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GRAN TIERRA ENERGY INC.
300, 625-11th Avenue S.W.
Calgary, Alberta T2R 0E1 Canada
(403) 265-3221
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 27, 201226, 2013
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, June 27, 2012,26, 2013, at 3:00 p.m. (Calgary time) at the Calgary Petroleum Club, Devonian Room, 319 Fifth Avenue S.W., Calgary, Alberta, Canada for the following purposes:
| 1. | To elect the Board of Directors’ |
| To approve, on an advisory basis, the compensation of Gran Tierra’s named executive officers, as disclosed in this proxy statement. |
| 3. | To ratify the selection by the Audit Committee of the Board of Directors of Deloitte |
| 4. | To conduct any other business properly brought before the meeting. |
These items of business are more fully described in the Proxy Statement accompanying this Notice.
The record date for the annual meeting is April 30, 2012.29, 2013. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.
Important Notice Regarding the Availability of Proxy Materials for the Stockholders’ Meeting to Be Held on June Calgary, Alberta Canada The proxy statement and annual report to stockholders are available to view at http://www.edocumentview.com/GTE See page |
By Order of the Board of Directors
/s/ David Hardy
David Hardy
| Vice President, Legal and General Counsel |
CALGARY, ALBERTA
April 30, 20122013
| 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 proxy mailed to you, or vote by telephone or |
GRAN TIERRA ENERGY INC.
300, 625-11th Avenue S.W.
Calgary, Alberta T2R 0E1 Canada
(403) 265-3221
PROXY STATEMENT
FOR THE 20122013 ANNUAL MEETING OF STOCKHOLDERS
June 27, 201226, 2013
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why am I receiving these materials?
We are sending you these proxy materials because the Board of Directors (the “Board”) of Gran Tierra Energy Inc. is soliciting your proxy to vote at the 20122013 annual meeting of stockholders, including at any adjournments or postponements of the annual meeting. 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 annual meeting to vote your shares. Instead, if you are a stockholder of record of our common stock, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or through the internet. See “How do I vote” below for further information on how to vote, including if you hold our common stock through a broker in “street name” or hold exchangeable shares.
Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the internet. We are sending to our stockholders of record the proxy materials, including this proxy statement and an annual report to stockholders. We intend that our stockholders who hold their stock in “street name” will receive a Notice of Internet Availability of Proxy Materials (the “Notice”). All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice.
We intend to mail the proxy materials on or about May 15, 201214, 2013, to all stockholders of record entitled to vote at the annual meeting. We expect that the Notice will be sent to stockholders who hold their stock in “street name” on or about that same date.
Will I receive any other proxy materials by mail?
If you are sent a Notice, you may be sent a proxy card, along with a second Notice, on or after May 25, 2012.24, 2013.
How do I attend the annual meeting?
The meeting will be held on Wednesday, June 27, 2012,26, 2013, at 3:00 p.m. (Calgary time) at the Calgary Petroleum Club, Devonian Room, 319 Fifth Avenue S.W., Calgary, Alberta, Canada. Directions to the annual meeting may be found at http://www.grantierra.com. Information on how to vote in person at the annual meeting is discussed below.
Who can vote at the annual meeting?
Only stockholders of record at the close of business on April 30, 201229, 2013, will be entitled to vote at the annual meeting. On this record date, there were 266,457,615 269,577,263 shares of common stock outstanding and entitled to vote, one share of Special A Voting Stock, and one share of Special B Voting Stock. On the record date, the one share of Special A Voting Stock was entitled to 6,223,810 votes, which equals the number of shares of common stock issuable upon exchange of exchangeable shares of Gran Tierra Goldstrike Inc. that were issued in connection with the transaction between the former stockholders of Gran Tierra Energy Inc., an Alberta corporation (“Gran Tierra Canada”), and Goldstrike, Inc. (the “Goldstrike Exchangeable Shares”). On the record date, the one share of Special B Voting Stock was entitled to 8,205,9806,840,062 votes, which equals the number of shares of common stock issuable upon exchange of exchangeable shares of Gran Tierra Exchangeco Inc. that were issued in connection with the transaction between the former stockholders of Solana Resources Limited, an Alberta corporation (“Solana”), and Gran Tierra (the “Solana Exchangeable Shares” and together with the Goldstrike Exchangeable Shares, the “Exchangeable Shares”).
2.
Stockholders of Record: Shares Registered in Your Name
If on April
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on April 30, 2012,29, 2013, 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 the Notice, and/or these proxy materials if you have received them, 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 annual meeting unless you request and obtain a valid proxy from your broker or other agent.
Stockholders Holding Exchangeable Shares
Holders of Goldstrike Exchangeable Shares are receiving these proxy materials which relate solely to the annual meeting of Gran Tierra and are being delivered in accordance with the provisions of the Goldstrike Exchangeable Shares and the Voting Exchange and Support Agreement dated November 10, 2005, (the “Goldstrike Voting Exchange Agreement”) among Goldstrike Inc., 1203647 Alberta Inc., Gran Tierra Goldstrike Inc. and Olympia Trust Company (the “Goldstrike Trustee”). The Goldstrike Exchangeable Shares are the economic equivalent to the shares of common stock of Gran Tierra. In accordance with the Goldstrike Voting Exchange Agreement, holders of Goldstrike Exchangeable Shares are entitled to instruct the Goldstrike Trustee as to how to vote their Goldstrike Exchangeable Shares. The Goldstrike Trustee holds the one outstanding share of our Special A Voting Stock, which is entitled to as many votes as there are outstanding Goldstrike Exchangeable Shares on the record date, and may only vote the one share of Special A Voting Stock as directed by the holders of Goldstrike Exchangeable Shares. Holders of Goldstrike Exchangeable Shares who do not hold their Goldstrike Exchangeable Shares in their own name are not entitled to instruct the Goldstrike Trustee as to how to exercise voting rights at the annual meeting. Only holders of Goldstrike Exchangeable Shares whose names appear on the records of Gran Tierra Goldstrike Inc. as the registered holders of Goldstrike Exchangeable Shares are entitled to instruct the Goldstrike Trustee as to how to exercise voting rights in respect of their Goldstrike Exchangeable Shares at the annual meeting. Holders of Goldstrike Exchangeable Shares may also obtain a proxy from the Goldstrike Trustee to vote their Goldstrike Exchangeable Shares at the annual meeting. Holders of Goldstrike Exchangeable Shares should follow the instructions sent to them by the Goldstrike Trustee in order to exercise their voting rights.
Holders of Solana Exchangeable Shares are receiving these proxy materials which relate solely to the annual meeting of Gran Tierra and are being delivered in accordance with the provisions of the Solana Exchangeable Shares and the Voting and Exchange Trust Agreement dated November 14, 2008, (the “Solana Voting Exchange Agreement”) among Gran Tierra, Gran Tierra Exchangeco Inc. and Computershare Trust Company of Canada (the “Solana Trustee”). The Solana Exchangeable Shares are the economic equivalent to the shares of common stock of Gran Tierra. In accordance with the Solana Voting Exchange Agreement, holders of Solana Exchangeable Shares are entitled to instruct the Solana Trustee as to how to vote their Solana Exchangeable Shares. The Solana Trustee holds the one outstanding share of our Special B Voting Stock, which is entitled to as many votes as there are outstanding Solana Exchangeable Shares on the record date, and may only vote the one share of Special B Voting Stock as directed by the holders of Solana Exchangeable Shares. Holders of Solana Exchangeable Shares who do not hold their Solana Exchangeable Shares in their own name are not entitled to instruct the Solana Trustee as to how to exercise voting rights at the annual meeting. Only holders of Solana Exchangeable Shares whose names appear on the records of Gran Tierra Exchangeco Inc. as the registered holders of Solana Exchangeable Shares are entitled to instruct the Solana Trustee as to how to exercise voting rights in respect of their Solana Exchangeable Shares at the annual meeting. Holders of Solana Exchangeable Shares may also obtain a proxy from the Solana Trustee to vote their Solana Exchangeable Shares at the annual meeting. Holders of Solana Exchangeable Shares should follow the instructions sent to them by the Solana Trustee in order to exercise their voting rights.
3.
If on April 30, 2012,29, 2013, your Exchangeable 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 the Notice, and these proxy materials if you have received them, are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of instructing your Trustee as to how to vote your Exchangeable Shares. As a beneficial owner, you have the right to direct your broker or other agent regarding how to instruct your Trustee as to how to vote your Exchangeable Shares.
What am I voting on?
There are fourthree matters scheduled for a vote:
| · | Election of the Board’s |
| · | Advisory approval of the compensation of Gran Tierra’s named executive officers, as disclosed in this proxy statement in accordance with SEC rules; and |
| · | Ratification of the selection by the Audit Committee of the Board of Deloitte |
What if another matter is properly brought before the annual meeting?
The Board knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the annual meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.
How do I vote?
You may either vote “For”
The procedures for voting are fairly simple:
Stockholders 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 on the internet or by telephone, or vote by proxy using a proxy card that you may request or that we may elect to deliver at a later time. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the annual meeting and vote in person even if you have already voted by proxy.
| Ø | To vote in person, come to the annual meeting and we will give you a ballot when you arrive. |
| Ø | To vote using the proxy card, simply complete, sign and date the proxy card that may be delivered and return it promptly in the envelope provided. If you return your signed proxy card to us by 11:59 p.m. Eastern Time on June |
| Ø | To vote over the telephone, dial 1-800-652-VOTE (8683) using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the Notice. Your vote must be received by 11:59 p.m. Eastern Time on June |
| Ø | To vote on the internet, go to http://www.investorvote.com/GTE to complete an electronic proxy card. You will be asked to provide the company number and control number from the Notice. Your vote must be received by 11:59 p.m. Eastern Time on June |
4.
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 Notice containing voting instructions from that organization rather than from Gran Tierra. Simply follow the voting instructions in the Notice to ensure that your vote is counted. If you have received these proxy materials and voting instructions therein, simply complete and mail the voting instructions to ensure that your vote is counted. Alternatively, you may vote by telephone or
Beneficial Owner: Exchangeable Shares
If you are a holder of Goldstrike Exchangeable Shares, you should have received voting instructions with these proxy materials from the Goldstrike Trustee, which is the holder of the one share of Special A Voting Stock. Follow the instructions from the Goldstrike Trustee, or contact the Goldstrike Trustee for further information. Instruments of proxy must be received by Olympia Trust Company, located at 2300, 125 - 9th Avenue S.E., Calgary, Alberta, T2G OP6, Canada, by 11:59 p.m. (Calgary time) on June
If you are a holder of record of Solana Exchangeable Shares, you should have received voting instructions with these proxy materials from the Solana Trustee, which is the holder of the one share of Special B Voting Stock. Follow the instructions from the Solana Trustee, or contact the Solana Trustee for further information. Instruments of proxy must be received by
If you are a beneficial owner of Exchangeable Shares registered in the name of your broker, bank, or other agent, you should have received a Notice containing voting instructions from that organization rather than from Gran Tierra. Simply follow the voting instructions in the Notice to ensure that your vote is counted.
| We provide telephone and internet proxy voting to allow you to vote your shares, 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 telephone or 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 April
What if I return a proxy card or otherwise vote but do not make specific choices?
If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of all
5.
What happens if I do not vote?
Stockholder of Record; Shares Registered in Your Name
If you are a stockholder of record and do not vote by completing your proxy card, by telephone, over the internet or in person at the annual meeting, your shares will not be voted.
Beneficial Owner; Shares Registered in the Name of a Broker or Bank
If you are a beneficial owner and do not instruct your broker, bank or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the New York Stock Exchange (“NYSE”) deems the particular proposal to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” 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 NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested), executive compensation (including any advisory stockholder votes on executive compensation and on the frequency of stockholder votes on executive compensation), and certain corporate governance proposals, even if management supported. Accordingly, your broker or nominee may not vote your shares on Proposals 1 or 2 without your instructions, but may vote your shares on Proposal 3.
What if I am a holder of Exchangeable Shares and do not return a voting election or return a voting election but do not make specific choices?
If you do not return a properly filled out voting election, or return a signed and dated voting election without marking voting selections, your shares will not be voted.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees and Georgeson Shareholder Services 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 if Georgeson Shareholder Services solicits proxies it will be paid its customary fee of approximately
What does it mean if I receive more than one Notice or more than one set of proxy materials?
If you receive more than one Notice or more than one set of proxy materials, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the Notices or the instructions on the proxy cards in the proxy materials 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 annual meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:
| Ø | You may submit another properly completed proxy card with a later date, or vote again by telephone or |
| Ø | You may send a timely written notice that you are revoking your proxy to Gran Tierra’s Corporate Secretary at 300, 625-11th Avenue S.W., Calgary, Alberta, T2R 0E1, Canada; or |
| Ø | You may attend the annual meeting and vote in person. Simply attending the annual meeting will not, by itself, revoke your proxy. |
6.
Your most current proxy card or telephone or internet proxy is the one that is counted.
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 Goldstrike Exchangeable Shares, you should follow the instructions provided by the Goldstrike Trustee with respect to the Goldstrike Exchangeable Shares you hold, and if you are a holder of Solana Exchangeable Shares, you should follow the instructions provided by the Solana Trustee with respect to the Solana Exchangeable Shares you hold.
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 January 15,
How are votes counted?
Votes will be counted by the inspector of election appointed for the annual meeting, who will separately count, for the proposal to elect directors, votes “For,” “Withhold” and broker non-votes; and, with respect to other proposals, votes “For” and “Against,” abstentions and, if applicable, broker non-votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.
What are “broker non-votes”?
How many votes are needed to approve each proposal?
| Ø | Proposal No. 1, the election of directors: the |
| Ø | Proposal No. 2, |
| Ø | Proposal No. |
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding outstanding shares of Gran Tierra’s capital stock representing at least a majority of the total number of votes are present at the annual meeting in person or represented by proxy. On the record date, there were
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 annual meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the Chairman of the annual meeting or the holders of a majority of shares present at the annual meeting in person or represented by proxy must adjourn the annual 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. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the annual meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the annual meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
What proxy materials are available on the internet?
The proxy statement and annual report to stockholders are available to view at:
http://www.edocumentview.com/GTEGTE.
or
on Gran Tierra’s website at:
http://www.grantierra.comwww.grantierra.com.
See page 64 of this proxy statement for voting instructions.
PROPOSAL 1
Gran Tierra’s Board currently consists of seven directors. One of the directors, Mr. Ray Antony, is retiring from the Board effective at the beginning of the annual meeting. Gran Tierra has benefited from and is grateful for Mr. Antony’s service to the Board, and wishes him the very best for his future.
As a result of Mr. Antony’s impending retirement, effective with the commencement of the annual meeting the size of the Board will be reduced by one and will consist of six directors. There are sevensix nominees for director this year. Each director to be elected and qualified will hold office until the next annual meeting of stockholders and until his 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 who was previously elected by the stockholders. It is Gran Tierra’s policy to invite nominees for directors to attend the annual meeting. FiveAll of the seven directors attended the 20112012 Annual Meeting of Stockholders.
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 sevensix 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 sevensix nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by Gran Tierra. Each person nominated for election has agreed to serve if elected. Gran Tierra’s management has no reason to believe that any nominee will be unable to serve.
The following is a brief biography of each nominee for director, his age on April 16, 2012,2013, and a discussion of the specific experience, qualifications, attributes or skills of each nominee that led the Nominating and Corporate Governance Committee to recommend that person for reelection as a director, as of the date of this proxy statement.
| Dana Coffield | President, | |||
| Jeffrey J. Scott | Chairman of the Board of Directors | |||
| Verne Johnson | Director | |||
| Nicholas G. Kirton | Director | |||
| Gerald Macey | Director | |||
| J. Scott Price | Director |
Dana Coffield, President, Chief Executive Officer and Director.
Mr. Coffield has served as our President and Chief Executive Officer, and as a Director, since May 2005. Prior to joining Gran Tierra, Mr. Coffield was Vice President of the Middle East Business Unit for EnCana Corporation, responsible for business development, exploration operations, commercial evaluations, government and partner relations, planning and budgeting, environment/health/safety, security and management of several overseas operating offices. He held various senior management positions for EnCana’s predecessor, Alberta Energy Company, including petroleum exploration operations in five countries. Mr. Coffield was previously with ARCO International for ten years, where he participated in exploration and production operations in North Africa, Southeast Asia and Alaska. He graduated from the University of South Carolina with an MSc and PhD in Geology and holds a BSc in Geological Engineering from the Colorado School of Mines. Mr. Coffield is also a member of the AAPG and the CSPG, and is a Fellow of the Explorers Club. The Nominating and Corporate Governance Committee recommended Mr. Coffield for reelection because of his valuable contributions in leadership to Gran Tierra for the past sixeight years and 2324 years of employment with publicly traded international oil and gas companies. Mr. Coffield’s background includes oil and gas production operations and business development.
