TVC PROXY 2005 08-26-05
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
Tri-Valley
Corporation
5555
Business Park South, Suite 200
Bakersfield,
California 93309
Meeting
to be Held:
DATE: Monday,
October 10, 2005
TIME: 10:00
A.M. (P.D.T.)
PLACE: The
Four Seasons Biltmore
1260
Channel Drive
Santa
Barbara, California 93108
Matters
to be Voted on:
|
1.
|
Electing
seven directors to serve for the ensuing year;
|
|
2.
|
Approving
the new Tri-Valley 2005 Incentive Stock Option Plan;
and
|
|
3.
|
Transacting
such other business as may properly come before the meeting and any
adjournment thereof.
|
Who
May Attend and Vote at the Meeting:
Shareholders
of record at the close of business on August 12, 2005, and valid proxy holders
may attend and vote at the meeting. If your shares are registered in the name
of
a brokerage firm or trustee and you plan to attend the meeting, please obtain
from the firm or trustee a letter or other evidence of your beneficial ownership
of those shares to facilitate your admittance to the meeting.
This
meeting notice and proxy statement was first sent to shareholders of Tri-Valley
Corporation on or about August 22, 2005.
By
Order
of the Board of Directors,
___________________________
F.
Lynn
Blystone
President
and Chief Executive Officer
PROXY
STATEMENT
To
the Shareholders of Tri-Valley
Corporation:
GENERAL
INFORMATION ABOUT THE SHAREHOLDERS’ MEETING
The
only
items of business which management intends to present at the meeting are listed
in the Notice of Annual Meeting of Shareholders. This proxy statement provides
details about the meeting.
The
enclosed proxy material relating to Tri-Valley Corporation from our board of
directors is sent to you as the direct or beneficial owner of our common stock,
with our sincere request that you give those materials your prompt and thorough
consideration. Your vote at the annual meeting is important to Tri-Valley.
The
board
of directors of Tri-Valley Corporation hereby solicits your proxy (on the
enclosed proxy form) for use at our Annual Meeting of Shareholders to be held
October 10, 2005, at 10:00 A.M. (local time) in the Loggia Ballroom of the
Four
Seasons Biltmore Hotel, 1260 Channel Drive, Santa Barbara, California 93108.
By
returning your signed proxy, you authorize management to vote your shares as
you
indicate on these items of business and to vote your shares in accordance with
management's best judgment in response to proposals initiated by others at
the
meeting.
Our
administrative office is located at 5555 Business Park South, Bakersfield,
California 93309. The approximate date on which this proxy statement and proxy
will first be sent to the shareholders is August 22, 2005. The costs of this
proxy notification will be paid by the company and are estimated to be
approximately $7,000. A professional proxy solicitor has not been
engaged.
If
you are unable to attend this meeting, we request that you return the enclosed
proxy form, properly executed, in order that your shares will be represented
and
voted at the meeting.
Changing
or Revoking Your Proxy Vote
You
may
revoke your signed proxy at any time before it is exercised at the annual
meeting. You may do this by advising our secretary in writing of your desire
to
revoke your proxy, or by submitting a duly executed proxy bearing a later date.
We will honor the proxy card with the latest date. You may also revoke your
proxy by attending the annual meeting and indicating that you wish to vote
in
person.
Who
May Vote
As
of
August 3, 2005, 22,553,969 shares of our common stock were outstanding. Each
share is entitled to one vote per director in the election of directors and
one
vote in 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 Friday, August 12, 2005,
are the only persons entitled to vote at this meeting.
Voting
in Person
Although
we encourage you to complete and return your proxy to ensure that your vote
is
counted, you can attend the annual meeting and vote your shares in
person.
How
Your Votes Are Counted
We
will
hold the annual meeting if holders of not less than one-half the outstanding
shares are present either in person or by proxy. If you sign and return your
proxy card, your shares will be counted to determine whether we have a quorum
even if you abstain or fail to vote on any of the matters listed on the proxy
card.
The
vote
of a majority of the shares present at the meeting, in person or by proxy,
is
necessary to elect directors.
ABSTAINING
IS THE SAME AS VOTING “NO”
If
you
mark "Abstain" with respect to any proposal on your proxy, your shares will
be
counted in the number of votes cast. However,
a vote to “Abstain” has the same effect as voting no. Management requests that
you vote either “For” or “Against” on each proposal to come before the
meeting.
If a
broker or other nominee holding shares for a beneficial owner does not vote
on a
proposal, the shares will not be counted in the number of votes cast.
A
''broker non-vote'' occurs when your broker submits a proxy for your shares
but
does not indicate a vote for a particular proposal because the broker does
not
have authority to vote on that proposal and has not received voting instructions
from you. ''Broker non-votes'' are not counted as votes against the proposal
in
question or as abstentions, nor are they counted to determine the number of
votes present for the particular proposal.
ITEMS
OF BUSINESS
Proposal
1: ELECTION OF DIRECTO
The
board
of directors consists of seven (7) members, having been expanded from six to
seven by resolution of the board in August 2005. Each director serves for a
term
of one (1) year. All seven (7) director positions are up for election at the
meeting. All seven of the currently serving directors have been nominated for
election. Six of the directors were elected by the shareholders at the 2004
annual meeting. The seventh director, Dr. Henry Lowenstein, was appointed to
the
board by the remaining directors in August 2005 to fill a newly created seat
on
our board.
Voting
The
seven
nominees receiving the highest number of votes will be elected. Proxies
solicited by the board of directors will be voted in favor of each nominee
unless shareholders specify otherwise in their proxies. Should any of the
nominees become unavailable at the time of the meeting to accept nomination
or
election as a director, the proxy holders named in the enclosed proxy will
vote
for substitute nominees at their discretion. Votes
withheld for a nominee will not be counted. Our articles of incorporation do
not
provide for cumulative voting in elections for director, and cumulative voting
for directors will not be permitted at the annual meeting.
Nominees
for the Board of Directors
The
board of directors recommends a vote FOR the election of each of the following
seven nominees for director.
Each
director must be elected by a majority vote of the shares represented at the
meeting.
Each
nominee for director was unanimously nominated by the board of directors,
including all of the independent directors.
The
following pages describe the nominees for director, including their principal
occupations for the past five years, certain other directorships, age, length
of
service as a Tri-Valley director, membership on the audit committee, attendance
at board and committee meetings, and ownership of our stock. Each nominee has
agreed to be named in this proxy statement and to serve as a director if
elected. The ages listed are as of August 3, 2005.
|
Name
and Position with Company
|
|
Age
|
|
Director
Since
|
|
Common
Stock Beneficially Owned(1)
|
|
Percent
of Class (2)
|
|
F.
Lynn Blystone, President,
CEO
and Director
|
|
69
|
|
1974
|
|
1,286,253
|
|
5.5%
|
|
Dennis
Lockhart, Director
|
|
58
|
|
1982
|
|
345,191
|
|
1.5%
|
|
Milton
Carlson, Director
|
|
75
|
|
1985
|
|
339,000
|
|
1.5%
|
|
Loren
Miller, Director
|
|
60
|
|
1992
|
|
311,800
|
|
1.4%
|
|
C.
Chase Hoffman, Director
|
|
82
|
|
2000
|
|
304,300
|
|
1.3%
|
|
Harold
J. Noyes, Director
|
|
57
|
|
2002
|
|
114,000
|
|
0.5%
|
|
Henry
Lowenstein, Director
|
|
51
|
|
2005
|
|
200
|
|
0.0%
|
|
All
Directors as a Group
|
|
|
|
|
|
2,700,744
|
|
11.7%
|
(1)
Includes shares which the listed shareholder has the right to acquire, from
options, within 60 days after December 31, 2004 as follows: F. Lynn Blystone
851,350; Dennis P. Lockhart 270,000; Milton J. Carlson 263,000; and Harold
J.
Noyes 100,000.
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.
(2)
Based
on total outstanding shares of 22,553,969 as of August 3, 2005. The persons
named herein have sole voting and investment power with respect to all shares
of
common stock shown as beneficially owned by them, subject to community property
laws where applicable.
Nominee
Profiles
|
F.
Lynn Blystone
|
|
President
and Chief Executive Officer of Tri-Valley Corporation and Tri-Valley
Power
Corporation, CEO of Tri-Valley Oil & Gas Company and Select Resources
Corporation, which are three wholly owned subsidiaries of Tri-Valley
Corporation, Bakersfield, California, Chairman of Tri-Western Resources.
LLC
|
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 Orange County, 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
|
|
Professor,
Georgetown University, Washington
D.C.
|
Mr.
Lockhart is a professor of International Business at Georgetown University.
He
was previously Managing Partner of Zephyr Management L.P., an international
private equity investment fund sponsor/manager headquartered in New York. He
remains a partner in this firm. He is also (non-executive) Chairman of the
Small
Enterprise Assistance Funds (SEAF),a not-for-profit operator of emerging markets
venture capital funds focused on the small and mid-sized company sector. He
is a
director of CapitalSource Inc. (NYSE) and SMELoan Asia/Maveo Systems (private,
Hong Kong based). In 2002 and 2003 he was an Adjunct Professor at the Johns
Hopkins University School of Advanced International Studies. From 1988 to 2001,
he was President of Heller International Group Inc., a non-bank corporate and
commercial finance company operating in 20 countries, and a director of the
group’s parent, Heller Financial Inc. From 1971 to 1988 he held a variety of
international and domestic positions at Citibank/Citicorp (now Citigroup)
including assignments in Lebanon, Saudi Arabia, Greece, Iran and the bank’s
Latin American group in New York. In 1999, he was Chairman of the Advisory
Committee of the U.S. Export Import Bank. He is a graduate of Stanford
University and The John Hopkins University School of Advanced International
Studies. He also attended the Senior Executive Program at the Sloan School
of
Management, Massachusetts Institute of Technology. Mr. Lockhart is an
independent member of our board of directors.
|
Milton
J. Carlson
|
|
Investor,
Kalispell, Montana
|
Mr.
