SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made and entered into as of the
1st day of September, 2005, by and between Gran Tierra Energy Inc., an Alberta
corporation (the "Borrower"), Gran Tierra Energy Argentina S.A. ("GTA"), an
Argentine corporation and a wholly-owned subsidiary of Borrower, and Goldstrike
Inc. ("Lender"), a Nevada corporation.
RECITALS:
The Borrower has issued and delivered or will issue and deliver to the
Lender a Secured Bridge Promissory Note in the principal amount of the
Commitment, as hereinafter defined, dated as of the date of this Agreement (the
"Note"). Pursuant to the Note, the Borrower has agreed to grant a security
interest in and to the Collateral (as defined in this Agreement) on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the Debt (as defined in this
Agreement), and of the premises and intending to be legally bound, the parties
covenant and agree as follows:
1. Definitions. In addition to the words and terms defined elsewhere in
this Agreement, the following words and terms shall have the following meanings,
unless the context otherwise clearly requires:
"Accounts" shall have the meaning given to that term in the Code and shall
include without limitation all rights of the Borrower or GTA, whenever
acquired, to payment for goods sold or leased or for services rendered,
whether or not earned by performance.
"As-extracted Collateral" shall have the meaning given to that term under
the Code.
"Borrower Control Shares" shall have the meaning given to that term in the
Bridge Loan Agreement.
"Bridge Loan Agreement" shall mean the Bridge Loan and Control Share
Pledge and Security Agreement by and between the Borrower and the Lender
dated as of even date herewith.
"Chattel Paper" shall have the meaning given to that term in the Code and
shall include without limitation all writings owned by the Borrower or,
whenever acquired, which evidence both a monetary obligation and a
security interest in or a lease of specific goods.
"Code" shall mean the Uniform Commercial Code as in effect on the date of
this Agreement and as amended from time to time, of the state or states
having jurisdiction with respect to all or any portion of the Collateral
from time to time.
"Collateral" shall mean all tangible and intangible assets of Borrower or
GTA, including, without limitation, collectively the Accounts,
As-extracted Collateral, Chattel Paper, Deposit Accounts, Documents,
Equipment, Fixtures, all oil and gas in and extracted from the area
covered by the Argentine Acquisition (as such term is defined in the
Bridge Loan Agreement), Borrower Control Shares, Subsidiary Securities,
General Intangibles, Instruments, Intellectual Property, Inventory,
Investment Property and Proceeds of each of them, as well as the meaning
ascribed to that term in Section 2.
"Commitment" shall have the meaning given to that term in the Bridge Loan
Agreement.
"Cure Period" shall mean the period of seventy-five (75) days following
written notice by Lender to Borrower of an Event of Default; provided,
however, that there shall be no Cure Period for an Event of Default under
Sections 6(e) or 6(f) of the Bridge Loan Agreement.
"Debt" shall mean (i) all indebtedness, both principal and interest, of
the Borrower to the Lender now or after the date of this Agreement
evidenced by the Note, (ii) all other debts, liabilities, duties and
obligations of the Borrower to the Lender arising after the date of this
Agreement contracted or incurred, whether arising under or in connection
with the Loan Documents or arising under or in connection with any other
agreement, instrument, or undertaking made by or for the benefit of the
Borrower to or for the benefit of the Lender, (iii) all costs and expenses
incurred by the Lender in the collection of any of the indebtedness
described in this paragraph or in connection with the enforcement of any
of the duties and obligations of the Borrower to the Lender described in
this paragraph, including reasonable attorneys' and paralegals' fees and
expenses, and (iv) all future advances made by the Lender for the
maintenance, protection, preservation or enforcement of, or realization
upon, the Collateral or any portion of the Collateral, including advances
for storage, transportation charges, taxes, insurance, repairs and the
like.
"Deposit Accounts" shall have the meaning given to that term in the Code
and shall include a demand, time, savings, passbook or similar account
maintained with a bank, savings bank, savings and loan association, credit
union, trust company or other organization that is engaged in the business
of banking.
"Documents" shall have the meaning given to that term in the Code and
shall include without limitation all warehouse receipts (as defined by the
Code) and other documents of title (as defined by the Code) owned by the
Borrower or GTA, whenever acquired.
