Document:

Exhibit 10.1 - Form of Directors Nonqualified Stock Option Agreement

    Exhibit
      10.1

    Form
      of
      Directors Nonqualified Stock Option Agreement

    

     

    ENGELHARD
      CORPORATION

     

    Name
      of Optionee:

    Number
      of Shares Under the Long Term Incentive Plan of 2002:

    Date
      of Agreement:

    Option
      Price:

     

    WITNESSETH:

     

    WHEREAS,
      this stock option has been granted to the Optionee pursuant to the Engelhard
      Corporation 2002 Long Term Incentive Plan (the "Plan"); and

     

    WHEREAS,
      it is desired to set forth herein the terms and conditions of such
      option;

     

    NOW,
      THEREFORE, the parties hereto agree as follows:

     

    1.  The
      Company hereby confirms that it has granted to the Optionee on the Date of
      Agreement set forth above, and on the terms set forth herein, an option to
      purchase, pursuant to the Plan, the number of shares of Common Stock, $1 par
      value, of the Company (the "Shares") set forth above. The option granted hereby
      is not intended to be an incentive stock option for purposes of Section 422
      of
      the Internal Revenue Code of 1986, as amended (the "Code").

     

    2.  The
      price
      at which each Share subject to this option may be purchased (the "Option Price")
      is set forth above and is not less than the fair market value of such shares
      on
      the Date of Agreement.

     

    3.  Subject
      to the terms and conditions set forth in the Plan and herein, this option may
      be
      exercised to purchase the Shares covered hereby only in accordance with the
      following schedule:

     

    
      	
              Period
                of Exercise

               

            	
              Cumulative
                Percentage

              of
                Total Shares Which May

              be
                Purchased

               

            
	 	 
	 	 
	 	 
	 	 
	 	 

    

     

    less,
      in
      the case of each period, the number of Shares, if any, previously purchased
      hereunder; provided, however, that this option shall become immediately
      exercisable in full at the time of a Change of Control (as defined in the Plan).
      This option shall terminate and no Shares may be purchased hereunder after
      ten
      (10) years from the Date of Agreement.

     

    4.  Except
      as
      provided in Section 8 hereof or in the Plan, this option may not be exercised
      unless the Optionee is serving as a Director of the Company at the time of
      such
      exercise and shall have been continuously so serving since the Date of
      Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    5.  Subject
      to the terms and conditions set forth herein, this option may be exercised
      at
      any time as to all or any of the shares then purchasable in accordance with
      Section 3 hereof by giving written notice to the Company (or notice by such
      means and to such representative(s) as the Company may otherwise designate)
      specifying the number of whole shares to be purchased and accompanied by payment
      in full (in a manner as set forth in the Plan) of the aggregate Option Price
      of
      such shares together with any amount which the Company may be required to
      withhold upon such exercise with respect to applicable taxes, or, if so elected,
      the Optionee's direction that the Company withhold Shares otherwise issuable
      upon such exercise in order to satisfy such withholding obligation; provided
      that this option may not be exercised for less than 10 Shares or the number
      of
      Shares remaining subject to the option, whichever is smaller. The amount of
      tax
      withholding to be satisfied by withholding Shares from the option exercise
      shall
      be limited to the minimum amount of taxes, including employment taxes, required
      to be withheld under applicable Federal, state and local law. The Optionee
      may
      pay the Option Price of such Shares in whole or in part with Shares having
      a
      fair market value on the exercise date equal to the cash value for which such
      Shares are substituted; provided that in no event may any portion of the Option
      Price be paid with Shares acquired either under an award granted pursuant to
      the
      Plan, upon exercise of a stock option granted under another Company plan or
      as a
      stock bonus or other stock award granted under another Company plan unless,
      in
      any such case, the Shares were acquired and vested more than six months in
      advance of the date of exercise hereunder. No holder of this option shall be
      entitled to any rights of a stockholder of the Company in respect of any Shares
      covered by this option until such Shares shall have been paid for in full and
      issued to the holder of this option.

     

    6.  As
      soon
      as practicable after receipt by the Company or its representative of notice
      of
      exercise and payment in full for any Shares being purchased (in a manner as
      set
      forth in the Plan) upon exercise of this option, the Company will deliver or
      transfer certificate(s) or account credit(s) to or at the direction of the
      Optionee representing the fully paid and nonassessable Shares so
      purchased.

     

    7.  This
      option is personal to the Optionee and during the Optionee's lifetime may be
      exercised only by the Optionee. This option shall not be transferable other
      than
      by will or the laws of descent and distribution.

     

    8.  Except
      as
      otherwise provided in the Plan, if the Optionee's service as a Director
      terminates or the Optionee dies under any of the circumstances set forth below
      but prior to the time this option has been fully exercised, this option shall
      be
      exercisable, as to any remaining Shares subject thereto, only in accordance
      with
      the following provisions; provided that this option in no event shall be
      exercisable more than ten (10) years from the Date of Agreement:

     

    (a)  If
      the
      Optionee's service as a Director terminates by reason of his or her disability
      or retirement after attaining age 65, this option may be exercised in full
      by
      the Optionee within ten (10) years from the Date of Agreement;

     

    (b)  If
      the
      Optionee’s service as a Director terminates other than as provided in
      (i) above and other than by reason of his or her death, this option, to the
      extent it is exercisable at the time of such termination of service, shall
      continue to be exercisable for three (3) months following the date of such
      termination of service;

     

    (c)  In
      the
      event of the death of the Optionee after termination of service as a Director
      covered by (i) or (ii) above, the person or persons to whom the Optionee's
      rights are transferred by will or the laws of descent and distribution may
      exercise this option to the extent to which the Optionee could have exercised
      this option had the Optionee survived for the remainder of the period under
      (i)
      or (ii) above during which the Optionee could have exercised this option if
      the
      Optionee had survived; and

     

    (d)  In
      the
      event of the death of the Optionee while serving as a Director, this option
      shall thereupon become exercisable in full, and the person or persons to whom
      the Optionee's rights are transferred by will or by the laws of descent and
      distribution shall have a period ending on the tenth anniversary of the Date
      of
      Agreement to exercise this option.

