SECURITY AGREEMENT
This Security Agreement (“Agreement”)
is made as of September ___, 2009 by and between CyberDefender Corporation, a
California corporation (the “Debtor”), and the holder or
holders of the Note described herein (collectively, the “Secured Party”).
A. Pursuant
to one or more 8% Secured Convertible Promissory Notes (collectively, the “Note”) of even date herewith
between the Debtor and the Secured Party, the Secured Party has loaned an
aggregate of $__________ to the Debtor.
B. As
a condition to loaning money under the Note, the Secured Party has required the
execution and delivery of this Agreement by the Debtor.
ACCORDINGLY, in consideration of the
mutual covenants contained in the Note and herein, the parties hereby agree as
follows:
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1.
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Definitions. The
following terms have the meanings set forth
below:
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Terms defined in UCC. The
following terms, when used herein (whether or not capitalized), shall have the
meanings given them in the UCC, except that (i) for purposes of this
Agreement, the meaning of such terms will not be limited by reason of any
limitation on the scope of the UCC, whether under Section 9-109 of the UCC, by
reason of federal preemption or otherwise, and (ii) to the extent the
definition of any category or type of Collateral is expanded by any amendment,
modification or revision to the UCC, such expanded definition will apply
automatically as of the date of such amendment, modification or
revision:
“Account”
“Chattel
paper”
“Commercial
tort claim”
“Consumer
goods”
“Deposit
account”
“Document”
“Equipment”
“General
intangible”
“Instrument”
“Inventory”
“Investment
property”
“Letter-of-credit
right”
“Letter
of credit”
“Money”
“Payment
intangible”
“Collateral” means all right,
title and interest of the Debtor in and to all of its assets, including, but not
limited to, accounts, chattel paper, commercial tort claims, consumer goods,
deposit accounts, documents, equipment, general intangibles, instruments,
inventory, investment property, letter-of-credit rights, letters of credit, and
money, whether now owned or hereafter acquired. Collateral shall not
include under any circumstances any of the intellectual property of the
Company.
“Event of Default” has the
meaning specified in the Note.
“Indebtedness” shall mean (a)
any liabilities for borrowed money or amounts owed (other than trade accounts
payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments due
under leases required to be capitalized in accordance with U.S.
GAAP.
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“Lien” means any mortgage,
deed of trust, lien, pledge, security interest or other charge or encumbrance,
of any kind whatsoever, including but not limited to the interest of the lessor
or titleholder under any capitalized lease, title retention contract or similar
agreement.
“Obligations” means the
Company’s monetary obligations under the Note.
“Permitted Indebtedness”
means (a) the Indebtedness of the Company existing on the Original Issue Date,
(b) lease obligations and purchase money indebtedness incurred in connection
with the acquisition of capital assets and lease obligations with respect to
acquired or leased assets, (c) indebtedness to a commercial lender, and (d)
“Payment Obligations”, as defined in that certain Media and Marketing Services
Agreement, dated as of March 24, 2009, between the Company and GR Match LLC (the
“Media Services Agreement”).
“Permitted Lien” means the
individual and collective reference to the following: (a) Liens for taxes,
assessments and other governmental charges or levies not yet due or Liens for
taxes, assessments and other governmental charges or levies being contested in
good faith and by appropriate proceedings for which adequate reserves (in the
good faith judgment of the management of the Company) have been established in
accordance with U.S. GAAP; (b) Liens imposed by law which were incurred in the
ordinary course of the Company’s business, such as carriers’, warehousemen’s and
mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
the ordinary course of the Company’s business, and which (x) do not individually
or in the aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien; (c) Liens incurred in connection with Permitted
Indebtedness; and (e) Liens incurred pursuant to Section 2.3 of the Media
Services Agreement and the Security Agreement contemplated thereby.
“Security Interest” means the
security interest granted under Section 2.
“UCC” means the Uniform
Commercial Code as adopted in the State of California.
2. Security
Interest. The Debtor hereby grants the Secured Party, except
as hereinafter provided, a first lien security interest (the “Security Interest”) in the
Collateral to secure payment of the Obligations. The Security
Interest shall be subordinate to any Permitted Liens.