2
"Equipment" shall have the meaning given to that term in the Code and
shall include without limitation all goods owned by the Borrower or GTA,
whenever acquired and wherever located, used or brought for use primarily
in the business or for the benefit of the Borrower or GTA and not included
in Inventory of the Borrower or GTA, together with all attachments,
accessories and parts used or intended to be used with any of those goods
or Fixtures, whether now or in the future installed therein or thereon or
affixed thereto, as well as all substitutes and replacements thereof in
whole or in part.
"Escrow Agent" shall mean Gottbetter & Partners, LLP.
"Escrow Agreement" shall mean the Pledge and Escrow Agreement among the
Borrower, the Lender and the Escrow Agent with respect to the Pledged
Shares and the Borrower Control Shares.
"Event of Default" shall mean (i) any of the Events of Default described
in the Note or the Loan Documents, or (ii) any default by the Borrower or
GTA in the performance of its obligations under this Agreement.
"Fixtures" shall have the meaning given to that term in the Code, and
shall include without limitation leasehold improvements.
"General Intangibles" shall have the meaning given to that term in the
Code and shall include, without limitation, all leases under which the
Borrower or GTA now or in the future leases and or obtains a right to
occupy or use real or personal property, or both, all of the other
contract rights of the Borrower or GTA, whenever acquired, and customer
lists, choses in action, claims (including claims for indemnification),
books, records, patents, copyrights, trademarks, blueprints, drawings,
designs and plans, trade secrets, methods, processes, contracts, licenses,
license agreements, formulae, tax and any other types of refunds, returned
and unearned insurance premiums, rights and claims under insurance
policies, and computer information, software, records and data, and oil,
gas, or other minerals before extraction now owned or acquired after the
date of this Agreement by the Borrower or GTA.
"Instruments" shall have the meaning given to that term in the Code and
shall include, without limitation, all negotiable instruments (as defined
in the Code), all certificated securities (as defined in the Code) and all
other writings which evidence a right to the payment of money now or after
the date of this Agreement owned by the Borrower or GTA.
"Inventory" shall have the meaning given to that term in the Code and
shall include without limitation all goods owned by the Borrower, whenever
acquired and wherever located, held for sale or lease or furnished or to
be furnished under contracts of service, and all raw materials, work in
process and materials owned by the Borrower and used or consumed in the
Borrower's business, whenever acquired and wherever located.
3
"Investment Property," "Securities Intermediary" and "Commodities
Intermediary" each shall have the meaning set forth in the Code.
"Know-How" means all documented and undocumented research, ideas, data,
theories, conclusions, reports, drawings, designs, blueprints, schematics,
exhibits, models, prototypes, source code, object code, flow charts,
manuals, processes, specifications, formulae, product configurations,
notes, inventions (whether or not patentable and whether or not reduced to
practice) and any other information of any kind developed, in development
or maintained by the Borrower or GTA or any of their respective employees,
agents or representatives relating to any goods or services sold or
licensed or offered for sale or license by the Borrower or GTA or goods or
services which the Borrower or GTA has a present intention to sell or
license.
"Loan Documents" shall mean collectively, this Agreement, the Note, the
Bridge Loan Agreement, the Escrow Agreement and all other agreements,
documents and instruments executed and delivered in connection therewith,
as each may be amended, supplemented or modified from time to time.
"Permitted Liens" shall mean all (i) all existing liens on the assets of
the Borrower or GTA which have been disclosed to the Lender by the
Borrower in the Bridge Loan Agreement, and (ii) all purchase money
security interests hereinafter incurred by the Borrower or GTA in the
ordinary course of business to the extent permitted by the Bridge Loan
Agreement.
"Pledged Shares" shall mean the Borrower Control Shares and the Subsidiary
Securities.
"Proceeds" shall have the meaning given to that term in the Code and shall
include without limitation whatever is received when Collateral or
Proceeds are sold, exchanged, collected or otherwise disposed of, whether
cash or non-cash, and includes without limitation proceeds of insurance
payable by reason of loss of or damage to Collateral.
"Subsidiary" means any corporation, partnership, joint venture or other
entity in which the Borrower has, directly or indirectly, an equity
interest representing 50% or more of the capital stock thereof or other
equity interests therein.
