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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
TRI-VALLEY CORPORATION
(Name of Registrant as Specified in its Charter)
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Filed on Behalf of the Board of Directors
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a6(i)(1)
and 0-11.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 19, 1999
To the Shareholders of TRI-VALLEY CORPORATION:
The enclosed proxy material relating to Tri-Valley Corporation (Tri-
Valley or the Company) from the Board of Directors of the Company is sent
to you as the direct or beneficial owner of common stock of the Company with
the Company's sincere request that you give those materials your prompt and
thorough consideration.
(1) To elect six directors to serve for the ensuing year and until their
successors have been elected and qualified. Management proposes and
nominates the following slate for re-election:
F. Lynn Blystone, Earl H. Beistline, Milton J. Carlson, Dennis P.
Lockhart, Loren J. Miller, and Clive Stockdale.
(2) To approve an amendment to the Certificate of Incorporation to increase
the number of authorized shares.
(3) Election by the Company to be governed by Section 203 of the Delaware
General Corporation Laws.
(4) To approve an amendment to the Company's Incentive Stock Option Plan to
increase the number of authorized shares.
(5) To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The meeting will also provide an opportunity for management to give a
current report on the progress of the Company and its plans and prospects for
the future. Only persons who held Common Stock of record at the close of
business on Monday September 27, 1999, will be entitled to vote at the Annual
Meeting and any adjournments thereof, as fixed by action of the Board of
Directors.
All shareholders are urged to attend the Annual Meeting in person or by
proxy.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING IN
PERSON, PLEASE COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY. IF YOU
RECEIVE MORE THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT
NAMES OR ADDRESSES, EACH SUCH PROXY SHOULD BE SIGNED AND RETURNED TO ASSURE
THAT ALL OF YOUR SHARES WILL BE VOTED. THE PROXY SHOULD BE SIGNED BY ALL
REGISTERED HOLDERS EXACTLY AS THE STOCK IS REGISTERED.
A Shareholder giving a proxy has the power to revoke it at any time
before it is exercised by attending the Annual Meeting and voting his shares
in person or by filing with the Secretary of the Company, prior to the
meeting date, either a written notice of revocation, or a duly executed
proxy bearing a later date.
By Order of the Board of Directors
Bakersfield, California
October 12, 1999
Thomas J. Cunningham
Secretary of the Corporation
Bakersfield, California
October 12, 1999
ANNUAL MEETING OF SHAREHOLDERS
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PROXY STATEMENT
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OF
TRI-VALLEY CORPORATION
230 South Montclair Street, Suite 101
Bakersfield, California 93309
SOLICITATION OF PROXIES FOR
MEETING OF STOCKHOLDERS
For the Annual Shareholder Meeting to be held in the
Beale Room of the Holiday Inn Select
801 Truxtun Avenue
Bakersfield, California 93309
at 10:00 A.M. (P.S.T.), on November 19, 1999
To the Shareholders of TRI-VALLEY CORPORATION:
The enclosed proxy material relating to Tri-Valley Corporation (Tri-
Valley or the Company) from the Board of Directors of the Company is sent
to you as the direct or beneficial owner of common stock of the Company with
the Company's sincere request that you give those materials your prompt and
thorough consideration.
- 1 -
The Board of Directors of Tri-Valley Corporation (the "Company") hereby
solicits your Proxy (on the gold form) for use at the Annual Meeting of
Shareholders of the Company to be held November 19, 1999, at 10:00 A.M.
(local time) in the Beale Room of the Holiday Inn Select, 801 Truxtun Avenue,
Bakersfield, California 93309.
If you are not able to be present at this meeting, it is requested that
you return the enclosed gold form proxy, properly executed, in order that
your shares be represented and voted at the meeting. You may revoke your
Proxy at any time prior to the exercise of the powers granted herein by
transmitting a written revocation to the Company or by appearing in person at
the meeting.
Our administrative office is located at 230 South Montclair Street,
Suite 101 Bakersfield, California 93309. The approximate date on which this
Proxy Statement and gold form of proxy will first be sent to the shareholders
is October 12, 1999. The costs of this proxy notification will be paid by
the Company. A professional proxy solicitor has not been engaged.
ACTIONS TO BE TAKEN AT THE MEETING
At the Annual Meeting, holders of our common stock will consider and
vote for the election as directors of the Company of F. Lynn Blystone,
Dennis P. Lockhart, Milton J.Carlson, Loren J. Miller, Earl H. Beistline,
and Clive Stockdale. In addition, the shareholders will consider and act
on two proposed amendments to the certificate of incorporation and an
amendment to our incentive stock option plan.
VOTING SECURITIES AND RIGHTS
There are 19,206,248 shares of common stock of the Company outstanding
as of September 21, 1999, each of which is entitled to one vote in the
election of directors and all other matters to be voted upon at the meeting.
Shareholders of record as of the close of business at 5:00 P.M. on Monday,
September 27, 1999, are the only persons entitled to vote at this meeting.
The presence in person or by proxy of the holders of not less than one-
half the outstanding shares is necessary to constitute a quorum at the
meeting. The vote of a majority of the shares present at the meeting, in
person or by proxy, is necessary to elect directors, and to amend the
incentive stock option plan. A vote of at least two-thirds of our shares
present at the meeting, in person or by proxy, is necessary to approve the
proposed amendments to the articles of incorporation.
Set forth below in tabular form is information concerning the only
persons believed by the Company to own more than 5% of the Company's common
stock as of September 21, 1999.
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Amount
Title of Name And Address Beneficially Percent
Class Of Beneficial Owner Owned of Class
-------- ------------------- ------------ ----------
Common Stock Albert C. & Frances Kutcher 1,303,900 6.8%
12052 Linda Flora Drive
Ojai, CA 93023
Common Stock Dennis Vaughan 1,033,200 5.4%
2298 Featherhill Road
Santa Barbara, CA 93108
Although we are incorporated in Delaware, we currently maintain our
business offices and principal oil and gas operations in California.
Accordingly, shareholders are entitled, under California corporation law, to
cumulative voting rights in the election of directors. This means
that a shareholder may multiply the shares held by the total number of
directors to be elected (six) and vote all of such shares for any one
director. Prior to the meeting and vote on directors, any shareholder
wishing to exercise cumulative voting rights must give the Company written
notice of same. Discretionary authority to cumulate votes in the exercise
of proxies is hereby solicited by management.
I. ELECTION OF DIRECTORS:
Pursuant to the By-Laws, the Board of Directors has expanded the number
of Directors to be elected for the next year from five (5) to six (6). Each
director serves for a term of one (1) year. All six (6) director positions
are up for election at the meeting.
The Board of Directors has nominated and recommends your approval of Dr.
Earl Beistline, Lynn Blystone, Milton Carlson, Dennis Lockhart, Loren Miller,
CPA, and Clive Stockdale as directors of Tri-Valley Corporation. Each
Director must be elected by a majority vote of the shares represented at the
meeting. All proxies will be voted FOR these nominees. Information about
the nominees follows:
Common Stock Percent
Name and Position Director Beneficially of
with Company Age Since Owned ** Class
- - ----------------- --- -------- ------------ ---------
F. Lynn Blystone 64 1974 774,264 3.9
Dennis Lockhart 52 1982 122,091 *
Milton Carlson 69 1985 129,000 *
Loren Miller 54 1992 95,300 *
Earl Beistline 83 1992 78,000 *
Clive Stockdale 59 Nominee 0 *
All Directors as a Group 1,198,655 6.0
* Less than 1%
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** Includes shares which the listed shareholder has the right to acquire
within 60 days after September 21, 1999, from options or warrants, as
follows: Mr. Blystone, 348,000 shares, Mr. Lockhart, 70,000 shares, Mr.
Carlson, 68,000 shares, Mr. Miller, 70,000 shares, Mr. Beistline, 48,000
shares, all Directors as a group, 604,000 shares. Under SEC rules, we
calculate the percentage ownership of each person who owns exercisable
options by adding (1) the number of exercisable options for that person
to (2) the number of total shares outstanding, and dividing that result
into (3) the total number of shares and exercisable options owned by that
person.
Principal Occupations Of Nominees During The Past Five Years:
F. Lynn Blystone - 64 President and Chief Executive Officer of 1974
Tri-Valley Corporation and Tri-Valley
Power Corporation, and CEO of Tri-Valley
Oil & Gas Company, which are two wholly
owned subsidiaries of Tri-Valley
Corporation, Bakersfield, California
Mr. Blystone became president and chief executive officer of Tri-Valley
Corporation in October 1981, and was nominally vice president from July to
October 1981. His background includes institution management, venture
capital and various management functions for a mainline pipeline contractor
including the Trans-Alaska Pipeline Project. He has founded, run and sold
companies in several fields including Learjet charter, commercial
construction, municipal finance and land development. He is also president
of a family corporation, Bandera Land Company, Inc., with real estate
interests in Kern, Riverside and Orange Counties California. A graduate of
Whittier College, California, he did graduate work at George Williams
College, Illinois in organization management. He gives full time to Tri-
Valley.
Dennis P. Lockhart - 52 President 1982
Heller International Group., Inc.
Chicago, Illinois
Mr. Lockhart is President of Heller International Group, Inc., a
subsidiary of Heller Financial Inc., a position he has held since 1988. He
also serves as a director of Heller Financial Inc., and several of the
company's overseas subsidiaries. Prior to joining Heller, Mr. Lockhart
was a domestic and international corporate banking officer with
Citicorp/Citibank. He worked for Citicorp in a succession of assignments in
Lebanon, Saudi Arabia, Greece, Iran, Atlanta, and New York. He is currently
serving on the Advisory Committee of the United States export-import Bank.
Mr. Lockhart was educated at Stanford University and Johns Hopkins
University. He attended the Senior Executives Program at the Sloan School of
Management, Massachusetts Institute of Technology, in 1994.
Milton J. Carlson - 69 Investor, Kalispell, Montana 1985
Mr. Carlson is a principal in Earthsong, Inc., which is a non-profit,
public benefit corporation engaged in a wide field of ecological matters in
the public interest. Until its merger with another firm, Mr. Carlson
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formerly was vice president and corporate secretary of Union Sugar Company,
a $100 million unit of Sara Lee Corporation. He was involved in
representing industrial end users of energy through the California
Manufacturers Association as the former chairman of the CMA steering
committee of the standing energy and environmental committees. Mr. Carlson
was also the energy and environmental representative with Sara Lee energy
advisory group and monitored related matters before the California Public
Utilities Commission and Energy Commission as well as serving as the
legislative representative in Sacramento and Washington, D.C. Mr. Carlson
attended the University of Colorado at Boulder and the University of Denver.
Earl H. Beistline,- 83 Mining Consultant 1992
LLD. Fairbanks, Alaska
Dr. Beistline is a past chairman of the Alaska State Minerals Commission
and Dean Emeritus of the School of Mineral Industry of the University of
Alaska. Born in Juneau, he has achieved a special position in Alaska during
its transition from territorial status into statehood. He has numerous
honors from local, state and federal governments, academia, professional and
civic organizations and the mineral industry. An active miner in the
Central-Circle Mining District, Dr. Beistline also serves as a director of
one of the states' primary companies, Usibelli Coal Mines, Inc. He holds a
bachelor of Mining Engineering, Engineer of Mines and Honorary Doctor of Law
degree from the University of Alaska.
