UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

 

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Gran Tierra Energy Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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GRAN TIERRA ENERGY INC.

 

900, 520-3 Avenue S.W.

Calgary, Alberta, Canada T2P 0R3

(403) 265-3221

 

NOTICE OF MEETING

 

ANNUAL MEETING OF THE STOCKHOLDERS OF GRAN TIERRA ENERGY INC.

 

Date: Wednesday, May 2, 2018
Time: 11:00 a.m. (Mountain Time)
Place: Centennial Place, 3rd Floor, West Tower, 250 - 5 Street SW, Calgary, Alberta, Canada T2P 0R4

 

The business of the meeting is to:

 

1.Elect the eight nominees specified in the accompanying proxy statement to serve as directors.

 

2.Ratify the appointment of KPMG LLP as Gran Tierra’s independent registered public accounting firm for 2018.

 

3.Approve, on an advisory basis, the compensation of Gran Tierra’s named executive officers as disclosed in the accompanying proxy statement.

 

4.Conduct any other business properly brought before the meeting.

 

These items of business are more fully described in the proxy statement accompanying this notice.

 

This notice and the attached proxy statement are first being mailed to our stockholders beginning on March 21, 2018. The record date for the annual meeting is March 12, 2018. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.

 

This year, we are using the “Notice and Access” method of providing proxy materials to our stockholders. We believe this process will provide our stockholders with a convenient way to access the proxy materials and vote, while allowing us to lower the costs of printing and distributing the proxy materials and reduce the environmental impact of our meeting. We will mail to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) in lieu of a paper copy of our proxy materials. Stockholders receiving the Notice may review the proxy materials online or request a paper copy by following the instructions set forth in the Notice.

 

Please submit your proxy or voting instructions on the Internet or by telephone promptly by following the instructions about how to view the proxy materials on your Notice of Internet Availability of Proxy Materials so that your shares can be voted, regardless of whether you expect to attend the annual meeting. If you received your proxy materials by mail, you may submit your proxy or voting instructions on the Internet or by telephone, or you may submit your proxy by marking, dating, signing and returning the enclosed proxy/confidential voting instruction card. If you attend the annual meeting, you may withdraw your proxy and vote in person.

 

By order of the Board of Directors

 

/s/ Gary S. Guidry

 

Gary S. Guidry

President and Chief Executive Officer

 

Calgary, Alberta, Canada

March 21, 2018

  

 

 

 

PROXY STATEMENT TABLE OF CONTENTS

 

Proxy Statement Summary 1
   
Questions and Answers about the Proxy Materials and 2018 annual meeting 4
   
Proposal 1: Election of Directors 11
   
Nominees for Director 12
   
The Board’s Role and Responsibilities 23
   
Board Structure and Processes 24
   
Information Regarding Committees of the Board of Directors 27
   
Director Compensation 31
   
Proposal 2: Ratification of Appointment of Selection of Independent Auditors 34
   
Report of the Audit Committee 35
   
Principal Accountant Fees and Services 36
   
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation 38
   
Security Ownership of Certain Beneficial Owners and Management 39
   
Executive Officers 40
   
Compensation Discussion and Analysis 43
   
Executive Compensation 55
   
Summary Compensation Table 55
   
2017 Grants of Plan-Based Awards 56
   
Outstanding Equity Awards at December 31, 2017 57
   
2017 Option Exercises and Stock Vested 58
   
Estimated Potential Payments 61
   
Pay Ratio Disclosure 62
   
Summary of Incentive Plans 62
   
Certain Relationships and Related Transactions 67
   
Stockholder Proposals 67
   
Householding of Proxy Materials 68
   
Other Matters 68

 

 

 

 

 

TO OUR STOCKHOLDERS,

 

We invite you to attend the Annual Meeting of Gran Tierra Energy Inc., (“Gran Tierra” or the “Company”) which will be held at Centennial Place, 3rd Floor, West Tower, 250 - 5 Street SW, Calgary, Alberta, Canada T2P 0R4 on May 2, 2018 at 11:00 a.m. Mountain Time.

 

The attached Notice of Annual Meeting of Stockholders and Proxy Statement describes the business to be conducted at the Annual Meeting. Whether or not you plan to attend the Annual Meeting of Stockholders, we urge you to submit your vote via the internet, telephone or mail.

 

After successfully transforming our portfolio and the Company in 2015 and 2016, our focus on execution in 2017 delivered strong financial performance. With our high netback production, low base production declines, an expanded drilling inventory and a large resource base, we demonstrated in 2017 that Gran Tierra has created a sustainable business model which we expect to be fully funded by forecasted cash from operating activities in 2018.

 

During 2017, our robust portfolio delivered:

 

Increased average Colombia only production in the fourth quarter of 2017 to 34,477 BOEPD, 14% higher than 30,258 BOEPD in the fourth quarter of 2016 and 53% higher than the second quarter of 2015, when the current senior management team started at Gran Tierra;

 

Growth of 18% in Proved plus Probable reserves in Colombia, 20% in reserves per share, 27% in total net present value to $2.5 billion and 30% in net asset value per share to $5.69 per share;

 

Increased Colombia unrisked mean prospective resources to 1,462 MMBOE, with 822 MMBOE primarily in the Putumayo regional carbonate play;

 

With our large resource base, we plan to drill 30 to 35 exploration wells over the next three years, which are all expected to be funded by cash from operating activities.

 

I encourage you to read our 2017 Annual Report for additional information. Following the formal portion of the Annual Meeting, management will review Gran Tierra’s operational and financial performance during 2017 and provide an outlook on priorities for 2018 and beyond. You will also have an opportunity to ask questions and to meet the directors and executives.

 

On behalf of our Board of Directors and the team at Gran Tierra, I want to thank all of our stakeholders for their continued support. We believe that our focused strategy is delivering results on several fronts and that Gran Tierra is well positioned for an exciting year of growth in 2018 and beyond as we continue to efficiently create value in the multi-horizon, proven hydrocarbon producing basins of Colombia.

 

Sincerely,

 

/s/ Gary S. Guidry

 

Gary S. Guidry

President and Chief Executive Officer

 

March 21, 2018

 

 

 

 

PROXY STATEMENT SUMMARY

 

This summary highlights information contained elsewhere within this proxy statement. You should read the entire proxy statement carefully and consider all information before voting. Page references are supplied to help you find further information in this proxy statement. This summary does not contain all of the information you should consider, and we encourage you to read the entire proxy statement before voting.

 

References to “we”, “us”, “our”, “Gran Tierra” or the “Company” are to Gran Tierra Energy Inc.

 

Important Notice Regarding the Availability of Materials for the 2018 Annual Meeting of Shareholders to be Held on May 2, 2018: The proxy statement and our Annual Report for the fiscal year ended December 31, 2017 are available free of charge at http://www.edocumentview.com/GTE

 

2018 Annual Meeting of Stockholders

 

Date: May 2, 2018
Time: 11:00 a.m. (Mountain Time)
Place: Centennial Place, 3rd Floor, West Tower, 250 - 5 Street SW, Calgary, Alberta, Canada T2P 0R4
Record Date: March 12, 2018

 

Voting Matters And Board Recommendations

 

Voting Matter Board Vote Recommendation

Proposal 1: Election of Directors (page 11)

 

The Board and the Nominating and Corporate Governance Committee believe that each of the director nominees possesses the necessary qualifications and skills to provide effective oversight of the business and quality advice and counsel to our management team.

FOR EACH NOMINEE

Proposal 2: Ratification of Selection of Independent Auditors (page 34)

 

The Board and the Audit Committee believe that the retention of KPMG LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2018 is in the best interests of the Company and its stockholders. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s selection of the independent registered public accounting firm.

FOR

Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation (page 38)

 

The Company seeks a non-binding advisory vote from its stockholders to approve the compensation of its named executive officers as described in the Compensation Discussion and Analysis section beginning on page 43 and the Compensation Tables section beginning on page 55. Our executive compensation program reflects our philosophy of aligning executive compensation with the interests of our stockholders and a commitment to pay for performance.

FOR

 

 1 

 

 

Director Nominees

 

The following table provides summary information about each director nominee. See pages 12 to 19 for more information.

 

Director Nominee Director Since Age Committees
Peter J. Dey 2015 77

Nominating and Corporate Governance Committee

Compensation Committee

Gary S. Guidry President and CEO 2015 62  
Evan Hazell 2015 59

Health, Safety & Environment Committee

Reserves Committee

Robert B. Hodgins 2015 66

Board Chairman

Audit Committee

Compensation Committee

Nominating and Corporate Governance Committee

Ronald W. Royal 2015 69

Audit Committee

Health, Safety & Environment Committee

Reserves Committee

Sondra Scott 2017 51

Nominating and Corporate Governance Committee

Health, Safety & Environment Committee

Reserves Committee

David P. Smith 2015 59

Audit Committee

Health, Safety & Environment Committee

Brooke Wade 2015 64

Compensation Committee

Nominating and Corporate Governance Committee

Reserves Committee

 

Corporate Governance

 

We are committed to good corporate governance practices, which promote the long-term interests of our stockholders and strengthens our Board and management accountability.

 

Highlights of our corporate governance practices include the following:

 

Independent Chairman of the Board Policy prohibiting speculative trading of the Company’s stock
Annual elections of the entire Board Clawback policy
Majority voting for directors with resignation policy Stockholders may call special meetings of stockholders
100% independent Committee members No stockholder rights (“poison pill”) or similar plan
Annual self-evaluation of the Board Regular executive sessions of independent directors
Stock ownership guidelines for directors and officers Stockholders have the right to fill director vacancies caused by director removal
No Tax Gross-Up provisions in any new executive agreements (currently only applies to Chief Executive Officer in order to be equalized to Canadian colleagues)  

 

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Executive compensation highlights

 

Our compensation philosophy and programs are based on the following core principles:

 

attract and retain highly capable individuals and offer competitive compensation opportunities,

 

pay for performance, and

 

align the interests of management with our stockholders.

 

Our equity compensation program is designed to be aligned with the interests of our stockholders and focus on pay-for-performance. The majority of 2017 executive compensation is considered to be “at risk” because its value is based on specific performance criteria and payout is not guaranteed. In 2017, 80% of the value of equity awards granted to the Named Executive Officers (“NEOs”) consisted of performance share units (“PSUs”) and 20% consisted of stock options. Base salaries for NEOs remained unchanged in 2017 from 2016 levels.

 

The following shows the breakdown of 2017 target total direct compensation opportunity for our Chief Executive Officer and Chief Financial Officer consisting of long-term equity awards, annual cash bonus and fixed base salary.

 

 

Further discussion of how our Company performance in 2017 impacted our Short-Term Incentive (“STIP”) and Long-Term Incentive Plan (“LTIP”) payouts can be found on pages 48 and 51 respectively. 

 

 3 

 

 

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND 2018 ANNUAL MEETING

 

Why am I receiving these materials?

 

We are sending you these proxy materials because the Board of Directors (the “Board”) of Gran Tierra Energy Inc., a Delaware corporation (“Gran Tierra” or the “Company”), is soliciting your proxy to vote at the 2018 annual meeting of stockholders, including at any adjournments or postponements of the annual meeting. You are invited to attend the annual meeting to vote on the proposals described in this proxy statement. However, you do not need to attend the annual meeting to vote your shares. Instead, if you are a stockholder of record of our common stock, you may simply complete, sign and return the proxy card, or follow the instructions below to submit your proxy over the telephone or through the internet. See “How do I vote” below for further information on how to vote, including if you hold our common stock through a broker in “street name” or hold exchangeable shares.

 

Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the internet. We are sending to our stockholders of record the proxy materials, including this proxy statement and an annual report, or a Notice Regarding the Availability of Proxy Materials (the “Notice”). We intend that our stockholders who hold their stock in “street name” will receive a Notice from their broker, bank or other agent in which they hold the stock in “street name,” unless they have specified otherwise. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice.

 

We intend to mail the proxy materials and Notice beginning on March 21, 2018, to all stockholders of record entitled to vote at the annual meeting. We expect that the Notice will be sent to stockholders who hold their stock in “street name” on or about this same date.

 

How do I attend the annual meeting?

 

The meeting will be held on Wednesday, May 2, 2018, at 11:00 a.m. (Mountain time) at Centennial Place, 3rd Floor, West Tower, 250 - 5 Street SW, Calgary, Alberta, Canada T2P 0R4. Directions to the annual meeting may be found at http://www.grantierra.com/investor- relations/2018-annual-meeting.html. Information on how to vote in person at the annual meeting is discussed below.

 

Who can vote at the annual meeting?

 

Only stockholders of record at the close of business on March 12, 2018, will be entitled to vote at the annual meeting. On this record date, there were 385,394,642 shares of common stock outstanding and entitled to vote, one share of Special A Voting Stock, and one share of Special B Voting Stock. On the record date, the one share of Special A Voting Stock was entitled to 1,688,889 votes, which equals the number of shares of common stock issuable upon exchange of exchangeable shares of Gran Tierra Goldstrike Inc. that were issued in connection with the transaction between the former stockholders of Gran Tierra Energy Inc., an Alberta corporation, and Goldstrike, Inc. (the “Goldstrike Exchangeable Shares”). On the record date, the one share of Special B Voting Stock was entitled to 4,219,176 votes, which equals the number of shares of common stock issuable upon exchange of exchangeable shares of Gran Tierra Exchangeco Inc. that were issued in connection with the transaction between the former stockholders of Solana Resources Limited, an Alberta corporation (“Solana”), and Gran Tierra (the “Solana Exchangeable Shares,” and together with the Goldstrike Exchangeable Shares, the “Exchangeable Shares”).

 

Stockholders of Record: Shares Registered in Your Name

 

If at the close of business on March 12, 2018, your shares were registered directly in your name with Gran Tierra’s transfer agent, Computershare Investor Services, then you are a stockholder of record. As a stockholder of record, you may vote in person at the annual meeting or vote by proxy. Whether or not you plan to attend the annual meeting, we urge you to fill out and return the proxy or vote by proxy by telephone or on the internet as instructed below to ensure your vote is counted. 

 

 4 

 

 

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

 

If at the close of business on March 12, 2018, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice, and/or these proxy materials if you have received them, are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the annual meeting unless you request and obtain a valid proxy from your broker or other agent.

 

Stockholders Holding Exchangeable Shares

 

Holders of Goldstrike Exchangeable Shares are receiving these proxy materials which relate solely to the annual meeting of Gran Tierra and are being delivered in accordance with the provisions of the Goldstrike Exchangeable Shares and the Voting Exchange and Support Agreement dated November 10, 2005, (the “Goldstrike Voting Exchange Agreement”) among Goldstrike Inc., 1203647 Alberta Inc., Gran Tierra Goldstrike Inc. and Olympia Trust Company (the “Goldstrike Trustee”). The Goldstrike Exchangeable Shares are the economic equivalent to the shares of common stock of Gran Tierra. In accordance with the Goldstrike Voting Exchange Agreement, holders of Goldstrike Exchangeable Shares are entitled to instruct the Goldstrike Trustee as to how to vote their Goldstrike Exchangeable Shares. The Goldstrike Trustee holds the one outstanding share of our Special A Voting Stock, which is entitled to as many votes as there are outstanding Goldstrike Exchangeable Shares on the record date, and may only vote the one share of Special A Voting Stock as directed by the holders of Goldstrike Exchangeable Shares. Holders of Goldstrike Exchangeable Shares who do not hold their Goldstrike Exchangeable Shares in their own name are not entitled to instruct the Goldstrike Trustee as to how to exercise voting rights at the annual meeting. Only holders of Goldstrike Exchangeable Shares whose names appear on the records of Gran Tierra Goldstrike Inc. as the registered holders of Goldstrike Exchangeable Shares are entitled to instruct the Goldstrike Trustee as to how to exercise voting rights in respect of their Goldstrike Exchangeable Shares at the annual meeting. Holders of Goldstrike Exchangeable Shares may also obtain a proxy from the Goldstrike Trustee to vote their Goldstrike Exchangeable Shares at the annual meeting. Holders of Goldstrike Exchangeable Shares should follow the instructions sent to them by the Goldstrike Trustee in order to exercise their voting rights.

 

Holders of Solana Exchangeable Shares are receiving these proxy materials which relate solely to the annual meeting of Gran Tierra and are being delivered in accordance with the provisions of the Solana Exchangeable Shares and the Voting and Exchange Trust Agreement dated November 14, 2008, (the “Solana Voting Exchange Agreement”) among Gran Tierra, Gran Tierra Exchangeco Inc. and Computershare Trust Company of Canada (the “Solana Trustee”). The Solana Exchangeable Shares are the economic equivalent to the shares of common stock of Gran Tierra. In accordance with the Solana Voting Exchange Agreement, holders of Solana Exchangeable Shares are entitled to instruct the Solana Trustee as to how to vote their Solana Exchangeable Shares. The Solana Trustee holds the one outstanding share of our Special B Voting Stock, which is entitled to as many votes as there are outstanding Solana Exchangeable Shares on the record date, and may only vote the one share of Special B Voting Stock as directed by the holders of Solana Exchangeable Shares. Holders of Solana Exchangeable Shares who do not hold their Solana Exchangeable Shares in their own name are not entitled to instruct the Solana Trustee as to how to exercise voting rights at the annual meeting. Only holders of Solana Exchangeable Shares whose names appear on the records of Gran Tierra Exchangeco Inc. as the registered holders of Solana Exchangeable Shares are entitled to instruct the Solana Trustee as to how to exercise voting rights in respect of their Solana Exchangeable Shares at the annual meeting. Holders of Solana Exchangeable Shares may also obtain a proxy from the Solana Trustee to vote their Solana Exchangeable Shares at the annual meeting. Holders of Solana Exchangeable Shares should follow the instructions sent to them by the Solana Trustee in order to exercise their voting rights.

 

If at the close of business on March 12, 2018, your Exchangeable Shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice, and these proxy materials if you have received them, are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of instructing your trustee as to how to vote your Exchangeable Shares. As a beneficial owner, you have the right to direct your broker or other agent regarding how to instruct your trustee as to how to vote your Exchangeable Shares. 

 

 5 

 

 

What am I voting on?

