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Exhibit 10.26
 
THIS NOTE, THE SHARES ISSUABLE UPON CONVERSION OF THE NOTE AND THE UNITS THAT
MAY BE ISSUED IN PAYMENT OF INTEREST DUE UNDER THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.  NEITHER THE NOTE NOR SUCH SHARES OR UNITS MAY BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER ANY APPLICABLE STATE
SECURITIES LAWS, OR
AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 
AETHLON MEDICAL, INC.
 

AMENDED AND RESTATED
12% SERIES A CONVERTIBLE NOTE
 

No. ____  $____________

 
 
FOR VALUE RECEIVED, Aethlon Medical, Inc., a Nevada corporation (the "Company"),
promises to pay to ________________________________________, or registered
assigns (the "Holder"), the sum of ________________________ in lawful money of
the United States of America on or before the Maturity Date as defined herein,
with all Interest thereon as defined and specified herein.  This Note includes
various advances (the “Advances”) that the Holder has made to the Company since
July 2005.  This Note is issued as an amendment of that certain Amended and
Restated 10% Series A Convertible Note dated November 29, 2007 and any notes
predecessor thereto issued by the Company to the Holder prior to the Issue Date
(the “Prior Notes”), and all amendments to the Prior Notes, including that
certain allonge entered into between the Company and the Holder on March 5, 2007
(the “Allonge”).
 
1.   Interest and Liquidated Damages.
 
1.1   Commencing on the Issue Date, this Note shall bear interest ("Interest")
equal to twelve percent (12%) per annum on the unpaid principal balance,
computed on a three hundred sixty (360)-day year, during the term of the
Note.  Prior to the Issue Date, Interest due under the Prior Notes accrued on
each Advance at a rate of ten percent (10%) per annum, commencing on the date of
the Advance, as set forth on Exhibit A to this Note.  Except as set forth in
Paragraph 1.2 below, the Company shall pay all accrued Interest on a quarterly
basis on the fifteenth day of January, April, July and October of each year
until the Maturity Date, when all accrued but unpaid Interest will be due and
payable.  In no event shall the rate of Interest payable on this Note exceed the
maximum rate of Interest permitted to be charged under applicable law.
 
 
 
 

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1.2   On June 14, 2010 (the “Interest Payment Date”), the Company will pay
Interest and Default Interest (as defined in Paragraph 11.5) accrued under this
Note and the Prior Notes from February 1, 2010 through the Interest Payment Date
and will prepay Interest scheduled to accrue under this Note following the
Interest Payment Date through December 31, 2010 (the “Combined Interest
Payment”).  On the Interest Payment Date, the Company also will pay liquidated
damages due through July 31, 2010 under that certain Registration Rights
Agreement dated as of November 29, 2007 between the Holder and the Company (the
“November 2007 Registration Rights Agreement”). The Company will pay the
Combined Interest Payment and the liquidated damages in units (“Units”) at the
rate of $0.20 per Unit (the “Interest Payment Rate”).  Each Unit shall be
composed of one share of the Company’s Common Stock and one Amended and Restated
Class A Common Stock Purchase Warrant (the “Amended Class A Warrant”).  The
Company shall pay the Combined Interest Payment and the liquidated damages by
issuing ________________ Units and shall pay all accrued Interest thereafter in
Units at the Interest Payment Rate.  Each Amended Class A Warrant will be
exercisable to purchase one share of Common Stock at a price of $0.20 per
share.  The form of Amended Class A Warrant is set forth as Exhibit C. The
Company previously issued to the Holder ______________ Class A Common Stock
Purchase Warrants (the “Prior Class A Warrants”) in satisfaction of Interest and
Default Interest accrued under the Prior Notes through January 31, 2010 and
liquidated damages due through September 30, 2008 under the November 2007
Registration Rights Agreement. Concurrently herewith, the Company will issue
___________ Amended Class A Warrants to the Holder as an amendment of such Prior
Class A Warrants.
 
1.3   All Interest accrued but unpaid under this Note after the Interest Payment
Date will, at the option of the Company, be payable in cash or in Units, valued
at the Interest Payment Rate, as such term is defined in this Note; provided
that, if, subsequent to the Combined Interest Payment, the Company is in default
under this Note at the time an Interest payment becomes due and payable, it will
be the Holder’s option as to whether to accept payment of such Interest in cash
or in Units.  No fractional shares will be issued.  In lieu thereof, the Company
will pay cash for fractional share amounts equal to the fair market value of the
Common Stock as quoted as the closing bid price of the Common Stock on the date
of payment.
 
1.4   The Company previously issued to the Holder ______________ Class A-1
Common Stock Purchase Warrants (the “Prior Class A-1 Warrants”) in satisfaction
of the liquidated damages due the Holder through November 29, 2007 under that
certain Registration Rights Agreement dated April 21, 2007 between the Holder
and the Company.  Concurrently herewith, the Company will issue ___________
Amended and Restated Class A-1 Common Stock Purchase Warrants (the “Amended
Class A-1 Warrants”) to the Holder as an amendment of such Prior Class A-1
Warrants. Each Amended Class A-1 Warrant will be exercisable to purchase one
share of Common Stock at a price of $0.20 per share. The form of Amended Class
A-1 Warrant is set forth as Exhibit D.
 
