EXHIBIT 10.1
OPTION AGREEMENT
----------------
May 19, 2003
OPTION AGREEMENT made as of the 19th day of May, 2003, between SLS
International, Inc., a Delaware corporation (the "Company"), and Steerpike
(Overseas) Ltd. ("Consultant").
WHEREAS, the Company desires to grant to the Consultant options to purchase
shares of its common stock, $.001 par value per share, in consideration for
services provided and to be provided by Consultant pursuant to a letter
agreement between the Company and the Consultant dated as of May 19, 2003 (the
"Letter Agreement").
WHEREAS, the Company and the Consultant each intends that the Options
granted herein shall be Non-Qualified Stock Options.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. GRANT OF OPTIONS. The Company hereby grants to Consultant options
("Options") to purchase shares of common stock of the Company commencing on the
date hereof ("Grant Date"). These Options permit you to purchase 1,000,000
shares of the Company's common stock, par value $.00l per share ("Shares"), at
the exercise price per share stated below ("Exercise Price").
2. CHARACTER OF OPTIONS. These Options shall be considered Non-Qualified
Stock Options.
3. EXERCISE PRICE. The Exercise Price of the Options is $0.25 per Share.
4. PAYMENT OF EXERCISE PRICE. Options represented hereby may be exercised
in whole or in part by delivering to the Company payment of the Exercise Price
of the Options so exercised (i) in cash or (ii) to the extent permitted by
applicable law, by delivering a written direction to the Company that the Option
be exercised pursuant to a "cashless" exercise/sale procedure (pursuant to which
funds to pay for exercise of the Option are delivered to the Company by a broker
upon receipt of stock certificates from the Company) through a licensed broker
whereby the stock certificate or certificates for the shares of Common Stock for
which the Option is exercised will be delivered to such broker as the agent for
the Consultant exercising the Option and the broker will deliver to the Company
cash equal to the aggregate Exercise Price for the shares of Common Stock
purchased pursuant to the exercise of the Option plus the amount (if any) of
federal and other taxes that the Company, in its reasonable judgment, is
required to withhold with respect to the exercise of the Option. Exercise of
this Option to the extent above stated may be made in whole or in part at any
time and from time to time, subject to the limitations stated herein, except
that no fractional share will be issued pursuant to this Option.
5. TERM OF OPTIONS. The term of the Options granted herein shall be for a
term of up to five years commencing with the Grant Date. The Options shall
expire and no longer be exercisable at the end of such term.
6. TRANSFER OF OPTIONS. The Options granted herein, and the Shares issuable
hereunder, shall be freely transferable, in whole or in part, and there are no
restrictions upon any transfer, sale, monetization, pledge, alienation or other
encumbrance with respect to either such Options or the Shares.
7. ADJUSTMENTS. If the outstanding shares of the Company's common stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Company, occurring after the date of this Option
Agreement, the number and kinds of shares subject to the outstanding Options
granted hereunder shall be adjusted proportionately and accordingly by the
Company. Any such adjustment in outstanding Options shall not change the
aggregate Exercise Price payable with respect to shares subject to the
unexercised portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Exercise Price per share.
8. TERMINATION OF CONSULTANCY. If you voluntarily terminate the Letter
Agreement with the Company (unless such termination is due to the Company's
breach of the Letter Agreement or a result of any of the occurrences noted in
Article 4 of Exhibit A of the Letter Agreement) prior to July 31, 2005, or if
the Company terminates such Letter Agreement as a result of your material breach
of such agreement prior to July 31, 2005 (unless such termination is disputed by
you in good faith), or if so disputed, then upon resolution of such dispute, if
such resolution results in a termination of the Letter Agreement), you shall
forfeit Options to purchase a number of Shares in an amount equal to the lesser
of (a) all outstanding Options or (b) the Pro Rata Portion. The "Pro Rata
Portion" means the total number of Shares granted pursuant to this Option
Agreement (as adjusted pursuant to Section 7 above) multiplied by a fraction,
the numerator of which is the number of days from the date of termination of the
Letter Agreement through July 31, 2005 and the denominator of which is the
number of days from the date of delivery of this Option Agreement through July
31, 2005 (the contractual expiration of the Letter Agreement). The number of
Options required to be forfeited pursuant to this Section 8 shall no longer be
exercisable on the date of termination of the Letter Agreement.
9. AMENDMENTS. The Company may not amend this Option Agreement without your
consent.
10. WITHHOLDING TAXES. The Company may withhold from sums due or to become
due to you from the Company any amount necessary to satisfy its obligation to
withhold taxes incurred by reason of the disposition of the Shares acquired by
exercise
of the Options in a disqualifying disposition (within the meaning of Section
421(b) of the Code), or may require you to reimburse the Company in such amount.