 

There are three matters scheduled for a vote:

 

1.Election of eight nominees named in the proxy statement to serve on the Board until the next annual meeting and until their respective successors are duly elected and qualified;

 

2.Ratification of the appointment of KPMG LLP as the independent registered public accounting firm for 2018; and

 

3.Approval, on an advisory basis, of the compensation of Gran Tierra’s named executive officers, as disclosed in this proxy statement.

 

What if another matter is properly brought before the annual meeting?

 

The Board knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the annual meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.

 

How do I vote?

 

You may either vote “For” or “Against” or abstain from voting with respect to each nominee to the Board and each of the other matters to be voted on.

 

Stockholders of Record: Shares Registered in Your Name

 

If you are a stockholder of record, you may vote in person at the annual meeting, vote by proxy on the internet or by telephone, or vote by proxy using a proxy card that you may request or that we may elect to deliver at a later time. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the annual meeting and vote in person even if you have already voted by proxy.

 

To vote in person, come to the annual meeting and we will give you a ballot when you arrive.

 

To vote using the proxy card, simply complete, sign and date the proxy card that may be delivered and return it promptly in the envelope provided. If you return your signed proxy card to us by 11:00 a.m. (Mountain time) on April 30, 2018, we will vote your shares as you direct.

 

To vote over the telephone, dial 1-800-652-VOTE (8683) using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the Notice or proxy card. Your telephone vote must be received by 11:00 a.m. (Mountain time) on April 30, 2018, to be counted.

 

To vote on the internet, go to http://www.investorvote.com/GTE to complete an electronic proxy card. You will be asked to provide the company number and control number from the Notice or proxy card. Your internet vote must be received by 11:00 a.m. (Mountain time) on April 30, 2018, to be counted.

 

Beneficial Owner: Shares Registered in the Name of Broker or Bank

 

If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received a Notice containing voting instructions, or these proxy materials and an annual report and form of proxy, from that organization rather than from Gran Tierra. Simply follow the voting instructions you receive from your broker, bank, or other agent to ensure that your vote is counted. If you have received these proxy materials and voting instructions therein, simply complete and mail the voting instructions to ensure that your vote is counted. Alternatively, if permitted by your broker or bank, you may vote by telephone or on the internet as instructed by your broker, bank or other agent. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker, bank, or other agent included with these proxy materials, or contact your broker, bank, or other agent to request a proxy form.

  

 6 

 

 

Beneficial Owner: Exchangeable Shares

 

If you are a holder of Goldstrike Exchangeable Shares, you should have received a voting instruction form with these proxy materials from the Goldstrike Trustee, which is the holder of the one share of Special A Voting Stock. Follow the instructions from the Goldstrike Trustee, or contact the Goldstrike Trustee for further information. Instruments of proxy must be received by Computershare Trust Company of Canada, Attention: Manager, Corporate Trust, 600, 530 - 8th Avenue S.W., Calgary, Alberta, Canada T2P 3S8, by 11:00 a.m. (Mountain Time) on April 30, 2018, or not less than 48 hours before the time of any adjournment(s) of the annual meeting. Follow the directions on the voting instruction form, which includes how voting instructions may be sent by facsimile transmission.

 

If you are a holder of record of Solana Exchangeable Shares, you should have received a voting instruction form with these proxy materials from the Solana Trustee, which is the holder of the one share of Special B Voting Stock. Follow the instructions from the Solana Trustee, or contact the Solana Trustee for further information. Instruments of proxy must be received by Computershare Trust Company of Canada, Attention: Manager, Corporate Trust, 600, 530 - 8th Avenue S.W., Calgary, Alberta, Canada T2P 3S8 by 11:00 a.m. (Mountain Time) on April 30, 2018, or not less than 48 hours before the time of any adjournment(s) of the annual meeting. Follow the directions on the voting instruction form.

 

If you are a beneficial owner of Exchangeable Shares registered in the name of your broker, bank, or other agent, you should have received a Notice containing voting instructions from that organization rather than from Gran Tierra. Simply follow the voting instructions in the Notice to ensure that your vote is counted.

 

We provide telephone and internet proxy voting to allow you to vote your shares, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your telephone or internet access, such as usage charges from internet access providers and telephone companies.

 

How many votes do I have?

 

On each matter to be voted upon, you have one vote for each share of common stock you own as of March 12, 2018. In addition, you have one vote for each Exchangeable Share held as of March 12, 2018, which are represented by the one share of Special A Voting Stock and one share of Special B Voting Stock of Gran Tierra, as applicable. Holders of Goldstrike Exchangeable Shares should follow the instructions sent to them by the Goldstrike Trustee and holders of Solana Exchangeable Shares should follow the instructions sent to them by the Solana Trustee in order to exercise their respective voting rights. Cumulative voting is not permitted.

 

What if I return a proxy card or otherwise vote but do not make specific choices?

 

Stockholder of Record; Shares Registered in Your Name

 

If you are a holder of record and return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of all eight nominees for director, “For” the ratification of the selection of KPMG LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2018, and “For” the advisory vote to approve named executive officer compensation. If any other matter is properly presented at the annual meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

 

Beneficial Owner; Shares Registered in the Name of a Broker or Bank

 

If you are a beneficial owner of shares registered in the name of your broker, bank or other nominee, and you do not provide the broker or other nominee that holds your shares with voting instructions, your broker or other nominee may not vote your shares on any proposal other than the ratification of the selection of KPMG LLP as our independent registered public accounting firm at the annual meeting. See “What are ‘broker non-votes’?” below. We encourage you to provide voting instructions to the organization that holds your shares to ensure that your vote is counted on all three proposals. 

 

 7 

 

 

Holder of Exchangeable Shares

 

If you are a holder of Exchangeable Shares and you do not return a properly filled out voting election, or if you return a signed and dated voting election without marking voting selections, your shares will not be voted.

 

What happens if I do not vote?

 

Stockholder of Record; Shares Registered in Your Name

 

If you are a stockholder of record and do not vote by completing your proxy card, by telephone, over the internet or in person at the annual meeting, your shares will not be voted.

 

Beneficial Owner; Shares Registered in the Name of a Broker or Bank

 

If you hold your shares in “street name,” you will receive instructions from your broker, bank or other nominee describing how to vote your shares. If you do not instruct your broker, bank or other nominee how to vote your shares, they may vote your shares as they decide as to each matter for which they have discretionary authority under the rules of the NYSE American. This year, the only matter with respect to which they may vote your shares without voting instructions is the proposal to ratify the selection of KPMG LLP as our independent registered public accounting firm (Proposal 2).

 

There are also non-discretionary matters for which brokers, banks and other nominees do not have discretionary authority to vote unless they receive timely instructions from you. When a broker, bank or other nominee does not have discretion to vote on a particular matter and you have not given timely instructions on how the broker, bank or other nominee should vote your shares, a “broker non-vote” results. Although any broker non-vote would be counted as present at the meeting for purposes of determining a quorum, it would be treated as not entitled to vote with respect to non-discretionary matters.

 

If your shares are held in “street name” and you do not give voting instructions, pursuant to NYSE American Company Guide Section 723, the record holder will not be permitted to vote your shares with respect to Proposals 1 or 3. If your shares are held in “street name” and you do not give voting instructions, the record holder will nevertheless be entitled to vote your shares with respect to Proposal 2.

 

Abstentions occur when stockholders are present at the annual meeting but voluntarily abstain on any of the matters upon which the stockholders are voting.

 

Holder of Exchangeable Shares

 

If you are a holder of Exchangeable Shares and you do not return a properly filled out voting election, or if you return a signed and dated voting election without marking voting selections, your shares will not be voted.

 

Who is paying for this proxy solicitation?

 

We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

 

What does it mean if I receive more than one Notice or more than one set of proxy materials?

 

If you receive more than one Notice or more than one set of proxy materials, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the Notices or the instructions on the proxy cards in the proxy materials to ensure that all of your shares are voted. 

 

 8 

 

 

Can I change my vote after submitting my proxy?

 

Stockholder of Record; Shares Registered in Your Name

 

Yes. You can revoke your proxy at any time before the final vote at the annual meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

 

You may submit another properly completed proxy card with a later date, or vote again by telephone or on the internet;

 

You may send a timely written notice that you are revoking your proxy to Gran Tierra’s Corporate Secretary at 900, 520 - 3rd Avenue S.W., Calgary, Alberta, Canada T2P 0R3; or

 

You may attend the annual meeting and vote in person. Simply attending the annual meeting will not, by itself, revoke your proxy.

 

Your most current proxy card or telephone or internet proxy is the one that is counted.

 

Beneficial Owner; Shares Registered in the Name of a Broker or Bank

 

If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

 

Holder of Exchangeable Shares

 

If you are a holder of Goldstrike Exchangeable Shares, you should follow the instructions provided by the Goldstrike Trustee with respect to the Goldstrike Exchangeable Shares you hold, and if you are a holder of Solana Exchangeable Shares, you should follow the instructions provided by the Solana Trustee with respect to the Solana Exchangeable Shares you hold.

 

When are stockholder proposals due for next year’s annual meeting?

 

Stockholders who desire to present proposals at the 2019 annual meeting of stockholders and to have proposals included in our proxy materials pursuant to Rule 14a-8 under the Exchange Act must submit their proposals to us at our principal executive offices (to the Corporate Secretary at 900, 520 - 3rd Avenue S.W., Calgary, Alberta, Canada T2P 0R3), not later than the close of business on November 21, 2018. If the date of the 2019 annual meeting is changed by more than 30 days from the date of the 2018 annual meeting, the deadline for submitting proposals is a reasonable time before we begin to print and mail the proxy materials for our 2019 annual meeting.

 

Our Bylaws provide that stockholders may nominate persons for election to the Board of Directors or bring any other business before the stockholders at the 2019 annual meeting only by sending to our Corporate Secretary a notice containing the information required by our Bylaws. Notice to us must be made not less than 30 or more than 65 days prior to the date of the annual meeting; provided, however, that if the annual meeting is to be held on a date that is less than 50 days after the date on which the public announcement of the date of the annual meeting was made by Gran Tierra, notice may be made not later than the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by Gran Tierra. Detailed information about how to make stockholder proposals or nominations for our annual meetings of stockholders can be found in our Bylaws.

 

How are votes counted?

 

Votes will be counted by the inspector of election appointed for the annual meeting, who will separately count, for the proposal to elect directors and the other proposals, votes “For,” “Against,” abstentions and, if applicable, broker non-votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.

 

What are “broker non-votes”?

 

As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed by the NYSE American to be “non-routine,” the broker or nominee cannot vote the shares. These unvoted shares are counted as “broker non-votes.” 

 

 9 

 

 

How many votes are needed to approve each proposal?

 

Proposal No. 1, the election of directors: our bylaws provide for a majority voting standard for the election of directors in uncontested elections, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected at the meeting. Because this is an uncontested election, each director shall be elected by the vote of a majority of the votes cast at a meeting of stockholders at which a quorum is present. A “majority of the votes cast” means that the number of shares voted “For” a director nominee must exceed the number of votes cast “Against” that director nominee. For these purposes, abstentions and broker non-votes will not count as a vote “For” or “Against” a nominee’s election and will have no effect in determining whether a director nominee has received a majority of the votes cast. If an incumbent director is not elected by a majority of the votes cast, the incumbent director must promptly tender his or her resignation to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the director’s resignation or whether other action should be taken. The Board will act on the Nominating and Corporate Governance Committee’s recommendation and publicly disclose its decision within 90 days from the date of the certification of the election results.

 

Proposal No. 2, the ratification of the appointment of KPMG LLP as Gran Tierra’s independent registered public accounting firm for 2018, will be approved if it receives the affirmative vote of shares representing a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Abstentions will have the same effect as a vote “Against.” We do not expect that there will be any broker non-votes, as this is a routine matter.

 

Proposal No. 3, the advisory vote to approve named executive officer compensation, as disclosed in this proxy statement, will be approved if it receives the affirmative vote of shares representing a majority of the votes present in person or represented by proxy at the meeting and entitled to vote on the matter. Abstentions will have the same effect as a vote “Against.” Broker non-votes will have no effect.

 

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding outstanding shares of Gran Tierra’s capital stock representing at least a majority of the total number of votes that may be cast at the annual meeting are present at the annual meeting in person or represented by proxy. On the record date, there were 391,302,707 votes that could be cast. Those votes were represented by 385,394,642 shares of common stock outstanding and entitled to vote and 5,908,065 shares of common stock issuable upon exchange of the Exchangeable Shares and therefore entitled to vote through the one share of Special A Voting Stock and one share of Special B Voting Stock. Thus, holders of outstanding shares representing at least 195,651,354 votes must be present in person or represented by proxy at the annual meeting to have a quorum.

 

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the annual meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the Chairman of the annual meeting or the holders of a majority of shares present at the annual meeting in person or represented by proxy must adjourn the annual meeting to another date.

 

How can I find out the results of the voting at the annual meeting?

 

Preliminary voting results will be announced at the annual meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the annual meeting.

 

What proxy materials are available on the internet?

 

The notice of meeting, proxy statement and annual report to stockholders are available to view at:

 

http://www.edocumentview.com/GTE

 

or

 

on Gran Tierra’s website at: http://www.grantierra.com

 

See “How do I vote?” above for voting instructions. 

 

 10 

 

 

CORPORATE GOVERNANCE AND BOARD MATTERS

 

PROPOSAL 1:

ELECTION OF DIRECTORS

 

The Board of Directors is nominating the eight individuals identified below for election as directors. Unless you specify differently, proxies received will be voted FOR Robert B. Hodgins, Peter J. Dey, Gary S. Guidry, Evan Hazell, Ronald W. Royal, Sondra Scott, David P. Smith and Brooke Wade. Each director to be elected and qualified will hold office until the next annual meeting of stockholders and until his or her successor is elected, or, if sooner, until the director’s death, resignation or removal. Each of the nominees listed below is currently a director of Gran Tierra. Sondra Scott was appointed to the Board on September 19, 2017 based on the recommendation of the Chief Executive Officer and Nominating and Corporate Governance Committee. It is Gran Tierra’s policy to invite nominees for directors to attend the annual meeting; all of the directors then in office attended the 2017 annual meeting of stockholders.

 

Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the eight nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by Gran Tierra.

 

THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED BELOW. 

 

 11 

 

 

NOMINEES FOR DIRECTOR

 

 

ROBERT B. HODGINS

 

Age: 66

Calgary, Alberta, Canada

Director since May 2015

 

Independent Director

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – 76.8%

 

Mr. Hodgins has been an independent businessman since November 2004. Prior thereto, Mr. Hodgins served as the Chief Financial Officer of Pengrowth Energy Trust (a TSX and NYSE-listed energy trust) from 2002 to 2004. Prior to that, Mr. Hodgins held the position of Vice President and Treasurer of Canadian Pacific Limited (a a Toronto Stock Exchange (“TSX”) and NYSE-listed diversified energy, transportation and hotels company) from 1998 to 2002 and was Chief Financial Officer of TransCanada PipeLines Limited (a TSX and NYSE-listed energy transportation company) from 1993 to 1998. Mr. Hodgins received an Honours Bachelor of Arts in Business from the Richard Ivey School of Business at the University of Western Ontario and received a Chartered Accountant designation and was admitted as a member of the Institute of Chartered Accountants of Ontario in 1977 and Alberta in 1991. Mr. Hodgins is a member of the Institute of Corporate Directors.

 

Qualifications: Mr. Hodgins’ 30-plus years in the oil and gas industry as an executive and director and his strong reputation in the Canadian business community brings valuable industry and leadership experience to the Board. As a Chartered Accountant and experienced executive in senior financial roles with several Canadian companies, Mr. Hodgins qualifies as one of Gran Tierra’s Audit Committee financial experts.

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Chair 9/9 100%
Audit Committee Member 4/4 100%
Compensation Committee Member 3/3 100%
Nominating and Corporate Governance Committee Member 2/2 100%

 

Year Common Shares DSUs Stock Options
2017 10,000 77,899 85,000
2016 10,000 38,045 85,000

 

Other Public Board Directorships Committee Position(s)(1)
AltaGas Ltd. (TSX) Audit Committee (Chairman)
Governance Committee
EnerPlus Corporation Audit & Risk Management Committee (Chair)
Corporate Governance & Nominating Committee
MEG Energy Corp. (TSX) Audit Committee (Chairman)
Compensation Committee

 

(1)The Board of Directors has determined that Mr. Hodgins’ ability to effectively serve on the Company’s Audit Committee is not impaired by his membership on the Audit Committee of the other public boards listed above.

  

 12 

 

 

 

PETER J. DEY

 

Age: 77

Toronto, Ontario, Canada

Director since May 2015

 

Independent Director

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – 96.7%

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Member 9/9 100%
Nominating and Corporate Governance Committee Chair 2/2 100%
Compensation Committee Member 3/3 100%

 

Mr. Dey has been the Chairman of Paradigm Capital Inc., an investment dealer, since November 2005. Mr. Dey was a Partner of the Toronto law firm Osler, Hoskin & Harcourt LLP, where he specialized in corporate board issues and mergers and acquisitions, from 2001 to 2005, and prior to that from 1985 to 1994 and from 1973 to 1983. From 1994 to 2001, Mr. Dey was Chairman of Morgan Stanley Canada Limited. From 1993 to 1995, Mr. Dey chaired The Toronto Stock Exchange Committee on Corporate Governance in Canada that released the December 1994 report entitled “Where Were the Directors?”, known as the Dey Report. Mr. Dey has also served as Chairman of the Ontario Securities Commission and was Canada’s representative to the Organisation for Economic Co-operation and Development (“OECD”) Task Force that developed the OECD Principles of Corporate Governance released in May of 1999. Mr. Dey attended Queen’s University, where he earned his Bachelor of Science in 1963 and Dalhousie University, where he earned his Bachelor of Laws degree in 1966. He received his Master of Laws degree from Harvard University in 1967.

 

Qualifications: With more than 40 years of experience dealing with issues of corporate governance ranging from serving on public boards to private practice as a lawyer, Mr. Dey provides significant value to Gran Tierra. His experience as a former director with other public company boards provides significant value to Gran Tierra.

