which
1,587,302 are held by Perfco. Mr. Dawson is the sole owner of Perfco and
has sole voting and investment power over the shares beneficially owned by
Perfco. Mr. Dawson disclaims beneficial ownership over the shares owned by
Mr. Dawson’s spouse.
(8) The
number of shares beneficially owned includes an option to acquire 33,333 shares
of common stock exercisable within 60 days of August 13, 2007, and shares
issuable upon exercise of a warrant to acquire 112,496 shares of common stock
exercisable within 60 days of August 13, 2007. The number of shares
beneficially owned includes 1,292,064 exchangeable shares, of which 396,825
are
held by KirstErin Resources, Ltd., a private family-owned business of which
Mr. Johnson is the President. Mr. Johnson has sole voting and investment
power over the shares held by KirstErin Resources, Ltd.
(9) The
number of shares beneficially owned includes an option to acquire 33,333 shares
of common stock exercisable within 60 days of August 13, 2007, shares
issuable upon exercise of a warrant to acquire 362,500 shares of common stock
exercisable within 60 days of August 13, 2007, and 100,000 shares and
shares issuable upon exercise of a warrant to acquire 50,000 shares of common
stock exercisable within 60 days of August 13, 2007 held by John D. Long,
Jr., Ms. Smith’s spouse.
(10) Greywolf
Capital Management LP is the investment manager for (a) Greywolf Capital
Overseas Fund (“GCOF”), which owns 4,899,400 shares of common stock and a
warrant to acquire 2,400,000 shares of common stock exercisable within
60 days of August 13, 2007, and (b) Greywolf Capital Partners II
(“GCP”), which owns 1,931,267 shares of common stock and a warrant to acquire
933,334 shares of common stock exercisable within 60 days of August 13,
2007. William Troy has the power to vote and dispose of the shares of common
stock beneficially owned by GCOF and GCP. The address for Greywolf Capital
Management LP is 4 Manhattanville Road, Purchase, NY 10577.
(11) Includes
shares beneficially owned by Millennium Global High Yield Fund Limited (the
“High Yield Fund”) and Millennium Global Natural Resources Fund Limited (the
“Natural Resources Fund”). The High Yield Fund owns 2,668,000 shares of common
stock and a warrant to acquire 1,334,000 shares of common stock exercisable
within 60 days of August 13, 2007. The Natural Resources Fund owns 667,000
shares of common stock and a warrant to acquire 333,500 shares of common stock
exercisable within 60 days of August 13, 2007. Joseph Strubel has the power
to
vote and dispose of the shares of common stock beneficially owned by the High
Yield Fund and the Natural Resources Fund. The address for Millennium Global
Investments Limited is 57-59 St. James Street, London, U.K., SW1A 1LD.
(12) Includes
shares beneficially owned by US Global Investors — Global Resources Fund (the
“Global Fund”) and US Global Investors — Balanced Natural Resources Fund (the
“Balanced Fund”). The Global Fund owns 3,883,675 shares of common stock and a
warrant to acquire 1,550,000 shares of common stock exercisable within
60 days of August 13, 2007. The Balanced Fund owns 233,333 shares of common
stock and a warrant to acquire 116,667 shares of common stock exercisable within
60 days of August 13, 2007. The remaining 858,675 shares of common stock
are owned by the Meridian Resources Fund. U.S. Global Investors has the power
to
vote and dispose of the shares of common stock beneficially owned by the Global
Fund, the Balanced fund and the Meridian Resources Fund. The address for US
Global Investors, Inc. is 7900 Callaghan Road, San Antonio, Texas
78229.
(13) The
number of shares beneficially owned includes options to acquire 366,667 shares
of common stock exercisable within 60 days of August 13, 2007, and warrants
to acquire 1,226,642 shares of common stock exercisable within 60 days of
August 13, 2007. The number of shares beneficially owned also includes
11,428,574 exchangeable shares.
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We
were
not subject to Section 16(a) of the Securities Exchange Act of 1934, as amended,
in fiscal 2006.
EXECUTIVE
COMPENSATION
EXECUTIVE
OFFICERS
The
following is a brief biography of all of our executive officers as of April
2,
2007:
Dana
Coffield, President and Chief Executive Officer and Director. See
Proposal 1 for Mr. Coffield’s biography.
Martin
H. Eden, Chief Financial Officer,
age
59.
Mr. Eden
joined our company as Chief Financial Officer on January 2, 2007. He has over
26
years experience in accounting and finance in the energy industry in Canada
and
overseas. He was Chief Financial Officer of Artumas Group Inc., a publicly
listed Canadian oil and gas company from April 2005 to December 2006 and was
a
director from June to October, 2006. He has been president of Eden and
Associates Ltd., a financial consulting firm, from January 1999 to present.
From
October 2004 to March 2005 he was CFO of Chariot Energy Inc., a Canadian private
oil and gas company. From January 2004 to September 2004, he was CFO of Assure
Energy Inc., a publicly traded oil and gas company listed in the United States.
From January 2001 to December 2002, he was CFO of Geodyne Energy Inc., a
publicly listed Canadian oil and gas company. From 1997 to 2000, he was
Controller and subsequently CFO of Kyrgoil Corporation, a publicly listed
Canadian oil and gas company with operations in Central Asia. He spent nine
years with Nexen Inc. (1986-1996), including three years as Finance Manager
for
Nexen’s Yemen operations and six years in Nexen’s financial reporting and
special projects areas in its Canadian head office. Mr. Eden has worked in
public practice, including two years as an audit manager for Coopers &
Lybrand in East Africa. Mr. Eden holds a Bachelor of Science degree in Economics
from Birmingham University, England, a Masters of Business Administration from
Henley Management College/Brunel University, England, and is a member of the
Institute of Chartered Accountants of Alberta and the Institute of Chartered
Accountants in England and Wales.
Max
Wei, Vice President, Operations, age
56.
Mr. Wei
is a Petroleum Engineering graduate from University of Alberta and has
twenty-five years of experience as a reservoir engineer and project manager
for
oil and gas exploration and production in Canada, the US, Qatar, Bahrain, Oman,
Kuwait, Egypt, Yemen, Pakistan, Bangladesh, Russia, Netherlands, Philippines,
Malaysia, Venezuela and Ecuador, among other countries. Mr. Wei began his career
with Shell Canada and later with Imperial Oil, in Heavy Oil Operations. He
moved
to the US in 1986 to work with Bechtel Petroleum Operations at Naval Petroleum
Reserves in Elk Hills, California and eventually joined Occidental Petroleum
in
Bakersfield. Mr. Wei returned to Canada in 2000 as Team Leader for Qatar and
Bahrain operations with AEC International and its successor, EnCana Corporation,
where he worked until 2004. He completed a project management position with
Petronas in Malaysia in April, 2005, before joining Gran Tierra in May,
2005.
Mr.
Wei
is specialized in reservoir engineering, project management, production
operations, field acquisition and development, and mentoring. He is a registered
Professional Engineer in the State of California and a member of the Association
of Professional Engineers, Geologists and Geophysicists of Alberta. Mr. Wei
has
a BSc in Petroleum Engineering from the University of Alberta and Certification
in Petroleum Engineering from Southern Alberta Institute of
Technology.
Rafael
Orunesu, Vice President, Latin America, age
50.
Mr.
Orunesu joined Gran Tierra in March 2005 and brings a mix of operations
management, project evaluation, production geology, reservoir and production
engineering as well as leadership skills to Gran Tierra, with a South American
focus. He was most recently Engineering Manager for Pluspetrol Peru, from 1997
through 2004, responsible for planning and development operations in the
Peruvian North jungle. He participated in numerous evaluation and asset purchase
and sale transactions covering Latin America and North Africa, incorporating
200,000,000 barrels of oil over a five-year period. Mr. Orunesu was previously
with Pluspetrol Argentina from 1990 to 1996 where he managed the
technical/economic evaluation of several oil fields. He began his career with
YPF, initially as a geologist in the Austral Basin of Argentina and eventually
as Chief of Exploitation Geology and Engineering for the Catriel Field in the
Nuequén Basin, where he was responsible for drilling programs, workovers and
secondary recovery projects. Mr. Orunesu has a postgraduate degree in Reservoir
Engineering and Exploitation Geology from Universidad Nacional de Buenos Aires
and a degree in Geology from Universidad Nacional de la Plata,
Argentina.
Edgar
Dyes, President Argosy Energy / Gran Tierra Energy Colombia, age
61.
Mr. Dyes
joined our company through the acquisition of Argosy Energy International L.P.,
where he was Executive Vice-President and Chief Operating Officer. His
experience in the Colombian oil industry spans twenty-one years, with the last
six years in charge of Argosy Energy’s planning, management, finance and
administration activities. Mr. Dyes began his career with Union Texas Petroleum
as a petroleum accountant, where he eventually advanced into supervision and
management positions in international operations for the company. He
subsequently worked for Quintana Energy Corporation, Jackson Exploration, Inc.,
CSX Oil and Gas, and Garnet Resources Corporation, where he held the position
of
Chief Financial Officer. Mr. Dyes has worked in various financial and management
roles on projects located in the United Kingdom, Germany, Indonesia, Oman,
Brunei, Egypt, Somalia, Ecuador and Colombia. Mr. Dyes holds a Bachelor’s degree
in Business Management from Stephen F. Austin State University, with
postgraduate studies in accounting.
COMPENSATION
DISCUSSION AND ANALYSIS
All
dollar amounts discussed below are in U.S. dollars. To the extent that
contractual amounts are in Canadian dollars, they have been converted into
US
dollars for the purposes of the discussion below at an exchange rate of one
Canadian dollar to US $0.8581, which is the conversion rate at December 31,
2006.
Compensation
Objectives
The
overall objectives of our compensation program are to attract and retain key
executives who are the best suited to make our company successful and to reward
individual performance to motivate our executives to accomplish our
goals.
Compensation
Process
The
Compensation Committee recommends amounts of compensation for the Chief
Executive Officer for approval by our board of directors. Our Chief Executive
Officer recommends amounts of compensation for our other executive officers
to
our Compensation Committee, which considers these recommendations in connection
with the goals and criteria discussed below. The Compensation Committee then
makes its determination, taking our Chief Executive Officer’s recommendations
into account, and makes its recommendations to our board of directors for
approval.
Our
practice is to consider compensation annually (at year-end), including the
award
of equity based compensation. Our Compensation Committee is currently defining
items of corporate performance to be considered in future compensation, which
it
expects will include budget targets (production, reserves, capital expenditures,
operating costs), financial measures (e.g., liquidity) and share price
performance, in addition to other objectives. Our compensation practices to
date
have been largely discretionary but within an increasingly formalized framework.
Our Compensation Committee intends to define elements of personal performance
by
the achievement of agreed objectives. This process is expected to be initiated
by the Chief Executive Officer, whose objectives will be documented and accepted
by the board of directors. Objectives for the remaining executives are within
the context of the Chief Executive Officer’s objectives and include other, more
specific goals. This process has been initiated for 2007.
Elements
of Compensation
Our
Compensation Committee, which consists of three non-executive directors, has
determined that we shall have three basic elements of compensation — base
salary, cash bonus and equity incentives. Each component has a different
purpose.
We
believe that base salaries at this stage in our growth must be competitive
in
order to retain our executive. We believe that principal performance incentives
should be in the form of long-term equity incentives given the financial
resources of our company and the longer-term nature of our business plan.
