<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 10, 2000
AETHLON MEDICAL, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Nevada 33-44567-NY 13-3632859
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No,)
7825 Fay Avenue, Suite 200, La Jolla, California 92037
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including are code (858) 456-5777
--------------
Not applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 10, 2000, Aethlon Medical, Inc., (formerly Bishop Equities, Inc.)
(the"Company") acquired all the outstanding common stock of Cell Activation,
Inc. ("Cell"), in exchange for 99,152 shares of common stock of the Company.
In addition, all the outstanding stock options of Cell were exchanged for
options to purchase 50,148 shares of common stock of the Company at $.3933
per share. Following the transaction, Cell became a wholly owned subsidiary
of the Company.
The acquisition was approved by the Board of Directors of the Company on
March 31, 2000.
Included in this transaction is a small amount of laboratory equipment
utilized by Cell in its development of tests to identify inappropriate and
damaging cell activation associated with trauma, cardiovascular surgery, and
autoimmune diseases. The Company intends to continue to utilize this
equipment for the same purpose.
The description of the transaction set forth above is qualified in its
entirety by the provisions of the Agreement and Plan of Reorganization for
the Acquisition of All of the Outstanding Shares of Common Stock of Cell
Activation, Inc. by Aethlon Medical, Inc. dated April 3, 2000, which is filed
as Exhibit 2 to this Form 8-K and incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
It is not practicable to include the financial statements of Cell as required
by Rule 3-05(b) of Regulation S-X at this time. The Company intends to file
such information on or Before June 20, 2000.
(b) Pro forma financial information
It is not practicable to include the pro forma financial information as
required by Article 11 of Regulation S-X at this time. The Company intends to
file such information on or before June 20, 2000.
(c) Exhibits
(2) Agreement and Plan of Reorganization for the Acquisition of All of the
Outstanding Shares of Common Stock of Cell Activation, Inc. by Bishop Equities,
Inc. DBA Aethlon Medical, Inc. dated April 3, 2000.
The Company agrees to furnish supplementally to the Securities and Exchange
Commission a copy of the exhibits to the Agreement and Plan of Reorganization
upon request.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Aethlon Medical, Inc.
/s/ Franklyn S. Barry, Jr.
----------------------------
Franklyn S. Barry, Jr., President
Date: April 25, 2000
<PAGE>
EXHIBIT INDEX
EXHIBIT 2
Agreement and Plan of Reorganization for the Acquisition of All of the
Outstanding Shares of Common Stock of Cell Activation, Inc. by Bishop
Equities, Inc. DBA Aethlon Medical, Inc. dated April 3, 2000.
Exhibit A - List of CELL Shareholders
Exhibit B - Resolutions of AETHLON
Exhibit C - Indemnification of PENHUNE
Exhibit D - Copies of Shares or Lost Certificate Affidavits
Exhibit E - Legal Opinion of AETHLON Counsel
Exhibit F - Power of Attorney to Shareholder Representative
Exhibit G - Schedule of Exceptions of CELL
Exhibit H - Financial Statements of CELL
Exhibit I - Legal Descriptions of Real Property of CELL
Exhibit J - List of Personal Property of CELL
Exhibit K - Patents, Trademarks, Service Marks of CELL
Exhibit L - List of all CELL Insurance Policies
Exhibit M - List of CELL Bank Accounts and Signatories Therefor
Exhibit N - Schedule of Exceptions of AETHLON
Exhibit O - Financial Statements of AETHLON
Exhibit P - Legal Descriptions of Real Property of AETHLON
Exhibit J - List of Personal Property of AETHLON
Exhibit K - Patents, Trademarks, Service Marks of AETHLON
Exhibit L - List of all AETHLON Insurance Policies
Exhibit M - List of AETHLON Bank Accounts and Signatories Therefor
<PAGE>
EXHIBIT 99.2
AGREEMENT AND PLAN OF REORGANIZATION
FOR THE ACQUISITION OF ALL OF THE OUTSTANDING SHARES OF
COMMON STOCK OF CELL ACTIVATION, INC.
BY BISHOP EQUITIES, INC. DBA AETHLON MEDICAL, INC.
<PAGE>
<TABLE>
TABLE OF CONTENTS
PAGE
<S> <C>
RECITALS......................................................................................... 1
ARTICLE I - THE REORGANIZATION................................................................... 2
ARTICLE II - EXCHANGE OF SHARES.................................................................. 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF CELL............................................. 5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF AETHLON........................................... 14
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS....................................... 23
ARTICLE VI - MISCELLANEOUS....................................................................... 24
EXHIBITS:
List of CELL Shareholders................................................................... "A-1"
Form of Hugli Option........................................................................ "A-2"
Form of Schmid-Schonbein Option............................................................. "A-3"
Resolutions of AETHLON...................................................................... "B"
Indemnification of PENHUNE.................................................................. "C"
Copies of Shares or Lost Certificate Affidavits............................................. "D"
Legal Opinion of AETHLON Counsel............................................................ "E"
Power of Attorney to Shareholder Representative............................................. "F"
Schedule of Exceptions of CELL.............................................................. "G"
Financial Statements of CELL................................................................ "H"
Legal Descriptions of Real Property of CELL ................................................ "I"
List of Personal Property of CELL .......................................................... "J"
Patents, Trademarks, Service Marks of CELL ................................................. "K"
List of all CELL Insurance Policies......................................................... "L"
List of CELL Bank Accounts and Signatories Therefor......................................... "M"
Schedule of Exceptions of AETHLON........................................................... "N"
Financial Statements of AETHLON............................................................. "O"
Legal Descriptions of Real Property of AETHLON ............................................. "P"
List of Personal Property of AETHLON ....................................................... "Q"
Patents, Trademarks, Service Marks of AETHLON .............................................. "R"
List of all AETHLON Insurance Policies ..................................................... "S"
List of AETHLON Bank Accounts and Signatories Therefor...................................... "T"
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
FOR THE ACQUISITION OF ALL OF THE OUTSTANDING SHARES OF
COMMON STOCK OF CELL ACTIVATION, INC.
BY BISHOP EQUITIES, INC. DBA AETHLON MEDICAL, INC.
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated this 31st day of
March, 2000, by and among the shareholders and optionholders of CELL ACTIVATION,
INC., whose names are listed in Exhibit "A," a copy of which is attached hereto
and incorporated herein by this reference (hereinafter collectively referred to
as the "Shareholders"), CELL ACTIVATION, INC. ("CELL"), a California
corporation, and BISHOP EQUITIES, INC. dba AETHLON MEDICAL, INC. ("AETHLON"), a
Nevada corporation.
