COLOMBIAN PARTICIPATION AGREEMENT BY AND AMONG ARGOSY ENERGY INTERNATIONAL, GRAN TIERRA ENERGY INC. AND CROSBY CAPITAL, LLC DATED AS OF JUNE 22, 2006
Exhibit
10.55
BY
AND AMONG
ARGOSY
ENERGY INTERNATIONAL,
GRAN
TIERRA ENERGY INC.
AND
XXXXXX
CAPITAL, LLC
DATED
AS
OF JUNE 22, 2006
TABLE
OF CONTENTS
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1
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1.1.
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“AAA
Rules”
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1
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1.1A.
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“Acceptable
Credit Rating”
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1
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1.2.
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“Adjusted
Net Revenue Interest”
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2
|
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1.3.
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“Adjusted
New Commercial Field Capital Expenditures”
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2
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1.4.
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“AFE”
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2
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1.5.
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“Affiliate”
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2
|
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1.6.
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“Allowed
Adjustment Factors”
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2
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1.7.
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“XXX”
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2
|
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1.8.
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“Base
Net Revenue Interest”
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2
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1.9.
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“Base
Overriding Royalty Interest”
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3
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1.10.
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“Capital
Expenditure Commitment”
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3
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1.11.
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“Capital
Expenditure Period”
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3
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1.12.
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“Colombia”
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3
|
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1.13.
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“Colombian
Ad Valorem Taxes”
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3
|
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1.14.
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“Colombian
Association Contracts”
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3
|
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1.15.
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“Colombian
Governmental Authorities”
|
3
|
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1.16.
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“Colombian
Source Taxes”
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3
|
|
1.17.
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“Confidential
Information”
|
4
|
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1.18.
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“Conversion
Precondition”
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4
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1.19.
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“Conditional
Overriding Royalty”
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4
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1.20.
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“Xxxxxx
Arbitration Award”
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4
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1.21.
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“Xxxxxx
Escrow Account”
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4
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1.22.
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“Xxxxxx
Escrow Agreement”
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4
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1.23.
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“Xxxxxx
Escrow Bank”
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4
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1.24.
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“Xxxxxx
Final Determination”
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4
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1.25.
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“Xxxxxx
Members”
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4
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1.26.
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“Xxxxxx
Net Profits Interest”
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4
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1.27.
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“Xxxxxx
Net Profits Interest Percentage”
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4
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1.28.
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“Cure
Period”
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4
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1.29.
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“Demand”
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4
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1.30.
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“Ecopetrol”
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4
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-i-
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1.31.
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“Effective
Date”
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5
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1.32.
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[INTENTIONALLY
DELETED]
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5
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1.33.
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“Historical
Properties”
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5
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1.34.
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“Hydrocarbons”
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5
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1.35.
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“Initial
Letter of Credit”
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5
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1.36.
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“Initial
Term”
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5
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1.37.
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“Issuer
Acceptable Credit Rating”
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5
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1.38.
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“Issuer
Bank”
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5
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1.39.
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“Letter
of Credit”
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5
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1.40.
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“Letter
of Credit Default”
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5
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1.41.
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“Material
Underpayment”
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5
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1.42.
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“Net
Revenue Interest”
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5
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1.43.
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“New
Commercial Field”
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6
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1.44.
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“New
Commercial Field Capital Expenditures”
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6
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1.45.
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“New
Letter of Credit”
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6
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1.46.
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“Operating
Expenses”
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6
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1.47.
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“Operator
Overhead Costs”
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7
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1.48.
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“Panel”
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7
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1.49.
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“Participation
Agreement Dispute”
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7
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1.50.
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“Participation
Rights”
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7
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1.51.
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“Payment
Default”
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7
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1.52.
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“Person”
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7
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1.53.
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“XXXX
Prospect Area”
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7
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1.54.
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“Pre-Existing
Fields”
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8
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1.55.
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“Prevailing
party”
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8
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1.56.
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“Release
Covenants”
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8
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1.57.
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“Sales
Proceeds”
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8
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1.58.
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“Subsequent
Argosy Sale”
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8
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1.59.
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“Subsequent
Transfer”
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8
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1.60.
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“U.S.
GAAP”
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8
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1.61.
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“Working
Interest”
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8
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2.
Payment
Obligation for Base Overriding Royalty.
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8
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2.1.
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Calculation
of Base Overriding Royalty.
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8
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-ii-
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2.2.
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Post-Effective
Date Transfers.
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9
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2.3.
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Unitization.
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9
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3.
Conversion
Rights and Payment Obligation for Xxxxxx Net Profits
Interest.
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9
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3.1.
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Right
to Convert.
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9
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3.2.
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Calculation
of Recovery of Adjusted New Commercial Field Capital
Expenditures.
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9
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3.3.
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Calculation
of Xxxxxx Net Profits Interest.
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9
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3.4.
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Net
Profits Amount and Adjustment.
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10
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3.5.
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Conversion
Notice.
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10
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3.6.
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Post-Effective
Date Transfers.
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10
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3.7.
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Unitization.
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10
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3.8.
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Pre-Existing
Fields.
|
10
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4.
Payment
Obligation for Conditional Overriding
Royalty
|
10
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|
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4.1.
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Conditional
Overriding Royalty Obligations.
|
10
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4.2.
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Conditional
Overriding Royalty Calculation.
|
10
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4.3.
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Post-Effective
Date Transfers.
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11
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4.4.
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Unitization.
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11
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4.5.
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Pre-Existing
Fields.
|
11
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5.
Capital
Expenditure Commitment.
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11
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5.1.
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5
Year Expenditure Requirement.
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11
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5.2.
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Underinvestment
payment.
|
12
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6.
Letter
of Credit.
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12
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6.1.
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Interim
Terms Prior To Letter of Credit
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12
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6.2.
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Initial
Term for Letter of Credit
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12
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6.3.
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Post-Initial
Term
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13
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6.4.
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Replacement
Letters of Credit.
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15
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6.5.
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Disbursement
of Xxxxxx Escrow Funds.
|
15
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6.6.
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Delivery
of Old or Replaced Letters of Credit.
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16
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6.7.
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Termination
of Section 6.
|
16
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7.
Payments;
Reports; Audit Rights.
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16
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7.1.
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Payments
and Reports Regarding Payments.
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16
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7.2.
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Calculation
of Payments During First Calendar Year.
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18
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7.3.
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Additional
Information Regarding Historical Properties.
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19
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7.4.
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Books
and Records.
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20
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-iii-
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7.5.
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Audit.
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20
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7.6.
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Confidentiality.
|
21
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8.
Assignment,
Sale or Transfer of Historical Properties by Argosy and/or Sale of
Argosy.
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21
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8.1.
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Subsequent
Transfers of Historical Properties.
|
21
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8.2.
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Subsequent
Sale of Argosy or its Successors.
|
21
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8.3.
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Assignment
of this Agreement By Argosy or Gran Tierra.
|
21
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8.4.
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Prohibited
Transfers and Assignments.
|
23
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8.5.
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Effect
of Transfers and Assignments.
|
23
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8.6.
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Release
of Gran Tierra, Argosy or Permitted Transferees.
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23
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9.
Assignment
by Xxxxxx.
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23
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9.1.
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Xxxxxx
Members.
|
23
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9.2.
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Assignment
by Xxxxxx to Non-Members.
|
24
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|
10.
Term;
Termination.
|
24
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10.1.
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Base
Term; Survival.
|
24
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10.2.
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Early
Termination.
|
24
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11.
Dispute
Resolution.
|
25
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11.1.
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Negotiation.
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25
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11.2.
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Arbitration.
|
25
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11.3.
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Injunctive
Relief.
|
26
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11.4.
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Place
of Arbitration.
|
26
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11.5.
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Legal
Fees and Expenses.
|
26
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11.6.
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Jurisdiction;
Venue.
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26
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12.
Representations
and Warranties.
|
26
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|
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12.1.
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Argosy
and Gran Tierra.
|
26
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12.2.
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Xxxxxx.
|
27
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13.
Miscellaneous.
|
28
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13.1.
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Notices.
|
28
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13.2.
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Inurement.
|
29
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13.3.
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No
Other Representations or Warranties.
|
29
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13.4.
|
Modification;
Waiver.
|
29
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13.5.
|
Entire
Agreement.
|
29
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13.6.
|
Headings.
|
29
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13.7.
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Interpretation.
|
29
|
-iv-
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13.8.
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Further
Assurances.
|
29
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13.9.
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Governing
Law.
|
30
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13.10.
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No
Liability.
|
30
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13.11.
|
Force
Majeure.
|
30
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13.12.
|
Survival.
|
30
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13.13.
|
Counterparts.
|
30
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13.14.
|
Severability.
|
30
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13.15.
|
Payments
in U.S. Dollars.
|
30
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13.16.
|
Purchase
Agreement.
|
30
|
-v-
Exhibits
Exhibit
A – Terms of Letter of Credit Draws
|
Schedules
|
||
|
Schedule
1.8
|
Base
Net Revenue Interests
|
|
|
Schedule
1.14
|
Colombian
Association Contracts
|
|
|
Schedule
1.33
|
Historical
Properties
|
|
|
Schedule
1.53
|
XXXX
Prospect Area Map
|
|
|
Schedule
1.54
|
Pre-Existing
Fields
|
|
|
Schedule
9.1
|
Xxxxxx
Members
|
-vi-
This
Colombian Participation Agreement (this “Agreement”)
is
effective as of the Effective Date (as defined below) by and among Argosy Energy
International, a Utah limited partnership (“Argosy”),
Gran
Tierra Energy Inc., a Nevada corporation whose federal tax id number is
00-0000000 (“Gran
Tierra”),
and
Xxxxxx Capital, LLC, a Texas limited liability company (“Xxxxxx”).
Argosy and Gran Tierra are referred to herein collectively as the “Co-Obligors.”
Argosy, Gran Tierra and Xxxxxx are each individually referred to herein as
a
“Party,”
and
collectively as the “Parties.”
RECITALS
| A. |
WHEREAS,
Argosy is an oil and gas exploration and production firm with operations
and an office in the Republic of Colombia, South America (“Colombia”).
|
| B. |
WHEREAS,
Gran Tierra is an oil and gas exploration and production company
based in
Calgary, Canada with a highly experienced management team with extensive
international experience.
|
| C. |
WHEREAS,
Gran Tierra and Xxxxxx have entered into a Securities Purchase Agreement
dated as of May 25, 2006, as amended on June 20, 2006 (the “Purchase
Agreement”),
pursuant to which Gran Tierra purchased from Xxxxxx all of its partnership
interests in Argosy and all of the capital stock the general partner
of
Argosy;
|
| D. |
WHEREAS,
as part of the consideration for the transactions contemplated by
the
Purchase Agreement, Gran Tierra and Argosy agree to pay Xxxxxx, after
the
Effective Date, certain amounts based on the future performance of
Argosy’s exploration and production initiatives, future oil and gas prices
and Argosy’s future investment in exploration initiatives, all in
accordance with the terms and conditions of this
Agreement.
|
| E. |
WHEREAS,
as part of the consideration contemplated by this Agreement, Gran
Tierra
will cause investment in and commit its experienced staff to Argosy’s
exploration and production initiatives through which Argosy shall
derive
direct and indirect benefits.
|
| F. |
WHEREAS,
in conjunction with the Purchase Agreement and other capital initiatives
Gran Tierra is arranging for a credit facility to fund its operations,
including the operations of Argosy.
|
| G. |
WHEREAS,
this Agreement is executed as a post-closing requirement of the Purchase
Agreement.
|
AGREEMENT
NOW,
THEREFORE, in consideration of the covenants and promises herein, and other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
1. Definitions.
As
used
in this Agreement, the following capitalized terms shall have the following
meanings:
1.1. “AAA
Rules”
has the
meaning set forth in Section
11.2.
1.1A. “Acceptable
Credit Rating” has
the
meaning set forth in Section
6.3.1.
-1-
1.2. “Adjusted
Net Revenue Interest”
means
the Base Net Revenue Interest adjusted for the Allowed Adjustment
Factors.
1.3. “Adjusted
New Commercial Field Capital Expenditures”
means
for any New Commercial Field, New Commercial Field Capital Expenditures for
such
New Commercial Field reduced
by any portion of such expenditures paid or reimbursed by any Person other
than
the
Co-Obligors and their Affiliates, including but not limited to any of the
Colombian Governmental Authorities or other Working Interest participant in
such
New Commercial Field.
1.4. “AFE”
has the
meaning set forth in Section
7.3.
1.5. “Affiliate”
means,
with respect to the first Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such first Person. The term “control”
means
the possession, directly or indirectly, of the power, whether or not exercised,
(i) to vote 5% or more of the securities having voting power for the election
of
directors (or Persons performing similar functions) of such Person or (ii)
to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms “controlled”
and
“common
control”
have
correlative meanings. In addition, Persons with officers and/or directors in
common with either of the Co-Obligors shall be deemed Affiliates of the
Co-Obligors. Notwithstanding the foregoing, in no event shall Xxxxxx or any
of
its members, or any of their Affiliates, be deemed to be an Affiliate of Gran
Tierra or Argosy.
1.6. “Allowed
Adjustment Factors”
means
(a) any change (increase or decrease) in royalty obligations of Argosy under
the
Colombian Association Contracts pursuant to applicable Colombian laws, rules
or
regulations, (b) any change (increase or decrease) in Ecopetrol participation
pursuant to the Colombian Association Contracts, and (c) any increase in
Argosy’s Working Interest in any of the Historical Properties. As a
non-exclusive example of how Argosy’s Working Interest in any of the Historical
Properties could increase, Argosy’s Working Interest would increase due any of
the following events: (a) if other Working Interest owners in the Historical
Properties do not participate in a new discovery pursuant to a joint operating
agreement; (b) any increase in Argosy’s Working Interest or rights as a matter
of law relating to the Historical Properties, arising from any legal
proceedings, actions or remedies; and (c) direct or indirect acquisition of
another party’s interest or rights in the Historical Properties whether through
an assignment, partnership or otherwise.
1.7. “XXX”
means
the Agencia Nacional de Hidrocarburos of Columbia.
1.8. “Base
Net Revenue Interest”
means
Argosy’s Net Revenue Interest in the Historical Properties as of the Effective
Date as set forth on Schedule
1.8
in the
sixth column entitled “Argosy
Net Revenue Interest.”
The Base
Net Revenue Interest for the Historical Properties is reflected as a percentage
on Schedule
1.8.
Schedule
1.8
reflects
the Base Net Revenue Interest by property, field and formation. The Base Net
Revenue Interest percentages were calculated in the following manner: a
percentage obtained as the product of multiplying (a) 100 by (b) one minus
the
share of production owed as a royalty to Colombian Governmental Authorities
expressed in a percentage multiplied by (c) the Working Interest owned by Argosy
expressed in a percentage.
-2-
1.9. “Base
Overriding Royalty Interest”
has the
meaning provided in Section
2.1.
1.10. “Capital
Expenditure Commitment”
has the
meaning set forth in Section
5.1.
1.11. “Capital
Expenditure Period”
means
the period beginning on the Effective Date hereof and ending 12:01 AM of the
fifth anniversary of the Effective Date.
1.12. “Colombia”
has the
meaning set forth in the Recitals.
1.13. “Colombian
Ad Valorem Taxes”
shall
mean any taxes required by applicable Colombian governmental authorities to
be
paid by Argosy (and/or any operator of New Commercial Fields) to any taxing
authority (national, provincial, municipal and/or any governmental entity within
Colombia) based on the value of owned real property, improvements and/or fixed
equipment situated on the Historical Properties. As of the Effective Date,
such
Colombia Ad Valorem Taxes include:
|
Type
of Tax
|
Spanish
Name
|
Colombian
income tax treatment
|
||
|
Real
Estate tax
|
Impuesto
Predial
|
Applicable
on real estate. Tax based on destination of the property and appraisal.
80% of the tax paid, deductible for income tax
purposes.
|
1.14. “Colombian
Association Contracts”
means
(i) the agreements listed on Schedule
1.14
by and
between Argosy and any Colombian Governmental Authorities, (ii) any and all
renewals, amendments or modifications to any of the foregoing, and (iii) any
other agreements by Argosy or its Affiliates or Gran Tierra or its Affiliates
with any Person, including without limitation any Colombian Governmental
Authority, related to or affecting the Historical Properties.
