Share Capital



	Shares of Common Stock		Exchangeable Shares of Gran Tierra Exchangeco Inc.		Exchangeable Shares of Gran Tierra Goldstrike Inc.
Balance, December 31, 2017	385,191,042		4,422,776		1,688,889
Options exercised	549,189		—		—
Shares repurchased and canceled	(4,772,869	)	—		—
Exchange of exchangeable shares	6,111,665		(4,422,776	)	(1,688,889	)
Balance, December 31, 2018	387,079,027		—		—

The Company’s authorized share capital consists of 595,000,000 shares of capital stock, of which 570 million are designated as Common Stock, par value $0.001 per share and 25 million are designated as Preferred Stock, par value $0.001 per share.

On May 1, 2018, Gran Tierra Exchangeco Inc., a wholly-owned subsidiary of the Company, announced that it had established a redemption date of July 5, 2018 in respect of all of its outstanding exchangeable shares. Effective July 5, 2018, all remaining outstanding exchangeable shares of record on July 4, 2018 were acquired for purchase consideration of one share of Gran Tierra common stock for each exchangeable share, and on July 9, 2018, the Company retired and canceled one share of Special A Voting Stock and one share of Special B Voting Stock, which held voting rights in connection with those exchangeable shares. As a result, no shares of Special A Voting Stock and Special B Voting Stock remain outstanding.

The holders of shares of Common Stock are entitled to one vote for each share on all matters submitted to a stockholder vote and are entitled to share in all dividends that the Company’s Board of Directors, in its discretion, declares from legally available funds. The holders of Common Stock have no pre-emptive rights, no conversion rights, and there are no redemption provisions applicable to the shares.

Share Repurchase Program

On March 7, 2018, the Company announced that it intended to implement a share repurchase program (the “2018 Program”) through the facilities of the Toronto Stock Exchange ("TSX") and eligible alternative trading platforms in Canada. Under the 2018 Program, the Company is able to purchase at prevailing market prices up to 19,269,732 shares of Common Stock, representing approximately 5% of the issued and outstanding shares of Common Stock as of March 8, 2018. Shares purchased pursuant to 2018 Program will be canceled. The 2018 Program will expire on March 11, 2019, or earlier if the 5% share maximum is reached.

Equity Compensation Awards

The Company has an equity compensation program in place for its executives and employees. Equity compensation grants vest either based solely on recipient's continued employment or achievement of certain key measures of performance. Equity awards consist 80% of Performance Stock Units (“PSUs”) and 20% of stock options. The Company’s equity compensation awards outstanding as at December 31, 2018, include PSUs, deferred share units (“DSUs”), and stock options.

In accordance with the 2007 Equity Incentive Plan, as amended, the Company’s Board of Directors is authorized to issue options or other rights to acquire shares of the Company’s Common Stock. On June 27, 2012, the shareholders of Gran Tierra approved an amendment to the Company’s 2007 Equity Incentive Plan, which increased the Common Stock available for issuance thereunder from 23,306,100 shares to 39,806,100 shares.

The following table provides information about PSU, DSU, RSU and stock option activity for the year ended December 31, 2018:



	PSUs		DSUs	RSUs		Stock Options
	Number of Outstanding Share Units		Number of Outstanding Share Units	Number of Outstanding Share Units		Number of Outstanding Stock Options		Weighted Average Exercise Price /Stock Option ($)
Balance, December 31, 2017	6,131,951		455,768	122,090		8,960,692		$	3.65
Granted	3,879,667		229,125	—		2,114,869		2.55
Exercised	—		—	(120,268	)	(549,189	)	2.60
Forfeited	(1,006,957	)	—	—		(856,772	)	4.56
Expired	—		—	(1,822	)	(635,188	)	6.47
Balance, December 31, 2018	9,004,661		684,893	—		9,034,412		$	3.18
Vested and exercisable, at December 31, 2018						5,649,640		$	3.55
Vested, or expected to vest, at December 31, 2018, through the life of the options						8,879,351		$	3.19

Stock-based compensation expense for the year ended December 31, 2018, was $8.3 million (December 31, 2017 - $9.8 million; December 31, 2016 - $6.3 million) and was primarily recorded in G&A expenses.

At December 31, 2018, there was $9.2 million (December 31, 2017 - $13.7 million) of unrecognized compensation cost related to unvested PSUs and stock options which is expected to be recognized over a weighted average period of 1.6 years. The weighted-average remaining contractual term of options vested, or expected to vest, at December 31, 2018 was 2.5 years.