Long-term incentives to date have been in the form of stock options but our
equity incentive plan also provides for other incentive forms, such as
restricted stock and stock bonuses, which the Compensation Committee is not
considering at this time. Short-term cash bonuses are a common element of
compensation in our industry and among our peers to which we must pay attention,
but our ability and desire to use cash bonuses are closely tied to the immediate
cash resources of our company. The Compensation Committee ultimately considers
the split between the three forms of compensation relative to our peers for
each
position, relative to the contributions of each executive, and the operational
and financial achievements of our company and our financial resources. This
exercise has been based on consensus among the members of the Compensation
Committee.
Executive
compensation through 2005 and the first part of 2006 was sufficient to attract
and retain our management team but had fallen significantly behind industry
norms by the end of 2006 and as our company grew beyond a start-up phase. In
late-2006, the Compensation Committee determined that it was necessary to review
compensation and subscribed to the compensation survey described below as a
starting point for a more structured and competitive compensation process.
Our
goal is to provide competitive compensation and an appropriate compensation
structure for an emerging oil and gas company relative to our stage of growth,
financial resources and success.
Third
Party Source Used
In
late
2006, we subscribed to the “2006 Mercer Total Compensation Survey for the
Petroleum Industry,” which covers oil and gas companies located in Canada, and
which presents compensation components and statistical ranges by position
description for peer groupings within the industry. The survey is published
annually and is widely recognized as a leading survey of its kind in
Canada.
The
survey provider is Mercer Human Resource Consulting. The primary purpose of
the
survey is to collect and consolidate meaningful data on salaries and benefits
in
the oil and gas industry in Canada, including those with international
operations. The original survey participants were 158 companies in the oil
and
gas industry based in Canada, including those with international operations.
The
survey divided the 158 companies into six peer groups based on relative levels
of production and revenues. There are 48 companies in our peer group with
average production between 1,000 and 4,000 barrels of oil equivalent per day,
including those with international operations. The results of the survey and
the
participants are confidential and cannot be disclosed in accordance with the
confidentiality agreement signed with the survey provider.
Salary
Salary
amounts for our executive officers for 2006 was pre-determined based on
individually-negotiated agreements with each of the executive officers when
they
joined our company. Prior to November 2005, we were a private Canadian
company incorporated in January 2005. For 2005 and for 2006, the four
inaugural executives of our company received the same base salary of
approximately $150,000 per year. Rafael Orunesu, who is President of our
operations in Argentina, was the first hire of our company in March 2005.
Mr. Orunesu negotiated his employment agreement directly with our board of
directors. Dana Coffield, James Hart and Max Wei, who are located in Calgary,
joined Gran Tierra in May 2005 and collectively negotiated terms of their
employment with our board of directors. As a start-up company with limited
financial resources, base salary in all instances was a discount to prior base
salaries for each executive at their previous employer. All executives agreed
to
the same base compensation to reflect the team nature of the venture. All signed
employment agreements outlined the potential for base salary increases, equity
incentives and cash bonuses if deemed appropriate by the board of directors.
The
agreements did not specify the amount or any criteria for determining the
bonuses and equity incentives, and so these determinations may be made by our
board of directors in its sole discretion. The executives purchased founding
shares to substantiate their commitment to our company and provide additional
financial incentives.
In
April 2006, Mr. Dyes became our President, Argosy Energy/Gran Tierra
Energy Colombia. He too negotiated his employment agreement, which provided
for
his annual base salary of $105,000 plus an annual supplemental salary of up
to
$42,000, the exact amount to be determined by the amount of time that he spends
in Colombia in excess of what is required under the employment agreement. This
agreement, too, did not specify the amount or any criteria for determining
the
bonuses and equity incentives, and so these determinations may be made by our
board of directors in its sole discretion.
In
January 2007, Mr. Eden became our Chief Financial Officer. The terms
of Mr. Eden’s employment agreement were individually negotiated by
Mr. Eden, and are described below in “Agreements with Executive Officers”.
The agreement did not specify the amount or any criteria for determining the
bonuses and equity incentives, and so these determinations may be made by our
board of directors in its sole discretion.
For
2007,
the Compensation Committee recommended to the board of directors, and our board
of directors approved, modest increases to the salaries of our executive
officers, so that their annual salaries for 2007 will be as
follows:
Mr. Coffield
— $214,525
Mr. Hart
— $193,073
Mr. Wei
— $171,620
Mr. Orunesu
— $180,000
Mr. Dyes
— $180,000
These
base salaries were determined by our Compensation Committee based upon its
review of the Mercer survey, targeting the 50
th
—
75
th
percentile as being appropriate to retain the services of our executives, the
exact amount determined by the Compensation Committee’s subjective assessment of
the appropriate salary for each executive given their performance and roles
within our company.
Bonus
No
cash
bonuses were paid to our executives for 2005 as this was deemed inappropriate
by
mutual agreement of our board of directors and our executives for our first
year
of operation.
In
2006,
our Compensation Committee used the Mercer survey to establish bonuses for
our
executives. In doing so, the Compensation Committee targeted the 50
th—
75
th
percentile for the position within the peer group for the industry as being
appropriate to retain the services of our executives. In doing so, the
Compensation Committee did not use any pre-determined criteria or formulas,
but
rather based its decisions within that range based on its subjective assessment
of the executives’ contribution to our company, our company’s operational and
financial results, and our financial resources, taken as a whole.
For
2007
we are in the process of implementing a more objective approach but our
Compensation Committee has not finalized items of corporate performance to
be
considered for 2007. These benchmarks are likely to include various operating
and financial measures, but the specific measures for corporate performance
and
weighting of all measures have not been determined.
Target
bonuses for 2007 for our executive officers have not been set for
2007.
Individual
objectives have been defined for 2007 as follows:
Chief
Executive Officer —
The
principal objectives for our Chief Executive Officer and President, which have
been recommended by our Compensation Committee and approved by our board of
directors, are as follows:
| |
•
|
Execute
approved $13.5 million capital expenditure work program (within +/-
10% of budget) which includes the drilling of 10 exploration wells,
8 in
Colombia and 2 in Argentina.
|
| |
•
|
Exit
2007 at production rate of 2,000 barrels of oil per day, net after
royalty
|
| |
|
|
| |
•
|
Add
2.9 million barrels of proven, probable and possible oil
reserves
|
| |
|
|
| |
•
|
Maintain
direct finding costs for new oil reserves at $4.67 per
barrel
|
| |
|
|
| |
•
|
Reduce
general and administration costs by 10% on a barrel of oil produced
basis
|
| |
|
|
| |
•
|
Reduce
operating costs by 10% per barrel of oil produced
|
| |
|
|
| |
•
|
Environment
Health Safety and Security — meet or exceed relevant industry standards;
target zero lost time incidents
|
| |
|
|
| |
•
|
Ensure
all regulatory and financial commitments with host government agencies
are
met
|
| |
|
|
| |
•
|
Ensure,
with Chief Financial Officer, that all financial reporting, controls
and
procedures, budgeting and forecasting, and corporate governance
requirements are identified and maintained
|
| |
|
|
| |
•
|
Move
Gran Tierra off OTC Bulletin Board to senior exchange
|
| |
|
|
| |
•
|
Resolve
current registration statement and associated penalty
issues
|
| |
|
|
| |
•
|
Revise
our strategy and position to execute next step change in
growth
|
| |
|
|
| |
•
|
Increase
both personal and Gran Tierra exposure to current and potential new
shareholder base
|
Chief
Financial Officer —
The
principal objectives for our Chief Financial Officer are as
follows:
| |
•
|
Maintain,
develop and enhance management and financial reporting
systems
|
| |
|
|
| |
•
|
Develop
and enhance budgeting and forecasting systems
|
| |
|
|
| |
•
|
Assist
our Chief Executive Officer in developing corporate strategy and
long-term
plan
|
| |
|
|
| |
•
|
Ensure
compliance with Sarbanes Oxley requirements, including implementation
of
corporate governance, internal controls and financial disclosure
controls
|
| |
|
|
| |
•
|
Secure
additional sources of financing as required
|
| |
|
|
| |
•
|
Assist
our Chief Executive Officer in developing and implementing an investor
relations strategy
|
| |
|
|
| |
•
|
Address
tax planning strategies
|
| |
|
|
| |
•
|
Assist
our Chief Executive Officer in developing administration and human
resources function
|
| |
|
|
|
Vice-President,
Operations—
The principal objectives for the Vice-President, Operations
are:
|
| |
|
|
| |
|
|
| |
•
|
Exit
2007 at 2,000 barrels of oil per day, net after royalty
|
| |
|
|
| |
•
|
Add
2.9 million barrels of proven, probable and possible oil
reserves
|
| |
|
|
| |
•
|
Reduce
operating costs by 10% per barrel of oil produced
|
| |
|
|
| |
•
|
Meet
or exceed relevant Environment Health Safety and Security industry
standards, targeting zero lost time incidents
|
| |
|
|
| |
•
|
Design,
implement, test and monitor emergency response plans for all operating
arenas
|
| |
|
|
| |
•
|
Complete
2007 drilling/workover program within budget and without
incidents
|
| |
|
|
| |
•
|
Design
and manage peer review of all proposed drilling, production and facility
upgrade projects, ensuring standardized commercial evaluations are
undertaken for each
|
| |
•
|
Design
and manage post-mortem reviews of all drilling, production and facility
upgrade projects, explaining any deviations from plan or budget,
and
distributing learnings to peers for integration into future
projects
|
| |
|
|
| |
•
|
Identify
opportunities from current portfolio of exploration and development
leads
on our existing land base for 2008 drilling
|
| |
|
|
| |
•
|
Ensure
integration of all IT (Information Technology) applications and hardware
in all our operating offices
|
President,
Gran Tierra Energy Colombia and the President, Gran Tierra
Argentina—
The
principal objectives for the President, Gran Tierra Energy Colombia and the
President, Gran Tierra Argentina for 2007 have been defined in context of the
2007 Budget, which defines a work program, capital expenditure budget and
operating results for the year. No personal objectives have been defined at
this
time.
The
weighting of all of the individual performance goals have not been determined,
nor has the percentage contribution of the individual performance goals to
bonus
determination been determined, but will be set prior to the end of
2007.
Equity
Incentives
In
November 2005, an equal number of stock options (162,500) were granted to
each executive officer then with our company when we became a public company
and
under the terms of our 2005 Equity Incentive Plan. These awards were deemed
appropriate by our board of directors based on its subjective assessment as
to
the appropriate level, and were equal to reflect the equal contributions of
each
executive. No options had been granted prior to this time.
In
November 2006, our Compensation Committee granted options to each of our
executive officers as follows: Mr. Coffield, 200,000 shares; Mr. Hart,
125,000 shares; Mr. Wei, 100,000 shares; Mr. Orunesu, 100,000 shares; and
Mr. Dyes, 100,000 shares. The Compensation Committee determined the level
of these awards based on the Mercer survey, again targeting the 50th
-
75th
percentile for the position within the peer group for the industry based on
value according to a Black-Scholes calculation. In doing so, the Compensation
Committee did not use any pre-determined criteria or formulas, but rather based
its decisions within that range based on its subjective assessment of the
appropriate incentive level given the executives’ respective roles in our
company.
In
connection with Mr. Eden joining our company, our Compensation Committee
granted him an option to purchase 225,000 shares of our common stock. The amount
of the stock options was negotiated with Mr. Eden in connection with the
negotiation of his employment agreement.
