Exhibit 10.1
AMENDMENT AND EXERCISE AGREEMENT
     AMENDMENT AND EXERCISE AGREEMENT (this “Agreement”), dated as of
January 25, 2007, by and among Stinger Systems, Inc., a Nevada corporation (the
“Company”), Bonanza Master Fund Ltd. (“Bonanza”), Tonga Partners, L.P.
(“Tonga”), The Cuttyhunk Fund Limited (“Cuttyhunk”), and Anegada Master Fund,
Ltd. (“Anegada”, and together with Bonanza, Tonga and Cuttyhunk, the “Holders”).
     WHEREAS, on or about December 30, 2004, the Company issued to each of the
Holders Common Stock Purchase Warrants (collectively, the “2004 Warrants”)
pursuant to which the Holders are entitled to purchase an aggregate of 999,999
shares (the “2004 Warrant Shares”) of the Company’s common stock, par value
$0.001 per share (“Common Stock”), at an exercise price of $7.50, as adjusted;
and
     WHEREAS, in connection with the issuance of the 2004 Warrants, the Company
and the Holders entered into that certain Registration Rights Agreement dated
December 30, 2004 (the “2004 Registration Rights Agreement”) pursuant to which
the Company agreed to register the 2004 Warrant Shares; and
     WHEREAS, pursuant to and in accordance with the terms of this Agreement,
the parties hereto desire: (i) to reduce the exercise price of the 2004 Warrants
to $0.60 per share; (ii) for the Holders to exercise all of the 2004 Warrants
for 999,999 shares of the Company’s Common Stock at an exercise price of $0.60
per share; (iii) for the Company to issue to the Holders new warrants in
substantially the form of Exhibit A attached hereto (the “2007 Warrants”, and
together with the 2004 Warrant Shares, the “Securities”) to purchase up to an
aggregate of 1,500,000 shares (the “2007 Warrant Shares”) of the Company’s
Common Stock at an exercise price of $2.00 per share; and (iv) to enter into a
registration rights agreement substantially in the form of Exhibit B attached
hereto (the “2007 Registration Rights Agreement”) pursuant to which the Company
will agree to register the shares of the Company’s Common Stock issuable upon
exercise of the 2004 Warrants and the 2007 Warrants in accordance with the terms
thereof.
     NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
     1. Waiver. The Holders hereby waive any effect of the provisions of
Section 3 of the 2004 Warrants as a result of the amendment of the exercise
price of the 2004 Warrants and the issuance of the 2007 Warrants, in each case
pursuant to the terms of this Agreement, with the effect that the amendment of
the exercise price of the 2004 Warrants and the issuance of the 2007 Warrants,
in each case pursuant to the terms of this Agreement, shall not otherwise effect
the exercise price of the 2004 Warrants.
     2. Amendment and Subsequent Exercise of 2004 Warrants.
          (a) Effective on the date hereof, the “Exercise Price” of the 2004
Warrants shall be $0.60 per share. In all other respects, the 2004 Warrants
remain in effect without amendment.

 

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          (b) Simultaneous with the execution and delivery of this Agreement,
each Holder hereby agrees as follows: (i) Bonanza hereby exercises its 2004
Warrants and purchases 300,000 shares of the Company’s Common Stock at an
exercise price of $0.60 per share; (ii) Tonga hereby exercises its 2004 Warrants
and purchases 292,520 shares of the Company’s Common Stock at an exercise price
of $0.60 per share; (iii) Cuttyhunk hereby exercises its 2004 Warrants and
purchases 206,758 shares of the Company’s Common Stock at an exercise price of
$0.60 per share; and (iv) Anegada hereby exercises its 2004 Warrants and
purchases 200,721 shares of the Company’s Common Stock at an exercise price of
$0.60 per share. Each Holder shall simultaneously deliver to the Company via
wire transfer in immediately available funds an amount equal to the product of
(x) the number of shares underlying such Holder’s respective 2004 Warrants
multiplied by (y) $0.60. The Company shall deliver to each Holder a facsimile
copy (with the original to be delivered to the Holder as soon as practicable
following the consummation the transactions hereunder) of a certificate
evidencing the number of shares underlying such Holder’s respective 2004
Warrants issued in the name of such Holder. Each Holder acknowledges and agrees
that the shares of the Company’s Common Stock issued as a result of such
exercise shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES OR “BLUE SKY”
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES OR
“BLUE SKY” LAWS AND AN OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
     3. Issuance of 2007 Warrants; Delivery of 2007 Registration Rights
Agreement; Termination of Prior Agreements.
          (a) Simultaneous with the execution and delivery of this Agreement
(i) the Company shall deliver to each Holder the 2007 Warrants, in each case in
accordance with Schedule I attached hereto and (ii) the Company and each of the
Holders shall execute and deliver the 2007 Registration Rights Agreement.
          (b) Effective as of the date hereof, each of the 2004 Registration
Rights Agreement and that certain Securities Purchase Agreement dated
December 30, 2004 (the “2004 Securities Purchase Agreement”) by and among the
Company and the parties thereto is hereby terminated, together with any rights,
obligations and claims of the parties thereunder.
     4. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Holder as follows:
          (a) The Company has all requisite corporate power and authority to
execute, deliver and perform this Agreement. All corporate action on the part of
the Company and its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of all obligations of the
Company under this Agreement has been or will be taken prior to or concurrently
with the execution and delivery of this Agreement in compliance with

