THE SECURITIES EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, 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 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.
OPTION TO PURCHASE COMMON
STOCK
OF
GEM SOLUTIONS,
INC.
Void after December 7,
2016
This certifies that, for value
received, Mark G. Sampson (“Holder”) is
entitled, subject to the terms set forth below, to purchase from
GeM Solutions, Inc. , a Delaware corporation (the
“Company”), shares of the common stock, $.001 par value
per share, of the Company (“Common Stock”), as
constituted on the date hereof, with the Notice of Exercise
attached hereto duly executed, and simultaneous payment therefor in
lawful money of the United States or as otherwise provided in
Section 3 hereof, at the Exercise Price then in effect. The number,
character and Exercise Price of the shares of Common Stock issuable
upon exercise hereof are subject to adjustment as provided
herein.
1. Term of Option . Subject
to compliance with the vesting provisions identified at Section 2.3
hereof, this Option shall be exercisable, in whole or in part,
during the term commencing on the date hereof and ending at 5:00
p.m. EST on December , 2016 (the “Option Expiration
Date”) and shall be void thereafter.
2. Number of Shares, Exercise
Price and Vesting Provisions.
2.1 Number of Shares . The
number of shares of Common Stock which may be purchased pursuant to
this Option shall be 4,000,000 shares (the “Shares”),
subject, however, to adjustment pursuant to Section 11
hereof.
2.2 Exercise Price . The
Exercise Price at which this Option, or portion thereof, may be
exercised shall be $0.25 per Share, subject, however, to adjustment
pursuant to Section 11 hereof.
2.3 Vesting. Subject to
Sections 11 and 3.3(a) hereof, this Option shall vest in accordance
with the following schedule:
(i) Options to purchase 1,333,333
shares shall vest and become exercisable on June 8,
2007;
(ii) Options to purchase 1,333,333
shares shall vest and become exercisable on December 8, 2007;
and
(iii) Options to purchase 1,333,334
shares shall vest and become exercisable on June 8,
2008.
3. Exercise of Option
.
3.1 Payment of Exercise Price
. Subject to the terms hereof, the purchase rights represented by
this Option are exercisable by the Holder in whole or in part, at
any time, or from time to time, by the surrender of this Option and
the Notice of Exercise annexed hereto duly completed and executed
on behalf of the Holder, at the office of the Company (or such
other office or agency of the Company as it may designate by notice
in writing to the Holder at the address of the Holder appearing on
the books of the Company) accompanied by payment of the Exercise
Price in full (i) in cash or by bank or certified check for the
Shares with respect to which this Option is exercised; (ii) by
delivery to the Company of shares of the Company’s Common
Stock having a Fair Market Value (as defined below) equal to the
aggregate Exercise Price of the Shares being purchased which Holder
is the record and beneficial owner of and which have been held by
the Holder for at least six (6) months; provided ,
however , that such method of payment is then permitted
under applicable law; (iii) if the sale of the Shares is covered by
an effective registration statement, by delivering to the Company a
Notice of Exercise together with an irrevocable direction to a
broker-dealer registered under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), to sell a sufficient
portion of the Shares and deliver the sales proceeds directly to
the Company to pay the Exercise Price; (iv) by set off against any
amounts owed to the Holder by the Company; (v) by reducing the
number of shares of Common Stock otherwise issuable under the
Option to the Holder upon the exercise of the Option by a number of
shares of Common Stock having a Fair Market Value (as defined
below) equal to the aggregated exercise price; provided ,
however , that such method of payment is then permitted
under applicable law; (vi) to the extent permitted by applicable
law, by: (A) delivery of a promissory note of the Holder to the
Company on terms determined by the Board of Directors (the
“Board”), or (B) payment of such other lawful
consideration as the Board may determine; or (vii) by any
combination of the procedures set forth in subsections (i), (ii),
(iii), (iv), (v), and (vi) of this Section 3.1.