 

Year Common Shares DSUs Stock Options
2017 20,000 71,120 108,184
2016 20,000 24,253 96,048

 

Other Public Board Directorships Committee Position(s)
None  

  

 13 

 

 

 

GARY S. GUIDRY

 

Age: 62

Calgary, Alberta, Canada

Director since May 2015

 

Non-Independent Director - President and Chief Executive Officer

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – 81.1%

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Member 9/9 100%

 

Mr. Guidry is a professional engineer and has more than 35 years of experience developing and maximizing assets in the international oil and gas industry. Mr. Guidry has direct experience managing large, international projects, including assets in Latin America, Africa, the Middle-East and Asia. Prior to joining Gran Tierra, Mr. Guidry was the President and Chief Executive Officer of Caracal Energy, a London Stock Exchange listed oil and gas company with operations in Chad, Africa. He held that position from mid-2011 until the company was acquired by Glencore plc for $1.8 billion in mid-2014. In 2014, Mr. Guidry was awarded the Oil Council Executive of the Year award for his leadership role with Caracal. Prior to Caracal, Mr. Guidry was the President and Chief Executive Officer of Orion Oil and Gas (TSX listed), which operated in western Canada from mid-2009 until mid-2011 when it was sold. From May 2005 until December 2008, he was the President and Chief Executive Officer of Tanganyika Oil Company (TSX listed) which operated in Syria and Egypt. Prior to Tanganyika, Mr. Guidry was Chief Executive Officer of Calpine Natural Gas Trust. Mr. Guidry is an Alberta-registered Professional Engineer and a member of the Association of Professional Engineers and Geoscientists. He received a Bachelor of Science in Petroleum Engineering from Texas A&M University in 1980.

 

Qualifications: Mr. Guidry, as Chief Executive Officer, is responsible for the operations, financial management and implementation of the Company’s strategy. Mr. Guidry’s extensive experience in the oil and gas industry and international operations developed through his experience as a senior executive at several publicly traded companies brings valuable expertise and perspective to the Board.

 

Year Common Shares RSUs PSUs Stock Options
2017 2,527,000 31,667 638,400 974,700
2016 2,482,000 63,334 312,800 790,500

 

Other Public Board Directorships Committee Position(s)
Africa Oil Corp. Audit Committee
ShaMaran Petroleum Corp. (1) (until May 2018) Audit Committee
Sterling Resources Ltd. (2) (related company)  

 

(1)Mr. Guidry has informed ShaMaran Petroleum Corp. that he will not be standing for re-election at the 2018 annual meeting of ShaMaran Petroleum Corp.

 

(2)Sterling Resources Ltd. purchased all of Gran Tierra’s assets in Peru effective December 18, 2017. The Company retains approximately 45.8% of Sterling’s common shares, and has entered into an investor rights agreement whereby the Company has the right, among other things, to nominate two directors to the board of Sterling.

  

 14 

 

 

 

EVAN HAZELL

 

Age: 59

Calgary, Alberta, Canada

Director since June 2015

 

Independent Director

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – 99.4% 

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Member 9/9 100%
Health, Safety and Environment Committee Chair 4/4 100%
Reserves Committee Member 3/3 100%

 

Mr. Hazell has been involved in the global oil and gas industry for over 30 years, initially as a petroleum engineer and then as an investment banker. From 1998 to 2011, Mr. Hazell acted as a managing director at several financial institutions including HSBC Global Investment Bank and RBC Capital Markets. At present he serves as a director of Primavera Resources Corp., Black Swan Energy and Kaisen Energy Corp. Mr. Hazell also serves as a director of a number of non-profit and community organizations including Calgary Municipal Land Corporation, Social Venture Partners Calgary, Opera America, and Pacific Opera Victoria. Mr. Hazell holds a Bachelor of Applied Science degree from Queen’s University, a Master of Engineering degree from the University of Calgary, and a Master of Business Administration degree from the University of Michigan, and is licensed as a Professional Engineer in Alberta.

 

Qualifications: Mr. Hazell possesses specific attributes that qualify him to serve as a director, including his extensive experience in the global energy industry as well as in the financial sector. Mr. Hazell also has significant experience at nonprofit organizations. His education in business and engineering provides significant value to Gran Tierra.

 

Year Common Shares DSUs Stock Options
2017 55,000 66,887 108,184
2016 55,000 32,667 96,408

 

Other Public Board Directorships Committee Position(s)
None  

  

 15 

 

 

 

RONALD W. ROYAL

 

Age: 69

Abbotsford, British Columbia, Canada

Director since May 2015

 

Independent Director

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – 99.4% 

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Member 9/9 100%
Audit Committee Member 4/4 100%
Health, Safety & Environment Committee Member 4/4 100%
Reserves Committee Chair 3/3 100%

 

Mr. Royal has been a private businessman since April 2007. Mr. Royal has more than 35 years of experience with Imperial Oil Ltd. and ExxonMobil’s international upstream affiliates. From 2011 to 2014, he served on the board of directors of Caracal Energy Inc., and prior to 2010, several other boards of private oil companies. Prior to retiring in 2007, Mr. Royal was President and Production Manager of Esso Exploration and Production Chad Inc. and resided in N’Djamena, Chad from 2002 to 2007. In 2003, he was awarded the title “Chevalier de l’Ordre National du Chad” for his contribution to the economic development of Chad. Mr. Royal received his Bachelor of Applied Science from the University of British Columbia in 1972 and completed the Executive Development Program at Cornell University in 1986. He has been a member of the Association of Professional Engineers and Geoscientists of Alberta since 1972.

 

Qualifications: Mr. Royal brings to the Board over 35 years of experience in the oil and gas industry, having previously held a variety of management positions both domestically and internationally.

 

Year Common Shares DSUs Stock Options
2017 254,667 100,595 108,184
2016 254,667 49,130 96,408

 

Other Public Board Directorships Committee Position(s)
Valeura Energy Inc.

Audit Committee

Reserves & Health, Safety and Environment Committee

 

 

 16 

 

 

 

SONDRA SCOTT

 

Age: 51

New York, New York

Director since September 2017

 

Independent Director

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – n/a 

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Member 3/3 100%
Health, Safety & Environment Committee Member 1/1 100%
Nominating and Corporate Governance Committee Member n/a n/a
Reserves Committee Member n/a n/a

 

Ms. Scott is currently president of Verisk Maplecroft, a data analytics and risk assessment company, where she is responsible for leading the company’s globalization and growth effort in the political, economic, human rights and environmental risk analytics market. Before joining Verisk Maplecroft in 2015, Ms. Scott filled a number of roles at Wood Mackenzie, a global energy, chemicals, renewables, metals and mining research and consultancy company, over a 13-year period. Her most recent position was head of Global Markets where she led a team focusing on macro energy economics and risk. Previously, Ms. Scott led Wood Mackenzie’s energy consultancy practice. Ms. Scott holds a Master of Science, Petroleum Engineering and Economics degree from a joint program with the University of Pennsylvania and the Institut Francais du Petrole (IFP) and received a Bachelor of Arts, Economics and Earth Sciences degree from Wesleyan University.

 

Qualifications: Ms. Scott has more than 25 years of experience as an energy and risk analytics business leader. She has significant leadership experience having led multi-sized global research and consultancy teams. Ms. Scott has worked in the United States, the United Kingdom, and Latin America, globalising businesses and building local practices.

 

Year Common Shares DSUs Stock Options
2017 0 6,990 85,000

 

Other Public Board Directorships Committee Position(s)
None  

  

 17 

 

 

 

DAVID P. SMITH

 

Age: 59

Toronto, Ontario, Canada

Director since May 2015

 

Independent Director

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – 99.4% 

 

Mr. Smith is a corporate director with extensive experience in the investment banking, investment research and management industry. He has been the Chairman of the Board of Directors of Superior Plus Corp., a diversified energy and specialty chemicals company, since August 2014. From March 2004 to August 2015, Mr. Smith served as Chair of the Audit Committee of Superior Plus Corp. Previously, Mr. Smith was Managing Partner of Enterprise Capital Management Inc. Mr. Smith is a Chartered Financial Analyst and graduated with honors from the University of Western Ontario with a degree in Business Administration in 1981.

 

Qualifications: Mr. Smith brings to the Board significant financial expertise, having spent his professional career in investment banking, investment research and management. His experience as the Chairman at Superior Plus Corp. and his previous experience as a director and member of the audit committee of other public companies provide valuable perspective to Gran Tierra’s Board. Mr. Smith’s education and experience qualifies him as one of Gran Tierra’s Audit Committee financial experts.

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Member 9/9 100%
Audit Committee Chair 4/4 100%
Health, Safety & Environment Committee Member 4/4 100%

 

Year Common Shares DSUs Stock Options
2017 187,500 31,682 108,184
2016 130,000 15,473 96,408

 

Other Public Board Directorships Committee Position(s)
Superior Plus Corp. Chairman

  

 18 

 

 

 

BROOKE WADE

 

Age: 64

Vancouver, British Columbia, Canada

Director since June 2015

 

Independent Director

 

Shareholder approval rating at the 2017 Gran Tierra annual meeting – 97.9% 

 

Mr. Wade is the President of Wade Capital Corporation, a private investment company active in private equity, oil and gas, real estate and industrial businesses. From 1994 until 2005, Mr. Wade was the co-founder and Chairman and Chief Executive Officer of Acetex Corporation, a publicly traded chemical company specializing in acetyls, specialty polymers, and films. In July 2005, Acetex was acquired by Blackstone. Prior to founding Acetex Corporation, Mr. Wade was founding President and Chief Executive Officer of Methanex Corporation. In 1991, Ocelot Industries spun out its oil and gas assets and began a plan of growth through acquisition into what is today Methanex Corporation — the world’s largest methanol producer. Prior to joining Ocelot, he was involved in a number of independent business ventures. Mr. Wade serves on the board of Kinder Morgan Canada Limited and also serves on the boards of several private companies including Novinium, Inc., Belkin Enterprises Ltd., and is a member of the Advisory Board of Northbridge Capital Partners and is a participant of AEA Investors groups of funds. In addition, Mr. Wade is a member of the Dean’s Advisory Council of the John F. Kennedy School of Government at Harvard University and the Buck Advisory Council of The Buck Institute for Research on Aging. Mr. Wade earned a Bachelor of Commerce Degree from the University of Calgary in 1974 and received his Chartered Accountant designation in 1977. In 2012, Mr. Wade became a Fellow of the Institute of Chartered Accountants of British Columbia.

 

Qualifications: Mr. Wade’s extensive executive experience provides the Board with strong leadership and decision-making capabilities. Having served as chief executive officer of two public companies, Mr. Wade has deep knowledge of key business issues, including finance and capital markets.

 

Board and Committee Participation Position Meetings Attendance
Board of Directors Member 9/9 100%
Compensation Committee Chair 3/3 100%
Nominating and Corporate Governance Committee Member 2/2 100%
Reserves Committee Member 3/3 100%

 

Year Common Shares DSUs Stock Options
2017 492,600 100,595 108,184
2016 350,000 49,130 96,408

 

Other Public Board Directorships Committee Position(s)
Kinder Morgan Canada Limited

Compensation Committee (Chair)
Audit Committee

Nominating and Governance Committee
Health and Safety Committee

 

 

 19 

 

 

Majority Voting Standard

 

Our Bylaws provide for a majority voting standard for the election of directors in uncontested elections, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected at the meeting. Because this is an uncontested election, each director shall be elected by the vote of a majority of the votes cast at a meeting of stockholders at which a quorum is present. A “majority of the votes cast” means that the number of shares voted “For” a director nominee must exceed the number of votes cast “Against” that director nominee. For these purposes, abstentions and broker non-votes will not count as a vote “For” or “Against” a nominee’s election and will have no effect in determining whether a director nominee has received a majority of the votes cast. If an incumbent director is not elected by a majority of the votes cast, the incumbent director must promptly tender his or her or her resignation to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the director’s resignation or whether other action should be taken. The Nominating and Corporate Governance Committee shall recommend, and the Board of Directors’ decision shall be, to accept the resignation absent exceptional circumstances. The Board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days from the date of the meeting of stockholders and publicly disclose its decision If the Board of Directors determines not to accept a resignation, the public disclosure shall fully state the reasons for such decision. A director who tenders his or her or her resignation after failing to receive a majority of the votes cast will not participate in the Nominating and Corporate Governance Committee’s or the Board’s recommendation or decision or any deliberations related thereto.

 

Other Information Regarding Our Directors

 

Our above-listed directors have neither been convicted in any criminal proceeding during the past ten years nor been parties to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining them from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities law or commodities law. Similarly, no bankruptcy petitions have been filed by or against any business or property of any of our directors or officers, nor has any bankruptcy petition been filed against a partnership or business association in which these persons were general partners or executive officers. 

 

 20 

 

 

Skills Matrix

 

Below is a listing of each director’s key skills, together with a description of those key skills and experience desirable to support the strategic direction of Gran Tierra. Not every director is expected to be skilled in every area, however, we aim for the Board to have a balance of skills and experience.

 

Skills and Experience Peter J.
Dey
Gary S. Guidry
(President
& CEO)
Evan
Hazell
Robert B.
Hodgins
(Chair)
Ronald W.
Royal
Sondra
Scott
David P.
Smith
Brooke
Wade
Relevant Industry Skills
Energy Industry Executive Experience  
Health, Safety and Environment Issues    
Engineering / Geology / Geophysics        
Hydrocarbon Transportation and Marketing      
General Business Skills
Leadership  
Board Experience  
Finance / Capital Markets    
Mergers and Acquisitions
Legal and Governance    
Government and Public Affairs    
International Experience  
Human Resources and Compensation    
Information Technology          
Risk Management    
Strategic Planning
Accounting /Audit      

 

Independence of the Board of Directors

 

Gran Tierra follows the listing standards of the NYSE American. As required under the NYSE American listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the Board.

 

The Board conducts an annual review regarding the independence from the Company’s management of each of its members. After review of all relevant identified transactions or relationships between each director, or any of his or her family members, and Gran Tierra, its senior management and its independent auditors, the Board has affirmatively determined that, other than Mr. Guidry, each of our directors and nominees for director (Peter J. Dey, Evan Hazell, Robert B. Hodgins, Ronald W. Royal, Sondra Scott, David P. Smith and Brooke Wade), are independent directors within the meaning of the applicable NYSE American listing standards. In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with Gran Tierra. Mr. Guidry, Gran Tierra’s President and Chief Executive Officer, is not an independent director by virtue of his employment with Gran Tierra.

 

In connection with its assessment of the independence of each non-employee director, the Board of Directors also determined that (i) Messrs. Smith, Hodgins and Royal, are independent as defined in Section 10A of the Exchange Act and under the standards set forth by the NYSE American applicable to members of the Audit Committee (ii) Messrs. Wade, Dey and Hodgins, are independent under the standards set forth by the NYSE American applicable to members of the Compensation Committee and (iii) Ms. Scott and Messrs. Dey, Hodgins and Wade, are independent under the standards set forth by the NYSE American applicable to members of the Nominating and Corporate Governance Committee.

 

 

 21 

 

 

Stockholder Recommendations and Nominations to the Board

 

The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth on page 24 in the section Considerations in Evaluating Director Nominees based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address: Gran Tierra Energy Inc., 900, 520 - 3 Avenue S.W., Calgary, Alberta, Canada T2P 0R3, Attention: Director Nominations. This written recommendation must be delivered at least 120 days prior to the anniversary of the mailing of Gran Tierra’s proxy statement for the last annual meeting of stockholders. Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s business experience for at least the previous five years, complete biographical information, a description of the proposed nominee’s qualifications as a director and a representation that the nominating stockholder is a beneficial or record holder of Gran Tierra’s stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.

 

Code of Ethics

 

Gran Tierra has adopted a Code of Business Conduct and Ethics which is available in English and Spanish and applies to every employee, officer and director. Employees, officers and directors are expected to understand the Code and its application to the performance of his or her business responsibilities. The Code of Business Conduct and Ethics is available on the Company’s website at www.grantierra.com/governance. If Gran Tierra makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, Gran Tierra will promptly disclose the nature of the amendment or waiver on its website. The Board did not grant any waiver of the Code in favor of a director or executive officer in 2017.

 

Diversity

 

Gran Tierra believes in the importance of diversity at all levels throughout the Company. In addition to the traditional concepts of diversity (i.e., gender, culture and geographic region), we believe it is important for the Board to achieve a diversity of knowledge, experience and capabilities that support the Company’s strategic direction. Currently, Gran Tierra does not have a formal policy concerning the diversity of director nominees as it is ultimately the skills and experience that are most important in determining the value that an individual brings to the Board. 

 

 22 

 

 

THE BOARD’S ROLE AND RESPONSIBILITIES

 

Role of the Board of Directors

 

The Board is selected by the stockholders to provide oversight of and strategic guidance to senior management. The core responsibility of a Board member is to fulfill his or her or her fiduciary duties of care and loyalty and otherwise to exercise his or her business judgment in the best interests of the Company and its stockholders. The Board has responsibilities to review, approve and monitor fundamental financial and business strategies and major corporate actions, assess major risks facing the Company and consider ways to address those risks, select and oversee management and determine its composition and oversee the establishment and maintenance of processes and conditions to maintain the integrity of the Company. Directors must act with integrity and are expected to demonstrate a commitment to the company, its values and its business and to long-term stockholder value. The duties and responsibilities of the Board and significant issues of corporate governance are set out in the Company’s Corporate Governance Guidelines which are regularly reviewed by the Nominating and Corporate Governance Committee. The guidelines are available on the Company’s website at www.grantierra.com/governance.

 

Succession Planning

 

As part of its mandate and annual workplan, the Nominating and Corporate Governance Committee reviews the succession plan for each senior officer, including the President and Chief Executive Officer. The Nominating and Corporate Governance Committee is responsible for ensuring that there is an orderly succession plan for the position of the President and Chief Executive Officer and other members of senior management. To meet this obligation, the President and Chief Executive Officer meets with the Nominating and Corporate Governance Committee and reviews each position, the status of the incumbent, a review of our talent pool and the succession plan for each role.

 

Board Role in Risk Oversight

 

The full Board is entrusted with the responsibility for overseeing the significant risks to which our business is exposed and ensuring there are processes in place to effectively identify, monitor and manage them. A significant risk is one that, if it were to occur, could materially impact our ability to meet or support our business objectives. The Board delegates responsibility for the execution of certain elements of risk oversight to the committees in order to ensure appropriate expertise, attention and diligence. The committees oversee the relevant risk areas and report to the Board regularly. Each committee operates according to a Board-approved written mandate outlining its duties and responsibilities. They also oversee the procedures and programs put in place by management to mitigate the risks and the allocation of adequate resources to address the risks. Management is responsible for ensuring that the Board and its committees are kept well informed of changing risks. The risk oversight responsibilities of the committees include the following:

 

The Audit Committee is responsible for overseeing the integrity of the Company’s financial statements, the independent auditor’s qualifications and independence, the performance of the Company’s internal audit function and independent auditor, compliance with legal and regulatory requirements, and the Company’s accounting and financing reporting processes.

