Item 1.01 Entry into
a Material Definitive Agreement.
Private Convertible Notes Offering
On March 31, 2016, Gran Tierra Energy Inc.
(the “Company”) entered into a purchase agreement (the “Purchase Agreement”), pursuant to which the Company
agreed to sell $100.0 million in aggregate principal amount of its 5.00% Convertible Senior Notes due 2021 (the “Notes”)
to the initial purchasers listed in the Purchase Agreement (collectively, the “Initial Purchasers”), and up to an additional
$15.0 million of Notes pursuant to an option granted to the Initial Purchasers (the “Offering”).
The Purchase Agreement contains customary
representations, warranties and agreements by the Company and customary conditions to closing, obligations of the parties and termination
provisions. Additionally, the Company has agreed to indemnify the Initial Purchasers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the “Securities Act”), or to contribute to payments the Initial Purchasers
may be required to make because of any of those liabilities. Furthermore, the Company has agreed with the Initial Purchasers not
to offer or sell any shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (or
securities exchangeable for or convertible into Common Stock), subject to certain exceptions set forth in the Purchase Agreement,
for a period of 90 days after March 31, 2016 without prior written consent of the representatives of the Initial Purchasers.
The foregoing description of the Purchase
Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement,
a copy of which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
On April 6, 2016, the Company completed
the Offering. The Notes are governed by an indenture (the “Indenture”), dated as of April 6, 2016, between the Company
and U.S. Bank National Association, as trustee.
The Notes bear interest at a rate of 5.00%
per year, payable semi-annually in arrears on each April 1 and October 1 of each year, beginning on October 1, 2016. The Notes
mature on April 1, 2021, unless earlier repurchased, redeemed or converted. The Company may not redeem the Notes prior to April
5, 2019, except in certain circumstances following a fundamental change (as defined in the Indenture), and no sinking fund is provided
for the Notes.
Holders of the Notes may convert their
Notes at their option at any time prior to the close of business on the business day immediately preceding the maturity date. Upon
conversion, the Company will deliver for each $1,000 principal amount of converted Notes a number of shares of its common stock
equal to the conversion rate, as described in the Indenture. The conversion rate is initially 311.4295 shares of common stock per
$1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $3.21 per share of common stock).
The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition,
following certain corporate events that occur prior to the maturity date, the Company will increase the conversion rate for a holder
who elects to convert its Notes in connection with such a corporate event in certain circumstances.
If the Company undergoes a fundamental
change, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase
price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding,
the fundamental change repurchase date.
The foregoing description of the Indenture
and Notes does not purport to be complete and is qualified in its entirety by reference to the full text of the Indenture and the
form of Note, copies of which are filed as Exhibit 4.1 and 4.2 hereto, respectively, and incorporated in this Item 1.01 by reference.
Credit Agreement Amendment
On March 31, 2016, in connection
with the Offering, the Company amended its credit facility (the “Amendment”) to permit the issuance of the Notes
in the Offering and to provide for an event of default upon the occurrence of a fundamental change. As a result of
the Amendment, the Company will also be required to prepay borrowings outstanding under its credit facility to the extent
it holds certain cash balances in excess of $35 million for any period of three business days.
The foregoing description of the Amendment
does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which
is filed as Exhibit 10.2 hereto and incorporated in this Item 1.01 by reference.
Relationships
Certain of the Initial Purchasers and their
respective affiliates have engaged in, and in the future may engage in, commercial banking, investment banking and advisory services
for the Company. They have received, or may in the future receive, customary fees and reimbursement of expenses in connection with
these transactions.