1.5   In connection with the issuance of a Prior Note, the Company issued to the
Holder a Class A Principal Common Stock Purchase Warrant (the “Prior Class A
Principal Warrant”) exercisable to purchase a total of ________________ shares
of Common Stock. Concurrently herewith, the Company will issue an Amended and
Restated Class A Principal Common Stock Purchase Warrant (the “Amended Class A
Principal Warrant”) to the Holder as an amendment of such Prior Class A
Principal Warrant. The Amended Class A Principal Warrant will be exercisable to
purchase a total of ________________ shares of Common Stock at a price of $0.20
per share. The form of Amended Class A Principal Warrant is set forth as Exhibit
E.
 
 
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1.6   Under certain conditions, upon the exercise of certain of the Prior Class
A Warrants and Prior Class A-1 Warrants (collectively, the “Prior Warrants”),
the Holder would have been entitled to receive an additional warrant for every
two (2) shares of Common Stock purchased upon such exercise. Concurrently
herewith, the Company will issue ___________ Class B Common Stock Purchase
Warrants (the “Class B Warrants”) to the Holder in lieu of the warrants that
would have been issuable to the Holder upon any such exercise of the Prior
Warrants. The Class B Warrants will be exercisable to purchase one share of
Common Stock at a price of $0.20 per share. The form of Class B Warrant is set
forth as Exhibit F.  The Amended Class A Warrants, the Amended Class A-1
Warrants, the Amended Class A Principal Warrant and the Class B Warrants are
referred to collectively as the “Warrants.”
 
1.7   Series of Notes.  This Note has been issued as an amendment of the Prior
Notes and Allonge issued to the Holder. This Note is one of a series of Notes
issued by the Company as of the date hereof (the “Amended Notes”) as amendments
of prior notes held by their respective Holders.
 
2.   Payments.  All payments under this Note shall first be credited against
costs and expenses provided for in this Note, second to the payment of any
penalties, third to the payment of accrued and unpaid Interest, if any, and the
remainder shall be credited against principal.  All cash payments due hereunder
shall be payable in legal tender of the United States of America, and in same
day funds delivered to the Holder by cashier's check, certified check, bank wire
transfer or any other means of guaranteed funds to the mailing address provided
below, or at such other place as the Holder shall designate in writing for such
purpose from time to time.  If a payment under this Note otherwise would become
due and payable on a Saturday, Sunday or legal holiday (any other day being a
"Business Day"), the due date of the payment shall be extended to the next
succeeding Business Day, and Interest, if any, shall be payable thereon during
such extension.
 
3.   Pre-Payments and Maturity Date.  This Note shall be due and payable in
full, including all accrued Interest thereon, on December 31, 2010 (the
"Maturity Date").  At any time on or prior to the Maturity Date, the Company
shall have the right to prepay this Note, in whole or in part, on ten (10) days'
advance notice to the Holder and subject to the right of the Holder to convert
in advance of such prepayment date and provided that, on such prepayment date,
the Company will pay in respect of the redeemed Note cash equal to the face
amount plus accrued but unpaid Interest on the Note (or portion thereof)
redeemed.  At any time after the Maturity Date, the Company shall have the right
to repay this Note, in whole or in part, on ten (10) days' advance notice to the
Holder and subject to the right of the Holder to convert in advance of such
repayment date.  The Company may prepay this Note at any time after issuance
without penalty.
 
4.   Equal Rank.  This Note represents one of a series of Amended Notes that are
amendments of a series of One Million Dollars ($1,000,000) principal amount of
10% Series A Convertible Notes previously issued by the Company.  All Amended
Notes rank equally and ratably without priority over one another.
 
5.   Conversion of Note and Issuance of Shares.
 
5.1   The unpaid principal amount of this Note is convertible, at the option of
the Holder, into shares of the Company’s Common Stock (the “Common Stock”) at
any time after the Issue Date prior to the close of business on the Business Day
prior to the date of repayment of such principal amount at the rate of $0.20 per
share (the “Conversion Price”), subject to adjustment as hereinafter provided.
No fractional shares will be issued. In lieu thereof, the Company will pay cash
for fractional share amounts equal to the Fair Market Value of the Common Stock
on the date of conversion.
 
