EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "AGREEMENT"), is dated as of August
24, 2009, by and between Aethlon Medical, Inc., a Nevada corporation (the
"COMPANY"), and the subscribers listed on SCHEDULE I hereto (the "SUBSCRIBERS").
WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("REGULATION D") as promulgated by the United States Securities and Exchange
Commission (the "COMMISSION") under the Securities Act of 1933, as amended (the
"1933 ACT");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers shall purchase for an
aggregate of $307,500 (the "PURCHASE PRICE") (i) $338,250 principal amount
("PRINCIPAL AMOUNT") of secured promissory notes of the Company ("NOTE" or
"NOTES"), a form of which is annexed hereto as EXHIBIT A, convertible into
shares of the Company's Common Stock, $0.001 par value (the "COMMON STOCK") at a
per share conversion price set forth in the Notes ("CONVERSION PRICE"); and (ii)
share purchase warrants (the "WARRANTS") in the form attached hereto as EXHIBIT
B, to purchase shares of the Company's Common Stock (the "WARRANT SHARES") (the
"OFFERING"). The Notes, shares of Common Stock issuable upon conversion of the
Notes (the "CONVERSION SHARES"), the Warrants and the Warrant Shares are
collectively referred to herein as the "SECURITIES."; and
WHEREAS, the aggregate proceeds of the sale of the Notes and the
Warrants contemplated hereby shall be held in escrow by Grushko & Xxxxxxx, P.C.,
000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (the "ESCROW AGENT")
pursuant to the terms of an Escrow Agreement to be executed by the parties
substantially in the form attached hereto as EXHIBIT C (the "ESCROW AGREEMENT").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Subscribers hereby
agree as follows:
1. CLOSING DATE. The "CLOSING DATE" shall be the date that the
Purchase Price is transmitted by wire transfer or otherwise credited to or for
the benefit of the Company. The consummation of the transactions contemplated
herein is referred to as the "CLOSING". The Closing shall take place at the
offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx
Xxxx 00000, upon the satisfaction or waiver of all conditions to closing set
forth in this Agreement. Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the Closing Date, Subscribers shall purchase
and the Company shall sell to Subscribers the Notes and Warrants as described in
Section 2 of this Agreement.
2. NOTES. Subject to the satisfaction or waiver of the terms
and conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase and the Company shall sell to the Subscriber a Note in the Principal
Amount designated on SCHEDULE I hereto for such Subscriber's Purchase Price
indicated thereon.
3. WARRANTS. On the Closing Date, the Company will issue and
deliver the Warrants to the Subscribers. Two Warrants will be issued for each
one Dollar of Note Principal Amount issued on the Closing Date. The exercise
price to acquire a Warrant Share upon exercise of a Warrant shall be equal to
$0.50, subject to reduction as described in the Warrants. The Warrants shall be
exercisable until three (3) years after the issue date of the Warrants.
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4. SUBSCRIBER REPRESENTATIONS AND WARRANTIES. Each of the
Subscribers hereby represents and warrants to and agrees with the Company that:
(a) ORGANIZATION AND STANDING OF THE SUBSCRIBER.
Subscriber, to the extent applicable, is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.
(b) AUTHORIZATION AND POWER. Subscriber has the
requisite power and authority to enter into and perform this Agreement and the
other Transaction Documents and to purchase the Note and Warrant being sold to
it hereunder. The execution, delivery and performance of this Agreement and the
other Transaction Documents by Subscriber and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action, and no further consent or authorization of
Subscriber or its Board of Directors or stockholders, if applicable, is
required. This Agreement and the other Transaction Documents have been duly
authorized, executed and when delivered by Subscriber and constitute, or shall
constitute when executed and delivered, a valid and binding obligation of
Subscriber, enforceable against Subscriber in accordance with the terms thereof.
(c) NO CONFLICTS. The execution, delivery and
performance of this Agreement and the other Transaction Documents and the
consummation by Subscriber of the transactions contemplated hereby and thereby
or relating hereto do not and will not (i) result in a violation of Subscriber's
charter documents, bylaws or other organizational documents, if applicable, (ii)
conflict with nor constitute a default (or an event which with notice or lapse
of time or both would become a default) under any agreement to which Subscriber
is a party, nor (iii) result in a violation of any law, rule, or regulation, or
any order, judgment or decree of any court or governmental agency applicable to
Subscriber or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a material adverse effect
on Subscriber). Subscriber is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement and the other Transaction Documents nor to purchase the
Securities in accordance with the terms hereof, provided that for purposes of
the representation made in this sentence, Subscriber is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) INFORMATION ON COMPANY. Such Subscriber has been
furnished with or has had access at the XXXXX Website of the Commission to the
Company's Form 10-KSB filed on July 2, 2009 for the fiscal year ended March 31,
2009, and the financial statements included therein, together with all
subsequent filings made with the Commission available at the XXXXX website
(hereinafter referred to collectively as the "REPORTS"). In addition, such
Subscriber may have received in writing from the Company such other information
concerning its operations, financial condition and other matters as such
Subscriber has requested in writing, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the "OTHER WRITTEN
INFORMATION"), and considered all factors such Subscriber deems material in
deciding on the advisability of investing in the Securities.
(e) INFORMATION ON SUBSCRIBER. Subscriber is, and
will be at the time of the conversion of the Notes and exercise of the Warrants,
an "ACCREDITED INVESTOR", as such term is defined in Regulation D promulgated by
the Commission under the 1933 Act, is experienced in investments and business
matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such knowledge and experience in
financial, tax and other business matters as to enable Subscriber to utilize the
information made available by the Company to evaluate the merits and risks of
and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
Subscriber is able to bear the risk of such investment for an indefinite period
and to afford a complete loss thereof. The information set forth on SCHEDULE I
hereto regarding Subscriber is accurate.
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(f) PURCHASE OF NOTES AND WARRANTS. On the Closing
Date, Subscriber will purchase its Note and Warrants as principal for its own
account for investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof.
(g) COMPLIANCE WITH SECURITIES ACT. Subscriber
understands and agrees that the Securities have not been registered under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction that does not require registration under the 1933 Act (based in
part on the accuracy of the representations and warranties of the Subscriber
contained herein), and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration. In any event, and subject
to compliance with applicable securities laws, the Subscriber may enter into
lawful hedging transactions in the course of hedging the position they assume
and the Subscriber may also enter into lawful short positions or other
derivative transactions relating to the Securities, or interests in the
Securities, and deliver the Securities, or interests in the Securities, to close
out their short or other positions or otherwise settle other transactions, or
loan or pledge the Securities, or interests in the Securities, to third parties
who in turn may dispose of these Securities.
(h) CONVERSION SHARES AND WARRANT SHARES LEGEND. The
Conversion Shares and Warrant Shares shall bear the following or similar legend:
"THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL
BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
(i) NOTES AND WARRANTS LEGEND. The Notes and Warrants
shall bear the following legend:
"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE -OR-EXERCISABLE] HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY
THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."
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(j) COMMUNICATION OF OFFER. The offer to sell the
Securities was directly communicated to Subscriber by the Company. At no time
was Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
(k) RESTRICTED SECURITIES. Subscriber understands
that the Securities have not been registered under the 1933 Act and Subscriber
will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer
any of the Securities unless pursuant to an effective registration statement
under the 1933 Act, or unless an exemption from registration is available.
