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EXHIBIT 10.39
THIS NOTE AND THE UNITS ISSUABLE UPON CONVERSION OF THE NOTE HAVE
NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE
SECURITIES LAWS. NEITHER THE NOTE NOR SUCH UNITS MAY BE OFFERED FOR
SALE, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE SECURITIES
LAWS, OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION
FROM SUCH
REGISTRATION IS AVAILABLE.
AETHLON MEDICAL, INC.
AMENDED AND RESTATED
10% SERIES A CONVERTIBLE NOTE
No. ____
$____________
FOR
VALUE RECEIVED, Aethlon Medical, Inc., a Nevada corporation
(the
"Company"), promises to pay to
________________________________________, or
registered assigns (the "Holder"), the sum ________________________
in lawful
money of the United States of America on or before the Maturity
Date as defined
herein, with all Interest thereon as defined and specified herein.
This Note
includes various advances (the "Advances") that the Holder has made
to the
Company since July 2005. This Note is issued in exchange for those
certain
promissory notes previously issued by the Company to the Holder
prior to the
Issue Date (the "Prior Notes"), and all amendments to the Prior
Notes, including
that certain allonge entered into between the Company and the
Holder on March 5,
2007 (the "Allonge").
1.
INTEREST AND LIQUIDATED DAMAGES.
1.1 This
Note shall bear interest ("Interest") equal to ten
percent (10%) per annum on the unpaid principal balance, computed
on a three
hundred sixty (360)-day year, during the term of the Note. Interest
accrues on
each Advance commencing on the date of the Advance, as set forth on
Exhibit A to
this Note. The Company shall pay all accrued Interest on a
quarterly basis on
the fifteenth day of January, April, July and October of each year
until the
Maturity Date, when all accrued but unpaid Interest will be due and
payable. In
no event shall the rate of Interest payable on this Note exceed the
maximum rate
of Interest permitted to be charged under applicable law.
1.2 On
January 3, 2008, the Company will pay accrued Interest
and Default Interest through December 31, 2007. The Company will
pay the
Interest in units ("Units") at the rate of $0.20 per Unit (the
"Interest Payment
Rate"). Each Unit shall be composed of one share of the Company's
Common Stock
and one Class A Common Stock Purchase Warrant (the "Class A
Warrant"). The
Company shall pay the accrued Interest and Default Interest by
issuing
________________ Units and shall pay all accrued Interest
thereafter in Units at
the Interest Payment Rate. Each Class A Warrant will be exercisable
to purchase
one share of Common Stock at a price of $0.20 per share (the
"Exercise Price").
If the Holder exercises Class A Warrants on or before February 15,
2010, the
Company will issue the Holder one Class B Common Stock Purchase
Warrant (the
"Class B Warrant"), for every two Class A Warrants exercised. No
half Class B
Warrants will be issued. Each Class B Warrant will be exercisable
to purchase
one share of Common Stock at an exercise price of $0.60 per share.
The Class A
Warrant and Class B Warrant are set forth as Exhibit C and Exhibit
D,
respectively.
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1.3 All
Interest accrued under this Note after December 31,
2007 will, at the option of the Company, be payable in cash or in
Units, valued
at the Interest Payment Rate, as such term is defined in this Note.
No
fractional shares will be issued. In lieu thereof, the Company will
pay cash for
fractional share amounts equal to the fair market value of the
Common Stock as
quoted as the closing bid price of the Common Stock on the date of
conversion.
1.4 On
January 3, 2008, the Company will pay the liquidated
damages ("Liquidated Damages") due under the Registration Rights
Agreement
through November 29, 2007. The Company will pay the Liquidated
Damages in units
("Damages Units") at the rate of $0.40 per Damages Unit (the
"Damages Interest
Payment Rate"). Each Damages Unit shall be composed of one share of
the
Company's Common Stock and one Class A-1 Common Stock Purchase
Warrant (the
"Class A-1 Warrant"). The Company shall pay the Liquidated Damages
and all
interest accrued on the Liquidated Damages by issuing ____________
Units. Each
Class A-1 Warrant will be exercisable to purchase one share of
Common Stock at a
price of $0.40 per share (the "Damages Exercise Price"). If the
Holder exercises
Class A-1 Warrants on or before February 15, 2010, the Company will
issue the
Holder one Class B-1 Common Stock Purchase Warrant (the "Class B-1
Warrant"),
for every two Class A-1 Warrants exercised. No half Class B-1
Warrants will be
issued. Each Class B-1 Warrant will be exercisable to purchase one
share of
Common Stock at an exercise price of $0.40 per share. The forms of
Class A-1
Warrant and Class B-1 Warrant are set forth as Exhibit E and
Exhibit F,
respectively. The Class A-1 Warrants together with the Class A
Principal
Warrants, Class A Warrants, the Class B Warrants and the Class B-1
Warrants are
referred to collectively as the "Warrants."