Termination
and Change in Control Provisions
Our
employment agreements with our executive officers contain termination and change
in control provisions. These provisions provide that our executive officers
will
receive severance payments in the event that their employment is terminated
other than for “cause” or if they terminate their employment with us for “good
reason,” as discussed in “Agreements with Executive Officers” below. The
termination and change-in control provisions are industry standard clauses
reached with the executives in arms-length negotiations at the time that they
entered into the employment agreements with us.
SUMMARY
COMPENSATION TABLE
All
dollar amounts set forth in the following tables reflecting executive officer
and director compensation are in U.S. dollars.
The
following table shows for the fiscal year ended December 31, 2006,
compensation awarded to or paid to, or earned by, our Chief Executive Officer,
Chief Financial Officer and our three other most highly compensated executive
officers at December 31, 2006 (the “Named Executive
Officers”):
Summary
Compensation Table for Fiscal 2006
|
Name and
|
|
|
|
|
|
|
|
Option
|
|
All Other
|
|
|
|
|
principal
|
|
|
|
Salary ($)
|
|
Bonus
|
|
Awards
|
|
Compensation ($)
|
|
|
|
|
position
|
|
Year
|
|
(1)
|
|
($)
|
|
($) (2)(3)
|
|
(4)
|
|
Total ($)
|
|
|
Dana
Coffield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
and Chief Executive Officer
|
|
2006
|
|
$
|
154,458
|
|
$
|
92,250
|
|
$
|
23,400
|
|
|
—
|
|
$
|
270,108
|
|
|
James
Hart Former
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice
President, Finance and Chief Financial Officer
|
|
2006
|
|
$
|
154,458
|
|
$
|
92,250
|
|
$
|
14,625
|
|
|
—
|
|
$
|
261,133
|
|
|
Rafael
Orunesu
President,
Gran Tierra
Argentina
|
|
2006
|
|
$
|
150,000
|
|
$
|
42,907
|
|
$
|
11,700
|
|
$
|
9,200
|
|
$
|
213,807
|
|
|
Max
Wei
Vice
President, Operations
|
|
2006
|
|
$
|
154,458
|
|
$
|
42,907
|
|
$
|
17,503
|
|
|
—
|
|
$
|
214,868
|
|
|
Edgar
Dyes
President,
Argosy Energy/Gran
Tierra
Energy Columbia
|
|
2006
|
|
$
|
138,750
|
|
$
|
25,000
|
|
|
—
|
|
|
—
|
|
$
|
163,750
|
|
|
(1)
|
|
Dana
Coffield and James Hart salaries and bonus are paid in Canadian dollars
and converted into US dollars for the purposes of the above table
at the
December 31, 2006 exchange rate of one Canadian dollar to US
$0.8581.
|
|
|
|
|
(2)
|
|
Granted
under terms of our 2005 Equity Incentive Plan.
|
|
|
|
|
(3)
|
|
Assumptions
made in the valuation of stock options granted are discussed in Note
6 to
our 2006 Consolidated Financial Statements. Reflects the dollar amount
recognized for financial statement reporting purposes with respect
to the
fiscal year in accordance with FAS 123R, disregarding estimates of
forfeiture.
|
|
|
|
|
(4)
|
|
Cost
of living allowance.
|
GRANTS
OF PLAN-BASED AWARDS
The
following table shows for the fiscal year ended December 31, 2006, certain
information regarding grants of plan-based awards to the Named Executive
Officers:
Grants
of Plan-Based Awards in Fiscal 2006
| |
|
|
|
All Other Option
|
|
|
|
|
|
| |
|
|
|
Awards:
|
|
|
|
Grant
Date Fair
|
|
| |
|
|
|
Number of
|
|
Exercise or Base
|
|
Value
of
|
|
| |
|
|
|
Securities
|
|
Price of
|
|
Stock and Option
|
|
| |
|
|
|
Underlying Options
|
|
Option Awards
|
|
Awards
|
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
($/Sh)
|
|
($)(1)
|
|
|
Mr.
Coffield
|
|
11/8/2006
|
|
|
200,000
|
|
|
1.27
|
|
$
|
84,080
|
|
|
Mr.
Hart
|
|
11/8/2006
|
|
|
125,000
|
|
|
1.27
|
|
$
|
52,550
|
|
|
Mr.
Wei
|
|
11/8/2006
|
|
|
100,000
|
|
|
1.27
|
|
$
|
42,550
|
|
|
Mr.
Orunesu
|
|
11/8/2006
|
|
|
100,000
|
|
|
1.27
|
|
$
|
42,550
|
|
|
Mr.
Dyes
|
|
11/8/2006
|
|
|
100,000
|
|
|
1.27
|
|
$
|
42,550
|
|
|
|
|
|
|
(1)
|
|
Represents
the grant date fair value of such option award as determined in accordance
with SFAS 123R. These amounts have been calculated in accordance
with SFAS
No. 123R using the Black Scholes valuation
model.
|
AGREEMENTS
WITH EXECUTIVE OFFICERS
We
have
entered into executive employment agreements with all members of our current
management team. The employment agreements entered into between Gran Tierra
and
Dana Coffield, James Hart and Max Wei have identical terms except for the
position held by each such person and terms related to participation on the
board of directors for Mr. Coffield and Mr. Hart. The respective
employment agreements provide for an initial annual base salary of CDN$180,000
($154,458 US dollars) and provide (a) for the executive to receive an annual
bonus as determined by our board of directors, and (b) the right to participate
in our stock option plans in the event of an initial public offering of our
common stock. The bonuses are to be paid within 60 days of the end of the
preceding year based on the executive performance. The agreements do not provide
for any criteria for determining the magnitude of the bonuses and option grants
and, therefore, the determination of the bonuses and grants are in the sole
discretion of the board of directors, using the criteria the board of directors
deem appropriate.
The
executives’ employment agreements became effective on May 1, 2005 and have
initial terms of three-years, subject to extension or earlier termination and
provide for severance payments to each employee, in the event the employee
is
terminated without cause or the employee terminates the agreement for good
reason, in the amount of two times total compensation for the prior year. “Good
reason” includes an adverse change in the executive’s position, title, duties or
responsibilities, or any failure to re-elect him to such position (except for
termination for “cause”). Initial contract terms for Messrs. Coffield, Hart
and Wei included rights to purchase 200,000 shares of our common stock before
an
initial public offering. These rights have been removed, with the mutual consent
of Gran Tierra and the applicable executives. All agreements include standard
indemnity, insurance, non-competition and confidentiality
provisions.
We
have
also entered into an employment agreement with Mr. Orunesu, through our
Ecuadorian subsidiary which provides for an initial annual base salary of
$150,000, annual bonuses and options as may be determined by the board of
directors in its sole discretion. The contract includes provision for payment
of
a cost of living adjustment of $55,200 per year. The agreement became effective
on March 1, 2005 and has an initial term of two years, which is subject to
extension or earlier termination. The agreement provides for severance payments
in the event of the employee’s termination without cause or for good reason, in
an amount equal to the salary payable under the employment agreement during
any
remaining time in the initial two year term. Initial rights provided in
Mr. Orunesu’s agreement, to purchase 200,000 shares of our common stock
before an initial public offering, have since been removed with mutual consent
of us and Mr. Orunesu.
We
entered into an employment agreement with Mr. Dyes, President of Gran
Tierra Colombia, formerly Argosy Energy International, which provides for an
initial base salary of $108,000 per year plus a supplemental amount of up to
$42,000 per year if he provides services in excess of 15 days per month in
Colombia. In addition, the agreement provides for an annual bonus along the
same
terms as described above for Messrs. Coffield, Hart and Wei, as well as the
right to participate in our company’s stock option plans, without specifying the
amount or criteria used. The contract became effective on April 1, 2006 and
terminates on April 1, 2008. Mr. Dyes also receives reasonable living
expenses while performing his duties in Colombia. The agreement provides for
severance payments equal to the amount of base salary plus bonus received for
the prior 12-month period in the event of termination without cause, termination
for good reason or termination for disability, prorated for the remaining term
of the agreement, payable within 30 days.
On
December 1, 2006, we entered into an executive employment agreement with
Mr. Eden that provides for an initial annual base salary of CDN$ 225,000
($193,073) In addition, the agreement provides for an annual bonus along the
same terms as described above of Messrs. Coffield, Hart and Wei, as well as
the
right to participate in our company’s stock option plans, without specifying the
amount of criteria used. Mr. Eden’s employment agreement became effective
on January 2, 2007 and has an initial term of three years, subject to
extension or earlier termination and provides for severance payments, in the
event he is terminated without cause or terminates the agreement for good
reason, in the amount of the greater of total cash compensation of the remaining
term and one year’s total cash compensation, with total cash compensation
meaning annualized salary plus bonus for the prior 12-month period. “Good
reason” includes an adverse change in the Mr. Eden’s position, title,
duties or responsibilities, or any failure to re-elect him to such position
(except for termination for “cause”). Mr. Eden’s employment agreement
includes customary indemnity, insurance, non-competition and confidentiality
provisions.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR -END.
The
following table shows for the fiscal year ended December 31, 2006, certain
information regarding outstanding equity awards at fiscal year end for the
Named
Executive Officers.
The
following table provides information concerning unexercised options for each
Named Executive, based on the executives performance Officer outstanding as
of
December 31, 2006.
| |
|
Number of
|
|
Number of
|
|
|
|
|
|
| |
|
Securities
|
|
Securities
|
|
|
|
|
|
| |
|
Underlying
|
|
Underlying
|
|
|
|
|
|
| |
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
| |
|
Options
|
|
Options
|
|
Option
|
|
|
|
| |
|
(#)
|
|
(#)
|
|
Exercise Price
|
|
Option Expiration
|
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
|
Dana
Coffield
|
|
|
54,167
|
(1)
|
|
108,333
|
(2)
|
$
|
0.80
|
|
|
11/10/2015
|
|
|
|
|
|
|
|
|
200,000
|
(3) |
$
|
1.27
|
|
|
11/8/2016
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
Hart
|
|
|
54,167
|
(1)
|
|
108,333
|
(2)
|
$
|
0.80
|
|
|
11/10/2015
|
|
|
|
|
|
|
|
|
125,000
|
(3) |
$
|
1.27
|
|
|
11/8/2016
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max
Wei
|
|
|
54,167
|
(1)
|
|
108,333
|
(2)
|
$
|
0.80
|
|
|
11/10/2015
|
|
|
|
|
|
|
|
|
100,000
|
(3) |
$
|
1.27
|
|
|
11/8/2016
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rafael
Orunesu
|
|
|
54,167
|
(1)
|
|
108,333
|
(2)
|
$
|
0.80
|
|
|
11/10/2015
|
|
|
|
|
|
|
|
|
100,000
|
(3) |
$
|
1.27
|
|
|
11/8/2016
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edgar
Dyes
|
|
|
—
|
|
|
100,000
|
(3)
|
$
|
1.27
|
|
|
11/8/2016
|
|
|
(1)
|
|
The
right to exercise the shares reported in this column vested on
November 10, 2006.
|
|
|
|
|
(2)
|
|
The
right to exercise one-half of the shares reported in this column
will vest
on November 10, 2007 and November 10, 2008, in each such case if
the option holder is still employed by Gran Tierra on such
date.
|
|
|
|
|
(3)
|
|
The
right to exercise one-third of the shares reported in this column
will
vest on each of November 8, 2007, November 8, 2009 and
November 8, 2010.
|
POTENTIAL
PAYOUTS UPON TERMINATION OR CHANGE IN CONTROL
In
the
event of a termination for “good reason” including a change in control of the
company, Messrs. Coffield, Hart and Wei are eligible to receive a payment
of two times prior year total compensation. Payment to Mr. Orunesu is equal
to salary payable under the agreement from the time of the event to the
remaining term of the contract. Payment to Mr. Dyes is equal to prior year
compensation. If a change of control had occurred on December 31, 2006, and
our named executive officers terminated for good reason, or if they were
terminated other than for cause, they would have received the following
payments:
|
Name
|
|
Payment
|
|
|
Mr.