 
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5.2   Limitation on Conversion Rights.  Notwithstanding any other provision of
Paragraph 5 to the contrary, the Holder shall not be entitled to convert this
Note in excess of that number of shares of Common Stock which, upon giving
effect to such conversion, would cause the aggregate number of shares of Common
Stock beneficially owned by the Holder and its Affiliates to exceed 9.9% of the
outstanding shares of the Common Stock following such conversion.  For purposes
of the foregoing provision, the aggregate number of shares of Common Stock
beneficially owned by the Holder and its Affiliates shall include the number of
shares of Common Stock beneficially owned and those shares issuable upon
conversion of this Note and all Related Notes with respect to which the
determination of such proviso is being made, but shall exclude the number of
shares of Common Stock that would be issuable upon (i) conversion of the
remaining principal amount of this Note and the Related Notes beneficially owned
by the Holder and its Affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company into
Common Stock beneficially owned by the Holder and its Affiliates that are
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Note.  For purposes of this Paragraph, in determining the
number of outstanding shares of Common Stock the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (a) the Company's most
recent Form 10-Q or Form 10-K, as the case may be, or (b) a more recent public
announcement by the Company or (c) any other written communication by the
Company or its Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the reasonable written or oral request of the Holder, the
Company shall promptly confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding.  In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
conversions, exercises or purchases by the Holder since the date as of which
such number of outstanding shares of Common Stock was reported.  Except as
otherwise set forth herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended.  If the foregoing 9.9% limitation is ever reached and the Holder
desires to convert this Note or part thereof into equity, the Company will
acknowledge the conversion in writing, but not issue the Holder any additional
shares of Common Stock at that point.  Under such circumstances the Holder will
have the right to receive additional shares of Common Stock as a result of the
conversion only at such point and to the extent that its beneficial ownership
subsequently becomes less than 9.9% and such issuance will not cause the
Holder’s beneficial ownership to exceed 9.9%.  Upon written notice to this
effect given by the Holder, the Company will issue such additional shares in
accordance with Paragraph 5.7, “Issuance of Certificate.”
 
5.3   Adjustment Based Upon Stock Dividends, Combination of Shares or
Recapitalization.  The Conversion Price shall be adjusted in the event that the
Company shall at any time (i) pay a stock dividend on the Common Stock; (ii)
subdivide its outstanding Common Stock into a greater number of shares; (iii)
combine its outstanding Common Stock into a smaller number of shares; (iv) issue
by reclassification of its Common Stock any other special capital stock of the
Company; or (v) distribute to all holders of Common Stock evidences of
indebtedness or assets (excluding cash dividends) or rights or warrants to
subscribe for Common Stock (other than those mentioned above).  No adjustment of
the Conversion Price will be required until cumulative adjustments amount to One
Dollar ($1.00) per Note or more.  Upon the occurrence of an event requiring
adjustment of the Conversion Price, and thereafter, the Holder, upon surrender
of this Note for conversion, shall be entitled to receive the number of shares
of Common Stock or other capital stock of the Company that the Holder would have
owned or been entitled to receive after the happening of any of the events
described above had this Note been converted immediately prior to the happening
of such event.
 
 
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5.4   Adjustment Based Upon Merger or Consolidation.  In case of any
consolidation or merger to which the Company is a party (other than a merger in
which the Company is the surviving entity and which does not result in any
reclassification of or change in the outstanding Common Stock of the Company),
or in case of any sale or conveyance to another person, firm, or corporation of
the property of the Company as an entirety or substantially as an entirety, the
Holder shall have the right to convert this Note into the kind and amount of
securities and property (including cash) receivable upon such consolidation,
merger, sale or conveyance by the Holder of the number of shares of Common Stock
into which such Note might have been converted immediately prior thereto.
 
5.5   Exercise of Conversion Privilege.
 
5.5.1   The conversion right provided for in this Note shall be exercisable by
the Holder by written notice to the Company or its successor and the surrender
of this Note in exchange for the number of shares of Common Stock (or other
securities and property, including cash, in the event of an adjustment of the
Conversion Price) into which this Note is convertible based upon the Conversion
Price.
 
5.5.2   The Holder's conversion right set forth in this Paragraph 5 may be
exercised at any time and from time to time but prior to payment in full of the
principal amount and the accrued Interest on this Note.  Conversion rights will
expire at the close of business on the Business Day prior to the redemption date
of this Note.
 
5.5.3   The Holder may exercise the right to convert all or any portion of the
principal amount and accrued Interest on this Note by delivery of (i) this Note
and (ii) a completed Conversion Notice in the form attached as Exhibit B on a
Business Day to the Company's principal executive offices.  Such conversion
shall be deemed to have been made immediately prior to the close of business on
the Business Day of such delivery of a conversion notice (the "Conversion
Date"), and the Holder shall be treated for all purposes as the record holder of
the shares of Common Stock into which this Note is converted as of such date.
 
5.5.4   Upon conversion of the entire principal amount and accrued Interest of
this Note and the delivery of shares of Common Stock upon conversion of this
Note, except as otherwise provided in Paragraph 22, "Representations and
Warranties to Survive Closing," the Company shall be forever released from all
of its obligations and liabilities under this Note.
 
5.6   Corporate Status of Common Stock to be Issued.  All shares of Common Stock
(or other securities in the event of an adjustment of the Conversion Price)
which may be issued upon the conversion of this Note shall, upon issuance, be
fully paid and nonassessable.
 
 
 
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5.7   Issuance of Certificate.  Upon the conversion of this Note, the Company
shall, within five (5) Business Days of such conversion, issue to the Holder a
certificate or certificates representing the number of shares of Common Stock
(or other securities in the event of an adjustment of the Conversion Price) to
which the conversion relates.
 