"Subsidiary Securities" means any Instruments representing or evidencing
an equity interest in a Subsidiary.
"Trade Secret Rights" means all documentation, Know-How and other
materials owned by the Borrower or GTA that is considered to be
proprietary to the Borrower or GTA, is maintained on a confidential or
secret basis, and is generally not known to other persons or entities who
are not subject to confidentiality restrictions.
4
2. Security Interest. As security for the full and timely payment of the
Debt in accordance with the terms of the Debt and the performance of the
obligations of the Borrower under the Note and this Agreement, the Borrower and
GTA agree that the Lender shall have, and the Borrower and GTA grant and convey
to and create in favor of the Lender, a security interest under the Code in and
to such of the Collateral as is now owned or acquired after the date of this
Agreement by the Borrower or GTA. The security interest granted to the Lender in
this Agreement shall be a first priority security interest, prior and superior
to the rights of all third parties existing on or arising after the date of this
Agreement, subject to the Permitted Liens. Certain of the Collateral is
described on Exhibit A hereto, which Collateral is included in the Collateral.
3. Provisions Applicable to the Collateral. The parties agree that the
following provisions shall be applicable to the Collateral:
(a) The Borrower covenants and agrees that at all times during the term of
this Agreement it shall keep accurate and complete books and records concerning
the Collateral that is now owned or acquired after the date of this Agreement by
the Borrower or GTA.
(b) The Lender or its representatives shall have the right, upon
reasonable prior written notice to the Borrower and GTA and during the regular
business hours of the Borrower and GTA, to examine and inspect the Collateral
and to review the books and records of the Borrower and GTA concerning the
Collateral that is now owned or acquired after the date of this Agreement by the
Borrower and to copy the same and make excerpts therefrom; provided, however,
that from and after the occurrence of an Event of Default, the rights of
inspection and entry shall be subject to the requirements of the Code.
t 6 0 (c) The Borrower and GTA shall at all times during the term of this
Agreement keep the Equipment, Inventory and Fixtures that are now owned or
acquired after the date of this Agreement by the Borrower and GTA at its various
locations or, upon written notice to the Lender, at such other locations for
which the Lender has filed financing statements, and at no other location
without 20 days' prior written notice to the Lender, except that the Borrower
shall have the right until one or more Events of Default shall occur to sell or
otherwise dispose of Inventory and other Collateral in the ordinary course of
business.
(d) The Borrower shall not move the location of its principal executive
offices without prior written notification to the Lender.
5
(e) Without the prior written consent of the Lender, the Borrower and GTA
shall not sell, lease or otherwise dispose of any Equipment or Fixtures, except
in the ordinary course of their business.
(f) Promptly upon request of the Lender from time to time, the Borrower
shall furnish the Lender with such information and documents regarding the
Collateral and the Borrower's financial condition, business, assets or
liabilities, at such times and in such form and detail as the Lender may
request.
(g) At all times during the term of this Agreement, the Borrower
shall deliver to the Lender, upon its written request, without limitation,
(i) all invoices and customer statements rendered to account
debtors, documents, contracts, chattel paper, instruments and other writings
pertaining to the Borrower's contracts or the performance of the Borrower's
contracts,
(ii) evidence of the Borrower's accounts and statements showing the
aging, identification, reconciliation and collection thereof, and
(iii) reports as to the Borrower's inventory and sales, shipment, damage
or loss thereof, all of the foregoing to be certified by authorized officers or
other employees of the Borrower, and Borrower shall take all necessary action
during the term of this Agreement to perfect any and all security interests in
favor of Borrower and to assign to Lender all such security interests in favor
of Borrower.
(h) Notwithstanding the security interest in the Collateral granted to and
created in favor of the Lender under this Agreement, the Borrower shall have the
right until one or more Events of Default shall occur, at its own cost and
expense, to collect the Accounts and the Chattel Paper and to enforce its
contract rights.
(i) Upon the continuance of an Event of Default following the expiration
of the applicable Cure Period, the Lender shall have the right, in its sole
discretion, to give notice of the Lender's security interest to account debtors
obligated to the Borrower or GTA and to take over and direct collection of the
Accounts and the Chattel Paper, to notify such account debtors to make payment
directly to the Lender and to enforce payment of the Accounts and the Chattel
Paper and to enforce the Borrower's or GTA's contract rights. It is understood
and agreed by the Borrower and GTA that the Lender shall have no liability
whatsoever under this subsection (i) except for its own gross negligence or
willful misconduct.