Coffield
|
|
$
|
493,416
|
|
|
Mr.
Hart
|
|
$
|
493,416
|
|
|
Mr.
Wei
|
|
$
|
394,730
|
|
|
Mr.
Orunesu
|
|
$
|
37,500
|
|
|
Mr.
Dyes
|
|
$
|
163,750
|
|
Subsequent
to December 31, 2006, Mr. Hart resigned as an employee of our company and,
therefore, is not entitled to receive any payments under these
arrangements.
DIRECTOR
COMPENSATION
|
Name
|
|
Option Awards
($)(1)
|
|
Total ($)
|
|
|
Jeffrey
Scott
|
|
$
|
16,156
|
|
$
|
16,156
|
|
|
Walter
Dawson
|
|
$
|
10,771
|
|
$
|
10,771
|
|
|
Verne
Johnson
|
|
$
|
10,771
|
|
$
|
10,771
|
|
|
Nadine
C. Smith
|
|
$
|
10,771
|
|
$
|
10,771
|
|
|
(1)
|
|
The
stock options were granted under terms of our 2005 Equity Incentive
Plan
in 2005. Assumptions made in the valuation of stock options granted
are
discussed in Note 6 to our 2006 Consolidated Financial Statements.
Reflects the dollar amount recognized for financial statement reporting
purposes with respect to the fiscal year in accordance with FAS 123R,
disregarding estimates of
forfeiture.
|
There
were no compensation arrangements in place in 2006 for the members of our board
of directors who are not also our employees. In 2007, we intend to pay a fee
of
$12,872 per year to each director who serves on our board of directors and
an
additional $12,872 per year for the chairman of our board of directors. We
will
also pay an additional fee of $6,436 per year for each committee chair and
a fee
of $644 for each meeting attended. Directors who are not our employees are
eligible to receive awards under our 2005 Equity Incentive Plan. Compensation
arrangements with the directors who are also our employees are described in
the
preceding sections of this prospectus under the heading “Executive
Compensation.”
TRANSACTIONS
WITH RELATED PERSONS
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During
2006, there have been no transactions, or proposed transactions, to which we
are
or were a party, in which any of our directors or executive officers, any
nominee for election as a director, any persons who beneficially owned, directly
or indirectly, shares with more than 5% of the common stock or any relatives
of
any of the foregoing had or is to have a direct or indirect material interest,
except for their purchase of our securities.
In
June 2006, we completed the sale of 50,000,000 units for gross proceeds
totaling $75,000,000, less issue costs of $6,306,699. Each unit consisted of
one
share of our common stock at $1.50 per share and a warrant to purchase one-half
share of our common stock for a period of five years at an exercise price of
$1.75 per whole share. The offering resulted in the issuance of 50,000,000
shares of Gran Tierra’s common stock and warrants to purchase 25,000,000 shares
of Gran Tierra’s common stock. In connection with the issuance of these
securities, Gran Tierra entered into registration rights agreements with the
investors pursuant to which Gran Tierra agreed to register for resale the shares
(and the shares issuable upon the warrants) issued to the investors in the
offering by November 17th,
2006.
Since the registration statement was not declared effective by the Securities
and Exchange Commission by that date, Gran Tierra accrued approximately USD
$7.75 million in liquidated damages. On June 27th,
2007,
under the terms of the registration rights agreements, Gran Tierra obtained
a
sufficient number of consents from the signatories to the agreements waiving
Gran Tierra’s obligation to pay in cash the accrued liquidated damages. Gran
Tierra agreed to amend the terms of the warrants issued in the offering by
reducing the exercise price of the warrants to $1.05 and extending the life
of
the warrants by one year. Participating in this financing were the following
related parties of our company:
|
Name
|
|
# Units Purchased
|
|
Purchase Price
|
|
|
Dana
Coffield (1)
|
|
|
66,667
|
|
$
|
100,001
|
|
|
Jeffrey
Scott (2)
|
|
|
100,000
|
|
$
|
150,000
|
|
|
William
Scott (3)
|
|
|
100,000
|
|
$
|
150,000
|
|
|
Verne
G. Johnson (4)
|
|
|
100,006
|
|
$
|
150,009
|
|
|
Perfco
Investments Ltd. (5)
|
|
|
200,000
|
|
$
|
300,000
|
|
|
Nadine
C. Smith and John Long, Jr. (6)
|
|
|
100,000
|
|
$
|
150,000
|
|
|
Rafael
Orunesu (7)
|
|
|
80,000
|
|
$
|
120,000
|
|
|
Max
Wei (8)
|
|
|
26,656
|
|
$
|
39,984
|
|
|
Greywolf
Capital Management LP (9)
|
|
|
6,666,667
|
|
$
|
10,000,001
|
|
|
Millennium
Global Investments Limited (10)
|
|
|
3,335,000
|
|
$
|
5,002,500
|
|
|
US
Global Investors, Inc. (11)
|
|
|
3,333,333
|
|
$
|
5,000,000
|
|
|
(1)
|
|
Mr. Coffield
is a director of our company and our Chief Executive
Officer.
|
|
|
|
|
(2)
|
|
Mr. Jeffrey
Scott is a director and is Chairman of our company.
|
|
|
|
|
(3)
|
|
Mr. William
Scott is the father of Jeffrey Scott, a director and chairman of
our
company.
|
|
|
|
|
(4)
|
|
Mr. Johnson
is a director of our company.
|
|
|
|
|
(5)
|
|
Perfco
Investments Ltd. is a company, the sole owner of which is Mr. Walter
Dawson, a director of our company.
|
|
|
|
|
(6)
|
|
Ms. Smith
is a director of our company. John Long Jr. is the husband of
Ms. Smith.
|
|
|
|
|
(7)
|
|
Mr. Orunesu
is the President of Gran Tierra Energy Argentina, our Argentinean
subsidiary.
|
|
|
|
|
(8)
|
|
Mr. Wei
is our Vice President, Operations.
|
|
|
|
|
(9)
|
|
Consists
of 4,800,000 units purchased by Greywolf Capital Overseas Fund LP,
and
1,866,667 units purchased by Greywolf Capital Partners II, LP. See
Note 8
of the Security Ownership of Certain Beneficial Owners and Management
table in Item 11 of this report.
|
|
|
|
|
(10)
|
|
Consists
of 2,668,000 units purchased by Millennium Global High Yield Fund
Limited,
and 667,000 units purchased by Millennium Global Natural Resources
Fund
Limited. See Note 9 of the Security Ownership of Certain Beneficial
Owners
and Management table in Item 11 of this report.
|
|
|
|
|
(11)
|
|
Consists
of 3,100,000 units purchased by US Global Investors — Global Resources
Fund, and 233,333 units purchased by US Global Investors — Balanced
Natural Resources Fund. See Note 10 of the Security Ownership of
Certain
Beneficial Owners and Management table in Item 11 of this
report.
|
During
2005, there were no transactions, or proposed transactions, to which we are
or
were a party, in which any of our directors or executive officers, any nominee
for election as a director, any persons who beneficially owned, directly or
indirectly, shares with more than 5% of the common stock or any relatives of
any
of the foregoing had or is to have a direct or indirect material interest,
except for their purchase of our securities.
|
Name
|
|
# Units Purchased
|
|
Purchase Price
|
|
|
Dana
Coffield (1)
|
|
|
29,985
|
|
$
|
23,988
|
|
|
Jeffrey
Scott (2)
|
|
|
449,981
|
|
$
|
359,985
|
|
|
Verne
G. Johnson (3)
|
|
|
124,985
|
|
$
|
99,988
|
|
|
Walter
Dawson/Perfco Investments Ltd.(4)
|
|
|
550,000
|
|
$
|
440,000
|
|
|
Nadine
C. Smith and John Long, Jr. (5)
|
|
|
625,000
|
|
$
|
500,000
|
|
|
Bank
Sal. Oppenheim Jr. & Cie (Switzerland) Ltd.
|
|
|
2,125,000
|
|
$
|
1,700,000
|
|
|
(1)
|
|
Mr. Coffield
is a director of our company and our Chief Executive
Officer.
|
| |
|
|
(2)
|
|
Mr. Jeffrey
Scott is a director and is Chairman of our company.
|
| |
|
|
(3)
|
|
Mr. Johnson
is a director of our company.
|
| |
|
|
(4)
|
|
Walter
Dawson is a director of our company and is sole owner of Perfco
Investments Ltd.
|
| |
|
|
(5)
|
|
Ms. Smith
is a director of our company. John Long Jr. is the husband of
Ms. Smith.
|
In
connection with our acquisition of Goldstrike, which occurred on
November 10, 2005, the following related parties received the following
numbers of exchangeable shares. Each had the option to receive exchangeable
shares or shares of our common stock. None of the parties elected to receive
shares of our common stock.
|
Name
|
|
# Exchangeable
Shares
|
|
Original Purchase
Price
|
|
|
Dana
Coffield (1)
|
|
|
1,689,683
|
|
$
|
111,825
|
|
|
James
Hart (2)
|
|
|
1,689,683
|
|
$
|
111,825
|
|
|
Max
Wei (3)
|
|
|
1,689,683
|
|
$
|
111,825
|
|
|
Rafael
Orunesu (4)
|
|
|
1,689,683
|
|
$
|
111,825
|
|
|
Jeffrey
Scott (5)
|
|
|
1,688,889
|
|
$
|
186,733
|
|
|
Verne
G. Johnson/KristErin Resources Inc. (6)
|
|
|
1,292,063
|
|
$
|
186,733
|
|
|
Walter
Dawson/Perfco Investments Ltd. (7)
|
|
|
1,688,889
|
|
$
|
161,733
|
|
|
411209
Alberta
|
|
|
1,587,302
|
|
$
|
175,000
|
|
|
(1)
|
|
Mr. Coffield
is a director of our company and our Chief Executive
Officer.
|
|
|
|
|
(2)
|
|
Mr. Hart
is a director and is former Chief Financial Officer of our
company.
|
|
|
|
|
(3)
|
|
Mr. Wei
is our Vice-President, Operations.
|
|
|
|
|
(4)
|
|
Rafael
Orunesu is President of our operations in Argentina.
|
|
|
|
|
(5)
|
|
Jeffrey
Scott is a director and is Chairman of our company.
|
|
|
|
|
(6)
|
|
Verne
Johnson is a director of our company and is sole owner of KristErin
Resources Inc.
|
|
|
|
|
(7)
|
|
Walter
Dawson is a director of our company and is sole owner of Perfco
Investments Ltd.
|
We
have
not engaged in any transactions with promoters or founders in which a promoter
or founder has received any type of consideration from us.
POLICIES
AND PROCEDURES
Our
company discourages related party transactions. Potential related party
transactions are to be referred to our Chief Executive Officer, and brought
to
the attention of the Board if material.
HOUSEHOLDING
OF PROXY MATERIALS
The
SEC
has adopted rules that permit companies and intermediaries (e.g., brokers)
to
satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more shareholders sharing the same address by delivering
a
single proxy statement addressed to those shareholders. This process, which
is
commonly referred to as “householding,” potentially means extra convenience for
shareholders and cost savings for companies.
