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Exhibit 10.37
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLIC DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Execution Version
FIFTEENTH AMENDMENT TO CREDIT AGREEMENT
This Fifteenth Amendment to Credit Agreement (this “Amendment”) is entered into effective as of the 7th day of December, 2020, by and among Gran Tierra Energy International Holdings Ltd., an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Borrower”), Gran Tierra Energy Inc., a corporation duly formed and existing under the laws of the State of Delaware (the “Parent”), The Bank of Nova Scotia, as administrative agent (the “Administrative Agent”) and the Lenders party hereto.
W I T N E S S E T H:
1.WHEREAS, the Borrower, the Parent, the Administrative Agent, and Lenders are parties to that certain Credit Agreement dated as of September 18, 2015 (as amended, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”) (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement as amended by this Amendment); 
2.WHEREAS, pursuant to the Credit Agreement, the Lenders have made certain Loans to the Borrower and provided certain other credit accommodations to the Borrower; 
3.WHEREAS, the Lenders have agreed to a redetermination of the Borrowing Base, which redetermination shall constitute the Scheduled Redetermination to occur on or about November 1, 2020;
4.WHEREAS, the Borrower has requested that the Lenders approve the form of Permitted Advance Payment Agreement (the “Fifteenth Amendment Permitted Advance Payment Agreement”) and the Commercial Contracts (as defined in the Permitted Advance Payment Agreement,  herein, the “Fifteenth Amendment Commercial Contracts”) in the forms attached as Exhibit A  and the form of Subordination Agreement in the form attached as Exhibit B (the “Fifteenth Amendment Subordination Agreement”);
5.WHEREAS, the parties desire to enter into this Amendment to make certain amendments and modifications, in each case upon the terms and conditions set forth herein and in each case to be effective as of the Fifteenth Amendment Effective Date (as defined below);
6.WHEREAS, the Administrative Agent, the Borrower and the Lenders party hereto, which constitute at least the Required Revolving Credit Lenders, have agreed to enter into this 

