Exhibit 10.14

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (the “Agreement”), made this 9th day of February, 2016
is entered into by Aethlon Medical, Inc., a Nevada corporation with its
principal place of business at 9635 Granite Ridge Drive, Suite 100, San Diego,
California 92123 (the “Company”), and Richard H. Tullis, residing at 3886
Spanish Oak Court, Oceanside, CA 92058 (the “Consultant”) .

 

INTRODUCTION

 

The Company and the Consultant are parties to that certain Employment Agreement
dated January 10, 2000 (the “Employment Agreement”). The Company and the
Consultant desire to terminate the Employment Agreement and to enter into this
Agreement pursuant to which the Company will retain the services of the
Consultant and the Consultant will perform certain services for the Company. In
consideration of the mutual covenants and promises contained herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties agree as follows:

 

1.               Services. The Consultant agrees to perform services to and for
the Company largely consistent with the services he previously provided to the
Company in his employment as Chief Science Officer of the Company and such other
services as the Company may request (the “Services”). The Consultant shall be
solely responsible for determining the method, details and means of performing
the Services. The Consultant will perform the Services under the title “Chief
Science Officer”; provided, however, that he shall no longer be deemed a
corporate officer of the Company notwithstanding such title. The Consultant
agrees to provide consulting services not to exceed 20 hours per week, provided
such hours may be adjusted upon mutual agreement of the parties. During the Term
(as defined below), the Consultant shall not engage in any activity of which the
consultant is aware that has a direct conflict of interest with the Company, and
to which the consultant has direct knowledge, including any competitive
employment, business, or other activity, and shall not assist any other person
or organization that competes, or intends to compete, with the business of the
Company.

 

2.               Payment for Prior Services/Stock Options. Prior to the
execution of this Agreement, the Company agrees to pay the Consultant any unpaid
compensation, bonuses and/or expenses incurred to date in the performance of his
duties and responsibilities as Chief Science Officer under the Employment
Agreement, and unpaid vacation days of six (6) weeks earned in 2015. The Company
will also work with the Consultant to transfer his 401(k) retirement savings
account to a new 401(k) administrator chosen by the Consultant. In addition, the
stock options granted to the Consultant under various stock option agreements
dated December 15, 2008, September 27, 2010, July 1, 2013 and June 6, 2014 (the
“Stock Options”) will remain in full force and effect, will continue to be
exercisable and will continue vesting under their amended terms until such time
as the Consultant is no longer performing services for the Company under this
Agreement. Each of the Stock Options shall be amended to set the exercise period
after termination for any reason except for cause (including death and
disability) to thirty-six (36) months after the date of termination, or the
expiration date of the Stock Option, whichever occurs first.

 

3.               Term. This Agreement shall commence on the date hereof and
shall continue for a two-month period (such period, as it may be extended, being
referred to as the “Term”), unless sooner terminated in accordance with the
provisions of Section 5. Unless terminated in accordance with Section 5, the
Term shall be automatically extended for additional one-month periods. The
parties agree that the Term will be for no less than two (2) months in duration.

 

 

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4.               Compensation.

 

4.1            Consulting Fees. The Company shall pay to the Consultant
consulting fees of $10,000 per month, payable in arrears on the last day of each
month. Payment for any partial month shall be prorated. The Company will have a
5 day grace period to make such payment, after which a 5% late fee will be added
to the total for each month the payment has not been made.

 

4.2            Reimbursement of Expenses. The Company shall reimburse the
Consultant for all reasonable and necessary expenses incurred or paid by the
Consultant in connection with, or related to, the performance of the Services
under this Agreement. The Consultant shall submit to the Company itemized
monthly statements, in a form satisfactory to the Company, of such expenses
incurred in the previous month. The Company shall pay to the Consultant amounts
shown on each such statement within 30 days after receipt thereof. The Company
will have a 5 day grace period to make such payment, after which a 5% late fee
will be added to the total for each month the payment has not been made.
Notwithstanding the foregoing, the Consultant shall not incur total expenses in
excess of $500 per month without the prior written approval of the Company.

 

4.3            Benefits. The Consultant shall not be entitled to any benefits,
coverages or privileges, including, without limitation, social security,
unemployment, medical or pension payments, made available to employees of the
Company. In addition, the Consultant shall obtain and maintain, at his own
expense, medical insurance coverage for himself, and shall be responsible for
the cost of his cellular phone service. The Consultant shall be permitted to
continue the use of the laptop computer provided to him by the Company; provided
that, upon termination or expiration of this Agreement, the Consultant shall
return said computer to the Company, as required by Section 5.2.

 

5.               Termination.

 

5.1            Termination of this Agreement. Both the Company and Consultant
may, without prejudice to any right or remedy it may have under this Agreement,
terminate the Agreement (and not permit the Term to automatically renew) upon 30
days’ prior written notice to the other (which notice shall be given at least 30
days prior to the end of the Term). In the event of such termination by either
party, the Consultant shall be entitled to payment for Services performed and
expenses paid or incurred prior to the effective date of termination, subject to
the limitation on reimbursement of expenses set forth in Section 4.2. Such
payments shall constitute full settlement of any and all claims of the
Consultant against the Company pertaining to compensation under this Agreement.
Notwithstanding the foregoing, the Company may terminate the Agreement,
effective immediately upon receipt of written notice, if the Consultant breaches
any provision of this Agreement including but not limited to Section 7.

 

5.2            Return of Company Property. Upon the termination or expiration of
this Agreement, the Consultant shall transfer to the Company all files
(including, but not limited to, electronic files), records, documents, data,
financial information, and similar items in his possession relating to the
business of the Company or its Proprietary Information (as defined in the
Employment Agreement (including any work product of the Consultant created
pursuant to this Agreement), as well as any equipment or other property owned by
the Company. All the collections required will be returned within one month of
the date of final separation

 

6.               Cooperation. The Consultant shall use his best efforts in the
performance of his obligations under this Agreement. The Company shall provide
such access to its information and property as may be reasonably required in
order to permit the Consultant to perform his obligations hereunder. The
Consultant shall cooperate with the Company’s personnel, shall not interfere
with the conduct of the Company’s business and shall observe all rules,
regulations and security requirements of the Company concerning the safety of
persons and property.