Notwithstanding anything to the contrary contained in this Agreement, Subscriber
may transfer (without restriction and without the need for an opinion of
counsel) the Securities to its Affiliates (as defined below) provided that each
such Affiliate is an "accredited investor" under Regulation D and such Affiliate
agrees to be bound by the terms and conditions of this Agreement. For the
purposes of this Agreement, an "AFFILIATE" of any person or entity means any
other person or entity directly or indirectly controlling, controlled by or
under direct or indirect common control with such person or entity. Affiliate
includes each Subsidiary of the Company. For purposes of this definition,
"CONTROL" means the power to direct the management and policies of such person
or firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
(l) NO GOVERNMENTAL REVIEW. Subscriber understands
that no United States federal or state agency or any other governmental or state
agency has passed on or made recommendations or endorsement of the Securities or
the suitability of the investment in the Securities nor have such authorities
passed upon or endorsed the merits of the offering of the Securities.
(m) CORRECTNESS OF REPRESENTATIONS. Subscriber
represents that the foregoing representations and warranties are true and
correct as of the date hereof and, unless Subscriber otherwise notifies the
Company prior to the Closing Date, shall be true and correct as of the Closing
Date.
(n) SURVIVAL. The foregoing representations and
warranties shall survive the Closing Date.
5. COMPANY REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to and agrees with each Subscriber that:
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(a) DUE INCORPORATION. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power to own
its properties and to carry on its business as presently conducted. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The Company is not currently in good standing as a foreign
corporation in the State of California. The Company's lack of good standing as a
foreign corporation in the State of California does not have a Material Adverse
Affect on the Company. For purposes of this Agreement, a "MATERIAL ADVERSE
EFFECT" shall mean a material adverse effect on the financial condition, results
of operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole. For purposes of this Agreement, "SUBSIDIARY"
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which more than 30% of (i) the
outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or limited
liability company or (iii) in the case of a trust, estate, association, joint
venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned or
controlled directly or indirectly through one or more intermediaries, by such
entity. As of the Closing Date, all of the Company's Subsidiaries and the
Company's ownership interest therein is set forth on SCHEDULE 5(A).
(b) OUTSTANDING STOCK. All issued and outstanding
shares of capital stock and equity interests in the Company have been duly
authorized and validly issued and are fully paid and non-assessable.
(c) AUTHORITY; ENFORCEABILITY. This Agreement, the
Notes, Conversion Shares, Warrants, Security Agreement, the Escrow Agreement,
and any other agreements delivered together with this Agreement or in connection
herewith (collectively "TRANSACTION DOCUMENTS") have been duly authorized,
executed and delivered by the Company and are valid and binding agreements of
the Company enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity. The Company has full corporate power and
authority necessary to enter into and deliver the Transaction Documents and to
perform its obligations thereunder.
(d) CAPITALIZATION AND ADDITIONAL ISSUANCES. The
authorized and outstanding capital stock of the Company and Subsidiaries on a
fully diluted basis as of the date of this Agreement and the Closing Date (not
including the Securities) are set forth on SCHEDULE 5(D). Except as set forth on
SCHEDULE 5(d), there are no options, warrants, or rights to subscribe to,
securities, rights, understandings or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock or other equity interest of the Company or any of the Subsidiaries. The
only officer, director, employee and consultant stock option or stock incentive
plan or similar plan currently in effect or contemplated by the Company is
described on SCHEDULE 5(D). There are no outstanding agreements or preemptive or
similar rights affecting the Company's Common Stock.
(e) CONSENTS. No consent, approval, authorization or
order of any court, governmental agency or body or arbitrator having
jurisdiction over the Company, or any of its Affiliates, the OTC Bulletin Board
(the "BULLETIN BOARD") or the Company's shareholders is required for the
execution by the Company of the Transaction Documents and compliance and
performance by the Company of its obligations under the Transaction Documents,
including, without limitation, the issuance and sale of the Securities. The
Transaction Documents and the Company's performance of its obligations
thereunder have been unanimously approved by the Company's Board of Directors.
No consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental authority in the
world, including without limitation, the United States, or elsewhere is required
by the Company or any Affiliate of the Company in connection with the
consummation of the transactions contemplated by this Agreement, except as would
not otherwise have a Material Adverse Effect or the consummation of any of the
other agreements, covenants or commitments of the Company or any Subsidiary
contemplated by the other Transaction Documents. Any such qualifications and
filings will, in the case of qualifications, be effective on the Closing and
will, in the case of filings, be made within the time prescribed by law.
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(f) NO VIOLATION OR CONFLICT. Assuming the
representations and warranties of the Subscriber in Section 4 are true and
correct, neither the issuance and sale of the Securities nor the performance of
the Company's obligations under this Agreement and all other agreements entered
into by the Company relating thereto by the Company will:
(i) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to constitute a default)
under (A) the articles or certificate of incorporation, charter or bylaws of the
Company, (B) to the Company's knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company of any
court, governmental agency or body, or arbitrator having jurisdiction over the
Company or over the properties or assets of the Company or any of its
Affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its Affiliates is a party, by which the Company or any of its Affiliates is
bound, or to which any of the properties of the Company or any of its Affiliates
is subject, or (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company, or any of its Affiliates
is a party except the violation, conflict, breach, or default of which would not
have a Material Adverse Effect; or
(ii) result in the creation or imposition of
any lien, charge or encumbrance upon the Securities or any of the assets of the
Company or any of its Affiliates except in favor of Subscribers as described
herein; or
(iii) except as set forth in SCHEDULE 5(F),
result in the activation of any anti-dilution rights or a reset or repricing of
any debt, equity or security instrument of any creditor or equity holder of the
Company, or the holder of the right to receive any debt, equity or security
instrument of the Company except for the Subscriber, nor result in the
acceleration of the due date of any obligation of the Company; or
(iv) result in the triggering of any
piggy-back or other registration rights of any person or entity holding
securities of the Company or having the right to receive securities of the
Company.
(g) THE SECURITIES. The Securities upon issuance:
(i) are, or will be, free and clear of any
security interests, liens, claims or other encumbrances, subject only to
restrictions upon transfer under the 1933 Act and any applicable state
securities laws;
(ii) have been, or will be, duly and validly
authorized and on the dates of issuance of the Conversion Shares upon conversion
of the Notes, and the Warrant Shares upon exercise of the Warrants, such
Conversion Shares and Warrant Shares will be duly and validly issued, fully paid
and non-assessable and if registered pursuant to the 1933 Act and resold
pursuant to an effective registration statement or exempt from registration will
be free trading, unrestricted and unlegended;
(iii) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company or rights to acquire securities of the Company;
(iv) will not subject the holders thereof to
personal liability by reason of being such holders; and
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(v) assuming the representations and
warranties of the Subscribers as set forth in Section 4 hereof are true and
correct, will not result in a violation of Section 5 under the 1933 Act.
(h) LITIGATION. There is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having jurisdiction
over the Company, or any of its Affiliates that would affect the execution by
the Company or the complete and timely performance by the Company of its
obligations under the Transaction Documents. Except as disclosed in the Reports,
there is no pending or, to the best knowledge of the Company, basis for or
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates which litigation if adversely determined would have a
Material Adverse Effect.
(i) NO MARKET MANIPULATION. The Company and its
Affiliates have not taken, and will not take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities or affect the price at which the Securities may
be issued or resold.
(j) INFORMATION CONCERNING COMPANY. The Reports and
Other Written Information contain all material information relating to the
Company and its operations and financial condition as of their respective dates
which information is required to be disclosed therein. Since March 31, 2009 and
except as modified in the Reports and Other Written Information or in the
Schedules hereto, there has been no Material Adverse Event relating to the
Company's business, financial condition or affairs. The Reports and Other
Written Information including the financial statements included therein do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, taken
as a whole, not misleading in light of the circumstances and when made.
