EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 20,
2004, by and between AETHLON MEDICAL, INC., a Nevada corporation, (the
"COMPANY"), and FUSION CAPITAL FUND II, LLC (together with it permitted assigns,
the "BUYER"). Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Common Stock Purchase
Agreement by and between the parties hereto, dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
"PURCHASE AGREEMENT").
WHEREAS:
A. The Company has agreed, upon the terms and subject to the conditions
of the Purchase Agreement, to issue to the Buyer (i) up to Six Million Two
Hundred Fifty Thousand Dollars ($6,250,000) of the Company's common stock, par
value $0.001 per share (the "COMMON STOCK") (the "PURCHASE SHARES"), and (ii)
such number of shares of Common Stock as is required pursuant to Section 4(f) of
the Purchase Agreement (the "COMMITMENT Shares"); and
B. To induce the Buyer to enter into the Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "1933 ACT"), and applicable state
securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means the Buyer, any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.
b. "PERSON" means any person or entity including any
corporation, a limited liability company, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more registration
statements of the Company in compliance with the 1933 Act and pursuant to Rule
415 under the 1933 Act or any successor rule providing for offering securities
on a continuous basis ("RULE 415"), and the declaration or ordering of
effectiveness of such registration statement(s) by the United States Securities
and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the Purchase Shares which
have been, or which may from time to time be, issued or issuable upon purchases
of the Available Amount under the Purchase Agreement (without regard to any
limitation or restriction on purchases) the Signing Shares, issued or issuable
to the Investor, the Warrant Shares and the Commitment Shares issued or issuable
to the Investor and any shares of capital stock issued or issuable with respect
to the Purchase Shares, the Warrant Shares, the Commitment Shares the Signing
Shares, issued or issuable to the Investor, or the Purchase Agreement as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitation on purchases under the
Purchase Agreement.
e. "REGISTRATION STATEMENT" means the registration statement
of the Company covering the sale of the Registrable Securities.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall within twenty
(20) Trading Days from the date hereof file with the SEC the Registration
Statement. The Investor and its counsel shall have a reasonable opportunity to
review and comment upon such registration statement or amendment to such
registration statement and any related prospectus prior to its filing with the
SEC. Investor shall furnish all information reasonably requested by the Company
for inclusion therein. The Company shall use its best efforts to have the
Registration Statement or amendment declared effective by the SEC at the
earliest possible date. The Company shall use reasonable best efforts to keep
the Registration Statement effective pursuant to Rule 415 promulgated under the
1933 Act and available for sales of all of the Registrable Securities at all
times until the earlier of (i) the date as of which the Investor may sell all of
the Registrable Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) or (ii) the date on which
(A) the Investor shall have sold all the Registrable Securities and no Available
Amount remains under the Purchase Agreement (the "REGISTRATION PERIOD"). The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any 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 in which
they were made, not misleading. In the event that the Registration Statement is
not filed by the Filing Date or declared effective by the SEC within (i) 30 days
from the Filing Date if there is no full review of the registration statement by
the SEC or (ii) 120 days from the date hereof if there is a full review of the
registration statement by the SEC, than, in addition to any other rights and
remedies available to Buyer hereunder, under the Purchase Agreement or under
applicable law, the Company shall pay to the Investor an amount in cash, as
liquidated damages and not as a penalty, equal to 2% of the aggregate amount
paid by the Buyer for the Purchase Shares on the 1st day of each 30 day period
or portion thereof that such failure continues. If after a Registration
Statement is first declared effective by the SEC it ceases to remain
continuously effective as to all Registerable Securities for 10 consecutive
Trading Days or an aggregate of 20 Trading Days during any 12 month period,
than, in addition to any other rights and remedies available to Buyer hereunder,
under the Purchase Agreement or under applicable law, the Company shall pay to
the Buyer an amount in cash, as liquidated damages and not as a penalty, equal
to 2% of the aggregate amount paid by the Buyer for the Purchase Shares then
held by the Buyer, on the 1st day of each 30 day period or portion thereof that
such failure continues. The Company shall not file another registration
statement registering securities of the Company until a Registration Statement
registering the Purchase Shares, the Warrant Shares, the Signing Shares and the
Commitment Shares has been declared effective by the SEC, provided, however that
with respect to a registration statement on Form S-8, the Company shall not file
such registration statement on Form S-8 until the ealier of (i) the date a
Registration Statement registering the Purchase Shares, the Warrant Shares, the
Signing Shares and the Commitment Shares has been declared effective or (ii) a
period of 180 days from the date hereof.
