Published on September 12, 2005
Exhibit 4.1
AETHLON MEDICAL, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Aethlon Medical, Inc. a
Nevada corporation (the "Company"):
OPTIONEE: James A. Joyce
GRANT DATE: September 9, 2005
EXERCISE PRICE: $0.21 per share
NUMBER OF OPTION SHARES: 2,857,143
EXPIRATION DATE: September 9, 2015
TYPE OF OPTION: Non-Statutory Stock Option
VESTING COMMENCE DATE: September 9, 2005
Optionee agrees to be bound by the terms of the Stock Option
Agreement attached hereto as EXHIBIT A.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or
in the attached Stock Option Agreement shall confer upon Optionee any right to
continue in service in any capacity, including as an employee, for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining Optionee) or
of Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's service and/or employment at any time for any reason, with or without
cause.
DEFINITIONS. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: SEPTEMBER 9, 2005 AETHLON MEDICAL, INC.
By: _____________________________
Name: James W. Dorst, CFO
OPTIONEE
__________________________________
Name: James A. Joyce
Address: _______________________
_______________________
ATTACHMENTS
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EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT A
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STOCK OPTION AGREEMENT
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AETHLON MEDICAL, INC.
STOCK OPTION AGREEMENT
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RECITALS
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The Board of Directors of Aethlon Medical, Inc. (the "Company"), in a
telephonic Board Meeting held September 8, 2005 has deemed it fair and in the
best interest of the Corporation and its stockholders that the Corporation issue
to James A. Joyce an aggregate of 2,857,143 options to acquire restricted common
stock.
The Optionee has agreed to immediately cancel $300,000 out of a total
liability owing to him from the Corporation of $364,966.20.
All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
AGREEMENT
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NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5.
3. LIMITED TRANSFERABILITY. During Optionee's lifetime, this option
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in as specified in the Grant Notice.
5. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
6. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
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7. REGISTRATION RIGHTS. If the Company at any time proposes to register
any of its securities under the Act for sale to the public, whether for its own
account or for the account of other security holders or both, provided the
Registrable Securities are not otherwise subject to an effective registration
statement, the Company will cause such Registrable Securities to be included
with the securities to be covered by the registration statement proposed to be
filed by the Company. In the event that any registration pursuant to this
Section 8 shall be, in whole or in part, an underwritten public offering of
Common Stock of the Company, the number of shares of Registrable Securities to
be included in such an underwriting may be reduced by the managing underwriter
if and to the extent that the Company and the underwriter shall reasonably be of
the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein; provided, however, that the
Company shall notify the Purchaser in writing of any such reduction.
"Registrable Securities" means the number of shares of the Company's Common
Stock set forth on the first page of the Notice of Grant of Stock Option.
10. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
the Optionee (or any other person or persons exercising the option) must take
the following actions:
(i) Execute and deliver to the Company a written
notice setting forth the number of Option Shares for which the
option is exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in cash or in one or more of the following
forms:
(A) by cancellation of indebtedness of the
Company to the Optionee;
(B) if approved by the Committee, by
surrender of shares that either: (1) have been owned
by the Optionee for more than one year and have been
paid for within the meaning of SEC Rule 144 (and, if
such shares were purchased from the Company by use of
a promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by the
Optionee in the public market;
(C) if approved by the Committee, by waiver
of compensation due or accrued to the Optionee for
services rendered;
(D) with respect only to purchases upon
exercise of an Option, and provided that a public
market for the Company's stock exists:
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(1) through a "same day sale"
commitment from the Optionee and a broker-dealer that
is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Optionee
irrevocably elects to exercise the Option and to sell
a portion of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company;
or
(2) through a "margin" commitment
from the Optionee and a NASD Dealer whereby the
Optionee irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise
Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(E) Notwithstanding any provisions herein to
the contrary, if the Fair Market Value of one share
of Common Stock is greater than the Exercise Price
(at the date of calculation as set forth below), in
lieu of exercising this Option for cash, the Holder
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 written notice in which event
the Company shall issue to the Holder a number of
shares of Common Stock computed using the following
formula:
X=Y (A-B)
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Where X= the number of shares of Common Stock to be
issued to the Holder.
Y= the number of shares of Common Stock 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 of the
Company's Common Stock (at the date of such
calculation).
B= Exercise Price (as adjusted to the date of such
calculation).
(F) By any combination of the foregoing.
Except to the extent the sale and remittance
procedure is utilized in connection with the option
exercise, payment of the Exercise Price must
accompany the written notice delivered to the Company
in connection with the option exercise.
(iii) Furnish to the Company appropriate
documentation that the person or persons exercising
the option (if other than Optionee) have the right to
exercise this option.
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(iv) Execute and deliver to the Company such written
representations as may be requested by the Company in
order for it to comply with the applicable
requirements of federal and state securities laws.
(v) Make appropriate arrangements with the Company
for the satisfaction of all federal, state and local
income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Company
shall issue to or on behalf of the Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Company and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq Stock Market or the
Over-The Counter Bulletin Board, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
(b) The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company of any liability with respect to the non-issuance or sale of
the Common Stock as to which such approval shall not have been obtained. The
Company, however, shall use its best efforts to obtain all such approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the Company and its successors and assigns and the Optionee,
the Optionee's assigns and the legal representatives, heirs and legatees of the
Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company at its principal corporate offices. Any notice required to be given
or delivered to the Optionee shall be in writing and addressed to the Optionee
at the address indicated below the Optionee's signature line on the Grant
Notice. All notices shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, postage prepaid and properly addressed to the party to
be notified.
14. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on this 8th Day of September, 2005
AETHLON MEDICAL, INC., a Nevada corporation
By: ____________________________________________
James W. Dorst, Chief Financial Officer
OPTIONEE
__________________________________________________
James A. Joyce
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APPENDIX A
The following definitions shall be in effect under the
Agreement:
1. AGREEMENT shall mean this Stock Option Agreement.
2. CODE shall mean the Internal Revenue Code of 1986, as amended.
3. COMMON STOCK shall mean the Company's common stock.
4. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 8 of the Agreement.
5. EXERCISE PRICE shall mean the exercise price payable per Option
Share as specified in the Grant Notice.
6. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
7. FAIR MARKET VALUE. Fair Market Value of a share of Common Stock as
of a particular date (the "DETERMINATION DATE") shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market or the NASDAQ SmallCap Market,
then the closing or last sale price, respectively, reported for the last
business day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market or the NASDAQ SmallCap Market but is
traded on the NASD OTC Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day immediately
preceding the Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree or in the absence of agreement by arbitration in accordance with
the rules then in effect of the American Arbitration Association, before a
single arbitrator to be chosen from a panel of persons qualified by education
and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all amounts to
be payable per share to holders of the Common Stock pursuant to the charter in
the event of such liquidation, dissolution or winding up, plus all other amounts
to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Option are outstanding at the
Determination Date.
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8. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.
9. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
10. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
11. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
14. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
15. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice pursuant to which the Optionee is to vest in the Option Shares.