 

The Compensation Committee is responsible for oversight of compensation-related risks, including reviewing management’s assessment of risks related to employee compensation programs.

 

The Health, Safety and Environment Committee assists in overseeing the development, monitoring and effective implementation of systems, programs and initiatives to promote the management of health, safety and security at Gran Tierra and to address environmental, safety and operational risks. Additional information can be found in our Corporate Responsibility Report which is available on the Company’s website at http://www.grantierra.com/corporate-responsibility.

 

The Nominating and Corporate Governance Committee assists in overseeing governance related risks, including regulatory, reputation and other risks. 

 

 23 

 

 

Communications With The Board Of Directors

 

The Board has adopted a formal process by which stockholders and other interested persons may communicate with the Board or any of its directors. This information is available on Gran Tierra’s website at www.grantierra.com/governance.

 

BOARD STRUCTURE AND PROCESSES

 

Board Leadership Structure

 

Robert B. Hodgins currently serves as non-executive Chairman of our Board. The Board believes that the current board leadership structure, coupled with a strong emphasis on board independence, effectively allocates authority, responsibility, and oversight between management and the independent members of our Board. We believe separation of the roles of Chairman and Chief Executive Officer helps preserve our Board’s independence and objectivity and provides an appropriate division of labor between our Chairman and Chief Executive Officer. The Chairman of our Board presides over meetings of the Board, presides over meetings of stockholders, consults and advises the Board and its committees on the business and affairs of the Company, and performs additional duties as the Board may otherwise determine and delegate.

 

Board Effectiveness and Director Assessment

 

The Board performs an annual self-assessment, led by the Chair of the Nominations and Corporate Governance Committee, to evaluate its effectiveness in fulfilling its obligations. Directors complete a written questionnaire covering performance of the Board and its committees. The Chair of the Nominations and Corporate Governance Committee then interviews each director to obtain an assessment of the effectiveness of the Board and committees, as well as director performance and Board dynamics, summarizes these individual assessments for discussion with the Board and committees, and then leads a discussion with the Nominating and Corporate Governance Committee and the Board.

 

Considerations in Evaluating Director Nominees

 

The Nominating and Corporate Governance Committee is responsible for identifying and recruiting new candidates for nomination to the Board. The Nominating and Corporate Governance Committee considers recommendations for nominees for directorships submitted by stockholders. The Company will evaluate director nominees proposed by stockholders on the same basis as recommendations received from any other source. Please see “Stockholder Proposals” in this Proxy Statement and our Bylaws for procedures to submit director nominees to the Nominating and Corporate Governance Committee.

 

In developing recommendations for the Board, the Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating nominees for directors. Candidates for director nominees are reviewed in the context of the current composition of the Board, the operating requirements of Gran Tierra and the long-term interests of stockholders. Some of the qualifications that the Nominating and Corporate Governance Committee considers include:

 

independence (as per applicable NYSE American listing standards and applicable SEC rules and regulations)

 

relevant industry experience

 

excellence in his or her field

 

potential conflicts of interest and other commitments

 

board experience

 

ethics

 

diversity of experience

  

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In conducting this assessment, the Nominating and Corporate Governance Committee considers diversity, age, skills, and such other factors as it deems appropriate given the current needs of the Board and Gran Tierra, to maintain a balance of knowledge, experience and capability.

 

The Nominating and Corporate Governance Committee believes that candidates should have certain minimum qualifications including:

 

the highest personal and professional ethics and integrity

 

skills that are complementary to those of the existing Board

 

financial literacy

 

sound business judgment

 

commitment to represent the long-term interests of Gran Tierra’s stockholders

 

To identify, recruit and evaluate qualified candidates for the Board, the Nominating and Corporate Governance Committee may use the services of professional search firms. In some cases, nominees have been individuals known to Board members or others through business or other relationships. In the case of Sondra Scott, a third-party professional search firm identified her as a potential director nominee.

 

Director Tenure

 

Gran Tierra does not have a retirement policy or term limit for directors. We review our Board composition annually to ensure our board has the right skills to ensure the Company’s long-term success. The Company added one new director in 2017, and in the last three years, the refreshment rate for Gran Tierra’s board has been 100%.

 

Orientation and Education

 

The purpose of the Director Orientation and Education Program is to ensure there is an orientation program for new directors and an ongoing education program for existing directors. The program includes materials and resources that will inform and educate directors on the Company’s corporate governance framework, its business, operations and current issues and strategies. New directors are provided with a copy of the Company’s director’s manual which includes the Board and Committee mandates, corporate governance guidelines and other company policies. New directors attend an orientation session at which senior management review the Company’s business, strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its Code of Business Conduct and Ethics, its principal officers, and its internal and independent auditors.

 

Each director is expected to maintain the necessary level of expertise to perform his or her responsibilities as a director. Continuing education is provided through a number of methods, including an annual dedicated strategy session, presentations from senior management, employees, and outside experts to the Board and its Committees on topics of interest and developing issues, as well as the ongoing distribution of relevant information. These presentations, meetings and discussions serve to increase the Board’s knowledge of the Company and its business, and assist the Board in the execution of its duties.

  

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Director Meetings and Attendance

 

Directors are expected to attend, in person or by telephone, all meetings of the Board and all meetings of each committee of which they are a member. All of the directors who were nominated attended the 2017 annual meeting.

 

  Meetings Attended / Meetings Held (2)  
Name Board Audit
Committee
Compensation
Committee
Health,
Safety and
Environment
Committee
Nominating
and Corporate
Governance
Committee
Reserves
Committee
Overall
Attendance
Peter J. Dey 9/9 3/3 2/2 100%
Gary S. Guidry(1) 9/9 100%
Evan Hazell 9/9 4/4 3/3 100%
Robert B. Hodgins 9/9 4/4 3/3 2/2 100%
Ronald W. Royal 9/9 4/4 4/4 3/3 100%
Sondra Scott (3) 2/2 1/1 100%
David P. Smith 9/9 4/4 4/4 100%
Brooke Wade 9/9 3/3 2/2 3/3 100%

 

(1)Mr. Guidry is not a member of any committee of the Board as he is not considered to be an independent director. Mr. Guidry participates in various committee meetings; however, each committee holds executive sessions without Mr. Guidry present.

 

(2)Directors who are not members of the committee attended certain of these meetings by invitation.

 

(3)Ms. Scott was appointed to the Board, Nominating and Corporate Governance Committee, Reserves Committee and Health, Safety and Environment Committees effective September 19, 2017.

 

Executive Sessions

 

As part of each regularly scheduled Board meeting, the independent directors meet without our management team. The Chairman leads such discussions. 

 

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INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS

 

The Board has five standing committees: an Audit Committee, a Compensation Committee, a Health, Safety and Environment Committee, a Nominating and Corporate Governance Committee, and a Reserves Committee. The composition and responsibilities are described below. Members serve on these committees until their resignation or until otherwise determined by the Board.

 

The committees regularly report their activities and actions to the full Board, generally at the next Board meeting following the committee meeting. Each of the committees operates under a charter approved by the Board. Current copies of the charters of the committees are available on the Company’s website at www.grantierra.com/governance.

 

Audit Committee
Members: David P. Smith (Chair), Robert B. Hodgins and Ronald W. Royal
The Board has determined that each of the members of the Audit Committee satisfies the requirements for audit committee independence and financial literacy under the rules and regulations of the NYSE American and the SEC. The Board has determined that Messrs. Hodgins and Smith are financial experts as per Item 407(d)(5) of Regulation S-K established by the SEC. The Audit Committee held four meetings during the fiscal year ended December 31, 2017.

The Audit Committee oversees the accounting and financial reporting process and the audit of the Company’s financial statements, and assists the Board in monitoring the financial systems and Gran Tierra’s legal and regulatory compliance. The Audit Committee met four times in 2017 and at each meeting met with our independent auditors and the internal auditor, both privately and in the presence of management. The Audit Committee is responsible for, among other things:

 

●         Evaluation and retention of Auditors

 

●         Approval of audit engagements

 

●         Approval of non-audit services

 

●         Review of audited financial statements and management’s discussion and analysis

 

●         Review of quarterly financial statements

 

●         Review of earnings press releases

 

●         Review of accounting principles and policies

 

●         Review of guidelines and policies with respect to risk assessment and risk management

 

●         Review of the scope, adequacy and effectiveness of internal control over financial reporting

 

●         Review and oversee the internal audit function

 

●         Approval of the Company’s hedging policies and procedures

 

The Audit Committee operates under a written charter that was adopted by the Board and satisfies the applicable standards of the SEC and the NYSE American. A copy of the Audit Committee Charter is available on Gran Tierra’s website at www.grantierra.com/governance.

 

 

 27 

 

 

Compensation Committee
Members: Brooke Wade (Chair), Peter J. Dey and Robert B. Hodgins
The Board has determined that each of the members of the Compensation Committee satisfies the requirements for compensation committee independence under the rules and regulations of the NYSE American and the SEC. The Compensation Committee held three meetings during the fiscal year ended December 31, 2017.

The Compensation Committee acts on behalf of the Board to review, recommend for adoption and oversee Gran Tierra’s compensation strategy, policies, plans and programs. The Compensation Committee is responsible for, among other things:

 

●         Review and approve the components of compensation for the Chief Executive Officer and other executive officers

 

●         Review and approve the corporate goals and objectives relevant to the compensation for the Chief Executive Officer and other executive officers

 

●         Evaluate the performance of the Chief Executive Officer and other executive officers in light of established goals and objectives

 

●         Establish policies with respect to equity compensation arrangements

 

●         Review the risks arising from our compensation policies and practices

 

●         Review and approve the compensation and other terms of employment or service, including severance and change-in-control arrangements, of Gran Tierra’s Chief Executive Officer and the other executive officers

 

●         Oversee Gran Tierra’s equity compensation plans for employees and directors

 

●         Evaluate and make recommendations regarding director compensation

 

●         Select compensation consultants and other advisors

 

●         Review the Compensation Discussion and Analysis

 

The Compensation Committee operates under a written charter that was adopted by the Board and satisfies the applicable standards of the SEC and the NYSE American. A copy of the Compensation Committee Charter is available on Gran Tierra’s website at www.grantierra.com/governance.

 

 

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Health, Safety and Environment Committee
Members: Evan Hazell (Chair), Ronald W. Royal, Sondra Scott and David P. Smith
The Board has determined that each of the members of the Health, Safety and Environment Committee satisfies the requirements for independence under the rules and regulations of the NYSE American. The Health, Safety and Environment Committee held four meetings during the fiscal year ended December 31, 2017.

The Health, Safety and Environment Committee acts on behalf of the Board and assists the Board in fulfilling its responsibilities in relation to environmental, health and safety matters, including monitoring and overseeing the Company’s policies and procedures for ensuring compliance by the Company with environmental regulatory requirements and ensuring that employees are provided with a safe environment in which to perform their duties. The Health, Safety and Environment Committee is responsible for, among other things:

 

●         Develop and approve the environmental, health and safety goals and objectives of the Company

 

●         Review and monitor the environmental policies and activities of the Company to ensure that the Company is in compliance with environmental laws and legislation and that the Company conforms with industry standards

 

●         Review and monitor the health and safety policies and activities of the Company

 

●         Review environmental, health and safety compliance issues and incidents of non-compliance to determine that the Company is taking all necessary action in respect of those matters and that the Company has been diligent in carrying out its responsibilities and activities in that regard

 

●         Review significant external or internal audit or consultants’ reports relating to environmental, health or safety matters;

 

●         Review significant legislative and regulatory changes including policy proposals and modifications that could impact the Company

 

The Health, Safety and Environment Committee operates under a written charter that was adopted by the Board, a copy of which is available on Gran Tierra’s website at www.grantierra.com/governance.

 

Reserves Committee
Members: Ronald W. Royal (Chair), Evan Hazell, Sondra Scott and Brooke Wade
The Board has determined that each of the members of the Reserves Committee satisfies the requirements for independence under the rules and regulations of the NYSE American. The Reserves Committee held three meetings during the fiscal year ended December 31, 2017.

The Reserves Committee acts on behalf of the Board and assists the Board in fulfilling its oversight responsibilities with respect to evaluating and reporting on the Company’s oil and gas reserves. The Reserves Committee is responsible for, among other things:

 

●         Approve the engagement of the independent reserves evaluators and their compensation

 

●         Review disclosure procedures with respect to the oil and gas activities of the Company

 

●         Review the Company’s procedures for providing information to the independent reserves evaluator

 

●         Meet in-camera with the independent reserves evaluators

 

●         Make recommendations to the Board regarding the approval of the Company’s year-end reserves evaluations

 

The Reserves Committee operates under a written charter that was adopted by the Board, a copy of which is available on Gran Tierra’s website at www.grantierra.com/governance.

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Nominating and Corporate Governance Committee
Members: Peter J. Dey (Chair), Robert B. Hodgins, Sondra Scott and Brooke Wade
The Board has determined that each of the members of the Nominating and Corporate Governance Committee satisfies the requirements for independence under the rules and regulations of the NYSE American. The Nominating and Corporate Governance Committee held two meetings during the fiscal year ended December 31, 2017.

The Nominating and Corporate Governance Committee acts on behalf of the Board to identify, review and evaluate candidates to serve as directors of Gran Tierra, making recommendations to the Board regarding corporate governance issues, assessing the performance of the Board and management, and developing a set of corporate governance principles for Gran Tierra. The Nominating and Corporate Governance Committee is responsible for, among other things:

 

●         Identify and review director nominees

 

●         Consider recommendations for Board nominees and proposals submitted by the Company’s stockholders

 

●         Assess the performance of the Board

 

●         Recommend chair and membership of board committees

 

●         Review director independence

 

●         Consider and review continuing education for directors

 

●         Review and assess our Corporate Governance Guidelines

 

●         Review succession planning for our Chief Executive Officer and other executive officers

 

●         Review insurance coverage for the directors and executive officers

 

The Nominating and Corporate Governance Committee operates under a written charter that was adopted by the Board and satisfies the applicable standards of the SEC and the NYSE American. A copy of the Compensation Committee Charter is available on Gran Tierra’s website at www.grantierra.com/governance.

 

Compensation Committee Interlocks And Insider Participation

 

None of the members of the Compensation Committee has at any time been an officer or employee of Gran Tierra. No member of the Board or of the Compensation Committee served as an executive officer of another entity that had one or more of our executive officers serving as a member of that entity’s board or compensation committee. 

 

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DIRECTOR COMPENSATION

 

The objective of Gran Tierra’s compensation program for non-executive directors is to attract and retain directors of a quality and nature that will enhance our long-term sustainable profitability and growth. Director compensation is intended to provide an appropriate level of remuneration considering the experience, responsibilities, time commitment and accountability of their roles. Any director who is also an employee of the Company does not receive additional compensation for serving as a director.

 

Non-executive director compensation is reviewed annually by the Nominating and Corporate Governance Committee to ensure that it is reasonable in light of the time required from directors and aligns directors’ interests with those of our stockholders.

 

In addition, we align the interests of our directors with our stockholders by requiring that Directors own a minimum number of shares or Deferred Stock Units (“DSUs” and each a “DSU”). Each non-executive director must hold shares or DSUs with a value equal to three times the annual cash retainer. The shareholdings of each non-executive director are valued using either the closing price of our shares on December 31 each year or the value at the time they were acquired, whichever is greater. Directors have five years to meet the share ownership requirement.

 

Directors’ DSU Plan

 

The Board introduced a DSU program in 2016 as a vehicle through which directors may elect to defer receipt of their fees and invest such deferred amounts in notional shares of Gran Tierra. Directors who have elected to be paid all or a portion of the annual retainer in DSUs receive their awards on a quarterly basis effective the first day of each quarter. The number of DSUs credited to each director is calculated by dividing the dollar value of the portion of the director’s retainer that he or she has elected to be paid in the form of DSUs by the fair market value on the day of determination. The DSUs vest immediately but are not paid out until the director ceases to be a director of Gran Tierra. The Board has discretion to settle the DSUs in common shares or in a cash amount equal to the market value of common shares at the time of settlement. DSUs are not shares and do not carry voting rights. DSUs received by directors in lieu of cash compensation and held by them represent an at-risk investment in Gran Tierra. The value of DSUs is based on the value of the common shares of Gran Tierra, and therefore is not guaranteed.

 

Fees and Retainers for 2017

 

The director compensation structure for non-executive directors consists of an all-inclusive Board retainer and consists of both a cash component and an equity component. Each of these components is described below in more detail.

 

   2017 Annual
Equity Retainer
 
2017 Annual Cash Retainer and Travel Fees (1)  (DSUs, RSUs, Stock Options) (1)
Chairman of the Board  $73,735   $103,627 
Director  $43,842   $56,198 
Audit Committee Chair  $35,871      
Other Committee Chairs  $23,914      
Committee Members  $11,957      
Travel Fee (over three hours) per meeting  $1,196      
(1)All compensation to non-employee directors is paid in Canadian dollars and converted into U.S. dollars for the purposes of the above table.

 

The cash retainer portion of the director’s fees can be taken in the form of cash, restricted stock Units (“RSUs”), DSUs or any combination thereof, as elected by each non-employee director. The equity portion must be taken in the form of equity until the stock ownership guideline is achieved. A maximum of 25% of the equity retainer can be taken as stock options which vest immediately and expire after five years. DSUs vest immediately but are not paid out until the director ceases to be a director of Gran Tierra. The number of DSUs, RSUs or stock options credited to each director is calculated by dividing the dollar value of the portion of the director’s retainer to be paid in the form of DSUs, RSUs or stock options by the fair market value on the day of determination. A travel fee is paid to each director for travel over three hours to a Board meeting.