(j) At all times during the term of this Agreement Borrower and GTA shall
promptly deliver to the Lender, upon its written request, all existing leases,
and all other leases entered into by Borrower or GTA from time to time, covering
any Equipment or Inventory ("Leased Inventory") which is leased to third
parties.
6
(l) Neither the Borrower nor GTA shall change its name, entity status,
federal taxpayer identification number, or provincial organizational or
registration number, or the state under which it is organized without the prior
written consent of the Lender.
(m) Neither the Borrower nor GTA shall close any of its Deposit Accounts
or open any new or additional Deposit Accounts without first giving the Lender
at least fifteen (15) days prior written notice thereof.
(n) The Borrower and GTA shall cooperate with the Lender, at Borrower's
expense, in perfecting Lender's security interest in any of the Collateral,
including the execution of any control agreement(s) required in order to perfect
Lender's security interest in the Deposit Accounts.
(o) Lender may file any necessary financing statements and other documents
Lender deems necessary in order to perfect Lender's security interest without
Borrower's signature. Borrower grants to Lender a power of attorney for the sole
purpose of executing any documents on behalf of Borrower which Lender deems
necessary to perfect Lender's security interest. Such power, coupled with an
interest, is irrevocable.
(p) The parties agree that the Lender shall have the right to designate
and appoint a collateral agent to act for and on behalf of the Lenders with
respect to the Collateral under this Agreement, provided that Borrower is
notified in writing at least ten (10) days in advance of such appointment.
4. Additional Provisions Applicable to the Pledged Shares.
(a) Simultaneously herewith the Borrower has delivered to the Escrow Agent
one or more certificates representing the Pledged Shares, together with stock
powers duly executed in blank by the Borrower. The Escrow Agent shall hold such
Pledged Shares pursuant to the terms of the Escrow Agreement.
(b) The Pledged Shares shall be held by the Escrow Agent as security for
the timely payment of all of the Borrower's obligations under the Note and for
the Borrower's performance of all of its obligations under this Agreement, as
provided herein.
(c) The Escrow Agreement shall provide that while the Escrow Agent holds
the Pledged Shares as security, the Borrower shall have the right to vote the
Pledged Shares at all meetings of the Subsidiaries' stockholders to the same
extent as if such Pledged Shares were held by Borrower; provided that no Event
of Default has occurred and is continuing following the expiration of the Cure
Period and that the Borrower is not in default in the performance of any term of
this Agreement. In the event of any such a default or continuance of Event of
Default following the expiration of the Cure Period, the Lender shall have the
right to the extent permitted by law to vote and to give consents, ratifications
and waivers and take any other action with respect to the Pledged Shares with
the same force and effect as if the Lender were the absolute and sole owner of
the Pledged Shares.
7
4. Actions with Respect to Accounts. The Borrower irrevocably makes,
constitutes and appoints the Lender its true and lawful attorney-in-fact with
power to sign its name and to take any of the following actions after the
occurrence and prior to the cure of an Event of Default, at any time without
notice to the Borrower and at the Borrower's expense:
(a) Verify the validity and amount of, or any other matter relating to,
the Collateral by mail, telephone, telegraph or otherwise;
(b) Notify all account debtors that the Accounts have been assigned to the
Lender and that the Lender have a security interest in the Accounts;
(c) Direct all account debtors to make payment of all Accounts directly to
the Lender;
(d) Take control in any reasonable manner of any cash or non-cash items of
payment or proceeds of Accounts;
(e) Receive, open and dispose of all mail addressed to the Borrower;
(f) Take control in any manner of any rejected, returned, stopped in
transit or repossessed goods relating to Accounts;
(g) Enforce payment of and collect any Accounts, by legal proceedings or
otherwise, and for such purpose the Lender may:
(1) Demand payment of any Accounts or direct any account debtors to
make payment of Accounts directly to the Lender;
(2) Receive and collect all monies due or to become due to the
Borrower or GTA pursuant to the Accounts;
(3) Exercise all of the Borrower's or GTA's rights and remedies with
respect to the collection of Accounts;
(4) Settle, adjust, compromise, extend, renew, discharge or release
Accounts in a commercially reasonable manner;
(5) Sell or assign Accounts on such reasonable terms, for such
reasonable amounts and at such reasonable times as the Lender reasonably deems
advisable;
(6) Prepare, file and sign the Borrower's or GTA's name or names on
any Proof of Claim or similar documents in any proceeding filed under federal or
state bankruptcy, insolvency, reorganization or other similar law as to any
account debtor;
8
(7) Prepare, file and sign the Borrower's or GTA's name or names on
any notice of lien, claim of mechanic's lien, assignment or satisfaction of lien
or mechanic's lien or similar document in connection with the Collateral;
(8) Endorse the name of the Borrower or GTA upon any chattel papers,
documents, instruments, invoices, freight bills, bills of lading or similar
documents or agreements relating to Accounts or goods pertaining to Accounts or
upon any checks or other media of payment or evidence of a security interest
that may come into the Lender, possession;
(9) Sign the name of the Borrower or GTA to verifications of
Accounts and notices of Accounts sent by account debtors to the Borrower or GTA;
or
(10) Take all other actions that the Lender reasonably deems to be
necessary or desirable to protect the Borrower's or GTA's interest in the
Accounts.
