NON-EXCLUSIVE FINDER'S AGREEMENT

 

                                                                    Exhibit 10.1

 

                        NON-EXCLUSIVE FINDER'S AGREEMENT

 

This Finder's Agreement (this "Agreement") is made as of November 30, 2004,

between SLS International, Inc., a Delaware corporation (the "Company"), and The

Shemano Group, Inc., a California corporation (the "Finder"). The Finder and the

Company agree:

 

         1.       ENGAGEMENT OF FINDER: The Company hereby engages the Finder,

                  and the Finder hereby accepts such engagement, to act as the

                  Company's non-exclusive finder with respect to sales by the

                  Company in a private placement transaction (the "Offering") of

                  up to $15 million aggregate principal amount of Equity,

                  Equity-Related or Debt Securities (the "Securities") of the

                  Company to the investors during the term of this Agreement as

                  set forth in Section 6.

 

         2.       OFFERING PROCEDURES: The Finder will introduce the Company to

                  investors who the Finder reasonably believes to be "accredited

                  investors," as that term is defined in Rule 501 of Regulation

                  D promulgated under the Securities Act of 1933, as amended

                  (the "1933 Act"), with whom the Finder has a pre-existing

                  substantive relationship (the "Offerees").

 

         3.       FINDER'S COMPENSATION: In consideration for the services

                  rendered by the Finder hereunder, the Company shall pay to the

                  Finder, or cause the Finder to be paid, compensation as

                  provided in this section within 3 days of the Company's

                  receipt of funds from the Offerees.

 

                  (A)  CASH COMPENSATION: The Company shall pay to the Finder

                       cash compensation equal to six percent (6%) of the gross

                       Offering funds received in the Offering.

 

                  (B)  WARRANTS: The Finder shall receive 4% warrant

                       compensation. The warrant calculation translates to

                       40,000 warrants per $1 million raised. The warrants

                       issued to the Finder shall have a strike price equal to

                       the lesser of $2.50 or the conversion price of any Equity

                       or Equity-Related Securities sold, have a five-year term

                       and cashless exercise after one year if the underlying

                       shares are not then registered. The registration rights

                       will be equal to to an warrants sold to Offerees in the

                       Offering. The warrant shares shall be subject to

                       equitable adjustment for stock splits, stock dividends

                       and similar events. The warrant shares shall have

                       "piggyback" registration rights.

 

                       For purposes of determining the Finder's compensation

                       under this Section 3, the gross offering funds received

                       in the Offering(s) shall include any amounts paid to the

                       Company by investors in respect to an exercise or

                       conversion of any of the Securities or Warrants,

                       including the value allocated to any securities not

                       issued pursuant to a "cashless exercise" or similar

                       provision, whenever actually received by the Company.

 

 

         4.       CERTAIN MATTERS RELATING TO FINDER'S DUTIES:

 

                  (A)  The Finder's responsibilities shall be limited to

                       introducing potential investors to the Company, and the

 

 

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                       Finder shall not have authority to offer or sell the

                       Securities to any potential investor. Finder shall not

                       use any general solicitation or general advertising

                       within the meaning of the applicable securities laws in

                       connection with any offering. The Finder shall have no

                       responsibility to participate or assist in any

                       negotiations between any potential investor and the

                       Company. The Finder will have no responsibility to act,

                       and the parties contemplate that the Finder will not act,

                       as a broker or dealer with respect to the offer or sale

                       of the Securities. Further, the finder shall have no

                       responsibility for fulfilling any SEC reporting or filing

                       requirements as relates to the Company provided however,

                       Finder agrees to provide Company with reasonable

                       assistance related to any registration, qualification or

                       other requirements of applicable securities laws and

                       other regulatory matters, upon request of the Company.

 

                  (B)  The Finder agrees to introduce the Company to Offerees

                       only in states in which the Finder has been advised by

                       the Company that offers and sales of Securities can be

                       legally made by the Company.

 

                  (C)  The Finder shall perform its duties under this Agreement

                       in a manner consistent with the instructions of the

                       Company. Such performance shall include, but not be

                       limited to, the delivery to each Offeree a current copy

                       of the Private Placement Memorandum, Subscription

                       Agreement and any Offering Questionnaire and/or similar

                       documents provided to the Finder by the Company, as such

                       documents may be amended from time to time by the Company

                       and delivered to the Finder. The Finder shall

                       consecutively number each copy of the Private Placement

                       Memorandum (which will include the first letter of the

                       Finder's name or other identifying mark sufficient to

                       designate an Offeree introduced by the Finder); keep a

                       log of when and to whom each copy of the Private

                       Placement Memorandum is given, with the Private Placement

                       Memorandum numbers; maintain a copy of any written

                       information the Finder obtains regarding the suitability

                       of each Offeree; and only use the Private Placement

                       Memorandum in introducing Offerees to the Company. The

                       Finder shall provide this log and all such written

                       information to the Company at any time and promptly upon

                       request of the Company at the termination of this

                       Agreement. The Company shall, promptly following

                       execution of this Agreement, provide the Finder with a

                       written list of prospective Offerees which the Company

                       does not want the Finder to contact. The Finder agrees to

                       not contact the persons on such list, and the Finder

                       shall not be entitled to the compensation set forth in

                       Section 3 with respect to any investment made by such

                       person in the Company's Securities.

 

 

                  (D)  The Finder is and will hereafter act as an independent

                       contractor and not as an employee of the Company and

                       nothing in this Agreement shall be interpreted or

                       construed to create any employment, partnership, joint

                       venture, or other relationship between the Finder and the

                       Company. The Finder will not hold itself out as having,

                       and will not state to any person that the Finder has, any

                       relationship with the Company other than as an

                       independent contractor. The Finder shall have no right or

                       power to find or create any liability or obligation for

                       or in the name of the Company or to sign any documents on

                       behalf of the Company.

 

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         5.       RIGHT OF FIRST REFUSAL. In consideration for the Finder acting

                  as the finder in connection with the proposed offering, the

                  Company hereby grants the Finder a right of first refusal to

                  serve as the Company's exclusive financial advisor and

                  investment banker in connection with any financial transaction

                  for a period of 1 year from the closing of the transaction. In

                  the event the company advises the Finder that it desires to

                  effect any financial transaction, the Company and the Finder

                  will negotiate in good faith the terms of the Finder's

                  engagement in a separate agreement which would set forth,

                  among other matters, compensation for the Finder based upon

                  customary fees for the services provided.

 

         6.       TERMINATION OF AGREEMENT. Either party may terminate this

                  Agreement by notifying the other party in writing upon a

                  material breach by that other party, unless such breach is

                  curable and is in fact cured within 15 days after such notice.

                  This Agreement will otherwise terminate upon completion or

                  termination of the Offering. The Company may terminate this

                  Agreement following ninety (90) days after the date hereof

                  upon written notice. Notwithstanding the foregoing, all

                  provisions of this Agreement other than section 1, 2 and 4

                  shall survive the termination of this Agreement with respect

                  to Offerees who the Finder introduces to the Company prior to

                  any termination with respect to the Offering. The Finder shall

                  be entitled to compensation under section 3 based on

                  investments made by such Offerees prior to the termination of

                  this Agreement or at any time within one year thereafter.

 

         7.       INDEMNIFICATION. The Company and the Finder each shall

                  indemnify and defend the other and the other's affiliates,

                  directors, officers, e