8% SECURED NOTE
Exhibit
10.7
| $___________ |
July
__,
2006
|
FOR
VALUE
RECEIVED, CyberDefender Corporation., a California corporation (the
"Maker"),
with
its primary offices located at ___________________, promises to pay to the
order
of ______________, or its registered assigns (the "Payee"),
upon
the terms set forth below, the principal sum of __________________
($___________.00) plus interest on the unpaid principal sum outstanding at
the
rate of 8% per annum.
1. Payments.
(a)
The
full amount of principal and accrued interest under this Note shall be due
on
the earlier of (i) January __, 2007 or (ii) unless waived at the sole discretion
of the Payee, the earliest date that the Maker raises additional capital by
means of an equity or debt financing (the "Maturity
Date"),
unless due earlier in accordance with the terms of this Note.
(b)
Maker
may not prepay, in whole or in part, the principal sum and interest under this
Note without the prior written consent of Xxxxx.
2.
Secured
Obligation.
As
security for the payment in full of principal, interest and performance under
this Note and of all other liabilities and obligations of the Maker to the
Payee, Maker hereby grants to the Payee a general security interest in all
assets of the Maker and all proceeds arising therefrom and any and all products
of such assets. Maker represents that it is the sole lawful owner of such assets
attributable to it, free and clear of any liens and encumbrances, and has the
right and power to pledge, sell, assign and transfer absolute title thereto
to
the Payee and that no previously filed financing statement covering such assets
will be effective at the Closing in any jurisdiction after giving effect to
the
Subordination Agreement. Xxxxx agrees that this security interest shall be
a
first priority security interest, senior and prior in payment to all other
indebtedness and obligations of Maker to third parties. Maker hereby authorizes
the Payee to file one or more financing statements under the UCC and any
amendments thereto or extensions thereof without the signature of the
Maker.
3.
Events
of Default.
(a)
"Event
of Default",
wherever used herein, means any one of the following events (whatever the
reason
and whether it shall be voluntary or involuntary or effected by operation
of law
or pursuant to any judgment, decree or order of any court, or any order,
rule or
regulation of any administrative or governmental body):
(i)
any
default in the payment of the principal of, or the interest on, this Note,
as
and when the same shall become due and payable; or
(ii)
Maker
shall fail to observe or perform any obligation or shall breach any
representation, warranty or term or provision of this Note, the Secured Note
Purchase Agreement, dated July __, 2006, pursuant to which this Note was issued
(the “Purchase
Agreement”),
any
of the other Transaction Documents (as defined in the Purchase Agreement) and
such failure or breach shall not have been remedied within ten days after the
date on which notice of such failure or breach shall have been delivered;
or
(iii)
Maker
or
any of its subsidiaries shall commence, or there shall be commenced against
Maker or any subsidiary a case under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto, or Maker or any
subsidiary commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or
similar law of any jurisdiction whether now or hereafter in effect relating
to
Maker or any subsidiary, or there is commenced against Maker or any subsidiary
any such bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or Maker or any subsidiary is adjudicated insolvent
or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Maker or any subsidiary suffers any appointment of
any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or Maker or any
subsidiary makes a general assignment for the benefit of creditors; or Maker
or
any subsidiary shall fail to pay, or shall state that it is unable to pay,
or
shall be unable to pay, its debts generally as they become due; or Maker or
any
subsidiary shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or Maker or any
subsidiary shall by any act or failure to act expressly indicate its consent
to,
approval of or acquiescence in any of the foregoing; or any corporate or other
action is taken by Maker or any subsidiary for the purpose of effecting any
of
the foregoing; or
(iv)
Maker
or
any subsidiary shall default in any of its respective obligations under any
other note or any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
of Maker or any subsidiary, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable; or
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(v)
Maker
shall, without Xxxxx’s prior written consent (a) be a party to any Change of
Control Transaction (as defined below), (b) agree to sell or dispose all or
in
excess of 50% of its assets in one or more transactions (whether or not such
sale would constitute a Change of Control Transaction), (c) redeem or repurchase
more than a de minimis number of shares of Common Stock or other equity
securities of Maker, or (d) make any distribution or declare or pay any
dividends (in cash or other property, other than common stock) on, or purchase,
acquire, redeem, or retire more than a de minimis amount of Maker's capital
stock, of any class, whether now or hereafter outstanding. "Change
of Control Transaction"
means
the occurrence of any of: (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Securities Exchange Act of 1934, as amended) of effective
control (whether through legal or beneficial ownership of capital stock of
Maker, by contract or otherwise) of in excess of 50% of the voting securities
of
Maker, (ii) a replacement at one time or over time of more than one-half of
the
members of Maker's board of directors which is not approved by a majority of
those individuals who are members of the board of directors on the date hereof
(or by those individuals who are serving as members of the board of directors
on
any date whose nomination to the board of directors was approved by a majority
of the members of the board of directors who are members on the date hereof),
(iii) the merger of Maker with or into another entity that is not wholly-owned
by Maker, consolidation or sale of 50% or more of the assets of Maker in one
or
a series of related transactions, or (iv) the execution by Maker of an agreement
to which Maker is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii) or (iii); or
(vi)
Xxxx
Xxxxxxxx, Maker's Chief Executive Officer shall cease to be Maker's Chief
Executive Officer or shall cease to perform any of the material functions and
duties currently performed by such person; or
(vii)
Maker
shall unreasonably modify or change its method of accounting or restate or
modify its financial statements for any period of time prior to the date of
this
Note.