1.15. “Colombian
Governmental Authorities”
means
Ecopetrol, XXX, and the Colombian Ministry of Mines, or any successors to any
of
the foregoing as applicable.
1.16. “Colombian
Source Taxes”
shall
mean any taxes required by applicable Colombian law, rule or regulation to
be
withheld by a first purchaser of Hydrocarbons and deposited by such first
purchaser on the account of Argosy (and/or any operator on the Historical
Properties who is delivering Hydrocarbons on the behalf of Agrosy) with a
national, provincial, municipal, and/or any other governmental entity in
Colombia. As of the Effective Date, such Colombian Source Taxes
include:
|
Type
of Tax
|
Rate
|
Spanish
Name
|
Colombian
income
tax
treatment
|
|||||||
|
Income
Tax Withholding Tax
|
3.5
|
%
|
retencion
en la fuente
|
Set
off against final income tax
|
||||||
|
Remittance
Tax
|
1
|
%
|
impuesto
de remesas
|
Set
off against final
|
||||||
|
Withholding*
|
income
tax/remittance tax liability for year
|
|||||||||
|
Stamp
Tax
|
1.5
|
%
|
impuesto
de timbre
|
Not
deductible. No tax setoff
|
||||||
*applicable
to sales payable U.S. dollars and not applicable to sales with pesos
payments
-3-
Colombian
Source Taxes shall not include, among others: (a) any “enterprise
taxes”
including, but not limited to (i) actual amounts of income taxes, (ii) actual
amounts of remittance taxes, (iii) any equity taxes (Spanish name: impuesto
al
patrimonio), and (iv) franchise taxes; (b) Colombian Ad Valorem Taxes; (c)
any
royalties payable under applicable Colombian law, rule or regulation; (d) any
value added tax; and (e) any other taxes or charges similar to those described
in paragraphs (a) through (d) of this Section
1.16.
1.17. “Confidential
Information”
has the
meaning provided in Section
7.6.
1.18. “Conversion
Precondition”
has the
meaning set forth in Section
3.1.
1.19. “Conditional
Overriding Royalty”
has the
meaning set forth in Section
4.
1.20. “Xxxxxx
Arbitration Award”
has the
meaning set forth in Exhibit
A.
1.21. “Xxxxxx
Escrow Account”
has the
meaning set forth in Section
6.5.1.
1.22. “Xxxxxx
Escrow Agreement”
has the
meaning set forth in Section
63.1.
1.23. “Xxxxxx
Escrow Bank”
has the
meaning set forth in Section
6.5.1.
1.24. “Xxxxxx
Final Determination”
has the
meaning set forth in Exhibit
A.
1.25. “Xxxxxx
Members”
has the
meaning set forth in Section
8.1.
1.26. “Xxxxxx
Net Profits Interest”
has the
meaning set forth in Section
3.
1.27. “Xxxxxx
Net Profits Interest Percentage”
has the
meaning set forth in Section
3.4
1.28. “Cure
Period”
has the
meaning set forth in Section
11.
1.29. “Demand”
has the
meaning set forth in Section
11.2.
1.30. “Ecopetrol”
means
Ecopetrol, S.A., formerly known as Empresa Colombian de Petroleos.
-4-
1.31. “Effective
Date”
means
12:01 a.m. Bogota, Colombia time on the first day following closing of the
transactions contemplated by the Purchase Agreement. All further time references
shall be to Bogota, Colombia time.
1.32. [INTENTIONALLY
DELETED]
1.33. “Historical
Properties”
means
the properties described on Schedule
1.33
attached
hereto, and any interests in the Colombian Association Contracts.
1.34. “Hydrocarbons”
means
any of the following minerals or substances that are produced from the
Historical Properties:
1.34.1 crude
oil;
1.34.2 natural
gas;
1.34.3 casinghead
gas;
1.34.4 condensate;
1.34.5 other
hydrocarbons and minerals as may be produced incidental
to and
as a part of or mixed with such crude oil or natural gas; or
1.34.6 any
other
minerals or substances which the Colombian Association Contracts allow to be
extracted and sold.
1.35. “Initial
Letter of Credit”
has the
meaning set forth in Section
6.2.1.
1.36. “Initial
Term”
has the
meaning set forth in Section
6.2.1.
1.37. “Issuer
Acceptable Credit Rating”
has the
meaning set forth in Section
6.2.1.
1.38. “Issuer
Bank”
has the
meaning set forth in Exhibit
A.
1.39. “Letter
of Credit”
has the
meaning set forth in Exhibit
A.
1.40. “Letter
of Credit Default”
has the
meaning set forth in Exhibit
A.
1.41. “Material
Underpayment” means
the
greater of 5% of the amount due to Xxxxxx
pursuant
to Section
7.1
or
$10,000.
1.42. “Net
Revenue Interest”
means an
interest expressed by a decimal number reflecting a revenue stream, net of
all
other interests burdening such revenue stream.
-5-
1.43. “New
Commercial Field”
means
any new discovery of Hydrocarbons on the Historical Properties in the 10 years
after the Effective Date. A new discovery may consist of one producing reservoir
or a group of producing reservoirs which is worthy of being developed
commercially. Argosy or any successor operator shall use reasonably prudent
standards to determine whether such discovery is worthy of being developed
commercially, taking into consideration
the recoverable reserves, production, pipeline and terminal facilities required,
estimated Hydrocarbon prices, and all other relevant technical and economic
factors. A New Commercial Field shall include but not be limited to any of
the
following: (i) the drilling vertically or horizontally of a new well bore
outside a Pre-Existing Field, (ii) the drilling vertically or horizontally
of a
new well bore within a Pre-Existing Field into a formation not referenced on
Schedule
1.54,
or
(iii) extending an existing well bore producing Hydrocarbons or recompleting
an
existing well bore into a formation not referenced on Schedule
1.54.
The
XXXX field on the Historical Properties related to the Rio Xxxxxxxxx Colombian
Association Contract shall be deemed a New Commercial Field regardless of the
timing of testing or completion of the XXXX #1 well.
1.44. “New
Commercial Field Capital Expenditures”
means
the direct tangible or intangible capital expenditures associated with the
discovery of New Commercial Fields. Such capital expenditures shall include
only
capital expenditures for the following:
1.44.1 successful
drilling expenditures;
1.44.2 any
dry
hole exploration expenditures affiliated with a successful New Commercial
Field;
1.44.3 allocable
gathering lines expenditure; or
1.44.4 allocable
capital expenditures related to compressing, dehydrating, treating, separating,
marketing and transporting Hydrocarbons.
Such
capital expenditures shall not include (i) any expenditures for geological,
geophysical or other related survey expenditures, (ii) any Operator Overhead
Costs or (iii) any expenditures related to facilities for storage of
Hydrocarbons from New Commercial Fields.
1.45. “New
Letter of Credit”
has the
meaning set forth in Section
6.3.4.
1.46. “Operating
Expenses”
means
the costs and expenses incurred in the operation and maintenance of the xxxxx
for the production of Hydrocarbons on the New Commercial Fields listed in this
Section
1.46.
Such
items of cost shall be limited to the following exclusively:
1.46.1 all
costs
of complying with legal requirements, meaning any law, statute, ordinance,
decree, requirement, order, judgment, rule or regulation of, including the
terms
of any license, permit or concession issued by, any Colombian Governmental
Authority;
1.46.2 all
costs
of lifting and producing Hydrocarbons from the xxxxx on the New Commercial
Fields, including all costs of (A) labor, (B) fuel, (C) repairs, (D) hauling,
(E) materials, (F) supplies, (G) utility charges, (H) workover and other
remedial well servicing operations and (1) other costs incident to any of the
foregoing (provided, however, such amounts shall be limited to amounts payable
under contracts for the providing of such services or goods negotiated in good
faith between non-affiliated parties);
-6-
1.46.3 non-capital
expenditure costs incurred in compressing, gathering, treating, separating,
transporting and marketing the Hydrocarbons produced from the xxxxx on the
New
Commercial Fields;
1.46.4 Colombian
Ad Valorem Taxes; and
1.46.5 Operator
Overhead Costs, limited to the lesser of (i) actual applicable Operator Overhead
Costs as allocated consistently across all Argosy oil and gas activities, (ii)
$2.50 per net barrel, or (iii) if there is an operating agreement applicable
to
a Historical Property, the applicable overhead charge pursuant to such operating
agreement.
provided,
however,
that
notwithstanding the foregoing, “Operating
Expenses”
shall
not include any of the following: (a) expenditures which are capitalized under
U.S. GAAP, (a) depreciation, (c) depletion, (d) amortization, (e) abandonment
expenditures or accruals, (f) royalties, overriding royalties or other like
payments out of production produced or producible from the xxxxx on the New
Commercial Fields, (g) New Commercial Field Capital Expenditures, (h) any tax
other than Colombian Ad Valorem Taxes, and (i) charges similar to those listed
in the foregoing (a) through (h) associated with the Historical Properties
or
the production and sale of Hydrocarbons therefrom.
1.47. “Operator
Overhead Costs”
shall
mean overhead costs provided in the applicable 2005 XXXXX Accounting Procedure,
as approved by the Council of Petroleum Accountant Societies and any amendments
or revisions thereto approved by the Council of Petroleum Accountant Societies
or any successor organization.
1.48. “Panel”
has the
meaning set forth in Section
11.2.
1.49. “Participation
Agreement Dispute”
has the
meaning set forth in Section
11.
1.50. “Participation
Rights”
means
the Overriding Royalty, the Xxxxxx Net Profits Interest, the Conditional
Overriding Royalty and the Capital Expenditure Commitment.
1.51. “Payment
Default”
has the
meaning set forth in Exhibit
A.
1.52. “Person”
means an
individual, a corporation, a partnership, a limited liability company, a trust,
an unincorporated organization or any other entity or organization, including
a
government or any agency or political subdivision thereof.
1.53. “XXXX
Prospect Area”
means
all acreage of the Rio Xxxxxxxxx Association Contract area that lies south
of
the northern most point of (i) an east west line defined by Bogotá east/west
coordinate 1,020,000, or (ii) an east west line intersecting the Ambalema-1
well
bore, as set forth in the map attached as Schedule
1.53.
The Rio
Xxxxxxxxx Association Contract area includes all the acreage, including any
productive Hydrocarbons intervals which are found beneath such acreage, provided
for in that certain Colombian Association Contract, dated February 8, 2002,
by
and between Argosy and Ecopetrol located in the Cundinamarca and Tolima
Provinces of Colombia, as further described in Schedule
1.33
attached
hereto, pages 40 and 79.
-7-
1.54. “Pre-Existing
Fields”
are
described in Schedule
1.54
attached
hereto.
1.55. “Prevailing
party”
has the
meaning set forth in Section
11.5.
1.56. “Release
Covenants”
has the
meaning set forth in Section
6.3.1.
1.57. “Sales
Proceeds”
means
the amount determined by calculating the product obtained by multiplying (a)
the
units of gross production of Hydrocarbons from the Historical Properties
measured at the wellhead minus the units of actual production of such
Hydrocarbons reasonably necessary to operate the Historical Properties by (b)
the Hydrocarbon unit sales price arising from
the
first arm’s length sales of such Hydrocarbons to Persons
who are
not Affiliates of Gran
Tierra or Argosy, such product to be reduced by (i) any applicable marketing
discounts, (ii) arms length commissions, brokerage fees and similar payments
related to the marketing and sale of the Hydrocarbons, (iii) applicable quality
adjustments required to be given, other than to
Affiliates of Gran Tierra or Argosy and (iv) Colombian Source Taxes. There
shall
be no deduction from Sales Proceeds for any costs and expenses of development,
operation, management and administration, including without limitation the
Operating Expenses. In the event that unit sales price
is
paid and/or determined partially or totally by U.S. currency, then the U.S.
currency value shall be used for determining Sales Proceeds. If unit sales
price
is in a currency other than U.S. currency then such unit sales price shall
be
converted to U.S. currency at the best available commercial
exchange rate prevailing for such time period, and the unit sales price as
converted
shall be
used for determining Sales Proceeds. In the event there is no first arm’s length
sale of a given Hydrocarbon (whether because of a sale to an Affiliate, use
of
all such Hydrocarbons on the Historical Properties, an exchange of Hydrocarbons
for consideration other than U.S. or foreign convertible
currency or otherwise), the sales unit price to be used would be a unit sales
price
from a
comparable sale (considering both location and quality of such Hydrocarbon)
involving Persons who
are
not Affiliates of Gran Tierra or Argosy. Sales Proceeds shall not include any
sale of
capital
equipment associated with a New Commercial Field.
1.58. “Subsequent
Argosy Sale”
has the
meaning set forth in Section
8.2.
1.59. “Subsequent
Transfer”
has the
meaning set forth in Section
8.1.
1.60. “U.S.
GAAP”
means
United States generally accepted accounting principles.
1.61. “Working
Interest”
means
the interest of any Person, reflected as a percentage, for the responsibilities
and/or obligation to pay for the costs of exploration and production of
Hydrocarbons on a specific property. A specific Working Interest may be
determined by reference to (i) the Colombian Association Agreements, (ii)
applicable joint operating agreement, and or (iii) other agreements between
joint venture parties. Argosy’s Working Interest as of date hereof for the
Historical Properties is reflected on Schedule
1.8
in the
fifth column entitled “Argosy
Working interest.”
2. Payment
Obligation for Base Overriding Royalty.
2.1. Calculation
of Base Overriding Royalty.
Gran
Tierra and Argosy shall jointly and severally pay Xxxxxx a base overriding
royalty calculated as two percent (2%) of the Sale Proceeds from Historical
Properties, multiplied by the applicable Adjusted Net Revenue Interest
(the
“Base
Overriding Royalty”).
-8-
2.2. Post-Effective
Date Transfers.
If after
the Effective Date Argosy, its successors or assigns, enters into an agreement
to farmout, encumber or otherwise reduce its interest in the Historical
Properties, or forms any type of joint venture relationship to develop
Hydrocarbons from the Historical Properties, the Base Overriding Royalty shall
not be reduced as a result of any of the foregoing.
2.3. Unitization.
In the
event after the Effective Date any portion of the Historical Properties is
pooled or unitized with any other lands that are not Historical Properties,
the
Base Overriding Royalty shall only apply to Argosy’s ratable share of
Hydrocarbons produced from the pooled unit comprising such portion of the
Historical Properties.
3. Conversion
Rights and Payment Obligation for Xxxxxx Net Profits
Interest.
3.1. Right
to Convert.
On a
field by field basis, if Argosy recovers an amount equal to 200% of its Adjusted
New Commercial Field Capital Expenditures with respect to any New Commercial
Field (each such recovery a “Conversion
Precondition”),
Xxxxxx may convert its Base Overriding Royalty in such New Commercial Field
to a
Xxxxxx Net Profits Interest. Xxxxxx shall have the right, but not the
obligation, to convert any or a given portion of its Base Overriding Royalties
into a net profits interest (the “Xxxxxx
Net Profits Interest”)
for
any New Commercial Field on a field by field basis, pursuant to Section
3.6.
In the
event of such conversion, Gran Tierra and Argosy hereby jointly and severally
agree to pay to Xxxxxx, in lieu of the Base Overriding Royalty for such New
Commercial Field, the Xxxxxx Net Profits Interest for such New Commercial Field
as set forth herein. Once made, such conversion shall be unconditional and
irrevocable and Xxxxxx shall have no right to convert back to the Base
Overriding Royalty for such New Commercial Field interest so
converted.
3.2. Calculation
of Recovery of Adjusted New Commercial Field Capital
Expenditures.
On a
field by field basis, the amount of Adjusted New Commercial Field Capital
Expenditures recovered for such New Commercial Field as of any date shall be
an
amount equal to (a) the aggregate Sales Proceeds from such New Commercial Field
attributable to Argosy’s Adjusted Net Revenue Interest as of such date less (b)
aggregate Operating Expenses attributable to Argosy’s working interest for such
New Commercial Field as of such date.
