SECURITIESPURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”), dated as of June 3, 2009, is entered into by and between CyberDefender Corporation, a California corporation (the “Company”), and GR Match, LLC, a Delaware limited liability company (the “Purchaser”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated thereunder, the board of directors of the Company has authorized the sale and issuance to the Purchaser of 1,142,860 shares of Common Stock, for a purchase price of $1.75 per share, subject to the terms and conditions of this Agreement (the “Offering”).

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act.  With respect to the Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as the Purchaser will be deemed to be an Affiliate of the Purchaser.

 

“Amendment” shall have the meaning ascribed to such term in Section 2.2(a)(iii).

 

 “Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close or any day that the Common Stock is not traded on the Trading Market.

 

 “Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing Date” means the Business Day when all of the Transaction Documents have been executed and delivered by the Company and the Purchaser, and all conditions precedent to (i) the Purchaser’s obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities have been satisfied or waived.

 

“Commercial Funds” shall have the meaning ascribed to such term in Section 4.4(a).

 

 

“Commercials” shall have the meaning ascribed to such term in Section 4.4(a).

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, no par value per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

 

“Common Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

“License Agreement” shall have the meaning ascribed to such term in Section 4.5.

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning ascribed to such term in Section 3.1(b).

 

“Media Services Agreement” shall have the meaning ascribed to such term in Section 2.2(a)(iii).

 

“Offering” has the meaning set forth in the recitals hereof.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

 “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Registration Statement” means a registration statement covering the resale of the Securities filed with the Commission pursuant to the Company’s obligations under Section 4.3 of this Agreement.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Securities” means the shares of Common Stock sold to the Purchaser pursuant to this Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated hereunder.

 

“Subscription Amount” means $2,000,005.00 United States Dollars in immediately available funds.

 

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

 

“Transaction Documents” means this Agreement and any other documents, instruments or agreements executed in connection with the transactions contemplated hereby.

 

 

 

2.1    Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein and substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell and the Purchaser agrees to purchase the Securities.  At or prior to the Closing, the Purchaser shall deliver the Subscription Amount to the Company by wire transfer in accordance with the Company’s written wire instructions to be provided to Purchaser.  On the Closing Date, the Company shall deliver to the Purchaser a certificate issued in the name of the Purchaser representing the Securities, and the Company and the Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. The Closing shall occur upon satisfaction of the conditions set forth in Sections 2.2 and 2.3.

 

2.2    Deliveries(a) On the Closing Date, the Company shall deliver or cause to be delivered to the Purchaser the following:

 

(ii)    a certificate for 1,142,860 shares of Common Stock issued in the name of the Purchaser; provided, however, that the Company may provide to Purchaser, and for the purposes of consummating the Closing the Purchaser shall accept, an electronic “pdf” copy such certificate, with the original certificate to be delivered to the Purchaser no later than two Business Days following the Closing Date; and

(iii)    an amendment of that certain Media and Marketing Services Agreement, dated March 24, 2009 (the “Media Services Agreement”), by and between the Purchaser and the Company, extending the term of such agreement to June 1, 2011, in the form attached hereto as Exhibit A (the “Amendment”) duly executed by the Company.

(b)    On the Closing Date, the Purchaser shall deliver or cause to be delivered to the Company the following:

 

 

(ii)    the Subscription Amount, less an amount equal to the Commercial Funds,  by wire transfer to a bank account designated in writing by the Company; and

 

(iii)    the Amendment duly executed by the Purchaser.

 

 

(a)    The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)    the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchaser contained herein;

 

(ii)    all obligations, covenants and agreements of the Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

 

(iii)    the delivery by the Purchaser to the Company of the items set forth in Section 2.2(b) of this Agreement.