Carlson is retired as the former corporate secretary of Union Sugar Company,
a
unit of Sara Lee Corporation. Since 1989, Mr. Carlson has been a principal
in
Earthsong Corporation, which, in part, consults on environmental matters and
performs environmental audits for government agencies and public and private
concerns.
Mr.
Carlson attended the University
of Colorado at Boulder and the
University
of Denver.
Mr.
Carlson is an independent member of our Board of Directors.
|
Loren
J. Miller, CPA
|
|
Treasurer
and CFO, Jankovich Company, San Pedro,
California
|
Mr.
Miller has served in a treasury and other senior financial capacities at the
Jankovich Company since 1994. Prior to that he served successively as vice
president and chief financial officer of Hershey Oil Corporation from 1987
to
1990 and Mock Resources from 1991 to 1992. Prior to that he was vice president
and general manager of Tosco Production Finance Corporation from 1975 to 1986
and was a senior auditor the accounting firm of Touche Ross & Company from
1968 to 1973. He is experienced in exploration, production, product trading,
refining and distribution as well as corporate finance. He holds a B.S. in
accounting and a M.B.A. in finance from the University of Southern California.
He is chairman of our audit committee. Mr. Miller is
an
independent member of our board
of
directors.
|
C.
Chase Hoffman
|
|
Owner,
Hoffman Farms Tulare, California
|
Since
1965 Mr. Hoffman has owned and operated a milk cow dairy and farmed 4,000 acres
of land. Additionally, he has been a commercial and residential land developer
in California and Hawaii since 1978. From 1973 to 1978 he was a senior vice
president and general manager for Knudsen for the State of California. Mr.
Hoffman also sits as a director for three companies whose shares are listed
on
the Canadian Venture Exchange: Seine River Resources, Inc., Vancouver, British
Columbia, with California gold operations and Guatemala oil properties;
International Powerhouse Energy Corporation, a British Columbia, Canada,
hydroelectric project; and Sea Breeze Energy, a British Columbia wind energy
company. He is a graduate of Stanford University with a degree in Economics
and
Business Administration from Graduate School of Business. He is chairman of
our
personnel and compensation committee. Mr. Hoffman is
an
independent member of our board
of
directors.
|
Harold
J. Noyes
|
|
Director,
President of Select Resources Corporation, a wholly owned subsidiary
of
Tri-Valley Corporation, Director of Tri-Valley Corporation, Director
of
Tri-Western Resources, LLC
|
Since
January 2005 he has been president of Select Resources Corporation, a newly
formed wholly owned subsidiary of Tri-Valley Corporation. Prior to that he
was
the president of H.J. Noyes and Associates, Inc., a firm that provides
consulting and business development services to the minerals industry. Dr.
Noyes
served two years as a senior program manager with Pacific Northwest National
Laboratory. He served October 2001 through October 2002 as vice president,
marketing and business development for Blake Street Investments, Inc., a money
management and investment advisory firm. From 1997 to 2000 he was president
of
North Star Exploration, Inc. He was manager, resource development for Alaska’s
largest native corporation, Doyon Limited, from 1983 to 1997. He previously
served in various capacities for Conoco, Minatome Corporation, Anaconda Copper
Company, and Westinghouse Electric Corporation from 1975 to 1983. Dr. Noyes
graduated from the University of Minnesota Magna Cum Laude in geology and took
his Ph.D. in geology and geochemistry at the Massachusetts Institute of
Technology. Later he earned a Masters in Business Administration at the
University of Chicago. In 2004, Mr. Noyes was an independent member of our
board
of directors.
|
Henry
Lowenstein
|
|
Director,
Dean, School of Business and Public Administration, California State
University, Bakersfield
|
Dr.
Lowenstein has had a full career in business, public administration and academe
having served in such business positions as vice president and Director of
Education for Dominion Bankshares Corporation, Director of Corporate Education
for Kemper Group Insurance/Financial Services, executive vice president of
American Furniture, Inc. He served in the U.S. Office of Management and Budget
and the executive office of the President of the U.S. His many posts in academe
include instructor, assistant professor and professor of Management, Chairman,
Divisions of Business and Economics and Public Administration for several
universities, to his present Deanship and professor of Management at Cal State
University, Bakersfield. He is the Vice Chair/Chair Elect of the California
State University Association of Business Deans. A graduate of Virginia
Commonwealth University, he holds an MBA from The George Washington University
and a Ph.D. from University of Illinois.
Dr.
Lowenstein was appointed to the board of directors in August of 2005 and is
an
independent member of our board of directors.
Board
of Directors' Meetings and Committees
During
2004, the board of directors held 7 meetings. All directors attended 100% of
the
meetings.
Compensation
Committee
The
Compensation Committee makes recommendations to the board of directors regarding
the compensation of the executive officers of the corporation and its
subsidiaries. It is composed of two independent directors -C. Chase Hoffman
(Chair) and Harold J. Noyes.
The
compensation committee met 2 times during 2004. Each member attended all
committee meetings in 2004.
Compensation
Committee Report
Mr.
Blystone’s compensation is paid pursuant to the provisions of his employment
contract, which had a primary period ending in December 2002 and which is
extendable for three consecutive annual periods through December 2005. The
base
salary amount is $99,000 per year plus 5,000 shares of our common stock at
the
end of each year of service. Mr. Blystone is also entitled to a bonus (not
to
exceed $25,000) equal to 10% of net operating cash flow before taxes, including
interest income and excluding debt service. Mr. Blystone is also entitled to
a
bonus of 4% of the company's annual net after-tax income. The total of the
bonuses from cash flow and net income may not exceed $50,000 per
year.
Because
of the relatively small size of the staff of Tri-Valley, which permits the
board
and compensation committee to evaluate the performance of Mr. Blystone and
the
remaining officers in detail, the compensation committee has not adopted
quantitative performance measures to review performance, award bonuses and
adjust compensation, other than those contained in Mr. Blystone’s employment
contract and noted in the preceding paragraph. Based on the performance of
Tri-Valley in 2004, the board awarded Mr. Blystone a $25,000 bonus that is
permitted under his contract. In making this award, the board and compensation
committee considered not only Mr. Blystone’s performance during 2004 but also
his continued dedication to the company over the past several
years.
The
employment agreement also provides a severance payment to Mr. Blystone if he
is
terminated within 12 months after a sale of control of Tri-Valley. The severance
payment equals $150,000. In addition, Mr. Blystone is entitled to a bonus equal
to 10% of net operating cash flow before taxes, including interest income and
excluding debt service, plus 4% of the company's annual net after-tax income,
up
to a maximum of $50,000 (with the maximum amount pro-rated over the period
for
which the payment is made). For purposes of the severance provision, a sale
of
control is deemed to be the sale of ownership of 30% of our outstanding stock
or
the acquisition by one person of enough stock to appoint a majority of the
board
of directors of Tri-Valley.
C.
Chase
Hoffman, Chair
Harold
J.
Noyes,
Tri-Valley
Corporation Compensation Committee
Audit
Committee
The
audit
committee provides an open avenue of communication between our independent
auditor, the company officers and the board of directors. The committee operates
under a charter that sets forth the committee’s tasks. The chief duties of the
committee are:
| · |
Assure
the independence and objectivity of the auditing
firm.
|
| · |
Review
and coordinate the auditing responsibilities with the auditor and
chief
financial officer.
|
| · |
Review
the adequacy of internal accounting
controls.
|
| · |
Inquire
about significant risks and about management’s actions to minimize
risks.
|
| · |
Review
significant audit findings and any difficulties encountered in conducting
the audit.
|
A
copy of
the Audit Committee Charter is included with this proxy statement as Exhibit
A.
The
audit
committee is composed of three independent members of the board of directors
-
Loren J. Miller, Chair, Dennis P. Lockhart, and Milton J Carlson. The audit
committee met five times during 2004. Mr. Miller and Mr. Carlson attended
all five committee meetings in 2004. Mr. Lockhart attended four.
Audit
Committee Report
The
audit
committee has reviewed and discussed the audited financial statements with
management as well as our independent public accountants. The audit committee
has received from the independent accountants a formal written statement
regarding the auditors’ independence and has discussed with the independent
accountant matters relating to their independence. The audit committee members
have satisfied themselves as to the auditors’ independence. The audit committee
has discussed with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61, which includes, among
other
items, matters related to the audit of our financial statements.
The
audit committee has recommended to the board of directors that the audited
financial statements be included in the company's Annual Report on Form
10-K for 2004 for filing with the Securities and Exchange
Commission.
Loren
J.
Miller, Chair
Milton
J.
Carlson
Dennis
P.
Lockhart
Tri-Valley
Corporation Audit Committee
Compensation
of Directors
We
compensate non-employee directors for their service on the board of directors.
The following tables sets forth information regarding the cash compensation
paid
to outside directors in 2004.
|
(a)
|
(b)
|
(c)
|
| |
|
|
|
Name
|
Fees
|
Restricted
Shares
|
| |
|
|
|
Harold
J. Noyes
|
$5,650
|
4,000
|
|
Milton
Carlson
|
$6,600
|
4,000
|
|
Dennis
P. Lockhart
|
$6,350
|
4,000
|
|
Loren
J. Miller
|
$7,000
|
4,000
|
|
C.
Chase Hoffman
|
$6,050
|
4,000
|
Executive
Compensation
The
following table summarizes the compensation of the president, F. Lynn Blystone,
for the fiscal years ended December 31, 2004, 2003, and 2002.