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b. RULE 424 PROSPECTUS. The Company shall, as required by
applicable securities regulations, from time to time file with the SEC, pursuant
to Rule 424 promulgated under the 1933 Act, the prospectus and prospectus
supplements, if any, to be used in connection with sales of the Registrable
Securities under the Registration Statement. The Investor and its counsel shall
have a reasonable opportunity to review and comment upon such prospectus prior
to its filing with the SEC. The Investor shall use its reasonable best efforts
to comment upon such prospectus within one (1) Trading Day from the date the
Investor receives the final version of such prospectus.
c. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under the Registration Statement is insufficient to
cover all of the Registrable Securities, the Company shall amend the
Registration Statement or file a new registration statement (a "NEW REGISTRATION
STATEMENT"), so as to cover all of such Registrable Securities as soon as
practicable, but in any event not later than ten (10) Trading Days after the
necessity therefor arises. The Company shall use it reasonable best efforts to
cause such amendment and/or New Registration Statement to become effective as
soon as practicable following the filing thereof.
3. RELATED OBLIGATIONS.
With respect to the Registration Statement and whenever any Registrable
Securities are to be registered pursuant to Section 2(b) including on any New
Registration Statement, the Company shall use its reasonable best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to any
registration statement and the prospectus used in connection with such
registration statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement or any New Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement or any New Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such registration statement.
b. The Company shall permit the Investor to review and comment
upon the Registration Statement or any New Registration Statement and all
amendments and supplements thereto at least two (2) Trading Days prior to their
filing with the SEC, and not file any document in a form to which Investor
reasonably objects. The Investor shall use its reasonable best efforts to
comment upon the Registration Statement or any New Registration Statement and
any amendments or supplements thereto within two (2) Trading Days from the date
the Investor receives the final version thereof. The Company shall furnish to
the Investor, without charge any correspondence from the SEC or the staff of the
SEC to the Company or its representatives relating to the Registration Statement
or any New Registration Statement.
c. Upon request of the Investor, the Company shall furnish to
the Investor, (i) promptly after the same is prepared and filed with the SEC, at
least one copy of such registration statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, (ii) upon the effectiveness of any registration
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statement, ten (10) copies of the prospectus included in such registration
statement and all amendments and supplements thereto (or such other number of
copies as the Investor may reasonably request) and (iii) such other documents,
including copies of any preliminary or final prospectus, as the Investor may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by the Investor.
d. The Company shall use reasonable best efforts to (i)
register and qualify the Registrable Securities covered by a registration
statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as the Investor reasonably requests, (ii) prepare and file
in those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
the Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
e. As promptly as practicable after becoming aware of such
event or facts, the Company shall notify the Investor in writing of the
happening of any event or existence of such facts as a result of which the
prospectus included in any registration statement, as then in effect, includes
an untrue statement of a material fact or omits 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, and
promptly prepare a supplement or amendment to such registration statement to
correct such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to the Investor (or such other number of copies as the
Investor may reasonably request). The Company shall also promptly notify the
Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a registration statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to the Investor by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to any registration statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be appropriate.
f. The Company shall use its reasonable best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
any registration statement, or the suspension of the qualification of any
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify the Investor of the issuance of such
order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
g. The Company shall (i) cause all the Registrable Securities
to be listed on each securities exchange on which securities of the same class
or series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
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(ii) secure designation and quotation of all the Registrable Securities on the
Principal Market. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section.
h. The Company shall cooperate with the Investor to facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to any
registration statement and enable such certificates to be in such denominations
or amounts as the Investor may reasonably request and registered in such names
as the Investor may request.
i. The Company shall at all times provide a transfer agent and
registrar with respect to its Common Stock.
j. If reasonably requested by the Investor, the Company shall
(i) immediately incorporate in a prospectus supplement or post-effective
amendment such information as the Investor believes should be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities; (ii) make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) supplement or make amendments to any
registration statement.
k. The Company shall use its reasonable best efforts to cause
the Registrable Securities covered by the any registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
l. Within one (1) Trading Day after any registration statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investor) confirmation that such registration statement has been declared
effective by the SEC in the form attached hereto as EXHIBIT A.
m. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investor of Registrable
Securities pursuant to any registration statement.