 

 

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7.               Restrictive Covenants. The Consultant shall remain subject to
the restrictive covenants set forth in Article V of the Employment Agreement
attached hereto as Appendix I. Provided the covenants of Article V of the
Employment Agreement are complied with, and the limitation on conflicting
activities set forth in Section 1 are complied with, Contractor shall be
entitled to perform services or become employed by other persons or entities as
Contractor so determines.

 

8.               Independent Contractor Status. The Consultant shall perform all
Services under this Agreement as an “independent contractor” and not as an
employee or agent of the Company. The Consultant is not authorized to assume or
create any obligation or responsibility, express or implied, on behalf of, or in
the name of, the Company or to bind the Company in any manner. The Consultant
acknowledges and agrees that the Consultant is not an employee of the Company,
that this Agreement is not an agreement of employment, and that the Services
will not transition into an employment arrangement with the Company. The
Consultant shall have full responsibility for applicable withholding taxes for
all compensation paid the Consultant and for compliance with all applicable tax,
labor and employment requirements with respect to the Consultant’s
self-employment, sole proprietorship or other form of business organization. The
Consultant agrees to indemnify, defend and hold the Company harmless from any
liability for, or assessment of, any claims or penalties with respect to such
withholding taxes or labor or employment requirements, including any liability
for, or assessment of, withholding taxes imposed on the Company by the relevant
taxing authorities with respect to any compensation paid to the Consultant.

 

9.               Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Mail, by registered or certified mail, postage
prepaid, or by deposit to and delivery by an overnight delivery service,
addressed to the other party at the address shown above, or at such other
address or addresses as either party shall designate to the other in accordance
with this Section 9.

 

10.            Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.

 

11.            Entire Agreement; Termination of Employment Agreement. This
Agreement constitutes the entire agreement between the parties and supersedes
all prior agreements and understandings, whether written or oral, relating to
the subject matter of this Agreement. The parties acknowledge and agree that the
Employment Agreement hereby is terminated and is of no further force and effect,
except with respect to the terms thereof that specifically survive termination
of the Employment Agreement or that are incorporated herein under Section 7.
Contractor acknowledges and agrees that he has freely determined to terminate
the Employment Agreement and to waive any and all benefits to which employees of
the Company are entitled.

 

12.            Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Consultant.

 

13.            Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of California.

 

14.            Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, both parties and their respective successors and
assigns, including any corporation with which, or into which, the Company may be
merged or which may succeed to its assets or business; provided, however, that
the obligations of the Consultant are personal and shall not be assigned by him.

 

 

 

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15.            Arbitration. Any dispute or claim arising out of or in connection
with any provision of this Agreement will be finally settled by binding
arbitration in San Diego County, California, in accordance with the rules of the
American Arbitration Association by one arbitrator appointed in accordance with
said rules. The arbitrator shall apply California law, without reference to
rules of conflicts of law or rules of statutory arbitration, to the resolution
of any dispute. Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. Notwithstanding the foregoing, the
parties may apply to any court of competent jurisdiction for preliminary or
interim equitable relief, or to compel arbitration in accordance with this
paragraph, without breach of this arbitration provision.

 

16.            Advice of Counsel. Each party acknowledges that, in executing
this Agreement, such party has had the opportunity to seek the advice of
independent legal counsel and has read and understood all of the terms and
provisions of this Agreement. This Agreement shall not be construed against any
party by reason of the drafting or preparation hereof.

 

17.            Miscellaneous.

 

17.1         No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or
consent given by the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion.

 

17.2         The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.

 

17.3         In the event that any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.

 

 

 

 

 

REMAINDER OF PAGE BLANK. SIGNATURE PAGE FOLLOWS DIRECTLY

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year set forth above.

 

 

COMPANY:

 

AETHLON MEDICAL, INC.

 

 

By: /s/ James B. Frakes                      

 

Name: James B. Frakes

 

Title: Chief Financial Officer

 

 

 

 

CONSULTANT:

 

/s/ Richard H. Tullis                        

Richard H. Tullis

 

 

 

 

 

 

 

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Appendix I

 

Employment Agreement

 

This Employment Agreement (the "Agreement") is made and entered into as of
January 10, 2000, by and between BISHOP EQUITIES, INC., dba AETHLON MEDICAL, a
Nevada corporation (the "Company") and RICHARD H. TULLIS ("Executive").

 

ARTICLE I

DUTIES AND TERM

 

1.1 EMPLOYMENT. In consideration of their mutual covenants and other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, the Company agrees to hire Executive, and Executive agrees to
remain in the employ of the Company, upon the terms and conditions herein
provided.

 

1.2 POSITION AND RESPONSIBILITIES.

 

1.2.1 Executive shall serve as the Vice President--Business Development of the
Company and President of Aethlon, Inc., a wholly-owned subsidiary of the Company
(or in a capacity and with a title of at least substantially equivalent quality)
reporting directly to Chief Executive Officer of the Company. Executive agrees
to perform services not inconsistent with his position as shall from time to
time be assigned to him by the Chief Executive Officer of the Company. Such
services to be performed by Executive shall include, but not be limited to, the
following:

 

1.2.1.1 Management and supervision of government grant proposals;

 

1.2.1.2 Technical due diligence for potential acquisitions by the Company;

 

1.2.1.3 Liaison with the Company's scientific staff and advisory board;

 

1.2.1.4 Scientific representation of the Company to the financial community;

 

1.2.1.5 Identification of new business opportunities; and

 

1.2.1.6 Management of the anticipated Cell Activation subsidiary.

 

1.2.2 Executive further agrees to serve, if elected, as a director of the
Company and as an officer or director of any subsidiary or affiliate of the
Company.

 

1.2.3 During the period of his employment hereunder, Executive shall devote
substantially all of his business time, attention, skill and efforts to the
faithful performance of his duties hereunder.

 

1.3 TERM. The term of Executive's employment under this Agreement shall commence
on the date first above written and shall continue, unless sooner terminated,
until January 9, 2002, and it will continue thereafter for successive One (1)
year periods unless and until either party gives the other party written notice
of termination at least Sixty (60) days prior to the end of a term.