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
Annual
Compensation
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
| |
|
Period
|
|
|
|
Other
|
|
Name
|
|
Covered
|
|
Salary
|
|
Compensation
|
| |
|
|
|
|
|
|
|
F.
Lynn Blystone,
|
|
2004
|
|
$108,900)
|
|
$25,000
|
|
CEO
|
|
2003
|
|
$99,000)
|
|
$50,000
|
| |
|
2002
|
|
$99,000)
|
|
$50,000
|
No
Options Were Granted in 2004
In
2004
we awarded 20,000 restricted stock shares to five outside directors. We did
not
grant any stock options to our officers or outside directors.
Aggregated
2004 Option Exercises and Year-End Values
The
following table summarizes the number and value of all unexercised stock options
held by the Named Officer and the Directors at the end of 2004.
|
(
a )
|
(b)
|
(c)
|
(d)
|
(e)
|
| |
|
|
Number
of Securities
|
Value
of Unexercised In-
|
| |
|
|
Underlying
Unexercised
|
The-Money
Options/SARs
|
| |
|
|
Options/SARs
at FY-End (#)
|
at
FY-End ($)*
|
| |
Shares
Acquired
|
Value
|
|
|
|
Name
|
On
Exercise (#)
|
Realized
($)
|
Exercisable/Unexercisable
|
Exercisable/Unexercisable
|
| |
|
|
|
|
|
F.
Lynn Blystone
|
17,000
|
$41,970
|
857,600/0
|
$9,414,148/0
|
|
C.
Chase Hoffman
|
200,000
|
$1,049,000
|
|
|
|
Loren
J. Miller
|
220,000
|
$1,324,500
|
50,000/0
|
$490,000/0
|
*Based
on
a fair market value of $12.23 per share, which was the closing bid price of
our
common stock on the American Stock Exchange on December 31, 2004.
Performance
Graph
The
following graph compares the cumulative total return of Tri-Valley’s common
stock during the last five years with the DJ US Exploration Index and the
Russell 2000 stock index, which includes Tri-Valley Corporation, during the
same
period. The graph shows the value of $100 invested in Tri-Valley’s Common Stock
or the indices as of the end of December for the last five years, adjusted
for
any stock splits and assuming the reinvestment of all dividends. Historical
stock price performance is not necessarily indicative of future stock price
performance.
[Missing
Graphic Reference]
|
Total
Return Analysis
|
|
|
|
|
|
|
| |
1999
|
2000
|
2001
|
2002
|
2003
|
2004
|
|
Tri-Valley
Corporation
|
100
|
108
|
107
|
93
|
293
|
815
|
|
DJ
US Exploration Index
|
100
|
160
|
147
|
150
|
196
|
279
|
|
Russell
2000 Stock Index
|
100
|
97
|
98
|
77
|
112
|
131
|
| |
|
|
|
|
|
|
Audit
Fees
The
aggregate fees billed or expected to be billed by Brown Armstrong for
professional services rendered for the audit of our annual financial statements
for the fiscal year ended December 31, 2004, and for the reviews of
the
financial statements included in our quarterly reports on Form 10-Q
for
that fiscal year are $50,833. A representative of Brown Armstrong Accountancy
Corporation will attend the annual meeting to answer questions.
All
Other Fees
The
aggregate fees billed by Brown Armstrong during 2004 for professional services
other than the audit fees described above are $19,575. These services included
tax preparation and services relating to SEC reporting requirements, in addition
to the audit work.
Proposal
2: ADOPTION
OF THE 2005 INCENTIVE STOCK OPTION PLAN
General
Our
directors have established the Tri-Valley 2005 Incentive Stock Option Plan
(the
“Option Plan”), subject to approval by the stockholders. The purpose of the
Option Plan is to advance the interests of Tri-Valley, our subsidiaries and
our
stockholders by affording certain employees, officers, directors, and key
consultants an opportunity to acquire or increase their proprietary interests
in
our company. The objective of the issuance of stock options, restricted stock
and stock purchase rights under the Option Plan is to promote our growth and
profitability because the grantees will have an additional incentive to achieve
our objectives through participation in our success and growth and by
encouraging their continued association with or services to us. The following
is
an explanation of the material features of the Option Plan, which is qualified
in its entirety by reference to the complete provisions of the Option Plan,
which is attached to this proxy statement as Exhibit B.
If
the
Option Plan is adopted by the stockholders, the board of directors intends
to
abandon our existing plan, the 1999 Stock Option Plan. The 1999 Stock Option
Plan authorized the grant of up to 3,000,000 options, almost all of which have
been granted. The new Option Plan will authorize the grant of up to 1,125,000
shares of common stock, which is equal to approximately 5% of our currently
issued and outstanding common stock.
Common
Stock Subject to the Option Plan
The
current maximum number of shares of common stock that may be issued under the
Option Plan is 1,125,000, plus all shares remaining available for issuance
under
the 1999 Stock Option Plan on the date of the adoption of this Option Plan
by
the shareholders. If, after the effective date of the Option Plan, any shares
covered by an award granted under the Option Plan or by an award granted under
a
predecessor plan, or to which such an award or predecessor plan award relates,
are forfeited, or if an award or predecessor plan award otherwise terminates
without the delivery of shares or of other consideration, then the shares
covered by such award or predecessor plan award, or to which such award or
predecessor plan award relates, or the number of shares otherwise counted
against the aggregate number of shares available under the Option Plan with
respect to such award or predecessor plan award, to the extent of any such
forfeiture or termination, shall again be, or shall become, available for
granting awards under the Option Plan. Options for no more than 1,250,000 shares
may be granted in any year. We may use either authorized and unissued shares
or
treasury shares to fulfill option awards, subject to adjustment in accordance
with anti-dilution provisions contained in the Option Plan. All shares of common
stock subject to the Option Plan may be issued in any combination of Incentive
Stock Options, as defined within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (“ISOs”), nonstatutory stock options,
restricted stock or stock purchase rights.
Term
of the Option Plan
The
term
of the Option Plan is 10 years, or until September 30, 2015, unless terminated
earlier as provided in the Option Plan. If our shareholders fail to approve
the
Option Plan within one year of its adoption by our directors, any ISOs granted
under the Option Plan will become non-statutory options. However, American
Stock
Exchange rules require that our shareholders approve the plan before any options
may be issued under it. No ISO may be granted more than ten years after October
1, 2005. The Option Plan may be abandoned or terminated at any time by the
our
directors, except with respect to options, restricted stock or stock purchase
rights then outstanding under the Option Plan.
Eligibility
All
of
our directors, officers, employees, including but not limited to executive
personnel, as well as our key consultants and advisors, are eligible to be
granted options under the Option Plan.
Administration
of the Option Plan
The
Option Plan shall be administered either by the board of directors or by a
committee consisting of at least two directors appointed by the board of
directors (in either case, the “Administrator”); provided, however, that with
respect to any options, restricted stock or stock purchase rights granted to
an
individual who is subject to the provisions of Section 16 of the Exchange Act,
the Administrator shall consist of at least two directors (who need not be
members of the Administrator with respect to grants to any other individuals)
who are non-employee directors, and all authority and discretion shall be
exercised by such non-employee directors. The Administrator selects the
individuals to whom options, restricted stock or stock purchase rights are
to be
granted, the number of shares to be granted and any other terms and conditions
specified under the Option Plan, including, but not limited to, the exercise
price, the times at which options or stock purchase rights shall become vested,
the times at which options or stock purchase rights shall become exercisable
and
the duration of the exercise periods.
Terms
of Options
The
exercise price of each option issued under the Option Plan shall be determined
by the administrator and shall not be less than fair market value of the common
stock as of the date the option is granted; provided, however, that the exercise
price of an ISO granted to any person owning at least 10% of the total combined
voting power of all classes of stock of Tri-Valley or any of its parents or
subsidiaries shall not be less than 110% of the fair market value on the date
the option is granted. The exercise period of each option shall be determined
by
the Administrator; provided, however, that an ISO shall not be exercisable
after
the expiration of ten years from the date of the option grant. In addition,
except in the case of death or disability, no option granted to an individual
who is subject to the provisions of Section 16 of the Exchange Act may be
exercisable prior to the expiration of six months from the date of the option
grant.
In
the
case of ISOs, the fair market value of stock with respect to which ISOs are
exercisable for the first time during any calendar year by any participant
in
the Option Plan may not exceed $100,000, such value being determined at the
time
the options are granted, as provided by the terms of Section 422 of the Internal
Revenue Code. To the extent the value of the underlying stock (determined in
accordance with the previous sentence) exceeds $100,000, such excess options
shall be treated as nonstatutory stock options.
After
an
option becomes exercisable, it may be exercised at any time as to any or all
full shares that have become purchasable under the terms of the option. The
exercise price of options granted under the Option Plan may be made in whole
or
in part through the surrender of previously held shares of common stock at
the
fair market value thereof or through the authorization to withhold shares of
stock otherwise issuable upon exercise of the option.
No
option
shall be transferable other than by will or the laws of descent and
distribution, or in the case of non-incentive stock options, pursuant to a
Qualified Domestic Relations Order, and no option shall be transferable by
an
individual who is subject to the provisions of Section 16 of the Exchange Act
prior to stockholder approval of the Option Plan. The Administrator shall have
the power to specify with respect to each grant of options the effect upon
such
grantee’s rights of the termination of such grantee’s employment or services
with Tri-Valley and the Administrator may determine at the time of grant that
such options shall become exercisable on an accelerated basis following a change
of control with respect to Tri-Valley. Nothing in the Option Plan shall confer
on any person any right to continue in the employ of Tri-Valley or any of our
subsidiaries or shall interfere in any way with the right of Tri-Valley or
any
of our subsidiaries to terminate such person’s employment at any
time.
