<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SGI International
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[SGI INTERNATIONAL LOGO]
SGI INTERNATIONAL
1200 Prospect Street, Suite 325
La Jolla, California 92037
June 7, 1996
Dear Shareholder:
You are cordially invited to attend the SGI International Annual Meeting on
Thursday, July 18, 1996, in La Jolla, California.
The meeting will begin promptly at 10:00 am at the Radisson Hotel, 3299 Holiday
Court, La Jolla, California 92037. The Radisson Hotel is west of Highway 5, at
the La Jolla Village Drive exit.
The Official Notice of Meeting, Proxy Statement and Proxy Card are also included
with this letter. The vote of every shareholder is important. Your cooperation
in promptly signing, dating and mailing your Proxy Card, will be greatly
appreciated. Please note that mailing your completed proxy will not prevent you
from voting in person at the meeting, if you wish to do so.
We look forward to meeting you personally, should you be able to attend the
annual meeting.
Sincerely,
/S/ JOSEPH A. SAVOCA
----------------------
JOSEPH A. SAVOCA
Chairman, President and
Chief Executive Officer
<PAGE> 3
SGI INTERNATIONAL
1200 Prospect Street, Suite 325
La Jolla, California 92037
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 18, 1996
The Annual Meeting of Shareholders of SGI International will be held at the
Radisson Hotel, 3299 Holiday Court, La Jolla, California 92037 for the following
purposes:
(1) to elect five directors to the Board of Directors,
(2) to ratify the selection by the Board of Directors of Ernst & Young LLP,
Independent Auditors, as auditors of the Company for 1996, and
(3) to transact such other business as may properly come before the meeting or
any adjournment or postponements thereof.
The Board of Directors has fixed the close of business on June 6, 1996, as the
record date for determining the shareholders entitled to receive notice of, and
to vote at, the Annual Meeting and any adjournment thereof. A complete list of
such stockholders will be available at SGI's offices for ten days before the
meeting.
By Order of the Board of Directors
/S/ JOSEPH A. SAVOCA
----------------------
JOSEPH A. SAVOCA
Chairman, President and
Chief Executive Officer
Your vote is important. Accordingly, you are asked to complete, sign, date and
return the accompanying Proxy Card in the envelope provided, which requires no
postage if mailed in the United States.
<PAGE> 4
La Jolla, California
June 7, 1996
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of SGI
International, a Utah corporation (the "Company"), for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held on July 18, 1996, at 10 a.m.,
or at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. The Annual Meeting will be held at the
Radisson Hotel, 3299 Holiday Court, La Jolla, California.
PROXY SOLICITATION
The Company will pay all Proxy solicitation costs, including preparation,
assembly, printing and mailing of this Proxy Statement, the Proxy, and any
additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of common stock beneficially owned by
others, to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners. Original solicitation of Proxies by mail may be
supplemented by telephone, telegram or personal solicitation by Directors,
Officers or other regular employees of the Company. No additional compensation
will be paid to Directors, Officers or other regular employees, for such
services. The Company intends to mail this Proxy Statement and accompanying
Proxy Card on or about June 11, 1996, to all stockholders entitled to vote at
the Annual Meeting.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholder proposals intended to be presented at the Annual Meeting in 1997
must be received by the Company no later than January 31, 1997, for inclusion in
the Company's Proxy Card and Form of Proxy for that meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
Stockholders of record at the close of business on June 6, 1996, ("Record
Date"), will be entitled to notice of, and to one vote for each share held on
all matters to be voted upon at the Annual Meeting. On May 10, 1996, SGI
International had outstanding 5,252,000 shares of common stock.
Any person signing and returning the enclosed Proxy has the power to revoke it
at any time before it is voted. It may be revoked by filing with the Secretary
of the Company at the Company's principal executive office, 1200 Prospect
Street, Suite 325, La Jolla, California 92037, a written notice of revocation or
a duly executed Proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of December 31, 1995, (i) by each
person who is known by the Company to own beneficially more than 5% of the
Company's common stock, (ii) by each of the Company's directors, and (iii) by
all officers and directors as a group. Also included is the ownership of
warrants and convertible preferred stock by such parties.