 

 

(i)    the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;

 

(ii)    all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

(iii)    the delivery by the Company to the Purchaser of the items set forth in Section 2.2(a) of this Agreement;

 

(iv)    there shall have been no Material Adverse Effect with respect to the Company since March 31, 2009; and

 

(v)    from the date hereof to the Closing Date, a banking moratorium shall not have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

3.1    Representations and Warranties of the Company.  Except as set forth in the SEC Documents or as specifically disclosed herein, the Company hereby represents and warrants, as of the date hereof and as of the Closing Date, to the Purchaser as follows:

 

(a)    Subsidiaries.  The Company has no (and has never had any) subsidiaries and does not presently own, or record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or other equity interest in any corporation, association or business entity, nor is the Company, directly or indirectly, a participant in any joint venture, partnership or other entity.

 

(b)    Organization and Qualification.  The Company is an entity duly incorporated, validly existing and in good standing under the laws of the State of California, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  The Company is not in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  The Company is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)    Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its board of directors or its stockholders in connection therewith other than in connection with the Required Approvals.  Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(d)    No Conflicts.  Except as set forth on Schedule 3.1(d), the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected (or result in the imposition of any material Liens upon any of the Company’s assets), or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company is bound or affected ; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e)    Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing with the Commission of a Registration Statement as required by this Agreement, and (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f)    Issuance of the Securities.  The Securities are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and non-assessable.

 

(g)    Capitalization.  Except as set forth on Schedule 3.1(g), the capitalization of the Company is as disclosed in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.  Except as a result of the purchase and sale of the Securities or otherwise as set forth on Schedule 3.1(g) or in such Quarterly Report, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. Except as set forth on Schedule 3.1(g), the issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  All of the outstanding shares of capital stock of the Company are validly issued, fully paid and non-assessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.  Except as set forth on Schedule 3.1(g) and except for (a) shares of Common Stock or Common Stock Equivalents issued to employees, officers, directors or consultants (other than any consultant which engages in any business which is competitive with or provides any services which are similar to the business of or services provided by the Purchaser or any of its Affiliates as determined at the time of the issuance) of the Company, (b) securities issued upon the exercise, exchange,  conversion or amendment of any securities issued and outstanding on the date hereof, or (c) securities issued pursuant to acquisitions or strategic transactions, since March 31, 2009, the Company has not sold or and issued any shares of Common Stock or Common Stock Equivalents at a price per share (or conversion or exercise price, as the case may be) of less than $1.75.

(h)    SEC Documents.    The Company hereby makes reference to the following documents filed by the Company with the Commission, which are available for review on the Commission’s website, www.sec.gov (collectively, the “SEC Documents”): (a) Annual Report on Form 10-K for the fiscal year ended December 31, 2008; (b) and the Quarterly Report on Form 10-Q for the period ended March 31, 2009; and any amendments thereto.  As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act, as amended, and the rules and regulations promulgated thereunder and none of the SEC Documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) (except, in the case of unaudited statements, as permitted by the applicable form under the Exchange Act) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the financial position of the Company as of the dates thereof and its consolidated statements of operations, stockholders’ equity and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments which were and are not expected to have a Material Adverse Effect.  Except as and to the extent set forth on the balance sheet of the Company as of March 31, 2009, including the notes thereto, the Company has no liability or obligation of any nature (whether accrued, absolute, contingent or otherwise and whether required to be reflected on a balance sheet or not).

 

 

(i)    Material Changes.  Since March 31, 2009, except as disclosed as a subsequent event in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information.

 

(j)    Litigation.  There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any director or officer thereof is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.

(n)           Broker’s Fees. The Purchaser shall not be obligated to pay any commission, brokerage fee, or finder’s fee based on any alleged agreement or understanding between the Company and a third person in respect of the transactions contemplated hereby.  The Company hereby agrees to indemnify the Purchaser against any claim by any third person for any commission, brokerage fee, finder’s fee, or other payment with respect to this Agreement or the transactions contemplated hereby based on any alleged agreement or understanding between the Company and any such third person, whether express or implied from the actions of the Company or anyone acting or purporting to act on behalf of the Company.

 

(o)           Disçlosure. All disclosures furnished by or on behalf of the Company to the Purchaser regarding the Company, its business and the transactions contemplated hereby with respect to the representations and warranties made herein are true and correct with respect to such representations and warranties and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

3.2    Representations and Warranties of the Purchaser.  The Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

(a)    Organization; Authority.  The Purchaser is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware with full right, limited liability company power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by the Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary limited liability company action on the part of the Purchaser.  Each Transaction Document has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b)    Own Account.  The Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting the Purchaser’s right to sell the Securities pursuant to a Registration Statement or otherwise in compliance with applicable federal and state securities laws).

(c)    Purchaser Status.  At the time the Purchaser was offered the Securities, it was, and at the date hereof it is: (i) an “accredited investor” as defined in Rule 501 under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  The Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(d)    Experience of the Purchaser.  The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e)    General Solicitation.  The Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

4.2    Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of the Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchaser under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

(a)    Commercials.  At the Closing, the Company shall advance to the Purchaser an amount equal to $400,000 (the “Commercial Funds”) which shall be designated solely to pay for the creation, development, and/or production of short form television direct response commercials which are no more than one minute twenty seconds (1:20) in length in connection with the advertisement and marketing of the CyberDefender Products (as defined in the Media Services Agreement) (“Commercials”).  Unless otherwise mutually agreed to by the Purchaser and the Company in writing, the Purchaser or an Affiliate of the Purchaser shall create, develop, and/or produce such Commercials on terms mutually acceptable to the Company and the Purchaser.  The Purchaser acknowledges and agrees that it shall reserve the Commercial Funds in one or more of the Purchaser's bank accounts and shall not use the Commercial Funds for any purposes other than the purposes set forth in this Section 4.4 without the prior written consent of the Company. Notwithstanding anything in the Media Services Agreement to the contrary, the Company shall have approval rights over the timing, budget, and content and other creative aspects of all Commercials which are funded, whether in whole or in part, using all or a portion of the Commercial Funds, which approval shall not be unreasonably withheld or delayed.  In the event the Company fails to provide its written disapproval of the timing, budget, and/or content and other creative aspects of any applicable Commercial within five (5) days of its receipt of a request from the Purchaser of the same, the Company shall be deemed to have approved such aspects of the applicable Commercial.  Notwithstanding anything herein to the contrary, the Purchaser shall have no obligation to develop, create, produce, revise, edit and/or otherwise modify, as the case may be, an applicable Commercial until the Company has provided is actual or deemed approval of the budget for such Commercial.  Not later than thirty (30) days following the completion of any applicable Commercial, the Purchaser shall provide to the Company a reasonably detailed schedule of the actual costs incurred by the Purchaser in connection with the creation, development, and production of such Commercial and an accounting of the amount of the Commercial Funds used for such Commercial.  Any portion of the Commercial Funds which have not been expended by the Purchaser in accordance with this Section 4.4(a) as of the expiration or earlier termination of the Media Services Agreement shall be promptly returned to the Company.  Any disputes regarding the timing, budget, and/or content and other creative aspects of any Commercial, or the use of the Commercial Funds, shall be resolved in accordance with Section 18 of the Media Services Agreement.  Notwithstanding anything to the contrary in the Media Services Agreement, any Commercials for which the development or production costs are funded using any portion of the Commercial Funds (the “Company Funded Commercials”) shall be deemed works made for hire, and the Company shall own all right, title and interest in, to and under any and all legally protectable intellectual property  created, produced, developed, or otherwise acquired in connection with the Company Funded Commercials subject to the rights of all third parties (including without limitation, celebrities, music, testimonials, etc.).  Notwithstanding the foregoing, CyberDefender acknowledges and agrees that it shall not use (i) the name of the Purchaser or any of its members or Affiliates, or any derivations thereof, (ii) any trademarks, service marks, logos or any other intellectual property of the Purchaser or any of its members or Affiliates, or (iii) the names, images, likenesses, biographical information or other references to any principals of the Purchaser or its Affiliates in any of the Company Funded Commercials without the prior written consent of the Purchaser.  The Purchaser shall have no right to use or otherwise exploit the Company Funded Commercials without the Company’s prior written consent, which consent the Company may withhold in its sole discretion.