(k) SOLVENCY. Based on the financial condition of the
Company as of the Closing Date, (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of
the Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
(l) DEFAULTS. The Company is not in violation of its
articles of incorporation or bylaws. Except as set forth in SCHEDULE 5(L), the
Company is (i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect, (ii) not in default with respect to any order of any
court, arbitrator or governmental body or subject to or party to any order of
any court or governmental authority arising out of any action, suit or
proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) not in
violation of any statute, rule or regulation of any governmental authority which
violation would have a Material Adverse Effect.
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(m) NO INTEGRATED OFFERING. Neither the Company, nor
any of its Affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security of the Company
nor solicited any offers to buy any security of the Company under circumstances
that would cause the offer of the Securities pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the Bulletin Board. No prior offering will
impair the exemptions relied upon in this Offering or the Company's ability to
timely comply with its obligations hereunder. Neither the Company nor any of its
Affiliates will take any action or steps that would cause the offer or issuance
of the Securities to be integrated with other offerings which would impair the
exemptions relied upon in this Offering or the Company's ability to timely
comply with its obligations hereunder. The Company will not conduct any offering
other than the transactions contemplated hereby that may be integrated with the
offer or issuance of the Securities that would impair the exemptions relied upon
in this Offering or the Company's ability to timely comply with its obligations
hereunder.
(n) NO GENERAL SOLICITATION. Neither the Company, nor
any of its Affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection with the
offer or sale of the Securities.
(o) NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
other than those incurred in the ordinary course of the Company businesses since
March 31, 2009 and which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
(p) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
March 31, 2009, except as disclosed in the Reports and except as set forth in
SCHEDULE 5(P), no event or circumstance has occurred or exists with respect to
the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.
(q) BANKING. SCHEDULE 5(Q) contains a list of all
financial institutions at which the Company and Subsidiaries maintain deposit,
checking and other accounts. The list includes the accurate addresses of such
financial institutions and account numbers of such accounts.
(r) DILUTION. The Company's executive officers and
directors understand the nature of the Securities being sold hereby and
recognize that the issuance of the Securities will have a potential dilutive
effect on the equity holdings of other holders of the Company's equity or rights
to receive equity of the Company. The board of directors of the Company has
concluded, in its good faith business judgment, that the issuance of the
Securities is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Conversion Shares upon conversion
of the Notes and the Warrant Shares upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company or parties
entitled to receive equity of the Company.
(s) NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.
There are no material disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise between the Company and the
accountants and lawyers previously and presently employed by the Company,
including but not limited to disputes or conflicts over payment owed to such
accountants and lawyers, nor have there been any such disagreements during the
two years prior to the Closing Date.
(t) INVESTMENT COMPANY. Neither the Company nor any
Affiliate of the Company is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
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(u) FOREIGN CORRUPT PRACTICES. Neither the Company,
nor to the knowledge of the Company, any agent or other person acting on behalf
of the Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(v) REPORTING COMPANY/SHELL COMPANY. The Company is a
publicly-held company subject to reporting obligations pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended (the "1934 ACT") and has a class
of Common Stock registered pursuant to Section 12(g) of the 1934 Act. Pursuant
to the provisions of the 1934 Act, the Company has timely filed all reports and
other materials required to be filed thereunder with the Commission during the
preceding twelve months. As of the Closing Date, the Company is not a "shell
company" but is a "former shell company" as those terms are employed in Rule 144
under the 1933 Act.
(w) LISTING. The Company's Common Stock is quoted on
the Bulletin Board under the symbol AEMD. The Company has not received any
pending oral or written notice that its Common Stock is not eligible nor will
become ineligible for quotation on the Bulletin Board nor that its Common Stock
does not meet all requirements for the continuation of such quotation and (ii)
the Company satisfies all the requirements for the continued quotation of its
Common Stock on the Bulletin Board.
(x) DTC STATUS. The Company's transfer agent is a
participant in, and the Common Stock is eligible for transfer pursuant to, the
Depository Trust Company Automated Securities Transfer Program. The name,
address, telephone number, fax number, contact person and email address of the
Company transfer agent is set forth on SCHEDULE 5(X) hereto.
(y) COMPANY PREDECESSOR AND SUBSIDIARIES. Except as
set forth in SCHEDULE 5(A), the Company makes each of the representations
contained in Sections 5(a), (b), (c), (d), (e), (f), (h), (j), (l), (o), (p),
(q), (s), (t) and (u) of this Agreement, as same relate or could be applicable
to each Subsidiary. All representations made by or relating to the Company of a
historical or prospective nature and all undertakings described in Sections 9(g)
through 9(l) shall relate, apply and refer to the Company and its predecessors
and successors. The Company represents that it owns all of the equity of the
Subsidiaries and rights to receive equity of the Subsidiaries identified on
SCHEDULE 5(A), free and clear of all liens, encumbrances and claims. No person
or entity other than the Company has the right to receive any equity interest in
the Subsidiaries. The Company further represents that the Subsidiaries have not
been known by any other name for the prior five years.
(z) CORRECTNESS OF REPRESENTATIONS. The Company
represents that the foregoing representations and warranties are true and
correct as of the date hereof in all material respects, and, unless the Company
otherwise notifies the Subscribers prior to the Closing Date, shall be true and
correct in all material respects as of the Closing Date; provided, that, if such
representation or warranty is made as of a different date, in which case such
representation or warranty shall be true as of such date.
(AA) SURVIVAL. The foregoing representations and
warranties shall survive the Closing Date.
9
6. REGULATION D OFFERING/LEGAL OPINION. The offer and issuance
of the Securities to the Subscribers is being made pursuant to the exemption
from the registration provisions of the 1933 Act afforded by Section 4(2) or
Section 4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated
thereunder. On the Closing Date, the Company will provide an opinion reasonably
acceptable to the Subscribers from the Company's legal counsel opining on the
availability of an exemption from registration under the 1933 Act as it relates
to the offer and issuance of the Securities and other matters reasonably
requested by Subscribers. A form of the legal opinion is annexed hereto as
EXHIBIT D. The Company will provide, at the Company's expense, to the Subscriber
such other legal opinions, if any, as are reasonably necessary in each
Subscriber's and such counsel's opinion for the issuance and resale of the
Conversion Shares and Warrant Shares pursuant to an effective registration
statement, Rule 144 under the 1933 Act or an exemption from registration.
7.1. CONVERSION OF NOTES.
(a) Upon the conversion of a Note or part thereof,
the Company shall, at its own cost and expense, take all necessary action,
including obtaining and delivering an opinion of counsel, to assure that the
Company's transfer agent shall issue stock certificates in the name of a
Subscriber (or its permitted nominee) or such other persons as designated by
Subscriber and in such denominations to be specified at conversion representing
the number of shares of Common Stock issuable upon such conversion. The Company
warrants that no instructions other than these instructions have been or will be
given to the transfer agent of the Company's Common Stock and that the
certificates representing such shares shall contain no legend other than the
legend set forth in Section 4(h). If and when a Subscriber sells the Conversion
Shares, assuming (i) a registration statement including such Conversion Shares
for registration has been filed with the Commission, is effective and the
prospectus, as supplemented or amended, contained therein is current and (ii)
Subscriber or its agent confirms in writing to the transfer agent that
Subscriber has complied with the prospectus delivery requirements, the Company
will reissue the Conversion Shares without restrictive legend and the Conversion
Shares will be free-trading, and freely transferable. In the event that the
Conversion Shares are sold in a manner that complies with an exemption from
registration, the Company will promptly instruct its counsel to issue to the
transfer agent an opinion permitting removal of the legend indefinitely, if
pursuant to Rule 144(b)(1)(i) of the 1933 Act, provided that Subscriber delivers
all reasonably requested representations in support of such opinion.