This
year, a number of brokers with account holders who are Gran Tierra Energy
Inc. stockholders
will be “householding” our proxy materials. A single proxy statement will be
delivered to multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders. Once you have
received notice from your broker that they will be “householding” communications
to your address, “householding” will continue until you are notified otherwise
or until you revoke your consent. If, at any time, you no longer wish to
participate in “householding” and would prefer to receive a separate proxy
statement and annual report, please notify your broker. Direct your written
request to Gran Tierra Energy, Inc., Martin Eden, Secretary, 300,
611-10th
Avenue,
S.W., Calgary, Alberta, Canada, T2R 0B2
or
contact Martin Eden at (403) 265-3221. Stockholders
who currently receive multiple copies of the proxy statement at their addresses
and would like to request “householding” of their communications should contact
their brokers.
OTHER
MATTERS
The
Board
of Directors knows of no other matters that will be presented for consideration
at the Annual Meeting. If any other matters are properly brought before the
meeting, it is the intention of the persons named in the accompanying proxy
to
vote on such matters in accordance with their best judgment.
By
Order
of the Board of Directors
/s/
Martin Eden
Martin
Eden
Secretary
September
10, 2007
A
copy of Gran Tierra’s Annual Report to the Securities and Exchange Commission on
Form 10-KSB for the fiscal year ended December 31, 2006 is available
without charge upon written request to: Corporate Secretary, Gran Tierra Energy
Inc., 300,
611-10th
Avenue, S.W., Calgary, Alberta, Canada, T2R 0B2.
| |
VOTE
BY
INTERNET
-
www.proxyvote.com
|
|
GRAN TIERRA ENERGY INC.
C/O AL PALOMBO
1370 AVENUE OF THE AMERICAS
SUITE 902
NEW YORK, NY 10019
|
Use
the
Internet
to
transmit
your
voting
instructions
and
for
electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the meeting date. Have your proxy card in hand
when
you
access
the
web
site
and
follow
the
instructions
to
obtain
your records and to create an electronic voting instruction form.
|
| |
|
| |
ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER
COMMUNICATIONS
|
| |
If
you
would
like
to
reduce
the
costs
incurred
by
Gran
Tierra
Energy
Inc.
in
mailing
proxy
materials,
you
can
consent
to
receiving
all
future
proxy
statements,
proxy
cards
and
annual
reports
electronically
via
e-mail
or
the
Internet. To
sign
up
for
electronic delivery, please follow the instructions above to vote
using the Internet and, when prompted, indicate that you agree
to receive or access shareholder communications
electronically in future years.
|
| |
|
| |
VOTE BY MAIL
|
| |
Mark, sign and date your proxy card and return it in the postage-
paid envelope we have provided or return it to Gran Tierra Energy
Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
|
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
GRNTR1
|
KEEP
THIS PORTION FOR YOUR RECORDS
|
|
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
|
DETACH
AND RETURN THIS PORTION ONLY
|
|
GRAN TIERRA ENERGY INC.
|
|
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS
|
|
|
For
|
Withhold
|
For
All
|
To
withhold authority to vote for any individual
|
|
Vote
On Directors
|
All
|
All
|
Except
|
nominee(s),
mark “For All except” and write the
|
|
|
|
|
|
number(s)
of the nominee(s) on the line below
|
| 1. |
To
elect as Directors of Gran Tierra Energy Inc., the nominees
listed below.
|
|
01)
|
Dana
Coffield |
04) |
Verne
Johnson |
0
|
0
|
0
|
|
| 02) |
Jeffrey
Scott |
05) |
Nadine
C. Smith |
|
|
|
|
| 03) |
Walter
Dawson |
|
|
|
|
|
|
Vote
On
Proposals
| |
|
For
|
Against
|
Abstain
|
|
2.
|
Proposal to approve the Gran Tierra Energy Inc. 2007 Equity Incentive Plan, as an amendment and restatement of the 2005
Equity Incentive Plan, including an increase in the aggregate number of shares of common stock authorized for issuance
under the plan from 2,000,000 to 9,000,000 shares.
|
0
|
0
|
0
|
| |
|
|
|
|
|
3.
|
Proposal to ratify the selection
by the Audit Committee of the Board of Directors of Deloitte & Touche LLP as independent
auditors of Gran Tierra Energy Inc. for its fiscal year ending December 31, 2007.
|
0
|
0
|
0
|
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|
|
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Signature
[PLEASE SIGN WITHIN BOX] Date
|
|
Signature
(Joint Owners) Date
|
GRAN
TIERRA ENERGY,
INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 10, 2007
The stockholders hereby appoint Martin Eden and Dana Coffield, or either of them, as proxies, each with the power to appoint
his or her substitute, and hereby authorizes each of them to represent and to vote all of the shares of Common Stock and
Special Voting Stock of Gran Tierra Energy Inc. that the stockholders are entitled to vote at the Annual Meeting of Stockholders
to be held at 10:00 a.m. Mountain Time on October 10, 2007, at 300 611-10th Avenue S.W., Calgary,
Alberta T2R 0B2
Canada, and any adjournments or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
AS DIRECTED BY THE STOCKHOLDERS. IF
NO SUCH DIRECTIONS ARE MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR EACH PROPOSAL.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED REPLY ENVELOPE.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
|
GRAN
TIERRA ENERGY INC.
VOTING
DIRECTION FOR HOLDERS OF
EXCHANGEABLE
SHARES OF GRAN TIERRA ENERGY INC.
The
undersigned holder (the “Holder”)
of
exchangeable shares (“Exchangeable
Shares”)
of
Gran Tierra Energy Inc. has the right to instruct Olympia Trust Company (the
“Trustee”)
in
respect of the exercise of their votes at the Annual Meeting of of Stockholders
Gran Tierra Energy Inc. (the “Company”)
to be
held on October 10, 2007 (the “Meeting”),
as
follows:
|
·
|
To
instruct the Trustee to exercise the votes to which the Holder is
entitled
as indicated below; OR
|
|
·
|
To
instruct the Trustee to appoint a representative of the Company’s
management as proxy to exercise the votes to which the Holder is
entitled
as indicated below; OR
|
|
·
|
To
instruct the Trustee to appoint the Holder, or the Holder’s designee as a
proxy to exercise personally the votes to which the Holder is entitled
as
indicated below.
|
|
The
Holder directs that their Exchangeable Shares be voted as
follows:
|
| |
|
1.
VOTE FOR
_____ or WITHHOLD
FROM VOTING ON
_____ the election of Dana Coffield as a director of the Company,
to serve
for the ensuing year and until his successor is
elected.
|
|
2.
VOTE FOR
_____ or WITHHOLD
FROM VOTING ON
_____ the election of Jeffrey Scott as a director of the Company,
to serve
for the ensuing year and until his successor is
elected.
|
|
3.
VOTE FOR
_____ or WITHHOLD
FROM VOTING ON
_____ the election of Walter Dawson as a director of the Company,
to serve
for the ensuing year and until his successor is
elected.
|
|
4.
VOTE FOR
_____ or WITHHOLD
FROM VOTING ON
_____ the election of Verne Johnson as a director of the Company,
to serve
for the ensuing year and until his successor is
elected.
|
|
5.
VOTE FOR
_____ or WITHHOLD
FROM VOTING ON
_____ the election of Nadine C. Smith as a director of the Company,
to
serve for the ensuing year and until her successor is
elected.
|
|
6.
VOTE FOR
_____ or VOTE
AGAINST _____ or
ABSTAIN FROM VOTING ON
_____ the resolution to approve the Company’s 2007 Equity Incentive Plan,
as an amendment and restatement of its 2005 Equity Incentive Plan,
including an increase in the aggregate number of shares of common
stock
authorized for issuance under the plan from 2,000,000 to 9,000,000
shares.
|
|
7.
VOTE FOR
_____ or VOTE
AGAINST _____ or
ABSTAIN FROM VOTING ON
_____ the resolution to ratify the selection by the Audit Committee
of the
Board of Directors of Deloitte & Touche LLP as independent auditors of
the Company for its fiscal year ending December 31, 2007.
|
| |
|
IMPORTANT
NOTE: IF NO DIRECTION IS MADE, FOR OR AGAINST, THE HOLDER’S EXCHANGEABLE
SHARES WILL NOT BE
VOTED
|
SEE
REVERSE FOR MORE VOTING INSTRUCTIONS
|
PLEASE
SELECT ONE OF THE FOLLOWING:
|
| |
|
o
|
Direct
the Trustee to Vote Exchangeable Shares
The
holder hereby directs the Trustee to vote as indicated.
|
| |
|
|
o
|
Appointment
of Company Management as Proxy
The
Holder hereby appoints Martin Eden and Dana Coffield, as proxyholder
of
the Holder, with power of substitution, and authorizes them to
represent
and vote, as indicated above, all of the Exchangeable Shares which
the
Holder may be entitled to vote at the Meeting, and at any adjournment
or
adjournments thereof and on every ballot that may take place in
consequence thereof, and with discretionary authority as to any
other
matters that may properly come before the Meeting.
|
| |
|
|
o
|
Appointment
of the Holder, or the Holder’s Designee as Proxy
The
Holder hereby appoints _________________________________ as proxyholder
of
the Holder and authorizes them to represent and vote, as indicated
above,
all of the Exchangeable Shares which the Holder may be entitled
to vote at
the Meeting, and at any adjournment or adjournments thereof and
on every
ballot that may take place in consequence thereof, and with discretionary
authority as to any other matters that may properly come before
the
Meeting.
|
| |
|
|
IF
THE HOLDER DOES NOT COMPLETE ONE OF THE FOREGOING, COMPLETES MORE
THAN ONE
OF THE FOREGOING OR COMPLETES THE THIRD SELECTION BUT DOES NOT
SPECIFY A
DESIGNEE, THE HOLDER WILL BE DEEMED TO HAVE DIRECTED THE TRUSTEE
TO VOTE
THEIR EXCHANGEABLE SHARES AS
INDICATED.
|
| |
|
|
|
|
| |
|
|
|
Signature
of Holder
|
| DATED: |
|
,
2007. |
|
|
| |
|
|
|
|
| |
|
|
|
Name
of Holder
|
| |
|
|
|
|
| |
|
|
|
|
| |
|
|
|
Number
of Exchangeable Shares Held
|
NOTES:
|
1.
|
This
voting direction will not be valid and not be acted upon unless it
is
completed as outlined herein and delivered to Olympia Trust Company,
2300,
125 - 9th
Avenue S.E.., Calgary, Alberta T2G 0P6, not less than 48 hours before
the
time set for the holding of the Meeting or any adjournment(s) thereof.
The
voting direction is valid only for the Meeting or any adjournment(s)
of
the Meeting.
|
|
2.
|
If
this voting direction is not signed by the Holder of Exchangeable
Shares,
the votes to which the Holder of the Exchangeable Shares is entitled
will
not be exercised.
|
|
3.
|
If
the Holder is a corporation, its corporate seal must be affixed or
it must
be signed by an officer or attorney thereof duly
authorized.
|
|
4.
|
This
voting direction must be dated and the signature hereon should be
exactly
the same as the name in which the Exchangeable Shares are
registered.
|
|
5.
|
Persons
signing as executors, administrators, trustees, etc., should so indicate
and give their full title as such.
|
| 6. |
A
holder who has submitted a voting direction may revoke it at any
time
prior to the Meeting. In addition to revocation in any other manner
permitted by law a voting direction may be revoked by instrument
in
writing executed by the Holder or his attorney authorized in writing
or,
if the Holder is a corporation, under its corporate seal or by an
officer
or attorney thereof duly authorized and deposited at the office of
the
Trustee at any time up to and including the last business day preceding
the day of the Meeting, or any adjournment thereof at which the voting
direction is to be acted upon or with a representative of the Trustee
in
attendance at the Meeting on the day of the Meeting or any adjournment
thereof, and upon either of such deposits, the voting direction is
revoked.
|
GRAN
TIERRA ENERGY INC.