Loren J. Miller - 54 Controller, Petro America, Inc. 1992
CPA Treasurer, Jankovich Company
San Pedro, California
For the last four years, Mr. Miller has been the controller of Petro
America, Inc., a large, private petroleum and products distributor. He has
also served in a treasury and chief financial officer capacity as vice
president successively of McMullen Oil Company, Mock Resources, Inc., and
Hershey Oil Corporation. Prior to that he was vice president and general
manager of Tosco Production Finance Corporation and formerly a senior
auditor with Touche Ross & Co. He is experienced in exploration, production,
product trading, refining and distribution as well as corporate finance.
He holds a B.S. in accounting and an M.B.A. in finance from the University
of Southern California.
Clive Stockdale - 59 Vice President, Oil Analyst 1999
Canaccord Capital Corporation
Vancouver, British Columbia
For the last fifteen years, Mr. Stockdale has been Vice President and
Oil Analyst for Canaccord Capital Corporation, one of the largest investment
firms in British Columbia. Prior to Canaccord, he was a consultant
specializing in oil securities. He has been an oil analyst for Loewen
Ondaatje, Pemberton Securities and Dominion Securities. Mr. Stockdale also
was a planning economist for Mobile Oil Corp. He was born in Marylebone,
England and graduated from the London School of Economics and is now a
Canadian citizen.
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During 1998, the Board of Directors held four meetings; no director
attended less than 50% of such meetings.
The Company has no nominating or compensation committees, as these are
dealt with by the full board. Mr. Miller is the audit representative.
Compensation of Officers and Directors
The following table summarizes the compensation of the chairman of the
board and the president of the Company and its subsidiaries, F. Lynn
Blystone, for the fiscal years ended December 31, 1998, December 31, 1997,
and December 31, 1996.
Long Term
Compensation
Annual Compensation Awards
------------------- ------------
(a) (b) (c) (d) (e)
Other Securities
Name Period Covered Salary Compensation Underlying Options
- - ---- -------------- ------ ------------ ------------------
F. Lynn FYE 12/31/98 $156,000(1) (2)
Blystone FYE 12/31/97 $197,660(1) $195,000(3)
CEO FYE 12/31/96 $ 72,626
(1) Includes salary that was deferred when Mr. Blystone took a reduced
salary in prior years.
(2) No options were issued to any officer or director during FY 1998.
(3) 95,000 options expired unexercised in December, 1997.
Aggregated 1998 Option Exercises and Year-End Values
The following table summarizes the number and value of all unexercised
stock options held by the Named Officers and Directors at the end of 1998.
(a) (b) (c) (d)
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options/SARs at
Options/SARs at FY-End (#) FY-End ($)*
Exercise
Name Exercisable/Unexercisable Price Exercisable/Unexercisable
---- ------------------------- -------- -------------------------
F. Lynn
Blystone 100,000/0 $1.50 0/0
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(a) (b) (c) (d)
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options/SARs at
Options/SARs at FY-End (#) FY-End ($)*
Exercise
Name Exercisable/Unexercisable Price Exercisable/Unexercisable
---- ------------------------- -------- -------------------------
Dennis P.
Lockhart 30,000/0 $0.50 0/0
40,000/0 $0.55 0/0
Milton J.
Carlson 30,000/0 $0.50 0/0
40,000/0 $0.55 0/0
Loren J.
Miller 30,000/0 $0.50 0/0
40,000/0 $0.55 0/0
Earl H.
Beistline 20,000/0 $0.50 0/0
40,000/0 $0.55 0/0
*Based on a fair market value of $0.50 per share, which was the
closing bid price of the Company's Common Stock on the Over-The-Counter
Bulletin Board on December 31, 1998.
Compensation of Directors
The Company compensates non-employee directors for their service on the
board of directors. No directors received any stock options in 1998. The
following table sets forth information regarding the cash compensation paid
to outside directors in 1998.
(a) (b)
Name Fees
---- ----
Earl Beistline $1,350
Milton Carlson $2,322
Dennis P. Lockhart $2,510
Loren J. Miller $1,834
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Compliance With Section 16(A) Of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 and Securities and
Exchange Commission regulations require that the Company's directors, certain
officers, and greater than 10 percent shareholders are required to file
reports of ownership and changes in ownership with the SEC and to furnish the
Company with copies of all such reports they file. Based solely upon
a review of the copies of the forms furnished to the Company, or written
representations from certain reporting persons that no reports were required,
the Company believes that no person failed to file required reports on a
timely basis during or in respect of 1998.
II. APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES
Tri-Valley is authorized to issue 50,000,000 shares of common stock, par
value $.001 per share, of which approximately 19,206,248 shares were
outstanding on September 21, 1999. Our Board of Directors believes that it
is necessary to increase the authorized number of common stock. The increase
is intended to accomplish three purposes:
- - - Allow for future issuance of shares in new financings or for
acquisitions as appropriate.
- - - Permit adoption of a Share Purchase Rights Plan.
- - - Provide sufficient shares to increase the number that may be issued
pursuant to our 1998 Stock Incentive Plan.
The Board of Directors recommends a vote FOR approval of the amendment
to the certificate of incorporation to increase the number of authorized
common shares from 50 million to 100 million, so that the Board can carry out
these purposes, as described below. The proposed amendment is attached
to this Proxy Statement as Exhibit A.
Future Issuances for Financings or Acquisitions
The Board believes that it is necessary to increase the number of
authorized shares of common stock to provide for the flexibility to declare
stock dividends to issue additional shares in financings to raise cash for
drilling or operations, or to make acquisitions for stock. We continually
evaluate drilling prospects, and we need to be able to take advantage of
opportunities to acquire attractive prospects as they arise. We believe
that we may be able to raise cash for these purposes in public or private
securities offerings in the foreseeable future. In addition, we believe
that attractive opportunities may arise to acquire properties or companies
in exchange for our common stock and wish to be able to take advantage of
such opportunities.
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Aside from the issuances of common stock pursuant to officer, director,
and employee stock options, Tri-Valley has not entered into any agreements
with respect to the issuance of additional shares of stock.
Adoption of Share Purchase Rights Plan
Our Board of Directors believes that it is in Tri-Valley's best
interests to adopt a Share Purchase Rights Plan which
would make it more difficult for another person or entity to engage in a
hostile or unwanted takeover of Tri-Valley and would provide an incentive to
such a person or entity to negotiate directly with the Board of Directors
instead of attempting a hostile takeover. The rights plan will require
amending our certificate of incorporation to increase the number of
authorized shares of Tri-Valley common stock. The following description of
the rights plan is intended as a summary only and is subject to final
review and approval of the rights plan by our Board.
Reasons for rights plan
The rights plan is designed to protect and maximize the value of the
outstanding equity interests in Tri-Valley in the event of an unsolicited
attempt by an acquirer to take over Tri-Valley, in a manner or on terms not
approved by the Board of Directors. Takeover attempts frequently include
coercive tactics to deprive a company's board of directors and its
stockholders of any real opportunity to determine the destiny of the
company. The rights will be declared in order to deter these types of
coercive tactics, which, include a gradual accumulation of shares in the
open market of a 15% of greater position to be followed by a merger or a
partial or two-tier tender offer that does not treat all stockholders
equally. These tactics unfairly pressure stockholders, squeeze them out of
their investment without giving them any real choice and deprive them of
the full value of their shares. The rights are not intended to prevent a
takeover of Tri-Valley and will not do so. Rather, they are intended to
provide the protections of the Tri-Valley stockholders rights plan. Because
the rights may be redeemed by Tri-Valley, they should not interfere with any
merger or business combination approved by the Board of Directors.
Issuance of the rights will not in any way weaken our financial strength
or interfere with our business plans. The issuance of the rights themselves
has no dilutive effect, will not affect our reported earnings per share,
should not be taxable to us or to our stockholders and will not change the
way in which our shares are presently traded. Our Board of Directors
believes that the rights will represent a sound and reasonable means of
addressing the complex issues of corporate policy created by the current
takeover environment. However, the rights may have the effect of rendering
more difficult or discouraging an acquisiont of Tri-Valley deemed undesirable
by the Board of Directors. The rights may cause substantial dilution to a
person or group that attempts to acquire Tri-Valley on terms or in a manner
not approved by our Board of Directors.
How the rights plan works
If the Board adopts the rights plan, we will issue one preferred stock
share purchase right for each outstanding share of common stock. Each right
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will entitle the registered holder to purchase from Tri-Valley one one-
hundredth of a share of our preferred stock at a purchase price of $20 per
share, subject to adjustment. The description and terms of the rights will
be set forth in a rights agreement to be entered between Tri-Valley and a
designated rights agent. We filed a copy of the proposed rights agreement
with the Securities and Exchange Commission as an exhibit to this Proxy
Statement. We will mail a copy of the proposed rights agreement, and of
any rights agreement which the Board finally adopts, to any of our
shareholders without charge upon written request.
The rights become exercisable after the lapse of either:
- - - 10 days following a public announcement or disclosure that a person or
group of affiliated or associated persons, or an acquiring person, has
acquired beneficial ownership of 15% or more of the outstanding shares
Of our common stock; or
- - - 10 business days, or a later date as may be determined by the board
prior to the itme a person or group becomes an acquiring person,
following the announcement of an intention to make a tender offer or
exchange offer the consummation of which would result in a person or
group becoming an acquiring person.
The earlier of those dates is called the distribution date. No person
or group will be an acquiring person if the board determines in good faith
that the person or group who would otherwise be an acquiring person has
become one inadvertently, and that person or group promptly takes the actions
necessary so that it would no longer be considered an acquiring person.
The rights will expire on the tenth anniversary after the Board adopts
the rights plan, unless they are redeemed earlier or unless the Board elects
to extend the expiration date.
Adjustments for stock splits or other transactions
The number of outstanding rights and number of shares of common stock
issuable upon exercise of each right also will be subject to adjustment in
the event of a stock split of the common stock or a stock dividend on the
common stock payable in common stock or subdivisions, consolidations or
combinations of the common stock occurring, in any such case, prior to
distribution of the rights.
Rights could purchase shares of common stock at a discount
If any person or group becomes an acquiring person, each holder of a
right, other than the acquiring person, will have the right to receive upon
exercise that number of shares of common stock having a market value of two
times the exercise price of the right unless the event causing the person or
group to become an acquiring person is a merger, acquisition or other
business combination described in the next paragraph. If we do not have a
sufficient amount of authorized common stock to satisfy the obligation to
issue shares of common stock, we must deliver upon payment of the exercise
- 10 -
price of a right an amount of cash or other securities equivalent in value to
the shares of common stock issuable upon exercise of a right.
