Exhibit 10.4
EXECUTION COPY
AMENDED AND RESTATED SECURITY AGREEMENT
          AMENDED AND RESTATED SECURITY AGREEMENT, dated as of February 29, 2008
(this “Agreement”) made by STINGER SYSTEMS, INC., a Nevada corporation, (the
“Company”), and the undersigned subsidiaries of the Company (each a “Grantor”
and collectively and together with the Company the “Grantors”), in favor of
CASTLERIGG MASTER INVESTMENTS LTD., a company organized under the laws of the
British Virgin Islands, in its capacity as collateral agent (in such capacity,
the “Collateral Agent”) for the “Buyers” (as defined below) party to the
Securities Purchase Agreements (defined below).
W I T N E S S E T H:
          WHEREAS, the Company and each party listed as a “Buyer” on the
Schedule of Buyers attached thereto (collectively, the “Original Buyers”) are
parties to the Securities Purchase Agreement, dated as of August 3, 2007 (as
amended, restated or otherwise modified from time to time, the “August 2007
Securities Purchase Agreement”), pursuant to which the Company sold, and the
Buyers purchased certain “Notes” (as defined therein) (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the “Original Notes”);
          WHEREAS, the Company and each party listed as a “Buyer” on the
Schedule of Buyers attached thereto (collectively, the “New Buyers”) are
entering into a new Securities Purchase Agreement, dated as of the date hereof
(as amended, restated or otherwise modified from time to time, the “New
Securities Purchase Agreement” and together with the August 2007 Securities
Purchase Agreement, the “Securities Purchase Agreements”), pursuant to which
(i) the Original Notes shall be amended and restated pursuant to the “Amended
and Restated Notes” (as defined therein) and (ii) the Company shall agree to
sell, and the Buyers shall agree to purchase certain additional “New Notes” (as
defined therein) (as may be amended, restated, replaced or otherwise modified
from time to time in accordance with the terms thereof, the “New Notes”, and
collectively with the Amended and Restated Notes, the “Notes”);
          WHEREAS, Contemporaneously with the consummation of the transactions
contemplated by the August 2007 Securities Purchase Agreement, the Company
entered into a Security Agreement, dated as of August 3, 2007, by the Company in
favor of the Collateral Agent, (the “Existing Security Agreement”).
          WHEREAS, it is a condition precedent to the Buyers purchasing the
Notes pursuant to the New Securities Purchase Agreement that the Grantors shall
amend and restate the Existing Security Agreement to include obligations all of
the Company’s obligations under both Securities Purchase Agreements, the Amended
and Restated Notes, the New Notes and all other “Transaction Documents” (as
defined in the respective Securities Purchase Agreement) (collectively, the
“Transaction Documents”) as “Obligations” hereunder; and
          WHEREAS, the Grantors have determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of,
the Grantors.

 

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          NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Buyers to perform under the New Securities
Purchase Agreement, each Grantor agrees with the Collateral Agent, for the
benefit of the Buyers, as follows:
          SECTION 1. Definitions.
          (a) Reference is hereby made to the Securities Purchase Agreements and
the Notes for a statement of the terms thereof. All terms used in this Agreement
and the recitals hereto which are defined in the Securities Purchase Agreements,
the Notes or in Articles 8 or 9 of the Uniform Commercial Code as in effect from
time to time in the State of New York (the “Code”), and which are not otherwise
defined herein shall have the same meanings herein as set forth therein;
provided that terms used herein which are defined in the Code as in effect in
the State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as the
Collateral Agent may otherwise determine.
          (b) The following terms shall have the respective meanings provided
for in the Code: “Accounts”, “Cash Proceeds”, “Chattel Paper”, “Commercial Tort
Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”,
“Documents”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”,
“Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”,
“Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”,
“Security”, “Record”, “Security Account”, “Software”, and “Supporting
Obligations”.
          (c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:
          “Additional Requirements” means (i) with respect to Deposit Accounts,
and all cash and other property from time to time deposited therein, for the
execution of a control agreement with the depository institution with which such
account is maintained, as provided in Section 5(i), (ii) with respect to
Commodity Contracts, for the execution of a control agreement with the commodity
intermediary with which such commodity contract is carried, as provided in
Section 5(i), (iii) with respect to the perfection of the security interest
created hereby in any Letter-of-Credit Rights, for the consent of the issuer of
the applicable letter of credit to the assignment of proceeds as provided in the
Uniform Commercial Code as in effect in the applicable jurisdiction, (iv) with
respect to any action that may be necessary to obtain control of Collateral
constituting Deposit Accounts, Commodity Contracts, Electronic Chattel Paper,
Investment Property or Letter-of-Credit Rights, the taking of such actions, and
(v) the Collateral Agent having possession of all Documents, Chattel Paper,
Instruments and cash constituting Collateral.
          “Capital Stock” means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.

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          “Copyright Licenses” means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensee or licensor
and providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Schedule II hereto).
          “Copyrights” means all domestic and foreign copyrights, whether
registered or not, including, without limitation, all copyright rights
throughout the universe (whether now or hereafter arising) in any and all media
(whether now or hereafter developed), in and to all original works of authorship
fixed in any tangible medium of expression, acquired or used by any Grantor
(including, without limitation, all copyrights described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.
          “Event of Default” shall have the meaning set forth in the Notes.
          “Governmental Authority” means any nation or government, any Federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
          “Insolvency Proceeding” means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of
the United States Code) or under any other bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, or extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
          “Intellectual Property” means the Copyrights, Trademarks and Patents.
          “Licenses” means the Copyright Licenses, the Trademark Licenses and
the Patent Licenses.
          “Lien” means any mortgage, lien, pledge, charge, security interest or
other encumbrance upon or in any property or assets (including accounts and
contract rights).
          “Patent Licenses” means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensee or licensor and
providing for the grant of any right to manufacture, use or sell any invention
covered by any Patent (including, without limitation, all Patent Licenses set
forth in Schedule II hereto).
          “Patents” means all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how, formulae, rights of publicity and other general intangibles of like
nature, now existing or hereafter acquired (including, without limitation, all
domestic and foreign letters patent, design patents, utility patents, industrial
designs, inventions, trade secrets, ideas, concepts, methods, techniques,
processes, proprietary