Jeffrey J. 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. Also, since February 2012, Mr. Scott has served as Executive Chairman of Sulvaris Inc., a private fertilizer technology company. Mr. Scott is also currently a
Verne Johnson, Director.
Mr. Johnson has served as a director since January 2005. Starting with Imperial Oil Limited 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 2002, Mr. Johnson served in senior capacities with various companies, achieving the positions of President of Paragon Petroleum Ltd., President and CEO of ELAN Energy Inc., and Senior Vice President of Enerplus Resources Group. Mr. Johnson retired in February 2002. Mr. Johnson is currently Chairman of
Nicholas G. Kirton, Director.
Mr. Kirton has served as a director since March 27, 2008. Mr. Kirton is a Chartered Accountant and former KPMG partner who retired in 2004 after a thirty-eight year career at KPMG.KPMG LLP (“KPMG”). He is currently a director of Canexus Corporation, Essential Energy Services Ltd., and the Canadian Investor Protection Fund and was previously a director for Canexus Corporation, Grand Cache Coal Corporation, Builders Energy Services, Result Energy Inc., and Innicor Subsurface Technologies Inc. In addition, he is a member of the Board of Governors and Audit Committee Vice Chair of the University of Calgary. Mr. Kirton received a Bachelor of Science (Mathematics and Physics) in 1966 from Bishop’s University, his Chartered Accountant designation in Quebec in 1969 and was named a Fellow of the Chartered Accountants (FCA) of Alberta in 1996, and in 2006 received the designation of ICD.D from the Institute of Corporate Directors. The Nominating and Corporate Governance Committee recommended Mr. Kirton for re-election because of his demonstrated leadership value and substantial financial leadership expertise stemming from his 38-year career in the Audit Practice of KPMG, LLP (“KPMG”), including 28 years as a partner with KPMG. In addition, since his retirement from KPMG in 2004, he has had substantial experience on other public company boards of directors and audit committees.
Gerald Macey, Director.
Mr. Macey has served as a director since August 19, 2010. Mr. Macey’s professional career started as a geologist with Gulf Canada Resources and Gulf Oil Corporation in the United Kingdom, which was followed by BP Resources Canada, Pan Canadian Petroleum (from 1999 to 2002) and ultimately Encana Corporation (from 2002 to 2004), where he served as President, International New Ventures Exploration Division and Executive Vice President. Mr. Macey has sat on numerous domestic and international boards of directors, including most recently Addax Petroleum Corporation and Verenex Energy Corporation, and is currently on the boards of Andora Energy and Pan Orient Energy Corporation. Mr. Macey is currently a member of the Association of Professional Engineers, Geologists and Geophysicists of Alberta, Canadian Society of Petroleum Geologists and the American Association of Petroleum Geologists. He was awarded the Stanley Slipper Gold Medal, the most prestigious award of the Canadian Society of Petroleum Geologists, for outstanding contribution to petroleum exploration in Canada, in 2005, and the Minerals Management Service Corporate Leadership Award, for exemplary leadership of the McCovey exploration project in the Beaufort Sea Outer Continental Shelf, in 2003. Mr. Macey received a Bachelors degree in Geotechnical Science from Concordia University and a Masters of Science in Geology from Carleton University. The Nominating and Corporate Governance Committee recommended Mr. Macey for election as a director because Mr. Macey has over 38 years of experience in the petroleum industry, including exploration and development expertise in basins around the world.
10.
J. Scott Price, Director.
Mr. Price has served as a director since November 14, 2008, when he was designated by Solana to serve on the Board of Gran Tierra pursuant to the Arrangement Agreement, which resulted in Solana’s combination with Gran Tierra. From October 2006 to November 14, 2008, he was the President and CEO of Solana. Mr. Price was previously the Founder, President and CEO of Breakaway Energy, Inc., a private international resource company, which was taken over by Solana. Mr. Price is currently the President & Director of Prospect International Inc. and Chairman of Marsa Energy Inc., a private international oil and gas exploration and production company. Mr. Price was previously a director of Blackhawk Resource Corp., a publicly traded company. Mr. Price has over 28 years of diverse global oil and gas experience in North and South America, Europe, Africa, Middle East and the former Soviet Union. He has been a founder, director and/or officer of a number of internationally focused public and private companies including Aventura Energy Inc. and Ocelot International Inc. Mr. Price holds a Bachelor of Science degree in Chemical Engineering and a Masters of Business Administration both from the University of Calgary. The Nominating and Corporate Governance Committee recommended Mr. Price for reelection because of his demonstrated leadership value and broad experience as CEO of a number of internationally focused oil and gas public companies, including Solana Resources Limited, complemented by his professional certification as a Chemical Engineer. Mr. Price’s 2829 years of public and private company experience in the oil and gas industry in both start up and mature organizations in combination with his MBA enhances his business oversight capabilities.
Jeffrey J. Scott entered into a settlement agreement with the Alberta Securities Commission (ASC)(“ASC”) on February 6, 2009, with respect to allegations that Mr. Scott, along with certain other directors of High Plains Energy Inc. (“High Plains”) acted contrary to the public interest in connection with their inadequate rectification of incorrect production information disclosed to the public in press releases issued by High Plains between July 2005 and January 2006. Mr. Scott admitted that he had acted contrary to the public interest by failing to: (i) disclose High Plains’ actual production for the period of July to November 2005, with comparative references to the untrue figures disclosed for those months in the press releases disseminated during that period; (ii) compare the actual production rates for December 2005 and January 2006 with the untrue figures disclosed in the press releases for those months; and (iii) ensure that High Plains disclosed in a timely manner that the accuracy of its earlier disclosures of the monthly production was questionable and under review by High Plains. Mr. Scott and each of the other respondents to the settlement agreement were ordered to pay $25,000 to the ASC of which $5,000 was a payment towards investigation costs. The ASC noted in the settlement agreement that Mr. Scott and the other directors were provided with false information by management of High Plains with respect to production levels, and thus had no knowledge of the untrue statements in certain press releases issued by management in late 2005, until January 30, 2006, at the earliest. The ASC also noted that each of the subject directors, upon being made aware of the potential problem with High Plains’ reported production, made substantial efforts and committed significant amount of time in a good faith effort to resolving the problems and determining High Plains’ actual production and noted that none of the subject directors had been previously sanctioned by the Commission,ASC, and each cooperated fully with staff in its investigation.
11.
As a result of the above the TSX Venture Exchange (“TSVE”) and the Toronto Stock Exchange (“TSX”) conducted their own reviews as to Mr. Scott’s acceptability to serve as a director or officer of any respective exchange-listed issuer. They determined that Mr. Scott must obtain written approval prior to occupying such post and the TSXV determined that he should complete a half-day workshop “Simplifying Timely Disclosures,” which he successfully completed on April 26, 2010, and further that any TSXV-listed company on whose board he sits implement a written disclosure policy.
Except as described above, our above-listed directors have neither been convicted in any criminal proceeding during the past ten years nor been parties to any judicial or administrative proceeding during the past ten 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
Gran Tierra follows the listing standards of the NYSE Amex.MKT. As required under the NYSE AmexMKT 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 the NYSE AmexMKT listing standards, as in effect from time to time.
Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his family members, and Gran Tierra, its senior management and its independent auditors, the Board has affirmatively determined that the following six of seven directors are independent directors within the meaning of the applicable NYSE AmexMKT listing standards: Messrs. Antony, Johnson, Kirton, Macey, Price and Scott. In making this determination, the Board found that none of 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.
BOARD LEADERSHIP STRUCTURE
Gran Tierra’s Chairman of the Board is an independent director. The Board has determined that this leadership structure is an appropriate structure for Gran Tierra because of the added experience and leadership provided to Gran Tierra from having separate individuals perform the Chairman and Chief Executive Officer function. Gran Tierra believes that having an independent Chairman of the Board also adds an extra level of independence to the board as a whole, and increases the ability and credibility of the board in its management oversight functions.
Gran Tierra’s management is responsible for assessing the risks facing Gran Tierra and evaluating such risks, and the Board provides an oversight role with respect to risk management. At the direction of the Board, at each quarterly meeting of the Board, management makes a presentation to the Board regarding the higher level risks facing Gran Tierra, as well as the actions being taken to ameliorate these risks. The Board then gives direction and guidance to management as to the risks presented and the actions proposed, and reassesses at the next quarterly meeting of the Board.
The Board met tenthirteen times during the last fiscal year as an entire board. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he served, held during the last fiscal year for which he was a director or committee member. As required under the NYSE AmexMKT listing standards, in fiscal 2011,2012, Gran Tierra’s independent directors met in regularly scheduled executive sessions at which only independent directors were present.
INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board has four standing committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, and a Reserves Committee. The following table provides membership and meeting information for fiscal year
| Name | Audit | Compensation | Nominating and Corporate Governance | Reserves | Audit | Compensation | Nominating and Corporate Governance | Reserves | ||||||||
| Dana Coffield | X | X | ||||||||||||||
| Jeffrey Scott | X | X*(1) | X | |||||||||||||
| Ray Antony | X | X | X | X | X | X | ||||||||||
| Verne Johnson | X | X* | X | X | X* | X | ||||||||||
| Scott Price | X | X* | X | X* | ||||||||||||
| Nicholas Kirton | X* | X | X* | X | ||||||||||||
| Gerald Macey | X*(1) | X(2) | X* | X | ||||||||||||
| Total Meetings in fiscal year 2011 | 5 | 3 | 3 | 1 | ||||||||||||
| Total Meetings in fiscal year 2012 | 4 | 1 | 1 | 6 | ||||||||||||
| * | Committee Chairperson |
13.
Below is a description of each committee of the Board. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. The Board has determined that each member of each committee meets the applicable NYSE AmexMKT rules and regulations regarding “independence” and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to Gran Tierra.
Audit Committee
The Audit Committee of the Board was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee Gran Tierra’s corporate 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; reviews and approves or rejects transactions between Gran Tierra 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 Gran Tierra’s annual audited financial statements and quarterly financial statements with management and the independent auditors, including a review of Gran Tierra’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The Audit Committee is composed of four directors: Jeffrey Scott, Verne Johnson, Ray Antony and Nicholas Kirton. The Audit Committee met fivefour times during the fiscal year. The Audit Committee has a written charter that is available to stockholders on Gran Tierra’s website at http://www.grantierra.com.
The Board reviews the NYSE
Report of the Audit Committee of the Board of Directors
The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31,
Nicholas Kirton, Chair
Ray Antony
Verne Johnson
Jeffrey Scott
| (1) | The material in this report is not “soliciting material” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Gran Tierra 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. |
The Compensation Committee is composed of three directors: Messrs. Antony, Johnson and Price. All members of Gran Tierra’s Compensation Committee are independent (as independence is currently defined in Rule 803(a)(2) of the NYSE AmexMKT listing standards). The Compensation Committee met three timesone time during 2011.2012. The Compensation Committee has a written charter that is available to stockholders on Gran Tierra’s website at http://www.grantierra.com.
The Compensation Committee of the Board 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 Gran Tierra’s executive officers, directors, and other senior management, as appropriate, and evaluating performance in light of these stated objectives; |
| · | establishment of 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 Gran Tierra’s Chief Executive Officer and the other executive officers; and |
| · | administration of Gran Tierra’s equity compensation plans, pension and profit-sharing plans, deferred compensation plans and other similar plan and programs. |
Each year, the Compensation Committee reviews with management Gran Tierra’s Compensation Discussion and Analysis and considers whether to recommend that it be included in proxy statements and other filings.
Compensation Committee Processes and Procedures
Typically, the Compensation Committee meets at least once 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. 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, to provide financial or other background information or advice or to 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.
15.
The Compensation Committee retained the services of Lane Caputo Compensation Inc. (the “Compensation Consultant”) as its executive compensation consultant pursuant to a written agreement. The Compensation Consultant reports directly to the Compensation Committee and the Compensation Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Compensation Committee, as requested, and communicates with the Compensation Committee Chair between meetings; however, the Compensation Committee makes all decisions and recommendations to the Board. The Compensation Consultant maintains a group of benchmark peers that the Compensation Committee finds relevant for comparison purposes. Services performed by the Compensation Consultant are pre-approved by the Compensation Committee and any additional work to be performed, including at the request of management, must be pre-approved by the Chair of the Compensation Committee.
Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees, as appropriate. In
New performance objectives are established 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, 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 2012 ARE DESCRIBED IN GREATER DETAIL IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION OF THIS PROXY STATEMENT.
A Vote In Favor Of Each Named Nominee.
12.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
INDEPENDENCE OF THE BOARD OF DIRECTORS
Gran Tierra follows the listing standards of the NYSE MKT. As required under the NYSE MKT 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 the NYSE MKT listing standards, as in effect from time to time.
Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his family members, and Gran Tierra, its senior management and its independent auditors, the Board has affirmatively determined that the following six of seven directors are independent directors within the meaning of the applicable NYSE MKT listing standards: Messrs. Antony, Johnson, Kirton, Macey, Price and Scott. In making this determination, the Board found that none of 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.
BOARD LEADERSHIP STRUCTURE
Gran Tierra’s Chairman of the Board is an independent director. The Board has determined that this leadership structure is an appropriate structure for Gran Tierra because of the added experience and leadership provided to Gran Tierra from having separate individuals perform the Chairman and Chief Executive Officer function. Gran Tierra believes that having an independent Chairman of the Board also adds an extra level of independence to the board as a whole, and increases the ability and credibility of the board in its management oversight functions.
ROLE OF THE BOARD IN RISK OVERSIGHT
Gran Tierra’s management is responsible for assessing the risks facing Gran Tierra and evaluating such risks, and the Board provides an oversight role with respect to risk management. At the direction of the Board, at each quarterly meeting of the Board, management makes a presentation to the Board regarding the higher level risks facing Gran Tierra, as well as the actions being taken to ameliorate these risks. The Board then gives direction and guidance to management as to the risks presented and the actions proposed, and reassesses at the next quarterly meeting of the Board.
MEETINGS OF THE BOARD OF DIRECTORS
The Board met thirteen times during the last fiscal year as an entire board. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he served, held during the last fiscal year for which he was a director or committee member. As required under the NYSE MKT listing standards, in fiscal 2012, Gran Tierra’s independent directors met in regularly scheduled executive sessions at which only independent directors were present.
INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board has four standing committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, and a Reserves Committee. The following table provides membership and meeting information for fiscal year 2012 for each committee of the Board:
| Name | Audit | Compensation | Nominating and Corporate Governance | Reserves | ||||
| Dana Coffield | X | |||||||
| Jeffrey Scott | X | |||||||
| Ray Antony | X | X | X | |||||
| Verne Johnson | X | X* | X | |||||
| Scott Price | X | X* | ||||||
| Nicholas Kirton | X* | X | ||||||
| Gerald Macey | X* | X | ||||||
| Total Meetings in fiscal year 2012 | 4 | 1 | 1 | 6 |
| * | Committee Chairperson |
13.
Below is a description of each committee of the Board. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. The Board has determined that each member of each committee meets the applicable NYSE MKT rules and regulations regarding “independence” and that each member is free of any relationship that would impair his individual exercise of independent judgment with regard to Gran Tierra.
Audit Committee
The Audit Committee of the Board
The Nominating and Corporate GovernanceAudit Committee is currently composed of threefour directors: Messrs. Macey, KirtonJeffrey Scott, Verne Johnson, Ray Antony and Antony. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined in Rule 803(a)(2) of the NYSE Amex listing standards).Nicholas Kirton. The Nominating and Corporate GovernanceAudit Committee met threefour times during the fiscal year. The Nominating and Corporate GovernanceAudit Committee has a written charter that is available to stockholders on Gran Tierra’s website at http://www.grantierra.com.
The
Report of the
The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2012, with management of Gran
Nicholas Kirton, Chair
Ray Antony
Verne Johnson
Jeffrey Scott
| (1) | The material in this report is not “soliciting material” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Gran Tierra 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. |
The primary purpose of the Reserves Committee is to act on behalf of the Board in fulfilling the Board’s oversight responsibilities with respect to evaluating and reporting on Gran Tierra’s oil and gas reserves.
| · |
| · |
| · |
| · | administration of Gran Tierra’s equity compensation plans, pension and profit-sharing plans, deferred compensation plans and other similar plan and programs. |
Each year, the Compensation Committee reviews with management Gran Tierra’s Compensation Discussion and Analysis and considers whether to recommend that it be included in proxy statements and other filings.