If any person or group becomes an acquiring person and (1) we merge
into or engage in certain other business combination transactions with an
acquiring person, or (2) 50% or more of our consolidated assets or earning
power are sold to an acquiring person, each holder of a right, other than
the acquiring person will have the right to receive that number of shares of
common stock of the acquiring company which will have a market value of two
times the exercise price of the right.
At any time after any person becomes an acquiring person and prior to
that person or group acquiring 50% or more of the outstanding shares of
common stock, the board may exchange the rights, other than rights owned by
that acquiring person, at an exchange ratio of one share of common stock,
or one one-hundredths of a preferred share per right.
Adjustments to the purchase price
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1%
in the purchase price. No fractional preferred shares will be issued.
However, fractions which are integral multiples of one one-hundredth of a
preferred share may, at our election, be evidenced by depositary receipts.
In lieu of fractional shares, an adjustment in cash will be made based on
the market price of the preferrred shares on the last trading day prior to
the date of exercise.
The board may redeem the rights
At any time prior to such time as a person or group becomes an
acquiring person, the board of directors may redeem all, but not some, of the
rights at a price of $0.001 per right. The redemption of the rights may be
made effective at the time, on the basis and with any conditions as the board
of directors in its sole discretion may establish. After the period for
redemption of the rights has expired, the board may not amend the rights
agreement to extend the period for redemption of the rights. The right to
exercise the rights terminates immediately when they are redeemed and the
only right of the holders of rights after that time will be to receive the
redemption price.
The board may amend the rights
The terms of the rights may be amended by a resolution of the board of
directors without the consent of the holders of the rights. However, from
after such time as any person or group becomes an acquiring person, no
amendment may adversely affect the interests of the holders of the rights
other than an acquiring person.
- 11 -
Holders of unexercised rights will not have privileges of a stockholder
Until a right is exercised, the holder will have no rights as a
stockholder of Tri-Valley, including, without limitation, the right to vote
or to receive dividends.
Terms of preferred shares subject to the rights plan
Redemption. The preferred shares purchasable upon exercise of the
rights, described above, will not be redeemable.
Dividends. Each preferred share will be entitled to a quarterly
dividend payment of 100 times the dividend declared per share of common
stock.
Voting. Each prefrred share will have 100 votes, voting together with
the shares of common stock. In the event of any merger, consolidation or
other transaction in which shares of common stock are exchanged, each
preferred share will be entitled to receive 100 times the amount received
per share of common stock.
Liquidation or dissolution. In the event of liquidation, each preferred
she will be entitled to a $1.00 preference, and after payment of the
preference, the holders of the preferred shares will be entitled to an
aggregate payment of 100 times the aggregate payment made per share of
common stock.
Because of the nature of the preferred shares' dividend, liquidation
and voting rights, the value of the one one-hundredths interest in a
preferred share purchasable upon exercise of each right should approximate
the value of one share of common stock.
Shares Reserved for Incentive Stock Option Plan
The Board also recommends amending our 1998 Incentive Stock Option
Plan to increase the number of shares that Tri-Valley is authorized to issue
pursuant to the Plan from 1,000,000 shares to 5,000,000 shares. That
proposal is discussed in Section IV of this Proxy Statement. The
recommended increase of total authorized common shares to 100,000,000 will be
sufficient to provide for this increase, if the shareholders adopt that
proposal by a separate vote.
In order to effectuate the Rights Plan described above, to provide for
the proposed increase in the number of shares subject to our Stock Incentive
Plan, and to accomodate future issues of common stock to raise capital for
company drilling and operations and allow for issuance of more shares in the
future, Tri-Valley needs to be able to issue more shares of common stock than
the 50 million shares that are current authorized by the certificate of
incorporation.
Therefore, the Board recommends a vote for the amendment to our
certificate of incorporation to increase the number of authorized shares of
common stock to 100 million shares. Approval of the amendment requires a
two-thirds majority of the shares represented at the meeting.
III. ELECTION FOR THE COMPANY TO BE GOVERNED BY SECTION 203 OF THE DELAWARE
GENERAL CORPORATION LAWS (DGCL)
Tri-Valley is presently subject to Section 203 of the DGCL,B the
Delaware control share statute. In order to be sure that we remain subject
to this statute in the future, we need to amend our articles of
incorporation as described below.
DGCL Section 203 is a share control statute that has the effect of
deterring hostile takeovers by preventing business combinations with an
interested stockholder for a period of three years after that person becomes
an interested stockholder. An interested stockholder is basically defined by
the statute as any owner of 15% or more of the voting stock in a
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corporation, while a business combination is defined to include any merger,
exchange of corporate assets or stock (including GK in a subsidiary), or
issuance of loans of other benefits.
However, Section 203 does not preclude all business combinations between
Tri-Valley and an interested stockholder during that three-year period. Such
business combinations may be permitted with an interested stockholder if (1)
the Board of Directors approves either the business combination or the
transaction whereby the interested stockholder attains such status prior to
its execution; (2) upon consummation of the transaction which resulted in a
person becoming an interested stockholder, that person owned at least 85% of
the outstanding voting stock of the corporation; or (3) after the transaction
whereby the interested stockholder attained that status, the business
combination is approved by the directors and authorized at an annual or
special meeting of the stockholders by a vote of at least 66 2/3% of the
voting stock which is not held by the interested stockholder. Section 203
thus helps to prevent hostile or unwanted takeovers, but it still allows a
business combination with an interested stockholder if the interested
stockholder can obtain ownership of at least 85% of the outstanding shares,
or else obtain the consent of either the Board of Directors or a two-thirds
majority of the other stockholders to the business combination.
The provisions of Section 203 may encourage persons interested in
acquiring Tri-Valley to negotiate in advance with our Board, since the
stockholder approval requirement would be avoided if a majority of the
directors then in office approves either the business combination or
the transaction which results in any such person becoming an interested
stockholder. It is possible that such provisions could make it more
difficult to accomplish transactions which Tri-Valley's stockholders may
otherwise deem to be in their best interests.
Section 203 automatically applies to corporations which do not have a
class of stock that is (1) listed on a national securities exchange; (2)
authorized for quotation on NASDAQ; or (3) held of record by more than 2,000
stockholders. Section 203 applies to Tri-Valley today because we are not
listed on an exchange or quoted on NASDAQ, and we have less than 2,000
stockholders. We believe that we may grow to more than 2,000 shareholders
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in the foreseeable future, and if we do, Section 203 will no longer
automatically apply to us. However, the Company may choose to opt into
Section 203 by amending its certificate of incorporation so as to elect to
be governed by its provisions.
The Board recommends a vote for the proposed amendment to our
certificate of incorporation opt into automatic application of Section 203
even if we grow to more than 2,000 shareholders or become listed on NASDAQ.
Approval of the amendment requires a two-thirds majority of the shares
represented at the meeting.
IV. APPROVE AN AMENDMENT TO OUR INCENTIVE STOCK OPTION PLAN
The Amendment to our 1998 Incentive Stock Option Plan would increase the
number of shares of the Company's common stock subject to the plan from 1
million shares to 3 million shares. A copy of the Plan is attached to the
Proxy Statement as Exhibit B.
The purpose of the Plan is to promote the growth and profitability of
the Company by providing, through the ownership of stock options, incentives
to attract and retain highly talented persons to provide managerial,
administrative, and other specialized services to the Company. It is the
intention of the Company in administering the Plan to provide employees,
including its executive officers, with an ongoing incentive to increase
earnings and productivity and to acknowledge superior service to the Company
by executive officers and employees. The Plan was approved by our
shareholders at the 1998 annual shareholders' meeting, and at that time we
reserved 1,000,000 shares of common stock for issuance under the Plan. The
increase in the proposed number of shares of authorized common stock,
discussed above, will be sufficient to permit use of the higher number of
shares subject to the Plan.
As our operations grow, we need to have a sufficient reserve of shares
to motivate our current employees and to attract new employees. In order to
continue to obtain the beneficial effects of the Plan, we need to increase
the number of shares available under the Plan.
The Plan is administered by a committee of the Company's Board of
Directors (the Committee). The Committee has full power and discretion to
determine which eligible officers and employees receive options and the time,
number of shares, and terms of any options to be granted under the Plan.
The exercise price of all options to be granted under the Plan is the fair
market value of the Company's Common Stock, determined by the closing daily
price on any stock exchange, automated quotation system or similar trading
system, on the date of grant of the option. If no such quotations exist on
the date of grant, the fair market value is determined in good faith by the
Committee. Members of the Committee may not be eligible to participate in
the plan and may not have been eligible to participate in the plan for one
year prior to appointment to the Committee.
All full and part time employees of the Company are eligible to
participate in the Plan, except for members of the Committee.
- 14 -
As of September 21, 1999, options to purchase an aggregate of 595,000
shares of common stock had been granted pursuant to the Plan, options to
purchase 2,000 shares had been exercised, options to purchase 593,000 shares
remained outstanding, and 405,000 shares remained available for future grant.
As of September 24, 1997, the market value of all shares of common stock
subject to outstanding options was approximately $1,497,600 (based on the
closing bid price of the common stock as reported on the OTC Bulletin Board
on September 21, 1999).
As of September 21,1999, Mr. Blystone, the executive named in the
Compensation Table appearing in Section I of this Proxy Statement, has been
granted 250,000 options under the Plan. Mr. Blystone had also been granted non-
qualified options to purchase Tri-Valley stock prior to implementation of the
Plan, as discussed in Section I.
Options issued under the Plan are entitled to incentive stock option
treatment for federal income tax purposes provided by Section 422 of
the Internal Revenue Code. An optionee, upon exercise of an option under
the Plan, will not realize taxable income (but may generate a tax preference
item which may result in tax liability under alternative minimum tax
provisions), nor will the Company then be entitled to a deduction. The gain
realized upon the subsequent disposition of the stock acquired upon exercise
of the options will be entitled to capital gain treatment, provided that no
such disposition is made within 2 years after the option was granted and 1
year after the option was exercised. If such holding period requirements are
not satisfied, the optionee will realize ordinary income equal to the lesser
of (i) the fair market value of the stock on the date of exercise minus the
exercise price or (ii) the amount realized on disposition minus the exercise
price, and will receive a credit against income tax to the extent alternative
minimum tax liability was incurred upon exercise. If the optionee must
recognize ordinary income, the Company will be entitled to a corresponding
deduction. The foregoing statements are based upon current federal income
tax laws and regulations and are subject to change if the tax laws and
regulations, or interpretations thereof, change.
In addition, the Plan may establish for officers and directors of the
Company an exemption from the provisions of Section 16(b) of the Securities
Exchange Act of 1934 for the grants of options. Section 16(b) provides for
recovery by the Company of profits made by officers and directors on short-
erm trading in shares of common stock of the Company. Grants of options to
purchase common stock under the Plan by officers and employee-directors of
the Company may be entitled to an exemption from the operation of Section
16(b), provided certain conditions are met under the rules and regulations of
the SEC.
The Board recommends a vote for the amendment to the 1998 Incentive
Stock Option Plan to increase the number of shares authorized under the Plan
to 3,000,000. A majority vote of the shares represented at the meeting is
required to approve this proposal.