4. OBLIGATIONS OF THE INVESTOR.
a. The Company shall notify the Investor in writing of the
information the Company reasonably requires from the Investor in connection with
any registration statement hereunder. The Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.
b. The Investor agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any registration statement hereunder.
c. The Investor agrees that, upon receipt of any notice from
the Company of the happening of any event or existence of facts of the kind
described in Section 3(f) or the first sentence of 3(e), the Investor will
immediately discontinue disposition of Registrable Securities pursuant to any
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registration statement(s) covering such Registrable Securities until the
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to promptly
deliver shares of Common Stock without any restrictive legend in accordance with
the terms of the Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale prior to the Investor's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than sales or brokerage
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company, shall be paid by the Company.
6. INDEMNIFICATION.
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend the Investor, each Person,
if any, who controls the Investor, the members, the directors, officers,
partners, employees, agents, representatives of the Investor and each Person, if
any, who controls the Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 ACT") (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "CLAIMS") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement, any New Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to the Registration Statement or
any New Registration Statement or (iv) any material violation by the Company of
this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "VIOLATIONS"). The Company shall reimburse each Indemnified Person
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
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with information furnished in writing to the Company by such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, any New Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superceded
prospectus, shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the superceded
prospectus was corrected in the revised prospectus, as then amended or
supplemented, if such revised prospectus was timely made available by the
Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the use
giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim is based
on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(c) or Section 3(e); and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investor pursuant to Section 9.
b. In connection with the Registration Statement or any New
Registration Statement, the Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement or any New Registration Statement,
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
about the Investor set forth on EXHIBIT B attached hereto and furnished to the
Company by the Investor expressly for use in connection with such registration
statement; and, subject to Section 6(d), the Investor will reimburse any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
the Investor as a result of the sale of Registrable Securities pursuant to such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
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with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.
d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.
With a view to making available to the Investor the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investor to sell
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securities of the Company to the public without registration ("RULE 144"), the
Company agrees, at the Company's sole expense, to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
c. furnish to the Investor so long as the Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting and or disclosure provisions of
Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
to permit the Investor to sell such securities pursuant to Rule 144 without
registration.
d. take such additional action as is requested by the Investor
to enable the Investor to sell the Registerable Securities pursuant to Rule 144,
including, without limitation, delivering all such legal opinions, consents,
certificates, resolutions and instructions to the Company's Transfer Agent as
may be requested from time to time by the Investor and otherwise fully cooperate
with Investor and Investor's broker to effect such sale of securities pursuant
to Rule 144.
The Company agrees that damages may be an inadequate remedy
for any breach of the terms and provisions of this Section 8 and that Investor
shall, whether or not it is pursuing any remedies at law, be entitled to
equitable relief in the form of a preliminary or permanent injunctions, without
having to post any bond or other security, upon any breach or threatened breach
of any such terms or provisions.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor which
shall not be unreasonably withheld, including by merger or consolidation. The
Investor may not assign its rights under this Agreement without the written
consent of the Company, other than to an affiliate of the Investor controlled by
Steven G. Martin or Joshua B. Scheinfeld.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investor.
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11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Trading Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Aethlon Medical, Inc.
7825 Fay Avenue, Suite 200
La Jolla, CA 92037
Telephone: 858-456-5777
Facsimile: 858-456-4690
Attention: James Joyce
With a copy to:
Richardson & Patel, LLP
10900 Wilshire Blvd., Suite 500
Los Angeles, CA 90404
Telephone: 310-208-1182
Facsimile: 310-208-1154
Attention: Nimish Patel, Esq.
