EXHIBIT 10.2

 

OPTION AGREEMENT

 

This Option Agreement (this “Agreement”) is entered into and made effective as
of June 14, 2005, by and between SLS International, Inc., a Delaware corporation
(the “Company”), and Mark Burnett (“Consultant”).

 

WHEREAS, the Company desires to grant to Consultant options to purchase shares
of its common stock, $.001 par value per share (“Common Stock”), in
consideration for services provided and to be provided by Consultant pursuant to
that certain Promotion Agreement by and among the Company, JMBP, Inc., a
California corporation, and Consultant dated as of the date hereof (the
“Promotion Agreement”); and

 

WHEREAS, each of the Company and Consultant 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; Exercise Price. On the date hereof (“Grant Date”), the
Company hereby grants to Consultant options (“Options”) to purchase one million
(1,000,000) shares of Common Stock (“Shares”), at an exercise price per share of
Two Dollars and Five Cents ($2.05) (the “Exercise Price”), subject to adjustment
as set forth in Section 7 hereof.

2.  

Character of Options. The Options shall be considered Non-Qualified Stock
Options.

3.      Vesting Schedule. The Options shall become exercisable in accordance
with the following vesting schedule:

Vesting Date

Number of Options Vesting

As of the date of this Agreement

400,000

As of the date on which the first Product Placement (as referred to in the
Promotion Agreement) is initially aired

100,000

As of the date on which the first Product Integration (as referred to in the
Promotion Agreement) is initially aired

400,000

As of the date on which the second Product Placement or Product Integration (as
referred to in the Promotion Agreement) is initially aired

100,000

Total:

1,000,000

 

 

 

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Notwithstanding the foregoing, vesting of the Options shall accelerate and the
Shares shall become issuable upon exercise of the Options therefor in full upon
the consummation of any sale of all or substantially all of the Company’s voting
stock, assets or business or any merger of the Company with another entity
(excluding a merger with a wholly owned subsidiary of the Company or any merger
in which the Company is the surviving or continuing entity). The Company shall
provide Consultant at least seven (7) days written notice prior to the
consummation of any such transaction.

 

4.

Payment of Exercise Price.

 

(a)         To the extent vested pursuant to Section 3 hereof, Options
represented hereby may be exercised in whole or in part by delivering to the
Company a written notice of exercise substantially in the form of the Exercise
Notice attached hereto as Exhibit A and payment of the Exercise Price of the
Options so exercised (i) in cash, (ii) by check, (iii) by delivering a written
direction to the Company that the Option be exercised pursuant to a
net/“cashless” exercise procedure, pursuant to which funds to pay for exercise
of the Option are delivered to the Company by a surrender of a portion of this
Option with a Fair Market Value (as defined below) equal to the aggregate
Exercise Price for the shares of Common Stock purchased pursuant to the exercise
of the Option, as set forth in more detail below (a “Cashless Exercise”) or (iv)
any combination of the foregoing. 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 Agreement. An Exercise Notice shall be deemed to have
been received by the Company five (5) days after being placed in the mail, if
mailed, or one (1) Business Day after being sent via nationally recognized
overnight carrier, upon receipt or refusal of receipt, if delivered personally,
or upon confirmed facsimile transmission (or, if such transmission does not
occur on a Business Day or occurs later than 5:00 p.m. Central Time, then upon
the next Business Day following such transmission). The Company shall issue to
Consultant stock certificates representing the Shares exercised in accordance
with this Section 4 within three (3) Trading Days (as defined in Section 8(b)
hereof) of receipt of a completed and duly executed Exercise Notice. “Business
Day” means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of Missouri are authorized or obligated by law,
regulation or executive order to close.

 

(b)           In connection with any Cashless Exercise, the Consultant may elect
to receive Shares equal to the value (as determined below) of this Option (or
the portion thereof being exercised) by surrender of this Option at the
principal office of the Company together with the properly endorsed Exercise
Notice in which event the Company shall issue to the Holder a number of Shares
computed using the following formula:

 

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X=(Y)

x

(A-B)

 

 

A

 

Where X =

the number of Shares to be issued to the Consultant

 

Y =

the number of Shares purchasable under the Option or, if only a portion of the
Option is being exercised, the portion of the Option being exercised (at the
date of such calculation)

A =

the Fair Market Value of one Share (at the date of such calculation)

 

B =

Exercise Price (as adjusted to the date of such calculation)

 

(c)            For purposes hereof, the "Fair Market Value" of a Share as of a
particular date (the “Determination Date”) shall mean the average of the closing
bid price for the Common Stock in the over-the-counter market (or the closing
price on the Nasdaq Stock Market or any principal exchange for the Common Stock)
(the “Closing Price”) reported for the last five (5) Trading Days immediately
preceding the Determination Date.