5.8   Price Protection.  In the event that the Company shall sell any of its
equity securities or issue securities convertible into, or exercisable or
exchangeable for, Common Stock at a price per share that is less than $0.20 (the
“New Price”), then, in such event, the Conversion Price shall automatically, and
without further action on the part of the Holder or the Company, be adjusted to
the New Price. Notwithstanding the foregoing, the provisions of this Section 5.8
shall not apply to the issuance of stock options to the Company’s management,
directors, employees, consultants and advisors so long as such options are
issued with exercise prices per share that are no less than the fair market
value of a share of Common Stock at the time of issuance.
 
6.   Status of Holder of Note.  This Note shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company or to any rights
whatsoever except the rights herein expressed, and no dividends shall be payable
or accrue in respect of this Note or the securities issuable upon the conversion
hereof unless and until this Note shall be converted.  Upon the conversion of
this Note, the Holder shall, to the extent permitted by law, be deemed to be the
holder of record of the shares of Common Stock issuable upon such conversion,
notwithstanding that the stock transfer books of the Company shall then be
closed or that the certificates representing such shares of Common Stock shall
not then be actually delivered.
 
7.   Reserve of Shares of Common Stock.  The Company shall reserve out of its
authorized shares of Common Stock, and other securities in the event of an
adjustment of the Conversion Price, a number of shares sufficient to enable it
to comply with its obligation to issue shares of Common Stock, and other
securities in the event of an adjustment of the Conversion Price, upon the
conversion of this Note.
 
8.   Transfer Restrictions; Exemption from Registration.
 
8.1   The Holder agrees that (i) this Note and the Common Stock issuable upon
conversion have not been registered under the Securities Act of 1933, as amended
(the “Act”), and may not be sold or transferred without registration under the
Act or unless an exemption from such registration is available; (ii) the Holder
has acquired this Note and will acquire the Common Stock for its own account for
investment purposes only and not with a view toward resale or distribution; and
(iii) if a registration statement that includes the Common Stock is not
effective at the time Common Stock is issued to Holder upon conversion under
this Note, and the Common Stock is not exempt from registration under Rule 144,
then the Common Stock shall be inscribed with the following legend:
 
 
 
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF HOLDER'S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
 
8.2   If an opinion of counsel of Holder provides that registration is not
required for the proposed conversion or transfer of this Note or the proposed
transfer of the shares of Common Stock issuable upon conversion and that the
proposed conversion or transfer in the absence of registration would require the
Company to take any action including executing and filing forms or other
documents with the Securities and Exchange Commission (the "SEC") or any state
securities agency, or delivering to the Holder any form or document in order to
establish the right of the Holder to effectuate the proposed conversion or
transfer, the Company agrees promptly, at its expense, to take any such action;
and provided, further, that the Company will reimburse the Holder in full for
any expenses (including but not limited to the fees and disbursements of such
counsel, but excluding brokers' commissions) incurred by the Holder or owner of
the Common Stock on his, her or its behalf in connection with such conversion or
transfer of the Note or transfer of the Common Stock.
 
9.   Registration Rights.  The Holder shall have the right, under the terms of
the Amended and Restated Registration Rights Agreement of even date herewith
between the Holder and the Company, to cause the Company to register the Common
Stock underlying the Warrants in a registration statement under the Act, filed
by the Company with the SEC.
 
10.   Rule 144.  If the Company (a) has registered or registers a class of
securities under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or (b) files or commences to file reports under Section 13
or 15(d) of the Exchange Act, then, at the request of any Holder who proposes to
sell securities in compliance with Rule 144 of the SEC, the Company will (i)
forthwith furnish to such holder a written statement of compliance with the
filing requirements of the SEC as set forth in Rule 144, as such rules may be
amended from time to time and (ii) make available to the public and such Holder
such information and take such other action as is requested by the Holder to
enable the Holder to make sales pursuant to Rule 144.
 
11.   Default.  The Company shall perform its obligations and covenants
hereunder and in each and every other agreement between the Company and Holder
pertaining to the Indebtedness evidenced hereby.  The following provisions shall
apply upon failure of the Company so to perform.
 
11.1   Event of Default.  Any of the following events shall constitute an "Event
of Default" hereunder:
 
11.1.1   Failure by the Company to pay principal of any of this Note when due
and payable on the Maturity Date;
 
 
 
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11.1.2   Failure of the Company to pay Interest when due hereunder; or
 
11.1.3   Except as set forth in Paragraphs 11.1.1 and 11.1.2, failure of the
Company to perform any of the covenants, conditions, provisions or agreements
contained herein, or in any other agreement between the Company and Holder,
which failure continues for a period of thirty (30) days after notice of default
has been given to the Company by the Holders of not less than twenty-five
percent (25%) of the principal amount of the Notes then outstanding; provided,
however, that if the nature of the Company's obligation is such that more than
thirty (30) days are required for performance, then an Event of Default shall
not occur if the Company commences performance within such thirty (30) day
period and thereafter diligently prosecutes the same to completion; or
 
11.1.4   The entry of an order for relief under the Federal Bankruptcy Code as
to the Company or entry of any order appointing a receiver or trustee for the
Company or approving a petition in reorganization or other similar relief under
bankruptcy or similar laws in the United States of America or any other
competent jurisdiction, and if such order, if involuntary, is not satisfied or
withdrawn within sixty (60) days after entry thereof; or the filing of a
petition by the Company seeking any of the foregoing, or consenting thereto; or
the filing of a petition to take advantage of any debtor's act; or making a
general assignment for the benefit of creditors; or admitting in writing
inability to pay debts as they mature.
 
11.2   Acceleration.  Upon any Event of Default (in addition to any other rights
or remedies provided for under this Note), at the option of the Holders of not
less than twenty-five percent (25%) of the principal amount of the Notes then
outstanding, all sums evidenced hereby, including all principal, Interest, fees
and all other amounts due hereunder, shall become immediately due and
payable.  If an Event of Default in the payment of principal or Interest should
occur and be continuing with respect to the Note, any one or more holders of the
Notes then outstanding may declare the principal of the Notes to be immediately
due and payable.  In the Event of a Default due to a breach of any other
covenant or term, Holders representing twenty-five percent (25%) of the
principal amount of the Notes may take action to accelerate the Notes.
 
11.3   Notice by Company.  Upon the happening of any Event of Default specified
in this paragraph that is not cured within the respective periods prescribed
above, the Company will give prompt written notice thereof to the Holder of this
Note.
 
11.4   No Waiver.  Failure of the Holder to exercise any option hereunder shall
not constitute a waiver of the right to exercise the same in the event of any
subsequent Event of Default, or in the event of continuance of any existing
Event of Default after demand or performance thereof.
 
11.5   Default Interest.  “Default Interest” will accrue on an unpaid principal
or Interest due hereunder at the rate of fifteen percent (15%) per annum upon
the occurrence of any Event of Default until the Event of Default is cured;
provided that, effective January 1, 2010, such rate will become twenty percent
(20%) per annum.
 
 
 
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11.6   Pursuit of any Remedy.  No Holder of a Note may pursue any remedy under
the Notes unless (i) the Company shall have received written notice of a
continuing Event of Default from the Holder and (ii) the Company shall have
received a request from Holders of at least twenty-five percent (25%) of
principal amount of the Notes to pursue such remedy.  The Holders of fifty-one
percent (51%) of principal amount of the Notes then outstanding have the right
to direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Noteholders under the Notes.
 
12.   Assignment, Transfer or Loss of the Note.
 
12.1   No Holder of this Note may assign, transfer, hypothecate or sell all or
any part of this Note or in any way alienate or encumber the Note without the
express written consent of the Company, the granting or denial of which shall be
within the absolute discretion of the Company.  Any attempt to effect such
transfer without the consent of the Company shall be null and void.  The Company
has not registered this Note under the Act or the applicable securities laws of
any state in reliance on exemptions from registration.  Such exemptions depend
upon the investment intent of the Holder at the time he acquires his Note.  The
Holder is acquiring this Note for his own account for investment purposes only
and not with a view toward distribution or resale of such Note within the
meaning of the Act and the applicable securities laws of any state.  The Company
shall be under no duty to register the Note or to comply with an exemption in
connection with the sale, transfer or other disposition under the applicable
laws and regulations of the Act or the applicable securities laws of any
state.  The Company may require the Holder to provide, at his expense, an
opinion of counsel satisfactory to the Company to the effect that any proposed
transfer or other assignment of the Note will not result in a violation of the
applicable federal or state securities laws or any other applicable federal or
state laws or regulations.
 
12.2   All expenses, including reasonable legal fees incurred by the Company in
connection with any permitted transfer, assignment or pledge of this Note will
be paid by the Holder requesting such transfer, assignment or pledge.
 
12.3   Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Note and, in the case of any such
loss, theft or destruction of any Note, upon delivery of an indemnity bond in
such reasonable amount as the Company may determine (or, in the case of any Note
held by the original Noteholder, of an indemnity agreement reasonably
satisfactory to the Company), or, in the case of any such mutilation, upon the
surrender of such Note to the Company at is principal office for cancellation,
the Company at its expense will execute and deliver, in lieu thereof, a new Note
of like tenor, dated the date to which interest hereunder shall have been paid
on such lost, stolen, destroyed or mutilated Note.
 
 
 
 
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12.4   Subject to Subparagraph 12.1 above, the Holder may, at his option, either
in person or by duly authorized attorney, surrender this Note for registration
of transfer at the principal office of the Company and, upon payment of any
expenses associated with the transfer, receive in exchange therefor a Note or
Notes, dated as of the date to which interest has been paid on the Note so
surrendered, each in the principal amount of $1,000 or any multiple thereof, for
the same aggregate unpaid principal amount as the Note so surrendered and
registered as payable to such person or persons as may be designated by the
Holder.  Every Note surrendered for registration of transfer shall be duly
endorsed or shall be accompanied by a written instrument of transfer duly
executed by the Holder or his attorney duly authorized in writing.  Every Note,
so made and delivered by the Company in exchange for any Note surrendered, shall
in all other respects be in the same form and have the same terms as the Note
surrendered.  No transfer of any Note shall be valid unless made in such manner
at the principal office of the Company.
 
12.5   The Company may treat the person in whose name this Note is registered as
the owner and Holder of this Note for the purpose of receiving payment of all
principal of and all Interest on this Note, and for all other purposes
whatsoever, whether or not such Note shall be overdue and, except for transfers
effected in accordance with this subparagraph, the Company shall not be affected
by notice to the contrary.
 
13.   Modifications and Amendments.  After notice given by the Company to the
Holders of all Notes at the time outstanding, the Company may from time to time
and at any time enter into an agreement or agreements supplemental to the
provisions of this Note for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Notes or of modifying
in any manner the rights of the Holders of the Notes; provided, however, that no
such supplemental agreement, modification or amendment may, without the consent
of the holder of each Note then outstanding affected thereby, (i) reduce the
percentage of principal amount of Notes whose Holders may consent to an
amendment, supplement or waiver; (ii) reduce the rate or change the time for
payment of interest, including Default Interest, on any Note; (iii) reduce the
principal amount of any Note or change the Maturity Date of the Notes; (iv) make
any Note payable in money other than that stated in the Note; (v) impair the
right to institute suit for the enforcement of any payment of principal of, or
premium, if any, or interest on, any Note; (vi) make any change in the
percentage of principal amount of Notes necessary to waive compliance with
certain provisions of the Note; or (vii) waive a continuing default or Event of
Default in the payment of principal of, premium, if any, or Interest on the
Notes.  The modifications and amendments of the Notes may be made by the Company
without the consent of any Holders of Notes in certain limited circumstances,
including (a) to cure any ambiguity, omission, defect or inconsistency, (b) to
provide for the assumption of the obligations of the Company under the Notes
upon the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company, or (c) to make any change that
does not adversely affect the rights of any holder of Notes.  The Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
any past default under the Notes, except a default in the payment of principal,
premium, if any, or Interest.  Promptly after execution by the Company and
Holders of the Notes of a supplemental agreement pursuant to the provisions of
this paragraph, the Company shall deliver a copy of such supplemental agreement
to all Holders of the Notes at the time outstanding.
 
14.   Notices.  All notices provided for herein shall be validly given if in
writing and delivered personally or sent by certified mail, postage prepaid, to
the office of the Company or such other address as the Company may from time to
time designate in writing sent by certified mail, postage prepaid, to the Holder
at his address set forth below or such other address as the Holder may from time
to time designate in writing to the Company by certified mail, postage prepaid.
 
 
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15.   Usury.  All Interest, Default Interest, fees, charges, goods, things in
action or any other sums or things of value, or other contractual obligations
(collectively, the "Additional Sums") paid by the Company hereunder, whether
pursuant to this Note or otherwise, with respect to the Indebtedness evidenced
hereby, or any other document or instrument in any way pertaining to the
Indebtedness, which, under the laws of the State of California may be deemed to
be Interest with respect to such loan or Indebtedness, shall, for the purpose of
any laws of the State of California, which may limit the maximum amount of
Interest to be charged with respect to such loan or Indebtedness, be payable by
the Company as, and shall be deemed to be, Interest and for such purposes only,
the agreed upon and contracted rate of Interest shall be deemed to be increased
by the Additional Sums.  Notwithstanding any provision of this Note to the
contrary, the total liability for payments in the nature of Interest under this
Note shall not exceed the limits imposed by applicable law.  The Company shall
not assert a claim, and shall actively resist any attempts to compel it to
assert a claim, respecting a benefit under any present or future usury laws
against any Holder of this Note.
 
16.   Binding Effect.  This Note shall be binding upon the parties hereto and
their respective heirs, executors, administrators, representatives, successors
and permitted assigns.
 
17.   Collection Fees.  Except as otherwise provided herein, the Company shall
pay all costs of collection, including reasonable attorneys' fees and all costs
of suit and preparation for such suit (and whether at trial or appellate level),
in the event the unpaid principal amount of this Note, or any payment of
Interest is not paid when due, or in the event Holder is made party to any
litigation because of the existence of the Indebtedness evidenced by this Note,
or if at any time Holder should incur any attorneys' fees in any proceeding
under the Federal Bankruptcy Code (or other similar laws for the protection of
debtors generally) in order to collect any Indebtedness hereunder or to
preserve, protect or realize upon any security for, or guarantee or surety of,
such Indebtedness whether suit be brought or not, and whether through courts of
original jurisdiction, as well as in courts of appellate jurisdiction, or
through a bankruptcy court or other legal proceedings.
 
18.   Construction.  This Note shall be governed as to its validity,
interpretation, construction, effect and in all other respects by and in
accordance with the laws and interpretations thereof of the State of
California.  Unless the context otherwise requires, the use of terms in singular
and masculine form shall include in all instances singular and plural number and
masculine, feminine and neuter gender.
 
19.   Severability.  In the event any one or more of the provisions contained in
this Note or any future amendment hereto shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note or such other
agreement, and in lieu of each such invalid, illegal or unenforceable provision
there shall be added automatically as a part of this Note a provision as similar
in terms to such invalid, illegal or unenforceable provision as may be possible
and be valid, legal and enforceable.
 
 
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20.   Entire Agreement.  This Note Agreement represents the entire agreement and
understanding between the parties concerning the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
representations and warranties with respect thereto.
 