 

 

 

 

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ARTICLE II

COMPENSATION

 

For all services rendered by Executive in any capacity during his employment
under this Agreement, including, without limitation, services as a director,
officer or member of any committee of the Board of the Company or of the Board
of Directors of any subsidiary or affiliate of the Company, the Company shall
compensate Executive as follows:

 

2.1 BASE SALARY. The Company shall pay to Executive an annual base salary
commencing January 10, 2000 of not less than $80,000.00 (the "Base Salary"). The
Base Salary shall be reviewed annually by the Board or a committee designated by
the Board and the Board or such committee may, in its discretion, increase the
Base Salary.

 

2.2 INCENTIVE PAYMENT. During the period of Executive's employment under this
Agreement, the Executive shall be eligible to participate in an incentive
compensation program implemented by the Board (the "Annual Incentive Bonus")
whereby Executive have the potential to earn an additional $30,000 per annum.

 

2.3 ADDITIONAL BENEFITS. Executive shall be entitled to participate in all
employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit-sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive fringe benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; PROVIDED,
HOWEVER, there shall be no duplication of termination or severance benefits, and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and programs shall be reduced by any benefit amounts paid
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement. Notwithstanding the
foregoing, the Company may terminate or reduce benefits under any benefit plans
and programs to the extent such reductions apply uniformly to all Senior
Executives entitled to participate therein, and Executive's benefits shall be
reduced or terminated accordingly. Specifically, without limitation, Executive
shall receive the following benefits:

 

2.3.1 HEALTH INSURANCE. The Company shall provide Executive a monthly cash
allowance for payment of health insurance premiums obtained by and for Executive
(and Executive's spouse and/or dependents) up to a maximum of Four Hundred
Dollars ($400.00) per month. Executive must submit to the Company statements
showing the actual amount of the health insurance premiums, and the Company
shall have the option to either pay the health insurance premiums directly or to
reimburse Executive for the health insurance premiums. The Company shall have
the option to obtain a group medical insurance plan which covers Executive in
place and stead of providing this monthly cash allowance. However, in no event
shall Executive be entitled to a cash payment for any unused portion of the
monthly allowance (i.e., if Executive's health insurance premiums are $300.00
per month, Executive is not entitled to receive cash for the unused $100.00
portion of the allowance).

 

2.3.2 DISABILITY BENEFITS. In the event of Executive's failure substantially to
perform his duties hereunder on a full-time basis for a period not exceeding 180
consecutive days or for periods aggregating not more than 180 days during any
twelve-month period as a result of incapacity due to physical or mental illness,
the Company shall continue to pay the Base Salary to Executive during the period
of such incapacity, but only in the amounts and to the extent that disability
benefits payable to Executive under Company-sponsored insurance policies are
less than Executive's Base Salary. Additionally, during the term of this
Agreement, including any renewals hereof, the Company shall procure and
maintain, at its own expense, a long-term disability insurance policy for the
benefit of Executive in the event of Executive's total disability (as defined in
Section 6.1).

 

 

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2.3.3 REIMBURSEMENT OF BUSINESS EXPENSES. The Company shall, in accordance with
standard Company policies, pay, or reimburse Executive for all reasonable travel
and other expenses incurred by Executive in performing his obligations under
this Agreement.

 

2.3.4 VACATIONS. Executive shall be entitled to twenty (20) business days
excluding Company holidays, of paid vacation during each year of employment
hereunder. Executive may accrue and carry forward no more than ten (10) unused
vacation days from any particular year of his employment under this Agreement to
the next.

 

ARTICLE III

TERMINATION OF EMPLOYMENT

 

3.1 DEATH OR RETIREMENT OF EXECUTIVE. Executive's employment under this
Agreement shall automatically terminate upon the death or retirement (as defined
in Section 6.1) of Executive.

 

3.2 BY EXECUTIVE. Executive shall be entitled to terminate his employment under
this Agreement by giving Notice of Termination (as defined in Section 6.1) to
the Company:

 

3.2.1 For good reason (as defined in Section 6.1);

 

3.2.2 At any time commencing with the date six (6) months following the date of
a change in control (as defined in Section 6.1) and ending with the date twelve
(12) months after the date of such change in control (a "Change in Control
Resignation"); and

 

3.2.3 At any time without good reason.

 

3.3 BY COMPANY. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination (as defined in
Section 6.1) to Executive:

 

3.3.1 In the event of Executive's total disability (as defined in Section 6.1);

 

3.3.2 For cause (as defined in Section 6.1); and

 

3.3.3 At any time without cause.

 

ARTICLE IV

COMPENSATION UPON TERMINATION OF EMPLOYMENT

 

If Executive's employment hereunder is terminated in accordance with the
provisions of Article III hereof except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.4 hereof:

 

4.1 UPON TERMINATION FOR DEATH OR DISABILITY. If Executive's employment
hereunder is terminated by reason of his death or total disability, the Company
shall:

 

4.1.1 Pay Executive (or his estate) or beneficiaries any Base Salary Which has
accrued but not been paid as of the termination date (the "Accrued Base
Salary");

 

4.1.2 Pay Executive (or his estate) or beneficiaries for unused vacation days
accrued as of the termination date in an amount equal to his Base Salary
multiplied by a fraction the numerator of which is the number of accrued unused
vacation days and the denominator of which is 360 (the "Accrued Vacation
Payment");

 

 

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4.1.3 Reimburse Executive (or his estate) or beneficiaries for expenses incurred
by him prior to the date of termination which are subject to reimbursement
pursuant to this Agreement (the "Accrued Reimbursable Expenses");

 

4.1.4 Provide to Executive (or his estate) or beneficiaries any accrued and
vested benefit required to be provided by the terms of any Company sponsored
benefit plans or programs (the "Accrued Benefits"), together with any benefits
required to be paid or provided in the event of Executive's death or total
disability under applicable law;

 

4.1.5 Pay Executive (or his estate) or beneficiaries any Annual Incentive Bonus
with respect to a prior fiscal year which has accrued but has not been paid,
plus a portion of the Annual Incentive Bonus for the year in which Executive's
employment is terminated hereunder computed at the end of the fiscal year and
pro rated to reflect the portion of the fiscal year that Executive was employed
by the Company (collectively, the "Accrued Annual Incentive Bonus"); and in
addition,

 

4.1.6 Executive (or his estate) or beneficiaries shall have the right to
exercise all vested unexercised stock options and warrants outstanding at the
termination date in accordance with terms of the plans and agreements pursuant
to which such options or warrants were issued.