RECITALS:
A. WHEREAS, the Shareholders together own, beneficially and of record,
the issued and outstanding shares of the common stock and options to purchase
shares of common stock of CELL (hereinafter the shares are referred to as the
"Exchanged Shares" and the options are referred to the "Exchanged Options") as
set forth in the schedule attached hereto and incorporated herein by this
reference as Exhibit "A;" and
B. WHEREAS, AETHLON desires to acquire from the Shareholders all of the
outstanding Exchanged Shares owned by them solely in exchange for an aggregate
of 99,152 shares (the "AETHLON Shares") of the common stock of AETHLON, par
value $.001, and the Shareholders desire to exchange their Exchanged Shares for
the AETHLON Shares, the number of the Exchanged Shares being surrendered and the
number of AETHLON Shares being received by the Shareholders are as set forth in
Exhibit "A-1" hereto; and
C. WHEREAS, AETHLON desires to acquire from the Shareholders the
Exchanged Options owned by them solely in exchange for an aggregate of 50,848
options to purchase shares of common stock of AETHLON (the "AETHLON Options"),
and the Shareholders desire to exchange their Exchanged Options for the AETHLON
Options, the number of the Exchanged Options being surrendered and the number of
AETHLON
<PAGE>
Options being received by the Shareholders are as set forth in Exhibit "A-1"
hereto, with the form of such options being set forth in Exhibits "A-2" and
"A-3" hereto; and
D. WHEREAS, AETHLON, acting through JAMES A. JOYCE ("JOYCE"), its
Chairman, as authorized by the Board of Directors, and the Shareholders, acting
through JOHN P. PENHUNE ("PENHUNE"), a member of the Board of Directors and the
President of CELL, acting as the designated representative of the Shareholders
(PENHUNE is sometimes referred to as the "Shareholder Representative"); and
E. WHEREAS, the parties hereto desire to set forth the definitive terms
and conditions upon which the Shareholders shall exchange with AETHLON, and
AETHLON shall exchange with the Shareholders, the Exchanged Shares and Exchanged
Options owned by each of them for the AETHLON Shares and the AETHLON Options;
and
F. WHEREAS, it is intended that CELL, AETHLON, and their respective
shareholders and option holders will recognize no gain or loss for U.S. federal
income tax purposes under Section 368 (a)(1)(B) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations promulgated thereunder as a
result of the Reorganization; and
F. WHEREAS, the parties hereto have entered into additional agreements
simultaneously with the execution of this Agreement which are not intended to
influence the tax-free result of exchange of the Exchanged Shares and the
Exchanged Options for the AETHLON Shares and AETHLON Options;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements contained herein,
and in accordance with the applicable provisions of state law, the parties
hereto covenant and agree as follows:
<PAGE>
ARTICLE I
THE REORGANIZATION
1.1 THE REORGANIZATION. On and as of the Closing (as defined in Section
1.2 below) of this Agreement, the Shareholders shall surrender all of the
Exchanged Shares and Exchanged Options (hereinafter collectively referred to as
the "Exchanged Securities") in exchange for the AETHLON Shares and the AETHLON
Options (hereinafter collectively referred to as the "AETHLON Securities") the
amounts set forth in Exhibit "A." The transactions contemplated hereby are
intended to qualify as a tax-free reorganization under ss.368(a)(1)(B) of the
Code and the regulations promulgated thereunder and the parties hereto agree to
report them as such.
1.2 CLOSING. The closing of the Reorganization (the "Closing") shall
take place (i) at the offices of AETHLON located at 7825 Fay Avenue, Suite 200,
La Jolla, California 92037 at 8:30 a.m., local time, on April 3, 2000; or (ii)
at such other time and place and on such other date as the Shareholder
Representative, CELL, and AETHLON agree (the "Closing Date"). The Closing Date
shall be the "Effective Date" of the Reorganization. The parties shall conduct a
pre-closing conference at the offices of AETHLON on March 31, 2000 at 8:30 a.m.,
local time.
1.3 TAKING OF NECESSARY ACTIONS. The Shareholder Representative (acting
on behalf of the Shareholders), CELL, and AETHLON shall each take all such
actions as may be reasonably necessary or appropriate in order to effectuate the
transactions contemplated hereby and to make the Reorganization effective as of
the Effective Date. If at any time after the Effective Date any further action
is necessary or desirable to carry out the purposes of this Agreement and to
vest AETHLON with full title to all of the Exchanged Securities, the Shareholder
Representative, on behalf of the Shareholders, and the officers and directors of
CELL and AETHLON, at the expense of the AETHLON, shall take all such necessary
or appropriate action. To effect the intents and purposes of this Agreement, the
following actions shall be taken at the Closing, shall be deemed to occur
simultaneously, and the accomplishment of which actions by the parties whose
duty it is to perform such actions is duly acknowledged by the execution of this
Agreement by the parties hereto:
<PAGE>
1.3.1 ELECTION OF DIRECTOR. AETHLON shall deliver to the
Shareholder Representative a Certificate of Secretary of AETHLON, a copy of
which is attached hereto as Exhibit "B," evidencing the adoption by the Board of
Directors of AETHLON of resolutions (i) electing and appointing PENHUNE as a
member of the Board of Directors of AETHLON, (ii) providing for indemnification
of PENHUNE reasonably satisfactory to counsel to PENHUNE, and (iii) approving
the execution of an indemnification agreement, a copy of which is attached
hereto as Exhibit "C" in favor of PENHUNE by the Chairman of AETHLON (the
"Indemnification Agreement").
1.3.2 EXECUTION AND DELIVERY OF INDEMNIFICATION AGREEMENTS.
The Chairman of AETHLON shall execute and deliver two copies of the
Indemnification Agreement in the form attached hereto as Exhibit "C" to PENHUNE
who shall countersign the Indemnification Agreement and deliver an executed copy
to AETHLON.
1.3.3 APPOINTMENT TO AETHLON SCIENCE ADVISORY BOARD: In
addition, as soon as practicable after the Closing, AETHLON agrees to appoint
GEERT W. SCHMID-SCHONBEIN ("SCHONBEIN"); TONY HUGLI ("HUGLI"); and ROLAND B.
STOUGHTON ("STOUGHTON") to the Aethlon Science Advisory Board.
1.3.4 APPOINTMENT TO AETHLON MEDICAL BUSINESS ADVISORY
COUNCIL. In addition, as soon as practicable after the Closing, AETHLON agrees
to appoint MONROE E. TROUT ("TROUT") to the Aethlon Medical Business Advisory
Council.
1.3.5 CONSULTING RE CELL ACTIVATION TECHNOLOGY: In addition,
as soon as practicable after the Closing, but in no event longer than 60 days
after the Closing Date, AETHLON and CELL agree to negotiate in good faith
consulting agreements whereby SCHONBEIN, HUGLI, and STOUGHTON shall provide
additional consulting to AETHLON in return for compensation. The parties
acknowledge and agree that there is no assurance as to willingness of SCHONBEIN,
HUGLI, and STOUGHTON to enter into or to perform under such consulting
agreements.
1.3.6 DELIVERY OF EXCHANGED SECURITIES TO AETHLON; DELIVERY OF
THE AETHLON SECURITIES TO THE SHAREHOLDERS. In consideration of the tender by
Shareholders of their Exchanged Securities, or lost certificate affidavits in
form acceptable to AETHLON, copies of which are attached hereto as Exhibit "D,"
<PAGE>
AETHLON shall deliver the AETHLON Securities to Shareholders in the amount set
forth in Exhibit "A."
1.3.7 LEGAL OPINION. Counsel to AETHLON shall deliver to
Shareholders an opinion of counsel, in the form of Exhibit "E," a copy of which
is attached hereto, addressed to Shareholders.
1.3.8 POWER OF ATTORNEY. PENHUNE or PAUL KENNERSON, as the
Shareholder Representative, shall deliver to AETHLON a power of attorney in the
form attached hereto as Exhibit "F," providing for the appointment of the
Shareholder Representative as attorney-in-fact for the individual Shareholders
to effect the exchange of certificates and agreements representing the Exchanged
Securities for the AETHLON Securities.