21.   Governing Law; Jurisdiction; Jury Trial.  The corporate laws of the State
of Nevada shall govern all issues concerning the relative rights of the Company
and its shareholders.  All other questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by the
internal laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of California or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of California.  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 therewith, or with any transaction contemplated hereby or
discussed herein, or in any manner arising in connection with or related to the
transactions contemplated hereby or involving the parties hereto whether at law
or equity and under any contract, tort or any other claim whatsoever 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 or faxing a copy
thereof to such party at the address for such notices as listed in this Note 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
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
22.   Representations and Warranties to Survive Closing.  All representations,
warranties and covenants contained herein shall survive the execution and
delivery of this Note and the issuance of any shares of Common Stock upon the
conversion hereof.
 
23.   Headings.  The headings used in this Note are used for convenience only
and are not to be considered in construing or interpreting this Note.
 
24.   Definitions.
 
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person.  For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
 
 
 
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"Board of Directors" means, with respect to any Person, the Board of Directors
of such Person or any committee of the Board of Directors of such Person duly
authorized to act on behalf of the Board of Directors of such Person.
 
"Capital Stock" means, with respect to any Person, any and all shares,
interests, equity participations or other equivalents (however designated) of
corporate stock or partnership interests and any and all warrants, options and
rights with respect thereto (whether or not currently exercisable), including
each class of common stock and preferred stock of such Person.
 
“Fair Market Value” means, as of any date, the value of a share of the Company’s
Common Stock determined as follows:

(a)           if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading;

(b)           if such Common Stock is quoted on the NASDAQ National Market or
the NASDAQ Capital Market, its closing price on the NASDAQ National Market or
the NASDAQ Capital Market, respectively, on the date of determination;

(c)           if such Common Stock is not listed on a national securities
exchange or quoted on the NASDAQ National Market or the NASDAQ Capital Market,
but is traded in the over-the-counter market, the average of the bid and ask
prices for a share of Common Stock on the most recent date on which the Common
Stock was publicly traded;
 
(d)   if none of the foregoing is applicable, by the Company’s Board of
Directors in good faith.

"GAAP" means generally accepted accounting principles as in effect in the United
States of America as of the Issue Date.
 
"Holder" means a Person in whose name a Note is registered on the Company's
books.
 
"Indebtedness" means, without duplication, with respect to any Person, (a) all
obligations of such Person (i) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or only to a
portion thereof); (ii) evidenced by bonds, notes, debentures or similar
instruments; (iii) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts payable or other
obligations arising in the ordinary course of business); (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v) for
the payment of money relating to a capitalized lease obligation under GAAP; or
(vi) evidenced by a letter of credit or a reimbursement obligation of such
Person with respect to any letter of credit; (b) all net obligations of such
Person under interest rate swap obligations and foreign currency hedges; (c) all
liabilities of others of the kind described in the preceding clauses (a) or (b)
that such Person has guaranteed or that are otherwise its legal liability; (d)
Indebtedness (as otherwise defined in this definition) of another Person secured
by lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, the amount of such obligations being deemed to be the lesser of
(1) the full amount of such obligations so secured, and (2) the fair market
value of such asset, as determined in good faith by the Board of Directors of
such Person, which determination shall be evidenced by a board resolution; and
(e) any and all deferrals, renewals, extensions, refinancings and refundings
(whether direct or indirect) of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a), (b),
(c), (d) or this clause (e), whether or not between or among the same parties.
 
 
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"Issue Date" means February 15, 2009.
 
"Maturity Date" means December 31, 2010.
 
"Person" means any individual, corporation, partnership, joint venture, trust,
estate, unincorporated organization or government or any agency or political
subdivision thereof.
 
“Senior Indebtedness” means any Indebtedness of the Company, outstanding prior
to the date of this Note, unless such Indebtedness is pari passu with or
contractually subordinate or junior in right to payment of this Note, except
Indebtedness to any Affiliate of the Company, which shall be junior and
subordinate to this Note.
 
“Subordinated Indebtedness of the Company” means any Indebtedness of the Company
incurred after the date of this Note.
 
A "subsidiary" of any Person means (i) a corporation a majority of whose Voting
Stock is at the time, directly or indirectly, owned by such Person, by one or
more subsidiaries of such Person or by such Person and one or more subsidiaries
of such Person, (ii) a partnership in which such Person or a subsidiary of such
Person is, at the date of determination, a general or limited partner of such
partnership, but only if such Person or its subsidiary is entitled to receive
more than fifty percent (50%) of the assets of such partnership upon its
dissolution, or (iii) any other Person (other than a corporation or partnership)
in which such Person, directly or indirectly, at the date of determination
thereof, has (x) at least a majority ownership interest or (y) the power to
elect or direct the election of a majority of directors or other governing body
of such Person.
 
"Subsidiary" means any subsidiary of the Company.
 
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof, whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency, to vote in the election of members of the Board of
Directors or other governing body of such Person.
 