 

5.              Term of Options. The term of the Options granted herein shall be
for five (5) years commencing with the Grant Date (the “Term”). The Options
shall expire and no longer be exercisable at the end of such term.

6.              Transfers of Options. Subject to Section 9 hereof, 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 such Shares, except as provided by law. The
Options are not transferable, other than to (a) Consultant's heirs or legatees,
(b) Consultant's family members or trusts for his or their benefit, or (c) one
or more “affiliates” of Consultant for tax or estate planning purposes. For
purposes of this Section 6, “affiliates” shall have the meaning provided to such
term in Rule 144 promulgated under the Securities Act of 1933, as amended (the
“Securities Act”). This Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and permitted
assigns.

7.

Adjustments.

(a)            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, in each case
effected without receipt of consideration by the Company, occurring after the
date of this Agreement, the number and kind of Shares issuable upon exercise of
any outstanding Options granted hereunder shall be adjusted proportionately and
accordingly by the Company. Any such adjustment in the number and kind of shares
subject to the outstanding Options shall not change the aggregate Exercise Price

 

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payable with respect to the Shares subject to the unexercised Options
outstanding but shall include a corresponding proportionate adjustment in the
Exercise Price per Share.

(b)           The Exercise Price and the number of Shares subject to the Options
shall be subject to adjustment from time to time as follows:

(i)             If the Company shall issue, after the date of this Agreement,
any Additional Stock (as defined below) without consideration or for a
consideration per share less than the Exercise Price in effect immediately prior
to the issuance of such Additional Stock, the Exercise Price in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price determined by multiplying
such Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock deemed outstanding immediately prior to such issuance
plus the number of shares of Common Stock that the aggregate consideration
received by the Company for such issuance would purchase at such Exercise Price;
and the denominator of which shall be the number of shares of Common Stock
deemed outstanding immediately prior to such issuance plus the number of shares
of such Additional Stock. Upon each adjustment of the Exercise Price pursuant to
this provision, the number of Shares issuable upon the exercise of the Options
shall be adjusted to the nearest full number obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Shares issuable upon exercise of the Options immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.

(ii)           The number of shares of Common Stock deemed outstanding shall be
calculated in each case assuming that all securities (or options or rights to
acquire securities) convertible into, exchangeable or exercisable for, or
otherwise entitling the holder thereof to subscribe for or receive, directly or
indirectly, additional Shares (referred to herein as “Common Stock Equivalents”)
have been fully converted into, exercised for, or exchanged into, shares of
Common Stock.

(iii)          With respect to the issuance of Common Stock Equivalents, the
following provisions shall apply for purposes of this Section 7:

(A)        The aggregate maximum number of shares of Common Stock deliverable
upon conversion of or in exchange for any such Common Stock Equivalents or upon
the exercise of options to purchase or rights to subscribe for such Common Stock
Equivalents and the subsequent conversion or exchange thereof (assuming the
satisfaction of any conditions to convertibility, exchangeability or
exerciseability, including, without limitation, the passage of time, but without
taking into account potential antidilution adjustments) shall be deemed to have
been issued at the time such Common Stock Equivalents were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such Common Stock
Equivalents and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Company upon the conversion or
exchange of such Common Stock Equivalents or the exercise of any related options
or rights.

 

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(B)        In the event of any change in the number of shares of Common Stock
deliverable by or in the consideration payable to the Company upon exercise of
such Common Stock Equivalents or upon conversion of or in exchange for such
Common Stock Equivalents, including, but not limited to, a change resulting from
the antidilution provisions thereof, the Exercise Price to the extent in any way
affected by or computed using such Common Stock Equivalents, shall be recomputed
to reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such Common Stock Equivalents or the conversion or exchange of such
Common Stock Equivalents.

(C)        Upon the expiration of any such Common Stock Equivalents, the
termination of any rights to convert or exchange or the expiration of any
options or rights related to such Common Stock Equivalents, the Exercise Price
to the extent in any way affected by or computed using such Common Stock
Equivalents or options or rights related to such Common Stock Equivalents, shall
be recomputed to reflect the issuance of only the number of shares of Common
Stock (and convertible or exchangeable Common Stock Equivalents which remain in
effect) actually issued upon the exercise of such Common Stock Equivalents, upon
the conversion or exchange of such Common Stock Equivalents or upon the exercise
of the options or rights related to such Common Stock Equivalents.