<TABLE>
<CAPTION>
Amount
Beneficially Percentage
Name Owned(1,7) of Class
- -------------------------------------------------------------------------------------
<S> <C> <C>
Joseph A. Savoca 205,000(2) 5.25%
5155 "C" Renaissance
San Diego, CA 92122
John R. Taylor 124,000(3) 3.24%
707 Sierra Avenue, #22
San Diego, CA 92075
Dr. Ernest P. Esztergar 277,192(4) 7.15%
6308 Avenida Cresta
La Jolla, CA 92037
E
Norman Grant 30,200(5) 0.81%
4018 Ethel Avenue
Studio City, CA 91604-2205
William Kerr 27,885(5) 0.75%
16183 Royal Oak Road
Encino, CA 91436-3915
Officers and Directors as a Group (5 persons) 664,277 15.22%
Certain beneficial owners
LFC Technology Partners 230,000(6) 5.85%
1087 W. River Street, Suite 200
Boise, ID 83702
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
subject to options and warrants, and convertible preferred currently
exercisable or convertible, or exercisable or convertible within 60
days, are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person or for any other purpose. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Includes 205,000 common shares under warrant.
(3) Includes 124,000 common shares under warrant.
(4) Includes 50,000 common shares issuable upon conversion of 200
convertible preferred shares, and 125,000 common shares under warrant.
(5) Includes 22,250 common shares under warrant.
(6) Includes 230,000 common shares under warrant.
(7) There are no arrangements known to the Company, including the pledge by
any person of securities of SGI, the operation of which may at a
subsequent date, result in a change of control of SGI.
2
<PAGE> 6
PROPOSAL I
ELECTION OF DIRECTORS
In March 1996, the number of Board of Directors seats was increased from four to
six. The Directors are divided into three classes. Each class is elected to
serve a three-year term, with the term of each class ending in successive years.
Messrs. Savoca and Baus have been nominated for election to the Board of
Directors for a term expiring at the annual shareholders' meeting in 1999, or
until their successors have been duly elected or appointed. Messrs. Esztergar
and Harris has been nominated for election to the Board of Directors for a term
expiring at the annual shareholders meeting in 1998, or until their successors
have been duly elected or appointed. Mr. Kerr has been nominated for election to
the Board of Directors for a term expiring at the annual shareholders' meeting
in 1997, or until his successor has been duly elected or appointed. Mr. Grant
will continue in office for the remaining year of his existing term. Proxies
solicited by the Board of Directors will, unless otherwise directed, be voted to
elect Messrs. Savoca, Esztergar, and Kerr, each of whom is currently a member of
the Board, and Messrs. Baus and Harris.
Directors are elected by a majority of votes cast. Shares represented by
executed proxies will be voted if authority to do so is not withheld, for the
election of the nominees named above. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected.
Biographical information for each Director follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING NOMINEES:
DR. BERNARD V. BAUS earned his Bachelor of Chemical Engineering Degree from
Tulane and his Ph.D. in Chemical Engineering from Cornell. The first endowed
chair in chemistry at Tulane was named in his honor. Dr. Baus held various
technical and engineering positions at DuPont, where he was responsible for
development of chemical manufacturing plants in Europe and Latin America. Later
he was President of Commonwealth Petrochemicals Co. He is currently President of
Industrial Chemicals Corporation, the only manufacturer of basic inorganic
chemicals in Puerto Rico, and President of Puerto Rico Alum Corporation, which
is a joint venture with a Venezuelan oil/ chemical company.
DR. ERNEST P. ESZTERGAR was a co-founder, Director, President and Technical
Director of Synfuel Genesis Incorporated, the predecessor corporation, from its
formation in July, 1980, until it was merged into the Company in June, 1985. He
received his undergraduate and graduate education at the Technical University of
Budapest, Hungary, completing his Doctorate of Engineering degree with a
dissertation in Structural Mechanics in 1954. He was research engineer for the
Hungarian National Institute of Mines until 1956. In the United States since
1957, he was employed by Babcock & Wilcox Company, Kaiser Engineers and
Gulf-General Atomic Company, where he was engaged in structural design and
materials research on elevated temperature problems of power generating systems.
