Document:

May 19, 2003

Mr. Parker Sroufe Executive Vice President, Marketing Helix BioMedix, Inc.
22122 20th Avenue SE
Bothell, Washington 98021

Dear Parker:

     It is our pleasure to present you with this offer letter for stock options.
The purpose of this letter is to describe  the stock  options  offered to you by
Helix Biomedix Inc.  ("Helix") and your  non-competition  obligations,  which we
discussed previously.

     Helix  offers  you fifty  thousand  (50,000)  qualified  stock  options  at
$1.00/share that vest on May 31, 2003, and an additional fifty thousand (50,000)
qualified stock options at $1.00/share that vest on May 31, 2004. Except for the
vesting date,  these stock options shall be subject to the terms and  conditions
of the Helix Biomedix,  Inc. 2000 Stock Option Plan,  initially adopted November
6, 2000 and  amended as of August 1, 2002 (a copy of which we have  provided  to
you).

     You agree that,  during the term of your  employment with Helix and for one
(1) year after any termination or expiration  thereof,  for any reason or for no
reason, you shall not, without the prior written consent of Helix, invest, carry
on, engage or become  involved,  directly or indirectly,  either as an employee,
agent, advisor, officer, director, manager, partner, joint venturer, participant
or  consultant  in any  business  enterprise  (other  than  Helix  or any of its
subsidiaries,  affiliates,  successors  or  assigns)  in the United  States that
derives  any  material  revenues  from the  Business;  provided,  however,  your
non-competition  obligations  shall not prevent you from: (i) leasing or renting
real property to a third party in the  Business,  on customary  commercial  real
estate lease or rental  terms,  in which you own a direct or indirect  interest;
(ii)  marrying a person then engaged in the Business and thereby  being  deemed,
directly  or  indirectly,  to own,  share in the  earnings  of, or invest in the
stocks,  bonds or other securities of any business or entity owned,  directly or
indirectly or in whole or in part, by such person that you marry,  provided that
you shall not be engaged or take part in, render  services to or otherwise serve
as an officer,  director or  employee of any such  business or entity;  or (iii)
beneficially  owning,  directly  or  indirectly,  5% or  less  of any  class  of
securities of an entity that has a class of securities  registered under Section
12 of the  Securities  Exchange  Act of  1934,  as  amended,  so  long  as  such
securities ownership does not include any operational,  managerial or consulting
relationship with such corporation or entity.

<PAGE>

     As used herein,  the "Business"  means any individual,  business or company
(a) that is a current customer of Helix; (b) that was a customer of Helix within
the three-year period prior to the termination or expiration of your employment;
(c) with which you had material  discussions  for  licensing  Helix's  peptides,
within the three -year period just prior to the  termination  or  expiration  of
your  employment;  or (d)  creates,  designs,  develops,  researches,  promotes,
markets,  distributes,  advertises,  sells,  offers  for  sale,  makes,  uses or
imports, or is attempting to or planning to create, design,  develop,  research,
promote,  market,  distribute,  advertise,  sell,  offer for sale,  make, use or
import peptides or peptide-based products or services that compete with Helix.

         We agree that your stock options are in consideration  for, among other
things,  services  rendered  and to be  rendered by you as an employee of Helix,
that certain Confidentiality and Nondisclosure Agreement, dated June 1, 2002, by
and between you and Helix,  and the  non-competition  clause  contained  in this
letter

     If you find this letter agreement acceptable,  please sign, date and return
it to me.  If you have any  questions  or I can  assist  you in any way,  please
contact me directly.

         Sincerely,

         /s/ R. Stephen Beatty
         ---------------------
         R. Stephen Beatty
         President and CEO

AGREED AND ACCEPTED:

By:  /s/ Parker Sroufe
     -----------------

Dated: May 19, 2003
     -----------------Exhibit
4.1

 

OPTION AGREEMENT

 

OPTION AGREEMENT dated this *** day of ******, 2001
between QSound
Labs, Inc., a body corporate, continued under the laws of the
Province of Alberta, having its head office at 400 – 3115 12th
Street NE, Calgary, AB T2E 7J2 (the “Company”) and  *******  (the “Optionee”);

 

WHEREAS the Optionee is an employee, officer, director
or consultant of the Company, and the Company is desirous of granting an
incentive option to the Optionee to purchase common shares without par value in
the capital of the Company;

 

In consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereby covenant and
agree each with the other as follows:

 

1.                                       Grant
of Option.   The Company hereby
grants to the Optionee under the 1998 Stock Option  Plan  (“Plan”) the irrevocable
option to purchase common shares without par value in the capital of the
Company, or any part thereof, as follows (“Option”):

Number of shares:                                                               *****

Exercise price:                                                                                  *****
per share

Expiry Date:

Vesting:

 

2.                                       Exercise
of Option.   Subject to section 5.
hereof, the Optionee may exercise the Option at any time or from time to time
by giving written notice to the Company substantially in the form attached
hereto as Schedule “A” and delivering to the Company a certified cheque in an
amount equal to the number of common shares in respect of which the Option is
being exercised multiplied by the exercise price specified in section 1.
hereof.