(iv)          “Additional Stock” means any shares of the Company’s common stock
or Common Stock Equivalents issued by the Company after the date of this
Agreement other than: (A) shares of common stock or Common Stock Equivalents
issuable or issued to employees, consultants, directors or vendors (if in
transactions with primarily non-financing purposes) of the Company directly or
pursuant to a stock option plan or restricted stock plan approved by the Board
of Directors of the Company; and (B) shares of the Company’s common stock issued
upon the exercise or conversion of options, warrants, rights or convertible or
exchangeable securities outstanding on the date of this Agreement.

(c)         Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company with or into another corporation during the Term
(other than a consolidation or merger in which the Company is the surviving or
continuing entity or that does not otherwise result in any reclassification or
change of the outstanding Common Stock) (a “Corporate Change”), then Consultant
shall thereafter have the right to receive upon exercise of the Options, in lieu
of the Shares otherwise issuable, such shares of stock, securities and/or other
property as would have been issued or payable in such Corporate Change with
respect to or in exchange for the number of Shares which would have been
issuable upon exercise had such Corporate Change not taken place, and in any
such case, appropriate provisions (in form and substance reasonably satisfactory
to the holder hereof) shall be made with respect to the rights and interests of
the holder to the end that the economic value of the Options and this Agreement
is in no way diminished by such Corporate Change and that the provisions hereof
shall thereafter be applicable, as nearly as may be practicable in relation to
any shares of stock or securities thereafter deliverable upon the exercise
thereof. This provision shall similarly apply to successive consolidations or
mergers.

 

 

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8.

Redemption.

(a)          Up to all of the Options (whether or not then vested pursuant to
Section 3 above) shall be redeemable by the Company, in its sole discretion, at
a price of $.001 per Share at any time during any Redemption Period (as defined
below), provided that (i) the Company has given written notice to Consultant of
the date of, and number of Options subject to, such redemption (a “Redemption
Notice”) no later than 11:59 p.m., Central Time, on the fifth (5th) Trading Day
(as defined below) after the Redemption Conditions (as defined below) in respect
of such redemption have been met and (ii) the Ability-to-Sell Conditions (as
defined below) are satisfied on each Trading Day during the period beginning on
the Trading Day on which the Redemption Notice is deemed received and ending on
the twentieth (20th) Trading Day after the Redemption Notice is deemed received.
Consultant shall be entitled to exercise the Options subject to the Redemption
Notice, regardless of whether such Options have otherwise vested pursuant to
Section 3 above, following his receipt of the Redemption Notice.
“Ability-to-Sell Conditions” means: (i) the Registration Statement shall be
effective and the Company shall not have informed Consultant that the prospectus
contained therein may not be used; (ii) the Registration Statement shall not be
subject to a stop order by the Securities and Exchange Commission (“SEC”); and
(iii) the Common Stock shall not be suspended from trading on any of, and shall
be listed or quoted for trading (and authorized) on the principal United States
securities exchange or trading market where the Common Stock is then listed or
traded.

 

(b)         “Redemption Period” shall mean the period beginning on the twentieth
(20th) Trading Day after the Redemption Notice is deemed received pursuant to
paragraph (a) above and ending at 11:59 p.m., Central Time, on the thirtieth
(30th) Trading Day after the Redemption Notice is deemed received pursuant to
paragraph (a) above. “Redemption Conditions” means: (i) the Closing Price shall
be equal to or greater than three hundred and fifty percent (350%) of the
Exercise Price therefor as then in effect, for a consecutive twenty (20) Trading
Day period; and (ii) the average daily trading volume for the Common Stock
during such twenty (20) Trading Day period shall be at least Two Hundred
Thousand (200,000) shares. “Trading Day” means any day on which the principal
United States securities exchange or trading market where the Common Stock is
then listed or traded is open for trading.

 

9.

Registration Rights; Black-Out Periods.

(a)          The Company will file, at its sole cost and expense, within one
hundred and twenty (120) days of the Grant Date, a Registration Statement on
Form SB-2 (the “Registration Statement”) (or such other registration form then
available, as determined by the Company) covering the Shares. The Company will
use its commercially reasonable good-faith efforts to have the Registration
Statement declared effective as soon as practicable and to maintain its
effectiveness, subject to the “black-out” periods below, until the date that all
of the Shares may be sold pursuant to Rule 144(k) under the Securities Act.
Consultant will at all times comply with applicable securities laws and
regulations with respect to the Options and Shares, including, without
limitation, Rule 10b-5 under the Securities Act. Consultant agrees to cooperate
with the Company and to furnish information reasonably requested by the Company
in connection with the preparation and filing of the Registration Statement
hereunder.