Compensation Committee Processes and Procedures
Typically, the Compensation Committee meets at least once annually and with greater frequency if necessary. The purposeagenda for each meeting is usually developed by the chair of this amendment isthe Compensation Committee, in consultation with the Chief Executive Officer. However, from time to ensure that Gran Tierra has a sufficient reservetime, various members of common stock available under the Incentive Plan to continue to grant stock optionsmanagement and other awards at market-competitive levels determined appropriateemployees as well as outside advisors or consultants may be invited by the Board. In order for Gran TierraCompensation Committee to continuemake presentations, to have the flexibilityprovide financial or other background information or advice or to grant market-competitive levels of stock options to current employees and future strategic hires, the Board determined that it was prudent to increase the fixed reserve of common stock available under the Incentive Plan by 16,500,000 shares (approximately 6.2%otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, any deliberations or determinations of the Gran Tierra common stock outstanding on April 27, 2012).
Compensation Committee regarding his compensation or individual performance objectives. The Gran Tierra stockholders previously approved an aggregatecharter of 23,306,100 shares of common stock reserved for issuance under the Incentive Plan of which, at December 31, 2011, stock awards (net of cancelled or expired awards) covering an aggregate of 12,864,003 shares (approximately 4.9%Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of Gran Tierra, common stock outstanding on such date) were outstanding underas well as authority to obtain, at the Incentive Plan and 4,251,304 shares (approximately 1.6%expense of Gran Tierra, common stock outstanding on such date) remained available for future grant underadvice and assistance from internal and external legal, accounting or other advisors and consultants and other external resources that the Incentive Plan. If this Proposal 2 is approved by stockholders, then the number of shares available for future grant under the Incentive Plan, combined with stock awards currently outstanding under the Incentive Plan will be 33,615,307 sharesCompensation Committee considers necessary or approximately 12.6% of common stock outstanding as of April 27, 2012.
The Board adopted the Incentive 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 retainingCompensation Committee retained 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 andLane Caputo Compensation Inc. (the “Compensation Consultant”) as its affiliates. As of February 29, 2012, all of the approximately 466 employees, directors and consultants of Gran Tierra and its affiliates are eligible to participate in the Incentive Plan and may receive all types of awards.
Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees, as appropriate. In 2012, the Compensation Committee did not form any subcommittees.
New performance objectives are established 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 resultstotal compensation that may become payable to executives in various hypothetical scenarios, executive and director stock ownership information, company stock performance data, analyses of this vote in making determinations in the future regardinghistorical executive compensation arrangements.levels, current company-wide compensation levels, and independent compensation surveys for the petroleum industry in Canada for peer groupings within the industry.
The Board Of Directors Recommends
A Vote In Favor Of Proposal 3Each Named Nominee.
INDEPENDENCE OF THE BOARD OF DIRECTORS
Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his family members, and Gran Tierra, its senior management and its independent auditors, the Board has affirmatively determined that the following six of seven directors are independent directors within the meaning of the applicable NYSE MKT listing standards: Messrs. Antony, Johnson, Kirton, Macey, Price and Scott. In making this determination, the Board found that none of 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.
BOARD LEADERSHIP STRUCTURE
Gran Tierra’s Chairman of the Board is an independent director. The Board has determined that this leadership structure is an appropriate structure for Gran Tierra because of the added experience and leadership provided to Gran Tierra from having separate individuals perform the Chairman and Chief Executive Officer function. Gran Tierra believes that having an independent Chairman of the Board also adds an extra level of independence to the board as a whole, and increases the ability and credibility of the board in its management oversight functions.
ROLE OF THE BOARD IN RISK OVERSIGHT
Gran Tierra’s management is responsible for assessing the risks facing Gran Tierra and evaluating such risks, and the Board provides an oversight role with respect to risk management. At the direction of the Board, at each quarterly meeting of the Board, management makes a presentation to the Board regarding the higher level risks facing Gran Tierra, as well as the actions being taken to ameliorate these risks. The Board then gives direction and guidance to management as to the risks presented and the actions proposed, and reassesses at the next quarterly meeting of the Board.
MEETINGS OF THE BOARD OF DIRECTORS
The Board met thirteen times during the last fiscal year as an entire board. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he served, held during the last fiscal year for which he was a director or committee member. As required under the NYSE MKT listing standards, in fiscal 2012, Gran Tierra’s independent directors met in regularly scheduled executive sessions at which only independent directors were present.
INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board has four standing committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, and a Reserves Committee. The following table provides membership and meeting information for fiscal year 2012 for each committee of the Board:
| Name | Audit | Compensation | Nominating and Corporate Governance | Reserves | ||||
| Dana Coffield | X | |||||||
| Jeffrey Scott | X | |||||||
| Ray Antony | X | X | X | |||||
| Verne Johnson | X | X* | X | |||||
| Scott Price | X | X* | ||||||
| Nicholas Kirton | X* | X | ||||||
| Gerald Macey | X* | X | ||||||
| Total Meetings in fiscal year 2012 | 4 | 1 | 1 | 6 |
| * | Committee Chairperson |
13.
Below is a description of each committee of the Board. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. The Board has determined that each member of each committee meets the applicable NYSE MKT rules and regulations regarding “independence” and that each member is free of any relationship that would impair his individual exercise of independent judgment with regard to Gran Tierra.
Audit Committee
The Audit Committee of the Board was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee Gran Tierra’s corporate 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; reviews and approves or rejects transactions between Gran Tierra 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 Gran Tierra’s annual audited financial statements and quarterly financial statements with management and the independent auditors, including a review of Gran Tierra’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The Audit Committee is composed of four directors: Jeffrey Scott, Verne Johnson, Ray Antony and Nicholas Kirton. The Audit Committee met four times during the fiscal year. The Audit Committee has a written charter that is available to stockholders on Gran Tierra’s website at http://www.grantierra.com.
The Board reviews the NYSE MKT listing standards definition of independence for Audit Committee members and has determined that all members of Gran Tierra’s Audit Committee are independent (as independence is currently established in Rule 803(a)(2) of the NYSE MKT 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 Exchange Act. The Board has determined that Mr. Kirton, 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 his past experience as a former KPMG partner. In addition to Gran Tierra’s Audit Committee: Mr. Kirton also serves on the Audit Committee of Essential Energy Services Ltd.; Mr. Antony also serves on the Audit Committees of Eaglewood Energy Ltd., Canyon Services Group Inc., Paramax Resources Ltd. and Blackhawk Resource Corp.; and Mr. Johnson also serves on the Audit Committees of Petromanas Energy Inc. and US Oil Sands Inc. (formerly Earth Energy). The Board has determined that these simultaneous services do not impair Messrs. Kirton, Antony or Johnson’s ability to effectively serve on Gran Tierra’s Audit Committee.
14.
Report of the Audit Committee of the Board of Directors (1)
The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2012, with management of Gran Tierra. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by 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 registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the audit committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in Gran Tierra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
Nicholas Kirton, Chair
Ray Antony
Verne Johnson
Jeffrey Scott
| (1) | The material in this report is not “soliciting material” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Gran Tierra 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. |
The Compensation Committee is composed of three directors: Messrs. Antony, Johnson and Price. All members of Gran Tierra’s Compensation Committee are independent (as independence is currently defined in Rule 803(a)(2) of the NYSE MKT listing standards). The Compensation Committee met one time during 2012. The Compensation Committee has a written charter that is available to stockholders on Gran Tierra’s website at http://www.grantierra.com.
The Compensation Committee of the Board 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 Gran Tierra’s executive officers, directors, and other senior management, as appropriate, and evaluating performance in light of these stated objectives; |
| · | establishment of 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 Gran Tierra’s Chief Executive Officer and the other executive officers; and |
| · | administration of Gran Tierra’s equity compensation plans, pension and profit-sharing plans, deferred compensation plans and other similar plan and programs. |
Each year, the Compensation Committee reviews with management Gran Tierra’s Compensation Discussion and Analysis and considers whether to recommend that it be included in proxy statements and other filings.
Compensation Committee Processes and Procedures
Typically, the Compensation Committee meets at least once 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. 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, to provide financial or other background information or advice or to 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.
15.
The Compensation Committee retained the services of Lane Caputo Compensation Inc. (the “Compensation Consultant”) as its executive compensation consultant pursuant to a written agreement. The Compensation Consultant reports directly to the Compensation Committee and the Compensation Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Compensation Committee, as requested, and communicates with the Compensation Committee Chair between meetings; however, the Compensation Committee makes all decisions and recommendations to the Board. The Compensation Consultant maintains a group of benchmark peers that the Compensation Committee finds relevant for comparison purposes. Services performed by the Compensation Consultant are pre-approved by the Compensation Committee and any additional work to be performed, including at the request of management, must be pre-approved by the Chair of the Compensation Committee.
Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees, as appropriate. In 2012, the Compensation Committee did not form any subcommittees.
New performance objectives are established 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, 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 2012 ARE DESCRIBED IN GREATER DETAIL IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION OF THIS PROXY STATEMENT.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board 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, 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 currently composed of three directors: Messrs. Macey, Kirton and Antony. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined in Rule 803(a)(2) of the NYSE MKT listing standards). The Nominating and Corporate Governance Committee met one time during the fiscal year. The Nominating and Corporate Governance Committee has a written charter that is available to stockholders on Gran Tierra’s website at http://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 Gran Tierra’s stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are 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 considers 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 also determines whether the nominee is independent for NYSE MKT purposes, which determination is based upon applicable NYSE MKT listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee conducts 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 2012, 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.
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The Nominating and Corporate Governance Committee does not have a formal policy regarding diversity in identifying nominees for director. However, in assessing a potential nominee, the Nomination and Corporate Governance Committee considers the professional experience, education, skills and viewpoints of the nominee and how those factors will contribute to expanding the collective knowledge and experience of the Board. The Nominating and Corporate Governance Committee considers that, while nominees should present a good fit with the existing Board in terms of their ability to work together to create stockholder value in a constructive way, diversity in opinion and viewpoint contribute to the overall success of the Board and Gran Tierra as a whole.
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. 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, 625-11th Avenue S.W., Calgary, Alberta T2R 0E1, Canada, Attention: Director Nominations. This written recommendation must be delivered at least 120 days prior to the anniversary 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 holder 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.
Reserves Committee
The primary purpose of the Reserves Committee is to act on behalf of the Board in fulfilling the Board’s oversight responsibilities with respect to evaluating and reporting on Gran Tierra’s oil and gas reserves.
The Reserves Committee oversees Gran Tierra’s (1) annual review of its oil and gas reserves, (2) procedures for evaluating and reporting its oil and gas producing activities, and (3) compliance with applicable regulatory and securities laws relating to the preparation and disclosure of information with respect to its oil and gas reserves. The Reserves Committee also consults with the Audit Committee on matters relating to Gran Tierra’s oil and gas reserves which impact Gran Tierra’s financial statements. The Reserves Committee is composed of four directors: Messrs. Price, Johnson, Macey and Coffield. All members of the Reserves Committee are independent (as independence is currently defined in Rule 803(a)(2) of the NYSE MKT listing standards), other than Mr. Coffield, Gran Tierra’s Chief Executive Officer. The Reserves Committee met four times during fiscal 2012. The Reserves Committee has a written charter that is available on Gran Tierra’s website at http://www.grantierra.com.
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VOTING STANDARD FOR ELECTION OF DIRECTORS
New rules of the TSX, which became effective December 31, 2012, require a listed issuer to disclose in the materials sent to its shareholders for a meeting at which directors are to be elected, whether or not it has adopted a majority voting policy and, if not, to explain why it has not adopted such a policy in its meeting materials. A majority voting policy generally requires that a director tender his or her resignation if the director receives more “withheld” votes than “for” votes at any meeting where shareholders vote on the uncontested election of directors. The Board considered whether to adopt a majority voting policy and determined not to adopt such a policy at this time. The Board believes a majority voting policy is unnecessary at this time as Gran Tierra has never experienced a high level of withheld votes for its directors in past elections and to date there have been no shareholder requests for such a policy. Gran Tierra is governed by the laws of Nevada which provides for plurality voting as opposed to majority voting for directors. The Board believes that plurality voting is advantageous as it ensures that a full Board will be elected annually at shareholders’ meetings. It does not diminish the right of shareholders to nominate other persons for election as directors in accordance with the applicable laws and Gran Tierra’s constating documents. In keeping with the new rules of the TSX, Gran Tierra will continue to elect each director annually and individually, will advise the TSX by e‐mail if a director receives a majority withheld vote and will forthwith after the shareholders’ meeting issue a press release disclosing the detailed results of the voting for directors.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board has adopted a formal process by which stockholders may communicate with the Board or any of its directors. This information is available on Gran Tierra’s website at http://www.grantierra.com.
CODE OF ETHICS
Gran Tierra has adopted the Gran Tierra Code of Business Conduct and Ethics that applies to all officers, directors and employees. The Code of Business Conduct and Ethics is available on Gran Tierra’s website at http://www.grantierra.com. If Gran Tierra makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code to any executive officer or director, Gran Tierra will promptly disclose the nature of the amendment or waiver on its website.
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PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and Section 14A of the Exchange Act, Gran Tierra’s stockholders are entitled to vote to approve, on an advisory basis, the compensation of Gran Tierra’s named executive officers as disclosed in this proxy statement in accordance with SEC rules. This vote is not intended to address any specific item of compensation, but rather the overall compensation of Gran Tierra’s named executive officers and the philosophy, policies and practices described in this proxy statement.
The compensation of Gran Tierra’s named executive officers subject to the vote is disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related narrative disclosure contained in this proxy statement. As discussed in those disclosures, Gran Tierra believes that its compensation policies and decisions are focused on pay-for-performance principles and strongly aligned with our stockholders’ interests, consistent with current market practices. Compensation of Gran Tierra’s named executive officers is designed to enable Gran Tierra to attract and retain talented and experienced executives to lead Gran Tierra successfully in a competitive environment.
Accordingly, the Board is asking the stockholders to indicate their support for the compensation of Gran Tierra’s named executive officers as described in this proxy statement by casting a non-binding advisory vote “FOR” the following resolution:
“RESOLVED, that the compensation paid to Gran Tierra’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion in this proxy statement, is hereby APPROVED.”
Because the vote is advisory, it is not binding on the Board or Gran Tierra. Nevertheless, the views expressed by the stockholders, whether through this vote or otherwise, are important to management and the Board and, accordingly, the Board and the Compensation Committee intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements.
Advisory approval of this proposal requires the vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board has selected Deloitte & Touche LLP as Gran Tierra’s independent registered public accounting firm for the fiscal year ending December 31, 20122013, and has further directed that management submit the selection of independent registered public accounting firm for ratification by the stockholders at the annual meeting. Deloitte & Touche LLP has audited Gran Tierra’s financial statements since its 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 Gran Tierra’s Bylaws nor other governing documents or law require stockholder ratification of the selection of Deloitte & Touche LLP as Gran Tierra’s independent registered public accounting firm. 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. Abstentions and broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved.
Set forth below is a summary of fees paid to Deloitte & Touche LLP, our independent registered Chartered Accountants,chartered accountants, for services in the fiscal periods ended December 31, 20112012, and December 31, 2010.2011. 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.
Fiscal Year Ended (in thousands) | Fiscal Year Ended | |||||||||||||||
| 2011 | 2010 | 2012 | 2011 | |||||||||||||
| Audit Fees | $ | 1,186,848 | $ | 977,630 | $ | 1,444,571 | $ | 1,186,848 | ||||||||
| Audit-related Fees | 55,607 | 36,663 | - | 55,607 | ||||||||||||
| Tax Fees | - | - | - | - | ||||||||||||
| All Other Fees | 18,769 | 39,757 | 42,220 | 18,769 | ||||||||||||
| Total Fees | $ | 1,261,224 | $ | 1,054,050 | $ | 1,486,791 | $ | 1,261,224 | ||||||||
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 consents.
Audit Related
Audit related fees include miscellaneous advisory services related to the acquisitions and share registration activities of Gran Tierra during the year.
All Other Fees
Other Fees included a project related to vulnerability assessment of Gran Tierra’s information systems as well as public accounting board information and comments letters.
All fees described above were approved by the Audit Committee.
