EXHIBIT 10.37
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of December 15, 2005, by and among AETHLON MEDICAL, INC., a Nevada corporation
(the "Company"), and the parties who are signatories to this Agreement
(collectively referred to as the "Holders").
WHEREAS, the Company sold to the Holders up to $1,000,000 principal
amount of 10% Series A Convertible Notes (the "Notes"), which are convertible
into units (the "Units") comprised of one share of the Company's Common Stock
(the "Common Stock") and one Common Stock purchase warrant (the "Warrant")
exercisable to purchase Common Stock at a price of $.20 per share in a private
placement (the "Offering");
WHEREAS, in order to induce the Holders to purchase the Notes, the
Company has entered into this Agreement to register the Common Stock issuable
upon conversion of the Notes (the "Conversion Shares") and upon exercise of the
Warrants (the "Warrant Shares") under the Securities Act of 1933, as amended
(the "Act") in accordance with the provisions of this Agreement.
WHEREAS, the Conversion Shares and Warrant Shares are collectively
referred to in this Agreement as "Registrable Securities."
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings. Other capitalized terms in this Agreement will have the meanings set
forth in the Notes and the Warrants, as the case may be.
1.1 "BUSINESS DAY" means any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking
institutions in the State of New York or the State of California are
authorized or required by law or other government actions to close.
1.2 "EFFECTIVENESS DATE" means, with respect to the initial
Registration Statement required to be filed hereunder as to shares of
Common Stock underlying the shares of Notes and Warrants, the ninetieth
(90th) calendar day following the Filing Date and, with respect to any
additional Registration Statements which may be required pursuant to
Section 3.3, the ninetieth (90th) calendar day following the date on
which the Company first knows, or reasonably should have known, that
such additional Registration Statement is required hereunder; provided,
however, if the Company is notified by the Commission that one of the
above Registration Statements will not be reviewed or is no longer
subject to further review and comments, the Effectiveness Date as to
such Registration Statement shall be the tenth (10th) Trading Day
following the date on which the Company is so notified if such date
precedes the dates required above.
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1.3 "EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2.1.
1.4 "FILING DATE" means, with respect to the initial
Registration Statement required to be filed hereunder as to shares of
Common Stock underlying the Notes and Warrants, the later of November
30, 2005 or 30 days after the date the Company completes an additional
financing of at least $1.0 million but in no event later than December
31, 2005 and, with respect to any additional Registration Statements
which may be required pursuant to Section 3.3, the thirtieth (30th) day
following the date on which the Company first knows, or reasonably
should have known that such additional Registration Statement is
required hereunder.
1.5 "HOLDER" or "Holders" means the holder or holders, as the
case may be, from time to time of Registrable Securities.
1.6 "INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5.3.
1.7 "INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5.3.
1.8 "PROSPECTUS" means the prospectus included in a
Registration Statement (including, without limitation, a prospectus
that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of
the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
1.9 "REGISTRABLE SECURITIES" means all of the shares of Common
Stock issuable upon conversion in full of the Notes and exercise in
full of the Warrants, and the shares of Common Stock issuable in lieu
of the payment of liquidated damages, together with any securities
issued or issuable upon any stock split, dividend or other distribution
recapitalization or similar event with respect to the foregoing.
1.10 "REGISTRATION STATEMENT" means the registration
statements required to be filed hereunder and any additional
registration statements contemplated by Section 3.3, including (in each
case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments,
all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
1.11 "RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
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1.12 "RULE 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
1.13 "SPECIAL COUNSEL" means one special counsel for the
Holders, the cost of whose services will be reimbursed by the Company
pursuant to Section 4.
1.14 "WARRANTS" shall mean the Common Stock purchase warrants
issued to the Holders upon conversion of the Notes.
2. SHELF REGISTRATION.
2.1 On or prior to each Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering
the resale of all Registrable Securities applicable to such Filing Date
for an offering to be made on a continuous basis pursuant to Rule 415.
The Registration Statement shall be on Form S-3 (except if the Company
is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on Form SB-2 or
another appropriate form in accordance herewith) and shall contain
(except if otherwise directed by the Holders) the "Plan of
Distribution" in substantially the form attached hereto as EXHIBIT A.
The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly
as possible after the filing thereof, but in any event prior to the
applicable Effectiveness Date, and shall use its best efforts to keep
such Registration Statement continuously effective under the Securities
Act until the date which is two years after the expiration date of the
Warrants or such earlier date when all Registrable Securities covered
by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k), as determined by the
counsel to the Company pursuant to a written opinion letter to such
effect, addressed and acceptable to the Company's transfer agent and
the affected Holders (the "EFFECTIVENESS PERIOD").