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ADDITIONAL INFORMATION
Prior to mailing the proxy statement to shareholders, each shareholder
has been mailed a copy of the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1998, which contains the Company's audited financial
statements dated December 31, 1998.
PROPOSALS BY SHAREHOLDERS - 2000
Any proposal by a shareholder to be submitted for inclusion in proxy
soliciting material for the 2000 annual shareholders meeting must be received
by the corporate secretary of the Company no later than December 31, 1999.
OTHER MATTERS
No proposals have been received from shareholders for inclusion in the
proxy statement or action at the 1999 annual meeting. Management does not
know of any matter to be acted upon at the meeting other than the matters
above described. However, if any other matter should properly come before
the meeting, the proxy holders named in the enclosed proxy will vote the
shares for which they hold proxies in their discretion.
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TRI-VALLEY CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints F. Lynn Blystone and Loren Miller as Proxies
with the power to appoint their substitutes, and hereby authorizes them to
represent and to vote, as designated below, all the shares of common stock of
Tri-Valley Corporation held on record by the undersigned on September 27,
1999, at the Annual Meeting of Shareholders to be held in the Beale Room of
the Holiday Inn Select in Bakersfield, California, on November 19, 1999, at
10:00 A.M. (P.S.T.).
1. ELECTION OF DIRECTORS or any adjournment thereof.
FOR ALL NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE CONTRARY BELOW).
(To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list below.)
F. L. Blystone E. H. Beistline M. J. Carlson
D. P. Lockhart L. J. Miller C. Stockdale
2. To approve an amendment to the Certificate of Incorporation to increase
the number of authorized shares.
For Against Abstain
---- ---- ----
3. Election by the Company to be governed by Section 203 of the Delaware
General Corporation Laws.
For Against Abstain
---- ---- ----
4. To approve an amendment to the Company's Incentive Stock Option Plan to
increase the number of authorized shares.
For Against Abstain
---- ---- ----
5. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
For Against Abstain
---- ---- ----
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 - 6.
Please sign and date this Proxy. When signing as attorney, executor,
administrator, trustee, guardian, corporate officer, etc., please indicate
your full title. Proxies received in this office later than 5:00 P.M. on
November 18, 1999, will not be voted upon unless the shareholders are present
to vote their shares.
OTHER BUSINESS
It is not anticipated that any other matters will be brought before the
meeting for action. If any other matters shall properly come before the
meeting or any adjournment thereof, it is intended that the holders of the
proxies may, in the absence of instruction to the contrary, exercise their
direction to vote or act on such matters as they determine to be appropriate.
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Dated:
(Please mark, sign, date and return the
Proxy Card Promptly
- - ---------------------------- ----------------------------
Signature Signature if held jointly
- 2 -
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EXHIBIT A
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF
TRI-VALLEY CORPORATION
Tri-Valley Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does
hereby certify:
FIRST: That at a meeting of the Board of Directors of TRI-VALLEY
CORPORATION resolutions were duly adopted setting forth a proposed amendment
of the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered Fourth (a) so that, as
amended, said Article shall be and read as follows:
FOURTH. (a) The total number of shares of stock which the
corporation is authorized to issue is one hundred million shares
of common stock at .001 par value, and five (5) million shares of
preferred stock at .01 par value.
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by adding a new Article thereof numbered Fourteenth which Article
Fourteenth shall be and read as follows:
FOURTEENTH. In accordance with the terms of Section 203(b) of the
General Corporation Law of the State of Delaware, the corporation
hereby elects to have Section 203 of the General Corporation Law
of the State of Delaware govern the corporation.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a meeting of the stockholders of said corporation was duly called and held
upon notice in accordance with Section 222 of the General Corporation Law of
the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or
by reason of said amendment.
- 1 -
IN WITNESS WHEREOF, said TRI-VALLEY CORPORATION has caused this certificate
to be signed by Thomas J. Cunningham, an Authorized Officer, this day of
-----
1999.
- - -----------------
By:
-----------------------------------------
Thomas J. Cunningham, Chief Financial
Officer
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EXHIBIT B
TRI-VALLEY CORPORATION
1999 - STOCK OPTION PLAN
(As Amended)
ARTICLE I
PURPOSE OF PLAN
The purpose of this Plan is to promote the growth and profitability of
the Company and other participating companies by providing, through the
ownership of Options, incentives to attract and retain highly talented
persons to provide managerial, administrative and other specialized services
to the Company and other participating Companies and to motivate such persons
to use their best efforts on behalf of the Company.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
set forth in this Article II:
2.1 Accrued installment. The term "Accrued installment" shall mean any
vested installment of an Option.
2.2 Board. The term "Board" shall mean the Board of Directors of the
Company.
2.3 Committee. The term "Committee" shall mean the Compensation
Committee, or a successor committee, appointed by the Board and constituting
not less than two members of the Board, each of whom is a Disinterested
Person.
2.4 Company. The term "Company" shall mean Tri-Valley Corporation, a
Delaware corporation, or any successor thereof.
2.5 Director. The term "Director" shall mean a member of the Board, or
a member of the board of directors of any Participating Company.
2.6 Disinterested Person. The term "Disinterested Person" shall mean
any person defined as a Disinterested Person in Rule 16b-3 of the Securities
and Exchange Commission as amended from time to time and as promulgated under
the Exchange Act.
2.7 Effective. Shall mean the date on which the Plan is approved by
the stockholders of the Company.
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2.8 Eligible Person. The term "Eligible Person" shall mean. except as
provided in Section 3. 1, any full-time employee or officer of any
participating Company.
2.9 Exchange Act. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
2.10 Fair Market Value. The term "Fair Market Value" shall mean the
closing sale price on the trading day in question of the Shares on the
Composite Tape for New York Stock Exchange Listed Stocks, or, if the Shares
are not quoted on the Composite Tape, on the New York Stock Exchange, or, if
the Shares are not listed on such Exchange, on the principal United States
securities exchange on which the Shares are listed, or, if the Shares are not
listed on any such exchange, the closing bid quotation with respect to the
Shares on the trading day in question on the National Association of
Securities Dealers, Inc. Automated Quotations Systems or any similar system
then in use, or if no such quotation is available, the fair market value on
the date in question of the Shares as determined in good faith by the
Committee. If the day in question is not a trading day, the determination of
Fair Market Value shall be made as of the nearest preceding trading day.
2.11 Option. The term "Option" shall mean an option to acquire Shares
granted under this Plan.
2.12 Optionee. The term "Optionee" shall mean an Eligible Person who
has been granted an Option.
2.13 Parent Corporation. The term "Parent Corporation" shall mean a
corporation as defined in Internal Revenue Code Section 424 (e) or any
successor thereto.
2.14 Participating Company. The term " Participating Company" shall
mean the Company and any Parent Corporation or Subsidiary Corporation of the
Company.
2.15 Plan. The term "Plan" shall refer to the Company's 1998 Stock
Option Plan.
2.16 Shares. The term "Shares" shall mean shares of the Company's
Class A Common Stock, $.001 par value, and may be un-issued shares or
treasury shares or shares purchased for purposes of this Plan.
2.17 Subsidiary Corporation. The term "Subsidiary Corporation" shall
mean a corporation as defined in Internal Revenue Code Section 424 (f) or any
successor thereto.
2.18 Terminating Transaction. The term "Terminating Transaction" shall
mean any of the following events, (a) the dissolution or liquidation of the
Company; (b) a reorganization, merger or consolidation of the Company with
one or more other corporations as a result of which the Company goes out of
existence or becomes a subsidiary of another corporation which shall be
deemed to have occurred if another corporation shall own, directly or
- 2 -
indirectly, over eighty percent (80%) of the aggregate voting power of all
outstanding equity securities of the Company); (c) a sale of all or
substantially all of the Company's assets; or (d) a sale of the equity
securities of the Company representing more than eighty percent (80%) of the
aggregate voting power of all outstanding equity securities of the Company to
any person or entity, or any group of persons and entities acting in concert.
2.19 Termination Date. The term "Termination Date" shall mean August
22, 2008.
2.20 Total Disability. The term "Total Disability" shall mean a
permanent and total disability as that is defined in Internal Revenue Code
Section 22 (e) (3) or any successor thereto.
ARTICLE III
ADMINISTRATION OF PLAN
3.1 Administration by the Committee. This Plan shall be administered
by the Compensation Committee of the board, of its successor (the
"Committee"). Subject to the provisions of this Plan document, the Committee
shall have full and absolute power and authority in its sole discretion to
(i) determine which Eligible Persons shall receive Option, (ii) determine the
time when Options shall be granted, (iii) determine the terms and conditions,
not inconsistent with the provisions of this Plan, of any Option granted
hereunder, (iv) determine the number of shares subject to or covered by each
Option, and (v) interpret the provisions of this Plan and of any Option
granted under this Plan. A member of the Committee shall not be an Eligible
Person, and shall not have been an Eligible Person at any time within one (1)
year prior to appointment to the Committee. Except as otherwise provided
herein or otherwise permitted by Rule 16b-3 (b) (3) of the Exchange Act,
during said one (1) year prior to such appointment, no member of the
Committee shall have been eligible to acquire stock, stock options or stock
appreciation rights under any plan of the Company.
The exercise price of the Options shall be Fair Market Value on the date
of grant.
3.2 Rules and Regulations. The Committee may adopt such rules and
regulations, as the Committee may deem necessary or appropriate to carry out
the purpose of this Plan and shall have authority to take all action
necessary or appropriate to administer this Plan.
3.3 Binding Authority. All decisions, determination, interpretations,
or other actions by the Committee shall be final, conclusive, and binding on
all Eligible Persons, Optionees, Participating Companies and any successors-
in-interest to such parties.
- 3 -
ARTICLE IV
NUMBER OF SHARES AVAILABLE UNDER THIS PLAN
The maximum aggregate number of Shares which may be optioned and sold
under this Plan is 5,000,000 Shares. In the event that Options granted under
this Plan shall for any reason terminate, lapse, be forfeited, or expire
without being exercised, the Shares subject to such unexercised Options may
again be subjected to Options under this Plan. In any event, however, no
Option may be granted hereunder if the sum of Shares subject to such Option
and the number of Shares subject to unexpired Options previously granted
hereunder (or subject to unexercised option or stock appreciation rights
under any stock option or stock appreciation right plan of the Company) would
exceed twenty percent (20%) of the total shares of voting stock outstanding
at such time.
ARTICLE V
TERM OF PLAN
This Plan shall be effective as of the Effective Date and shall
terminate on the Termination Date. No Option may be granted hereunder after
the Termination Date.
ARTICLE VI
OPTIONS TERMS
6.1 Form of Option Agreement. Any option granted under this Plan shall
be evidenced by an agreement ("Option Agreement") in such form as the
Committee, in its discretion, may from time to time approve. Any Option
Agreement shall contain such terms and conditions as the Committee may deem,
in its sole discretion, necessary or appropriate and which are not
inconsistent with the provisions of this Plan.