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PRE-APPROVAL POLICIES AND PROCEDURES
Our Audit Committee is responsible for the engagement of the independent auditors and Procedures
| · | the Audit Committee approves the performance by the independent auditors of auditing or permitted non-audit services, subject to restrictions in certain cases, based on the Audit Committee’s determination that this would not be likely to impair the independence of the independent auditors from Gran Tierra; |
| · | Gran Tierra’s management must obtain the specific prior approval of our Audit Committee for each engagement of the independent auditors to perform any auditing or permitted non-audit services; and |
| · | the performance by the independent auditors of certain types of services (bookkeeping or other services related to the accounting records or financial statements of Gran Tierra; financial information systems design and implementation; appraisal or valuation services, fairness opinions or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions or human resources; broker or dealer, or investment adviser or investment banking services; legal services and expert services unrelated to the audit; and any other service that the applicable federal oversight regulatory authority determines, by regulation, is impermissible) is prohibited due to the likelihood that their independence would be impaired. |
In its review of all non-audit service fees, our Audit Committee consider, priorconsiders, among other things, the possible effect of these services on the independence of our independent auditors. Relevant considerations include, but are not limited 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
Any approval required under this policy must be made in writing to Gran Tierra’s independent auditor specifying the services requested and the reasons for the request, andgiven by our Audit Committee or by the chairperson of the Audit Committee willin office at the time, provided that any pre-approval decisions made by the chairperson must be copied on the communication. Gran Tierra’s independent auditor must respond to Gran Tierra’s request 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 backreported to the Audit Committee at theits next scheduled meeting. Gran Tierra’s Audit Committee meeting for ratification.will not delegate its responsibilities to approve services performed by the independent auditors to any member of management.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of Gran Tierra’s common stock as of February 29, 201228, 2013, by (1) each of its directors and named executive officers, (2) each person that beneficially owns more than 5% of the outstanding shares of Gran Tierra’s common stock and (3) all of Gran Tierra’s executive officers and directors as a group. All ownership percentage calculations below assume that all Exchangeable Shares have been converted on a one-for-one basis into corresponding shares of our common stock, as such shares vote together with our common stock on all matters as if shares of our common stock. Unless otherwise indicated, the address for each of the beneficial owners in the table below is c/o Gran Tierra Energy Inc., 300, 625 11th Avenue S.W., Calgary, Alberta T2R 0E1 Canada.
Name of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership | Percentage of Class | ||||||
| Dana Coffield (2) | 2,345,905 | * | ||||||
| Martin Eden (3) | 763,999 | * | ||||||
| Shane O’Leary (4) | 484,299 | * | ||||||
| Júlio César Moreira (5) | 178,999 | * | ||||||
| Duncan Nightingale (6) | 119,999 | * | ||||||
| James Rozon (7) | 188,332 | * | ||||||
| Jeffrey Scott (8) | 3,307,194 | 1.2 | % | |||||
| Ray Antony (9) | 482,535 | * | ||||||
| Verne Johnson (10) | 1,450,240 | * | ||||||
| Nicholas G. Kirton (11) | 409,999 | * | ||||||
| Gerald Macey (12) | 59,999 | * | ||||||
| J. Scott Price (13) | 3,391,079 | 1.2 | % | |||||
| FMR LLC (14) | 23,559,560 | 8.5 | % | |||||
| Amber Capital LP (15) | 18,067,506 | 6.4 | % | |||||
| Directors and officers as a group (total of 15 persons) (16) | 15,629,287 | 5.5 | % | |||||
Name of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership | Percentage of Class | |||||
| Dana Coffield (2) | 2,662,572 | * | |||||
| David Hardy (3) | 304,527 | * | |||||
| Duncan Nightingale (4) | 246,667 | * | |||||
| Shane O’Leary (5) | 409,300 | * | |||||
| James Rozon (6) | 225,000 | * | |||||
| Jeffrey Scott (7) | 3,392,194 | 1.2 | % | ||||
| Ray Antony (8) | 532,536 | * | |||||
| Verne Johnson (9) | 1,500,241 | * | |||||
| Nicholas G. Kirton (10) | 476,561 | * | |||||
| Gerald Macey (11) | 114,999 | * | |||||
| J. Scott Price (12) | 3,441,080 | 1.2 | % | ||||
| FMR LLC (13) | 22,231,170 | 7.9 | % | ||||
| Amber Capital LP (14) | 14,805,299 | 5.3 | % | ||||
| Directors and officers as a group (total of 14 persons) (15) | 15,895,016 | 5.5 | % | ||||
| * | Less than 1%. |
| (1) | Beneficial ownership is calculated based on |
| (2) | Includes shares issuable upon options to acquire |
| (3) | Consists of shares issuable upon options to acquire |
| (4) | Consists solely of shares issuable upon exercise of options exercisable within 60 days of February 28, 2013. |
| (5) | Consists of shares issuable upon options to acquire |
| (6) | Consists solely of shares issuable upon exercise of options exercisable within 60 days of February |
| (7) |
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| (8) | Includes shares issuable upon exercise of an option to acquire |
| (9) | Includes shares issuable upon exercise of an option to acquire 555,000 shares of common stock exercisable within 60 days of February 28, 2013, and 895,238 shares issuable upon exchange of Exchangeable Shares. |
| (10) | Includes shares issuable upon exercise of an option to acquire |
| (11) | Includes shares issuable upon exercise of an option to acquire |
| (12) |
| Consists solely of shares issuable upon exercise of an option to acquire |
| Based on a Schedule 13G/A reporting beneficial ownership as of December 31, |
| Based on a Schedule 13G/A reporting beneficial ownership as of December 31, |
| Includes shares issuable upon exercise of options to acquire |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Gran Tierra’s directors and executive officers, and persons who own more than ten percent of a registered class of Gran Tierra’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of Gran Tierra. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish Gran Tierra with copies of all Section 16(a) forms they file.
To Gran Tierra’s knowledge, based solely on a review of the copies of such reports furnished to Gran Tierra and written representations that no other reports were required, during the fiscal year ended December 31, 2011,2012, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
All dollar amounts discussed below are in U.S. dollars, except as otherwise noted.
To the extent that contractual amounts are in Canadian dollars, which is the case for all of Gran Tierra’s directors and all of Gran Tierra’s named executive officers, other than Júlio César Moreira, they have been converted into U.S. dollars for the purposes of the discussion below. For discussion of 2012 bonus and other compensation amounts, the exchange rate at December 31, 2012, of one Canadian dollar to US $1.0051 is used. For discussion of 2011 bonus and other compensation amounts (other than 2011 salary), the exchange rate at December 31, 2011, of one Canadian dollar to US $0.9796 is used. For discussion of 2010 bonus amounts and 2011 salary amounts, the exchange rate at December 31, 2010, of one Canadian dollar to US $1.0054 is used. For discussion of 2010 salary, the exchange rate of one Canadian dollar to US $0.9709 is used, which is calculated as the average of the daily noon rates as posted by the Bank of Canada in 2010. For discussion of 2009 bonus amounts, the exchange rate at December 31, 2009 of one Canadian dollar to US $0.9555 is used. For discussion of 2009 salary amount, the exchange rate at December 31, 2008 of one Canadian dollar to US $0.8661 is used.
Overview
In this section, we will describe the material components of our executive compensation program for our “named executive officers” or “NEOs,officers,” whose compensation is set forthi.e. our executive officers appearing in the 2011 Summary Compensation Table and other compensation tables contained in this proxy statement:
| · | Dana Coffield, our President and Chief Executive |
| · |
James Rozon, our Officer; |
| · | Shane O’Leary, our Chief Operating |
| · | Duncan Nightingale, our President, Gran Tierra Energy Colombia, Ltd.; and |
| · |
We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why theour Compensation Committee ofand our Board (the “Compensation Committee”) arrivesarrived at specific compensation policies and decisions involving the NEOs.named executive officers.
Opportunity for Stockholder Feedback
The Compensation Committee carefully considers feedback from our stockholders regarding our executive compensation program. Stockholders are invited to express their views to the Compensation Committee as described under the heading “Communication“Stockholder Communications with the Board of Directors” in this proxy statement. In addition, the annual advisory vote on the compensation of the NEOsnamed executive officers provides our stockholders with an opportunity to communicate their views on our executive compensation program.
At the 20112012 Annual Meeting, 96%98.7% of the votes cast on the advisory vote on executive compensation proposal (Proposal 2)3) were cast in favor of our named executive officer compensation as disclosed in the 2012 proxy statement, and as a result our named executive officer compensation was approved.statement. The board of directorsBoard and Compensation Committee reviewed these final vote results and determined that, given the significant level of support, no changes to our executive compensation policies and decisionsprocesses were necessary at this time based on the vote results.
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You should read this section of the proxy statementCompensation Discussion and Analysis in conjunctionconnection with “Proposal 2 — Advisory Vote on Executive Compensation,” the advisory vote that we are conducting on the compensation of the NEOs (See “Proposal 3 — Advisory Vote on Executive Compensation”).named executive officers. This Compensation Discussion and Analysis contains information that is relevant to your voting decision.
Our Business
Gran Tierra is an independent international energy company engaged in oil and gas acquisition, exploration, development and production. We own oil and gas properties in Colombia, Argentina, Peru and Brazil. Our revenue and interestother income for the year ended December 31, 20112012, was approximately $597.4$585.2 million. For more information about our business, please see the sections titled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on February 27, 2012.26, 2013.
While the past 12 months2012 marked another year of uncertainty and challenges in the global economy, andthe global financial markets throughout this period,and South American political environment, as a result of our steady leadership, we were able to seize opportunities and continued to differentiate ourselves from the competition. competition throughout this period. As we previously reported, the guerrilla activity in Colombia increased significantly in 2012 which resulted in the Ecopetrol-operated Trans-Andean oil pipeline (the “OTA pipeline”) in Colombia, the primary method Gran Tierra delivers its oil to the market, shutdown for over 162 days which had a material adverse effect on our deliveries and our financial performance for 2012. In 2012, we developed alternative transportation arrangements in Colombia and we implemented such arrangements in 2013 which allows us to deliver more of our production that was adversely impacted by the pipeline shutdowns. While these deliveries resulted in reduced realized revenue compared to the Ecopetrol-operated OTA pipeline, such arrangements will continue to be used when guerrilla activity impacts the OTA pipeline.
During 2011,2012, we also had the following significant accomplishments:
| · | Estimated proved oil and natural gas liquids (“NGL”) reserves, |
| · | Received regulatory approval and acquired the remaining 30% working interest of four blocks in Brazil; |
| · | In Brazil, production was initiated from two new wells drilled in the Tiê Field on Block 155, with production growing to approximately 1,000 barrels of oil per day (“BOPD”) gross or 850 BOPD NAR; |
| · | Drilled the 1-GTE-05HP-BA horizontal well in Block 142, the first horizontal well to be drilled in the tight sands of the Gomo formation in the Recôncavo Basin of Brazil; |
| · | Added Sinu-1 and Sinu-3 Blocks in the Sinu Basin of northern Colombia in the National Hydrocarbon Agency 2012 Bid Round and continued development of the Moqueta and Costayaco fields; |
| · | Increased working interest in multiple blocks in Peru, completed civil construction on a drilling platform and commenced drilling an exploration well in Block 95; and |
| · | Continued development of our producing fields in Argentina, including Surubi, Puesto Morales and Rinconada Norte fields. The Proa oil field discovery on the Surubi Block, Argentina, tested 6,300 BOPD of 46° API crude oil and the PMN-1117 horizontal well in the Puesto Morales Block, the first horizontal multi-stage fracture stimulated well drilled in the tight sands of the Loma Montosa formation of Argentina, tested at a rate of approximately 840 BOPD initially and is currently flowing naturally at a choke-restricted rate of 100 BOPD of 33.8°API oil with a 27% water cut. |
Other business developments for the year were as follows:
| · | In 2012, oil and natural gas production NAR and after inventory adjustments averaged 16,897 barrels of oil equivalent per day (“BOEPD”), a decrease of 3% from 2011. However, despite pipeline downtime, year-to-date production before inventory adjustments through and including March 31, 2013, averaged approximately 21,860 BOEPD NAR; |
| · | Estimated proved gas reserves, NAR, as at December 31, |
| · | Revenue and other income |
| · | Net income |
| · | Funds flow from operations increased |
| · | Cash and cash equivalents was |
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2012 Executive Compensation Highlights
In January 2012, in view of our financial performance during 2011, as well as our other business accomplishments (as described above), the Compensation Committee tookrecommended, and in February 2012 our Board approved, the following compensation actions:
| We maintained our 2011 compensation philosophy for 2012 which is (i) to |
| We made annual |
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2012 Compensation Corporate Governance Highlights
We endeavor to maintain good governance standards, including with respect to the oversight of our executive compensation policies and practices. The following policies and practices were in effect during 2011:2012 relating to executive compensation:
| · | The Compensation Committee is composed solely of independent directors who have established ways to communicate with stockholders regarding their executive compensation ideas and concerns; |
| · | The Compensation Committee’s independent compensation consultant, Lane Caputo Compensation Inc. (“Lane Caputo”), is retained directly by the Compensation Committee and performs only limited consulting services for us with the full knowledge of the Compensation Committee; and |
| · | The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation-related risk profile so that our compensation-related risks are not reasonably likely to have a material adverse effect on Gran Tierra. |
Philosophy and Objectives of our Executive Compensation Program
Our philosophy underlying our executive compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our stockholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our stockholders and communities where we have a strong presence. Our executive compensation program is an important component of these overall human resources policies. Our compensation practices also serve as a means of communicating our goals and standards of conduct and performance, and for motivating and rewarding employees in relation to their achievements.
We observe the follow principles:
| · | Retain and Hire Top Caliber Executives: Executive officers should have base salaries and employee benefits that are market competitive and that permit us to hire and retain high-caliber individuals at all levels; |
| · | Pay for Performance: A significant portion of the annual compensation of our executive officers should vary with annual business performance and each individual’s contribution to that performance; |
| · | Reward long-term growth and profitability: Executive officers should be rewarded for achieving long-term results, and |
| · | Provide modest perquisites: Perquisites for our executive officers should be minimized and limited to items that serve a reasonable business purpose. |
Gran Tierra’s compensation program consists of three basic elements—elements: base salary, cash bonus and equity incentives. We focus on providing a majority of ourthe total compensation for our named executive officers linked to both Gran Tierra’s performance (solely in the case of Dana Coffield, our President and Chief Executive Officer) and to individual performance through performance-based cash awards, and equity awards which are only valuable if Gran Tierra’s stock price increases.based on performance:
| · | we provide cash bonuses linked both to Gran Tierra’s performance (solely in the case of Dana Coffield, our President and Chief Executive Officer) and to each individual’s performance; we link the portion of our executive officers’ cash compensation to Gran Tierra’s performance as measured by achievement of budget targets for items such as production, reserves, capital expenditures, revenues and operating costs, as well as other factors such as liquidity, share price performance given overall market conditions, and other objectives specific to Gran Tierra’s situation at the time; and |
| · | in 2012, we provided long-term incentives in the form of stock option grants; options generally vest over three years, linking executive officers’ rewards directly to their ability to create value for our stockholders and providing an incentive for our executive officers to remain with Gran Tierra over the long term. |
The price of oil directly impacts the performance of Gran Tierra. During 2011,2012, the price of West Texas Intermediate Crude oil (the reference price for most of our contracts) experienced fluctuations from $75.67$77.69 to $113.93. In addition, we provide long-term incentives to our executives and employees in the form of stock option grants. Options generally vest over three years, linking executives’ rewards directly to their ability to create value for our stockholders and providing an incentive for our executives to remain with Gran Tierra over the long term.$109.77.
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Risk Assessment
In January 2012, we conducted an update to our assessment ofFebruary 2013, the Compensation Committee and Board assessed the risks associated with our compensation policies and practices. This updateassessment included an examination of the changes in Gran Tierra’s risk profile over the past year for our executive compensation policies and practices. Based on this assessment, wethe Compensation Committee and the Board determined that these risks were not reasonably likely to have a material adverse effect on Gran Tierra. Among other things, wethe Compensation Committee and the Board took into consideration the fact that our principal incentive compensation plans and arrangements contained similar design and risk mitigation features as the prior year’s plans and arrangements.that:
| · | the current significant weighting towards long-term incentive compensation discourages short-term risk taking; |
| · | our goals are appropriately set to avoid targets that, if not achieved, result in a large percentage loss of compensation; |
| · | incentive awards are decided by the Compensation Committee and recommended to the Board for approval; and |
| · | as an oil and gas exploration company, we do not face the same level of risks associated with compensation for employees at financial services (traders and instruments with a high degree of risk) or technology companies (rapidly changing markets). |
Compensation Process
The Compensation Committee recommends to the Board for approval the annual compensation for Gran Tierra’s President and Chief Executive Officer. Within the framework of the compensation programs reviewed and approved by the Compensation Committee and based on management’s review of market competitive positions, each year our Chief Executive Officer recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for executive officers, including the other named executive officers. These recommendations are based upon his assessment of each executive officer’s performance (including his own), the performance of the individual’s respective business or function, and employee retention considerations. The Compensation Committee reviews our Chief Executive Officer’s recommendations, as well as the recommendations of Lane Caputo, and approvesdeliberates as to whether any compensation changes should be made affecting our executive officers asofficers. Following this deliberation, it determines, in its sole discretion, and then makes its recommendations to be made to the Board for approval. Our Chief Executive Officer does not attend that portion of the Board meeting at which his compensation is approved.
30.
Role of the Compensation Consultant
The Compensation Committee relies upon external advisors and third-party compensation surveys as well as the knowledge and experience of Compensation Committee members and other members of the Board to set rewarding and competitive levels of salary and other compensation. The retention of and scope of services from independent compensation advisors are to be assessed on an annual basis.
