EXHIBIT 10.1
EXECUTION COPY
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PRIVATE PLACEMENT AGREEMENT
PRIVATE PLACEMENT AGREEMENT (the "Agreement"), dated as of May 1, 2008,
by and between AETHLON MEDICAL, INC., a Nevada corporation (the "Company"), and
FUSION CAPITAL FUND II, LLC, an Illinois limited liability company (the
"Buyer"). Capitalized terms used herein and not otherwise defined herein are
defined in Section 7 hereof.
WHEREAS:
Subject to the terms and conditions set forth in this Agreement, the
Company wishes to sell to the Buyer, and the Buyer wishes to buy from the
Company 1,000,000 shares of the Company's common stock, par value $0.001 per
share (the "Common Stock") for an aggregate purchase price of Five Hundred
Thousand Dollars ($500,000.00). The 1,000,000 shares of Common Stock to be
purchased hereunder are referred to herein as the "Purchase Shares."
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE OF COMMON STOCK.
Subject to the terms and conditions set forth in this Agreement, the
Company hereby agrees to sell to the Buyer, and the Buyer hereby agrees to
purchase from the Company, 1,000,000 shares of Common Stock as follows:
(a) PURCHASE OF SHARE. Immediately upon the execution hereof, the Buyer
shall buy from the Company as of the date hereof 1,000,000 shares of Common
Stock for an aggregate purchase price of Five Hundred Thousand Dollars
($500,000.00) or $0.50 per share.
(b) PAYMENT FOR PURCHASE SHARES. The Buyer shall pay to the Company
$500,000.00 as the full and complete aggregate purchase price with respect to
the Purchase Shares via wire transfer of immediately available funds on the same
Business Day that the Buyer receives such Purchase Shares (with the legend set
forth in Section 5(a) hereof and no other legend), if they are received by the
Buyer before 2:00 p.m. eastern time or if received by the Buyer after 2:00 p.m.
eastern time, the next Business Day. All payments made under this Agreement
shall be made in lawful money of the United States of America or wire transfer
of immediately available funds to such account as the Company may designate by
written notice in accordance with the provisions of this Agreement. Whenever any
amount expressed to be due by the terms of this Agreement is due on any day that
is not a Business Day, the same shall instead be due on the next succeeding day
that is a Business Day.
(c) TAXES. The Company shall pay any and all transfer, stamp or similar
taxes that may be payable with respect to the issuance and delivery of any
shares of Common Stock to the Buyer made under this Agreement.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants to the Company that as of the date
hereof:
(a) INVESTMENT PURPOSE. The Buyer is entering into this Agreement and
acquiring the Purchase Shares for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof; provided however, by making the representations herein,
the Buyer does not agree to hold any of the Purchase Shares for any minimum or
other specific term.
(b) ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. The Buyer understands that the Purchase
Shares are being offered and sold to it in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Purchase Shares.
(d) INFORMATION. The Buyer has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Purchase Shares that have been reasonably
requested by the Buyer, including, without limitation, the SEC Documents (as
defined in Section 3(f) hereof). The Buyer understands that its investment in
the Purchase Shares involves a high degree of risk. The Buyer (i) is able to
bear the economic risk of an investment in the Purchase Shares including a total
loss, (ii) has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the proposed investment
in the Purchase Shares and (iii) has had an opportunity to ask questions of and
receive answers from the officers of the Company concerning the financial
condition and business of the Company and others matters related to an
investment in the Purchase Shares. Neither such inquiries nor any other due
diligence investigations conducted by the Buyer or its representatives shall
modify, amend or affect the Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Purchase Shares.
(e) NO GOVERNMENTAL REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Purchase Shares or
the fairness or suitability of the investment in the Purchase Shares nor have
such authorities passed upon or endorsed the merits of the offering of the
Purchase Shares.
(f) TRANSFER OR SALE. The Buyer understands that: (i) the Purchase
Shares have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Purchase Shares to be sold, assigned or transferred
without such registration; (ii) any sale of the Purchase Shares made in reliance
on Rule 144 may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of the Purchase Shares under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Purchase Shares under the 1933
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.
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(g) VALIDITY; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(h) RESIDENCY. The Buyer is a resident of the State of Illinois.