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applicable law and agreements. This Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors’ rights generally or by equitable principles, (b) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (c) to the extent that the enforceability of the
indemnification provisions may be limited by applicable laws.
          (b) The 2004 Warrant Shares have been duly authorized and, when issued
and paid for in accordance with this Agreement, will be duly and validly issued,
fully paid and non-assessable.
          (c) The 2007 Warrants constitute the legal, valid and binding
obligation of the Company, enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law. The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable upon exercise of the 2007
Warrants, and upon exercise in accordance with their terms, the 2007 Warrant
Shares will be duly authorized, validly issued, fully paid and non-assessable.
     5. Representations and Warranties of the Holders. Each Holder, severally
and not jointly, hereby represents and warrants to the Company as follows:
          (a) Such Holder has all requisite power and authority to execute,
deliver and perform this Agreement. All action on the part of the Holder and its
officers, directors, partners, members and stockholders necessary for the
authorization, execution, delivery and performance of all obligations of such
Holder under this Agreement has been or will be taken prior to or concurrently
with the execution and delivery of this Agreement in compliance with applicable
law and agreements. This Agreement constitutes a valid and legally binding
obligation of such Holder, enforceable in accordance with its terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors’ rights
generally or by equitable principles, (b) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (c) to the extent that the enforceability of the indemnification
provisions may be limited by applicable laws.
          (b) Such Holder is an “accredited investor” within the meaning of
Rule 501 promulgated pursuant to the Securities Act of 1933, as amended (the
“Securities Act”).
          (c) Such Holder is acquiring the Securities as principal for its own
account for investment purposes only and not with a view to or for distributing
such Securities or any part thereof in violation of applicable federal and state
securities laws; provided, however that such representation is made without
prejudice to such Holder’s right at all times to sell or otherwise dispose of
all or any part of such Securities in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Investor to hold the Securities for any period of time.

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          (d) Such Holder understands that the Securities are being offered and
sold to it in reliance upon specific exemptions from the registration
requirements of U.S. federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Holder’s compliance with, the
representations, warranties, agreements, acknowledgements and understandings of
the Holder set forth in this Section 5 in order to determine the availability of
such exemption and the eligibility of the Holder to acquire the Securities.
          (e) Such Holder is not acquiring the Securities as a result of any
advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
          (f) Such Holder acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing therein;
(ii) access to public information about the Company and its subsidiaries and
their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional public
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Holder or its representatives or counsel shall
modify, amend or affect such Investor’s right to rely on the truth, accuracy and
completeness of the Company’s representations and warranties contained in this
Agreement.
          (g) Such Holder has independently evaluated the merits of its decision
to purchase the Securities pursuant to this Agreement, such decision has been
independently made by such Holder and such Holder confirms that it has only
relied on the advice of its own business and/or legal counsel and not on the
advice of any other Holder’s business and/or legal counsel in making such
decision.
          (h) Such Holder acknowledges and understands that its investment in
the Securities involves a significant degree of risk, including, without
limitation that (i) an investment in the Company is not without risk and (ii) in
the event of a disposition of the Securities, the Holder could sustain the loss
of its entire investment.
          (i) Such Holder understands that except as otherwise provided in this
Agreement and the 2007 Registration Rights Agreement, the Securities have not
been and are not being registered under the Securities Act or any applicable
state securities laws and, consequently, the Holder may have to bear the risk of
owning the Securities for an indefinite period of time because the 2007 Warrants
may not be transferred unless (i) the resale of the Securities is registered
pursuant to an effective registration statement under the Securities Act; or the
Securities are sold or transferred pursuant to Rule 144.