(b) Each Subscriber will give notice of its decision
to exercise its right to convert its Note, interest, or part thereof by
telecopying or otherwise delivering a completed Notice of Conversion (a form of
which is annexed as EXHIBIT A to the Note) to the Company via confirmed
telecopier transmission or otherwise pursuant to Section 13(a) of this
Agreement. Subscriber will not be required to surrender the Note until the Note
has been fully converted or satisfied. Each date on which a Notice of Conversion
is telecopied to the Company in accordance with the provisions hereof by 6 PM
Eastern Time ("ET") (or if received by the Company after 6 PM ET, then the next
business day) shall be deemed a "CONVERSION DATE." The Company will itself or
cause the Company's transfer agent to transmit the Company's Common Stock
certificates representing the Conversion Shares issuable upon conversion of the
Note to Subscriber via express courier for receipt by Subscriber within five (5)
business days after the Conversion Date (such fifth day being the "DELIVERY
DATE"). In the event the Conversion Shares are electronically transferable, then
delivery of the Shares MUST be made by electronic transfer provided request for
such electronic transfer has been made by the Subscriber. A Note representing
the balance of the Note not so converted will be provided by the Company to
Subscriber if requested by Subscriber, provided Subscriber delivers the original
Note to the Company.
(c) The Company understands that a delay in the
delivery of the Conversion Shares in the form required pursuant to Section 7.1
hereof later than the Delivery Date could result in economic loss to the
Subscribers. As compensation to Subscribers for such loss, the Company agrees to
pay (as liquidated damages and not as a penalty) to each applicable Subscriber
for late issuance of Conversion Shares in the form required pursuant to Section
7.1 hereof upon Conversion of the Note, the amount of $100 per business day
after the Delivery Date for each $10,000 of Note principal amount and interest
(and proportionately for other amounts) being converted of the corresponding
Conversion Shares which are not timely delivered. The Company shall pay any
payments incurred under this Section upon demand. Furthermore, in addition to
any other remedies which may be available to the Subscribers, in the event that
the Company fails for any reason to effect delivery of the Conversion Shares
within seven (7) business days after the Delivery Date, the relevant Subscriber
will be entitled to revoke all or part of the relevant Notice of Conversion by
delivery of a notice to such effect to the Company whereupon the Company and
Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that the damages payable in
connection with the Company's default shall be payable through the date notice
of revocation or rescission is given to the Company.
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7.2. MANDATORY REDEMPTION AT SUBSCRIBER'S ELECTION. Upon the
occurrence of an Event of Default (as defined in the Note or in this Agreement),
that continues for more than twenty (20) business days, (iii) a Change in
Control (as defined below), or (iv) of the liquidation, dissolution or winding
up of the Company, then at the Subscriber's election, the Company must pay to
each Subscriber ten (30) business days after request by each Subscriber
("CALCULATION PERIOD"), a sum of money determined by multiplying up to the
outstanding principal amount of the Note designated by each such Subscriber by
120%, plus accrued but unpaid interest ("MANDATORY REDEMPTION PAYMENT"). The
Mandatory Redemption Payment must be received by each Subscriber not later than
thirty (30) business days after request ("MANDATORY REDEMPTION PAYMENT DATE").
Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding. For
purposes of this Section 7.1, "CHANGE IN CONTROL" shall mean (i) the Company no
longer having a class of shares publicly traded or listed on a Principal Market
(as defined in Section 9(b)), (ii) the Company becoming a Subsidiary of another
entity (other than a corporation formed by the Company for purposes of
reincorporation in another U.S. jurisdiction), (iii) a majority of the board of
directors of the Company as of the Closing Date no longer serving as directors
of the Company except due to natural causes, and (iv) the sale, lease or
transfer of substantially all the assets of the Company or Subsidiaries.
7.3. MAXIMUM CONVERSION. A Subscriber shall not be entitled to
convert on a Conversion Date that amount of a Note nor may the Company make any
payment including principal, interest, or liquidated or other damages by
delivery of Conversion Shares in connection with that number of Conversion
Shares which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by such Subscriber and its Affiliates on a Conversion
Date or payment date, and (ii) the number of Conversion Shares issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock of the Company on such Conversion Date. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Rule 13d-3 thereunder. Subject to the foregoing, the Subscriber
shall not be limited to aggregate conversions of only 4.99% and aggregate
conversions by the Subscriber may exceed 4.99%. The Subscriber may increase the
permitted beneficial ownership amount up to 9.99% upon and effective after 61
days prior written notice to the Company. Subscriber may allocate which of the
equity of the Company deemed beneficially owned by Subscriber shall be included
in the 4.99% amount described above and which shall be allocated to the excess
above 4.99%.
7.4. INJUNCTION POSTING OF BOND. In the event a Subscriber
shall elect to convert a Note or part thereof, the Company may not refuse
conversion based on any claim that Subscriber or any one associated or
affiliated with Subscriber has been engaged in any violation of law, or for any
other reason, unless, a final non-appealable injunction from a court made on
notice to Subscriber, restraining and or enjoining conversion of all or part of
such Note shall have been sought and obtained by the Company or the Company has
posted a surety bond for the benefit of Subscriber in the amount of 120% of the
outstanding principal and accrued but unpaid interest of the Note, or aggregate
purchase price of the Conversion Shares which are sought to be subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to Subscriber to the extent the judgment or decision is in Subscriber's favor.
11
7.5. BUY-IN. In addition to any other rights available to
Subscribers, if the Company fails to deliver to a Subscriber Conversion Shares
by the Delivery Date and if after the Delivery Date Subscriber or a broker on
Subscriber's behalf purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by Subscriber of the
Common Stock which Subscriber was entitled to receive upon such conversion (a
"BUY-IN"), then the Company shall pay to Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) Subscriber's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (B) the aggregate principal and/or interest
amount of the Note for which such conversion request was not timely honored
together with interest thereon at a rate of 15% per annum, accruing until such
amount and any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if a Subscriber
purchases shares of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of $10,000 of Note
principal and/or interest, the Company shall be required to pay Subscriber
$1,000 plus interest. Subscriber shall provide the Company written notice and
evidence indicating the amounts payable to Subscriber in respect of the Buy-In.
7.6 ADJUSTMENTS. The Conversion Price, Warrant exercise price
and amount of Conversion Shares and Warrant Shares shall be equitably adjusted
and as otherwise described in this Agreement, the Notes and Warrants.
7.7. REDEMPTION. The Note shall not be redeemable or callable
by the Company, except as described in the Note.
8. FEES.
(a) COMMISSION. The Company on the one hand, and each
Subscriber (for himself only) on the other hand, agree to indemnify the other
against and hold the other harmless from any and all liabilities to any persons
claiming brokerage commissions or finder's fees on account of services purported
to have been rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby or in connection with any
investment in the Company at any time, whether or not such investment was
consummated and arising out of such party's actions. The Company represents that
there are no parties entitled to receive fees, commissions, or similar payments
in connection with the Offering.
(b) SUBSCRIBER'S LEGAL FEES. The Company shall pay to
Grushko & Xxxxxxx, P.C., a fee of $7,500 ("SUBSCRIBER'S LEGAL FEES") as
reimbursement for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Notes and Warrants (the "OFFERING").
The Subscriber's Legal Fees and expenses will be payable out of funds held
pursuant to the Escrow Agreement.
9. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the Subscribers as follows:
(a) STOP ORDERS. Subject to the prior notice
requirement described in Section 9(n), the Company will advise the Subscribers,
within twenty-four hours after it receives notice of issuance by the Commission,
any state securities commission or any other regulatory authority of any stop
order or of any order preventing or suspending any offering of any securities of
the Company, or of the suspension of the qualification of the Common Stock of
the Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose. The Company will not issue any stop transfer
order or other order impeding the sale, resale or delivery of any of the
Securities, except as may be required by any applicable federal or state
securities laws and unless contemporaneous notice of such instruction is given
to the Subscribers.
12
(b) LISTING/QUOTATION. The Company shall promptly
secure the quotation or listing of the Conversion Shares and Warrant Shares upon
each national securities exchange, or automated quotation system upon which the
Company's Common Stock is quoted or listed and upon which such Conversion Shares
and Warrant Shares are or become eligible for quotation or listing (subject to
official notice of issuance) and shall maintain same so long as any Notes and
Warrants are outstanding. The Company will maintain the quotation or listing of
its Common Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq
Global Market, Nasdaq Global Select Market, Bulletin Board, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the "PRINCIPAL MARKET"), and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide Subscribers with copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.
(c) MARKET REGULATIONS. If required, the Company
shall notify the Commission, the Principal Market and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to the Subscribers.
(d) FILING REQUIREMENTS. From the date of this
Agreement and until the last to occur of (i) all the Conversion Shares have been
resold or transferred by the Subscribers pursuant to a registration statement or
pursuant to Rule 144(b)(1)(i), or (ii) the Notes and Warrants are no longer
outstanding (the date of such latest occurrence being the "END DATE"), the
Company will (A) cause its Common Stock to continue to be registered under
Section 12(b) or 12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) voluntarily comply with
all reporting requirements that are applicable to an issuer with a class of
shares registered pursuant to Section 12(g) of the 1934 Act, if the Company is
not subject to such reporting requirements, and (D) comply with all requirements
related to any registration statement filed pursuant to this Agreement. The
Company will use its best efforts not to take any action or file any document
(whether or not permitted by the 1933 Act or the 1934 Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said acts until the End Date. Until
the End Date, the Company will continue the listing or quotation of the Common
Stock on a Principal Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market. The Company agrees to timely file a Form D with respect to the
Securities if required under Regulation D and to provide a copy thereof to
Subscribers promptly after such filing.
(e) USE OF PROCEEDS. The proceeds of the Offering
will be substantially employed by the Company for general working capital. The
Purchase Price may not and will not be used for accrued and unpaid officer and
director salaries, payment of financing related debt, redemption of outstanding
notes or equity instruments of the Company nor non-trade obligations outstanding
on the Closing Date. For so long as any Note is outstanding, the Company will
not prepay any financing related debt obligations, except equipment payments,
nor redeem any equity instruments of the Company without the prior consent of
the Subscribers.
(f) RESERVATION. Prior to the Closing, the Company
undertakes to reserve on behalf of Subscribers from its authorized but unissued
Common Stock, a number of shares of Common Stock equal to 150% of the amount of
Common Stock necessary to allow Subscribers to be able to convert the entire
Notes and 100% of the amount of Warrant Shares issuable upon exercise of the
Warrants ("REQUIRED RESERVATION"). Failure to have sufficient shares reserved
pursuant to this Section 9(f) at any time shall be a material default of the
Company's obligations under this Agreement and an Event of Default under the
Notes. If at any time Notes and Warrants are outstanding the Company has
insufficient Common Stock reserved on behalf of the Subscribers in an amount
less than 125% of the amount necessary for full conversion of the outstanding
Notes principal and interest at the conversion price that would be in effect on
every such date and 100% of the Warrant Shares ("MINIMUM REQUIRED RESERVATION"),
the Company will promptly reserve the Minimum Required Reservation, or if there
are insufficient authorized and available shares of Common Stock to do so, the
Company will take all action necessary to increase its authorized capital to be
able to fully satisfy its reservation requirements hereunder, including the
filing of a preliminary proxy with the Commission not later than fifteen
business days after the first day the Company has less than the Minimum Required
Reservation. The Company agrees to provide notice to the Subscribers not later
than three days after the date the Company has less than the Minimum Required
Reservation reserved on behalf of the Subscriber.
13
(g) DTC PROGRAM. At all times that Notes or Warrants
are outstanding, the Company will employ as the transfer agent for the Common
Stock, Conversion Shares and Warrant Shares a participant in the Depository
Trust Company Automated Securities Transfer Program.
(h) TAXES. From the date of this Agreement and until
the End Date, the Company will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.
(i) INSURANCE. From the date of this Agreement and
until the End Date, the Company will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business and location, in amounts and to the
extent and in the manner customary for companies in similar businesses similarly
situated and located and to the extent available on commercially reasonable
terms.
(j) BOOKS AND RECORDS. From the date of this
Agreement and until the End Date, the Company will keep true records and books
of account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
(k) GOVERNMENTAL AUTHORITIES. From the date of this
Agreement and until the End Date, the Company shall duly observe and conform in
all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.
(l) INTELLECTUAL PROPERTY. From the date of this
Agreement and until the End Date, the Company shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses and other
rights to use intellectual property owned or possessed by it and reasonably
deemed to be necessary to the conduct of its business, unless it is sold for
value.
(m) PROPERTIES. From the date of this Agreement and
until the End Date, the Company will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases and claims to which it is a party or under which it
occupies or has rights to property if the breach of such provision could
reasonably be expected to have a Material Adverse Effect. The Company will not
abandon any of its assets except for those assets which have negligible or
marginal value or for which it is prudent to do so under the circumstances.
14
(n) CONFIDENTIALITY/PUBLIC ANNOUNCEMENT. From the
date of this Agreement and until the End Date, the Company agrees that except in
connection with a Form 8-K, Form 10-Q, Form 10-K and the registration statement
or statements regarding the Subscribers' Securities or in correspondence with
the Commission regarding same, it will not disclose publicly or privately the
identity of the Subscribers unless expressly agreed to in writing by Subscribers
or only to the extent required by law and then only upon not less than three
days prior notice to Subscribers. In any event and subject to the foregoing, the
Company undertakes to file a Form 8-K describing the Offering not later than the
first (1st) business day after the Closing Date. Prior to the filing date of
such Form 8-K, a draft in the final form will be provided to Subscribers for
Subscribers' review and approval. In the Form 8-K, the Company will specifically
disclose the amount of Common Stock outstanding immediately after the Closing.
Upon delivery by the Company to the Subscribers after the Closing Date of any
notice or information, in writing, electronically or otherwise, and while a
Note, Conversion Shares or Warrants are held by Subscribers, unless the Company
has in good faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Company or
Subsidiaries, the Company shall within one business day after any such delivery
publicly disclose such material, nonpublic information on a Report on Form 8-K.
IN THE EVENT THAT THE COMPANY BELIEVES THAT A NOTICE OR COMMUNICATION TO
SUBSCRIBERS CONTAINS MATERIAL, NONPUBLIC INFORMATION RELATING TO THE COMPANY OR
SUBSIDIARIES, THE COMPANY SHALL SO INDICATE TO SUBSCRIBERS PRIOR TO DELIVERY OF
SUCH NOTICE OR INFORMATION. SUBSCRIBERS WILL BE GRANTED SUFFICIENT TIME TO
NOTIFY THE COMPANY THAT SUBSCRIBERS ELECTS NOT TO RECEIVE SUCH INFORMATION. IN
SUCH CASE, THE COMPANY WILL NOT DELIVER SUCH INFORMATION TO SUBSCRIBERS. IN THE
ABSENCE OF ANY SUCH INDICATION, SUBSCRIBERS SHALL BE ALLOWED TO PRESUME THAT ALL
MATTERS RELATING TO SUCH NOTICE AND INFORMATION DO NOT CONSTITUTE MATERIAL,
NONPUBLIC INFORMATION RELATING TO THE COMPANY OR SUBSIDIARIES.
(o) NON-PUBLIC INFORMATION. THE COMPANY COVENANTS AND
AGREES THAT EXCEPT FOR THE REPORTS, OTHER WRITTEN INFORMATION AND SCHEDULES AND
EXHIBITS TO THIS AGREEMENT AND THE TRANSACTION DOCUMENTS, WHICH INFORMATION THE
COMPANY UNDERTAKES TO PUBLICLY DISCLOSE ON THE FORM 8-K DESCRIBED IN SECTION
9(N) ABOVE, NEITHER IT NOR ANY OTHER PERSON ACTING ON ITS BEHALF WILL AT ANY
TIME PROVIDE SUBSCRIBERS OR ITS AGENTS OR COUNSEL WITH ANY INFORMATION THAT THE
COMPANY BELIEVES CONSTITUTES MATERIAL NON-PUBLIC INFORMATION, UNLESS PRIOR
THERETO SUBSCRIBERS SHALL HAVE AGREED IN WRITING TO ACCEPT SUCH INFORMATION. THE
COMPANY UNDERSTANDS AND CONFIRMS THAT SUBSCRIBERS SHALL BE RELYING ON THE
FOREGOING REPRESENTATIONS IN EFFECTING TRANSACTIONS IN SECURITIES OF THE
COMPANY.
(p) NEGATIVE COVENANTS. So long as a Note is
outstanding, without the consent of the Subscribers, the Company will not and
will not permit any of its Subsidiaries to directly or indirectly:
(i) create, incur, assume or suffer to exist
any pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, security title, mortgage, security deed or deed of trust,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Uniform
Commercial Code or comparable law of any jurisdiction) (each, a "LIEN") upon any
of its property, whether now owned or hereafter acquired except for: (A) the
Excepted Issuances (as defined in Section 12(a) hereof), and (B) (a) Liens
imposed by law for taxes that are not yet due or are being contested in good
faith and for which adequate reserves have been established in accordance with
generally accepted accounting principles; (b) carriers', warehousemen's,
mechanics', material men's, repairmen's and other like Liens imposed by law,
arising in the ordinary course of business and securing obligations that are not
overdue by more than 30 days or that are being contested in good faith and by
appropriate proceedings; (c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations; (d) deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business; (e) Liens created with respect to the
financing of the purchase of new property in the ordinary course of the
Company's business up to the amount of the purchase price of such property; and
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property (each of (a) through (f), a "PERMITTED LIEN");
15
(ii) amend its certificate of incorporation,
bylaws or its charter documents so as to materially and adversely affect any
rights of the Subscribers (an increase in the amount of authorized shares and an
increase in the number of directors will not be deemed adverse to the rights of
the Subscribers);
(iii) repay, repurchase or offer to repay,
repurchase or otherwise acquire or make any dividend or distribution in respect
of any of its Common Stock, preferred stock, or other equity securities other
than to the extent permitted or required under the Transaction Documents;
(iv) prepay or redeem any financing related
debt or past due obligations or securities outstanding as of the Closing Date,
or past due obligations (except with respect to vendor obligations, or any such
obligations which in management's good faith, reasonable judgment must be repaid
to avoid disruption of the Company's businesses).
(q) SENIORITY. Except for Permitted Liens, until the
Notes are fully satisfied or converted, the Company shall not grant nor allow
any security interest to be taken in any assets of the Company or any Subsidiary
or any Subsidiary's assets; nor issue any debt, equity or other instrument which
would give the holder thereof directly or indirectly, a right in any assets of
the Company or any Subsidiary or any right to payment equal to or superior to
any right of the Subscribers as holders of the Notes in or to such assets or
payment, nor issue or incur any debt not in the ordinary course of business.
(r) NOTICES. For so long as the Subscribers hold any
Securities, the Company will maintain a United States address and United States
fax number for notice purposes under the Transaction Documents.
10. COVENANTS OF THE COMPANY REGARDING INDEMNIFICATION.
(a) INDEMNIFICATION. The Company agrees to indemnify,
hold harmless, reimburse and defend the Subscribers, the Subscribers' officers,
directors, agents, counsel, Affiliates, members, managers, control persons, and
principal shareholders, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon the Subscribers or any such person which results, arises out of or
is based upon (i) any material misrepresentation by Company or breach of any
representation or warranty by Company in this Agreement or in any Exhibits or
Schedules attached hereto in any Transaction Document, or other agreement
delivered pursuant hereto or in connection herewith, now or after the date
hereof; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by the Company of any covenant or undertaking to be
performed by the Company hereunder, or any other agreement entered into by the
Company and Subscribers relating hereto.
(b) INDEMNIFICATION PROCEDURES. Promptly after
receipt by an indemnified party hereunder of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Section 10(b) and shall only relieve it from any liability which
it may have to such indemnified party under this Section 10(b), except and only
if and to the extent the indemnifying party is prejudiced by such omission. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10(b) for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnifying party shall have
reasonably concluded that there may be reasonable defenses available to
indemnified party which are different from or additional to those available to
the indemnifying party or if the interests of the indemnified party reasonably
may be deemed to conflict with the interests of the indemnifying party, the
indemnified parties, as a group, shall have the right to select one separate
counsel, reasonably satisfactory to the indemnified and indemnifying party, and
to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
16
11. ADDITIONAL POST-CLOSING OBLIGATIONS.
11.1. PIGGY-BACK REGISTRATIONS. If at any time until two years
after the Closing Date there is not an effective registration statement
registering all of the Warrant Shares and the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
equity securities, , but excluding Forms S-4 or S-8 and similar forms which do
not permit such registration, then the Company shall send to each holder of any
of the Securities written notice of such determination and, if within fifteen
calendar days after receipt of such notice, any such holder shall so request in
writing, the Company shall include in such registration statement all or any
part of the Conversion Shares such holder requests to be registered, subject to
customary underwriter cutbacks applicable to all holders of registration rights.
The obligations of the Company under this Section may be waived by any holder of
any of the Securities entitled to registration rights under this Section 11.1.
The holders whose Conversion Shares are included or required to be included in
such registration statement are granted the same rights, benefits, liquidated or
other damages and indemnification granted to other holders of securities
included in such registration statement. Notwithstanding anything to the
contrary herein, the registration rights granted hereunder to the holders of
Securities shall not be applicable for such times as such Conversion Shares may
be sold by the holder thereof without restriction pursuant to Section 144(b)(1)
of the 1933 Act. In no event shall the liability of any holder of Securities or
permitted successor in connection with any Conversion Shares included in any
such registration statement be greater in amount than the dollar amount of the
net proceeds actually received by such Subscriber upon the sale of the
Conversion Shares sold pursuant to such registration or such lesser amount
applicable to other holders of Securities included in such registration
statement. All expenses incurred by the Company in complying with Section 11,
including, without limitation, all registration and filing fees, printing
expenses (if required), fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the NASD, transfer taxes, and fees of transfer agents and
registrars, are called "REGISTRATION EXPENSES." All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities are called