(h) Negotiate and endorse any Document in favor of the Lender or its
designees, covering Inventory which constitutes Collateral, and related
documents for the purpose of carrying out the provisions of this Agreement and
taking any action and executing in the name of Borrower or GTA any instrument
which the Lender may reasonably deem necessary or advisable to accomplish the
purpose hereof. Without limiting the generality of the foregoing, the Lender
shall have the right and power to receive, endorse and collect checks and other
orders for the payment of money made payable to the Borrower or GTA representing
any payment or reimbursement made under, pursuant to or with respect to, the
Collateral or any part thereof and to give full discharge to the same. The
Borrower and GTA ratify and approve all acts of said attorney and agree that
said attorney shall not be liable for any acts of commission or omission, nor
for any error of judgment or mistake of fact or law, except for said attorney's
own gross negligence or willful misconduct. This power, being coupled with an
interest, is irrevocable until the Debt is paid in full (at which time this
power shall terminate in full) and the Borrower and GTA shall have performed all
of their obligations under this Agreement. The Borrower and GTA further agree to
use their reasonable efforts to assist the Lender in the collection and
enforcement of the Accounts and will not hinder, delay or impede the Lender in
any manner in its collection and enforcement of the Accounts.
5. Preservation and Protection of Security Interest. Each of the Borrower
and GTA represents and warrants that it has, and covenants and agrees that at
all times during the term of this Agreement, it will have, good and marketable
title to the Collateral from time to time owned or acquired by it free and clear
of all mortgages, pledges, liens, security interests, charges or other
encumbrances, except for the Permitted Liens and those junior in right of
payment and enforcement to that of the Lender or in favor of the Lender, and
shall defend the Collateral against the claims and demands of all persons, firms
and entities whomsoever. Each of the Borrower and GTA represents and warrants
that as of the date of this Agreement the Lender has, and that all times in the
future the Lender will have, a first priority perfected security interest in the
Collateral, prior and superior to the rights of all third parties in the
Collateral existing on the date of this Agreement or arising after the date of
this Agreement, subject to the Permitted Liens. Except as permitted by this
9
Agreement, each of the Borrower and GTA covenants and agrees that it shall not,
without the prior written consent of the Lender (i) borrow against the
Collateral or any portion of the Collateral from any other person, firm or
entity, except for borrowings which are subordinate to the rights of the Lender,
(ii) grant or create or permit to attach or exist any mortgage, pledge, lien,
charge or other encumbrance, or security interest on, of or in any of the
Collateral or any portion of the Collateral except those in favor of the Lender
or the Permitted Liens, (iii) permit any levy or attachment to be made against
the Collateral or any portion of the Collateral, except those subject to the
Permitted Liens, or (iv) permit any financing statements to be on file with
respect to any of the Collateral, except financing statements in favor of the
Lender or those with respect to the Permitted Liens. The Borrower and GTA shall
faithfully preserve and protect the Lender's security interest in the Collateral
and shall, at their own cost and expense, cause, or assist the Lender to cause
that security interest to be perfected and continue perfected so long as the
Debt or any portion of the Debt is outstanding, unpaid or executory. For
purposes of the perfection of the Lender's security interest in the Collateral
in accordance with the requirements of this Agreement, the Borrower and GTA
shall from time to time at the request of the Lender file or record, or cause to
be filed or recorded, such instruments, documents and notices, including
assignments, financing statements and continuation statements, as the Lender may
reasonably deem necessary or advisable from time to time in order to perfect and
continue perfected such security interest. The Borrower and GTA shall do all
such other acts and things and shall execute and deliver all such other
instruments and documents, including further security agreements, pledges,
endorsements, assignments and notices, as the Lender in its discretion may
reasonably deem necessary or advisable from time to time in order to perfect and
preserve the priority of such security interest as a first lien security
interest in the Collateral prior to the rights of all third persons, firms and
entities, subject to the Permitted Liens and except as may be otherwise provided
in this Agreement. The Borrower and GTA agree that a carbon, photographic or
other reproduction of this Agreement or a financing statement is sufficient as a
financing statement and may be filed instead of the original.