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     6. MISCELLANEOUS.
          (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (EXCLUDING NEW YORK CONFLICT OF LAWS RULES) APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK.
          (b) Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
          (c) No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the parties hereto.
          (d) This Agreement constitutes the entire agreement among the parties
and supersedes any prior understandings, agreements or representations by or
among the parties, written or oral, to the extent they related in any way to the
subject matter hereof.
          (e) Each of the parties hereto recognizes and acknowledges that a
breach by it of any covenants or agreements contained in this Agreement will
cause the other party to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore, each of the parties hereto
agrees that in the event of any such breach the aggrieved party shall be
entitled to the remedy of specific performance of such covenants and agreements
and injunctive and other equitable relief in addition to any other remedy to
which it may be entitled, at law or in equity. The parties agree that they shall
be entitled to enforce specifically the terms and provisions of this Agreement
in any court of law, this being in addition to any other remedy to which they
are entitled at law or in equity.
          (f) This Agreement may be executed in any number of counterparts and
by different parties hereto on separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which together
shall constitute a single instrument. Delivery of an executed counterpart of a
signature page of this Agreement by facsimile transmission shall be as effective
as delivery of a manually executed counterpart hereof.
          (g) Effective as of the date hereof, except for Claims (as defined
below) a Holder may have under the 2007 Warrants and the 2007 Registration
Rights Agreement, each Holder, for and on behalf of such Holder and its
successors and assigns, as applicable (collectively, the “Holder Releasing
Parties”), hereby irrevocably and unconditionally releases and forever
discharges the Company and its directors, officers, stockholders, agents, past
or present employees, representatives, attorneys, predecessors, successors,
parents, affiliates, insurers, heirs, executors, administrators and assigns, and
all persons acting by, through, under or in concert with any of them
(collectively, the “Released Parties”), of and from any and all actions, causes
of action, suits, debts, charges and expenses (including attorneys’ fees and
costs), of any nature whatsoever, whether arising out of federal, state or local
statute, rule or ordinance and any other claims in law or equity, whether
asserted or unasserted, known or unknown, fixed

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or contingent, direct or indirect (collectively, the “Claims”), which the Holder
Releasing Parties ever had or now has, or hereafter may have against the
Released Parties, or any of them, arising under the 2004 Registration Rights
Agreement, the 2004 Warrants or the 2004 Securities Purchase Agreement.
[The remainder of this page is intentionally blank.]

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     IN WITNESS WHEREOF, the Company and the Holders have caused this Agreement
to be signed by a duly authorized officer as of the date above.

          STINGER SYSTEMS, INC.    
 
       
By:
  /s/ David J. Meador
 
    Name: David J. Meador     Title: Chief Financial Officer    
 
        BONANZA MASTER FUND LTD.    
 
       
By:
  /s/ Brian Ladin
 
    Name: Brian Ladin     Title: Partner    
 
        TONGA PARTNERS, L.P.    
 
       
By:
  /s/ J. Carlo Cannell
 
    Name: J. Carlo Cannell     Title: General Partner    
 
        THE CUTTYHUNK FUND LIMITED    
 
       
By:
  /s/ Geoffrey M. Lewis
 
    Name: Geoffrey M. Lewis     Title: Director    
 
        ANEGADA MASTER FUND, LTD.    
 
       
By:
  /s/ J. Carlo Cannell
 
    Name: J. Carlo Cannell     Title: Director & Investment Adviser    

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SCHEDULE I

          Name   Number of 2007 Warrants
Bonanza Master Fund Ltd.
    450,000  
Tonga Partners, L.P.
    438,781  
The Cuttyhunk Fund Limited
    310,138  
Anegada Master Fund, Ltd.
    301,082