In 1965, he assumed supervisory duties in the Gulf-Atomic Engineering Analysis
Department, conducting research and development programs. As Section Leader, and
later as Branch Manager, he directed computer analysis and materials development
studies for advanced reactor applications. In private practice since 1971, he
served as an engineering research consultant to various national laboratories,
electric utilities and engineering firms and was Research Director for the
Pressure Vessel Research Committee of the Welding Research Council. As Technical
Director for Synfuel Genesis Incorporated, he assembled its technical team and
developed a multi-phased development program for commercial coal liquids
production. He also was responsible for supervising the subcontracted test work
and computer process model development program. He has held various posts in
professional organizations, is the author of over 40 technical papers and holds
seven patents. Dr. Esztergar has been a Director since 1985.
WILLIAM R. HARRIS obtained his Bachelor of Chemical Engineering Degree from Ohio
State and is a graduate of MIT Business School. He worked for PPG Industries for
43 years starting as a chemical engineer, and rose through the ranks to become
Works Manager of PPG's largest chemical plant in Barberton, Ohio. Later he was
Vice President of various PPG Chemical Divisions, then Group Vice President
Chemicals, and retired as Senior Vice President International, PPG Industries.
Harris has served on the Boards of Arkansas Chemical, PPG Canada, St. Clair
Memorial Hospital, and Asahi Glass/PPG Joint Venture.
3
<PAGE> 7
WILLIAM A. KERR was Chairman of the Board, Chief Executive Officer, President,
and Chief Operating Officer of Kerr Glass Manufacturing Corporation, working for
that company from 1957-1984. During his time with Kerr Glass, he expanded the
company from a three-plant glass container operation with $32 million in sales,
to a fifteen-plant diversified operation with $498 million in sales. From 1941
to 1957, Kerr was a pilot for TWA and Northrop Aircraft. From 1985 until the
present, he has been both Vice President and General Manager of the A. H. Kerr
Foundation, and an independent Management Consultant. Kerr has been a Director
since 1992.
JOSEPH A. SAVOCA has been Chairman of the Board and Chief Executive Officer of
the Company since June, 1995. He received his Bachelor of Chemical Engineering
from the University of South Carolina. From 1954 to 1976, Savoca worked with
various petrochemical and petroleum companies in research and development,
marketing, and in numerous executive positions. In 1976, he became the owner and
CEO of International Petchemco, Inc., which engaged in the international trading
of crude oil, petroleum products and petrochemical feedstocks. In 1987, he
consulted with a variety of companies in the crude oil, petroleum products and
petrochemical field. From 1989 to 1992, he was a Managing Director of Aegis
Holdings Corporation. From 1992 to 1994, he was Chairman of the Board of EPS
Group, Inc., which was engaged in a variety of consulting and marketing
services. Immediately prior to joining SGI, Savoca was the Executive Director of
The FORUM Foundation, Inc., where he was primarily responsible for the overall
activities of this philanthropic organization. Over the years, he has served on
numerous Boards of Directors, and is a member of many professional
organizations.
CONTINUING DIRECTOR
NORMAN A. GRANT was a Director of the Company during 1985 and 1986, and was a
Director (from March, 1981) and Senior Consultant of Synfuel Genesis,
Incorporated, from its founding until it was merged into the Company. He
received a B.S. degree in Mining Engineering from the University of Alberta,
Canada, in 1943, continuing with graduate studies in geology, business
administration and corporate finance. In 1958, after serving in managerial
positions with Eldorado Nuclear Ltd. and Gunnar Mines in Canada, he came to the
United States as Manager of Mining and Mineral Development for a joint venture
formed by Getty Oil Co., Tidewater Oil Corp. and Skelly Oil Co. In 1970, he was
employed by Laubett Corp., a subsidiary of Bechtel Corporation, to analyze
investments for the Bechtel Corporation and the Bechtel Family Trust. In 1971,
he joined the Signal Companies as Manager of Mineral Development and as the
financial advisor to the Centrifuge Project. After the sale of Signal Oil
Company to Burmah Oil, Ltd., followed by its resale to American Independent Oil
Co. (a subsidiary of R.J. Reynolds & Co.), Grant served as Manager of the
Synthetic Fuels Program, with the responsibility for economical development of
Alaskan coal fields within ecological limitations. Since 1978, he has served as
consultant to coal companies and energy development firms and has been engaged
in financial and engineering evaluation of long-range energy development
programs. Grant has been a Director since 1992, and his current term expires in
1997.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings during 1995, and no additional
compensation was paid for attendance at said meetings. Each of the incumbent
Directors attended at least 75% of the aggregate number of meetings of the board
and its committees. The Board does not have Nominating or Compensation
Committees, as such functions are decided by the entire Board. The Board's Audit
Committee consists of Messrs. Grant and Kerr, both outside Directors, and Mr.
Savoca. It met twice during the fiscal year ended December 31, 1995. The Audit
Committee recommends a firm to be appointed by the Board, subject to
ratification by the stockholders, as independent auditors to audit the Company's
financial statements and to perform services related to the audit. The Audit
Committee also has the responsibility to review the scope and results of the
audit with the independent auditors, review with management and the independent
auditors the Company's interim and year-end operating results, consider the
adequacy of the internal accounting and control procedures of the Company,
review any non-audit services to be performed by the independent auditors, and
consider the effect of such performance on the auditor's independence.
EMPLOYMENT CONTRACTS
All Executive Officers currently serve the Company pursuant to term employment
agreements. Mr. Savoca's employment agreement has a three year term effective
June 12, 1995, and provides for incentive payments based on the Company's
breaking even and on making $1,000,000 in net income. The base salary and
warrants provided pursuant to the agreement have been described elsewhere.
4
<PAGE> 8
SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors, executive officers and holders of more
than 10% of the Company's Common Stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the "Commission").
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on a review of the copies of such forms received by it, or written
representation from certain reporting persons, the Company believes that during
the fiscal year ended December 31, 1995, all filing requirements applicable to
its officers, directors, and greater than 10% beneficial owners were complied
with.
COMPENSATION OF OUTSIDE DIRECTORS
The outside (non-employee) Directors of the Company currently do not receive
cash compensation, but are reimbursed for certain expenses incurred, and are
granted warrants periodically. During 1993 and 1994, Messrs. Kerr and Grant were
each granted Warrants for the purchase of 2,250 shares of common stock at
exercise prices ranging from $40.00 to $54.00 per share. During 1995, Messrs.
Kerr and Grant were each granted warrants to purchase 20,000 shares at $1.125 to
$1.25 per share. In December, 1995, the Board reduced the exercise price of all
warrants previously granted to all outside directors to $0.60 per share.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The Summary Compensation Table shows the annual and
long-term compensation for Joseph A. Savoca, Chairman and Chief Executive
Officer of the Company, and John R. Taylor, Secretary of the Company. The
Company does not have a long-term incentive plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation(1,2)
Annual Compensation Awards Payouts
- -------------------------------------------------------------------------------------------------------------------------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options/ LTIP Compen-
Name and Salary sation(1) Awards SARs Payouts sation
Principal Position Year ($) ($) $ (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph A. Savoca, 1995 85,000 -0- -0- 1,055,000(3) -0- -0-
Chairman of the Board, 1994 -0- -0- -0- -0- -0- -0-
President and 1993 -0- -0- -0- -0- -0- -0-
Chief Executive Officer
John R. Taylor, 1995 130,000 -0- -0- 417,000(4) -0- -0-
General Counsel and 1994 10,833 -0- -0- -0- -0- -0-
Secretary 1993 -0- -0- -0- -0- -0- -0-
</TABLE>
(1)There were no Restricted Stock Awards or Long-Term Incentive Plan Awards or
Payouts for Executive Officers during the fiscal years ended December 31, 1995,
1994, or 1993
(2)There were no Options or Stock Appreciation Rights exercised, or realized by
any Executive Officer during the fiscal years ended December 31, 1995, 1994, or
1993.
(3)Includes a warrant for the purchase of 850,000 shares of OCET Corporation
(subsidiary) common stock.
(4)Includes a warrant for the purchase of 293,000 shares of OCET Corporation
(subsidiary) common stock.
5
<PAGE> 9
DEFINED BENEFIT AND ACTUARIAL PLANS
The Company has not supplied Defined Benefits, or similar Pension, Benefit or
Actuarial Plan Benefits to its Executive Officers.
OPTION* GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total/SARs
Granted to
Options*/ Employees Exercise or
SARs in Fiscal Base Price Expiration
Name Granted (#) Year ($/Sh) Date 5% 10%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Savoca 170,000 12% .60 12/99 $ 22,000 $ 47,000
35,000 2% .60 12/00 5,800 12,900
850,000** 24% 1.00 12/99 183,200 394,500
John R. Taylor 94,000 7% .60 12/99 12,200 26,200
30,000 2% .60 12/00 5,000 11,000
293,000** 8% 1.00 12/99 63,200 136,000
</TABLE>
*All entries reflect warrants issued, not options.
**OCET Corporation (Subsidiary)
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options/SARs Options/SARs
Acquired Value at FY-End (#) at FY-End ($)
on Exercise Realized Exercisable Exercisable
Name (#) $ Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph A. Savoca 0 0 0/205,000 0/17,938
John R. Taylor 0 0 6,000/118,000 525/10,325
</TABLE>
REPRICING OF OPTIONS AND STOCK APPRECIATION RIGHTS
TEN-YEAR OPTIONS*/SAR REPRICING
<TABLE>
<CAPTION>
Length of
Original
Market price Exercise Option Term
Number of of Stock at Price of Remaining
Options */SARs Time of Time of New at Date of
Repriced Repricing or Repricing of Exercise Repricing or
Name Date or Amended (#) Amendment ($) Amendment ($) Price ($) Amendment
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John R. Taylor 06/02/95 6,000 1.37500 3.125 1.375 55 mos.
John R. Taylor 07/26/95 54,000 1.12500 1.375 1.125 53 mos.
John R. Taylor 09/05/95 74,000 0.87500 1.125 0.875 52 mos.
John R. Taylor 12/12/95 104,000 0.65625 0.875 0.660 48 mos.
John R. Taylor 12/22/95 104,000 0.59375 0.660 0.600 60 mos.
Joseph A. Savoca 07/26/95 150,000 1.12500 1.375 1.125 53 mos.
Joseph A. Savoca 09/05/95 170,000 0.87500 1.125 0.875 52 mos.
Joseph A. Savoca 12/12/95 205,000 0.65625 0.875 0.660 48 mos.
Joseph A. Savoca 12/22/95 205,000 0.59375 0.660 0.600 60 mos.
</TABLE>
6
<PAGE> 10
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The current compensation policy of the Board of Directors is based primarily on
the fact that the Company's technologies have not yet produced significant
revenues, the Company operates at a net loss, and utilizes capital derived
primarily from the sale of equity securities to finance operations.
The principal responsibilities of the Chief Executive Officer and the Secretary
at the present time are to support the continued development and marketing of
the Company's technologies and other products, and to arrange financing for the
continuing operations of the Company.
Neither of the Executive Officers of the Company had an increase in cash
compensation during 1995. The Board's Compensation policy is based on the
Board's evaluation and conclusion that the cash compensation being paid to both
Executive Officers is substantially below the amount which either could obtain
in reasonably available positions outside of the Company, and substantially
below the amount the Company would be required to pay to engage a suitable
replacement for either one of the current Executive Officers. Based on that
evaluation, one of the principal policies of the Board is that it believes the
base salary and other compensation arrangement for its Executive Officers should
be increased. However, the Board has deferred any increase in cash compensation
because the Company is not producing significant revenues and has no net income.
