OPTION SUSPENSION AGREEMENT
Published on July 2, 2009
EXHIBIT 10.49
OPTION SUSPENSION AGREEMENT
This Option Suspension Agreement is entered into by and between Mr. James
Joyce, an individual ("Joyce") and Aethlon Medical, Inc., a Nevada corporation
(the "Company) as of June 29, 2009.
RECITALS:
WHEREAS, the Company is approaching the limits of its authorized common
stock (the "Common Stock");
WHEREAS, the Company's cash position requires that is raise new working
capital which would require the issuance or reservation of shares of Common
Stock for investors;
WHEREAS, Joyce, the Chief Executive Officer and a Director of the Company
has agreed to accommodate the Company's fundraising needs and lack of available
capital by suspending the exercisability of his stock options pending the
increase of the authorized capital of the Company; and
WHEREAS, the Board of Directors of the Company has determined to accept
Joyce's offer to suspend the exercisability of this stock options upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Joyce and the Company (each a
"Party" and collectively the "Parties") agree as follows:
1. SUSPENSION OF EXERCISE RIGHTS. The Parties agree that Joyce currently owns
the stock options set forth on SCHEDULE A hereto (the "Stock Options), some
of which are subject to continuing vesting. Joyce hereby agrees to suspend
the exercisability of his Stock Options as follows: (A) with respect to
2,857,143 Stock Options (related to the September 9, 2005 grant) Joyce will
not exercise his rights to acquire shares of Common Stock underlying such
Options until the date upon which the Company amends its Articles of
Incorporation in the State of Nevada to increase its authorized capital
stock to a number of shares that would permit the exercisability of all the
Stock Options (the "Charter Amendment"); and (B) with respect to the
balance of all Stock Options (6,731,090 Stock Options) the later of (i) the
filing and effectiveness of the Charter Amendment, or (ii) June 9, 2010.
The period of time from the date hereof until the date the Stock Options
become exercisable again, the "Suspension Period."
2. NO RESERVATION OF SHARES UNDERLYING STOCK OPTIONS. The Parties agree that
during the Suspension Period, the Company and the Board of Directors shall
have no obligation to reserve or set aside any shares of Common Stock
underlying the Stock Options suspended and that all such shares shall be
immediately deemed "not reserved" for issuance if so previously reserved,
and shall be available for reservation or issuance for other purposes at
the discretion of the Board of Directors. Joyce acknowledges and agrees
that any attempted exercise of the Stock Options during the Suspension
Period shall be null and void and of no force or effect.
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3. EXTENSION OF EXERCISE PERIOD; CONTINUATION OF VESTING. The original
expiration date of each Stock Option shall be deemed extended by the number
of days to which each such Stock Option is subject to the Suspension
Period. The Suspension Period shall have no effect upon the vesting
schedule of any Stock Options and all Stock Options subject to vesting
shall continue vesting during the Suspension Period according to the terms
of the original vesting schedule.
4. CHANGE OF CONTROL DURING SUSPENSION PERIOD.
(A) In consideration of the fact that the Stock Options will not be
exercisable in full, if at all, during the Suspension Period, the Parties
recognize the economic risk to Joyce in the event the Stock Options hold
value and there is a Change of Control transaction (as defined below).
Accordingly, the Parties hereby agree as follows: If a Change of Control
shall occur prior to the filing of the Charter Amendment, and if any of the
Stock Options hold positive value (i.e., are "in the money") as compared to
the Fair Market Value (defined below) of each share of Common Stock of the
Company on the Determination Date (defined below), then in such event, the
Company shall, as a condition to such Change of Control transaction,
require that either the Company or the acquiring person or company (if
applicable) tender to Joyce the same consideration per share (whether such
consideration be in the form of cash, notes, securities or other property)
that he would have received had he been able to exercise such Stock Options
on the Determination Date. In the event a Change of Control transaction
shall occur prior to June 9, 2010, but subsequent to the filing and
effectiveness of the Amended Charter, then in such event, the Stock Options
still subject to the Suspension Period shall become immediately exercisable
pursuant to their terms such that Joyce's rights to exercise shall be
reinstated in advance of the Determination Date (as defined below.
(B) A "CHANGE OF CONTROL" shall mean: (a) a merger or consolidation of
the Company with or into any other corporation or other business entity
(except one in which the holders of capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least
a majority of the outstanding securities having the right to vote in an
election of the Board of Directors of the surviving corporation ("VOTING
STOCK")); (b) a sale, lease, exchange or other transfer (in one transaction
or a related series of transactions) of all or substantially all of the
Company's assets; or (c) the acquisition by any person or any group of
persons (other than the Company, any of its direct or indirect
subsidiaries, or any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Company or any
of its direct or indirect subsidiaries) acting together in any transaction
or related series of transactions undertaken after the date hereof, of such
number of shares of the Company's Voting Stock as causes such person, or
group of persons, to own beneficially, directly or indirectly, as of the
time immediately after such transaction or series of transactions, fifty
percent (50%) or more of the combined voting power of the Voting Stock of
the Company other than as a result of an acquisition of securities directly
from the Company, or solely as a result of an acquisition of securities by
the Company which by reducing the number of shares of the Voting Stock
outstanding increases the proportionate voting power represented by the
Voting Stock owned by any such person or group of persons to fifty percent
(50%) or more of the combined voting power of such Voting Stock. The "FAIR
MARKET VALUE" of the Common Stock shall mean: (a) If the Company's Common
Stock is traded on an
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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 (as defined
below). (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 Over the Counter 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
Joyce 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 Change of Control,
then all amounts to be payable per share to holders of the Common Stock
pursuant to the Articles of Incorporation of the Company then in effect
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. "DETERMINATION DATE" shall mean the date that is
five (5) business days prior to the date established as the effective date
of the Change of Control transaction.
5. NO OTHER AMENDMENT. Except as modified or amended hereby, the Stock Options
and their respective granting terms and agreements shall remain unchanged.
6. MISCELLANEOUS. Neither this Agreement nor any provision hereof shall be
waived, modified, discharged or terminated except by an instrument in
writing signed by the Parties hereto. This Agreement and the rights and
obligations hereunder are not transferable or assignable by Joyce. This
Agreement shall be governed by and construed in accordance with the laws of
the State of Nevada, without regard to principles of conflicts of law. Each
Party agrees to provide, if requested, any additional information that may
be requested or required to effect the intents and purposes of this
Agreement. This Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
no party shall be liable or bound to the other in any manner by any
representations, warranties, covenants and agreements except as
specifically set forth herein. In the event one or more of the provisions
of this Agreement should be held, for any reason, to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions of this Agreement,
and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date set forth on this signature page.
AETHLON MEDICAL, INC., a Nevada corporation
By: /s/ James A. Joyce
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Name: James A. Joyce
Title: Chairman and Chief Executive Officer
By: /s/ Richard H. Tullis
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Name: Richard H. Tullis
Title: VP & Chief Science Officer
JAMES JOYCE, Individually
/s/ James A. Joyce
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James Joyce
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