 

4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE OTHER THAN FOR GOOD
REASON. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or total disability, (y) for good reason, or (z) pursuant to a
Change In Control Resignation (as defined in Section 3.2.2, the Company shall:

 

4.2.1 Pay Executive the Accrued Base Salary;

 

4.2.2 Pay Executive the Accrued Vacation Payment;

 

4.2.3 Pay Executive the Accrued Reimbursable Expenses;

 

4.2.4 Pay Executive the Accrued Benefits, together with any benefits required to
be paid or provided under applicable law;

 

4.2.5 Pay Executive any Annual Incentive Bonus with respect to a prior fiscal
year which has accrued but has not been paid; and in addition

 

4.2.6 Executive shall have the right to exercise vested options and warrants in
accordance with Section 4.1.6.

 

4.3 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD
REASON OR PURSUANT TO A CHANGE IN CONTROL RESIGNATION. If Executive's employment
is terminated (i) by the Company Without Cause, or (ii) by Executive for Good
Reason, or (iii) pursuant to a Change in Control Resignation, the Company shall:

 

4.3.1 Pay Executive the Accrued Base Salary;

 

4.3.2 Pay Executive the Accrued Vacation Payment;

 

4.3.3 Pay Executive the Accrued Reimbursable Expenses;

 

4.3.4 Pay Executive the Accrued Benefits, together with any benefits required to
be paid or provided under applicable law;

 

4.3.5 Pay Executive the Accrued Annual Incentive Bonus;

 

4.3.6 Pay Executive commencing on the thirtieth (30th) day following the
termination date twelve (12) monthly payments equal to one-twelfth (1/12th) of
Executive's Base Salary in effect immediately prior to the time such termination
occurs;

 

 

 

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4.3.7 Maintain in full force and effect, for Executive's and his eligible
beneficiaries' continued benefit, until the first to occur of (x) his attainment
of alternative employment or (y) twelve (12) months following the termination
date of his employment hereunder the employee benefits provided pursuant to
Company-sponsored benefit plans. programs or other arrangements in which
Executive was entitled to participate as a full-time employee immediately prior
to such termination in accordance with Section 2.4 hereof, subject to the terms
and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition

 

4.3.8 Executive shall have the right to exercise all vested unexercised stock
options and warrants in accordance with Section 4.1.6.

 

ARTICLE V

RESTRICTIVE COVENANTS

 

5.1 CONFIDENTIALITY.

 

5.1.1 Executive covenants and agrees to hold in strictest confidence, and not
disclose to any person without the express written consent of the Company, any
and all of the Company's proprietary information, as defined in Subparagraph
5.1.3 below, except as such disclosure may be required in connection with his
employment hereunder. This covenant and agreement shall survive this Agreement
and continue to be binding upon Executive after the expiration or termination of
this Agreement, whether by passage of time or otherwise, so long as such
information and data shill remain proprietary information.

 

5.1.2 Upon expiration or termination of this Agreement for any reason, Executive
shall immediately turnover to the Company any "Proprietary Information."
Executive shall have no right to retain any copies of any material qualifying as
Proprietary Information for any reason whatsoever after expiration or
termination of his employment hereunder without the express written consent of
the Company.

 

5.1.3 For purposes of this Agreement, "Proprietary Information" means and
includes the following: the identity of clients or customers or potential
clients or customers of the Company or its affiliates; any written, typed or
printed lists, or other materia1s identifying the clients or customers of the
Company or its affiliates; Research & Development programs, plans and
discoveries; product development, marketing, and plans; any business plans or
strategic contracts, partnerships or alliances; any financial or other
information supplied by clients or customers of the Company or its affiliates;
any and all data or information involving the Company, its affiliates, programs,
methods or contacts employed by the Company or its affiliates in the conduct of
their business; any lists, documents. manuals, records, forms or other materials
used by the Company or its affiliates in the conduct of their business; any
descriptive materials describing the methods and procedures employed by the
Company or its affiliates in the conduct of their business; and any other secret
or confidential information concerning the Company's or its affiliates' business
or affairs. The terms "list," "document" or their equivalents, as used in this
Subparagraph (c), are not limited to a physical writing or compilation but also
include any and all information whatsoever regarding the subject matter of the
"list" or "documents," whether or not such compilation has been reduced to
writing. "Proprietary Information" shall not include any information which: (i)
is or becomes publicly available through no act or failure of Executive; (ii)
was or is rightfully learned by Executive from a source other than the Company
before being received from the Company; or (iii) becomes independently available
to Executive as a matter of right from a third party. If only a portion of the
Proprietary Information is or becomes publicly available, then only than portion
shall not be Proprietary Information hereunder.

 

 

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5.1.4 Executive acknowledges that he is the Vice President--Business Development
of the Company and President of Aethlon, Inc. and in such capacity he will be a
representative of the Company with respect to clients and potential clients of
the Company. Executive also acknowledges that he has had and will continue to
have access to confidential information about the Company, its affiliates, and
their clients and that "Proprietary Information" acquired by him at the expense
of the Company is for use in its business. Executive has substantial experience
in the management of medical research and development and possesses special,
unique, extraordinary skills and knowledge in this field. Executive's management
and scientific services to the Company are special, unique and extraordinary and
the success or failure of the Company is dependent upon his discharge of his
duties and obligations. Accordingly, by execution of this Agreement, and subject
to Subparagraph 5.1.3 hereof, Executive agrees that during his employment with
the Company and for a period of Two (2) years immediately after termination of
his employment with the Company (the "Non-Competition Period"), he shall not
violate the provisions of Section 5.2.

