x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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FOR THE QUARTERLY PERIOD ENDED March 31, 2011
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM __________ TO __________
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Nevada
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98-0479924
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. employer
identification number)
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|
300, 625 11th Avenue S.W.
Calgary, Alberta, Canada
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T2R 0E1
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(Address of principal executive offices)
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(Zip code)
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Large Accelerated Filer x
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Accelerated Filer ¨
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Non-Accelerated Filer ¨
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(do not check if a smaller reporting company) Smaller Reporting
Company ¨
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Page
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||
PART I - FINANCIAL INFORMATION
|
||
ITEM 1.
|
FINANCIAL STATEMENTS
|
3
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ITEM 2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
23
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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41
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ITEM 4.
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CONTROLS AND PROCEDURES
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42
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PART II - OTHER INFORMATION
|
||
ITEM 1.
|
LEGAL PROCEEDINGS
|
43
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ITEM 1A.
|
RISK FACTORS
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43
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ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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55
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ITEM 5.
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OTHER INFORMATION
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56
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ITEM 6.
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EXHIBITS
|
56
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SIGNATURES
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56
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|
EXHIBIT INDEX
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56
|
Three Months Ended March 31,
|
||||||||
2011
|
2010
|
|||||||
REVENUE AND OTHER INCOME
|
||||||||
Oil and natural gas sales
|
$ | 122,296 | $ | 92,932 | ||||
Interest
|
223 | 178 | ||||||
122,519 | 93,110 | |||||||
EXPENSES
|
||||||||
Operating
|
16,396 | 10,185 | ||||||
Depletion, depreciation, accretion, and impairment (Note 5)
|
63,357 | 40,343 | ||||||
General and administrative
|
13,638 | 7,190 | ||||||
Equity tax (Note 8)
|
8,050 | - | ||||||
Financial instruments gain (Note 11)
|
(230 | ) | (44 | ) | ||||
Gain on acquisition (Note 3)
|
(24,300 | ) | - | |||||
Foreign exchange loss
|
5,199 | 14,294 | ||||||
82,110 | 71,968 | |||||||
INCOME BEFORE INCOME TAXES
|
40,409 | 21,142 | ||||||
Income tax expense (Note 8)
|
(26,696 | ) | (11,182 | ) | ||||
NET INCOME AND COMPREHENSIVE INCOME
|
13,713 | 9,960 | ||||||
RETAINED EARNINGS, BEGINNING OF PERIOD
|
58,097 | 20,925 | ||||||
RETAINED EARNINGS, END OF PERIOD
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$ | 71,810 | $ | 30,885 | ||||
NET INCOME PER SHARE — BASIC
|
$ | 0.05 | $ | 0.04 | ||||
NET INCOME PER SHARE — DILUTED
|
$ | 0.05 | $ | 0.04 | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC (Note 6)
|
260,930,753 | 248,818,662 | ||||||
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (Note 6)
|
267,819,800 | 256,863,106 |
March 31,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 253,901 | $ | 355,428 | ||||
Restricted cash (Note 12)
|
7,950 | 250 | ||||||
Accounts receivable
|
137,059 | 43,035 | ||||||
Inventory (Note 2)
|
6,448 | 5,669 | ||||||
Taxes receivable
|
16,660 | 6,974 | ||||||
Prepaids
|
3,107 | 1,940 | ||||||
Deferred tax assets (Note 8)
|
2,112 | 4,852 | ||||||
Total Current Assets
|
427,237 | 418,148 | ||||||
Oil and Gas Properties (using the full cost method of accounting)
|
||||||||
Proved
|
544,828 | 442,404 | ||||||
Unproved
|
402,070 | 278,753 | ||||||
Total Oil and Gas Properties
|
946,898 | 721,157 | ||||||
Other capital assets
|
6,352 | 5,867 | ||||||
Total Property, Plant and Equipment (Note 5)
|
953,250 | 727,024 | ||||||
Other Long Term Assets
|
||||||||
Restricted cash (Note 12)
|
2,335 | 1,190 | ||||||
Deferred tax assets (Note 8)
|
2,497 | - | ||||||
Other long term assets
|
308 | 311 | ||||||
Goodwill
|
102,581 | 102,581 | ||||||
Total Other Long Term Assets
|
107,721 | 104,082 | ||||||
Total Assets
|
$ | 1,488,208 | $ | 1,249,254 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current Liabilities
|
||||||||
Accounts payable (Note 9)
|
$ | 42,689 | $ | 76,023 | ||||
Accrued liabilities (Note 9)
|
60,808 | 32,120 | ||||||
Bank debt (Note 12)
|
31,250 | - | ||||||
Taxes payable
|
66,300 | 43,832 | ||||||
Replacement warrants (Notes 3 and 6)
|
1,292 | - | ||||||
Asset retirement obligations (Note 7)
|
334 | 338 | ||||||
Total Current Liabilities
|
202,673 | 152,313 | ||||||
Long Term Liabilities
|
||||||||
Deferred tax liabilities (Note 8)
|
216,697 | 204,570 | ||||||
Deferred remittance tax and other
|
1,064 | 1,036 | ||||||
Equity tax payable (Note 8)
|
10,174 | - | ||||||
Asset retirement obligations (Note 7)
|
9,767 | 4,469 | ||||||
Total Long Term Liabilities
|
237,702 | 210,075 | ||||||
Commitments and Contingencies (Note 10)
|
||||||||
Shareholders’ Equity
|
||||||||
Common shares (Note 6)
|
5,848 | 4,797 | ||||||
(260,053,351 and 240,440,830 common shares and 16,959,181 and 17,681,123 exchangeable shares, par value $0.001 per share, issued and outstanding as at March 31, 2011 and December 31, 2010 respectively)
|
||||||||
Additional paid in capital
|
968,101 | 821,781 | ||||||
Warrants (Note 6)
|
2,074 | 2,191 | ||||||
Retained earnings
|
71,810 | 58,097 | ||||||
Total Shareholders’ Equity
|
1,047,833 | 886,866 | ||||||
Total Liabilities and Shareholders’ Equity
|
$ | 1,488,208 | $ | 1,249,254 |
Three Months Ended March 31,
|
||||||||
2011
|
2010
|
|||||||
Operating Activities
|
||||||||
Net income
|
$ | 13,713 | $ | 9,960 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depletion, depreciation, accretion, and impairment
|
63,357 | 40,343 | ||||||
Deferred taxes
|
(187 | ) | (10,054 | ) | ||||
Stock based compensation (Note 6)
|
3,453 | 1,362 | ||||||
Unrealized gain on financial instruments (Note 11)
|
(62 | ) | (44 | ) | ||||
Unrealized foreign exchange loss
|
4,458 | 12,707 | ||||||
Settlement of asset retirement obligations (Note 7)
|
(4 | ) | - | |||||
Equity taxes payable long term
|
6,132 | - | ||||||
Gain on acquisition (Note 3)
|
(24,300 | ) | - | |||||
Net changes in non-cash working capital
|
||||||||
Accounts receivable
|
(83,036 | ) | (46,208 | ) | ||||
Inventory
|
736 | 97 | ||||||
Prepaids
|
(831 | ) | (669 | ) | ||||
Accounts payable and accrued liabilities
|
(22,756 | ) | (17,796 | ) | ||||
Taxes receivable and payable
|
8,101 | 12,747 | ||||||
Net cash provided by (used in) operating activities
|
(31,226 | ) | 2,445 | |||||
Investing Activities
|
||||||||
Restricted cash
|
(5,600 | ) | 712 | |||||
Additions to property, plant and equipment
|
(74,266 | ) | (27,072 | ) | ||||
Proceeds from disposition of oil and gas property
|
- | 600 | ||||||
Cash acquired on acquisition (Note 3)
|
7,747 | - | ||||||
Proceeds on sale of asset backed commercial paper (Note 3)
|
22,679 | - | ||||||
Long term assets and liabilities
|
3 | 32 | ||||||
Net cash used in investing activities
|
(49,437 | ) | (25,728 | ) | ||||
Financing Activities
|
||||||||
Settlement of bank debt (Notes 3 and 12)
|
(22,853 | ) | - | |||||
Proceeds from issuance of common shares
|
1,989 | 18,173 | ||||||
Net cash (used in) provided by financing activities
|
(20,864 | ) | 18,173 | |||||
Net decrease in cash and cash equivalents
|
(101,527 | ) | (5,110 | ) | ||||
Cash and cash equivalents, beginning of period
|
355,428 | 270,786 | ||||||
Cash and cash equivalents, end of period
|
$ | 253,901 | $ | 265,676 | ||||
Cash
|
$ | 243,399 | $ | 101,580 | ||||
Term deposits
|
10,502 | 164,096 | ||||||
Cash and cash equivalents, end of period
|
$ | 253,901 | $ | 265,676 | ||||
Supplemental cash flow disclosures:
|
||||||||
Cash paid for interest
|
$ | 668 | $ | - | ||||
Cash paid for income taxes
|
$ | 9,693 | $ | 10,147 | ||||
Non-cash investing activities:
|
||||||||
Non-cash working capital related to property, plant and equipment
|
$ | 42,698 | $ | 10,328 |
Three Months Ended
|
Year Ended
|
|||||||
March 31, 2011
|
December 31, 2010
|
|||||||
Share Capital
|
||||||||
Balance, beginning of period
|
$ | 4,797 | $ | 1,431 | ||||
Issue of common shares
|
1,051 | 3,366 | ||||||
Balance, end of period
|
5,848 | 4,797 | ||||||
Additional Paid in Capital
|
||||||||
Balance, beginning of period
|
821,781 | 766,963 | ||||||
Issue of common shares
|
141,910 | 19,119 | ||||||
Exercise of warrants (Note 6)
|
117 | 24,916 | ||||||
Exercise of stock options (Note 6)
|
717 | 2,300 | ||||||
Stock based compensation expense (Note 6)
|
3,576 | 8,483 | ||||||
Balance, end of period
|
968,101 | 821,781 | ||||||
Warrants
|
||||||||
Balance, beginning of period
|
2,191 | 27,107 | ||||||
Exercise of warrants (Note 6)
|
(117 | ) | (24,916 | ) | ||||
Balance, end of period
|
2,074 | 2,191 | ||||||
Retained Earnings
|
||||||||
Balance, beginning of period
|
58,097 | 20,925 | ||||||
Net income
|
13,713 | 37,172 | ||||||
Balance, end of period
|
71,810 | 58,097 | ||||||
Total Shareholders’ Equity
|
$ | 1,047,833 | $ | 886,866 |
Exercise price (CDN dollars per warrant)
|
$ | 9.67 | ||
Risk-free interest rate
|
1.3 | % | ||
Expected life
|
0.45 Years
|
|||
Volatility
|
44 | % | ||
Expected annual dividend per share
|
Nil
|
|||
Estimated fair value per warrant (CDN dollars)
|
$ | 0.32 |
(Thousands of U.S. Dollars)
|
||||
Consideration Transferred:
|
||||
Common shares issued net of share issue costs
|
$ | 141,690 | ||
Replacement Warrants
|
1,354 | |||
$ | 143,044 | |||
Allocation of Consideration Transferred (1):
|
||||
Oil and gas properties
|
||||
Proved
|
$ | 58,457 | ||
Unproved
|
161,278 | |||
Other long term assets
|
4,417 | |||
Net working capital (including cash acquired of $7.7 million and accounts receivable of $6.4 million)
|
(14,622 | ) | ||
Asset retirement obligations
|
(4,901 | ) | ||
Bank debt
|
(22,853 | ) | ||
Other long term liabilities
|
(14,432 | ) | ||
Gain on acquisition
|
(24,300 | ) | ||
$ | 143,044 |
Three Months Ended March 31,
|
||||||||
(Thousands of U.S. Dollars except per share amounts)
|
2011
|
2010
|
||||||
Oil and natural gas sales and interest
|
$ | 131,714 | $ | 107,882 | ||||
Net (loss) income
|
$ | (21,711 | ) | $ | 11,821 | |||
Net (loss) income per share -basic
|
$ | (0.08 | ) | $ | 0.04 | |||
Net (loss) income per share - diluted
|
$ | (0.08 | ) | $ | 0.04 |
Three Months Ended March 31, 2011
|
||||||||||||||||||||
(Thousands of U.S. Dollars
except per unit of production
amounts)
|
Colombia
|
Argentina
|
Peru
|
Corporate
|
Total
|
|||||||||||||||
Revenues
|
$ | 117,304 | $ | 4,992 | $ | - | $ | - | $ | 122,296 | ||||||||||
Interest income
|
87 | - | - | 136 | 223 | |||||||||||||||
Depreciation, depletion, accretion and impairment
|
30,036 | 1,147 | 31,933 | 241 | 63,357 | |||||||||||||||
Depreciation, depletion, accretion and impairment - per unit of production
|
24.77 | 11.90 | - | - | 48.39 | |||||||||||||||
Segment income (loss) before income taxes
|
57,886 | (430 | ) | (32,625 | ) | 15,578 | 40,409 | |||||||||||||
Segment capital expenditures
|
$ | 42,264 | $ | 11,622 | $ | 14,287 | $ | 930 | $ | 69,103 |
Three Months Ended March 31, 2010
|
||||||||||||||||||||
(Thousands of U.S. Dollars
except per unit of production
amounts)
|
Colombia
|
Argentina
|
Peru
|
Corporate
|
Total
|
|||||||||||||||
Revenues
|
$ | 89,433 | $ | 3,499 | $ | - | $ | - | $ | 92,932 | ||||||||||
Interest income
|
77 | 16 | - | 85 | 178 | |||||||||||||||
Depreciation, depletion, accretion, and impairment
|
35,006 | 5,267 | 8 | 62 | 40,343 | |||||||||||||||