3.3. Calculation
of Xxxxxx Net Profits Interest.
The
Xxxxxx Net Profits Interest for such New Commercial Field shall equal an amount
determined as the product of (i) the Saks Proceeds less Operating Expenses,
multiplied by (ii) the Adjusted Net Revenue Interest for such New Commercial
Field, multiplied by (iii) the Xxxxxx Net Profits Interest Percentage set forth
in Section
3.4.
-9-
3.4. Net
Profits Amount and Adjustment.
The
initial Xxxxxx Net Profits Interest Percentage upon satisfaction of the
Conversion Precondition provided in Section
3.1
shall be
7.5%. Upon recovery by Argosy of an additional 100% of Adjusted New Commercial
Field Capital Expenditures for any New Commercial Field (i.e.,
an
aggregate of 300% of such Adjusted New Commercial Field Capital Expenditures),
the Xxxxxx Net Profits Interest Percentage shall automatically increase to
10%
without the necessity of any action, notice or election
by Xxxxxx. Such increase shall be effective with respect to the Production
of
Hydrocarbons from any field to which the conversion applies beginning with
the
first day of the month following the month within which Argosy recovers the
final increment of the additional 100% of Adjusted New Commercial Field Capital
Expenditures. Notwithstanding the foregoing, Xxxxxx’x Net Profits Interest
Percentage for any New Commercial Field related to the XXXX Prospect Area shall
be the following: (i) 15% for the initial Xxxxxx Net Profits Interest Percentage
upon satisfaction of the Conversion Precondition provided in Section
3.1 for
such
New Commercial Field, and (ii) upon recovery of an additional 100% of Adjusted
New Commercial Field Capital Expenditures with respect to such New Commercial
Field (i.e.,
an
aggregate of 300% of such Adjusted New Commercial Field Capital Expenditures),
the Xxxxxx Net Profits Interest Percentage for such New Commercial Field shall
automatically increase to 20% without the necessity of any action, notice or
election by Xxxxxx.
3.5. Conversion
Notice. Xxxxxx
shall give Argosy written notice of Xxxxxx’x election to convert. Xxxxxx may
convert its Base Overriding Royalty for a New Commercial Field to a Xxxxxx
Net
Profits Interest within thirty (30) days after receipt of the report required
in
Section
7
that
discloses such 200% recovery as set forth in Section
3.1,
and
such conversion shall be effective retroactively to 12:01 a.m. on the first
day
of the first month following the month in which Argosy achieved such 200%
recovery. If Xxxxxx does not give notice to convert its Overriding Royalty
to a
Xxxxxx Net Profits Interest within such thirty (30) day period, Xxxxxx may
do so
at any time thereafter upon written notice thereof to Argosy, with such
conversion having a prospective effective date of 12:01 a.m. on the first day
of
the first calendar quarter following the quarter in which Xxxxxx delivers such
notice.
3.6. Post-Effective
Date Transfers.
If after
the Effective Date Argosy, its successors or assigns, enters into an agreement
to farmout, encumber or otherwise reduce its interest in the Historical
Properties, or forms any type of joint venture relationship to develop
Hydrocarbons from the Historical Properties, the Xxxxxx Net Profits Interest
shall not be reduced as a result of any of the foregoing.
3.7. Unitization.
In the
event after the Effective Date any portion of the Historical Properties is
pooled or unitized with any other lands that are not Historical Properties,
the
Xxxxxx Net Profits Interest shall only apply to Argosy’s ratable share of
Hydrocarbons produced from the pooled unit comprising such portion of the
Historical Properties.
3.8. Pre-Existing
Fields.
Xxxxxx’x
right to convert Base Overriding Royalties to the Xxxxxx Net Profits Interest
shall not apply to Pre-Existing Fields.
4. Payment
Obligation for Conditional Overriding Royalty
4.1. Conditional
Overriding Royalty Obligations.
Gran
Tierra and Argosy shall jointly and severally pay Xxxxxx a conditional
overriding royalty as set forth in this Section
4
(the
“Conditional
Overriding Royalty”).
The
Conditional Overriding Royalty is in addition to the Base Overriding Royalty
in
Section
2
and
Xxxxxx Net Profits Interest in Section
3.
4.2. Conditional
Overriding Royalty Calculation. The
Conditional Overriding Royalty shall be calculated as follows:
-10-
For
each
calendar year, the payment obligation of the Conditional Ovemding Royalty shall
equal the product of (i) the number of barrels of crude oil and other comparable
liquid Hydrocarbons produced from Historical Properties in such calendar year,
multiplied by (ii) the applicable Adjusted Net Revenue Interest, multiplied
by
(iii) two and a half percent (2.5%) multiplied by (iv) the difference between
(A) the average daily closing price for West Texas Intermediate Crude Oil on
the
New York Mercantile Exchange (if in excess of $70.00) for that calendar year
and
(B) $70.00. If the annual average daily closing price of West Texas Intermediate
Crude Oil on the New York Mercantile Exchange (or any successor exchange and/or
successor comparable crude oil benchmark) is less than $70 for any calendar
year, then no Conditional Overriding Royalty shall be payable for such calendar
year. As an example, if in a calendar year 1,000,000 barrels of oil are produced
from the Historical Properties, the Adjusted Net Revenue Interest was thirty
percent (30%) and the average annual price of West Texas Intermediate Crude
Oil
on the New York Mercantile Exchange for such year was $75.00, then the
Conditional Overriding Royalty would equal $37,500 [(1,000,000 barrels x 30%)
x
2.5% x ($75.00-$70.00))].
4.3. Post-Effective
Date Transfers.
If after
the Effective Date Argosy, its successors or assigns, enters into an agreement
to farmout, encumber or otherwise reduce its interest in the Historical
Properties, or forms any type of joint venture relationship to develop
Hydrocarbons from the Historical Properties, the Conditional Overriding Royalty
shall not be reduced as a result of any of the foregoing.
4.4. Unitization.
In the
event after the Effective Date any portion of the Historical Properties is
pooled or unitized with any other lands that are not Historical Properties,
the
Conditional Overriding Royalty shall be proportionately reduced and only apply
to Argosy’s ratable share arising from those portions of the Historical
Properties included in the pooled unit.
4.5. Pre-Existing
Fields.
The
Conditional Overriding Royalty shall be applicable only to Pre-Existing
Fields.
5. Capital
Expenditure Commitment.
5.1. 5
Year Expenditure Requirement. Gran
Tierra and Argosy jointly and severally
covenant
that Argosy or its Affiliates, or, without in any way intending to limit the
generality of Section
12.2,
their
permitted successors, assigns, farmees or partners or their Affiliates shall
spend at least US$15,000,000 for total capital expenditures, as defined by
U.S.
GAAP, on the Historical Properties over the Capital Expenditure Period (the
“Capital
Expenditure Commitment”).
The
expenditures of parties other than Argosy to any joint operating agreement
or
commercial agreements related to the Historical Properties shall not count
against the Capital Expenditure Commitment. Gran Tierra and/or Argosy shall
have
the right to forgo such investments and elect to make the payment provided
in
Section
5.2
herein.
By way of example and not of limitation, the following expenditures shall be
included in calculating the Capital Expenditure Commitment:
5.1.1 all
drilling expenditures;
-11-
5.1.2 geological,
geophysical or other related survey expenditures;
5.1.3 any
dry
hole exploration expenditures;
5.1.4 gathering
lines expenditures;
5.1.5 capital
expenditures related to compressing, dehydrating, treating, separating.
marketing and transporting Hydrocarbons; or
5.1.6 any
other
expenditures related to facilities for transportation or storage of Hydrocarbons
from New Commercial Fields,
5.2. Underinvestment
payment.
In the
event that Gran Tierra or Argosy or their respective Affiliates, or, without
in
any way intending to limit the generality of Section
12.2,
the
permitted successors, assigns, farmees or partners of Argosy, Gran Tierra or
their Affiliates do not spend the entire Capital Expenditure Commitment over
the
Capital Expenditure Period, upon the expiration of such Capital Expenditure
Period, Gran Tierra and/or Argosy shall within thirty (30) days of such
expiration pay to Xxxxxx an amount in cash or other immediately available funds
equal to twenty percent (20%) of the amount by which such New Field Capital
Expenditures over the Capital Expenditure Period are less than US$15,000,000.
At
Gran Tierra’s option, Gran Tierra and/or Argosy can make the payment provided
for in this Section 5.2
early,
with such payment in that event being equal to twenty percent (20%) of the
amount by which such New Field Capital Expenditures over the period starting
on
the Effective Date and ending on the date of such payment are less than
US$15,000,000.
6. Letter
of Credit.
6.1. Interim
Terms Prior To Letter of Credit
6.1.1 In
accordance with Section 1.11 of the Purchase Agreement, Gran Tierra shall have
deposited USD$4,000,000 in cash with the Escrow Agent (as defined in the
Purchase Agreement), to be released in conjunction with posting of the Letter
of
Credit provided in Section 6.2 or otherwise in accordance with the terms of
the
Escrow Agreement (as defined in the Purchase Agreement).
6.1.2 Except
as
set forth in the Escrow Agreement, Gran Tierra shall not pledge the escrowed
funds or otherwise grant a security interest or lien in such funds so long
as
they are subject to the escrow arrangements described herein and in the Purchase
Agreement.
6.2. Initial
Term for Letter of Credit
6.2.1 Irrevocable
Letter Of Credit.
Gran
Tierra shall procure and deliver to Xxxxxx an irrevocable standby letter of
credit (the “Initial
Letter of Credit”)
within
the time frames set forth in the Purchase Agreement with the following
terms:
-12-
(a) Amount:
The
face amount of the initial Letter of Credit shall be USD$4,000,000.00. Draws
from the Initial Letter of Credit must be replaced to keep the required
USD$4,000,000 face value of the Letter of Credit in place.
(b) Term:
The
Initial Letter of Credit shall remain outstanding for a period of three years
from date of Closing if either (i) the Capital Expenditure Commitment has been
fulfilled within that three year period or (ii) Gran Tierra and/or Gran Tierra
or Argosy have paid Xxxxxx the payment provided for in Section 5.2. If the
Capital Expenditure Commitment has not been fulfilled within such three year
period or Argosy and/or Gran Tierra has not made the payment provided for in
Section
5.2,
the
Initial Letter of Credit shall remain outstanding until the earlier of (i)
the
fulfillment of the Capital Expenditure Commitment or the receipt by Xxxxxx
of
such payment, or (ii) five years from date of Closing. Such period is referred
to herein as the “Initial
Term.”
(c) Issuer:
The
Initial Letter of Credit on terms consistent with this Section 6 and Exhibit
A
attached hereto, with such other documentary conditions as may be acceptable
to
Xxxxxx shall be issued by a bank with a minimum credit rating by Standard and
Poor’s of BBB (the “Issuer
Acceptable Credit Rating”).
Xxxxxx may request and Gran Tierra shall then promptly provide a replacement
irrevocable standby letter of credit in accordance with the terms of this
Section 6 if the Issuer Acceptable Credit Rating declines below
BBB.
(d) Issuer
Fees Expenses:
Fees
for the Initial Letter of Credit are the sole responsibility of Gran
Tierra.
(e) Draws:
The
conditions for draws on the Letter of Credit are set out in Exhibit A, which
is
incorporated into this Agreement in full.
6.3. Post-Initial
Term
6.3.1 Irrevocable
Letter Of Credit.
After
the Initial Term, Gran Tierra shall be released from its Letter of Credit
obligation if: (1) all of the following conditions provided in Section 6.3.2
(“Release
Covenants”)
are
met and maintained as of the end of any quarter, or (ii) Gran Tierra maintains
a
minimum credit rating on its medium term debt or commercial paper of BB or
equivalent according to Standard and Poor’s (the “Acceptable
Credit Rating”).
During any period that such Release Covenants are not maintained and/or Gran
Tierra’s Acceptable Credit Rating is not maintained, Gran Tierra through the
remaining term of this Agreement shall provide a Letter of Credit pursuant
to
Section
6.3.4.
6.3.2 Release
Covenants.
The
Release Covenants are as follows:
(a) Total
Debt To Total Debt Plus Equity Ratio: less than or equal to 30%;
(b) Net
Working Capital: Greater than or equal to $1.5 million USD; and
-13-
(c) Absence
of significant claims. judgments or litigation against or affecting Gran Tierra
or Argosy that exceeds in the aggregate $1.5 million USD.
Capitalized
terms in this Section
6.3.2
are to
be defined in accordance with financial industry norms.
6.3.3 Measurement
of Release Covenants.
The
Release Covenants shall be measured on a quarterly basis using Gran Tierra
financial statements and disclosure in accordance with U.S. GAAP. Gran Tierra’s
compliance (or non-compliance) with such Release Covenants shall be reported
quarterly to Xxxxxx in the same manner as the information set forth in
Section
7.3
in the
form of a compliance certificate executed by GTEI’s Chief Financial
Officer.
6.3.4 Non-Satisfaction
Of Release Covenants or Acceptable Credit Rating:
If at
the end of such Initial Term, or in any quarter during which Gran Tierra is
not
already required to have a letter of credit in place pursuant to the terms
of
this Section
6,
Gran
Tierra cannot meet one or more of the Release Covenants or has not maintained
the Acceptable Credit Rating (measured at the end of the Initial Term or such
quarter as applicable), Xxxxxx may, at its sole discretion, request and receive
from Gran Tierra a new irrevocable standby Letter of Credit (the “New
Letter of Credit”)
with
the following characteristics:
(a) Amount:
The New
Letter of Credit shall have a face value equivalent to the greater of: (a)
the
product of (i) the aggregate amount of the trailing 4 quarters payments earned
by Xxxxxx from the Colombian Participation Agreement multiplied by (ii) 4 or
(b)
$1 million USD. Draws from any New Letter of Credit must be replaced to keep
the
required face value of such Letter of Credit in place.
(b) Term:
The New
Letter of Credit shall be maintained for successive one year terms until Gran
Tierra can meet the Release Covenants or maintain the Acceptable Credit
Rating.
(c) Issuer:
The New
Letter of Credit on terms and documentary conditions acceptable to Xxxxxx shall
be issued by a bank with an Issuer Acceptable Credit Rating. Xxxxxx may request
and receive a replacement irrevocable standby letter of credit if the issuing
bank’s credit rating declines below the Issuer Acceptable Credit
Rating.
(d) Issuer
Fees and Expenses:
Fees
for the New Letter of Credit and any replacement letters of credit are the
sole
responsibility of Gran Tierra.
(e) Draws:
The
conditions for draws on the New Letter of Credit
are set
out in Exhibit A.
-14-
6.3.5 Re-Satisfaction
of Release Covenants or Achievement of Acceptable Credit Rating.
If
during any period during which Argosy or Gran Tierra or a permitted transferee
is required to provide New Letters) of Credit, Gran Tierra or a permitted
transferee, as applicable, provides a certificate pursuant to Section
6.3.3
indicating satisfaction of the Release Covenants or provides Xxxxxx reasonable
evidence that Gran Tierra or the permitted transferee, as applicable, has
maintained the Acceptable Credit Rating, Xxxxxx shall return the applicable
Letter of Credit in accordance with Section
6.6
6.4. Replacement
Letters of Credit.
At any
time, Gran Tierra and/or Argosy and/or permitted transferee(s) pursuant to
a
Subsequent Transfer or a Subsequent Argosy Sale may provide one or more new
Letters of Credit (which will replace one or more then current Letters of
Credit) in an aggregate face value amount (including ongoing Letters of Credit)
equal to the amount of coverage Xxxxxx is entitled to under this Section 6.
The
aggregate face value of such Letters of Credit shall be allocated among Gran
Tierra and Argosy and any permitted transferees in the manner set forth in
Section
8.3.3.
Such
replacement Letters of Credit shall have the terms required under this Section
6
with respect to the Initial Letter of Credit or any New Letter of Credit, as
the
case may be.
6.5. Disbursement
of Xxxxxx Escrow Funds.
