Prepared and filed by St Ives Financial

 
Exhibit 10.1

Option No.  2007-___

GEM SOLUTIONS, INC.



STOCK OPTION AGREEMENT

UNDER THE

GEM SOLUTIONS, INC.

2005 STOCK INCENTIVE PLAN 

     This Agreement is made as of the date set forth on Schedule A hereto (the "Grant Date") by and between GeM Solutions, Inc.  (the "Company"), and the person named on Schedule A hereto (the "Optionee").

     WHEREAS, Optionee is a valuable employee of either the Company or any Company Participating Group (hereinafter collectively or separately referred to as the “Company”), which includes all subsidiaries of the Company, and whereas the Company considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Company and an incentive to advance the interests of the Company by granting the Optionee an option to purchase shares of common stock of the Company (the "Common Stock"); and

     WHEREAS, to cover the granting of such Options, the Company has adopted the GeM Solutions, Inc. 2005 Stock Incentive Plan (the "Plan").

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that as of the Grant Date, the Company hereby grants Optionee an option (the “Option”) to purchase from it, upon the terms and conditions set forth in this Agreement and the Plan, that number of shares of the authorized and unissued Common Stock of the Company as is set forth on Schedule A hereto.

	 
1.     Terms
            of Stock Option. The Option to purchase Common Stock granted
            hereby is subject to the terms, conditions, and covenants set forth
    in the Plan as well as the following:
	 
	
 (a) The Optionee
has been provided with, reviewed and fully understood, the terms, conditions
and covenants, of the Plan;

	 
	  (b) This
      Option is granted under, and subject in its entirety to, the terms of the
    Plan;

	 


 






	  (c) The
      per share exercise price for the shares subject to this Option shall be
      no less than the fair market value (as defined in the Plan) of the Common
      Stock on the Grant Date, which exercise price is set forth on Schedule
    A hereto;

	 
	  (d) This
      Option shall vest in accordance with the vesting schedule set forth on
      Schedule A hereto, subject to whatever other limitations are set forth
    within the Plan or contained in this Agreement; 

	 
	  (e) No
      portion of this Option may be exercised more than ten (10) years from the
    Grant Date; and

	 
	  (f) This
      Option shall be subject to the restrictions on transferability set forth
    within the Plan.

	 
	

    2.     Payment
    of Exercise Price. The Option may be exercised, in part or in whole,
    only by written request to the Company accompanied by payment of the exercise
    price in full either: (i) in cash for the shares with respect to which it
    is exercised; (ii) by set off against any amounts owed to the Optionee by
    the Company; (iii) if the shares underlying the option are registered under
    the Securities Act, by delivering to the Company a notice of exercise with
    an irrevocable and unconditional direction to a creditworthy broker-dealer
    registered under the Securities Exchange Act of 1934, as amended, to sell
    a sufficient portion of the shares and deliver the sale proceeds directly
    to the Company to pay the exercise price; (iv) by delivering previously owned
    shares of Common Stock or a combination of shares and cash having an aggregate
    Fair Market Value (as defined in the Plan) equal to the exercise price of
    the shares being purchased; provided, however, that shares
    of Common Stock delivered by the Optionee may be accepted as full or partial
    payment of the exercise price for any exercise of the Option hereunder only
    if the shares have been held by the Optionee for at least six (6) months,
    are not subject to any repurchase, vesting or similar right, and such method
    of payment is then permitted by law; (v) by reducing the number of shares
    of Common Stock otherwise issuable under the Option to the Optionee upon
    the exercise of the Option by a number of shares of Common Stock having a
    Fair Market Value (as defined in the Plan) 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 Optionee to the Company
    on terms determined by the Board, or (B) payment of such other lawful consideration
    as the Board may determine; or (vii) by any combination of the above permitted
    forms of payment. 
	 
	

    3.    Miscellaneous.
	 
	
  (a)      This
        Agreement is binding upon the parties hereto and their respective heirs,
    personal representatives, successors and assigns.