 

5.2 COMPETITION.

 

5.2.1 During the Non-Competition Period specified in Section 5.1.4, Executive
shall not:

 

5.2.1.1 Except as a passive investor in publicly-held companies, and except for
investments held as of the date hereof, directly or indirectly own, operate,
mange, consult with, control, participate in the management or control of, be
employed by, maintain or continue any interest whatsoever in any company that
directly competes with the Company or any parent corporation, subsidiary
corporations or affiliated entity or company (hereinafter referred to as an
"Affiliate") in the United States; or

 

5.2.1.2 Directly or indirectly solicit any business of a nature that is directly
competitive with the business of the Company or an Affiliate from any individual
or entity that obtained such products or services from the Company or its
Affiliates at any time during his employment with the Company; or

 

5.2.1.3 Directly or indirectly solicit any business of a nature that is directly
competitive with the business of the Company or an Affiliate from any individual
or entity solicited by him on behalf of the Company or its Affiliates; or

 

5.2.1.4 Employ, or directly or indirectly solicit, or cause the solicitation of,
any employees of the Company or its Affiliates who are in the employ of the
Company or its Affiliates on the termination date of his employment hereunder
for employment by others.

 

5.2.2 Executive expressly agrees and acknowledges that:

 

5.2.2.1 The Company and its Affiliates have protected business interests
throughout North America, Europe, and Asia and that competition with and against
such business interests would be harmful to the Company and/or its Affiliates;

 

5.2.2.2 This covenant not to compete is reasonable as to time and geographical
area and does not place any unreasonable burden upon him;

 

5.2.2.3 The general public will not be harmed as a result of enforcement of this
covenant not to compete;

 

5.2.2.4 He has had the opportunity to review this covenant not to compete with
his own independent legal counsel; and

 

 

 

 11 

 

 

5.2.2.5 He understands and hereby agrees to each and every term and condition of
to this covenant not to compete (including, without limitation, the provisions
of Section 5.4).

 

5.3 NON-DISPARAGEMENT. During the term of this Agreement and the Non-Competition
Period, neither Executive nor the Company shall disparage the other, and neither
shall disclose to any third party the conditions of Executive's employment with
the Company except as may be required (1) pursuant to applicable law or
regulations, including the rules and regulations of the Securities and Exchange
Commission, (ii) to effectuate the provisions of employee plans or programs and
insurance policies, or (iii) as may be otherwise contemplated herein or unless
such information becomes publicly available without fault of the party making
such disclosure.

 

5.4 REMEDIES. Executive expressly agrees and acknowledges that this covenant not
to compete is necessary for the protection of the Company and its affiliates
because of the nature and scope of their business and his position with the
Company. Further, Executive acknowledges that any breach of this covenant not to
compete would result in irreparable damage to the Company, and in the event of
his breach of this covenant not to compete, money damages will not sufficiently
compensate the Company for its injury caused thereby, and that the remedy at law
for any breach or threatened breach of Sections 5.1, 5.2 and 5.3 will be
inadequate and, accordingly agrees, that the Company shall, in addition to all
other available remedies (including without limitation, seeking such damages as
it can show it has sustained by reason of such breach), be entitled to
injunctive relief or specific performance and that in addition to such money
damages he may be restrained and enjoined from any continuing breach of this
covenant not to compete without any bond or other security being required of any
court. Executive further acknowledges and agrees that if the covenant not to
compete herein is deemed to be unenforceable and/or the Executive fails to
comply with this Article V, the Company has no obligation to provide any
compensation or other benefits described in Article IV hereof.

 

5.5 OWNERSHIP OF INVENTIONS.

 

5.5.1 During the employment by the Company, Executive will have access to trade
secrets, data, know-how, knowledge or other confidential information originated
in the Company or disclosed to the Company by others under agreements to hold
the same confidential (collectively referred to as "Confidential Information").
Executive acknowledges that Confidential Information includes any information
not readily available to the public, and includes not only technical information
but also business information. In addition, Executive may, during the period of
employment, create, make, develop or conceive inventions, discoveries, concepts,
ideas, designs, works of authorship, developments, information, improvements, or
trade secrets, whether patentable or not, and whether solely or jointly with
others, which may or may not also constitute Confidential Information
(collectively referred to as "Inventions"). Executive agrees that all works of
authorship to which Executive contributes shall be considered "works made for
hire" and shall be the sole property of the Company.

 

5.5.2 Executive agrees that Executive will neither utilize any Confidential
Information for Executive's own benefit or for the benefit of anyone except the
Company, nor disclose, disseminate, lecture upon or publish articles about any
Confidential Information to any one outside the Company, or to any officer or
employee of the~ Company not also having access to Confidential Information, at
any time either during or after employment by the Company.

 

 

 12 

 

 

 

5.5.3 Executive agrees to disclose promptly, in writing to Executive's
Supervisor, Company's Counsel and Chief Executive Officer, any Inventions that
Executive may make, develop or conceive, solely or jointly, during the period of
employment by the Company, or by its predecessors, successors in business,
subsidiaries, parents or affiliates. All such Inventions shall be and remain the
property of the Company. Executive hereby assigns to the Company all Executive's
rights, titles and interests in and to any such Inventions, whether or not such
Inventions may be reduced to practice during the period of Executive's
employment, and to execute all patent or copyright applications, assignments and
other documents, and to take all other steps necessary, to vest in the Company
the entire right, title and interest in and to those Inventions and in and to
any patents or copyrights obtainable therefor in the United States and in
foreign countries, all at the Company's expense, but for no consideration to
Executive in addition to Executive's salary or wages. Executive agrees to keep
adequate records of all Inventions and make such records available to the
Company.

 

5.5.4 If the Company chooses to prosecute applications for patents or copyrights
for any such Inventions, the Company shall assume the entire expense of
preparing, filing and prosecuting such applications, through counsel appointed
by the Company; provided, however, that the Company is under no obligation to
prosecute such applications. Executive agrees to cooperate with the Company and
do whatever is necessary or appropriate to obtain patents, copyrights or other
legal protections for Inventions. If Executive is incapacitated or refuses to so
cooperate for any reason, Executive hereby authorizes the Company to act as
Executive's agent and to take whatever actions, or execute whatever documents,
may be needed to carry out this Agreement.