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US 7513942v.7

Amendment to amend the Credit Agreement and to set the Borrowing Base pursuant to the Scheduled Redetermination, as more particularly set forth herein; 
7.NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Credit Parties, the Administrative Agent and the Lenders hereto hereby agree as follows:
Section 1.Amendments.  In reliance on the representations, warranties, covenants and agreements contained in this Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is, effective as of the Fifteenth Amendment Effective Date, hereby amended in the manner provided in this Section 1.
a.Amendment to Section 1.02.  Section 1.02 of the Credit Agreement is hereby amended to insert the following definitions therein in appropriate alphabetical order which shall read in full as follows:
“Accounts Payable” means all accounts payable and all accrued expenses and liabilities to third parties or other obligations of such Person to pay the deferred purchase price of Property or services.
“Commercial Contract” has the meaning set forth in the definition of Permitted Advance Payment Agreement.
“Fifteenth Amendment” means that certain Fifteenth Amendment, dated as of December 7th, 2020, by and among the Parent, the Borrower, the Administrative Agent and the other parties thereto.
“Fifteenth Amendment Permitted Advance Payment Agreement” has the meaning set forth in the Fifteenth Amendment.
“Fifteenth Amendment Subordination Agreement” has the meaning set forth in the Fifteenth Amendment.
“Initial Permitted Advance Payment Amount” has the meaning set forth in Section 8.01(y).
 “Outstanding Permitted Advance Payment Amount” has the meaning set forth in Section 8.01(y).
 “Required Availability Amount” means an amount, as of the relevant date of determination, equal to (a) (i) from December 31, 2020 through and including, June 29, 2021, $15,000,000 and (ii) from June 30, 2021 and thereafter, $20,000,000, plus (b) one-half (1/2) of the Outstanding Permitted Advance Payment Amount, plus (c) to the extent not included in the Outstanding Permitted Advance Payment Amount in the foregoing clause (b), one half (1/2) of any Initial Permitted Advance Payment Amount. 
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“Shortfall Payment” means a cash payment required to be made on a monthly basis in lieu of delivery of crude oil and solely due to under delivery of crude oil pursuant to the terms of any applicable Permitted Advance Payment Agreement; which repayment under any Permitted Advance Payment Agreement shall be substantially in accordance with the requirements of clause 4.5.3(ii) of the Fifteenth Amendment Advance Payment Agreement.
b.Amendment to Section 1.02.  Section 1.02 of the Credit Agreement is hereby amended to amend and restate the definition of “Permitted Advance Payment Agreement” therein which shall read in full as follows:
“Permitted Advance Payment Agreement” means any agreement between any Credit Party and any Person pursuant to which such Credit Party agrees to sell production from Oil and Gas Properties pursuant to one or more Commercial Contracts (as defined in such Permitted Advance Payment Agreement) to such Person  in exchange for one or more advance payments from such Person, in form and substance (a) substantially consistent, and otherwise in form reasonably satisfactory to the Administrative Agent, with the Fifteenth Amendment Permitted Advance Payment Agreement; provided that the following additions and changes to the Fifteenth Amendment Permitted Advance Payment Agreement shall be deemed not to be substantially consistent with the Fifteenth Amendment Permitted Advance Payment Agreement: any existence of minimum volume commitments, more punitive advance life coverage ratio, additional or inconsistent termination or prepayment provisions (of any kind, including as they relate to the Commercial Contracts), collateral or guarantee requirements, the removal of the requirement that such contract be subordinated on the same terms to the claims of the Lenders or any other economic change which is adverse to any Credit Party or the interests of the Lenders; or (b) reasonably satisfactory to the Required Revolving Credit Lenders.
c.Amendment to Section 1.02.  Section 1.02 of the Credit Agreement is hereby amended to amend and restate the definition of “Senior Secured Leverage Ratio” therein which shall read in full as follows:
“Senior Secured Leverage Ratio” means, as of any date of determination, the ratio of (a)(i) Senior Secured Obligations plus (ii) solely to the extent not constituting Senior Secured Obligations, Accounts Payable which are more than ninety (90) days past the date of invoice, in each case, as of such date to (b) EBITDAX for the four fiscal quarters ending on such date.
d.Amendment to Section 1.02.  Section 1.02 of the Credit Agreement is hereby amended to amend and restate the definition of “Subordination Agreement” therein which shall read in full as follows:
“Subordination Agreement” means any subordination agreement subordinating the Credit Parties’ obligations under any Permitted Advance Payment Agreement to the Credit Parties’ Secured Obligations, in form and substance (a) substantially consistent, and otherwise in form reasonably satisfactory to the Administrative Agent, with the 
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Fifteenth Amendment Subordination Agreement; provided that any removal of any requirement that the counterparty thereto is not subordinate on the same terms of payment, any removal of any pledge or security interest granted by such counterparty or any other change to the priority of security or payment subordination set forth therein shall be deemed not to be substantially consistent with such subordination agreement; or (b) reasonably satisfactory to the Required Revolving Credit Lenders.
e.Amendment to Section 1.02.  Section 1.02 of the Credit Agreement is hereby amended to insert “(c), “ immediately after each instance of “(a), (b), ” in the definition of “Total Debt” therein.
f.Amendment to Section 6.02.  Section 6.02 of the Credit Agreement is hereby amended to:
(i)Amend and restate the final paragraph thereof as follows:
Each request for a Borrowing of Loans under Section 2.02 and each request for the issuance, amendment, renewal or extension of any Letter of Credit shall be deemed to constitute a representation and warranty by the Credit Parties on the date thereof as to the matters specified in Section 6.02(a), (b), (d) and (e).
(ii)insert a new clause (e) immediately after clause (d) therein which shall read in full as follows:
(e) During the Covenant Relief Period, at the time of and on a pro forma basis, immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, the aggregate Revolving Credit Exposure of all Revolving Credit Lenders shall not exceed an amount equal to (i) the aggregate Revolving Credit Commitments of all Revolving Credit Lenders minus (ii) the Required Availability Amount (or such lesser amount as consented to by the Required Revolving Credit Lenders).
g.Amendment to Section 8.01.  Section 8.01 of the Credit Agreement is hereby amended to insert the following new clauses (x) and (y) in appropriate alphabetical order thereto which shall read in full as follows:
(x)    Accounts Payable Aging.    No later than fourteen (14) days after the end of each calendar month, a report in form reasonably acceptable to the Administrative Agent, detailing (i) the aggregate amounts and days outstanding for all Accounts Payable as of the end of such prior calendar month, segregated into categories of (A) less than or equal to thirty (30), (B) less than or equal to sixty (60), (C) less than or equal to ninety (90) and (D) greater than ninety (90), in each case, days outstanding from both the date of invoice and the due date thereof and (ii) with respect to any Accounts Payable which are outstanding more than ninety (90) days from the date of invoice or the due date thereof, to whom such Accounts Payable are owed and any supporting information reasonably requested by the Administrative Agent.
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(y)    Permitted Advance Payment Agreement Reporting.  (i) No later than fourteen (14) days after the end of each calendar month, a certificate of a Responsible Officer of the Borrower (A) setting forth all amounts outstanding under each Permitted Advance Payment Agreement as of the end of such prior calendar month (such aggregate amount outstanding under all Permitted Advance Payment Agreements, the “Outstanding Permitted Advance Payment Amount”), (B) setting forth the aggregate amount paid and volume of oil delivered (if any) by any Credit Party under each Permitted Advance Payment Agreement during such prior calendar month, and (C) certifying that the information set forth in such certificate is true and correct and (ii) no later than three (3) days after the execution of any Permitted Advance Payment Agreement, a certificate of a Responsible Officer of the Borrower (A) setting forth the initial amount outstanding under such Permitted Advance Payment Agreement (such amount, an “Initial Permitted Advance Payment Amount”) and (B) certifying that the information set forth in such certificate is true and correct.
h.Amendment to Section 8.02(d).  Section 8.02(d) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