Depreciation, depletion, accretion and impairment - per unit of production
|
27.58 | 69.20 | - | - | 29.99 | |||||||||||||||
Segment income (loss) before income taxes
|
28,760 | (4,644 | ) | (248 | ) | (2,726 | ) | 21,142 | ||||||||||||
Segment capital expenditures
|
$ | 17,553 | $ | 660 | $ | 527 | $ | 764 | $ | 19,504 | ||||||||||
As at March 31, 2011
|
||||||||||||||||||||
(Thousands of U.S. Dollars)
|
Colombia
|
Argentina
|
Peru
|
Corporate
|
Total
|
|||||||||||||||
Property, plant and equipment
|
$ | 766,838 | $ | 148,140 | $ | 22,471 | $ | 15,801 | $ | 953,250 | ||||||||||
Goodwill
|
102,581 | - | - | - | 102,581 | |||||||||||||||
Other assets
|
198,756 | 41,807 | 7,164 | 184,650 | 432,377 | |||||||||||||||
Total Assets
|
$ | 1,068,175 | $ | 189,947 | $ | 29,635 | $ | 200,451 | $ | 1,488,208 | ||||||||||
As at December 31, 2010
|
||||||||||||||||||||
(Thousands of U.S. Dollars)
|
Colombia
|
Argentina
|
Peru
|
Corporate
|
Total
|
|||||||||||||||
Property, plant and equipment
|
$ | 654,416 | $ | 29,031 | $ | 28,578 | $ | 14,999 | $ | 727,024 | ||||||||||
Goodwill
|
102,581 | - | - | - | 102,581 | |||||||||||||||
Other assets
|
155,798 | 15,220 | 18,575 | 230,056 | 419,649 | |||||||||||||||
Total Assets
|
$ | 912,795 | $ | 44,251 | $ | 47,153 | $ | 245,055 | $ | 1,249,254 |
As at March 31, 2011
|
||||||||||||
(Thousands of U.S. Dollars)
|
Cost
|
Accumulated DD&A
|
Net book value
|
|||||||||
Oil and natural gas properties
|
||||||||||||
Proved
|
$ | 943,475 | $ | (398,647 | ) | $ | 544,828 | |||||
Unproved
|
402,070 | - | 402,070 | |||||||||
1,345,545 | (398,647 | ) | 946,898 | |||||||||
Furniture and fixtures and leasehold improvements
|
5,253 | (2,940 | ) | 2,313 | ||||||||
Computer equipment
|
6,082 | (2,467 | ) | 3,615 | ||||||||
Automobiles
|
933 | (509 | ) | 424 | ||||||||
Total Property, Plant and Equipment
|
$ | 1,357,813 | $ | (404,563 | ) | $ | 953,250 |
As at December 31, 2010
|
||||||||||||
(Thousands of U.S. Dollars)
|
Cost
|
Accumulated DD&A
|
Net book value
|
|||||||||
Oil and natural gas properties
|
||||||||||||
Proved
|
$ | 777,262 | $ | (334,858 | ) | $ | 442,404 | |||||
Unproved
|
278,753 | - | 278,753 | |||||||||
1,056,015 | (334,858 | ) | 721,157 | |||||||||
Furniture and fixtures and leasehold improvements
|
5,233 | (2,831 | ) | 2,402 | ||||||||
Computer equipment
|
5,521 | (2,358 | ) | 3,163 | ||||||||
Automobiles
|
779 | (477 | ) | 302 | ||||||||
Total Property, Plant and Equipment
|
$ | 1,067,548 | $ | (340,524 | ) | $ | 727,024 |
Exercise price (CDN dollars per warrant)
|
$ | 9.67 | ||
Risk-free interest rate
|
1.3 | % | ||
Expected life
|
0.45 Years
|
|||
Volatility
|
44 | % | ||
Expected annual dividend per share
|
Nil
|
|||
Estimated fair value per warrant (CDN dollars)
|
$ | 0.32 |
Number of
|
Weighted Average
|
|||||||
Outstanding
|
Exercise Price
|
|||||||
Options
|
$/Option
|
|||||||
Balance, December 31, 2010
|
10,943,058 | $ | 3.49 | |||||
Granted in 2011
|
3,219,996 | 8.39 | ||||||
Exercised in 2011
|
(605,332 | ) | (2.92 | ) | ||||
Forfeited in 2011
|
(29,167 | ) | (3.96 | ) | ||||
Balance, March 31, 2011
|
13,528,555 | $ | 4.68 |
Number of
|
Weighted Average
|
Weighted
|
||||||||||
Outstanding
|
Exercise Price
|
Average
|
||||||||||
Range of Exercise Prices ($/option)
|
Options
|
$/Option
|
Expiry Years
|
|||||||||
0.50 to 2.00
|
1,369,171 | $ | 1.14 | 5.4 | ||||||||
2.01 to 3.50
|
5,144,552 | 2.46 | 7.5 | |||||||||
3.51 to 5.50
|
466,666 | 4.43 | 8.5 | |||||||||
5.51 to 7.00
|
3,123,170 | 5.92 | 8.9 | |||||||||
7.01 to 8.40
|
3,424,996 | 8.35 | 9.9 | |||||||||
Total
|
13,528,555 | $ | 4.68 | 8.3 |
Three Months Ended March 31,
|
||||||||
2011
|
2010
|
|||||||
Dividend yield (per share) | $ | nil | $ | nil | ||||
Volatility
|
81 | % | 90 | % | ||||
Risk-free interest rate
|
1.4 | % | 0.4 | % | ||||
Expected term
|
4 - 6 years
|
3 years
|
||||||
Estimated forfeiture percentage (per year)
|
4 | % | 10 | % |
Three Months Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
Weighted average number of common and exchangeable shares outstanding
|
260,930,753 | 248,818,662 | ||||||
Shares issuable pursuant to warrants
|
3,203,257 | 5,518,333 | ||||||
Shares issuable pursuant to stock options
|
5,894,518 | 5,013,174 | ||||||
Shares to be purchased from proceeds of stock options
|
(2,208,728 | ) | (2,487,063 | ) | ||||
Weighted average number of diluted common and exchangeable shares outstanding
|
267,819,800 | 256,863,106 |
Three Months Ended
|
Year Ended
|
|||||||
(Thousands of U.S. Dollars)
|
March 31, 2011
|
December 31, 2010
|
||||||
Balance, beginning of period
|
$ | 4,807 | $ | 4,708 | ||||
Settlements
|
(4 | ) | (286 | ) | ||||
Disposal
|
- | (720 | ) | |||||
Liability incurred
|
270 | 719 | ||||||
Liability assumed in a business combination (Note 3)
|
4,901 | - | ||||||
Foreign exchange
|
5 | 58 | ||||||
Accretion
|
122 | 328 | ||||||
Balance, end of period
|
$ | 10,101 | $ | 4,807 | ||||
Asset retirement obligations - current
|
$ | 334 | $ | 338 | ||||
Asset retirement obligations - long term
|
9,767 | 4,469 | ||||||
Balance, end of period
|
$ | 10,101 | $ | 4,807 |
Three Months Ended March 31,
|
||||||||
(Thousands of U.S. Dollars)
|
2011
|
2010
|
||||||
Income before income taxes
|
$ | 40,409 | $ | 21,142 | ||||
35 | % | 35 | % | |||||
Income tax expense expected
|
14,143 | 7,400 | ||||||
Other permanent differences
|
4,065 | (612 | ) | |||||
Foreign currency translation adjustments
|
1,981 | 4,166 | ||||||
Impact of foreign taxes
|
(1,598 | ) | (840 | ) | ||||
Enhanced tax depreciation incentive
|
- | (1,292 | ) | |||||
Stock based compensation
|
1,143 | 449 | ||||||
Increase in valuation allowance
|
15,288 | 1,721 | ||||||
Branch and other foreign income pick-up in the United States and Canada
|
(1,619 | ) | (1,248 | ) | ||||
Non-deductible third party royalty in Colombia
|
1,820 | 1,438 | ||||||
Non-taxable gain on bargain purchase
|
(8,527 | ) | - | |||||
Total income tax expense
|
$ | 26,696 | $ | 11,182 | ||||
Current income tax
|
26,677 | 21,236 | ||||||
Deferred tax (recovery)
|
19 | (10,054 | ) | |||||
Total income tax expense
|
$ | 26,696 | $ | 11,182 |
As at
|
||||||||
(Thousands of U.S. Dollars)
|
March 31, 2011
|
December 31, 2010
|
||||||
Deferred Tax Assets
|
||||||||
Tax benefit of loss carryforwards
|
$ | 45,317 | $ | 27,527 | ||||
Tax basis in excess of book basis
|
21,459 | 7,975 | ||||||
Foreign tax credits and other accruals
|
23,520 | 16,895 | ||||||
Capital losses
|
1,453 | 1,413 | ||||||
Deferred tax assets before valuation allowance
|
91,749 | 53,810 | ||||||
Valuation allowance
|
(87,140 | ) | (48,958 | ) | ||||
$ | 4,609 | $ | 4,852 | |||||
Deferred tax assets - current
|
$ | 2,112 | $ | 4,852 | ||||
Deferred tax assets - long term
|
2,497 | - | ||||||
4,609 | 4,852 | |||||||
Deferred Tax Liabilities
|
||||||||
Long-term - book value in excess of tax basis
|
(216,697 | ) | (204,570 | ) | ||||
Net Deferred Tax Liabilities
|
$ | (212,088 | ) | $ | (199,718 | ) |
Changes in the Company's Unrecognized Tax Benefit are as Follows:
|
||||
(Thousands of U.S. Dollars)
|
||||
Unrecognized tax benefit at January 1, 2011
|
$ | 4,175 | ||
Additions to tax position related to prior years
|
70 | |||
Additions to tax position related to the current year
|
12,364 | |||
Balance at March 31, 2011
|
$ | 16,609 |
As at March 31, 2011
|
||||||||||||||||||||
(Thousands of U.S. Dollars)
|
Colombia
|
Argentina
|
Peru
|
Corporate
|
Total
|
|||||||||||||||
Property, plant and equipment
|
$ | 31,971 | $ | 10,670 | $ | 8,274 | $ | 1,379 | $ | 52,294 | ||||||||||
Payroll
|
2,567 | 322 | 76 | 1,525 | 4,490 | |||||||||||||||
Audit, legal, and consultants
|
5 | 219 | - | 2,060 | 2,284 | |||||||||||||||
General and administrative
|
2,503 | 102 | 145 | 446 | 3,196 | |||||||||||||||
Operating
|
35,254 | 5,606 | 373 | - | 41,233 | |||||||||||||||
Total
|
$ | 72,300 | $ | 16,919 | $ | 8,868 | $ | 5,410 | $ | 103,497 |
As at December 31, 2010
|
||||||||||||||||||||
(Thousands of U.S. Dollars)
|
Colombia
|
Argentina
|
Peru
|
Corporate
|
Total
|
|||||||||||||||
Property, plant and equipment
|
$ | 32,854 | $ | 10,452 | $ | 8,377 | $ | 1,438 | $ | 53,121 | ||||||||||
Payroll
|
3,256 | 186 | - | 2,300 | 5,742 | |||||||||||||||
Audit, legal, and consultants
|
- | 140 | 16 | 1,676 | 1,832 | |||||||||||||||
General and administrative
|
1,039 | 590 | 70 | 363 | 2,062 | |||||||||||||||
Operating
|
43,037 | 2,141 | 173 | 35 | 45,386 | |||||||||||||||
Total
|
$ | 80,186 | $ | 13,509 | $ | 8,636 | $ | 5,812 | $ | 108,143 |
As at March 31, 2011
|
||||||||||||||||||||
Payments Due in Period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less
than 1
Year
|
1 to 3
years
|
3 to 5
years
|
More
than 5
years
|
|||||||||||||||
(Thousands of U.S. Dollars)
|
||||||||||||||||||||
Operating leases
|
$ | 7,835 | $ | 3,151 | $ | 3,044 | $ | 1,640 | $ | - | ||||||||||
Bank debt
|
31,250 | 31,250 | - | - | - | |||||||||||||||
Software and Telecommunication
|
1,228 | 1,033 | 195 | - | - | |||||||||||||||
Drilling, Completion, Facility Construction and Oil Transportation Services
|
64,571 | 48,301 | 16,270 | - | - | |||||||||||||||
Consulting
|
317 | 317 | - | - | - | |||||||||||||||
Total
|
$ | 105,201 | $ | 84,052 | $ | 19,509 | $ | 1,640 | $ | - |
Three Months Ended
|
Year Ended
|
|||||||
(Thousands of U.S. Dollars)
|
March 31, 2011
|
December 31, 2010
|
||||||
Current bank debt
|
||||||||
Reserve-backed credit facility
|
$ | 31,250 | $ | - | ||||
Balance, end of period
|
$ | 31,250 | $ | - |
(Thousands of U.S. Dollars)
|
||||
Consideration Transferred:
|
||||
Common shares issued net of share issue costs
|
$ | 141,690 | ||
Replacement Warrants
|
1,354 | |||
$ | 143,044 | |||
Allocation of Consideration Transferred (1):
|
||||
Oil and gas properties
|
||||
Proved
|
$ | 58,457 | ||
Unproved
|
161,278 | |||
Other long term assets
|
4,417 | |||
Net working capital (including cash acquired of $7.7 million and accounts receivable of $6.4 million)
|
(14,622 | ) | ||
Asset retirement obligations
|
(4,901 | ) | ||
Bank debt
|
(22,853 | ) | ||
Other long term liabilities
|
(14,432 | ) | ||
Gain on acquisition
|
(24,300 | ) | ||
$ | 143,044 |
Three Months Ended March 31,
|
||||||||||||
2011
|
2010
|
% Change
|
||||||||||
Production - Barrels of Oil Equivalent ("boe") per Day (1)
|
14,546 | 14,949 | (3 | ) | ||||||||
Prices Realized - per boe
|
$ | 93.41 | $ | 69.07 | 35 | |||||||
Revenue and Other Income ($000s)
|
$ | 122,519 | $ | 93,110 | 32 | |||||||
Net Income ($000s)
|
$ | 13,713 | $ | 9,960 | 38 | |||||||
Net Income Per Share - Basic
|
$ | 0.05 | $ | 0.04 | 25 | |||||||
Net Income Per Share - Diluted
|
$ | 0.05 | $ | 0.04 | 25 | |||||||
Funds Flow From Operations ($000s) (2)
|
$ | 66,560 | $ | 54,274 | 23 | |||||||
Capital Expenditures ($000s)
|
$ | 69,103 | $ | 19,504 | 254 |
As at
|
||||||||||||
March 31, 2011
|
December 31,
2010
|
% Change
|
||||||||||
Cash & Cash Equivalents ($000s)
|
$ | 253,901 | $ | 355,428 | (29 | ) | ||||||
Working Capital (including cash & cash equivalents) ($000s)
|
$ | 224,564 | $ | 265,835 | (16 | ) | ||||||
Property, Plant & Equipment ($000s)
|
$ | 953,250 | $ | 727,024 | 31 |
Three Months Ended March 31,
|
||||||||
Funds Flow From Operations - Non-GAAP Measure ($000s)
|
2011
|
2010
|
||||||
Net income
|
$ | 13,713 | $ | 9,960 | ||||
Adjustments to reconcile net income to funds flow from operations
|
||||||||
Depletion, depreciation, accretion and impairment
|
63,357 | 40,343 | ||||||
Deferred taxes
|
(187 | ) | (10,054 | ) | ||||
Stock-based compensation
|
3,453 | 1,362 | ||||||
Unrealized gain on financial instruments
|
(62 | ) | (44 | ) | ||||
Unrealized foreign exchange loss
|
4,458 | 12,707 | ||||||
Settlement of asset retirement obligations
|
(4 | ) | - | |||||
Equity taxes payable long term
|
6,132 | - | ||||||
Gain on acquisition
|
(24,300 | ) | - | |||||
Funds flows from operations
|
$ | 66,560 | $ | 54,274 |
Three Months Ended March 31,
|
||||||||||||
Consolidated Results of Operations
|
2011
|
2010
|
% Change
|
|||||||||
(Thousands of U.S. Dollars)
|
||||||||||||
Oil and natural gas sales
|
$ | 122,296 | $ | 92,932 | 32 | |||||||
Interest
|
223 | 178 | 25 | |||||||||
122,519 | 93,110 | 32 | ||||||||||
Operating expenses
|
16,396 | 10,185 | 61 | |||||||||
Depletion, depreciation, accretion, and impairment
|
63,357 | 40,343 | 57 | |||||||||
General and administrative expenses
|
13,638 | 7,190 | 90 | |||||||||
Equity tax
|
8,050 | - | - | |||||||||
Foreign exchange loss
|
5,199 | 14,294 | 64 | |||||||||
Gain on acquisition
|
(24,300 | ) | - | - | ||||||||