25.   Miscellaneous.  Except as otherwise provided herein, the Company waives
demand, diligence, presentment for payment and protest, notice of extension,
dishonor, maturity and protest.  Time is of the essence with respect to the
performance of each and every covenant, condition, term and provision hereof.
 
 
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26.   Covenants of the Company.  The Company covenants to perform the following:
 
26.1   The Warrants will have a term expiring seven (7) years from their
respective dates of issuance.  All Warrants will be assignable by their holders.
 
26.2   The Company will hold Board meetings, whether formal or informal, at a
frequency consistent with its past practices.
 
26.3   Upon the execution of this Note, the Company will pay a total of
$64,153.14 for all of the fees and related costs of Quarles & Brady, LLP, legal
counsel of the Holder by (i) issuing to Quarles & Brady a promissory note on the
same terms and conditions as this Note; provided that such note will bear
interest at the rate of twelve percent (12%) per annum from the date of the
original invoices for services rendered, and (ii) issuing to Quarles & Brady
Common Stock purchase warrants providing a “net exercise” or “cashless exercise”
option. The forms of promissory note and warrants to be issued under this
Paragraph 26.3 are set forth as Exhibits G, H and I.
 
26.4   The Company will execute such other documents as may be necessary or
appropriate to carry out the provisions of this Note and the Warrants.  The
Company will bear all reasonable costs associated with the preparation and
implementation of this Note and the Warrants.
 
27.   Senior Subordinated Indebtedness.
 
27.1   This Note constitutes Senior Subordinated Indebtedness of the Company and
is unsecured.
 
27.2   The Indebtedness evidenced by this Note and all of the Notes will be
subordinated to the prior payment when due of the principal of, and premium, if
any, and accrued and unpaid interest on, all existing Senior Indebtedness.  This
Note will be senior to, in right of payment of principal of, premium, if any,
and accrued and unpaid interest on, any Subordinated Indebtedness of the
Company.
 
27.3   Upon any distribution of assets of the Company in any dissolution,
winding up, liquidation or reorganization of the Company, all holders of Senior
Indebtedness of the Company must be paid in full before any payment or
distribution is made with respect to this Note.  The Company shall pay all
principal or distribution to the holders of Subordinated Indebtedness.
 
 
 
 
 
 
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IN WITNESS WHEREOF, this Note has been executed on the 14th day of June, 2010.
 
 

  AETHLON MEDICAL, INC.       By:  /s/ James B.
Frakes                                                        James B. Frakes  
Senior Vice President - Finance       Accepted and agreed to:       By:
____________________________

 
 
 
 
 
 
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Mailing Address of Holder:
____________________
____________________
____________________

Mailing Address of Company:
8910 University Center Lane
Suite 660
San Diego, CA 92122
 
 
 
 
 
 
 
 
 
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EXHIBIT A
 
SCHEDULE OF ADVANCES
 
 
 
 
 
 
 
 
 

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EXHIBIT B

CONVERSION NOTICE

(To be signed only upon conversion of this Note)

TO:   AETHLON MEDICAL, INC.

The undersigned, the registered holder of the Amended and Restated 12 % Series A
Convertible Note (the "Note") of AETHLON MEDICAL, INC. (the "Company"), hereby
surrenders the Note for conversion into shares of Common Stock of the Company
(the "Common Stock") to the extent of $____________ unpaid principal amount of
the Note and $__________ unpaid accrued Interest due under the Note, all in
accordance with the provisions of such Note.  The undersigned requests (i) that
a certificate representing the shares, bearing the appropriate legends, be
issued to the undersigned, and (ii) if the unpaid principal amount so converted
is less than the entire unpaid principal amount of the Note, that a new
substitute note representing the portion of said unpaid principal amount that is
not so converted be issued in accordance with the provisions of the Note.

 
________________________________________
  (Signature and name of the registered holder)

________________________________________
  Print Name

Dated:___________________________________
 

 
 
 

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EXHIBIT C

FORM OF AMENDED CLASS A WARRANT
 
[Attached hereto]
 
 
 
 
 
 
 
 
 
 

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EXHIBIT D

FORM OF AMENDED CLASS A-1 WARRANT

[Attached hereto]
 
 
 
 
 
 
 
 
 
 
 

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EXHIBIT E

FORM OF AMENDED CLASS A PRINCIPAL WARRANT

[Attached hereto]
 
 
 
 
 
 
 
 
 
 

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EXHIBIT F

FORM OF CLASS B WARRANT

[Attached hereto]
 
 
 
 
 
 
 
 
 
 
 
 

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EXHIBIT G

FORM OF QUARLES & BRADY, LLP
PROMISSORY NOTE

[Attached hereto]
 
 
 
 
 
 
 
 
 
 
 

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EXHIBIT H

FORM OF QUARLES & BRADY, LLP
AMENDED AND RESTATED
CLASS A
COMMON STOCK PURCHASE WARRANT

[Attached hereto]
 
 
 
 
 
 
 
 
 
 
 
 

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EXHIBIT I

FORM OF QUARLES & BRADY, LLP
AMENDED AND RESTATED
CLASS A PRINCIPAL
COMMON STOCK PURCHASE WARRANT

[Attached hereto]
 
 
 
 
 
 
 
 
 

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