Therefore, it has been the Board's decision simply to maintain its Executive
Officer's cash compensation, and to periodically grant and reprice warrants to
them and to all employees, while it continues to evaluate additional and
different overall compensation packages which may be utilized in the future.
The lack of significant Company revenues and net income continues to be the
decisive consideration in not providing additional cash compensation to
Executive Officers, who do not participate in board deliberations concerning
their salary.
The material in this report and the accompanying Stockholder Return Performance
Graph is not "soliciting material", is not deemed filed with the SEC and is not
to be incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of our
general incorporation language in any such filing.
7
<PAGE> 11
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE,
INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Company does not presently have a separate Compensation Committee of the
Board of Directors, or other Board Committees performing equivalent functions,
and did not at any time during the last three years. The entire Board of
Directors presently performs these functions, including the Director who is also
Executive Officer of the Company, and who receives compensation as such from the
Company. The Executive Officer does not serve in the management, or compensation
or other board committee of any other company.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
The Securities and Exchange Commission requires a comparison on an indexed basis
of cumulative total shareholder return for the Company, a relevant broad equity
market index and a published industry or line-of-business index. Cumulative
total shareholder return represents share value appreciation assuming dividend
reinvestment. The common stock of the Company is traded on the NASD OTC Bulletin
Board. Set forth below is a graph comparing cumulative total shareholder return
for the last five (5) fiscal years on the Company's common stock. (The indices
were prepared by the Center for Research in Securities Prices at the University
of Chicago):
PERFORMANCE GRAPH FOR SGI INTERNATIONAL
[GRAPH OMMITTED]
<TABLE>
<CAPTION>
Symbol CRSP Total Return Index for: 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/30/95
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[BOX] SGI International 100.0 303.7 167.9 92.6 28.4 4.7
[STAR] NASDAQ Stock Market (U.S. & Foreign) 100.0 159.6 185.2 214.4 207.4 288.1
[TRIANGLE] NASDAQ Stocks
(SIC 8730-8739 U.S. & Foreign) 100.0 182.3 140.8 138.6 97.1 191.5
Research, Development, and
Testing Services
</TABLE>
Notes:
- -------------------------------------------------------------------------------
1. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
2. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
3. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
4. The index level for all series was set to $100.00 on 12/31/90.
5. No trading activity recorded for SGI International after 6/21/95.
8
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise indicated, all information concerning grants/price
reductions of warrants/preferred shares was at or above the fair market value on
the date of the transaction.
In November 1984, Dr. Ernest P. Esztergar, a Director of the Company, assigned
certain patent rights to the LFC Process. In consideration for the assignment,
minimum annual royalties of $50,000 are due Dr. Esztergar beginning with the
calendar year ending December 31, 1985, through the year ending December 31,
1999. In 1987, Dr. Esztergar revised his royalty agreement to provide financial
royalty payments equal to the greater of $50,000 per year or one-tenth of 1%
(0.1%) of royalty revenues received during the year from the licensing of the
LFC Process. The transactions were approved by the Board of Directors.
Upon approval by the Board of Directors, Dr. Esztergar purchased 200 shares of
Series P90 convertible preferred stock for $22,000 on January 19, 1990, the fair
value of the preferred shares on that date. The preferred shares were
convertible into 50,000 restricted common shares upon payment of $15.00 per
common share. The public market common stock bid price on January 19, 1990, was
$13.20 per common share. The Board reduced the conversion payment to $1.375 per
common share (market price) in June 1995.
