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EXHIBIT 10.36
THIS NOTE
AND THE SHARES OF COMMON STOCK 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 SHARES OF COMMON STOCK 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.
10% SERIES A CONVERTIBLE NOTE
No. ___
$________
FOR
VALUE RECEIVED, Aethlon Medical, Inc., a Nevada corporation
(the
"Company"), promises to pay to ______________________, whose
address is
____________________________, or registered assigns (the "Holder"),
the sum of
_______________________ Dollars ($_____________) 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 replaces promissory notes previously issued by the
Company to
the Holder prior to the Issue Date respecting certain of those
Advances and
provides documentation for other Advances for which no notes have
yet been
issued.
1.
INTEREST. 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
will accrue
on each Advance commencing on the date of the Advance, as set forth
on Exhibit A
to this Note. The Company shall pay all Interest on or before the
Maturity Date.
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.
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 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 January 2, 2007
(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 up to 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 CONVERSION OF NOTE/CONVERSION PRICE. 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 $.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 as
quoted as the closing bid price of the Common Stock on the date of
conversion.
5.2 ISSUANCE OF WARRANTS. Upon the conversion of this Note, the
Company will issue to the Holder a Common Stock Purchase Warrant
(the "Warrant")
exercisable to purchase the same number of shares of Common Stock
into which
this Note would be convertible on the Issue Date. The Warrant is
exercisable to
purchase shares of Common Stock at the price of $.20 per share and
as otherwise
specified in the Warrant.
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, and any other outstanding Notes of this Series A
issued to
the Holder that is convertible into Common Stock (the "Related
Notes") 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
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recent Form 10-Q or Form 10-K, as the case may be, or (b) more
recent public
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 shares of
Common Stock
into which such Note might have been converted immediately prior
thereto.
5.6 Exercise of Conversion Privilege.
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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.
5.6.2 The Holder's conversion right set forth in this Paragraph
5.5 may be exercised at any time and from time to time but prior to
payment in
full of the principal amount of 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 shares of Common Stock 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 shares of Common Stock
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 Common
Stock
(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
shares of the
Common Stock (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.
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8.
Transfer Restrictions; Exemption from Registration.
8.1 The Holder agrees that (i) this Note and the shares of
Common
Stock 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 Common Stock 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 shares of Common Stock on his, her or its behalf in
connection with
such conversion or transfer of the Note or transfer of the shares
of Common
Stock.
9.
Registration Rights.
The Holders of the Notes and Warrants or Common Stock issued to
the
Holder without an effective Registration Statement under the Act
(the
"Restricted Shares") shall have the right, under the terms of a
Registration
Rights Agreement between the Holder and the Company, to cause the
