Document:

EX-10.4 REGISTRATION RIGHTS AGREEMENT

 

Exhibit 10.4

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of August 2, 2007, by and among
Stinger Systems, Inc., a Nevada corporation, with headquarters located at 2701 N. Rocky Point
Drive, Suite 1130, Tampa, Florida 33607 (the “Company”), and the undersigned buyers (each, a
“Buyer”, and collectively, the “Buyers”).

          WHEREAS:

          A. In connection with the Securities Purchase Agreement by and among the parties hereto of
even date herewith (the “Securities Purchase Agreement”), the Company has agreed, upon the terms
and subject to the conditions set forth in the Securities Purchase Agreement, to issue and sell to
each Buyer (i) senior secured convertible notes (the “Notes”) which will, among other things, be
convertible into shares of the Company’s common stock, par value $.001 per share (the “Common
Stock,” as converted, collectively, the “Conversion Shares”) and (ii) warrants (the “Warrants”),
which will be exercisable to purchase shares of Common Stock (as exercised collectively, the
“Warrant Shares”).

          B. The Notes bear interest, which at the option of the Company, subject to certain conditions,
may be paid in shares of Common Stock (the “Interest Shares”).

          C. In accordance with the terms of the Securities Purchase Agreement, the Company has agreed
to provide certain registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and
applicable state securities laws.

          NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each of the Buyers hereby agree as follows:

          1. Definitions.

          Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:

          a. “Additional Effectiveness Date” means the date the Additional Registration Statement is
declared effective by the SEC.

          b. “Additional Effectiveness Deadline” means the date which is thirty (30) calendar days after
the earlier of the Additional Filing Date and the Additional Filing Deadline or in the event that
the Registration Statement is subject to a full review by the SEC, ninety (90) calendar days after
the earlier of the Additional Filing Date and the Additional Filing Deadline.

 

 

          c. “Additional Filing Date” means the date on which the Additional Registration Statement is
filed with the SEC.

          d. “Additional Filing Deadline” means the later of (i) the date sixty (60) days after the date
substantially all of the Registrable Securities registered under the immediately preceding
Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or
the last Additional Effective Date, as applicable.

          e. “Additional Registrable Securities” means any of the following not previously included on a
Registration Statement: (i) the Conversion Shares issued or issuable upon conversion of the Notes,
(ii) the Warrant Shares issued or issuable upon exercise of the Warrants, (iii) the Interest Shares
issued or issuable with respect to the Notes, and (iv) any capital stock of the Company issued or
issuable, with respect to the Notes, Conversion Shares, the Interest Shares, the Warrant Shares or
the Warrants as a result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on conversion of the Notes or exercise of the
Warrants.

          f. “Additional Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act covering any Additional Registrable Securities.

          g. “Additional Required Registration Amount” means a number of shares of Common Stock equal to
one third (1/3) of the non-affiliate public float of the Common Stock as of the trading day
immediately preceding the Closing Date.

          h. “Business Day” means any day other than Saturday, Sunday or any other day on which
commercial banks in the City of New York are authorized or required by law to remain closed.

          i. “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement.

          j. “Effective Date” means the Initial Effective Date and the Additional Effective Date, as
applicable.

          k. “Effectiveness Deadline” means the Initial Effectiveness Deadline and the Additional
Effectiveness Deadline, as applicable.

          l. “Filing Deadline” means the Initial Filing Deadline and the Additional Filing Deadline, as
applicable.

          m. “Initial Effective Date” means the date that the Initial Registration Statement has been
declared effective by the SEC.

          n. “Initial Effectiveness Deadline” means the date which is one-hundred and twenty (120)
calendar days after the Closing Date.

