SGI International
1200 Prospect Street, Suite 325
La Jolla, California 92037
May 8, 1997
Dear Shareholder:
You are cordially invited to attend the SGI International Annual Meeting on
Friday, June 20, 1997, in San Diego, California.
The meeting will begin promptly at 2:00 p.m. local time at the San Diego Hilton
Beach and Tennis Resort, 1775 East Mission Bay Drive, San Diego, California
92109. Directions are as follows: from Interstate 5 South, exit at Sea World
Drive and turn right, turn right onto East Mission Bay Drive, go one mile to
the resort; from Interstate 8 East, proceed to Interstate 5 North, exit at Sea
World Drive, turn left, go to the second light and turn right onto East Mission
Bay Drive, go one mile to the resort.
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
Chairman, President and
Chief Executive Officer
Notice Of Annual Meeting Of Shareholders
La Jolla, Ca
May 8, 1997
The Annual Meeting of the Shareholders of SGI International, a Utah Corporation
(the "Company"), will be held on Friday, June 20, 1997, at 2:00 p.m. local
time, at the San Diego Hilton Beach and Tennis Resort, 1775 East Mission Bay
Drive, San Diego, California 92109, for the purposes of:
1. electing two directors to the Board of Directors;
2. considering and acting upon a proposal to adopt the Company's 1996 Omnibus
Stock Plan;
3. ratifying the selection by the Board of Directors of Ernst & Young LLP,
Independent Auditors, as auditors of the Company for 1997; and
4. transacting such other business as properly may come before the meeting
or any adjournments thereof.
Shareholders of record at the close of business on May 1, 1997, will be
entitled to receive notice of, and to vote at, the meeting or any adjournments
thereof.
A copy of the Company's Annual Report for 1996 accompanies this notice.
By Order of the Board of Directors,
/s/
Joseph A. Savoca
Chairman, President and Chief Executive Officer
Whether or not you intend to be present at the meeting, please promptly mark,
sign, date and return the accompanying proxy. A return addressed envelope is
enclosed for your convenience.
Proxy Statement
Solicitation of Proxies
The enclosed proxy is solicited by the Board of Directors of SGI International,
a Utah corporation ("SGI" or the "Company"), for use at the annual meeting of
the Company's shareholders to be held at the San Diego Hilton Beach and Tennis
Resort, 1775 East Mission Bay Drive, San Diego, California 92109, on June 20,
1997 at 2:00 p.m. local time, or any adjournments thereof. Shareholders of
record at the close of business on May 1, 1997 (the "Record Date"), will be
entitled to receive notice of, and to vote at, the meeting. Whether or not you
expect to attend the meeting in person, please return your executed proxy in
the enclosed envelope and the shares represented thereby will be voted in
accordance with your wishes.
The first mailing of proxies to shareholders will occur on or about May 8,
1997. If, after sending in your proxy, you decide to vote in person or desire
to change the voting instructions on your proxy or revoke your proxy, you may
do so by notifying the Secretary of the Company in writing of such revocation
at any time prior to the voting of the proxy, by submitting a later dated
proxy or by attending the meeting and voting in person.
The required quorum for the transaction of business at the annual meeting is a
majority of the shares of common stock issued and outstanding on the Record
Date. Abstentions will be treated as shares that are present and entitled to a
vote for purposes of determining the presence of a quorum, but as unvoted
for purposes of determining the approval of any matter submitted for a vote of
the stockholders. If a broker indicates on the proxy that the broker does not
have discretionary authority to vote on a particular matter as to certain
shares, those shares will be counted for general quorum purposes but will not
be considered as present and entitled to vote with respect to that matter.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, proxies may also be solicited by certain of the Company's
officers, directors and regular employees without additional compensation,
personally or by telephone, telefax or telegram.
Action To Be Taken Under Proxy
Shares will be voted as instructed in the accompanying proxy on each matter
submitted to the vote of shareholders. If any duly executed proxy is returned
without voting instructions, the persons named as proxies thereon intend to
vote all shares represented by such proxy as follows:
(1) FOR the election of the persons named herein as nominees for Directors of
the Company to hold office until the annual meeting of the Company's
shareholders in the year 2000, or until their successors have been duly
elected and qualified;
(2) FOR the approval of the SGI International 1996 Omnibus Stock Plan;
(3) FOR the ratification of Ernst & Young LLP, Independent Auditors, as
auditors of the Company for 1997; and,
(4) according to their best judgment on the transaction of such other business
as properly may come before the meeting or any adjournments thereof.
Company Securities
On April 13, 1997, there were issued and outstanding 6,235,063 shares of Common
Stock. The holders of shares of Common Stock issued and outstanding on the
Record Date are entitled to cast one vote per share on all matters voted on at
the annual meeting.
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 February 28, 1997, (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.
Amount
Beneficially Percent
Name Owned (1,5) of Class
Bernard V. Baus 20,000(2) 0.33
Calle Emajagua, #17
San Juan, Puerto
Rico 00913
Ernest Esztergar 352,192(3) 5.55
6308 Avenida Cresta
La Jolla, CA 92037
Norman Grant 42,250(2) 0.69
4018 Ethel Avenue
Studio City, CA 91604
William R. Harris 20,000(2) 0.33
244 Allenberry Circle
Pittsburgh, PA 15234
William Kerr 331,085(4) 5.39
16183 Royal Oak Road
Encino, CA 91436
Joseph A. Savoca 275,000(2) 4.32
5155 "C" Renaissance
San Diego, CA 92122
John R. Taylor 172,000(2) 2.74
15795 Caminito Cantaras
Del Mar, CA 92014
Officers and Directors 1,212,777 17.53
Directors
as a Group (7 persons)
(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 warrants
and convertible preferred stock currently exercisable or convertible, or
exercisable or convertible within 60 days, are deemed outstanding for computing
the percentage of the person holding such securities 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) Represents common shares under warrant.
(3) Includes 50,000 common shares issuable upon conversion of 200
convertible preferred shares and 200,000 common shares under warrant.
(4) Includes 42,250 common shares under warrant.
(5) 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.
Item 1. Election Of Directors
The Company's bylaws provide that the Board of Directors shall consist of not
less than three directors nor more than nine directors, with the number to be
determined from time to time by the Board of Directors. The Board of Directors
has currently fixed the number of directors at six.
The Directors are divided into three classes. Currently there are two Directors
in each class, each class is elected to serve a three-year term, and the term
of each class ends in successive years. Messrs. Grant and Kerr have been
nominated for election to the Board of Directors for a term expiring at the
annual shareholders' meeting in the year 2000, or until their successors
have been duly elected or appointed. The terms of Dr. Esztergar and Mr. Harris
expire at the annual shareholders' meeting in 1998, or until their successors
have been duly elected or appointed. The terms of Messrs. Baus and Savoca
expire at the annual shareholders' meeting in 1999, or until their successors
have been duly elected or appointed.
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. Each person nominated for election has
agreed to serve if elected. 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 the Board of
Directors may propose. The Board of Directors is not aware of any reason that
might cause any nominee to be unavailable.
The Board of Directors recommends a vote "FOR" the election of all of the
listed nominees.
Information About Directors, Nominees and Executive Officers
The following states each director's, nominee's and executive officer's age,
principal occupation, present position with the Company and the year in
which each director or nominee first was elected as a director (each serving
continuously since first elected except as set forth otherwise). Unless
indicated otherwise, each individual has held his or her present position for
at least five years.
Dr. Bernard V. Baus, 71 years old, 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. Baus has been a Director
since 1996.
Dr. Ernest P. Esztergar, 65 years old, 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. Dr. Esztergar has been a Director since 1985 and Senior
Vice President - Technology since March, 1996.
William R. Harris, 75 years old, obtained his Bachelor of Chemical Engineering
degree from Ohio State, and is a graduate of the 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. Mr. Harris has been a Director since
1996.
William A. Kerr, 82 years old, 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. Mr. Kerr has been a
Director since 1992.
Joseph A. Savoca, 69 years old, has been Chairman of the Board and Chief
Executive Officer since June, 1995. He received his Bachelor of Chemical
Engineering from the University of South Carolina. From 1954 to 1976, Mr.
Savoca worked with various petrochemical and petroleum companies in research
and development, marketing, and in numerous executive positions. Mr. Savoca
has been a Director since 1995.
John R. Taylor, 52 years old, has been Senior Vice President since March, 1996,
Corporate Secretary since June, 1995, and General Counsel since December, 1994.
Mr. Taylor held various positions in Pacific Energy and its subsidiaries from
1977 to 1994, including Director of Contract Administration, Special Counsel,
Secretary and House Counsel.
Information Concerning Board Of Directors
Committees and Meetings
During 1996, the Board of Directors of the Company held four meetings. Each
director attended at least 75% of the meetings of the Board of Directors and
committees on which such director served. The Board of Directors does not have
Nominating or Compensation Committees, as such functions are performed by the
entire Board.
The Board of Directors has a standing Audit Committee, consisting of Messrs.
Grant, Kerr, and Savoca. During 1996, the Audit Committee held one meeting.
The Audit Committee performs the following functions: (a) review of periodic
financial statements, (b) communication with independent accountants, (c)
review of the Company's internal accounting controls, and (d) recommendation to
the Board of Directors as to selection of independent accountants.
Compensation of 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 1994, Messrs. Grant and Kerr were each
granted warrants to purchase 500 common shares at $40.00 per share. During
1995, Messrs. Grant and Kerr 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 the outside directors to
$0.60 per share. During 1996, Messrs. Baus, Grant, Harris and Kerr were each
granted warrants to purchase 20,000 shares at $1.72 to $5.125 per share. The
warrants granted expire through December 2001.
Board Of Directors Report On Executive Compensation
The Company's executive compensation policy is designed to provide a
competitive compensation program that will enable the Company to attract,
motivate, reward and retain executives who have the skills, experience and
talents required to promote the short-term and long-term financial performance
and growth of the Company. The compensation policy is influenced by the fact
that the Company's technologies and technological investments currently
produce insignificant revenues; the Company operates at a net loss; and, the
Company primarily utilizes equity capital to finance operations. The
compensation policy is based on the principle that the financial rewards to the
executives must be aligned with the financial interests of the shareholders of
the Company. In this manner, the Company will meet its ultimate responsibility
to its shareholders.
None of the executives of the Company had an increase in cash compensation
during 1996, except the Senior Vice President of Technology whose annual salary
was increased to $115,000 from $90,000. The Board believes that the cash
compensation being paid to the executives is substantially below the amount the
Company would be required to pay to engage suitable replacements for the
current executive officers. Further, the Board believes the base salary and
other compensation arrangements for its executives should be increased.
However, based on the Company's financial condition, the Board has deferred any
other increases in cash compensation and will periodically grant warrants with
market exercise prices. The Board will continue to evaluate additional and
different overall compensation packages which may be utilized in the future to
attract and retain qualified personnel. 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 following table compares cumulative five-
year shareholder returns (including reinvestment of dividends) on an indexed
basis with the Center for Research in Security Prices ("CRSP") Index for the
Nasdaq Stock Market (US and Foreign companies), and a peer group made up of the
current publicly traded members of SIC codes 8730 through 8739. These
benchmarks are included for comparative purposes only and do not necessarily
reflect management's opinion that such indices are an appropriate measure of
the relative performance of the stock involved, and are not intended to
forecast or be indicative of possible future performance of the Common Stock.
These calculations were prepared by Research Holdings Ltd.
Cumulative Total Return
12/91 12/92 12/93 12/94 12/95 12/96
SGI International 100.00 54.89 30.89 9.35 0.48 2.75
Peer Group 100.00 100.35 87.23 64.93 88.83 93.53
Nasdaq Stock Market- 100.00 116.03 134.32 130.28 182.96 224.06
US & Foreign
Executive Compensation
Summary Compensation Table
The following table sets forth the compensation of the named executive officers
of the Company for the three years ended December 31, 1996.
- -------------------------------------------------------------------------------
Long-Term Compensation(1)
-------------------------
Annual Compensation Awards Payouts
------------------------- ----------------------- -------
Other
Annual Restricted Shares LTIP All other
Year Salary Bonus Compen- Stock Underlying Payouts Compen-
($) ($) sation($) Awards($) Warrants(#) ($) sation($)
- -------------------------------------------------------------------------------
Ernest P. Esztergar, Director, Sr. Vice President Technology
1996 115,000 -0- -0- -0- 1,075,000(2) -0- -0-
1995 90,000 -0- -0- -0- 1,000,000(2) -0- -0-
1994 90,000 -0- -0- -0- 885,000(2) -0- -0-
Joseph A. Savoca, Chairman of the Board, President & Chief Executive Officer
1996 150,000 -0- -0- -0- 1,125,000(2) -0- -0-
1995 85,000 -0- -0- -0- 1,055,000(2) -0- -0-
1994 -0- -0- -0- -0- -0- -0- -0-
John R. Taylor, Sr. Vice President, General Counsel & Secretary
1996 130,000 -0- -0- -0- 465,000(3) -0- -0-
1995 130,000 -0- -0- -0- 417,000(3) -0- -0-
1994 10,833 -0- -0- -0- -0- -0- -0-
- -------------------------------------------------------------------------------
(1) There were no Restricted Stock Awards or Long-Term Incentive Plan
Awards or Payouts for Executive Officers during the fiscal years ended December
31, 1996, 1995, or 1994.
(2) Includes a warrant to purchase 850,000 common shares of OCET Corpora-
tion, an SGI subsidiary.
(3) Includes a warrant to purchase 293,000 common shares of OCET Corpora-
tion, an SGI subsidiary.
Warrant Grants in Last Fiscal Year
The following table sets forth information concerning warrant grants made in
the fiscal year ended December 31, 1996, to the individuals named in the
Summary Compensation Table. There were no grants of SARs to said individuals
during the year.
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
for Warrant
Individual Grants Term (1)
- ------------------------------------------------------------------------------
Number of % of Total
Shares Warrants
Underlying Granted to Exercise Expira-
Warrants Employees in Price tion
Name Granted(#) Fiscal Year ($/Sh) Date 5($) 10($)
- -------------------------------------------------------------------------------
Ernest P.
Esztergar 25,000 1.90% 1.72 12/01 14,000 32,000
50,000 3.80% 4.375 12/02 67,500 150,500
Joseph A.
Savoca 35,000 2.70% 1.72 12/01 19,600 44,800
35,000 2.70% 4.375 12/01 47,250 105,350
John R.
Taylor 25,000 1.90% 1.72 12/01 14,000 32,000
25,000 1.90% 4.375 12/01 33,750 75,250
(1) Potential realizable value is based on an assumption that the common stock
price appreciates at the annual rate shown (compounded annually) from the date
of grant until the warrant expires. These numbers are calculated based on the
requirements of the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price performance.
Aggregated Warrant Exercises in Last Fiscal Year and FY-End Warrant Values
The following table sets forth information concerning the number and value
realized as to warrants exercised during 1996 and warrants held at December
31, 1996, by the individuals named in the Summary Compensation Table and the
value of those warrants held at such date. The warrants exercised were not
exercised as SARs and no SARs were held at year end.
- ------------------------------------------------------------------------------
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Warrants at Warrants at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($) Unexercisable Unexerciseable
- -------------------------------------------------------------------------------
Ernest P.
Esztergar -0- -0- 1,075,000(1)/0 544,460/0
Joseph A.
Savoca -0- -0- 1,125,000(1)/0 784,288/0
John R.
Taylor 2,000 10,675 465,000(2)/0 476,386/0
- -------------------------------------------------------------------------------
(1) Includes warrants to purchase 850,000 common shares of OCET Corporation, an
SGI subsidiary.
(2) Includes warrants to purchase 293,000 common shares of OCET Corporation, an
SGI subsidiary.
Ten-Year Warrant Repricings
The following table sets forth information concerning the repricing of warrants
held by the individuals named in the Summary Compensation Table during the
prior ten years. The Board of Directors elects to reprice warrants as a method
of rewarding and retaining the individuals without increasing their cash
compensation.
Length of
Original
Warrant Term
Number of Market Price of Exercise New Remaining at
Name & # Warrants Stock at Time Price at time Exercise Date of
Date Repriced(#) of Repricing($) of Repricing($) Price($) Repricing
- ------------------------------------------------------------------------------
Ernest P. Esztergar
12/28/94 10,000 15.0000 54.000 15.000 36 mos.
06/02/95 10,000 1.37500 3.125 1.375 55 mos.
07/26/95 70,000 1.12500 1.375 1.125 53 mos.
09/05/95 90,000 0.87500 1.125 0.875 52 mos.
12/12/95 125,000 0.65625 0.875 0.660 48 mos.
12/22/95 125,000 0.59375 0.660 0.600 48 mos.
Joseph A. Savoca
07/26/95 150,000 1.12500 3.0625 1.125 53 mos.
09/05/95 170,000 0.87500 1.125 0.875 52 mos.
12/12/95 205,000 0.65625 0.875 0.660 48 mos.
12/22/95 205,000 0.59375 0.660 0.600 48 mos.
John R. Taylor
06/02/95 6,000 1.37500 3.125 1.375 55 mos.
07/26/95 54,000 1.12500 1.375 1.125 53 mos.
09/05/95 74,000 0.87500 1.125 0.875 52 mos.
12/12/95 124,000 0.65625 0.875 0.660 48 mos.
12/22/95 124,000 0.59375 0.660 0.600 48 mos.
- ------------------------------------------------------------------------------
Compliance with Section 16 of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and 10% or greater shareholders of the Company ("Reporting
Persons") to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of equity securities of the
Company. To the Company's knowledge, based solely on its review of the
copies of such reports furnished to the Company and written representations
that certain reports were not required, during the year ended December 31,
1996, all Section 16(a) filing requirements applicable to Reporting Persons
were complied with.
Certain Relationships and Related Transactions
In November 1984, Dr. Ernest P. Esztergar, a Director of the Company,
assigned certain LFC Process patent rights to the Company. In consideration
for the assignment, minimum annual royalties of $50,000 were 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. During 1996, Esztergar forgave all past
and future royalties due under the royalty agreement.
During 1995 and early 1996, the Company entered into a series of transactions
wherein operating funds were borrowed from an entity controlled by a Board
member. In March 1996, the principal and interest on the loans totaling
$375,000 were exchanged for 283,200 shares of restricted common stock. The
closing bid price on the exchange date was $1.71875.
On January 16, 1996, William M. Owens (former Chairman and CEO) 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
this settlement, Owens tendered his warrant for 850,000 shares of OCET 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 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 covering its
officers and directors.
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 two Directors who
are also executive officers of the Company, and who receive compensation as
such from the Company. These executive officers do not serve in the
management, or compensation or other board committee of any other company.
ITEM 2. APPROVAL OF THE SGI INTERNATIONAL 1996 OMNIBUS STOCK PLAN
General. The 1996 Omnibus Stock Plan (the "1996 Stock Plan") was adopted by
the Board of Directors on November 7, 1996. The affirmative vote of a majority
of the votes cast at the Annual Meeting is required to approve the 1996 Stock
Plan. The shareholders are asked to approve the 1996 Stock Plan, a copy of
which is attached to this Proxy Statement as Exhibit A. The principal
features of the 1996 Stock Plan are outlined below.
Purpose. The purpose of the 1996 Stock Plan is to strengthen the Company
by providing to participating employees added incentives for high levels of
performance and to encourage stock ownership in the Company. The 1996
Omnibus Stock Plan seeks to accomplish these goals by providing a means whereby
employees of the Company may be given an opportunity to purchase, by way of
option or stock purchase rights, Common Stock of the Company. The 1996 Stock
Plan also provides for the use of stock appreciation rights ("SARs") and
long term performance awards as employee incentives. The 1996 Stock Plan is
intended to enable the Company and its subsidiaries to compete effectively
for and retain the services of such persons and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
subsidiaries.
The Company intends that the options issued under the 1996 Stock Plan shall,
in the discretion of the Board, or any committee to which responsibility for
administration of all or any part of the 1996 Stock Plan has been delegated,
be either incentive stock options ("Incentive Stock Options") as that term is
used in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor thereto, or options which do not qualify as incentive
stock options ("Non-Qualified Stock Options").
Administration. The Board, or duly delegated committee of the Board, will
administer the 1996 Stock Plan. The Board shall have full power and
authority in its discretion to take any and all action required or permitted
to be taken under the 1996 Stock Plan, including the selection of participants
to whom stock options may be granted, the determination of the number of
shares which may be covered by stock options and other terms and conditions
thereof. The Board will also administer the award, if any, of SARs, stock
purchase rights, or long term performance awards.
Shares Reserved. During the projected ten year term of the 1996 Stock Plan,
there will be 2,000,000 shares of Common Stock, if the 1996 Stock Plan is
adopted, reserved for issuance upon exercise of options or providing of
other incentives granted under the 1996 Stock Plan. Shares of Common Stock
will be made available from the authorized and unissued shares of the
Company. If any option or other right granted under the 1996 Stock Plan shall
for any reason expire, terminate, be canceled or otherwise be annulled
without having been exercised in full, the shares not purchased under such
option or right shall again become available for the 1996 Stock Plan.
Eligibility. Key employees, as determined by the Committee, including
executive officers, directors, consultants, and advisors are eligible to
participate in the 1996 Stock Plan. As of the date hereof, the Company
estimates that approximately 80 employees are eligible to participate. The
Company may issue Incentive Stock Options provided that the aggregate fair
market value (determined at the time the Incentive Stock Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by the optionee during any calendar year (under all
Incentive Stock Option plans of the Company) shall not exceed $100,000.
Should it be determined that any Incentive Stock Option granted pursuant to
the 1996 Stock Plan exceeds such maximum, such Incentive Stock Option
shall be considered to be a Non-Qualified Stock Option and not to qualify for
treatment as an Incentive Stock Option under Section 422 of the Code
to the extent, but only to the extent, of such excess.
Option Price. The exercise price of each Non-Qualified Stock option shall
be determined by the Board, but shall not be less than 100% of the fair
market value of the Common Stock subject to the option on the date the option
is granted. The exercise price of Incentive Stock Options may not be less
than 100% of the fair market value of the Common Stock subject to the option
on the date the option is granted; provided, however, that the purchase price
of the Common Stock subject to the Incentive Stock Option may not be less
than 110% of such fair market value (without regard to any restriction
other than a restriction which, by its terms, will never lapse) where the
optionee owns (or is deemed to own pursuant to Section 424(d) of the Code)
Common Stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any of its subsidiaries. An option shall
be exercised by written notice to the Company upon terms and conditions as
the optionee's stock option agreement provides and in accordance with such
other procedures for the exercise of options as the Board of Directors
or Committee may establish from time to time. The purchase price of Common
Stock acquired pursuant to an option shall be paid by such method or methods as
the Board may determine and may consist of cash or check payable to the order
of the Company, a promissory note or whole shares of Common Stock of
the Company owned by the optionee having a fair market value on the exercise
date (determined by the Committee in accordance with any reasonable valuation
method) equal to the option price for the shares being purchased. Payments
of Common Stock shall be made by delivery of Common Stock certificates
properly endorsed for transfer in negotiable form. Options and rights can
not be transferred, pledged or sold, other than by way of the laws of descent
or distribution, and can be exercised only by optionee.
SARs, Stock Purchase Rights And Long Term Performance Awards. The Board may
also provide incentives under the 1996 Stock Plan using SARs, Stock Purchase
Rights, and long term performance awards. A SAR would allow an employee to
surrender an option, or any part thereof, and be paid the differential between
the Fair Market Value of a share and the option strike price. The Board of
Directors does not anticipate granting SARs until The Company is generating
net income.
Stock Purchase Rights are rights to purchase restricted common
stock. Long term performance awards are cash or stock bonus awards that may be
granted alone or in addition to other awards granted under the 1996 Stock Plan.
Adjustments Upon Changes In Common Stock; Reorganization, Merger,
Consolidation. Subject to any required action by the shareholders of the
Company, if the outstanding shares of Common Stock of the Company are
increased, decreased, or changed into, or exchanged for a different number or
kind of shares or securities of the Company, through reorganization, merger,
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 without receipt of consideration by
Company, then a corresponding adjustment changing the number or kind of
shares and the exercise price per share allocated to unexercised options, or
portions thereof, which shall have been granted prior to any such change,
shall likewise be made. Adjustments shall be made by the Board whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the 1996 Stock Plan on account of any such adjustment. Upon the
dissolution or liquidation of the Company, or upon any reorganization, merger
or consolidation of the Company where the Company is the surviving corporation
and the stockholders immediately prior to such transaction do not own at least
50% of the Company's Common Stock immediately after such transaction, or upon
any reorganization, merger or consolidation of the Company where the Company is
not the surviving corporation, or upon a sale of substantially all of the
assets or 50% or more of the then outstanding Common Stock to another person,
corporation or entity, including any person as such term is used in Section
13(d) or 14(d) of the Securities Exchange Act of 1934 (any such reorganization,
merger, consolidation, sale of assets, or sale of shares of Common Stock being
hereinafter referred to as the "Transaction"), the 1996 Stock Plan will
terminate provided however that (i) any options granted and outstanding prior
thereto shall become immediately exercisable in full and (ii) the termination
of the 1996 Stock Plan, and exercise of any option (to the extent that the
holder's right to exercise such option has been accelerated) shall be
concurrent with, subject to and conditioned upon the consummation of the
Transaction to which such termination and acceleration relates, and if, for any
reason, such Transaction is abandoned, exercise of the option shall be void
and such option shall thereafter be exercisable only as permitted by the
1996 Stock Plan and the related option agreement which shall remain in full
force and effect.
Vesting. The Board shall determine vesting periods, if any, for options
granted under the 1996 Stock Plan.
Expiration, Termination And Transfer Of Options. Subject to earlier
termination as provided in the 1996 Stock Plan, each Incentive Stock Option
granted and all rights or obligations thereunder by its terms shall expire on
such date as the Board may determine as set forth in its discretion, but not
later than (i) 5 years from the date of grant in the case of any Incentive
Stock Option granted to an optionee who owns (or is deemed to own pursuant to
Section 424(d) of the Code) Common Stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any
of its subsidiaries, and (ii) 10 years from the date of grant in the case of
all other Incentive Stock Options. In the case of Non-Qualified Options, the
term may not exceed 10 years. For purposes of the 1996 Stock Plan, the date
of grant of an option shall be the date on which the Board takes final action
approving the award of the option, notwithstanding the date the optionee
accepts the option, the date of execution of the option agreement, or any
other date with respect to such option. Except in the event of termination of
employment due to disability or death, Incentive Stock Options will terminate
three months and other options or SARs six months after an optionee ceases
to be employed by the Company or its subsidiaries unless the options by their
terms were scheduled to terminate earlier, but only as to such number of shares
as to which the option was exercisable on the date of termination. If
termination occurs by reason of disability (as defined in the 1996 Stock Plan)
such three month period shall be extended to six months. If an employee
dies while in the employ of the Company or within three months after
cessation of such employment, his or her estate or personal representation
shall have the right to exercise such option before the date such option
would otherwise terminate, but only as to the number of shares as to which
such option was exercisable on the date of death. An option by its terms
may only be transferred by will or by laws of descent or pursuant to a
qualified domestic relations order, and, except as otherwise required
pursuant to a qualified domestic relations order, options shall be exercisable
during the lifetime of the person to whom the option is granted only by such
person (or in the case of disability by his or her court appointed legal
representative).
Termination And Amendment Of The 1996 Stock Plan. The 1996 Stock Plan will
terminate in 2006. The 1996 Stock Plan will also terminate upon liquidation,
reorganization, merger or consolidation of the Company as discussed above.
No options may be granted under the 1996 Stock Plan after it is terminated.
No termination, suspension, modification or amendment of the 1996 Stock Plan
may, without the consent of the person to whom an option shall theretofore
have been granted, adversely affect the rights of such person with respect to
such option. No modification, extension, renewal or other change in any
option granted under the 1996 Stock Plan shall be made after the grant of
such option, unless the same is consistent with the provisions of the 1996
Stock Plan.
The 1996 Stock Plan may be amended only with the approval of the shareholders.
The Board of Directors recommends a vote "FOR" adoption of the 1996 Omnibus
Stock Plan.
ITEM 3. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, Independent Auditors, as
the Company's independent auditors for the year ending December 31, 1997, and
has further directed that management submit the selection of independent
auditors for ratification by the shareholders at the annual meeting. Ernst
& Young LLP has audited the Company's financial statements since 1986.
Representatives of Ernst & Young LLP are expected to be present at the
annual meeting and will have an opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" such ratification.
Report On Form 10-K
A copy of the Company's Report on Form 10-K for the period ended December 31,
1996, filed with the Securities and Exchange Commission (including related
financial statements) is available to shareholders without charge, upon
written request to the Company.
Future Proposals Of Security Holders
All proposals of security holders intended to be presented at the 1997
annual meeting of shareholders must be received by the Company not later
than December 31, 1997, for inclusion in the Company's 1997 proxy statement and
form of proxy relating to the 1997 annual meeting. Upon timely receipt of
any such proposal, the Company will determine whether or not to include such
proposal in the proxy statement and proxy in accordance with applicable
regulations and provisions governing the solicitation of proxies.
Other Business
The Company knows of no business to be brought before the annual meeting
other than as set forth above. If other matters properly come before the
meeting, it is the intention of the persons named in the solicited proxy to
vote the proxy on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/
Joseph A. Savoca
La Jolla, California
May 8, 1997
20
SGI INTERNATIONAL
1996 OMNIBUS STOCK PLAN
1. Purpose of the Plan. The purpose of the SGI International 1996
Omnibus Stock Plan is to enable SGI International to provide an incentive to
eligible employees, consultants, advisors, Directors, and Officers whose
present and potential contributions are important to the continued success of
the Company, to afford these individuals the opportunity to acquire a
proprietary interest in the Company, and to enable the Company to enlist and
retain in its employment the best available talent for the successful conduct
of its business. It is intended that this purpose will be effected through the
granting of (a) incentive and nonqualified stock options, (b) stock purchase
rights, (c) stock appreciation rights, and (d) long-term performance awards.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under applicable securities laws, Utah
corporate law, and the Internal Revenue Code.
(b) "Board" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committees.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in
accordance with Section 5 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means SGI International, a Utah corporation.
(g) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, any such leave may not exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute; or (ii) transfers between locations of the
Company or between the Company, its Parent, its Subsidiaries or its successor.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc.,
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
common stock shall be the closing bid price for such stock as quoted on such
system or exchange (or the exchange with the greatest volume of trading in
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 Board deems
reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or 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 Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.
(n) "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.
(o) "Long-Term Performance Award" means an award under Section 10
below. A Long-Term Performance Award shall permit the recipient to receive a
cash or stock bonus (as determined by the Board) upon satisfaction of such
performance factors as are set out in the recipient's individual grant. Long-
term Performance Awards will be based upon the achievement of Company,
Subsidiary and/or individual performance factors or upon such other criteria
as the Board may deem appropriate.
(p) "Long-Term Performance Award Agreement" means a written
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Long-Term Performance Award grant. The Long-Term
Performance Award Agreement is subject to the terms and conditions of the Plan.
(q) "Nonqualified Stock Option" means any Option that is not an
Incentive Stock Option.
(r) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option, Stock Purchase Right, or Long-
Term Performance Award grant. The Notice of Grant is part of the Option
Agreement, and the Long-Term Performance Award Agreement.
(s) "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.
(t) "Option" means a stock option granted pursuant to the Plan.
(u) "Option Agreement" means a written 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.
(v) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(w) "Optioned Stock" means the Common Stock underlying an Option
or Right.
(x) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Right.
(y) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1996 Omnibus Stock Plan.
(aa) "Restricted Stock" means shares of Common Stock subject to a
Restricted Stock Purchase Agreement acquired pursuant to a grant of Stock
Purchase Rights under Section 9 below.
(bb) "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.
(cc) "Right" means and includes Long-Term Performance Awards, Stock
Appreciation Rights, and Stock Purchase Rights granted pursuant to the Plan.
(dd) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor rule thereto, as in effect when discretion is being exercised with
respect to the Plan.
(ee) "SAR" means a stock appreciation right granted pursuant to
Section 8 of the Plan.
(ff) "SAR Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual SAR grant.
The SAR Agreement is subject to the terms and conditions of the Plan.
(gg) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(hh) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 9 of the Plan, as evidenced by a Notice of Grant.
(ii) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Eligibility. Nonqualified Stock Options and Rights may be granted
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been
granted an Option or Right may be granted additional Options or Rights.
4. Stock Subject to the Plan.
(a) Shares Reserved. Subject to the provisions of Section 12 of
the Plan, the total number of Shares reserved and available for distribution
under the Plan is 2,000,000 Shares. Subject to Section 12 of the Plan, if any
Shares that have been optioned under an Option cease to be subject to such
Option (other than through exercise of the Option), or if any Option or Right
granted hereunder is forfeited or any such award otherwise terminates prior to
the issuance of Common Stock to the participant, the shares that were subject
to such Option or Right shall again be available for distribution in connection
with future Option or Right grants under the Plan; provided, however, that
Shares that have actually been issued under the Plan, whether upon exercise of
an Option or Right, shall not in any event be returned to the Plan and shall
not become available for future distribution under the Plan.
(b) No Fractional Shares. No fractional Shares may be issued
under this Plan; fractional Shares shall be rounded to the nearest whole
Share.
(c) Conditional Issuances. If this Plan is amended at any time
subject to shareholder approval, then the Board may, in accordance with the
terms and conditions of this Plan, grant Options or Rights on a conditional
basis, subject to such approval by the shareholders of the Company not later
than the next annual meeting of the shareholders of the Company following the
date of such conditional grant. Any Options or Rights granted on a conditional
basis shall not be exercisable unless and until the amendment to this Plan is
approved by the shareholders of the Company. If such an amendment is not
approved by the shareholders at the next annual meeting of shareholders of
the Company following the conditional grant, then the conditional grant shall
be canceled.
5. Administration.
(a) Administration by the Board. The Plan shall be administered
by the Board, including any duly appointed Committee of the Board. All
questions of interpretation of the Plan or of any Option or Right shall be
determined by the Board, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Option or Right. Any
Officer of a Parent or Subsidiary shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such
matter, right, obligation, determination or election.
(b) Powers of the Board. 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 Board shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(m) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms
and conditions include, but are not limited to, the exercise price, the
time or times when Options or 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 Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Board, in its sole discretion, shall
determine;
(vii) to construe and interpret the terms of the Plan;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(ix) to determine whether and under what circumstances an
Option or Right may be settled in cash instead of Common Stock or Common
Stock instead of cash;
(x) to reduce the exercise price of any Option or Right;
(xi) to modify or amend each Option or Right (subject to
Section 14 of the Plan);
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Right
previously granted by the Board;
(xiii) to institute an Option Exchange Program;
(xiv) to determine the terms and restrictions applicable to
Options and Rights and any Restricted Stock; and
(xv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Board's Decision. The Board's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Rights.
(d) Limitations on Grants. The following limitations will apply
to grants of Options and Rights under the Plan:
(i) no Employee or Consultant will be granted Options or
Rights under the Plan to receive more than 100,000 Shares in any one fiscal
year; and
(ii) no Employee or Consultant will be granted Options or
Rights under the Plan to purchase more than 500,000 Shares over the term of
the Plan, provided that, if the number of Shares available for issuance under
Paragraph 4 of the Plan is increased, the maximum number of Options or Rights
that any Employee or consultant may be granted will also increase by a pro
rata amount for each additional fiscal year in which Shares are allocated for
issuance under the Plan.
(e) Rule 16b-3 Compliance. It is the intent that this Plan and
all Options and Rights granted pursuant to it shall be administered, in the
discretion of the Board, so as to permit this Plan and the Options and Rights
to comply with Exchange Act Rule 16b-3. With respect to grants of Options and
Rights to Executive Officers and Directors, the Plan will be administered by
the full Board or a Committee to satisfy Rule 16b-3 to the extent the Board
determines, in its sole discretion, that compliance with Rule 16b-3 is
necessary or desirable. If any provision of this Plan or of any Options and
Rights would otherwise frustrate or conflict with the intent expressed in this
Section 5 (e), that provision, to the extent the Board determines it possible,
necessary, or desirable, shall be interpreted and deemed amended in the manner
determined by the Board so as to avoid such conflict. To the extent of any
remaining irreconcilable conflict with such intent, the provision shall be
deemed void as applicable to Optionees who are then subject to the reporting
requirements of Section 16 of the Exchange Act to the extent permitted by law
and in the manner deemed advisable by the Committee.
6. Duration of the Plan. The Plan shall remain in effect until
terminated by the Board under the terms of the Plan, provided that in no event
may Incentive Stock Options be granted under the Plan later than 10 years from
the date the Plan was adopted by the Board.
7. Options.
(a) Options. The Board, in its discretion, may grant Options to
eligible participants and shall determine whether such Options shall be
Incentive Stock Options or Nonqualified Stock Options. Each Option shall be
evidenced by a Notice of Grant/Option Agreement which shall expressly identify
the Options as Incentive Stock Options or as Nonqualified Stock Options, and
be in such form and contain such provisions as the Board shall from time to
time deem appropriate. The Notice of Grant/Option Agreement shall govern each
Optionee's rights and obligations with respect to each such particular Option.
Without limiting the foregoing, the Board may at any time authorize the
Company, with the consent of the respective recipients, to issue new Options or
Rights in exchange for the surrender and cancellation of outstanding Options or
Rights. Option agreements shall contain the following terms and conditions:
(i) Exercise Price; Number of Shares. The per Share exercise
price for the Shares issuable pursuant to an Option shall be such price as is
determined by the Board; provided, however, that in the case of an Incentive
Stock Option, the price shall be no less than 100% of the Fair Market Value of
the Common Stock on the date the Option is granted, subject to any additional
conditions set out in Section 7(a)(iv) below. In the case of a Nonqualified
Stock Option, the per share exercise price for the Shares issuable pursuant
to an Option shall be such price as is determined by the Board; provided,
however, the price shall not be less than 100% of the Fair Market Value of the
Common Stock on the date the Option is granted.
(1) The Notice of Grant shall specify the number of
Shares to which it pertains.
(ii) Waiting Period and Exercise Dates. At the time an Option
is granted, the Board will determine the terms and conditions to be satisfied
before Shares may be purchased, including the dates on which Shares subject to
the Option may first be purchased. The Board may specify that an Option may
not be exercised until the completion of the service period specified at the
time of grant. (Any such period is referred to herein as the "waiting period.")
At the time an Option is granted, the Board shall fix the period within which
the Option may be exercised, which shall not be earlier than the end of the
waiting period, if any, nor, in the case of an Incentive Stock Option, later
than ten (10) years, from the date of grant.
(iii) Form of Payment. The consideration to be paid for
the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Board (and, in the case of an Incentive
Stock Option, shall be determined at the time of grant) and may consist
entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) 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, unless otherwise permitted under Applicable
Laws, including Rule 16b-3 and Section 16(b) of the Exchange Act, and (b) have
a Fair Market Value on the date of surrender not greater than the aggregate
exercise price of the Shares as to which said Option shall be exercised;
(5) delivery of a properly executed exercise notice
together with such other documentation as the Board and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
the use of such other procedures which shall effect a cashless exercise;
(6) any combination of the foregoing methods of payment; or
(7) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
(iv) Special Incentive Stock Option Provisions. In addition to
the foregoing, Options granted under the Plan which are intended to be
Incentive Stock Options under Section 422 of the Code shall be subject to the
following terms and conditions:
(1) Dollar Limitation. To the extent that the aggregate
Fair Market Value of (a) the Shares with respect to which Options designated as
Incentive Stock Options plus (b) the shares of stock of the Company, Parent and
any Subsidiary with respect to which other incentive stock options are
exercisable for the first time by an Optionee during any calendar year under
all plans of the Company and any Parent and Subsidiary exceeds $100,000, such
Options shall be treated as Nonqualified Stock Options. For purposes of the
preceding sentence, (x) Options shall be taken into account in the order in
which they were granted, and (y) the Fair Market Value of the Shares shall be
determined as of the time the Option or other incentive stock option is
granted.
(2) 10% Shareholder. If any Optionee to whom an Incentive
Stock Option is to be granted pursuant to the provisions of the Plan is, on
the date of grant, the owner of Common Stock (as determined under Section
424(d) of the Code) possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company, then the following special provisions shall be applicable to the
Option granted to such individual:
(a) The per Share Option price of Shares subject to
such Incentive Stock Option shall not be less than 110% of the Fair Market
Value of Common Stock on the date of grant: and
(b) The Option shall not have a term in excess of
five (5) years from the date of grant.
Except as modified by the preceding provisions of this subsection 7(a)(iv)
and except as otherwise limited by Section 422 of the Code, all of the
provisions of the Plan shall be applicable to the Incentive Stock Options
granted hereunder.
(v) Other Provisions. Each Option granted under the Plan may
contain such other terms, provisions, and conditions not inconsistent with the
Plan as may be determined by the Board.
(vi) Buyout Provisions. The Board 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 Board shall establish and communicate to the
Optionee at the time that such offer is made; provided, however, that buyout
offers made to Officers, Directors, and 10% shareholders may only be payable
in cash and shall comply with Rule 16b-3 to the extent deemed desirable or
required by the Board.
(b) Method of Exercise.
(i) Procedure for Exercise, Rights as a Shareholder. Any
Option or SAR granted hereunder shall be exercisable at such times and under
such conditions as determined by the Board and as shall be permissible under
the terms of the Plan.
An Option or SAR shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option or SAR by the person entitled to exercise the Option or SAR
and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. Full payment may, as authorized by the Board
(and, in the case of an Incentive Stock Option, determined at the time of
grant) and permitted by the Option Agreement consist, of any consideration and
method of payment allowable under subsection 7(a)(iii) of the Plan. Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter shall be 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. Exercise of an SAR in any manner shall, to
the extent the SAR is exercised, result in a decrease in the number of Shares
which thereafter shall be available for purposes of the Plan.
(ii) Rule 16b-3. Options and SARs granted to individuals
subject to Section 16 of the Exchange Act ("Insiders") may, in the discretion
of the Board, comply with the applicable provisions of Rule 16b-3 and may
contain such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
(iii) Termination of Employment or Consulting Relationship.
In the event an Optionee's Continuous Status as an Employee or Consultant
terminates (other than upon the Optionee's death or Disability), the Optionee
may exercise his or her Option or SAR, but only within such period of time
as is determined by the Board at the time of grant, not to exceed six (6)
months, (three (3) months in the case of an Incentive Stock Option) from the
date of such termination, and only to the extent that the Optionee was entitled
to exercise it at the date of such termination (but in no event later than the
expiration of the term of such Option or SAR as set forth in the SAR or Option
Agreement). To the extent that Optionee was not entitled to exercise an Option
or SAR at the date of such termination, and to the extent that the Optionee
does not exercise such Option or SAR (to the extent otherwise so entitled)
within the time specified herein, the Option or SAR shall terminate.
(iv) Disability of Optionee. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option or SAR, but
only within six (6) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option or SAR as set forth in the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or SAR at the date of such
termination, and to the extent that the Optionee does not exercise such Option
or SAR (to the extent otherwise so entitled) within the time specified herein,
the Option or SAR shall terminate.
(v) Death of Optionee. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the
deceased Optionee's Option or SAR by bequest or inheritance may exercise the
Option or SAR, but only within twelve (12) months following the date of death,
and only to the extent that the Optionee was entitled to exercise it at the
date of death (but in no event later than the expiration of the term of such
Option or SAR as set forth in the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or SAR at the date of death,
and to the extent that the Optionee's estate or a person who acquired the right
to exercise such Option or SAR does not exercise such Option or SAR (to the
extent otherwise so entitled) within the time specified herein, the Option or
SAR shall terminate.
8. Stock Appreciation Rights
All Stock Appreciation Rights granted under the Plan shall comply
with, and the related SAR Agreement shall be deemed to include and be subject
to, the applicable terms and conditions set forth in this Section 8 and also
the terms and conditions set forth in Section 12 and Section 7(b) (iii), (iv),
and (v); provided, however, that the Committee may authorize an SAR Agreement
related to a Stock Appreciation Right that expressly contains terms and
provisions that differ from the terms and provisions set forth in Section 12
and any of the terms and provisions of Section 7(b)(iii), (iv), or (v).
(a) Form of Right. A Stock Appreciation Right may be granted (i)
in connection with an Option, either at the time of grant or at any time during
the term of the Option, or (ii) without relation to an Option.
(b) Rights Related to Options. A Stock Appreciation Right granted
pursuant to an Option shall entitle the Optionee, upon exercise, to surrender
that Option or any portion thereof, to the extent unexercised, and to receive
payment of any amount computed pursuant to Section 8(b)(ii). That Option shall
then cease to be exercisable to the extent surrendered. Stock Appreciation
Rights granted in connection with an Option shall be subject to the terms of
the SAR Agreement governing the Option, which shall comply with the following
provisions in addition to those applicable to Options:
(i) Exercise and Transfer. Subject to Section 15, a Stock
Appreciation Right granted in connection with an Option shall be exercisable
only at such time or times and only to the extent that the related Option is
exercised and shall not be transferable except to the extent that the related
Option is transferable. To the extent that an Option has been exercised, the
Stock Appreciation Rights granted in connection with such Option shall
terminate.
(ii) Value of Right. Upon the exercise of a Stock Appreciation
Right related to an Option, the Optionee shall be entitled to receive payment
from the Company of an amount determined by multiplying:
(a) The difference obtained by subtracting the exercise
price of a Share specified in the related Option from the Fair Market Value of
a Share on the date of exercise of the Stock Appreciation Right, by
(b) The number of Shares as to which that Stock
Appreciation Right has been exercised.
(c) Right Without Option. A Stock Appreciation Right
granted without relationship to an Option shall be exercisable as determined by
the Board and set forth in the SAR Agreement governing the Stock Appreciation
Right, which SAR Agreement shall comply with the following provisions:
(i) Number of Shares. Each SAR Agreement shall state the
total number of Shares to which the Stock Appreciation Right relates.
(ii) Vesting. Each SAR Agreement shall state the time or
periods in which the right to exercise the Stock Appreciation Right or a
portion thereof shall vest and the number of Shares for which the right to
exercise the Stock Appreciation Right shall vest at each such time or period.
(iii) Expiration of Rights. Each SAR Agreement shall state the
date at which the Stock Appreciation Rights shall expire if not previously
exercised.
(iv) Value of Right. A Stock Appreciation Right granted
without relationship to an Option shall entitle the Optionee or holder of a
SAR, upon exercise of the Stock Appreciation Right, to receive payment of an
amount determined by multiplying:
(a) The difference obtained by subtracting the Fair
Market Value of a Share on the date the Stock Appreciation Right is granted
from the Fair Market Value of a Share on the date of exercise of that Stock
Appreciation Right, by
(b) The number of rights as to which the Stock
Appreciation Right has been exercised.
(d) Limitations on Rights. Notwithstanding Section 8(b)(ii) and
Section 8(c)(iv), the Board may limit the amount payable upon exercise of a
Stock Appreciation Right. Any such limitation must be determined on the date
of the Notice of Grant and be noted on the instrument evidencing the Optionee's
Stock Appreciation Right.
(e) Payment of Rights. Payment of the amount determined under
Section 8(b)(ii) or Section 8(c)(iv) and Section 8(d) may be made solely in
whole Shares valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right or, in the sole discretion of the Board solely in cash or
a combination of cash and Shares. If the Board decides to make full payment
in Shares and the amount payable results in a fractional Share, payment for
the fractional Share shall be made in cash.
(f) Stockholder Privileges. No Employee or Consultant shall have
any rights as a stockholder with respect to any Shares covered by a Stock
Appreciation Right until the Employee or Consultant becomes the holder of
record of such Common Stock, and no adjustments shall be made for dividends
or other distributions or other rights as to which there is a record date
preceding the date such Employee or Consultant becomes the holder of record of
such Common Stock.
(g) Other Agreement Provisions. The SAR Agreements authorized
relating to Stock Appreciation Rights shall contain such provisions in
addition to those required by the Plan (including, without limitation,
restrictions or the removal of restrictions upon the exercise of the Stock
Appreciation Right and the retention or transfer of shares thereby acquired
as the Board may deem advisable.
9. Stock Purchase Rights.
(a) Grant of Restricted Stock. Subject to the terms and provisions
of the Plan, the Board, at any time and from time to time, may grant Stock
Purchase Rights to Employees and Consultants in such amounts as the Board in
its sole discretion shall determine.
(b) Restricted Stock Purchase Agreement. Each Restricted Stock
grant shall be evidenced by a Restricted Stock Purchase Agreement that shall
specify the period of time during which the transfer of Restricted Stock is
limited in some way, including the passage of time, achievement of performance
goals, or upon the occurrence of other events as determined by the Board in
its sole discretion ("Period of Restriction"), the number of Shares of
Restricted Stock granted, and such other provisions as the Board, in its sole
discretion, shall determine.
(c) Transferability. Except as provided in this Section 9(c), the
Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Board and specified in the
Restricted Stock Purchase Agreement, or upon earlier satisfaction of any
other conditions, as specified by the Board in its sole discretion and set
forth in the Restricted Stock Purchase Agreement. The Restricted Stock is
subject to substantial risk of forfeiture during the Period of Restriction.
(d) Other Restrictions. The Board shall impose such other
restrictions on any Restricted Stock granted pursuant to the Plan as it may
deem advisable including, without limitation, restrictions based upon the \
achievement of specific performance goals (Company-wide, Subsidiary, and/or
individual), and/or restrictions under applicable Federal or state securities
laws, and may legend the certificate representing Restricted Stock to give
appropriate notice for such restrictions. The Restricted Stock shall be
deposited in escrow with the Company until the Restricted Stock is vested and
the Period of Restriction is terminated.
(e) Certificate Legend. In addition to any legends placed on
certificates pursuant to this Section 9(e) each certificate representing
Restricted Stock granted pursuant to the Plan shall bear the following legend:
"The sale or other transfer of the Shares of stock represented
by this Certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the SGI
International 1996 Omnibus Stock Plan and in a Restricted Stock Purchase
Agreement dated November 7, 1996. A copy of the Plan and such Restricted Stock
Purchase Agreement may be obtained from the Chief Financial Officer of SGI
International."
(f) Removal of Restrictions. Except as otherwise provided in this
Section 9, Restricted Stock covered by each Restricted Stock grant made under
the Plan shall become freely transferable by the participant after the last day
of the Period of Restriction. The Board, in its discretion, may accelerate the
time at which any restriction shall lapse and/or remove any restrictions. Once
the Shares are released from the restrictions, the Employee or Consultant shall
be entitled to have the legend required by Section 9(e) removed from his or her
Share certificate.
(g) Voting Rights. During the Period of Restriction, Employees or
Consultants holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares.
(h) Dividends and Other Distributions. During the Period of
Restriction, Employees or Consultants holding Shares of Restricted Stock
granted hereunder shall be entitled to receive all dividends and other
distributions paid with respect to those Shares while they are so held. If
any such dividends or distributions are paid in Shares, the Shares shall be
subject to the same restrictions on transferability and forfeitability as the
Restricted Stock with respect to which they were paid.
(i) Termination of Employment Due to Death, Disability, or
Retirement. In the event that an Employee or Consultant's employment with the
Company is terminated by reason of death or Disability, the restrictions on the
Employee or Consultant's Restricted Stock shall lapse as of the date of
termination (in the case of Disability, the restrictions shall lapse on the
date the Employee or Consultant's Disability is determined by the Board to be
total and permanent).
(j) Termination of Employment for Other Reasons. If the employment
of the Employee or Consultant shall terminate for any reason other than those
reasons described in Section 9(i), including termination for cause, all
nonvested Restricted Stock held by the Employee or Consultant at that time
shall be subject to the repurchase option of the Company, unless the Board
determines otherwise. However, with the exception of a termination of
employment for cause, the Board, in its sole discretion, shall have the right
to provide for lapsing of the restrictions on Restricted Stock following
employment termination, upon such terms and provisions as it deems proper.
(k) Rule 16b-3. If the Company has any class of equity security
registered pursuant to Section 12 of the Exchange Act, Stock Purchase Rights
granted to Insiders, and Shares purchased by Insiders in connection with the
Stock Purchase Rights, may be, in the discretion of the Board, subject to any
restrictions applicable thereto in compliance with Rule 16b-3. An Insider
may only purchase Shares pursuant to the grant of a Stock Purchase Right and
may only sell Shares purchased pursuant to the grant of a Stock Purchase
Right, during such time or times as are permitted by Rule 16b-3, unless waived
in the sole discretion of the Board.
10. Long-Term Performance Awards.
(a) Administration. Long-Term Performance Awards are cash or
stock bonus awards that may be granted either alone or in addition to other
awards granted under the Plan. Such awards shall be granted for no cash
consideration. The Board shall determine the nature, length and starting
date of any performance period (the "Performance Period") for each Long-Term
Performance Award, and shall determine the performance or employment factors,
if any, to be used in the determination of Long-Term Performance Awards and
the extent to which such Long-Term Performance Awards are valued or have
been earned. Long-Term Performance Awards may vary from participant to
participant and between groups of participants and shall be based upon the
achievement of Company, Subsidiary, Parent and/or individual performance
factors or upon such other criteria as the Board may deem appropriate.
Performance Periods may overlap and participants may participate simultaneously
with respect to Long-Term Performance Awards that are subject to different
Performance Periods and different performance factors and criteria. Long-
Term Performance Awards shall be confirmed by, and be subject to the terms of,
a Long-Term Performance Award agreement. The terms of such awards need not
be the same with respect to each participant.
At the beginning of each Performance Period, the Board may determine
for each Long-Term Performance Award subject to such Performance Period the
range of dollar values or number of shares of Common Stock to be awarded to the
participant at the end of the Performance Period if and to the extent that the
relevant measures of performance for such Long-Term Performance Award are
met. Such dollar values or number of shares of Common Stock may be fixed or
may vary in accordance with such performance or other criteria as may be
determined by the Board.
(b) Adjustment of Awards. The Board may adjust the performance
factors applicable to the Long-Term Performance Awards to take into account
changes in legal, accounting and tax rules and to make such adjustments as
the Board deems necessary or appropriate to reflect the inclusion or exclusion
of the impact of extraordinary or unusual items, events or circumstances in
order to avoid windfalls or hardships.
11. Non-Transferability of Options. Options and Rights 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.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and 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 Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Right, as well as the price per
share of Common Stock covered by each such outstanding Option or 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; provided, however,
that 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 Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or
Right has not been previously exercised, it will terminate immediately prior
to the consummation of such proposed action. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option or Right
shall terminate as of a date fixed by the Board and give each Optionee the
right to exercise his or her Option or Right as to all or any part of the
Optioned Stock, including Shares as to which the Option or Right would not
otherwise be exercisable.
(c) Merger or Asset Sale. Subject to the provisions of paragraph
(d) hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company,
each outstanding Option and Right shall be assumed, or an equivalent Option or
Right substituted, by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation does
not agree to assume the Option or to substitute an equivalent option, the
Board shall, in lieu of such assumption or substitution, provide for the
Optionee to have the right to exercise the Option or Right as to all or a
portion of the Optioned Stock, including Shares as to which it would not
otherwise be exercisable. If the Board makes an Option or Right exercisable
in lieu of assumption or substitution in the event of a merger or sale of
assets, the Board shall notify the Optionee that the Option or Right shall be
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Right will terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Right shall be considered assumed if,
immediately following the merger or sale of assets, the Option or Right
confers the right to purchase, for each Share of Optioned Stock subject to
the Option or Right immediately prior to the merger or sale of assets, for 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); provided, however, that if such consideration
received in the merger or sale of assets was not solely common stock of the
successor corporation or its Parent, the Board may, with the consent of the
successor corporation and the participant, provide for the consideration to
be received upon the exercise of the Option or Right, for each Share of
Optioned Stock subject to the Option or Right, to be solely common stock of the
successor corporation or its Parent equal in Fair Market Value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
(d) Change in Control. In the event of a "Change in Control" of
the Company, as defined in paragraph (e) below, then the following acceleration
and valuation provisions shall apply:
(i) Except as otherwise determined by the Board, in its
discretion, prior to the occurrence of a Change in Control, any Options and
Rights outstanding on the date such Change in Control is determined to have
occurred that are not yet exercisable and vested on such date shall become
fully exercisable and vested;
(ii) Except as otherwise determined by the Board, in its
discretion, prior to the occurrence of a Change in Control, all outstanding
Options and Rights, to the extent they are exercisable and vested (including
Options and Rights that shall become exercisable and vested pursuant to
subparagraph (i) above), shall be terminated in exchange for a cash payment
equal to the Change in Control Price, (reduced by the exercise price, if any,
applicable to such Options or Rights). These cash proceeds shall be paid to
the Optionee or, in the event of death of an Optionee prior to payment, to the
estate of the Optionee or to a person who acquired the right to exercise the
Option or Right by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this
Section 12, a "Change in Control" means the happening of any of the following:
(i) When any "person," as such term is used in Section 13(d)
and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally in the
election of directors; or
(ii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%)
of the total voting power represented by the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve an agreement for
the sale or disposition by the Company of all or substantially all the
Company's assets; or
(iii) A change in the composition of the Board of Directors
of the Company occurring within a two-year period, as a result of which fewer
than a majority of the directors are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (x) are
directors of the Company as of the date the Plan is approved by the
Board or the shareholders, whichever shall first occur, or (y) are
elected, or nominated for election, to the Board of the Company with
the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection
with an actual or threatened proxy contest relating to the election
of directors to the Company).
(f) Change in Control Price. For purposes of this Section 12,
"Change in Control Price" shall be, as determined by the Board, (i) the highest
Fair Market Value of a Share within the 60-day period immediately preceding
the date of determination of the Change in Control Price by the Board (the
"60--Day Period"), or (ii) the highest price paid or offered per Share, as
determined by the Board, in any bona fide transaction or bona fide offer
related to the Change in Control of the Company, at any time within the 60-Day
Period, or (iii) such lower price as the Board, in its discretion, determines
to be a reasonable estimate of the fair market value of a Share.
13. Date of Grant. The date of grant of an Option or Right shall be,
for all purposes, the date on which the Board makes the determination granting
such Option or Right, or such other later date as is determined by the Board.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan for any reason.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent requested by Applicable Law,
rule or regulation, including the requirements of any exchange or quotation
system on which the Common Stock is listed or quoted. Such shareholder
approval, if required, shall be obtained in such a manner and to such a degree
as is required by the Applicable Laws, rules or regulations.
(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 Board, which
agreement must be in writing and signed by the Optionee and the Company
unless such amendment, alteration, suspension or termination is required to
enable an Option designated as an Incentive Stock Option to qualify as an
Incentive Stock Option or is necessary to comply with any Applicable Laws or
government regulations.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Right unless the exercise of such Option or Right
and the issuance and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933
("Securities Act"), as amended, the Exchange Act, the securities laws of
applicable states, the rules and regulations promulgated thereunder,
Applicable Laws, and the requirements of any stock exchange or quotation
system upon which the Shares may then be listed or quoted, and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
(b) Investment Representations Re: Federal Securities Laws. The
Shares underlying these Options and Rights, as of the date hereof, have not
been registered under the Securities Act. The Optionee represents that if
Options or Rights are exercised in whole or in part at a time when there is
not in effect, under the Securities Act, a registration statement applicable
to the Shares issuable upon exercise, then the purchase of such Shares is
expressly conditioned upon the following representations, warranties and
covenants:
(i) Investment Intent. Optionee is acquiring the Shares
for its own account, not as a nominee or agent, and not with a view to their
resale or distribution and is prepared to hold the Shares for an indefinite
period and has no present intention to sell, distribute, or grant any
participating interests in the Shares. Optionee acknowledges the Shares have
not been registered under the Securities Act or the securities laws of any
other state, province or country (collectively, with the 1933 Act, the
"Securities Laws"), and that the Company is issuing the Shares to it in
reliance on its representations made herein.
(ii) Restricted Securities. Optionee hereby confirms it
has been informed that the Shares may not be resold or transferred unless
such Shares are first registered under the applicable Securities Laws or unless
an exemption from such registration is available. Accordingly, Optionee
acknowledges it is prepared to hold the Shares for an indefinite period.
(iii) Investment Experience. In connection with the investment
representations made herein, Optionee represents that it is able to fend for
itself in the transactions contemplated by this Plan, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, has the ability to bear the economic
risks of its investment, and has been furnished with and has had access to such
information as is normally made available in the form of a registration
statement, together with such additional information as is necessary to verify
the accuracy of the information supplied and to have all questions answered by
the Company.
(iv) Disposition of Shares. Optionee agrees that it shall make
no disposition of the Shares, unless and until:
(a) Optionee shall have complied with all requirements
of this Agreement and any stock exchange on which such Shares (or any
substituted securities) may be listed;
(b) Optionee shall have notified the Company of the
proposed disposition and furnished it with a written summary of the terms and
conditions of the proposed disposition; and
(c) Optionee shall have provided an opinion to the
Company's counsel (at optionee's expense), in form and substance reasonably
satisfactory to the Company, that (x) the proposed disposition does not require
registration of the Shares under the applicable Securities Laws or (y) all
appropriate action necessary for compliance with the registration requirements
of the applicable Securities Laws or of any exemption from registration
available under the applicable Securities Laws has been taken.
16. Liability of Company.
(a) 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.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Right exceeds, as of the date of grant, the number
of Shares which may be issued under the Plan without additional shareholder
approval, such Option or Right shall be void with respect to such excess
Optioned Stock, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 14(b) of the Plan.
17. 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.
18. Provision of Information. At least annually, copies of the
Company's annual report or Form 10-K for the just completed fiscal year shall
be made available to each Optionee and purchaser of Shares upon exercise of
an Option or Right. The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.
19. Plan Does Not Affect Employment Status.
(a) Status as an Employee or Consultant shall not be construed as a
commitment that any Option or Right will be made under the Plan to such
Employee or Consultant or to eligible Employees or Consultants generally.
(b) Nothing in the Plan or in any Agreement or related documents
shall confer upon any Employee or Consultant or Optionee any right to
continue in the employment of the Company or any Parent or Subsidiary or
constitute any contract of employment or affect any right which the Company or
any Parent or Subsidiary may have to change such person's compensation, other
benefits, job responsibilities, or title, or to terminate the employment of
such person with or without cause.
20. Unfunded Plan. The Plan shall be unfunded and the Company shall
not be required to segregate any assets that may at any time be represented by
Options or Rights under the Plan. Neither the Company, its Parent or
Subsidiary, nor the Board shall be deemed to be a trustee of any amounts to
be paid under the Plan, nor shall anything contained in the Plan or any action
taken pursuant to its provisions create or be construed to create a fiduciary
relationship between the Company and/or its Parent or Subsidiary and an
Optionee. To the extent any person acquires a right to receive an Option or
Right under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
21. Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or Officers or
employees of the Company and any Parent or Subsidiary, members of the Board
and any Officers or employees of the Company and any Parent or Subsidiary to
whom authority to act for the Board is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any
of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan, or any right granted hereunder, and against
all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for gross negligence, bad faith
or intentional misconduct in duties; provided, however, that within sixty
(60) days after the institution of such action, suit or proceeding, such person
shall offer to the Company, in writing, the opportunity at its own expense to
handle and defend the same.
22. Stock Withholding to Satisfy Withholding Tax Obligations
(a) Ability to Use Stock to Satisfy Withholding. At the
discretion of the Company, Optionees may satisfy withholding obligations as
provided in this Section 22. When an Optionee incurs tax liability in
connection with the award, vesting or exercise of an Option or Right, which tax
liability is subject to tax withholding under applicable tax laws (including
federal, state and local laws), the Optionee may satisfy the withholding tax
obligation (up to an amount calculated by applying such Optionee's maximum
marginal tax rate) by electing to have the Company withhold from the Shares to
be issued upon award, vesting or exercise of the Option or Right, that number
of Shares, or by delivering to the Company that number of previously owned
Shares, having a Fair Market Value (as defined in the Plan) equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld or delivered, as the case may be, shall be determined on the date
that the amount of tax to be withheld is determined (the "Tax Date").
(b) Election to Have Shares Withheld. All elections by an
Optionee to have Shares withheld or to deliver previously owned Shares
pursuant to this Section 22 shall be made in writing in a form acceptable to
the Company and shall be subject to the following restrictions:
(i) the election must be made on or prior to the application
Tax Date;
(ii) all elections shall be subject to the consent or
disapproval of the Company; and
(iii) if the Optionee is subject to Section 16 of the Securities
Act, the election shall, to the extent practicable, desirable, or as determined
by the Board, comply with the applicable provisions of Rule 16b-3 and may be
subject to such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
(c) Section 83(b) Elections. In the event that (i) an election
to have the Shares withheld is made by an Optionee, (ii) no election is filed
under Section 83(b) of the Internal Revenue Code by such Optionee, and (iii)
the Tax Date is deferred under Section 83 of the Internal Revenue Code, the
Optionee shall receive the full number of Shares with respect to which the
Option or Right has been awarded, has vested or has been exercised, as the case
may be, but such Optionee shall be unconditionally obligated to tender back
to the Company the proper number of Shares on the Tax Date.
23. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company within twelve (12) months after
the date the Plan is adopted. Such shareholder approval shall be obtained in
the manner and to the degree required under applicable federal and state law.
Adopted by the Board of Directors on November 7, 1996
ATTEST:
SGI International
/s/
_______________________________
John R. Taylor, General Counsel
