Ann: SPP Offer Document, page-18

When you buy shares at 7c with the options included, you will have to pay an additional 10c per share if you decide to exercise those options in the future.

For the 7c option with options included:

• If the future price $P$ is less than 10c, the options are worthless. So,Total Value = $100,000\times P-\$7,000$

• If the future price $P$ is greater than 10c, you could exercise the options to buy more shares. Assuming you exercise all options, the value would be:Total Value from shares = $100,000\times P$Cost to exercise options = $50,000\times \$0.10=\$5,000$Value from exercising options = $50,000\times (P-\$0.10)$Total Value = $100,000\times P+50,000\times (P-\$0.10)-\$7,000-\$5,000$Total Value = $150,000\times P-\$12,000-\$5,000$Total Value = $150,000\times P-\$17,000$

For the 6.1c option:Total Value = $100,000\times P-\$6,100$

For the 7c offer with the options to be a better deal, its total value should be greater than the 6.1c option's total value.

Setting the two expressions equal and solving for $P$,$150,000\times P-\$17,000$ > $100,000\times P-\$6,100$

Simplifying:50,000P > $10,900P > $0.218 or 21.8c

Thus, for the 7c option with the 10c options included to be a better deal, QPM would need to trade above 21.8c.

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