Terms
of Restricted Stock
Until
any
restrictions upon restricted stock awarded to a grantee under the Option Plan
have lapsed, such shares shall not be transferable other than by will or the
laws of descent and distribution, or pursuant to a Qualified Domestic Relations
Order, nor shall they be delivered to the grantee. The Administrator shall
have
the power to specify with respect to each award of restricted stock the effect
upon such grantee’s rights of the termination of such grantee’s employment with
Tri-Valley. The Administrator may determine at the time of award that such
restricted stock shall become fully vested following a change of control with
respect to the Tri-Valley.
Terms
of Stock Purchase Rights
Stock
purchase rights may be issued either alone, in addition to, or in tandem with
other awards granted under the Option Plan and/or cash awards made outside
the
Option Plan, the terms of which are determined at the discretion of the
Administrator. The Restricted Stock Purchase Agreement shall grant Tri-Valley
a
repurchase option exercisable upon the voluntary or involuntary termination
of
the purchaser’s service with Tri-Valley for any reason (including death or
disability). The purchase price for shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to Tri-Valley. The repurchase option shall lapse at a rate determined by the
Administrator. Once the Stock Purchase Right is exercised, the purchaser shall
have the rights equivalent to those of a stockholder, and shall be a stockholder
when his or her purchase is entered upon the records of the duly authorized
transfer agent.
Federal
Tax Consequences of Options
Under
current federal income tax laws, options granted under the Option Plan will
generally have the following consequences. The holder of a nonstatutory stock
option recognizes no income for federal income tax purposes upon the grant
of
such option, and Tri-Valley, therefore, receives no deduction at such time.
At
the time of exercise, however, the grantee generally will recognize income,
taxable at ordinary income, to the extent that the fair market value of the
shares received on the exercise date exceeds the nonstatutory stock option
exercise price. Tri-Valley will be entitled to a corresponding deduction for
federal income tax purposes in the year in which the nonstatutory stock option
is exercised so long as either Section 162(m) is inapplicable or its
requirements are met. If the shares are held for at least one year and one
day
after exercise, long-term capital gain will be realized upon disposition of
such
shares to the extent the amount realized on such disposition exceeds their
fair
market value as of the exercise date.
If
a
grantee is awarded an ISO, no income will be recognized for federal income
tax
purposes at the time of grant or exercise, and Tri-Valley will therefore, not
receive any corresponding deduction. The excess of fair market value of the
shares of common stock received at the date of exercise over the exercise price
will become an item of tax preference for the grantee for purposes of the
grantee’s alternative minimum tax in the year of exercise, however. The grantee
will be subject to federal income tax when the grantee sells the shares acquired
upon the exercise of the ISO. If the grantee holds the shares for more than
two
years from the date of grant and more than one year from the date the shares
were transferred to that person, any gain will be taxed as long-term capital
gain. Tri-Valley will not be entitled to any deduction for federal income tax
purposes as to any amount taxed as long-term capital gain in connection with
the
sale of shares acquired upon the exercise of an ISO. Tri-Valley will, however,
be entitled to a corresponding deduction for federal income tax purposes for
any
amount taxed as ordinary income.
Amendment
of the Option Plan
The
board
of directors may at any time terminate the Option Plan, and may at any time
and
in any respect amend the Option Plan; provided, however, that the board (unless
its actions are approved or ratified by our stockholders within twelve months
of
the date that the board amends the Option Plan) may not amend the Option Plan
to
(i) increase the total number of shares of common stock issuable pursuant to
ISOs under the Option Plan or materially increase the number of shares of common
stock subject to the Option Plan; (ii) change the class of employees eligible
to
receive ISOs that may participate in the Option Plan or materially change the
class of person that may participate in the Option Plan; or (iii) otherwise
materially increase the benefits accruing to participants under the Option
Plan.
No termination, amendment or modification of the Option Plan shall adversely
affect options, stock purchase rights or restricted stock then outstanding
under
the Option Plan without the consent of the grantee or his legal
representative.
Required
Vote; Recommendation
As
required by the rules of the American Stock Exchange, the affirmative vote
of
the majority of the shares of our common stock present in person or represented
by proxy at the meeting and entitled to vote is required for the approval of
the
Option Plan. With respect to this vote, abstentions will have the effect of
a
“no” vote and broker non-votes will have no effect on the vote.
THE
BOARD HAS UNANIMOUSLY APPROVED THE PLAN AND RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE PLAN. SHARES OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING BY
SIGNED BUT UNMARKED PROXIES WILL BE VOTED "FOR" THE PLAN.
Proposal
3: OTHER
MATTERS
At
the
date of mailing of this proxy statement, we are not aware of any business to
be
presented at the annual meeting other than those items previously discussed.
The
proxy being solicited by the board of directors provides authority for the
proxy
holder, F. Lynn Blystone, to use his discretion to vote on such other matters
as
may lawfully come before the meeting, including matters incidental to the
conduct of the meeting, and any adjournment thereof.
OTHER
INFORMATION
Outside
Auditors
Under
new
rules promulgated under the Sarbanes-Oxley Act of 2002, shareholders no longer
ratify the selection of our outside auditing firm, which is now selected by
the
audit committee of the board of directors. Our financial statements for the
years ended December 31, 2004 and 2003, have been audited by Brown Armstrong
Paulden McCown Starbuck and Keeter Accountancy Corporation. A representative
of
the independent accountants will attend the meeting, have the opportunity to
make a statement if they desire to do so, and be available to answer
questions.
Annual
Report
Our
Annual Report on Form 10-K for the year ended December 31, 2004, which contains
our audited financial statements dated December 31, 2004 and 2003, was mailed
previously to shareholders.
Section
16(a) Beneficial Ownership Reporting Requirement
Section
16(a) of the Securities Exchange Act of 1934 and Securities and Exchange
Commission regulations require our directors, certain officers, and greater
than
10 percent shareholders to file reports of ownership and changes in ownership
with the SEC and to furnish us with copies of all such reports they file. Based
solely upon a review of the copies of the forms furnished to us, or written
representations from certain reporting persons that no reports were required,
we
believe that no person failed to file required reports on a timely basis during
or in respect of 2004.
Where
to Obtain Additional Information
You
may
obtain, free of charge, a copy of our Annual Report or Form 10-K for the year
ended December 31, 2004 (including the financial statements and schedules
thereto) filed with the Securities and Exchange Commission by writing to
Tri-Valley's Secretary at 5555 Business Park South, Suite 200, Bakersfield,
California 93309; telephone 661-864-0500.
We
file
annual, quarterly and period reports, proxy statements and other information
with the Securities and Exchange Commission using the SEC's EDGAR system. You
can find our SEC filings on the SEC's web site, www.sec.gov.
You may
read and copy any materials that we file with the SEC at its Public Reference
Room at 450 5th Street, N.W., Washington, D.C. 20549. Our common stock is traded
under the symbol "TIV." We use the calendar year as our fiscal
year.
Proposals
by Shareholders - 2006
Any
proposal by a shareholder to be submitted for inclusion in proxy soliciting
material for the 2006 annual shareholders meeting must be received by our
corporate secretary no later than April 22, 2006.
Other
Matters
No
proposals have been received from shareholders for inclusion in the proxy
statement or action at the 2005 annual meeting. We do 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.
Your
vote
at the annual meeting is important to us. Please vote your shares of common
stock by completing the enclosed proxy card and returning it to us in the
enclosed envelope.
Date:
August
22, 2005 By
Order
of the Board of Directors,
______________________________
F.
Lynn
Blystone
President
and Chief Executive Officer
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 August 12, 2005, at the
Annual
Meeting of Shareholders to be held in the Four Seasons Biltmore Hotel, 1260
Channel Drive, Santa Barbara, California 93108, on October 10, 2005, at 10:00
A.M. (P.D.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 M.
J.
Carlson C.
C.
Hoffman
D.
P.
Lockhart Henry
Lowenstein L.
J.
Miller
H.
J.
Noyes
2. Adoption
of the 2005 incentive stock option plan.
For
Against Abstain
----
----
----
3. 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 - 3.
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 October 8, 2005,
will
not be voted upon unless the shareholders are present to vote their
shares.
Dated:
---------------------------
(Please
mark, sign, date and return the Proxy Card promptly.)
-------------------------------------- --------------------------------------
Signature Signature
if held jointly
EXHIBIT
A
Tri-Valley
Corporation
Charter
of the Audit Committee
Organization
The
audit
committee of the board of directors shall consist of at least three independent
directors who are generally knowledgeable in financial and auditing matters.
The
committee shall include at least one member with accounting or related financial
management expertise, who qualifies as an audit committee financial expert
under
Item 401(h) of Regulation S-K of the U.S. Securities and Exchange Commission.
Each member shall be free of any relationship that, in the opinion of the
board,
would interfere with his or her individual exercise of independent judgment.
Applicable laws and regulations shall be followed in evaluating a member’s
independence, including the rules of the Securities and Exchange Commission
and
the American Stock Exchange. The chairperson shall be appointed by the full
board.
Statement
of Policy
The
audit
committee assists the corporate directors in fulfilling their responsibility
to
the shareholders, potential shareholders, and investment community relating
to
corporate accounting, reporting practices of the corporation, and the quality
and integrity of the financial reports of the corporation. It is the
responsibility of the audit committee to maintain free and open means of
communication between the directors, the independent auditors, the internal
accounting staff, and the financial management of the corporation.