ARTICLE II
EXCHANGE OF SHARES
2.1 EXCHANGE OF SHARES. Subject to the terms and conditions of this
Agreement, on the Closing Date, by virtue of the Reorganization and without any
further action on the part of the Shareholders, CELL, or AETHLON, all of the
Exchanged Securities shall be exchanged for the AETHLON Securities in the
amounts set forth in Exhibit "A." Each of the AETHLON Shares shall be validly
issued, duly authorized, fully paid, and nonassessable shares of the Common
Stock of AETHLON as of the Closing Date. Each of the AETHLON Options shall be
duly authorized and validly granted, and, when the AETHLON Options are
exercised, the shares underlying the AETHLON Options shall be validly issued,
duly authorized, fully paid, and nonassessable shares of the Common Stock of
AETHLON as of the date of issuance.
2.2 EXCHANGE OF CERTIFICATES. At the Closing, AETHLON shall present and
deliver to the Shareholder Representative the stock certificates and option
agreements representing all of the AETHLON Securities. Upon delivery thereof,
the Shareholder Representative shall present and deliver to AETHLON all of the
stock certificates and option agreements representing the Exchanged Securities,
or lost certificate affidavits in form acceptable to AETHLON.
<PAGE>
2.3 NO FURTHER RIGHTS. From and after the Closing Date, holders of
stock certificates and option agreements formerly evidencing the Exchanged
Securities shall cease to have any rights as shareholders and optionholders of
CELL, except as provided herein or by law.
2.4 CONDITIONS PRECEDENT TO CLOSING. The Closing shall be contingent
upon the agreement of Shareholders holding a minimum of 100% of the outstanding
Exchanged Securities. At such time as Shareholders holding a minimum of 100% of
the Exchanged Securities have entered into this Agreement, the parties shall
proceed with the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF CELL
Except as set forth in the Schedule of Exceptions attached hereto and
incorporated herein by reference as Exhibit "G," CELL represents and warrants
to, and covenants with, AETHLON, as of the date hereof and as of the Closing
Date, as follows:
3.1 ORGANIZATION AND CORPORATE POWER. CELL is a corporation duly
organized, in good standing, and validly existing under the laws of California.
CELL has all requisite corporate power and authority to conduct its business as
now being conducted and to own and lease the properties that it now owns and
leases. The charter documents of CELL as amended to date, the Bylaws of CELL as
amended to date, and the resolutions of CELL's shareholders (if necessary) and
directors authorizing the execution, delivery, and performance of this
Agreement, all certified by the President and the Secretary, which have
previously been provided to AETHLON by CELL, are true and complete copies
thereof as currently in effect.
3.2 AUTHORIZATION. CELL has full corporate power, legal capacity, and
authority to enter into this Agreement, to execute all attendant documents and
instruments contemplated hereby, and to perform all of its obligations
hereunder. This Agreement, and each and every other agreement, document and
instrument to be executed by CELL in connection herewith, has been effectively
authorized by all necessary action on the part of CELL, including without
limitation the approvals of CELL's Board of Directors (and the Shareholders if
necessary), which authorizations
<PAGE>
remain in full force and effect, have been duly executed and delivered by CELL.
No other authorizations or proceedings on the part of CELL or Shareholders, or
otherwise, are required to authorize this Agreement and/or the transactions
contemplated hereby. This Agreement constitutes the legal, valid and binding
obligation of CELL and the Shareholders and is enforceable against each of them
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, priority or other laws or court
decisions relating to or affecting generally the enforcement of creditors'
rights or affecting generally the availability of equitable remedies.
3.3. NO CONFLICTS; NO CONSENTS. Other than that set forth in the
Schedule of Exceptions, neither the execution and delivery of this Agreement,
nor the consummation by CELL or the Shareholders of any of the transactions
contemplated hereby, or compliance with any of the provisions hereof, will (i)
conflict with or result in a material breach of, violation of, or default under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, license, lease, credit agreement or other agreement, document,
instrument, permit, authorization, or obligation (including, without limitation,
any of its charter documents) to which CELL is a party or by which it or any of
its assets or properties may be bound, or (ii) violate any judgment, order,
injunction, decree, statute, rule or regulation applicable to CELL or its assets
or properties, the violation of which would have a material adverse effect upon
the business, properties, or assets, or in the condition (financial or
otherwise) of CELL. No authorization, consent or approval of any public body or
authority was or is necessary for the consummation by CELL or the Shareholders
of the transactions contemplated by this Agreement.
3.4 CAPITALIZATION. The authorized capital stock of CELL consists of
100,000,000 shares of common stock, no par value, and 50,000,000 of preferred.
As of the date hereof, there are 3,900,000 shares of common stock issued and
outstanding. There are an additional 2,000,000 shares of common stock reserved
for issuance upon exercise of outstanding stock options. CELL does not have any
contracts or obligations to redeem, repurchase, or otherwise reacquire any
equity security of CELL. All of the Exchanged Shares are duly authorized,
validly issued and outstanding, fully paid, and nonassessable and have been
issued in conformity with all applicable laws. All of the Exchanged Options are
duly authorized and validly granted in conformity with all applicable laws.
<PAGE>
3.5 NO PENDING MATERIAL LITIGATION OR PROCEEDINGS. There are no
actions, suits or proceedings pending or, to the best knowledge of CELL,
threatened against or affecting CELL affecting the Shareholders' rights in the
Exchanged Securities (including actions, suits or proceedings where liabilities
may be adequately covered by insurance) at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, court,
board, bureau, agency or instrumentality, domestic or foreign, or affecting any
of the officers, directors of CELL or the Shareholders in connection with the
business, operations or affairs of either of them, which might reasonably be
expected to result in any material adverse change in the business, properties or
assets, or in the condition (financial or otherwise) of CELL, or which question
or challenge the Reorganization. CELL is not subject to any voluntary or
involuntary proceeding under federal bankruptcy laws and has not made an
assignment for the benefit of creditors.
3.6 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES AND
CERTAIN DEVELOPMENTS. Attached hereto as Exhibit "H" is the unaudited and
internally prepared balance sheet as of December 31, 1999 (the "CELL Balance
Sheet"), copies of the related bank statements for the months of January and
February, 2000, and a copy of the check register for the CELL bank account. The
CELL Balance Sheet (i) is derived from the books and records of CELL, which
books and records have been consistently maintained in a manner which reflects,
and such books and records do fairly and accurately reflect, the assets and
liabilities of CELL, and (ii) fairly present in all material respects the
financial condition of CELL on December 31, 1999. CELL has had no income from
any operations from the date of inception through the date of this Agreement.