 

5.5.5 All records and other material pertaining to Confidential Information,
whether developed by Executive or others, shall be and remain the property of
the Company. Upon termination of Executive's employment with the Company, all
documents, records, notebooks and other material of any kind pertaining to or
containing Confidential Information then in Executive's possession, or under
Executive's control, whether prepared by Executive or others, will be returned
to the Company unconditionally.

 

5.5.6 Executive shall not be obligated to assign any Invention which/relates to
or would be useful in any business or activities in which the Company is engaged
if such Invention was conceived and reduced to practice by Executive prior to
Executive's employment with the Company, provided that all such Inventions are
listed at the time of employment on the attached Exhibit "B." If no entry is
made on Exhibit `B," then such entry shall be deemed to be "none," whether or
not Exhibit "B" is signed by Executive. Except as listed on Exhibit "B,"
Executive will not assert any rights to any Inventions, as having been made or
acquired by Executive prior to being employed by the Company.

 

5.5.7 Executive shall not be obligated to assign any Invention which may be
wholly conceived by Executive after Executive leaves the employ of the Company,
except that Executive is so obligated if such Invention shall involve the
utilization of Confidential Information of the Company.

 

5.5.8 Notwithstanding anything in this Agreement to the contrary, Executive
shall not be obligated to assign to the Company and of Executive's rights in an
Invention that the Executive developed entirely on Executive's own time without
using the Company's equipment, supplies, facilities or Confidential Information,
except for those Inventions that either: (i) relate, at the time of conception
or reduction to practice of Invention, to either the Company's business, or
actual or demonstrably anticipated research or development of the Company, or
(ii) result from any work performed by the Executive for the Company. THIS
AGREEMENT DOES NOT APPLY TO ANY INVENTION WHICH QUALIFIES FULLY UNDER THE
PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870 OR ANY OTHER SUBSTANTIALLY
EQUIVALENT LAW IN THE STATE IN WHICH THE EXECUTIVE IS EMPLOYED. With regard to
those Inventions which Executive is not obligated to assign to the Company,
Executive shall give the Company a right of first refusal on any and all such
Inventions and the right to meet any firm offer of another for such Inventions.
The Company must exercise such right of first refusal within thirty (30) days of
receipt of written notice from Executive setting forth such offer.

 

 

 

 13 

 

 

ARTICLE VI

MISCELLANEOUS

 

6.1 DEFINITIONS. For purposes of this Agreement, the following terms shall have
the following meanings:

 

6.1.1 "Accrued Annual Incentive Bonus" - as defined in Section 4.1.5;

 

6.1.2 "Accrued Base Salary" - as defined in Section 4.1.1;

 

6.1.3 "Accrued Benefits" - as defined in Section 4.1.4;

 

6.1.4 "Accrued Reimbursable Expenses" - as defined in Section 4.1.3;

 

6.1.5 "Annual Vacation Payment" - as defined in Section 4.1.2;

 

6.1.6 "Annual Incentive Bonus" - as defined in Section 2.2;

 

6.1.7 "Base Salary" - as defined in Section 2.1;

 

6.1.8 "Board" - shall mean the Board of Directors of the Company ;

 

6.1.9 "Cause" shall mean the occurrence of any of the following:

 

6.1.9.1 Executive's gross and willful misconduct which is injurious to the
Company;

 

6.1.9.2 Executive's engaging in fraudulent conduct with respect to the Company's
business or in conduct of a criminal nature that may have an adverse impact on
the Company's standing and reputation;

 

6.1.9.3 The continued and unjustified failure or refusal by Executive to perform
the duties required of him by this Agreement which failure or refusal shall not
be cured within fifteen (15) days following (a) receipt of Executive of written
notice from the Board specifying the factors or events constituting such failure
or refusal, and (b) a reasonable opportunity for Executive to correct such
deficiencies;

 

6.1.9.4 Executive's use of drugs and/or alcohol in violation of then current
Company policy; or

 

6.1.9.5 Executive's breach of his obligation under Section 1.2.3 hereof which
shall not be cured within fifteen (15) days after written notice thereof to
Executive.

 

6.1.10 "Change In Control" shall mean and shall be deemed to have occurred if:

 

6.1.10.1 After the date of this Agreement, any "person" (as such term is used in
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor provision thereto) shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act or any
successor provision thereof) directly or indirectly of securities of the Company
representing fifteen percent (15%) or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to vote at an
election of directors; PROVIDED, HOWEVER, that, for purposes of this
Subparagraph, "person" shall exclude the Company, its subsidiaries, any person
acquiring such securities directly from the Company, any employee benefit plan
sponsored by the Company or from Executive or any stockholder owning fifteen
percent (15%) or more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement; or

 

 

 

 14 

 

 

6.1.10.2 Any stockholder of the Company owning fifteen percent or more of the
combined voting power of the Company's outstanding securities as of the date of
this Agreement shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) directly or indirectly of securities of the
Company (other than through the acquisition of securities directly from the
Company or from Executive) representing thirty-three and one-third percent (33
1/3%) or more of the combined voting power of the Company's then outstanding
securities ordinarily having the right to vote at an election of directors; or

 

6.1.10.3 Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least eighty percent
(80%) of the Board; provided, however, that any person becoming a member of the
Board subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least eighty percent
(80%) of the members then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act or any successor provision
thereto) shall be, for purposes of this Agreement, considered as though such
person were a member of the Incumbent Board; or

 

6.1.10.4 Approval by the stockholders of the Company and consummation of (a) a
reorganization, merger, consolidation, or sale or other disposition of all or
substantially all of the assets of the Company, in each case, with or to a
corporation or other person or entity of which persons who were the stockholders
of the Company immediately prior to such transaction do not, immediately
thereafter, own more than sixty percent (60%) of the combined voting power of
the outstanding voting securities entitled to vote generally in the election of
directors of the reorganized, merged, consolidated or purchasing corporation
(or, in the case of a noncorporate person or entity) were not members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such reorganization, merger, consolidation or sale, or (b) a liquidation or
dissolution of the Company.