(d)    the occurrence of any event which requires any payment of the Credit Parties’ obligations (including prior to the original due date thereof) or results in the termination of any Permitted Advance Payment Agreement prior to the initial stated maturity date thereof. 
i.Amendment to Section 8.16.  Section 8.16 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
Section 8.16    Minimum Hedging Requirement.  Minimum Hedging Requirement.  Within ten (10) Business Days after the first funding under any Permitted Advance Payment Agreement, the Credit Parties shall enter into and maintain Swap Agreements (with price floors reasonably satisfactory to the Administrative Agent), where net notional volumes (when aggregated with other commodity Swap Agreements then in effect) are not less than one hundred percent (100%) of the total amount of production required to be sold under all Permitted Advance Payment Agreements on a monthly basis sufficient to cover the monthly amortization payments under all then existing Permitted Advance Payment Agreements until the final scheduled payment thereunder.
j.Amendment to Section 9.01(c).  Section 9.01(c) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
(c)    Interest Coverage Ratio. The Parent will not (i) as of last day of the fiscal quarters ending (x) June 30, 2020 and (y) September 30, 2020, in each case, permit its ratio of EBITDAX for the period of four fiscal quarters then ending to Interest Expense for such period to be less than 2.5 to 1.0, (ii) as of the last day of the fiscal quarters ending December 31, 2020 and March 31, 2021, permit its ratio of EBITDAX for the period of four fiscal quarters then ending to Interest Expense for such period to be less than 1.5 to 1.0, (iii) as of the last day of the fiscal quarters ending June 30, 2021 and 
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September 30, 2021, permit its ratio of EBITDAX for the period of four fiscal quarters then ending to Interest Expense for such period to be less than 2.0 to 1.0, and (iv) as of the last day of any fiscal quarter thereafter, commencing on the fiscal quarter ending 
December 31, 2021, permit its ratio of EBITDAX for the period of four fiscal quarters then ending to Interest Expense for such period to be less than 2.5 to 1.0.
k.Amendment to Section 9.02(l).  Section 9.02(l) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
(l)    Unsecured Debt constituting obligations under Permitted Advance Payments Agreements in an aggregate amount for all such Permitted Advance Payment Agreements not to exceed $25,000,000.00 (or such greater amount as consented to by the Required Revolving Credit Lenders); provided that (a) a Subordination Agreement (including the Fifteenth Amendment Subordination Agreement) shall be executed concurrently with any such Permitted Advance Payment Agreement (including the Fifteenth Amendment Permitted Advance Payment Agreement), and such Permitted Advance Payment Agreement (including the Fifteenth Amendment Permitted Advance Payment Agreement) shall remain subject to such Subordination Agreement (including the Fifteenth Amendment Subordination Agreement), (b) on or before the date of execution of any such Permitted Advance Payment Agreement (including the Fifteenth Amendment Permitted Advance Payment Agreement), the Administrative Agent shall have received an opinion of special Colombian counsel regarding such Subordination Agreement (including the Fifteenth Amendment Subordination Agreement), including that such Subordination Agreement  (including the Fifteenth Amendment Subordination Agreement) is enforceable against the creditor of such Debt (such creditor being the Person purchasing Oil and Gas under the applicable Permitted Advance Payment Agreement), and covering such other matters and otherwise in form and substance satisfactory to the Administrative Agent and (c) no amounts shall be outstanding under any Permitted Advance Payment Agreement and no Credit Party shall make a utilization under a Permitted Advance Payment Agreement if it results in scheduled amortization (whether by way of cash or the delivery of Oil and Gas under a Commercial Contract or otherwise), in each case, at any time after January 29, 2022, without the prior written consent of the Required Revolving Credit Lenders.
l.Amendment to Sections 9.04(b)(ii)(A) and (B).  Sections 9.04(b)(ii)(A) and (B) of the Credit Agreement are each hereby amended to insert the following proviso immediately after the first reference of “seventy five percent (75%)” in each such provision:
; provided that the Credit Parties may make up to four (4) Shortfall Payments in total, with no more than two (2) Shortfall Payments being paid on or before June 30, 2021 and no more than two (2) Shortfall Payments being paid on or after July 1, 2021 and on or before December 31, 2021, in each case, if it is otherwise unable to meet the criteria set forth in this clause (1)
m.Amendment to Section 9.04(c).  Section 9.04(c) of the Credit Agreement is amended to (a) delete “or” immediately before “(C)” therein and insert “, ” in lieu thereof and (b) insert “or (D) any amendment, modification or waiver which is not deemed to be substantially consistent with the 
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Fifteenth Amendment Permitted Advance Payment Agreement as set forth in the definition of “Permitted Advance Payment Agreement” shall be deemed adverse to the Lenders” immediately before the “.” at the end of such subsection.
n.Amendment to Article IX.  Article IX of the Credit Agreement is hereby amended to insert a new Section 9.21 in appropriate numerical order thereto which shall read in full as follows:
Section 9.21.    Required Availability Amount.    At all times until the Covenant Relief Period Expiration Date, the Credit Parties shall not permit the aggregate Revolving Credit Exposure for all Revolving Credit Lenders to exceed an amount equal to (a) the aggregate Revolving Credit Commitments of all Revolving Credit Lenders minus (b) the Required Availability Amount; provided that (a) if the Required Availability Amount increases by an Initial Advance Payment Amount as a result of the execution of a Permitted Advance Payment Agreement, such increase shall become effective five (5) Business Days after execution of such Permitted Advance Payment Agreement solely for purposes of this Section 9.21 and (b) neither this Section 9.21 not the definition of “Required Revolving Availability Amount” may be amended without the consent of the Administrative Agent and the Required Revolving Credit Lenders. 
o.Amendment to Section 10.01(q).  Section 10.01(q) of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
(q)    any event or circumstance occurs which requires any Credit Party to make any payment under any Permitted Advance Payment Agreement prior to the original due date thereof, whether by acceleration or otherwise (but excluding, for clarity, any Shortfall Payments permitted to be made pursuant to Section 9.04(b)(ii)) or which results in the termination of any Permitted Advance Payment Agreement prior to the initial stated termination date thereof.
p.Amendment to Section 10.01.  Section 10.01 of the Credit Agreement is hereby amended to insert a new clause (r) in appropriate alphabetical order thereto which shall read in full as follows:
(r)    the failure of any Person to whom a Permitted Advance Payment Agreement is assigned to comply with the requirement that, at the time of such assignment, such Person enter into an acknowledgment and acceptance letter recognizing the existence of, or an agreement agreeing to be bound by, the applicable Subordination Agreement in form and substance reasonably satisfactory to the Administrative Agent.
q.Amendment to Article XI.  Article XI of the Credit Agreement is hereby amended to insert a new Section 11.15 in appropriate numerical order thereto, which shall read in full as follows:
Section 11.15    Subordination Agreement. 
(a)    Each of the Lenders, the Issuing Bank and the other Secured Parties hereby irrevocably authorizes and directs the Administrative Agent to execute and deliver, in each case on behalf of such Secured Party and without any further consent, 
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authorization or other action by such Secured Party, (i) from time to time upon the request of the Borrower, in connection with the execution of any Permitted Advance Payment Agreement, any Subordination Agreement and (ii) any documents relating thereto.
(b)    Each of the Lenders, the Issuing Bank and the other Secured Parties hereby irrevocably (i) consents to the treatment of Liens to be provided for under the Subordination Agreement, (ii) agrees that, upon the execution and delivery thereof, such Secured Party will be bound by the provisions of any Subordination Agreement as if it were a signatory thereto and will take no actions contrary to the provisions of any Subordination Agreement, (iii) agrees that no Secured Party shall have any right of action whatsoever against the Administrative Agent as a result of any action taken by the Administrative Agent pursuant to this Section or in accordance with the terms of any Subordination Agreement and (iv) authorizes and directs the Administrative Agent to carry out the provisions and intent of any Subordination Agreement.