Except as and to the extent reflected or reserved against in the CELL Balance
Sheet and as set forth in the Schedule of Exceptions attached hereto and
incorporated herein by reference as Exhibit "G," CELL has no liability or
obligation of a type required by generally accepted accounting principles to be
reflected in the CELL Balance Sheet (whether accrued, to become due, contingent
or otherwise) which individually or in the aggregate could have a materially
adverse effect on the business, assets, condition (financial or otherwise) or
prospects of CELL. Except as set forth in Exhibit "H," since December 31, 1999,
there has been (a) no declaration, setting aside or payment of any dividend or
other distribution with respect to the Exchanged Securities or redemption,
purchase or other acquisition of any of the Exchanged Securities or any splitup
or other recapitalization relative to any of the Exchanged Securities or any
<PAGE>
action authorizing or obligating CELL to do any of the foregoing, (b) no
material loss, destruction or damage to any material property or asset of CELL
whether or not insured, (c) no acquisition or disposition of assets (or any
contract or arrangement therefor), or any other transaction by CELL otherwise
than for fair value and in the ordinary course of business, (d) no discharge or
satisfaction by CELL of any lien or encumbrance or payment of any obligation or
liability (absolute or contingent) other than current liabilities shown on the
CELL Balance Sheet, or current liabilities incurred since the date thereof in
the ordinary course of business, (e) no sale, assignment or transfer by CELL of
any of its tangible or intangible assets except in the ordinary course of
business, cancellation by CELL of any debts, claims or obligations, or mortgage,
pledge, subjection of any assets to any lien, charge, security interest or other
encumbrance, or waiver by CELL of any rights of value which, in any such case,
is material to the business of CELL, (f) no payment of any bonus to or change in
the compensation of any director, officer or employee, whether directly or by
means of any bonus, pension plan, contract or commitment, (g) no writeoff or
material reduction in the carrying value of any asset which is material to the
business of CELL, (h) no disposition or lapse of rights as to any intangible
property which is material to the business of CELL, (i) except for ordinary
travel advances, no loans or extensions of credit to shareholders, officers,
directors or employees of CELL, (j) no agreement to do any of the things
described in this Section 3.6, and (k) no material adverse change in the
condition (financial or otherwise) of CELL or in its assets, liabilities,
properties, business, or prospects.
3.7 APPLICABLE PERMITS; COMPLIANCE WITH LAWS. CELL (i) holds all
licenses, franchises, permits, and authorizations necessary for the lawful
conduct of its business as presently conducted and which the failure to so hold
would have a material adverse effect upon the business, properties, or assets,
or the condition (financial or otherwise) of CELL, and (ii) has complied with
all applicable statutes, laws, ordinances, rules, and regulations of all
governmental bodies, agencies and subdivisions having, asserting or claiming
jurisdiction over it, which the failure to comply with would have a material
adverse effect upon the business, properties, or assets, or the condition
(financial or otherwise) of CELL.
3.8 DISCLOSURE. Neither this Agreement, nor any material certificate,
exhibit, or other written document or statement, furnished to AETHLON by or on
behalf of CELL or, to its knowledge, the Shareholders in connection with the
transactions
<PAGE>
contemplated by this Agreement contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to be
stated in order to make the statements contained herein or therein, when taken
as a whole, not misleading. Neither CELL nor, to its knowledge, the Shareholders
has any knowledge of any fact which has not been disclosed in writing to AETHLON
which may reasonably be expected to materially and adversely affect the
business, properties, or assets, or the condition (financial or otherwise) of
CELL or title of the Shareholders to the Exchanged Securities or their ability
to perform all of the obligations to be performed by them under this Agreement
and/or any other agreement between CELL, the Shareholders, and AETHLON to be
entered into pursuant to any provision of this Agreement.
3.9 OWNERSHIP OF CELL. CELL issued each Shareholder that number of
Exchanged Shares set forth opposite the Shareholders' respective names on
Exhibit "A," which shares together constitute all of the issued and outstanding
shares of the capital stock, common and preferred, of CELL. The Exchanged Shares
are duly authorized, validly issued and outstanding, fully paid and
nonassessable and were issued by CELL in conformity with all applicable laws.
CELL issued each Shareholder that number of Exchanged Options set forth opposite
the Shareholders' respective names on Exhibit "A," which options together
constitute all of the issued and outstanding options to purchase the capital
stock, common and preferred, of CELL. The Exchanged Options are duly authorized
and were validly granted by CELL in conformity with all applicable laws.
3.10 SUBSIDIARIES. CELL has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever.
3.11 REAL PROPERTY. Exhibit "I," attached hereto and incorporated
herein by this reference, contains a complete and accurate legal description of
each parcel of real property owned by or leased to and occupied or subleased by
CELL, and CELL neither owns or leases, nor occupies, any other real property.
3.12 TANGIBLE PERSONAL PROPERTY. Exhibit "J" attached hereto sets forth
a complete list of all items of tangible personal property owned or leased and
used by CELL in the current conduct of its business, where the original cost was
in excess of
<PAGE>
$2,000. CELL has good and marketable title to, or in the case of leased
equipment a valid leasehold interest in, and is in possession of, all such items
of personal property owned or leased by it, free and clear of all title defects,
mortgages, pledges, security interests conditional sales agreements, liens,
restrictions or encumbrances, the presence of which would result in a material
adverse change in the business, properties, or assets, or the condition
(financial or otherwise) of CELL. Included in Exhibit "J" is a list of all
outstanding equipment leases and maintenance agreements to which CELL is a party
as lessee and which individually provide for future lease payments in excess of
$1,000 per month, with the identities of the other parties to all such leases
and agreements shown thereon. All leases of tangible personal property to which
CELL is a party and which are material to the business of CELL are fully
effective in accordance with their respective terms, and, to the best knowledge
of CELL, there exists no default on the part of CELL or termination thereof, the
presence of which would result in a material adverse change in the business,
properties, or assets, or the condition (financial or otherwise) of CELL. Each
item of capital equipment reflected in the Cell Balance Sheet that is used in
the current conduct of CELL's business is in good operating and usable condition
and repair, ordinary wear and tear excepted, and is and will be suitable for use
in the ordinary course of CELL's business and fit for its intended purposes.
3.13 TAX MATTERS. From its inception, CELL has not filed any tax
returns. The only income that CELL has generated since its inception has been
bank interest. The parties acknowledge that all California tax returns have been
filed prior to the Effective Date and that taxes associated therewith in the
amount of $3,702 have been paid. The parties acknowledge that no Federal tax
returns have been filed and that no Federal income tax is due. The parties agree
that they will cooperate in the preparation and filing of Federal tax returns
for prior years after the Effective Date.
3.14 CONTRACTS AND COMMITMENTS. CELL has no contract, agreement,
obligation or commitment, written or oral, expressed or implied, which involves
a commitment or liability of CELL in excess of $10,000 (other than obligations
which are included in accounts payable), and no union contracts, employee or
consulting contracts, financing agreements, debtor or creditor arrangements,
licenses, franchise, manufacturing, distributorship or dealership agreements,
leases, or bonus, health or stock option plans, except as described in Exhibits
"H" and "I." True and complete copies of all such contracts and other agreements
listed in Exhibits "H" and "I" which involve a commitment or liability of CELL
in excess of $10,000 have been made
<PAGE>
available to AETHLON prior to the execution hereof. As of the date hereof, to
the best of their knowledge, there exist no circumstances that would affect the
validity or enforceability of any of such contracts and other agreements in
accordance with their respective terms. CELL has performed and complied in all
material respects with all obligations required to be performed by it to date
under, and is not in default (without giving effect to any required notice or
grace period) under, or in breach of, the terms, conditions or provisions of any
of such contracts and other agreements. The validity and enforceability of any
contract or other agreement described herein has not been and shall not be
materially and adversely affected by the execution and delivery of this
Agreement without any further action. CELL has no contract, agreement,
obligation or commitment which to the best knowledge of CELL requires or will
require future expenditures (including internal costs and overhead) in excess of
reasonably anticipated receipts, nor which is likely to be materially adverse to
CELL's business, assets, condition (financial and otherwise), or prospects.