6. Insurance. Risk of loss of, damage to or destruction of the Equipment,
Inventory and Fixtures is on the Borrower and GTA. The Borrower and GTA shall
insure the Equipment, Inventory and Fixtures against such risks and casualties
and in such amounts and with such insurance companies as is ordinarily carried
by corporations or other entities engaged in the same or similar businesses and
similarly situated or as otherwise reasonably required by the Lender in its sole
discretion. In the event of loss of, damage to or destruction of the Equipment,
Inventory or Fixtures during the term of this Agreement, the Borrower shall
promptly notify Lender of such loss, damage or destruction. At the reasonable
request of the Lender, each of the Borrower's or GTA's policies of insurance
shall contain loss payable clauses in favor of the Borrower or GTA and the
Lender as their respective interests may appear and shall contain provision for
notification of the Lender thirty (30) days prior to the termination of such
policy. At the request of the Lender, copies of all such policies, or
certificates evidencing the same, shall be deposited with the Lender. If the
Borrower or GTA fails to effect and keep in full force and effect such insurance
or fails to pay the premiums when due, the Lender may (but shall not be
10
obligated to) do so for the account of the Borrower or GTA and add the cost
thereof to the Debt. The Lender is irrevocably appointed attorney-in-fact of the
Borrower and GTA to endorse any draft or check which may be payable to the
Borrower or GTA in order to collect the proceeds of such insurance. Unless an
Event of Default has occurred and is continuing, the Lender will turn over to
the Borrower or GTA the proceeds of any such insurance collected by it on the
condition that the Borrower or GTA apply such proceeds either (i) to the repair
of damaged Equipment, Inventory or Fixtures, or (ii) to the replacement of
destroyed Equipment, Inventory or Fixtures with Equipment, Inventory or Fixtures
of the same or similar type and function and of at least equivalent value (in
the sole judgment of the Lender), provided such replacement Equipment, Fixtures
or Inventory is made subject to the security interest created by this Agreement
and constitutes a first lien security interest in the Equipment, Inventory and
Fixtures subject only to Permitted Liens and other security interests permitted
under this Agreement, and is perfected by the filing of financing statements in
the appropriate public offices and the taking of such other action as may be
necessary or desirable in order to perfect and continue perfected such security
interest. Any balance of insurance proceeds remaining in the possession of the
Lender after payment in full of the Debt shall be paid over to the Borrower or
GTA or its order.
7. Maintenance and Repair. The Borrower and GTA shall maintain the
Equipment, Inventory and Fixtures, and every portion thereof, in good condition,
repair and working order, reasonable wear and tear alone excepted, and shall pay
and discharge all taxes, levies and other impositions assessed or levied thereon
as well as the cost of repairs to or maintenance of the same. If the Borrower or
GTA fails to do so, the Lender may (but shall not be obligated to) pay the cost
of such repairs or maintenance and such taxes, levies or impositions for the
account of the Borrower or GTA and add the amount of such payments to the Debt.