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information, technology, know-how and formulae described in Schedule II hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office, or in any similar office or agency of the United
States or any other country or any political subdivision thereof), and all
reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.
          “Person” means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority.
          “Trademark Licenses” means all licenses, contracts or other
agreements, whether written or oral, naming any Grantor as licensor or licensee
and providing for the grant of any right concerning any Trademark, together with
any goodwill connected with and symbolized by any such trademark licenses,
contracts or agreements and the right to prepare for sale or lease and sell or
lease any and all Inventory now or hereafter owned by any Grantor and now or
hereafter covered by such licenses (including, without limitation, all Trademark
Licenses described in Schedule II hereto).
          “Trademarks” means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a’s,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a’s, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.
          SECTION 2. Grant of Security Interest. As collateral security for all
of the “Obligations” (as defined in Section 3 hereof), each Grantor hereby
pledges and assigns to the Collateral Agent for the benefit of the Buyers, and
grants to the Collateral Agent for the benefit of the Buyers a continuing
security interest in, all personal property of each Grantor, wherever located
and whether now or hereafter existing and whether now owned or hereafter
acquired, of every kind and description, tangible or intangible (collectively,
the “Collateral”), including, without limitation, the following:
          (a) all Accounts;
          (b) all Chattel Paper (whether tangible or electronic);
          (c) the Commercial Tort Claims specified on Schedule VI hereto;

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          (d) all Deposit Accounts, all cash and other property from time to
time deposited therein and the monies and property in the possession or under
the control of the Collateral Agent or Buyer or any affiliate, representative,
agent or correspondent of the Collateral Agent or Buyer;
          (e) all Documents;
          (f) all Equipment;
          (g) all Fixtures;
          (h) all General Intangibles (including, without limitation, all
Payment Intangibles);
          (i) all Goods;
          (j) all Instruments (including, without limitation, Promissory Notes
and each certificated Security);
          (k) all Inventory;
          (l) all Investment Property;
          (m) all Copyrights, Patents and Trademarks, and all Licenses;
          (n) all Letter-of-Credit Rights;
          (o) all Supporting Obligations;
          (p) all other tangible and intangible personal property of each
Grantor (whether or not subject to the Code), including, without limitation, all
bank and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of any Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by each Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of any Grantor or any other Person from time to
time acting for any Grantor, in each case, to the extent of such Grantors rights
therein, that at any time evidence or contain information relating to any of the
property described in the preceding clauses of this Section 2 or are otherwise
necessary or helpful in the collection or realization thereof; and
          (q) all Proceeds, including all Cash Proceeds and Noncash Proceeds,
and products of any and all of the foregoing Collateral;
in each case howsoever any Grantor’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).

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Notwithstanding anything herein to the contrary, the term “Collateral” shall not
include in the case of a Subsidiary of such Grantor organized under the laws of
a jurisdiction other than the United States, any of the states thereof or the
District of Columbia (a “Foreign Subsidiary”), more than 65% (or such greater
percentage that, due to a change in applicable law after the date hereof,
(A) would not reasonably be expected to cause the undistributed earnings of such
Foreign Subsidiary as determined for United States federal income tax purposes
to be treated as a deemed dividend to such Foreign Subsidiary’s United States
parent and (B) would not reasonably be expected to cause any material adverse
tax consequences) of the issued and outstanding shares of Capital Stock entitled
to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) (it being
understood and agreed that the Collateral shall include 100% of the issued and
outstanding shares of Capital Stock not entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) or other equity interest of such Foreign
Subsidiary).
The Grantors agree that the pledge of the shares of Capital Stock acquired by a
Grantor of any and all Persons now or hereafter existing who is a Foreign
Subsidiary may be supplemented by one or more separate pledge agreements, deeds
of pledge, share charges, or other similar agreements or instruments, executed
and delivered by the relevant Grantors in favor of the Collateral Agent, which
pledge agreements will provide for the pledge of such shares of Capital Stock in
accordance with the laws of the applicable foreign jurisdiction. With respect to
such shares of Capital Stock, the Collateral Agent may, at any time and from
time to time, in its sole discretion, take actions in such foreign jurisdictions
that will result in the perfection of the Lien created in such shares of Capital
Stock.
          SECTION 3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred
(collectively, the “Obligations”):
          (a) for so long as the Notes are outstanding, (i) the payment by the
Company, as and when due and payable (by scheduled maturity, required
prepayment, acceleration, demand or otherwise), of all amounts from time to time
owing by it in respect of the Securities Purchase Agreements, the Notes and the
other Transaction Documents, and (ii) in the case of any Guarantors, the payment
by such Guarantors, as and when due and payable of all “Guaranteed Obligations”
under (and as defined in) the Guaranty, including, without limitation, in both
cases, (A) all principal of and interest on the Notes (including, without
limitation, all interest that accrues after the commencement of any Insolvency
Proceeding of any Grantor, whether or not the payment of such interest is
unenforceable or is not allowable due to the existence of such Insolvency
Proceeding), and (B) all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under any of the
Transaction Documents; and
          (b) for so long as the Notes are outstanding, the due performance and
observance by each Grantor of all of its other obligations from time to time
existing in respect of any of the Transaction Documents, including without
limitation, with respect to any conversion or redemption rights of the Buyers
under the Notes.

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          SECTION 4. Representations and Warranties. Each Grantor represents and
warrants as of the date of this Agreement as follows:
          (a) Schedule I hereto sets forth (i) the exact legal name of each
Grantor, and (ii) the state of incorporation, organization or formation and the
organizational identification number of each Grantor in such state.
          (b) There is no pending or, to its knowledge, written notice
threatening any action, suit, proceeding or claim affecting any Grantor before
any governmental authority or any arbitrator, or any order, judgment or award
issued by any governmental authority or arbitrator, in each case, that may
adversely affect the grant by any Grantor, or the perfection, of the security
interest purported to be created hereby in the Collateral, or the exercise by
the Collateral Agent of any of its rights or remedies hereunder.
          (c) All Federal, state and local tax returns and other reports
required by applicable law to be filed by any Grantor have been filed, or
extensions have been obtained, and all taxes, assessments and other governmental
charges imposed upon any Grantor or any property of any Grantor (including,
without limitation, all federal income and social security taxes on employees’
wages) and which have become due and payable on or prior to the date hereof have
been paid, except to the extent contested in good faith by proper proceedings
which stay the imposition of any penalty, fine or Lien resulting from the
non-payment thereof and with respect to which adequate reserves have been set
aside for the payment thereof in accordance with generally accepted accounting
principles consistently applied (“GAAP”).
          (d) All Equipment, Fixtures, Goods and Inventory of each Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of each Grantor
hereafter existing will be, located and/or based at the addresses specified
therefor in Schedule III hereto, except that each Grantor will give the
Collateral Agent written notice of any change in the location of any such
Collateral within 20 days of such change, other than to locations set forth on
Schedule III hereto (or a new Schedule III delivered by the Grantors to the
Collateral Agent from time to time) and with respect to which the Collateral
Agent has filed financing statements and otherwise fully perfected its Liens
thereon or will take such actions pursuant to Section 5(n). Each Grantor’s chief
place of business and chief executive office, the place where each Grantor keeps
its Records concerning Accounts and all originals of all Chattel Paper are
located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other Instruments. Set forth in
Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of (i) each Promissory Note, Security and other Instrument owned by
each Grantor and (ii) each Deposit Account, Securities Account and Commodities
Account of each Grantor, together with the name and address of each institution
at which each such account is maintained, the account number for each such
account and a description of the purpose of each such account. Set forth in
Schedule II hereto is a complete and correct list of each trade name used by
each Grantor and the name of, and each trade name used by, each person from
which each Grantor has acquired any substantial part of the Collateral.
          (e) Each Grantor has delivered to the Collateral Agent complete and
correct copies of each License described in Schedule II hereto, including all
schedules and exhibits thereto, which represents all of the Licenses existing on
the date of this Agreement. Each such

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License sets forth the entire agreement and understanding of the parties thereto
relating to the subject matter thereof, and there are no other agreements,
arrangements or understandings, written or oral, relating to the matters covered
thereby or the rights of such Grantor or any of its affiliates in respect
thereof. Each material License now existing is, and any material License entered
into in the future will be, the legal, valid and binding obligation of the
parties thereto, enforceable against such parties in accordance with its terms.
No default under any material License by any such party has occurred, nor does
any defense, offset, deduction or counterclaim exist thereunder in favor of any
such party.
          (f) Each Grantor owns and controls, or otherwise possesses adequate
rights to use, all Trademarks, Patents and Copyrights, which are the only
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity necessary to
conduct its business in substantially the same manner as conducted as of the
date hereof. Schedule II hereto sets forth a true and complete list of all
registered copyrights, issued Patents, Trademarks, and Licenses annually owned
or used by each Grantor as of the date hereof. To the best knowledge of each
Grantor, all such Intellectual Property of each Grantor is subsisting and in
full force and effect, has not been adjudged invalid or unenforceable, is valid
and enforceable and has not been abandoned in whole or in part. Except as set
forth in Schedule II, no such Intellectual Property is the subject of any
licensing or franchising agreement. Each Grantor has no knowledge of any
conflict with the rights of others to any such Intellectual Property and, to the
best knowledge of each Grantor, each Grantor is not now infringing or in
conflict with any such rights of others in any material respect, and to the best
knowledge of each Grantor, no other Person is now infringing or in conflict in
any material respect with any such properties, assets and rights owned or used
by each Grantor. No Grantor has received any notice that it is violating or has
violated the trademarks, patents, copyrights, inventions, trade secrets,
proprietary information and technology, know-how, formulae, rights of publicity
or other intellectual property rights of any third party.
          (g) Each Grantor is and will be at all times the sole and exclusive
owner of, or otherwise has and will have adequate rights in, the Collateral free
and clear of any Liens, except for Permitted Liens. No effective financing
statement or other instrument similar in effect covering all or any part of the
Collateral is on file in any recording or filing office except such as (i) may
have been filed in favor of the Collateral Agent and/or the Buyers relating to
this Agreement or the other Security Documents and (ii) are described on
Schedule 4(g) hereto.
          (h) The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene any law or any contractual restriction
binding on or otherwise affecting each Grantor or any of its properties and will
not result in or require the creation of any Lien, upon or with respect to any
of its properties.
          (i) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body, is required
for (i) the grant by each Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or (ii) the exercise by the
Collateral Agent of any of its rights and remedies hereunder, except (A) for the
filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in Schedule V hereto (or a
new Schedule V delivered by Grantors to Collateral Agent from time to time), all
of which financing statements

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have been duly filed and are in full force and effect or will be duly filed and
in full force and effect, (B) with respect to the perfection of the security
interest created hereby in the United States Intellectual Property and Licenses,
for the recording of the appropriate Assignment for Security, substantially in
the form of Exhibit A hereto in the United States Patent and Trademark Office or
the United States Copyright Office, as applicable, (C) with respect to the
perfection of the security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to such foreign Intellectual Property and Licenses, and (D) with respect to the
perfection of the security interest created hereby in Titled Collateral, for the
submission of an appropriate application requesting that the Lien of the
Collateral Agent be noted on the Certificate of Title or certificate of
ownership, completed and authenticated by the applicable Grantor, together with
the Certificate of Title or certificate of ownership, with respect to such
Titled Collateral, to the appropriate governmental authority (subclauses (A),
(B), (C) and (D), together with the Additional Requirements, each a “Perfection
Requirement” and collectively, the “Perfection Requirements”).
          (j) This Agreement creates in favor of the Collateral Agent a legal,
valid and enforceable security interest in the Collateral, as security for the
Obligations. The Perfection Requirements result in the perfection of such
security interests. Such security interests are, or in the case of Collateral in
which each Grantor obtains rights after the date hereof, will be, perfected,
first priority security interests, subject only to Permitted Liens and the
Perfection Requirements and the financing statements described in Schedule 4(g).
Such recordings and filings and all other action necessary to perfect and
protect such security interest have been duly taken or will be taken pursuant to
Section 5(n), and, in the case of Collateral in which each Grantor obtains
rights after the date hereof, will be duly taken, except for the Collateral
Agent’s having possession of all Documents, Chattel Paper, Instruments and cash
constituting Collateral after the date hereof and the other actions, filings and
recordations described above, including the Perfection Requirements.
          (k) As of the date hereof, no Grantor holds any Commercial Tort Claims
or has knowledge of any pending Commercial Tort Claims, except for such
Commercial Tort Claims described in Schedule VI.
          SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:
          (a) Further Assurances. Each Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Collateral Agent may reasonably
request in order to: (i) perfect and protect the security interest purported to
be created hereby; (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) otherwise
effect the purposes of this Agreement, including, without limitation:
(A) marking conspicuously all Chattel Paper and each License and, at the request
of the Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B)  delivering and pledging to the Collateral Agent
pursuant to the Pledge Agreement each Promissory Note, Security, Chattel Paper
or other Instrument, now or

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hereafter owned by any Grantor, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent, (C) executing and filing (to the extent, if any, that any
Grantor’s signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or that the Collateral Agent may reasonably request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral in each case as the Collateral Agent may reasonably request,
all in reasonable detail, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Collateral Agent’s security interest
created hereby and obtaining a written acknowledgment from such Person that such
Person holds possession of the Collateral for the benefit of the Collateral
Agent, which such written acknowledgement shall be in form and substance
reasonably satisfactory to the Collateral Agent, (F) if at any time after the
date hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly
notifying the Collateral Agent in a writing signed by such Grantor setting forth
a brief description of such Commercial Tort Claim and granting to the Collateral
Agent a security interest therein and in the proceeds thereof, which writing
shall incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date
hereof by any Grantor of any motor vehicle or other Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or Equipment that
is subject to a purchase money security interest), causing the Collateral Agent
to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with
Section 5(j) hereof; and (H) taking all actions required by any earlier versions
of the Uniform Commercial Code or by other law, as applicable, in any relevant
Uniform Commercial Code jurisdiction, or by other law as applicable in any
foreign jurisdiction.
          (b) Location of Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory (i) at the locations specified therefor on Schedule III
hereto, or (ii) at such other locations set forth on Schedule III (or a new
Schedule III delivered by Grantors to Collateral Agent from time to time) and
with respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected its Liens thereon, or (iii) at such other locations in
the United States, provided that within 20 days following the relocation of
Equipment or Inventory to such other location or the acquisition of Equipment or
Inventory, Grantor shall deliver to the Collateral Agent a new Schedule III
indicating such new locations.
          (c) Condition of Equipment. Each Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment of any
Grantor within a commercially reasonable time after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Collateral Agent may request to such end. Any Grantor
will promptly furnish to the Collateral Agent a statement describing in
reasonable detail any such loss or damage in excess of $250,000 per occurrence
to any Equipment.

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          (d) Taxes, Etc. Each Grantor agrees to pay promptly when due all
property and other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside
for the payment thereof.
          (e) Insurance.
               (i) Each Grantor will, at its own expense, maintain insurance
(including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with responsible and reputable insurance companies
or associations as is required by any governmental authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and in
any event, in amount, adequacy and scope reasonably satisfactory to the
Collateral Agent. To the extent requested by the Collateral Agent at any time
and from time to time, each such policy for liability insurance shall provide
for all losses to be paid on behalf of the Collateral Agent and any Grantor as
their respective interests may appear, and each policy for property damage
insurance shall provide for all losses to be adjusted with, and paid directly
to, the Collateral Agent. To the extent requested by the Collateral Agent at any
time and from time to time, each such policy shall in addition (A) name the
Collateral Agent as an additional insured party or loss payee thereunder
(without any representation or warranty by or obligation upon the Collateral
Agent) as their interests may appear, (B) contain an agreement by the insurer
that any loss thereunder shall be payable to the Collateral Agent on its own
account notwithstanding any action, inaction or breach of representation or
warranty by any Grantor, (C) provide that there shall be no recourse against the
Collateral Agent for payment of premiums or other amounts with respect thereto,
and (D) provide that at least 30 days’ prior written notice of cancellation,
lapse, expiration or other adverse change shall be given to the Collateral Agent
by the insurer. Any Grantor will, if so requested by the Collateral Agent,
deliver to the Collateral Agent original or duplicate policies of such insurance
and, as often as the Collateral Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Any Grantor will
also, at the request of the Collateral Agent, execute and deliver instruments of
assignment of such insurance policies and cause the respective insurers to
acknowledge notice of such assignment.
               (ii) Reimbursement under any liability insurance maintained by
any Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment or Inventory, any proceeds of insurance maintained
by any Grantor pursuant to this Section 5(e) shall be paid to the Collateral
Agent (except as to which paragraph (iii) of this Section 5(e) is not
applicable), any Grantor will make or cause to be made the necessary repairs to
or replacements of such Equipment or Inventory, and any proceeds of insurance
maintained by any Grantor pursuant to this Section 5(e) shall be paid by the
Collateral Agent to any Grantor as reimbursement for the costs of such repairs
or replacements.

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               (iii) Following and during the continuance of an Event of
Default, all insurance payments in respect of such Equipment or Inventory shall
be paid to the Collateral Agent and applied as specified in Section 7(b) hereof.
          (f) Provisions Concerning the Accounts and the Licenses.
               (i) Each Grantor will (A) give the Collateral Agent at least
30 days’ prior written notice of any change in such Grantor’s name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation,
organization or formation as set forth in Schedule I hereto, (C) immediately
notify the Collateral Agent upon obtaining an organizational identification
number, if on the date hereof such Grantor did not have such identification
number, and (D) keep adequate records concerning the Accounts and Chattel Paper
and permit representatives of the Collateral Agent during normal business hours
on reasonable notice to such Grantor, to inspect and make abstracts from such
Records and Chattel Paper.
               (ii) Each Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts. In connection with such collections, any Grantor
may (and, at the Collateral Agent’s direction, will) take such action as any
Grantor or the Collateral Agent may deem necessary or advisable to enforce
collection or performance of the Accounts; provided, however, that the
Collateral Agent shall have the right at any time, upon the occurrence and
during the continuance of an Event of Default, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to the Collateral
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to any Grantor thereunder directly to the
Collateral Agent or its designated agent and, upon such notification and at the
expense of any Grantor and to the extent permitted by law, to enforce collection
of any such Accounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as any Grantor might have
done. After receipt by any Grantor of a notice from the Collateral Agent that
the Collateral Agent has notified, intends to notify, or has enforced or intends
to enforce any Grantor’s rights against the account debtors or obligors under
any Accounts as referred to in the proviso to the immediately preceding
sentence, (A) all amounts and proceeds (including Instruments) received by any
Grantor in respect of the Accounts shall be received in trust for the benefit of
the Collateral Agent hereunder, shall be segregated from other funds of any
Grantor and shall be forthwith paid over to the Collateral Agent in the same
form as so received (with any necessary endorsement) to be applied as specified
in Section 7(b) hereof, and (B) no Grantor will adjust, settle or compromise the
amount or payment of any Account or release wholly or partly any account debtor
or obligor thereof or allow any credit or discount thereon. In addition, upon
the occurrence and during the continuance of an Event of Default, the Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and financial institutions with which any Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent shall be applied as specified in
accordance with Section 7(b) hereof.

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               (iii) Upon the occurrence and during the continuance of any
breach or default under any material License referred to in Schedule II hereto
by any party thereto other than any Grantor, each Grantor party thereto will,
promptly after obtaining knowledge thereof, give the Collateral Agent written
notice of the nature and duration thereof, specifying what action, if any, it
has taken and proposes to take with respect thereto and thereafter will take
reasonable steps to protect and preserve its rights and remedies in respect of
such breach or default, or will obtain or acquire an appropriate substitute
License.
               (iv) Each Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor thereto.
               (v) Each Grantor will exercise promptly and diligently each and
every right which it may have under each material License (other than any right
of termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. No Grantor will,
without the prior written consent of the Collateral Agent, cancel, terminate,
amend or otherwise modify in any respect, or waive any provision of, any
material License referred to in Schedule II hereto.
          (g) Transfers and Other Liens.
               (i) No Grantor will sell, assign (by operation of law or
otherwise), lease, license, exchange or otherwise transfer or dispose of any of
the Collateral, except (A) Inventory in the ordinary course of business, and
(B) worn out or obsolete assets, not necessary to the business.
               (ii) No Grantor will create, suffer to exist or grant any Lien
upon or with respect to any Collateral other than a Permitted Lien.
          (h) Intellectual Property.
               (i) If applicable, any Grantor shall, upon the Collateral Agent’s
written request, duly execute and deliver the applicable Assignment for Security
in the form attached hereto as Exhibit A. Each Grantor (either itself or through
licensees) will, and will cause each licensee thereof to, take all action
necessary to maintain all of the Intellectual Property in full force and effect,
including, without limitation, using the proper statutory notices and markings
and using the Trademarks on each applicable trademark class of goods in order to
so maintain the Trademarks in full force and free from any claim of abandonment
for non-use, and each Grantor will not (nor permit any licensee thereof to) do
any act or knowingly omit to do any act whereby any Intellectual Property may
become invalidated; provided, however, that so long as no Event of Default has
occurred and is continuing, no Grantor shall have an obligation to use or to
maintain any Intellectual Property (A) that relates solely to any product or
work, that has been, or is in the process of being, discontinued, abandoned or
terminated, (B) that is being replaced with Intellectual Property substantially
similar to the Intellectual Property that may be abandoned or

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otherwise become invalid, so long as the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of such
replacement Intellectual Property and so long as such replacement Intellectual
Property is subject to the Lien created by this Agreement or (C) that is
substantially the same as another Intellectual Property that is in full force,
so long the failure to use or maintain such Intellectual Property does not
materially adversely affect the validity of such replacement Intellectual
Property and so long as such other Intellectual Property is subject to the Lien
and security interest created by this Agreement. Each Grantor will cause to be
taken all necessary steps in any proceeding before the United States Patent and
Trademark Office and the United States Copyright Office or any similar office or
agency in any other country or political subdivision thereof to maintain each
registration of the Intellectual Property (other than the Intellectual Property
described in the proviso to the immediately preceding sentence), including,
without limitation, filing of renewals, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and
payment of maintenance fees, filing fees, taxes or other governmental fees. If
any Intellectual Property (other than Intellectual Property described in the
proviso to the first sentence of subsection (i) of this clause (h)) is
infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, each Grantor shall (x) upon learning of such
infringement, misappropriation, dilution or other violation, promptly notify the
Collateral Agent and (y) to the extent any Grantor shall deem appropriate under
the circumstances, promptly sue for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and recover any and
all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as such Grantor shall deem appropriate
under the circumstances to protect such Intellectual Property. Each Grantor
shall furnish to the Collateral Agent from time to time upon its request
statements and schedules further identifying and describing the Intellectual
Property and Licenses and such other reports in connection with the Intellectual
Property and Licenses as the Collateral Agent may reasonably request, all in
reasonable detail and promptly upon request of the Collateral Agent, following
receipt by the Collateral Agent of any such statements, schedules or reports,
each Grantor shall modify this Agreement by amending Schedule II hereto, as the
case may be, to include any Intellectual Property and License, as the case may
be, which becomes part of the Collateral under this Agreement and shall execute
and authenticate such documents and do such acts as shall be necessary or, in
the reasonable judgment of the Collateral Agent, desirable to subject such
Intellectual Property and Licenses to the Lien and security interest created by
this Agreement. Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, no Grantor may
abandon or otherwise permit any Intellectual Property to become invalid without
the prior written consent of the Collateral Agent, and if any Intellectual
Property is infringed, misappropriated, diluted or otherwise violated in any
material respect by a third party, each Grantor will take such action as the
Collateral Agent shall deem appropriate under the circumstances to protect such
Intellectual Property.
               (ii) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the issuance of any Patent with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency of the United States or any
country or any political subdivision thereof unless it gives the Collateral
Agent prior written notice thereof. Upon request of the Collateral Agent, any
Grantor shall execute, authenticate and deliver any and all assignments,
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent’s security

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interest hereunder in such Intellectual Property and the General Intangibles of
any Grantor relating thereto or represented thereby, and each Grantor hereby
appoints the Collateral Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the indefeasible payment in full in
cash of all of the Obligations in full.
          (i) Deposit, Commodities and Securities Accounts. Upon the Collateral
Agent’s written request, each Grantor shall request that each bank and other
financial institution with an account referred to in Schedule IV hereto execute
and deliver to the Collateral Agent a control agreement, in form and substance
reasonably satisfactory to the Collateral Agent, duly executed by each Grantor
and such bank or financial institution, or enter into other arrangements in form
and substance satisfactory to the Collateral Agent, pursuant to which such
institution shall irrevocably agree, inter alia, that (i) it will comply at any
time with the instructions originated by the Collateral Agent to such bank or
financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of each Grantor, which instructions the
Collateral Agent will not give to such bank or other financial institution in
the absence of a continuing Event of Default, (ii) all Commodity Contracts,
securities, Investment Property and other items of each Grantor deposited with
such institution shall be subject to a perfected, first priority security
interest in favor of the Collateral Agent, (iii) any right of set off (other
than recoupment of standard fees), banker’s Lien or other similar Lien, security
interest or encumbrance shall be fully waived as against the Collateral Agent,
and (iv) upon receipt of written notice from the Collateral Agent during the
continuance of an Event of Default, such bank or financial institution shall
immediately send to the Collateral Agent by wire transfer (to such account as
the Collateral Agent shall specify, or in such other manner as the Collateral
Agent shall direct) all such cash, the value of any Commodity Contracts,
securities, Investment Property and other items held by it. Without the prior
written consent of the Collateral Agent, each Grantor shall not make or maintain
any Deposit Account, Commodity Account or Securities Account except for the
accounts set forth in Schedule IV hereto. The provisions of this paragraph 5(i)
shall not apply to (i) Deposit Accounts for which the Collateral Agent is the
depositary and (ii) Deposit Accounts specially and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of each Grantor’s salaried or hourly employees.
          (j) Motor Vehicles.
               (i) Upon the Collateral Agent’s written request, each Grantor
shall deliver to the Collateral Agent originals of the certificates of title or
ownership for all motor vehicles with a value in excess of $50,000, owned by it
with the Collateral Agent listed as lienholder, for the benefit of the Buyers.
               (ii) Each Grantor hereby appoints the Collateral Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination
of this Agreement, for the purpose of (A) executing on behalf of such Grantor
title or ownership applications for filing with appropriate state agencies to
enable motor vehicles now owned or hereafter acquired by such Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such

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applications with such state agencies, and (C) executing such other documents
and instruments on behalf of, and taking such other action in the name of, such
Grantor as the Collateral Agent may deem necessary or advisable to accomplish
the purposes hereof (including, without limitation, for the purpose of creating
in favor of the Collateral Agent a perfected Lien on the motor vehicles and
exercising the rights and remedies of the Collateral Agent hereunder). This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until all of the Obligations are indefeasibly paid in full in cash.
               (iii) Any certificates of title or ownership delivered pursuant
to the terms hereof shall be accompanied by odometer statements for each motor
vehicle covered thereby.
               (iv) So long as no Event of Default shall have occurred and be
continuing, upon the request of any Grantor, the Collateral Agent shall execute
and deliver to any Grantor such instruments as any Grantor shall reasonably
request to remove the notation of the Collateral Agent as lienholder on any
certificate of title for any motor vehicle; provided, however, that any such
instruments shall be delivered, and the release effective, only upon receipt by
the Collateral Agent of a certificate from any Grantor stating that such motor
vehicle is to be sold or has suffered a casualty loss (with title thereto in
such case passing to the casualty insurance company therefor in settlement of
the claim for such loss) and the amount that any Grantor will receive as sale
proceeds or insurance proceeds. Any proceeds of such sale or casualty loss shall
be paid to the Collateral Agent hereunder immediately upon receipt, to be
applied to the Obligations then outstanding.
          (k) Control. Each Grantor hereby agrees to take any or all action that
may be necessary or that the Collateral Agent may reasonably request in order
for the Collateral Agent to obtain control in accordance with Sections 9-105 –
9-107 of the Code with respect to the following Collateral: (i) Electronic
Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit Rights.
          (l) Inspection and Reporting. Each Grantor shall permit the Collateral
Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate, during normal business hours,
after reasonable notice in the absence of an Event of Default and not more than
once a year in the absence of an Event of Default, (i) to examine and make
copies of and abstracts from any Grantor’s records and books of account, (ii) to
visit and inspect its properties, (iii) to verify materials, leases,
Instruments, Accounts, Inventory and other assets of any Grantor from time to
time, (iii) to conduct audits, physical counts, appraisals and/or valuations,
examinations at the locations of any Grantor. Each Grantor shall also permit the
Collateral Agent, or any agent or representatives thereof or such professionals
or other Persons as the Collateral Agent may designate to discuss such Grantor’s
affairs, finances and accounts with any of its directors, officers, managerial
employees, independent accountants or any of its other representatives.
          (m) Future Subsidiaries. If any Grantor shall hereafter create or
acquire any Subsidiary, simultaneously with the creation or acquisition of such
Subsidiary, such Grantor shall (i) cause such Subsidiary to become a party to
this Agreement as an additional “Grantor”

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hereunder, (ii) shall deliver to Collateral Agent revised Schedules to this
Agreement, as appropriate, (iii) cause such Subsidiary (the “Guarantor”) to duly
execute and deliver a guaranty (the “Guaranty”) of the Obligations in favor of
the Collateral Agent in form and substance reasonably acceptable to the
Collateral Agent, (iv) cause such Subsidiary to duly execute and deliver a
pledge agreement in form and substance reasonably acceptable to the Collateral
Agent (the “Pledge Agreement”) together with (x) certificates evidencing all of
the Capital Stock of any Person owned by such Subsidiary, and (y) undated stock
powers executed in blank with signature guaranteed, (v) shall execute and
deliver a Pledge Agreement together with (x) certificates evidencing all of the
Capital Stock of such Subsidiary, and (y) undated stock powers executed in blank
with signature guaranteed, and (vi) shall duly execute and/or deliver such
opinions of counsel and other documents, in form and substance reasonably
acceptable to the Collateral Agent, as the Collateral Agent shall reasonably
request with respect thereto, provided that any Grantor that acquires a
subsidiary on or within two days after the Closing Date shall have 10 Business
Days in which to satisfy the requirements of this Section 5(m).
          SECTION 6. Additional Provisions Concerning the Collateral.
          (a) To the maximum extent permitted by applicable law, and for the
purpose of taking any action that the Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, each Grantor hereby
(i) authorizes the Collateral Agent to file such agreements, instruments or
other documents in such Grantor’s name and in any appropriate filing office,
(ii) authorizes the Collateral Agent at any time and from time to time to file,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral (including, without limitation, any such financing
statements that (A) describe the Collateral as “all assets” or “all personal
property” (or words of similar effect) or that describe or identify the
Collateral by type or in any other manner as the Collateral Agent may determine
regardless of whether any particular asset of such Grantor falls within the
scope of Article 9 of the Uniform Commercial Code or whether any particular
asset of such Grantor constitutes part of the Collateral, and (B) contain any
other information required by Part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment, including, without limitation, whether such Grantor is
an organization, the type of organization and any organizational identification
number issued to such Grantor) and (iii) ratifies such authorization to the
extent that the Collateral Agent has filed any such financing or continuation
statements, or amendments thereto, prior to the date hereof. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
          (b) Each Grantor hereby irrevocably appoints the Collateral Agent as
its attorney-in-fact and proxy, with full authority in the place and stead of
such Grantor and in the name of such Grantor or otherwise, from time to time in
the Collateral Agent’s discretion, so long as an Event of Default shall have
occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement (subject to the rights of each Grantor
under Section 5 hereof), including, without limitation, (i) to obtain and adjust
insurance required to be paid to the Collateral Agent pursuant to Section 5(e)
hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral, (iii) to receive, endorse, and collect any drafts or
other

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instruments, documents and chattel paper in connection with clause (i) or
(ii) above, (iv) to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem necessary or desirable for the
collection of any Collateral or otherwise to enforce the rights of the
Collateral Agent and the Buyers with respect to any Collateral, and (v) to
execute assignments, licenses and other documents to enforce the rights of the
Collateral Agent and the Buyers with respect to any Collateral. This power is
coupled with an interest and is irrevocable until all of the Obligations are
indefeasibly paid in full in cash.
          (c) For the purpose of enabling the Collateral Agent to exercise
rights and remedies hereunder, at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose, each Grantor hereby grants to the Collateral Agent, to the extent
assignable, and so long as an Event of Default shall have occurred and is
continuing, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to any Grantor) to use, assign, license or
sublicense any Intellectual Property now owned or hereafter acquired by such
Grantor, wherever the same may be located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
Notwithstanding anything contained herein to the contrary, but subject to the
provisions of the Securities Purchase Agreements that limit the right of any
Grantor to dispose of its property, and Section 5(g) and Section 5(h) hereof, so
long as no Event of Default shall have occurred and be continuing, any Grantor
may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of
or take other actions with respect to the Intellectual Property in the ordinary
course of its business. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing, the Collateral Agent shall from
time to time, upon the request of any Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in such Grantor’s judgment)
to allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the indefeasible payment in full in cash of all of the Obligations
or the conversion into shares of Common Stock of the Company all of the
Obligations, the Collateral Agent (subject to Section 10(e) hereof) shall
release and reassign to any Grantor all of the Collateral Agent’s right, title
and interest in and to the Intellectual Property, and the Licenses, all without
recourse, representation or warranty whatsoever. The exercise of rights and
remedies hereunder by the Collateral Agent shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by each Grantor in
accordance with the second sentence of this clause (c). Each Grantor hereby
releases the Collateral Agent from any claims, causes of action and demands at
any time arising out of or with respect to any actions taken or omitted to be
taken by the Collateral Agent under the powers of attorney granted herein other
than actions taken or omitted to be taken through the Collateral Agent’s gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.
          (d) If any Grantor fails to perform any agreement or obligation
contained herein, the Collateral Agent may itself perform, or cause performance
of, such agreement or obligation, in the name of such Grantor or the Collateral
Agent, and the expenses of the Collateral Agent incurred in connection therewith
shall be payable by such Grantor pursuant to Section 8 hereof and shall be
secured by the Collateral.

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          (e) The powers conferred on the Collateral Agent hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Collateral Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
          (f) Anything herein to the contrary notwithstanding (i) each Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed,
(ii) the exercise by the Collateral Agent of any of its rights hereunder shall
not release any Grantor from any of its obligations under the Licenses or
otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not
have any obligation or liability by reason of this Agreement under the Licenses
or with respect to any of the other Collateral, nor shall the Collateral Agent
be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
          SECTION 7. Remedies Upon Event of Default. If any Event of Default
shall have occurred and be continuing:
          (a) The Collateral Agent may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the affected Collateral), and
also may (i) take absolute control of the Collateral, including, without
limitation, transfer into the Collateral Agent’s name or into the name of its
nominee or nominees (to the extent the Collateral Agent has not theretofore done
so) and thereafter receive, for the benefit of the Collateral Agent, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that
it will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of its respective Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place or places to be
designated by the Collateral Agent that is reasonably convenient to both
parties, and the Collateral Agent may enter into and occupy any premises owned
or leased by any Grantor where the Collateral or any part thereof is located or
assembled for a reasonable period in order to effectuate the Collateral Agent’s
rights and remedies hereunder or under law, without obligation to any Grantor in
respect of such occupation, and (iii) without notice except as specified below
and without any obligation to prepare or process the Collateral for sale,
(A) sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent’s offices or elsewhere, for cash,
on credit or for future delivery, and at such price or prices and upon such
other terms as the Collateral Agent may deem commercially reasonable and/or
(B) lease, license or dispose of the Collateral or any part thereof upon such
terms as the Collateral Agent may deem commercially reasonable. Each Grantor
agrees that, to the extent notice of sale or any other disposition of its
respective Collateral shall be required by law, at least ten (10) days’ notice
to any Grantor of the time and place of any public sale or the time after which
any private sale or other disposition of its respective Collateral is to be made
shall constitute reasonable notification. The Collateral Agent shall not be
obligated

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to make any sale or other disposition of any Collateral regardless of notice of
sale having been given. The Collateral Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Each Grantor hereby waives any claims against the Collateral
Agent and the Buyers arising by reason of the fact that the price at which its
respective Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Collateral Agent accepts the
first offer received and does not offer such Collateral to more than one
offeree, and waives all rights that any Grantor may have to require that all or
any part of such Collateral be marshaled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale of its
respective Collateral by the Collateral Agent shall be made without warranty,
(ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in
clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing,
(1) upon written notice to any Grantor from the Collateral Agent after and
during the continuance of an Event of Default, such Grantor shall cease any use
of the Intellectual Property or any trademark, patent or copyright similar
thereto for any purpose described in such notice; (2) the Collateral Agent may,
at any time and from time to time after and during the continuance of an Event
of Default, upon 10 days’ prior notice to such Grantor, license, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any of the Intellectual Property, throughout the universe for such term
or terms, on such conditions, and in such manner, as the Collateral Agent shall
in its sole discretion determine; and (3) the Collateral Agent may, at any time,
pursuant to the authority granted in Section 6 hereof (such authority being
effective upon the occurrence and during the continuance of an Event of
Default), execute and deliver on behalf of such Grantor, one or more instruments
of assignment of the Intellectual Property (or any application or registration
thereof), in form suitable for filing, recording or registration in any country.
          (b) Any cash held by the Collateral Agent as Collateral and all Cash
Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Collateral
shall be applied (after payment of any amounts payable to the Collateral Agent
pursuant to Section 8 hereof) by the Collateral Agent against, all or any part
of the Obligations in such order as the Collateral Agent shall elect, consistent
with the provisions of the Securities Purchase Agreements. Any surplus of such
cash or Cash Proceeds held by the Collateral Agent and remaining after the
indefeasible payment in full in cash of all of the Obligations shall be paid
over to whomsoever shall be lawfully entitled to receive the same or as a court
of competent jurisdiction shall direct.
          (c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Buyers are legally entitled, each Grantor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in the
Notes for interest on overdue principal thereof or such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees, costs, expenses and other client charges of any attorneys
employed by the Collateral Agent to collect such deficiency.

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          (d) Each Grantor hereby acknowledges that if the Collateral Agent
complies with any applicable state, provincial, or federal law requirements in
connection with a disposition of the Collateral, such compliance will not
adversely affect the commercial reasonableness of any sale or other disposition
of the Collateral.
          (e) The Collateral Agent shall not be required to marshal any present
or future collateral security (including, but not limited to, this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order, and all of the Collateral Agent’s rights hereunder and
in respect of such collateral security and other assurances of payment shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that any Grantor lawfully may, each Grantor hereby agrees that it
will not invoke any law relating to the marshaling of collateral which might
cause delay in or impede the enforcement of the Collateral Agent’s rights under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, each Grantor hereby irrevocably waives the
benefits of all such laws.
          SECTION 8. Indemnity and Expenses.
          (a) Each Grantor agrees, jointly and severally, to defend, protect,
indemnify and hold the Collateral Agent and each of the Buyers, jointly and
severally, harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, reasonable legal fees, costs, expenses, and disbursements of
such Person’s counsel) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of this
Agreement), except to the extent resulting from such Person’s gross negligence
or willful misconduct, as determined by a final judgment of a court of competent
jurisdiction.
          (b) Each Grantor agrees, jointly and severally, to pay to the
Collateral Agent upon demand the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and disbursements of counsel for
the Collateral Agent and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Collateral
Agent), which the Collateral Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder, or (iv) the
failure by any Grantor to perform or observe any of the provisions hereof.
          SECTION 9. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed (by certified mail,
postage prepaid and return receipt requested), telecopied, e-mailed or
delivered, if to any Grantor, at its address specified on the signature pages
below; or as to any such Person, at such other address as shall be designated by
such Person in a written notice to all other parties hereto complying as to
delivery with the terms of this Section 9. All such notices and other
communications shall be effective (a) if sent by certified mail, return receipt
requested, when received or three days after deposited in the