Financial instruments gain
|
(230 | ) | (44 | ) | 422 | |||||||
82,110 | 71,968 | 14 | ||||||||||
Income before income taxes
|
40,409 | 21,142 | 91 | |||||||||
Income tax expense
|
(26,696 | ) | (11,182 | ) | 139 | |||||||
Net income
|
$ | 13,713 | $ | 9,960 | 38 | |||||||
Production, Net of Royalties
|
||||||||||||
Oil and NGL's ("bbl") (1)
|
1,293,453 | 1,341,682 | (4 | ) | ||||||||
Natural gas ("mcf") (1)
|
94,317 | 22,518 | 319 | |||||||||
Total production ("boe") (1) (2)
|
1,309,173 | 1,345,435 | (3 | ) | ||||||||
Average Prices
|
||||||||||||
Oil and NGL's ("per bbl")
|
$ | 94.31 | $ | 69.20 | 36 | |||||||
Natural gas ("per mcf")
|
$ | 3.35 | $ | 3.90 | (14 | ) | ||||||
Consolidated Results of Operations ("per boe")
|
||||||||||||
Oil and natural gas sales
|
$ | 93.41 | $ | 69.07 | 35 | |||||||
Interest
|
0.17 | 0.13 | 31 | |||||||||
93.58 | 69.20 | 35 | ||||||||||
Operating expenses
|
12.52 | 7.57 | 65 | |||||||||
Depletion, depreciation, accretion, and impairment
|
48.39 | 29.99 | 61 | |||||||||
General and administrative expenses
|
10.42 | 5.34 | 95 | |||||||||
Equity tax
|
6.15 | - | - | |||||||||
Foreign exchange loss
|
3.97 | 10.62 | 63 | |||||||||
Gain on acquisition
|
(18.56 | ) | - | - | ||||||||
Financial instruments gain
|
(0.18 | ) | (0.03 | ) | 500 | |||||||
62.71 | 53.49 | 17 | ||||||||||
Income before income taxes
|
30.87 | 15.71 | 96 | |||||||||
Income tax expense
|
(20.39 | ) | (8.31 | ) | 145 | |||||||
Net income
|
$ | 10.48 | $ | 7.40 | 42 |
Three Months Ended March 31,
|
||||||||||||
Segmented Results of Operations – Colombia
|
2011
|
2010
|
% Change
|
|||||||||
(Thousands of U.S. Dollars)
|
||||||||||||
Oil and natural gas sales
|
$ | 117,304 | $ | 89,433 | 31 | |||||||
Interest
|
87 | 77 | 13 | |||||||||
117,391 | 89,510 | 31 | ||||||||||
Operating expenses
|
12,785 | 8,102 | 58 | |||||||||
Depletion, depreciation and accretion
|
30,036 | 35,006 | (14 | ) | ||||||||
General and administrative expenses
|
3,313 | 3,072 | 8 | |||||||||
Equity tax
|
8,050 | - | - | |||||||||
Foreign exchange loss
|
5,321 | 14,570 | 63 | |||||||||
59,505 | 60,750 | (2 | ) | |||||||||
Segment income before income taxes
|
$ | 57,886 | $ | 28,760 | 101 | |||||||
Production, Net of Royalties
|
||||||||||||
Oil and NGL's ("bbl") (1)
|
1,203,615 | 1,265,569 | (5 | ) | ||||||||
Natural gas ("mcf") (1)
|
55,257 | 22,518 | 145 | |||||||||
Total production ("boe") (1) (2)
|
1,212,825 | 1,269,322 | (4 | ) | ||||||||
Average Prices
|
||||||||||||
Oil and NGL's ("per bbl")
|
$ | 97.27 | $ | 70.60 | 38 | |||||||
Natural gas ("per mcf")
|
$ | 4.04 | $ | 4.02 | - | |||||||
Segmented Results of Operations ("per boe")
|
||||||||||||
Oil and natural gas sales
|
$ | 96.72 | $ | 70.46 | 37 | |||||||
Interest
|
0.07 | 0.06 | 17 | |||||||||
96.79 | 70.52 | 37 | ||||||||||
Operating expenses
|
10.54 | 6.38 | 65 | |||||||||
Depletion, depreciation and accretion
|
24.77 | 27.58 | (10 | ) | ||||||||
General and administrative expenses
|
2.73 | 2.42 | 13 | |||||||||
Equity Tax | 6.64 | - | - | |||||||||
Foreign exchange loss
|
4.39 | 11.48 | 62 | |||||||||
47.07 | 47.86 | 3 | ||||||||||
Segment income before income taxes
|
$ | 47.72 | $ | 22.66 | 111 |
(1)
|
Gas volumes are converted to barrel of oil equivalent (“boe”) at the rate of six thousand cubic feet (“mcf”) of gas per barrel of oil, based upon the approximate relative energy content of gas and oil, which rate is not necessarily indicative of the relationship of oil and gas prices. Natural gas liquids (“NGL”) volumes are converted to boe on a one-to-one basis with oil.
|
(2)
|
Production represents production volumes adjusted for inventory changes.
|
Segmented Capital Expenditures – Colombia
|
Three Months Ended,
|
||||
Block and Activity
|
March 31, 2011
|
||||
(Millions of U.S. Dollars)
|
|||||
Chaza
|
Costayaco facilities, Moqueta pipeline, Pacayco-1, Canangucho-1, Costayaco-12, Costayaco-13, and Moqueta-4 drilling
|
$ | 25.4 | ||
Guayayaco
|
Juanambu-3 drilling, and facilities
|
1.9 | |||
Rumiyaco
|
Acquisition of seismic
|
0.1 | |||
Garibay
|
Jilguero-1 drilling
|
0.4 | |||
Piedemonte Sur
|
Taruka -1 drilling
|
5.7 | |||
Sierra Nevada
|
Brillante facilities
|
5.4 | |||
Magdalena
|
San Angel-1 drilling
|
2.0 | |||
Santana
|
Facilities
|
0.1 | |||
Capitalized G&A and other
|
1.3 | ||||
Segmented Capital Expenditures – Colombia
|
$ | 42.3 |
Segmented Capital Expenditures - Colombia
|
Three Months Ended,
|
|||||
Block and Activity
|
March 31, 2010
|
|||||
(Millions of U.S. Dollars)
|
||||||
Chaza
|
Costayaco facilities and site preparation for Costayaco -11 and Moqueta -1 drilling
|
$ | 7.2 | |||
Guayayaco
|
Juanambu -2 drilling and facilities
|
4.8 | ||||
Rumiyaco
|
Commencement of 3D seismic
|
2.3 | ||||
Garibay
|
Completion of 3D seismic program
|
0.6 | ||||
Piedemonte Sur
|
Rig mobilization for Taruka -1 well
|
0.6 | ||||
Capitalized G&A and other
|
2.1 | |||||
Segmented Capital Expenditures – Colombia
|
$ | 17.6 |
Three Months Ended March 31,
|
||||||||||||
Segmented Results of Operations - Argentina
|
2011
|
2010
|
% Change
|
|||||||||
(Thousands of U.S. Dollars)
|
||||||||||||
Oil and natural gas sales
|
$ | 4,992 | $ | 3,499 | 43 | |||||||
Interest
|
- | 16 | - | |||||||||
4,992 | 3,515 | 42 | ||||||||||
Operating expenses
|
3,547 | 2,029 | 75 | |||||||||
Depletion, depreciation, accretion, and impairment
|
1,147 | 5,267 | (78 | ) | ||||||||
General and administrative expenses
|
918 | 720 | 28 | |||||||||
Foreign exchange (gain) loss
|
(190 | ) | 143 | (233 | ) | |||||||
5,422 | 8,159 | (34 | ) | |||||||||
Segment loss before income taxes
|
$ | (430 | ) | $ | (4,644 | ) | (91 | ) | ||||
Production, Net of Royalties
|
||||||||||||
Oil and NGL's ("bbl") (1) (2)
|
89,838 | 76,113 | 18 | |||||||||
Natural gas ("mcf") (2)
|
39,060 | - | - | |||||||||
Total production ("boe") (2) (3)
|
96,348 | 76,113 | 27 | |||||||||
Average Prices
|
||||||||||||
Oil and NGL's ("per bbl")
|
$ | 54.54 | $ | 45.97 | 19 | |||||||
Natural gas ("mcf") (1)
|
$ | 2.37 | $ | - | - | |||||||
Segmented Results of Operations ("per boe")
|
||||||||||||
Oil and natural gas sales
|
$ | 51.81 | $ | 45.97 | 13 | |||||||
Interest
|
- | 0.21 | - | |||||||||
51.81 | 46.18 | 12 | ||||||||||
Operating expenses
|
36.81 | 26.66 | 38 | |||||||||
Depletion, depreciation, accretion, and impairment
|
11.90 | 69.20 | (83 | ) | ||||||||
General and administrative expenses
|
9.53 | 9.46 | 1 | |||||||||
Foreign exchange (gain) loss
|
(1.97 | ) | 1.88 | 205 | ||||||||
56.27 | 107.20 | (48 | ) | |||||||||
Segment loss before income taxes
|
$ | (4.46 | ) | $ | (61.02 | ) | (93 | ) |
Three Months Ended March 31,
|
||||||||||||
2011
|
2010
|
% Change
|
||||||||||
Segmented Results of Operations - Peru
|
||||||||||||
(Thousands of U.S. Dollars)
|
||||||||||||
Operating expenses
|
$ | 64 | $ | 36 | 78 | |||||||
Depletion, depreciation, accretion and impairment
|
31,933 | 8 | - | |||||||||
General and administrative expenses
|
565 | 204 | 177 | |||||||||
Foreign exchange loss
|
63 | - | - | |||||||||
32,625 | 248 | 13,055 | ||||||||||
Segment loss before income taxes
|
$ | (32,625 | ) | $ | (248 | ) | 13,055 |
Three Months Ended March 31,
|
||||||||||||
2011
|
2010
|
% Change
|
||||||||||
Segmented Results of Operations - Corporate
|
||||||||||||
(Thousands of U.S. Dollars)
|
||||||||||||
Interest
|
$ | 136 | $ | 85 | 60 | |||||||
Operating expenses
|
- | 18 | - | |||||||||
Depletion, depreciation and accretion
|
241 | 62 | 289 | |||||||||
General and administrative expenses
|
8,842 | 3,194 | 177 | |||||||||
Financial instruments gain
|
(230 | ) | (44 | ) | 423 | |||||||
Gain on acquisition
|
(24,300 | ) | - | - | ||||||||
Foreign exchange loss (gain)
|
5 | (419 | ) | 101 | ||||||||
(15,442 | ) | 2,811 | (649 | ) | ||||||||
Segment loss before income taxes
|
$ | 15,578 | $ | (2,726 | ) | (671 | ) |
As at March 31, 2011
|
||||||||||||||||||||
Payments Due in Period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less
than 1
Year
|
1 to 3
years
|
3 to 5
years
|
More
than 5
years
|
|||||||||||||||
(Thousands of U.S. Dollars)
|
||||||||||||||||||||
Operating leases
|
$ | 7,835 | $ | 3,151 | $ | 3,044 | $ | 1,640 | $ | - | ||||||||||
Bank debt
|
31,250 | 31,250 | - | - | - | |||||||||||||||
Software and Telecommunication
|
1,228 | 1,033 | 195 | - | - | |||||||||||||||
Drilling, Completion, Facility Construction and Oil Transportation Services
|
64,571 | 48,301 | 16,270 | - | - | |||||||||||||||
Consulting
|
317 | 317 | - | - | - | |||||||||||||||
Total
|
$ | 105,201 | $ | 84,052 | $ | 19,509 | $ | 1,640 | $ | - |
Date: May 10, 2011
|
/s/ Dana Coffield
|
By: Dana Coffield
|
|
Its: Chief Executive Officer
|
Date: May 10, 2011
|
/s/ Martin Eden
|
By: Martin Eden
|
|
Its: Chief Financial Officer
|
Exhibit
|
||||
No.
|
Description
|
Reference
|
||
2.1
|
Arrangement Agreement, dated as of July 28, 2008, by and among Gran Tierra Energy Inc., Solana Resources Limited and Gran Tierra Exchangeco Inc.
|
Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (SEC File No. 001-34018), filed with the SEC on August 1, 2008.
|
||
2.2
|
Amendment No. 2 to Arrangement Agreement, which supersedes Amendment No. 1 thereto and includes the Plan of Arrangement, including appendices
|
Incorporated by reference to Exhibit 2.2 to the Registration Statement on Form S-3 (SEC File No. 333-153376), filed with the SEC on October 10, 2008.
|
2.3
|
Arrangement Agreement, dated January 17, 2011, by and between Gran Tierra Energy Inc. and Petrolifera Petroleum Limited.#
|
Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the SEC on January 21, 2011 (SEC File No. 001-34018).
|
||
3.1
|
Amended and Restated Articles of Incorporation.
|
Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q/A (SEC File No. 001-34018), filed with the SEC on January 6, 2010.
|
||
3.2
|
Amended and Restated Bylaws of Gran Tierra Energy Inc.
|
Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 22, 2008 (SEC File No. 000-52594).
|
||
4.1
|
Reference is made to Exhibits 3.1 to 3.2.
|
|||
4.2
|
Form of Warrant issued to institutional and retail investors in connection with the private offering in June 2006.
|
Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 21, 2006 (SEC File No. 333-111656).
|
||
4.3
|
Details of the Goldstrike Special Voting Share.
|
Incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-KSB/A for the period ended December 31, 2005 and filed with the Securities and Exchange on April 21, 2006 (SEC File No. 333-111656).
|
||
4.4
|
Goldstrike Exchangeable Share Provisions.
|
Incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-KSB/A for the period ended December 31, 2005 and filed with the Securities and Exchange on April 21, 2006 (SEC File No. 333-111656).
|
||
4.5
|
Provisions Attaching to the GTE–Solana Exchangeable Shares.
|
Incorporated by reference to Annex E to the Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on October 14, 2008 (SEC File No. 001-34018).
|
||
4.6
|
Supplemental Warrant Indenture, dated as of March 18, 2011, among Gran Tierra Energy Inc., Petrolifera Petroleum Limited, and Computershare Trust Company of Canada.
|
Filed herewith.
|
||
10.1
|
Cash Compensation Arrangements with Named Executive Officers
|
Filed herewith.
|
||
10.2
|
Form of Voting Support Agreement Respecting the Arrangement Involving Petrolifera Petroleum Limited and Gran Tierra Energy Inc. (Petrolifera Directors and Officers)
|
Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on January 21, 2011 (SEC File No. 001-34018).
|
||
10.3
|
Form of Voting Support Agreement Respecting the Arrangement Involving Petrolifera Petroleum Limited and Gran Tierra Energy Inc. (Petrolifera largest stockholder)
|
Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the SEC on January 21, 2011 (SEC File No. 001-34018).
|
||
10.4
|
Third Amendment to Credit Agreement, dated as of January 20, 2011, among Solana Resources Limited, Gran Tierra Energy Inc., BNP Paribas and Other Lenders
|
Incorporated by reference to Exhibit 10.47 to the Annual Report on Form 10-K, filed with the SEC on February 25, 2011 (SEC File No. 001-34018).
|
10.5
|
Consulting Services Agreement, between David Hardy and Gran Tierra Energy Inc.
|
Filed herewith.
|
||
10.6
|
Executive Employment Agreement, dated January 20, 2010, between Gran Tierra Energy Inc. and David Hardy.
|
Filed herewith.
|
||
31.1
|
Certification of Principal Executive Officer
|
Filed herewith.
|
||
31.2
|
Certification of Principal Financial Officer
|
Filed herewith.
|
||
32.1
|
Section 1350 Certifications.
|
Filed herewith.
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Page
|
||||
ARTICLE 1
|
INTERPRETATION
|
2
|
||
1.1
|
Definitions
|
2
|
||
1.2
|
Gender and Number
|
4
|
||
1.3
|
Interpretation not Affected by Headings, etc
|
4
|
||
1.4
|
Day not a Business Day
|
4
|
||
1.5
|
Time of the Essence
|
4
|
||
1.6
|
Applicable Law
|
5
|
||
1.7
|
Severability
|
5
|
||
1.8
|
Conflicts
|
5
|
||
1.9
|
Supersedes Original Indenture
|
5
|
||
ARTICLE 2
|
ISSUE OF WARRANTS
|
5
|
||
2.1
|
Issue of Warrants
|
5
|
||
2.2
|
Acceleration of Expiry Date
|
5
|
||
2.3
|
Form and Terms of Warrants
|
6
|
||
2.4
|
Warrantholder not a Shareholder
|
6
|
||
2.5
|
Warrants to Rank pari passu
|
6
|
||
2.6
|
Signing of Warrant Certificates
|
6
|
||
2.7
|
Certification by the Warrant Agent
|
7
|
||
2.8
|
Issue in Substitution for Warrant Certificates Lost, etc
|
7
|
||
2.9
|
Exchange of Warrant Certificates
|
7
|
||
2.10
|
Transfer of Warrants
|
8
|
||
2.11
|
Charges for Exchange and Transfer
|
8
|
||
2.12
|
Registration of Warrants
|
8
|
||
2.13
|
Transferee Entitled to Registration
|
8
|
||
2.14
|
Registers Open for Inspection
|
9
|
||
2.15
|
Ownership of Warrants
|
9
|
||
ARTICLE 3
|
EXERCISE OF WARRANTS
|
9
|
||
3.1
|
Method of Exercise of Warrants
|
9
|
||
3.2
|
Effect of Exercise of Warrants
|
10
|
||
3.3
|
Partial Exercise of Warrants; Fractions
|
10
|
||
3.4
|
Expiration of Warrants
|
11
|
||
3.5
|
Cancellation of Surrendered Warrants
|
11
|
||
3.6
|
Accounting and Recording
|
11
|
||
3.7
|
Common Share Certificates
|
11
|
||
ARTICLE 4
|
ADJUSTMENT OF NUMBER OF COMMON SHARES
|
12
|
||
4.1
|
Adjustment of Number of Common Shares
|
12
|
||
4.2
|
Entitlement to Shares on Exercise of Warrant
|
15
|
||
4.3
|
No Adjustment for Stock Options or Warrants
|
15
|
||
4.4
|
Determination by Corporation's Auditors
|
15
|
||
4.5
|
Proceedings Prior to any Action Requiring Adjustment
|
15
|
||
4.6
|
Certificate of Adjustment
|
15
|
||
4.7
|
Notice of Special Matters
|
16
|
||
4.8
|
No Action after Notice
|
16
|
||
4.9
|
Protection of Warrant Agent
|
16
|
||
4.10
|
Other Adjustments
|
16
|
Page
|
||||
ARTICLE 5
|
RIGHTS AND COVENANTS OF THE CORPORATION
|
17
|
||
5.1
|
Optional Purchases by the Corporation
|
17
|
||
5.2
|
General Covenants
|
17
|
||
5.3
|
Warrant Agent's Remuneration and Expenses
|
17
|
||
5.4
|
Performance of Covenants by Warrant Agent
|
18
|
||
ARTICLE 6
|
ENFORCEMENT
|
18
|
||
6.1
|
Suits by Warrantholders
|
18
|
||
6.2
|
Limitation of Liability
|
19
|
||
6.3
|
Waiver of Default
|
19
|
||
ARTICLE 7
|
MEETINGS OF WARRANTHOLDERS
|
20
|
||
7.1
|
Right to Convene Meetings
|
20
|
||
7.2
|
Notice
|
20
|
||
7.3
|
Chairman
|
20
|
||
7.4
|
Quorum
|
20
|
||
7.5
|
Power to Adjourn
|
21
|
||
7.6
|
Show of Hands
|
21
|
||
7.7
|
Poll and Voting
|
21
|
||
7.8
|
Regulations
|
21
|
||
7.9
|
Corporation and Warrant Agent May be Represented
|
22
|
||
7.10
|
Powers Exercisable by Extraordinary Resolution
|
22
|
||
7.11
|
Meaning of Extraordinary Resolution
|
23
|
||
7.12
|
Powers Cumulative
|
23
|
||
7.13
|
Minutes
|
23
|
||
7.14
|
Instruments in Writing
|
24
|
||
7.15
|
Binding Effect of Resolutions
|
24
|
||
7.16
|
Holdings by Corporation Disregarded
|
24
|
||
ARTICLE 8
|
SUPPLEMENTAL INDENTURES
|
24
|
||
8.1
|
Provision for Supplemental Indentures for Certain Purposes
|
24
|
||
8.2
|
Successor Corporations
|
25
|
||
ARTICLE 9
|
CONCERNING THE WARRANT AGENT
|
25
|
||
9.1
|
Trust Indenture Legislation
|
25
|
||
9.2
|
Rights and Duties of Warrant Agent
|
25
|
||
9.3
|
Evidence, Experts and Advisers
|
26
|
||
9.4
|
Documents, Monies, etc. Held by Warrant Agent
|
27
|
||
9.5
|
Actions by Warrant Agent to Protect Interest
|
27
|
||
9.6
|
Warrant Agent Not Required to Give Security
|
27
|
||
9.7
|
Protection of Warrant Agent
|
27
|
||
9.8
|
Replacement of Warrant Agent; Successor by Merger
|
28
|
||
9.9
|
Conflict of Interest
|
28
|
||
9.10
|
Acceptance of Trust
|
29
|
||
9.11
|
Warrant Agent Not to be Appointed Receiver
|
29
|
||
9.12
|
Knowledge of Warrant Agent
|
29
|
||
9.13
|
Indemnification of Warrant Agent
|
29
|
||
9.14
|
Warrant Agent Not Required to Give Notice of Default
|
29
|
||
9.15
|
Warrant Agent's Right Not to Act
|
30
|
Page
|
||||
9.16
|
No Third Party Interests
|
30
|
||
ARTICLE 10
|
GENERAL
|
30
|
||
10.1
|
Notice to the Corporation and the Warrant Agent
|
30
|
||
10.2
|
Notice to Warrantholders
|
31
|
||
10.3
|
Evidence of Ownership
|
31
|
||
10.4
|
Counterparts
|
32
|
||
10.5
|
Satisfaction and Discharge of Indenture
|
32
|
||
10.6
|
Provisions of Supplemental Indenture and Warrants for the Sole Benefit of Parties and Warrantholders
|
32
|
||
10.7
|
Warrants Owned by the Corporation or its Subsidiaries – Certificate to be Provided
|
32
|
||
10.8
|
Matters Relating to the Privacy of Personal Information
|
33
|
||
10.9
|
Matters Relating to the SEC
|
33
|
||
10.10
|
Force Majeure
|
33
|
||
10.11
|
Successors
|
34
|
1.1
|
Definitions
|
1.2
|
Gender and Number
|
1.3
|
Interpretation not Affected by Headings, etc.
|
1.4
|
Day not a Business Day
|
1.5
|
Time of the Essence
|
1.6
|
Applicable Law
|
1.7
|
Severability
|
1.8
|
Conflicts
|
1.9
|
Supersedes Original Indenture
|
2.1
|
Issue of Warrants
|
|
A
|
=
|
the Closing Trading Price.
|
|
B
|
=
|
the Exercise Price.
|
2.2
|
Acceleration of Expiry Date
|
2.3
|
Form and Terms of Warrants
|
|
(a)
|
The Warrant Certificates (including all replacements issued in accordance with this Indenture) shall be substantially in the form set out in Schedule "A" hereto, shall bear such legends and distinguishing letters and numbers as the Corporation may, with the approval of the Warrant Agent, prescribe, and shall be issuable in any denomination excluding fractions.
|
|
(b)
|
The Warrant Certificates may be engraved, printed, lithographed or in other form or partly in one form and partly in another as the Corporation with the approval of the Warrant Agent may determine. No change in the Warrant Certificate shall be required by reason of any adjustment made pursuant to Article 4 in the number or class of Common Shares or other securities to which a holder is entitled pursuant to the exercise of the Warrants or by reason of any acceleration made pursuant to Section 2.2 to the date the Warrants expire.
|
|
(c)
|
No fractional Warrants shall be issued or otherwise provided for hereunder. Any fractional interests in Common Shares of a Warrantholder will be aggregated to form whole numbers of Common Shares with any remaining fractional interests rounded down to the nearest whole Common Share. Cash will be paid in lieu of any fractional share entitlement based on the Current Market Price of the Common Shares, provided that the Corporation shall not be required to make any such cash payment that is less than $10.00.
|
|
(d)
|
The number of Common Shares which may be received pursuant to the exercise of Warrants in accordance with the terms and conditions of this Supplemental Indenture shall be adjusted in the events and in the manner specified in Article 4.
|
|
(e)
|
Each Warrant shall entitle the holder thereof to such other rights and privileges as are set forth in this Supplemental Indenture.
|
2.4
|
Warrantholder not a Shareholder
|
2.5
|
Warrants to Rank pari passu
|
2.6
|
Signing of Warrant Certificates
|
2.7
|
Certification by the Warrant Agent
|
|
(a)
|
No Warrant Certificate shall be issued or, if issued, shall be valid for any purpose or entitle the holder to the benefit hereof until it has been certified by manual signature by or on behalf of the Warrant Agent and such certification by the Warrant Agent upon any Warrant Certificate shall be conclusive evidence as against the Corporation that the Warrant Certificate so certified has been duly issued hereunder and that the holder is entitled to the benefits hereof.
|
|
(b)
|
The certification of the Warrant Agent on Warrant Certificates issued hereunder shall not be construed as a representation or warranty by the Warrant Agent as to the validity of this Supplemental Indenture or the Warrant Certificates (except the due certification thereof) and the Warrant Agent shall in no respect be liable or answerable for the use made of the Warrant Certificate or any of them or of the consideration therefor except as otherwise specified herein. The countersignature of the Warrant Agent will, however, be a representation and warranty of the Warrant Agent that the Warrant Certificate has been duly countersigned by or on behalf of the Warrant Agent pursuant to the provisions of this Supplemental Indenture.
|
2.8
|
Issue in Substitution for Warrant Certificates Lost, etc.
|
|
(a)
|
In the event that any Warrant Certificate shall become mutilated or be lost, destroyed or stolen, the Corporation, subject to applicable law, shall issue and thereupon the Warrant Agent shall certify and deliver, a new Warrant Certificate of like tenor as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of such mutilated Warrant Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Warrant Certificate, and the substituted Warrant Certificate shall be in a form approved by the Warrant Agent and the Warrants evidenced thereby shall be entitled to the benefits hereof and shall rank equally in accordance with its terms with all other Warrants issued or to be issued hereunder.
|
|
(b)
|
The applicant for the issue of a new Warrant Certificate pursuant to this Section 2.8 shall bear the cost of the issue thereof and in case of loss, destruction or theft shall, as a condition precedent to the issue thereof, furnish to the Corporation and to the Warrant Agent such evidence of ownership and of the loss, destruction or theft of the Warrant Certificate so lost destroyed or stolen as shall be satisfactory to the Corporation and to the Warrant Agent each in their sole discretion, and such applicant shall also be required to furnish an indemnity and surety bond in amount and form satisfactory to the Corporation and the Warrant Agent each in their discretion and shall pay the reasonable charges of the Corporation and the Warrant Agent in connection therewith.
|
2.9
|
Exchange of Warrant Certificates
|
|
(a)
|
Warrant Certificates representing Warrants to acquire any specified number of Common Shares may, upon compliance with the reasonable requirements of the Warrant Agent, be exchanged for another Warrant Certificate or Warrant Certificates entitling the holder thereto to acquire in the aggregate the same number of Common Shares as may be acquired under the Warrant Certificate or Warrant Certificates so exchanged. Upon compliance with the reasonable requirements of the Warrant Agent and the terms and conditions hereof, the Corporation will sign, and the Warrant Agent will countersign, all Warrant Certificates necessary to carry out these exchanges.
|
|
(b)
|
Warrant Certificates may be exchanged only at a Warrant Agency or at any other place that is designated by the Corporation with the approval of the Warrant Agent. Any Warrant Certificate tendered for exchange shall be cancelled by the Warrant Agent.