 

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(b)           Upon (i) the issuance by the SEC of a stop order suspending the
effectiveness of the Registration Statement or the initiation of proceedings
with respect to the Registration Statement under Section 8(d) or 8(e) of the
Securities Act, (ii) the occurrence of any event or the existence of any fact as
a result of which any Registration Statement shall contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
related prospectus shall contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or (iii) the occurrence or existence of any pending
development that, in the reasonable discretion of the Company, makes it
appropriate to suspend the availability of the Registration Statement and the
related prospectus, the Company shall be entitled to suspend the availability of
the Registration Statement and any related prospectus, provided that any such
suspension period shall not exceed sixty (60) days in any three (3) month period
or ninety (90) days in any twelve-month period. The Company shall give prompt
written notice of such suspension to Consultant.

(c)

Indemnification and Contribution.

 

(i)          The Company agrees to indemnify and hold harmless Consultant
against any and all losses, claims, damages or liabilities to which Consultant
may become subject under the Securities Act, the Securities Exchange Act of
1934, as amended (“Exchange Act”) or any other federal or state statutory law or
regulations, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) (“Claims”) arise out of or are
based upon (A) any untrue statement or alleged untrue statement of a material
fact in the Registration Statement (as originally filed or in any amendment
thereto) or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (B) any untrue statement or alleged untrue statement of a material
fact contained in the prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading (any of the matters in the
foregoing clauses (A) and (B), a “Violation”), and agrees to reimburse each such
indemnified party for any out-of-pocket legal or other expenses reasonably
incurred by Consultant in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained in this Agreement, the
indemnification covenants contained in this Section 9(e)(i): (x) shall not apply
to a Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by
Consultant expressly for use in the Registration Statement or any such amendment
thereof or supplement thereto; and (y) with respect to any prospectus, shall not
inure to the benefit of Consultant if (I) the untrue statement or omission of
material fact contained in the prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, (II) such corrected prospectus was
timely made available by the Company, and (III) Consultant was promptly advised
in writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Consultant, notwithstanding such advice, used it.

 

(ii)        Consultant agrees to indemnify and hold harmless the Company, each
of its directors, each of its officers who signs the Registration Statement, and
each person, if

 

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any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to Consultant, but only with reference to written
information relating to Consultant furnished to the Company by or on behalf of
Consultant specifically for inclusion in the documents referred to in the
foregoing indemnity.

 

(iii)       Promptly after receipt by an indemnified party under this Section
9(e) of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
this Section 9(e), notify the indemnifying party in writing of the commencement
thereof; but the failure so to notify the indemnifying party will not relieve it
from liability under paragraph (i) or (ii) above unless and to the extent that
the indemnifying party is actually prejudiced in its ability to defend such
action. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ one
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (A) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would create a conflict of interest, (B) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (C) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (D)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.

 

(iv)        In the event that the indemnity provided in paragraph (i) or (ii) of
this Section 9(c) is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and Consultant severally agree to
contribute to the aggregate Claims to which the Company and Consultant may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and by Consultant on the other from the
offering of the Shares; provided, however, that in no case (except in the case
of any fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) by Consultant) shall Consultant be responsible for any amount in excess of
the proceeds received by Consultant upon the sale of the Shares hereunder. If
the allocation provided by the immediately preceding

 

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sentence is unavailable for any reason, the Company and Consultant severally
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
of Consultant on the other in connection with the statements or omissions which
resulted in such Claims as well as any other relevant equitable considerations.
Relative fault shall be determined by reference to, among other things, whether
any untrue or any alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information provided by the
Company on the one hand or Consultant on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The Company and Consultant agree
that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (iv), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

 

10.           Representations and Warranties by Consultant. Consultant
represents and warrants to the Company that:

 

(a)         Consultant is acquiring the Options for his own account for
investment purposes only and not with a present view towards the public sale or
distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Consultant understands that he must bear the economic risk
of this investment indefinitely, unless the Options are registered pursuant to
the Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering the resale of the Options or the Shares, except
as contemplated by Section 9 of this Agreement.

 

(b)         Consultant is an “Accredited Investor” as that term is defined in
Rule 501(a) of Regulation D promulgated under the Securities Act.

 

(c)         Consultant understands that the Options are being offered and
delivered to him, and the underlying shares of Common Stock are being offered to
him, in reliance upon specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and Consultant’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
Consultant set forth herein in order to determine the availability of such
exemptions and the eligibility of Consultant to acquire the Options and the
Shares.