Relationship
with Auditors
The
audit
committee is responsible for the engagement, supervision, compensation and
termination of the company’s independent auditors. The independent auditors
shall report directly to the audit committee. The audit committee is responsible
for determining the independence of the company’s outside auditor and must
approve in advance, all audit and non-audit services provided by the outside
auditor.
Relationship
with Management
The
audit
committee consults with management to review critical accounting policies
and
alternative accounting treatment of financial reporting issues. In the event
of
a dispute between management and the company’s independent auditors over
accounting and financial reporting, the audit committee will resolve disputes
after consulting with both management and the independent auditors.
Relationship
with the Board of Directors
The
audit
committee regularly reports to the full board on internal auditing, the
performance of the auditors, and all significant accounting and financial
reporting issues. Members of the audit committee are not, however, expected
to
bear greater responsibility or liability for assuring compliance with accounting
rules and federal and state securities laws than other members of the board
of
directors.
Authority
In
discharging its oversight role, the audit committee is empowered to investigate
any matter brought to its attention, with full power to retain and compensate
outside counsel or other experts for this purpose. The company must sufficiently
fund the audit committee to discharge its duties, including retention of
experts.
Specific
Responsibilities
The
committee has the following specific responsibilities:
Review
of Documents and Reports
| 1. |
At
the completion of the annual audit, review with management and
the
independent auditor the following:
|
| - |
The
annual financial statements and related footnotes and financial
information to be included in the company’s annual report to shareholders
on Form 10-K including: (i) the selection and disclosure of all
critical
accounting policies and practices used; (ii) any required management
certifications; and (iii) any certification, report, opinion or
review
rendered by the independent
auditor.
|
| - |
Results
of the audit of the financial statements and the related report
thereon
and, if applicable, a report on changes during the year in accounting
principles and their application.
|
| - |
Significant
developments in accounting guidelines, policies and procedures
including
any changes in generally accepted accounting principles which may
impact
the company’s accounting policies or financial
results.
|
| - |
Other
communications as required to be communicated by the independent
auditor
by Statement of Auditing Standards (SAS) 61 as amended by SAS 90
relating
to the conduct of the audit. Further, receive a written communication
provided by the independent auditor concerning their judgment about
the
quality of the company’s accounting principles, as outlined in SAS 61 as
amended by SAS 90, and that they concur with management’s representation
concerning audit adjustments.
|
If
deemed
appropriate after such review and discussion, the committee shall recommend
to
the board that the financial statements be included in the company’s annual
report on Form 10-K.
| 2. |
After
preparation by management and review by independent auditor, approve
the
report required under SEC rules to be included in the company’s annual
proxy statement.
|
| 3. |
Review
and reassess the adequacy of the audit committee charter on an
annual
basis. The audit committee charter is to be published as an appendix
to
the proxy statement every three
years.
|
| 4. |
Review
with the company’s management and the independent auditor prior to filing
the company’s interim financial information, earnings press release and
the financials information contained in the company’s quarterly reports on
Form 10-Q, including: (i) the selection, application and disclosure
of the
critical accounting policies and practices used; and (ii) any management
certifications related thereto. The chairperson may represent the
committee for purposes of review.
|
| 5. |
Review
with the company’s management and the independent auditor all significant
accounting and reporting principles, practices and procedures applied
by
the company in preparing its financial statements. Discuss with
the
independent auditor their judgments about the quality, not just
the
acceptability, of the company’s accounting principles used in financial
reporting.
|
| 6. |
Review
any reports submitted by the independent auditor, including a report,
if
prepared, relating to: (i) all critical accounting policies and
practices
used; (ii) all alternative treatments of financial information
within
generally accepted accounting principles that have been discussed
with
management, ramifications of the use of such alternative disclosures
and
treatments, and the treatment preferred by the independent auditor;
and
(iii) other material written communications between the independent
auditor and management, such as any management letter or schedule
of
unadjusted differences.
|
| 7. |
Review
disclosures made by CEO and CFO during the Forms 10-K and 10-Q
certification process about significant deficiencies in the design
or
operation of internal controls or any fraud that involves management
or
other employees who have a significant role in the company’s internal
controls.
|
| 8. |
Generally
as part of the review of the annual financial statements, receive
an oral
report(s), at least annually, from legal counsel concerning legal
and
regulatory matters that may have a material impact on the financial
statements.
|
Control
Process
| 8. |
Review
with the company’s management and the independent auditor the company’s
accounting and financial reporting controls. Obtain annually in
writing
from the independent auditor their letter as to the adequacy of
such
controls.
|
| 9. |
Require
that the independent auditor will advise management and the committee,
through its chairperson, of any matters identified through the
procedures
followed for interim quarterly financial statements that may adversely
affect the quality or the acceptability of the quarterly financial
reports. This notification is required under standards for communication
with audit committees regarding the effect on quality for significant
events, transactions, and changes in accounting estimates, is to
be made
prior to the related press release or, if not practicable, prior
to filing
Form 10-Q with the SEC.
|
| 10. |
Meet
with management and the independent auditor to discuss any relevant
significant recommendations that the independent auditor may have,
particularly those characterized as “material” or “serious”. Typically,
such recommendations will be presented by the independent auditor
in the
form of a letter of comments and recommendations to the committee.
The
committee should review responses of management to the letter of
comments
and recommendations from the independent auditor and receive follow-up
reports on action taken concerning the aforementioned
recommendations.
|
| 11. |
Discuss
the independent auditor the quality of the company’s financial and
accounting personnel. Also elicit the comments of management regarding
the
responsiveness of the independent auditor to the company’s
needs.
|
Internal
Audit
| 12. |
Review
with the company’s management the annual internal audit plan; any
significant findings during the year and management’s responses thereto;
and the effectiveness and adequacy of the internal audit
function.
|
| 13. |
Review
with the company’s management and the independent auditor significant
changes to the audit plan, if any, and any serious disputes or
difficulties with management encountered during the audit. Inquire
about
the cooperation received by the independent auditor and whether
there have
been any disagreements with management which is not satisfactorily
resolved, would have caused them to issue a nonstandard report
on the
company’s financial statements.
|
External
Audit
| 14. |
Pre-approve
in accordance with applicable law (including SEC and American Stock
Exchange rules) all audit and permissible non-audit services provided
to
the Company by the independent auditor. The committee may delegate
this
responsibility to one or more members of the
committee.
|
| 15. |
Review
the scope and general extent of the independent auditor’s annual audit.
The committee’s review should include an explanation from the independent
auditor of the factors considered by the accountants in determining
the
audit scope, including the major risk factors. The independent
auditor
should confirm to the committee that no limitations have been placed
on
the scope or nature of their audit
procedures.
|
| 16. |
At
least annually, obtain and review a report by the independent auditor
describing: (i) the independent auditor’s internal quality control
procedures: (ii) any material issues raised by the most recent
internal
quality control review, or peer review, of the registered public
accounting firm, or by any inquiry or investigation by governmental
or
professional authorities, within the preceding five years, respecting
one
or more independent audits carried out by the independent accounting
firm,
and any steps taken to deal with any such issues; and (iii) all
relationships between the independent auditor and the company (to
assess
the independent auditor’s
independence).
|
| 17. |
Inquire
as to the independence of the independent auditor and obtain from
the
independent auditor, at least annually, a formal written statement
delineating all relationships and services between the independent
auditor
and the company as contemplated by Independence Standards Board
Standard
No. 1, Independence
Discussions with Audit Committee.
|
| 18. |
Actively
engage in a dialogue with the independent auditor with respect
to any
disclosed relationships or services that may impact the objectivity
and
independence of the auditor and take, or recommend that the full
Board
take, appropriate action to oversee the independence of the independent
auditor.
|
| 19. |
Review
any reports submitted to the committee by the independent
auditor.
|
Compliance
| 20. |
As
the committee may deem appropriate, obtain, weigh and consider
expert
advice as to audit committee related rules of the American Stock
Exchange,
Statements on Auditing Standards and other accounting, legal and
regulatory provisions.
|
| 21. |
Review
with management and the independent auditor the methods used to
establish
and monitor the company’s policies with respect to unethical or illegal
activities by company employees that may have a material impact
on the
financial statements.
|
| 22. |
Establish
procedures for: (i) the receipt, retention and treatment of complaints
received by the listed issuer regarding accounting, internal accounting
control, or auditing matters; and (ii) the confidential, anonymous
submission by employees of the listed issuer of concerns regarding
questionable accounting or auditing matters in compliance with
applicable
law, including SEC rules.
|
| 23. |
Review
and investigate any matters pertaining to the integrity of management,
including conflicts of interest, or adherence to standard of conduct,
as
required by the code of conduct policy adopted by the board and
any other
policies of the company governing the integrity and conduct of
management
which the board determines should be overseen by the committee.