2007
EQUITY INCENTIVE PLAN
ADOPTED:
AUGUST 9, 2007
APPROVED
BY STOCKHOLDERS: OCTOBER [10], 2007
1. GENERAL
PURPOSES.
(a) Amendment
and Restatement.
The Plan
is intended as a complete amendment and restatement of the Company’s 2005 Equity
Incentive Plan (the “Prior
Plan”).
All
outstanding stock awards granted under the Prior Plan shall remain subject
to
the terms of the Prior Plan. All Stock Awards granted subsequent to the
effective date of this Plan shall be subject to the terms of this Plan.
(b) Eligible
Stock Award Recipients.
The
persons eligible to receive Stock Awards are Employees, Directors and
Consultants.
(c) Available
Stock Awards.
The
purpose of the Plan is to provide a means by which eligible recipients of Stock
Awards may be given an opportunity to benefit from increases in value of the
Common Stock through the granting of the following Stock Awards: (i) Options,
(ii) Restricted Stock Awards, (iii) Stock Appreciation Rights, (iv) Restricted
Stock Units and (v) Other Stock Awards.
(d) General
Purpose.
The
Company, by means of the Plan, seeks to retain the services of the group of
persons eligible to receive Stock Awards, to secure and retain the services
of
new members of this group and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
2. DEFINITIONS.
(a) “Affiliate”
means
any parent corporation or subsidiary corporation of the Company, whether now
or
hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Code.
(b) “Board”
means
the Board of Directors of the Company.
(c) “Capitalization
Adjustment”
has the
meaning ascribed to that term in Section 11(a).
(d) “Change
in Control”
means
the occurrence, in a single transaction or in a series of related transactions,
of any one or more of the following events:
(i) any
Exchange Act Person becomes the Owner, directly or indirectly, of securities
of
the Company representing more than fifty percent (50%) of the combined voting
power of the Company’s then outstanding securities other than by virtue of a
merger, consolidation or similar transaction. Notwithstanding the foregoing,
a
Change in Control shall not be deemed to occur (A) on account of the acquisition
of securities of the Company by an institutional investor, any affiliate thereof
or any other Exchange Act Person that acquires the Company’s securities in a
transaction or series of related transactions that are primarily a private
financing transaction for the Company or (B) solely because the level of
Ownership held by any Exchange Act Person (the “Subject
Person”)
exceeds the designated percentage threshold of the outstanding voting securities
as a result of a repurchase or other acquisition of voting securities by the
Company reducing the number of shares outstanding, provided that if a Change
in
Control would occur (but for the operation of this sentence) as a result of
the
acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by
the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;
(ii) there
is
consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company if, immediately after the consummation of such
merger, consolidation or similar transaction, the stockholders of the Company
immediately prior thereto do not Own, directly or indirectly, either (A)
outstanding voting securities representing more than fifty percent (50%) of
the
combined outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction or (B) more than fifty percent (50%) of
the
combined outstanding voting power of the parent of the surviving Entity in
such
merger, consolidation or similar transaction;
(iii) there
is
consummated a sale, lease, license or other disposition of all or substantially
all of the consolidated assets of the Company and its Subsidiaries, other than
a
sale, lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an Entity, more
than
fifty percent (50%) of the combined voting power of the voting securities of
which are Owned by stockholders of the Company in substantially the same
proportion as their Ownership of the Company immediately prior to such sale,
lease, license or other disposition; or
(iv) individuals
who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent
Board”)
cease
for any reason to constitute at least a majority of the members of the Board;
provided,
however,
that if
the appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan,
be
considered as a member of the Incumbent Board).
The
term
Change in Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of
the
Company.
Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change
in
Control (or any analogous term) in an individual written agreement between
the
Company or any Affiliate and the Participant shall supersede the foregoing
definition with respect to Stock Awards subject to such agreement (it being
understood, however, that if no definition of Change in Control or any analogous
term is set forth in such an individual written agreement, the foregoing
definition shall apply).
(e) “Code”
means
the United States Internal Revenue Code of 1986, as amended.
(f) “Committee”
means a
committee of one or more members of the Board appointed by the Board in
accordance with Section 3(c).
(g) “Common
Stock”
means
the common stock of the Company.
(h) “Company”
means
Gran Tierra Energy Inc., a Nevada corporation.
(i) “Consultant”
means
any person, including an advisor, (i) engaged by the Company or an Affiliate
to
render consulting or advisory services and who is compensated for such services
or (ii) serving as a member of the Board of Directors of an Affiliate and who
is
compensated for such services. However, the term “Consultant” shall not include
Directors who are not compensated by the Company for their services as
Directors, and the payment of a director’s fee by the Company for services as a
Director shall not cause a Director to be considered a “Consultant” for purposes
of the Plan.
(j) “Continuous
Service”
means
that the Participant’s service with the Company or an Affiliate, whether as an
Employee, Director or Consultant, is not interrupted or terminated. A change
in
the capacity in which the Participant renders service to the Company or an
Affiliate as an Employee, Consultant or Director or a change in the entity
for
which the Participant renders such service, provided that there is no
interruption or termination of the Participant’s service with the Company or an
Affiliate, shall not terminate a Participant’s Continuous Service. For example,
a change in status from an employee of the Company to a consultant to an
Affiliate or to a Director shall not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party’s sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
Notwithstanding the foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in a Stock Award only to such extent as may
be
provided in the Company’s leave of absence policy or in the written terms of the
Participant’s leave of absence.
(k) “Corporate
Transaction”
means
the occurrence, in a single transaction or in a series of related transactions,
of any one or more of the following events:
(i) a
sale or
other
disposition of all or substantially all, as determined by the Board in its
discretion, of the consolidated assets of the Company and its
Subsidiaries;
(ii) a
sale or
other disposition of at least fifty percent (50%) of the outstanding securities
of the Company;
(iii) a
merger,
consolidation or similar transaction following which the Company is not the
surviving corporation; or
(iv) a
merger,
consolidation or similar transaction following which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or
exchanged by virtue of the merger, consolidation or similar transaction into
other property, whether in the form of securities, cash or
otherwise.
(l) “Covered
Employee”
means
the chief executive officer and the four (4) other highest compensated officers
of the Company for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes of Section
162(m) of the Code.
(m) “Director”
means a
member of the Board.
(n) “Disability”
means
the permanent and total disability of a person within the meaning of Section
22(e)(3) of the Code.
(o) “Employee”
means
any person employed by the Company or an Affiliate. Service as a Director or
payment of a director’s fee by the Company for such service or for service as a
member of the Board of Directors of an Affiliate shall not be sufficient to
constitute “employment” by the Company or an Affiliate.
(p) “Entity”
means a
corporation, partnership or other entity.
(q) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
(r) “Exchange
Act Person” means
any
natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d)
of the Exchange Act), except that “Exchange Act Person” shall not include (A)
the Company or any Subsidiary of the Company, (B) any employee benefit plan
of
the Company or any Subsidiary of the Company or any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
Subsidiary of the Company, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (D) an Entity Owned, directly
or
indirectly, by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company.
(s) “Fair
Market Value”
means,
as of any date, the value of the Common Stock determined as
follows:
(i) If
the
Common Stock is listed on any established stock exchange or traded on the Nasdaq
Global Select Market, Nasdaq Global Market or the Nasdaq Capital Market, the
Fair Market Value of a share of Common Stock, unless otherwise determined by
the
Board, shall be the closing sales price for such stock (or the closing bid,
if
no sales were reported) as quoted on such exchange or market (or the exchange
or
market with the greatest volume of trading in the Common Stock) on the day
of
determination (or if such day of determination does not fall on a market trading
day, then the last market trading day prior to the day of determination), as
reported in The
Wall Street Journal or
such
other source as the Board deems reliable.
(ii) In
the
absence of such markets for the Common Stock, the Fair Market Value shall be
determined in good faith by the Board.
(t) “Non-Employee
Director” means
a
Director who either (i) is not currently an employee or officer of the Company
or its parent or a subsidiary, does not receive compensation, either directly
or
indirectly, from the Company or its parent or a subsidiary, for services
rendered as a consultant or in any capacity other than as a Director (except
for
an amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act (“Regulation
S-K”)),
does
not possess an interest in any other transaction for which disclosure would
be
required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for
purposes of Rule 16b-3.
(u) “Officer”
means a
person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder.
(v) “Option”
means a
stock option granted pursuant to the Plan (Options are not intended to qualify
as incentive stock options within the meaning of Section 422 of the Code and
the
regulations promulgated thereunder).
(w) “Option
Agreement”
means a
written agreement between the Company and an Optionholder evidencing the terms
and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan.
(x) “Optionholder”
means a
person to whom an Option is granted pursuant to the Plan or, if applicable,
such
other person who holds an outstanding Option.
(y) “Other
Stock Award”
means an
award based in whole or in part by reference to the Common Stock which is
granted pursuant to the terms and conditions of Section 7(d).
(z) “Outside
Director”
means a
Director who either (i) is not a current employee of the Company or an
“affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company
or an
“affiliated corporation” who receives compensation for prior services (other
than benefits under a tax qualified retirement plan) during the taxable year,
has not been an officer of the Company or an “affiliated corporation,” and does
not receive remuneration from the Company or an “affiliated corporation,” either
directly or indirectly, in any capacity other than as a Director or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the
Code.
(aa) “Own,”
“Owned,” “Owner,” “Ownership” A
person
or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to
have acquired “Ownership” of securities if such person or Entity, directly or
indirectly, through any contract, arrangement, understanding, relationship
or
otherwise, has or shares voting power, which includes the power to vote or
to
direct the voting, with respect to such securities.
(bb) “Participant”
means a
person to whom a Stock Award is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Stock Award.
(cc) “Plan”
means
this Gran Tierra Energy Inc. 2007 Equity Incentive Plan.
(dd) “Restricted
Stock Award” means
an
award of shares of Common Stock which is granted pursuant to the terms and
conditions of Section 7(a).
(ee) “Restricted
Stock Unit”
means a
right to receive shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(b).
(ff) “Rule
16b-3”
means
Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3,
as
in effect from time to time.
(gg) “Securities
Act”
means
the Securities Act of 1933, as amended.
(hh) “Stock
Appreciation Right”
means a
right to receive the appreciation on Common Stock that is granted pursuant
to
the terms and conditions of Section 7(c).
(ii) “Stock
Award”
means
any right granted under the Plan, including an Option, Restricted Stock Award,
Restricted Stock Unit, Stock Appreciation Right and Other Stock
Award.
(jj) “Stock
Award Agreement”
means a
written agreement between the Company and a holder of a Stock Award evidencing
the terms and conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.
(kk) “Subsidiary”
means,
with respect to the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power
to
elect a majority of the board of directors of such corporation (irrespective
of
whether, at the time, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the Company,
and
(ii) any partnership in which the Company has a direct or indirect interest
(whether in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%).