2.2 The Registration Statements to be filed hereunder shall
include a number of shares of Common Stock equal to no less than the
sum of (i) 150% of the number of shares of Common Stock issuable upon
conversion in full of the Notes subject to such Registration Statement,
assuming for such purposes that Notes are outstanding for their full
term and the lowest possible Conversion Price, as defined in the Notes,
applies and (ii) 150% of the number of shares of Common Stock issuable
upon exercise in full of the Warrants subject to such Registration
Statement.
2.3 The Company shall be subject to the provisions of Sections
2.4 if
2.3.1 a Registration Statement is not filed on or
prior to its respective Filing Date (if the Company files such
Registration Statement without affording the Holder the
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opportunity to review and comment on the same as required by
Section 3.1 hereof, the Company shall not be deemed to have
satisfied this Subsection 2.3.1); or
2.3.2 a Registration Statement filed hereunder is not
declared effective by the Commission on or prior to its
Effectiveness Date; or
2.3.3 after a Registration Statement is filed with
and declared effective by the Commission, such Registration
Statement ceases to be effective as to all Registrable
Securities to which it is required to relate at any time prior
to the expiration of the Effectiveness Period without being
succeeded within ten (10) Business Days by an amendment to
such Registration Statement or by a subsequent Registration
Statement filed with and declared effective by the Commission;
or
2.3.4 the Common Stock shall be delisted or suspended
from trading on the New York Stock Exchange, American Stock
Exchange, the Nasdaq Stock Market or the Nasdaq OTC Bulletin
Board (each, a "SUBSEQUENT MARKET") for more than twenty (20)
Business Days (which need not be consecutive Business Days);
or
Any failure or breach set forth in this Section 2.3
is referred to as an "EVENT." The following are referred to as
"Event Date": for purposes of Subsections 2.3.1 and 2.3.2, the
date on which such Event occurs, or for purposes of
Subsections 2.3.3 and 2.3.4, the date on which such ten (10)
and twenty (20) Business Day periods are exceeded.
2.4 On an Event Date, the Company shall pay to each Holder, as
liquidated damages and not as a penalty, an amount in cash
equal to one percent (1.0%) of the original principal amount
of the Notes of such Holder. On every month after the Event
Date until the applicable Event is cured, the Company shall
pay to each Holder, as liquidated damages and not as a
penalty, an amount in cash equal to one and one-half percent
(1.5%) of the original principal amount of the Notes. If the
Warrants have been issued and are "in the money," the
penalties shall be computed based on the value of any
outstanding Warrants on an Event Date and on each month
following an Event Date until the Event is cured. The value of
the Warrants for such purposes shall be the difference between
the closing price of the Common Stock on the Event Date (and
after the Event Date, the average of the closing sales prices
during the applicable month) and the exercise price multiplied
by the number of shares of Common Stock issuable upon exercise
of the Warrants. If the Company fails to pay any liquidated
damages pursuant to this Section in full within seven (7) days
after the date payable, the Company will pay interest thereon
at a rate of twelve (12%) per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the
Holder, accruing daily from the date such liquidated damages
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are due until such amounts, plus all such interest thereon,
are paid in full. At the option of the Company, shares of
Common Stock may be issued to the Holder in lieu of a cash
payment for such liquidated damages based upon the Conversion
Price then in effect, provided that such shares have been
registered for resale by such Holder and the Company provides
the Holder with at least five (5) Business Days' irrevocable
notice prior to the date such payment is due. The liquidated
damages pursuant to the terms hereof shall apply on a pro-rata
basis for any portion of a month prior to the cure of an
Event.
3. REGISTRATION PROCEDURES. In connection with the Company's
registration obligations hereunder, the Company shall:
3.1 Not less than five (5) Business Days prior to the filing
of each Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the
Company shall (i) furnish to the Holders and their Special Counsel
copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders and their
Special Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries
as shall be necessary, in the reasonable opinion of respective counsel
to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement
or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities and their
Special Counsel shall reasonably object, provided the Company is
notified of such objection no later than five (5) Business Days after
the Holders have been so furnished copies of such documents and
provided, further, that such objections relate to the selling
shareholder information, the plan of distribution, any information
relating to the Holders, either directly or indirectly, or the
compliance under the Securities Act of such Registration Statement or
Prospectus as to form.
3.2 (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to a Registration Statement and
the Prospectus used in connection therewith as may be necessary to keep
a Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended
or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond
as promptly as reasonably possible, and in any event within ten (10)
days, to any comments received from the Commission with respect to a
Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to a Registration
Statement; and (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so
supplemented.
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3.3 File additional Registration Statements if the number of
Registrable Securities at any time exceeds seventy-five percent (75%)
of the number of shares of Common Stock then registered for the account
of the Holders in all existing Registration Statements hereunder.