The Compensation Committee retained the services of Lane Caputo Compensation Inc. (the “Compensation Consultant”) as its executive compensation consultant pursuant to a written agreement. The Compensation ConsultantLane Caputo reports directly to the Compensation Committee and the Compensation Committee may replace the Compensation ConsultantLane Caputo or hire additional consultants at any time. A representative of the Compensation ConsultantLane Caputo attends meetings of the Compensation Committee, as requested, and communicates with the Compensation Committee Chair between meetings; however, the Compensation Committee makes all decisions and recommendations to the Board. The Compensation ConsultantLane Caputo maintains a group of benchmark peers that the Compensation Committee findsand the Board find relevant for comparison purposes. Services performed by the Compensation ConsultantLane Caputo are pre-approved by the Compensation Committee and any additional work to be performed, including at the request of management, must be pre-approved by the Chair of the Compensation Committee.
The total amount of fees paid to the Compensation ConsultantLane Caputo for services to the Compensation Committee in 20112012 was $161,465. The Compensation Consultant$93,248. Lane Caputo received $35,707$37,416 in other fees from us for general compensation related work for Gran Tierra and $3,429$3,166 to participate in a general industry survey of long-term compensation.
The Compensation Committee assesses the performance and independence of Lane Caputo and of each individual employee of the consulting firm who directly provides services to Gran Tierra. In April 2013, the Compensation Committee considered whether Lane Caputo could serve as an independent adviser to the Compensation Committee. The Compensation Committee requested information from Lane Caputo about potential conflicts of interest, and in particular, considered the fact that Lane Caputo provides minimal other services to Gran Tierra, that the individual representative of Lane Caputo who works directly with the Compensation Committee has no other business relationships with the Board, management or Gran Tierra, and Lane Caputo’s own policies on ethics and conflicts of interest. In particular, the fees paid to Lane Caputo in 2012 did not exceed 10% of Lane Caputo’s annual gross revenues. As a result, the Compensation Committee concluded that there were no actual conflicts of interest with respect to Lane Caputo providing services to the Compensation Committee.
2012 Compensation Structure, Base Salaries and Target Bonuses
Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for employees, while being subject to centralized design, approval, and control. The Compensation Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the named executive officers. To assist in establishing recommendations for 2011 bonuses and theour 2012 executive compensation structure, the Compensation Consultantbase salaries and target bonuses, Lane Caputo continued with the philosophy of measuring Gran Tierra’s compensation structure against a relevant group of industry peers (the “Custom Peer Group”) against which to benchmark executive compensation. This Custom Peer Group iswas substantially similar to last year’sthe 2011 Custom Peer Group with the exception of the removal of three companies (Antrim Energy Inc., Perpetual Energy Inc. and Provident Energy Ltd.) and the addition of one company (P 1 Energy Corp.).Group. Although it would have been preferable to only include peers that compete with Gran Tierra in the international energy arena, Gran Tierra’s relative size, and the lack of sufficient international peers of similar size, dictated that peers with domestic operations of similar size be included in the peer group, and, in fact, such domestic peers are predominate in the group. As a result, the Custom Peer Group included peers of a similar size to Gran Tierra based on market capitalization and average daily production volumes, and included peers with operations located both internationally and domestically. The Custom Peer Group consisted of the following 22 companies:
Advantage Oil & Gas Ltd. | NuVista Energy Ltd. |
| Bankers Petroleum Ltd. | P 1 Energy Corp. |
| Birchcliff Energy Ltd. | Pacific Rubiales Energy Corp. |
| BPZ Resources Inc. | Paramount Resources Ltd. |
| C&C Energia Ltd. | Parex Resources Inc. |
| Canacol Energy Ltd. | PetroBakken Energy Ltd. |
| Celtic Exploration Ltd. | Petrominerales Ltd. |
| Crew Energy Inc. | Peyto Exploration & Development Corp. |
| Daylight Energy Ltd. | Progress Energy Resources Corp. |
| Legacy Oil & Gas Inc. | Trilogy Energy Corp. |
| Niko Resources Ltd. | Vermilion Energy Inc. |
31.
In making compensation decisions regarding executive officers located in South America, the Compensation Committee also utilized the following local compensation surveys to reflect the local pay practices in each country:
| · | Aon Hewitt Market Review (Argentina). |
| · | Towers Watson 2011 Oil & Gas Total Rewards Survey (Brazil). |
| · | Hay Group Diagnostico Salarial (Peru). |
Benchmark data from Lane Caputo Compensation’s International Energy Exploration & Production Compensation Survey was also used to reflect the expatriate assignment of theDuncan Nightingale, our President of Gran Tierra Colombia.Energy Colombia, Ltd.
2012 Actual Bonuses, and 2013 Compensation Structure, Base Salaries and Target Bonuses
To assist in establishing recommendations for 2012 bonuses and the 2013 executive compensation structure, base salaries and target bonuses, Lane Caputo continued with the philosophy of measuring Gran Tierra’s compensation structure against a relevant group of industry peers against which to benchmark executive compensation, revising the Custom Peer Group slightly by removing Daylight Energy Ltd. (acquired by Sinopec International Petroleum Exploration and Production Corporation in October 2011) and P1 Energy Corp (lack of comparable oil and gas production) and adding Transglobe Energy Corp.
In making compensation decisions regarding executive officers located in South America, the Compensation Committee also utilized the following local compensation surveys to reflect the local pay practices in each country:
| · | Aon Hewitt Market Review (Argentina). |
| · | Towers Watson 2012 Oil & Gas Total Rewards Survey (Brazil). |
| · | Mercer 2012 Compensation & Benefits Survey (Colombia). |
| · | Mercer Compensation Survey 2012 (Peru). |
In addition to the local market data, benchmark data from Lane Caputo Compensation’s International Energy Exploration & Production Compensation Survey was also used to reflect the expatriate assignment of Duncan Nightingale, our President of Gran Tierra Energy Colombia, Ltd.
Application of Judgment
Given the extensive research and analysis used to develop the peer benchmark group, the Compensation Committee believes that the compensation survey data used provides a useful guide for comparative purposes. The Compensation Committee recognizes that a successful compensation program also requires an application of judgment to maintain a subjective determination of individual performance by our executives.executive officers. Therefore, the Compensation Committee applies its judgment in reconciling the program’s objectives and peer comparisons with the realities of rewarding excellent performance and retaining valued employees.
Elements of Compensation
The Compensation Committee has determined that Gran Tierra will use three basic elements of compensation —compensation: base salary (including benefits), cash bonus and equity incentives. Each component has a different purpose.
The Compensation Committee believes that base salaries at this stage in Gran Tierra’s growth and especially within the international exploration and production sector, must be competitive to retain the best executives. The Compensation Committee believes that principal performance incentives should be in the form of long-term equity incentives given the longer-term nature of Gran Tierra’s business plan. Long-term incentives to date have been in the form of stock options butoptions; however, Gran Tierra’s equity incentive plan also providesallows for other forms of equity incentive forms,incentives, such as restricted stock andunits, restricted stock bonuses, which the Compensation Committee is not considering at this time.or stock bonuses. Short-term cash bonuses are a common element of compensation in Gran Tierra’s industry and among Gran Tierra’s peers with whomwhich Gran Tierra competes with for executive talent. The Compensation Committee ultimately determines the optimal allocation split between the three forms of compensation relative to Gran Tierra’s peers for each executive position, taking into account the contributions of each executive officer and the operational and financial achievements of Gran Tierra. This exerciseThe Compensation Committee does not use a formula to establish the allocation between base salary, target bonus and long term incentives; rather, this allocation has been based on the evaluation of the achievement of goals set by the Chief Executive Officer at the beginning of the year and consensus among the members of the Compensation Committee, all of whom have significant experience in the oil and gas exploration business. Actual bonuses are determined based on the subjective determination by the Compensation Committee and the Board of the achievement of goals set at the beginning of the year.
32.
Salary
The Compensation Committee determined 20112012 base salaries based upon the market data presented by the Compensation ConsultantLane Caputo and, taking into consideration the very competitive nature of the international exploration and production sector and the corresponding shortage of experienced seniorexecutive talent, particularly in Calgary, Canada, Gran Tierra’s headquarters, determined that a general target atof the 65th65th percentile of the Custom Peer Group data was appropriate to retain the services of Gran Tierra’s executives,executive officers, with the exact amount determined by the Compensation Committee’s subjective assessment of the appropriate salary for each executive officer given their performance and roles within Gran Tierra.
The Compensation Committee recommended to the Board, and the Board approved, the following annual salaries (USD) for 2011:2012:
| Name | Salary | |||
| Mr. Coffield | $ | 427,179 | ||
| Mr. Rozon | 231,179 | |||
| Mr. O’Leary | 361,845 | |||
| Mr. Nightingale | 311,589 | |||
| Mr. Hardy | 276,410 | |||
Mr. Coffield’s Mr. Eden’s and Mr. Moreira’s 2011 salaries were2012 salary was positioned slightly aboveat the median65th percentile of the Custom Peer Group while Mr. O’Leary’s was slightly above the 75th75th percentile due primarily to the inclusion of peers with domestic operations and the differences in compensation practices between operational executives in international locales (relatively higher compensation for this role) and domestic locales (generally lower compensation for the role) locales.. Due to his recent appointment as acting Chief Financial Officer, Mr. Rozon’s andsalary was positioned at the 25th percentile of the Custom Peer Group. Following his appointment to Chief Financial Officer, Mr. Rozon’s annual salary was increased to $301,538, which positioned him at the 65th percentile of the Custom Peer Group. Mr. Nightingale’s new2012 salary was positioned above the 75th percentile of comparable expatriate roles were not benchmarked until 2012.due primarily to the relative importance and larger scope of operations he oversees compared to his peers. Mr. Hardy’s 2012 salary was positioned at the 65th percentile.
Annual Bonus
Bonuses for 20112012 were based on corporate, business unit and personal performance, with the following individual weightings:
Corporate Performance | Business Unit Performance | Personal Performance | ||||||||||||||||
| Name | Corporate Performance | Business Unit Performance | Personal Performance | |||||||||||||||
| Mr. Coffield | 100 | % | 0 | % | 0 | % | 100% | 0% | 0% | |||||||||
| Mr. Eden | 70 | % | 0 | % | 30 | % | ||||||||||||
| Mr. Rozon | 60 | % | 0 | % | 40 | % | 70% | 0% | 30% | |||||||||
| Mr. O’Leary | 70 | % | 0 | % | 30 | % | 70% | 0% | 30% | |||||||||
| Mr. Moreira | 30 | % | 40 | % | 30 | % | ||||||||||||
| Mr. Nightingale | 30 | % | 40 | % | 30 | % | 30% | 40% | 30% | |||||||||
| Mr. Hardy | 60% | 0% | 40% | |||||||||||||||
33.
The Compensation Committee, using its subjective judgment of Gran Tierra’s performance in 20112012 measured against the performance goals set forth for Gran Tierra, determined that the corporate performance score, as well as the business unit score for 2011the Colombia business unit, for 2012 was 70%90%. For Mr. Coffield, the corporate performance was applied to 100% of the target bonus. For Messrs. O’LearyRozon and Eden andO’Leary, the corporate performance score was applied to 70% of the target bonus and the remaining 30% of target bonus was determined based upon the Compensation Committee’s subjective determination of such executive officer’s respective individual performance as measured against thesuch executive officer’s specific executive’s individual performance objectives. For Messrs.Mr. Nightingale, and Moreira, the corporate performance score applied to 30% of the target bonus, 40% of target bonus was determined based upon business unit performance and the remaining 30% of target bonus was determined based upon the Compensation Committee’s subjective determination of his individual performance.performance as measured against his specific individual performance objectives. For the period January 1, 2011 through December 8, 2011, Mr. Rozon’s target bonus was applied toHardy, the corporate performance score ofwas applied to 60% of the target bonus and the remaining 40% of target bonus was determined based upon the Compensation Committee’s subjective determination of his individual performance as measured against thehis specific executive’s individual performance objectives. Thereafter, with respect to Mr. Rozon’s role as Acting Chief Financial Officer, during the period December 9, 2011 through December 31, 2011, Mr. Rozon’sNightingale had a significant portion of his target bonus was appliedtied to thebusiness unit performance, rather than corporate performance, scorebecause he was in charge of 70%our Colombia business unit and had significantly more ability to influence the performance of the target bonus,Colombia business unit than overall corporate performance; no other named executive officer was in charge of a business unit. The allocation of weightings between corporate performance (or in the case of Mr. Nightingale, business unit performance) and the remaining 30% based upon individual performance as measured againstwas based on the specific executive’s individual performance objectives.
subjective determination of the relative abilities of the executive officers to affect corporate performance.
Individual objectives defined for 20112012 were as follows:
Dana Coffield - Chief Executive Officer and President
The principal corporate objectives in 20112012 for Gran Tierra’s Chief Executive Officer and President,Tierra, and therefore Gran Tierra,for Mr. Coffield, which were recommended by the Compensation Committee and approved by the Board in March 2011,February 2012, were:
Reserves (35%(25%)
| · | Add |
Production (25%)
| · | Attain average production of |
Business Development (15%)
| · | Execute business development strategies to manage the portfolio consistent with business unit objectives. |
Finance (2%(4%)
| · | Maintain compliance with SEC, NYSE and TSX regulatory environments along with host-country regulatory compliance. |
| · | Ensure integrity of financial |
| · | Deliver internal and |
| · | Manage cash and working capital, and ensure financial resources are |
Legal (2%(3%)
| · |
| · | Assist with |
Leadership (20%(15%)
| · |
Environmental, Health, Safety, Security and Community Relations (2%Corporate Social Responsibility (10%)
| · | Ensure |
Human Resources (2%(3%)
| · | Ensure |
James Rozon - Acting Chief Financial Officer
The principal objectives in 20112012 for Gran Tierra’s Acting Chief Financial Officer were:
| · |
| Complete |
| · | Complete |
| · | Complete |
| · |
| · |
| · |
| · |
| · | Leadership: Lead by example and maintain a culture of open and honest communication; promote staff training and professional development along with clearly aligned accountabilities and goals (15%). |
Shane O’Leary - Chief Operating Officer
The principal objectives in 20112012 for Gran Tierra’s Chief Operating Officer were:
| · |
Reserves (35%(30%)
| · | Add |
Production (35%(30%)
| · | Attain average production of |
| Leadership |
| · |
| · | Roll out centralized Drilling, Completions and Operations organization. |
Duncan Nightingale – President, Gran Tierra Energy BrasilColombia, Ltd.
The principal objectives in 2011 for Gran Tierra’s President, Gran Tierra Energy Brasil were:
Production (25%)
| · |
Reserves (25%)
| · | Add working interest reserves of 9.5 MMBOE Proved resources and 10.5 MMBOE Proved plus |
Operations Execution (10%)
| · | Drill four exploration and |
| · |
| · |
35.
Geographical and Geophysical Program Execution (10%)
| · | Complete five geographical and geophysical programs, each program within ten percent of |
Business Development (15%)
| · | Execute |
Environmental, Health, Safety, Security, and Corporate Social Responsibility (10%)
| · |
Budget (5%)
| · |
David Hardy – Vice-President, Legal and General Counsel
The principal objectives in 2012 for Gran Tierra’s Vice President, Legal and General Counsel are listed below. Mr. Hardy’s principal objectives were considered in their entirety with no specific weighing of objectives.
| · |
| · |
| · |
| · |
| · | Complete the merger of Solana Colombia and Gran Tierra Energy Colombia, Ltd. |
Equity Incentives
In February 2011,January 2012 the Compensation Committee considered the recommendations of Lane Caputo, and elements of individual, business unit and corporate performance, in determining grant levelsits recommendations for equity incentive grants, and recommended toin February 2012 the Board of Directors, and the Board of Directors granted options under the terms of Gran Tierra’s 2007 Equity Incentive Plan to each of Gran Tierra’s named executive officers as follows:
| Name | Number of Shares | |
| Mr. Coffield | 375,000 | |
| Mr. Rozon | 35,000 | |
| Mr. O’Leary | 275,000 | |
| Mr. Nightingale | 50,000 | |
| Mr. Hardy | 100,000 |
The levels of these awards were based on recommendations from the Compensation Consultant,Lane Caputo, taking into account Gran Tierra’s desired competitive positioning of Total Direct Compensationtotal direct compensation targeting the 75th75th percentile of the Custom Peer Group, as stateddiscussed in the sections titled “Overview” and “Philosophy and Objectives of our Executive Compensation Philosophy describedProgram” above based on the fair value of awards at time of grant. In addition to the fair value, the absolute number of awards and each award as a percentage of total shares outstanding versus the Custom Peer Group were also considered as well as the country of residence of the executive officer.