(i) NO PRIOR SHORT SELLING. The Buyer represents and warrants to the
Company that at no time prior to the date of this Agreement has any of the
Buyer, its agents, representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is
defined in Section 242.200 of Regulation SHO of the Purchase Shares Exchange Act
of 1934, as amended (the "1934 Act")) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that as of the date
hereof and as of the Commencement Date:
(a) ORGANIZATION AND QUALIFICATION. The Company and its "Subsidiaries"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns 50% or more of the voting stock or capital stock or
other similar equity interests) are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authority to own their
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing could not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, "Material Adverse Effect" means any material
adverse effect on any of: (i) the business, properties, assets, operations,
results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the
Company to perform its obligations under this Agreement.
(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and to issue the Purchase Shares in accordance
with the terms hereof, (ii) the execution and delivery of this Agreement by the
Company and the consummation by it of the transaction contemplated hereby, the
issuance and sale of the Purchase Shares issuable under this Agreement, have
been duly authorized by the Company's Board of Directors and no further consent
or authorization is required by the Company, its Board of Directors or its
shareholders, (iii) this Agreement has been duly executed and delivered by the
Company and (iv) this Agreement constitutes the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies. The Board of Directors of the Company has approved the
resolutions (the "Signing Resolutions") substantially in the form as set forth
as EXHIBIT A attached hereto to authorize this Agreement and the transaction
contemplated hereby. The Signing Resolutions are valid, in full force and effect
and have not been modified or supplemented in any respect. The Company has
delivered to the Buyer a true and correct copy of a unanimous written consent
adopting the Signing Resolutions executed by all of the members of the Board of
Directors of the Company. No other approvals or consents of the Company's Board
of Directors and/or shareholders is necessary under applicable laws and the
Company's Certificate of Incorporation and/or Bylaws to authorize the execution
and delivery of this Agreement or the transaction contemplated hereby, the
issuance and sale of the Purchase Shares.
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(c) CAPITALIZATION. As of the date hereof, the authorized capital stock
of the Company consists of (i) 100,000,000 shares of Common Stock, of which as
of the date hereof, 39,240,256 shares are issued and outstanding, none are held
as treasury shares, 500,000 shares are reserved for issuance pursuant to the
Company's stock option plans of which 467,500 shares remain available for future
grants and 29,697,913 shares are issuable and reserved for issuance pursuant to
securities (other than stock options issued pursuant to the Company's stock
option plans) exercisable or exchangeable for, or convertible into, shares of
Common Stock and (ii) no shares of Preferred Stock are issued and outstanding.
(d) ISSUANCE OF PURCHASE SHARES. The sale of the Purchase Shares
hereunder has been duly authorized and, upon issuance and payment therefor in
accordance with the terms hereof, the Purchase Shares shall be (i) validly
issued, fully paid and non-assessable and (ii) free from all taxes, liens and
charges with respect to the issue thereof. Upon issuance and payment therefor in
accordance with the terms and conditions of this Agreement, the Purchase Shares
shall be validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transaction
contemplated hereby, the issuance and sale of the Purchase Shares, will not (i)
result in a violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market applicable to the Company or any of its Subsidiaries) or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations under clause (ii), which
could not reasonably be expected to result in a Material Adverse Effect.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 2007, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). As of their respective dates (except as
they have been correctly amended), the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC (except as they may have
been properly amended), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates (except as they
have been properly amended), the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
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periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) ABSENCE OF CERTAIN CHANGES. Since January 1, 2008, there has been
no material adverse change in the business, properties, operations, financial
condition or results of operations of the Company or its Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy or insolvency proceedings.
(h) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
which could reasonably be expected to have a Material Adverse Effect.
(i) ACKNOWLEDGMENT REGARDING BUYER'S STATUS. The Company acknowledges
and agrees that the Buyer is acting solely in the capacity of arm's length
purchaser with respect to the transaction contemplated hereby. The Company
further acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
transaction contemplated hereby and any advice given by the Buyer or any of its
representatives or agents in connection with this Agreement and the transaction
contemplated hereby is merely incidental to the Buyer's purchase of the Purchase
Shares. The Company further represents to the Buyer that the Company's decision
to enter into this Agreement has been based solely on the independent evaluation
by the Company and its representatives and advisors.
(j) NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor 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
Purchase Shares.