 

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Director Compensation Table

 

The following table shows for the fiscal year ended December 31, 2017, the value of amounts paid or granted to all non-employee directors of Gran Tierra:

 

  Fees Earned or
Paid in Cash ($) (1)

Option Awards

($)

All Other
Compensation ($) (4)
Total
($)
Peter J. Dey 130,752   5,381 136,133
Evan Hazell 131,999   1,196 133,195
Robert B. Hodgins 209,297   5,978 215,275
Ronald W. Royal 142,254   4,783 147,037
Sondra Scott 38,465 81,919 2,391 122,775
David P. Smith 145,735   5,978 151,713
Brooke Wade 142,254   1,196 143,450
(1)Amounts reported in this column represent Board and committee retainers. Cash fees that were deferred by an election of a director and received in the form of DSUs (Stock Awards) or Option Awards are reported in the table below. All compensation to non-employee directors is paid in Canadian dollars and converted into U.S. dollars for the purposes of the above table. For 2017 compensation amounts, the exchange rate at December 29, 2017 of one U.S. dollar to Canadian $1.2545 is used.

  

    Stock Awards Option Awards
  Cash ($) ($) (2) ($) (3)
Peter J. Dey 117,233 13,519
Evan Hazell 32,881 85,599 13,519
Robert B. Hodgins 109,606 99,691
Ronald W. Royal 128,735 13,519
Sondra Scott 22,528 15,937
David P. Smith 91,670 40,546 13,519
Brooke Wade 128,735 13,519

  

(2)Amounts in the Stock Awards column reflect the aggregate grant date fair value of DSUs computed in accordance with GAAP. The Company currently intends to settle the DSUs outstanding as of December 31, 2017 in cash, and, therefore, DSUs are accounted for as liability instruments. The amounts in this column include DSUs which were issued as a result of an election by the directors to be paid a portion of their retainer in the form of DSUs. The value ultimately realized by each director may or may not be equal to this determined value. As of December 31, 2017, each of the non-employee directors had aggregate outstanding DSUs as follows, all of which were fully vested: Mr. Dey – 71,120; Mr. Hazell – 66,887; Mr. Hodgins – 77,899; Mr. Royal – 100,595; Ms. Scott – 6,990; Mr. Smith – 31,682; and Mr. Wade – 100,595. None of the directors hold RSUs.

 

(3)Amounts in the Options Awards column reflect the aggregate grant date fair value computed in accordance with ASC 718. Assumptions made in the valuation of stock options granted are discussed in Note 7 to Gran Tierra’s 2017 Consolidated Financial Statements, which can be found in Item 8 of the Form 10-K filed with the SEC on February 27, 2018. The amounts in this column include stock options which were issued as a result of an election by the directors to be paid a portion of the equity retainer in the form of stock options. As of December 31, 2017, each of the non-employee directors had aggregate outstanding stock options as follows: Mr. Dey – 108,184; Mr. Hazell – 108,184; Mr. Hodgins - 85,000; Mr. Royal – 108,184; Ms. Scott – 85,000; Mr. Smith – 108,184 and Mr. Wade – 108,184.

 

(4)Amounts reported in this column represent fees paid for travel to or from a meeting of the Board in excess of three hours per meeting.

  

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Director Share Ownership Requirements

 

Gran Tierra has introduced a policy requiring directors to acquire common shares and/or DSUs equivalent in value to three times their annual cash retainer within five years from the date of first election to the Board. The following table sets out the non-executive director share ownership requirements for 2017.

 

  Ownership Requirement 2017
Chairman of the Board

3x annual Board cash retainer fees in Common Shares and DSUs

$73,735 x 3 = $221,204

Non-Executive Directors

3x annual Board cash retainer fees in Common Shares and DSUs

$43,842 x 3 = $131,527

 

All of the current Directors have met or have additional time to achieve their share ownership requirements as at December 31, 2017.

 

Name Common
Shares
(#)
DSUs
(#)
Total Value of 
Common Shares 
and DSUs (1)
($)
Share
Ownership

Requirement
($)
Share
Ownership
Achievement
Share 
Ownership 
Requirement
Date
Peter J. Dey 20,000 71,120 246,024 131,527 Achieved Feb. 2021
Evan Hazell 55,000 66,887 329,095 131,527 Achieved Feb. 2021
Robert B. Hodgins 10,000 77,899 237,327 221,204 Achieved Feb. 2021
Ronald W. Royal 254,667 100,595 959,207 131,527 Achieved Feb. 2021
Sondra Scott 6,990 18,873 131,527 In Progress Sept. 2022
David P. Smith 187,500 31,682 591,791 131,527 Achieved Feb. 2021
Brooke Wade 492,600 100,595 1,601,627 131,527 Achieved Feb. 2021
(1)Based on the closing market price of the Company’s shares on December 29, 2017 of $2.70.

 

Directors’ and Officers’ Insurance

 

We maintain an insurance policy for directors’ and officers’ liability. It provides coverage for costs incurred to defend and settle claims against directors or officers up to an annual limit of $100 million. The cost of coverage for 2017 was approximately $390,000. Directors and officers do not pay any portion of the premiums. No claims were made or became payable in 2017.

  

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AUDIT- RELATED MATTERS

 

PROPOSAL 2:

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

 

The Audit Committee of the Board has selected KPMG LLP as Gran Tierra’s independent registered public accounting firm for the fiscal year ending December 31, 2018, and has further directed that management submit the selection of independent registered public accounting firm for ratification by the stockholders at the annual meeting.

 

Neither Gran Tierra’s Bylaws nor other governing documents or law require stockholder ratification of the selection of KPMG LLP as Gran Tierra’s independent registered public accounting firm. However, the Audit Committee of the Board is submitting the selection of KPMG LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of Gran Tierra and its stockholders.

 

Representatives of KPMG LLP are expected to be present at the annual meeting and will have an opportunity to make a statement and respond to appropriate questions from stockholders raised at the meeting.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.

 

RECENT CHANGE IN INDEPENDENT AUDITORS

 

As previously reported in a Current Report on Form 8-K, on March 12, 2018, the Audit Committee of the Board of Directors of the Company approved the dismissal of Deloitte LLP (“Deloitte”) as the Company’s independent registered public accounting firm. On March 12, 2018, the Company notified Deloitte of its dismissal effective immediately. Also, on March 12, 2018, the Committee approved the engagement of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm. KPMG was formally engaged on March 12, 2018.

 

Deloitte’s reports on the Company’s consolidated financial statements for the fiscal years ended December 31, 2017 and 2016 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the two most recent fiscal years ended December 31, 2017 and 2016 and in the subsequent interim period through the Dismissal Date, there were (i) no disagreements between the Company and Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the subject matter of the disagreement in its reports on the consolidated financial statements for such years and (ii) no “reportable events” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K). The Company provided Deloitte with a copy of the disclosure from its Current Report on Form 8-K, and requested that Deloitte furnish the Company with a letter addressed to the U.S. Securities and Exchange Commission stating whether Deloitte agrees with the disclosures contained in this Current Report on Form 8-K, and, if not, stating the respects in which it does not agree. The Company received the requested letter from Deloitte and a copy of Deloitte’s letter was filed as Exhibit 16.1 to its Current Report on Form 8-K.

 

Furthermore, during the Company’s two most recent fiscal years ended December 31, 2017 and 2016 and the subsequent interim period through the Dismissal Date, neither the Company nor anyone on its behalf has consulted with KPMG regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that KPMG concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue or (ii) any matter that was either the subject of a “disagreement” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K). 

 

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AUDIT COMMITTEE REPORT

 

The Audit Committee is a committee of the Board comprised solely of independent directors as required by the listing standards of the NYSE American and rules of the SEC. In accordance with the written Audit Committee Charter, the Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices or the Company.

 

The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2017, with management of Gran Tierra and the independent registered public accounting firm. Management has the responsibility for the preparation of the Company’s financial statements, and the independent registered public accounting firm has the responsibility for the audit of those statements. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in Gran Tierra’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for filing with the Securities and Exchange Commission.

 

Respectfully submitted by the Audit Committee of the Board of Directors,

 

David P. Smith, Chair

 

Robert B. Hodgins

 

Ronald W. Royal

  

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PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Set forth below is a summary of fees paid to Deloitte for services in the years ended December 31, 2017 and 2016. In determining the independence of Deloitte, the Audit Committee considered whether the provision of non-audit services is compatible with maintaining Deloitte’s independence. 

 

   Year Ended December 31, 
(Thousands of U.S. Dollars)  2017   2016 
Audit Fees  $824   $994 
Audit-related Fees   109    466 
Tax Fees        51 
All Other Fees   42     
Total Fees  $975   $1,511 

 

Audit Fees

 

Audit Fees are primarily for the annual audit of the Company’s consolidated financial statements included in the Form 10-K, including the audit of the effectiveness of the Company’s internal controls over financial reporting, the reviews of the Company’s financial statements included in the Forms 10-Qs, statutory audits, and other procedures required to be performed by the independent auditor to be able to form an opinion on the Company’s consolidated financial statements.

 

Audit-Related Fees

 

Audit-Related Fees include fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the independent auditor. Audit-Related Fees paid to Deloitte in 2017 were in connection with the Company’s notes offering, dispositions of Brazil and Peru operations, working interest and Block assignments in Colombia, branch wind-ups in Colombia and Mexican bid round. Audit-Related Fees paid to Deloitte in 2016 were in connection with the Company’s equity and convertible notes offerings, acquisitions of Petroamerica and PetroLatina, and working interest and Block assignments in Colombia.

 

Tax Fees

 

Tax Fees in 2016 included fees billed for tax services related to potential acquisitions.

 

All Other Fees

 

Other fees in 2017 related to French translation work and tax consulting performed by Deloitte.

 

All services described above were approved by the Audit Committee.

 

Pre-Approval Policies and Procedures

 

Our Audit Committee is responsible for the engagement of the independent auditors and for approving, in advance, all auditing services and permitted non-audit services to be provided by the independent auditors. The Audit Committee maintains a policy for the engagement of independent auditors that is intended to maintain the independence from Gran Tierra of the independent auditors. In adopting this policy, our Audit Committee considered the various services that independent auditors have historically performed or may be needed to perform in the future for Gran Tierra. Under this policy:

 

the Audit Committee approves the performance by the independent auditors of audit or permitted non-audit services, subject to restrictions in certain cases, based on the Audit Committee’s determination that such services would not be likely to impair the independence of the independent auditors from Gran Tierra;

 

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Gran Tierra’s management must obtain the specific prior approval of our Audit Committee for each engagement of the independent auditors to perform any audit or permitted non-audit services; and

 

the performance by the independent auditors of certain types of services (bookkeeping or other services related to the accounting records or financial statements of Gran Tierra; financial information systems design and implementation; appraisal or valuation services, fairness opinions or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions or human resources; broker or dealer, or investment adviser or investment banking services; legal services and expert services unrelated to the audit; and any other service that the applicable federal oversight regulatory authority determines, by regulation, is impermissible) is prohibited due to the likelihood that their independence would be impaired.

 

In its review of all non-audit service fees, our Audit Committee considers, among other things, the possible effect of these services on the independence of our independent auditors. Relevant considerations include, but are not limited to, whether the services are prohibited pursuant to SEC rules, whether the auditors are best positioned to provide the services, and the percentage of total services the non-audit services will comprise.

 

Any approval required under this policy must be given by our Audit Committee or by the chairperson of the Audit Committee in office at the time, provided that any pre-approval decisions made by the chairperson must be reported to the Audit Committee at its next scheduled meeting. Gran Tierra’s Audit Committee will not delegate its responsibilities to approve services performed by the independent auditors to any member of management. All services rendered by Deloitte in 2017 were subject to our pre-approval policy. 

 

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PROPOSAL 3:

ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Section 14A of the Exchange Act, Gran Tierra’s stockholders are entitled to vote to approve, on an advisory basis, the compensation of Gran Tierra’s named executive officers as disclosed in this proxy statement in accordance with SEC rules. At the 2017 annual meeting of stockholders, the stockholders indicated their preference that Gran Tierra solicit a non-binding advisory vote on the compensation of the named executive officers every year. Unless the Board modifies its policy on the frequency of holding such advisory votes on compensation, the next such vote will occur in 2019. This vote is not intended to address any specific item of compensation, but rather the overall compensation of Gran Tierra’s named executive officers for the last completed fiscal year and the philosophy, policies and practices described in this proxy statement.

 

The compensation of Gran Tierra’s named executive officers subject to the vote is disclosed in the Compensation Discussion and Analysis, the compensation tables that follow, and the related narrative disclosure contained in this proxy statement. As discussed in those disclosures, Gran Tierra believes that its compensation policies and decisions are consistent with current market practices and are focused on pay-for-performance principles that strongly align the interests of our named executive officers with those of our stockholders. Compensation of Gran Tierra’s named executive officers is designed to enable Gran Tierra to attract and retain talented and experienced executives to lead Gran Tierra successfully in a competitive environment.

 

Accordingly, the Board is asking the stockholders to indicate their support for the compensation of Gran Tierra’s named executive officers as described in this proxy statement by casting a non-binding advisory vote “FOR” the following resolution:

 

“RESOLVED, that the compensation paid to Gran Tierra’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion in this proxy statement, is hereby APPROVED.”

 

Because the vote is advisory, it is not binding on the Board or Gran Tierra. Nevertheless, the views expressed by the stockholders, whether through this vote or otherwise, are important to management and the Board and, accordingly, the Board and the Compensation Committee intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.

 

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SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

Security Ownership Of Certain Beneficial Owners And Management

 

The following table sets forth certain information regarding the beneficial ownership of Gran Tierra common stock as of March 12, 2018 (unless otherwise indicated) by each person known by the Company to own beneficially more than 5% of the outstanding shares of the Company’s common stock.

 

   Amount and     
   Nature of Beneficial   Percentage 
Name of Person or Identity of Group  Ownership   of Class (1) 
Entities affiliated with GMT Capital Corp. (2)   57,259,706    14.86% 
Luminus Management, LLC (3)   32,908,586    8.54% 

 

(1)Based on 385,394,642 shares of common stock outstanding (excluding Exchangeable Shares).

 

(2)Based upon information filed on The System for Electronic Disclosure by Insiders (www.sedi.ca) on January 30, 2018, reporting beneficial ownership as of that date. The address of GMT Capital Corp. is 2300 Windy Ridge Parkway, Suite 550, South Atlanta, GA 30339.

 

(3)Based upon a Schedule 13G/A (Amendment No. 2) filed with the SEC on February 16, 2018 reporting beneficial ownership as of December 31, 2017. The Schedule 13G reports that Luminus Management, LLC has shared voting and dispositive authority with respect to these shares with Luminus Energy Partners Master Fund, Ltd. and Jonathan Barrett. The address of Luminus Management, LLC is 1700 Broadway, 38th Floor, New York, New York 10019.

 

Beneficial Ownership of Directors and Named Executive Officers

 

The following table sets forth certain information regarding the beneficial ownership of Gran Tierra common stock as of March 12, 2018 by (i) each executive officer of Gran Tierra named in the Summary Compensation Table on page 43, (ii) each current director of Gran Tierra (including director nominees) and (iii) all of Gran Tierra’s named executive officers and directors as a group as of March 12, 2018. All ownership percentage calculations below assume that all Exchangeable Shares have been converted on a one-for-one basis into corresponding shares of our common stock, as such shares vote together with our common stock on all matters as if shares of our common stock. Except as otherwise noted, the persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them.

 

Name of Person  Common Stock   Shares Which May
Be Acquired
Within 60 Days (1)
   Total Shares
Beneficially Owned (2)
   Percent of
Outstanding
Common Stock (3)
 
Adrian Coral   0    148,809    148,809    * 
Peter J. Dey   20,000    165,049    185,049    * 
Ryan Ellson (4)   266,030    279,333    545,363    * 
Jim Evans (5)   251,405    160,533    411,938    * 
Gary S. Guidry   2,527,000    463,500    2,990,500    * 
David Hardy (6)   78,527    699,100    777,627    * 
Evan Hazell   55,000    157,774    212,774    * 
Robert B. Hodgins   10,000    146,930    156,930    * 
Ronald W. Royal   254,667    195,631    450,298    * 
Sondra Scott       19,563    19,563    * 
David P. Smith (7)   187,500    118,237    305,737    * 
Brooke Wade (8)   642,600    195,631    838,231    * 
Lawrence West   245,030    160,533    405,563    * 
Directors and named executive officers as a group (total of 13 persons)   4,537,759    2,910,623    7,448,382    1.9% 

 

*Less than 1°%.

 

(1)Includes shares which may be acquired as of or within 60 days after January 12, 2018, upon the exercise of stock options and stock awards held by executive officers and directors.

 

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(2)Represents the total shares listed under the columns “Common Stock” and “Shares Which May Be Acquired Within 60 Days.” Under SEC rules, beneficial ownership as of any date includes any shares as to which a person, directly or indirectly, has or shares, voting power or dispositive power and also any shares as to which a person has the right to acquire such voting or dispositive power as of or within 60 days after such date through the exercise of any stock option or other right.

 

(3)Based on 391,302,707 shares of common stock issued and outstanding as of March 12, 2018, which, for purposes of this table includes 5,908,065 Exchangeable Shares issued and outstanding as of March 12, 2018, as such shares are immediately exchangeable for shares of our common stock and vote together with our common stock on all matters as if shares of our common stock.

 

(4)The number of common stock includes 30,000 shares owned by Mr. Ellson’s spouse.

 

(5)The number of common stock includes 61,000 shares owned by Mr. Evans’ spouse.

 

(6)Mr. Hardy ceased to be an employee or officer of Gran Tierra on August 30, 2017. Share ownership is based on last known information provided to the Company. The number of common stock includes 54,527 Exchangeable Shares and common stock owned by Mr. Hardy’s spouse.

 

(7)The number of common stock includes 122,500 shares owned by Mr. Smith’s spouse.

 

(8)The number of common stock includes 400,000 shares owned by Wade Capital Corporation, a corporation owned by Mr. Wade.

 

Section 16(A) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires Gran Tierra’s directors and executive officers, and persons who own more than ten percent of a registered class of Gran Tierra’s equity securities, to file with the SEC initial reports disclosing the amount and nature of their beneficial ownership and reports of changes of their beneficial ownership of common stock and other equity securities of Gran Tierra.

 

To Gran Tierra’s knowledge, based solely on a review of these reports and written representations from these individuals that no other reports were required, Gran Tierra believes that all required filings were timely made in 2017 except for one late Form 4 that was filed on behalf of Susan Mawdsley with respect to the vesting of an RSU.

