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/ XXXXXX X. XXXXXX
Title: Chief Executive Office/Chairman
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:
