NEITHER THIS
SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE
WARRANT
To Purchase
2,250,000 Shares of Common Stock of
CyberDefender
Corporation
THIS COMMON STOCK PURCHASE WARRANT (the “
Warrant ”) certifies that, for value received,
Newview Finance L.L.C. (the “ Holder
”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date hereof (the “ Initial
Exercise Date ”) and on or prior to the close of business
on November 10, 20011 (the “ Termination Date ”)
but not thereafter, to subscribe for and purchase from
CyberDefender Corporation, a California corporation (the “
Company ”), 2,250,000 shares (the
“ Warrant Shares ”) of Common Stock, no par
value, of the Company (the “ Common Stock ”).
The purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).
This Warrant is executed and delivered pursuant to that certain
Consulting Agreement, dated as of the Initial Exercise Date,
between the Holder and the Company (the “Consulting
Agreement”).
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Vesting of
Warrant Shares . Exercise
of the purchase rights represented by this Warrant may be made as
follows:
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900,000 of the
Warrant Shares shall vest and become exercisable on the Initial
Exercise Date.
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270,000 of the
Warrant Shares shall vest and become exercisable over the five
month period commencing on December 1, 2008 and ending on April 1,
2009; provided, however, in the event the Consulting Agreement is
terminated prior to April 1, 2009, any unvested Warrant Shares at
the time of such termination shall be forfeited and the Holder
shall no longer have any purchase rights with respect
thereto.
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Exercise of
Warrant . Subject to the
foregoing vesting provisions, exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination
Date by delivery to the Company of a duly executed facsimile copy
of the Notice of Exercise Form annexed hereto (or such other office
or agency of the Company as it may designate by notice in writing
to the registered Holder at the address of such Holder appearing on
the books of the Company); provided , however ,
within 5 Trading Days of the date said Notice of Exercise is
delivered to the Company, the Holder shall have surrendered this
Warrant to the Company and the Company shall have received payment
of the aggregate Exercise Price of the shares thereby purchased by
wire transfer or cashier’s check drawn on a United States
bank.
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Exercise
Price . The exercise
price of the Common Stock under this Warrant shall be $1.25,
subject to adjustment hereunder (the “ Exercise Price
”).
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Exercise
Limitations ;
Holder’s Restrictions . The Holder shall not have the
right to exercise any portion of this Warrant to the extent that
after giving effect to such issuance after exercise, the Holder
(together with the Holder’s affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of
4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to such issuance. For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of
Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned
by the Holder or any of its affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Notes or Warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 2(c),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act, it being acknowledged by Holder that the
Company is not representing to Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section 2(c) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by
the Holder) and of which a portion of this Warrant is exercisable
shall be in the sole discretion of such Holder, and the submission
of a Notice of Exercise shall be deemed to be such Holder’s
determination of whether this Warrant is exercisable (in relation
to other securities owned by such Holder) and of which portion of
this Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For purposes
of this Section 2(c), in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-QSB or Form 10-KSB, as the case
may be, (y) a more recent public announcement by the Company or (z)
any other notice by the Company or the Company’s Transfer
Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of the Holder,
the Company shall within two Trading Days confirm orally and in
writing by email to the Holder the number of shares of Common Stock
then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including
this Warrant, by the Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. The provisions of this Section 2(c) may be waived by the
Holder upon, at the election of the Holder, not less than 61
days’ prior notice to the Company, and the provisions of this
Section 2(c) shall continue to apply until such 61
st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver).
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i)
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Authorization of Warrant Shares
. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company covenants that
during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of
the purchase rights under this Warrant. The Company will take all
such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation
of any applicable law or regulation, or of any requirements of the
Trading Market upon which the Common Stock may be
listed.
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ii)
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Delivery of
Certificates Upon Exercise . Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the
Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal
Agent Commission (“ DWAC ”) system if the
Company is a participant in such system, and otherwise by physical
delivery to the address specified by the Holder in the Notice of
Exercise within 5 Trading Days from the delivery to the Company of
the Notice of Exercise Form, surrender of this Warrant and payment
of the aggregate Exercise Price as set forth above (“
Warrant Share Delivery Date ”). This Warrant shall be
deemed to have been exercised on the date the Exercise Price is
received by the Company. The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of
such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(d)(vi) prior to the issuance of such shares, have been
paid.
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iii)
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Delivery of
New Warrants Upon Exercise . If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this
Warrant.
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iv)
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Rescission
Rights . If the Company
fails to cause its transfer agent to transmit to the Holder a
certificate or certificates representing the Warrant Shares
pursuant to this Section 2(d)(iv) by the Warrant Share Delivery
Date, then the Holder will have the right to rescind such
exercise.
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v)
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No
Fractional Shares or Scrip . No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise
be entitled to purchase upon such exercise, the Company shall pay a
cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price.
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vi)
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Charges,
Taxes and Expenses .
Issuance of certificates for Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate,
all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in
such name or names as may be directed by the Holder;
provided , however , that in the event certificates
for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder; and the Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto.
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vii)
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Closing of
Books . The Company will
not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
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a)
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Stock
Dividends and Splits . If
the Company, at any time while this Warrant is outstanding: (A)
pays a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company pursuant to this Warrant), (B)
subdivides outstanding shares of Common Stock into a larger number
of shares, (C) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (D) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock
outstanding after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.
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Calculations . All calculations under this Section 3 shall be
made to the nearest cent or the nearest 1/100th of a share, as the
case may be. The number of shares of Common Stock outstanding at
any given time shall not includes shares of Common Stock owned or
held by or for the account of the Company, and the description of
any such shares of Common Stock shall be considered on issue or
sale of Common Stock. For purposes of this Section 3, the number of
shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and
outstanding.
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i. Adjustment to Exercise Price
. Whenever the Exercise Price is
adjusted pursuant to this Section 3, the Company shall promptly
mail to each Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by Holder
. If (A) the Company shall declare a
dividend (or any other distribution)
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