(k) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's material trademarks, trade
names, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or, by the terms and conditions thereof, could expire or terminate within two
years from the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of any
material trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx registrations,
trade secret or other similar rights of others, or of any such development of
similar or identical trade secrets or technical information by others and, there
is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service xxxx registrations, trade secret
or other infringement, which could reasonably be expected to have a Material
Adverse Effect.
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(l) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(m) TITLE. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and facilities held under
lease by the Company and any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
(n) INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
(o) REGULATORY PERMITS. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(p) TAX STATUS. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(q) TRANSACTIONS WITH AFFILIATES. None of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has an interest or is an officer, director, trustee or
partner.
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(r) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the Buyer
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Purchase Shares and the
Buyer's ownership of the Purchase Shares.
(s) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
4. COVENANTS.
(a) FILING OF FORM 8-K AND REGISTRATION STATEMENT. The Company agrees
that it shall, within the time required under the 1934 Act file a Report on Form
8-K disclosing this Agreement and the transaction contemplated hereby.
(b) BLUE SKY. The Company shall take such action, if any, as is
reasonably necessary in order to obtain an exemption for or to qualify (i) the
sale of the Purchase Shares to the Buyer under this Agreement and (ii) any
subsequent sale of the Commitment Shares and any Purchase Shares by the Buyer,
in each case, under applicable securities or "Blue Sky" laws of the states of
the United States in such states as is reasonably requested by the Buyer from
time to time, and shall provide evidence of any such action so taken to the
Buyer.
5. ISSUANCE WITH LEGEND; REMOVAL OF LEGEND.
(a) ISSUANCE OF PURCHASE SHARES WITH LEGEND. Immediately upon the
execution of this Agreement, the Company shall issue to the Buyer the Purchase
Shares by delivery of the letter to its transfer agent in the form of EXHIBIT B
attached hereto. The Purchase Shares shall be issued in certificated form and
(subject to Section 5(b) hereof) shall bear the following restrictive legend and
no other restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER'S COUNSEL, IN
A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS.
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Subject to applicable securities law restrictions, the Company hereby represents
and warrants to the Buyer that the Purchase Shares shall be unconditionally
freely transferable on the books and records of the Company in all respects and
at all times.
(b) REMOVAL OF LEGEND. On or at any time after November 1, 2008 (six
months from the date hereof), the Buyer may request that the Company cause its
transfer agent to remove any restrictive legend set forth on the Purchase Shares
and otherwise cause the Purchase Shares to become free trading shares. Upon
receiving such a request, the Company shall promptly cause its transfer agent to
remove any restrictive legend on the Purchase Shares. If after ten (10) Business
Days from the Buyer's written request, for any reason or for no reason other
than the Permitted Reason (as define below), the Company fails to cause its
transfer agent to remove any restrictive legend from the Purchase Shares and
otherwise make the Purchase Shares freely tradable by the Buyer, the Company
shall pay to the Buyer $1,000 per day for each calendar day after the tenth
(10th) Business Day following the Buyer's written request for removal of the
restrictive legend as partial compensation to the Buyer for its loss of
liquidity in respect of the Purchase Shares. In addition, the Company shall be
fully liable to the Buyer for any and all additional losses or damages
(including lost profits) that the Buyer may incur as a result of being unable to
sell the Purchase Shares. "Permitted Reason" shall mean a legal opinion from
Xxxxxxxxxx & Xxxxx, LLP addressed to the Buyer and delivered to the Buyer no
later than the tenth (10th) Business Day following the Buyer's written request
for removal of the restrictive legend, opining that removal of the restrictive
legend would not be permitted at that time under Rule 144 of the Securities Act.
Such legal opinion shall specify in meaningful detail all facts and legal
analysis which form the basis of such legal opinion.
6. INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Purchase Shares hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Buyer and all of its affiliates,
shareholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents or other representatives (including,
without limitation, those retained in connection with the transaction
contemplated by this Agreement) (collectively, the "Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement
or any other certificate, instrument or document contemplated hereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other certificate,
instrument or document contemplated hereby, other than with respect to
Indemnified Liabilities which directly and primarily result from the gross
negligence or willful misconduct of the Indemnitee. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
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7. CERTAIN DEFINED TERMS.
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.
(c) "Business Day" means any day on which the Principal Market is open
for trading including any day on which the Principal Market is open for trading
for a period of time less than the customary time.
(d) "Person" means an individual or entity including any limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(e) "Principal Market" means the Nasdaq OTC Bulletin Board.
(f) "SEC" means the United States Securities and Exchange Commission.
(g) "Transfer Agent" means the transfer agent of the Company as set
forth in Section 8(f) hereof or such other person who is then serving as the
transfer agent for the Company in respect of the Common Stock.
8. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws of the
State of Nevada shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
9
(b) COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT. This Agreement supersedes all other prior oral or
written agreements between the Buyer, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor the
Buyer makes any representation, warranty, covenant or undertaking with respect
to such matters. The Company acknowledges and agrees that is has not relied on,
in any manner whatsoever, any representations or statements, written or oral,
other than as expressly set forth in this Agreement.
(f) NOTICES. Any notices, consents or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt when delivered
personally; (ii) upon receipt when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Aethlon Medical, Inc.
0000 Xxxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chief Executive Officer
With a copy to:
Xxxxxxxxxx & Xxxxx, LLP
00000 Xxxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxxx Xxxx, Esq.
If to the Buyer:
Fusion Capital Fund II, LLC
000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
10
If to the Transfer Agent:
Computershare Trust Company
000 Xxxxxxx Xxxxxx, #000
Xxxxxx, XX 00000
Telephone: (303) 262-0600 ext. 4761
Facsimile: (000) 000-0000
Attention: Xxx Xxxxxx
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Buye. The Buyer may not
assign its rights or obligations under this Agreement.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) NO FINANCIAL ADVISOR, PLACEMENT AGENT, BROKER OR FINDER. The
Company represents and warrants to the Buyer that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Buyer represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. The Company
shall be responsible for the payment of any fees or commissions, if any, of any
financial advisor, placement agent, broker or finder relating to or arising out
of the transactions contemplated hereby. The Company shall pay, and hold the
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in connection
with any such claim.
(m) NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
11
(n) REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
Buyer's remedies provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Buyer contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Buyer's right to pursue actual damages for any failure by the
Company to comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
(o) ENFORCEMENT COSTS. If: (i) this Agreement is placed by the Buyer in
the hands of an attorney for enforcement or is enforced by the Buyer through any
legal proceeding; or (ii) an attorney is retained to represent the Buyer in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Buyer in any other proceedings whatsoever
in connection with this Agreement, then the Company shall pay to the Buyer, as
incurred by the Buyer, all reasonable costs and expenses including attorneys'
fees incurred in connection therewith, in addition to all other amounts due
hereunder.
(p) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
* * * * *
12
IN WITNESS WHEREOF, the Buyer and the Company have caused this Private
Placement Agreement to be duly executed as of the date first written above.
THE COMPANY:
------------
AETHLON MEDICAL, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
BUYER:
------
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS, LLC
BY: SGM HOLDINGS CORP.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
13
EXHIBIT A
---------
FORM OF COMPANY RESOLUTIONS
FOR SIGNING PRIVATE PLACEMENT AGREEMENT
UNANIMOUS WRITTEN CONSENT OF
AETHLON MEDICAL, INC.
The undersigned, being all of the members of the Board of Directors of
Aethlon Medical, Inc., a Nevada corporation (the "Corporation"), acting pursuant
to the authority Granted by Section 78.315 of the Nevada General Corporation
Law, do hereby adopt the following resolutions by written consent as of April
__, 2008:
WHEREAS, there has been presented to the Board of Directors of the
Corporation a draft of the Common Stock Purchase Agreement (the "Private
Placement Agreement") by and between the Corporation and Fusion Capital Fund II,
LLC ("Fusion"), providing for the purchase by Fusion of Five Hundred Thousand
Dollars ($500,000.00) of the Corporation's common stock, par value $0.001 (the
"Common Stock"); and
WHEREAS, after careful consideration of the Private Placement
Agreement, the documents incident thereto and other factors deemed relevant by
the Board of Directors, the Board of Directors has determined that it is
advisable and in the best interests of the Corporation to engage in the
transaction contemplated by the Purchase Agreement, the issuance and sale of
1,000,000 shares of Common Stock to Fusion (the "Purchase Shares") for an
aggregate purchase price of $500,000.00.