3. ADMINISTRATION.
(a) Administration
by Board.
The
Board shall administer the Plan unless and until the Board delegates
administration to a Committee, as provided in Section 3(c).
(b) Powers
of Board.
The
Board shall have the power, subject to, and within the limitations of, the
express provisions of the Plan:
(i) To
determine from time to time which of the persons eligible under the Plan shall
be granted Stock Awards; when and how each Stock Award shall be granted; what
type or combination of types of Stock Award shall be granted; the provisions
of
each Stock Award granted (which need not be identical), including the time
or
times when a person shall be permitted to receive Common Stock pursuant to
a
Stock Award; and the number of shares of Common Stock with respect to which
a
Stock Award shall be granted to each such person.
(ii) To
construe and interpret the Plan and Stock Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and
to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
(iii) To
amend
the Plan or a Stock Award as provided in Section 12.
(iv) To
terminate or suspend the Plan as provided in Section 13.
(v) Generally,
to exercise such powers and to perform such acts as the Board deems necessary
or
expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan.
(c) Delegation
to Committee.
(i) General.
The
Board may delegate administration of the Plan to a Committee or Committees
of
one (1) or more members of the Board, and the term “Committee” shall apply to
any person or persons to whom such authority has been delegated. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references
in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions
of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration
of
the Plan.
(ii) Section
162(m) and Rule 16b-3 Compliance.
In the
discretion of the Board, the Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or solely of
two
or more Non-Employee Directors, in accordance with Rule 16b-3. In addition,
the
Board or the Committee may delegate to a committee of one or more members of
the
Board the authority to grant Stock Awards to eligible persons who are either
(a)
not then Covered Employees and are not expected to be Covered Employees at
the
time of recognition of income resulting from such Stock Award, (b) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code, or (c) not then subject to Section 16 of the Exchange Act.
(d) Effect
of Board’s Decision.
All
determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.
4. SHARES
SUBJECT TO THE PLAN.
(a) Share
Reserve.
Subject
to the provisions of Section 11(a) relating to Capitalization Adjustments,
the
Common Stock that may be issued pursuant to Stock Awards shall not exceed in
the
aggregate nine million (9,000,000) shares of Common Stock.
(b) Reversion
of Shares to the Share Reserve.
If any
Stock Award shall for any reason expire or otherwise terminate, in whole or
in
part, without having been exercised in full, the shares of Common Stock not
acquired under such Stock Award shall revert to and again become available
for
issuance under the Plan.
(c) Source
of Shares.
The
shares of Common Stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Eligibility
for Specific Stock Awards.
Stock
Awards may be granted to Employees, Directors and Consultants.
(b) Section
162(m) Limitation on Annual Grants.
Subject
to the provisions of Section 11(a) relating to Capitalization Adjustments,
no
Employee shall be eligible to be granted Options covering more than one million
(1,000,000) shares of Common Stock during any calendar year.
(c) Consultants.
A
Consultant shall not be eligible for the grant of a Stock Award if, at the
time
of grant, a Form S-8 Registration Statement under the Securities Act
(“Form
S-8”)
is not
available to register either the offer or the sale of the Company’s securities
to such Consultant because of the nature of the services that the Consultant
is
providing to the Company, because the Consultant is not a natural person, or
because of any other rule governing the use of Form S-8.
6. OPTION
PROVISIONS.
Each
Option shall be in such form and shall contain such terms and conditions as
the
Board shall deem appropriate. The provisions of each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:
(a) Term. No
Option
shall be exercisable after the expiration of ten (10) years from the date on
which it was granted.
(b) Exercise
Price of a Stock Option.
The
exercise price of each Option shall be not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence
if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Consideration.
The
purchase price of Common Stock acquired pursuant to an Option shall be paid,
to
the extent permitted by applicable statutes and regulations, either (i) in
cash
at the time the Option is exercised or (ii) at the discretion of the Board
at
the time of or subsequently to the grant of the Option (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) by a “net exercise” of the
Option (as further described below) (4) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of Common Stock, results in either the receipt of cash (or check)
by
the Company or the receipt of irrevocable instruction to pay the aggregate
exercise price to the Company from the sales proceeds or (5) in any other form
of legal consideration that may be acceptable to the Board. Unless otherwise
specifically provided in the Option, the purchase price of Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Common
Stock acquired, directly or indirectly from the Company, shall be paid only
by
shares of the Common Stock of the Company that have been held for more than
six
(6) months (or such longer or shorter period of time required to avoid a charge
to earnings for financial accounting purposes). At any time that the Company
is
incorporated in Nevada, payment of the Common Stock’s “par value,” as defined in
the Nevada Revised Statutes, shall not be made by deferred payment.
In
the
case of any deferred payment arrangement, interest shall be compounded at least
annually and shall be charged at the minimum rate of interest necessary to
avoid
(1) the treatment as interest, under any applicable provisions of the Code,
of
any amounts other than amounts stated to be interest under the deferred payment
arrangement and (2) the treatment of the Option as a variable award for
financial accounting purposes.
In
the
case of a “net exercise” of an Option, the Company will not require a payment of
the exercise price of the Option from the Participant but will reduce the number
of shares of Common Stock issued upon the exercise by the largest number of
whole shares that has a Fair Market Value that does not exceed the aggregate
exercise price. With respect to any remaining balance of the aggregate exercise
price, the Company shall accept a cash payment from the Participant. The shares
of Common Stock so used to pay the exercise price of an Option under a “net
exercise” will be considered to have resulted from the exercise of the Option,
and accordingly, the Option will not again be exercisable with respect to such
shares, the shares actually delivered to the Participant, and any shares
withheld for purposes of tax withholding.
(d) Transferability
of an Option.
An
Option shall be transferable to the extent provided in the Option Agreement.
If
the Option does not provide for transferability, then the Option shall not
be
transferable except by will or by the laws of descent and distribution or
pursuant a domestic relations order and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. Notwithstanding the foregoing,
the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(e) Vesting
Generally.
The
total number of shares of Common Stock subject to an Option may, but need not,
vest and therefore become exercisable in periodic installments that may, but
need not, be equal. The Option may be subject to such other terms and conditions
on the time or times when it may be exercised (which may be based on performance
or other criteria) as the Board may deem appropriate. The vesting provisions
of
individual Options may vary. The provisions of this Section 6(e) are subject
to
any Option provisions governing the minimum number of shares of Common Stock
as
to which an Option may be exercised.
(f) Termination
of Continuous Service.
In the
event that an Optionholder’s Continuous Service terminates (other than upon the
Optionholder’s death or Disability), the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination) but only within such period of time ending on
the
earlier of (i) the date three (3) months following the termination of the
Optionholder’s Continuous Service (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does
not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate.
(g) Extension
of Termination Date.
An
Optionholder’s Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder’s Continuous Service (other
than upon the Optionholder’s death or Disability) would be prohibited at any
time solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in Section 6(a) or (ii) the expiration of a period of three (3) months
after the termination of the Optionholder’s Continuous Service during which the
exercise of the Option would not be in violation of such registration
requirements.
(h) Disability
of Optionholder.
In the
event that an Optionholder’s Continuous Service terminates as a result of the
Optionholder’s Disability, the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such Option as of
the
date of termination), but only within such period of time ending on the earlier
of (i) the date twelve (12) months following such termination (or such longer
or
shorter period specified in the Option Agreement or (ii) the expiration of
the
term of the Option as set forth in the Option Agreement. If, after termination,
the Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(i) Death
of Optionholder.
In the
event that (i) an Optionholder’s Continuous Service terminates as a result of
the Optionholder’s death or (ii) the Optionholder dies within the period (if
any) specified in the Option Agreement after the termination of the
Optionholder’s Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death pursuant
to Section 6(d), but only within the period ending on the earlier of (1) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement or (2) the expiration of the term
of
such Option as set forth in the Option Agreement. If, after death, the Option
is
not exercised within the time specified herein, the Option shall
terminate.
(j) Early
Exercise.
The
Option may, but need not, include a provision whereby the Optionholder may
elect
at any time before the Optionholder’s Continuous Service terminates to exercise
the Option as to any part or all of the shares of Common Stock subject to the
Option prior to the full vesting of the Option. Any unvested shares of Common
Stock so purchased may be subject to a repurchase option in favor of the Company
or to any other restriction the Board determines to be appropriate. The Company
will not exercise its repurchase option until at least six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes) have elapsed following exercise of the Option
unless the Board otherwise specifically provides in the Option.
7. PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.
(a) Restricted
Stock Awards.
Each
Restricted Stock Award agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The terms and
conditions of Restricted Stock Award agreements may change from time to time,
and the terms and conditions of separate Restricted Stock Award agreements
need
not be identical; provided,
however, that
each
Restricted Stock Award agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance
of
each of the following provisions:
(i) Purchase
Price.
At the
time of the grant of a Restricted Stock Award, the Board will determine the
price to be paid by the Participant for each share subject to the Restricted
Stock Award. To the extent required by applicable law, the price to be paid
by
the Participant for each share of the Restricted Stock Award will not be less
than the par value of a share of Common Stock. A Restricted Stock Award may
be
awarded as a stock bonus (i.e.,
with no
cash purchase price to be paid) to the extent permissible under applicable
law.
(ii) Consideration.
At the
time of the grant of a Restricted Stock Award, the Board will determine the
consideration permissible for the payment of the purchase price of the
Restricted Stock Award. The purchase price of Common Stock acquired pursuant
to
the Restricted Stock Award shall be paid in one of the following ways: (i)
in
cash at the time of purchase; (ii) at the discretion of the Board, according
to
a deferred payment or other similar arrangement with the Participant; (iii)
by
services rendered or to be rendered to the Company; or (iv) in any other form
of
legal consideration that may be acceptable to the Board; provided,
however, that
at
any time that the Company is incorporated in Nevada, the Common Stock’s “par
value,” as defined in the Nevada Revised Statutes, shall not be paid by deferred
payment and must be paid in a form of consideration that is permissible under
the Nevada Corporation Law.
(iii) Vesting.
Shares
of Common Stock acquired under a Restricted Stock Award may, but need not,
be
subject to a share repurchase option in favor of the Company in accordance
with
a vesting schedule to be determined by the Board.
(iv) Termination
of Participant’s Continuous Service.
In the
event that a Participant’s Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock
held
by the Participant that have not vested as of the date of termination under
the
terms of the Restricted Stock Award agreement. The Company will not exercise
its
repurchase option until at least six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for financial accounting
purposes) have elapsed following the purchase of the restricted stock unless
otherwise determined by the Board or provided in the Restricted Stock Award
agreement.
(v) Transferability.
Rights
to purchase or receive shares of Common Stock granted under a Restricted Stock
Award shall be transferable by the Participant only upon such terms and
conditions as are set forth in the Restricted Stock Award agreement, as the
Board shall determine in its discretion, and so long as Common Stock awarded
under the Restricted Stock Award remains subject to the terms of the Restricted
Stock Award agreement.
(b) Restricted
Stock Units. Each
Restricted Stock Unit agreement shall be in such form and shall contain such
terms and conditions as the Board shall determine. The terms and conditions
of
Restricted Stock Unit agreements may change from time to time, and the terms
and
conditions of separate Restricted Stock Unit agreements need not be identical;
provided,
however, that
each
Restricted Stock Unit agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance
of
each of the following provisions:
(i) Consideration.
At the
time of grant of a Restricted Stock Unit award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each
share
of Common Stock subject to the Restricted Stock Unit award. To the extent
required by applicable law, the consideration to be paid by the Participant
for
each share of Common Stock subject to a Restricted Stock Unit award will not
be
less than the par value of a share of Common Stock. Such consideration may
be
paid in any form permitted under applicable law.
(ii) Vesting.
At
the
time of the grant of a Restricted Stock Unit award, the Board may impose such
restrictions or conditions to the vesting of the shares Restricted Stock Unit
as
it deems appropriate.
(iii) Payment.
A
Restricted Stock Unit award may be settled by the delivery of shares of Common
Stock, their cash equivalent, or any combination of the two, as the Board deems
appropriate.
(iv) Additional
Restrictions. At
the
time of the grant of a Restricted Stock Unit award, the Board, as it deems
appropriate, may impose such restrictions or conditions that delay the delivery
of the shares of Common Stock (or their cash equivalent) subject to a Restricted
Stock Unit award after the vesting of such Award.
(v) Dividend
Equivalents. Dividend
equivalents may be credited in respect of Restricted Stock Units, as the Board
deems appropriate. Such dividend equivalents may be converted into additional
Restricted Stock Units by dividing (1) the aggregate amount or value of the
dividends paid with respect to that number of shares of Common Stock equal
to
the number of Restricted Stock Units then credited by (2) the Fair Market Value
per share of Common Stock on the payment date for such dividend. The additional
Restricted Stock Units credited by reason of such dividend equivalents will
be
subject to all the terms and conditions of the underlying Restricted Stock
Unit
award to which they relate.
(vi) Termination
of Participant’s Continuous Service. Except
as
otherwise provided in the applicable Stock Award Agreement, Restricted Stock
Units that have not vested will be forfeited upon the Participant’s termination
of Continuous Service for any reason.
(c) Stock
Appreciation Rights. Each
Stock Appreciation Right agreement shall be in such form and shall contain
such
terms and conditions as the Board shall deem appropriate. The terms and
conditions of Stock Appreciation Right agreements may change from time to time,
and the terms and conditions of separate Stock Appreciation Rights agreements
need not be identical, but each Stock Appreciation Right agreement shall include
(through incorporation of the provisions hereof by reference in the agreement
or
otherwise) the substance of each of the following provisions:
(i) Calculation
of Appreciation.
Each
Stock Appreciation Right will be denominated in share of Common Stock
equivalents. The appreciation distribution payable on the exercise of a Stock
Appreciation Right will be not greater than an amount equal to the excess of
(A)
the aggregate Fair Market Value (on the date of the exercise of the Stock
Appreciation Right) of a number of shares of Common Stock equal to the number
of
share of Common Stock equivalents in which the Participant is vested under
such
Stock Appreciation Right and with respect to which the Participant is exercising
the Stock Appreciation Right on such date, over (B) an amount that will be
determined by the Committee at the time of grant of the Stock Appreciation
Right.
(ii) Vesting.
At
the
time of the grant of a Stock Appreciation Right, the Board may impose such
restrictions or conditions to the vesting of such Right as it deems
appropriate.
(iii) Exercise.
To
exercise any outstanding Stock Appreciation Right, the Participant must provide
written notice of exercise to the Company in compliance with the provisions
of
the Stock Appreciation Rights agreement evidencing such Right.
(iv) Payment.
The
appreciation distribution in respect of a Stock Appreciation Right may be paid
in Common Stock, in cash, or any combination of the two, as the Board deems
appropriate.
(v) Termination
of Continuous Service.
If a
Participant’s Continuous Service terminates for
any
reason, any unvested Stock Appreciation Rights shall be forfeited and any vested
Stock Appreciation Rights shall be automatically redeemed.
(d) Other
Stock Awards.
Other
forms of Stock Awards valued in whole or in part by reference to, or otherwise
based on, Common Stock may be granted either alone or in addition to Stock
Awards provided for under Section 6 and the preceding provisions of this Section
7. Subject to the provisions of the Plan, the Board shall have sole and complete
authority to determine the persons to whom and the time or times at which such
Other Stock Awards will be granted, the number of shares of Common Stock (or
the
cash equivalent thereof) to be granted pursuant to such Awards and all other
terms and conditions of such Awards..
8. COVENANTS
OF THE COMPANY.
(a) Availability
of Shares.
During
the terms of the Stock Awards, the Company shall keep available at all times
the
number of shares of Common Stock required to satisfy such Stock
Awards.
(b) Securities
Law Compliance.
The
Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Stock
Awards and to issue and sell shares of Common Stock upon exercise of the Stock
Awards; provided,
however,
that
this undertaking shall not require the Company to register under the Securities
Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant
to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of Common
Stock
under the Plan, the Company shall be relieved from any liability for failure
to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
9. USE
OF PROCEEDS FROM STOCK.
Proceeds
from the sale of Common Stock pursuant to Stock Awards shall constitute general
funds of the Company.
10.
MISCELLANEOUS.
(a) Acceleration
of Exercisability and Vesting.
The
Board shall have the power to accelerate the time at which a Stock Award may
first be exercised or the time during which a Stock Award or any part thereof
will vest in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time
during which it will vest.
(b) Stockholder
Rights.
Subject
to the further limitations of Section 7(b)(iv) hereof, no Participant shall
be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Stock Award unless and
until such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms.
(c) No
Employment or other Service Rights.
Nothing
in the Plan or any instrument executed or Stock Award granted pursuant thereto
shall confer upon any Participant any right to continue to serve the Company
or
an Affiliate in the capacity in effect at the time the Stock Award was granted
or shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause,
(ii)
the service of a Consultant pursuant to the terms of such Consultant’s agreement
with the Company or an Affiliate or (iii) the service of a Director pursuant
to
the Bylaws of the Company or an Affiliate, and any applicable provisions of
the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(d) Investment
Assurances.
The
Company may require a Participant, as a condition of exercising or acquiring
Common Stock under any Stock Award, (i) to give written assurances satisfactory
to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock
Award for the Participant’s own account and not with any present intention of
selling or otherwise distributing the Common Stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative
if
(1) the issuance of the shares of Common Stock upon the exercise or acquisition
of Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company
that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.
(e) Withholding
Obligations.
To the
extent provided by the terms of a Stock Award Agreement, the Participant may
satisfy any country, federal, state, provincial or local tax withholding
obligation relating to the exercise or acquisition of Common Stock under a
Stock
Award by any of the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the Company) or by
a
combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares of Common Stock from the shares of Common Stock
otherwise issuable to the Participant as a result of the exercise or acquisition
of Common Stock under the Stock Award; provided,
however,
that no
shares of Common Stock are withheld with a value exceeding the minimum amount
of
tax required to be withheld by law (or such lesser amount as may be necessary
to
avoid variable award accounting); or (iii) delivering to the Company owned
and
unencumbered shares of Common Stock.
11.
ADJUSTMENTS
UPON CHANGES IN STOCK.
(a) Capitalization
Adjustments.
If any
change is made in, or other event occurs with respect to, the Common Stock
subject to the Plan or subject to any Stock Award without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company (each a “Capitalization
Adjustment”),
the
Plan will be appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to Sections 4(a) and 4(b) and the
maximum number of securities subject to award to any person pursuant to Section
5(b), and the outstanding Stock Awards will be appropriately adjusted in the
class(es) and number of securities and price per share of Common Stock subject
to such outstanding Stock Awards. The Board shall make such adjustments, and
its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
“without receipt of consideration” by the Company.)
(b) Dissolution
or Liquidation.
In the
event of a dissolution or liquidation of the Company, then all outstanding
Options shall terminate immediately prior to the completion of such dissolution
or liquidation, and shares of Common Stock subject to the Company’s repurchase
option may be repurchased by the Company notwithstanding the fact that the
holder of such stock is still in Continuous Service.
(c) Corporate
Transaction.
In the
event of a Corporate Transaction, any surviving corporation or acquiring
corporation may assume or continue any or all Stock Awards outstanding under
the
Plan or may substitute similar stock awards for Stock Awards outstanding under
the Plan (it being understood that similar stock awards include, but are not
limited to, awards to acquire the same consideration paid to the stockholders
or
the Company, as the case may be, pursuant to the Corporate Transaction), and
any
reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to Stock Awards may be assigned by the Company to the
successor of the Company (or the successor’s parent company), if any, in
connection with such Corporate Transaction. In the event that any surviving
corporation or acquiring corporation does not assume or continue any or all
such
outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have been not assumed,
continued or substituted and that are held by Participants whose Continuous
Service has not terminated prior to the effective time of the Corporate
Transaction, the vesting of such Stock Awards (and, if applicable, the time
at
which such Stock Awards may be exercised) shall (contingent upon the
effectiveness of the Corporate Transaction) be accelerated in full to a date
prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that
is
five (5) days prior to the effective time of the Corporate Transaction), the
Stock Awards shall terminate if not exercised (if applicable) at or prior to
such effective time, and any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards held by Participants whose Continuous
Service has not terminated shall (contingent upon the effectiveness of the
Corporate Transaction) lapse. With respect to any other Stock Awards outstanding
under the Plan that have not been assumed, continued or substituted, the vesting
of such Stock Awards (and, if applicable, the time at which such Stock Award
may
be exercised) shall not be accelerated, unless otherwise provided in a written
agreement between the Company or any Affiliate and the holder of such Stock
Award, and such Stock Awards shall terminate if not exercised (if applicable)
prior to the effective time of the Corporate Transaction.
(d) Change
in Control.
A Stock
Award held by any Participant whose Continuous Service has not terminated prior
to the effective time of a Change in Control may be subject to additional
acceleration of vesting and exercisability upon or after such event as may
be
provided in the Stock Award Agreement for such Stock Award or as may be provided
in any other written agreement between the Company or any Affiliate and the
Participant, but in the absence of such provision, no such acceleration shall
occur.
12.
AMENDMENT
OF THE PLAN AND STOCK AWARDS.
(a) Amendment
of Plan.
The
Board at any time, and from time to time, may amend the Plan. However, except
as
provided in Section 11(a) relating to Capitalization Adjustments, no amendment
shall be effective unless approved by the stockholders of the Company to the
extent stockholder approval is necessary to satisfy the requirements of Section
422 of the Code.
(b) Stockholder
Approval.
The
Board, in its sole discretion, may submit any other amendment to the Plan for
stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to Covered
Employees.
(c) No
Impairment of Rights.
Rights
under any Stock Award granted before amendment of the Plan shall not be impaired
by any amendment of the Plan unless (i) the Company requests the consent of
the
Participant and (ii) the Participant consents in writing.
(d) Amendment
of Stock Awards.
The
Board at any time, and from time to time, may amend the terms of any one or
more
Stock Awards; provided,
however,
that the
rights under any Stock Award shall not be impaired by any such amendment unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
13.
TERMINATION
OR SUSPENSION OF THE PLAN.
(a) Plan
Term.
The
Board may suspend or terminate the Plan at any time. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is
terminated.
(b) No
Impairment of Rights.
Suspension or termination of the Plan shall not impair rights and obligations
under any Stock Award granted while the Plan is in effect except with the
written consent of the Participant.
14.
EFFECTIVE
DATE OF PLAN.
The
Plan
shall become effective as determined by the Board, but no Stock Award shall
be
exercised (or, in the case of a stock bonus, shall be granted) unless and until
the Plan has been approved by the stockholders of the Company, which approval
shall be within twelve (12) months before or after the date the Plan is adopted
by the Board.
15.
CHOICE
OF LAW.
The
law
of the State of Nevada shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such state’s
conflict of laws rules.