 

(d)         Consultant and his counsel have been furnished all materials
relating to the business, finances and operations of the Company and materials
relating to the Options and the Shares which have been specifically requested by
him or his counsel. Consultant understands that his investment in the Options
and the Shares involves a high degree of risk.

 

11.

SEC Documents. The Company represents and warrants to Consultant that:

 

 

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(a) The Company has made available to Consultant true and complete copies of all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Exchange Act
(“SEC Documents”) that such Consultant has requested, and all such documents are
otherwise available at www.sec.gov.

 

(b) As of their respective dates, all SEC Documents filed since June 1, 2003
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as applicable, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of such SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

 

12.            Reserved Shares. The Company shall, as of and after the date upon
which the Registration Statement shall have been declared effective by the SEC,
but in no event later than August 25, 2005, reserve such number of shares of its
authorized but unissued shares of Common Stock to provide for the issuance of
shares of Common Stock upon full exercise of the Options.

 

13.            Amendments. This Agreement may not be amended without the written
consent of each of the parties hereto.

 

14.           Withholding Taxes. The Company may withhold from sums due or to
become due to Consultant from the Company any amount necessary to satisfy any
tax obligation to the extent required to be withheld by law.

15.           Assignment. Subject to the rights of Consultant under Section 6,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either party hereto (whether by operation of law or
otherwise) without the prior written consent of the other party.

16.           Notice. The initial addresses for any notices or other
communications shall be as follows, and each party shall provide notice to the
other party of any change in such party’s address:

 

(a)

If to the Company:

 

SLS International, Inc.

1650 West Jackson Street

Ozark, MO 65721

Facsimile: (417) 883-2723

Attention: Chief Executive Officer and President

 

With a copy (which shall not constitute notice) to:

 

Drinker Biddle & Reath LLP

 

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50 Fremont Street, 20th Floor

San Francisco, CA 94109

Facsimile: (415) 591-7510

Attention: Scott Joachim, Esq.

 

(b)

If to Consultant:

 

JMBP, Inc.

640 North Sepulveda Boulevard, 2nd Floor

Los Angeles, CA 90049

Facsimile: (310) 903-5500

Attention: Jordan Yospe, Esq.

 

With a copy (which shall not constitute notice) to:

 

Irell & Manella LLP

1800 Avenue of the Stars

Suite 900

Los Angeles, CA 90067

Facsimile: (310) 203-7199

Attention: Rick Wirthlin, Esq.

 

Any notice hereunder shall be deemed to have been received by the party
receiving such notice five (5) days after being placed in the mail, if mailed,
or one (1) Business Day after being sent via a nationally recognized overnight
carrier, upon receipt or refusal of receipt, if delivered personally, or upon
confirmed facsimile transmission (or, if such transmission does not occur on a
Business Day or occurs later than 5:00 p.m. Central Time, then upon the next
Business Day following such transmission). “Business Day” means any day, other
than a Saturday or Sunday or a day on which banking institutions in the State of
Missouri are authorized or obligated by law, regulation or executive order to
close.

 

17.           Governing Law. This Agreement shall be construed and enforced in
accordance with the law of the State of Delaware, without giving effect to
conflict of law principles thereof.

18.           Counterparts. 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.

19.           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.

[Signature Page Follows]

 

 

 

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--------------------------------------------------------------------------------

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.

 

SLS INTERNATIONAL, INC.

 

__________________________________

By: John Gott, President

 

MARK BURNETT

 

__________________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Option Agreement

 

 

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--------------------------------------------------------------------------------

 

 

EXHIBIT A

 

FORM OF EXERCISE NOTICE

 

The undersigned hereby irrevocably exercises the right to purchase _____________
shares of the Common Stock of SLS International, Inc., a corporation organized
under the laws of the State of Delaware (the “Company”), pursuant to the Option
Agreement (the “Option”) between the Company and the undersigned, dated June
___, 2005, at the current Exercise Price of $____, and herewith [makes payment
of the Exercise Price with respect to such shares in full][elects to effect a
Cashless Exercise (as defined in Section 4 of such Option)], all in accordance
with the conditions and provisions of said Option.

 

The undersigned agrees not to offer, sell, transfer or otherwise dispose of any
shares of Common Stock purchased hereby, except under circumstances that will
not result in a violation of the Securities Act of 1933, as amended, or any
state securities laws.

 

 

Dated:_________________

_____________________________________

Signature of Holder

 

_____________________________________

Name of Holder (Print)

 

Address:

 

_____________________________________

_____________________________________

_____________________________________

 

 

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