3. Representations,
Warranties and Agreements. The Debtor hereby represents,
warrants and agrees as follows:
(a) Title. The
Debtor (i) has absolute title to each item of Collateral in existence on
the date hereof, free and clear of all Liens other than Permitted Liens,
(ii) will have, at the time the Debtor acquires any rights in Collateral
hereafter arising, absolute title to each such item of Collateral free and clear
of all Liens other than Permitted Liens, (iii) will keep all Collateral
free and clear of all Liens other than Permitted Liens, and (iv) will
defend the Collateral against all claims or demands of all persons other than
the Secured Party except holders of Permitted Liens. The Debtor will not sell or
otherwise dispose of the Collateral or any interest therein without the prior
written consent of the holder or holders of more than 51% of the outstanding
principal amount of the Note, except that, until the occurrence of an Event of
Default and the revocation by the holder or holders of more than 51% of the
outstanding principal amount of the Note of the Debtor’s right to do so, the
Debtor may sell any inventory constituting Collateral to buyers in the ordinary
course of business.
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(b) Legal Name; Jurisdiction;
Chief Executive Office. CyberDefender Corporation is the Debtor’s correct
legal name. The Debtor is organized as a corporation under the laws
of the State of California. Its chief executive office is located in
Los Angeles, California.
4. Financing
Statements. The Secured Party may (and the Debtor hereby
authorizes the Secured Party to) execute and file such financing statements and
other documents as the Secured Party may at any time deem appropriate to perfect
the Security Interest.
5. Remedies
upon Event of Default. If the holder or holders of more than
51% of the outstanding principal amount of the Note elect(s) to accelerate the
Note upon the occurrence and continuation of an Event of Default, the Secured
Party may at any time thereafter exercise any one or more of the following
rights and remedies: (a) exercise and enforce any or all rights and
remedies available upon default to a secured party under the UCC, including but
not limited to the right to take possession of any Collateral, proceeding
without judicial process or by judicial process (without a prior hearing or
notice thereof, which the Debtor hereby expressly waives), and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and in
connection therewith, the Secured Party may require the Debtor to make the
Collateral available to the Secured Party at a place to be designated by the
Secured Party which is reasonably convenient to both parties, and if notice to
the Debtor of any intended disposition of Collateral or any other intended
action is required by law in a particular instance, such notice shall be deemed
commercially reasonable if given at least 10 calendar days prior to the date of
intended disposition or other action; and (c) exercise or enforce any or
all other rights or remedies available to the Secured Party by law or agreement
against the Collateral, against the Debtor or against any other person or
property.
6. Secured
Party’s Obligations. The Secured Party’s duty of care with
respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if the Secured Party exercises reasonable care in physically
safekeeping such Collateral or, in the case of Collateral in the custody or
possession of a bailee or other third person, exercises reasonable care in the
selection of the bailee or other third person.
7. Waiver;
Cumulative Remedies. This Agreement can be waived, modified,
amended, terminated or discharged, and the Security Interest can be released,
only explicitly in writing signed by the holder or holders of at least 51% of
the outstanding principal amount of the Note; provided, that this Security
Interest will be released in full, without further action by any party, upon the
satisfaction in full of the Note. A waiver signed by the Secured
Party shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the
exercise or enforcement of any of the Secured Party’s rights or
remedies. All rights and remedies of the Secured Party shall be
cumulative and may be exercised singularly or concurrently, at the Secured
Party’s option, and the exercise or enforcement of any one such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other. Any waiver, modification or amendment of this Agreement
affecting any rights of the Debtor shall be in writing signed by the
Debtor.
8. Binding
Effect. This Agreement has been duly and validly authorized by
all necessary action of the Debtor and the Secured Party. This Agreement shall
be binding upon and inure to the benefit of the Debtor and the Secured Party and
their respective successors and assigns and shall take effect when signed by the
Debtor and delivered to the Secured Party, and the Debtor waives notice of the
Secured Party’s acceptance hereof.
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9. Governing
Law; Venue. This Agreement will be governed by the laws of the
State of California without giving effect to any choice or conflict of law
provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction. Venue for any legal action under this Agreement
shall be the state or federal courts located in the City of Los Angeles,
California.
10. Severability. If
any provision or application of this Agreement is held unlawful or unenforceable
in any respect, such illegality or unenforceability shall not affect other
provisions or applications which can be given effect and this Agreement shall be
construed as if the unlawful or unenforceable provision or application had never
been contained herein or prescribed hereby.
11. Survival. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations.
12. Counterparts. This
Agreement may be executed by facsimile signature and in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date and year first above
written.
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CYBERDEFENDER
CORPORATION,
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a
California Corporation
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Xxxx
Xxxxxxxx
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Chief
Executive Officer
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SECURED
PARTY:
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