"SELLING EXPENSES." The Company will pay all Registration Expenses in connection
with the registration statement under Section 11. Selling Expenses in connection
with each registration statement under Section 11 shall be borne by the holder
and will be apportioned among such holders in proportion to the number of Shares
included therein for a holder relative to all the Securities included therein
for all selling holders, or as all holders may agree
11.2. DELIVERY OF UNLEGENDED SHARES.
(a) Within three (3) business days (such third
business day being the "UNLEGENDED SHARES DELIVERY DATE") after the business day
on which the Company has received (i) a notice that Conversion Shares, or any
other Common Stock held by Subscriber has been sold pursuant to a registration
statement or Rule 144 under the 1933 Act, (ii) a representation that the
prospectus delivery requirements, or the requirements of Rule 144, as applicable
and if required, have been satisfied, (iii) the original share certificates
representing the shares of Common Stock that have been sold, and (iv) in the
case of sales under Rule 144, customary representation letters of the Subscriber
and, if required, Subscriber's broker regarding compliance with the requirements
of Rule 144, the Company at its expense, (y) shall deliver, and shall cause
legal counsel selected by the Company to deliver to its transfer agent (with
copies to Subscriber) an appropriate instruction and opinion of such counsel,
directing the delivery of shares of Common Stock without any legends including
the legend set forth in Section 4(h) above (the "UNLEGENDED SHARES"); and (z)
cause the transmission of the certificates representing the Unlegended Shares
together with a legended certificate representing the balance of the submitted
Common Stock certificate, if any, to the Subscriber at the address specified in
the notice of sale, via express courier, by electronic transfer or otherwise on
or before the Unlegended Shares Delivery Date.
17
(b) In lieu of delivering physical certificates
representing the Unlegended Shares, upon request of Subscriber, so long as the
certificates therefor do not bear a legend and the Subscriber is not obligated
to return such certificate for the placement of a legend thereon, the Company
shall cause its transfer agent to electronically transmit the Unlegended Shares
by crediting the account of Subscriber's prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission system, if such transfer
agent participates in such DWAC system. Such delivery must be made on or before
the Unlegended Shares Delivery Date.
(c) The Company understands that a delay in the
delivery of the Unlegended Shares pursuant to Section 11 hereof later than the
Unlegended Shares Delivery Date could result in economic loss to a Subscriber.
As compensation to a Subscriber for such loss, the Company agrees to pay late
payment fees (as liquidated damages and not as a penalty) to the Subscriber for
late delivery of Unlegended Shares in the amount of $100 per business day after
the Delivery Date for each $10,000 of purchase price of the Unlegended Shares
subject to the delivery default. If during any 360 day period, the Company fails
to deliver Unlegended Shares as required by this Section 11.2 for an aggregate
of thirty days, then each Subscriber or assignee holding Securities subject to
such default may, at its option, require the Company to redeem all or any
portion of the Shares subject to such default at a price per share equal to the
greater of (i) 120%, or (ii) a fraction in which the numerator is the highest
closing price of the Common Stock during the aforedescribed thirty day period
and the denominator of which is the lowest conversion price during such thirty
day period, multiplied by the price paid by Subscriber for such Common Stock
("UNLEGENDED REDEMPTION AMOUNT"). The Company shall pay any payments incurred
under this Section in immediately available funds upon demand.
(d) In the event a Subscriber shall request delivery
of Unlegended Shares as described in Section 11.2 and the Company is required to
deliver such Unlegended Shares pursuant to Section 11.2, the Company may not
refuse to deliver Unlegended Shares based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery
of such Unlegended Shares shall have been sought and obtained by the Company and
the Company has posted a surety bond for the benefit of such Subscriber in the
amount of 120% of the amount of the aggregate purchase price of the Common Stock
which are subject to the injunction or temporary restraining order, which bond
shall remain in effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such Subscriber to the
extent Subscriber obtains judgment in Subscriber's favor.
(e) In addition to any other rights available to
Subscriber, if the Company fails to deliver to a Subscriber Unlegended Shares as
required pursuant to this Agreement and after the Unlegended Shares Delivery
Date, the Subscriber or a broker on the Subscriber's behalf, purchases (in an
open market transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by such Subscriber of the shares of Common Stock which
the Subscriber was entitled to receive from the Company (a "BUY-IN"), then the
Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of common stock so purchased exceeds (B) the aggregate purchase price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together with interest thereon at a rate of 15% per annum
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the Buy-In.
18
11.3. 144 DEFAULT. In the event commencing six months after
the Closing Date and ending twenty-four months thereafter, the Subscriber is not
permitted to resell any of the Conversion Shares without any restrictive legend
or if such sales are permitted but subject to volume limitations or further
restrictions on resale as a result of the unavailability to Subscriber of Rule
144(b)(1)(i) under the 1933 Act or any successor rule (a "144 DEFAULT"), for any
reason except for Subscriber's status as an Affiliate or "control person" of the
Company, or as a result of a change in current applicable securities laws, then
the Company shall pay such Subscriber as liquidated damages and not as a penalty
an amount equal to two percent (2%) for each thirty days (or such lesser
pro-rata amount for any period less than thirty days) thereafter of the purchase
price of the Conversion Shares subject to such 144 Default during the pendency
of the 144 Default. Liquidated Damages shall not be payable pursuant to this
Section 11.3 in connection with Shares for such times as such Shares may be sold
by the holder thereof without volume or other restrictions pursuant to Section
144(b)(1)(i) of the 1933 Act or pursuant to an effective registration statement.
12. (a) RIGHT OF FIRST REFUSAL. For so long as any amount
remains outstanding on the Notes, the Subscribers shall be given not less than
fifteen (15) business days prior written notice of any proposed sale by the
Company of its common stock or other securities or equity linked debt
obligations, except in connection with the Excepted Issuances [as defined in
Section 12(b)]. If Subscribers elect to exercise their rights pursuant to this
Section 12(a), Subscribers shall have the right during the fifteen (15) business
days following receipt of the notice to purchase in the aggregate up to all of
such offered common stock, debt or other securities in accordance with the terms
and conditions set forth in the notice of sale relative to each other in
proportion to the amount principal of the Notes to be issued to them on the
Closing Date. In the event such terms and conditions are modified during the
notice period, Subscribers shall be given prompt notice of such modification and
shall have the right during the fifteen (15) business days following the notice
of modification to exercise such right.
(b) FAVORED NATIONS PROVISION. Other than in
connection with (i) full or partial consideration in connection with a strategic
merger, acquisition, consolidation or purchase of substantially all of the
securities or assets of a corporation or other entity which holders of such
securities or debt are not at any time granted registration rights, (ii) the
Company's issuance of securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not for the
purpose of raising capital and which holders of such securities or debt are not
at any time granted registration rights, (iii) the Company's issuance of Common
Stock or the issuances or grants of options to purchase Common Stock to
employees, directors, and consultants, pursuant to plans described on SCHEDULE
5(D) as such plans are constituted on the Closing Date, (iv) securities upon the
exercise or exchange of or conversion of any securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Agreement on the terms in effect on the Closing
Date including the permissible amendment thereof after the Closing Date, and
described on SCHEDULE 5(D), and (v) as a result of the exercise of Warrants or
conversion of Notes which are granted or issued pursuant to this Agreement
(collectively, the foregoing (i) through (v) are "EXCEPTED Issuances"), if at
any time the Notes or Warrants are outstanding, the Company shall agree to or
issue (the "LOWER PRICE ISSUANCE") any Common Stock or securities convertible
into or exercisable for shares of Common Stock (or modify any of the foregoing
which may be outstanding) to any person or entity at a price per share or
conversion or exercise price per share which shall be less than the Conversion
Price in effect at such time, or if less than the Warrant exercise price in
effect at such time, without the consent of the Subscribers, then the Conversion
Price and Warrant exercise price shall automatically be reduced to such other
lower price. The average Purchase Price of the Conversion Shares and average
exercise price in relation to the Warrant Shares shall be calculated separately
for the Conversion Shares and Warrant Shares. Common Stock issued or issuable by
the Company for no consideration or for consideration that cannot be determined
at the time of issue will be deemed issuable or to have been issued for $0.001
per share of Common Stock. The rights of Subscribers set forth in this Section
12 are in addition to any other rights the Subscribers have pursuant to this
Agreement, the Notes, any Transaction Document, and any other agreement referred
to or entered into in connection herewith or to which Subscribers and Company
are parties.