3.15 PROPRIETARY INFORMATION. Except as disclosed in Exhibit "K," CELL
does not have any patents, applications for patents, trademarks, applications
for trademarks, trade names, licenses or service marks relating to the business
of CELL, nor does any present or former shareholder, officer, director or
employee of CELL own any patent rights relating to any products manufactured,
rented or sold by as disclosed in Exhibit "K." To the best knowledge of CELL,
CELL has the unrestricted right to use, free and clear of any claims or rights
of others, all trade secrets, customer lists, and manufacturing and secret
processes reasonably necessary to the manufacture and marketing of all products
made or proposed to be made by CELL, except for any rights the presence of which
would not result in a material adverse change in the business, properties, or
assets, or the condition (financial or otherwise) of CELL, and, to the best
knowledge of CELL, the continued use thereof by AETHLON following the Closing
will not conflict with, infringe upon, or otherwise violate any rights of
others. CELL has not used and is not making use of any confidential information
or trade secrets of any present or past employee of CELL.
3.16 INSURANCE. CELL does not maintain insurance on its equipment,
tools, machinery, inventory, and properties.
3.17 ARRANGEMENTS WITH EMPLOYEES; LABOR RELATIONS. Except for that
listed in Exhibit "G," no stockholder, director, officer or employee of CELL is
presently a party
<PAGE>
to any transaction with CELL, including without limitation any contract, loan or
other agreement or arrangement providing for the furnishing of services by, the
rental of real or personal property from or to, or otherwise requiring loans or
payments to, any such stockholder, director, officer or employee, or to any
member of the family of any of the foregoing, or to any corporation,
partnership, trust or other entity in which any stockholder, director, officer
or employee or any member of the family of any of them has a substantial
interest or is an officer, director, trustee, partner or employee. There are no
bonus, pension, profit sharing, commission, deferred compensation or other plans
or arrangements in effect as of the date of this Agreement. CELL has no
obligations under any collective bargaining agreement or other contract with a
labor union, under any employment contract or consulting agreement, or under any
executive's compensation plan, agreement or arrangement, nor is any union, labor
organization or group of employees of CELL presently seeking the right to enter
into collective bargaining with CELL on behalf of any of its employees. CELL has
furnished AETHLON with a copy of all written personnel policies, including
without limitation vacation, severance, bonus, pension, profit sharing, and
commissions policies applicable to any of CELL's employees.
3.18 BANK ACCOUNTS. All bank and savings accounts, and other accounts
at similar financial institutions, of CELL existing at date of Closing are
listed on Exhibit "M." Exhibit "M" contains a list of the name of each person or
entity authorized to sign on the bank accounts, borrow money, or incur or
guarantee indebtedness on behalf of CELL.
3.19 POWERS OF ATTORNEY. Other than that set forth in the Schedule of
Exceptions of CELL, no valid powers of attorney from CELL to any person or
entity exist as of the date of this Agreement.
3.20 ABSENCE OF QUESTIONABLE PAYMENTS. To the best of its knowledge,
neither CELL nor any shareholder, director, officer, agent, employee, consultant
or other person associated with or acting on behalf of any of them, has (i) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any direct or
indirect unlawful payments to governmental officials or others from corporate
funds, engaged in any payments or activity which would be deemed a violation of
the Foreign Corrupt Practices Act or rules or
<PAGE>
regulations promulgated thereunder, or (iii) established or maintained any
unlawful or unrecorded accounts.
3.21 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS. No present substantial
customer or substantial supplier to CELL has indicated an intention to terminate
or materially and adversely alter its existing business relationship therewith,
and, to the best knowledge of CELL, none of the present customers of or
substantial suppliers to CELL intends to do so.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF AETHLON
Except as set forth in the Schedule of Exceptions attached hereto and
incorporated herein by this reference as Exhibit "N," AETHLON hereby represents
and warrants to, and covenants with, Shareholder and CELL as follows:
4.1 ORGANIZATION AND CORPORATE POWER. AETHLON is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where the failure to be so qualified would have a materially adverse effect upon
AETHLON. AETHLON has all requisite corporate power and authority to conduct its
business as now being conducted and to own and lease the properties that it now
owns and leases. The Articles of Incorporation as amended to date, certified by
the Secretary of State of Nevada, the Bylaws of AETHLON as amended to date, and
the resolutions of AETHLON's shareholders and directors authorizing the
execution, delivery, and performance of this Agreement, all certified by the
President and the Secretary of AETHLON, which have previously been provided to
CELL by AETHLON, are true and complete copies thereof as currently in effect.
4.2 AUTHORIZATION. AETHLON has full corporate power, legal capacity and
corporate authority to enter into this Agreement, to execute all attendant
documents and instruments contemplated hereby, to enter into this
Reorganization, and to perform all of its obligations hereunder. This Agreement,
and each and every other agreement,
<PAGE>
document and instrument to be executed by AETHLON in connection herewith, has
been effectively authorized by all necessary action on the part of AETHLON,
including without limitation the approvals of AETHLON's Board of Directors (and
shareholders, if necessary) which authorizations remain in full force and
effect, have been duly executed and delivered by AETHLON, and no other
authorizations or proceedings on the part of AETHLON, or otherwise, are required
to authorize this Agreement and/or the transactions contemplated hereby. This
Agreement constitutes the legal, valid, and binding obligation of AETHLON and is
enforceable against AETHLON in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, priority or other laws
or court decisions relating to or affecting generally the enforcement of
creditors' rights or affecting generally the availability of equitable remedies.
4.3. NO CONFLICTS; NO CONSENTS. Neither the execution and delivery of
this Agreement, nor the consummation by AETHLON of any of the transactions
contemplated hereby, or compliance with any of the provisions hereof, will (i)
conflict with or result in a material breach of, violation of, or default under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, license, lease, credit agreement or other agreement, document,
instrument or obligation (including, without limitation, any of its charter
documents) to which AETHLON is a party or by which it or any of its assets or
properties may be bound, or (ii) violate any judgment, order, injunction,
decree, statute, rule or regulation applicable to AETHLON or its assets or
properties, the violation of which would have a material adverse effect upon the
business, properties, or assets, or in the condition (financial or otherwise) of
AETHLON. No authorization, consent or approval of any public body or authority
was or is necessary for the consummation by AETHLON of the transactions
contemplated by this Agreement.
4.4 CAPITALIZATION. The authorized capital stock of AETHLON consists of
25,000,000 shares of common stock, par value $.001. As of the date hereof, there
are 2,660,000 shares of common stock issued and outstanding. All of the shares
of common stock issued and outstanding are validly issued, fully paid, and
nonassessable. Except as disclosed in Exhibit "O," there are no outstanding
contracts or other rights to subscribe for or purchase, or contracts or
obligations to issue or grant any rights to acquire any equity security of
AETHLON. AETHLON does not have any contracts or obligations to redeem,
repurchase or otherwise reacquire any equity security of
<PAGE>
AETHLON. All of the AETHLON Securities, when issued to Shareholder, will be duly
authorized, validly issued and outstanding, fully paid and nonassessable and
were issued in conformity with all applicable laws.