 

6.1.11 "Change In Control Resignation" - as defined in Section 3.2.2;

 

6.1.12 "Continued Benefits" - as defined in Section 4.3.7;

 

6.1.13 "Expiration" shall mean the expiration of Executive's employment
hereunder in accordance with Section 1.3;

 

6.1.14 "Good Reason" shall mean the occurrence of any of the following:

 

6.1.14.1 The Company's failure to elect or reelect or to appoint or reappoint
Executive to offices, titles or positions carrying comparable authority,
responsibilities, dignity and importance to that of Executive's offices and
positions as of January 10, 2000;

 

6.1.14.2 Material change by the Company in Executive's function, duties or
responsibilities (including reporting responsibilities) which would cause
Executive's position with the Company to become of less dignity, responsibility
and importance than those associated with his functions, duties or
responsibilities as of January 10, 2000; or

 

6.1.14.3 Other material breach of this Agreement by the Company, which breach is
not cured within fifteen (15) days after written notice thereof is, received by
the Company.

 

6.1.15 "Non-Competition Period" - as defined in Section 5.1.4;

 

 

 

 

 15 

 

 

6.1.16 "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision of this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provisions so indicated. Each
Notice of Termination shall be delivered at least sixty (60) days prior to the
effective date of termination;

 

6.1.17 "Proprietary Information" - as defined in Section 5.1.3;

 

6.1.18 "Retirement" shall mean normal retirement at age as determined by the
Board;

 

6.1.19 "Senior Executives" shall mean the chief executive officer and the four
(4) most highly compensated executive officers of the Company determined in
accordance with the rules and regulations of the Securities and Exchange
Commission under the Exchange Act;

 

6.1.20 "Termination" shall mean the termination of Executive's employment
hereunder other than upon expiration of the term of such employment in
accordance with Section 1.3;

 

6.1.21 "Total Disability" shall mean Executive's failure substantially to
perform his duties hereunder on a full-time basis for a period exceeding one
hundred eighty (180) consecutive days or for periods aggregating more than 180
days during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive each shall promptly select a physician, and if these
physicians cannot agree, the physicians shall promptly select a third physician
whose decision shall be binding on all parties. If such a dispute arises,
Executive shall submit to such examinations and shall provide such information
as such physician(s) may request, and the determination of the physician(s) as
to Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.

 

6.2 KEY MAN INSURANCE. The Company shall have the right, in its sole discretion,
to purchase "key man" insurance on the life of Executive. The Company shall be
the owner and beneficiary of any such policy. If the Company elects to purchase
a policy, Executive shall take such physical examinations and supply such
information as may be reasonably requested by the insurer.

 

6.3 MITIGATION OF DAMAGES; NO SET-OFF; DISPUTE RESOLUTION.

 

6.3.1 Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date of termination of his employment hereunder or otherwise. The
Company's obligation to make the payments provided for in this Agreement shall
not be affected by any set-off, counterclaim, recoupment, defense or other claim
or action which the Company may have against Executive.

 

 

 

 16 

 

 

 

6.3.2 If there shall be any dispute between the Company and Executive (i) in the
event of any termination of Executive's employment by the Company, whether such
termination was for Cause, or (ii) in the event of any termination of employment
by Executive, whether Good Reason existed, or (iii) otherwise, the dispute shall
be resolved in accordance with the dispute resolution procedures set forth in
Exhibit "A" hereto, the provisions of which are incorporated as a part hereof,
and the parties hereto hereby agree that such dispute resolution procedures
shall be the exclusive method for resolution of disputes under this Agreement.
In the event of a dispute hereunder as to whether a termination by the Company
was for Cause or by the Executive for Good Reason, until there is a resolution
and award as provided in Exhibit "A," the Company shall pay all amounts, and
provide all benefits, to Executive and/or Executive's family or other
beneficiaries, as the case may be, that the Company would be required to pay or
provide hereunder as though such termination were by the Company without Cause
or by Executive for Good Reason and shall pay the reasonable legal fees and
expenses of counsel for Executive in connection with such dispute resolution;
provided, however, that the Company shall not be required to pay any disputed
amounts or any legal fees and expenses pursuant to this Subparagraph (b) except
upon receipt of a written undertaking by or on behalf of Executive (and/or
Executive's family or other beneficiaries, as the case may be) to repay, without
interest or penalty, as soon as practicable after completion of the dispute
resolution (A) all such amounts to which Executive (or Executive's family or
other beneficiaries, as the case may be) is ultimately adjudged to not be
entitled with respect to the payment of such disputed amount(s) and (B) in
addition, in the case of legal fees and expenses, a proportionate amount of
legal fees and expenses attributable to any of Executive's claim(s) or any of
Executive's defenses or counter-claim(s), if any, which shall have been found by
the dispute resolver to have been frivolous or without merit.

 

6.4 SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon any
successor to the Company and shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, beneficiaries, designees,
executors, administrators, heirs, distributees, devisees and legatees.

 

6.5 MODIFICATION; NO WAIVER. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto. No term or
condition of this Agreement shall be deemed to have been waived, nor shall there
be any estoppel against the enforcement of any provision of this Agreement,
except by written instrument by the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any other term or condition.

 

6.6 SEVERABILITY. The covenants and agreements contained herein are separate and
severable and the invalidity or unenforceability of any one or more of such
covenants or agreements, if not material to the employment arrangement that is
the basis for this Agreement, shall not affect the validity or enforceability of
any other covenant or agreement contained herein. If, in any judicial
proceeding, a court shall refuse to enforce one or more of the covenants or
agreements contained herein because the duration thereof is too long, or the
scope thereof is too broad, it is deemed reduced to the extent necessary to
permit the enforcement of such covenants or agreements.

 

6.7 NOTICES. All the notices and other communications required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, to the parties hereto at
the following addresses:

 

If to the Company, to it at:

 

Bishop Equities, Inc. dba Aethlon Medical

7825 Fay Avenue

Suite 200

La Jolla, California 92037

 

If Executive, to him at:

 

Mr. Richard H. Tullis

7825 Fay Avenue

Suite 200

La Jolla, California 92037

 

 

 

 

 17 

 

 

6.8 ASSIGNMENT. This Agreement and any rights hereunder shall not be assignable
by either party without the prior written consent of the other party except as
otherwise specifically provided for herein.