19
(c) MAXIMUM EXERCISE OF RIGHTS. In the event the
exercise of the rights described in Section 12(a) and Section 12(b) would or
could result in the issuance of an amount of Common Stock of the Company that
would exceed the maximum amount that may be issued to Subscribers calculated in
the manner described in Section 7.3 of this Agreement, then the issuance of such
additional shares of Common Stock of the Company to Subscribers will be deferred
in whole or in part until such time as Subscribers are able to beneficially own
such Common Stock without exceeding the applicable maximum amount set forth
calculated in the manner described in Section 7.3 of this Agreement and notifies
the Company accordingly.
13.MISCELLANEOUS.
(a) NOTICES. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i) if to the
Company, to: Aethlon Medical, Inc., 0000 Xxxxxx Xxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxxx, XX 00000, Attn: Xxxxx X. Xxxxx, CEO, facsimile: (000) 000-0000, with a
copy by telecopier only to: Law Office of Xxxxxxxx X. Post, 000 Xxxxx Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attn: Xxxxxxxx X. Post, Esq.,
facsimile: (000) 000-0000, and (ii) if to the Subscribers, to: the addresses and
fax numbers indicated on SCHEDULE I hereto, with an additional copy by fax only
to: Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, facsimile: (000) 000-0000.
(b) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and
other documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties. Neither the Company nor the
Subscribers has relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
the Company shall be assigned without prior notice to and the written consent of
the Subscribers.
(c) COUNTERPARTS/EXECUTION. This Agreement may be
executed in any number of counterparts and by the different signatories hereto
on separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile signature and delivered
by electronic transmission.
20
(d) LAW GOVERNING THIS AGREEMENT. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of laws. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state and county of New York. The parties to this
Agreement hereby irrevocably waive any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon FORUM NON CONVENIENS. THE PARTIES
EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE IN PERSONAM
JURISDICTION OF SUCH COURTS AND HEREBY IRREVOCABLY WAIVE TRIAL BY JURY. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to
process being served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law.
(e) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
The Company and Subscribers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(d) hereof, the Company hereby irrevocably waives,
and agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction in New York of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(f) DAMAGES. In the event the Subscriber is entitled
to receive any liquidated damages pursuant to the Transactions Documents, the
Subscriber may elect to receive the greater of actual damages or such liquidated
damages.
(g) MAXIMUM PAYMENTS. Nothing contained herein or in
any document referred to herein or delivered in connection herewith shall be
deemed to establish or require the payment of a rate of interest or other
charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest or dividends required to be paid or other charges hereunder
exceed the maximum permitted by such law, any payments in excess of such maximum
shall be credited against amounts owed by the Company to the Subscribers and
thus refunded to the Company.
(h) CALENDAR DAYS. All references to "days" in the
Transaction Documents shall mean calendar days unless otherwise stated. The
terms "business days" and "trading days" shall mean days that the New York Stock
Exchange is open for trading for three or more hours. Time periods shall be
determined as if the relevant action, calculation or time period were occurring
in New York City. Any deadline that falls on a non-business day in any of the
Transaction Documents shall be automatically extended to the next business day
and interest, if any, shall be calculated and payable through such extended
period.
21
(i) CAPTIONS: CERTAIN DEFINITIONS. The captions of
the various sections and paragraphs of this Agreement have been inserted only
for the purposes of convenience; such captions are not a part of this Agreement
and shall not be deemed in any manner to modify, explain, enlarge or restrict
any of the provisions of this Agreement. As used in this Agreement the term
"PERSON" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
(j) CONSENT. As used in this Agreement and the
Transaction Documents and any other agreement delivered in connection herewith,
"consent of the Subscribers" or similar language means the consent of holders of
not less than 70% of the outstanding principal amount of the Notes on the date
consent is requested (such amount being a "MAJORITY IN INTEREST"). A Majority in
Interest may consent to take or forebear from any action permitted under or in
connection with the Transaction Documents, modify any Transaction Documents or
waive any default or requirement applicable to the Company, Subsidiaries or
Subscribers under the Transaction Documents provided the effect of such action
does not waive any accrued interest or damages and further provided that the
relative rights of the Subscribers to each other remains unchanged.
(k) SEVERABILITY. In the event that any term or
provision of this Agreement shall be finally determined to be superseded,
invalid, illegal or otherwise unenforceable pursuant to applicable law by an
authority having jurisdiction and venue, that determination shall not impair or
otherwise affect the validity, legality or enforceability: (i) by or before that
authority of the remaining terms and provisions of this Agreement, which shall
be enforced as if the unenforceable term or provision were deleted, or (ii) by
or before any other authority of any of the terms and provisions of this
Agreement.
(l) SUCCESSOR LAWS. References in the Transaction
Documents to laws, rules, regulations and forms shall also include successors to
and functionally equivalent replacements of such laws, rules, regulations and
forms. A successor rule to Rule 144(b)(1)(i) shall include any rule that would
be available to a non-Affiliate of the Company for the sale of Common Stock not
subject to volume restrictions and after a six month holding period.
(m) ALLOCATION OF PURCHASE PRICE. The Purchase Price
will be allocated among the components of the Securities so that each component
of the Securities will be fully paid and non-assessable.
(n) MAXIMUM LIABILITY. In no event shall the
liability of the Subscribers or permitted successor hereunder or under any
Transaction Document or other agreement delivered in connection herewith be
greater in amount than the dollar amount of the net proceeds actually received
by such Subscriber or successor upon the sale of Registrable Securities (as
defined herein).
[SIGNATURE PAGE FOLLOWS]
22
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
AETHLON MEDICAL, INC.
a Nevada corporation
By: _______________________________
Name:
Title:
Dated: August ___, 2009
-------------------------------------- ---------------------- --------------------- ------------------------
SUBSCRIBER PURCHASE PRICE PRINCIPAL AMOUNT WARRANTS
-------------------------------------- ---------------------- --------------------- ------------------------
-----------------------------------------------
By:
-------------------------------------- ---------------------- --------------------- ------------------------
23
SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)
--------------------------------------------
Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.
AETHLON MEDICAL, INC.
a Nevada corporation
By: _______________________________
Name:
Title:
Dated: August ___, 2009
----------------------------------------------- --------------------- ----------------------- ------------------------
SUBSCRIBER PURCHASE PRICE NOTE PRINCIPAL WARRANTS
----------------------------------------------- --------------------- ----------------------- ------------------------
---------------------------------------------
By:
----------------------------------------------- --------------------- ----------------------- ------------------------
24
SCHEDULE I
----------
--------------------------------------------------- ---------------------- ------------------- ---------------------
SUBSCRIBER AND ADDRESS PURCHASE PRICE NOTE PRINCIPAL WARRANT SHARES
--------------------------------------------------- ---------------------- ------------------- ---------------------
--------------------------------------------------- ---------------------- ------------------- ---------------------
TOTALS $307,500.00 $338,250.00 676,500
--------------------------------------------------- ---------------------- ------------------- ---------------------
25
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Escrow Agreement
Exhibit D Form of Legal Opinion
Schedule I List of Subscribers
Schedule 5(a) Subsidiaries
Schedule 5(d) Capitalization and Additional Issuances
Schedule 5(q) Banking
Schedule 5(x) Transfer Agent
26