1.5
Concurrent herewith, the Company will issue to the Holder
one Class A Warrant (the "Class A Principal Warrant"). The Class A
Principal
Warrant will be exercisable to purchase a total of ________________
shares of
Common Stock on the same terms and conditions as set forth in 1.2
above
regarding the Class A Warrant. The Class A Principal Warrant is set
forth as
Exhibit G.
1.6 SERIES
OF NOTES. This Note has been issued in exchange for
certain Prior Notes issued to the Holder as follows:
______________________.
This Note is one of a Series of Notes issued by the Company as of
the date
hereof in exchange for the surrender of prior notes outstanding by
Holder.
2.
PAYMENTS. All payments under
this Note shall first be credited
against costs and expenses provided for in this Note, second to the
payment of
any penalties, third to the payment of accrued and unpaid Interest,
if any, and
the remainder shall be credited against principal. All cash
payments due
hereunder shall be payable in legal tender of the United States of
America, and
in same day funds delivered to Holder by cashier's check, certified
check, bank
wire transfer or any other means of guaranteed funds to the mailing
address
provided below, or at such other place as the Holder shall
designate in writing
for such purpose from time to time. If a payment under this Note
otherwise would
become due and payable on a Saturday, Sunday or legal holiday (any
other day
being a "Business Day"), the due date of the payment shall be
extended to the
next succeeding Business Day, and Interest, if any, shall be
payable thereon
during such extension.
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3.
PRE-PAYMENTS AND MATURITY DATE. This Note shall be due and
payable
in full, including all accrued Interest thereon, on February 15,
2009 (the
"Maturity Date"). At any time on or prior to the Maturity Date, the
Company
shall have the right to prepay this Note, in whole or in part, on
ten (10) days'
advance notice to the Holder and subject to the right of the Holder
to convert
in advance of such prepayment date and provided that on such
prepayment date,
the Company will pay in respect of the redeemed Note cash equal to
the face
amount plus accrued Interest on the Note (or portion thereof)
redeemed. At any
time after the Maturity Date, the Company shall have the right to
repay this
Note, in whole or in part, on ten (10) days' advance notice to the
Holder and
subject to the right of the Holder to convert in advance of such
repayment date.
The Company may prepay this Note at any time after issuance without
penalty.
4.
EQUAL RANK. This Note represents one of a series of One Million
Dollars ($1,000,000) principal amount of 10% Series A Convertible
Notes (the
"Notes") issued or to be issued by the Company. All Notes rank
equally and
ratably without priority over one another.
5.
CONVERSION OF NOTE AND ISSUANCE OF WARRANTS.
5.1 The
principal amount of this Note is convertible, at the
option of the Holder, into shares of the Company's Common Stock
(the "Common
Stock") at any time after the Issue Date prior to the close of
business on the
Business Day prior to the Maturity Date at the rate of $0.20 per
share (the
"Conversion Price"), subject to adjustment as hereinafter provided.
No
fractional shares will be issued. In lieu thereof, the Company will
pay cash for
fractional share amounts equal to the Fair Market Value of the
Common Stock on
the date of conversion.
5.2
INTENTIONALLY OMITTED.