8. Preservation of Rights Against Third Parties; Preservation of
Collateral in Lender's Possession. Until such time as the Lender exercise its
right to effect direct collection of the Accounts and the Chattel Paper and to
effect the enforcement of the Borrower's or GTA's contract rights, the Borrower
and GTA assume full responsibility for taking any and all commercially
reasonable steps to preserve rights in respect of the Accounts and the Chattel
Paper and their contracts against prior parties. The Lender shall be deemed to
have exercised reasonable care in the custody and preservation of such of the
Collateral as may come into its possession from time to time if the Lender takes
such action for that purpose as the Borrower or GTA shall request in writing,
provided that such requested action shall not, in the judgment of the Lender,
impair the Lender's security interest in the Collateral or its right in, or the
value of, the Collateral, and provided further that the Lender receives such
written request in sufficient time to permit the Lender to take the requested
action.
11
9. Events of Default and Remedies.
(a) If any one or more of the Events of Default shall occur or shall
exist, the Lender may upon the expiration of the applicable Cure Period or at
any time thereafter, so long as such default shall continue, foreclose the lien
or security interest in the Collateral in any way permitted by law, or upon
fifteen (15) days prior written notice to the Borrower and GTA, sell any or all
Collateral at private sale at any time or place in one or more sales, at such
price or prices and upon such terms, either for cash or on credit, as the
Lender, in its sole discretion, may elect, or sell any or all Collateral at
public auction, either for cash or on credit, as the Lender, in its sole
discretion, may elect, and at any such sale, the Lender may bid for and become
the purchaser of any or all such Collateral. Pending any such action the Lender
may liquidate the Collateral.
(b) If any one or more of the Events of Default shall occur or shall
exist, the Lender may upon the expiration of the applicable Cure Period, or at
any time thereafter, so long as such default shall continue, grant extensions
to, or adjust claims of, or make compromises or settlements with, debtors,
guarantors or any other parties with respect to Collateral or any securities,
guarantees or insurance applying thereon, without notice to or the consent of
the Borrower or GTA, without affecting the Borrower's or GTA's liability under
this Agreement or the Note. Each of the Borrower and GTA waives notice of
acceptance, of nonpayment, protest or notice of protest of any Accounts or
Chattel Paper or any of its contract rights and any other notices to which the
Borrower or GTA may be entitled.
(c) If any one or more of the Events of Default shall occur or shall exist
and be continuing following the expiration of the applicable Cure Period, then
in any such event, the Lender shall have such additional rights and remedies in
respect of the Collateral or any portion thereof as are provided by the Code and
such other rights and remedies in respect thereof which it may have at law or in
equity or under this Agreement, including without limitation the right to enter
any premises where Equipment, Inventory and/or Fixtures are located and take
possession and control thereof without demand or notice and without prior
judicial hearing or legal proceedings, which the Borrower and GTA expressly
waive.
(d) The Lender shall apply the Proceeds of any sale or liquidation of the
Collateral, and, subject to Section 6, any Proceeds received by the Lender from
insurance, first to the payment of the reasonable costs and expenses incurred by
the Lender in connection with such sale or collection, including without
limitation reasonable attorneys' fees and legal expenses, second to the payment
of the Debt, whether on account of principal or interest or otherwise as the
Lender, in its sole discretion, may elect, and then to pay the balance, if any,
to the Borrower or as otherwise required by law. If such Proceeds are
insufficient to pay the amounts required by law, the Borrower shall be liable
for any deficiency.
(e) Upon the occurrence of any Event of Default and such Event of
Default's continuance following the expiration of the applicable Cure Period,
the Borrower and GTA shall promptly upon written demand by the Lender assemble
the Equipment, Inventory and Fixtures and make them available to the Lender at a
place or places to be designated by the Lender. The rights of the Lender under
this paragraph to have the Equipment, Inventory and Fixtures assembled and made
available to it is of the essence of this Agreement and the Lender may, at its
election, enforce such right by an action in equity for injunctive relief or
specific performance, without the requirement of a bond.
12
(f) Notwithstanding anything herein to the contrary, if an Event of
Default is cured prior to the end of the Cure Period (including, but not limited
to, an Event of Default pursuant to Section 6.1(d) of the Bridge Loan
Agreement), the Borrower shall use its best efforts to ensure that the Merger
and the Transactions, as such terms are defined in the Bridge Loan Agreement,
are consummated.