 

Executive Officers

 

Our executive officers as of March 12, 2018, are as follows:

 

Name Age Title
Gary S. Guidry 62 President and Chief Executive Officer
Ryan Ellson 42 Chief Financial Officer
Ed Caldwell 68 Vice President, Health, Safety and Environment & Corporate Social Responsibility
Adrian Coral 44 President, Gran Tierra Energy Colombia
James Evans 52 Vice President, Corporate Services
Alan Johnson 47 Vice President, Asset Management
Glen Mah 61 Vice President, Business Development
Susan Mawdsley 51 Vice President, Finance and Corporate Controller
Rodger Trimble 56 Vice President, Investor Relations
Lawrence West 61 Vice President, Exploration

 

Gary S. Guidry. For the biography of Mr. Guidry, see “Proposal 1, Election of Directors.”

 

Ryan Ellson has been our Chief Financial Officer since May 2015. Mr. Ellson has 17 years of experience in a broad range of international corporate finance and accounting roles. Mr. Ellson was Chief Financial Officer of Onza Energy Inc. from January 2015 to May 2015. From July 2014 until December 2014, Mr. Ellson was Head of Finance for Glencore E&P (Canada), an oil and gas company, and prior thereto Vice President, Finance at Caracal Energy, an international oil and gas company listed on the London Stock Exchange with operations in Chad, Africa. He held that position from August 2011 until the company was acquired by Glencore plc for $1.8 billion in July 2014. Prior

 

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to Caracal, Mr. Ellson was Vice President of Finance at Sea Dragon Energy from April 2010 until August 2011. In these positions, Mr. Ellson oversaw financial and accounting functions, implemented and oversaw internal financial controls, secured a reserve based lending facility and was involved in multiple capital raises. Mr. Ellson has held management and executive positions with companies operating in Chad, Egypt, India and Canada. Mr. Ellson is a Chartered Accountant and holds a Bachelor of Commerce and a Master of Professional Accounting from the University of Saskatchewan.

 

Ed Caldwell has been our Vice President, Health, Safety and Environment & Corporate Social Responsibility since June 2016. Mr. Caldwell had a distinguished 27-year career with ExxonMobil and Imperial Oil, and most recently worked with Caracal Energy Inc. in Caracal’s efforts and achievement in Chad. Mr. Caldwell has extensive experience in senior Regulatory Approvals and HSE Management roles in Canada, Asia, Russia, and Africa. He has also worked with the Government of Canada and, in that capacity, represented Canada at the OECD Energy/Environment Committee as well as at the Intergovernmental Panel on Climate Change. Mr. Caldwell graduated in Chemical Engineering (Distinction) from Dalhousie University.

 

Adrian Coral has been President, Gran Tierra Energy Colombia, Ltd., a subsidiary of the Company, since August 2014. Mr. Coral joined Gran Tierra in August 2006 as an operations engineer in Gran Tierra Energy Colombia, Ltd. and served in that capacity until February 2007. Mr. Coral rejoined Gran Tierra in August 2008 as Operations Director of Gran Tierra Energy Colombia, Ltd. He served in that capacity until September 2011, when he was promoted to Production Manager of Gran Tierra Energy Colombia, Ltd. Mr. Coral was promoted to Senior Operations Manager of Gran Tierra Energy Colombia, Ltd. in April 2013. On August 1, 2014, Mr. Coral was promoted to President, Gran Tierra Energy Colombia, Ltd. Mr. Coral has a total of 20 years of experience as an engineer or manager in the oil and gas industry. Mr. Coral graduated from the Universidad de América – Bogotá D.C. with a degree as a Petroleum Engineer and from the School of Business Management – Bogotá D.C with degree in Project Management.

 

James Evans has been our Vice President, Corporate Services since May 2015. Mr. Evans has over 28 years of experience including working the last 12 years in the international oil and gas industry. Most recently, Mr. Evans was the Head of Compliance & Corporate Services for Glencore E&P (Canada), an oil and gas company, from July 2014 to December 2014, and prior thereto Vice President of Compliance & Corporate Services at Caracal Energy, an international oil and gas company, from July 2011 to June 2014, in each case where he oversaw the execution of corporate strategy and goals, developed and implemented a robust corporate compliance program, and managed all aspects of information technology, document control, security and administration. Mr. Evans also managed the recruitment, training and retention of staff in both Calgary and Chad. He oversaw the growth of Caracal Energy from seven employees to in excess of 400 as Caracal Energy exceeded 20,000 barrels of oil per day at the time of sale to Glencore. Prior to Caracal, Mr. Evans held senior management and executive positions at Orion Oil and Gas and Tanganyika Oil, with operating experience in Egypt, Syria and Canada. Mr. Evans is a Certified General Accountant and holds a Bachelor of Commerce degree from the University of Calgary.

 

Alan Johnson has been our Vice President, Asset Management since May 2015. Mr. Johnson is a professional engineer with more than 20 years of experience working internationally in the oil and gas industry. His experience includes varied technical, managerial and executive roles in drilling, production, reservoir, reserves, corporate planning and asset management. Most recently Mr. Johnson was Head of Asset Management for Glencore E&P (Canada), an oil and gas company, from April 2014 to April 2015, where he was responsible for all development activities in Chad and prior thereto Director of Asset Management at Caracal Energy, an international oil and gas company, from August 2011 to March 2014, where he was responsible for development activities in the Doba basin in Chad, Africa. Mr. Johnson was instrumental in developing oil and gas assets in remote areas of southern Chad, achieving first production in less than 18 months. Mr. Johnson started his exploration and production career with Shell International in the Dutch North Sea. He then held positions of increasing responsibility with Shell Canada, APF Energy, Rockyview Energy, Delphi Energy and BG Australia. Mr. Johnson graduated with a 1st Class B.Eng (Hons) from Heriot Watt University in Scotland. Mr. Johnson is a Chartered Engineer in the UK and a Professional Engineer in Alberta.

 

Susan Mawdsley has been our Vice President, Finance and Corporate Controller since June 2016. Ms. Mawdsley is a Chartered Accountant with 25 years of experience in the oil and gas industry. She has been the Corporate Controller of Gran Tierra Energy since 2012 and has direct responsibility for the finance departments in all business units, as well as internal audit. Prior to joining Gran Tierra in 2011, she was an independent consultant providing contract controller, Chief Financial Officer, and other finance related services to publicly

 

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traded domestic and international oil and gas companies. Ms. Mawdsley is a Chartered Accountant and holds a Bachelor of Music in Performance degree from the University of Toronto.

 

Glen Mah has been our Vice President, Business Development since June 2016. Mr. Mah is a Petroleum Geologist with extensive management experience covering the execution of exploration programs, field development and asset management for conventional and unconventional hydrocarbons. He has worked with onshore and offshore projects in various petroleum basins in the Americas, Africa, Middle East and Asia. From 2005 until 2008, Mr. Mah was the Chief Geologist with the highly successful Tanganyika Oil Company Ltd. Mr. Mah has Alberta-registered Professional designation with APEGA and holds a Bachelor of Science degree Specialization in Geology from the University of Alberta.

 

Rodger Trimble has been our Vice President, Investor Relations since June 2016. Mr. Trimble is a Professional Engineer with 30+ years of experience in domestic and international basins in various management positions. Prior to joining Gran Tierra, Mr. Trimble was Head of Corporate Planning, Budgeting & Finance with Glencore E&P (Canada) Inc., an oil and gas company. In January 2013, Mr. Trimble became Director Corporate Planning, Budget & Business Development with Caracal Energy Inc., an international oil and gas company, which was acquired by Glencore E&P (Canada) in July 2014. He has held several senior management positions ranging from Country Manager in Argentina with Canadian Hunter Exploration, Vice President, Exploitation with Esprit Energy Trust, Manager, Reservoir Engineering with Apache Canada Inc. and Manager, Upstream Evaluations - Frontiers & International with Husky Energy. Mr. Trimble is an Alberta-registered Professional Engineer and a member of APEGA. He received a Bachelor of Science in Petroleum Engineering (with Distinction) from Stanford University.

 

Lawrence West has been our Vice President, Exploration since May 2015. Mr. West has 35 years of experience as an executive, explorationist, and geologist. Most recently, Mr. West was Vice President, Exploration at Caracal Energy, an international oil and gas company, from July 2011 to June 2014. Mr. West built a multi-disciplinary team to assess resources and grow reserves in the interior rift basins within Chad and led a successful exploration program. During his tenure he successfully executed two large 2D/3D seismic shoots in remote frontier basins, on time and on budget. Prior to Caracal he has been involved in starting and growing several public and private companies, including Reserve Royalty Corp., Chariot Energy, Auriga Energy and Orion Oil and Gas. Lawrence worked at Alberta Energy Company (“AEC”), where he was on the team that merged with Conwest. He built and led the AEC East team to the Rocky Mountain USA basins. His career began with Imperial Oil working on prospect and reservoir characterization, in multi-disciplinary teams, and as a technical mentor to exploration teams. Mr. West has an Honours Bachelor of Science in Geology from McMaster University and an MBA, specializing in economics, from the University of Calgary.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

The following discussion provides details regarding our executive compensation program and 2017 compensation arrangements for each of our Named Executive Officers (“NEOs”) who, in 2017 were:

 

Name Title at December 31, 2017
Gary S. Guidry President and Chief Executive Officer
Ryan Ellson Chief Financial Officer
Adrian Coral President, Gran Tierra Energy Colombia
Jim Evans Vice President, Corporate Services
Lawrence West Vice President, Exploration
David Hardy Former Vice President, Legal and General Counsel

 

Philosophy and Objectives of our Executive Compensation Program

 

Our compensation philosophy is to provide an attractive, flexible, and market-based total compensation program that is tied to performance and aligns the interests of our NEOs with those of our stockholders. The Company’s objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our stockholders as well as economic growth and respect for the communities in which we have a strong presence. Our compensation philosophy also serves as a means of communicating our goals and standards of conduct and performance, and for motivating and rewarding our NEOs in relation to their achievements. Our compensation philosophy includes the principles described below:

 

·Hire and retain top caliber and highly capable executives: Executive officers should have a total compensation package that is market competitive and permits us to hire and retain high-caliber individuals at all levels.

 

·Pay for performance: A significant portion of the annual compensation opportunity for our executive officers should be directly tied to the achievement of key operational and financial measures aligned with our strategy, relative TSR and our share price performance. Directly linking pay with our performance is essential to delivering long-term value to our stockholders.

 

·Create Stockholder Alignment: A significant portion of compensation should be variable (at risk) and equity-based. Executives are also required to meet significant share-ownership guidelines.

 

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Responsibilities for Executive Compensation

 

Compensation decisions for our executive officers are made by the Compensation Committee, with input from our independent compensation consultants as well as from our Chief Executive Officer. The specific roles are summarized below:

 

Compensation Committee   · Oversees compensation policies, plans and programs, reviews and determines the compensation to be paid to our executive officers and directors annually.
       
    · Oversees our annual and long-term incentive plans and programs and periodically assesses our non-employee director compensation program.
       
    · Approves the goals of our Chief Executive Officer, evaluates our Chief Executive Officer’s performance in light of those goals and objectives and recommends to the Board the approval of the Chief Executive Officer’s annual compensation.
       
    · Together with our Chief Executive Officer, reviews and approves the corporate performance goals and objectives of our other NEOs and recommends to the Board the approval of the annual compensation package for the other NEOs.
       
    · Holds executive sessions with no management present.
       
       
Board   · Reviews Chief Executive Officer’s performance.
       
    · Approves Chief Executive Officer and NEO compensation.
       
       
Independent Compensation Consultants   · Provides the Compensation Committee with independent advice concerning the types and levels of compensation to be paid to our Chief Executive Officer and the other NEOs.
       
    · Provides market compensation data (e.g., industry compensation surveys and benchmarking data) on base salary, annual incentives and long-term incentives and industry trends.
       
       
Chief Executive Officer   · Reviews performance of other NEOs with the Compensation Committee.
       
    · Makes recommendations on base salary, annual bonus and long-term incentives awards for the other NEOs.

 

The Board and the Compensation Committee hold regular executive sessions at the end of each meeting with no representatives of the management team present. Our Chief Executive Officer does not attend any portion of the Compensation Committee or Board meeting at which his compensation is deliberated or approved. Except as described in the table above, our Chief Executive Officer does not play any role with respect to any matter affecting his own compensation.

 

The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with the Chief Executive Officer. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The charter of the Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of Gran Tierra. In addition, under the charter, the Compensation Committee has the authority to obtain, at the expense of Gran Tierra, advice and assistance from compensation consultants, internal and external legal, accounting or other advisors and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. The Compensation Committee has direct responsibility for the oversight of the work of any advisers engaged for the purpose of advising the Compensation Committee and may amend the engagement with or terminate any such advisor as it deems necessary or appropriate. Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees, as appropriate. In 2017, the Compensation Committee did not form any subcommittees.

 

The Compensation Committee and the Board make their compensation decisions for the upcoming year, and review performance for the prior year, generally in the first quarter of the year. For example, annual bonuses in respect of 2017 performance, as well as the consideration of salary increases for 2018, were recommended by the Compensation Committee and approved by the Board in January of 2018.

 

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Assessment of Company Performance

 

The Compensation Committee uses Company performance measures to establish total compensation ranges relative to our performance and the performance of our comparator groups as outlined on the following page. In addition, the Compensation Committee establishes specific performance measures that determine payouts under cash and equity-based incentive programs.

 

Role of the Independent Compensation Consultant

 

When making determinations regarding executive compensation, the Compensation Committee considers advice from external advisors and third-party compensation surveys as well as the advice of Compensation Committee members and other members of the Board based on their knowledge and experience to set competitive, results driven levels of salary and other compensation.

 

The Compensation Committee may, in its sole discretion, retain or obtain the advice of independent compensation consultants or other external advisors and is directly responsible for the appointment, compensation arrangements and oversight of the work of any such person. The retention of independent compensation consultants and scope of services provided by them are assessed on an annual basis.

 

The Compensation Committee may select a compensation consultant only after taking into consideration all factors relevant to that person’s independence from management. We will provide appropriate funding, as determined by the Compensation Committee, for payment of reasonable compensation to any independent compensation consultants or other external advisors retained by the Compensation Committee. During 2017, the Compensation Committee engaged the independent compensation consultant for limited services such as LTIP measurement. In 2017, the Compensation Committee evaluated whether any work provided by its Compensation Committee consultant raised any conflict of interest and determined that it did not.

 

Risk Considerations

 

The Compensation Committee and the Board periodically review the risks associated with our compensation policies and practices. These assessments include an examination of the changes in our risk profile over the past year for our compensation policies and practices. Based on this assessment, the Compensation Committee and the Board each determined that these risks were not reasonably likely to have a material adverse effect on us. Among other things, the Compensation Committee and the Board took into consideration the fact that:

 

·the current significant weighting towards long-term incentive compensation, the value of which depends on the value of our shares, discourages short-term risk taking;

 

·our annual incentive compensation program includes several different metrics, preventing NEOs from focusing on one metric at the exclusion of other important performance goals;

 

·our compensation program is appropriately balanced such that if annual bonus targets are not achieved, base pay and long-term incentive compensation will still provide the executives with a reasonable minimum amount of compensation;

 

·stock options and PSUs for executives vest over three years, which discourages short-term risk taking;

 

·our clawback policy permits us to recover executive compensation in the case of fraud or intentional misconduct requiring a material restatement of financial results;

 

·stock ownership guidelines encourage a long-term perspective by our executives; and

 

·incentive awards are decided by the Compensation Committee and recommended to the Board for approval.

 

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Compensation Peer Group - 2017

 

The following is our peer group for executive compensation purposes. The companies in the executive compensation peer group were selected as they are of similar size as Gran Tierra, are in the same line of business, and are listed on a major exchange in Canada or the United States. During 2017, Oando Energy Resources Inc., Bankers Petroleum Ltd. and Mart Resources Inc. were removed from our peer group as they were either sold or delisted. As the Company’s executive office is located in Canada, most of the companies in the peer group above were chosen as they are also located in Canada and would have similar pay structures. Although the Company monitors the salaries of the executives in its compensation peer group, there were no salary increases for the Company’s NEOs in 2017.

 

Pengrowth Energy Corporation Bonavista Energy Corporation
Raging River Exploration Inc. Birchcliff Energy Ltd.
Parex Resources Inc. TORC Oil & Gas Ltd.
Crew Energy Inc. NuVista Energy Ltd.
Canacol Energy Ltd. Surge Energy Inc.
TransGlobe Energy Corporation  

 

The Company has a separate peer group for evaluating performance which is further explained on page 50.

 

Elements of Our Compensation Program

 

Our executive compensation program includes a mix of fixed and variable pay with performance periods ranging from one to five years. The primary elements are summarized in the table below:

 

Compensation Fixed/Variable Cash/Equity Time Period Goal
Base Salary Fixed Cash 1 year Provide fixed level of income
Short-term Incentive Variable Annual cash bonus 1 year Reward contribution to annual corporate and individual performance
Long-term Incentive Variable PSUs
Stock options
3 years
5 years
Reward medium and long-term performance

 

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Base Salary

 

We pay base salaries in order to attract and retain talented executives and to provide our NEOs with a fixed base of cash compensation. The salaries typically reflect each NEOs experience, skills, knowledge and responsibilities. Competitive market conditions also have an impact on setting salary levels. The salaries of our NEOs are reviewed on an annual basis by our Chief Executive Officer (other than with respect to his own salary, which is reviewed and determined by the Compensation Committee). The table below sets forth the annual base salaries for our NEOs for fiscal 2017 which were unchanged from 2016.

 

Name  2017 Base Salary
($)
   2016 Base Salary (1)
($)
   % Increase
2016-2017
 
Gary S. Guidry  $318,852   $318,852     
Ryan Ellson  $259,067   $259,067     
Adrian Coral  $230,000   $230,000     
Jim Evans  $239,139   $239,139     
Lawrence West  $239,139   $239,139     
David Hardy  $255,879   $255,879     

 

(1)For ease of comparison, amounts reported in this column are converted from Canadian dollars and Colombia pesos to U.S. dollars at the exchange rate at December 29, 2017.