4.5 FINANCIAL STATEMENTS OF AETHLON; ABSENCE OF UNDISCLOSED
LIABILITIES; NO ADVERSE CHANGES. Attached hereto as Exhibit "O" are the audited
financial statements of AETHLON for the years ended March 31, 1999, and the
unaudited financial statements for the period ended December 31, 1999 consisting
of AETHLON's balance sheets as of such dates (the "AETHLON Balance Sheets"), the
related statements of profit or loss for the periods then ended, and the
respective notes thereto. Such financial statements (and the notes related
thereto) are herein sometimes collectively referred to as the "AETHLON Financial
Statements." The AETHLON Financial Statements (i) are derived from the books and
records of AETHLON, which books and records have been consistently maintained in
a manner which reflects, and such books and records do fairly and accurately
reflect, the assets and liabilities of AETHLON, (ii) fairly and accurately
present the financial condition of AETHLON on the date of such statements and
the results of its operations for the periods indicated, except as may be
disclosed in the notes thereto, and (iii) have been prepared in all material
respects in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise
disclosed in the notes thereto). Except as and to the extent reflected or
reserved against in the AETHLON Balance Sheets, and as to matters arising in the
ordinary course of its business since the respective dates of the AETHLON
Balance Sheets, AETHLON has no liability or obligation (whether accrued, to
become due, contingent or otherwise) which individually or in the aggregate
could have a materially adverse effect on the business, assets, condition
(financial or otherwise) or prospects of AETHLON. Except as set forth in Exhibit
"O," since the dates of the respective AETHLON Balance Sheetss, there has been
(a) no declaration, setting aside or payment of any dividend or other
distribution with respect to the common stock of AETHLON or redemption, purchase
or other acquisition of any of the common stock of AETHLON or any splitup or
other recapitalization relative to any of the common stock of AETHLON or any
action authorizing or obligating AETHLON to do any of the foregoing, (b) no
loss, destruction or damage to any material property or asset of AETHLON,
whether or not insured, (c) no acquisition or disposition of assets (or any
contract or arrangement therefor), or any other transaction by AETHLON otherwise
than for fair value and in the ordinary course of business, (d) no discharge or
satisfaction by AETHLON of any lien or encumbrance
<PAGE>
or payment of any obligation or liability (absolute or contingent) other than
current liabilities shown on the AETHLON Balance Sheets, or current liabilities
incurred since the date thereof in the ordinary course of business, (e) no sale,
assignment or transfer by AETHLON of any of its tangible or intangible assets
except in the ordinary course of business, cancellation by AETHLON of any debts,
claims or obligations, or mortgage, pledge, subjection of any assets to any
lien, charge, security interest or other encumbrance, or waiver by AETHLON of
any rights of value which, in any such case, is material to the business of
AETHLON, (f) no payment of any material bonus to or material change in the
compensation of any director, officer or employee, whether directly or by means
of any bonus, pension plan, contract or commitment, (g) no writeoff or material
reduction in the carrying value of any asset which is material to the business
of AETHLON, (h) no disposition or lapse of rights as to any intangible property
which is material to the business of AETHLON, (i) except for ordinary travel
advances, no loans or extensions of credit to shareholders, officers, directors
or employees of AETHLON, (j) no agreement to do any of the things described in
this Section 4.5, and (k) no material adverse change in the condition (financial
or otherwise) of AETHLON or in its assets, liabilities, properties, business, or
prospects.
4.6 TAX MATTERS. AETHLON has, since its inception, accurately prepared
and duly filed all federal, state, county and local tax returns required to have
been filed by it in those jurisdictions where the nature or conduct of its
business requires such filing and where the failure to so file would be
materially adverse to AETHLON. Copies of all such tax returns have been made
available for inspection by CELL and Shareholders prior to the execution hereof.
All federal, state, county and local taxes, including but not limited to those
taxes due with respect to AETHLON's properties, income, gross receipts, excise,
occupation, franchise, permit, licenses, sales, payroll, and inventory due and
payable as of the date of the Closing by AETHLON have been paid or will be paid
prior to the time they become delinquent. The amount reflected in the AETHLON
Balance Sheets of AETHLON as liabilities or reserves for taxes which are due but
not yet payable is sufficient for the payment of all accrued and unpaid taxes of
the types referred to hereinabove.
4.7 NO PENDING MATERIAL LITIGATION OR PROCEEDINGS. There are no
actions, suits or proceedings pending or, to the best knowledge of AETHLON,
threatened against or affecting AETHLON (including actions, suits or proceedings
where liabilities may be adequately covered by insurance) at law or in equity or
before or by any federal,
<PAGE>
state, municipal or other governmental department, commission, court, board,
bureau, agency or instrumentality, domestic or foreign, or affecting any of the
Shareholders, officers or directors of AETHLON in connection with the business,
operations or affairs of AETHLON, which might result in any material adverse
change in the business, properties or assets, or in the condition (financial or
otherwise) of AETHLON, or which question or challenge the Reorganization.
AETHLON is not subject to any voluntary or involuntary proceeding under
applicable bankruptcy laws and has not made an assignment for the benefit of
creditors.
4.8 COMPLIANCE WITH LAWS. AETHLON (i) holds all licenses, franchises,
permits and authorizations necessary for the lawful conduct of its business as
presently conducted and which the failure to so hold would have a material
adverse effect upon the business, properties, or assets, or the condition
(financial or otherwise) of AETHLON, and (ii) has complied with all applicable
statutes, laws, ordinances, rules and regulations of all governmental bodies,
agencies and subdivisions having, asserting or claiming jurisdiction over it,
which the failure to comply with would have a material adverse effect upon the
business, properties, or assets, or the condition (financial or otherwise) of
AETHLON.
4.9 DISCLOSURE. Neither this Agreement, nor any certificate, exhibit,
or other written document or statement, furnished to CELL or the Shareholders by
or on behalf of AETHLON in connection with the transactions contemplated by this
Agreement contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to be stated in order to
make the statements contained herein or therein, when taken as a whole, not
misleading. AETHLON has no knowledge of any fact which has not been disclosed in
writing to CELL or the Shareholders which may reasonably be expected to
materially and adversely affect the business, properties, operations, and/or
prospects of AETHLON or the ability of AETHLON to perform all of the obligations
to be performed by AETHLON under this Agreement and/or any other agreement
between CELL and AETHLON to be entered into pursuant to any provision of this
Agreement.
4.10 SUBSIDIARIES. AETHLON has no subsidiaries other than Syngen
Research, Inc., and no investments, directly or indirectly, or other financial
interest in any other corporation or business organization, joint venture or
partnership of any kind whatsoever except as reflected in the AETHLON Financial
Statements.
<PAGE>
4.11 OFFERING. Subject to the accuracy of the Shareholders'
representations in Section 5.4 hereof, the offer, sale, and issuance of the
AETHLON Securities to be issued in conformity with the terms of this Agreement
and the transactions contemplated hereby, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended, and from all applicable state registration or qualification
requirements.
4.12 REAL PROPERTY. Exhibit "P," attached hereto and incorporated
herein by this reference, contains a complete and accurate legal description of
each parcel of real property owned by or leased to and occupied or subleased by
AETHLON, and AETHLON neither owns or leases, nor occupies, any other real
property. The building and all fixtures and improvements located on such real
property are in good operating condition, ordinary wear and tear excepted. To
the best of its knowledge, AETHLON is not in violation of any material zoning,
building or safety ordinance, regulation or requirement, or other law or
regulation applicable to the operation of owned or leased properties, and
AETHLON has not received any notice of violation with which its has not
complied. All leases of real property to which AETHLON is a party and which are
material to the business of AETHLON are fully effective in accordance with their
respective terms and afford AETHLON peaceful and undisturbed possession of the
subject matter of the lease, and, to the best knowledge of AETHLON, there exists
no default on the part of AETHLON or termination thereof.