6.5.1 If
Xxxxxx
has drawn on a Letter of Credit pursuant to Sections II or III of Exhibit A,
it
shall place the drawn funds in an escrow account (the “Xxxxxx
Escrow Account”)
with
the Bank of New York or, if the Bank of New York will not serve as an escrow
agent, another financial institution with a minimum credit rating from Standard
& Poor’s of at least BBB (the “Xxxxxx
Escrow Bank”),
pursuant to an escrow agreement that shall contain terms for release of such
escrowed funds substantially similar to the draw requirements set forth in
Exhibit A (the “Xxxxxx
Escrow Agreement”).
Xxxxxx shall be entitled to receive money it is owed hereunder from such escrow
account for any Payment Default under the procedures set forth in Section 1
of
Exhibit A.
6.5.2 Gran
Tierra and/or Argosy shall receive the proceeds from such the Xxxxxx Escrow
Account if and only if Gran Tierra (i) has executed the Xxxxxx Escrow Agreement,
(ii) has agreed to pay all fees and expenses of the Xxxxxx Escrow Bank, and
(iii) certifies to the Xxxxxx Escrow Bank with reasonable evidence attached
thereto that the two following conditions are met, and then such escrowed funds
shall be paid to Gran Tierra and/or Argosy:
(a) Gran
Tierra and/or Argosy provided to Xxxxxx a form of Letter of Credit which
satisfies the terms and conditions set forth in Section
6
and
Exhibit A hereof; and either:
(1) Xxxxxx
failed to initiate arbitration under Section
11
hereof
(without regard to Section
11.1)
within
10 business days of receipt of the form of Letter of Credit; or
(2) The
Panel
provided in writing that the form of Letter of Credit satisfied the terms and
conditions of Section
6
and
Exhibit A hereof; and
-15-
(b) Gran
Tierra and/or Argosy delivered the approved Letter of Credit to
Xxxxxx.
6.6. Delivery
of Old or Replaced Letters of Credit.
If Gran
Tierra, Argosy and/or any permitted transferee hereunder have satisfied their
obligations under this Section
6
and
either (i) Xxxxxx is not entitled at such time to a Letter of Credit pursuant
to
Section
63.1,
or (ii)
Gran Tierra, Argosy and/or any permitted transferee deliver to Xxxxxx
replacement Letters of Credit that comply with the provisions of this
Section
6
and
Exhibit
A
(including without limitation the requirement as to the aggregate face amount
of
such Letters of Credit), then Xxxxxx shall promptly deliver to Gran Tierra,
Argosy or such permitted transferee, as the case may be, the original Letters
of
Credit that either are (i) no longer required hereunder or (ii) replaced, as
the
case may be.
6.7. Termination
of Section 6.
If in
any quarterly period after the tenth anniversary of the end of the expiration
of
the Initial Term, the aggregate amount of the trailing 4 quarters payments
earned by Xxxxxx from the Colombian Participation Agreement is less than
$250,000, Gran Tierra and Argosy shall have the option upon written notice
to
Xxxxxx to terminate the provisions of this Section 6, and upon receipt by Xxxxxx
of such notice such provisions shall then terminate and be of no further force
and effect, and any Letter of Credit in place at the time shall be cancelled
and
released; provided, however, that (i) to the extent there is a current claim
by
Xxxxxx outstanding at such time, and Xxxxxx has initiated dispute resolution
under Exhibit A hereto and Section
11,
such
Letter of Credit shall not be cancelled and released until such claim is
resolved pursuant to Section
11
and any
draw against such Letter of Credit permitted hereunder has been made, and (ii)
if Gran Tierra or Argosy delivers such notice of termination, Argosy shall
simultaneously issue mortgages in favor of Xxxxxx on the Historical Properties
securing payment of the Participation Rights, which mortgages can and shall
be
subordinate to any and all prior recorded liens other than liens of Affiliates
of Gran Tierra and/or Argosy.
7. Payments;
Reports; Audit Rights.
7.1. Payments
and Reports Regarding Payments.
7.1.1 Quarterly.
Within
forty-five (45) days after the end of each of the first three calendar quarters
of each calendar year (that is, March 31, June 30 and September 30), Gran Tierra
and Argosy shall:
| (A) |
calculate
(i) the amounts owed to Xxxxxx for such quarter pursuant to Section
2
(Base Overriding Royalty), and (ii) 75% of the estimated amounts
owed to
Xxxxxx for such quarter pursuant to Section 3
(Net Profits Interest). No quarterly calculations of the Conditional
Overriding Royalty (Section
4)
are required in any quarterly report provided under this Section
7.1.1;
|
|
(B)
|
furnish
such calculations to Xxxxxx in a statement in a form reasonably
satisfactory to Xxxxxx, certified by responsible officers of Gran
Tierra
and Argosy, showing for the preceding calendar quarter the (i) Sales
Proceeds, (ii) Operating Expenses, (iii) Production
of Hydrocarbons, (iv) Recovery of Adjusted New Commercial Field Capital
Expenditures, (v) the amount of Argosy’s capital expenditures as required
by Section
5.1,
and (vi) the amounts payable under Sections
2 and 3
hereof for such quarter; and
|
-16-
|
(C)
|
pay
Xxxxxx by wire transfer
in
United States Dollars, the amount shown on such quarterly
statement.
|
7.1.2 Annual
Within sixty (60) days after the end of each calendar year, Gran Tierra and
Argosy shall:
| (A) |
calculate
(i) the amount owed to Xxxxxx for the quarter ended December 31 of
each
calendar year pursuant to Section
2
(Base Overriding Royalty, and (ii) the final amount owed to Xxxxxx
for
such calendar year pursuant to Section
3
(Net Profits Interest) less any amounts previously paid with respect
to
such Section
3
for such calendar year, and (iii) the amount owed to Xxxxxx for such
calendar year pursuant to Section
4
(Conditional Overriding Royalty);
|
|
(B)
|
furnish
such calculations to Xxxxxx in a statement in a form reasonably
satisfactory to Xxxxxx, certified by responsible officers of Gran
Tierra
and Argosy, showing for such quarter and calendar year (i) Sales
Proceeds,
(ii) Operating Expenses, (iii) Production of Hydrocarbons, (iv) Recovery
of Adjusted New Commercial Field Capital Expenditures, (v) the amount
of
Argosy’s capital expenditures as required by Section
5.1,
(vi) the amounts payable under Sections
2, 3 and 4
hereof for such preceding quarter and calendar year, and(vii) for
the
first annual report after the date hereof, whether there have been
any
claims prior to November 30, 2006, by a Gran Tierra Indemnified Person
(as
defined in the Purchase Agreement) in accordance with Section
1.11,
of the Purchase Agreement; and
|
|
(C)
|
pay
Xxxxxx by wire transfer in United States Dollars, the amount shown
on such
statement for such calendar year less any amounts already paid with
respect to such calendar year.
|
7.1.3 Ability
to Challenge Payments.
Payments
made by Argosy and Gran Tierra to Xxxxxx hereunder for a calendar year,
including any quarterly payments made during such year, shall be deemed final
and non-adjustable unless within thirty (30) days of Xxxxxx’x receipt of an
annual report as set forth in Section
7.1.2,
Xxxxxx
delivers written notice to Gran Tierra and/or Argosy of a disagreement with
such
annual report and a request for an audit related to such annual report. Any
such
audit pursuant to this Section
7.1.3
shall be
in addition to Xxxxxx’x audit rights under Section
7.5.
Xxxxxx
shall use reasonable commercial efforts to have its auditor complete such audit
and submit
its final written report to Xxxxxx within 90 days of the date such audit begins.
If such audit report indicates that such annual report is incorrect, Xxxxxx
must
initiate arbitration under Section
11
(without
regard to Section
11.1)
with
respect to such audit report within 21 days of Xxxxxx’x receipt of such audit
report, or Xxxxxx shall not be entitled to challenge such annual
report.
-17-
7.1.4 No
Offsets.
THERE
SHALL BE NO COMMERCIAL OFFSET, NET OUT, OR ANY OTHER NONJUDICIAL SUSPENSION
OR
SET OFF OF PAYMENTS OF ANY AMOUNTS DUE XXXXXX AND ITS SUCCESSORS AND ASSIGNS
HEREUNDER FOR ANY REASON WHATSOEVER, INCLUDING WITHOUT LIMITATION RELATING
TO
DISPUTES OR CLAIMS RELATING TO THE PURCHASE AGREEMENT. Notwithstanding the
foregoing, if (i) there is bona fide uncertainty as to the ownership of the
Participation Rights (as an example, with respect to a successor assignee of
Xxxxxx), (ii) there is a claim by a Gran Tierra Indemnified Person (as defined
in the Purchase Agreement) in accordance with Section
1.11(b)
of the
Purchase Agreement prior to November 30, 2006, or (iii) there is a dispute
under
Section
7.1.5,
then
Gran Tierra and Argosy or their successors may immediately commence an
arbitration pursuant to Section
11
(without
regard to the provisions of Section
11.1)
and to
the extent of the amount in issue, may deposit the applicable payments due
hereunder (but not an amount in excess of the amount claimed) with the Panel
(or
an escrow agent designated by the Panel) and request interpleader relief for
such funds related to such issue.
7.1.5 Tax
Withholdings.
There
shall be no withholding of taxes in the United States or Colombia for any
payments hereunder without at least 90 days prior written notice to Xxxxxx.
Such
notice shall include (1) the calculation of the proposed withholding percentage,
(2) the legal requirement for such withholding, (3) the anticipated amount
of
such withholding, (4) the anticipated timing of any related deposit. and (5)
the
governmental entities which will receive such withholding. If there is no
disagreement regarding such notice, Gran Tierra, Argosy and Xxxxxx shall
cooperate to facilitate the appropriate withholding, if any, and after such
withholding is made, Argosy shall send written confirmation to Xxxxxx of such
tax deposits and any other information reasonably requested by Xxxxxx regarding
such deposits. If there is any disagreement regarding any matters related to
such notice, the Xxxxxx must initiate dispute resolution pursuant to
Section
11
within
such 90 day notice period. If Xxxxxx initiates such dispute resolution, the
amount of withholding in question shall be deposited with the Panel (or an
escrow agent designated by the Panel) as interpleader funds. If Xxxxxx does
not
initiate such dispute resolution pursuant to Section 11 within such 90 day
notice period, it shall be deemed to have approved such
withholding.
7.1.6 Delivery
Address and Wiring instructions.
The
payments and statements required under this Section
7.1
shall be
sent to Xxxxxx at the notice address set out in this Agreement, and pursuant
to
wiring instructions or other instructions provided by Xxxxxx in writing to
Gran
Tierra and Argosy.
7.2. Calculation
of Payments During First Calendar Year.
During
the first calendar year in which this Agreement is effective (i.e., during
the
period beginning on the Effective
Date through December 31 of the calendar year in which this Agreement is
executed and delivered by the Parties):
-18-
7.2.1 The
Base
Overriding Royalty shall be based on the actual production of net barrels of
crude oil and other Hydrocarbons sold from Historical Properties alter the
Effective Date.
7.2.2 The
calculation of Adjusted New Field Capital Expenditures shall use a pro rata
amount for the month in which the Effective Date occurs (i.e., if the Effective
Date were May 10, the aggregate qualifying expenditures for the entire month
would be divided by 31 and multiplied by 21).
7.2.3 the
Conditional Overriding Royalty for the first calendar year shall be based on
the
production of barrels of crude oil and other Hydrocarbons for the period from
the Effective Date through December 31, 2006 and the applicable price per barrel
for West Texas Intermediate for the period from the Effective Date through
December 31, 2006.
7.3. Additional
Information Regarding Historical Properties.
At the
times Gran Tierra and Argosy are required to provide to Xxxxxx the reports
required under Section
7.1,
they
shall also provide to Xxxxxx the following information that was produced,
delivered or received in the prior quarter; provided,
however,
that
any information previously provided to Xxxxxx pursuant to this Section
7.3
need not
be provided again in subsequent quarters:
7.3.1 Any
and
all reports, meeting minutes, correspondence or other information provided
to or
received from during the prior quarter any Colombian Governmental Authority
relating to any of the Historical Properties.
7.3.2 Any
and
all daily and/or monthly well by well (formation by formation if applicable)
production data for Hydrocarbons produced from Historical
Properties.
7.3.3 Any
and
all geological, geophysical, aerial or other surveys or subsurface mapping
relating to any of the Historical Properties.
7.3.4 Any
and
all well logs, mud logs, production surveys and/or any other data gathered
from
well bores on the Historical Properties.
7.3.5 Any
Authorization for Expenditures (an “AFE”)
whether internal or forwarded to any other Working Interest owner on any of
the
Historical Properties, and any comparison of AFE to final cost.
7.3.6 Any
new
contracts or new amendments or other modifications or changes to contracts
for
the sale of Hydrocarbons from Historical Properties.
7.3.7 Any
non-privileged information regarding any pending or threatened legal
proceedings, lawsuits, claims or other similar matters relating to or affecting
(i) the Historical Properties, (ii) the Colombian Association Contracts, or
(iii) Gran Tierra’s or Argosy’s ability to comply with the terms and provisions
of this Agreement.
-19-
7.3.8 Any
and
all internal or independent reserve engineering reports or estimates of
prospective resources.
7.3.9 Any
applicable invoices regarding Sales Proceeds.
7.3.10 The
base
documentation regarding any applicable marketing discounts, commissions,
brokerage fees and similar payments relating to the marketing or sales of the
Hydrocarbons.
7.3.11 Applicable
statements regarding (i) Colombian Source Taxes and (ii) Colombian Ad Valorem
Taxes.
7.3.12 The
additional information referred to in this Section
7.3
shall be
forwarded to Xxxxxx in the form received or generated by Gran Tierra or Argosy
(i.e. information
in digital format shall be forwarded digitally, including all applicable seismic
and/or accounting spreadsheets). Gran Tierra and/or Argosy may edit any portion
of such information to exclude matters not related to Historical
Properties.
7.3.13 Nothing
in this Section
7.3
shall
require Gran Tierra or Argosy to create new information or reports. If either
Gran Tierra or Argosy, however, has prepared (or caused to be prepared)
translations into English of any materials listed in this Section
7.3,
such
translations shall be provided with the materials required by this Section
7.3.
7.4. Books
and Records.
Argosy
shall at all times maintain true and correct books and records sufficient to
determine the amounts payable to Xxxxxx from the Participation Interests. Such
books and records shall be open for inspection by Xxxxxx during normal business
hours pursuant to Section
7.5.
7.5. Audit.
Upon
five (5) days’ notice to Argosy and Gran Tierra, Xxxxxx, at its expense, shall
have the right at any time during regular business hours, not more frequently
than three times annually, to have a qualified accountant selected by Xxxxxx
audit the records of Argosy to the extent necessary to verify Argosy’s
statements and payments of the Participation Interests hereunder. Such records
shall be made available to Xxxxxx’x accountant at Argosy’s office located in
Bogota, Colombia, or at Gran Tierra’s office located at the following address:
000, 000-00xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx, Xxxxxx, X0X 0X0. Argosy and Gran
Tierra shall cooperate with and assist Xxxxxx’x accountant for the purpose of
facilitating such audit. If, as a result of such audit, Xxxxxx’x accountant
determines that the amount of payments due pursuant to the Participation
Interests was greater than the amount reported by Argosy in quarterly and annual
statements furnished pursuant to this Section
7,
Xxxxxx
shall promptly furnish to Argosy a copy of the report of its accountant setting
forth the amount of the deficiency showing, in reasonable detail, the basis
upon
which such deficiency was determined. if Argosy agrees with such assessment,
Argosy shall, within 30 days of receipt of Xxxxxx’x accountant’s report, remit
to Xxxxxx a sum equal to such deficiency so claimed, together with interest
thereon at the rate of ten percent (I0%) per annum from the date such payment
was due until the date of such remittance. In addition, if the audit reveals
a
Material Underpayment in any period, Argosy shall pay to Xxxxxx an additional
amount equal to I00% of such underpayment, plus the cost of such audit. If
Argosy disputes the claim, the dispute shall be resolved pursuant to
Section
11.