3.4 Notify the Holders of Registrable Securities to be sold
and their Special Counsel as promptly as reasonably possible (and, in
the case of (i)(A) below, not less than five (5) Business Days prior to
such filing) and (if requested by any such Person) confirm such notice
in writing no later than one Business Day following the day (i)(A) when
a Prospectus or any Prospectus supplement or post-effective amendment
to a Registration Statement is proposed to be filed; and (B) with
respect to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of the issuance by the
Commission of any stop order suspending the effectiveness of a
Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iii)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any
of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and (iv)
of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement ineligible
for inclusion therein or any statement made in a Registration Statement
or Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires
any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.5 Promptly deliver to each Holder and their Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses,
including each form of Prospectus, and each amendment or supplement
thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
3.6 Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the
selling Holders and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United
States as any Holder requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during
the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions
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of the Registrable Securities covered by a Registration Statement;
provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or
subject the Company to any material tax in any such jurisdiction where
it is not then so subject.
3.7 Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by
law, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as
any such Holders may request.
3.8 Upon the occurrence of any event contemplated this Section
3, as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to a Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither a Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.9 Comply with all applicable rules and regulations of the
Commission.
3.10 Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the
effectiveness of a Registration Statement, or (ii) any suspension of
the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
3.11 Furnish to each Holder and their Special Counsel, without
charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
3.12 Notwithstanding anything herein to the contrary, if at
any time or from time to time during the Effectiveness Period, the
Company notifies the Holders in writing of the existence of a Potential
Material Event (as defined below), the Holders shall not offer or sell
any Securities from the time of the giving of notice with respect to a
Potential Material Event until the Holders receive written notice from
the Company that such Potential Material Event either has been
disclosed to the public or no longer constitutes a Potential Material
Event; PROVIDED, HOWEVER, that, subject to Subsections 3.12.1 and
3.12.2, the Company may not so suspend the right to such holders of
Securities for more than sixty (60) calendar days in the aggregate
during any twelve-month period, and if such period is exceeded, such
period shall be deemed an "Event" and the Company shall be liable to
the Holder for liquidated damages pursuant to Section 2(c); PROVIDED,
FURTHER, subject to Subsections 3.12.1 and 3.12.2, the failure to
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maintain a Registration Statement for not more than sixty (60) calendar
days in the aggregate during any twelve (12) month period as a result
of a Potential Material Event shall not be deemed a breach of this
Agreement, provided the Company timely pays the Holder such liquidated
damages. The Company must give the Holders at least thirty (30)
calendar days' prior written notice that such a blackout period
(without indicating the nature of such blackout period) will occur and
such notice must be acknowledged in writing by the Holders. Failure to
provide the Holders with such notice shall constitute an Event during
the entire applicable period that the Registration Statement is
suspended. "Potential Material Event" means any of the following:
3.12.1 The Board of Directors of the Company
determines, in its good faith judgment, that the use of any
Prospectus would require the disclosure of important
information which the Company has a bona fide business purpose
for preserving as confidential or the disclosure of which
would impede the Company's ability to consummate a significant
transaction, in which event such period may be extended for up
to thirty (30) additional days in any twelve (12) month
period;
3.12.2 Company consummates any business combination
for purposes of Rule 3-05 or Article 11 of Regulation S-X
under the Securities Act, in which event such restricted
period may be extended until the date on which the Company has
filed such reports or obtained the financial information
required by Rule 3-05 or Article 11 of Regulation S-X to be
included in the Registration Statement, but in no event more
sixty (60) additional days in any twelve (12) month period;
3.12.3 After one year from the Closing Date, the
Company files or proposes to file a registration statement in
an underwritten primary equity offering initiated by the
Company (other than any registration by the Company on Form
S-8), which underwriters are reasonably acceptable to a
majority in interest of the Holders, or a successor or
substantially similar form, of (i) an employee stock option,
stock purchase or compensation plan or of securities issued or
issuable pursuant to any such plan, or (ii) a dividend
reinvestment plan), in which event such restricted period may
be extended for thirty (30) days prior to the effective date
of the registration statement covering such underwritten
primary equity offering and ending on the date specified by
such managing underwriter in such written request to each
Holder, which date shall be no more than thirty (30) days
after such effective date, during which the Holder agrees, if
requested in writing by the managing underwriter or
underwriters administering such offering, not to effect any
offer, sale or distribution of Company securities (or any
option or right to acquire Company securities;
4. REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Nasdaq OTC Bulletin Board and any Subsequent Market
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on which the Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws (including, without limitation,
fees and disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders)); (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders);
(iii) messenger, telephone and delivery expenses; (iv) fees and disbursements of
counsel for the Company; and (v) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement; and (vi) and fees and expenses of the Special
Counsel up to $20,000. In addition, the Company shall be responsible for all of
its internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents, brokers
(including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a
margin call of Common Stock), investment advisors and employees of each
of them, each Person who controls any such Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or relating to any untrue or alleged untrue statement of
a material fact contained in a Registration Statement, any Prospectus
or any form of prospectus or in any amendment or supplement thereto or
in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (i) such untrue statements or
omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder
or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such
Holder expressly for use in a Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or
(ii) in the case of an occurrence of an event of the type specified in
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Section 3.4(ii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6.5. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection
with the transactions contemplated by this Agreement.