36.
The energy industry, including companies in the Custom Peer Group, has faced increasing risks in retaining executive officers and key employees as a result of historical volatility in the stock price for stock options. In November 2012, the Compensation Committee retained Lane Caputo to assist in researching potential alternative equity incentive programs to attract and retain the caliber of executive officers and key employees necessary to operate our business. The Compensation Committee and the Board, while recognizing the inherent value in compensating employees by promoting long-term value creation through the need for sustained increases in our stock price for stock options to be meaningful, also recognizes the need to keep pace with competitive market trends and is therefore considering the addition of alternative equity incentives in the current compensation program. In April 2013, the Compensation Committee adopted and has recommended to the Board a new long-term program to be implemented in 2013.
Termination and Change in Control Provisions
Gran Tierra’s employment agreements with Gran Tierra’sour executive officers contain termination and change in control provisions. These provisions provide that Gran Tierra’s 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 the section titled “Agreements with Named Executive Officers” below. The termination and change-in controlchange-in-control provisions were industry standard clauses at the time that the executive officers entered into the employment agreements with Gran Tierra.
us.
Benefits
Messrs. Coffield, Eden, Rozon, O’Leary, MoreiraHardy, Nightingale and NightingaleO’Leary are eligible for full participation in all rights and benefits under any life insurance, disability, medical, dental, health and accident plans maintained by Gran Tierra for its employees and executives.executive officers. Our executive officers generally do not receive any supplemental retirement benefits or perquisites, except for limited perquisites provided on a case-by-case basis. In addition, these Executivesexecutive officers will be paid their base salary in the event they become disabled, until such time as the Executiveexecutive officer begins to receive long-term disability insurance benefits. These are standard basic benefits in the industry.our industry and help to retain and recruit key talent.
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 that the CD&A be included in this proxy statement and incorporated into Gran Tierra’s Annual Report on Form 10-K for the fiscal year ended December 31,
Verne Johnson, Chair
J. Scott Price
Ray Antony
37.
COMPENSATION POLICIES AND PRACTICES AS THEY RELATE TO RISK MANAGEMENT
The Compensation Committee, with assistance of compensation consultants and legal counsel, and the Board reviewed Gran Tierra’s compensation policies and practices as they relate to risk management practices and risk-taking incentives. In the course of this review the Compensation Committee and the Board noted that the fixed (or salary) portion of compensation is designed to provide a steady income regardless of Gran Tierra’s stock price performance so that executives do not feel pressured to focus exclusively on stock price performance to the detriment of other important business metrics. The variable (cash bonus and equity) portions of compensation are designed to reward both short term and long term corporate performance. For short-term performance, Gran Tierra’s cash bonus is awarded based on a formula using the achievement of a combination of corporate goals, personal goals and business goals (if applicable), except in the case of the Chief Executive Officer, who was evaluated for 20112012 performance on the basis of the achievement of the corporate goals only. For long-term performance, the stock option awards cliff vest annually over three years and are only valuable if Gran Tierra’s stock price increases over time. The Compensation Committee concluded that these variable elements of compensation are a sufficient percentage of overall compensation to motivate executives to produce superior short-and long-term corporate results, while the fixed element is also sufficiently high that the executives are not encouraged to take unnecessary or excessive risks in doing so. Finally:
| · | significant weighting towards long-term incentive compensation discourages short-term risk taking; |
| · | goals are appropriately set to avoid targets that, if not achieved, result in a large percentage loss of compensation; |
| · | incentive awards are decided by the Compensation Committee and recommended to the Board for approval; and |
| · | as an oil and gas exploration company, Gran Tierra does not face the same level of risks associated with compensation for employees at financial services (traders and instruments with a high degree of risk) or technology companies (rapidly changing markets). |
Based on the above, the Compensation Committee concluded that the risks arising from Gran Tierra’s compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on Gran Tierra.
As noted above, Gran Tierra’s Compensation Committee consists of Messrs. Johnson, Price and Antony. None of the members of the Compensation Committee has at any time been an officer or employee of Gran Tierra. No member of the Board or of the Compensation Committee served as an executive officer of another entity that had one or more of Gran Tierra’s executive officers serving as a member of that entity’s board or compensation committee.
SUMMARY COMPENSATION TABLE
The following table shows for the fiscal years ended December 31, 2012, 2011 2010 and 2009,2010, compensation awarded to or paid to, or earned by, Gran Tierra’s Chief Executive Officer, Chief Financial Officer Acting Chief Financial Officer and three other most highly compensated executive officers at December 31, 20112012 (the “Named Executive Officers”):
Summary Compensation Table
| Name and principal position | Year | Salary (US$)(1) | Bonus (US$)(1)(2) | Option Awards (US$)(3) | All Other Compensation (US$) | Total (US$) | ||||||||||||||||
| Dana Coffield | 2012 | $ | 427,179 | $ | 351,794 | $ | 1,313,116 | $ | 25,587 | (4) | $ | 2,117,676 | ||||||||||
| President and Chief Executive | 2011 | $ | 356,927 | $ | 195,925 | $ | 2,030,550 | $ | 22,731 | (5)(14) | $ | 2,606,133 | ||||||||||
| Officer | 2010 | $ | 320,397 | $ | 239,292 | $ | 666,776 | $ | 34,607 | (6)(14) | $ | 1,261,072 | ||||||||||
| James Rozon | 2012 | $ | 277,819 | $ | 211,076 | $ | 122,557 | $ | 19,770 | (7) | $ | 631,222 | ||||||||||
| Chief Financial Officer | 2011 | $ | 193,722 | $ | 63,578 | $ | 171,213 | $ | 3,511 | $ | 432,024 | |||||||||||
| Shane O’Leary | 2012 | $ | 361,845 | $ | 261,333 | $ | 962,952 | $ | 36,336 | (9) | $ | 1,622,466 | ||||||||||
| Chief Operating Officer | 2011 | $ | 307,661 | $ | 156,740 | $ | 1,489,070 | $ | 20,101 | (9)(14) | $ | 1,973,572 | ||||||||||
| 2010 | $ | 282,726 | $ | 186,004 | $ | 416,735 | $ | 18,188 | (10)(14) | $ | 903,653 | |||||||||||
| Duncan Nightingale | 2012 | $ | 311,589 | $ | 130,666 | $ | 175,082 | $ | 471,537 | (11) | $ | 1,088,874 | ||||||||||
| President, Gran Tierra Energy Colombia Ltd. | 2011 | $ | 264,784 | $ | 127,351 | $ | 270,740 | $ | 305,270 | (12) | $ | 968,145 | ||||||||||
| David Hardy | 2012 | $ | 276,410 | $ | 127,651 | $ | 350,164 | $ | 23,985 | (13) | $ | 778,210 | ||||||||||
| Vice President, Legal and General Counsel | ||||||||||||||||||||||
Name and principal position | Year | Salary (US$)(1) | Bonus (US$)(1)(2) | Option Awards (US$)(3)(4) | All Other Compensation (US$) | Total (US$) | ||||||||||||||||||
| Dana Coffield | 2011 | $ | 356,927 | $ | 195,925 | $ | 2,030,550 | $ | 3,594 | $ | 2,586,996 | |||||||||||||
| President and Chief Executive Officer | 2010 | $ | 320,397 | $ | 239,292 | $ | 666,776 | $ | 25,795 | (5 | ) | $ | 1,252,260 | |||||||||||
| 2009 | $ | 286,642 | $ | 171,234 | $ | - | $ | 2,326 | $ | 460,202 | ||||||||||||||
| Martin Eden | 2011 | $ | 273,476 | $ | 132,249 | $ | 1,082,960 | $ | 5,464 | $ | 1,494,149 | |||||||||||||
| Vice President, Finance and Former Chief | 2010 | $ | 250,184 | $ | 162,880 | $ | 416,735 | $ | 19,688 | (7 | ) | $ | 849,487 | |||||||||||
| Financial Officer (6) | 2009 | $ | 239,824 | $ | 136,389 | $ | - | $ | 2,326 | $ | 378,539 | |||||||||||||
| Shane O’Leary | 2011 | $ | 307,661 | $ | 156,740 | $ | 1,489,070 | $ | 5,118 | $ | 1,958,589 | |||||||||||||
| Chief Operating Officer | 2010 | $ | 282,726 | $ | 186,004 | $ | 416,735 | $ | 3,205 | $ | 888,670 | |||||||||||||
| 2009 | $ | 222,944 | $ | 147,131 | $ | 716,563 | $ | 1,733 | $ | 1,088,371 | ||||||||||||||
| Júlio César Moreira | 2011 | $ | 303,797 | $ | 88,930 | $ | 676,850 | $ | 82,576 | (9 | ) | $ | 1,152,153 | |||||||||||
| President, Gran Tierra Brasil Ltda. | 2010 | $ | 321,641 | $ | 177,395 | $ | 166,694 | $ | 88,114 | (10 | ) | $ | 753,844 | |||||||||||
| 2009 | $ | 87,069 | (8) | $ | 45,661 | $ | 356,190 | $ | 65,857 | (11 | ) | $ | 554,777 | |||||||||||
Duncan Nightingale President, Gran Tierra Energy Colombia Ltd. | 2011 | $ | 264,784 | $ | 127,351 | $ | 270,740 | $ | 305,270 | (12 | ) | $ | 968,145 | |||||||||||
James Rozon Acting Chief Financial Officer (6) | 2011 | $ | 193,722 | $ | 63,578 | $ | 171,213 | $ | 3,511 | $ | 432,024 | |||||||||||||
38.
| (1) | Messrs. Coffield, |
| (2) | For |
| (3) | Granted under terms of Gran Tierra’s 2005 and 2007 Equity Incentive Plan. |
| Assumptions made in the valuation of stock options granted are discussed in Note 7 to Gran Tierra’s |
| (4) | Consists of critical illness and disability insurance premiums of $19,137, life insurance premiums of $1,836 and parking fees of $4,614. |
| (5) |
| (6) | Consists of a vacation payout of |
| (7) |
| (8) |
| (9) | Consists of critical illness and disability insurance premiums of $14,983, life insurance premiums of $2,777 and parking fees of $2,341. |
| (10) | Consists of critical illness and disability insurance premiums of $14,983 and life insurance premiums of $3,205. |
| (11) | Consists of payments related to Mr. Nightingale’s expat assignment in Colombia for |
| (12) |
| (13) | Consists of critical illness and disability insurance premiums of $18,303, life insurance premiums of $1,068 and parking fees of $4,614. |
| (14) | Other compensation for the prior periods has been restated to include imputed income earned on behalf of our Named Executive Officers for critical illness and disability insurance premiums. |
GRANTS OF PLAN-BASED AWARDS
The following table shows for the fiscal year ended December 31, 2012, certain information regarding grants of plan-based awards to the Named Executive Officers:
Grants of Plan-Based Awards
Name | Grant Date | Date of Corporate Approval (1) | All Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Option Awards ($)(2) | Grant Date | Date of Corporate Approval (1) | All Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Option Awards ($)(2) | ||||||||||||||||||||||
| Mr. Coffield | 3/9/2011 | 2/3/2011 | 375,000 | $ | 8.40 | $ | 2,030,533 | 2/29/2012 | 2/3/2012 | 375,000 | $ | 5.83 | $ | 1,313,116 | ||||||||||||||||||
| Mr. Eden | 3/9/2011 | 2/3/2011 | 200,000 | $ | 8.40 | $ | 1,082,951 | |||||||||||||||||||||||||
| Mr. Hardy | 2/29/2012 | 2/3/2012 | 100,000 | $ | 5.83 | $ | 350,164 | |||||||||||||||||||||||||
| Mr. Nightingale | 2/29/2012 | 2/3/2012 | 50,000 | $ | 5.83 | $ | 175,082 | |||||||||||||||||||||||||
| Mr. O’Leary | 3/9/2011 | 2/3/2011 | 275,000 | $ | 8.40 | $ | 1,489,058 | 2/29/2012 | 2/3/2012 | 275,000 | $ | 5.83 | $ | 962,952 | ||||||||||||||||||
| Mr. Moreira | 3/9/2011 | 2/3/2011 | 125,000 | $ | 8.40 | $ | 676,844 | |||||||||||||||||||||||||
| Mr. Nightingale | 3/9/2011 | 2/3/2011 | 50,000 | $ | 8.40 | $ | 270,738 | |||||||||||||||||||||||||
| Mr. Rozon | 3/9/2011 | 2/3/2011 | 35,000 | $ | 8.40 | $ | 171,213 | 2/29/2012 | 2/3/2012 | 35,000 | $ | 5.83 | $ | 122,557 | ||||||||||||||||||
| (1) | Represents the date that the Compensation Committee took the action to grant the option. |
| (2) | Represents the grant date fair value of such option award as determined in accordance with ASC 718. These amounts have been calculated in accordance with ASC 718 using the Black Scholes valuation model. |
39.
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The employment agreements entered into with Messrs. Coffield, Eden, O’Leary, Moreira,Hardy, Nightingale and Rozon have virtually identical terms except for:
| · | the position held by each such person; |
| · | limitations on business class travel (Mr. |
| · | Mr. Nightingale receives contributions to the employee matching savings plan offered to employees of Gran Tierra Energy Colombia Ltd.; and |
| · | Mr. Nightingale also receives certain allowances related to his expatriate assignment, including a cost of living allowance, relocation assistance, health club membership, and car allowance. |
The employment agreements provide that the respective executive will:
| · | receive a base salary, as initially set forth therein and as thereafter determined by the Board; |
| · | be eligible to receive an annual bonus, as determined by the Board; and |
| · | be eligible to participate in the stock option plans of Gran Tierra. |
The bonuses are to be paid within 60 days of the end of the preceding year based on the executive performance.
The employment agreements do not have terms of specified duration. With respect to the employment agreements with all of the executive officers, other than Mr. Rozon, the employment agreements provide for severance payments to each executive, in the event the executive is terminated without cause or the executive terminates the agreement for good reason, in the amount of two times the annualized base salary plus bonus payment for the prior 12 month period (in the case of Mr. Coffield) or in the amount of one times the annualized base salary plus bonus payment for the prior 12 month period for Mr. Nightingale, an amount equal to one-and-one-half times the annualized base salary plus bonus payment for the prior 12 month period (in the case of Messrs. Eden, Moreira,Hardy and Nightingale)Rozon, or an amount equal to one-and-one-half times the annualized base salary plus bonus payment for the prior 18 month period for Mr. O’Leary. Mr. Rozon’s employment agreement provides for 90 days notice, or payment in lieu, for termination without cause. In March 2012, the Board approved amendments to the severance arrangements with Mr. Eden to increase the severance payable to one-and-one-half times the annualized base salary plus bonus payment for the prior 12 month period, and with Mr. Rozon from 90 days to nine months.
With respect to the employment agreement with all of the named executive officers, other than Messrs. Moreira and Rozon, the definitions of “cause,” “good reason” and “change in control” are set forth below. Mr. Moreira’s employment agreement contains definitions of these terms that are similar but not entirely consistent with these definitions.
“Cause” is defined as any of the following: (i) conviction of, or plea of nolo contendere to, a felony; (ii) participation in a fraud against Gran Tierra; (iii) participation in an act of dishonesty against Gran Tierra intended to result in the executive’s personal enrichment; (iv) willful material breach of Gran Tierra’s written policies; (v) intentional significant damage to Gran Tierra’s property by the executive; (vi) material breach of the employment agreement; or (vii) conduct by the executive that, in the good faith and reasonable determination of the Board, demonstrates gross unfitness to serve provided that in such event, Gran Tierra shall provide notice to the executive describing the nature of the gross unfitness and the executive shall thereafter have ten (10) days to cure such gross unfitness if such gross unfitness is capable of being cured. In the case of Mr. Rozon, “cause” also includes the intentional making of any material profit by Mr. Rozon or his family at the expense of Gran Tierra, without Gran Tierra’s written consent.
40.
“Good reason” includes (i) 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”),; (ii) a reduction in the executive’s base salary unless all other executive officers are similarly reduced, or a change in the basis upon which the executive’s annual compensation is paid or determined except that annual performance bonuses are discretionary and shall not be considered adverse under the agreement if a performance bonus is reduced from a prior year or not paid,paid; (iii) a change in control,control; or (iv) any breach by the employer of any material provision of the employment agreement.
A “Change in Control” is defined as (i) a dissolution, liquidation or sale of all or substantially all of the assets of Gran Tierra; (ii) a merger or consolidation in which Gran Tierra is not the surviving corporation; (iii) a reverse merger in which Gran Tierra is the surviving corporation but the shares of Gran Tierra’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (iv) the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act (excluding any employee benefit plan, or related trust, sponsored or maintained by Gran Tierra or any affiliate of Gran Tierra) of the beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities of Gran Tierra representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors.