-20-
7.6. Confidentiality.
Xxxxxx
and its members shall keep confidential any and all information provided by
Argosy or Gran Tierra pursuant to this Agreement (the “Confidential
Information”),
provided that Xxxxxx and its members may share such information to tax, legal,
accounting, financial and other advisors who have a duty of confidentiality
to
them. This Section
7.6
shall
not apply to information which (i) was or becomes generally available to the
public other than as a result of a disclosure by Xxxxxx or its members, (ii)
becomes available to Xxxxxx or its members on a non-confidential basis from
a
source other than the Gran Tierra or Argosy, provided that such source is not
known to Xxxxxx or its members to be bound by a confidential arrangement with
Gran Tierra or Argosy or otherwise prohibited from transmitting the information
to us by a contractual, legal or fiduciary obligation, or (iii) becomes
independently developed by Xxxxxx or its members without violating any of our
obligations hereunder. Notwithstanding the foregoing, Xxxxxx and its members
may
disclose such Confidential Information (a) in connection with the resolution
of
any dispute pursuant to the procedures set forth in Section
11,
or (b)
if, in the opinion of its counsel, disclosure is required by law; provided,
however, that Xxxxxx or its members, as applicable, will promptly notify Argosy
or Gran Tierra of the obligation to make such disclosure in advance of the
disclosure so that Argosy or Gran Tierra, as the case may be, will have a
reasonable opportunity to object to such disclosure. Xxxxxx agrees that it
shall
treat the information provided by Argosy and Gran Tierra hereunder with the
same
degree of care it accords its own confidential information of a similar nature;
provided that in no event shall Xxxxxx exercise less than reasonable care to
protect the Confidential Information.
|
8.
|
Assignment,
Sale or Transfer of Historical Properties by Argosy and/or Sale of
Argosy.
|
8.1. Subsequent
Transfers of Historical Properties.
Argosy
shall not assign, sell, transfer or otherwise dispose of all or a part of its
interest in any of the Historical Properties (a “Subsequent
Transfer”)
without first complying with the provisions of Section
8.3.
8.2. Subsequent
Sale of Argosy or its Successors.
Gran
Tierra and/or its Affiliates shall not assign, sell, transfer or otherwise
dispose of Argosy (a “Subsequent
Argosy Sale”)
without providing prior written notice to Xxxxxx and without an agreement by
the
purchaser thereof to execute a counterpart to this Agreement and thereby be
bound by the terms hereof, including without limitation the provisions of
Section
6.
8.3. Assignment
of this Agreement By Argosy or Gran Tierra. Argosy
may assign to one or more Persons all or a portion of its rights and
responsibilities under this Agreement in connection with a Subsequent Transfer;
provided,
that
8.3.1 Argosy,
Gran Tierra or a subsequent transferee, as the case may be, shall give Xxxxxx
an
officer’s certificate at least fifteen (15) business days prior to any such
Subsequent Transfer and assignment, certifying as to the compliance of such
Subsequent Transfer and assignment with this Agreement, and such certificate
shall be accompanied by:
(a) a
copy of
all documents related to such assignment; and
-21-
(b) if
the
proposed transferee is not delivering a Letter of Credit, one of the following:
(i) financial statements of the proposed transferee setting forth whether such
proposed transferee would be in compliance with the Release Covenants as of
the
date of such assignment or (ii) reasonable evidence that such proposed
transferee maintains the Acceptable Credit Rating; and
(c) the
proposed allocation of rights and responsibilities pursuant to Section
8.3.3;
and
(d) if
such
proposed transferee would not be in compliance with the Release Covenants or
the
Acceptable Credit Rating as of the date of such proposed assignment, a proposed
Letter of Credit complying with the terms and provisions of Section
6
and
Exhibit
A.
8.3.2 the
Agreement is fully assumed in writing by such transferee, including without
limitation the obligation of such transferee to provide a Letter of Credit
to
the extent required by Section
6
and
Exhibit
A,
and
8.3.3 in
the
event of a partial Subsequent Transfer and assignment, rights and
responsibilities under this Agreement (including with respect to the obligations
of Gran Tierra and Argosy under Section
7)
are
allocated between Argosy and such transferees based on the aggregate amount
of
the trailing 4 quarters payments earned by Xxxxxx from the Colombian
Participation Agreement which is attributable to each portion of the Historical
Properties held by Argosy and any subsequent transferees; and
8.3.4 Within
ten ( I0) business days of Xxxxxx’x receipt of such officer’s certificate and
accompanying documents set forth in Section 8.33, Xxxxxx may object to such
Subsequent Transfer and assignment and start dispute resolution under
Section
11
for any
of the following reasons:
(a) either:
(i) the form of Letter of Credit (if attached) to such officer’s certificate
does not comply with the requirements of Section 6 and Exhibit A or (ii) the
issuer bank for such Letter of Credit (if attached) does not have an Issuer
Acceptable Credit Rating; or
(b) if
a form
of Letter of Credit is not attached, the proposed transferee would not satisfy
as of the date of such proposed transfer, either (i) the Release Covenants
or
(ii) the Acceptable Credit Rating; or
(c) the
proposed allocation pursuant to Section
8.3.3
is
incorrect; or
(d) the
proposed form of assignment and transfer documents do not comply with the
provisions of Section
8.3.2.
-22-
If
Xxxxxx
does not timely object to such proposed Subsequent Transfer or assignment for
at
least one of the foregoing reasons, then Xxxxxx shall be deemed to have accepted
such Subsequent Transfer and assignment. If Xxxxxx does timely object to such
proposed Subsequent Transfer or assignment for one or more of the foregoing
reasons and begins dispute resolution under Section 11 hereof, then either
(i)
such Subsequent Transfer and assignment shall not take place unless and until
such dispute resolutions under Section 11 is finally resolved, or (ii) the
transferor (whether Gran Tierra and Argosy or a subsequent transferee) can
notify Xxxxxx in writing that it will continue to be liable for any payments
due
to Xxxxxx hereunder related to the portion of the Colombian Association
Contracts (and related rights and obligations under this Agreement) proposed
to
be assigned. If such transferor chooses to remain liable under this Agreement
in
response to Xxxxxx’x objection, such transferor may subsequently be released
from its ongoing obligations with respect to the Assigned Rights and Obligations
if (i) a Panel approves the proposed transfer and such transferor complies
with
the conditions set by the Panel for any such transfer; or (ii) such transferor
provides Xxxxxx either (A) evidence satisfactory to Xxxxxx that such transferee
is complying with the Release Covenants or satisfies the Acceptable Credit
Rating or (B) a Letter of Credit from such transferee in compliance with
Section
6
and
Exhibit
A.
8.4. Prohibited
Transfers and Assignments.
Except
as expressly set forth herein, Xxxxxx shall have the right to withhold, in
its
sole discretion and for any reason or no reason, its consent to any Subsequent
Transfer, any Subsequent Argosy Sale or any assignment under Section
8.3.
Any
attempted Subsequent Transfer, Subsequent Argosy Sale or assignment by Argosy
or
Gran Tierra of its rights and responsibilities under this Agreement that is
not
(i) otherwise expressly permitted hereunder and/or (ii) consented to by Xxxxxx
in accordance with the terms hereof (as applicable), shall be void ab initio
and
of no force or effect,
8.5. Effect
of Transfers and Assignments.
If Gran
Tierra, Argosy or a permitted transferee makes
any
Subsequent Transfer, any Subsequent Argosy Sale
or any
assignment under Section
8.3,
the
written agreement by which such transferee assumes the rights and obligations
of
Gran Tierra and/or Argosy, as the case may be, shall provide that in each case
references to Argosy or Gran Tierra, as the case may be, shall mean such
transferee to the extent of such rights and obligations so assigned. The
provisions of this Section
8.5
shall
apply to subsequent permitted transferees.
8.6. Release
of Gran Tierra, Argosy or Permitted Transferees.
If Gran
Tierra transfers all of its interest in Argosy, or Argosy transfers all or
a
portion of the Historical Properties, in each case in compliance with
Section
8.1, 8.2 or 8.3,
as
applicable, and there is no then current dispute under Section
11
hereof
with respect to Gran Tierra or Argosy, as applicable, then Gran Tierra or
Argosy, as the case may be, shall be released from its obligations under this
Agreement with respect to the portion of the Historical Properties (and related
rights and obligations under this Agreement) so assigned or transferred. The
provisions of this Section
8.6
shall
apply to subsequent permitted transferees.
9. Assignment
by Xxxxxx.
9.1. Xxxxxx
Members.
After
November 30, 2006, subject to Section
9.3,
Xxxxxx
may assign its rights and responsibilities under this Agreement, with prior
written notice to Argosy or Gran Tierra, to any of its members who are set
forth
on Schedule
9.1
(the
“Xxxxxx
Members”);
provided, that such Xxxxxx Members expressly agrees in writing to be bound
by
all of the terms and provisions of this Agreement. If Xxxxxx assigns its rights
under this Agreement to
any of
the Xxxxxx Members:
-23-
9.1.1 Argosy
shall make pro rata payments of the amounts due hereunder directly to such
Xxxxxx Members, provided that all of the reports and additional information
required pursuant to Section
7
shall be
delivered to a single Person designated by Xxxxxx. Such Person shall have sole
authority to act for all holders of Participation Rights pursuant to this
Agreement, including but not limited to (i) resolving any matters relating
to
the Letter of Credit, (ii) initiating audits hereunder, (iii) disputing the
amount of such payments, (iv) amending this Agreement and (v) being the sole
representative in any dispute resolution process.
9.1.2 Each
Xxxxxx Member shall have the pro rata right
to
convert its Overriding Royalty to a Xxxxxx Net Profits Interest for each New
Commercial Field in accordance with the terms of this Agreement.
9.2. Assignment
by Xxxxxx to Non-Members.
After
November 30, 2006, Xxxxxx and/or each Xxxxxx Member shall have the right to
sell, assign, transfer or otherwise dispose of any or all of the Participation
Rights to any Person or Persons. Any such sale, assignment, transfer or other
disposition may be (i) on a pro rata basis or (ii) with respect to any portion
of the Historical Properties, or (iii) any one of the Participation Rights
separately (i.e., Base Overriding Royalty, Net Profits Interest or Conditional
Overriding Royalty for any New Commercial Field). Any such sale, assignment,
transfer or disposition shall be made in compliance with applicable federal
and
state securities laws, and any such transferee shall agree in writing
to be bound by the terms and provisions of this Agreement. In
addition,
Xxxxxx
and/or the Xxxxxx Members shall provide to Gran Tierra and Argosy an opinion
of
counsel that any such
sale, assignment, transfer or disposition complies with applicable federal
and
state
securities laws. Any such sale, assignment, transfer or other disposition
pursuant to this Section
9.2
shall be
subject to the provisions of Section 9.1.1.
10. Term;
Termination.
10.1. Base
Term; Survival.
This
Agreement shall commence on the Effective Date and remain in force and effect
through December 31, 2099 unless terminated pursuant to Section
10.2
hereof;
provided, however, that after such termination pursuant to this Section
10.1
or
Section
10.2,
Sections 1 and 6 through 13 shall
remain in effect until any amounts owing Xxxxxx under Sections
2, 3, 4 and 5
are
paid, and any disputes hereunder are fully and finally resolved.
10.2. Early
Termination.
At any
time Argosy and Gran Tierra are not in breach of, or default under, any terms
and condition of this Agreement, Argosy and Gran Tierra can terminate this
agreement by providing Xxxxxx a written certification executed by both Gran
Tierra’s President and each of Argosy’s managing officers that the following is
true and correct:
10.2.1 There
have been no Sales Proceeds from the Historical Properties for five successive
years;
10.2.2 Neither
Argosy, Gran Tierra, their successors and/or assigns and/or their Affiliates
have any continuing interest in the Colombian Association Contracts;
or
-24-
10.2.3 Neither
Argosy, Gran Tierra, their successors and/or assigns and/or their Affiliates
have had for a period of three years any ownership in any oil and gas
exploration or production activities within fifty (50) kilometers of any of
the
Historical Properties.
For
written certifications pursuant to Sections
10.2.1
through
10.2.3,
such
termination shall be effective ninety (90) days after receipt unless either
( I
) within such ninety (90) day period Xxxxxx notifies Argosy and Gran Tierra
in
writing of a dispute regarding the accuracy, correctness or sufficiency of
such
notice and/or (2) after such ninety (90) day period Xxxxxx demonstrates that
such certification was materially false or inaccurate.
11. Dispute
Resolution.
The
Parties agree not to commence any action against each other in the event of
an
alleged breach or default of an obligation arising under this Agreement, unless
and until the Party alleging such breach or default has given the Party or
Parties alleged to have breached or defaulted written notice of such breach
or
default, and an opportunity to cure such failure within ten (10) business days
following the giving of such notice (in the manner provided in the Agreement)
(the “Cure
Period”).
Furthermore, the Parties expressly stipulate and agree that no Party shall
commence any action against the other Party after receipt of a notice of breach,
failure or default from such Party, until the expiration of the Cure Period.
In
the event an asserted default or breach is not cured to the satisfaction of
the
Party asserting the same within the Cure Period, resolution of any and all
disputes arising from or in connection with this Agreement and/or the
negotiation and making of this Agreement, whether based in contract, tort,
or
otherwise
(each a “Participation
Agreement Dispute”),
shall
be exclusively governed
by and
settled in accordance with the provisions of this Section
11.
The
Parties shall not initiate any proceedings in any Court of law until the
provisions of Sections
11.1 and 11.2
are
completed (other than to enforce the provisions of such Sections
11.1 and 11.2).
11.1. Negotiation.
The
parties to any Participation Agreement Dispute shall have their designated
executives meet within 30 days of written notice of any dispute in to attempt
to
resolve such dispute. if the disputes cannot be resolved by such meetings with
such 30-day period, or the party being noticed is unable or unwilling to meet
within the 30-day period, any party may pursue its remedies in accordance with
this Agreement.
11.2. Arbitration.
If any
Participation Agreement Dispute remains unsettled after following the procedures
set forth in Section
11.1,
a party
hereto may commence arbitration proceedings by delivering a written notice
(the
“Demand”)
to the
other parties providing reasonable description of the Participation Agreement
Dispute to the others and expressly requesting arbitration hereunder. Such
Participation Agreement Dispute shall be submitted to arbitration under the
terms hereof, which arbitration shall be final, conclusive and binding upon
the
parties, their successors and assigns. The arbitration shall be conducted by
three neutral arbitrators who have experience in oil and gas exploration and
production matters, acting by majority vote (the “Panel”),
selected by agreement of the parties not later than ten (10) business days
after
delivery of the Demand or, failing such agreement, appointed from the Texas
statewide panel of full-time neutral arbitrators of the American Arbitration
Association who have experience in oil and gas exploration and production
matters, and pursuant to the commercial arbitration rules of the American
Arbitration Association (including the emergency procedures thereof), as amended
from time to time (the “AAA
Rules”).
If an
arbitrator so selected becomes unable
to
serve, his or her successors shall be similarly selected or appointed. The
Panel
shall have case management authority and shall fully and finally resolve the
Participation Agreement Dispute within one hundred eighty (180) days from the
commencement of the arbitration. The Panel shall not be entitled to award
special, exemplary, punitive or consequential damages (including lost profit);
provided,
however,
that
such limitation shall not apply to Xxxxxx’x rights to the interest and other
payments due with respect to any audit conducted pursuant to Section
75,
including without limitation any amounts due for Material Underpayments. Any
arbitration award shall be binding and enforceable against the Parties, and
judgment may be entered thereon in any court of competent
jurisdiction.
-25-
11.3. Injunctive
Relief.
No Party
shall be entitled to injunctive relief other than through the emergency
procedures set forth in the AAA Rules.
11.4. Place
of Arbitration.
Any
arbitration pursuant to this Agreement shall take place in Houston, Texas,
which
shall be the sole and exclusive jurisdiction and venue for any claims to
adjudicate a Participation Agreement Dispute.
11.5. Legal
Fees and Expenses.
If any
arbitration or other legal action is brought for the resolution of a
Participation Agreement Dispute, for the enforcement of this Agreement, or
because of an alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, the prevailing party
or
parties shall recover its or their actual and reasonable attorneys’ fees and
other costs incurred in that action or proceeding (including without limitation
the arbitrators’ fees, arbitration fees and expenses, deposition fees and
expenses, expert witness fees and expenses, and travel expenses), in addition
to
any other relief to which it or they may be entitled. “Prevailing
party”
within
the meaning of this Section
113
includes, without limitation, the party who agrees to dismiss an action upon
the
other party’s payment of all or a portion of the sums allegedly due or
performance of the covenants allegedly breached, or who obtains substantially
the relief sought by it.
11.6. Jurisdiction;
Venue. EACH
OF THE PARTIES HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT
LOCATED WITHIN THE COUNTY OF XXXXXX, STATE OF TEXAS, AND IRREVOCABLY AGREES
THAT
ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY AGREEMENT OR
INSTRUMENT EXECUTED HEREUNDER, OTHER THAN ANY ACTION OR PROCEEDING REQUIRED
BY
THIS SECTION
11
TO BE SUBMITTED TO ARBITRATION, SHALL BE LITIGATED IN SUCH COURTS, AND EACH
OF
THE PARTIES WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS
TO THE CONDUCT OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.
12. Representations
and Warranties.
12.1. Argosy
and Gran Tierra.
Each of
Argosy and Gran Tierra jointly and severally represents and warrants to Xxxxxx
as of the date hereof that:
12.1.1 its
undersigned representative is duly authorized to execute this
Agreement
and the
documents ancillary hereto:
-26-
12.1.2 it
has
all requisite power and authority to enter into this Agreement and the documents
ancillary hereto, and to consummate the transactions contemplated
hereby;
12.1.3 this
Agreement and all other documents ancillary thereto to be executed by it in
connection herewith have been (or upon execution will have been) duly executed
and delivered it, have been effectively authorized by all necessary action
(corporate, partnership or otherwise) and constitute (or upon execution will
constitute) its legal, valid and binding obligations, enforceable against it
in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity);
12.1.4 the
execution, delivery and performance of this Agreement by it and the consummation
of the transactions contemplated hereby will not result in a breach of any
of
the terms and provisions of, or constitute a default under, or conflict with
any
contract or any other agreement, indenture or other instrument to which it
is a
party or by which it is bound, its organizational documents, or any judgment,
decree, order, award, law, rule or regulation of any United States, state,
local, or other governmental entity or municipality or subdivision thereof
or
any authority, department, commission, agency, board, bureau, court or other
instrumentality thereof; and
12.1.5 it
has
not assigned, sold, transferred, conveyed, alienated or encumbered, in whole
or
in part, or agreed to assign, sell, transfer, convey, alienate or encumber,
in
whole or in part, any of its rights or interests in the Historical Properties
(or the underlying Colombian Association Contracts).
12.2. Xxxxxx.
Xxxxxx
represents and warrants to Argosy and Gran Tierra as of the Effective Date
that:
12.2.1 its
undersigned
representative is duly authorized to execute
this
Agreement and the documents ancillary hereto;
12.2.2 it
has
all
requisite power and authority to enter into this Agreement
and
the documents ancillary hereto, and to consummate the transactions contemplated
hereby;
12.2.3 this
Agreement
and all other documents ancillary thereto to be executed
by it in
connection herewith have been (or upon execution will have been) duly executed
and delivered it, have been effectively authorized by all necessary action
(corporate, partnership or otherwise) and constitute (or upon execution will
constitute) its legal, valid and binding obligations, enforceable against it
in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity); and
-27-
12.2.4 the
execution, delivery and performance of this Agreement by it and the consummation
of the transactions contemplated hereby will not result in a breach of any
of
the terms and provisions of, or constitute a default under, or conflict with
any
contract or any other agreement, indenture or other instrument to which it
is a
party or by which it is bound, its organizational documents, or any judgment,
decree, order, award, law, rule or regulation of any United States, state,
local, or other governmental entity or municipality or subdivision thereof
or
any authority, department, commission, agency, board, bureau, court or other
instrumentality thereof.
13. Miscellaneous.
13.1. Notices.
All
notices, requests, demands and other communications called for or contemplated
hereunder shall be in writing and shall be deemed to have been duly given when
sent to the Party to whom addressed by registered or certified mail, return
receipt requested, postage prepaid, by overnight courier, with the fees
therefore prepaid or billed to the sender, or by facsimile to such Party (if
confirmed by one of the other methods described in this Section
13.1),
their
successors in interest, or their assignees at the following addresses, or at
such other addresses as the Parties may designate by written notice in the
manner aforesaid:
|
If to Argosy or Gran Tierra:
|
Gran
Tierra Energy Inc.
|
|
000,
000-00xx Xxxxxx X.X.
|
|
|
Xxxxxxx,
Xxxxxxx, Xxxxxx, X0X 0X0
|
|
|
Attn:
Xxxx Xxxxxxxx
|
|
|
Facsimile
No. (000) 000-0000
|
|
|
With
copies to:
|
XxXxxxx
Xxxxx LLP
|
|
0000
Xxxxxx xx xxx Xxxxxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Attn:
Xxxxx X. Xxxxx
|
|
|
Facsimile
No. (000) 000-0000
|
|
|
If
to Xxxxxx:
|
Xxxxxx
Capital, LLC
|
|
000
Xxxx Xxxxxx, Xxxxx 0000
|
|
|
Xxxxxxx,
XX 00000
|
|
|
Attn:
Xxx Xxxxx Xxxxxxx
|
|
|
Facsimile
No. (000) 000-0000
|
|
|
With
copies to:
|
Glast,
Xxxxxxxx & Xxxxxx, P.C.
|
|
2200
One Galleria Tower
|
|
|
00000
Xxxx Xxxx
|
|
|
Xxxxxx,
XX 00000
|
|
|
Attn:
Xxxxxxx X. Xxxxxxxxxx
|
|
|
Facsimile
No. (000) 000-0000
|
-28-
13.2. Inurement.
This
Agreement shall be binding on all Parties, their employees, agents,
representatives, attorneys, shareholders, partners, affiliates, assigns, and
successors in case of, but not limited to, merger, capital reorganization,
reclassification of stock, consolidation, sale of all or substantially all
of
any Party’s assets, or any other change in business form by operation of law or
contract or otherwise. The Parties agree to execute such other and further
documentation necessary to effect this paragraph.
13.3. No
Other Representations or Warranties.
The
Parties hereto have entered into this Agreement in reliance solely upon the
representations, warranties and agreements made by each to the other as
expressly set forth in this Agreement and not upon any other representation,
warranty or statement, whether written or oral, or express or
implied.
13.4. Modification;
Waiver.
Any
modification or waiver of any provision of this Agreement, or any consent to
any
departure from the terms of this Agreement, shall not be binding unless the
same
is in writing and signed by the Party against whom such modification or waiver
is sought to be enforced. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement shall operate as a waiver of
such
right, power, or privilege, unless there is a specific time period set forth
herein with respect to the exercise of such right, power or privilege. No single
or partial exercise of any such right, power,
or
privilege shall preclude any other or further
exercise
of such right,
power, or privilege or the exercise of any other right,
power,
or privilege. To the maximum extent permitted by applicable law, (a) no claim
or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver
or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party shall be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on
one
party shall be deemed to be a waiver of any obligation of such party or of
the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to
in
this Agreement.
13.5. Entire
Agreement.
This
Agreement contains the entire agreement of the Parties with respect to the
subject matter hereof and supersede and cancel any prior understandings and
agreements of the Parties with respect to such matters.
13.6. Headings. Section
headings are inserted for convenience only and shall
not
affect any construction or interpretation of this Agreement.
13.7. Interpretation.
This
Agreement, and all other documents or instruments executed pursuant to this
Agreement, were negotiated and drafted by the mutual efforts of all Parties
and
their counsel and, accordingly, the language of each of this Agreement and
such
other documents and instruments shall be construed as a whole, according to
its
fair meaning, and not strictly for or against any Party.
13.8. Further
Assurances.
Each
Party agrees to execute any and all documents reasonably required to effectuate
the purposes and intent of this Agreement, at present or in the future.
Specifically and without limiting the prior sentence, if the law of Colombia
in
the future provides for a direct assignment of the Base Overriding Royalty
from
the Historical Properties, at
the
request of Xxxxxx, Argosy shall make such assignment to Xxxxxx.
-29-
13.9. Governing
Law.
THE
PARTIES HEREBY AGREE THAT THIS AGREEMENT AND ALL INSTRUMENTS EXECUTED PURSUANT
TO THIS AGREEMENT (UNLESS OTHERWISE EXPRESSLY STATED THEREIN) SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW THEREOF.
13.10. No
Liability.
Xxxxxx
and/or any holder of the Xxxxxx Net Profits Interest shall not be liable to
Argosy and/or any other Party for any costs, expenses, losses or liabilities
of
any nature whatsoever related to the operation of the Historical Properties
after the date hereof.
13.11. Force
Majeure.
Gran
Tierra’s and Argosy’s obligations to make capital expenditures under this
Agreement shall be suspended and tolled during any period to the extent Argosy
cannot conduct its business due to accident, labor dispute or disruption,
strike, shortage of labor, materials, fuel or power, fire, flood or other act
of
God or lack of transportation facilities. Gran Tierra’s and Argosy’s obligations
hereunder shall promptly begin again after Argosy’s business is no longer such
disrupted. Gran Tierra and/or Argosy shall within 30 days of a qualifying force
majeure event under this Section
13.11
give
Xxxxxx written notice of such event, or the provisions of this Section
13.11
shall
not be applicable.
13.12. Survival.
The
representations, warranties, agreements and covenants of the Parties shall
survive the execution and delivery of this Agreement.
13.13. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which constitute one and the same instrument.
The
execution and delivery of this Agreement by facsimile shall constitute the
valid
execution and delivery of this Agreement by the Party providing the facsimile
signature.
13.14. Severability.
Any
provision of this Agreement which is invalid, illegal or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement invalid, illegal or unenforceable in any
other
jurisdiction.
13.15. Payments
in U.S. Dollars.
All
payments owed to Xxxxxx hereunder shall be paid in United States
dollars.
13.16. Purchase
Agreement.
In the
event of any inconsistency between the Purchase Agreement and this Agreement,
the terms and provisions of this Agreement shall govern.
-30-
IN
WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
executed as of the date first written above.
|
|
ARGOSY
ENERGY INTERNATIONAL
|
||
|
By:
|
Argosy
Energy Corp., General Partner
|
||
|
By:
|
/s/
Xxxx Xxxxxxxx
|
||
|
Name:
|
Xxxx
Xxxxxxxx
|
||
|
Title:
|
President
|
||
|
CITY
OF CALGARY
|
§
|
|
§
|
|
|
PROVINCE OF ALBERTA
|
§
|
On
this
22nd day of June, 2006, before me appeared Xxxx Xxxxxxxx, to me personally
known, who being by me duly sworn did say that he is the President of Argosy
Energy Corp., the General Partner of Argosy Energy International, and that
the
instrument was signed on behalf of Argosy Energy International, by the authority
of the Board of Directors of Argosy Energy Corp. as the General Partner of
such
partnership, and that he acknowledged the instrument to be the free act and
deed
of said partnership.
This
instrument was acknowledged before me on the 22nd day of June, 2006, by Xxxx
Xxxxxxxx, the President of Argosy Energy Corp., the General Partner of Argosy
Energy International.
|
[illegible]
|
||
|
Notary
Public in and for the Province of Alberta
|
||
|
My
Commission Expires:
|
||
|
not
applicable
|
-00-
|
XXXX
XXXXXX ENERGY INC.
|
|
|
By:
|
/s/
Xxxx Xxxxxxxx
|
|
Name:
|
Xxxx
Xxxxxxxx
|
|
Title:
|
President
and Chief Executive Officer
|
|
CITY
OF CALGARY
|
§
|
|
§
|
|
|
PROVINCE
OF ALBERTA
|
§
|
On
this
22nd day of June, 2006, before me appeared Xxxx Xxxxxxxx, to me personally
known, who being by me duly sworn did say that he is the President of and Chief
Executive Officer of Gran Tierra Energy Inc., and that the instrument was signed
on behalf of same, by the authority of its Board of Directors, and that he
acknowledged the instrument to be the free act and deed of said
corporation.
This
instrument was acknowledged before me on the 22nd day of June, 2006, by Xxxx
Xxxxxxxx, the President and Chief Executive Officer of Gran Tierra Energy
Inc.
|
[illegible]
|
||
|
Notary
Public in and for the Province of Alberta
|
||
|
My
Commission Expires:
|
||
|
not
applicable
|
-32-
|
XXXXXX
CAPITAL, LLC
|
|
|
By:
|
/s/
Xxx Xxxxx Xxxxxxx
|
|
Xxx
Xxxxx Xxxxxxx
|
|
|
President
|
|
|
CITY
OF TEXAS
|
§
|
|
§
|
|
|
PROVINCE
OF XXXXXX
|
§
|
On
this
26th day of June, 2006, before me appeared Xxx Xxxxxxx, to me personally known,
who being by me duly sworn did say that he is the President of Xxxxxx Capital,
LLC, and that the instrument was signed on behalf of same, by the authority
of
its Board of Managers, and that he acknowledged the instrument to be the free
act and deed of said limited liability company.
This
instrument was acknowledged before me on the 26th day of June, 2006, by Xxx
Xxxxx Xxxxxxx, the President of Xxxxxx Capital, LLC
|
/s/
Xxxxx Xxx Xxxxxx
|
||
|
Notary
Public in and for the State of Texas
|
||
|
[seal]
|
||
|
July
11, 2007
|
-33-
SCHEDULE
1.8
COLOMBIAN
ASSOCIATION CONTRACTS
-34-
|
Colombia
Block/Field(a)
|
Well
Name
|
Royalty
Interest
|
Other
Working
Interest
|
Argosy
Working
Interest
|
Argosy
Net
Revenue
Interest
|
|||||||||||
|
Guayuyaco
Field:
Guayuyaco
|
Guayuyaco 1
Guayuyaco 2
|
8.00000
8.00000
|
(b)
(b)
|
65.00000
65.00000
|
35.00000
35.00000
|
32.20000
32.20000
|
||||||||||
|
Xxxxxxx
Field:
Xxxxx
|
Xxxxx 1
Xxxxx
2
Xxxxx
3
Xxxxx
4
Xxxxx
5
|
20.00000
20.00000
20.00000
20.00000
20.00000
|
65.00000
65.00000
65.00000
65.00000
65.00000
|
35.00000
35.00000
35.00000
35.00000
35.00000
|
28.00000
28.00000
28.00000
28.00000
28.00000
|
|||||||||||
|
Xxxxxxx
Field:
Inchiyaco (c)
|
Inchiyaco
1
|
20.00000
|
74.17350
|
25.82650
|
20.66120
|
|||||||||||
|
Xxxxxxx
Field:
Xxxx
|
Xxxx
1
Xxxx
2
Xxxx
3
Xxxx
5
|
20.00000
20.00000
20.00000
20.00000
|
65.00000
65.00000
65.00000
65.00000
|
35.00000
35.00000
35.00000
35.00000
|
28.00000
28.00000
28.00000
28.00000
|
|||||||||||
|
Xxxxxxx:
Field:
Xxxxxxxx
|
Xxxxxxxx
|
20.00000
|
65.00000
|
35.00000
|
28.00000
|
|||||||||||
|
Xxxxxxx
Field:
Xxxxxxxx
|
Xxxxxxxx
0
Xxxxxxxx
0
Xxxxxxxx
3
Toroyaco
4
|
20.00000
20.00000
20.00000
20.00000
|
65.00000
65.00000
65.00000
65.00000
|
35.00000
35.00000
35.00000
35.00000
|
28.00000
28.00000
28.00000
28.00000
|
|||||||||||
-00-
|
Xxxxxxxx
Xxxxx/Xxxxx(x)
|
Xxxx Name
|
Royalty
Interest
|
Other
Working
Interest
|
Argosy
Working
Interest
|
Argosy
Net
Revenue
Interest
|
|||||||||||
|
Chaza
|
|
(d)
|
8.00000
(b
|
)
|
50.00000
|
50.00000
|
46.00000
|
|||||||||
|
Mecaya
|
|
(d)
|
8.00000
(b
|
)
|
85.00000
|
15.00000
|
13.80000
|
|||||||||
|
Mandiyaco
|
|
(d)(e)
|
8.00000
(b
|
)
|
0.00000
|
100.00000
|
92.00000
|
|||||||||
|
Rio
Xxxxxxxxx
|
|
(d)
|
8.00000
(b
|
)
|
65.00000
|
35.00000
|
32.20000
|
|||||||||
|
Talora
|
|
(d)
|
8.00000
(b
|
)
|
80.00000
|
20.00000
|
18.40000
|
|||||||||
|
Primavera
|
|
(d)
|
8.00000
(b
|
)
|
85.00000
|
15.00000
|
13.80000
|
|||||||||
| (a) |
The
formations for each block and field are referenced on CPA Schedule
1.54
and Argosy’s Net Revenue Interest is the same for each formation in such
field.