|
2.10
|
Transfer of Warrants
|
|
(a)
|
Subject to subsection 2.10(b) below and such reasonable requirements as the Warrant Agent may prescribe and all applicable securities legislation and requirements of regulatory authorities, the Warrants may be transferred on the register kept at the Warrant Agency by the Warrantholder (or its legal representatives or its attorney duly appointed by an instrument in writing in form and manner of execution satisfactory to the Warrant Agent) only upon the surrender of the relevant Warrant Certificate with the transfer form forming part thereof duly completed and signed. After receiving the surrendered Warrant Certificate(s) and upon the person surrendering the same meeting the requirements set forth above, the Warrant Agent shall issue to the transferee a Warrant Certificate representing the Warrants transferred.
|
|
(b)
|
No transfer of a Warrant shall be valid: (i) unless made in accordance with the provisions hereof; (ii) until, upon compliance with such reasonable requirements as the Warrant Agent may prescribe, such transfer is recorded on the register maintained by the Warrant Agent pursuant to Section 2.12; (iii) unless such registration shall be noted on the Warrant Certificate by the Warrant Agent; and (iv) until all governmental or other charges arising by reason of such transfer have been paid.
|
2.11
|
Charges for Exchange and Transfer
|
2.12
|
Registration of Warrants
|
2.13
|
Transferee Entitled to Registration
|
2.14
|
Registers Open for Inspection
|
2.15
|
Ownership of Warrants
|
|
(a)
|
The Corporation and the Warrant Agent may deem and treat the registered Warrantholder of any Warrant Certificate as the absolute owner of the Warrant represented thereby for all purposes, and the Corporation and the Warrant Agent shall not be affected by any notice or knowledge to the contrary, except where the Corporation or the Warrant Agent is required to take notice by statute or by order of a court of competent jurisdiction. For greater certainty, subject to applicable law, neither the Corporation nor the Warrant Agent will be bound to take notice of or see to the execution of any trust, whether express, implied or constructive, in respect of any Warrant, and may transfer any Warrant on the direction of the person registered as Warrantholder thereof, whether named as trustee or otherwise, as though that person were the beneficial owner thereof.
|
|
(b)
|
Subject to the provisions of this Supplemental Indenture and applicable law, each Warrantholder shall be entitled to the rights and privileges attaching to the Warrants held thereby. The exercise of the Warrants in accordance with the terms hereof and the receipt by any such Warrantholder of Common Shares pursuant thereto shall be a good discharge to the Corporation and the Warrant Agent with respect to such Warrants and neither the Corporation nor the Warrant Agent shall be bound to inquire into the title of any such holder.
|
3.1
|
Method of Exercise of Warrants
|
|
(a)
|
The holder of any Warrant may exercise the right evidenced thereby conferred on such holder to acquire Common Shares by surrendering, prior to the Time of Expiry or the Accelerated Time of Expiry, as applicable, to the Warrant Agent at a Warrant Agency the Warrant Certificate representing such Warrant, with a duly completed and executed exercise form in the form attached to the Warrant Certificate. Promptly upon the receipt of a duly completed and executed exercise form, the Warrant Agent will deliver a notice to the Corporation of the exercise and the Corporation will provide the Warrant Agent with confirmation of the number of Common Shares to be issued in accordance with Section 2.1
|
|
(b)
|
Any exercise form referred to in subsection 3.1(a) shall be signed by the Warrantholder or his executors, administrators or other legal representatives or his attorney duly appointed (such persons being obligated to provide the Warrant Agent at the Warrant Agency with proof satisfactory to the Warrant Agent of his or her authority to act on behalf of the Warrantholder) and shall specify:
|
|
(i)
|
the number of Warrants which the holder wishes to exercise (being not more than those which are represented by the Warrant Certificate(s) surrendered);
|
|
(ii)
|
the person or persons in whose name or names such Common Shares are to be issued, and if such persons are individuals, the relevant social insurance numbers;
|
|
(iii)
|
the address or addresses of such person or persons; and
|
|
(iv)
|
the number of Warrants to be exercised by each such person if more than one is so specified.
|
|
(c)
|
In connection with the exchange of Warrant Certificates and exercise of Warrants and compliance with such other terms and conditions hereof as may be required, the Corporation has appointed the principal office of the Warrant Agent in Calgary and Toronto as an agency at which Warrant Certificates may be surrendered for exchange or at which Warrants may be exercised and the Warrant Agent has accepted such appointment. The Corporation shall give notice to the Warrant Agent of any change of the Warrant Agency.
|
3.2
|
Effect of Exercise of Warrants
|
|
(a)
|
Upon compliance by the holder of any Warrant Certificate with the provisions of Section 3.1, and subject to Section 3.3, the Common Shares issuable pursuant to the exercise of such Warrants shall be deemed to have been issued as fully paid and non-assessable and the person or persons to whom such Common Shares are to be issued shall be deemed to have become the holder or holders of record of such Common Shares on the Exercise Date unless the transfer registers of the Corporation shall be closed on such date, in which case the Common Shares subscribed for shall be deemed to have been issued and such person or persons shall be deemed to have become the holder or holders of record of such Common Shares, on the date on which such transfer registers are reopened.
|
|
(b)
|
Within five Business Days after the Exercise Date of a Warrant as set forth above, the Warrant Agent shall cause to be mailed to the person or persons in whose name or names the Common Shares have been issued, as specified in the exercise form completed in connection with the exercise of the Warrants, at the address specified in such exercise form or, if so specified in such exercise form, cause to be delivered to such person or persons at the Warrant Agency where the Warrant Certificate was surrendered, a certificate or certificates for the appropriate number of Common Shares subscribed for.
|
3.3
|
Partial Exercise of Warrants; Fractions
|
|
(a)
|
The holder of any Warrants may acquire a number of Common Shares less than the number which the holder is entitled to acquire pursuant to the surrendered Warrant Certificate(s). In the event of any exercise of a number of Warrants less than the number which the holder is entitled to exercise, the holder of the Warrants upon exercise thereof shall, in addition, be entitled to receive without charge therefor, a new Warrant Certificate(s) in respect of the balance of the Warrants which such holder was entitled to exercise pursuant to the surrendered Warrant Certificate(s) and which were not then exercised.
|
|
(b)
|
Notwithstanding anything herein contained including any adjustment provided for in Article 4, the Corporation shall not be required, upon the exercise of any Warrants, to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares. In lieu of fractional Common Shares, the Corporation shall pay to the holder who would otherwise be entitled to receive fractional Common Shares upon an exercise of Warrants, within 10 Business Days after the date upon which the fractional Common Shares would have been issued, an amount in lawful money of Canada equal to the Current Market Price of the Common Shares as of the Exercise Date multiplied by an amount equal to the fractional interest of Common Shares such holder would otherwise be entitled to receive upon such exercise, provided that the Corporation shall not be required to make any payment, calculated as aforesaid, that is less than $10.00. The price to be paid shall be provided by the Corporation in writing to the Warrant Agent upon request.
|
3.4
|
Expiration of Warrants
|
3.5
|
Cancellation of Surrendered Warrants
|
3.6
|
Accounting and Recording
|
|
(a)
|
The Warrant Agent shall as soon as reasonably practicable account to the Corporation with respect to Warrants exercised. Any monies, securities or other instruments, from time to time received by the Warrant Agent pursuant to the exercise of Warrants shall be received in trust for and shall be segregated and kept apart by the Warrant Agent in trust for the Corporation.
|
|
(b)
|
The Warrant Agent shall record the particulars of any Warrants exercised, which shall include the names and addresses of the persons who become holders of Common Shares on exercise and the Exercise Date. Within five Business Days of each Exercise Date, the Warrant Agent shall provide such particulars in writing to the Corporation.
|
3.7
|
Common Share Certificates
|
4.1
|
Adjustment of Number of Common Shares
|
|
(a)
|
If and whenever at any time during the Adjustment Period, the Corporation shall:
|
|
(i)
|
subdivide, redivide or change outstanding Common Shares into a greater number of shares,
|
|
(ii)
|
reduce, combine or consolidate the outstanding Common Shares into a smaller number of shares, or
|
|
(iii)
|
issue Common Shares or securities exchangeable for or convertible into Common Shares at no additional cost to the holders of all or substantially all of the outstanding Common Shares by way of a stock dividend or other distribution (other than the issue of Common Shares to holders of Common Shares pursuant to their exercise of options to receive dividends in the form of Common Shares in lieu of Dividends Paid in the Ordinary Course on the Common Shares),
|
|
(b)
|
If and whenever at any time during the Adjustment Period, the Corporation shall fix a record date for the issuance of rights, options or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible or exchangeable into Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price of a Common Share on such record date, the Exercise Price shall be adjusted immediately after such record date so that it shall equal the amount determined by multiplying the Exercise Price in effect on such record date by a fraction of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase or into which the convertible or exchangeable securities so offered are convertible or exchangeable; any Common Shares owned by or held for the account of the Corporation or any Subsidiary shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed or to the Exercise Price which would then be in effect based upon the number of Common Shares (or securities convertible or exchangeable into Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be.
|
|
(c)
|
If and whenever at any time during the Adjustment Period, the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) securities of any class, whether of the Corporation or any other person (other than Common Shares and other than securities distributed to holders of Common Shares pursuant to their exercise of options to receive dividends in the form of such securities in lieu of Dividends Paid in the Ordinary Course on the Common Shares), (ii) rights, options or warrants (excluding those referred to in subsection 4.1(b)), (iii) evidences of its indebtedness or (iv) assets (excluding Dividends Paid in the Ordinary Course) then, in each such case, the Exercise Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price of a Common Share on such record date, less the aggregate fair market value (as determined by the directors, which determination shall be conclusive) of such securities shares, rights, options, warrants, evidences of indebtedness or assets so distributed, and of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price; any Common Shares owned by or held for the account of the Corporation or any Subsidiary shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that such distribution is not so made, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed or to the Exercise Price which would then be in effect based upon such shares or rights, options or warrants or evidences of indebtedness or assets actually distributed, as the case may be; in clause (iv) of this subsection 4.1(c) the term "Dividends Paid in the Ordinary Course" shall include the value of any securities or other property or assets distributed in lieu of cash Dividends Paid in the Ordinary Course at the option of Shareholders.
|
|
(d)
|
If and whenever at any time during the Adjustment Period, there is a reclassification of the Common Shares or a capital reorganization of the Corporation (other than as described in subsection 4.1(a)) or a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other body corporate, trust, partnership or other entity (other than a consolidation, amalgamation, arrangement or merger which does not result in any reclassification of the outstanding Common Shares or a change of the Common Shares into other securities), or a sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other body corporate, trust, partnership or other entity or a liquidation, dissolution or winding up of the Corporation (any of such events being hereinafter called a "Capital Reorganization"), any Warrantholder who has not exercised its right of acquisition prior to the effective date of such Capital Reorganization, upon the exercise of such right thereafter, shall be entitled to receive and shall accept, in lieu of the number of Common Shares then sought to be acquired by it, the number of shares or other securities or property of the Corporation or of the body corporate, trust, partnership or other entity resulting from such Capital Reorganization, or of the parent entity of such resulting entity, or of such entity to which such sale or conveyance has been made, as the case may be, that such Warrantholder would have been entitled to receive on such Capital Reorganization, if, on the record date or the effective date thereof, as the case may be, the Warrantholder had been the registered holder of the number of Common Shares sought to be acquired by it and to which it was entitled to acquire upon exercise of the Warrants. If determined appropriate by the Warrant Agent to give effect to or to evidence the provisions of this subsection 4.1(d), the Corporation, its successor, or such purchasing body corporate, partnership, trust or other entity, as the case may be, shall, prior to or contemporaneously with any such Capital Reorganization, enter into an indenture which shall provide, to the extent possible, for the application of the provisions set forth in this Supplemental Indenture with respect to the rights and interests thereafter of the Warrantholders to the end that the provisions set forth in this Supplemental Indenture shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any shares, other securities or property to which a Warrantholder is entitled on exercise of its acquisition rights thereafter. Any indenture entered into between the Corporation and the Warrant Agent pursuant to the provisions of this subsection 4.1(d) shall be a supplemental indenture entered into pursuant to the provisions of Article 8. Any indenture entered into between the Corporation, any successor to the Corporation or such purchasing body corporate, partnership, trust or other entity and the Warrant Agent shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section 4.1 and which shall apply to successive Capital Reorganizations.
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(e)
|
In any case in which this Section 4.1 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the holder of any Warrant exercised after such record date and before the occurrence of such event the additional Common Shares or other securities or property issuable upon such exercise by reason of the adjustment required by such event; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder's right to receive such additional Common Shares or other securities or property upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares or other securities or property declared in favour of holders of record of Common Shares or such other securities or property on and after the relevant date of exercise or such later date as such holder would, but for the provisions of this subsection 4.1(e), have become the holder of record of such additional Common Shares or other securities or property pursuant to this Section 4.1.
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(f)
|
In any case in which subsections 4.1(a), 4.1(b) or 4.1(c) require that an adjustment be made to the Exercise Price, no such adjustment shall be made if, the holders of the outstanding Warrants receive the Common Shares or securities exchangeable for or convertible into Common Shares referred to in subsection 4.1(a), the rights, options or warrants referred to in subsection 4.1(b) or the securities, rights, options, warrants, evidences of indebtedness or assets referred to in subsection 4.1(c), as the case may be, in such kind and number as they would have received if they had been holders of Common Shares on the applicable record date or effective date, as the case may be, by virtue of their outstanding Warrant having then been exercised into Common Shares at the Exercise Price in effect on the applicable record or effective date, as the case may be.
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(g)
|
The adjustments provided for in this Section 4.1 are cumulative and shall, in the case of adjustments to the Exercise Price, be computed to the nearest whole cent and shall apply to successive subdivisions, redivisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section 4.1, provided that, notwithstanding any other provision of this Section, no adjustment of the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price then in effect or a change in the number of Common Shares purchasable upon exercise by at least one one-hundredth of a Common Share, as the case may be; provided, however, that any adjustments which by reason of this subsection 4.1(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
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|
(h)
|
After any adjustment pursuant to this Section 4.1, the term "Common Shares" where used in this Supplemental Indenture shall be interpreted to mean securities of any class or classes which, as a result of such adjustment and all prior adjustments pursuant to this Section 4.1, the Warrantholder is entitled to receive upon the exercise of such holder's Warrant and the number of Common Shares indicated by any exercise made pursuant to a Warrant shall be interpreted to mean the number of Common Shares or other property or securities a Warrantholder is entitled to receive, as a result of such adjustment and all prior adjustments pursuant to this Section 4.1, upon the full exercise of a Warrant.