5.2 INDEMNIFICATION BY HOLDERS. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted
by applicable law, from and against all Losses (as determined by a
court of competent jurisdiction in a final judgment not subject to
appeal or review) arising out of or based upon any untrue statement of
a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or
supplement thereto, or arising solely out of or based solely upon any
omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only
to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder
or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such
Holder expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or
(ii) in the case of an occurrence of an event of the type specified in
Section 3(d)(ii)-(vi), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(e). In
no event shall the liability of any selling Holder hereunder be greater
in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
5.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS.
5.3.1 If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PArty"), such Indemnified Party shall promptly
notify the Person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party
shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection
with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant
to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent
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jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
5.3.2 An Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified
Party or Parties unless: (i) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (ii) the
Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding;
or (iii) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have
been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
5.3.3 All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within
ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying
Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
5.4 CONTRIBUTION.
5.4.1 If a claim for indemnification under Section
5.1 or 5.2 is unavailable to an Indemnified Party (by reason
of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified
Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall
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be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission
of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed
to include, subject to the limitations set forth in Section
5.3, any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any
Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification
provided for in this Section was available to such party in
accordance with its terms.
5.4.2 The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section
5.4 were determined by pro rata allocation or by any other
method of allocation that does not take into account the
equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this
Section 5.4, no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
5.4.3 The indemnity and contribution agreements
contained in this Section are in addition to any liability
that the Indemnifying Parties may have to the Indemnified
Parties.
6. MISCELLANEOUS.
6.1 AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing
and signed by the Company and the Holders of at least two-thirds of the
then outstanding Registrable Securities. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may
be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; PROVIDED, HOWEVER,
that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
6.2 NO INCONSISTENT AGREEMENTS. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the
Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities,
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that would have the effect of impairing the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions
hereof. Except as and to the extent specified in Schedule 6.2 hereto,
neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any
of its securities to any Person that have not been satisfied in full.
6.3 NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
specified in Schedule 6.3 hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration
Statement other than the Registrable Securities, and the Company shall
not after the date hereof enter into any agreement providing any such
right to any of its security holders.
6.4 COMPLIANCE. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act
as applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
6.5 DISCONTINUED DISPOSITION. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a
notice from the Company of the occurrence of any event of the kind
described in Sections 3.4, such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by
Section 3.8, or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by reference
in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 PIGGY-BACK REGISTRATIONS. If at any time during the
Effectiveness Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of
others under the Securities Act of any of its equity securities, other
than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each
Holder written notice of such determination and, if within fifteen (15)
days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all
or any part of such Registrable Securities such holder requests to be
registered, subject to customary underwriter cutbacks applicable to all
Holders of registration rights; provided, that, the Company shall not
be required to register any Registrable Securities pursuant to this
Section 6.6 that are eligible for resale pursuant to Rule 144(k)
promulgated under the Securities Act.
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6.7 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be
delivered as set forth in the Purchase Agreement.
6.8 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the
prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
6.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be
an original and, all of which taken together shall constitute one and
the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
6.10 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
governed by and construed and enforced in accordance with the internal
laws of the State of California, without regard to the principles of
conflicts of law thereof. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the
City of San Diego, for the adjudication of any dispute hereunder or in
connection herewith 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 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 in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If
either party shall commence a Proceeding to enforce any provisions of
this Agreement, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its attorneys fees and other costs
and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
6.11 CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
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6.12 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
6.13 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
6.14 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS.
The obligations of each Purchaser hereunder is several and not joint
with the obligations of any other Purchaser hereunder, and no Purchaser
shall be responsible in any way for the performance of the obligations
of any other Purchaser hereunder. Nothing contained herein or in any
other agreement or document delivered at any closing, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such
obligations or the transactions contemplated by this Agreement. Each
Purchaser shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
AETHLON MEDICAL, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President and Chief Executive Officer
15
HOLDER SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
------------------------------
Signature of Holder
$5,000
Outstanding Principal Amount of Notes
▇▇▇▇▇▇▇▇▇ CAPITAL, LLC
----------------------
Name of Holder
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EXHIBIT A
PLAN OF DISTRIBUTION
--------------------
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a
security interest in some or all of the Shares or Common Stock or Warrant owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act amending the list of Selling Stockholders to include the pledgee, transferee
or other successors in interest as Selling Stockholders under this prospectus.
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The Selling Stockholders also may transfer the shares of Common Stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholders have
informed the Company that it does not have any agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.
The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
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