 

6.9 ENTIRE UNDERSTANDING. This Agreement (together with the Exhibit incorporated
as a part hereof) constitutes the entire understanding between the parties
hereto and no agreement, representation, warranty or covenant has been made by
either party except as expressly set forth herein.

 

6.10 EXECUTIVE'S REPRESENTATIONS. Executive represents and warrants that neither
the execution and delivery of this Agreement nor the performance of his duties
hereunder violates the provisions of any other agreement to which he is a party
or by which he is bound.

 

6.11 LIABILITY OF COMPANY WITH RESPECT TO INSURANCE POLICY. Executive has
selected the insurer and policy referred to in Section 2.4(a) hereof, and the
Company shall not have any liability to Executive (or his beneficiaries) should
the insurance company which issues the policy referred to therein fail or refuse
to pay (whether voluntarily or by reason of any order, injunction or otherwise)
thereunder or if any rights or elections otherwise available to Executive
thereunder are restricted or eliminated.

 

6.12 GOVERNING LAW. This Agreement shall be construed in accordance with and
governed for all purposes by the laws of the State of California applicable to
contracts executed and wholly performed within such state.

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

COMPANY

 

BISHOP EQUITIES, INC., a Nevada

corporation dba Aethlon Medical

 

By: /s/ Franklyn S. Barry, Jr.              

Franklyn S. Barry, Jr.

Its President and C.E.O.

 

 

EXECUTIVE

 

/s/ Richard H. Tullis                          

RICHARD H. TULLIS

 

 

 

 

 

 18 

 

 

 

EXHIBIT "A"

DISPUTE RESOLUTION PROCEDURES

 

A. If a controversy should arise which is covered by Section 6.3 of Article VI,
then not later than twelve (12) months from the date of the event which is the
subject of dispute either party may serve on the other a written notice
specifying the existence of such controversy and setting forth in reasonably
specific detail the grounds thereof ("Notice of Controversy"); PROVIDED that, in
any event, the other party shall have at least thirty (30) days from and after
the date of the Notice of Controversy to serve a written notice of any
counterclaim ("Notice of Counterclaim"). The Notice of Counterclaim shall
specify the claim or claims in reasonably specific detail. If the Notice of
Controversy or the Notice of Counterclaim, as the case may be, is not served
within the applicable period, the claim set forth therein will be deemed to have
been waived, abandoned and rendered unenforceable.

 

B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three (3) week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.

 

C. If the parties should agree during the Period of Negotiation to mediate the
dispute, then the Period of Negotiation shall be extended by an amount of time
to be agreed upon by the parties to permit such mediation. In no event, however,
may the Period of Negotiation be extended by more than five (5) weeks or, stated
differently, in no event may the Period of Negotiation be extended to encompass
more than a total of eight (8) weeks.

 

D. If the parties agree to mediate the dispute but are thereafter unable to
agree within one (1) week on the format and procedures for the mediation, then
the effort to mediate shall cease, and the Period of Negotiation shall terminate
four (4) weeks from the Notice of Controversy (or the Notice of Counterclaim, as
the case may be).

 

E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").

 

F. A notice of intention to arbitrate ("Notice of Arbitration") shall be served
within forty-five (45) days of the termination of the Period of Negotiation. If
the Notice of Arbitration is not served within this period, the claim set forth
in the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.

 

G. The arbitration, including the Notice of Arbitration, will be governed by the
Commercial Rules of the American Arbitration Association except that the terms
of this Arbitration Agreement shall control in the event of any difference or
conflict between such Rules and the terms of this Arbitration Agreement. The
arbitration shall be scheduled to take place in San Diego, California.

 

H. The dispute resolver shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of California.

 

 

 

 19 

 

 

I. There shall be one dispute resolver, regardless of the amount in controversy.
The dispute resolver will be empowered to render an award and interim decisions
and shall be a member of the bar of any of the fifty States of the United States
or of the District of Columbia. The dispute resolver shall be promptly appointed
pursuant to Rule 13 of the Commercial Rules of the American Arbitration
Association ("AAA"). If the dispute resolver has not been appointed within
forty-five (45) days of the AAA's initial transmission of lists of potential
arbitrators, then the AAA shall unilaterally designate the dispute resolver.

 

J. At the time of appointment and as a condition thereto, the dispute resolver
will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.

 

K. During the 30-day period following appointment of the dispute resolver,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
(7) days of the request.

 

L. Following the 30-day period of document production, there will be a
forty-five (45) day period during which limited depositions will be permissible.
Neither party will take more than five (5) depositions, and no deposition will
exceed three (3) hours of direct testimony.

 

M. Disputes as to discovery or prehearing matters of a procedural nature shall
be promptly submitted to the dispute resolver pursuant to telephone conference
call or otherwise. The dispute resolver shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five (5) business days thereafter.

 

N. Following the promptly commence. The dispute hearing within thirty (30) days
of the will make every effort to conduct the period of depositions, the
arbitration hearing shall resolver will make every effort to commence the
conclusion of the deposition period and, in addition, hearing on consecutive
business days to conclusion.

 

O. An award will be rendered, at the latest, within nine (9) months of the date
of the Notice of Arbitration and within thirty (30) days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision in
reasonably specific detail and shall also specify whether any claim (or defense
or counterclaim) of Executive is found to be frivolous or without merit and what
proportion, if any, of his legal fees and expenses which have been paid by the
Company Executive shall be required to repay to the Company in accordance with
Section 6.3.2. The award shall be final and nonappealable.

 

 

 

 

 20 

 

 

P. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT THEY ARE WAIVING THEIR RIGHTS
TO A TRIAL IN A STATE OR FEDERAL COURT AND ARE ALSO WAIVING THEIR RIGHT TO A
JURY TRIAL.

 

 

  COMPANY   EXECUTIVE           BISHOP EQUITIES, INC.,       a Nevada
corporation dba       Aethlon Medical                       By: /s/ Franklyn S.
Barry, Jr.                  /s/ Richard H. Tullis                Franklyn S.
Barry, Jr.   Richard H. Tullis   Its: President and C.E.O.    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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