|
| (b) |
Subject
to sliding scale
|
| (c) |
Inchiyaco
field connected to Xxxx Xxxxx
|
| (d) |
No
producing xxxxx as of May 25, 2006
|
| (e) |
Potential
other working interest owner if Repsol Farm-in is basis of property
acquisition. Such interest, if any, would reduce Argosy’s Net Revenue
Interest.
|
-36-
SCHEDULE
1.14
HISTORICAL
PROPERTIES
-37-
SCHEDULE
1.14
TO
THE
COLOMBIAN
ASSOCIATION CONTRACTS
SEE
ATTACHED PAGE 1
-38-
|
Block
|
Contractual
Documentation
|
Effective
Date
|
||
|
Xxxxxxx
|
ECP
Risk Sharing Contract
|
July
27, 1987
|
||
|
Rio
Xxxxxxxxx
|
ECP
Association Contract
|
February
8, 2002
|
||
|
Guayuyaco
|
ECP
Association Contract
|
September
20, 2002
|
||
|
Xxxxxx
|
XXX
Contract for Exploration and Exploitation of Hydrocarbons
|
September
16, 2004
|
||
|
Xxxxx
|
XXX
Contract for Exploration and Exploitation of Hydrocarbons
|
June
27, 2005
|
||
|
Xxxxxxxxx
|
XXX
Contract for Exploration and Exploitation of Hydrocarbons
|
May
9, 2006
|
||
|
Mecaya
|
Application
for XXX Contract for Exploration and Exploitation of
Hydrocarbons
|
(1)
|
||
|
Mandiyaco
|
Application
for XXX Contract for Exploration and Exploitation of
Hydrocarbons
|
(2)
|
|
(1)
|
Argosy
submitted the “Mecaya” application to XXX on October 27, 2005 for an area
in the Putumayo basin. XXX advised Argosy verbally the application
was
accepted on April 20, 2006. Argosy has received written confirmation
and
is scheduling a contract closing on or about June 2,
2006.
|
|
(2)
|
Argosy
submitted the “Mandiyaco” application to XXX on April 26, 2006 for an area
in the Putumayo Basin. XXX has suspended review of this application
until
a previously submitted application is processed. Therefore, this
application may need to be renewed and/or
resubmitted.
|
-39-
SCHEDULE
1.33
CURRENT
NET REVENUE INTERESTS
-40-
SCHEDULE
1.33
TO
THE
HISTORICAL
PROPERTIES
|
Colombia
Block/Field
|
Well
Names
|
Argosy
Net
Revenue
Interest
|
Description
of Historical Property(1)
|
|||
|
Block:
Santana
Fields:
Xxxxx
Inchiyaco
Xxxx
Xxxxxxxx
Toroyaco
|
Xxxxx
1
Xxxxx
2
Xxxxx
3
Xxxxx
4
Xxxxx
5
Inchiyaco
I
Xxxx
1
Xxxx
2
Xxxx
3
Xxxx
5
Xxxxxxxx
Toroyaco
1
Xxxxxxxx
0
Xxxxxxxx
0
Xxxxxxxx
0
|
28.0%
28.0%
28.0%
28.0%
28.0%
20.6612%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28,0%
28.0%
28.0%
|
The
area more specifically described in Annex A of the Amendment to the
Xxxxxxx Shared Risk Contract effective August 14, 2002, attached
to this
Schedule 1.28 on pages 2 to 28, setting forth the coordinates of
the
property (a) comprising an area of 21,191 hectares and 5,800 square
meters, located in the Guayuyaco Sector in the municipal jurisdictions
of
Villa Xxxxxx, Puerto Xxxxxx and Mocoa in the Putumayo Province, and the
municipal jurisdiction of Santa Xxxx in the Cauca Province, and
including
only
(b) (i) the productive areas individually redefined for each of the
reservoirs of the Xxxx, Xxxxxxxx, Xxxxx and Toroyaco fields, as described
more fully therein; and (ii) the Inchiyaco field which has been determined
to be connected to the Xxxx xxxxx.
|
|||
|
Block:
Guayuyaco
Field:
Guayuyaco
|
Guayuyaco
1
Guayuyaco
2
|
32.2%
32.2%
|
The
area more specifically described in Annex A of the Guayuyaco Adjacent
Prospect Contract effective September 20, 2002, attached to this
Schedule
1.28 on pages 29 to 39, setting forth the coordinates of the property
(a)
comprising an area of 21,191 hectares and 5,800 square meters, located
in
the Guayuyaco Sector in the municipal jurisdictions of Villa Xxxxxx,
Puerto Xxxxxx and Mocoa in the Putumayo Province, and the municipal
jurisdiction of Santa Xxxx in the Cauca Province, and excluding
(b) (i) the productive areas individually redefined for each of the
reservoirs of the Xxxx, Xxxxxxxx, Xxxxx and Toroyaco fields, as described
more fully therein; and (ii) the Inchiyaco field which has been determined
to be connected to the Xxxx xxxxx.
|
|||
|
Block:
Rio
Xxxxxxxxx
|
(2)
|
32.2%
|
The
area more specifically described in Annex A of the Rio Xxxxxxxxx
Association Contract effective February 8, 2002, attached to this
Schedule
1.28 on pages 40 to 79, setting forth the coordinates of property
comprising an area of 43,841 hectares and 867 square meters, located
in
the Río Xxxxxxxxx Sector in the municipal jurisdictions of San Xxxx xx
Xxxxxxx, Xxxxxxx, Pulí and Guataqui in the Cundinamarca Province, and the
municipal jurisdictions of Guayabal, Lérida, Venadillo, Ambalema and
Piedras in the Tolima Province.
|
|||
|
Block:
Talora
|
(2)
|
18.4%
|
The
area more specifically described in Annex A of the Talora Exploration
and
Exploitation Contract effective September 16, 2004, attached to this
Schedule 1.28 on pages 45 to 47, setting forth the coordinates of
property
comprising an area of 32,472 hectares and 6,893 square meters, located
in
the Chaza Sector in the municipal jurisdictions of Mocoa and Villagarzón
in the Putumayo Province and the municipal jurisdiction of Piamonte
in the
Cauca Province.
|
-41-
|
Block:
Chaza
|
(2)
|
46.0%
|
The
area more specifically described in Annex A of the Chaza Exploration
and
Exploitation Contract effective June 27, 2005, attached to this Schedule
1.28 on pages 53 to 62, setting forth the coordinates of property
comprising an area of 32,472 hectares and 6,893 square meters, located
in
the Chaza Sector in the municipal jurisdictions of Mocoa and Villagarzón
in the Putumayo Province and the municipal jurisdiction of Piamonte
in the
Cauca Province.
|
|||
|
Block:
Primavera
|
(2)
|
13.8%
|
The
area more specifically described in Annex A of the Primavera Exploration
and Exploitation Agreement effective May 9, 2006, setting forth the
coordinates of property commonly known as Primavera Block, which
description is attached to this Schedule 1.28 on pages 63 to
74.
|
|||
|
Block:
Mecaya
|
(2)
|
13.8%
|
The
area more specifically described in Exhibit I of the Mecaya Commercial
Agreement effective May 23, 2006 by and among Expet S.A., Mecaya
Colombia
Partners LLC and Argosy Energy International, setting forth the
coordinates of the Mecaya exploration block in the Putumayo Province
of
Colombia, which Exhibit I is attached to this Schedule 1.28 op pages
75 to
77.
|
|||
|
Block:
Mandiyaco
|
(2)
|
92.0%
|
The
area more specifically described in the attachment to the application
for
the Mandiyaco Block with XXX dated April 27, 2006, setting forth
the
coordinates of the proposed Mandiyaco exploration block in the Cauca
Province of Colombia, which such “Mandiyaco Area” attachment is attached
to this Schedule 1.28 on pages 78 to
79.
|
| (1) |
The
following descriptions are the surface areas for such Historical
Properties, and include any productive Hydrocarbon bearing intervals
which
are found beneath such surface
areas.
|
| (2) |
No
producing xxxxx as of May 25, 2006
|
-42-
SCHEDULE
1.53
XXXX
PROSPECT AREA MAP
-43-
SCHEDULE
1.53
TO
THE
XXXX
PROSPECT AREA MAP
SEE
ATTACHED PAGE 1
[Map]
CPA
SCHEDULE 1.53 PAGE 1
[Map]
-44-
SCHEDULE
1.54
PREEXISTING
FIELDS
-45-
SCHEDULE
1.54
TO
THE
PRE-EXISTING
FIELDS
SEE
ATTACHED PAGE 1
-46-
|
Field
Name
|
|
Colombian
Contract
Area
|
|
Formation
Name
|
|
Formation
Depth
|
|
Xxxxx
|
|
Xxxxxxx
Block
|
|
Villeta
“U”
|
|
8688
- 8938
|
|
|
|
|
|
Villeta
“T”
|
|
8800
- 8970
|
|
|
|
|
|
Villeta
“N”
|
|
8076
- 8345
|
|
|
|
|
|
Caballos
|
|
8991
- 9105
|
|
|
|
|
|
|
|
|
|
Xxxx
|
|
Xxxxxxx
Block
|
|
Villeta
“U”
|
|
7404
- 7715
|
|
|
|
|
|
Villeta
“T”
|
|
7647
- 7882
|
|
|
|
|
|
Villeta
“N”
|
|
6894
- 6902
|
|
|
|
|
|
Caballos
|
|
7767
- 8018
|
|
|
|
|
|
|
|
|
|
Inchiyaco
|
|
Xxxxxxx
Block
|
|
Villeta
“U”
|
|
7354
- 7520
|
|
|
|
|
|
Caballos
|
|
7916
- 7976
|
|
|
|
|
|
|
|
|
|
Xxxxxxxx
|
|
Xxxxxxx
Block
|
|
Villeta
“U”
|
|
6476
- 6545
|
|
|
|
|
|
Villeta
“T”
|
|
6652
- 6798
|
|
|
|
|
|
Villeta
“N”
|
|
5868
- 5896
|
|
|
|
|
|
Caballos
|
|
6780
- 6820
|
|
|
|
|
|
|
|
|
|
Toroyaco
|
|
Xxxxxxx
Block
|
|
Villeta
“U”
|
|
8838
- 9100
|
|
|
|
|
|
Villeta
“T”
|
|
9036
- 9274
|
|
|
|
|
|
Villeta
“N”
|
|
8128
- 8138
|
|
|
|
|
|
Caballos
|
|
9370
- 9396
|
|
|
|
|
|
|
|
|
|
Guayuyaco
|
|
Guayuyaco
Block
|
|
Villeta
“U”
|
|
7490
- 7620
|
|
|
|
|
|
Villeta
“T”
|
|
7754
- 7790
|
|
|
|
|
|
Caballos
|
|
7882
- 7903
|
-47-
SCHEDULE
9.1
TO
THE
COLOMBIAN
PARTICIPATION AGREEMENT
XXXXXX
CAPITAL, LLC MEMBERS
SEE
ATTACHED PAGE 1
-48-
| • |
LJB
Partners, L.P.
|
| • |
Xxxxxxxxxx
Living Trust
|
| • |
Lincoln
Trust Company, Custodian FBO Xxxxxx X. Xxxxxxxxxx Xxxx/XXX — Account
00000000
|
| • |
Lincoln
Trust Company, Custodian FBO Xxxxxx X. Xxxxxxxxxx Xxxx/XXX — Account
00000000
|
| • |
Xxx
Xxxxx Xxxxxxx
|
| • |
Bunker
Hill Associates, Inc.
|
-49-
EXHIBIT
A
TO
COLOMBIAN PARTICIPATION AGREEMENT
Terms
of Letter of Credit Draws
The
Initial Letter of Credit, a New Letter of Credit or any replacement letter
of
credit provided under Section 6 of this Agreement (collectively, the
“Letters
of Credit”)
can be
drawn under the following circumstances: (i) a payment default by Gran Tierra
and/or Argosy under this Agreement pursuant to the terms of Section I below
(a
“Payment
Default”),
or
(ii) any time Xxxxxx should be protected with a Letter of Credit in the correct
aggregate amount as set forth in Section
6
of this
Agreement but is not, pursuant to the terms of Section II below (a “Letter
of Credit Default”),
or
(iii) any time Xxxxxx should be protected with a Letter of Credit from an Issuer
Bank with an Issuer Acceptable Credit Rating as set forth in Section 6 of this
Agreement but is not, pursuant to the terms of Section
III
below.
I. Payment
Default.
Xxxxxx
shall be entitled to draw under the Letter of Credit in the exact amount that
it
is owed under this Agreement if and only it certifies to the issuing bank (the
“Issuer
Bank”)
with
reasonable evidence attached thereto that one of the following two conditions
has been satisfied:
A. Condition
One: Gran Tierra and/or Argosy fail to make a payment and Gran Tierra and/or
Argosy admit explicitly in writing that they owe such amount; or
B. Condition
Two: Either:
| (1) |
|
| (a) |
An
award of the Panel provided in Section 11.2 provides for payment
of money
to Xxxxxx (“Xxxxxx
Arbitration Award”);
and
|
|
(b)
|
Within
10 business days of such award, (i) the Xxxxxx Arbitration Award
has not
been paid and (ii) the Xxxxxx Arbitration Award has been appealed;
or
|
| (2) |
|
| (a) |
In
the event the Xxxxxx Arbitration Award has been appealed, a final
determination favorable to Xxxxxx has been entered (the “Xxxxxx
Final Determination”);
and
|
|
(b)
|
Xxxxxx
has not been paid in full the amount of the Xxxxxx Final Determination
within five business days of such Xxxxxx Final
Determination.
|
II. Letter
of Credit Renewal Default.
Xxxxxx
shall be entitled to draw a Letter of Credit in full and deposit such amount
in
an escrow account at the Xxxxxx Escrow Bank if and only if it certifies to
the
Issuer Bank with reasonable evidence attached thereto that the money will be
deposited in such escrow and the following two conditions are
satisfied:
A. Not
less
than 60 days nor more than 90 days prior to the end of any Letter of Credit
term, Xxxxxx delivered written notice to Gran Tierra, Argosy and/or any
permitted transferee, that any of them, as the case may be, is required under
pursuant to Section
6
and this
Exhibit
A
to
deliver to Xxxxxx a Letter of Credit satisfying the terms set forth Section
6
and this
Exhibit
A;
and
-50-
B. Gran
Tierra, Argosy or such permitted transferee has not within ten (10) business
days provided such new Letter of Credit.
III. Issuer
Bank Credit Rating Non-Maintenance Default.
Xxxxxx
shall be entitled to draw a Letter of Credit in full and
deposit
such amount in an escrow account at the Xxxxxx Escrow Bank if and only if it
certifies to the Issuer Bank with reasonable evidence attached thereto that
the
money will be deposited in such escrow and the following two conditions are
satisfied:
X. Xxxxxx
delivered written notice to Gran Tierra, Argosy and/or any permitted transferee,
as applicable, that the Issuer Bank’s rating by Standard & Poor’s has fallen
below the Issuer Acceptable Credit Rating, and requesting delivery of a
replacement Letter of Credit as required under and satisfying the terms of
Section
6
and this
Exhibit
A;
and
B. Gran
Tierra, Argosy or such permitted transferee, as the case may be, has not within
fifteen (15) business days provided such new Letter of Credit.