 

3.                                       Optionee’s
Representation. The Optionee hereby confirms and represents that he/she is
an employee, officer, director or consultant of or for the Company (“Service
Provider”), as the case may be, at the date hereof.

 

4.                                       Other
Remuneration.   This Agreement shall
not preclude or limit the Company from paying, or the Optionee from accepting,
compensation or other remuneration for any work or services performed by the
Optionee for the Company.

 

5.                                       Entitlement
to Exercise                        Not
withstanding any other provision hereof, the Optionee shall only be entitled to
exercise the Option while a Service Provider of the Company or any of its
subsidiaries or during a period commencing on the date of notice given by
either Company or Optionee to the other party, of termination of Optionee as a
Service Provider of the Company or any of its subsidiaries and ending on the
earlier of 30 days thereafter and the Expiry Date, or on such later date as may
be determined by the Board of Directors.

 

6.                                       Exercise
by Personal Representative   In the
event of the Optionee’s death while a Service Provider of the Company or any of
its subsidiaries, the personal representative of the Optionee shall be entitled
to exercise the Option in whole or in part as to any shares not previously
purchased hereunder by giving written notice to the Company and paying the purchase
price to the Company during a period commencing on the date of death of the
Optionee and ending on the earlier of one year thereafter and the Expiry Date,
or on such later date as may be determined by the Board of Directors.

 

7.                                       Fully
Paid Shares   All common shares
purchased by the Optionee hereunder shall be fully paid and non-assessable
common shares.

 

8.                                       Adjustment   The number of common shares subject to the
Option shall be increased or decreased proportionately in the event of the
subdivision or consolidation of common shares of the Company, and in any event
a corresponding adjustment shall be made changing the number of shares
deliverable upon the exercise of the Option without change in the total price
applicable to the unexercised portion of the option, but with a corresponding
adjustment in the price for each share covered by the Option.  In case the Company is reorganized or merged
or

 

 

consolidated or
amalgamated with another corporation, appropriate provisions shall be made for
the continuance of the Option and to prevent its dilution or enlargement.

 

9.                                       No
Registration  The Optionee
understands that the common shares to be issued pursuant to the option may not
be registered under the United States Securities Act of 1933 (the “Act”) in reliance
upon an exemption from the registration requirements thereof pursuant to
Section 4(2) of the Act.  The Optionee
agrees to execute and deliver any and all documents at the time of exercise of
the Option as may be necessary to assure compliance with U.S. federal and state
securities laws.  The Optionee
understands that QSound Labs, Inc. shall not be required to register any common
shares acquired by the Optionee and that the Optionee may be required to hold
such common shares indefinitely in the absence of registration or an exemption
from registration under the United States federal or state securities laws.

 

10.                                 Legend
The Optionee acknowledges that all common shares issued pursuant hereto may
bear the following legends (which may be modified from time to time in such
manner as the Corporation’s attorneys recommend):

 

“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES
FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY
THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT
REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR
STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM,
SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN
OPINION OF SECURITYHOLDER’S COUNSEL, ACCEPTABLE TO THE CORPORATION, THAT NO
VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT.”

 

“THE SECURITIES
REPERSENTED HEREBY MAY NOT BE SOLD TO A RESIDENT OF THE  PROVINCE OF ALBERTA WITHIN ONE YEAR FROM THE
DATE OF ISSUANCE.”

 

11.                                 Amendment   If the approval of the Company’s
shareholders to any amendment to this Agreement shall be required by the
prevailing policies of the regulatory securities bodies having jurisdiction
over the Company, then any amendment made to this agreement shall be subject to
the approval of the shareholders of the Company.

 

12.                                 Time
of the Essence  Time shall be essence
hereof.

 

13.                                 Transfer  Upon the approval of the Plan Administrator,
the Option may be transferred in accordance with the provisions of the Plan.

 

IN WITNESS WHEREOF
the parties hereto have executed there presents on the day and year first above
written.

 

QSOUND LABS, INC.

 

	
  Per:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  OPTIONEE

  	
   

  	
  WITNESS

  	
   

  

 

2

 

SCHEDULE
A

QSound Labs, Inc. 

400 – 3115 12th
Street N.E.

Calgary, AB

T2E 7J2

 

Attention:  Secretary

 

Dear Sirs:

 

Re:  Exercise
of Stock Option

 

The undersigned, being the holder of an option to
purchase common shares of QSound Labs, Inc. (the “Company”) does hereby elect
to exercise such option to the extent of the purchase of
                           common
shares at the exercise prices of
$                    per
share  and does hereby tender to the
Company the total purchase price of $                    
therefor.

 

The undersigned acknowledges that if common shares
issued pursuant hereto may not be registered pursuant to applicable securities
laws of the United States, any certificate representing such shares will bear a
legend in a form which may be approved by the Company’s counsel and the
undersigned consents to the imposition of any such legend.

 

Yours truly,

 

 

OPTIONEE

 

 

DATED this
         day
of                               ,
200      .

 

3

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