(c)    The Administrative Agent shall have the benefit of the provisions of Article XII with respect to all actions taken by it pursuant to this Section 11.15 or in accordance with the terms of any Intercreditor Agreement to the full extent thereof.
Section 2.Redetermination of Borrowing Base.  Subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Lenders hereby agree that for the period from and including the Fifteenth Amendment Effective Date, but until the next Scheduled Redetermination Date, the next Interim Redetermination Date or the next adjustment to the Borrowing Base, including under Section 2.08(e), Section 2.08(f) or Section 2.08(g) of the Credit Agreement, whichever occurs first, the amount of the Borrowing Base shall be reduced from $225,000,000 to $215,000,000, which redetermination of the Borrowing Base shall constitute the November 1, 2020 Scheduled Redetermination of the Borrowing Base.  This Section 2 constitutes the New Borrowing Base Notice for the November 1, 2020 Scheduled Redetermination of the Borrowing Base.
Section 3.Consent to Execution.  The Administrative Agent and each Lender, by executing this Amendment, hereby consent to the execution and delivery of the Fifteenth Amendment Permitted Advance Payment Agreement, the Fifteenth Amendment Commercial Contracts and the Fifteenth Amendment Subordination Agreement, in each case, with [***], on the terms and conditions, and subject to the limitations, in each case set forth herein and in the Credit Agreement (as amended by this Amendment).  The consent set forth in this Section 3 is a one-time consent only to the execution and delivery of the Fifteenth Amendment Permitted Advance Payment Agreement, the Fifteenth Amendment Commercial Contracts and the Fifteenth Amendment Subordination Agreement, in each case explicitly subject to the terms, conditions and limitations in the Credit Agreement (as amended by this Amendment) and shall not be deemed or construed to be, and the Credit Parties agree that it is not, a waiver of any or all of such terms, conditions and limitations.  The consent set forth in this Section 3 shall not obligate the Administrative Agent or the Lenders to waive any such term, condition or 
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limitation or consent to the breach of any such term, condition or limitation in the future and does not constitute a course of dealing among the parties.
Section 4.Conditions Precedent.  This Amendment shall be effective on the date that each of the following conditions precedent is satisfied or waived by the Required Revolving Credit Lenders (the “Fifteenth Amendment Effective Date”):
a.Counterparts. Administrative Agent shall have received from the Lenders constituting at least the Required Revolving Credit Lenders, the Parent, the Borrower and Guarantors counterparts (in such number as may be requested by the Administrative Agent) of this Amendment signed on behalf of such Persons.
b.Approval of the Fifteenth Amendment Permitted Advance Payment Agreement, the Fifteenth Amendment Commercial Contracts and the Fifteenth Amendment Subordination Agreement. The Administrative Agent shall have received confirmation that the Lenders constituting at least the Required Revolving Credit Lenders shall have consented to the forms of the Fifteenth Amendment Permitted Advance Payment Agreement, the Fifteenth Amendment Commercial Contracts and the Fifteenth Amendment Subordination Agreement, in each case, with [***].
c.Fees and Expenses.  The Borrower shall have paid to the Administrative Agent all other fees and expenses required to be paid by the Borrower under Section 12.03 of the Credit Agreement (other than fees of counsel to the Administrative Agent), including those payable pursuant to that certain fee letter by and between the Borrower and the Administrative Agent, dated as of the date hereof.
Section 5.Representations and Warranties of the Borrower.  To induce the Lenders and Administrative Agent to enter into this Amendment, each Credit Party hereby represents and warrants to Lenders and Administrative Agent as follows: 
a.Reaffirmation of Loan Documents; Extension of Liens.  Any and all of the terms and provisions of the Credit Agreement and the other Loan Documents shall, except as amended hereby, remain in full force and effect.  The Credit Parties hereby extend the Liens securing the Secured Obligations until the Secured Obligations have been paid in full, and agree that the amendments and waivers herein contained shall in no manner affect or impair the Secured Obligations or the Liens securing payment and performance thereof, all of which are ratified and confirmed.
b.Reaffirm Existing Representations and Warranties.  Each representation and warranty of such Credit Party contained in the Credit Agreement and the other Loan Documents is true and correct in all material respects (except to the extent any such representation or warranty is qualified by materiality or Material Adverse Effect, in which case it shall be true and correct in all respects) on the date hereof after giving effect to the amendments set forth herein, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties shall continue to be true and correct in all material respects (except to the extent any such representation or warranty is qualified by materiality or Material Adverse Effect, in which case it shall be true and correct in all respects) as of such specified earlier date. 
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c.Due Authorization; No Conflict.  The execution, delivery and performance by such Credit Party of this Amendment are within such Credit Party’s organizational powers and have been duly authorized by all necessary corporate and, if required, stockholder or shareholder action (including, without limitation, any action required to be taken by any class of directors of such Credit Party or any other Person, whether interested or disinterested, in order to ensure the due authorization of this Amendment). The execution, delivery and performance by such Credit Party of this Amendment (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including shareholders or any class of directors, whether interested or disinterested, of the Parent, such Credit Party or any other Person), nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of this Amendment, except such as have been obtained or made and are in full force and effect other than those third party approvals or consents which, if not made or obtained, would not cause a Default hereunder, could not reasonably be expected to have a Material Adverse Effect or do not have an adverse effect on the enforceability of this Amendment, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of such Credit Party or any order of any Governmental Authority, (c) will not violate or result in a default under any Material Document or any indenture, agreement or other instrument binding upon such Credit Party or its Properties, or give rise to a right thereunder to require any payment to be made such Credit Party, and (d) will not result in the creation or imposition of any Lien on any Property of any Credit Party (other than the Liens created by the Loan Documents).
d.Validity and Enforceability.  This Amendment constitutes a legal, valid and binding obligation of such Credit Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
e.Acknowledgment of No Defenses.  Such Credit Party acknowledges that it has no defense to  such Credit Party’s obligation to pay the Obligations when due, or  the validity, enforceability or binding effect against such Credit Party of the Credit Agreement or any of the other Loan Documents (to the extent a party thereto) or any Liens intended to be created thereby. 
Section 6.Miscellaneous.
a.Reaffirmation of Loan Documents.  Any and all of the terms and provisions of the Credit Agreement and the Loan Documents shall, except as amended and modified hereby, remain in full force and effect.  This Amendment shall not limit or impair any Liens securing the Secured Obligations, each of which are hereby ratified, affirmed and extended to secure the Secured Obligations as it may be increased pursuant hereto.  This Amendment constitutes a Loan Document.
b.Parties in Interest.  All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
c.Counterparts.  This Amendment may be executed in counterparts, including, without limitation, by an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record (an “Electronic Signature”), and all parties need not execute the same counterpart; however, no 
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party shall be bound by this Amendment until each Credit Party, the Administrative Agent and the Lenders have executed a counterpart.  Facsimiles or other electronic transmissions (e.g. pdfs) of such executed counterparts shall be effective as originals.  The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any  document to be signed in connection with this Fifteenth Amendment and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
d.Complete Agreement.  THIS AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
e.Headings.  The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
f.Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers on the date and year first above written.