-51-
Exhibit
B
[Form
of the Initial Letter of Credit attached hereto]
Amendment
No. 1 to
Colombian
Participation Agreement
-52-
IRREVOCABLE
STANDBY LETTER OF CREDIT
Effective
as of 31st October, 2006
Irrevocable
Letter of Credit No. [ ]
|
APPLICANT:
GRAN
TIERRA ENERGY INC.
300,
611 - 10th
Avenue S.W.
Calgary,
Alberta
Canada
T2R OBZ
|
|
|
STATED
AMOUNT:
USD
$4,000,000
|
|
|
EXPIRY
DATE:
31st
October, 2007
(save
as such date may be extended pursuant to paragraph 9
below)
AT
OUR COUNTERS
|
|
|
BENEFICIARY:
XXXXXX
CAPITAL, LLC
000
Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000
Attention:
Xxx Xxxxx Xxxxxxx
|
Re: Colombian
Participation Agreement
1. We,
Standard Bank Plc (the “Issuing
Bank”),
hereby issue our irrevocable Standby Letter of Credit on behalf of Gran Tierra
Energy Inc (the “Applicant”)
for an
amount of USD 4,000,000 (Four Million United States Dollars) in favour of Xxxxxx
Capital, LLC (the “Beneficiary”).
2. This
Standby Letter of Credit covers all monics and liabilities (whether actual
or
contingent) for up to the amount of USD 4,000,000 (Four Million United States
Dollars) which are now or shall at any time hereafter be due, owing or payable
to the Beneficiary from or by the Applicant under the terms of a participation
agreement entered into on 22nd
June,
2006 between the Applicant, Beneficiary and Argosy Energy International (as
amended and in effect from time to time, the “Colombian
Participation Agreement”).
3. CLAIM
DOCUMENTATION. Authenticated swift or tested telex claiming the sum due and
in
the appropriate form designated below:
|
(a)
|
if
a claim is being made with respect to a payment default under the
Colombian Participation Agreement, the form of Exhibit A
hereto;
|
-53-
|
(b)
|
if
a claim is being made with respect to a Letter of Credit renewal
default
under the Colombian Participation Agreement, the form of Exhibit
B
hereto;
|
|
(c)
|
if
a claim is being made with respect to a default under the Columbian
Participation Agreement in providing an additional Letter of Credit
following a draw under a Letter of Credit, the form of Exhibit C;
and/or
|
|
(d)
|
if
a claim is being made with respect to an Issuing Bank credit rating
downgrade under the Colombian Participation Agreement, the form of
Exhibit
D hereto.
|
4. We
hereby
irrevocably and unconditionally undertake to honour all claims made by the
Beneficiary in accordance with the terms and conditions of this Standby Letter
of Credit within five (5) Business Days after our receipt thereof provided
such
claim documentation is received on or prior to 5:30pm (Greenwich Meantime)
on
the Expiry Date or on any day prior to the Expiry Date. For the purposes of
this
Standby Letter of Credit, “Business
Day”
shall
mean any day (other than a Saturday or Sunday) on which banks are open for
business in London.
5. It
is
further agreed that this Standby Letter of Credit shall be without prejudice
to
such rights as the Beneficiary may have at any time in respect of any security
that the Beneficiary may hold for the said indebtedness and liabilities and
that
our liability shall not be affected by giving time or other indulgence to the
Applicant, or by the Beneficiary realizing or entering into any compromise
with
depositors or any other collateral the Beneficiary may hold at any time in
respect of the said liability.
6. TT
Reimbursement and partial drawings are allowed.
7. This
Standby Letter of Credit is not assignable.
8. A
person
who is not a party to this Standby Letter of Credit has no right under the
Contracts (Rights of Third Parties) Xxx 0000 to enforce the terms of this
Standby Letter of Credit.
9. Save
as
may be extended in accordance with the terms below, this Standby Letter of
Credit expires at the counters of Standard Bank Plc on the Expiry Date. At
any
time no less than 90 days but no more than 120 days prior to the Expiry Date,
the Applicant may by written notice addressed to the Issuing Bank request that
the Expiry Date is extended for an additional period not to exceed one year.
The
Issuing Bank shall, no later than 30 days after receiving such request, notify
the Beneficiary and the Applicant of its acceptance or rejection of such request
and, if accepted, confirm the new Expiry Date.
10. All
documents presented to the Issuing Bank in connection with any demand for
payment under this Letter of Credit, as well as all notices and other
communications to the Issuing Bank in respect hereof, shall be in writing,
shall
make specific reference to this Standby Letter of Credit by number and shall
be
delivered to the Issuing Bank at its office located at Standard Bank PLC, Canon
Xxxxxx Xxxxx, 00 Xxxxxxx Xxxx, Xxxxxx, XX0X 0XX (or at any other office of
the
Issuing Bank as may be designated by the Issuing Bank by written notice
delivered to the Beneficiary) by authenticated SWIFT message (or any other
form
of communication previously agreed in writing with the Issuing Bank) to the
following address (or at any number(s) designated by the Issuing Bank by written
notice delivered to the Beneficiary), as applicable: [please
provide].
-54-
11. This
Standby Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the “UCP”).
This
Standby Letter of Credit shall be governed by the laws of the State of New
York,
and the state and federal courts located in the State, County and City of New
York shall have non-exclusive jurisdiction in any action or proceeding arising
out of this Standby Letter of Credit.
12. Demand
for payment under this Standby Letter of Credit shall be presented directly
to
the Issuing Bank and shall not be negotiated.
13. Standard
Bank Plc’s charges are for the account of the Applicant, all other charges are
for the account of the Beneficiary.
14. By
paying
the Beneficiary an amount demanded in accordance with this Standby Letter of
Credit, the Issuing Bank makes no representation as to the correctness of the
amount demanded or of the calculations and representations of the Beneficiary
required by this Letter of Credit.
15. This
Standby Letter of Credit sets forth in full the Issuing Bank’s undertaking, and
such undertaking shall not be deemed in any way to be modified, amended,
amplified or otherwise affected by any document, instrument or agreement
referred to herein (including, without limitation, the Colombian Participation
Agreement or credit agreement to which is relates), except only the Uniform
Customs and the certificate(s) provided for herein.
|
STANDARD
BANK PLC
|
|
|
By:
|
|
|
Title:
|
|
|
By:
|
|
|
Title:
|
|
-55-
Exhibit
A
Irrevocable
Letter of Credit
No.
CERTIFICATE
FOR A PAYMENT DEFAULT
The
undersigned hereby certifies to Standard Bank PLC (the “Issuing
Bank”),
with
reference to Irrevocable Letter of Credit No. _______ (the “Letter
of Credit”)
issued
by the Issuing Bank in favor of Xxxxxx Capital, LLC (the “Beneficiary”),
and
fur the account of Gran Tierra Energy Inc. (the “Account
Party”),
that
the undersigned is a duly authorized officer of the Beneficiary, that any
capitalized term used but not defined herein shall have its respective meaning
set forth in the Letter of Credit or the Colombian Participation ion Agreement
referred to therein and that:
The
Beneficiary is entitled to draw $[
] (the
“Draw
Amount”)
under
the Letter of Credit, which is the exact amount that is owed to the Beneficiary
under the Colombian Participation Agreement. The Beneficiary hereby directs
the
Issuing Bank to pay the Draw Amount by wire transfer of such amount in
immediately available funds to the account of the Beneficiary specified
below:
Bank
Name:
Address:
ABA
No.:
Account
Name:
Account
No.:
Attention:
[Include
either [A] or [B].]
| [A] |
[The
Beneficiary further certifies to the Issuing Bank that attached hereto
is
the written agreement of the Account Party acknowledging that the
Draw
Amount is due to the Beneficiary under the Colombian Participation
Agreement and that the Account Party and its affiliates have failed
to
make such payment.]
|
| [B] |
[Include
either [1] or [2]]
|
[(1)]
[The Beneficiary further certifies to the Issuing Bank that:
(a) an
award
of the Panel provided in Section 11.2 of the Colombian Participation Agreement,
provided for payment of the Draw Amount to the Beneficiary (the “Xxxxxx
Arbitration Award”);
and
(b) within
10
business days of the Xxxxxx Arbitration Award, (i) the Xxxxxx Arbitration Award
has not been paid and (ii) the Xxxxxx Arbitration Award has not been
appealed.]
[(2)]
[The Beneficiary further certifies to the Issuing Bank that:
(a)
an
award of the Panel provided in Section 11.2 of the Colombian Participation
Agreement, provided for payment of the Draw Amount to the Beneficiary (the
“Xxxxxx
Arbitration Award”);
-56-
Exhibit
A
Irrevocable
Letter of Credit
No.
(b) within
10
business days of the Xxxxxx Arbitration Award, (i) the Xxxxxx Arbitration Award
was not paid and (ii) the Xxxxxx Arbitration Award was appealed;
(c) a
final
determination of the Xxxxxx Arbitration Award favorable to the Beneficiary
has
been entered (the “Xxxxxx
Final Determination”)
on
appeal; and
(d) the
Beneficiary has not been paid in full the amount of the Xxxxxx Final
Determination within 5 business days of such Xxxxxx Final
Determination.]
IN
WITNESS WHEREOF, the Beneficiary has executed and delivered this Certificate
as
of the ___ day of _____, ______.
| XXXXXX CAPITAL, LLC | ||
|
By:
|
||
|
Title:
|
||
-57-
Exhibit
B
Irrevocable
Letter of Credit
No.
CERTIFICATE
FOR A LETTER OF CREDIT RENEWAL DEFAULT
The
undersigned hereby certifies to Standard Bank PLC (the “Issuing
Bank”),
with
reference to Irrevocable Letter of Credit No. ____ (the “Letter
of Credit”)
issued
by the Issuing Bank in favor of Xxxxxx Capital, LLC (the “Beneficiary”),
and
for the account of Gran Tierra Energy Inc. (the “Account
Party”),
that
the undersigned is a duly authorized officer of the Beneficiary, that any
capitalized term used but not defined herein shall have its respective meaning
set forth in the Letter of Credit or the Colombian Participation Agreement
referred to therein and that:
The
Beneficiary is entitled to draw the Letter of Credit in full and deposit the
Stated Amount in the escrow account at the Xxxxxx Escrow Bank specified below
(the “Escrow
Account”).
The
Xxxxxx Escrow Agreement has been executed by each of the Beneficiary and the
Xxxxxx Escrow Bank, and contains the provisions required by the Colombian
Participation Agreement. A copy of such executed Xxxxxx Escrow Agreement is
delivered herewith. The Beneficiary hereby directs the Issuing Bank to pay
the
Stated Amount under the Letter of Credit by wire transfer of such amount in
immediately available finds directly to the Escrow Account, as
follows:
Bank
Name:
Address:
ABA
No.:
Account
Name:
Account
No.:
Attention:
[Include
either [A] or [B].]
| [A] |
The
Beneficiary hereby further certifies to the Issuing Bank that: (1)
the
Initial Term has not expired; and (2) the Account Party has failed
to
extend the Expiry Date of the Letter of Credit for an additional
one year,
pursuant to Section 9 of the Letter of
Credit.]
|
| [B] |
The
Beneficiary hereby further certifies
that:
|
|
(1)
|
not
less than 60 days nor more than 90 days prior to the Stated Termination
Date, the Beneficiary delivered written notice to the Account Party
that
the Account Party is required under Section 6 of the Participation
Agreement to deliver to the Beneficiary confirmation of an extension
of
the Letter of Credit for an additional period equal to the shorter
of (i)
one year from the Stated Termination Date and (ii) the period ending
on
the last day of the Initial Term;
and
|
|
(2)
|
the
Account Party has not provided such an extension of the Letter of
Credit
prior to the date that is 10 Business Days following the date which
is 60
days prior to the Stated Termination
Date.]
|
-58-
Exhibit
B
Irrevocable
Letter of Credit
No.
IN
WITNESS WHEREOF, the Beneficiary has executed and delivered this Certificate
as
of the ___ day of ______, ______.
|
XXXXXX
CAPITAL, LLC
|
||
|
By:
|
||
|
Title:
|
||
-59-
Exhibit
C
Irrevocable
Letter of Credit
No.
CERTIFICATE
FOR A LETTER OF CREDIT REINSTATEMENT DEFAULT
The
undersigned hereby certifies to Standard Bank PLC (the “issuing
Bank”),
with
reference to Irrevocable Letter of Credit No. ______ (the “Letter
of Credit”)
issued
by the Issuing Bank in favor of Xxxxxx Capital, LLC (the “Beneficiary”),
and
for the account of Gran Tierra Energy Inc. (the “Account
Party”),
that
the undersigned is a duly authorized officer of the Beneficiary, that any
capitalized term used but not defined herein shall have its respective meaning
set forth in the Letter of Credit or the Colombian Participation Agreement
referred to therein and that:
The
Beneficiary is entitled to draw the remaining undrawn portion of the Stated
Amount of the Letter of Credit (the “Remaining
Amount”)
and
deposit the Remaining Amount in the escrow account at the Xxxxxx Escrow Bank
specified below (the “Escrow
Account”).
The
Xxxxxx Escrow Agreement has been executed by each of the Beneficiary and the
Xxxxxx Escrow Bank, and contains the provisions required by the Colombian
Participation Agreement. A copy of such executed Xxxxxx Escrow Agreement is
delivered herewith. The Beneficiary hereby directs the Issuing Bank to pay
the
Remaining Amount under the Letter of Credit by wire transfer of such amount
in
immediately available funds directly to the Escrow Account, as
follows:
Bank
Name:
Address:
ABA
No.:
Account
Name:
Account
No.:
Attention:
The
Beneficiary hereby further certifies that, following a prior draw under a Letter
of Credit, the Account Party has failed to deliver a new letter of credit to
the
Beneficiary in the amount of such draw within 45 days of such draw as required
by the Columbian Participation Agreement.
IN
WITNESS WHEREOF, the Beneficiary has executed and delivered this Certificate
as
of the ____ day of _____, ______.
|
XXXXXX
CAPITAL, LLC
|
||
|
By:
|
||
|
Title:
|
||
-60-
CERTIFICATE
FOR AN ISSUING BANK CREDIT
RATING
NON-MAINTENANCE DEFAULT
The
undersigned hereby certifies to Standard Bank PLC (the “Issuing
Bank”),
with
reference to Irrevocable Letter of Credit No. ______ (the “Letter
of Credit”)
issued
by the Issuing Bank in favor of Xxxxxx Capital, LLC (the “Beneficiary”),
and
for the account of Gran Tierra Energy Inc. (the “Account
Party”).
that
the undersigned is a duly authorized officer of the Beneficiary, that any
capitalized term used but not defined herein shall have its respective meaning
set forth in the Letter of Credit or the Colombian Participation Agreement
referred to therein and that:
The
Beneficiary is entitled to draw the Letter of Credit in full and deposit the
Stated Amount in the escrow account at the Xxxxxx Escrow Bank specified below
(the “Escrow
Account”).
The
Xxxxxx Escrow Agreement has been executed by each of the Beneficiary and the
Xxxxxx Escrow Bank, and contains the provisions required by the Colombian
Participation Agreement. A copy of such executed Xxxxxx Escrow Agreement is
delivered herewith. The Beneficiary hereby directs the Issuing Bank to pay
the
Stated Amount under the Letter of Credit by wire transfer of such amount in
immediately available funds directly to the Escrow Account, as
follows:
Bank
Name:
Address:
ABA
No.:
Account
Name:
Account
No.:
Attention:
The
Beneficiary hereby further certifies that:
|
A.
|
the
Beneficiary delivered written notice to the Account Party that the
Issuing
Bank’s credit rating has fallen below the Issuer Acceptable Credit Rating
and requested delivery of a replacement Letter of Credit as required
under
Section 6 of the Participation Agreement;
and
|
|
B.
|
the
Account Party has not within 15 business days following receipt of
such
notice provided such a replacement Letter of
Credit.
|
IN
WITNESS WHEREOF, the Beneficiary has executed and delivered this Certificate
as
of the
____
day
of ______, _______.
|
XXXXXX
CAPITAL, LLC
|
||
|
By:
|
||
|
Title:
|
||
-61-