4.5           Product License.  Promptly following the Purchaser's request to enter into the same, the Company and the Purchaser shall use their good faith efforts to enter into a license agreement in substantially the form of  the license agreement used by the Purchaser for transactions of this type and on terms and conditions mutually acceptable to the Company and the Purchaser (the “License Agreement”) pursuant to which the Company will grant to the Purchaser a non-exclusive, worldwide license to exploit, advertise, market and sell the CyberDefender Products in connection with the private label branding of the CyberDefender Products under the “For Dummies” brand name by John Wiley & Sons, Inc. (“Wiley”) or under an alternative brand name by any other third party which is acceptable to the Company, as determined by the Company in good faith.  The term of the License Agreement shall expire as of the later of (i) five (5) years following the execution thereof or (ii) the expiration or earlier termination of the term of any applicable license agreement between the Purchaser and Wiley or any other third party relating to the private label branding of the CyberDefender Products under the “For Dummies” brand name (or under an alternative brand name acceptable to the Company, as determined by the Company in good faith).

 

4.6           Indemnification of the Purchaser. The Company will indemnify and hold the Purchaser and its Affiliates, and each of their directors, managers, officers, shareholders, members, employees and agents, as the case may be (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, provided that the Company’s liability under this Section for a breach of any representations or warranties made by the Company in this Agreement shall in no event exceed the Subscription Amount.

 

4.7           Securities Laws Disclosure; Publicity. The Company and the Purchaser shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor the Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Purchaser, or without the prior consent of the Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law or regulation, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Purchaser, or include the name of the Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of the Purchaser, except (i) as required by federal securities law or regulation in connection with (A) any registration statement contemplated herein and (B) the filing with the Commission on Form 8-K of final Transaction Documents (including signature pages thereto) and a summary thereof and (ii) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this subclause (ii).

 

4.8           Subsequent Equity Sales. If, at any time within ninety (90) days following the Closing Date, the Company sells and issues any shares of Common Stock or Common Stock Equivalents at a price per share (or conversion or exercise price, as the case may be) of less than  $1.75 (a “Dilutive Issuance”), then, not later than ten (10) business days following such Dilutive Issuance, the Company shall be required to issue to the Purchaser, for no additional consideration, an additional number shares of Common Stock equal to the difference of (i) an amount equal to (A) the Subscription Amount divided by (B) the price per share of shares issued or underlying Common Stock Equivalents in connection with such Dilutive Issuance, less (ii) the number of shares of Common Stock issued to the Purchaser hereunder, less (iii) the number of shares of Common Stock issued to the Purchaser pursuant to this Section 4.8 as a result of a prior Dilutive Issuance.  Such additional shares of Common Stock shall be issued to the Purchaser whenever a Dilutive Issuance occurs.  A Dilutive Issuance shall not include:  (a) shares of Common Stock or Common Stock Equivalents issued to employees, officers, directors or consultants (other than any consultant which engages in any business which is competitive with or provides any services which are similar to the business of or services provided by the Purchaser or any of its Affiliates as determined at the time of the Dilutive Issuance) of the Company, (b) securities issued upon the exercise, exchange, conversion or amendment of any securities issued and outstanding on the date hereof, or (c) securities issued pursuant to acquisitions or strategic transactions.

5.1    Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchaser.

 

5.2    Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3    Notices.  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.

 

5.4    Amendments; Waivers.  Except as otherwise set forth herein, any provision of this Agreement may be waived, modified, supplemented or amended in a written instrument signed by the Company and the Purchaser.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.5    Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.6    Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  Neither the Company nor the Purchaser may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other (other than by merger).

 

5.7    No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

5.8    Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of Los Angeles.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Los Angeles for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  The parties hereby waive all rights to a trial by jury.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

5.9    Survival.  The representations and, warranties, shall survive the Closing and the delivery, of the Securities, for the applicable statue of limitations.

 

5.10    Execution.  This Agreement may be executed in two or more 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.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.11    Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.12    Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.13    Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

 

5.14    Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.