This code
of conduct will be applicable to all directors, officers and employees
and
shall be made publicly available in accordance with SEC and American
Stock
Exchange rules.
|
Other
Responsibilities
| 24. |
Make
reports and recommendations to the board on matters within the
scope of
the committee’s functions.
|
| 25. |
Review
and reassess the adequacy of this charter annually and recommend
any
proposed changes to the board for approval. This should be done
in
compliance with applicable SEC and American Stock Exchange audit
committee
requirements.
|
| 26. |
Should
the company receive an audit opinion that contains a going concern
qualification, the committee will assure that the company makes
a timely
public announcement through the public news media disclosing the
receipt
of such qualification and provides the text of the public announcement
to
the appropriate American Stock Exchange department in accordance
with
American Stock Exchange rules.
|
| 27. |
Review
and approve, where appropriate, all related-party transaction as
are
required to be disclosed pursuant to SEC Regulation S-K, Item
404.
|
| 28. |
Engage
independent counsel and other advisors, as the committee deems
necessary
or appropriate to carry out its duties, with funding provided by
the
company.
|
| 29. |
Perform
other activities related to this charter as requested by the
board.
|
Audit
Committee Checklist
The
audit
committee checklist delineates the committee’s specific responsibilities. The
committee relies on expertise from management, the independent auditors and
the
corporate staff in carrying out its responsibilities. Management of the company
is responsible to determine that the company’s financial statements are
complete, accurate, and in accordance with generally accepted accounting
principles. The public accounting firm is responsible for auditing the company’s
financial statements. It is not the audit committee’s duty to plan or conduct
audits, to determine that the financial statements are complete, accurate
and in
accordance with generally accepted accounting principles, to conduct
investigations, or to assure compliance with laws and regulations or the
company’s internal procedures or controls.
|
Audit
Committee Checklist
|
| |
|
Qtr
1
|
Qtr
2
|
Qtr
3
|
Qtr
4
|
As
Needed
|
|
1.
|
Meet
4 times per year or more frequently as circumstances require. Each
meeting
must include time for an executive session of the committee. The
committee
may invite members of management or others to attend parts of the
meeting
as necessary.
|
X
|
X
|
X
|
X
|
X
|
|
2.
|
Prepare
written agenda in consultation between the committee chairperson,
management and the independent auditors.
|
X
|
X
|
X
|
X
|
X
|
|
3.
|
Provide
open communications between the independent auditors, management
and the
board. Report committee actions to the board as the committee deems
appropriate.
|
|
|
|
|
X
|
|
4.
|
Verify
that at least one committee member qualifies as an “audit committee
financial expert” under Item 401(h) of SEC regulation S-K.
|
|
|
|
X
|
|
|
5.
|
Verify
the committee consists of a minimum of 3 independent directors,
who are
financially literate.
|
|
|
|
X
|
|
|
6.
|
Review
and reassess the audit committee charter and update the audit committee
checklist annually.
|
|
|
|
X
|
|
|
7.
|
Include
copy of the committee charter as an appendix to the proxy statement
at
least once every 3 years.
|
|
|
|
|
X
|
|
8.
|
Appoint,
approve the compensation of, and provide oversight of the independent
auditor.
|
X
|
X
|
X
|
X
|
|
|
9.
|
Confirm
annually the independence of the independent auditor.
|
X
|
|
|
|
|
|
10.
|
Quarterly
review non-audit services provided by the independent
auditor.
|
X
|
X
|
X
|
X
|
|
|
11.
|
Inquire
of management and the independent auditor of significant risks
or
exposures and assess steps management has taken to minimize such
risk to
the company.
|
|
|
|
|
X
|
|
12.
|
Consider
and review with the independent auditor:
|
|
|
|
|
|
| |
a.
Adequacy of the company’s internal controls.
|
|
|
X
|
|
|
| |
b.
Any related significant findings and recommendations of the independent
auditor together with management’s responses.
|
|
|
X
|
|
|
|
13.
|
Review
with the independent auditor and management any significant changes
to
GAAP policies or standards.
|
|
|
X
|
|
|
|
14.
|
Review
with the independent auditors and management at the completion
of the
annual audit:
|
|
|
|
|
|
| |
a.
The financial statements and accompanying notes.
|
X
|
|
|
|
|
| |
b.
The auditors’ report.
|
X
|
|
|
|
|
| |
c.
Any significant changes required in the audit plan.
|
X
|
|
|
|
|
| |
d.
Any difficulties or disputes between the auditors and management
encountered during the course of the audit.
|
X
|
|
|
|
|
| |
e.
Other matters related to the conduct of the audit which are communicated
to the committee under generally accepted accounting
standards.
|
X
|
|
|
|
|
|
15.
|
Review
with management and the auditors the company’s critical accounting
policies.
|
X
|
|
|
|
X
|
|
16.
|
Review
policies and procedures with respect to transactions between the
company
and its officers, directors and affiliates that are not a normal
part of
the company’s business.
|
|
|
|
X
|
|
|
17.
|
Review
with management and the auditors:
|
|
|
|
|
|
| |
a.
Any significant findings by auditors and management’s responses
thereto.
|
|
|
|
|
X
|
| |
b.
Any difficulties encountered in the course of audits, including
any
restrictions on the scope of their work or access to required
information.
|
|
|
|
|
X
|
| |
c.
Any changes required in planned scope of their audit.
|
|
|
|
|
X
|
|
18.
|
Review
periodic reports of the company with management and the auditors
prior to
filing with the SEC.
|
X
|
X
|
X
|
X
|
X
|
|
19.
|
In
connection with the review of periodic reports, review management’s
disclosure to the committee of any deficiencies in disclosure controls
or
internal controls under Section 302 of the Sarbanes-Oxley
Act.
|
X
|
X
|
X
|
X
|
|
|
20.
|
Monitor
as appropriate the standards adopted as a code of conduct for the
company.
|
|
|
|
|
X
|
|
21.
|
Meet
with the auditors in executive session to discuss any matters that
the
committee or auditor believe should be discussed privately with
the audit
committee.
|
|
|
|
|
X
|
|
22.
|
Meet
with management in executive session to discuss any matters that
the
committee or auditor believe should be discussed privately with
the audit
committee.
|
|
|
|
|
X
|
|
23.
|
Review
and make recommendations to the board of directors concerning any
matters
reported to the committee by the company’s legal counsel concerning
material violations of securities law or breaches of fiduciary
duty by the
company, its officers, directors or employees.
|
|
|
|
|
X
|
|
24.
|
Provide
for receipt, retention and treatment of complaints received by
the issuer
regarding accounting, internal accounting controls or auditing
matters,
including providing for confidential and anonymous submissions
by
employees of the issuer to the chairperson of the committee regarding
questionable accounting or auditing matters.
|
|
|
|
|
X
|
EXHIBIT
B
2005
STOCK OPTION AND INCENTIVE PLAN
Adopted
as of October 1, 2005
TRI-VALLEY
CORPORATION
1.
Purposes of the Plan.
The
purposes of this 2005 Stock Option Plan are:
| · |
to
attract and retain the best available personnel for positions of
substantial responsibility,
|
| · |
to
provide additional incentive to Employees, Directors and Consultants,
and
|
| · |
to
promote the success of the Company's
business.
|
Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in
Exhibit A.
2.
Stock Subject to the Plan.
Subject
to adjustment as provided in Section 12, the number of Shares available for
granting Awards under the Plan shall be 1,125,000, plus all Shares remaining
available for issuance under the Predecessor Plans on the date of the adoption
of this Plan by the shareholders. If, after the effective date of the Plan,
any
Shares covered by an Award granted under the Plan or by an award granted
under a
Predecessor Plan, or to which such an Award or Predecessor Plan award relates,
are forfeited, or if an Award or Predecessor Plan award otherwise terminates
without the delivery of Shares or of other consideration, then the Shares
covered by such Award or Predecessor Plan award, or to which such Award or
Predecessor Plan award relates, or the number of Shares otherwise counted
against the aggregate number of Shares available under the Plan with respect
to
such Award or Predecessor Plan award, to the extent of any such forfeiture
or
termination, shall again be, or shall become, available for granting Awards
under the Plan. Notwithstanding the foregoing, the maximum number of Shares
with
respect to which Incentive Stock Options may be granted in any year shall
be
1,125,000. Any Shares delivered pursuant to an award may consist, in whole
or in
part, of authorized and unissued Shares or of treasury Shares.
3.
Administration of the Plan.
(a)
Procedure.
(i)
Administration.
Other
than as provided below, the Plan shall be administered by (A) the Board or
(B) a
Committee, which committee shall be constituted to satisfy Applicable
Laws.
(ii)
Multiple Administrative Bodies.
Different Committees with respect to different groups of Service Providers
may
administer the Plan. (iii)
Section 162(m).
To the
extent that the Administrator determines it to be desirable to qualify Options
granted hereunder as “performance-based compensation” within the meaning of
Section 162(m) of the Code, the Plan shall be administered by a Committee
of two
or more “outside directors” within the meaning of Section 162(m) of the
Code.
(iv)
Rule
16b-3.
To the
extent desirable to qualify transactions hereunder as exempt under Rule 16b-3,
the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.
(b)
Powers of the Administrator.
Subject
to the provisions of the Plan, and in the case of a Committee, subject to
the
specific duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discretion:
(i)
to
determine the Fair Market Value;
(ii)
to
select the Service Providers to whom Options and Stock Purchase Rights may
be
granted hereunder;
(iii)
to
determine the number of shares of Common Stock to be covered by each Option
and
Stock Purchase Right granted hereunder;
(iv)
to
approve forms of agreement for use under the Plan;
(v)
to
determine the terms and conditions, not inconsistent with the terms of the
Plan,
of any Option, Stock Purchase Right or other Award granted hereunder. Such
terms
and conditions include, but are not limited to, the exercise price, the time
or
times when Options or Stock Purchase Rights may be exercised (which may be
based
on performance criteria), any vesting, acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi)
to
institute an Option Exchange Program;
(vii)
to
construe and interpret the terms of the Plan and awards granted pursuant
to the
Plan;
(viii)
to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax
laws;
(ix)
to
modify or amend each Option or Stock Purchase Right (subject to Section 14(c)
of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in
the
Plan;
(x)
to
authorize any person to execute on behalf of the Company any instrument required
to effect the grant of an Option or Stock Purchase Right previously granted
by
the Administrator;
(xi)
to
make all other determinations deemed necessary or advisable for administering
the Plan.
(c)
Effect of Administrator's Decision.
The
Administrator's decisions, determinations and interpretations shall be final
and
binding on all Optionees and any other holders of Options or Stock Purchase
Rights.
4.
Eligibility.
Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service
Providers. Incentive Stock Options may be granted only to
Employees.
5.
Limitations.
(a)
Incentive Option Limits.
Each
Option shall be designated in the Option Agreement as either an Incentive
Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are exercisable for the first
time
by the Optionee during any calendar year (under all plans of the Company
and any
Parent or Subsidiary) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(a), Incentive
Stock
Options shall be taken into account in the order in which they were granted.
The
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(b)
No
Right to Employment.
Neither
the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee
any right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at
any
time, with or without cause.
6.
Term of Plan.
Subject
to Section 18 of the Plan, the Plan shall become effective on October 1,
2005;
provided, however, that to the extent that Awards are granted under the Plan
before its approval by the shareholders, the Awards will be contingent on
approval of the Plan by the shareholders of the Company at an annual meeting,
special meeting, or by written consent. The Plan shall continue in effect
for a
term of ten (10) years unless terminated earlier under Section 14 of the
Plan.
7.
Term of Option.
The term
of each Option shall be stated in the Option Agreement. In the case of an
Incentive Stock Option, the term shall be ten (10) years from the date of
grant
or such shorter term as may be provided in the Option Agreement. Moreover,
in
the case of an Incentive Stock Option granted to an Optionee who, at the
time
the Incentive Stock Option is granted, owns stock representing more than
ten
percent (10%) of the total combined voting power of all classes of stock
of the
Company or any Parent or Subsidiary, the term of the Incentive Stock Option
shall be five (5) years from the date of grant or such shorter term as may
be
provided in the Option Agreement.
8.
Option Exercise Price and Consideration.
(a)
Exercise Price.
The per
share exercise price for the Shares to be issued pursuant to exercise of
an
Option shall be determined by the Administrator, subject to the
following:
(i)
In
the case of an Incentive Stock Option
(A)
granted to an Employee who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the voting power of
all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share
on
the date of grant.
(B)
granted to any Employee other than an Employee described in paragraph (A)
immediately above, the per Share exercise price shall be no less than 100%
of
the Fair Market Value per Share on the date of grant.
(ii)
In
the case of a Nonstatutory Stock Option, the per Share exercise price shall
be
determined by the Administrator. In the case of a Nonstatutory Stock Option
intended to qualify as “performance-based compensation” within the meaning of
Section 162(m) of the Code, the per Share exercise price shall be no less
than
100% of the Fair Market Value per Share on the date of grant.
(iii)
Notwithstanding the foregoing, Options may be granted with a per Share exercise
price of less than 100% of the Fair Market Value per Share on the date of
grant
pursuant to a merger or other corporate transaction.
(b)
Waiting Period and Exercise Dates.
At the
time an Option is granted, the Administrator shall fix the period within
which
the Option may be exercised and shall determine any conditions that must
be
satisfied before the Option may be exercised.
(c)
Form
of Consideration.
The
Administrator shall determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable
form of
consideration at the time of grant. Such consideration may consist entirely
of:
(i)
cash;
(ii)
check;
(iii)
promissory note;
(iv)
other Shares which (A) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six months on the date
of
surrender, and (B) have a Fair Market Value on the date of surrender equal
to
the aggregate exercise price of the Shares as to which said Option shall
be
exercised;
(v)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan;
(vi)
a
reduction in the amount of any Company liability to the Optionee, including
any
liability attributable to the Optionee's participation in any Company-sponsored
deferred compensation program or arrangement;
(vii)
any
combination of the foregoing methods of payment; or
(viii)
such other consideration and method of payment for the issuance of Shares
to the
extent permitted by Applicable Laws.
9.
Exercise of Option.
(a)
Procedure for Exercise; Rights as a Stockholder.
Any
Option granted hereunder shall be exercisable according to the terms of the
Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of
a
Share.
An
Option
shall be deemed exercised when the Company receives:
(i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and
(ii)
full
payment for the Shares with respect to which the Option is
exercised.
(b)
Payment of Consideration.
Full
payment may consist of any consideration and method of payment authorized
by the
Administrator and permitted by the Option Agreement and the Plan. Shares
issued
upon exercise of an Option shall be issued in the name of the Optionee or,
if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the
books
of the Company or of a duly authorized transfer agent of the Company), no
right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after
the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except
as
provided in Section 12 of the Plan.
(c)
Unexercised Portion of Option.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is
exercised.
(d)
Termination of Relationship as a Service Provider.
If an
Optionee ceases to be a Service Provider, other than upon the Optionee's
death
or Disability, the Optionee may exercise his or her Option within such period
of
time as is specified in the Option Agreement to the extent that the Option
is
vested on the date of termination (but in no event later than the expiration
of
the term of such Option as set forth in the Option Agreement). In the absence
of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the date of the Optionee's termination. If,
on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert
to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the
Plan.
(e)
Disability of Optionee.
If an
Optionee ceases to be a Service Provider as a result of the Optionee's
Disability, the Optionee may exercise his or her Option within such period
of
time as is specified in the Option Agreement to the extent the Option is
vested
on the date of termination (but in no event later than the expiration of
the
term of such Option as set forth in the Option Agreement). In the absence
of a
specified time in the Option Agreement, the Option shall remain exercisable
for
twelve (12) months following the Optionee's termination. If, on the date
of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the
Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered
by
such Option shall revert to the Plan.
(f)
Death
of Optionee.
If an
Optionee dies while a Service Provider, the Option may be exercised within
such
period of time as is specified in the Option Agreement (but in no event later
than the expiration of the term of such Option as set forth in the Notice
of
Grant), by the Optionee's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that
the
Option is vested on the date of death. In the absence of a specified time
in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of death, the Optionee
is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. The Option may
be
exercised by the executor or administrator of the Optionee's estate or, if
none,
by the person(s) entitled to exercise the Option under the Optionee's will
or
the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered
by
such Option shall revert to the Plan.
(g)
Buyout Provisions.
The
Administrator may at any time offer to buy out for a payment in cash or Shares
an Option previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at the time
that
such offer is made.
10.
Stock Purchase Rights.
(a)
Rights to Purchase.
Stock
Purchase Rights may be issued either alone, in addition to, or in tandem
with
other awards granted under the Plan and/or cash awards made outside of the
Plan.
After the Administrator determines that it will offer Stock Purchase Rights
under the Plan, it shall advise the offeree in writing by means of a Notice
of
Grant, of the terms, conditions and restrictions related to the offer, including
the number of Shares that the offeree shall be entitled to purchase, the
price
to be paid, and the time within which the offeree must accept such offer.
The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement
in
the form determined by the Administrator.
(b)
Repurchase Option.
Unless
the Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary
or
involuntary termination of the purchaser's service with the Company for any
reason (including death or Disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be
the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall
lapse
at a rate determined by the Administrator.
(c)
Other
Provisions.
The
Restricted Stock Purchase Agreement shall contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion.
(d)
Rights as a Stockholder.
Once
the Stock Purchase Right is exercised, the purchaser shall have the rights
equivalent to those of a stockholder, and shall be a stockholder when his
or her
purchase is entered upon the records of the duly authorized transfer agent
of
the Company. No adjustment will be made for a dividend or other right for
which
the record date is prior to the date the Stock Purchase Right is exercised,
except as provided in Section 12 of the Plan.
11.
Non-Transferability of Options and Stock Purchase
Rights.
Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right
may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any
manner other than by will or by the laws of descent or distribution and may
be
exercised, during the lifetime of the Optionee, only by the Optionee. If
the
Administrator makes an Option or Stock Purchase Right transferable, such
Option
or Stock Purchase Right shall contain such additional terms and conditions
as
the Administrator deems appropriate.
12.
Additional
Awards.
The
Administrator may also make grants and Awards of Shares available under the
Plan
as a bonus or as compensation for services actually rendered by Employees,
Directors and Consultants. Each such Award shall be in such form and shall
contain such terms and conditions as the Administrator shall deem appropriate.
The terms and conditions of a stock bonus or compensation Award agreement
may
change from time to time, and the terms and conditions of separate agreements
need not be identical. Stock bonus or compensation Awards under the Plan
may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Administrator.
In the
event that the status of an Employee, Director or Consultant with the Company
terminates, the Company may repurchase or otherwise reacquire any or all
of the
shares of stock held by the Employee, Director or Consultant which have not
vested as of the date of termination under the terms of the stock bonus or
compensation Award agreement between the Company and such Employee, Director
or
Consultant.
13.
Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.
(a)
Changes in Capitalization.
Subject
to any required action by the stockholders of the Company,
(i)
the
number of shares of Common Stock covered by each outstanding Option and Stock
Purchase Right, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options or Stock
Purchase Rights have yet been granted or which have been returned to the
Plan
upon cancellation or expiration of an Option or Stock Purchase Right,
and
(ii)
the
price per share of Common Stock covered by each such outstanding Option or
Stock
Purchase Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company.
Conversion of any convertible securities of the Company shall not be deemed
to
have been “effected without receipt of consideration.” Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock
of any class, shall affect, and no adjustment by reason thereof shall be
made
with respect to, the number or price of shares of Common Stock subject to
an
Option or Stock Purchase Right.
(b)
Dissolution or Liquidation.
In the
event of the proposed dissolution or liquidation of the Company, the
Administrator shall notify each Optionee as soon as practicable prior to
the
effective date of such proposed transaction. The Administrator in its discretion
may provide for an Optionee to have the right to exercise his or her Option
until ten (10) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option would not otherwise
be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an
Option
or Stock Purchase Right shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option
or
Stock Purchase Right will terminate immediately prior to the consummation
of
such proposed action.
(c)
Merger or Asset Sale.