5.3
LIMITATION ON CONVERSION RIGHTS. Notwithstanding any other
provision of Paragraph 5 to the contrary, the Holder shall not be
entitled to
convert this Note, in excess of that number of shares of Common
Stock which,
upon giving effect to such conversion, would cause the aggregate
number of
shares of Common Stock beneficially owned by the Holder and its
Affiliates to
exceed 9.9% of the outstanding shares of the Common Stock following
such
conversion. For purposes of the foregoing provision, the aggregate
number of
shares of Common Stock beneficially owned by the Holder and its
Affiliates shall
include the number of shares of Common Stock beneficially owned and
those shares
issuable upon conversion of this Note and all Related Notes with
respect to
which the determination of such proviso is being made, but shall
exclude the
number of shares of Common Stock that would be issuable upon (i)
conversion of
the remaining principal amount of this Note and the Related Notes
beneficially
owned by the Holder and its Affiliates and (ii) exercise or
conversion of the
unexercised or unconverted portion of any other securities of the
Company into
Common Stock beneficially owned by the Holder and its Affiliates
that are
subject to a limitation on conversion or exercise analogous to the
limitation
contained in this Note. For purposes of this Paragraph, in
determining the
number of outstanding shares of Common Stock the Holder may rely on
the number
of outstanding shares of Common Stock as reflected in (a) the
Company's most
recent Form 10-Q or Form 10-K, as the case may be, or (b) more
recent public
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announcement by the Company or (c) any other written communication
by the
Company or its Transfer Agent setting forth the number of shares of
Common Stock
outstanding. Upon the reasonable written or oral request of the
Holder, the
Company shall promptly confirm orally and in writing to the Holder
the number of
shares of Common Stock then outstanding. In any case, the number of
outstanding
shares of Common Stock shall be determined after giving effect to
any
conversions, exercises or purchases by the Holder since the date as
of which
such number of outstanding shares of Common Stock was reported.
Except as
otherwise set forth herein, beneficial ownership shall be
determined in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as
amended. If the foregoing 9.9% limitation is ever reached and the
Holder desires
to convert this Note or part thereof into equity, the Company will
acknowledge
the conversion in writing, but not issue the Holder any additional
shares of
Common Stock at that point. Under such circumstances the Holder
will have the
right to receive additional shares of Common Stock as a result of
the conversion
only at such point and to the extent that its beneficial ownership
subsequently
becomes less than 9.9% and such issuance will not cause the
Holder's beneficial
ownership to exceed 9.9%. Upon written notice to this effect given
by the
Holder, the Company will issue such additional shares in accordance
with
Paragraph 5.8, "Issuance of Certificate."
5.4
ADJUSTMENT BASED UPON STOCK DIVIDENDS, COMBINATION OF
SHARES OR RECAPITALIZATION. The Conversion Price shall be adjusted
in the event
that the Company shall at any time (i) pay a stock dividend on the
Common Stock;
(ii) subdivide its outstanding Common Stock into a greater number
of shares;
(iii) combine its outstanding Common Stock into a smaller number of
shares; (iv)
issue by reclassification of its Common Stock any other special
capital stock of
the Company; or (v) distribute to all holders of Common Stock
evidences of
indebtedness or assets (excluding cash dividends) or rights or
warrants to
subscribe for Common Stock (other than those mentioned above). No
adjustment of
the Conversion Price will be required until cumulative adjustments
amount to One
Dollar ($1.00) per Note or more. Upon the occurrence of an event
requiring
adjustment of the Conversion Price, and thereafter, the Holder,
upon surrender
of this Note for conversion, shall be entitled to receive the
number of shares
of Common Stock or other capital stock of the Company that the
Holder would have
owned or have been entitled to receive after the happening of any
of the events
described above had this Note been converted immediately prior to
the happening
of such event.
5.5
ADJUSTMENT BASED UPON MERGER OR CONSOLIDATION. In case of
any consolidation or merger to which the Company is a party (other
than a merger
in which the Company is the surviving entity and which does not
result in any
reclassification of or change in the outstanding Common Stock of
the Company),
or in case of any sale or conveyance to another person, firm, or
corporation of
the property of the Company as an entirety or substantially as an
entirety, the
Holder shall have the right to convert this Note into the kind and
amount of
securities and property (including cash) receivable upon such
consolidation,
merger, sale or conveyance by the Holder of the number of Units
into which such
Note might have been converted immediately prior thereto.
5.6
Exercise of Conversion Privilege.
5.6.1 The Conversion
Privilege provided for in this Note
shall be exercisable by the Holder by written notice to the Company
or its
successor and the surrender of this Note in exchange for the number
of shares
(or other securities and property, including cash, in the event of
an adjustment
of the Conversion Price) into which this Note is convertible based
upon the
Conversion Price.
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5.6.2 The Holder's
conversion right set forth in this
Paragraph 5 may be exercised at any time and from time to time but
prior to
payment in full of the principal amount and the accrued interest on
this Note.
Conversion rights will expire at the close of business on the
Business Day prior
to the Maturity Date or redemption date of this Note.