All agreements include standard insurance, non-competition and confidentiality provisions.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table shows for the fiscal year ended December 31, 2011,2012, certain information regarding outstanding equity awards at fiscal year endyear-end for the Gran Tierra named executive officers.
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | |||||||
| Mr. Coffield | 200,000 | (1) | $ | 2.51 | 12/15/2018 | ||||||
| 66,666 | (2) | 133,334 | (2) | $ | 5.90 | 03/03/2020 | |||||
| 375,000 | (3) | $ | 8.40 | 03/09/2021 | |||||||
| Mr. Eden | 100,000 | (4) | $ | 1.19 | 01/02/2017 | ||||||
| 100,000 | (5) | $ | 2.14 | 12/17/2017 | |||||||
| 400,000 | (1) | $ | 2.51 | 12/15/2018 | |||||||
| 41,666 | (2) | 83,334 | (2) | $ | 5.90 | 03/03/2020 | |||||
| 275,000 | (3) | $ | 8.40 | 03/09/2021 | |||||||
| Mr. O’Leary | 133,333 | (6) | 166,667 | (6) | $ | 2.37 | 03/04/2019 | ||||
| 41,666 | (2) | 83,334 | (2) | $ | 5.90 | 03/03/2020 | |||||
| 275,000 | (3) | $ | 8.40 | 03/09/2021 | |||||||
| Mr. Moreira | 100,000 | (7) | 50,000 | (7) | $ | 3.95 | 09/08/2019 | ||||
| 16,666 | 33,334 | (2) | $ | 5.90 | 03/03/2020 | ||||||
| 125,000 | (3) | $ | 8.40 | 03/09/2021 | |||||||
| Mr. Nightingale | 83,333 | (7) | 83,334 | (7) | $ | 3.95 | 09/08/2019 | ||||
| 10,000 | (2) | 20,000 | (2) | $ | 5.90 | 03/03/2020 | |||||
| 50,000 | (3) | $ | 8.40 | 03/09/2021 | |||||||
| Mr. Rozon | 25,000 | (8) | $ | 1.72 | 11/13/2017 | ||||||
| 125,000 | (1) | $ | 2.51 | 12/15/2018 | |||||||
| 13,333 | (2) | 26,667 | (2) | $ | 5.90 | 03/03/2020 | |||||
| 35,000 | (3) | $ | 8.40 | 03/09/2021 | |||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||||||||||
| Mr. Coffield | 200,000 | (1 | ) | $ | 2.51 | 12/15/2018 | ||||||||||||||||
| 133,333 | (2 | ) | 66,667 | (2 | ) | $ | 5.90 | 03/02/2020 | ||||||||||||||
| 124,999 | (3 | ) | 250,001 | (3 | ) | $ | 8.40 | 03/08/2021 | ||||||||||||||
| 375,000 | (4 | ) | $ | 5.83 | 03/01/2022 | |||||||||||||||||
| Mr. Hardy | 100,000 | (2 | ) | 50,000 | (2 | ) | $ | 5.90 | 03/02/2020 | |||||||||||||
| 33,333 | (3 | ) | 66,667 | (3 | ) | $ | 8.40 | 03/08/2021 | ||||||||||||||
| 100,000 | (4 | ) | $ | 5.83 | 03/01/2022 | |||||||||||||||||
| Mr. Nightingale | 166,667 | (1 | ) | $ | 3.95 | 09/08/2019 | ||||||||||||||||
| 20,000 | (2 | ) | 10,000 | (2 | ) | $ | 5.90 | 03/03/2020 | ||||||||||||||
| 16,666 | (3 | ) | 33,334 | (3 | ) | $ | 8.40 | 03/09/2021 | ||||||||||||||
| 50,000 | (4 | ) | $ | 5.83 | 03/01/2022 | |||||||||||||||||
| Mr. O’Leary | 300,000 | (1 | ) | $ | 2.37 | 03/04/2019 | ||||||||||||||||
| 83,334 | (2 | ) | 41,666 | (2 | ) | $ | 5.90 | 03/02/2020 | ||||||||||||||
| 91,667 | (3 | ) | 183,333 | (3 | ) | $ | 8.40 | 03/08/2021 | ||||||||||||||
| 275,000 | (4 | ) | $ | 5.83 | 03/01/2022 | |||||||||||||||||
| Mr. Rozon | 25,000 | (1 | ) | $ | 1.72 | 11/13/2017 | ||||||||||||||||
| 125,000 | (1 | ) | $ | 2.51 | 12/15/2018 | |||||||||||||||||
| 26,667 | (2 | ) | 13,333 | (2 | ) | $ | 5.90 | 03/03/2020 | ||||||||||||||
| 11,666 | (3 | ) | 23,334 | (3 | ) | $ | 8.40 | 03/09/2021 | ||||||||||||||
| 35,000 | (4 | ) | $ | 5.83 | 03/01/2022 | |||||||||||||||||
| (1) |
| (2) | The right to exercise the option vested as to one third on March 3, 2011, |
| (3) | The right to exercise the option vested one third on March 9, 2012, and |
| (4) | The right to exercise the option vested one third on |
The following table presents information concerning the aggregate number of shares for whichNamed Executive Officers did not exercise any options were exercised during fiscal 2011 for the Named Executive Officers.year ended December 31, 2012. The Named Executive Officers do not have restricted stock awards.
| Option Awards | ||||||||
| Name | Number of Shares Acquired on Exercise | Value Realized on Exercise (1) | ||||||
| Mr. Coffield | 807,500 | $ | 2,470,854 | |||||
| Mr. Eden | - | $ | - | |||||
| Mr. O’Leary | 100,000 | $ | 370,796 | |||||
| Mr. Moreira | - | $ | - | |||||
| Mr. Nightingale | - | $ | - | |||||
| Mr. Rozon | - | $ | - | |||||
Our named executive officers do not participate in a companyGran Tierra deferred compensation plan other than Mr. Moreira, who participates in the broad-based plan offered to employees of Gran Tierra Energy Brasil Ltda. This supplemental social security plan is a “Brazilian Free Benefit Generating Plan,” or “PGBL,” and intended to primarily provide tax deferred savings to supplement the benefit provided to employees under the national retirement benefit system. A lower tax rate may apply to benefits paid out under the plan after a defined length of investment in accordance with applicable law. Vested and accrued amounts are generally paid out upon a termination of service after the age of 55, although distributions prior to such may be permitted under the plan in limited circumstances in accordance with applicable law. The plan was adopted in June, 2010. The amount of the benefit under the PGBL is based on the employer’s contributions to the plan equal to a percentage of the eligible employee’s base salary, ranging from 4% for rank and file employees to 8% for executives like Mr. Moreira, and the employee’s own contributions (Mr. Moreira has made no contributions to the plan). This aggregate account balance is increased or decreased each month based on the returns provided under one or more of four permitted investment funds set forth in the plan document. The employer’s contribution is credited with earnings or losses based only on one fund, which is a fixed income fund investing in Brazilian National Treasury and/or Central Bank bonds, National Treasury Securities and by fixed income investments permitted by the current legislation. Participants may “invest” their own contributions in this fund and/or in up to three additional funds set forth in the plan document that are selected in accordance with Brazilian law.
| Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) (1) | Aggregate Earnings in Last FY ($) (2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(3) | |||||||||||||||
| Mr. Coffield | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Mr. Eden | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Mr. O’Leary | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Mr. Moreira | $ | - | $ | 21,389 | $ | 2,258 | $ | - | $ | 51,909 | ||||||||||
| Mr. Nightingale | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Mr. Rozon | $ | - | $ | - | $ | - | $ | - | $ | - |
The Named Executive Officers are entitled to severance payments in the event of an involuntary termination of employment by Gran Tierra other than for “cause” (as defined in their employment agreements), or a termination of employment by the Named Executive Officer for “good reason” (as defined in their employment agreements, including a change in control of Gran Tierra), as follows: Mr. Coffield is eligible to receive a payment equal to two times the previous 12 months total compensation; Mr. O’Leary is eligible for a payment equal to one-and-one-half times the annualized previous 18 months total compensation; Mr.each of Messrs. Hardy and Rozon is eligible for a notice period or payment in lieu equal to 90 days salary;one-and-one-half times the previous 12 months total compensation; and each of Messrs. Eden, Moreira andMr. Nightingale is eligible for a payment equal to the previous 12 months total compensation. If an involuntary termination of employment without “cause,” or a termination for “good reason” had occurred, on December 31, 2011,2012, the Named Executive Officers would have received the following payments:
| Name | Payment | |||
| Mr. Coffield | $ | 1,105,704 | ||
| Mr. Eden | $ | 405,725 | ||
| Mr. O’Leary | $ | 696,602 | ||
| Mr. Moreira | $ | 392,727 | ||
| Mr. Nightingale | $ | 392,135 | ||
| Mr. Rozon | $ | 64,325 | ||
| Name | Payment | |||
| Mr. Coffield | $ | 1,256,408 | ||
| Mr. Hardy | $ | 572,922 | ||
| Mr. Nightingale | $ | 512,614 | ||
| Mr. O’Leary | $ | 756,860 | ||
| Mr. Rozon | $ | 552,776 | ||
The following table shows for the fiscal year ended December 31, 2011,2012, certain information with respect to the compensation of all non-employee directors of Gran Tierra:
| Name | Fees Earned or Paid in Cash (1) | Option Awards (2) (3) | Total ($) | Fees Earned or Paid in Cash (1) | Option Awards (2) (3) | Total ($) | ||||||||||||||||||
| Jeffrey Scott | $ | 105,652 | $ | 333,685 | $ | 439,337 | $ | 97,095 | $ | 483,595 | $ | 580,690 | ||||||||||||
| Verne Johnson | $ | 86,011 | $ | 273,015 | $ | 359,026 | $ | 91,869 | $ | 174,094 | $ | 265,963 | ||||||||||||
| Nick Kirton | $ | 84,835 | $ | 273,015 | $ | 357,850 | $ | 89,456 | $ | 174,094 | $ | 263,550 | ||||||||||||
| Scott Price | $ | 65,439 | $ | 273,015 | $ | 338,454 | ||||||||||||||||||
| J. Scott Price | $ | 74,379 | $ | 174,094 | $ | 248,474 | ||||||||||||||||||
| Ray Antony | $ | 79,839 | $ | 273,015 | $ | 352,854 | $ | 84,431 | $ | 174,094 | $ | 258,525 | ||||||||||||
| Gerald Macey | $ | 42,369 | $ | 121,340 | $ | 163,709 | $ | 75,586 | $ | 174,094 | $ | 249,680 | ||||||||||||
42.
| (1) | All compensation to non-employee directors is paid in Canadian dollars and converted into U.S. dollars for the purposes of the above table. See “Presentation in |
| (2) | Assumptions made in the valuation of stock options granted are discussed in Note 7 to Gran Tierra’s |
| (3) | At December 31, |
| Name | Shares | |||
| Mr. Scott | ||||
| Mr. Johnson | ||||
| Mr. Kirton | ||||
| Mr. Price | ||||
| Mr. Antony | ||||
| Mr. Macey | ||||
On March 9, 2011,1, 2012, each of the above non-employee directors were granted an option to purchase 45,000 shares (55,000(125,000 shares in the case of Mr. Scott, Gran Tierra’s Chairman of the Board and 20,000 shares in the case of Mr. Macey)Board) of Gran Tierra common stock at an exercise price of $8.40,$5.83, the fair market value on the date of grant. Gran Tierra expects that in the future annual grants to its non-employee directors will continue to occur in the first quarter of the calendar year.
For
In February 2013, the Board established non-employee director compensation for 2013 to be as follows: CDN$35,000 to each director who serves on the Board and an additional CDN$35,000 for the Chairman of the Board. Gran Tierra also pays an additional annual fee of CDN$15,000 for each committee chair (except for the audit committee) and CDN$10,000 for each committee member (except for the audit committee). The audit committee chair is paid an annual fee of CDN$30,000 and each member is paid an annual fee of CDN$15,000. In addition, a fee of CDN$1,200 is paid for each Board or committee meeting attended. Non-employee directors
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gran Tierra discourages transactions with related persons. The charter of the Audit Committee provides that the Audit Committee is charged with reviewing and approving or disapproving any related person transactions, as defined under Regulation S-K, Item 404. In addition, potential related persons transactions are to be referred to the Chief Executive Officer, and brought to the attention of the full Board if material.
Gran Tierra has entered into indemnity agreements with certain officers and directors which provide, among other things, that Gran Tierra will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he may be required to pay in actions or proceedings which he is or may be made a party by reason of his position as a director, officer or other agent of Gran Tierra, and otherwise to the fullest extent permitted under Nevada law and Gran Tierra’s Bylaws.
DESCRIPTION OF 2007 EQUITY INCENTIVE PLAN AND AMENDMENTS
General
The following table provides certain information with respect to securities authorized for issuance under all of Gran Tierra’s equity compensation plans in effect as of the end of December 31, 2011:
| Plan category | Number of securities to be issued upon exercise of options | Weighted average exercise price of outstanding options | Number of securities remaining available for future issuance | |||||||||
| Equity compensation plans approved by security holders | 12,864,002 | $ | 4.90 | 4,251,304 | ||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 12,864,002 | 4.90 | 4,251,304 | |||||||||
Purpose
The Board adopted the Incentive 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. As of April 30, 2013, all of the approximately 489 employees, directors and consultants of Gran Tierra and its affiliates are eligible to participate in the Incentive Plan and may receive all types of awards.
Administration
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 one or more 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 Exchange Act. The Board has delegated administration of the Incentive Plan to the Compensation Committee of the Board. As used in this description of the Incentive Plan, the “Board” refers to any committee the Board appoints as well as to the Gran Tierra Board itself.
Stock Subject to the Plan
The maximum aggregate number of shares reserved for issuance under the Incentive Plan is 39,806,100 shares, or the “Share Reserve.”
The Share Reserve will be reduced by (i) one share for each share of common stock issued pursuant to an option or stock appreciation right, and (ii) 1.55 shares for each share of common stock issued pursuant to any other type of stock award, referred to as a “Full Value Award.” If a stock award is settled in cash, such settlement will not reduce the Share Reserve.
44.
The following shares of common stock granted pursuant to a stock award under the Incentive Plan or the Prior Plan will become available for subsequent issuance under the Incentive Plan as such shares become available from time to time, as follows:
| · | one share for each share subject to an outstanding option or stock appreciation right that expires, terminates for any reason prior to exercise or settlement or that is forfeited or otherwise returns because of the failure to meet a contingency or condition required to vest such shares; |
| · | 1.55 shares for each share subject to a Full Value Award that is forfeited or otherwise returns because of the failure to meet a contingency or condition required to vest such shares or the Full Value Award otherwise terminates without all of the shares covered by the Full Value Award having been issued; and |
| · | 1.55 shares for each share subject to a Full Value Award that is reacquired or withheld or not issued to satisfy a tax withholding obligation. |
However, any shares of common stock granted pursuant to a stock award under the Incentive Plan or the Prior Plan that are not delivered to a participant because of any of the following reasons will not become available for subsequent issuance under the Incentive Plan:
| · | shares are not delivered to a participant because an option or stock appreciation right is exercised through a reduction in the number of shares subject to the stock award (a “net exercise”); |
| · | shares are reacquired or withheld or not issued to satisfy a tax withholding obligation in connection with an option or stock appreciation right; |
| · | shares are used as consideration for the exercise of an option or stock appreciation right; or |
| · | shares are repurchased by Gran Tierra on the open market with the proceeds of an option or stock appreciation right exercise price. |
As of April 30, 2013, options to purchase approximately 14,585,149 shares of common stock were outstanding, which is approximately 5.2% of total shares of common stock outstanding on that date. As of that same date, approximately 17,810,114 additional shares of common stock were available for grant and not subject to Awards under the Incentive Plan, which is approximately 6.3% of total shares of common stock outstanding on that date. The weighted average exercise price of all options outstanding as of April 30, 2013, was approximately $5.25 and the weighted average remaining term of such options was approximately 7.0 years. A total of 282,641,135 shares of Gran Tierra's common stock were outstanding as of April 30, 2013, including for purposes of these calculations shares issuable upon the exchange of Exchangeable Shares.
Eligibility
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. Under the Incentive Plan, no employee may be granted options or stock appreciation rights whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the fair market value on the date of grant covering more than 1,000,000 shares of common stock during any calendar year. This limitation assures that any deductions to which Gran Tierra would otherwise be entitled upon the exercise of options and stock appreciation rights granted under the Incentive Plan will not be subject to the $1 million limitation on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code. The maximum number of shares which may be reserved for issuance to insiders, at any time, under the Incentive Plan, and any other share compensation arrangement of Gran Tierra shall be 10% of the shares of common stock issued and outstanding. Additionally, the maximum number of shares of common stock which may be issued under the Incentive Plan, at any time, and any other share compensation arrangements within any 12-month period shall be 10% of the common stock outstanding for insiders as a group and 5% of the common stock outstanding for any one insider and such insider’s associates. The maximum number of options that may be granted to any one consultant in any 12-month period shall not exceed 2% of the issued and outstanding common stock at the time of grant.