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mails, whichever occurs first, (b) if telecopied or e-mailed, when transmitted
(during normal business hours) and confirmation is received, and otherwise, the
day after the notice or communication was transmitted and confirmation is
received, or (c) if delivered in person, upon delivery.
          SECTION 10. Miscellaneous.
          (a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by each Grantor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
each Grantor therefrom, shall be effective unless it is in writing and signed by
each Grantor and the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
          (b) No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any of the other Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Collateral Agent or
any Buyer provided herein and in the other Transaction Documents are cumulative
and are in addition to, and not exclusive of, any rights or remedies provided by
law. The rights of the Collateral Agent or any Buyer under any of the other
Transaction Documents against any party thereto are not conditional or
contingent on any attempt by such Person to exercise any of its rights under any
of the other Transaction Documents against such party or against any other
Person, including but not limited to, any Grantor.
          (c) Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
          (d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full in cash of the Obligations, and (ii) be binding on each Grantor
and all other Persons who become bound as debtor to this Agreement in accordance
with Section 9-203(d) of the Code and shall inure, together with all rights and
remedies of the Collateral Agent and the Buyers hereunder, to the benefit of the
Collateral Agent and the Buyers and their respective permitted successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, without notice to any Grantor, the Collateral
Agent and the Buyers may assign or otherwise transfer their rights and
obligations under this Agreement and any of the other Transaction Documents, to
any other Person and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to the Collateral Agent and the Buyers
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to the Collateral Agent or any such Buyer shall mean the assignee
of the Collateral Agent or such Buyer. None of the rights or obligations of any
Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Collateral Agent, and any such assignment or transfer
without the consent of the Collateral Agent shall be null and void.

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          (e) Upon the indefeasible payment in full in cash of the Obligations
or the conversion into shares of Common Stock of the Company all of the
Obligations, (i) this Agreement and the security interests created hereby shall
terminate and all rights to the Collateral shall revert to the respective
Grantor that granted such security interests hereunder, and (ii) the Collateral
Agent will, upon any Grantor’s request and at such Grantor’s expense, (A) return
to such Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof, and (B) execute and deliver
to such Grantor such documents as such Grantor shall reasonably request to
evidence such termination, all without any representation, warranty or recourse
whatsoever.
          (f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
          (g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH GRANTOR HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
          (h) EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS
AGREEMENT) THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, ORAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE
PARTIES HERETO.
          (i) Each Grantor irrevocably consents to the service of process of any
of the aforesaid courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to any

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Grantor at its address provided herein, such service to become effective 10 days
after such mailing.
          (j) Nothing contained herein shall affect the right of the Collateral
Agent to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against any Grantor or any property of any
Grantor in any other jurisdiction.
          (k) Each Grantor irrevocably and unconditionally waives any right it
may have to claim or recover in any legal action, suit or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
          (l) Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
          (m) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together constitute one in the
same Agreement.
          (n) The parties hereto hereby acknowledge and agree that this
Agreement shall amend, restate, modify, extend, renew and continue the terms and
provisions contained in the Existing Security Agreement and shall not extinguish
or release any Grantor from any liability under the Existing Security Agreement
or otherwise constitute a novation of its obligations thereunder.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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          IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.

                  COMPANY:    
 
                STINGER SYSTEMS, INC.    
 
           
 
  By:   /s/ Robert Gruder
 
Name: Robert Gruder    
 
      Title: President    
 
           
 
      Address:    
 
           
 
      Facsimile:    

          ACCEPTED BY:    
 
        CASTLERIGG MASTER INVESTMENTS LTD., as Collateral Agent    
 
        By: Sandell Asset Management Corp.    
 
        By:   /s/ Patrick T. Burke     Name: Patrick T. Burke     Title: Senior
Managing Director    

Security Agreement

 

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EXHIBIT A
Assignment For Security
[Trademarks] [Patents] [Copyrights]
          WHEREAS,
                                                            (th e “Assignor”)
[has adopted, used and is using, and holds all right, title and interest in and
to, the trademarks and service marks listed on the annexed Schedule 1A, which
trademarks and service marks are registered or applied for in the United States
Patent and Trademark Office (the “Trademarks”)] [holds all right, title and
interest in the letter patents, design patents and utility patents listed on the
annexed Schedule 1A, which patents are issued or applied for in the United
States Patent and Trademark Office (the “Patents”)] [holds all right, title and
interest in the copyrights listed on the annexed Schedule 1A, which copyrights
are registered in the United States Copyright Office (the “Copyrights”)];
          WHEREAS, the Assignor has entered into an Amended and Restated
Security Agreement, dated as of February ___, 2008 (as amended, restated or
otherwise modified from time to time the “Security Agreement”), in favor of
Castlerigg Master Investments Ltd., as collateral agent for certain purchasers
(the “Assignee”);
          WHEREAS, pursuant to the Security Agreement, the Assignor has assigned
to the Assignee and granted to the Assignee for the benefit of the Buyers (as
defined in the Security Agreement) a continuing security interest in all right,
title and interest of the Assignor in, to and under the [Trademarks, together
with, among other things, the good-will of the business symbolized by the
Trademarks] [Patents] [Copyrights] and the applications and registrations
thereof, and all proceeds thereof, including, without limitation, any and all
causes of action which may exist by reason of infringement thereof and any and
all damages arising from past, present and future violations thereof (the
“Collateral”), to secure the payment, performance and observance of the
“Obligations” (as defined in the Security Agreement);
          NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor does hereby pledge,
convey, sell, assign, transfer and set over unto the Assignee and grants to the
Assignee for the benefit of the Buyers a continuing security interest in the
Collateral to secure the prompt payment, performance and for the benefit of the
Buyers observance of the Obligations.
          The Assignor does hereby further acknowledge and affirm that the
rights and remedies of the Assignee with respect to the Collateral are more
fully set forth in the Security Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.

 

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          IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of                     ,
20___

            [GRANTORS]
      By:           Name:           Title:      

 

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STATE OF
       
 
 
 
   
 
      ss.:
 
       
COUNTY OF
       
 
 
 
   

          On this ___day of                                        , 20___,
before me personally came                                          , to me known
to be the person who executed the foregoing instrument, and who, being duly
sworn by me, did depose and say that s/he is the                      of
                                                            , a
                    , and that s/he executed the foregoing instrument in the
firm name of                                         , and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.