If to the Investor:
Fusion Capital Fund II, LLC
222 Merchandise Mart Plaza, Suite 9-112
Chicago, IL 60654
Telephone: 312-644-6644
Facsimile: 312-644-6244
Attention: Steven G. Martin
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Trading Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
-10-
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. The corporate laws of the State of Nevada shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting the City of Chicago, 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 brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This Agreement, and the Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
-11-
j. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
k. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
-12-
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
THE COMPANY:
------------
AETHLON MEDICAL, INC.
By:____________________________________
Name:
Title:
BUYER:
------
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS, LLC
BY: SGM HOLDINGS CORP.
By:____________________________________
Name: Steven G. Martin
Title: President
-13-
EXHIBIT A
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TO REGISTRATION RIGHTS AGREEMENT
--------------------------------
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Date]
[TRANSFER AGENT]
_________________
_________________
Re: [__________]
Ladies and Gentlemen:
We are counsel to AETHLON MEDICAL, INC., a Nevada corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Common Stock Purchase Agreement, dated as of _________, 2004 (the "PURCHASE
AGREEMENT"), entered into by and between the Company and Fusion Capital Fund II,
LLC (the "BUYER") pursuant to which the Company has agreed to issue to the
Holder shares of the Company's Common Stock, par value $0.001 per share (the
"COMMON STOCK"), in an amount up to Six Million Two Hundred Fifty Thousand
Dollars ($6,250,000) (the "PURCHASE SHARES"), in accordance with the terms of
the Purchase Agreement. In addition, pursuant to the Stock Purchase Agreement,
the Company issued to the Buyer 568,181 shares of Common Stock (the "INITIAL
COMMITMENT SHARES") and in connection with each purchase of Purchase Shares, the
Company shall issue to the Buyer additional shares of Common Stock up to an
additional 139,535 shares of Common Stock ("ADDITIONAL COMMITMENT SHARES" and
together with the Initial Commitment Shares, "COMMITMENT SHARES"). In addition,
pursuant to the Stock Purchase Agreement, the Company issued to the Buyer
warrants to purchase 568,181 shares of Common Stock (the "WARRANT SHARES").
Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement, dated as of ______, 2004, with the Buyer (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among
other things, to register the Purchase Shares, Warrant Shares, Signing Shares
(as defined in the Purchase Agreement), and the Commitment Shares under the
Securities Act of 1933, as amended (the "1933 ACT"). In connection with the
Company's obligations under the Purchase Agreement and the Registration Rights
Agreement, on _______, 200_, the Company filed a Registration Statement (File
No. 333-_________) (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission (the "SEC") relating to the sale of the Purchase Shares,
Signing Shares and the Commitment Shares.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at 5:00 P.M.
on __________, 200_ and we have no knowledge, after telephonic inquiry of a
member of the SEC's staff, that any stop order suspending its effectiveness has
been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Purchase Shares, Signing Shares, Warrant Shares
and the Commitment Shares are available for sale under the 1933 Act pursuant to
the Registration Statement.
The Buyer has confirmed it shall comply with all securities laws and
regulations applicable to it including applicable prospectus delivery
requirements upon sale of the Purchase Shares, Warrant Shares, Signing Shares,
and the Commitment Shares.
Very truly yours,
[Company Counsel]
By:____________________
CC: Fusion Capital Fund II, LLC
EXHIBIT B
---------
TO REGISTRATION RIGHTS AGREEMENT
--------------------------------
INFORMATION ABOUT THE INVESTOR FURNISHED TO THE COMPANY BY THE INVESTOR
EXPRESSLY FOR USE IN CONNECTION WITH THE REGISTRATION STATEMENT
As of the date of the Purchase Agreement, Fusion Capital beneficially owned
_______ shares of common stock of the Company. Steven G. Martin and Joshua B.
Scheinfeld, the principals of Fusion Capital, are deemed to be beneficial owners
of all of the shares of common stock owned by Fusion Capital. Messrs. Martin and
Scheinfeld have shared voting and investment power over the shares being offered
under the prospectus filed with the SEC in connection with the transactions
contemplated under the Purchase Agreement.