4.13 TANGIBLE PERSONAL PROPERTY. Exhibit "Q" attached hereto sets forth
a complete list of all items of tangible personal property owned or leased and
used by AETHLON in the current conduct of its business, where the original cost
was in excess of $10,000. AETHLON has good and marketable title to, or in the
case of leased equipment a valid leasehold interest in, and is in possession of,
all such items of personal property owned or leased by it, free and clear of all
title defects, mortgages, pledges, security interests conditional sales
agreements, liens, restrictions or encumbrances, the presence of which would
result in a material adverse change in the business, properties, or assets, or
the condition (financial or otherwise) of AETHLON. Included in Exhibit "Q" is a
list of all outstanding equipment leases and maintenance agreements to which
AETHLON is a party as lessee and which individually provide for future lease
payments in excess of $1,000 per month, with the identities of the other parties
to all such leases and agreements shown thereon. All leases of tangible personal
<PAGE>
property to which AETHLON is a party and which are material to the business of
AETHLON are fully effective in accordance with their respective terms, and, to
the best knowledge of AETHLON, there exists no default on the part of AETHLON or
termination thereof, the presence of which would result in a material adverse
change in the business, properties, or assets, or the condition (financial or
otherwise) of AETHLON. Each item of capital equipment reflected in the AETHLON
Balance Sheetss which is used in the current conduct of AETHLON's business is in
good operating and usable condition and repair, ordinary wear and tear excepted,
and is and will be suitable for use in the ordinary course of AETHLON's business
and fit for its intended purposes.
4.14 CONTRACTS AND COMMITMENTS. AETHLON has no contract, agreement,
obligation or commitment, written or oral, expressed or implied, which involves
a commitment or liability of AETHLON in excess of $10,000, and no union
contracts, employee or consulting contracts, financing agreements, debtor or
creditor arrangements, licenses, franchise, manufacturing, distributorship or
dealership agreements, leases, or bonus, health or stock option plans, except as
described in Exhibit "N." True and complete copies of all such contracts and
other agreements listed in Exhibit "N" have been made available to CELL prior to
the execution hereof. AETHLON has performed and complied in all material
respects with all obligations required to be performed by it to date under, and
is not in default (without giving effect to any required notice or grace period)
under, or in breach of, the terms, conditions or provisions of any of such
contracts and other agreements. The validity and enforceability of any contract
or other agreement described herein has not been and shall not be materially and
adversely affected by the execution and delivery of this Agreement without any
further action. AETHLON has no contract, agreement, obligation or commitment
which requires or will require future expenditures (including internal costs and
overhead) in excess of reasonably anticipated receipts, nor which is likely to
be materially adverse to AETHLON's business, assets, condition (financial and
otherwise), or prospects.
4.15 PROPRIETARY INFORMATION. AETHLON does not have any patents,
applications for patents, trademarks, applications for trademarks, trade names,
licenses or service marks relating to the business of AETHLON, nor does any
present or former shareholder, officer, director or employee of AETHLON own any
patent rights relating to any products manufactured, rented or sold by AETHLON
except as disclosed in
<PAGE>
Exhibit "R." To the best knowledge of AETHLON, AETHLON has the unrestricted
right to use, free and clear of any claims or rights of others, all trade
secrets, customer lists, and manufacturing and secret processes reasonably
necessary to the manufacture and marketing of all products made or proposed to
be made by AETHLON, except for any rights the presence of which would not result
in a material adverse change in the business, properties, or assets, or the
condition (financial or otherwise) of AETHLON, and, to the best knowledge of
AETHLON, the continued use thereof by AETHLON following the Closing will not
conflict with, infringe upon, or otherwise violate any rights of others. AETHLON
has not used and is not making use of any confidential information or trade
secrets of any present or past employee of AETHLON.
4.16 INSURANCE. AETHLON maintains workers' compensation, property and
general liability, disability, and directors' and officers' insurance with
reputable insurance companies as are usually insured by companies similarly
situated and to the extent customarily insured. A true and complete listing and
general description of each of AETHLON's insurance policies as currently in
force is set forth in Exhibit "S" attached hereto. All such insurance policies
currently are in full force and effect.
4.17 ARRANGEMENTS WITH EMPLOYEES; LABOR RELATIONS. Except as set forth
in Exhibit "N," no stockholder, director, officer or employee of AETHLON is
presently a party to any transaction with AETHLON, including without limitation
any contract, loan or other agreement or arrangement providing for the
furnishing of services by, the rental of real or personal property from or to,
or otherwise requiring loans or payments to, any such stockholder, director,
officer or employee, or to any member of the family of any of the foregoing, or
to any corporation, partnership, trust or other entity in which any stockholder,
director, officer or employee or any member of the family of any of them has a
substantial interest or is an officer, director, trustee, partner or employee.
There are no bonus, pension, profit sharing, commission, deferred compensation
or other plans or arrangements in effect as of the date of this Agreement.
AETHLON has no obligations under any collective bargaining agreement or other
contract with a labor union, under any employment contract or consulting
agreement, or under any executive's compensation plan, agreement or arrangement,
nor is any union, labor organization or group of employees of AETHLON presently
seeking the right to enter into collective bargaining with AETHLON on behalf of
any of its employees. AETHLON has furnished CELL with a copy of all written
personnel policies, including
<PAGE>
without limitation vacation, severance, bonus, pension, profit sharing, and
commissions policies applicable to any of AETHLON's employees.
4.18 BANK ACCOUNTS. All bank and savings accounts, and other accounts
at similar financial institutions, of AETHLON existing at date of Closing are
listed on Exhibit "T." Exhibit "T" contains a list of the name of each person or
entity authorized to sign on the bank accounts, borrow money, or incur or
guarantee indebtedness on behalf of AETHLON.
4.19 POWERS OF ATTORNEY. Other than that set forth in the Schedule of
Exceptions of AETHLON, no valid powers of attorney from AETHLON to any person or
entity exist as of the date of this Agreement.
4.20 ABSENCE OF QUESTIONABLE PAYMENTS. To the best of its knowledge,
neither AETHLON nor any shareholder, director, officer, agent, employee,
consultant or other person associated with or acting on behalf of any of them,
has (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any direct or indirect unlawful payments to governmental officials or
others from corporate funds, engaged in any payments or activity which would be
deemed a violation of the Foreign Corrupt Practices Act or rules or regulations
promulgated thereunder, or (iii) established or maintained any unlawful or
unrecorded accounts.
4.21 REPORTING REQUIREMENTS. AETHLON has complied with and will
maintain its compliance with all of the reporting requirements under the Act and
the Securities Exchange Act of 1934, as amended, through the Closing Date.