10. Defeasance. Notwithstanding anything to the contrary contained in this
Agreement upon payment and performance in full of the Debt, this Agreement shall
terminate and be of no further force and effect and the Lender shall thereupon
terminate its security interest in the Collateral. Until such time, however,
this Agreement shall be binding upon and inure to the benefit of the parties,
their successors and assigns, provided that, without the prior written consent
of the Lender, neither the Borrower nor GTA may assign this Agreement or any of
its rights under this Agreement or delegate any of its duties or obligations
under this Agreement and any such attempted assignment or delegation shall be
null and void. This Agreement is not intended and shall not be construed to
obligate the Lender to take any action whatsoever with respect to the Collateral
or to incur expenses or perform or discharge any obligation, duty or disability
of the Borrower or GTA.
11. Miscellaneous.
(a) The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall for any reason be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or any other provision of this
Agreement in any jurisdiction.
(b) No failure or delay on the part of the Lender in exercising any right,
remedy, power or privilege under this Agreement and the Note shall operate as a
waiver thereof or of any other right, remedy, power or privilege of the Lender
under this Agreement, the Note or any of the other Loan Documents; nor shall any
single or partial exercise of any such right, remedy, power or privilege
preclude any other right, remedy, power or privilege or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges of the Lender under this Agreement, the Note and
the other Loan Documents are cumulative and not exclusive of any rights or
remedies which they may otherwise have.
13
(c) All notices, statements, requests and demands given to or made upon
either party in accordance with the provisions of this Agreement shall be deemed
to have been given or made when personally delivered or when deposited in the
United States or Canadian mail, postage prepaid or with private overnight
courier service, charges prepaid, addressed as provided below, with a copy by
facsimile:
If to Borrower:
Gran Tierra Energy Inc.
Xxxxx Xxxxx, 00 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attn: Xxxx Xxxxxxxx, President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
McGuireWoods LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxx , Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Lender:
Goldstrike Inc.
0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, X.X. Xxxxxx X0X 0X0
Attn: Xx. Xxx Xxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to GTA
[to come]
14
with a copy to:
McGuireWoods LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxx , Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) The section headings contained in this Agreement are for reference
purposes only and shall not control or affect its construction or interpretation
in any respect.
(e) Unless the context otherwise requires, all terms used in this
Agreement which are defined by the Code shall have the meanings stated in the
Code.
(f) The Code shall govern the settlement, perfection and the effect of
attachment and perfection of the Lender's security interest in the Collateral,
and the rights, duties and obligations of the Lender and the Borrower and GTA
with respect to the Collateral. This Agreement shall be deemed to be a contract
under the laws of the State of New York and the execution and delivery of this
Agreement and, to the extent not inconsistent with the preceding sentence, the
terms and provisions of this Agreement shall be governed by and construed in
accordance with the laws of that State.
(g) This Agreement may be executed in several counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument. All of such counterparts shall be read as though one, and they shall
have the same force and effect as though all the signers had signed a single
page.
[SIGNATURE PAGE FOLLOWS]
15
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
executed and delivered this Agreement as of the day and year set forth at the
beginning of this Agreement.
BORROWER:
GRAN TIERRA ENERGY INC.
By:
------------------------------------
Name:
Title
LENDER:
GOLDSTRIKE INC.
By:
------------------------------------
Name:
Title
GRAN TIERRA ENERGY ARGENTINA S.A.
By:
------------------------------------
Name:
Title
16
EXHIBIT A
Collateral Relating To Argentine Working Interest
All of GTA's rights, title and interest, including Proceeds thereof, in the
following:
Fourteen per cent (14%) of the participating interests in the Agreement for the
UTE: "YPF S.A. / Pluspetrol / Norcen, Palmar Largo Union Transitoria de
Empresas" entered into by and between Y.P.F. Sociedad Anonima, Pluspetrol
Sociedad Anonima, Norcen International Ltd, Compania General de Combustibles
Sociedad Anonima and Dong Won Co. Ltd, for the exploration, development and
exploitation of the Area "Palmar Largo", Northwest Basin, Salta and Formosa
Provinces, approved by Decree No. 2444/92 granted by the National Executive
Branch of Argentina, dated December 22nd, 1992, and published on December 24,
1992, in the Official Gazette.
17