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4.2
|
Entitlement to Shares on Exercise of Warrant
|
4.3
|
No Adjustment for Stock Options or Warrants
|
4.4
|
Determination by Corporation's Auditors
|
4.5
|
Proceedings Prior to any Action Requiring Adjustment
|
4.6
|
Certificate of Adjustment
|
4.7
|
Notice of Special Matters
|
4.8
|
No Action after Notice
|
4.9
|
Protection of Warrant Agent
|
|
(a)
|
shall be entitled to act and rely on any adjustment calculation of the Corporation or the Corporation's Auditors;
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|
(b)
|
shall not at any time be under any duty or responsibility to any Warrantholder to determine whether any facts exist which may require any adjustment contemplated by Section 4.1, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;
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|
(c)
|
shall not be accountable with respect to the validity or value (or the kind or amount) of any Common Shares or of any shares or other securities or property which may at any time be issued or delivered upon the exercise of the rights attaching to any Warrant;
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(d)
|
shall not be responsible for any failure of the Corporation to issue, transfer or deliver Common Shares or certificates for the same upon the surrender of any Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in this Article 4; and
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(e)
|
shall not incur any liability or responsibility whatsoever or be in any way responsible for the consequences of any breach on the part of the Corporation of any of the representations, warranties or covenants herein contained.
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4.10
|
Other Adjustments
|
5.1
|
Optional Purchases by the Corporation
|
5.2
|
General Covenants
|
|
(a)
|
the Warrants, when issued and countersigned as provided in this Supplemental Indenture, will be valid and binding obligations enforceable against it in accordance with and subject to the provisions of this Supplemental Indenture;
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(b)
|
it will reserve and keep available a sufficient number of Common Shares for the purpose of enabling it to satisfy its obligations to issue Common Shares upon exercise of the Warrants;
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|
(c)
|
it will cause the Common Shares and the certificates representing the Common Shares from time to time acquired pursuant to the exercise of the Warrants to be duly issued and delivered in accordance with the Warrant Certificates and the terms hereof;
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(d)
|
all Common Shares which shall be issued upon exercise of the right to acquire provided for herein and in the Warrant Certificates shall be fully paid and non-assessable;
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(e)
|
the Corporation will do, or cause to be done, all things necessary to preserve and keep in full force and effect its corporate existence, provided however that (subject to Article 4 and Section 8.2) nothing will prevent the amalgamation, consolidation, merger or sale of, or other business combination involving, the Corporation;
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(f)
|
it will perform and carry out all of the acts or things to be done by it as provided in this Supplemental Indenture; and
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(g)
|
it will execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, all other acts, deeds and assurances in law as the Warrant Agent may reasonably require for the better accomplishing and effecting the intentions and provisions of this Supplemental Indenture.
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5.3
|
Warrant Agent's Remuneration and Expenses
|
5.4
|
Performance of Covenants by Warrant Agent
|
6.1
|
Suits by Warrantholders
|
|
(a)
|
No Warrantholder has the right to institute any action or proceeding or to exercise any other remedy authorized hereunder for the purpose of enforcing any right on behalf of the Warrantholders or for the execution of any trust or power hereunder or for the appointment of a liquidator or receiver or receiver and manager or for a receiving order under the Bankruptcy and Insolvency Act (Canada) or to have the Corporation wound up or to file or prove a claim in any liquidation or bankruptcy proceedings, unless the Warrant Agent has received a Warrantholders' Request directing it to take the requested action and has been provided with sufficient funds or other security and/or such indemnity satisfactory to the Warrant Agent in respect of the costs, expenses and liabilities that may be incurred by it in so proceeding and the Warrant Agent has failed to act within a reasonable time thereafter. If the Warrant Agent has so failed to act, but not otherwise, any Warrantholder acting on behalf of all Warrantholders will be entitled to take any of the proceedings that the Warrant Agent might have taken hereunder. No Warrantholder has any right in any manner whatsoever to effect, disturb or prejudice the rights hereby created by its action or to enforce any right hereunder or under any Warrant, except subject to the conditions and in the manner herein provided. Any money received as a result of a proceeding taken by any Warrantholder hereunder must be forthwith paid to the Warrant Agent.
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(b)
|
All rights of action under this Supplemental Indenture may be enforced by the Warrant Agent without the possession of any of the Warrants or the production thereof on any trial or other proceedings relative thereto.
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(c)
|
The Warrant Agent shall be entitled and empowered, either in its own name or as Warrant Agent of an express trust, or as attorney-in-fact for the Warrantholders, or in any one or more of such capacities, to file such proof of debt, amendment of proof of debt, claim, petition or other document as may be necessary or advisable in order to have the claim of the Warrant Agent and the Warrantholders allowed in any insolvency, bankruptcy, liquidation or other judicial proceedings relative to the Corporation or its creditors or relative to or affecting its property. The Warrant Agent is hereby irrevocably appointed (and the successive respective Warrantholders by taking and holding the same shall be conclusively deemed to have so appointed the Warrant Agent) the true and lawful attorney-in-fact of the respective Warrantholders or on behalf of the Warrantholders as a class, subject to deduction from any such claims of the amounts of any claims filed by any of the Warrantholders themselves if and to the extent permitted hereunder, for any proof of debt, amendment of proof of debt, claim, petition or other document in any such proceedings and to receive payment of any sums becoming distributable on account thereof, and to execute any such other papers and documents and to do and perform any and all such acts and things for and on behalf of the Warrantholders, as may be necessary or advisable in the opinion of the Warrant Agent, in order to have the respective claims of the Warrant Agent and of the Warrantholders against the Corporation or its property allowed in any such proceeding, and to receive payment of or on account of such claims; provided, however, that nothing contained in this Supplemental Indenture shall be deemed to give the Warrant Agent, unless so authorized by extraordinary resolution (as provided in Section 7.11), any right to accept or consent to any plan of reorganization or otherwise by action of any character in such proceeding to waive or change in any way any right of any Warrantholder.
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|
(d)
|
The Warrant Agent shall also have the power, but not the obligation, at any time and from time to time to institute and to maintain such suits and proceedings as it may be advised shall be necessary or advisable to preserve and protect its interests and the interests of the Warrantholders.
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|
(e)
|
Any such suit or proceeding instituted by the Warrant Agent may be brought in the name of the Warrant Agent as Warrant Agent of an express trust, and any recovery of judgment shall be for the rateable benefit of the Warrantholders subject to provisions of this Supplemental Indenture. In any proceeding brought by the Warrant Agent (and also any proceeding in which a declaratory judgment of a court may be sought as to the interpretation or construction of any provision of this Supplemental Indenture, to which the Warrant Agent shall be a party), the Warrant Agent shall be held to represent all the Warrantholders, and it shall not be necessary to make any Warrantholders parties to any such proceeding.
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6.2
|
Limitation of Liability
|
6.3
|
Waiver of Default
|
|
(a)
|
the holders of not less than 51% of the Warrants then outstanding shall have power (in addition to the powers exercisable by extraordinary resolution as provided in Section 7.10) by requisition in writing to instruct the Warrant Agent to waive any default hereunder and the Warrant Agent shall thereupon waive the default upon such terms and conditions as shall be prescribed in such requisition; or
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|
(b)
|
the Warrant Agent shall have power to waive any default hereunder upon such terms and conditions as the Warrant Agent may deem advisable, if, in the Warrant Agent's opinion, the same shall have been cured or adequate provision made therefor;
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7.1
|
Right to Convene Meetings
|
7.2
|
Notice
|
7.3
|
Chairman
|
7.4
|
Quorum
|
7.5
|
Power to Adjourn
|
7.6
|
Show of Hands
|
7.7
|
Poll and Voting
|
7.8
|
Regulations
|
|
(a)
|
the setting of the record date for a meeting for the purpose of determining Warrantholders entitled to receive notice of and to vote at the meeting;
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|
(b)
|
for Warrantholders to appoint a proxy or proxies to represent them and vote for them at any such meeting (and any adjournment thereof) and the manner in which same is to be executed, and for the production of the authority of any persons signing on behalf of the Warrantholder appointing them;
|
|
(c)
|
the deposit of instruments appointing proxies at such place and time as the Warrant Agent, the Corporation or the Warrantholders convening the meeting, as the case may be, may in the notice convening the meeting direct;
|
|
(d)
|
the deposit of instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be mailed or sent by facsimile before the meeting to the Corporation or to the Warrant Agent at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting;
|
|
(e)
|
the form of the instrument of proxy or the manner in which it must be executed; and
|
|
(f)
|
generally for the calling of meetings of Warrantholders and the conduct of business thereat.
|
7.9
|
Corporation and Warrant Agent May be Represented
|
7.10
|
Powers Exercisable by Extraordinary Resolution
|
|
(a)
|
subject to the approval of the TSX, to agree to any modification, abrogation, alteration, compromise or arrangement of the rights of Warrantholders or, subject to the consent of the Warrant Agent, the Warrant Agent in its capacity as trustee hereunder or on behalf of the Warrantholders, in each case which may be agreed to by the Corporation, whether such rights arise under this Supplemental Indenture or the Warrant Certificates or otherwise;
|
|
(b)
|
subject to the approval of the TSX, to amend, alter or repeal any extraordinary resolution previously passed or sanctioned by the Warrantholders;
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|
(c)
|
to direct or to authorize the Warrant Agent to enforce any of the covenants on the part of the Corporation contained in this Supplemental Indenture or the Warrant Certificates or to enforce any of the rights of the Warrantholders in any manner specified in such extraordinary resolution or to refrain from enforcing any such covenant or right;
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|
(d)
|
to waive, and to direct the Warrant Agent to waive, any default on the part of the Corporation in complying with any provisions of this Supplemental Indenture or the Warrant Certificates either unconditionally or upon any conditions specified in such extraordinary resolution;
|
|
(e)
|
to restrain any Warrantholder from taking or instituting any suit, action or proceeding against the Corporation for the enforcement of any of the covenants on the part of the Corporation in this Supplemental Indenture or the Warrant Certificates or to enforce any of the rights of the Warrantholders;
|
|
(f)
|
to direct any Warrantholder who, as such, has brought any suit, action or proceeding to stay or to discontinue or otherwise to deal with the same upon payment of the costs, charges and expenses reasonably and properly incurred by such Warrantholder in connection therewith;
|
|
(g)
|
to assent to any change in or omission from the provisions contained in the Warrant Certificates and this Supplemental Indenture or any ancillary or supplemental instrument which may be agreed to by the Corporation, and to authorize the Warrant Agent to concur in and execute any ancillary or supplemental indenture embodying the change or omission;
|
|
(h)
|
with the consent of the Corporation, not to be unreasonably withheld, to remove the Warrant Agent or its successor in office and to appoint a new trustee or trustees to take the place of the Warrant Agent so removed; and
|
|
(i)
|
to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of shares or other securities of the Corporation.
|
7.11
|
Meaning of Extraordinary Resolution
|
|
(a)
|
The expression "extraordinary resolution" when used in this Supplemental Indenture means, subject as hereinafter provided in this Section 7.11 and in Section 7.14, a resolution proposed at a meeting of Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article 7 at which there are present in person or by proxy Warrantholders representing at least 10% of the aggregate number of the then outstanding Warrants and passed by the affirmative votes of Warrantholders representing not less than 66 2/3% of the then outstanding Warrants represented at the meeting and voted on the poll upon such resolution.
|
|
(b)
|
If, at the meeting at which an extraordinary resolution is to be considered, Warrantholders representing at least 10% of the aggregate number of the then outstanding Warrants are not present in person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by Warrantholders or on a Warrantholders' Request, shall be dissolved; but in any other case it shall stand adjourned to such day, being not less than 15 or more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 10 days' prior notice shall be given of the time and place of such adjourned meeting in the manner provided for in Section 10.2. Such notice shall state that at the adjourned meeting, the Warrantholders present in person or by proxy shall form a quorum but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting, the Warrantholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at such adjourned meeting and passed by the requisite vote as provided in subsection 7.11(a) shall be an extraordinary resolution within the meaning of this Supplemental Indenture notwithstanding that Warrantholders representing at least 10% of the aggregate number the then outstanding Warrants are not present in person or by proxy at such adjourned meeting.
|
|
(c)
|
Votes on an extraordinary resolution shall always be given on a poll and no demand for a poll on an extraordinary resolution shall be necessary.
|
7.12
|
Powers Cumulative
|
7.13
|
Minutes
|
7.14
|
Instruments in Writing
|
7.15
|
Binding Effect of Resolutions
|
7.16
|
Holdings by Corporation Disregarded
|
8.1
|
Provision for Supplemental Indentures for Certain Purposes
|
|
(a)
|
setting forth any adjustments resulting from the application of the provisions of Article 4 where a supplemental indenture would be appropriate;
|
|
(b)
|
adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of Counsel, are necessary or advisable in the premises, provided that the same are not in the opinion of the Warrant Agent relying on the advice of Counsel, prejudicial to the interests of the Warrantholders;
|
|
(c)
|
giving effect to any extraordinary resolution passed as provided in Article 7;
|
|
(d)
|
making such provisions not inconsistent with this Supplemental Indenture as may be necessary or desirable with respect to matters or questions arising hereunder or for the purpose of obtaining or maintaining a listing or quotation of the Warrants on any stock exchange, provided that such provisions are not, in the opinion of the Warrant Agent relying on the advice of Counsel, prejudicial to the interests of the Warrantholders;
|
|
(e)
|
modifying any of the provisions of this Supplemental Indenture, including relieving the Corporation from any of the obligations, conditions or restrictions herein contained, provided that such modification or relief shall be or become operative or effective only if, in the opinion of the Warrant Agent relying on the advice of Counsel, such modification or relief in no way prejudices any of the rights of the Warrantholders or of the Warrant Agent, and provided further that the Warrant Agent may in its sole discretion decline to enter into any such supplemental indenture which in its opinion may not afford adequate protection to the Warrant Agent when the same shall become operative; and
|
|
(f)
|
for any other purpose not inconsistent with the terms of this Supplemental Indenture, including the correction or rectification of any ambiguities, defective or inconsistent provisions, errors, mistakes or omissions herein, provided that in the opinion of the Warrant Agent relying on the advice of Counsel the rights of the Warrant Agent and of the Warrantholders are in no way prejudiced thereby.
|
8.2
|
Successor Corporations
|
9.1
|
Trust Indenture Legislation
|
|
(a)
|
If and to the extent that any provision of this Supplemental Indenture limits, qualifies or conflicts with a mandatory requirement of any legislation applicable to this Supplemental Indenture, such mandatory requirement shall prevail.
|
|
(b)
|
The Corporation and the Warrant Agent agree that each will, at all times in relation to this Supplemental Indenture and any action to be taken hereunder, observe and comply with and be entitled to the benefits of all legislation applicable to this Supplemental Indenture.
|
9.2
|
Rights and Duties of Warrant Agent
|
|
(a)
|
In the exercise of the rights and duties prescribed or conferred by the terms of this Supplemental Indenture, the Warrant Agent shall exercise that degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances. The Warrant Agent shall be liable only for its own gross negligence, or its own wilful misconduct or bad faith.