6.2 Vesting and Exercisability of Options. Subject to the limitations
set forth herein and/or in any applicable Option Agreement entered into
hereunder, Options granted under this Plan shall vest and be exercisable in
accordance with the rules set forth in this Section 6.2.
a. General. Subject to the other provisions of this Section 6.2,
Options shall vest and become exercisable at such times and in such
installments, as the Committee shall provide in each individual Option
Agreement. Notwithstanding the foregoing, the Committee may in its sole
discretion accelerate the time at which an Option or installment
- 4 -
thereof may be exercised. Unless otherwise provided in this Section 6.2 or
in the Option Agreement pursuant to which an Option is granted, an Option may
be exercised when Accrued Installments accrue as provided in such Option
Agreement and at any time thereafter until, and including, the Option
Termination Date (as defined below).
b. Termination of Options. All installments and Options shall
expire and terminate on such date as the Committee shall determine ("Option
Termination Date"), which in no event shall be later than ten (10) years from
the date on which such Option was granted.
c. Termination of Eligible Person Status Other Than by Reason of
Death or Disability. In the event that the employment of an Eligible Person
with a Participating Company is terminated for any such reason (other than
byreason of death or Total Disability). Any installments under an Option held
by such Eligible Person which has not accrued as of such termination date
shall expire and become unexercisable as of such termination date. All
Accrued installments as of the employment termination date shall remain
exercisable only within such period of time as the Committee may determine,
but in no event shall any Accrued installments remain exercisable for a
period in excess of three (3) months following such termination date or for
a period in excess of the original Option Termination Date, whichever is
earlier. For purposes of this Plan, an Eligible Person who is a employee or
Director of any Participating Company shall not be deemed to have incurred a
termination of his employment (whichever may be applicable) so long as such
Eligible Person is an employee or Director (whichever may be applicable) of
any Participating Company.
d. Leave of Absence. In the case of any employee on an approved
leave of absence, the Committee may deem such provision respecting
continuance of any Options held by the employee as the Committee deems
appropriate in its sole discretion, except in no event shall an Option be
exercisable after the original Option Termination Date.
e. Death or Total Disability of Eligible Person. In the event
that the employment of an Eligible Person with a Participating Company is
terminated by reason of death or Total Disability, any unexercised Accrued
installments of Options granted hereunder to such Eligible Person shall
expire and become unexercisable as of the earlier of:
(1) The applicable Option Termination Date, or
(2) The first anniversary of the date of termination of the
employment of such Eligible Person by reason of the Eligible person's death
or Total Disability. Any such Accrued Installments of a deceased Eligible
Person may be exercised prior to their expiration only by the person or
persons to whom the Eligible Person Option rights pass by will or the laws of
descent and distribution. Any Option installments under such a deceased or
disabled Eligible Person's Option that have not accrued as of the date of
the termination of employment, or directorship due to death or Total
Disability shall expire and become unexercisable as of such termination date.
- 5 -
6.3 Options Not Transferable. Options granted under this Plan may not
be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, either voluntarily or involuntarily
or by operation of law, other than by will or the laws of descent and
distribution, and (except as specifically provided to the contrary in Section
6.2 (e) hereof) may be exercised during the lifetime of an Optionee only by
such Optionee.
6.4 Restrictions on Issuance of Shares.
a. No Shares shall be issued or delivered upon exercise of an
Option unless and until there shall have been compliance with all applicable
requirements of the Securities Act of 1933, all applicable listing
requirements of any market or securities exchange on which the Company's
Common Stock is then listed, and any other requirements of law or of any
regulatory body having jurisdiction over such issuance and delivery. The
inability of the Company to obtain any required permits, authorizations or
approvals necessary for the lawful issuance and sale of any Shares hereunder
on terms deemed reasonable by the Committee shall relieve the Company, the
Board, and the Committee of any liability in respect of the non-issuance or
sale of such Shares as to which such requisite permits, authorizations or
approvals shall not have been obtained.
b. As a condition to the granting or exercise of any Option, the
Committee may require the person receiving or exercising such Option to make
any representations and warranties to the Company as may be required or
appropriate under any applicable law or regulation, including, but not
limited to, a representation that the Option or Shares are being acquired
only for investment and without any present intention to sell or distribute
such Option or Shares, if such a representation is required under the
Securities Act of 1933 or any other applicable law, rule or regulation.
c. The exercise of any Option under this plan is conditioned on
approval of this Plan, within twelve (12) months of the adoption of this Plan
by the Board, by (i) the vote of the holders of a majority of the outstanding
securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with applicable law, or (ii) the written
consent of the holders of a majority of the securities of the Company
entitled to vote if the requirements of Rule 16b-3 (b) (2) promulgated under
the Exchange Act are otherwise satisfied. In the event such shareholder
approval is not obtained within such time period, any Options granted
hereunder shall be void.
6.5 Option Adjustments.
a. If the outstanding Shares are increased, decreased, changed
into or exchanged for a different number or kind of shares of the Company
through reorganization, recapitalization, reclassification, stock dividend,
stock split or reverse stock-split, an appropriate and proportionate
adjustment shall be made in the number or kind of shares, and the per-share
Option price thereof which may be issued in the aggregate and to any
individual
- 6 -
Optionee under this Plan upon exercise of Options granted under this Plan;
provided, however, that no such adjustment need be made if, upon the advice
of counsel, the Committee determines that such adjustment may result in the
receipt of federally taxable income to holders of Options granted hereunder
or the holders of Shares or other classes of the Company's securities.
b. Upon the occurrence of a Terminating Transaction (as defined
in Article II hereof), as of the effective date of such Terminating
Transaction, this Plan and any then outstanding Options (whether or not
vested) shall terminate unless (i) provision is made in writing in connection
with such transaction for the continuance of this Plan and for the assumption
of such Options, or for the substitution of such Options of new options
covering the securities of the successor or surviving corporation in the
Terminating Transaction or an affiliate thereof, with appropriate adjustments
as to the number and kind of securities and prices, in which event this Plan
and such outstanding Options shall continue or be replaced, as the case may
be, in the manner and under the terms so provided; or (ii) the Committee
otherwise shall provide in writing for such adjustments as it deems
appropriate in the terms and conditions of the then outstanding Options
(whether or not vested), including without limitation (a) accelerating the
vesting of outstanding Options, and/or (b) providing for the cancellation of
Options and their automatic conversion into the right to receive the
securities or other properties which a holder of the Shares underlying such
Options would have been entitled to receive upon consummation of such
Terminating Transaction had such Shares been issued and outstanding (net of
the appropriate optionexercise prices). If this Plan or the Options shall
terminate pursuant to the foregoing provisions of this paragraph (b) because
neither (i) nor (ii) is satisfied, any Optionee holding outstanding Options
shall have the right, at such time immediately prior to the consummation of
the Terminating Transaction as the Company shall designate and theretofore
exercised, including any installments which have not yet become Accrued
installments.
c. In all cases, the nature and extent of adjustments under this
Section 6.5 shall be determined by the Committee in its sole discretion, and
any such determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of
stock shall be issued under this Plan pursuant to any such adjustment.
6.6 Taxes. The Committee shall make such provisions and take such
steps as it deems necessary or appropriate for the withholding of any
federal, state, local and other tax required by law to be withheld with
respect to the grant or exercise of an Option under this Plan, including, but
without limitation, the withholding of the number of Shares at the time of
the grant or exercise of an Option the Fair Market Value of which would
satisfy any withholding tax on said exercise or grant, the deduction of the
amount of any such withholding tax from any compensation or other amounts
payable to an Optionee by any member of the Participating Companies, or
requiring an Optionee (or the Optionee beneficiary or legal representative)
as a condition of granting or exercising an Option to pay to any member of
the Participating Companies any amount required to be withheld, or to execute
such otherdocuments as the Committee deems necessary or appropriate in
connection with the satisfaction of any applicable withholding obligation.
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6.7 Legends. Each Option Agreement and each certificate representing
Shares acquired upon exercise of an Option shall be endorsed with all
legends, if any, required by applicable federal and state securities laws to
be placed thereon. The determination of which legends, if any, shall be
placed upon Option Agreements and/or said Share certificates shall be made by
the Committee in its sole discretion and such decision shall be final,
binding and conclusive.
ARTICLE VII
SPECIAL OPTION TERMS UNDER THIS PLAN
7.1 Option Exercise Price. The Option exercise price for Shares to be
issued under this Plan shall be the Fair Market Value of the Shares on the
date of grant. The date of grant shall be deemed to be the date on which the
Committee authorizes the grant of the Option, unless a subsequent date is
specified in such authorization.
7.2 Exercise of Options. An Option may be exercised in accordance with
this Section 7.2 as to all or any portion of the Shares covered by an Accrued
installment of the Option from time to time during the applicable Option
period, except that an Option shall not be exercisable with respect to
fractions of a Share. Options may be exercised, in whole or in part, by
giving written notice of exercise to the Company, which notice shall specify
the number of Shares to be purchased and shall be accompanied by payment in
full of the purchase price in accordance with Section 7.3. An Option shall be
deemed exercised when such written notice of exercise and payment has been
received by the Company. No Shares shall be issued until full payment has
been made and the Optionee has satisfied such other conditions as may be
required by this Plan, as may be by applicable law, rules, or regulations, or
as may be adopted or imposed by the Committee. Until the required stock
certificates have been issued, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to optioned Shares
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other rights for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 6.5.
7.3 Payment of Option Exercise Price.
a. Except as otherwise provided in Section 7.3 (b), the entire
Option exercise price shall be paid in cash at the time the Option is
exercised.
b. In the discretion of the Committee, an Optionee may elect to pay
for all or some of the Optionee's Shares with Common Stock of the Company
previously acquired and owned at the time of exercise by the Optionee, subject
to all restrictions and limitations of applicable laws, rules and regulations,
and subject to the satisfaction of any
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conditions the Committee may impose, including, but not limited to, the
making of such representations andwarranties and the providing of such other
assurances that the Committee may require with respect to the Optionee's title
to the Company's Common Stock used for payment of the exercise price. Such
payment shall be made by delivery of certificates representing the Company's
Common Stock, duly endorsed or with duly signed stock power attached, such
Common Stock to be valued at its Fair Market Value on the date notice of
exercise is received by the Company.
7.4 Special Limitations on Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to
whichIncentive Stock Options are exercisable for the first time by an
individual during any calendar year under all incentive stock option plans of
the Company and its Parent Corporation and Subsidiaries exceeds $100,000,
such excess Incentive Stock Options shall be treated as Nonqualified Options.
The Committee shall determine, in accordance with applicable provisions of
the Code, Treasury Regulations and other administrative pronouncements, which
of an Optionee's Incentive Stock Option will not constitute Incentive Stock
Options because of such limitation and shall notify the Optionee of such
determination as soon as practicable after such determination. No Incentive
Stock Option shall be granted to an individual if, at the time the Option is
granted, such individual owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of its Parent
Corporation or a Subsidiary, within the meaning of Section 422(b)(6) of
theCode, unless (i) at the time such Option is granted the option price is at
least 110% of the Fair Market Value of the Common Stock subject to the Option
and (ii) such Option by its terms is not exercisable after the expiration of
five years from the date of grant.