4.22 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS. No present substantial
customer or substantial supplier to AETHLON has indicated an intention to
terminate or materially and adversely alter its existing business relationship
therewith, and, to the best knowledge of AETHLON, none of the present customers
of or substantial suppliers to AETHLON intends to do so.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDERS
<PAGE>
Each of the Shareholders, severally and not jointly, represents and
warrants to and covenants with AETHLON, as of the date hereof, as follows:
5.1 AUTHORITY. The Shareholder has full rights, power, and authority to
enter into this Agreement; the execution, delivery, and performance of this
Agreement by the Shareholder and the consummation by the Shareholder of the
transactions contemplated hereby will not conflict with or result in a breach of
any agreement to which the Shareholder is a party and which a conflict or breach
thereof would have a material adverse effect upon the Shareholder or the
Shareholder's properties or assets.
5.2 TITLE. The Shareholder has valid and marketable title to the number
of shares set forth opposite the Shareholder's name on Exhibit "A," free and
clear of any pledge, lien, security interest, or encumbrance other than pursuant
to this Agreement. As of the Closing Date there is no lien, charge, mortgage,
pledge, conditional sale agreement, or other encumbrance of any kind or nature
recorded in the book of registry of shareholders of CELL with respect to any of
the Exchanged Securities owned by the Shareholder and the Exchanged Securities
set forth in Exhibit "A" are duly registered in the name of the Shareholder as
set forth in Exhibit "A."
5.3 RESTRICTED STOCK. The Shareholder acknowledges that the Exchanged
Shares being issued to the Shareholder hereunder will be issued by AETHLON
without registration or qualification or other filings being made under the Act,
or the securities or "blue sky" laws of any state, in reliance upon specific
exemptions therefrom, and in furtherance thereof the Shareholder represents that
he or she is acquiring and will hold the shares to be delivered hereunder for
his or her own account, for investment only, and not for distribution within the
meaning of the U.S. federal securities laws. The Shareholder acknowledges that a
legend, substantially in the following form, shall be placed upon the face of
each certificate representing any of AETHLON Shares being delivered to the
Shareholder hereunder:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
ARE RESTRICTED SECURITIES, AND NO OFFER, SALE, TRANSFER OR OTHER
DISPOSITION OF THIS CERTIFICATE OR THE SECURITIES REPRESENTED HEREBY,
OR OF ANY INTEREST HEREIN, MAY BE MADE WITHOUT SUCH REGISTRATION
UNLESS, IN THE OPINION OF COUNSEL
<PAGE>
ACCEPTABLE TO THE COMPANY, AN EXEMPTION FROM REGISTRATION UNDER THE ACT
IS AVAILABLE.
ARTICLE VI
MISCELLANEOUS
6.1 TAXES AND EXPENSES.
6.1.1 Except as otherwise expressly provided in 6.1.2
immediately below, each of AETHLON and CELL shall pay all of their own
respective taxes due prior to the Closing, attorneys' fees and other costs and
expenses payable in connection with or as a result of the transactions
contemplated hereby and the performance and compliance with all agreements and
conditions contained in this Agreement respectively to be performed or observed
by each of them. The parties represent and warrant that no brokerage, finders'
or other similar fees are being paid by any of the parties in connection with
this Agreement.
6.1.2 The representations and warranties of CELL, the
Shareholders, and AETHLON contained herein and in any other document or
instrument delivered by or on behalf of CELL and/or the Shareholders or on
behalf of AETHLON pursuant hereto, as such may be qualified in Exhibits "H" or
"O," respectively, shall survive the Closing and any investigations made by or
on behalf of AETHLON made prior to the Closing, and shall remain in full force
and effect for a period of two full years from the date of the Closing the
("Warranty Period"), and thereupon expire.
6.2 OTHER DOCUMENTS. Each of the parties hereto shall execute and
deliver such other and further documents and instruments, and take such other
and further actions, as may be reasonably requested of them for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
6.3 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, the heirs, personal representatives,
successors and assigns of AETHLON, the Shareholders, and CELL, but shall not
confer, expressly or by implication, any rights or remedies upon any other
party.
<PAGE>
6.4 GOVERNING LAW. This Agreement is made and shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of California.
6.5 NOTICES. Any notice or the delivery of any item to be delivered by
a party hereto shall be delivered personally, by U.S. mail, return receipt
requested, or by Federal Express, next-day delivery. Any personal delivery made
shall be deemed to have been made upon the execution of a receipt for the item
to be delivered by the party to whom delivery is made. Delivery by U.S. mail or
Federal Express shall be deemed to have been made when delivered by Federal
Express to the party to whom addressed. All such deliveries shall be made to the
following addresses, or such other addresses as the parties may have instructed
the others in accordance with the provisions of this Paragraph:
(a) If to AETHLON: BISHOP EQUITIES, INC. DBA AETHLON MEDICAL
7825 Fay Avenue, Suite 200
La Jolla, CA 92037
With copies to: Bruce H. Haglund, Esq.
Gibson, Haglund & Paulsen
2 Park Place, Suite 450
Irvine, California 92614
(b) If to CELL
or the Shareholders: CELL ACTIVATION, INC.
c/o Kennerson, Schwartz
101 West Broadway, Suite 810
San Diego, CA 92101-8203
With copies to: Ross J. Schwartz, Esq.
Kennerson Schwartz Semerdjian & Haile LLP
101 West Broadway, Suite 810
San Diego, CA 92101-8203
Any party hereto may change its address by written notice to the other party
given in accordance with this Section 6.5.
6.6 ENTIRE AGREEMENT. This Agreement and the exhibits attached hereto
contains the entire agreement between the parties and supersede all prior
agreements, understandings and writings between the parties with respect to the
subject matter hereof and thereof. Each party hereto acknowledges that no
representations,
<PAGE>
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting with authority on behalf of any party, which are not
embodied herein or in an exhibit hereto, and that no other agreement, statement
or promise may be relied upon or shall be valid or binding. Neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated
orally. This Agreement may be amended or any term hereof may be changed, waived,
discharged or terminated by an agreement in writing signed by AETHLON, CELL, and
Shareholders.
6.7 SEVERABILITY. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable by any court, department, official,
political subdivision, agency or other instrumentality of any government,
whether state, local or federal, the remaining provisions of this Agreement to
the extent permitted by law shall remain in full force and effect. To the extent
permitted by law, the parties hereto waive any provision of law that renders any
provision hereof invalid or unenforceable in any respect.
6.8 HEADINGS. The captions and headings used herein are for convenience
only and shall not be construed as a part of this Agreement.
6.9 ATTORNEYS' FEES. In the event of any litigation between AETHLON and
CELL, the non-prevailing party shall pay the reasonable expenses, including the
attorneys' fees, of the prevailing party in connection therewith.
6.10 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which taken together shall
constitute but one and the same document.
6.11 GENDER. Whenever the content of this Agreement requires, the
masculine gender shall include the feminine or neuter, and the singular number
shall include the plural.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
BISHOP EQUITIES, INC. CELL ACTIVATION, INC.
DBA AETHLON MEDICAL a California corporation
a Nevada corporation
<PAGE>
By: By:
------------------------- -----------------------
JAMES A. JOYCE, JOHN P. PENHUNE, Ph. D,
Chairman of the Board President
SHAREHOLDERS:
- -----------------------------------
JOHN H. PENHUNE
- -----------------------------------
ROLAND STOUGHTON
- -----------------------------------
PAUL R. KENNERSON
- -----------------------------------
MONROE E. TROUT
- -----------------------------------
GERT SCHMID-SCHONBEIN
- -----------------------------------
TONY HUGLI