[Signature pages to follow]

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BORROWER:        gran tierra energy international
         holdings ltd.
By:      /s/ Manuel Buitrago        
Name:  Manuel Buitrago 
Title:     President

PARENT:        GRAN TIERRA ENERGY INC.
By:       /s/ Ryan Ellson                
Name:  Ryan Ellson
Title:   Executive Vice President and Chief Financial
     Officer

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ADMINISTRATIVE AGENT:      THE BANK OF NOVA SCOTIA,
By:        /s/ Ana Espinoza                                     
Name:  Ana Espinoza
Title:    Director, International Banking

By:        /s/ Daniel Gracian                                   
Name:   Daniel Gracian
Title:     Director, International Banking

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

LENDERS:      THE BANK OF NOVA SCOTIA, as a Lender
By:        /s/ Ana Espinoza                            
Name:  Ana Espinoza
Title:    Director, International Banking

By:        /s/ Ana Espinoza                            
Name:   Daniel Gracian
Title:     Director, International Banking

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

    SOCIÉTÉ GÉNÉRALE,
as a Lender

By:       /s/ Roberto Simon                        
Name:  Roberto Simon
Title:    Managing Director

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

    HSBC BANK CANADA,
    as a Lender

By:       /s/ Sherry Gauthier                              
Name:  Sherry Gauthier
Title:    Assistant Vice President, Sales &     Operations,
             Commercial Banking, Prairies Region 

By:       /s/ Bruce Robinson           _                  
Name:  Bruce Robinson
Title:   VP, Energy Financing

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

    EXPORT DEVELOPMENT CANADA,
    as a Lender

By:       /s/ Sylvain Emond    
Name:  Sylvain Emond
Title:    Project Finance Manager
             

By:       /s/ Ashley Glen    
Name:  Ashley Glen
Title:    Project Finance Manager

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

    ROYAL BANK OF CANADA,
    as a Lender

By:       /s/ Maria Hushovd    
Name:  Maria Hushovd
Title:    Authorized Signatory

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

    CANADIAN IMPERIAL BANK OF COMMERCE,
    as a Lender

By:       /s/ Ryan Shea    
Name:  Ryan Shea
Title:    Director

By:       /s/ Graydon Falls    
Name:  Graydon Falls
Title:    Executive Director

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

Signature Page – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

Each of the undersigned Guarantors (i) consents and agrees to this Amendment, and (ii) agrees that the Loan Documents and Security Instruments to which it is a party (including, without limitation, the Guaranty Agreement, dated as of September 18, 2015, each as amended, modified or supplemented) shall remain in full force and effect and shall continue to be the legal, valid and binding obligation of the undersigned, enforceable against it in accordance with its terms.

CONSENTED, ACKNOWLEDGED AND AGREED TO BY: 
GRAN TIERRA ENERGY INC.

By:       /s/ Ryan Ellson                
Name:  Ryan Ellson
Title:   Executive Vice President and Chief
    Financial Officer
    

GRAN TIERRA ENERGY COLOMBIA, LLC

By:      /s/ Manuel Buitrago                         
Name:  Manuel Buitrago
Title:     President

GRAN TIERRA RESOURCES LIMITED

By:       /s/ Ryan Ellson                
Name:  Ryan Ellson
Title:   Chief Financial Officer

GRAN TIERRA ENERGY CAYMAN ISLANDS INC.

By:      /s/ Manuel Buitrago                         
Name:  Manuel Buitrago
Title:     President

Signature Page to Guarantor Reaffirmation – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

PETROLIFERA PETROLEUM (COLOMBIA) LIMITED

By:      /s/ Manuel Buitrago                         
Name:  Manuel Buitrago
Title:     President

GRAN TIERRA COLOMBIA INC.

By:      /s/ Manuel Buitrago                         
Name:  Manuel Buitrago
Title:     President
    

GRAN TIERRA ENERGY RESOURCES INC.

By:      /s/ Manuel Buitrago                         
Name:  Manuel Buitrago
Title:     President
    

Signature Page to Guarantor Reaffirmation – Fifteenth Amendment (Gran Tierra Energy International Holdings Ltd.)

Exhibit A

Form of Permitted Advance Payment Agreement
[Attached.]

Exhibit A

Exhibit B

Form of Subordination Agreement
[Attached.]

Exhibit Bck1424182-ex41_9.htm

 

Exhibit 4.1

 

DESCRIPTION OF THE COMPANY’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

As of December 31, 2019, we had one class of stock registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):  our common stock, par value $0.001 per share (“Common Stock”). The following is a summary of the material terms of our Common Stock, as well as certain provisions of our Articles of Incorporation, as amended and supplemented (our “Charter”), and our Amended and Restated Bylaws (our “Bylaws”).  The summary is subject to and qualified in its entirety by reference to our Charter and Bylaws, each of which is incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this exhibit is a part.  It also summarizes certain relevant provisions of the Maryland General Corporation Law (the “MGCL”), and is subject to and qualified in its entirety by reference to the MGCL. References herein to our “Company” or “our” refer to Broadstone Net Lease, Inc.

 

Description of Common Stock 

 

All holders of shares of our Common Stock are entitled to one vote per share on all matters voted on by stockholders, including election of our directors. Directors are elected by a plurality of the votes cast at a meeting in which directors are being elected and at which a quorum is present. Our Charter does not provide for cumulative voting in the election of our directors, which means that the holders of a majority of the outstanding shares of our Common Stock can effectively elect all of the directors then standing for election, and the holders of the remaining shares will not be able to elect any directors. Subject to any preferential rights of any outstanding class or series of preferred stock (or other capital stock), the holders of shares of our Common Stock are entitled to such distributions as may be authorized from time to time by our board of directors and declared by us out of legally available funds and, in the event of our liquidation, dissolution, or winding up, are also entitled to share ratably in our assets legally available for distribution to our stockholders after payment of, or adequate provision for, all of our known debts and liabilities. All holders of our Common Stock will share equally in any distributions authorized by our board of directors and declared by us.

 

Our common stockholders have no preference, conversion, exchange, sinking fund, or redemption rights and have no preemptive rights to purchase or subscribe for any of our capital stock. Our Charter does not include a provision exempting holders of shares of our Common Stock of the rights of an objecting stockholder as provided for in the MGCL, sometimes referred to as “appraisal rights.” Accordingly, holders of shares of our Common Stock will be entitled to these rights under the MGCL (applicable only under limited circumstances, including a merger, consolidation, share exchange, or transfer of assets). Subject to the restrictions on ownership and transfer of our stock in our Charter, holders of shares of our Common Stock will initially have equal dividend, liquidation, and other rights. Because our operating assets are held by Broadstone Net Lease, LLC (the “OP”) or its wholly-owned subsidiaries, these subsidiaries may be able to merge or transfer all or substantially all of their assets without the approval of our stockholders. Stockholders are not liable for our acts or obligations due to their status as stockholders.

 

Our board of directors has authorized the issuance of shares of our capital stock without certificates. Shares of our Common Stock are held in “uncertificated” form, which eliminates the physical handling and safekeeping responsibilities inherent in owning transferable share certificates and eliminates the need to return a duly executed share certificate to effect a transfer. Information regarding restrictions on the transferability of our shares of Common Stock that, under Maryland law, would otherwise have been required to appear on our share certificates are instead furnished to our stockholders upon request and without charge. We maintain a stock ledger that contains the name and address of each stockholder and the number of shares that the stockholder holds. 

 

 

 

Pursuant to the limited liability company agreement, as amended (the “OP Agreement”), of the OP, each outstanding membership unit of the OP (“OP Unit”) is convertible into one share of our Common Stock, subject to the terms and conditions set forth in the OP Agreement. Holders of OP Units may exchange all or any portion of their OP Units for an equal number of shares of our Common Stock on a quarterly basis, provided that (i) no conversions will be permitted if (A) the delivery of shares of our Common Stock would cause us to be taxed as a corporation rather than a real estate investment trust for federal income tax purposes or (B) the exercise of the conversion right would cause the number of aggregate OP Units that have been converted, sold, redeemed, or otherwise disposed of, subject to certain exclusions, in the fiscal year to exceed ten percent of all the OP Units outstanding, except as otherwise authorized by us in our discretion, and (ii) the holder of the OP Units to be converted satisfies the investor suitability standards established from time to time.

 

Power to Issue Additional Shares of Common Stock and Preferred Stock

 

We believe that the power to issue additional shares of our Common Stock or preferred stock and to classify or reclassify unissued shares of our Common Stock or preferred stock and to issue the classified or reclassified shares provides us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. Pursuant to our Charter, these actions can be taken without action by our stockholders, unless stockholder approval is required by applicable law, the terms of any class or series of our stock, or the rules of any stock exchange or automated quotation system on which our stock may be listed or traded. Although we have no present intention of doing so, we could issue a class or series of stock that would provide the holders thereof with specified dividend payments and payments upon liquidation prior or senior to those of the Common Stock or could delay, defer, or prevent a transaction or a change in control of our Company that might involve a premium price for our stock or that our stockholders otherwise believe to be in their best interest. In addition, our issuance of additional shares of stock in the future could dilute the voting and other rights of the holders of shares of Common Stock. 

 

Restrictions on Ownership and Transfer of Shares of Capital Stock

 

For us to qualify as a real estate investment trust (“REIT”), no more than 50% in value of the outstanding shares of our stock may be owned, directly or indirectly through the application of certain attribution rules under the Internal Revenue Code of 1986, as amended (the “Code”), by any five or fewer individuals, as defined in the Code to include specified entities, during the last half of any taxable year, excluding our first taxable year for which we elected to be taxed as a REIT. In addition, the outstanding shares of our stock must be owned by 100 or more persons during at least 335 days of a 12-month taxable year or during a proportionate part of a shorter taxable year, excluding our first taxable year for which we elected to be taxed as a REIT. In addition, we must meet requirements regarding the nature of our gross income to qualify as a REIT. One of these requirements is that at least 75% of our gross income for each calendar year must consist of rents from real property and income from other real property investments. Subject to special rules for leases to our taxable REIT subsidiaries, the aggregate of the rents received by the OP from any tenant will not qualify as rents from real property, which could result in our loss of REIT status, if we own, actually or constructively within the meaning of certain provisions of the Code, 10% or more of the ownership interests in that tenant. To assist us in preserving our status as a REIT, among other consequences, our Charter contains limitations on the ownership and transfer of shares of our stock which are intended to prohibit: (1) any person or entity from owning or acquiring, directly or indirectly, more than 9.8% of the value of the aggregate of our then outstanding capital stock (of any class or series) or more than 9.8% of the value or number of shares, whichever is more restrictive, of the aggregate of our then outstanding Common Stock and (2) any transfer of or other event or transaction with respect to shares of capital stock that would result in the beneficial ownership of our outstanding shares of capital stock by 

 

 

fewer than 100 persons. In addition, our Charter includes provisions intended to prohibit any transfer of, or other event with respect to, shares of our capital stock that would result in us being “closely held” within the meaning of Section 856(h) of the Code or otherwise failing to qualify as a REIT (including, but not limited to, ownership that would result in us owning an interest in a tenant if the income derived by us from such tenant would cause us to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

 

Our Charter provides that the shares of our capital stock of any class or series that, if transferred, would result in a violation of the ownership limits described above will be transferred automatically to a trust effective on the business day before the purported transfer of such shares of our capital stock. We will designate a trustee of the trust that will not be affiliated with us or the purported transferee or record holder. We will also name a charitable organization as beneficiary of the trust. The trustee will receive all distributions on the shares of our capital stock in the trust and will hold such distributions in trust for the benefit of the beneficiary. The trustee also will vote the shares of capital stock in the trust and, subject to Maryland law, will have the authority to rescind as void any vote cast by the intended transferee prior to our discovery that the shares have been transferred to the trust and to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast the vote. Our Charter provides that the intended transferee will acquire no rights in such shares of capital stock, unless, in the case of a transfer that would cause a violation of the 9.8% ownership limits the transfer is exempted (prospectively or retroactively) by our board of directors from the ownership limits based upon receipt of information (including certain representations and undertakings from the intended transferee) that such transfer would not result in us being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise failing to qualify as a REIT (including, but not limited to, ownership that would result in us owning an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by us from such tenant would cause us to fail to satisfy any of the gross income requirements of Section 856(c) of the Code). If the transfer to the trust would not be effective for any reason to prevent a violation of the foregoing limitations on ownership and transfer, then our Charter provides that the transfer of that number of shares that otherwise would cause the violation will be null and void, with the intended transferee acquiring no rights in such shares. In addition, our Charter provides that any transfer of shares of our capital stock that would result in shares of our capital stock being beneficially owned by fewer than 100 persons will be null and void and the intended transferee will acquire no rights in such shares of our capital stock.

 

Within 20 days of receiving notice from us that shares of our stock have been transferred to the trust, the trustee will sell the shares to a person designated by the trustee, whose ownership of the shares will not violate the above ownership limitations. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the intended transferee and to the charitable beneficiary as follows. The intended transferee will receive an amount equal to the lesser of (1) the price paid by the intended transferee for the shares or, if the intended transferee did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the Determined Share Value of the shares on the day of the event causing the shares to be held in the trust and (2) the price received by the trustee from the sale or other disposition of the shares. Any net sale proceeds in excess of the amount payable to the intended transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares have been transferred to the trust, the shares are sold by the intended transferee, then (1) the shares will be deemed to have been sold on behalf of the trust and (2) to the extent that the intended transferee received an amount for the shares that exceeds the amount described above that such intended transferee was entitled to receive, such excess will be paid to the trustee upon demand.

 

 

 

In addition, shares of our stock held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the Determined Share Value at the time of the devise or gift) and (2) 95% of the Determined Share Value on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the intended transferee.

 

Any person who acquires or attempts or intends to acquire shares of our capital stock in violation of the foregoing restrictions or who would have owned shares of our capital stock that were transferred to any such trust is required to give immediate written notice to us or, in the case of a proposed or attempted transaction, at least 15 days’ prior written notice. In both cases, such persons must provide to us such other information as we may request to determine the effect, if any, of such event on our status as a REIT. The foregoing restrictions will continue to apply until our board of directors determines it is no longer in our best interest to attempt to, or to continue to qualify as a REIT or that compliance is no longer required in order for REIT qualification.

 

The ownership limits do not apply to a person or persons that our board of directors exempts (prospectively or retroactively) from the ownership limits upon receiving appropriate assurances from such person that our qualification as a REIT is not jeopardized. Any person who owns more than 5.0% (or such other percentage as required under the Code or the Treasury Regulations promulgated thereunder) of the outstanding shares of our capital stock during any taxable year will be asked to deliver a statement or affidavit setting forth, among other things, the number of shares of our capital stock beneficially owned.

 

These restrictions on ownership and transfer apply to all classes and series of our capital stock, including our Common Stock, and could delay, defer, or prevent a transaction or a change of control of our Company that might involve a premium price for our stock that our stockholders believe to be in their best interest.

 

Transfer Agent and Registrar 

 

The transfer agent and registrar for our shares of our Common Stock is Computershare Trust Company, N.A.

 

Certain Provisions of the MGCL and Our Charter and Bylaws

 

The following description of certain provisions of the MGCL and of our Charter and Bylaws is only a summary. For a complete description, we refer you to the MGCL, our Charter and Bylaws, as applicable.

 

Number of Directors; Vacancies

 

Our Charter and Bylaws provide that the number of directors of our Company may be established, increased, or decreased only by a majority of our directors then serving but may not be fewer than the minimum number required under the MGCL (which is one) or our Charter (whichever is greater) nor, unless our bylaws are amended, more than 12.  A director may resign at any time. A vacancy created by an increase in the number of directors, the removal of a director or the death, resignation, adjudicated incompetence or other incapacity of a director may be filled by a vote of a majority of the remaining directors or by our stockholders. Any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred. 

 

 

 

Removal of Directors

 

Under the MGCL, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, and unless the board of directors is classified (which ours is not) or the charter requires cause or a higher vote (which ours does not), stockholders may remove any director, with or without cause, by the affirmative vote of a majority of all the votes entitled to be cast generally for the election of directors.

 

Business Combinations

 

Under the MGCL, certain “business combinations” (including a merger, consolidation, statutory share exchange, or, in certain circumstances specified under the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland corporation and any interested stockholder, or an affiliate of such an interested stockholder, are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. Maryland law defines an interested stockholder as:

 

	
 
	
•
	
any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or

	
 
	
•
	
an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation.

 

A person is not an interested stockholder under the MGCL if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. In approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of the approval, with any terms and conditions determined by it.

 

After such five-year period, any such business combination must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

 

	
 
	
•
	
80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

	
 
	
•
	
two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom (or with whose affiliate) the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

 

These supermajority approval requirements do not apply if, among other conditions, the corporation’s common stockholders receive a minimum price (as defined in the MGCL) for their shares and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its share.

 

These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a corporation’s board of directors prior to the time that the interested stockholder becomes an interested stockholder. As permitted by the MGCL, our Charter exempts any business combination between us and any other person from the provisions of this statute. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations involving us. As a result, any person will be able to enter into business combinations with us that may not be in the best interests of 

 

 

our stockholders, without compliance with the supermajority vote requirements and other provisions of the statute.

 

Control Share Acquisitions

 

The MGCL provides that a holder of “control shares” of a Maryland corporation acquired in a “control share acquisition” has no voting rights with respect to those shares except to the extent approved by the affirmative vote of at least two-thirds of the votes entitled to be cast by stockholders entitled to exercise or direct the exercise of the voting power in the election of directors generally but excluding: (1) the person who has made or proposes to make the control share acquisition; (2) any officer of the corporation; or (3) any employee of the corporation who is also a director of the corporation. “Control shares” are voting shares of stock that, if aggregated with all other such shares of stock previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges:

 

	
 
	
•
	
one-tenth or more but less than one-third;

	
 
	
•
	
one-third or more but less than a majority; or

	
 
	
•
	
a majority or more of all voting power.

 

Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition, directly or indirectly, of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares, subject to certain exceptions.

 

A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and making an “acquiring person statement” as described in the MGCL), may compel the board of directors of the company to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the control shares. If no request for a special meeting is made, the corporation may itself present the question at any stockholders meeting.

 

If voting rights of control shares are not approved at the meeting or if the acquiring person does not deliver an “acquiring person statement” as required by the statute, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or, if a meeting of stockholders at which the voting rights of such shares are considered and not approved is held, as of the date of such meeting. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

 

The control share acquisition statute does not apply (1) to shares acquired in a merger, consolidation, or statutory share exchange if the corporation is a party to the transaction or (2) to acquisitions approved or exempted by the charter or bylaws of the corporation.

 

Our Charter and Bylaws contain a provision exempting from the control share acquisition statute any and all control share acquisitions by any person of shares of our stock.

 

 

 

Subtitle 8

 

Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to be subject to any or all of the following five provisions:

 

	
 
	
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a classified board;

	
 
	
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a two-thirds vote requirement for removing a director;

	
 
	
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a requirement that the number of directors be fixed only by vote of the directors;

	
 
	
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a requirement that a vacancy on the board be filled only by a vote of the remaining directors (whether or not they constitute a quorum) and for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies; or

	
 
	
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a majority requirement for the calling of a special meeting of stockholders.

 

We have elected to provide that vacancies on our board of directors may be filled by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred. We have also elected to provide that a special meeting of stockholders may only be called by our secretary upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting. Through provisions in our Charter and Bylaws, we vest in our board of directors the exclusive power to fix the number of directorships; provided that the number is not fewer than the minimum number required by the MGCL. We have not elected to be subject to the other provisions of Subtitle 8.