ARTICLE VIII
AMENDMENT OR TERMINATION OF PLAN
8.1 Board Authority. The Board may amend, alter, and/or terminate this
Plan at any time; provided, however, that unless required by applicable law,
rule, or regulation or unless no longer required to satisfy the requirements
of Rule 16b-3 promulgated under the Exchange Act, the Board shall not amend
this Plan without the approval of stockholders (as obtained in accordance
with the provisions of Section 6.4(c) hereof) if the amendment would (A)
materially increase the benefits accruing to participants under this Plan,
(B) materially increase the number of securities which may be issued under
this Plan, or (C) materially modify the requirements as to eligibility for
participation in this Plan. In determining whether a given amendment is
within the scope of (A), (B) or (C), the Company may rely, without
limitation, upon the regulations promulgated and the advice provided by the
Securities and Exchange Commission with respect to Rule 16b-3. No amendment
of this Plan or of any Option Agreement shall affect in a material and
adverse manner Options granted prior to the date of any such amendment
without the consent of any Optionee holding any such affected Options.
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8.2 Contingent Grants Based on Amendments. Options may be granted in
reliance on and consistent with any amendment adopted by the Board alone
which is necessary to enable such Options to be granted under this Plan, even
though such amendment requires future stockholder approval; provided,
however, that any such contingent Option by its terms may not be exercised
prior to stockholder approval of such amendment and provided, further, that
in the event stockholder approval is not obtained within twelve (12) months
of the date of grant of such contingent Option, then such contingent Option
shall be deemed canceled and no longer outstanding.
ARTICLE IX
GENERAL PROVISIONS
9.1 Availability of Plan. A copy of this Plan shall be delivered to the
Secretary and Assistant Secretary of the Company and shall be shown by the
Secretary or Assistant Secretary to any Eligible Person making reasonable
inquiry concerning this Plan.
9.2 Notice. Any notice or other communication required or permitted to
be given pursuant to this Plan or under any Option Agreement must be in
writing and shall be deemed to have been given when delivered to and actually
received by the party to whom addressed. Notice shall be given to Optionee's
at their most recent addresses shown in the Company's records. Notice to the
Company shall be addressed to the Company at the address of the Company's
principal executive offices, to the attention of the Secretary of the
Company.
9.3 Titles and Headings. Titles and headings of sections of this Plan
are for convenience of reference only and shall not affect the construction
of any provision of this Plan.
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RIGHTS AGREEMENT
This Rights Agreement (the "Agreement"), dated as of
_________________, between Tri-Valley Corporation, a Delaware corporation
(the "Company"), and Registrar and Transfer Company, as Rights Agent (the
"Rights Agent").
The board of directors of the Company (the "Board of
Directors") has authorized and declared a dividend of one preferred share
purchase right (a "Right") for each Common Share (as hereinafter defined) of
the Company outstanding on___________________ (the "Record
Date"), each Right representing the right to purchase one one-hundredth of a
Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution
Date,the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined), including any Common Shares issued in connection with
the initial public offering of the Common Shares.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit plan of the Company or of any Subsidiary
of the Company, or any entity holding Common Shares for or pursuant to the
terms of any such plan. Notwithstanding anything in this definition of
Acquiring Person to the contrary, no Person shall become an "Acquiring
Person" as the result of an acquisition of Common Shares by the Company
which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or
more of the Common Shares of the Company then outstanding; provided, however,
that if a Person shall become the Beneficial Owner of 15% or more of the
Common Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an "Acquiring Person." Notwithstanding anything
in this definition of Acquiring Person to the contrary, if the Board of
Directors determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common Shares so that such
Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be
deemed to be an "Acquiring Person" for any purposes of this Agreement.
- 1 -
(b) "Affiliate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as
in effect on the date of this Agreement.
(c) "Associate" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Exchange Act as
in effect on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote, or the right to
direct the vote, pursuant to any agreement, arrangement or understanding;
provided, however , that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, any security, if the agreement, arrangement or
understanding to vote, or direct the vote of, such security (1) arises
solely from a revocable proxy or consent given to such Person in response to
a public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations promulgated under the Exchange
Act and (2) is not also then reportable on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso
to Section 1(d)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership
to the contrary, the phrase "then outstanding", when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
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number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
(e) "Board of Directors" shall have the meaning set forth in the
preamble hereof.
(f) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean 5:00 P.M., New
York time, on such date; provided, however, that, if such date is not a
Business Day, it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
(h) "Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $.01 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting
power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.
(i) "Company" shall have the meaning set forth in the preamble
hereof.
(j) "Current Per Share Market Price" shall have the meaning set
forth in Section 11(d)(i) hereof.
(k) "Distribution Date" shall have the meaning set forth in Section
3 hereof.
(l) "Equivalent preferred shares" shall have the meaning set forth
in Section 11(b) hereof.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(n) "Exchange Ratio" shall have the meaning set forth in Section
24(a) hereof.
(o) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(p) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
(q) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company
having the rights and preferences set forth in the Form of Certificate of
Designations attached to this Agreement as Exhibit A.
(r) "Purchase Price" shall have the meaning set forth in Section 4
hereof.
(s) "Record Date" shall have the meaning set forth in the preamble
hereof.
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(t) "Redemption Date" shall have the meaning set forth in Section
7(a) hereof.
(u) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(v) "Right" shall have the meaning set forth in the preamble hereof.
(w) "Right Certificate" shall have the meaning set forth in Section
3(a) hereof.
(x) "Rights Agent" shall have the meaning set forth in the preamble
hereof.
(y)"Security" shall have the meaning set forth in Section 11(d)
hereof.
(z) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person
has become such.
(aa) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person.
(bb) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(cc) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall, prior to the
Distribution, Date also be the holders of the Common Shares) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts
such appointment. The Company may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of
(i) the tenth day after the Shares Acquisition Date or (ii) the tenth
Business Day (or such later date as may be determined by action of the Board
of Directors prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or
of any Subsidiary of the Company, or any entity holding Common Shares for or
pursuant to the terms of any such plan) of, or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity holding Common Shares for or
pursuant to the terms of any such plan) to commence, a tender or exchange
offer the consummation of which would result in any Person becoming the
Beneficial Owner of Common Shares aggregating 15% or more of the then
outstanding Common Shares (the earlier of such dates being herein referred
to as the "Distribution Date"), (x) the Rights will be evidenced (subject to
- 4 -
the provisions of Section 3(b) hereof) by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall
also be deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of Common Shares. As soon
as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or
cause to be sent (and the Rights Agent will, if requested, send) by
first-class, postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"),
evidencing one Right for each Common Share so held. From and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares,
in substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as
of the Close of Business on the Record Date, at the address of such holder
shown on the records of the Company. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached
thereto. Until the Distribution Date (or the earlier of the Redemption Date
or the Final Expiration Date), the surrender for transfer of any certificate
for Common Shares outstanding on the Record Date, with or without a copy of
the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the
last sentence of this paragraph (c)) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date, shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Lucent
Technologies Inc. and Registrar and Transfer Company, dated as of
(the "Rights Agreement"), the terms of which are
-----------------
hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of Tri-Valley Corporation.
Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Lucent
Technologies Inc. will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a
written request therefor. Under certain circumstances, as set forth
in the Rights Agreement, Rights issued to any Person who becomes
an Acquiring Person (as defined in the Rights Agreement) may become
null and void.
- 5 -
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Company purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated
with such Common Shares shall be deemed cancelled and retired so that the
Company shall not be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and
the forms of election to purchase Preferred Shares and of assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange or automated quotation system on which the Rights may
from time to time be listed, or to conform to usage. Subject to the
provisions of Section 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as shall be set forth therein at the price per one one-hundredth of a
Preferred Share set forth therein (the "Purchase Price"), but the number of
such one one-hundredths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its Chairman of
the Board, its Chief Executive Officer, its President, any of its Vice
Presidents, or its Treasurer, either manually or by facsimile signature,
shall have affixed thereto the Company's seal or a facsimile thereof, and
shall be attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such officer of
the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the individual who signed such
Right Certificates had not ceased to be such officer of the Company; and any
Right Certificate may be signed on behalf of the Company by any individual
who, at the actual date of the execution of such Right Certificate, shall be
a proper officer of the Company to sign such Right Certificate although at
the date of the execution of this Agreement any such individual was not such
an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of
the Right Certificates issued hereunder. Such books shall show the names and
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addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date
of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
Subject to the provisions of Section 14 hereof, at any time after the Close
of Business on the Distribution Date, and at or prior to the Close of
Business on the earlier of the Redemption Date or the Final Expiration Date,
any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(ii)
hereof or that have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined, or exchanged for another Right Certificate
or other Right Certificates entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right
ertificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the principal office of the Rights Agent. Thereupon the Rights
Agent shall countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will make
and deliver a new Right Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) The registered holder of any Right Certificate may exercise the
ights evidenced thereby (except as otherwise provided herein), in whole or in
part, at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the principal office of the
Rights Agent, together with payment of the Purchase Price for each one
one-hundredth of a Preferred Share as to which the Rights are exercised, at
or prior to the earliest of (i) the Close of Business on {the tenth
anniversary of the execution of this Agreement} (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date"), or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred
- 7 -
Share purchasable pursuant to the exercise of a Right shall initially be $10,
and shall be subject to adjustment from time to time as provided in Section
11 or 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 9 hereof by certified
check, cashier's check or money order payable to the order of the Company,
the Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Shares certificates for the number of
Preferred Shares to be purchased and the Company hereby irrevocably
authorizes any such transfer agent to comply with all such requests, or
(B) requisition from the depositary agent depositary receipts representing
such number of one one-hundredths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent of the Preferred
Shares with such depositary agent) and the Company hereby directs such
depositary agent to comply with such request; (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 14 hereof; (iii)
promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be
designated by such holder; and (iv) when appropriate, after receipt,
promptly deliver such cash to or upon the order of the registered holder of
such Right Certificate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent,
shall be cancelled by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any other Right
Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Right Certificates to the
Company, or shall, at the written request of the Company, destroy such
cancelled Right Certificates, and, in such case, shall deliver a certificate
of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company
covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued Preferred Shares or any Preferred Shares held
in its treasury, the number of Preferred Shares that will be sufficient to
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permit the exercise in full of all outstanding Rights in accordance with
Section 7. The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon
exercise of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Right
Certificates or of any Preferred Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a
Person other than, or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates or depositary receipts
for Preferred Shares upon the exercise of any Rights until any such tax shall
have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's reasonable satisfaction that no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in
whose name any certificate for Preferred Shares is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of
record of the Preferred Shares represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred Shares transfer
books of the Company are closed, such Person shall be deemed to have become
the record holder of such shares on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Shares transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate shall not be entitled to any rights of a
holder of Preferred Shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or
other distributions or to exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares
or Number of Rights. The Purchase Price, the number of Preferred Shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares payable
in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification of
the Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
- 9 -
corporation), except as otherwise provided in this Section 11(a), the
Purchase Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification,
and the number and kind of shares of capital stock issuable on such date,
shall be proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive the aggregate number and kind of
shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Shares
transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any
Person becomes an Acquiring Person, each holder of a Right shall thereafter
have a right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of Common
Shares of the Company as shall equal the result obtained by (A) multiplying
the then current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable and dividing that
product by (B) 50% of the then Current Per Share Market Price of the
Company's Common Shares (determined pursuant to Section 11(d)(i) hereof) on
the date of the occurrence of such event. In the event that any Person shall
become an Acquiring Person and the Rights shall then be outstanding, the
Company shall not take any action which would eliminate or diminish the
benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any Associate
or Affiliate of such Acquiring Person) shall be void and any holder of such
Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 that represents Rights beneficially owned by an Acquiring Person
whose Rights would
be void pursuant to the preceding sentence, or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer
of any Rights to an Acquiring Person whose Rights would be void pursuant to
the preceding sentence or any Associate or Affiliate thereof or to any
nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence shall be
cancelled.