3.2 Fair Market Value. If
previously owned shares of Common Stock are tendered as payment of
the Exercise Price, the value of such shares shall be the
“Fair Market Value” of such shares on the trading date
immediately preceding the date of exercise. For the purpose of this
Agreement, the “Fair Market Value” shall be:
(a) If the Common Stock is admitted
to quotation on the National Association of Securities Dealers
Automated Quotation System (“ NASDAQ ”), the
Fair Market Value on any given date shall be the average of the
highest bid and lowest asked prices of the Common Stock as reported
for such date or, if no bid and asked prices were reported for such
date, for the last day preceding such date for which such prices
were reported;
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(b) If the Common Stock is admitted
to trading on a United States securities exchange or the NASDAQ
National Market System, the Fair Market Value on any date shall be
the closing price reported for the Common Stock on such exchange or
system for such date or, if no sales were reported for such date,
for the last day preceding such date for which a sale was
reported;
(c) If the Common Stock is traded in
the over-the-counter market and not on any national securities
exchange nor in the NASDAQ Reporting System, the Fair Market Value
shall be the average of the mean between the last bid and ask
prices per share, as reported by the National Quotation Bureau,
Inc., or an equivalent generally accepted reporting service, or if
not so reported, the average of the closing bid and asked prices
for a share as furnished to the Company by any member of the
National Association of Securities Dealers, Inc., selected by the
Company for that purpose; or
(d) If the Fair Market Value of the
Common Stock cannot be determined on the basis previously set forth
in this definition on the date that the Fair Market Value is to be
determined, the Board of Directors of the Company shall in good
faith determine the Fair Market Value of the Common Stock on such
date.
If the tender of previously owned
shares would result in an issuance of a whole number of Shares and
a fractional Share of Common Stock, the value of such fractional
share shall be paid to the Company in cash or by check by the
Holder.
3.3 Termination of Employment or
Service; Death.
(a) If Holder shall cease to be
employed by or provide management services to the Company as a
result of Holder resigning or otherwise voluntarily leaving the
employ of the Company or ceasing to provide services to the
Company, all Options to which Holder is then entitled to exercise
may be exercised only within ninety (90) days after the termination
of employment or cessation of service and prior to the Option
Termination Date. In the event that any termination of employment
or cessation of service shall be for Cause (as defined below), then
this Option shall forthwith terminate. In the event that the
Company shall terminate Holder’s employment with Company or
service relationship with the Company for any reason other than for
Cause (as defined below), all Options shall become immediately
vested and exercisable in full and may be exercised at any time
within two (2) years after such termination of employment or
service relationship and prior to the Option Termination
Date.
For purposes of this Option, the
term “ Cause ” shall mean (a) if Holder is
a party to a written agreement with the Company, or provides
services to the Company pursuant to a services agreement between
the Company and a third party, which contains a definition of
“cause” or “for cause” or words of similar
import for purposes of termination of employment or service
thereunder by the Company, “cause” or “for
cause” as defined in such agreement; (b) in all other
cases (i) the Holder’s intentional, persistent failure,
dereliction, or refusal to perform such duties as are reasonably
assigned to him or her by the officers or directors of the Company;
(ii) the Holder’s fraud, dishonesty or other deliberate
injury to the Company in the performance of his or her duties on
behalf of, or for, the Company; (iii) the Holder’s conviction
of a crime which constitutes a felony involving moral turpitude,
fraud or deceit in the jurisdiction in which the Holder is
employed, regardless of whether such crime involves the Company;
(iv) the willful commission by the Holder of a criminal or other
act that causes substantial economic damage to the Company or
substantial injury to the business reputation of the Company; or
(v) the Holder’s material breach of his or her employment
agreement, or the material breach of a services agreement by and
between the Company and a third party pursuant to which the Holder
provides services to the Company, if any. For purposes of this
Option, no act, or failure to act, on the part of any person shall
be considered “willful” unless done or omitted to be
done by the person other than in good faith and without reasonable
belief that the person’s action or omission was in the best
interest of the Company.