 

Amendments to Our Charter and Bylaws

 

As provided in the MGCL, amendments to our Charter must be advised by our board of directors and approved by the affirmative vote of two-thirds of the votes entitled to be cast on the matter. Pursuant to our Bylaws, our board of directors has the exclusive authority to amend our Bylaws.

 

Limitation of Liability and Indemnification of Directors and Officers

 

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property, or services or active and deliberate dishonesty that is established by a final judgment and is material to the cause of action. Our Charter contains such a provision that eliminates such liability to the maximum extent permitted by Maryland law.

 

The MGCL requires a Maryland corporation (unless its charter provides otherwise, which our Charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The MGCL permits a Maryland corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements, and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or are threatened to be made a party by reason of their service in those or other capacities unless it is established that:

 

	
 
	
•
	
the act or omission of the director or officer was material to the matter giving rise to the proceeding and

 

 

	
 
	
o
	
was committed in bad faith; or

	
 
	
o
	
was the result of active and deliberate dishonesty;

	
 
	
•
	
the director or officer actually received an improper personal benefit in money, property or services; or

	
 
	
•
	
in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

 

However, under the MGCL, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or on behalf of the corporation or if the director or officer was adjudged liable on the basis that personal benefit was improperly received, unless, in either case, a court orders indemnification and then only for expenses. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct or was adjudged liable on the basis that personal benefit was improperly received.

 

Our Charter provides, as permitted by the MGCL, that we may advance reasonable expenses incurred by a director or officer who is party to a proceeding in advance of the final disposition of the proceeding upon our receipt of:

 

	
 
	
•
	
a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by us; and

	
 
	
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a written undertaking by the director or officer or on his or her behalf to repay the amount advanced to him or her if it is ultimately determined that the standard of conduct for indemnification by us was not met.

 

Our Charter also requires us to provide the same indemnification and advancement of expenses that we are permitted to provide to directors and officers to any person who served as an employee or agent of our Company or an employee or agent of our previous asset manager or property manager.

 

Meetings of Stockholders

 

Under our Bylaws and pursuant to the MGCL, annual meetings of stockholders will be held each year at a date and at the time and place determined by our board of directors. Special meetings of stockholders may be called by the chairman of our board of directors, our president, our chief executive officer, a majority of our board of directors, or a majority of our independent directors. Additionally, subject to the provisions of our Bylaws, special meetings of the stockholders to act on any matter must be called by our secretary upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting who have requested the special meeting in accordance with the procedures set forth in, and provided the information and certifications required by, our Bylaws. Only matters set forth in the notice of the special meeting may be considered and acted upon at such a meeting. Our secretary will inform the requesting stockholders of the reasonably estimated cost of preparing and delivering the notice of meeting (including our proxy materials), and the requesting stockholder must pay such estimated cost before our secretary may prepare and deliver the notice of the special meeting.

 

Advance Notice of Director Nominations and New Business

 

Our Bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of business to be considered by a 

 

 

stockholder may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of our board of directors, or (3) by a stockholder who is a stockholder of record both at the time of giving the advance notice required by our Bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business, and who has complied with the advance notice procedures of our Bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to our board of directors at a special meeting may be made only (1) by or at the direction of our board of directors or (2) provided that the special meeting has been called in accordance with our Bylaws for the purpose of electing directors, by a stockholder who is a stockholder of record both at the time of giving the advance notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the advance notice provisions of our Bylaws.

 

The purpose of requiring stockholders to give advance notice of nominations and other proposals is to afford our board of directors and our stockholders the opportunity to consider the qualifications of the proposed nominees or the advisability of the other proposals and, to the extent considered necessary by our board of directors, to inform stockholders and make recommendations regarding the nominations or other proposals. Although our Bylaws do not give our board of directors the power to disapprove timely stockholder nominations and proposals, our Bylaws may have the effect of precluding a contest for the election of directors or proposals for other action if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors to our board of directors or to approve its own proposal.

 

 

Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws

 

The restrictions on ownership and transfer of our stock and the advance notice provisions of our Bylaws could delay, defer, or prevent a transaction or a change of control of our Company. Likewise, if our board of directors were to elect to be subject to the business combination provisions of the MGCL or if the provision in our Bylaws opting out of the control share acquisition provisions of the MGCL were amended or rescinded, these provisions of the MGCL could have similar anti-takeover effects.

 

Further, a majority of our entire board of directors has the power, to increase or decrease the aggregate number of authorized shares of stock or the number of shares of any class or series of stock that we are authorized to issue, to classify, and reclassify any unissued shares of our stock into other classes or series of stock, and to authorize us to issue the newly classified shares, and could authorize the issuance of shares of Common Stock or another class or series of stock, including a class or series of preferred stock, that could provide the holders thereof with specified dividend payments and payments upon liquidation prior or senior to those of the Common Stock, and could have the effect of delaying, deferring, or preventing a change in control of us. These actions may be taken without stockholder approval unless such approval is required by applicable law, the terms of any other class or series of our stock, or the rules of any stock exchange or automated quotation system on which any of our stock is listed or traded. We believe that the power of our board of directors to increase or decrease the number of authorized shares of stock and to classify or reclassify unissued shares of our Common Stock or preferred stock and thereafter to cause us to issue such shares of stock will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise.

 

Our Charter and Bylaws also will provide that the number of directors may be established only by our board of directors, which prevents our stockholders from increasing the number of our directors and filling any vacancies created by such increase with their own nominees. The provisions of our Bylaws discussed above under the captions “—Meetings of Stockholders” and “—Advance Notice of Director Nominations and New Business” will require stockholders seeking to call a special meeting, nominate an 

 

 

individual for election as a director, or propose other business at an annual or special meeting to comply with certain notice and information requirements. We believe that these provisions will help to assure the continuity and stability of our business strategies and policies as determined by our board of directors and promote good corporate governance by providing us with clear procedures for calling special meetings, information about a stockholder proponent’s interest in us, and adequate time to consider stockholder nominees and other business proposals. However, these provisions, alone or in combination, could make it more difficult for our stockholders to remove incumbent directors or fill vacancies on our board of directors with their own nominees and could delay, defer, or prevent a change in control, including a proxy contest or tender offer that might involve a premium price for our common stockholders or otherwise be in the best interest of our stockholders.

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