(b)
If
any
Event of Default occurs, the full principal amount of this Note, together with
all accrued interest thereon, shall become, at the Payee's election, immediately
due and payable in cash. Commencing 5 days after the occurrence of any Event
of
Default that results in the acceleration of this Note, the interest rate on
this
Note shall accrue at the rate of 18% per annum, or such lower maximum amount
of
interest permitted to be charged under applicable law. The Payee need not
provide and Maker hereby waives any presentment, demand, protest or other notice
of any kind, and the Payee may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Xxxxx at any time prior to payment hereunder. No such rescission
or annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
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4.
Most
Favored Nations.
The
Payee shall have the right, in its sole discretion, to convert the principal
balance of this Note then outstanding plus accrued but unpaid interest, in
whole
or in part, into securities of the Maker (or its successor or parent) being
issued in any private or public offering of equity securities of the Maker
(or
its successor or parent) consummated while this Note is outstanding, upon the
terms and conditions of such offering, at a rate equal to, for each $1 of
principal amount of this Note surrendered, $1.15 of new consideration offered
for such securities. By way of example, if the Maker undertakes an offering
of
convertible debentures and common stock purchase warrants, the Payee may elect
to surrender $100,000 principal amount of this Note and shall receive
convertible debentures with a principal amount of $115,000 along with any
warrants and other consideration given to a purchaser of such principal amount
of convertible debentures in such transaction.
5.
No
Waiver of Payee's Rights.
All
payments of principal and interest shall be made without setoff, deduction
or
counterclaim. No delay or failure on the part of the Payee in exercising any
of
its options, powers or rights, nor any partial or single exercise of its
options, powers or rights shall constitute a waiver thereof or of any other
option, power or right, and no waiver on the part of the Payee of any of its
options, powers or rights shall constitute a waiver of any other option, power
or right. Maker hereby waives presentment of payment, protest, and all notices
or demands in connection with the delivery, acceptance, performance, default
or
endorsement of this Note. Acceptance by the Payee of less than the full amount
due and payable hereunder shall in no way limit the right of the Payee to
require full payment of all sums due and payable hereunder in accordance with
the terms hereof.
6.
Modifications.
No term
or provision contained herein may be modified, amended or waived except by
written agreement or consent signed by the party to be bound
thereby.
7.
Cumulative
Rights and Remedies; Usury.
The
rights and remedies of Payee expressed herein are cumulative and not exclusive
of any rights and remedies otherwise available under this Note, the Security
Agreements, or applicable law (including at equity). The election of Payee
to
avail itself of any one or more remedies shall not be a bar to any other
available remedies, which Maker agrees Payee may take from time to time. If
it
shall be found that any interest due hereunder shall violate applicable laws
governing usury, the applicable rate of interest due hereunder shall be reduced
to the maximum permitted rate of interest under such law.
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8.
Collection
Expenses.
If
Payee shall commence an action or proceeding to enforce this Secured Promissory
Note, then Maker shall reimburse Payee for its costs of collection and
reasonable attorneys fees incurred with the investigation, preparation and
prosecution of such action or proceeding.
9.
Severability.
If any
provision of this Note is declared by a court of competent jurisdiction to
be in
any way invalid, illegal or unenforceable, the balance of this Note shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
10.
Successors,
Assigns and Assumption.
This
Note shall be binding upon Maker and its successors and shall inure to the
benefit of the Payee and its successors and assigns. The term "Payee" as used
herein, shall also include any endorsee, assignee or other holder of this Note.
Any successor to the Maker or any surviving entity in a transaction with the
Maker shall (i) assume, prior to such transaction, all of the obligations of
the
Maker under this Note and the other documents entered into in connection
herewith pursuant to written agreements in form and substance satisfactory
to
the Payee (such approval not to be unreasonably withheld or delayed) and (ii)
issue to the Payee a new debenture of such successor entity evidenced by a
written instrument substantially similar in form and substance to this Note,
including, without limitation, having a principal amount and interest rate
equal
to the principal amount and the interest rate of this Note and having similar
ranking to this Note, which shall be satisfactory to the Payee (any such
approval not to be unreasonably withheld or delayed). The provisions of
this Section shall apply similarly and equally to successive
transaction.
11.
Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Note shall be governed by and construed and enforced by the terms of
the
Purchase Agreement.
12. Notice.
Any and
all notices or other communications or deliveries to be provided by the Payee
hereunder shall be made pursuant to the Purchase Agreement.
The
undersigned signs this Note as a maker and not as a surety or guarantor or
in
any other capacity.
| CYBERDEFENDER CORPORATION | |||
| By: | |||
|
Name: Xxxx Xxxxxxxx
|
|||
| Title: Chief Executive Officer |
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