11. REGISTRATION.
(a) The Company agrees to:
(i) prepare and file with the Securities Exchange Commission
(the "Commission") by August 28, 2003 a registration statement on the
appropriate form with respect to the Shares and to use its best efforts to cause
such registration statement to become effective as promptly as practicable;
(ii) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to (x) keep such
registration statement effective and (y) comply with the provisions of the
Securities Act, until the earlier of (A) such time as all of such Shares have
been disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement or (B) such
time as the Shares are eligible for resale pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act");
(iii) furnish to the Consultant without charge such number of
conformed copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by reference in
such registration statement or prospectus, and such other documents, as the
Consultant may reasonably request;
(iv) use its reasonable best efforts to register or qualify
all Shares covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the Consultant shall reasonably request and as
shall be appropriate considering the nature and size of the offering, and do any
and all other acts and things which may be necessary or advisable to enable the
Consultant to consummate the disposition in such jurisdiction of its Shares
covered by such registration statement; provided, however, that the Company
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction,
unless the Company is already subject to service in such jurisdiction;
(v) use its reasonable best efforts to cause all Shares
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers thereof
to consummate the disposition of such Shares in accordance with the intended
method or methods of disposition thereof;
(vi) promptly notify the Consultant, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and at the request of the Consultant prepare
and furnish to the Consultant a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not misleading in
the light of the circumstances then existing, and as promptly as practicable,
prepare and furnish to the Consultant a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(vii) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission until the earlier of (A)
such time as all of such Shares have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement or (B) such time as the Shares are eligible for
resale pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act");
(viii) use its reasonable best efforts to list such securities
on each securities exchange on which the Common Stock of the Company is then
listed (including the NASDAQ Stock Market), or, if such securities are not
already so listed, on any national securities exchange (including the NASDAQ
Stock Market), and, if necessary, provide a transfer agent and registrar for
such Shares not later than the effective date of such registration statement;
(ix) use its reasonable best efforts to provide a transfer
agent and registrar for such Shares not later than the effective date of such
registration statement; and
(x) use its reasonable best efforts to prevent the issuance
and obtain the lifting of a stop-order by the Commission.
(b) the Company will pay all expenses in connection with the above
registration.
(c) in connection with the preparation and filing of the registration
statement registering Shares under the Securities Act, the Company will permit
the Consultant to participate in the preparation of the sections of any such
registration statement related to the Consultant.
(d) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 10 that the Consultant shall furnish to
the Company such information regarding itself, the Shares held by it, and the
intended method of disposition of such securities as shall be required in
connection with the action to be taken by the Company; provided that, if the
Company has not requested all information it requires in connection with its
obligations under Section 11(a)(i) on or before August 18, 2003, and the Company
breaches such obligations, such condition precedent shall be deemed to have been
fulfilled and the Company shall be deemed to be in breach of this Agreement.
(e) To the extent permitted by law, the Company will indemnify and hold
harmless the Consultant, the partners, shareholders, managers, officers and
directors of the Consultant, and each person, if any, who controls the
Consultant within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any material fact contained
in such registration statement, including, without limitation, any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or arise out of any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration; and will
reimburse the Consultant, such underwriter, or controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability, or action, provided,
however, that the indemnity agreement contained in this Section 11(e) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld or delayed), nor shall the
Company be liable in any such case with respect to any such Consultant or
underwriter for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with an instrument
duly executed by such Consultant, underwriter or controlling person and stated
to be specifically for use in connection with such registration.
(f) To the extent permitted by law, the Consultant requesting or joining in
a registration will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, and any underwriter for the Company (within the meaning of the Securities
Act) against any losses, claims, damages or liabilities to which the Company or
any such director, officer, controlling person or underwriter may become
subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement, preliminary prospectus or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by the Consultant under an instrument duly executed by the Consultant
and stated to be specifically for use in connection with such registration; and
will reimburse the Company or any such director, officer, controlling person or
underwriter for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 11(f) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Consultant (which consent shall not be unreasonably withheld
or delayed) and provided further that the Consultant shall have no liability
under this Section 11(f) in excess of the net proceeds actually received by the
Consultant in the relevant public offering.
11. Governing Law. This Agreement shall be construed and enforced in
accordance with the law of the State of Delaware, without giving effect to the
conflict of law principles thereof.
12. Counterparts; Effectiveness. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument.
13. Invalidity of Provision. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision in any
other jurisdiction.
SLS INTERNATIONAL, INC.
_________________________
By: ▇▇▇▇ ▇▇▇▇, President
STEERPIKE (OVERSEAS) LTD.
_________________________
By: ______________, ___________