 

Short Term Incentives - Cash Bonus

 

One of our key compensation objectives is for a significant portion of each NEO’s compensation to be tied to Company performance. Our annual cash bonus plan provides opportunities for our executives, including the NEOs, to earn annual cash bonuses tied to the successful achievement of key operational, financial and market objectives that that drive our business and stockholder value.

 

In February 2017, the Compensation Committee approved the annual bonus target for each of our NEOs which were calculated as a percentage of their respective base salaries.

 

The value of the bonus is calculated as below:

 

 

The following bonus structure was approved by the Compensation Committee for the following executives in connection with 2017 performance:

 

Name  Target Payout as a %
of Base Salary
   Corporate Performance
Weighting
   Individual Performance
Weighting
 
Gary S. Guidry   100%    100%    —% 
Ryan Ellson   80%    80%    20% 
Adrian Coral   60%    60%    40% 
Jim Evans   50%    60%    40% 
Lawrence West   50%    60%    40% 
David Hardy   50%    60%    40% 

 

Assessment of Individual Performance

 

Individual performance has a significant impact on the annual cash bonus for NEOs other than the Chief Executive Officer and is weighted between 20% and 40% of the award with the remaining amount being driven by our performance relative to our performance measures. The individual performance rating for each NEO, other than the Chief Executive Officer, is determined through a formal performance evaluation conducted with the Chief Executive Officer. The performance evaluation measures how each NEO performs against criteria directly related to their position.

 

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2017 Corporate Performance Goals and Scores

 

At the beginning of each fiscal year, the Board of Directors approves the measures (and associated performance targets) that will be used to measure corporate performance for the fiscal year. For 2017, the Board of Directors approved eight goals based on the Company’s budget and operating plan that were considered to be the key drivers to the success of the Company’s business plan for the year, which were used as corporate performance metrics to determine the 2017 annual bonus structure (40% operational, 30% financial, 10% market and 20% strategic). Each of the measures had a threshold level of performance which had to be reached for the measure to contribute to a payout. There is a target level of performance for each element and a stretch level of performance above threshold. Between threshold and target performance, and between target and the stretch maximum, performance factors are graduated according to the performance level actually reached. The Board of Directors met in January 2018 to assess the Company’s 2017 performance relative to the pre-established targets. The following table summarizes the results of the assessment:

 

Metric  

Relative

Weighting

Factor

   

2017

Corporate

Targets

   

2017

Performance

Result

   

2017

Performance

Factor Level

   

Performance

Factor

 
                               
Operational Goals                              
Gross Field Reserve 2P Additions (MMBOE) (1)   15%     10 - 15 - 20     27.9     Maximum     30%  
2P Finding & Development Costs (“F&D”), Including Future Development Costs ($/BOE) (2)   10%     15 - 12 - 10     11.3     Above Target     14%  
WI Production before royalties (BOEPD)   15%     35 - 36 - 38     32.1     Below Threshold     0%  
                               
Financial Goals                              
General & Administration Expenses ($/BOE)   10%     4.5 - 3.0 - 2.5     2.6     Maximum     20%  
Cash Costs ($/BOE) (3)   10%     25 - 20 - 18     16.4     Maximum     20%  
Funds Flow from Operations ($ millions) (4)   10%     200 - 225 - 250     220.2     Below Target     8%  
                               
Market Goals                              
Increase in NAV/share (5)   10%     17.58 - 12%     30%     Maximum     20%  
                               
Strategic Goals (6)   20%           -     Partially Met Target     15%  
    100%                       127%  

 

(1)2P reserves have been calculated in compliance with NI 51-101 and COGEH and are based on the GTE McDaniel Reserves Report. See “Disclosure of Oil and Gas Information” for important information.

 

(2)F&D costs are calculated as estimated exploration and development capital expenditures in Colombia, excluding acquisitions and dispositions, divided by the applicable reserves additions both before and after changes in future development costs (“FDC”) costs. The calculation of F&D costs incorporates the change in FDC required to bring proved undeveloped and developed reserves into production. The aggregate of the exploration and development costs incurred in the financial year and the changes during that year in estimated FDC may not reflect the total F&D costs related to reserves additions for that year. Management uses F&D costs per BOE as a measure of its ability to execute its capital program and of its asset quality.

 

(3)Cash costs includes operating, transportation and commercialization expenses.

 

(4)Funds flow from operations is a non-GAAP measure and does not have a standardized meaning under generally accepted accounting principles in the United States of America (“GAAP”). Funds flow from operations, as presented, is net income or loss adjusted for DD&A expenses, asset impairment, deferred tax expense or recovery, stock-based compensation expense, amortization of debt issuance costs, cash settlement of RSUs, unrealized foreign exchange and financial instruments gains and losses and loss on sale of business units or gain on acquisition. Management uses this financial measure to analyze performance and income or loss generated by our principal business activities prior to the consideration of how non-cash items affect that income or loss, and believes that this financial measure is also useful supplemental information for investors to analyze performance and our financial results.

 

(5)See page 50 for further details of NAV.

 

(6)The 2017 Strategic Goals include metrics set by the Compensation Committee relating to joint ventures, exploration discoveries, financing and exploration commitments included in the Company’s annual budget and approved by the Board.

 

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Actual Annual Cash Bonuses Earned for 2017

 

The following table shows the 2017 annual cash bonus awards earned by each NEO:

 

    Base Salary
for 2017 ($)
    Target Payout as a %
of Base Salary
    2017 Cash Bonus
Awarded ($) (1)
    2017 Cash Bonus
(% of Base Salary)
 
Gary S. Guidry   318,852     100%     404,145     127  
Ryan Ellson   259,067     80%     262,256     101  
Adrian Coral   230,000     60%     166,600     72  
Jim Evans   239,139     50%     150,658     63  
Lawrence West   239,139     50%     136,309     57  
David Hardy (2)   255,879     50%     n/a     n/a  

 

(1)2017 Cash Bonuses were paid on February 15, 2018.

 

(2)Mr. Hardy’s employment with us terminated on August 30, 2017 and, as such, he did not receive a cash bonus for 2017.

 

Long-Term Equity Incentive Program

 

Our equity compensation program was redesigned in 2016 to incorporate equity awards that vest based on the achievement of key operational goals established by the Board of Directors as described below. Approximately 80% of the value of equity awards granted in 2017 consisted of PSUs and 20% of the value of equity awards consisted of stock options, based on the fair value at grant date.

 

2017 PSUs Granted

 

As part of our long-term incentive plan, PSUs are designed to create a link between executive compensation and increased stockholder value by rewarding NEOs for achievement against key performance metrics over a three-year period. Our goal is to further incentivize our executives to achieve the operational goals established by the Board and to increase share and net asset value for our stockholders.

 

Each PSU entitles the holder to be issued the number of common shares designated in the performance award multiplied by a payout multiplier, with such common shares (or cash equal in value to such shares) to be issued on dates determined by the Compensation Committee, but no later than March 15 of the year following the year in which the last performance period applicable to the award ends. The payout multiplier is dependent on the performance of the Company relative to pre-defined corporate performance measures for the period. The number of PSUs that vest may range from zero to 200% of the target number granted based on the performance multiplier earned under the terms of the award agreement. Each recipient must also remain in the continuous service of Gran Tierra from the date of grant through the date of settlement in order for the award to vest. PSUs are granted annually.

 

The PSUs granted to our NEOs in 2017 may become fully vested at the end of the three-year performance period, based upon our performance with respect to four separate performance periods as follows:

 

Performance Period   Percentage of Target Award Subject to Performance Period  
January 1, 2017 - December 31, 2017   20%  
January 1, 2018 - December 31, 2018   20%  
January 1, 2019 - December 31, 2019   20%  
January 1, 2017 - December 31, 2019   40%  
    100%  

 

The calculation of the performance multiplier is as follows:

 

·50% weighting: Gran Tierra’s Relative Total Shareholder Return (“TSR”);

 

·25% weighting: Gran Tierra’s Net Asset Value (“NAV”) per shares; and

 

·25% weighting: execution of strategy (as determined by the Board).

 

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Total Shareholder Return. The Compensation Committee believes that the comparison of Gran Tierra’s TSR over a specified period of time to the returns of peer companies over the same period is an objective external measure of the Company’s effectiveness in translating its results into stockholder returns. TSR is calculated by comparing Gran Tierra’s change in share price plus reinvestment of dividends relative to the performance of a pre-selected peer group of companies with respect to the same measures. The framework included in the table below is used to determining our relative TSR. Results between the performance levels are interpolated on a linear basis.

 

    Annualized TSR Above/Below   Payout Multiplier  
Performance Level   Median of Peers   (% of the Target Award)  
Threshold   -15%   0  
Target   At median   100  
Maximum   20%   200  

 

The Compensation Committee approved the following total shareholder return performance peer group (the “Performance Peer Group”) for the 2017 PSUs:

 

Callon Petroleum Company Oasis Petroleum Inc.
Canacol Energy Ltd. Obsidian Energy Ltd. (formerly Penn West Petroleum Ltd.)
Carrizo Oil & Gas Inc. Parex Resources Inc.
Contango Oil & Gas Company Spartan Energy Corp.
Jones Energy Inc. Synergy Resources Corp.
Kosmos Energy Ltd. Tamarack Valley Energy Ltd.
Matador Resources Company TransGlobe Energy Corp.
Frontera Energy Corporation
(formerly Pacific Exploration & Production Corp.)
W&T Offshore Inc.

 

If any of the peer companies undergoes a change in corporate capitalization or a corporate transaction (including, but not limited to, a going-private transaction, bankruptcy, liquidation, merger or consolidation) during the performance period, the Committee shall undertake an evaluation to determine whether such peer company will be replaced. The Committee has pre-approved Denbury Resources Inc., Baytex Energy Corp. and EP Energy Corporation as replacement companies. During 2017 Cobalt International Energy Inc., Stone Energy Corp. and TransAtlantic Petroleum Ltd. were removed from the Performance Peer Group and Tamarack Valley Energy Ltd., Carrizo Oil & Gas Inc., and Oasis Petroleum Inc. were added as replacements.

 

The Performance Peer Group was developed with the assistance of our Compensation Consultants to meet at least one of the following specifications: an enterprise value of at least $1 billion; Proved Reserves of 30 million BOE; WI production before royalties of 20,000+ BOEPD; production to be at least 50% oil and natural gas liquids. Enterprise value was calculated as the market value of our common stock plus the market value of debt minus cash and investments.

 

Net Asset Value. NAV per share is based on before tax NPV discounted at 10% of Colombia only proved plus probable (2P) reserves, year-end 2017 net debt of $272 million, comprised of working capital deficit of $16 million, senior convertible notes of $111 million (net of unamortized fees; $115 million gross) and reserves-based credit facility of $145 million (net of unamortized fees; $148 million gross), excluding risk management assets and liabilities and investment in Sterling Resources Ltd. shares, and number of shares of Gran Tierra’s common stock and Exchangeable Shares issued and outstanding at December 31, 2017 and 2016, of 391 million and 399 million, respectively. Net working capital and debt at December 31, 2017 and 2016, prepared in accordance with generally accepted accounting principles in the United States of America. NAV per share was chosen as a performance metric for our PSUs because it provides an indication of the value of the Company’s reserves on a per share basis. Growth in NAV per share demonstrates the Company’s ability to increase the underlying value of the Company without diluting stockholders. The framework included in the table below is used to assess NAV per share performance. Results between the performance levels are interpolated on a linear basis.

 

 50 

 

 

Performance Level   Compound Annual Growth
in NAV/share
    Payout Multiplier
(% of the Target Award)
 
Threshold   less than 8%     0  
Target   8%     100  
Maximum   12%     200  

 

Strategy. Execution of strategy was chosen as a performance metric for our PSUs because it provides a link to the Company’s success in meeting key milestones and achieving its strategic goals. The Strategic Goals included metrics set by the Compensation Committee relating to acquisitions, exploration discoveries, financing and exploration commitments included in the Company’s annual budget and approved by the Board.

 

The following table lists the number of PSUs awarded in 2017 at minimum, target, and maximum levels :

 

    Minimum # of units     Target # of units     Maximum # of units  
Gary S. Guidry   0     325,600     651,200  
Ryan Ellson   0     235,800     471,600  
Adrian Coral   0     131,200     262,400  
Jim Evans   0     139,500     279,000  
Lawrence West   0     139,500     279,000  
David Hardy (1)   0     149,300     298,600  

 

(1)All PSUs held by David Hardy were forfeited upon his retirement on August 30, 2017.

 

2017 Performance Results. In February 2018, the Compensation Committee confirmed and approved the performance results for the portion of the 2017 annual PSU awards that vest based on performance during the one-year performance period ended December 31, 2017 and continued employment through the end of 2019.

 

For the performance period ended December 31, 2017, the performance results were as follows:

 

    2017 result     Performance Level     Weighting     Payout Multiplier  
TSR - Relative TSR above or below median of peers   +0.5%     Above Target     50%     0.67  
NAV - Compound annual growth in NAV per share   +30%     Maximum     25%     0.50  
Strategy         Above Target     25%     0.46  
Total Multiplier                     1.62  

 

Stock Options

 

Stock options provide NEOs with an option to buy Gran Tierra common shares at a future date at the exercise price determined at the time of grant.

 

Our Compensation Committee and Board continues to believe that time-vested stock options are an important element of our equity compensation program because they serve as a strong retention tool while ensuring that the recipient only receives value upon an increase in the value of our common stock. Stock options within the LTIP mix account for 20% of the value of equity awards granted.

 

Stock options vest pro-rata annually over three years, beginning with the first anniversary of the date of grant, and have a term of five years, subject to the officer’s continuous provision of services to Gran Tierra through the vesting date (except as otherwise provided in an officer’s award agreement or any employment agreement with Gran Tierra). The exercise price for our stock options is equal to the market price per share at the time of grant. The Compensation Committee meets in the first quarter each year to evaluate, review and approve the annual stock option award design and level of awards for the NEOs.

 

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RSUs

 

No RSUs were granted to NEOs in 2017 as the program has been replaced with grants of PSUs for our executives. RSUs granted prior to 2017 entitle the holder to receive, either the underlying number of shares of our 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. RSUs vest over three years, and once an RSU is vested, it is immediately settled.

 

Equity Awards Granted During 2017

 

In 2017, the Compensation Committee approved the following awards under our 2007 Equity Incentive Plan for the NEOs:

 

          PSUs     Stock Options  
    Total LTI Grant
Date Fair Value ($)
    Target #
of units
    Grant Date Fair
Value ($) (1)
    # of units     Grant Date Fair
Value ($) (1)
 
Gary S. Guidry   1,046,505     325,600     836,792     184,200     209,713  
Ryan Ellson   757,883     235,800     606,006     133,400     151,877  
Adrian Coral   421,661     131,200     337,184     74,200     84,477  
Jim Evans   448,343     139,500     358,515     78,900     89,828  
Lawrence West   448,343     139,500     358,515     78,900     89,828  
David Hardy (2)   479,905     149,300     383,701     84,500     96,204  

 

(1)The grant date fair value reported in this column is calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 Compensation - Stock Compensation (“ASC 718”).

 

(2)All PSUs held by David Hardy were forfeited upon his retirement on August 30, 2017.

 

Benefits

 

The NEOs are eligible for full participation in all rights and benefits under any life insurance, disability, medical, dental, health and accident plans maintained by Gran Tierra for its employees and executive officers. Our executive officers generally do not receive any supplemental retirement benefits or perquisites, except for limited perquisites provided on a case-by-case basis. In addition, our employees including our executive officers will be paid 100% of their base salary in the event they become disabled while still employed by us, until such time as the executive officer begins to receive long-term disability insurance benefits which is intended to pay two-thirds of base salary to a maximum of $15,000/month to age 70. These are standard basic benefits in our industry and help to retain and recruit key talent.

 

Share Ownership Guidelines

 

We have implemented share ownership guidelines for all of our executives, which are designed to align their long-term financial interests with those of our stockholders. The NEO share ownership guidelines are as follows:

 

Position Guideline     Ownership Relative to Base Salary
as of December 31, 2017 (1)
 
Chief Executive Officer 3 X base salary     Exceeds  
Chief Financial Officer 2 X base salary     Exceeds  
Other NEOs 1 X base salary     Exceeds or In-Progress  

 

If at any time an executive officer does not meet their ownership requirement, they must retain (a) any of our Common Stock owned by them (whether owned directly or indirectly) and (b) any net shares received as the result of the exercise, vesting or payment of any equity award until the ownership requirement is met, in each case unless otherwise approved by the Compensation Committee. For this purpose, “net shares” means the shares of stock that remain after shares are sold or withheld to (i) pay the exercise price for a stock option award or (ii) satisfy any tax obligations, including withholding taxes, arising in connection with the exercise, vesting or payment of an equity award.

 

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Compliance with these requirements is evaluated as of December 31 of each year. The value of an individual’s share ownership as of such date is determined by multiplying the number of shares of our stock or other eligible equity interests held by the individual by the greater of the purchase price of the stock or the closing price on December 31 of each year.

 

In determining stock ownership levels, we include shares of common stock held directly or indirectly by the officer (including shares beneficially owned in a trust, by a limited liability company or partnership, and by a spouse and/or minor children). Outstanding RSUs, PSUs and unexercised stock options are not included. If an executive officer does not satisfy the stock ownership requirements, they must retain all shares acquired on the vesting of equity awards or the exercise of stock options (net of exercise costs and taxes) until compliance is achieved.

 

The following table shows the number and value of shares owned at December 31, 2017 compared with the minimum share ownership guideline:

 

    Number of Shares
Owned as of
December 31, 2017
    Value of Shares
owned as of
December 31, 2017 (1)
    Minimum
Ownership
Per Guideline
 
Gary S. Guidry   2,527,000     $ 6,822,900     $ 956,557  
Ryan Ellson   266,030     $ 718,281     $ 518,135  
Adrian Coral   0     0     230,000  
Jim Evans   251,405     $ 678,794     $ 239,139  
Lawrence West   245,030     $ 661,581     $ 239,139  
David Hardy   n/a     n/a     n/a  

 

(1)Value is calculated based on the closing price of the Company’s shares on the NYSE American on December 29, 2017, which was $2.70.

 

Clawback Provisions

 

The Company has adopted a policy specifying that if an executive engages in fraud or intentional misconduct that requires a material restatement of financial results, and the fraud or intentional misconduct results in an incorrect determination that an incentive compensation performance goal had been achieved, the Board may take action to recover any incentive compensation resulting from the incorrect determination that had been paid to the executive during the three-year period preceding the filing of the accounting restatement.

 

Prohibition on Speculative Trading of Company Stock

 

We maintain a policy for securities transactions applicable to all officers, directors, and other members of management of the Company which prohibits engaging in short sales, transactions in put or call options, hedging transactions or other inherently speculative transactions with respect to our stock at any time. In addition, our Insider Trading Policy, among other things, prohibits our officers, including our NEOs, directors and employees from trading during quarterly and special blackout periods.

 

Employment Agreements

 

The Compensation Committee approves the terms of all NEO employment agreements. The terms of those agreements were structured to attract and retain persons key to our success, as well as to be competitive with compensation practices for executives in similar positions at companies of similar size and complexity. In assessing whether the terms of the employment agreements were competitive, the Compensation Committees received advice from our Compensation Consultant and reviewed appropriate surveys and industry benchmarking data. The employment agreements do not have a fixed term. No changes were made to any of the NEO employment agreements during 2017. The terms of the NEO employment agreements provide for certain payments and benefits in connection with a termination of employment and corporate transaction. The Compensation Committee believes these payments allow management to focus their attention and energy on making objective business decisions that are in the best interests of stockholders without allowing personal considerations to affect the decision-making process. Additionally, executive officers at other companies in our industry and the general market in which we compete for executive talent commonly provide post-termination payments, and we have consistently provided this benefit to certain executives in order to remain competitive in attracting and retaining skilled professionals in

 

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our industry. In 2017, the Company’s pay practices were amended so that no new employment agreements entered into between Gran Tierra and executive officers will include any provisions that provide for excise tax gross-ups or change in control “Single” or “Modified Single” triggers of severance payments or equity vesting accelerations.

 

Say on Pay Advisory Vote on Executive Compensation

 

The Company asked stockholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2017 at the 2017 annual meeting of stockholders. Stockholders expressed substantial support for the compensation of our named executive officers, with approximately 95% of the votes cast in favor of the “say-on-pay” advisory vote. The Compensation Committee carefully evaluated the results of the 2017 advisory vote. The Compensation Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Compensation Committee’s assessment of the interaction of our compensation programs with our corporate business objectives and review of peer group data, each of which is evaluated in the context of the Compensation Committee’s fiduciary duty to act as the directors determine to be in stockholders’ best interests. While each of these factors bore on the Compensation Committee’s decisions regarding our named executive officers’ compensation, the Compensation Committee did not make any changes to our executive compensation program and policies as a result of the 2017 “say-on-pay” advisory vote.

 

REPORT OF THE COMPENSATION COMMITTEE

 

The Compensation Committee has reviewed and discussed with management the Company’s disclosure under “Compensation Discussion and Analysis” contained in this proxy statement. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

Members of the Compensation Committee:

 

Brooke Wade, Chair
Peter J. Dey
Robert B. Hodgins

 

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EXECUTIVE COMPENSATION

 

SUMMARY COMPENSATION TABLE

 

The following table summarizes the compensation of our NEOs for their performance during the years ended December 31, 2017, 2016 and 2015.

 

Name and Position   Year     Salary (1)
($)
    Stock
Awards (3)
($)
    Option
Awards (4)
($)
    Non-Equity
Incentive Plan
Compensation (2)
($)
    All Other
Compensation(5)
($)
    Total
($)
 
Gary S. Guidry (6)   2017     318,852     836,792     209,713     404,145     6,804     1,776,306  
President and Chief   2016     297,907     832,048     219,984     359,723     4,555     1,714,217  
Executive Officer   2015     187,204     350,550     896,072     140,173     2,238     1,576,237  
                                           
Ryan Ellson (7)   2017     259,067     606,006     151,877     262,256     6,804     1,286,010  
Chief Financial Officer   2016     242,050     602,756     159,358     235,347     4,555     1,244,066  
    2015     151,214     221,400     522,709     102,601     2,228     1,000,152  
                                           
Jim Evans (8)   2017     239,139     358,515     89,828     150,658     89,697     927,837  
Vice President, Corporate   2016     223,430     356,440     94,229     128,845     3,997     806,941  
Services   2015     134,921     73,800     298,691     51,301     2,228     560,941  
                                           
Adrian Coral,   2017     210,461     337,184     84,477     166,600     116,694     915,416  
President, Colombia   2016     185,303     78,204     20,670     156,551     122,557     563,285  
    2015     206,230     68,750     94,024     136,070     120,217     625,291  
                                           
Lawrence West (9)   2017     239,139     358,515     89,828     136,309     264,963     1,088,754  
Vice President,   2016     223,430     356,440     94,229     125,866     247,069     1,047,034  
Exploration   2015     98,522     73,800     298,691     51,301     154,681     676,995  
                                           
David Hardy (10)   2017     170,586     383,701     96,204     0     731,288     1,381,779  
Former Vice President, Legal   2016     239,071     381,710     100,812     184,702     25,515     931,810  
and General Counsel   2015     231,936     88,550     160,393     108,382     37,503     626,764  

 

(1)All compensation is paid in Canadian dollars and converted into U.S. dollars for the purposes of the above table. For 2017 compensation amounts, the exchange rate at December 29, 2017 of one U.S. dollar to Canadian $1.2545 is used.

 

(2)Amounts reported in the “Non-equity Incentive Plan Compensation” column for each year represent the amount earned in that year, irrespective of when the amount was paid.

 

(3)Amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of RSU and PSU awards, computed in accordance with ASC 718, disregarding estimated forfeitures. The PSU awards are subject to market conditions and have been valued based on the probable outcome of the market conditions as of the grant date. For a discussion of valuation assumptions, see Note 7 - Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2017. Assuming maximum performance is achieved, the value of PSUs based on the price of the Company’s shares at the date of grant would be as follows: Gary S. Guidry - $1,673,584; Ryan Ellson - $1,212,012; Jim Evans - $717,030; Adrian Coral - $674,368; Lawrence West - $717,030; David Hardy - $767,402.

 

(4)Amounts reported in the “Option Awards” column represent the aggregate grant date fair value of stock options, computed in accordance with ASC 718. The value ultimately realized by the NEOs upon the actual vesting of the award(s) or the exercise of the stock option(s) may or may not be equal to this determined value. For a discussion of valuation assumptions, see Note 7 - Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2017.

 

(5)Amounts reported in the “All Other Compensation” column include severance payments, vacation pay, parking and transportation allowances, group term life insurance, and other perquisites, as shown in the table below.

 

(6)Mr. Guidry became President and Chief Executive Officer on May 7, 2015.

 

(7)Mr. Ellson became Chief Financial Officer on May 11, 2015.

 

(8)Mr. Evans became Vice President, Corporate Services on May 11, 2015.

 

(9)Mr. West became Vice President, Exploration on May 11, 2015.

 

(10)Mr. Hardy ceased to be our Vice President, Legal and General Counsel on August 30, 2017.

 

 55 

 

 

Name   Group Term
Life Insurance
(S)
  Parking and
Transportation
Allowance
($)
  Vacation
Pay ($)
  Severance
Payment ($)
  Other ($)   Total
($)
 
Gary S. Guidry   928   5,876         6,804  
Ryan Ellson   928   5,876         6,804  
Adrian Coral   3,722     7,747     105,225 (1) 116,694  
Jim Evans   928   3,029       85,740 (2) 89,697  
David Hardy   655   2,551   47,731   680,351       731,288  
Lawrence West           264,963 (3) 264,963  

 

(1)Consists of $89,190 for driver, vehicle and vehicle expenses, $6,136 for club membership and $9,899 for savings fund contributions. Mr. Coral resides in Bogota, Colombia.

 

(2)Consists of $15,945 allowance for housing and utilities; $37,713 for driver, vehicle and vehicle expenses; $27,401 for foreign service and hardship allowance; $4,384 for goods and services costs; and $297 for language training. Mr. Evans has been residing in Bogota, Colombia since September 2017.

 

(3)Consists of $84,987 allowance for housing and utilities; $86,872 for driver, vehicle and vehicle expenses; $63,573 for foreign service and hardship allowance; $14,922 for goods and services costs; $12,365 for club membership; and $2,244 for language training. Mr. West currently resides in Bogota, Colombia.

 

2017 GRANTS OF PLAN-BASED AWARDS

 

The following table shows certain information regarding grants of plan-based awards granted to the NEOs for the fiscal year ended December 31, 2017:

 

        Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
    Estimated Future Payouts
Under Equity Incentive
Plan Awards
    All Other
Option
Awards:
Number of
Securities
Underlying
  Exercise or
Base Price
of Option
  Grant Date
Fair Value
of Stock
and Option
 
Name   Grant Date   Threshold
($)
  Target
($)
  Maximum
($)
    Threshold
(#)
  Target
(#)
  Maximum
(#)
    Options
(#)
  Awards
($/Sh)
  Awards
($) (1)
 
Gary S. Guidry       $0   318,852   637,704                              
    2017/03/02                 0   325,600   651,200                
    2017/03/02                               184,200   2.57   209,713  
                                               
Ryan Ellson       $0   207,254   383,420                              
    2017/03/02                 0   235,800   471,600                
    2017/03/02                               133,400   2.57   151,877  
                                               
Adrian Coral       $0   138,000   234,600                              
    2017/03/02                 0   131,200   262,400                
    2017/03/02                               74,200   2.57   84,477  
                                               
Jim Evans       $0   119,570   203,268                              
    2017/03/02                 0   139,500   279,000                
    2017/03/02                               78,900   2.57   89,828  
                                               
Lawrence West       $0   119,570   203,268                              
    2017/03/02                 0   139,500   279,000                
    2017/03/02                               78,900   2.57   89,828  
                                               
David Hardy       $0   127,939   217,497                              
    2017/03/02                 0   149,300   298,600                
    2017/03/02                               84,500   2.57   96,204  

 

(1)The amounts in this column reflect the aggregate grant date fair value of awards granted to NEOs in 2017 computed in accordance with ASC 718, disregarding estimated forfeitures. The value ultimately realized by each NEO upon the actual vesting of the award(s) or exercise of the stock option(s) may or may not be equal to this determined value. For a discussion of the valuation assumptions, see Note 7 Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2017.

 

 56 

 

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2017

 

The following table shows for the fiscal year ended December 31, 2017, certain information regarding outstanding equity awards held by each of the NEOs.

 

    Option Awards     Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
  Option
Exercise
Price
($)
  Option Expiration
Date
    Number of
Shares or Units
That Have Not
Vested
(#)
  Market Value of
Unearned Units
That Have Not
Vested ($) (2)
  Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
(#)
  Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($) (2)
 
Gary S. Guidry   400,000   200,000 (1) 3.69   May 11, 2020     31,667 (7) 85,501          
    63,500   127,000 (5) 2.66   March 1, 2021     212,704 (8) 574,301   375,360 (3)  1,013,472  
    0   184,200 (6) 2.57   March 2, 2022     105,300 (9) 284,310   520,000 (4)  1,404,000  
                                     
Ryan Ellson   233,333   116,667 (1) 3.69   May 11, 2020     20,000 (7) 54,000          
    46,000   92,000 (5) 2.66   March 1, 2021     154,088 (8) 416,038   271,920 (3)  734,184  
    0   133,400 (6) 2.57   March 2, 2022     76,399 (9) 206,278   377,280 (4)  1,018,656  
                                     
Adrian Coral   10,000     2.51   December 15, 2018     8,334 (10) 22,502          
    23,000     5.90   March 3, 2020     19,992 (8) 53,978   35,280 (3)  95,256  
    16,312     8.40   March 9, 2021     42,509 (9) 114,774   209,920 (4)  566,784  
    7,500     5.83   Feb. 28, 2022                    
    8,865     7.09   Feb. 28, 2019                    
    20,500     6.45   Aug. 10, 2019                    
    56,666   28,334   2.75   Mar. 3, 2020                    
    5,966   11,934   2.66   Mar. 1, 2021                    
    0   74,200   2.57   Mar. 2, 2022                    
                                     
Jim Evans   133,333   66,667 (1) 3.69   May 11, 2020     6,667 (7) 18,001          
    27,200   54,400 (5) 2.66   March 1, 2021     91,120 (8) 246,024   160,800 (3)  434,160  
    0   78,900 (6) 2.57   March 2, 2022     45,198 (9) 122,035   233,200 (4)  602,640  
                                     
Lawrence                                    
West   133,333   66,667 (1) 3.69   May 11, 2020     6,667 (7) 18,001          
    27,200   54,400 (5) 2.66   March 1, 2021     91,120 (8) 246,024   160,800 (3)  434,160  
    0   78,900 (6) 2.57   March 2, 2022     45,198 (9) 122,035   233,200 (4)  602,640  
                                     
David Hardy   150,000     5.90   August 30, 2018            
    100,000     8.40   August 30, 2018                    
    100,000     5.83   August 30, 2018                    
    75,000     6.28   August 30, 2018                    
    100,000     7.09   August 30, 2018                    
    145,000     2.75   August 30, 2018                    
    29,100     2.66   August 30, 2018                    

 

(1)The right to exercise the option will vest on May 12, 2018, as long as the option holder is still employed by Gran Tierra on that date.

 

(2)Calculated using $2.70 which is the closing price of Gran Tierra’s shares on December 29, 2017.

 

(3)These amounts include the tranches (representing 60% of the target amount) of the PSU award granted in March of 2016 the vesting of which is still subject to company performance. The applicable performance period for the third tranche (representing 20% of the target amount) is January 1, 2018 through December, 2018. The fourth tranche (representing 40% of the target amount) has a performance period which began on January 1, 2016 and will end on December 31, 2018. Because our performance during 2016 exceeded target, the amounts above represent the maximum number of the PSUs that may vest. The actual number of PSUs that vest pursuant to the PSU award granted in March of 2016 will depend on our performance over the applicable performance periods and the NEOs continued employment through the date of settlement.

 

 57 

 

 

(4)These amounts include the tranches (representing 80% of the target amount) of the PSU award granted in March of 2017 the vesting of which is still subject to company performance. The applicable performance period for the second tranche (representing 20% of the target amount) is January 1, 2018 through December 31, 2018, and the applicable performance period for the third tranche (representing 20% of the target amount) is January 1, 2019 through December, 2019. The fourth tranche (representing 40% of the target amount) has a performance period which began on January 1, 2017 and will end on December 31, 2019. Because our performance during 2017 exceeded target, the amounts above represent the maximum number of the PSUs that may vest. The actual number of PSUs that vest pursuant to the PSU award granted in March of 2017 will depend on our performance over the applicable performance periods and the NEOs continued employment through the date of settlement.

 

(5)The right to exercise the option will vest one-half on March 2, 2018 and one-half on March 2, 2019, in each case if the option holder is still employed by Gran Tierra on such date.

 

(6)The right to exercise the option will vest one-third on March 2, 2018, one-third on March 2, 2019, and one-third on March 2, 2020, in each case if the option holder is still employed by Gran Tierra on such date.

 

(7)The RSUs will all vest on May 12, 2018.

 

(8)Provided that our NEOs remain employed through the settlement date, these amounts represent the number of common shares, or their cash equivalent, deliverable to each NEO with respect to the first tranche (representing 20% of the target amount) of the PSU award granted in March of 2016. These amounts represent the actual number of common shares, or their cash equivalent, earned pursuant to the terms of the PSUs for the performance period from January 1, 2016 through December 31, 2016. This tranche became earned at 178% of target. The awards are enumerated in this column because while the performance element of vesting for the awards has been fulfilled, the continued service requirement for vesting has not. If the NEOs do not remain employed through the settlement date, they will forfeit the awards. As such, the awards were not fully vested as of December 31, 2016.

 

(9)Provided that our NEOs remain employed through the settlement date, these amounts represent the number of common shares, or their cash equivalent, deliverable to each NEO with respect to the first tranche (representing 20% of the target amount) of the PSU award granted in March of 2017. These amounts represent the actual number of common shares, or their cash equivalent, earned pursuant to the terms of the PSUs for the performance period from January 1, 2017 through December 31, 2017. This tranche became earned at 162% of target. The awards are enumerated in this column because while the performance element of vesting for the awards has been fulfilled, the continued service requirement for vesting has not. If the NEOs do not remain employed through the settlement date, they will forfeit the awards. As such, the awards were not fully vested as of December 31, 2017.

 

(10)The RSUs vested on March 1, 2018

 

2017 OPTION EXERCISES AND STOCK VESTED

 

The following table presents information concerning the aggregate number of RSUs that vested during the fiscal year ended December 31, 2017, for the NEOs. There were no option exercises for the NEOs during the fiscal year ended December 31, 2017, and no PSUs vested during the fiscal year ended December 31, 2017.

 

    Stock Awards  
Name  

Number of Shares

Acquired on Vesting

(#) (1)

 

Value Realized on

Vesting

($) (2)

 
Gary S. Guidry   31,667   79,168  
Ryan Ellson   20,000   50,000  
Adrian Coral   11,639   29,381  
Jim Evans   6,667   16,668  
Lawrence West   6,667   16,668  
David Hardy   --   -  

 

(1)All RSUs that vested during 2017 were settled in cash, and no shares of common stock were issued.

 

(2)The amounts in this column were calculated by multiplying the number of shares of common stock subject to the RSU that vested by the closing market price of common stock on the vesting date.

 

 58 

 

 

POTENTIAL PAYMENT UPON TERMINATION OR CHANGE OF CONTROL

 

Mr. Hardy

 

In connection with Mr. Hardy’s retirement from employment on August 30, 2017, we entered into a Severance Agreement providing for the following:

 

·Lump sum cash payment of $680,351, excluding vacation pay; and

 

·All outstanding and vested stock options will remain exercisable through August 30, 2018.

 

Messrs. Guidry, Ellson, Coral, Evans and West

 

In the event that Messrs. Guidry, Ellson, Coral, Evans or West die, voluntarily resign (without good reason, as defined below), or their employment is terminated by Gran Tierra for cause (as defined below), the executive will not be entitled to receive any further compensation or benefits whatsoever other than those which have accrued up to the executive’s last day of active service.

 

The NEOs are entitled to severance payments in the event of an involuntary termination of employment by Gran Tierra other than for cause or a termination of employment by the NEO for good reason, as follows: