As filed with the Securities and Exchange Commission on May 8, 2000
File No. 2-93124
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SGI INTERNATIONAL
(Exact Name of Registrant as Specified in its Charter)
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Utah 33-0119035
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
1200 Prospect Street, Suite 325
La Jolla, California, CA 92037
(Address of Registrant's Principal Executive Office)
Amended SGI International 1996 Omnibus Stock Plan
(Full title of the plan)
Mr. Lynn Mabey
Murphy, Tolboe & Mabey
124 South 600 East, Suite 100
Salt Lake City, Utah 84102
(Name and Address of Agent for Service)
(801) 533-8505
(Telephone number, including area code, of agent for service)
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Copies of correspondence to:
David A. Fisher
Fisher Thurber, LLP
4225 Executive Square, Suite 1600
La Jolla, California 92037-1483
(619) 535-9400
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<PAGE>
<TABLE>
Calculation of Registration Fee
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Proposed Maximum Proposed Amount of
Title of Securities Amount to be Offering Price Maximum Aggregate Registration
to be Registered Registered(1) per share(2) Offering Price(2) Fee(3)
- -------------------- ------------------ ----------------- -------------------- --------------
<S> <C> <C> <C> <C>
Common Stock, 2,000,000 shares $ 0.36 $720,000 $190
No Par Value
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</TABLE>
(1) Includes approximately 1,990,000 shares underlying options previously
issued.
(2) Estimated solely for the purpose of determining the registration fee.
(3) Calculated pursuant to Rule 457(h)(1) based on the average of the bid and
ask prices of the Common Stock on the OTCBB on May 5, 2000.
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PART I
INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
Not filed as part of this Registration Statement pursuant to Note to
Part 1 of Form S-8.
Item 2. Registrant Information and Employee Plan Annual Information.
Not filed as part of this Registration Statement pursuant to Note to
Part 1 of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents, which previously have been filed by the Company with
the Securities and Exchange Commission (the "Commission"), are incorporated
herein by reference and made a part hereof:
(i) The Company's Annual Report on Form 10-KSB for the year ended December
31, 1999;
(ii) The Company's Current Report on Form 8-K, filed with the Commission on
April 12, 2000;
(iii) All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
the end of the fiscal year covered by the Annual Report referred to in
(i) above; and
(iv) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated April 6, 1988, as amended by
an amendment to Application or Report on Form 8 dated April 13,
1988, including any other amendment or report filed for the purpose of
updating such description.
(v) All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Registration Statement and prior to the filing of a
post-effective amendment hereto, which indicates that all securities
offered hereunder have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such
documents.
For purposes of this Registration Statement, any document or any statement
contained in a document incorporated or deemed to be incorporated herein by
reference shall be deemed to be modified or superseded to the extent that a
subsequently filed document or a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated herein
by reference modifies or supersedes such document or such statement in such
document. Any statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Registration Statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
The Bylaws of the Company provide that, subject to any limitations imposed by
the Utah Revised Business Corporation Act, the officers and directors of the
Company shall be indemnified by the Company against expenses, including
attorneys' fees, reasonably incurred in connection with or resulting from the
defense of any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person becomes or is threatened
to be made part of by reason of his position as an officer, director, employee
or agent of the Company or his service at the request of the Company as an
officer, director, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, provided that, in the context of such
action, such officer or director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, such officer or
director had no reasonable cause to believe his conduct was unlawful.
Any indemnification made pursuant to the Bylaws shall be made only upon the
determination by a majority vote of a quorum of the Board of Directors,
provided, however, that such indemnification shall be made without such
determination to the extent that the officer or director is successful in the
defense of the action at issue. Additionally, any expenses incurred in defense
of an action against an officer or director shall be paid in advance of final
disposition of the action upon receipt of an undertaking by or on behalf of such
officer or director to repay the amount advanced if it is ultimately determined
that he is not entitled to be indemnified for such expenses.
The Utah Revised Business Corporation Act (the "Code") permits the Company to
indemnify an Officer or Director who was or is a party or is threatened to be
made a party to any proceeding because of his or her position, if the Officer or
Director acted in good faith and in a manner he or she reasonably believed to be
in the best interests of the Company. The Code authorizes the Company to advance
expenses incurred in defending any such proceeding under certain circumstances,
and if the Officer or Director is successful on the merits, it authorizes the
Company to indemnify the Officer or Director against all expenses, including
attorneys' fees, incurred in connection with any such proceeding.
The Company's Bylaws reflect the indemnification provisions contained in the
Utah Revised Business Corporation Act, except that pursuant to the Utah Revised
Business Corporation Act no indemnification may be made to an officer or
director in connection with an action by or in the right of the Company.
Additionally, no indemnification may be made where the officer or director has
been adjudged to be liable to the Company, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that such person is fairly and reasonably entitled to indemnity for
such expenses as the court considers proper.
Registrant has currently in effect a claims made directors and officers
liability insurance and company reimbursement insurance policy protecting its
directors and officers against liability by reason of their being or having been
directors or officers. The directors and officers liability portion of such
policy covers all directors and officers of the registrant and of certain
subsidiary companies. The policy provides for a payment on behalf of the
directors and officers up to the policy limits for all Losses (as defined) which
the directors and officers, or any of them, shall become legally obligated to
pay, from claims made against them during the policy period for defined Wrongful
Acts. The directors and officers or any of them shall become legally obligated
to pay, from claims made against them during the policy period for defined
wrongful acts, which include; errors, misstatements, misleading statements, acts
or omissions, neglect or breach of duty by the directors or officers in the
discharge of their duties solely in their capacity as directors and officers of
the company, individually or collectively. The insurance includes the cost of
defenses, appeals, bonds, settlements and judgments. The insurers limit of
liability under the policy is $2 million in the aggregate for all losses per
year. The policy contains various reporting requirements, deductibles, and
exclusions.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
The following exhibits are filed pursuant to Item 601 of Regulation S-K:
99.1 Amended SGI International 1996 Omnibus Stock Plan.(1)
99.2 Form of Incentive Stock Option dated March 2, 2000.(1)
99.3 Form of Incentive Stock Option dated April 1, 1999.(1)
99.4 Form of Incentive Stock Option dated October 1, 1998.(1)
99.5 Form of Incentive Stock Option dated April 21, 1998.(1)
99.6 Form of Incentive Stock Option dated January 14, 1998.(1)
99.7 Form of Incentive Stock Option dated September 11, 1997.(1)
5.1 Opinion of Fisher Thurber, LLP. regarding the legality of the Common
Stock registered hereby.(1)
23.1 Consent of J.H. Cohn, LLP, Independent Accountants.(1)
23.2 Consent of Fisher Thurber, LLP.(included in Exhibit 5).(1)
24.1 Power of Attorney is contained on signature page.
- --------------------
(1) Filed herewith.
Item 9. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that paragraphs (1)(i)
and (1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of La Jolla, State of California, on May 5, 2000.
SGI INTERNATIONAL
By: /s/ MICHAEL L. ROSE
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Michael L. Rose, Chief Executive Officer
Each person whose signature appears below constitutes and appoints Michael L.
Rose and John R. Taylor, and each of them, his true and lawful attorneys-in-fact
and agents, each with full power of substitution and resubstitution, severally,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys- in-fact and agents, or any of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to
the requirements of the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/ MICHAEL L. ROSE Chairman of the Board and May 5, 2000
- --------------------------- Chief Executive Officer
Michael L. Rose
/s/ ERNEST P. ESZTERGAR Director May 5, 2000
- ---------------------------
Ernest P. Esztergar
/s/ NORMAN A. GRANT Director May 5, 2000
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Norman A. Grant
/s/ WILLIAM A. KERR Director May 5, 2000
- ---------------------------
William A. Kerr
/s/ JAMES W. MAHLER Director May 5, 2000
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James W. Mahler
/s/ JOHN R. TAYLOR Director May 5, 2000
- ---------------------------
John R. Taylor
/s/ JEFFREY L. SMITH Director May 5, 2000
- ---------------------------
Jeffrey L. Smith
<PAGE>
EXHIBIT INDEX
No. Description
99.1 Amended SGI International 1996 Omnibus Stock Plan.
99.2 Form of Incentive Stock Option dated March 2, 2000.
99.3 Form of Incentive Stock Option dated April 1, 1999.
99.4 Form of Incentive Stock Option dated October 1, 1998.
99.5 Form of Incentive Stock Option dated April 21, 1998.
99.6 Form of Incentive Stock Option dated January 14, 1998.
99.7 Form of Incentive Stock Option dated September 11, 1997.
5.1 Opinion of Fisher Thurber, LLP. regarding the legality of the Common
Stock registered hereby.
23.1 Consent of J.H. Cohn, LLP, Independent Accountants.
23.2 Consent of Fisher Thurber, LLP.(included in Exhibit 5).
24.1 Power of Attorney is contained on signature page.
AMENDED
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.
(ii) The total number of shares to be issued under this
Plan shall never exceed thirty percent (30%) of the then outstanding shares of
this Company.
(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. Notwithstanding
the above, every employee shall have the right to exercise at least twenty
percent (20%) of their options each year over a period of five (5) 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 a period of six (6) months, (thirty (30)
days 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 within six (6) months of such termination then 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. The repurchase price must be made at the original purchase
price, provided the right to repurchase at such price lapses at the rate of at
least 20% per year over 5 years from the date the option is granted. Also, SGI's
right to repurchase must be exercised for cash or cancellation of purchase money
indebtedness within 90 days of termination of employment, or in the case of
securities issued upon exercise of options after the date of termination, within
90 days after the date of exercise. These purchase rights apply only to
employees and not to officers, directors, or consultants.
(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 February 16, 1999
ATTEST:
SGI International
By: /s/ JOHN R. TAYLOR
________________________________
John R. Taylor, General Counsel
SGI INTERNATIONAL
INCENTIVE STOCK OPTION AGREEMENT
2000ISO-____
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of March 2, 2000, by and between SGI International and
_____________________ the "Optionee").
The Company has granted to the Optionee an option to purchase certain
Shares upon the terms and conditions set forth in this Option Agreement (the
"Option"). The Option shall in all respects be subject to the terms and
conditions of the SGI International 1996 Omnibus Stock Plan (the "Plan"), the
provisions of which are incorporated herein by reference.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "Date of Option Grant" means March 2, 2000.
(b) "Number of Option Shares" means ___________ Shares as adjusted from time
to time pursuant to Section 8.
(c) "Exercise Price" means $0.37 per Share, as adjusted from time to time
pursuant to Section 8.
(d) "Initial Exercise Date" is January 17, 2001.
(e) "Option Expiration Date" means the date five (5) years after the Date of
Option Grant.
(f) "Company" means SGI International, a Utah corporation, or any successor
corporation thereto.
(g) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(h) "Securities Act" means the Securities Act of 1993, as amended.
(i) "Continuous Status as an Employee" means that the employment relationship is
not interrupted or terminated by the Company, the Parent or Subsidiary.
Continuous Status as an Employee 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. [NOTE: If the Option is exercised more than
three (3) months after the date on which the Optionee ceased to be an Employee
(other than by reason of death or a Disability) the Option will be treated as a
Non-Qualified Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.]
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is intended to include the conjunctive as well as
the disjunctive.
2. Tax Consequences.
2.1 Tax Status of the Option. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Company) is greater than One Hundred Thousand Dollars ($100,000),
the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option.
2.2 Election Under Section 83(b) of the Code. If the Optionee
exercises this Option to purchase Shares that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Continuous Status as an Employee terminates, (b) the Optionee
is an officer, director, or 10% shareholder ("Insider") and exercises the Option
within six (6) months of the Date of Option Grant (if a class of equity security
of the Company is registered under Section 12 of the Exchange Act and no
exemption from Rule 16b-3 is available), or (c) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any Officer of the
Company or a Parent or Subsidiary shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, 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,
or election.
4. Exercise of the Option.
4.1 Right to Exercise.
(a) Except as otherwise provided herein, the Option shall be exercisable on and
after the Initial Exercise Date and prior to the termination of the Option (as
provided in Section 6) in an amount not to exceed the Number of Option Shares
less the number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Company prior to the
Date of Option Grant with respect to which such options are exercisable for the
first time during the same calendar year, shall not exceed One Hundred Thousand
Dollars ($100,000). For purposes of the preceding sentence, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of shares of stock shall be
determined as of the time the option with respect to such shares is granted.
Such limitation on exercise shall be referred to in this Option Agreement as the
"ISO Exercise Limitation." If Section 422 of the Code is amended to provide for
a different limitation from that set forth in this Section 4.1(a), the ISO
Exercise Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee's termination of Service, (ii)
the day immediately prior to the effective date of a Change of Control in which
the Option is not assumed or substituted for by the acquiring Corporation as
provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Non-Qualified Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
4.2 Payment of Exercise Price.
(a) Form of Payment. The payment of the aggregate Exercise Price for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Board at the time of grant, and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) 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 (2) 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.
(b) Tender of Stock. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of Shares to the extent such tender of Shares
would constitute a violation of the provisions of any law, regulation, or
agreement restricting the redemption of the Company's stock. The Option may not
be exercised by tender to the Company of Shares unless such Shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company unless approved by the Board and in
compliance with Applicable Laws, including Rule 16b-3.
4.3 Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for,
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company, if any, which arise in connection with
the Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the tax withholding obligations of the Company are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired, even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided
herein. At the discretion of the Company, Optionees may satisfy withholding
obligations by electing to have the Company withhold from the Shares to be
issued upon award, vesting, or exercise of the Option, that number of Shares
having a fair market value equal to the amount required to be withheld.
4.4 Certificate Registration. Except in the event the Exercise Price is paid
by means of a cashless exercise, the certificate for the shares as to which
the Option is exercised shall be registered in the name of the Optionee, or,
if applicable, the heirs of the Optionee.
4.5 Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation or the requirements of any stock exchange or market
system upon which the Stock may then be listed. In addition, the Option may not
be exercised unless (i) a registration statement under the Securities Act shall
at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares subject to
the Option 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. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as maybe requested by
the Company.
4.6 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise of the Option.
5. Non-transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent provided in Section 7, may be
so exercised by the Optionee's legal representative or by any person empowered
to do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Continuing Status as an Employee as described in Section 1.1(i), or (c) a Change
of Control to the extent provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) 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 by bequest or inheritance may exercise the Option, 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 as set forth in the Option
Agreement). To the extent that Optionee was not entitled to exercise an Option
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 does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(b) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option, 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. To the extent that Optionee was not entitled
to exercise an Option at the date of such termination, and to the extent that
the Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate. If the Option is
exercised more than three (3) months after the date on which the Optionee's
Continuing Status as an Employee terminated as a result of a disability other
than a permanent and total disability as defined in Section 22(a)(3) of the
Code, the Option will be treated as a Non-Qualified Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.
(c) Termination of Employment. Subject to Section 24 of the Plan relating to
forfeitures of Options, in the event an Optionee's Continuous Status as an
Employee terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of time as
is determined by the Board at the time of grant, not to exceed 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. To the extent that
Optionee was not entitled to exercise an Option at the date of such termination,
and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
7.2 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.5, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.
7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred ninetieth (190th) day after
the Optionee's termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as to
the tax consequences to the Optionee of any such delayed exercise.
8. 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 the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option 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 shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option 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 shall be assumed or an equivalent Option
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 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 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 shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, immediately following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option 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, for each Share of Optioned Stock subject to the Option, 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 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, to the extent
they are exercisable and vested (including Options 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). 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 by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section 8, 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 the Company occurring within a
two-year period, and other than as a result of an illness or death of a director
or directors, and as a result of which fewer than a majority of the directors
are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the
Company as of the date the Plan is approved by the Board or the shareholders,
whichever shall first occur, or (B) 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 8,
"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.
9. Rights as a Shareholder, Employee, or Consultant. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the company). No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 8. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue as an Employee of the Company or interfere in any
way with any right of the Company to terminate the Optionee's continuing status
as an Employee, as the case may be, at any time.
10. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) yeas after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfer shall continue notwithstanding
that a legend has been placed on the certificate pursuant to the preceding
sentence.
11. Legends. The Company may at any time place legends referencing any
applicable federal, state, or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
11.3 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS FROM THE DATE THE
OPTION IS GRANTED AND WITHIN ONE YEAR AFTER THE EXERCISE AND TRANSFER OF SUCH
SHARES. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR
TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES
SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL
SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock made by the Company pursuant to an
effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such public offering; provided,
however, that such period of time shall not exceed one hundred eighty (180) days
from the effective date of the registration statement to be filed in connection
with such public offering. The foregoing limitation shall not apply to shares
registered in the public offering under the Securities Act. The Optionee shall
be subject to this Section provided, and only if, the Officers and Directors of
the Company are also subject to similar arrangements.
13. Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, and assigns.
14. Termination or Amendment. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion thereof
without the consent of the Optionee, unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
15. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein or therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company with respect to such subject matter other than
those set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.
SGI INTERNATIONAL
By:/s/ MICHAEL L. ROSE
- -------------------------------------
Michael L. Rose, President and CEO
<PAGE>
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Options granted
hereunder subject to all of the terms and provisions thereof. The Optionee
hereby agrees to accept as binding, conclusive, and final, all decisions or
interpretations of the Board upon any questions arising under this Option
Agreement.
The undersigned acknowledges receipt of a copy of the Plan.
OPTIONEE
Date:
SGI INTERNATIONAL
INCENTIVE STOCK OPTION AGREEMENT
99ISO-_____
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of April 1, 1999, by and between SGI International and
______________________ (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
Shares upon the terms and conditions set forth in this Option Agreement (the
"Option"). The Option shall in all respects be subject to the terms and
conditions of the SGI International 1996 Omnibus Stock Plan (the "Plan"), the
provisions of which are incorporated herein by reference.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "Date of Option Grant" means April 1, 1999.
(b) "Number of Option Shares" means _______________ Shares as
adjusted from time to time pursuant to Section 8.
(c) "Exercise Price" means $0.125 per Share, as adjusted from time to time
pursuant to Section 8.
(d) "Initial Exercise Date" means April 2, 1999.
(e) "Option Expiration Date" means the date five (5) years after the Date of
Option Grant.
(f) "Company" means SGI International, a Utah corporation, or any successor
corporation thereto.
(g) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(h) "Securities Act" means the Securities Act of 1993, as amended.
(i) "Continuous Status as an Employee" means that the employment relationship is
not interrupted or terminated by the Company, the Parent or Subsidiary.
Continuous Status as an Employee 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. [NOTE: If the Option is exercised more than
three (3) months after the date on which the Optionee ceased to be an Employee
(other than by reason of death or a Disability) the Option will be treated as a
Non-Qualified Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.]
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is intended to include the conjunctive as well as
the disjunctive.
2. Tax Consequences.
2.1 Tax Status of the Option. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Company) is greater than One Hundred Thousand Dollars ($100,000),
the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option.
2.2 Election Under Section 83(b) of the Code. If the Optionee
exercises this Option to purchase Shares that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Continuous Status as an Employee terminates, (b) the Optionee
is an officer, director, or 10% shareholder ("Insider") and exercises the Option
within six (6) months of the Date of Option Grant (if a class of equity security
of the Company is registered under Section 12 of the Exchange Act and no
exemption from Rule 16b-3 is available), or (c) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any Officer of the
Company or a Parent or Subsidiary shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, 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,
or election.
4. Exercise of the Option.
4.1 Right to Exercise.
(a) Except as otherwise provided herein, the Option shall be exercisable on and
after the Initial Exercise Date and prior to the termination of the Option (as
provided in Section 6) in an amount not to exceed the Number of Option Shares
less the number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Company prior to the
Date of Option Grant with respect to which such options are exercisable for the
first time during the same calendar year, shall not exceed One Hundred Thousand
Dollars ($100,000). For purposes of the preceding sentence, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of shares of stock shall be
determined as of the time the option with respect to such shares is granted.
Such limitation on exercise shall be referred to in this Option Agreement as the
"ISO Exercise Limitation." If Section 422 of the Code is amended to provide for
a different limitation from that set forth in this Section 4.1(a), the ISO
Exercise Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee's termination of Service, (ii)
the day immediately prior to the effective date of a Change of Control in which
the Option is not assumed or substituted for by the acquiring Corporation as
provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Non-Qualified Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
4.2 Payment of Exercise Price.
(a) Form of Payment. The payment of the aggregate Exercise Price for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Board at the time of grant, and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) 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 (2) 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.
(b) Tender of Stock. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of Shares to the extent such tender of Shares
would constitute a violation of the provisions of any law, regulation, or
agreement restricting the redemption of the Company's stock. The Option may not
be exercised by tender to the Company of Shares unless such Shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company unless approved by the Board and in
compliance with Applicable Laws, including Rule 16b-3.
4.3 Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for,
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company, if any, which arise in connection with
the Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the tax withholding obligations of the Company are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired, even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided
herein. At the discretion of the Company, Optionees may satisfy withholding
obligations by electing to have the Company withhold from the Shares to be
issued upon award, vesting, or exercise of the Option, that number of Shares
having a fair market value equal to the amount required to be withheld.
4.4 Certificate Registration. Except in the event the Exercise Price is paid by
means of a cashless exercise, the certificate for the shares as to which the
Option is exercised shall be registered in the name of the Optionee, or, if
applicable, the heirs of the Optionee.
4.5 Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation or the requirements of any stock exchange or market
system upon which the Stock may then be listed. In addition, the Option may not
be exercised unless (i) a registration statement under the Securities Act shall
at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares subject to
the Option 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. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as maybe requested by
the Company.
4.6 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise of the Option.
5. Non-transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent provided in Section 7, may be
so exercised by the Optionee's legal representative or by any person empowered
to do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Continuing Status as an Employee as described in Section 1.1(i), or (c) a Change
of Control to the extent provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) 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 by bequest or inheritance may exercise the Option, 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 as set forth in the Option
Agreement). To the extent that Optionee was not entitled to exercise an Option
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 does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(b) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option, 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. To the extent that Optionee was not entitled
to exercise an Option at the date of such termination, and to the extent that
the Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate. If the Option is
exercised more than three (3) months after the date on which the Optionee's
Continuing Status as an Employee terminated as a result of a disability other
than a permanent and total disability as defined in Section 22(a)(3) of the
Code, the Option will be treated as a Non-Qualified Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.
(c) Termination of Employment. Subject to Section 24 of the Plan relating to
forfeitures of Options, in the event an Optionee's Continuous Status as an
Employee terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of time as
is determined by the Board at the time of grant, not to exceed 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. To the extent that
Optionee was not entitled to exercise an Option at the date of such termination,
and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
7.2 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.5, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.
7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred ninetieth (190th) day after
the Optionee's termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as to
the tax consequences to the Optionee of any such delayed exercise.
8. 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 the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option 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 shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option 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 shall be assumed or an equivalent Option
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 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 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 shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, immediately following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option 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, for each Share of Optioned Stock subject to the Option, 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 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, to the extent
they are exercisable and vested (including Options 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). 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 by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section 8, 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 the Company occurring within a
two-year period, and other than as a result of an illness or death of a director
or directors, and as a result of which fewer than a majority of the directors
are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the
Company as of the date the Plan is approved by the Board or the shareholders,
whichever shall first occur, or (B) 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 8,
"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.
9. Rights as a Shareholder, Employee, or Consultant. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the company). No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 8. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue as an Employee of the Company or interfere in any
way with any right of the Company to terminate the Optionee's continuing status
as an Employee, as the case may be, at any time.
10. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) yeas after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfer shall continue notwithstanding
that a legend has been placed on the certificate pursuant to the preceding
sentence.
11. Legends. The Company may at any time place legends referencing any
applicable federal, state, or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
11.3 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS FROM THE DATE THE
OPTION IS GRANTED AND WITHIN ONE YEAR AFTER THE EXERCISE AND TRANSFER OF SUCH
SHARES. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR
TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES
SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL
SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock made by the Company pursuant to an
effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such public offering; provided,
however, that such period of time shall not exceed one hundred eighty (180) days
from the effective date of the registration statement to be filed in connection
with such public offering. The foregoing limitation shall not apply to shares
registered in the public offering under the Securities Act. The Optionee shall
be subject to this Section provided, and only if, the Officers and Directors of
the Company are also subject to similar arrangements.
13. Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, and assigns.
14. Termination or Amendment. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion thereof
without the consent of the Optionee, unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
15. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein or therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company with respect to such subject matter other than
those set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.
SGI INTERNATIONAL
By: /s/ JOSEPH A. SAVOCA
Title: Chief Executive Office/Chairman
<PAGE>
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Options granted
hereunder subject to all of the terms and provisions thereof. The Optionee
hereby agrees to accept as binding, conclusive, and final, all decisions or
interpretations of the Board upon any questions arising under this Option
Agreement.
The undersigned acknowledges receipt of a copy of the Plan.
OPTIONEE
Date:
SGI INTERNATIONAL
INCENTIVE STOCK OPTION AGREEMENT
98ISO-_________
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of October 1, 1998, by and between SGI International and
____________________________ (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
Shares upon the terms and conditions set forth in this Option Agreement (the
"Option"). The Option shall in all respects be subject to the terms and
conditions of the SGI International 1996 Omnibus Stock Plan (the "Plan"), the
provisions of which are incorporated herein by reference.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "Date of Option Grant" means October 1, 1998.
(b) "Number of Option Shares" means _____________ Shares as
adjusted from time to time pursuant to Section 8.
(c) "Exercise Price" means $0.265 per Share, as adjusted from time to time
pursuant to Section 8.
(d) "Initial Exercise Date" means Date of Option Grant.
(e) "Option Expiration Date" means the date five (5) years after the Date of
Option Grant.
(f) "Company" means SGI International, a Utah corporation, or any successor
corporation thereto.
(g) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(h) "Securities Act" means the Securities Act of 1993, as amended.
(i) "Continuous Status as an Employee" means that the employment relationship is
not interrupted or terminated by the Company, the Parent or Subsidiary.
Continuous Status as an Employee 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. [NOTE: If the Option is exercised more than
three (3) months after the date on which the Optionee ceased to be an Employee
(other than by reason of death or a Disability) the Option will be treated as a
Non-Qualified Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.]
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is intended to include the conjunctive as well as
the disjunctive.
2. Tax Consequences.
2.1 Tax Status of the Option. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Company) is greater than One Hundred Thousand Dollars ($100,000),
the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option.
2.2 Election Under Section 83(b) of the Code. If the Optionee
exercises this Option to purchase Shares that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Continuous Status as an Employee terminates, (b) the Optionee
is an officer, director, or 10% shareholder ("Insider") and exercises the Option
within six (6) months of the Date of Option Grant (if a class of equity security
of the Company is registered under Section 12 of the Exchange Act and no
exemption from Rule 16b-3 is available), or (c) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any Officer of the
Company or a Parent or Subsidiary shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, 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,
or election.
4. Exercise of the Option.
4.1 Right to Exercise.
(a) Except as otherwise provided herein, the Option shall be exercisable on and
after the Initial Exercise Date and prior to the termination of the Option (as
provided in Section 6) in an amount not to exceed the Number of Option Shares
less the number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Company prior to the
Date of Option Grant with respect to which such options are exercisable for the
first time during the same calendar year, shall not exceed One Hundred Thousand
Dollars ($100,000). For purposes of the preceding sentence, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of shares of stock shall be
determined as of the time the option with respect to such shares is granted.
Such limitation on exercise shall be referred to in this Option Agreement as the
"ISO Exercise Limitation." If Section 422 of the Code is amended to provide for
a different limitation from that set forth in this Section 4.1(a), the ISO
Exercise Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee's termination of Service, (ii)
the day immediately prior to the effective date of a Change of Control in which
the Option is not assumed or substituted for by the acquiring Corporation as
provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Non-Qualified Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
4.2 Payment of Exercise Price.
(a) Form of Payment. The payment of the aggregate Exercise Price for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Board at the time of grant, and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) 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 (2) 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.
(b) Tender of Stock. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of Shares to the extent such tender of Shares
would constitute a violation of the provisions of any law, regulation, or
agreement restricting the redemption of the Company's stock. The Option may not
be exercised by tender to the Company of Shares unless such Shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company unless approved by the Board and in
compliance with Applicable Laws, including Rule 16b-3.
4.3 Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for,
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company, if any, which arise in connection with
the Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the tax withholding obligations of the Company are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired, even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided
herein. At the discretion of the Company, Optionees may satisfy withholding
obligations by electing to have the Company withhold from the Shares to be
issued upon award, vesting, or exercise of the Option, that number of Shares
having a fair market value equal to the amount required to be withheld.
4.4 Certificate Registration. Except in the event the Exercise Price is paid by
means of a cashless exercise, the certificate for the shares as to which the
Option is exercised shall be registered in the name of the Optionee, or, if
applicable, the heirs of the Optionee.
4.5 Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation or the requirements of any stock exchange or market
system upon which the Stock may then be listed. In addition, the Option may not
be exercised unless (i) a registration statement under the Securities Act shall
at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares subject to
the Option 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. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as maybe requested by
the Company.
4.6 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise of the Option.
5. Non-transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent provided in Section 7, may be
so exercised by the Optionee's legal representative or by any person empowered
to do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Continuing Status as an Employee as described in Section 1.1(i), or (c) a Change
of Control to the extent provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) 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 by bequest or inheritance may exercise the Option, 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 as set forth in the Option
Agreement). To the extent that Optionee was not entitled to exercise an Option
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 does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(b) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option, 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. To the extent that Optionee was not entitled
to exercise an Option at the date of such termination, and to the extent that
the Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate. If the Option is
exercised more than three (3) months after the date on which the Optionee's
Continuing Status as an Employee terminated as a result of a disability other
than a permanent and total disability as defined in Section 22(a)(3) of the
Code, the Option will be treated as a Non-Qualified Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.
(c) Termination of Employment. Subject to Section 24 of the Plan relating to
forfeitures of Options, in the event an Optionee's Continuous Status as an
Employee terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of time as
is determined by the Board at the time of grant, not to exceed 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. To the extent that
Optionee was not entitled to exercise an Option at the date of such termination,
and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
7.2 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.5, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.
7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred ninetieth (190th) day after
the Optionee's termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as to
the tax consequences to the Optionee of any such delayed exercise.
8. 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 the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option 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 shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option 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 shall be assumed or an equivalent Option
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 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 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 shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, immediately following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option 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, for each Share of Optioned Stock subject to the Option, 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 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, to the extent
they are exercisable and vested (including Options 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). 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 by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section 8, 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 the Company occurring within a
two-year period, and other than as a result of an illness or death of a director
or directors, and as a result of which fewer than a majority of the directors
are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the
Company as of the date the Plan is approved by the Board or the shareholders,
whichever shall first occur, or (B) 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 8,
"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.
9. Rights as a Shareholder, Employee, or Consultant. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the company). No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 8. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue as an Employee of the Company or interfere in any
way with any right of the Company to terminate the Optionee's continuing status
as an Employee, as the case may be, at any time.
10. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) yeas after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfer shall continue notwithstanding
that a legend has been placed on the certificate pursuant to the preceding
sentence.
11. Legends. The Company may at any time place legends referencing any
applicable federal, state, or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
11.3 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS FROM THE DATE THE
OPTION IS GRANTED AND WITHIN ONE YEAR AFTER THE EXERCISE AND TRANSFER OF SUCH
SHARES. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR
TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES
SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL
SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock made by the Company pursuant to an
effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such public offering; provided,
however, that such period of time shall not exceed one hundred eighty (180) days
from the effective date of the registration statement to be filed in connection
with such public offering. The foregoing limitation shall not apply to shares
registered in the public offering under the Securities Act. The Optionee shall
be subject to this Section provided, and only if, the Officers and Directors of
the Company are also subject to similar arrangements.
13. Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, and assigns.
14. Termination or Amendment. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion thereof
without the consent of the Optionee, unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
15. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein or therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company with respect to such subject matter other than
those set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.
SGI INTERNATIONAL
By: /s/ JOSEPH A. SAVOCA
Title: Chief Executive Office/Chairman
<PAGE>
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Options granted
hereunder subject to all of the terms and provisions thereof. The Optionee
hereby agrees to accept as binding, conclusive, and final, all decisions or
interpretations of the Board upon any questions arising under this Option
Agreement.
The undersigned acknowledges receipt of a copy of the Plan.
OPTIONEE
Date:
SGI INTERNATIONAL
INCENTIVE STOCK OPTION AGREEMENT
98ISO-________
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of April 21, 1998, by and between SGI International and
______________________________ (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
Shares upon the terms and conditions set forth in this Option Agreement (the
"Option"). The Option shall in all respects be subject to the terms and
conditions of the SGI International 1996 Omnibus Stock Plan (the "Plan"), the
provisions of which are incorporated herein by reference.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "Date of Option Grant" means April 21, 1998.
(b) "Number of Option Shares" means _________________ Shares as
adjusted from time to time pursuant to Section 8.
(c) "Exercise Price" means $0.625 per Share, as adjusted from time to time
pursuant to Section 8.
(d) "Initial Exercise Date" means Date of Option Grant.
(e) "Option Expiration Date" means the date five (5) years after the Date of
Option Grant.
(f) "Company" means SGI International, a Utah corporation, or any successor
corporation thereto.
(g) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(h) "Securities Act" means the Securities Act of 1993, as amended.
(i) ?Continuous Status as an Employee? means that the employment relationship is
not interrupted or terminated by the Company, the Parent or Subsidiary.
Continuous Status as an Employee 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. [NOTE: If the Option is exercised more than
three (3) months after the date on which the Optionee ceased to be an Employee
(other than by reason of death or a Disability) the Option will be treated as a
Non-Qualified Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.]
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular. Use of the term ?or? is intended to include the conjunctive as well as
the disjunctive.
2. Tax Consequences.
2.1 Tax Status of the Option. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee?s own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Company) is greater than One Hundred Thousand Dollars ($100,000),
the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option.
2.2 Election Under Section 83(b) of the Code. If the Optionee
exercises this Option to purchase Shares that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee?s tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee?s original purchase price
if the Optionee?s Continuous Status as an Employee terminates, (b) the Optionee
is an officer, director, or 10% shareholder (?Insider?) and exercises the Option
within six (6) months of the Date of Option Grant (if a class of equity security
of the Company is registered under Section 12 of the Exchange Act and no
exemption from Rule 16b-3 is available), or (c) the Optionee is subject to a
restriction on transfer to comply with ?Pooling-of-Interests Accounting? rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE?S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any Officer of the
Company or a Parent or Subsidiary shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, 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,
or election.
4. Exercise of the Option.
4.1 Right to Exercise.
(a) Except as otherwise provided herein, the Option shall be exercisable on and
after the Initial Exercise Date and prior to the termination of the Option (as
provided in Section 6) in an amount not to exceed the Number of Option Shares
less the number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Company prior to the
Date of Option Grant with respect to which such options are exercisable for the
first time during the same calendar year, shall not exceed One Hundred Thousand
Dollars ($100,000). For purposes of the preceding sentence, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of shares of stock shall be
determined as of the time the option with respect to such shares is granted.
Such limitation on exercise shall be referred to in this Option Agreement as the
?ISO Exercise Limitation.? If Section 422 of the Code is amended to provide for
a different limitation from that set forth in this Section 4.1(a), the ISO
Exercise Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee?s termination of Service, (ii)
the day immediately prior to the effective date of a Change of Control in which
the Option is not assumed or substituted for by the acquiring Corporation as
provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Non-Qualified Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
4.2 Payment of Exercise Price.
(a) Form of Payment. The payment of the aggregate Exercise Price for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Board at the time of grant, and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) 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 (2) 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.
(b) Tender of Stock. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of Shares to the extent such tender of Shares
would constitute a violation of the provisions of any law, regulation, or
agreement restricting the redemption of the Company?s stock. The Option may not
be exercised by tender to the Company of Shares unless such Shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company unless approved by the Board and in
compliance with Applicable Laws, including Rule 16b-3.
4.3 Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for,
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company, if any, which arise in connection with
the Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the tax withholding obligations of the Company are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired, even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided
herein. At the discretion of the Company, Optionees may satisfy withholding
obligations by electing to have the Company withhold from the Shares to be
issued upon award, vesting, or exercise of the Option, that number of Shares
having a fair market value equal to the amount required to be withheld.
4.4 Certificate Registration. Except in the event the Exercise Price is paid by
means of a cashless exercise, the certificate for the shares as to which the
Option is exercised shall be registered in the name of the Optionee, or, if
applicable, the heirs of the Optionee.
4.5 Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation or the requirements of any stock exchange or market
system upon which the Stock may then be listed. In addition, the Option may not
be exercised unless (i) a registration statement under the Securities Act shall
at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company?s legal
counsel to be necessary to the lawful issuance and sale of any shares subject to
the Option 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. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as maybe requested by
the Company.
4.6 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise of the Option.
5. Non-transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee?s
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent provided in Section 7, may be
so exercised by the Optionee?s legal representative or by any person empowered
to do so under the deceased Optionee?s will or under the then applicable laws of
descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee?s
Continuing Status as an Employee as described in Section 1.1(i), or (c) a Change
of Control to the extent provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) 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 by bequest or inheritance may exercise the Option, 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 as set forth in the Option
Agreement). To the extent that Optionee was not entitled to exercise an Option
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 does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(b) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option, 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. To the extent that Optionee was not entitled
to exercise an Option at the date of such termination, and to the extent that
the Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate. If the Option is
exercised more than three (3) months after the date on which the Optionee?s
Continuing Status as an Employee terminated as a result of a disability other
than a permanent and total disability as defined in Section 22(a)(3) of the
Code, the Option will be treated as a Non-Qualified Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.
(c) Termination of Employment. Subject to Section 24 of the Plan relating to
forfeitures of Options, in the event an Optionee's Continuous Status as an
Employee terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of time as
is determined by the Board at the time of grant, not to exceed 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. To the extent that
Optionee was not entitled to exercise an Option at the date of such termination,
and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
7.2 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.5, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee?s own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.
7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred ninetieth (190th) day after
the Optionee?s termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee?s own tax advisor as to
the tax consequences to the Optionee of any such delayed exercise.
8. 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 the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option 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 shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option 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 shall be assumed or an equivalent Option
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 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 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 shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, immediately following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option 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, for each Share of Optioned Stock subject to the Option, 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 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, to the extent
they are exercisable and vested (including Options 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). 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 by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section 8, 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 the Company occurring within a
two-year period, and other than as a result of an illness or death of a director
or directors, and as a result of which fewer than a majority of the directors
are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the
Company as of the date the Plan is approved by the Board or the shareholders,
whichever shall first occur, or (B) 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 8,
"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.
9. Rights as a Shareholder, Employee, or Consultant. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the company). No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 8. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue as an Employee of the Company or interfere in any
way with any right of the Company to terminate the Optionee?s continuing status
as an Employee, as the case may be, at any time.
10. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) yeas after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee?s
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company?s
stock to notify the Company of any such transfer shall continue notwithstanding
that a legend has been placed on the certificate pursuant to the preceding
sentence.
11. Legends. The Company may at any time place legends referencing any
applicable federal, state, or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
11.3 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (?ISO?). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS FROM THE DATE THE
OPTION IS GRANTED AND WITHIN ONE YEAR AFTER THE EXERCISE AND TRANSFER OF SUCH
SHARES. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR
TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES
SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL
SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER?S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock made by the Company pursuant to an
effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such public offering; provided,
however, that such period of time shall not exceed one hundred eighty (180) days
from the effective date of the registration statement to be filed in connection
with such public offering. The foregoing limitation shall not apply to shares
registered in the public offering under the Securities Act. The Optionee shall
be subject to this Section provided, and only if, the Officers and Directors of
the Company are also subject to similar arrangements.
13. Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, and assigns.
14. Termination or Amendment. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion thereof
without the consent of the Optionee, unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
15. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein or therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company with respect to such subject matter other than
those set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.
SGI INTERNATIONAL
By: /s/ JOSEPH A. SAVOCA
Title: Chief Executive Office/Chairman
<PAGE>
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Options granted
hereunder subject to all of the terms and provisions thereof. The Optionee
hereby agrees to accept as binding, conclusive, and final, all decisions or
interpretations of the Board upon any questions arising under this Option
Agreement.
The undersigned acknowledges receipt of a copy of the Plan.
OPTIONEE
Date:
SGI INTERNATIONAL
INCENTIVE STOCK OPTION AGREEMENT
98ISO-________
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of January 14, 1998, by and between SGI International and
___________________ (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
Shares upon the terms and conditions set forth in this Option Agreement (the
"Option"). The Option shall in all respects be subject to the terms and
conditions of the SGI International 1996 Omnibus Stock Plan (the "Plan"), the
provisions of which are incorporated herein by reference.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "Date of Option Grant" means January 14, 1998.
(b) "Number of Option Shares" means ___________________ Shares as
adjusted from time to time pursuant to Section 8.
(c) "Exercise Price" means $0.8437 per Share, as adjusted from time to time
pursuant to Section 8.
(d) "Initial Exercise Date" is February 2, 1998.
(e) "Option Expiration Date" means the date five (5) years after the Date of
Option Grant.
(f) "Company" means SGI International, a Utah corporation, or any successor
corporation thereto.
(g) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(h) "Securities Act" means the Securities Act of 1993, as amended.
(i) "Continuous Status as an Employee" means that the employment relationship is
not interrupted or terminated by the Company, the Parent or Subsidiary.
Continuous Status as an Employee 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. [NOTE: If the Option is exercised more than
three (3) months after the date on which the Optionee ceased to be an Employee
(other than by reason of death or a Disability) the Option will be treated as a
Non-Qualified Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.]
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is intended to include the conjunctive as well as
the disjunctive.
2. Tax Consequences.
2.1 Tax Status of the Option. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Company) is greater than One Hundred Thousand Dollars ($100,000),
the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option.
2.2 Election Under Section 83(b) of the Code. If the Optionee
exercises this Option to purchase Shares that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Continuous Status as an Employee terminates, (b) the Optionee
is an officer, director, or 10% shareholder ("Insider") and exercises the Option
within six (6) months of the Date of Option Grant (if a class of equity security
of the Company is registered under Section 12 of the Exchange Act and no
exemption from Rule 16b-3 is available), or (c) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any Officer of the
Company or a Parent or Subsidiary shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, 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,
or election.
4. Exercise of the Option.
4.1 Right to Exercise.
(a) Except as otherwise provided herein, the Option shall be exercisable on and
after the Initial Exercise Date and prior to the termination of the Option (as
provided in Section 6) in an amount not to exceed the Number of Option Shares
less the number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Company prior to the
Date of Option Grant with respect to which such options are exercisable for the
first time during the same calendar year, shall not exceed One Hundred Thousand
Dollars ($100,000). For purposes of the preceding sentence, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of shares of stock shall be
determined as of the time the option with respect to such shares is granted.
Such limitation on exercise shall be referred to in this Option Agreement as the
"ISO Exercise Limitation." If Section 422 of the Code is amended to provide for
a different limitation from that set forth in this Section 4.1(a), the ISO
Exercise Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee's termination of Service, (ii)
the day immediately prior to the effective date of a Change of Control in which
the Option is not assumed or substituted for by the acquiring Corporation as
provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Non-Qualified Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
4.2 Payment of Exercise Price.
(a) Form of Payment. The payment of the aggregate Exercise Price for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Board at the time of grant, and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) 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 (2) 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.
(b) Tender of Stock. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of Shares to the extent such tender of Shares
would constitute a violation of the provisions of any law, regulation, or
agreement restricting the redemption of the Company's stock. The Option may not
be exercised by tender to the Company of Shares unless such Shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company unless approved by the Board and in
compliance with Applicable Laws, including Rule 16b-3.
4.3 Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for,
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company, if any, which arise in connection with
the Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the tax withholding obligations of the Company are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired, even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided
herein. At the discretion of the Company, Optionees may satisfy withholding
obligations by electing to have the Company withhold from the Shares to be
issued upon award, vesting, or exercise of the Option, that number of Shares
having a fair market value equal to the amount required to be withheld.
4.4 Certificate Registration. Except in the event the Exercise Price is paid by
means of a cashless exercise, the certificate for the shares as to which the
Option is exercised shall be registered in the name of the Optionee, or, if
applicable, the heirs of the Optionee.
4.5 Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation or the requirements of any stock exchange or market
system upon which the Stock may then be listed. In addition, the Option may not
be exercised unless (i) a registration statement under the Securities Act shall
at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares subject to
the Option 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. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as maybe requested by
the Company.
4.6 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise of the Option.
5. Non-transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent provided in Section 7, may be
so exercised by the Optionee's legal representative or by any person empowered
to do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Continuing Status as an Employee as described in Section 1.1(i), or (c) a Change
of Control to the extent provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) 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 by bequest or inheritance may exercise the Option, 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 as set forth in the Option
Agreement). To the extent that Optionee was not entitled to exercise an Option
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 does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(b) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option, 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. To the extent that Optionee was not entitled
to exercise an Option at the date of such termination, and to the extent that
the Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate. If the Option is
exercised more than three (3) months after the date on which the Optionee's
Continuing Status as an Employee terminated as a result of a disability other
than a permanent and total disability as defined in Section 22(a)(3) of the
Code, the Option will be treated as a Non-Qualified Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.
(c) Termination of Employment. Subject to Section 24 of the Plan relating to
forfeitures of Options, in the event an Optionee's Continuous Status as an
Employee terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of time as
is determined by the Board at the time of grant, not to exceed 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. To the extent that
Optionee was not entitled to exercise an Option at the date of such termination,
and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
7.2 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.5, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.
7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred ninetieth (190th) day after
the Optionee's termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as to
the tax consequences to the Optionee of any such delayed exercise.
8. 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 the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option 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 shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option 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 shall be assumed or an equivalent Option
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 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 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 shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, immediately following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option 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, for each Share of Optioned Stock subject to the Option, 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 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, to the extent
they are exercisable and vested (including Options 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). 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 by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section 8, 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 the Company occurring within a
two-year period, and other than as a result of an illness or death of a director
or directors, and as a result of which fewer than a majority of the directors
are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the
Company as of the date the Plan is approved by the Board or the shareholders,
whichever shall first occur, or (B) 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 8,
"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.
9. Rights as a Shareholder, Employee, or Consultant. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the company). No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 8. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue as an Employee of the Company or interfere in any
way with any right of the Company to terminate the Optionee's continuing status
as an Employee, as the case may be, at any time.
10. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) yeas after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfer shall continue notwithstanding
that a legend has been placed on the certificate pursuant to the preceding
sentence.
11. Legends. The Company may at any time place legends referencing any
applicable federal, state, or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
11.3 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS FROM THE DATE THE
OPTION IS GRANTED AND WITHIN ONE YEAR AFTER THE EXERCISE AND TRANSFER OF SUCH
SHARES. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR
TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES
SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL
SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock made by the Company pursuant to an
effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such public offering; provided,
however, that such period of time shall not exceed one hundred eighty (180) days
from the effective date of the registration statement to be filed in connection
with such public offering. The foregoing limitation shall not apply to shares
registered in the public offering under the Securities Act. The Optionee shall
be subject to this Section provided, and only if, the Officers and Directors of
the Company are also subject to similar arrangements.
13. Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, and assigns.
14. Termination or Amendment. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion thereof
without the consent of the Optionee, unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
15. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein or therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company with respect to such subject matter other than
those set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.
SGI INTERNATIONAL
By: /s/ JOSEPH A. SAVOCA
Title: Chief Executive Office/Chairman
<PAGE>
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Options granted
hereunder subject to all of the terms and provisions thereof. The Optionee
hereby agrees to accept as binding, conclusive, and final, all decisions or
interpretations of the Board upon any questions arising under this Option
Agreement.
The undersigned acknowledges receipt of a copy of the Plan.
OPTIONEE
Date:
SGI INTERNATIONAL
INCENTIVE STOCK OPTION AGREEMENT
97ISO-___________
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of September 11, 1997, by and between SGI International and
_______________________ (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
Shares upon the terms and conditions set forth in this Option Agreement (the
"Option"). The Option shall in all respects be subject to the terms and
conditions of the SGI International 1996 Omnibus Stock Plan (the "Plan"), the
provisions of which are incorporated herein by reference.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "Date of Option Grant" means September 11, 1997.
(b) "Number of Option Shares" means ____________ Shares as adjusted from time
to time pursuant to Section 8.
(c) "Exercise Price" means $1.03 per Share, as adjusted from time to time
pursuant to Section 8.
(d) "Initial Exercise Date" is February 2, 1998.
(e) "Option Expiration Date" means the date ten (10) years after the Date of
Option Grant.
(f) "Company" means SGI International, a Utah corporation, or any successor
corporation thereto.
(g) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(h) "Securities Act" means the Securities Act of 1993, as amended.
(i) "Continuous Status as an Employee" means that the employment relationship is
not interrupted or terminated by the Company, the Parent or Subsidiary.
Continuous Status as an Employee 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. [NOTE: If the Option is exercised more than
three (3) months after the date on which the Optionee ceased to be an Employee
(other than by reason of death or a Disability) the Option will be treated as a
Non-Qualified Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.]
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is intended to include the conjunctive as well as
the disjunctive.
2. Tax Consequences.
2.1 Tax Status of the Option. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Company) is greater than One Hundred Thousand Dollars ($100,000),
the Optionee should contact the Chief Financial Officer of the Company to
ascertain whether the entire Option qualifies as an Incentive Stock Option.
2.2 Election Under Section 83(b) of the Code. If the Optionee
exercises this Option to purchase Shares that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Continuous Status as an Employee terminates, (b) the Optionee
is an officer, director, or 10% shareholder ("Insider") and exercises the Option
within six (6) months of the Date of Option Grant (if a class of equity security
of the Company is registered under Section 12 of the Exchange Act and no
exemption from Rule 16b-3 is available), or (c) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any Officer of the
Company or a Parent or Subsidiary shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, 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,
or election.
4. Exercise of the Option.
4.1 Right to Exercise.
(a) Except as otherwise provided herein, the Option shall be exercisable on and
after the Initial Exercise Date and prior to the termination of the Option (as
provided in Section 6) in an amount not to exceed the Number of Option Shares
less the number of shares previously acquired upon exercise of the Option.
Notwithstanding the foregoing, the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Company prior to the
Date of Option Grant with respect to which such options are exercisable for the
first time during the same calendar year, shall not exceed One Hundred Thousand
Dollars ($100,000). For purposes of the preceding sentence, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of shares of stock shall be
determined as of the time the option with respect to such shares is granted.
Such limitation on exercise shall be referred to in this Option Agreement as the
"ISO Exercise Limitation." If Section 422 of the Code is amended to provide for
a different limitation from that set forth in this Section 4.1(a), the ISO
Exercise Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee's termination of Service, (ii)
the day immediately prior to the effective date of a Change of Control in which
the Option is not assumed or substituted for by the acquiring Corporation as
provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Non-Qualified Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
4.2 Payment of Exercise Price.
(a) Form of Payment. The payment of the aggregate Exercise Price for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Board at the time of grant, and may consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) 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 (2) 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.
(b) Tender of Stock. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of Shares to the extent such tender of Shares
would constitute a violation of the provisions of any law, regulation, or
agreement restricting the redemption of the Company's stock. The Option may not
be exercised by tender to the Company of Shares unless such Shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company unless approved by the Board and in
compliance with Applicable Laws, including Rule 16b-3.
4.3 Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for,
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company, if any, which arise in connection with
the Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in
part, of any shares acquired upon exercise of the Option, (iii) the operation of
any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option. The Optionee is cautioned that the Option is not exercisable unless
the tax withholding obligations of the Company are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired, even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided
herein. At the discretion of the Company, Optionees may satisfy withholding
obligations by electing to have the Company withhold from the Shares to be
issued upon award, vesting, or exercise of the Option, that number of Shares
having a fair market value equal to the amount required to be withheld.
4.4 Certificate Registration. Except in the event the Exercise Price is paid
by means of a cashless exercise, the certificate for the shares as to which the
Option is exercised shall be registered in the name of the Optionee, or, if
applicable, the heirs of the Optionee.
4.5 Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The Option
may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation or the requirements of any stock exchange or market
system upon which the Stock may then be listed. In addition, the Option may not
be exercised unless (i) a registration statement under the Securities Act shall
at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares subject to
the Option 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. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as maybe requested by
the Company.
4.6 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise of the Option.
5. Non-transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent provided in Section 7, may be
so exercised by the Optionee's legal representative or by any person empowered
to do so under the deceased Optionee's will or under the then applicable laws of
descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Continuing Status as an Employee as described in Section 1.1(i), or (c) a Change
of Control to the extent provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) 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 by bequest or inheritance may exercise the Option, 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 as set forth in the Option
Agreement). To the extent that Optionee was not entitled to exercise an Option
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 does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(b) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option, 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. To the extent that Optionee was not entitled
to exercise an Option at the date of such termination, and to the extent that
the Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate. If the Option is
exercised more than three (3) months after the date on which the Optionee's
Continuing Status as an Employee terminated as a result of a disability other
than a permanent and total disability as defined in Section 22(a)(3) of the
Code, the Option will be treated as a Non-Qualified Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.
(c) Termination of Employment. Subject to Section 24 of the Plan relating to
forfeitures of Options, in the event an Optionee's Continuous Status as an
Employee terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of time as
is determined by the Board at the time of grant, not to exceed 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. To the extent that
Optionee was not entitled to exercise an Option at the date of such termination,
and to the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
7.2 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.5, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date. The Company makes no
representation as to the tax consequences of any such delayed exercise. The
Optionee should consult with the Optionee's own tax advisor as to the tax
consequences to the Optionee of any such delayed exercise.
7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred ninetieth (190th) day after
the Optionee's termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as to
the tax consequences to the Optionee of any such delayed exercise.
8. 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 the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option 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 shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option 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 shall be assumed or an equivalent Option
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 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 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 shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, immediately following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option 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, for each Share of Optioned Stock subject to the Option, 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 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, to the
extent they are exercisable and vested (including Options 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). 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 by bequest or inheritance.
(e) Definition of "Change in Control". For purposes of this Section 8, 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 the Company occurring within a
two-year period, and other than as a result of an illness or death of a director
or directors, and as a result of which fewer than a majority of the directors
are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (A) are directors of the
Company as of the date the Plan is approved by the Board or the shareholders,
whichever shall first occur, or (B) 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 8,
"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.
9. Rights as a Shareholder, Employee, or Consultant. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the company). No
adjustment shall be made for dividends, distributions, or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 8. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue as an Employee of the Company or interfere in any
way with any right of the Company to terminate the Optionee's continuing status
as an Employee, as the case may be, at any time.
10. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) yeas after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfer shall continue notwithstanding
that a legend has been placed on the certificate pursuant to the preceding
sentence.
11. Legends. The Company may at any time place legends referencing any
applicable federal, state, or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
11.3 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS FROM THE DATE THE
OPTION IS GRANTED AND WITHIN ONE YEAR AFTER THE EXERCISE AND TRANSFER OF SUCH
SHARES. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR
TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES
SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL
SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL
TRANSFERRED AS DESCRIBED ABOVE."
12. Public Offering. The Optionee hereby agrees that in the event of
any underwritten public offering of stock made by the Company pursuant to an
effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such public offering; provided,
however, that such period of time shall not exceed one hundred eighty (180) days
from the effective date of the registration statement to be filed in connection
with such public offering. The foregoing limitation shall not apply to shares
registered in the public offering under the Securities Act. The Optionee shall
be subject to this Section provided, and only if, the Officers and Directors of
the Company are also subject to similar arrangements.
13. Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators,
successors, and assigns.
14. Termination or Amendment. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion thereof
without the consent of the Optionee, unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
15. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein or therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company with respect to such subject matter other than
those set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.
SGI INTERNATIONAL
By: /s/ JOSEPH A. SAVOCA
Title: Chief Executive Office/Chairman
<PAGE>
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Options granted
hereunder subject to all of the terms and provisions thereof. The Optionee
hereby agrees to accept as binding, conclusive, and final, all decisions or
interpretations of the Board upon any questions arising under this Option
Agreement.
The undersigned acknowledges receipt of a copy of the Plan.
OPTIONEE
Date:
May 5, 2000
SGI International
1200 Prospect Street
La Jolla, CA 92037
Re: Form S-8 Registration Statement
Gentlemen:
We have acted as special counsel to SGI International, a Utah
corporation (the "Company") in connection with a Registration Statement on Form
S-8 (the "Registration Statement") to be filed with the Securities and Exchange
Commission in order to register 2,000,000 shares of the Company's common stock,
no par value per share (the "Common Stock"), which is issuable upon exercise of
the stock options granted by the Company pursuant to the terms of the SGI
International 1996 Omnibus Stock Plan described in the Registration Statement
(the "Plan").
For purposes of rendering this opinion, we have made such legal and
factual examinations as we have deemed necessary under the circumstances and, as
part of such examination, we have examined among other things, originals and
copies, certified or otherwise, identified to our satisfaction, of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate. For the purposes of such examination, we have assumed the
genuineness of all signatures on original documents and the conformity to
original documents of all copies submitted to us.
On the basis of and relying upon the foregoing examination and
assumptions, we are of the opinion that, assuming the Registration Statement
shall have become effective pursuant to the provisions of the Securities Act of
1933, as amended, the shares of Common Stock being offered in the Registration
Statement, when issued in accordance with the Registration Statement and the
provisions of the option agreements and the Plan referenced in the Registration
Statement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Fisher Thurber LLP
/s/ DAVID A. FISHER
By: ____________________________
David A. Fisher
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8, to be filed with the Securities and Exchange Commission
on or about May 5, 2000, by SGI International (the "Company") of our report
dated March 15, 2000, appearing in the Company's annual Report on Form 10-KSB
for the fiscal year ended December 31, 1999 (the "Form 10-KSB"), on our audits
of the financial statements of the Company as of December 31, 1999, and for
each of the two years in the period ended December 31, 1999, also appearing in
the Form 10-KSB, which contains an explanatory paragraph related to the
Company's ability to continue as a going concern.
/s/ J.H. COHN LLP
San Diego, California
May 4, 2000