During 1993, the Board of Directors granted Dr. Esztergar a warrant for the
purchase of 10,000 SGI common shares at $54.00 per share. The common stock
closing bid price on the date of grant was $52.50. In March 1995, Dr. Esztergar
was granted a warrant to purchase 850,000 shares of OCET Corporation common
stock at a strike price of $1.00 per share. Mr. Savoca joined the Company in
June 1995, and received a warrant to purchase 150,000 SGI common shares at
$3.0625 per share. At that time, he was also granted a warrant to purchase
850,000 shares of OCET Corporation common stock at a strike price of $1.00 per
share. Mr. Taylor joined the Company in December 1994, and received a warrant to
purchase 6,000 shares of SGI common stock at $20.00 per share. Mr. Taylor
received an additional warrant in May 1995, to purchase 48,000 SGI common shares
at $3.0625 per share and in September 1995, a warrant to purchase 20,000 such
common shares at $0.875 per share. In May 1995, Mr. Taylor was granted a warrant
to purchase 293,000 shares of OCET Corporation common stock at a strike price of
$1.00 per share. In July 1995, Messrs. Savoca, Esztergar and Taylor each
received a warrant to purchase 20,000 SGI common shares at $1.125 per share;
Messrs. Grant and Kerr each also received warrants to purchase 10,000 SGI common
shares at said price. In November 1995, the following individuals received
warrants to purchase the referenced number of SGI common shares at $1.25 per
share: Savoca and Esztergar 35,000 shares each; Taylor 30,000 shares; and Grant
and Kerr 10,000 shares each. In December 1995, the Board of Directors reduced
the exercise price of certain warrants previously granted to employees/directors
to $0.60 per share.
During 1995 and early 1996, the Company entered into a series of transactions
wherein it borrowed operating funds from Mr. Kerr and/or the A.H. Kerr
Foundation. In March 1996, the principal and interest on the loans totaling
$375,000 was exchanged for 283,200 shares ($1.25 per share) of SGI restricted
common stock. The closing bid price on the exchange date was $1.71875. On
January 16, 1996, former CEO William M. Owens and the Company entered into a
Settlement Agreement. That agreement amended Owens' March 16, 1995 Employment
Agreement and, in accordance with the Employment Agreement, forgave certain
loans made to Owens by the Company. As part of the settlement, Owens tendered
his Warrant for 850,000 shares of OCET Corporation common stock to the Company
for cancellation.
The Company's bylaws currently provide for the limitation of director liability
and for indemnification of employees and agents, including officers and
directors, to the fullest extent permitted by Utah law. The Company has entered
into Indemnification Agreements with all of its directors. These provisions also
do not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws. The Company also
has Director and Officer liability insurance for its officers and directors.
9
<PAGE> 13
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, Independent Auditors, as
SGI's independent auditors for the year ending December 31, 1996, and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited SGI's financial statements since 1986. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting. The Ernst & Young
LLP representatives will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the Common Stock
represented at the Annual Meeting, voting together as a single class, is
required for approval of this proposal, provided that a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF SUCH RATIFICATION.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Meeting, but if other matters do properly come before the meeting, it is
intended that the persons named in the Proxy will vote on such matters in
accordance with their best judgement.
10
<PAGE> 14
SGI INTERNATIONAL
1200 Prospect Street, Suite 325
La Jolla, CA 92037
PROXY
This Proxy is solicited on behalf of the Board of Directors
Annual Meeting of Shareholders July 18, 1996
The undersigned hereby appoints Joseph A. Savoca and Ernest P. Esztergar as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of SGI International held of record by the undersigned on June 6, 1996,
at the annual meeting of shareholders to be held on July 18, 1996, or any
adjournment thereof.
Item 1. Election of Directors
Nominees:
01 Bernard V. Baus 02 Ernest P. Esztergar 03 William R. Harris
04 William A. Kerr 05 Joseph A. Savoca
[ ] For all nominees [ ] Withhold authority to vote for any individual
nominees. Write number(s) of nominee(s) below.
[ ] Withhold all nominees
______________________________________________
<PAGE> 15
Item 2. Appointment of Ernst & Young LLP, Independent Auditors
[ ] For [ ] Against [ ] Abstain
This proxy when properly executed will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
ALL nominees for Director and FOR Proposal 2. Please sign exactly as name
appears. When shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a Partnership, please sign in
partnership name by authorized person.
_______________________________________________________________________________
SIGNATURES DATE
_______________________________________________________________________________
SIGNATURE IF HELD JOINTLY DATE
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