|
|
(b)
|
The obligation of the Warrant Agent to commence or continue any act, action or proceeding for the purpose of enforcing any rights of the Warrant Agent or the Warrantholders hereunder shall be conditional upon the Warrantholders furnishing, when required by notice by the Warrant Agent, sufficient funds to commence or to continue such act, action or proceeding and an indemnity reasonably satisfactory to the Warrant Agent to protect and to hold harmless the Warrant Agent against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Supplemental Indenture shall require the Warrant Agent to expend or to risk its own funds or otherwise to incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified as aforesaid.
|
|
(c)
|
The Warrant Agent may, before commencing or at any time during the continuance of any such act, action or proceeding, require the Warrantholders, at whose instance it is acting, to deposit with the Warrant Agent the Warrants held by them, for which Warrants the Warrant Agent shall issue receipts.
|
9.3
|
Evidence, Experts and Advisers
|
|
(a)
|
In addition to the reports, certificates, opinions and other evidence required by this Supplemental Indenture, the Corporation shall furnish to the Warrant Agent such additional evidence of compliance with any provision hereof, and in such form, as may be prescribed by any legislation applicable to this Supplemental Indenture or as the Warrant Agent may reasonably require by written notice to the Corporation.
|
|
(b)
|
In the exercise of its rights and duties hereunder, the Warrant Agent may, if it is acting in good faith, rely as to the truth of the statements and the accuracy of the opinions expressed in statutory declarations, opinions, reports, written requests, consents, or orders of the Corporation, certificates of the Corporation or other evidence furnished to the Warrant Agent pursuant to a request of the Warrant Agent, provided that such evidence complies with all legislation applicable to this Supplemental Indenture and that the Warrant Agent complies with such legislation and that the Warrant Agent examines the same and determines that such evidence complies with the applicable requirements of this Supplemental Indenture.
|
|
(c)
|
Whenever it is provided in this Supplemental Indenture or under any legislation applicable to this Supplemental Indenture that the Corporation shall deposit with the Warrant Agent resolutions, certificates, reports, opinions, requests, orders or other documents, it is intended that the trust, accuracy and good faith on the effective date thereof and the facts and opinions stated in all such documents so deposited shall, in each and every such case, be conditions precedent to the right of the Corporation to have the Warrant Agent take the action to be based thereon.
|
|
(d)
|
Proof of the execution of an instrument in writing by any Warrantholder may be made by the certificate of a notary public or other officer with similar powers, that the person signing such instrument acknowledged to it the execution thereof, or by an affidavit of a witness to such execution or in any other manner which the Warrant Agent may consider adequate.
|
|
(e)
|
The Warrant Agent may employ or retain at the Corporation's expense such Counsel, accountants, appraisers or other experts or advisers as it may reasonably require for the purpose of determining and discharging its duties hereunder and may pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any Counsel, and shall not be responsible for any misconduct or negligence on the part of any such experts or advisers who have been appointed with due care by the Warrant Agent.
|
9.4
|
Documents, Monies, etc. Held by Warrant Agent
|
9.5
|
Actions by Warrant Agent to Protect Interest
|
9.6
|
Warrant Agent Not Required to Give Security
|
9.7
|
Protection of Warrant Agent
|
|
(a)
|
the Warrant Agent shall not be liable for or by reason of any statements of fact or recitals in this Supplemental Indenture or in the Warrant Certificates (except the representation contained in Section 9.9 or in the certificate of the Warrant Agent on the Warrant Certificates) or be required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Corporation;
|
|
(b)
|
nothing herein contained shall impose any obligation on the Warrant Agent to see to or to require evidence of the registration or filing (or renewal thereof) of this Supplemental Indenture or any instrument ancillary or supplemental hereto;
|
|
(c)
|
the Warrant Agent shall not be bound to give notice to any person or persons of the execution hereof; and
|
|
(d)
|
the Warrant Agent shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Corporation to any of the covenants herein contained or of any acts of any directors, officers, employees, agents or servants of the Corporation.
|
9.8
|
Replacement of Warrant Agent; Successor by Merger
|
|
(a)
|
The Warrant Agent may resign its trust and be discharged from all further duties and liabilities hereunder, subject to this Section 9.8, by giving to the Corporation not less than 90 days' prior notice in writing or such shorter prior notice as the Corporation may accept as sufficient. The Warrantholders by extraordinary resolution shall have power at any time to remove the existing Warrant Agent and to appoint a new warrant agent. In the event of the Warrant Agent resigning or being removed as aforesaid or being dissolved, becoming bankrupt, going into liquidation otherwise becoming incapable of acting hereunder, the Corporation shall forthwith appoint a new trustee unless a new trustee has already been appointed by the Warrantholders; failing such appointment by the Corporation, the retiring Warrant Agent, at the Corporation's expense, or any Warrantholder may apply to a justice of the Court of Queen's Bench of the Province of Alberta on such notice as such justice may direct, for the appointment of a new trustee; but any new trustee so appointed by the Corporation or by the Court shall be subject to removal as aforesaid by the Warrantholders. Any new trustee appointed under any provision of this Section 9.8 shall be a corporation authorized to carry on the business of a trust company in the Province of Alberta and, if required by any legislation applicable to this Supplemental Indenture for any other provinces, in such other provinces. On any such appointment, the new trustee shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Warrant Agent hereunder and there shall be immediately executed, at the expense of the Corporation, all such conveyances or other instruments as may, in the reasonable opinion of Counsel, be necessary or advisable to vest the new trustee with such powers, rights, duties and responsibilities, provided that the predecessor Warrant Agent shall have no obligation to execute any such conveyances or instruments until such time as it has received payment of all outstanding remuneration and expenses payable by the Corporation to such Warrant Agent under this Supplemental Indenture.
|
|
(b)
|
Upon the appointment of a successor trustee, the Corporation shall promptly notify the Warrantholders thereof in the manner provided for in Section 10.2 hereof.
|
|
(c)
|
Any corporation into or with which the Warrant Agent may be merged or consolidated or amalgamated, or any corporation resulting therefrom to which the Warrant Agent shall be a party, or any corporation succeeding to the trust business of the Warrant Agent shall be the successor to the Warrant Agent hereunder without any further act on its part or any of the parties hereto, provided that such corporation would be eligible for appointment as a successor trustee under subsection 9.8(a).
|
|
(d)
|
Any Warrant Certificates certified but not delivered by a predecessor trustee may be certified by the successor trustee in the name of the predecessor or successor trustee.
|
9.9
|
Conflict of Interest
|
|
(a)
|
The Warrant Agent represents to the Corporation that at the time of execution and delivery hereof no material conflict of interest exists between its role as a trustee hereunder and its role in any other capacity and agrees that in the event of a material conflict of interest arising hereafter it will, within 90 days after ascertaining that it has such material conflict of interest, either eliminate the same or assign its trust hereunder to a successor trustee approved by the Corporation and meeting the requirements set forth in subsection 9.8(a). Notwithstanding the foregoing provisions of this subsection 9.9(a), if any such material conflict of interest exists or hereafter shall exist, the validity and enforceability of this Supplemental Indenture and the Warrant Certificates shall not be affected in any manner whatsoever by reason thereof.
|
|
(b)
|
Subject to subsection 9.9(a), the Warrant Agent, in its personal or any other capacity, may buy, lend upon and deal in securities of the Corporation and generally may contract and enter into financial transactions with the Corporation or any Subsidiary of the Corporation without being liable to account for any profit made thereby.
|
9.10
|
Acceptance of Trust
|
9.11
|
Warrant Agent Not to be Appointed Receiver
|
9.12
|
Knowledge of Warrant Agent
|
9.13
|
Indemnification of Warrant Agent
|
9.14
|
Warrant Agent Not Required to Give Notice of Default
|
9.15
|
Warrant Agent's Right Not to Act
|
9.16
|
No Third Party Interests
|
10.1
|
Notice to the Corporation and the Warrant Agent
|
|
(a)
|
Unless herein otherwise expressly provided, any notice to be given hereunder to the Corporation or the Warrant Agent shall be deemed to be validly given if delivered or if sent by registered letter, postage prepaid or by facsimile:
|
Attention:
|
Vice President, Legal and General Counsel
|
Fax:
|
(403) 265-3242
|
Attention:
|
Corporate Trust
|
Fax:
|
403 267-6598
|
|
(b)
|
The Corporation or the Warrant Agent, as the case may be, may from time to time notify the other in the manner provided in subsection 10.1(a) of a change of address which, from the effective date of such notice and until changed by like notice, shall be the address of the Corporation or the Warrant Agent, as the case may be, for all purposes of this Supplemental Indenture.
|
|
(c)
|
If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrant Agent or to the Corporation hereunder could reasonably be considered unlikely to reach its destination, such notice shall be valid and effective only if it is delivered to the named officer of the party to which it is addressed or, if it is delivered to such party at the appropriate address provided in subsection 10.1(a), by facsimile or other means of prepaid, transmitted and recorded communication.
|
10.2
|
Notice to Warrantholders
|
|
(a)
|
Any notice to the Warrantholders under the provisions of this Supplemental Indenture shall be valid and effective if delivered or if sent by ordinary post addressed to such holders at their postal addresses appearing on the register of Warrantholders maintained under this Supplemental Indenture. Any such notice delivered in accordance with the foregoing is deemed to have been effectively given (and received by the Warrantholders) on the date of delivery (with receipt confirmed) if such date is a Business Day or, if mailed, five Business Days following actual posting of the notice.
|
|
(b)
|
If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrantholders hereunder could reasonably be considered unlikely to reach its destination, such notice shall be valid and effective only if it is delivered personally to such Warrantholders or if delivered to the address for such Warrantholders contained in the register of Warrants maintained by the Warrant Agent, by other means of prepaid transmitted and recorded communication. Accidental error or omission in giving notice or accidental failure to mail notice to any holder will not invalidate any action or proceeding founded thereon.
|
|
(c)
|
In addition to the other requirements for notice under this Section, where a meeting of Warrantholders is being convened, the Warrant Agent or Corporation may require publication of such notice in such municipalities and filing with securities regulatory authorities, as necessary to comply with applicable legal, regulatory or stock exchange requirements.
|
10.3
|
Evidence of Ownership
|
|
(a)
|
Upon receipt of a certificate of any bank, trust company or other depositary satisfactory to the Warrant Agent stating that the Warrants specified therein have been deposited by a named person with such bank, trust company or other depositary and will remain so deposited until the expiry of the period specified therein and the acknowledgement by the named person of such certificate, the Corporation and the Warrant Agent may treat the person so named as the owner, and such certificate as sufficient evidence of the ownership by such person of such Warrant during such period, for the purpose of any requisition, direction, consent, instrument or other document to be made, signed or given by the holder of the Warrant so deposited.
|
|
(b)
|
The Corporation and the Warrant Agent may accept as sufficient evidence of the fact and date of the signing of any requisition, direction, consent, instrument or other document by any person: (i) the signature of any officer of any bank, trust company, or other depositary satisfactory to the Warrant Agent as witness of such execution; (ii) the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded at the place where such certificate is made that the person signing acknowledged to him the execution thereof; or (iii) a satisfactory declaration of a witness of such execution.
|
10.4
|
Counterparts
|
10.5
|
Satisfaction and Discharge of Indenture
|
|
(a)
|
the date by which there shall have been delivered to the Warrant Agent for exercise or destruction all Warrant Certificates theretofore certified hereunder; or
|
|
(b)
|
30 days after the Time of Expiry or the Accelerated Time of Expiry, as applicable;
|
10.6
|
Provisions of Supplemental Indenture and Warrants for the Sole Benefit of Parties and Warrantholders
|
10.7
|
Warrants Owned by the Corporation or its Subsidiaries – Certificate to be Provided
|
|
(a)
|
the names (other than the name of the Corporation) of the registered holders of Warrants which, to the knowledge of the Corporation, are owned by or held for the account of the Corporation or any Subsidiary of the Corporation; and
|
|
(b)
|
the number of Warrants owned legally or beneficially by the Corporation or any Subsidiary of the Corporation,
|
10.8
|
Matters Relating to the Privacy of Personal Information
|
10.9
|
Matters Relating to the SEC
|
10.10
|
Force Majeure
|
10.11
|
Successors
|
GRAN TIERRA ENERGY INC.
|
||
Per:
|
/s/ Martin Eden
|
|
Martin Eden
|
||
Vice-President, Finance and
|
||
Chief Financial Officer
|
||
PETROLIFERA PETROLEUM LIMITED
|
||
Per:
|
/s/ Kristen J. Bibby
|
|
Kristen J. Bibby
|
||
Vice-President, Finance and
|
||
Chief Financial Officer
|
||
COMPUTERSHARE TRUST COMPANY OF CANADA
|
||
Per:
|
/s/ Nazim Nathoo
|
|
Nazim Nathoo
|
||
Corporate Trust Officer
|
||
Per:
|
/s/ Laura Leong
|
|
Laura Leong
|
||
Corporate Trust Officer
|
WARRANT CERTIFICATE NUMBER
|
GRAN TIERRA ENERGY INC.
(A NEVADA CORPORATION)
|
NUMBER OF WARRANTS
|
||
CUSIP
|
is nominally entitled to purchase in the manner and subject to the restrictions and adjustments set forth herein, at any time and from time to time after the date hereof until 5:00 p.m. (Calgary time) (the "Time of Expiry") August 28, 2011 (the "Expiry Date") one fully paid and non-assessable share of Common Stock ("Common Share") par value of Gran Tierra Energy Inc. (the "Corporation") at a price per Common Share of $9.67, for each Warrant represented hereby; provided, however, that the foregoing notwithstanding, no Warrant shall be exercised by payment of the exercise in cash, but rather each Warrant may only be “net exercised” (as described below) for such fraction of a Common Share as shall equal (A – B)/A, where: A = the Closing Trading Price on the date immediately preceding the date of exercise; and B = $9.67; provided further, that no fractional Common Shares shall be issued, and any fractional Common Share otherwise issuable upon exercise of the Warrants being exercised and represented hereby after aggregation of all Common Shares issuable upon such exercise shall not be issued, and cash will be paid in lieu of any fractional share entitlement based on the Current Market Price of the Common Shares, provided that the Corporation shall not be required to make any such cash payment that is less than $10.00. For purposes hereof: (1) "Closing Trading Price" means the closing trading price on the TSX on the business day immediately prior to the date on which the Warrant is exercised; (2) “Current Market Price” on a date shall mean the weighted average of the trading prices per share for such shares for any 10 consecutive Trading Days (as selected by the directors of the Corporation) during the period commencing not more than 30 Trading Days before such date on the TSX or, if on such date the Common Shares are not listed on the TSX, on such stock exchange upon which such shares are listed and as selected by the directors, or, if such shares are not listed on any stock exchange then on such over-the-counter market as may be selected for such purpose by the directors, or, if the Common Shares are not listed on any stock exchange or traded through an over-the-counter market, the Current Market Price is to be determined in good faith by the directors of the Corporation; and (3) "Trading Day" means a day on which the TSX, other stock exchange or over-the-counter market, as the case may be, is open for the transaction of business and on which the Common Shares actually trade on such exchange or market. At any time after the Issue Date and ending at the Time of Expiry, if the 20 trading day volume weighted average price of the Common Shares on the TSX (or such other stock exchange or quotation system on which the Corporation's shares are listed and where a majority of the trading volume occurs), exceeds $20.15, the Corporation may, within five business days after such an event, provide notice (the "Acceleration Notice") to the Warrantholder advising that the Warrants will expire at 5:00 p.m. (Calgary Time) (the "Accelerated Time of Expiry") on the date which is 30 days after the date of the Acceleration Notice (the "Accelerated Expiry Date") if not exercised prior to the Accelerated Time of Expiry on the Accelerated Expiry Date.
