SUBORDINATION AGREEMENT
To
the
purchasers of 10% Convertible Promissory Notes (the “New Notes”) of
CyberDefender Corporation, a California corporation (the “Company”)
Ladies
and Gentlemen:
The
holders of at least 75% of the outstanding principal amount (collectively,
the
“75% Debenture Holders”) of the Company’s 10% Secured Convertible Debentures due
September 12, 2009 (the “Debentures”) desire to grant consent, for and on behalf
of all of the holders of the Debentures (the “Senior Lenders”), to permit the
Company to consummate a private placement involving the issuance of up to
$1,200,000 in aggregate principal amount of the New Notes, as required by
Section 7(a) of the Debentures. Defined terms not otherwise defined herein
shall
have the meanings set forth in that certain Securities Purchase Agreement dated
September 12, 2006 among the Company and the Senior Lenders (the “Purchase
Agreement”).
For
the purpose of inducing the 75% Debenture Holders to grant the above-described
consent, and in consideration thereof, the undersigned purchasers of the New
Notes (“New Lenders”) agree as follows:
1.
Any
and
all claims of New Lenders against the Company, now or hereafter existing, are,
and shall be at all times, subject and subordinate to any and all claims, now
or
hereafter existing which any Senior Lender may have against the Company
(including any claim by the Senior Lenders for interest accruing after any
Bankruptcy Event, or any claim by the Senior Lenders for any such interest
which
would have accrued in the absence of such Bankruptcy Event).
2.
Each
New
Lender agrees not to commence or threaten to commence any action or proceeding,
xxx upon, or to collect, or to receive payment of the principal or interest
of
any claim or claims now or hereafter existing which such New Lender may hold
against the Company, and not to sell, assign, transfer, pledge, hypothecate,
or
encumber such claim or claims except subject expressly to this Agreement, and
not to enforce or apply any security now or hereafter existing therefor, nor
to
file or join in any petition to commence any proceeding under Title 11 of the
U.S. Code (the “Bankruptcy Code”), nor to take any lien or security on any of
the Company’s property, real or personal, so long as any claim of Senior Lenders
against the Company shall exist.
3.
In
case
of any Bankruptcy Event: (a) the Company and any assignee, trustee in
bankruptcy, receiver, debtor in possession or other person or persons in charge
are hereby directed to pay to Senior Lenders the full amount of Senior Lenders’
claims against the Company (including interest to the date of payment) before
making any payment of principal or interest to New Lenders, and insofar as
may
be necessary for that purpose, each New Lender hereby assigns and transfers
to
the Senior Lenders all rights to any payments, dividends or other distributions,
and (b) each New Lender hereby irrevocably constitutes and appoints each Senior
Lender its true and lawful attorney to act in its name and stead: (i) to file
the appropriate claim or claims on behalf of such New Lender if such New Lender
does not do so prior to 30 days before the expiration of the time to file claims
in such proceeding and if any Senior Lender elects in its sole discretion to
file such claim or claims and (ii) to accept or reject any plan of
reorganization or arrangement on behalf of New Lenders, and to otherwise vote
New Lenders’ claim in respect of any indebtedness now or hereafter owing from
the Company to New Lenders in any manner the Senior Lenders deem appropriate
for
their respective own benefit and protection.
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4.
Each
New
Lender acknowledges and agrees that the Senior Lenders may agree with the
Company to (a) renew, compromise, extend, accelerate or otherwise change the
time of payment, or any other terms, of any existing or future claim of the
Senior Lenders against the Company, (b) increase or decrease the rate of
interest payable thereon or any part thereof, (c) exchange, enforce, waive
or
release any security therefor, (d) apply such security and direct the order
or
manner of sale thereof in such manner as the Senior Lenders may determine in
accordance with the Security Documents and the Debentures, (e) release the
Company or any guarantor of any indebtedness of the Company from liability,
and
(f) make optional future advances to the Company, all without notice to the
New
Lenders without affecting the subordination provided by this
Agreement.
5. In
the
event that any payment or any cash or noncash distribution is made to any New
Lender in violation of the terms of this Agreement, such New Lender shall
receive same in trust for the benefit of the Senior Lenders, and shall forthwith
remit it to the Agent in the form in which it was received, together with such
endorsements or documents as may be necessary to effectively negotiate or
transfer same to the Senior Lenders.
6.
Until
all
such claims of Senior Lenders against the Company shall be paid in full, no
gift
or loan shall be made by the Company to any New Lender.
7.
For
violation of this Agreement, each New Lender, severally and not jointly, shall
be liable for all loss and damage sustained by reason of such breach, provided,
however, in no event shall any New Lender be liable for any loss or damage
in
excess of the principal amount of such New Lender’s New Note, and in no event
shall any New Lender be liable for actions taken by any other New Lender in
violation of this Agreement.
8.
This
Agreement shall be binding upon the heirs, successors and assigns of New
Lenders, the Company and the Senior Lenders. This Agreement and any existing
or
future claim of a Senior Lender against the Company may be assigned by such
Senior Lender, in whole or in part, without notice to New Lenders or the
Company.
9. Any
and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 5:30 p.m. (New York City time) on a Business
Day,
(b) the next Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto on a day that is not a Business Day or
later
than 5:30 p.m. (New York City time) on any Business Day, (c) the 2nd
Business
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
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10. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be determined in accordance with the provisions of
the
Purchase Agreement.
11. This
Agreement may be executed in counterparts, all of which when taken together
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party,
it
being understood that both parties need not sign the same counterpart.
12. This
Agreement constitutes the entire agreement among the parties with respect to
the
matters covered hereby and thereby and supersedes all previous written, oral
or
implied understandings among them with respect to such matters.
13. The
invalidity of any portion hereof shall not affect the validity, force or effect
of the remaining portions hereof. If it is ever held that any restriction
hereunder is too broad to permit enforcement of such restriction to its fullest
extent, such restriction shall be enforced to the maximum extent permitted
by
law.
14. Each
of
the parties hereto acknowledges that this Agreement has been prepared jointly
by
the parties hereto, and shall not be strictly construed against either
party.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement
to
be duly executed by their respective authorized signatories as of the date
first
indicated above.
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Name
of New Lender
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By:
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Name
and Title:
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Address
for Notice:
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Fax
#:
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Acceptance of Subordination Agreement by Company
The
undersigned being the Company named in the foregoing Subordination Agreement,
hereby accepts and consents thereto and agrees to be bound by all the provisions
thereof and to recognize all priorities and other rights granted thereby to
the
Senior Lenders (as defined therein), their respective successors and assigns,
and to perform this Agreement in accordance therewith.
Dated:
______________, 2008
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CYBERDEFENDER
CORPORATION
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By:
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Name:
Xxxx Xxxxxxxx
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Title:
Chief Executive Officer
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Address:
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000
Xxxx 0xx
Xxxxxx, Xxxxx 000
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Xxx
Xxxxxxx, XX 00000
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Fax
#: 000.000.0000
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