(iii) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit the exercise
in full of the Rights in accordance with the foregoing subparagraph (ii), the
Company shall take all such action as may be necessary to authorize
- 10 -
additional Common Shares for issuance upon exercise of the Rights. In the
event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Shares, the
Company shall substitute, for each Common Share that would otherwise be
issuable upon exercise of a Right, a number of Preferred Shares or fraction
thereof such that the Current Per Share Market Price of one Preferred Share
multiplied by such number or fraction is equal to the Current Per Share
Market Price of one Common Share as of the date of issuance of such Preferred
Shares or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then Current
Per Share Market Price of the Preferred Shares) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the number of Preferred
Shares outstanding on such record date plus the number of Preferred Shares
which the aggregate offering price of the total number of Preferred Shares
and/or equivalent preferred shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered)
would purchase at such current market price and the denominator of which
shall be the number of Preferred Shares outstanding on such record date plus
the number of additional Preferred Shares and/or equivalent preferred shares
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right. In case such subscription
price may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and holders of the Rights. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of the Preferred Shares (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then Current Per Share Market Price of
- 11 -
the Preferred Shares on such record date, less the fair market value (as
determined in good faith by the Board of Directors, whose determination shall
be described in a statement filed with the Rights Agent and shall be binding
on the Rights Agent and holders of the Rights) of the portion of the assets
or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one Preferred Share and the denominator of
which shall be such Current Per Share Market Price of the Preferred Shares;
provided, however, that in no event shall the consideration to be paid upon
the exercise of one Right be less than the aggregate par value of the shares
of capital stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"Current Per Share Market Price" of any security (a "Security" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the 30
consecutive Trading Days immediately prior to such date; provided, however,
that in the event that the Current Per Share Market Price of the Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares
of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to
the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Per
Share Market Price shall be appropriately adjusted to reflect the current
market price per share equivalent of such Security. The closing price for
each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or,if the Security is not listed
or admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported on the Nasdaq National Market or
such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Security selected by the Board of Directors. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which the
Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "Current
Per Share Market Price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "Current Per Share Market Price" of the
- 12 -
Preferred Shares shall be conclusively deemed to be the Current Per Share
Market Price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one hundred. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "Current Per Share Market Price" shall mean the fair value
per share as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent and the holders of the Rights.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one
one-millionth of a Preferred Share or one ten-thousandth of any other share
or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the right
to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred
Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Preferred Shares contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall evidence the
right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a Preferred Share purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price,
that number of one one-hundredths of a Preferred Share (calculated to the
nearest one one-millionth of a Preferred Share) obtained by (A) multiplying
(x) the number of one one-hundredths of a share covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (B) dividing
the product so obtained by the Purchase Price in effect immediately after
such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
- 13 -
the Purchase Price to adjust the number of Rights in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the
number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have been
issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders
of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which
such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right
Certificates so to be distributed shall be issued, executed and countersigned
in the manner provided for herein and shall be registered in the names of the
holders of record of Right Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Preferred Shares at such adjusted Purchase
Price.
(l) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date of the Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Preferred
- 14 -
Shares and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder
a due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it, in its sole discretion, shall
determine to be advisable in order that any consolidation or subdivision of
the Preferred Shares, issuance wholly for cash of any Preferred Shares at
less than the current market price, issuance wholly for cash of Preferred
Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, dividends on Preferred Shares payable in
Preferred Shares or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare
or pay any dividend on the Common Shares payable in Common Shares, or (ii)
effect a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A)
the number of one one-hundredths of a Preferred Share purchasable after such
event upon proper exercise of each Right shall be determined by multiplying
the number of one one- hundredths of a Preferred Share so purchasable
immediately prior to such event by a fraction, the numerator of
which is the number of Common Shares outstanding immediately before such
event and the denominator of which is the number of Common Shares outstanding
immediately after such event, and (B) each Common Share outstanding
mmediately after such event shall have issued with respect to it that number
of Rights which each Common Share outstanding immediately prior to such event
had issued with respect to it. The adjustments provided for in this Section
11(n) shall be made successively whenever such a dividend is declared or paid
or such a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 13
hereof, the Company shall promptly (a) prepare a certificate setting forth
such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for
the Common Shares or the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. In the event, directly or indirectly, at any time after a
Person has become an Acquiring Person, (a) the Company shall consolidate
with, or merge with and into, any other Person, (b) any Person shall
consolidate with the Company, or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such merger and,
in connection with such merger, all or part of the Common Shares shall be
changed into orexchanged for stock or other securities of any other Person
- 15 -
(or the Company) or cash or any other property, or (c) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person other than the Company or
one or more of its wholly owned Subsidiaries (except, prior to the Spinoff
Date in the case of each of (a), (b) and (c) above, where such other Person
is an AT&T Entity), then, and in each such case, proper provision shall be
made so that (i) each holder of a Right (except as otherwise provided herein)
shall thereafter have the right to receive, upon the exercise thereof at a
price equal to the then current Purchase Price multiplied by the number of
one one-hundredths of a Preferred Share for which a Right is then
exercisable,in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of such other Person
(including the Company as successor thereto or as the surviving corporation)
as shall equal the result obtained by (A) multiplying the then current
urchase Price by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable and dividing that product by (B) 50% of the
then Current Per Share Market Price of the Common Shares of such other Person
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such consolidation, merger, sale or transfer; (ii) the issuer of such Common
Shares shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such issuer; and (iv) such issuer shall take
such steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise
of the Rights. The Company shall not consummate any such consolidation,
merger, sale or transfer unless prior thereto the Company and such issuer
shall have executed and delivered to the Rights Agent a supplemental
agreement so providing. The Company shall not enter into any transaction of
the kind referred to in this Section 13 if at the time of such transaction
there are any rights, warrants, instruments or securities outstanding or any
agreements or arrangements which, as a result of the consummation of such
ransaction, would eliminate or substantially diminish the benefits intended
to be afforded by the Rights. The provisions of this Section 13 shall
similarly apply to successive mergers or consolidations or sales or other
transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for
the Trading Day immediately prior to the date on which such fractional Rights
would have been otherwise issuable. The closing price for any day shall be
the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case, as reported in the principal consolidated transaction reporting
- 16 -
system with respect to securities listed or admitted to trading on the New
ork Stock Exchange or, if the Rights are not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading
on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported on the Nasdaq National Market or such
other system then in use or, if on any such date the Rights are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights
selected by the Board of Directors. If on any such date no such market maker
is making a market in the Rights, the fair value of the Rights on such date
as determined in good faith by the Board of Directors shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other
than fractions which are integral multiples of one one-hundredth of a
Preferred Share). Fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement
between the Company and a depositary selected by it; provided that such
greement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled
as beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral
multiples of one one-hundredth of a Preferred Share, the Companyshall pay to
the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of one Preferred Share. For the purposes of this
Section 14(b), the current market value of a Preferred Share shall be
the closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent
under Section 18 hereof, are vested in the respective registered holders of
the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Shares), may,
in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by
such Right Certificate in the manner provided in such Right Certificate and
- 17 -
in this Agreement. Without limiting the foregoing or any remedies available
to the holders of Rights, it is specifically acknowledged that the holders
of Rights would not have an adequate remedy at law for any breach of this
Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent shall
be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
- 18 -
expense incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability
in the premises.
The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it
to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons, or otherwise upon the advice
of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent. Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part
of any of the parties hereto; provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver such Right Certificates so countersigned; and, in
case at that time any of the Right Certificates shall not have been
ountersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the
name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Right Certificates so countersigned; and in case at
that time any of the Right Certificates shall not have been countersigned,
the Rights Agent may countersign such Right Certificates either in its prior
name or in its changed name; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
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(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence, bad faith or
willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in
the Right Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Section 3,
11, 13, 23 or 24, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after actual notice that such change
or adjustment is required); nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any Preferred Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
- 20 -
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with
its duties, and it shall not be liable for any action taken or suffered by it
in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall
not be answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under
this Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares or Preferred Shares by registered or certified mail, and to the
holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice
of such removal or after it has been notified in writing of such resignation
or incapacity by the resigning or incapacitated Rights Agent or by the holder
of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation
organized and doing business under the laws of the United States or of the
State of New York (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the
State of New York, in good standing, having an office in the State of New
York, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights
- 21 -
Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof
in writing with the predecessor Rights Agent and each transfer agent of the
Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors may, at its
option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.001 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the
"Redemption Price"). The redemption of the Rights by the Board of Directors
may be made effective at such time, on such basis and with such conditions as
the Board of Directors, in its sole discretion, may establish.
(b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that
the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption. Within 10 days after such action of the Board of
Directors ordering the redemption of the Rights, the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in
connection with the purchase of Common Shares prior to the Distribution Date.
- 22 -
Section 24. Exchange. (a) The Board of Directors may, at its
option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share
per Right, appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such exchange ratio
being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company or any entity holding Common Shares for or pursuant to the
terms of any such plan or, prior to the Spinoff Date, any AT&T Entity),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange. The Company promptly shall
mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided shall be
deemed given,whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 11(a)(ii) hereof) held by
each holder of Rights.
(c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exchange of the Rights. In the
event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Shares, the
Company shall substitute, for each Common Share that would otherwise be
issuable upon exchange of a Right, a number of Preferred Shares or fraction
thereof such that the Current Per Share Market Price of one Preferred Share
multiplied by such number or fraction is equal to the Current Per Share
Market Price of one Common Share as of the date of issuance of such Preferred
Shares or fraction thereof.