5.6.3 The Holder may
exercise the right to convert all or
any portion of the principal amount and accrued Interest on this
Note by
delivery of (i) this Note and (ii) a completed Conversion Notice in
the form
attached as Exhibit B on a Business Day to the Company's principal
executive
offices. Such conversion shall be deemed to have been made
immediately prior to
the close of business on the Business Day of such delivery a
conversion notice
(the "Conversion Date"), and the Holder shall be treated for all
purposes as the
record holder of the Units into which this Note is converted as of
such date.
5.6.4 Upon conversion
of the entire principal amount and
accrued Interest of this Note and the delivery of Units upon
conversion of this
Note, except as otherwise provided in Paragraph 22,
"Representations and
Warranties to Survive Closing," the Company shall be forever
released from all
of its obligations and liabilities under this Note.
5.7
CORPORATE STATUS OF COMMON STOCK TO BE ISSUED. All Units
(or other securities in the event of an adjustment of the
Conversion Price)
which may be issued upon the conversion of this Note shall, upon
issuance, be
fully paid and nonassessable.
5.8
ISSUANCE OF CERTIFICATE. Upon the conversion of this Note,
the Company shall, within five (5) Business Days of such
conversion, issue to
the Holder a certificate or certificates representing the number of
Units (or
other securities in the event of an adjustment of the Conversion
Price) to which
the conversion relates.
6.
STATUS OF HOLDER OF NOTE. This Note shall not entitle the
Holder
to any voting rights or other rights as a shareholder of the
Company or to any
rights whatsoever except the rights herein expressed, and no
dividends shall be
payable or accrue in respect of this Note or the securities
issuable upon the
conversion hereof unless and until this Note shall be converted.
Upon the
conversion of this Note, the Holder shall, to the extent permitted
by law, be
deemed to be the holder of record of the shares of Common Stock and
Warrants
issuable upon such conversion, notwithstanding that the stock
transfer books of
the Company shall then be closed or that the certificates
representing such
shares of Common Stock and Warrants shall not then be actually
delivered.
7.
RESERVE OF SHARES OF COMMON STOCK. The Company shall reserve
out
of its authorized shares of Common Stock, and other securities in
the event of
an adjustment of the Conversion Price, a number of shares
sufficient to enable
it to comply with its obligation to issue shares of Common Stock,
and other
securities in the event of an adjustment of the Conversion Price,
upon the
conversion of this Note.
8.
TRANSFER RESTRICTIONS; EXEMPTION FROM REGISTRATION.
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8.1 The
Holder agrees that (i) this Note and the Units issuable
upon conversion have not been registered under the Act and may not
be sold or
transferred without registration under the Act or unless an
exemption from such
registration is available; (ii) the Holder has acquired this Note
and will
acquire the Common Stock for its own account for investment
purposes only and
not with a view toward resale or distribution; and (iii) if a
registration
statement that includes the Common Stock is not effective at the
time Common
Stock is issued to Holder upon conversion under this Note, and the
Common Stock
is not exempt from registration under Rule 144, then the Common
Stock shall be
inscribed with the following 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, OR AN OPINION OF
HOLDER'S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID
ACT.
8.2 If an
opinion of counsel of Holder provides that
registration is not required for the proposed conversion or
transfer of this
Note or the proposed transfer of the shares of Units issuable upon
conversion
and that the proposed conversion or transfer in the absence of
registration
would require the Company to take any action including executing
and filing
forms or other documents with the Securities and Exchange
Commission (the "SEC")
or any state securities agency, or delivering to the Holder any
form or document
in order to establish the right of the Holder to effectuate the
proposed
conversion or transfer, the Company agrees promptly, at its
expense, to take any
such action; and provided, further, that the Company will reimburse
the Holder
in full for any expenses (including but not limited to the fees
and
disbursements of such counsel, but excluding brokers' commissions)
incurred by
the Holder or owner of Units on his, her or its behalf in
connection with such
conversion or transfer of the Note or transfer of the Units.
9.
Registration Rights.
The
Holder shall have the right, under the terms of a Registration
Rights
Agreement dated November 29, 2007, the "New Registration Rights
Agreement"
between the Holder and the Company, to cause the Company to
register the Common
Stock underlying the Warrants (the "Underlying Common Stock") in a
Registration
Statement under the Securitie