     

    9.  This
      option does not confer on the Optionee any right to continue to serve as a
      Director.

     

    10.  In
      the
      event that the Committee shall determine that any dividend in Shares,
      recapitalization, Share split, reverse split, reorganization, merger,
      consolidation, spin-off, combination, repurchase, or share exchange, or

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    other
      similar corporate transaction or event, affects the Shares such that an
      adjustment is appropriate in order to prevent dilution or enlargement of the
      rights of participants under the Plan, then the Committee shall make such
      equitable changes or adjustments as it deems appropriate and, in such manner
      as
      it may deem equitable, adjust any or all of the number and kind of shares,
      other
      securities or other consideration issued or issuable in respect of this option
      and the Option Price.

     

    11.  This
      option shall be subject to the requirement that if at any time the Board shall
      determine that the registration, listing, or qualification of Shares covered
      hereby upon any securities exchange or under any federal or state law, or the
      consent or approval of any governmental regulatory body is necessary or
      desirable in connection with, the granting of this option or the purchase of
      Shares hereunder, this option may not be exercised unless and until such
      registration, listing, qualification, consent or approval shall have been
      effected or obtained free of any conditions not acceptable to the Board. The
      Board may require that the person exercising this option make such
      representations and agreements and furnish such information as it deems
      appropriate to assure compliance with or exemption from the foregoing or any
      other applicable legal requirement and may cause the certificate or certificates
      issued upon exercise of this option to bear a legend indicating the existence
      of
      any restriction resulting from such representations and agreements.

     

    12.  This
      option and the terms and conditions herein set forth are subject in all respects
      to the terms and conditions of the Plan, which shall be controlling and which
      are incorporated herein by reference. All interpretations or determinations
      of
      the Committee shall be binding and conclusive upon the Optionee and the
      Optionee's legal representatives on any question arising hereunder or under
      the
      Plan.

     

    Please
      indicate your understanding and acceptance of the foregoing by signing and
      returning a copy of this Agreement.

     

     

    ENGELHARD
      CORPORATION

     

     

    BY: _____________________________

     

    I
      confirm
      my understanding of the foregoing and accept the option covering the above
      Shares, subject to the terms and conditions described herein.

     

    Signature: _________________________ Date: ___________________

    

    

    
      
         

      

      
        3<PAGE>

                                                                    EXHIBIT 10.1

July 29, 2005

Mr. James Dorst
2097 Caminito Capa
La Jolla, CA 92037

Dear Jim:

         Aethlon Medical ("Aethlon") is pleased to offer you the position of
Chief Financial Officer. We would like your start date to be August 1, 2005.

         You will be expected to perform various duties consistent with your
position, as provided to you by the Chairman and CEO. Aethlon may change your
position, duties and work location from time to time, as it deems necessary.

         If you accept this offer, your compensation will be $6,250.00, semi
monthly, less standard payroll deductions and all required withholdings.

         This offer also includes options to purchase 500,000 shares of common
stock at a price equal to market close on August 1, 2005. These options will
vest on the anniversary start date over three years, as follows:

             165,000 vest at August 1, 2006
             165,000 vest at August 1, 2007
             170,000 vest at August 1, 2008

         Aethlon Medical will reimburse your costs associated with continuing
benefits under your previous employer's group benefit plan(s) for you and your
qualified dependents. Upon implementation, you and any qualified dependents will
be eligible to participate in Aethlon's employee group benefit plan(s). At such
time group benefits become available, Aethlon will then cease payments of
premiums to plans outside of the company.

         As an Aethlon employee, you will be expected to abide by Aethlon
corporate policies. As a condition of employment, you will be required to sign
and comply with our Employee Nondisclosure and Invention Assignment Agreement,
which among other things, prohibits unauthorized use or disclosure of
proprietary technology, information, and trade secrets of Aethlon.

         Please understand that all employees at Aethlon are considered to be
"at will employees," which means that no guarantee of employment is made or
implied. You may terminate your employment with Aethlon at any time and for any
reason whatsoever simply by notifying Aethlon. Likewise, Aethlon may terminate
your employment at any time and for any reason whatsoever, with or without cause
or advance notice. This at-will employment relationship cannot be changed except
in writing signed by an authorized Aethlon officer.

         This letter provides a complete and exclusive statement of the terms of
your employment with Aethlon. The employment terms in this letter supersede any
other agreements or promises made to you by anyone, whether oral or written.
This offer is subject to satisfactory proof of your right to work in the United
States as well as your fulfillment of all other necessary conditions required by
state or federal law.

         Please sign and date one copy of this letter, and return it to me at
Aethlon Medical, Inc., 3030 Bunker Hill, Suite 4000, San Diego, CA 92109 to
indicate your acceptance of this offer. Retain the second copy for your records.

         When reporting to your first day of employment, please be prepared to
provide satisfactory evidence for eligibility of employment as required by
federal law. Failure to provide satisfactory evidence for eligibility of
employment may delay your employment status with Aethlon.

         We are looking forward to a mutually rewarding relationship and believe
in your ability to contribute to the future success of Aethlon. If you have any
questions about this offer, please do not hesitate to call me.

    Sincerely,

By: /s/ James A. Joyce
    --------------------
    Chairman and CEO

    Agreed and Accepted:

By: /s/ James Dorst
    --------------------

    July 29, 2005
    Date

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