The right to purchase Common Shares may only be exercised by the holder within the time set forth above by:
|
(a) duly completing and executing the Exercise Form attached hereto; and
(b) surrendering this Warrant Certificate to Computershare Trust Company of Canada (the "Warrant Agent") at the principal office of the Warrant Agent in the City of Calgary or the City of Toronto.
This Warrant Certificate shall be deemed to be surrendered only upon personal delivery hereof or, if sent by mail or other means of transmission, upon actual receipt thereof by the Warrant Agent at the office referred to above.
Upon surrender of this Warrant Certificate, the person or persons in whose name or names the Common Shares issuable upon exercise of the Warrants are to be issued shall be deemed for all purposes (except as provided in the Indenture) to be the holder or holders of record of such Common Shares and the Corporation covenants that it will (subject to the provisions of the Indenture) cause a certificate or certificates representing such Common Shares to be delivered or mailed to the person or persons at the address or addresses specified in the Exercise Form.
In the event of an exercise of that number of Warrants which is fewer than the number which may be exercised hereby, the registered holder of this Warrant Certificate shall be entitled to receive without charge a new Warrant Certificate in respect of the balance of the Warrants not then exercised. Under no circumstances is the Corporation obliged to issue fractional Common Shares.
The Warrants represented by this certificate are issued under and pursuant to a Supplemental Warrant Indenture (referred to herein as the "Indenture") made as of March [__], 2011 among the Corporation, Petrolifera Petroleum Limited and the Warrant Agent. Reference is made to the Indenture and any instruments supplemental thereto for a full description of the rights of the holders of the Warrants and the terms and conditions upon which the Warrants are, or are to be, issued and held, with the same effect as if the provisions of the Indenture and all instruments supplemental thereto were herein set forth. The provisions of the Indenture will prevail in the event of conflict with this Warrant Certificate. By acceptance hereof, the holder assents to all provisions of the Indenture. Capitalized terms used in this Warrant Certificate but not defined herein have the meanings given thereto in the Indenture.
The Indenture provides for the giving of notice by the Corporation prior to taking certain actions specified therein.
The holder may, at any time prior to the Time of Expiry on the Expiry Date or the Accelerated Time of Expiry on the Accelerated Expiry Date, as applicable, upon surrender hereof to the Warrant Agent at its principal office in the City of Calgary or the City of Toronto, exchange this Warrant Certificate for other Warrant Certificates entitling the holder to acquire, in the aggregate, the same number of Common Shares as may be acquired under this Warrant Certificate.
|
The holding of the Warrants evidenced by this Warrant Certificate shall not constitute the holder hereof a shareholder of the Corporation or entitle the holder to any right or interest in respect thereof except as expressly provided in the Indenture and in this Warrant Certificate.
The Indenture provides that all holders of Warrants shall be bound by any resolution passed at a meeting of the holders held in accordance with the provisions of the Indenture and resolutions signed by the holders of a specified majority of the then outstanding Warrants.
The Warrants evidenced by this Warrant Certificate may be transferred on the register kept at the offices of the Warrant Agent by the registered holder hereof or its legal representatives or its attorney duly appointed by an instrument in writing in form and execution satisfactory to the Warrant Agent only upon compliance with the conditions prescribed in the Indenture and upon compliance with such reasonable requirements as the Warrant Agent may prescribe.
|
This Warrant Certificate shall not be valid for any purpose whatever unless and until it has been certified by or on behalf of the Warrant Agent.
Time shall be of the essence hereof. This Warrant Certificate shall be governed by and construed in accordance with the laws in force in the Province of Alberta.
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be signed by its duly authorized officer as of
Date .
|
COMPUTERSHARE TRUST COMPANY OF CANADA, as Warrant Agent
|
GRAN TIERRA ENERGY INC.
|
|
By:
|
||
This Warrant Certificate is one of the Warrant
Certificates referred to in the Indenture
|
By:
|
||
AUTHORIZED SIGNATURE
|
Signature Guaranteed
|
Signature of Warrantholder or Authorized Representative
|
|
Name of Warrantholder
|
||
|
Name and Title of Authorized Representative
|
1.
|
If the Transfer Form is signed by a trustee, executor, administrator, curator, guardian, attorney, director or officer of a corporation or any person acting in a fiduciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Warrant Agent and the Corporation.
|
2.
|
The signature on the Transfer Form must be guaranteed as set forth below under "Signature Guarantee".
|
3.
|
The Warrants shall only be transferable in accordance with applicable laws.
|
TO:
|
GRAN TIERRA ENERGY INC.
|
Name:
|
Address in full
|
|||
(print clearly)
|
||||
Social Insurance Number:
|
Number of Warrants Exercised:
|
Signature Guaranteed
|
Signature of Warrantholder or Authorized Representative
|
|
Name of Warrantholder
|
||
|
Name and Title of Authorized Representative
|
¨
|
Please check if the Common Share certificates are to be picked up at the office of the Warrant Agent where the Warrant Certificate is surrendered or failing this Common Share certificates will be mailed to the address set forth above or if no address is specified, to the address as set forth in the records of the Corporation.
|
1.
|
The registered holder may exercise its right to receive Common Shares by completing this form and surrendering this form and the Warrant Certificate representing the Warrants being exercised, together with payment, to Computershare Trust Company of Canada at its principal office at 600, 530 – 8th Avenue SW, Calgary, AB T2P 3S8, Canada. Certificates for Common Shares will be delivered or mailed as soon as practicable after the exercise of the Warrants. The rights of the registered holder hereof cease if the Warrants are not exercised by 5:00 p.m. (Calgary time) on the Expiry Date or the Accelerated Time of Expiry on the Accelerated Expiry Date, as applicable
|
2.
|
If the Exercise Form indicates that Warrants are to be exercised and the resultant Common Shares are to be issued to a person or persons other than the registered holder of the Warrant Certificate, the signature of such holder on the Exercise Form must be guaranteed as set forth below under "Signature Guarantee".
|
3.
|
If the Exercise Form is signed by a trustee, executor, administrator, curator, guardian, attorney, director or officer of a corporation or any person acting in a fiduciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Warrant Agent and the Corporation.
|
Name
|
Base Salary
|
Target Bonus(3)
|
||
Dana Coffield
President and Chief Executive Officer
|
$355,000*
($356,927 USD)
|
80%
|
||
Shane O’Leary
Chief Operating Officer
|
$306,000*
($307,661 USD)
|
70%
|
||
Martin Eden
Chief Financial Officer
|
$272,000*
($273,477 USD)
|
70%
|
||
Rafael Orunesu
President, Gran Tierra Energy Argentina
|
$289,338 USD
|
60%
|
||
Júlio César Moreira
President, Gran Tierra Energy Brazil
|
R$543,311(1)
($326,078 USD)
|
60%
|
||
David Hardy
General Counsel, Vice-President Legal, and Secretary
|
$253,000*
($254,373 USD)
|
60%
|
||
Julian Garcia
President, Gran Tierra
Energy Columbia
|
COL$725,138,121(2)
($393,750 USD)
|
60%
|
1.
|
Scope of Work
|
2.
|
Term
|
3.
|
Compensation
|
4.
|
Confidentiality
|
5.
|
Compliance with laws and Policies of the Company
|
6.
|
Relationship of Parties
|
7.
|
Miscellaneous
|
Gran Tierra Energy Inc., an Alberta
|
Gran Tierra Energy Inc., a Nevada
|
|||
corporation
|
corporation
|
|||
By:
|
/s/ Dana Coffield
|
By:
|
/s/Dana Coffield
|
|
Name: Dana Coffield
|
Name: Dana Coffield
|
|||
Title: President and CEO
|
Title: President and CEO
|
|||
Date:
|
January 19, 2010
|
Date:
|
January 19, 2010
|
Contractor | ||
/s/ David Hardy
|
||
David Hardy
|
||
Date:
|
January 19, 2010
|
1.
|
review constating documents of the Company;
|
2.
|
review the Company's Policies;
|
3.
|
gain knowledge of the structure of the Company and its affiliates;
|
4.
|
identify internal and external counsel currently performing work for the Company and gain an understanding of the work currently being performed;
|
5.
|
review Company's current areas of operations and holdings;
|
6.
|
gain knowledge of the Company's strategic goals, including with respect to new venture and M&A initiatives, and current work programs and budget;
|
7.
|
review the Company's contracting and procurement methods and procedures and assist with procurement issues;
|
8.
|
gain knowledge of securities and corporate secretarial procedures of the Company; and
|
9.
|
such other matters as the CEO may direct.
|
A.
|
The Executive has specialized knowledge, skills and experience which are valuable to the management and success of the Company's business.
|
B.
|
The Company wishes to secure the services of the Executive as its General Counsel.
|
C.
|
The Parties wish to set forth their entire understanding and agreement with respect to the subject matter herein in its entirety with this Executive Employment Agreement (the "Agreement").
|
Gran Tierra Energy Inc., an Alberta Corporation
|
Gran Tierra Energy Inc., a Nevada corporation
|
|||
By:
|
/s/ Dana Coffield
|
By:
|
/s/ Dana Coffield
|
|
Name: Dana Coffield
|
Name: Dana Coffield
|
|||
Title: President and CEO
|
Title: President and CEO
|
|||
Date:
|
January 18, 2010
|
Date:
|
January 18, 2010
|
|
Executive
|
||||
By:
|
/s/ David Hardy
|
|||
David Hardy
|
||||
Date:
|
January 20, 2010
|
SIGNED, SEALED & DELIVERED
|
In presence of:
|
/s/ Sonya Messner
|
Sonya Messner
|
|
·
|
This is the top legal position for the Company with responsibility for determining the Company's legal posture and interests. The General Counsel works with the other members of the management team of the Company to ensure that the Company's business policies, practices and dealings meet legal and regulatory requirements in order to protect the Company from legal actions and complaints. The General Counsel also facilitates the Company's business activities by providing legal, commercial and negotiation support while protecting the Company's legal and commercial rights and interests, including with respect to transactional activities (M&A, farmouts, acreage acquisition) and competitive issues (trademarks, patents, copyrights, contractual arrangements, etc.), and manages the defense of legal claims and complaints and the interpretation and preparation of legal documents.
|
|
·
|
The General Counsel is accountable for all legal affairs of the company to ensure appropriate protection of the Company's legal rights pertaining to general law, energy law, property law, securities law, employment and labour law, and corporate and commercial law related to deal acquisition and deal making.
|
|
·
|
The General Counsel will be responsible for the overall leadership and management of all Company legal activities.
|
|
·
|
The General Counsel will also function as the Corporate Secretary for the Company and ensure that corporate secretarial functions are fulfilled by internal and/or external counsel.
|
|
·
|
The General Counsel will be accountable for overseeing through internal counsel and/or external counsel, complex legal requirements related to securities and regulatory issues and major company transactions for the growth and future success of the Company's business.
|
|
·
|
The General Counsel is responsible for providing legal advice and guidance to the executive officers of the Company with a view to preventing legal issues from arising and for dealing with any legal issues that do arise (including suits filed against the Company) expeditiously and cost effectively.
|
|
·
|
Provide leadership and oversight to the Company's legal teams (internal and external) in Colombia, Peru, Brazil, Argentina, and other potential new geographic areas and, where appropriate, ensure a level of consistency in legal approach across the Company's agreements.
|
|
·
|
Act as the Corporate Secretary for the Company and its subsidiaries.
|
|
·
|
Retain and manage the work assigned to extemallegal counsel to ensure the appropriate standards are met and compliance with laws and regulations in all geographic areas where the Company operates.
|
|
·
|
Represent the Company with external legal counsel in the United States and Canada to ensure compliance with Securities Regulations in the United States and Canada.
|
|
·
|
Participate with the other members of the management team-and, in particular, the CEO, COO, CFO -and provide legal leadership in developing and implementing corporate and business strategies and initiatives, including new business development.
|
|
·
|
Participate in capturing New Venture opportunities by working with other New Venture personnel to design appropriate procedures and practices and seeing to the preparation and negotiation of bid agreements, JOAs, PSCs, CAs, PSAs, and other commercial agreements related to bid rounds, farmins, and M&A activity.
|
|
·
|
Assume legal leadership on all M&A activities for the company, including the management of any necessary legal due diligence support for mergers and acquisitions through internal and external counsel.
|
|
·
|
Provide leadership and manage the preparation of contracts and agreements with local Business Units and maintain and, where necessary, improve existing contract management procedures.
|
|
·
|
Provide leadership in promoting the Company's high ethical standards -including code of ethics, corporate social responsibility, environmental standards, compliance with Foreign Corrupt Practices Act.
|
|
·
|
Act as the Privacy Officer for the Company and its subsidiaries.
|
|
·
|
Ensure that the CEO and CFO receive the support and expertise they require to ensure that the Company's controls and procedures are properly designed and remain effective in operation and ensure the maintenance of all SOX related requirements, including support with respect to certification requirements.
|
|
·
|
Ensure that procedures relating to legal functions are properly documented and effectively implemented across the Company's operations.
|
|
·
|
Ensure that the Board and the management team receive appropriate support with respect to any legal issues arising related to their areas of responsibilities.
|
|
·
|
Prepare the Company's annual legal expenditure budget and be accountable for the expenditures under the budget.
|
|
·
|
Ensure the CFO and Treasurer receive appropriate legal support in the Company's debt and equity fund raising activities.
|
|
·
|
Ensure the Finance Team receive appropriate legal support with the preparation of SEC registration statements and Canadian prospectuses.
|
/s/ Dana Coffield
|
Dana Coffield
|
Chief Executive Officer
|
/s/ Martin Eden
|
Martin Eden
|
Chief Financial Officer
|
/s/Dana Coffield
|
/s/ Martin Eden
|
|
Dana Coffield
|
Martin Eden
|
|
Chief Executive Officer
|
Chief Financial Officer
|
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