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(b) If Holder shall die while
employed by or providing services to the Company and prior to the
Option Termination Date, any Options then exercisable may be
exercised only within one (1) year after Holder’s death,
prior to the Option Termination Date, and only by the
Holder’s personal representative or persons entitled thereto
under the Holder’s will or the laws of descent and
distribution.
(c) This Option may not be exercised
for more Shares (subject to adjustment as provided in
Section 11 hereof) after the termination of the Holder’s
employment, cessation of services to the Company, or death, as the
case may be, than the Holder was entitled to purchase thereunder at
the time of the termination of the Holder’s employment, the
cessation of services to the Company, or death.
3.4 Exercise Date; Delivery of
Certificates. This Option shall be deemed to have been
exercised immediately prior to the close of business on the date of
its surrender for exercise as provided above, and Holder shall be
treated for all purposes as the holder of record of such Shares as
of the close of business on such date. As promptly as practicable
on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to
the Holder a certificate or certificates for the number of Shares
issuable upon such exercise. In the event that this Option is
exercised in part, the Company at its expense will execute and
deliver a new Option of like tenor exercisable for the number of
shares for which this Option may then be exercised.
4. No Fractional Shares or
Scrip . No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Option. In lieu of
any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the
Exercise Price multiplied by such fraction.
5. Replacement of Option . On
receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Option and, in the
case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and substance to the
Company or, in the case of mutilation, on surrender and
cancellation of this Option, the Company at its expense shall
execute and deliver, in lieu of this Option, a new Option of like
tenor and amount.
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6. Rights of Stockholder .
Except as otherwise contemplated herein, the Holder shall not be
entitled to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock,
change of par value, or change of stock to no par value,
consolidation, merger, conveyance or otherwise) or to receive
notice of meetings, or to receive dividends or subscription rights
or otherwise until the Option shall have been exercised as provided
herein.
7. Transfer of
Option.
7.1. Non-Transferability .
This Option shall not be assigned, transferred, pledged or
hypothecated in any way, nor subject to execution, attachment or
similar process, otherwise than by will or by the laws of descent
and distribution. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Option contrary to the
provisions hereof, and the levy of an execution, attachment, or
similar process upon the Option, shall be null and void and without
effect.
7.2. Compliance with Securities
Laws; Restrictions on Transfers. In addition to restrictions on
transfer of this Option and Shares set forth in Section 7.1
above.
(a) The Holder of this Option, by
acceptance hereof, acknowledges that this Option and the Shares to
be issued upon exercise hereof are being acquired solely for the
Holder’s own account and not as a nominee for any other
party, and for investment (unless such shares are subject to resale
pursuant to an effective prospectus), and that the Holder will not
offer, sell or otherwise dispose of any Shares to be issued upon
exercise hereof except under circumstances that will not result in
a violation of applicable federal and state securities laws. Upon
exercise of this Option, the Holder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company,
that the Shares of Common Stock so purchased are being acquired
solely for the Holder’s own account and not as a nominee for
any other party, for investment (unless such shares are subject to
resale pursuant to an effective prospectus), and not with a view
toward distribution or resale.
(b) Neither this Option nor any
share of Common Stock issued upon exercise of this Option may be
offered for sale or sold, or otherwise transferred or sold in any
transaction which would constitute a sale thereof within the
meaning of the 1933 Act, unless (i) such security has been
registered for sale under the 1933 Act and registered or qualified
under applicable state securities laws relating to the offer and
sale of securities; or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification
requirements of all such state securities laws are available and
the Company shall have received an opinion of counsel that the
proposed sale or other disposition of such securities may be
effected without registration under the 1933 Act and would not
result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for
sale, such counsel and such opinion to be satisfactory to the
Company. The Holder of this Option, by acceptance hereof,
acknowledges that the Company has no obligation to file a
registration statement with the Securities and Exchange Commission
or any state securities commission to register the issuance of the
S
