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Exhibit 4.1
THIS OPTION AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”). THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AND
APPLICABLE STATE SECURITIES LAW.
Option to Purchase Common Stock
of
Chapeau, Inc.
Void after March 21, 2010
This
Option is issued to TEFCO, LLC, a Virginia limited
liability company (the
“Optionee”), by Chapeau, Inc., a Utah corporation
(the “Company”), as of March 21, 2008 (the
“Option Issue Date”). This Option is
issued pursuant to that certain Turnkey Financing, Loan and
Security Agreement dated as of March 20, 2008 (the
“Agreement”).
The
Company and the Optionee agree as follows:
Subject to the terms and
conditions set forth herein, the Company grants to Optionee a
nonqualified stock option (the “Option”) to
purchase Five Million (5,000,000) shares of the
Company’s authorized and unissued common stock, par
value $0.001 per share (the “Common Stock”), from
the Company, with an exercise price per share (the
“Exercise Price”) equal to 90% of the average
closing price per share of Common Stock on the
over-the-counter bulletin board during the 30 days prior to
December 14, 2007. The number
of shares of Capital Stock issuable to this Section 1 as well
as the Exercise Price of such shares, shall be subject to
adjustment pursuant to Section 8 below.
The Option granted
hereunder is granted to Optionee in connection with the
Agreement, and it is not intended to qualify as an
“incentive stock option” under Section 422 of the
Internal Revenue Code of 1986, as amended (the
“Code”).
The Option shall terminate
on, and shall not be exercisable after 5:00 p.m. Eastern on
the two (2) year anniversary of the Option Issue Date (the
“Expiration Date”); provided that in the event
(each a “Disposition Event”) of (i) the closing
of the Company’s sale or transfer of all or
substantially all of its assets, or (ii) the closing of the
acquisition of the Company by another entity by means of
merger, consolidation or other transaction or series of
related transactions, resulting in the exchange of the
outstanding shares of the Common Stock (unless (A) the
shareholders of the Company immediately prior to such
transaction or series of related transactions are holders of
a majority of the voting equity securities of the surviving
or acquiring corporation immediately thereafter, and (B) each
of such shareholders immediately prior to such transaction or
series of related transactions holds the same pro rata share
of such majority of the voting equity securities of the
surviving or acquiring corporation as each hold of the
Company immediately prior to such transaction or series of
related transactions), this Option shall, on the date of a
Disposition Event, no longer be exercisable and become null
and void. The Company shall notify the Optionee at least 60
days prior to the consummation of any Disposition Event and,
in all circumstances, the Optionee shall have at least 40
days after the Option Issue Date to exercise this
Option.
4.
Exercise
4.1
Exercisability
. The Option shall be immediately exercisable with
respect to the entire number of shares of Common Stock subject
to the Option.
4.2
Notice of
Exercise . The Optionee shall exercise the
Option by delivering to the Company, either in person or by
certified or registered mail, written notice of election to
exercise, in the form attached hereto as Schedule
A , payment in full of the Exercise Price as provided
in Section 4.3 below and payment of the sums required by, or
other compliance with, the provisions of Section 4.4
below. The Company shall notify Optionee of the
expiration date of the Option thirty (30) days prior to their
expiration. Failure to do so shall extend the
Option thirty (30) days from the date of receipt by the
Optionee of such expiration notice.
4.3
Payment of
Exercise Price . The Exercise Price for any
shares of Common Stock with respect to which Optionee
exercises this Option shall be paid in full at the time
Optionee delivers the written notice of exercise to the
Company. The Exercise Price shall be paid (i) in
cash, (ii) by check or (ii) via the following net exercise
provision. In lieu of exercising this Option by
paying the Exercise Price in cash, the Optionee may elect to
receive shares equal to the value of this Option (or the
portion thereof being exercised) by surrender of this Option
at the principal office of the Company together with the
Notice of Cashless Exercise annexed hereto as Schedule B
duly completed and executed, in which event the Company shall
issue to Optionee the number of shares of Common Stock
computed using the following formula:
X=
(Y)(A-B)
A
Where
X = The number of shares of
Common Stock to be issued to Optionee.
Y
= The
number of shares of Common Stock purchasable under this
Option.
A
= The
fair market value of one share of Common Stock.
B
= The
Exercise Price (as adjusted to the date of such
calculations).
For
purposes of this Section, the fair market value of one share
of Common Stock shall be equal to the volume weighted average
closing price per share of Common Stock on the
over-the-counter bulletin board (or such other securities
exchange or Nasdaq market on which the Company’s
securities are trading) over the 30 days prior to exercise,
or, if the Company’s Common Stock is not trading on the
over-the-counter bulletin board (or such other securities
exchange or Nasdaq market) the fair market value shall be
determined by the Board of Directors in good
faith.
4.4
Withholding
. Upon exercise of the Option, or any portion
thereof, Optionee shall pay to the Company, or make
arrangements satisfactory to the Board for payment to the
Company of, all federal, state and local taxes, if any,
required to be withheld by the Company in connection with the
exercise of the Option or the relevant portion
thereof.
Promptly after the
Company’s receipt of the written notice of exercise
provided for in Section 4.2 above, Optionee’s payment
in full of the Exercise Price, and Optionee’s
compliance with the provisions of Section 4.4 above, the
Company shall deliver, or cause to be delivered to Optionee,
separate certificates for the whole number of shares of
Common Stock with respect to which each portion of the Option
is being exercised by Optionee. Such shares shall
be registered in the name of Optionee. If any law
or regulation of the United States Securities and Exchange
Commission or of any other federal or state governmental body
having jurisdiction shall require the Company or Optionee to
take any action prior to the issuance to Optionee of the
shares of Common Stock specified in the written notice of
election to exercise, or if any listing agreement between the
Company and any national securities exchange requires such
shares to be listed prior to issuance, the date for the
delivery of such shares shall be deferred until the
completion of such action and/or such listing.
6.
Fractional
Shares
In no event shall the
Company be required to issue fractional shares of Common
Stock upon the exercise of any part of the Option, and any
exercise that would otherwise result in such an issuance
shall be rounded up to the nearest whole number of
shares.
7.
Rights as a
Shareholder
Prior to exercise of this
Option, the Optionee shall not be entitled to any rights of a
shareholder with respect to this Option, including without
limitation the right to vote, receive dividends or
othe
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