- 23 -
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to
the registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal
to the same fraction of the current market value of a whole Common Share. For
the purposes of this paragraph (d), the current market value of a whole
Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading
Day immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders
of its Preferred Shares or to make any other distribution to the holders of
its Preferred Shares (other than a regular quarterly cash dividend), (ii) to
offer to the holders of its Preferred Shares rights or warrants to subscribe
for or to purchase any additional Preferred Shares or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to
effect any consolidation or merger into or with, or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions, of 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the
Common Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares), then, in each such
case, the Company shall give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend, or
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least 10 days prior to the
record date for determining holders of the Preferred Shares for purposes of
such action, and in the case of any such other action, at least 10 days prior
to the date of the taking of such proposed action orthe date of participation
therein by the holders of the Common Shares and/or Preferred Shares,
whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof
shall occur, then the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such
event and the consequences of such event to holders of Rights under Section
11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Right Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address
- 24 -
is filed in writing with the Rights Agent) as follows:
Tri-Valley Corporation
230 S. Montclair, Suite 101
Bakersfield, California 93303
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the
registry books of the Rights Agent.
Section 27. Supplements and Amendments. The Company may from time
to time supplement or amend this Agreement without the approval of any
holders of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other
provisions with respect to the Rights which the Company may deem necessary
or desirable, any such supplement or amendment to be evidenced by a writing
signed by the Company and the Rights Agent; provided, however, that from and
after such time as any Person becomes an Acquiring Person, this Agreement
shall not be amended in any manner which would adversely affect the interests
of the holders of Rights.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date, the Common
Shares).
Section 30. Severability. If any term, provision, covenant or
- 25 -
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired
or invalidated.
Section 31. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
In witness whereof, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.
The Company: The Rights Agent:
Tri-Valley Corporation Registrar and Transfer Company
By: By:
---------------------------------- ----------------------------
Name: Name:
---------------------------------- ----------------------------
Title: Title:
---------------------------------- ----------------------------
- 26 -
Exhibit A
Form of
Certificate of Designations of
Series A Junior Participating Preferred Stock
of
Tri-Valley Corporation
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Tri-Valley Corporation., a corporation organized and
existing under the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Corporation as
required by Section 151 of the General Corporation Law at a meeting duly
called and held on :
------------------------------
Resolved, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (hereinafter called the
"Board of Directors" or the "Board") in accordance with the provisions of
the Certificate of Incorporation, the Board of Directors hereby creates a
series of Preferred Stock, par value $0.01 per share, of the Corporation (the
"Preferred Stock") and hereby states the designation and number of shares,
and fixes the relative rights, preferences, and limitations thereof as
follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series
A Preferred Stock shall be 500,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number
less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the holders
of Common Stock, par value $.001 per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first
- 27 -
day of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject
to the provision for adjustment hereinafter set forth, 100 times the
aggregate or share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior
o such event under clause (b) of the preceding sentence shall be adjusted by
ultiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share
on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board
of Directors may fix a record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive payment of a dividend or
- 28 -
distribution declared thereon, which record date shall be not more than 60
days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect
a subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series A Preferred Stock
and the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section
2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred
- 29 -
Stock and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock subject to the conditions and restrictions
on issuance set forth herein, in the Certificate of Incorporation, or in any
other Certificate of Designations creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, except distributions made ratably on
the Series A Preferred Stock and all such parity stock in proportion to the
- 30 -
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case each share of Series A Preferred Stock shall at the same time be
similarly
exchanged or changed into an amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of
the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote
of the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
- 31 -
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its and
attested by its this day of .
-----------------------
Tri-Valley Corporation
- - -----------------------------
Lynn Blystone, President
Attest:
- - -----------------------------
Tom Cunningham, Secretary
- 32 -
Exhibit B
Form of Right Certificate
Certificate No. R- Rights
----------
NOT EXERCISABLE AFTER MARCH 31, 2006 OR EARLIER IF REDEMPTION
OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT
$.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT.
Right Certificate
TRI-VALLEY CORPORATION
This certifies that , or registered assigns, is
----------
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions
of the Rights Agreement, dated as of April 4, 1996 (the "Rights Agreement"),
between Tri-Valley Corporation, a Delaware corporation (the "Company"), and
Registrar and Transfer Company (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M., New York time, on
at the principal office of the Rights Agent, or at the office
- - -----------
of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, par
value $0.01 per share, of the Company (the "Preferred Shares"), at a purchase
price of $10 per one one-hundredth of a Preferred Share (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the
Form of Election to Purchase duly executed. The number of Rights evidenced by
this Right Certificate (and the number of one one-hundredths of a Preferred
Share which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of April
4, 1996, based on the Preferred Shares as constituted at such date. As
provided in the Rights Agreement, the Purchase Price and the number of one
one-hundredths of a Preferred Share which may be purchased upon the exercise
of the Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions
and conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the offices of the Rights
Agent.
This Right Certificate, with or without other Right
- 33 -
Certificates, upon surrender at the principal office of the Rights Agent,
may be exchanged for another Right Certificate or Right Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder
to purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate
or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Right Certificate (i) may be redeemed by the Company at a
redemption price of $.001 per Right or (ii) may be exchanged in whole or in
part for Preferred Shares or shares of the Company's Common Stock, par value
$.01 per share.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share, which may,
at the election of the Company, be evidenced by depositary receipts), but,in
lieu thereof, a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such,
any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting stockholders
(except as provided in the Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by
this Right Certificate shall have been exercised as provided in the Rights
Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of .
ATTEST: Tri-Valley Corporation
By
----------------------------- ---------------------------
Name: Name:
Title: Title:
- 34 -
Countersigned:
Registrar and Transfer Company
By
--------------------------------
Name:
Title:
- 35 -
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the Right Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and
------------------
transfers unto: (Please print name and address of transferee)
- - --------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
Attorney-in-fact, to transfer the within Right
- - ----------------------
Certificate on the books of the within-named Company, with full power of
substitution.
Dated:
--------------------, ---------
-------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States or by another eligible guarantor
institution, as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
- - -------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
-------------------------
Signature
- - ---------------------------------------------------------------
- 36 -
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Right
Certificate.)
To: TRI-VALLEY CORPORATION
The undersigned hereby irrevocably elects to exercise
--------------
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security or other identifying number:
------------------
(Please print name and address)
- - -----------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number:
-------------------
(Please print name and address)
- - -----------------------------------------------------------------------------
Dated:
--------------------, ---------
-------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
- 37 -
office or correspondent in the United States or by another eligible guarantor
institution, as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
- - -------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced
by this Right Certificate are not beneficially owned by an Acquiring Person
or an Affiliate or Associate thereof (as defined in the Rights Agreement).
------------------------
Signature
- - ---------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the
face of this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
- 38 -
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
The Board of Directors of Tri-Valley Corporation (the
"Company") declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $.001 per
share, of the Company (the "Common Shares"). The dividend is payable on
(the "Record Date") to the stockholders of record on that
- - ---------------
date. Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $0.01 per share, of the Company (the "Preferred Shares") at a price
of $20 per one one-hundredth of a Preferred Share (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth
in a Rights Agreement (the "Rights Agreement") between the Company and
Registrar and Transfer Company, as Rights Agent (the "Rights Agent").
Pursuant to the Rights Plan, we will issue one preferred share purchase right
(a Right) for each outstanding share of common stock. Each Right will
entitle the registered holder to purchase from Tri-Valley one one-hundredth
of a preferred share at a price of $20 per share (the Purchase Price),
subject to adjustment. The description and terms of the Rights are set forth
in a Rights Agreement (the Rights Agreement), between Tri-Valley and
Registrar and Transfer Company as Rights Agent. The Rights Agreement is on
file with Tri-Valley, was filed with the Securities and Exchange Commission
as an exhibit to our 1999 Proxy Statement.
We will not issue separate certificates representing the Rights until a
third party acquires or makes a tender offer or exchange offer to acquire 15%
or more of our common stock. Until one of those events occurs, the Rights
will be evidenced by the certificates already representing our common stock.
Until such an acquisition, tender offer or exchange offer occurs, (or until
the Rights expire), the Rights will be transferred with and only with our
common stock, and our stock certificates will carry a notation incorporating
the Rights Agreement by reference.
Ten business days after a third party or group makes a public
announcement that they have acquired beneficial ownership of 15% or more of
our outstanding common stock, or ten days after a third party or group
commences an exchange offer or tender offer that could result in their owning
15% or more of our outstanding common stock (or such later date as determined
by our Board prior to when any person acquires 15% or more of our outstanding
common stock), the Rights will become exercisable. We will then mail
separate certificates evidencing the Rights to our common stockholders of
record as of the close of business on date when the Rights became
exercisable.
When the Rights become exercisable after a person or group acquires 15% or
more of our stock the Rights will have the following characteristics:
- - - Each holder of a Right (other than Rights beneficially owned by the
- 39 -
person or group that acquired the 15% interest) will receive the right
to receive on exercise that number of shares o f common stock having a
market value of two times the exercise price of the right unless the
event causing the Rights to become exercisable is a merger, acquisition
or other business combination described in the next paragraph.
- - - If Tri-Valley is acquired in a merger or other business combination
transaction, or if 50% or more of its consolidated assets or earning
power are sold, each holder of a Right (other than Rights beneficially
owned by the person or group that acquired the 15% interest) will
thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of
common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price
of the Right.
- - - After the person or group acquires their 15% interest but before they
acquire 50% or more of our outstanding stock, our Board may exchange
the Rights (other than Rights owned by the 15% interest holders, which
have become void), in whole or in part, at an exchange ratio of one
share of common stock per Right (subject to adjustment).
- - - The Rights that are owned beneficially by the party or group that
acquired the 15% interest will become void and unexerciseable after
they acquire their 15%.
The Rights will expire on the 10th anniversary of the date of
issuance unless we extend their expiration date or unless we redeem or
exchange the Rights prior to their expiration as summarized below.
At any time before a person or group acquires beneficial ownership of
15% or more of our outstanding common stock, our Board may redeem the Rights
in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). The redemption of the Rights may be made effective at such time on
such basis and with such conditions as our Board, in its sole discretion, may
establish. Immediately upon any redemption of the Rights, the right to
exercise the rights will terminate and the only right of the holders of the
Rights will be that they are eligible to receive the Redemption Price.
The terms of the Rights may be amended by our Board without the consent
of the holders of the Rights; provided, however, that, from and after such
time as any person or group of affiliated or associated persons becomes
an Acquiring Person, no such amendment may adversely affect the interests of
the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a Tri-Valley stockholder, such as the right to vote or to
receive dividends.
The number of outstanding Rights and the number of shares of common
stock issuable upon exercise of each Right also will be subject to adjustment
in the event of a stock split of the common stock or a stock dividend on the
- 40 -
common stock payable in common stock or subdivisions, consolidations or
combinations of the common stock occurring, in any such case, prior to
distribution of the Rights.
With certain exceptions, no adjustment in the Rights Purchase Price
will be required until cumulative adjustments require an adjustment of at
least one percent in such Purchase Price. No fractional shares of common
tock will be issued, and in lieu thereof, an adjustment in cash will be made
based on the market price of the common stock on the last trading day prior
to the date of exercise.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group of persons that attempts to acquire
Tri-Valley on terms not approved by our Board. The Rights should not
interfere with any merger or other business combination approved by our Board
prior to the time that a person or group has acquired beneficial ownership of
15% percent or more of the common stock since the Rights may be redeemed by
us at the Redemption Price until such time.
- 41 -