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EXHIBIT 10.2
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE 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.
PRINCIPAL AMOUNT:
$________
ISSUE DATE: AUGUST 24, 2009
PURCHASE PRICE: $__________
CONVERTIBLE PROMISSORY NOTE
---------------------------
FOR VALUE
RECEIVED, AETHLON MEDICAL, INC., a Nevada corporation
(hereinafter called "BORROWER"), hereby promises to pay to the
order of
_______________ (the "HOLDER"), without demand, the sum of
_____________ Dollars
($_________.00) ("PRINCIPAL AMOUNT"), with interest accruing
thereon, on August
24, 2010 (the "MATURITY Date"), if not sooner paid.
This Note has been
entered into pursuant to the terms of a subscription
agreement between the Borrower, the Holder and the other
signatories thereto
("OTHER HOLDERS") dated at or about the date hereof (the
"SUBSCRIPTION
AGREEMENT"), who have been issued Notes pursuant to the
Subscription Agreement
("OTHER NOTES") and shall be governed by the terms of such
Subscription
Agreement. Unless otherwise separately defined herein, all
capitalized terms
used in this Note shall have the same meaning as is set forth in
the
Subscription Agreement. The following terms shall apply to this
Note:
ARTICLE I
GENERAL PROVISIONS
1.1 INTEREST RATE.
Interest payable on this Note shall accrue at the
annual rate of ten percent (10%) and be payable on the Maturity
Date,
accelerated or otherwise, when the principal and remaining accrued
but unpaid
interest shall be due and payable, or sooner as described
below.
1.2 PAYMENT GRACE
PERIOD. The Borrower shall not have any grace period
to pay any monetary amounts due under this Note. During the
pendency of an Event
of Default (as described in Article III), a default interest rate
of fifteen
percent (15%) per annum shall be in effect.
1.3 CONVERSION
PRIVILEGES. The Conversion Rights set forth in ARTICLE
II shall remain in full force and effect immediately from the date
hereof and
until the Note is paid in full regardless of the occurrence of an
Event of
Default. This Note shall be payable in full on the Maturity Date,
unless
previously converted into Common Stock in accordance with ARTICLE
II hereof.
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ARTICLE II
CONVERSION RIGHTS
The Holder shall
have the right to convert the principal and any
interest due under this Note into Shares of the Borrower's Common
Stock, $.001
par value per share ("COMMON STOCK") as set forth below.
2.1. CONVERSION
INTO THE BORROWER'S COMMON STOCK.
(a) The Holder shall have the right from and after the date of
the issuance of this Note and then at any time until this Note is
fully paid, to
convert any outstanding and unpaid principal portion of this Note,
and accrued
interest, at the election of the Holder (the date of giving of such
notice of
conversion being a "CONVERSION DATE") into fully paid and
non-assessable shares
of Common Stock as such stock exists on the date of issuance of
this Note, or
any shares of capital stock of Borrower into which such Common
Stock shall
hereafter be changed or reclassified, at the conversion price as
defined in
SECTION 2.1(b) hereof (the "CONVERSION PRICE"), determined as
provided herein.
Upon delivery to the Borrower of a completed Notice of Conversion,
a form of
which is annexed hereto as EXHIBIT A, Borrower shall issue and
deliver to the
Holder within three (3) business days after the Conversion Date
(such third day
being the "DELIVERY DATE") that number of shares of Common Stock
for the portion
of the Note converted in accordance with the foregoing. At the
election of the
Holder, the Borrower will deliver accrued but unpaid interest on
the Note, if
any, through the Conversion Date directly to the Holder on or
before the
Delivery Date. The number of shares of Common Stock to be issued
upon each
conversion of this Note shall be determined by dividing that
portion of the
principal of the Note and interest, if any, to be converted, by the
Conversion
Price.
(b) Subject to adjustment as provided in SECTION 2.1(c)
hereof, the conversion price per share shall be equal to eighty
percent (80%) of
the average of the three lowest closing bid prices of the Common
Stock as
reported by Bloomberg L.P. for the Principal Market for the ten
(10) trading
days preceding the Conversion Date. Subject to adjustment as
described herein,
the Conversion Price may not be more than $0.25 nor less than
$0.15.