APPROVAL OF PRIVATE PLACEMENT AGREEMENT
---------------------------------------
NOW, THEREFORE, BE IT RESOLVED, that the transaction described in the
Private Placement Agreement is hereby approved and Xxxxx X. Xxxxx and
___________ (the "Authorized Officers") are severally authorized to execute and
deliver the Private Placement Agreement, and any other agreements or documents
contemplated thereby, with such amendments, changes, additions and deletions as
the Authorized Officers may deem to be appropriate and approve on behalf of, the
Corporation, such approval to be conclusively evidenced by the signature of an
Authorized Officer thereon; and
EXECUTION OF PRIVATE PLACEMENT AGREEMENT
----------------------------------------
FURTHER RESOLVED, that the Corporation be and it hereby is authorized
to execute the Private Placement Agreement providing for the issuance and sale
of common stock of the Corporation for an aggregate purchase price of
$500,000.00; and
ISSUANCE OF COMMON STOCK
------------------------
FURTHER RESOLVED, that the Corporation is hereby authorized to issue
1,000,000 shares of Common Stock to Fusion Capital Fund II, LLC as the Purchase
Shares and that upon issuance of the Purchase Shares pursuant to the Private
Placement Agreement, the Purchase Shares shall be duly authorized, validly
issued, fully paid and nonassessable with no personal liability attaching to the
ownership thereof; and
APPROVAL OF ACTIONS
-------------------
FURTHER RESOLVED, that, without limiting the foregoing, the Authorized
Officers are, and each of them hereby is, authorized and directed to proceed on
behalf of the Corporation and to take all such steps as deemed necessary or
appropriate, with the advice and assistance of counsel, to cause the Corporation
to consummate the agreement referred to herein and to perform its obligations
under such agreement; and
14
FURTHER RESOLVED, that the Authorized Officers be, and each of them
hereby is, authorized, empowered and directed on behalf of and in the name of
the Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and to incur and pay all such
fees and expenses as in their judgment shall be necessary, proper or desirable
to carry into effect the purpose and intent of any and all of the foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the Corporation in connection with the transactions contemplated by the
agreements described herein are hereby approved, ratified and confirmed in all
respects.
15
IN WITNESS WHEREOF, the Board of Directors has executed and delivered
this Consent effective as of April __, 2008. This Written Consent may be
executed in counterparts and with facsimile signatures with the effect as if all
parties hereto had executed the same document. All counterparts shall be
construed together and shall constitute a single Written Consent.
Dated as of April __, 2008
DIRECTORS:
__________________________
Xxxxx X. Xxxxx
________________________
Xxxxxxxx X. Xxxxx, Xx.
___________________________
Xxxxxx X. Xxxxxxxxxx
___________________________
Xxxxxxx X. Xxxxxx
16
EXHIBIT B
---------
FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE PURCHASE
SHARES AT SIGNING OF THE PRIVATE PLACEMENT AGREEMENT
[COMPANY LETTERHEAD]
[DATE]
[TRANSFER AGENT]
__________________
__________________
__________________
Re: Issuance of 1,000,000 Shares to Fusion Capital Fund II, LLC
Dear ________,
On behalf of AETHLON MEDICAL, INC., a Nevada corporation (the "Company"), you
are hereby instructed to issue AS SOON AS POSSIBLE 1,000,000 shares of our
common stock in the name of FUSION CAPITAL FUND II, LLC. The share certificate
should be dated [DATE OF THE COMMON STOCK PURCHASE AGREEMENT]. I have included a
true and correct copy of a unanimous written consent executed by all of the
members of the Board of Directors of the Company adopting resolutions approving
the issuance of these shares. The shares should be issued subject to the
following restrictive legend and NO OTHER LEGEND WHATSOEVER:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (2) AN OPINION OF HOLDER'S COUNSEL, IN A CUSTOMARY
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
17
The share certificate should be sent AS SOON AS POSSIBLE VIA OVERNIGHT MAIL to
the following address:
Fusion Capital Fund II, LLC
000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Thank you very much for your help. Please call me at ______________ if you have
any questions or need anything further.
AETHLON MEDICAL, INC., a Nevada corporation
BY:_____________________________
[name]
[title]
18