(i)
In
the event of a merger of the Company with or into another corporation, or
the
sale of all or substantially all of the assets of the Company, each outstanding
Option and Stock Purchase Right shall be assumed or an equivalent option
or
right substituted by the successor corporation or a Parent or Subsidiary
thereof
(the "Successor Corporation").
(ii)
For
the purposes of this Section, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option
or
right confers the right to purchase or receive, for each Share of Optioned
Stock
subject to the Option or Stock Purchase Right immediately prior to the merger
or
sale of assets, the consideration (whether stock, cash, or other securities
or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen
by the
holders of a majority of the outstanding Shares). If such consideration received
in the merger or sale of assets is not solely common stock of the Successor
Corporation, the Administrator may, with the consent of the Successor
Corporation, provide for the consideration to be received upon the exercise
of
the Option or Stock Purchase Right, for each Share of Optioned Stock subject
to
the Option or Stock Purchase Right, to be solely common stock of the Successor
Corporation equal in fair market value to the per share consideration received
by holders of Common Stock in the merger or sale of assets.
(iii)
If
the Successor Corporation refuses to assume or substitute for the Option
or
Stock Purchase Right, the Optionee shall fully vest in and have the right
to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable.
If
an Option or Stock Purchase Right becomes fully vested and exercisable in
lieu
of assumption or substitution in the event of a merger or sale of assets,
the
Administrator shall notify the Optionee in writing or electronically that
the
Option or Stock Purchase Right shall be fully vested and exercisable for
a
period of fifteen (15) days from the date of such notice, and the Option
or
Stock Purchase Right shall terminate upon the expiration of such
period.
14.
Date of Grant.
The date
of grant of an Option or Stock Purchase Right shall be, for all purposes,
the
date on which the Administrator makes the determination granting such Option
or
Stock Purchase Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
15.
Amendment and Termination of the Plan.
(a)
Amendment and Termination.
The
Board may at any time amend, alter, suspend or terminate the Plan.
(b)
Stockholder Approval.
The
Company shall obtain stockholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws.
(c)
Effect of Amendment or Termination.
No
amendment, alteration, suspension or termination of the Plan shall impair
the
rights of any Optionee, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.
16.
Conditions Upon Issuance of Shares.
(a)
Legal
Compliance.
Shares
shall not be issued pursuant to the exercise of an Option or Stock Purchase
Right unless the exercise of such Option or Stock Purchase Right and the
issuance and delivery of such Shares shall comply with Applicable Laws and
shall
be further subject to the approval of counsel for the Company with respect
to
such compliance.
(b)
Investment Representations.
As a
condition to the exercise of an Option or Stock Purchase Right, the Company
may
require the person exercising such Option or Stock Purchase Right to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute
such
Shares if, in the opinion of counsel for the Company, such a representation
is
required.
17.
Inability to Obtain Authority.
The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such
Shares
as to which such requisite authority shall not have been obtained.
18.
Reservation of Shares.
The
Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
19.
Stockholder Approval.
The Plan
shall be subject to approval by the stockholders of the Company within twelve
(12) months after the date the Plan is adopted. Such stockholder approval
shall
be obtained in the manner and to the degree required under Applicable
Laws.
20.
Termination of Predecessor Plans.
Upon
approval of the Plan by the stockholders of the Company, the Predecessor
Plans
shall terminate, and no further awards or grants may be made under such
Plans.
21.
General Provisions.
(a)
No
Rights To Awards.
No
Employee, Participant or other Person shall have any claim to be granted
any
Award under the Plan, and there is no obligation for uniformity of treatment
of
Employees, Outside Director, Consultants, other holders or beneficiaries
of
Awards under the Plan. The terms and conditions of Awards need not be the
same
with respect to each recipient.
(b)
Withholding.
The
Company or any Affiliate shall be authorized to withhold from any Award granted
or any payment due or transfer made under any Award or under the Plan the
amount
(in cash, Shares, other securities, other Awards, or other property) of
withholding taxes due in respect of an Award, its exercise, or any payment
or
transfer under such Award or under the Plan and to take such other action
as may
be necessary in the opinion of the Company or Affiliate to satisfy all
obligations for the payment of such taxes.
(c)
No
Limit on Other Compensation.
Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and
such
arrangements may be either generally applicable or applicable only in specific
cases.
(d)
Applicable Law.
The
validity, construction, and effect of the Plan and any rules and regulations
relating to the Plan shall be determined in accordance with the laws of the
State of Delaware and applicable Federal law.
(e)
Severability.
If any
provision of the Plan or any Award is or becomes or is deemed to be invalid,
illegal, or unenforceable in any jurisdiction, or as to any Person or Award,
or
would disqualify the Plan or any Award under any law deemed applicable by
the
Committee, such provision shall be construed or deemed amended to conform
to
applicable laws, or if it cannot be so construed or deemed amended without,
in
the determination of the Committee, materially altering the intent of the
Plan
or the Award, such provision shall be stricken as to such jurisdiction, Person,
or Award, and the remainder of the Plan and any such Award shall remain in
full
force and effect.
(f)
No
Trust Fund Created.
Neither
the Plan nor any Award shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the Company
or any
Affiliate and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate pursuant
to an Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Affiliate.
(g)
No
Fractional Shares.
No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award, and the Committee shall determine whether cash, other securities,
or
other property shall be paid or transferred in lieu of any fractional Shares,
or
whether such fractional Shares or any rights thereto shall be canceled,
terminated, or otherwise eliminated.
(h)
Headings.
Headings are given to the Sections and subsections of the Plan solely as
a
convenience to facilitate reference. Such headings shall not be deemed in
any
way material or relevant to the construction or interpretation of the Plan
or
any provision thereof.
EXHIBIT
A
DEFINITIONS
As
used
herein, the following definitions shall apply:
(a)
“Administrator” means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 3 of the Plan.
(b)
“Applicable Laws” means the requirements relating to the administration of stock
option plans under Delaware law U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is
listed
or quoted and the applicable laws of any foreign country or jurisdiction
where
Options or Stock Purchase Rights are, or will be, granted under the
Plan.
(c)
“Award” means any Option or Stock Purchase Right or other award granted under
this Plan.
(d)
“Board” means the Board of Directors of the Company.
(e)
“Code” means the Internal Revenue Code of 1986, as amended.
(f)
“Committee” means a committee of Directors appointed by the Board in accordance
with Section 3 of the Plan.
(g)
“Common Stock” means the common stock of the Company.
(h)
“Company” means Tri-Valley Corporation, a Delaware corporation.
(i)
“Consultant” means any person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity.
(j)
“Director” means a member of the Board.
(k)
“Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code.
(l)
“Employee” means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. A Service Provider shall
not
cease to be an Employee in the case of (i) any leave of absence approved
by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive
Stock Options, no such leave may exceed ninety days, unless reemployment
upon
expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held
by
the Optionee shall cease to be treated as an Incentive Stock Option and shall
be
treated for tax purposes as a Nonstatutory Stock Option. Neither service
as a
Director nor payment of a director's fee by the Company shall be sufficient
to
constitute “employment” by the Company.
(m)
“Exchange Act” means the Securities Exchange Act of 1934, as
amended.
(n)
“Fair
Market Value” means, as of any date, the value of Common Stock determined as
follows:
(o)
If
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or
The
Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall
be the closing sales price for such stock (or the closing bid, if no sales
were
reported) as quoted on such exchange or system for the last market trading
day
prior to the time of determination, as reported in The Wall Street Journal
or
such other source as the Administrator deems reliable;
(p)
If
the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the
Common
Stock on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(q)
In
the absence of an established market for the Common Stock, the Fair Market
Value
shall be determined in good faith by the Administrator.
(r)
“Incentive Stock Option” means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
(s)
“Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.
(t)
“Notice of Grant” means a written or electronic notice evidencing certain terms
and conditions of an individual Option or Stock Purchase Right grant. The
Notice
of Grant is part of the Option Agreement.
(u)
“Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
(v)
“Option” means a stock option granted pursuant to the Plan.
(w)
“Option Agreement” means an agreement between the Company and an Optionee
evidencing the terms and conditions of an individual Option grant. The Option
Agreement is subject to the terms and conditions of the Plan.
(x)
“Option Exchange Program” means a program whereby outstanding Options are
surrendered in exchange for Options with a lower exercise price.
(y)
“Optioned Stock” means the Common Stock subject to an Option or Stock Purchase
Right
(z)
“Optionee” means the holder of an outstanding Option or Stock Purchase Right
granted under the Plan.
(aa)
“Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.
(bb)
“Plan” means this 2005 Stock Option Plan.
(cc)
“Predecessor Plan” means the Company's 2001 Stock Option Plan, Amended and
Restated 1997 Stock Option Plan, Amended and restated 1996 Employee Stock
Option
Plan, Amended and Restated 1995 Employee Stock Option Plan, Amended and Restated
1994 Stock Option Plan, and the American Bingo 7 Gaming Corp. Stock Option
Plan.
(dd)
“Restricted Stock” means shares of Common Stock acquired pursuant to a grant of
Stock Purchase Rights under Section 12 of the Plan.
(ee)
“Restricted Stock Purchase Agreement” means a written agreement between the
Company and the Optionee evidencing the terms and restrictions applying to
stock
purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement
is subject to the terms and conditions of the Plan and the Notice of
Grant.
(ff)
“Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule
16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(gg)
“Section 16(b)” means Section 16(b) of the Exchange Act.
(hh)
“Service Provider” means an Employee, Director or Consultant.
(ii)
“Share” means a share of the Common Stock, as adjusted in accordance with
Section 12 of the Plan.
(jj)
“Stock Purchase Right” means the right to purchase Common Stock pursuant to
Section 10 of the Plan, as evidenced by a Notice of Grant.
(kk)
“Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the
Code.