(c) The Conversion Price and number and kind of shares or
other securities to be issued upon conversion determined pursuant
to SECTION
2.1(a), shall be subject to adjustment from time to time upon the
happening of
certain events while this conversion right remains outstanding, as
follows:
A. MERGER, SALE OF ASSETS, ETC. If (A) the Borrower
effects any merger or consolidation of the Borrower with or into
another entity,
(B) the Borrower effects any sale of all or substantially all of
its assets in
one or a series of related transactions, (C) any tender offer or
exchange offer
(whether by the Borrower or another entity) is completed pursuant
to which
holders of Common Stock are permitted to tender or exchange their
shares for
other securities, cash or property, (D) the Borrower consummates a
stock
purchase agreement or other business combination (including,
without limitation,
a reorganization, recapitalization, spin-off or scheme of
arrangement) with one
or more persons or entities whereby such other persons or entities
acquire more
than the 50% of the outstanding shares of Common Stock (not
including any shares
of Common Stock held by such other persons or entities making or
party to, or
associated or affiliated with the other persons or entities making
or party to,
such stock purchase agreement or other business combination), (E)
any "person"
or "group" (as these terms are used for purposes of Sections 13(d)
and 14(d) of
the 1934 Act) is or shall become the "beneficial owner" (as defined
in Rule
13d-3 under the 1934 Act), directly or indirectly, of 50% of the
aggregate
Common Stock of the Borrower, or (F) the Borrower effects any
reclassification
of the Common Stock or any compulsory share exchange pursuant to
which the
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Common Stock is effectively converted into or exchanged for other
securities,
cash or property (in any such case, a "FUNDAMENTAL TRANSACTION"),
this Note, as
to the unpaid principal portion thereof and accrued interest
thereon, shall
thereafter be deemed to evidence the right to convert into such
number and kind
of shares or other securities and property as would have been
issuable or
distributable on account of such Fundamental Transaction, upon or
with respect
to the securities subject to the conversion right immediately prior
to such
Fundamental Transaction. The foregoing provision shall similarly
apply to
successive Fundamental Transactions of a similar nature by any such
successor or
purchaser. Without limiting the generality of the foregoing, the
anti-dilution
provisions of this Section shall apply to such securities of such
successor or
purchaser after any such Fundamental Transaction.
B. RECLASSIFICATION, ETC. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock
into the same
or a different number of securities of any class or classes that
may be issued
or outstanding, this Note, as to the unpaid principal portion
thereof and
accrued interest thereon, shall thereafter be deemed to evidence
the right to
purchase an adjusted number of such securities and kind of
securities as would
have been issuable as the result of such change with respect to the
Common Stock
immediately prior to such reclassification or other change.
C. STOCK SPLITS, COMBINATIONS AND DIVIDENDS. If the
shares of Common Stock are subdivided or combined into a greater or
smaller
number of shares of Common Stock, or if a dividend is paid on the
Common Stock
in shares of Common Stock, the Conversion Price shall be
proportionately reduced
in case of subdivision of shares or stock dividend or
proportionately increased
in the case of combination of shares, in each such case by the
ratio which the
total number of shares of Common Stock outstanding immediately
after such event
bears to the total number of shares of Common Stock outstanding
immediately
prior to such event.
D. SHARE ISSUANCE. So long as this Note is
outstanding, if the Borrower shall issue any Common Stock except
for the
Excepted Issuances (as defined in the Subscription Agreement),
prior to the
complete conversion or payment of this Note, for a consideration
per share that
is less than the Conversion Price that would be in effect at the
time of such
issue, then, and thereafter successively upon each such issuance,
the Conversion
Price shall be reduced to such other lower issue price. For
purposes of this
adjustment, the issuance of any security or debt instrument of the
Borrower
carrying the right to convert such security or debt instrument into
Common Stock
or of any warrant, right or option to purchase Common Stock shall
result in an
adjustment to the Conversion Price upon the issuance of the
above-described
security, debt instrument, warrant, right, or option and again upon
the issuance
of shares of Common Stock upon exercise of such conversion or
purchase rights if
such issuance is at a price lower than the then applicable
Conversion Price.
Common Stock issued or issuable by the Borrower for no
consideration will be
deemed issuable or to have been issued for $0.001 per share of
Common Stock. The
reduction of the Conversion Price described in this paragraph is in
addition to
the other rights of the Holder described in the Subscription
Agreement.
(d) Whenever the Conversion Price is adjusted pursuant to
SECTION 2.1(c) above, the Borrower shall promptly mail to the
Holder a notice
setting forth the Conversion Price after such adjustment and
setting forth a
statement of the f