	 
	
(b)      This
        Agreement will be governed and interpreted in accordance with the laws
        of the State of Delaware, and may be executed in more than one counterpart,
    each of which shall constitute an original document.


	 
	
(c)      No
        alterations, amendments, changes or additions to this agreement will
        be binding upon either the Company on or Optionee unless reduced to writing
    and signed by both parties.





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	(d)      Capitalized
        terms used within this Agreement unless otherwise defined, shall have
    the meaning ascribed thereto in the Plan.

	 
	(e)      Nothing
        contained herein shall be construed as a guarantee of continued employment
    of Optionee for any specific duration of time.



     IN WITNESS WHEREOF, the parties have executed this Agreement as of the Grant Date.

	 	 GEM SOLUTIONS, INC.
	 	 	 
	 	 By:	 /s/ John E. Baker                        
	 	 	Authorized Executive Officer
	 	 	 
	 	 OPTIONEE
	 	 	 
	 	 /s/ Brian Ellis                                      
	 	 Signature
	 	 	 
	 	 	 
	 	 	 
	 	 Brian Ellis
	 	 Print Name


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Schedule A

1.      Optionee:  Brian Ellis

2.      Grant Date:  January 5, 2007

3.      Number of Shares of Common Stock covered by the Option:  350,000

4.      Exercise Price:  $.15

5.      The Option shall vest in accordance with the following schedule:

	 	(a)	General
    Vesting Provisions:
	 	 	 
	 	(i)	
 Options to purchase 116,666 shares shall vest on July 5, 2007 (the “First Vesting Date”) provided Optionee remains continuously employed by the Company from the Grant Date through the First Vesting Date; and if Optionee shall not remain continuously employed by the Company through the First Versting Date, Optionee shall forfeit upon such termination of service, the right to vest in all of the Options granted under this Agreement;


	 	 	 
	 	(ii)	
 thereafter, on January 5, 2008 (the “Second Vesting Date”), Options to purchase 116,667 shares shall vest provided Optionee remains continuously employed by the Company from the Grant Date through the Second Vesting Date; and if a termination of service occurs prior to the Second Vesting Date, all of the unvested Options as of the date such termination of service shall no longer continue to vest after such termination of service, and thereafter Optionee shall forfeit any and all rights to any unvested Options; and


	 	 	 
	 	(iii)	
 thereafter, on July 5, 2008 (the “Third Vesting Date”), Options to purchase 116,667 shares shall vest  provided Optionee remains continuously employed by the Company from the Grant Date through the Third Vesting Date; and if a termination of service occurs prior to the Third Vesting Date, all of the unvested Options as of the date of such termination of service shall no longer continue to vest after such termination of service, and thereafter Optionee shall forfeit any and all rights to any unvested Options.
	 	 	 
	 	(b)	Other:
	 	 	 
	 	 	(i)     upon
      whatever earlier dates as are permitted by the Company in its sole discretion;
    or


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(ii)     as otherwise provided for, and in accordance with, the terms and provisions of the Plan.
		 	 
	6.	Once
      a termination of employment or other service to the Company occurs, all
      Options to which Optionee is then entitled to exercise may only be exercised,
      if at all, in accordance with, and subject to, the terms and provisions
      of the Plan, unless otherwise provided for in this Option Agreement. Notwithstanding
      the forgoing, if the Company terminates the employment of Optionee or other
      service relationship between Optionee and the Company for any reason other
      than for Cause, this Option shall become immediately vested and exercisable
      in full and may be exercised at any time prior to two years after such
    termination and before the date this Option terminates.
		 	 
	7.	  The last two sentences of Section 12(c)(2)(a)
    of the Plan shall not apply to this Option.


 

	 	 GEM SOLUTIONS, INC.
	 	 	 
	 	 By: 	/s/ John E. Baker                        
	 	 	     Authorized Executive Officer
	 	 	 
	 	 	 
	 	 OPTIONEE
	 	 
	 	 /s/ Brian Ellis                                      
	 	 Signature
	 	 	 
	 	 	 
	 	 Brian Ellis
	 	 Name


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