PSUs

PSUs entitle the holder to receive, at the option of the Company, either the underlying number of shares of the Company's Common Stock upon vesting of such units or a cash payment equal to the value of the underlying shares. PSUs will cliff vest after three years, subject to the continued employment of the grantee. Upon vesting, the underlying number of Common Shares or the cash payment equivalent to their value may range from zero to 200% of the number of PSU's vested, based on the Company’s performance with respect to the applicable performance targets. As at December 31, 2018, 2.7 million (December 31, 2017 - nil) of PSU's had vested and will be settled in cash. The performance targets for the PSUs outstanding as at December 31, 2018, were as follows:

(i) 50% of the award is subject to targets relating to the total shareholder return (“TSR”) of the Company against a group of

peer companies

(ii) 25% of the award is subject to targets relating to net asset value ("NAV") of the Company per share and NAV is based on

before tax net present value discounted at 10% of proved plus probable reserves; and

(iii) 25% of the award is subject to targets relating to the execution of corporate strategy.

The compensation cost of PSUs is subject to adjustment based upon the attainability of these performance targets. No settlement will occur with respect to the portion of the PSU award subject to each performance target for results below the applicable minimum threshold for that target. PSUs in excess of the target number granted will vest and be settled if performance exceeds the targeted performance goals. The Company currently intends to settle the PSUs in cash.

DSUs

DSUs entitle the holder to receive, either the underlying number of shares of the Company's Common Stock upon vesting of such units or, at the option of the Company, a cash payment equal to the value of the underlying shares. Once a DSU is vested, it is immediately settled. During the year ended December 31, 2018, DSUs were granted to directors and will vest 100% at such time the grantee ceases to be a member of the Board of Directors. The Company currently intends to settle the DSUs in cash.

RSUs

During the year ended December 31, 2018, the Company paid $0.4 million to cash settle restricted stock units (“RSUs”) (2017 - $0.6 million and 2016 - $1.2 million). There were no RSU's outstanding as at December 31, 2018.

Stock Options

Each stock option permits the holder to purchase one share of Common Stock at the stated exercise price. The exercise price equals the market price of a share of Common Stock at the time of grant. Stock options generally vest over three years. The term of stock options granted starting in May of 2013 is five years or three months after the grantee’s end of service to the Company, whichever occurs first. Stock options granted prior to May of 2013 continue to have a term of ten years or three months after the end of the grantee’s service to the Company, whichever occurs first.

For the year ended December 31, 2018, 549,189 stock options were exercised for cash proceeds of $1.4 million (2017 – nil options exercised and shares issued; 2016 – 2,165,370 options exercised and shares issued).

At December 31, 2018, the weighted average remaining contractual term of outstanding stock options was 2.5 years and of exercisable stock options was 1.9 years.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model based on assumptions noted in the following table:



	Year Ended December 31,
	2018		2017		2016
Dividend yield (per share)	Nil		Nil		Nil
Volatility	51% to 55%		51% to 53%		50% to 54%
Weighted average volatility	54	%	52	%	52	%
Risk-free interest rate	2.18% to 3.00%		1.75% to 2.10%		0.94% to 1.78%
Expected term	4-5 years		4-5 years		4-5 years

The weighted average grant date fair value for options granted in the year ended December 31, 2018, was $1.15 (2017 - $1.11; 2016 - $1.14). The weighted average grant date fair value for options vested in the year ended December 31, 2018, was $1.23 (2017 - $1.31; 2016 - $1.52). The total fair value of stock options vested during year ended December 31, 2018, was $2.8 million (2017 - $2.5 million; 2016 - $2.8 million).

Weighted Average Shares Outstanding



	Year Ended December 31,
	2018		2017	2016
Weighted Average number of common and exchangeable shares outstanding	390,930,453		396,683,593	320,851,538
Shares issuable pursuant to stock options	4,207,542		—	—
Shares assumed to be purchased from proceeds of stock options	(3,832,516	)	—	—
Shares issuable on conversion of Convertible Notes	35,814,393		—	—
Weighted average number of diluted common and exchange shares outstanding	427,119,872		396,683,593	320,851,538

For the year ended December 31, 2018, 5,354,545 options, on a weighted average basis, (2017 - 9,681,304 options; 2016 - 10,662,034 options) were excluded from the diluted loss per share calculation as the options were anti-dilutive.