45.
Repricing; Cancellation and Re-Grant of Stock Awards
Under the Incentive Plan, the Board does not have the authority to reduce the exercise, purchase or strike price of an option or stock appreciation right or to cancel any outstanding option or stock appreciation right that has an exercise price greater than the current fair market value of our common stock in exchange for cash or other stock awards without obtaining the approval of our stockholders within 12 months prior to the repricing or cancellation and re-grant event. Additionally, the Board may not reduce the exercise price of an option or extend the term of an option held by an insider without obtaining the approval of the stockholders other than insiders who are eligible to receive stock awards and such insiders’ associates, at a meeting of the stockholders.
Terms of Options
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.
The “fair market value” of Gran Tierra’s common stock on a particular day is generally the closing sales price for the common stock (or the closing bid, if no sales were reported) as quoted on the primary exchange or market upon which Gran Tierra’s common stock trades. If that day is not a market trading day, then the last market trading day prior to the day of determination is used. If Gran Tierra’s common stock were not to be traded on a market, the Board would make a good faith determination of the fair market value in a manner that complies with specified U.S. tax requirements.
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) by a “net exercise” arrangement, (iii) 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 Gran Tierra or the receipt of irrevocable instructions to pay the aggregate exercise price to Gran Tierra from the sale proceeds, or (iv) 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, or vest, as determined by the Board. Shares covered by currently outstanding options under the Incentive Plan typically vest over a three year period in three equal annual installments during the participant’s employment by, or service as a director or consultant to, Gran Tierra or an affiliate, collectively referred to as “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.
46.
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, 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.
Restrictions On Transfer
The Board may grant stock options that are transferable to the extent provided in the stock option agreement. If an 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 to a domestic relations order and shall be exercisable during the lifetime of the option holder and only by the option holder. 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.
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 the par 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 cash at the time of purchase, (ii) by services rendered, or to be rendered to Gran Tierra 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.
Termination of Service
In the event that a participant’s Service terminates, Gran Tierra may repurchase or otherwise reacquire any or all of the shares held by the participant that have not vested at the date of termination.
47.
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.
Terms of Restricted Stock Units
The Incentive Plan authorizes the grant of restricted stock units, which is the right to receive shares of common stock upon the vesting of the restricted stock units. The Board will determine the terms and conditions, including with respect to vesting, delivery and dividends, of any restricted stock units granted. At the time of grant the Board will determine the consideration, if any, to be paid by the participant upon delivery of each share subject to a restricted stock unit award. If required by applicable law, the consideration to be paid by the participant for each share will not be less than the par value of a share. Consideration may be paid in any form permitted by applicable law. Except as otherwise provided in the agreement granting the restricted stock units, restricted stock units that have not vested will be forfeited upon the participant's termination of Service for any reason.
Terms of Stock Appreciation Rights
The Incentive Plan authorizes the grant of stock appreciation rights. At the time of grant, the Board may impose such restrictions or conditions on the stock appreciation right as it deems appropriate. 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. If a participant’s Service terminates for any reason, any unvested stock appreciation rights will be forfeited and any vested stock appreciation rights will be automatically redeemed.
Other Stock Awards
Other forms of stock awards valued in whole or in part with reference to or otherwise based on our common stock may be granted either alone or in addition to other stock awards under the Incentive Plan. The Board will 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 and all other conditions of such other stock awards. Other forms of stock awards may be subject to vesting in accordance with a vesting schedule to be determined by the Board.
Adjustment Provisions
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 August 2011, the Board amended the Incentive Plan to provide that in the event of the consummation of (i) the sale or other disposition of all or substantially all of the assets of Gran Tierra, (ii) the sale or other disposition of at least fifty percent of the outstanding securities of Gran Tierra, or (iii) certain specified types of merger, consolidation or similar transactions, or collectively, a corporate transaction, any surviving or acquiring corporation may continue or assume Awards outstanding under the Incentive Plan or may substitute similar Awards. Regardless of whether any surviving or acquiring corporation assumes such Awards or substitutes similar Awards, with respect to Awards held by participants whose Service with Gran Tierra or an affiliate has not terminated as of the effective time 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. Prior to the August 2011 amendment by the Board, the vesting of such Awards accelerated only in the event that the surviving or acquiring corporation did not assume such awards or substitutes similar Awards, in which case such Awards would terminate if not exercised at or prior to such effective time. Stockholder approval of this amendment was not required under applicable laws and exchange rules and, accordingly, was not sought or obtained.
48.
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 at any time, or from time to time, amend or revise the Incentive Plan without stockholder approval as follows: (a) to make amendments to the Incentive Plan or a Stock Award of a housekeeping or administrative nature; (b) if the common stock is listed on the Toronto Stock Exchange (“TSX”) subject to any required approval of the TSX, to change the vesting or termination provisions of a Stock Award or the Incentive Plan; (c) amendments necessary to comply with provisions of applicable law or stock exchange requirements or for grants to qualify for favorable treatment under applicable laws; and (d) any other amendment, fundamental or otherwise, not requiring stockholder approval under the Code. 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.
For so long as Gran Tierra’s stock is listed on the TSX, under the rules and policies of the TSX any amendment to the Incentive Plan is subject to pre-clearance of such amendment by the TSX, and no amendment, suspension or discontinuance of the Incentive Plan may contravene the requirements of the TSX.
Description of 2012 Amendments
On February 22, 2012, our Board approved, and on June 27, 2012, our stockholders approved, the amendment and restatement of the 2007 Equity Incentive Plan to make the following changes:
| · | increased the aggregate number of shares issuable under the Incentive Plan to 39,806,100 shares; |
| · | provided that the number of shares available for issuance under the Incentive Plan will be reduced by one share for each share of common stock issued pursuant to an option or stock appreciation right and 1.55 shares for each share of common stock issued pursuant to a Full Value Award (generally an award other than an option or stock appreciation right); and |
| · | provided that shares forfeited in connection with any stock awards and shares not issued or reacquired to satisfy tax withholding obligations in connection with Full Value Awards will again become available for issuance and clarify that in connection with options and stock appreciation rights, shares not issued or reacquired to satisfy tax withholding obligations, shares used as consideration for the exercise of options or stock appreciation rights or shares repurchased by Gran Tierra on the open market with the proceeds of option or stock appreciation right exercise price will not again become available for issuance under the Incentive Plan. |
49.
On February 22, 2012, our Board also adopted amendments to the Incentive Plan that did not require stockholder approval. These amendments:
| · | clarified that stock appreciation rights, in addition to stock options, were subject to the one million share limitation per year on grants to any one employee; and |
| · | clarified that in the event of a tender offer for our shares of common stock, the announcement or commencement of a tender offer is not a “change of control” as defined in the Incentive Plan, but rather a “change of control” occurs as a result of a tender offer only when the tender offer closes and a majority of the outstanding shares changes hands. |
Neither of these amendments required stockholder approval under United States tax laws, and as a result they did not require stockholder approval pursuant to the terms of the Incentive Plan, as described under the caption “Duration, Amendment And Termination” above. The first of these amendments simply clarified that the one million share limit, which is in the Incentive Plan to meet a requirement of Section 162(m) of the Code, applies to stock appreciation rights as well as options, as this was always an intended provision of the Incentive Plan and was described as being part of the Incentive Plan in our 2010 proxy statement. The latter of these two amendments was a clarification made to address concerns by a proxy advisory firm that the definition of “change of control” could be read to be the announcement or commencement of a tender offer that never closes, and could confer benefits on holders of awards, and dilute Gran Tierra stockholders, without a change of control of Gran Tierra actually occurring.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other annual meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other annual meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding”, potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are stockholders of Gran Tierra will be “householding” Gran Tierra’s proxy materials. A single Notice of Internet Availability of Proxy Materials or a single set of annual meeting materials 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 Notice of Internet Availability of Proxy Materials or a separate set of annual meeting materials, please notify your broker. Direct your written request to Gran Tierra Energy Inc., Jason Crumley, Investor Relations Director, 300, 625-11th Avenue S.W., Calgary, Alberta, T2R 0E1, Canada or contact David Hardy, Vice President, Legal and General Counsel, at (403) 265-3221. Stockholders who currently receive multiple copies of the Notices of Internet Availability of Proxy Materials or multiple sets of annual meeting materials 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/ David Hardy | |
| David Hardy | |
| Vice President, Legal and General Counsel |
April 30, 20122013
A copy of Gran Tierra’s Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31,
VOTE BY INTERNET - http://www.investorvote.com/GTE | ||
GRAN TIERRA ENERGY INC. c/o Computershare Investor Services, P.O. Box 43102, Providence RI 02940, USA | Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on June | |
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS | ||
If you would like to reduce the costs incurred by our company in mailing future proxy materials, you can consent to receive 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 proxy materials electronically in future years. | ||
VOTE BY PHONE – 1-800-652-VOTE | ||
| (8683) Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on June 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 Proxy Services, c/o Computershare Investor Services, P.O. Box 43102, Providence RI 02940, USA. |
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. | KEEP THIS PORTION FOR YOUR RECORDS |
Proposals -- The Board of Directors recommends that you vote FOR all nominees listed and FOR Proposals 2 and 3.
| For | Withhold | ||||
| 1. | Election of Directors | ||||
Nominees. | |||||
| 01) | Dana Coffield | o | o | ||
| 02) | Jeffrey Scott | o | o | ||
| 03) | Verne Johnson | o | o | ||
| 04) | Nicholas G. Kirton | o | o | ||
| 05) | |||||
| J. Scott Price | o | o | |||
| Gerald Macey | o | o | |||
51.
| 2. | ||||||||||||||||
Proposal to approve, on an advisory basis, the compensation of Gran Tierra’s named executive officers, as disclosed in the proxy statement. | o | FOR | o | AGAINST | o | ABSTAIN | ||||||||||
| | ||||||||||||||||
| Proposal to ratify the selection by the Audit Committee of the Board of Directors of Deloitte | o | FOR | o | AGAINST | o | ABSTAIN | ||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
| Signature | Signature (Joint Owners) | |
| Date | Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice,
52.
GRAN TIERRA ENERGY INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 27, 201226, 2013
The stockholders hereby appoint Dana Coffield, James Rozon and David Hardy, or any 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, Special A Voting Stock, and Special B Voting Stock of Gran Tierra Energy Inc. that the stockholders are entitled to vote at the Annual Meeting of Stockholders to be held at3:00 p.m. (Calgary time) on June 27, 2012,26, 2013, at the Calgary Petroleum Club, Devonian Room, 319 Fifth Avenue S.W., Calgary, Alberta, Canada, and any adjournments or postponements thereof, hereby revoking all previous proxies, with all powers the stockholders would possess if present, on all matters listed on the reverse side and in accordance with the instructions designated on the reverse side and with discretionary authority as to any and all such other matters as may properly come before the meeting. For directions to the meeting, please visit www.grantierra.com.
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 OF PROPOSALS 2 3 AND 4.3.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE OR VOTE ONLINE AS INSTRUCTED IN THIS PROXY CARD.
GRAN TIERRA ENERGY INC.
VOTING DIRECTION FOR HOLDERS OF
GOLDSTRIKE EXCHANGEABLE SHARES OF GRAN TIERRA ENERGY INC.
The undersigned holder (the “Holder”) of exchangeable shares of Gran Tierra Energy Inc., a Nevada corporation (the “Company”), that were issued in connection with the transaction between the former stockholders of Gran Tierra Energy, Inc., an Alberta corporation, and Goldstrike, Inc. (the “Goldstrike Exchangeable Shares”) has the right to instruct Olympia Trust Company (the “Trustee”) in respect of the exercise of the Holder’s votes at the annual meeting of stockholders of the Company to be held on June 27, 201226, 2013 (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 Goldstrike Exchangeable Shares be voted as follows:
| 1. |
| 2. | VOTE FOR _____ or WITHHOLD FROM VOTING _____ to elect 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 _____ to elect Verne Johnson 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 _____ to elect Nicholas G. Kirton 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 _____ to elect J. Scott Price as a director of the Company, to serve for the ensuing year and until his successor is elected. |
| 6. | VOTE FOR _____ or WITHHOLD FROM VOTING _____ to elect Gerald Macey as a director of the Company, to serve for the ensuing year and until his successor is elected. |
| 7. | VOTE FOR _____ or VOTE AGAINST _____ or ABSTAIN FROM VOTING _____ to approve, on an advisory basis, the compensation of Gran Tierra’s named executive officers, as disclosed in the proxy statement. |
| 8. | VOTE FOR _____ or VOTE AGAINST _____ or ABSTAIN FROM VOTING _____ to ratify the selection of the Audit Committee of the Board of Directors of Deloitte LLP as independent registered public accounting firm of the Company for its fiscal year ending December 31, 2013. |
IMPORTANT NOTE: IF NO DIRECTION IS MADE, FOR OR AGAINST, THE HOLDER’S GOLDSTRIKE EXCHANGEABLE SHARES WILL NOT BE VOTED
SEE REVERSE FOR MORE VOTING INSTRUCTIONS
PLEASE SELECT ONE OF THE FOLLOWING:
o | Direct the Trustee to Vote Goldstrike Exchangeable Shares |
The holder hereby directs the Trustee to vote as indicated.
o | Appointment of Company Management as Proxy |
The Holder hereby appoints Dana Coffield, James Rozon and David Hardy, or any of them, as proxyholder of the Holder, with power of substitution, and authorizes them to represent and vote, as indicated above, all of the Goldstrike 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 Goldstrike 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.
54.
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 GOLDSTRIKE EXCHANGEABLE SHARES AS INDICATED.
| DATED: ________________, | Signature of Holder | |
| Name of Holder | ||
| Number of Goldstrike 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, or sent by facsimile to (403) 265-1455 Attention: W. Anne DeWaele, by 11:59 p.m. (Calgary time) on June |
| 2. | If this voting direction is not signed by the Holder of Goldstrike Exchangeable Shares, the votes to which the Holder of the Goldstrike 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 Goldstrike 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.
VOTING DIRECTION FOR HOLDERS OF
SOLANA EXCHANGEABLE SHARES OF GRAN TIERRA ENERGY INC.
The undersigned holder (the “Holder”) of exchangeable shares of Gran Tierra Energy Inc. (the “Company”) ”) that were issued in connection with the transaction between the former stockholders of Solana Resources Limited and the Company (the “Solana Exchangeable Shares“) “) has the right to instruct Computershare Trust Company of Canada (the “Trustee”) in respect of the exercise of the Holder’s votes at the annual meeting of stockholders of the Company to be held on June 27, 201226, 2013 (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 Solana Exchangeable Shares be voted as follows:
| 1. | VOTE FOR _____ or WITHHOLD FROM VOTING _____ to elect 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 _____ to elect 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 _____ to elect Verne Johnson 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 _____ to elect Nicholas G. Kirton 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 _____ to elect J. Scott Price as a director of the Company, to serve for the ensuing year and until his successor is elected. |
| 6. | VOTE FOR _____ or WITHHOLD FROM VOTING _____ to elect Gerald Macey as a director of the Company, to serve for the ensuing year and until his successor is elected. |
| 7. | VOTE FOR _____ or VOTE AGAINST _____ or ABSTAIN FROM VOTING _____ to approve, on an advisory basis, the compensation of Gran Tierra’s named executive officers, as disclosed in the proxy statement. |
| 8. | VOTE FOR _____ or VOTE AGAINST _____ or ABSTAIN FROM VOTING _____ to ratify the selection of the Audit Committee of the Board of Directors of Deloitte LLP as independent registered public accounting firm of the Company for its fiscal year ending December 31, 2013. |
IMPORTANT NOTE: IF NO DIRECTION IS MADE, FOR OR AGAINST, THE HOLDER’S SOLANA EXCHANGEABLE SHARES WILL NOT BE VOTED
SEE REVERSE FOR MORE VOTING INSTRUCTIONS
PLEASE SELECT ONE OF THE FOLLOWING:
| o | Direct the Trustee to Vote Solana Exchangeable Shares |
The holder hereby directs the Trustee to vote as indicated.
56.
| o | Appointment of Company Management as Proxy |
The Holder hereby appoints Dana Coffield, James Rozon and David Hardy, or any of them, as proxyholder of the Holder, with power of substitution, and authorizes them to represent and vote, as indicated above, all of the Solana 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 Solana 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 SOLANA EXCHANGEABLE SHARES AS INDICATED.
| DATED: ________________, | Signature of Holder | |
| 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 |
| 2. | If this voting direction is not signed by the Holder of Solana Exchangeable Shares, the votes to which the Holder of the Solana 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 Solana 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. |