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          o. “Initial Filing Deadline” means the date which is thirty (30) calendar days after the
Closing Date.

          p. “Initial Registrable Securities” for the Initial Registration Statement means (i) the
Conversion Shares issued or issuable upon conversion of the Notes, (ii) the Warrant Shares issued
or issuable upon exercise of the Warrants, (iii) the Interest Shares issued or issuable with
respect to the Notes, and (iv) any capital stock of the Company issued or issuable, with respect to
the Notes, Conversion Shares, the Interest Shares, the Warrant Shares or the Warrants as a result
of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversion of the Notes or exercise of the Warrants.

          q. “Initial Required Registration Amount” means a number of shares of Common Stock equal to
one third (1/3) of the non-affiliate public float of the Common Stock as of the trading day
immediately preceding the Closing Date.

          r. “Initial Registration Statement” means a registration statement or registration statements
of the Company filed under the 1933 Act covering the Initial Registrable Securities.

          s. “Investor” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its
rights under this Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 9.

          t. “Person” means an individual, a limited liability company, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any department or agency
thereof.

          u. “register,” “registered,” and “registration” refer to a registration effected by preparing
and filing one or more Registration Statements in compliance with the 1933 Act and pursuant to Rule
415 and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

          v. “Registrable Securities” means the Initial Registrable Securities and the Additional
Registrable Securities.

          w. “Registration Statement” means a registration statement or registration statements of the
Company filed under the 1933 Act covering the Registrable Securities.

          x. “Required Holders” means the holders of at least a majority of the Registrable Securities.

          y. “Required Registration Amount” means either the Initial Required Registration Amount or the
Additional Required Registration Amount, as applicable.

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          z. “Rule 415” means Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.

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

          bb. “Total Required Registration Amount” means 130% of the aggregate Registerable Securities.

          2. Registration.

     a. Initial Mandatory Registration. The Company shall prepare, and, as soon as
practicable, but in no event later than the Initial Filing Deadline, file with the SEC the Initial
Registration Statement on Form S-3 covering the resale of all of the Initial Registrable
Securities. In the event that Form S-3 is unavailable for such a registration, the Company shall
use such other form as is available for such a registration on another appropriate form reasonably
acceptable to the Required Holders, subject to the provisions of Section 2(e). The Initial
Registration Statement prepared pursuant hereto shall register for resale at least the number of
shares of Common Stock equal to the Initial Required Registration Amount determined as of the date
the Initial Registration Statement is initially filed with the SEC. The Initial Registration
Statement shall contain (except if otherwise directed by the Required Holders) the “Selling
Stockholders” and “Plan of Distribution” sections in substantially the form attached
hereto as Exhibit B. The Company shall use its best efforts to have the Initial
Registration Statement declared effective by the SEC as soon as practicable, but in no event later
than the Initial Effectiveness Deadline. By 9:30 a.m. New York time on the Business Day following
the Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under
the 1933 Act the final prospectus to be used in connection with sales pursuant to such Initial
Registration Statement.

     b. Additional Mandatory Registrations. The Company shall prepare, and, as soon as
practicable but in no event later than the Additional Filing Deadline, file with the SEC an
Additional Registration Statement on Form S-3 covering the resale of the Additional Required
Registration Amount. Until the Total Required Registration Amount of Registerable Securities are
registered on a Registration Statement, the Company shall file Additional Registration Statements
successively trying to register on each such Additional Registration Statement the maximum number
of remaining Additional Registrable Securities until the Total Required Registration Amount has
been registered with the SEC. In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration on another
appropriate form reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(e). Each Additional Registration Statement prepared pursuant hereto shall register for
resale at least that number of shares of Common Stock equal to the Additional Required
Registration Amount as of date the Registration Statement is initially filed with the SEC. Each
Additional Registration Statement shall contain (except if otherwise directed by the Required
Holders) the “Selling Stockholders” and “Plan of Distribution” sections in
substantially the form attached hereto as Exhibit B. The Company shall use its best
efforts to have each Additional Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. New
York time on the date following the Additional Effective Date,

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the Company shall file with the SEC
in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with
sales pursuant to such Additional Registration Statement.

     c. Allocation of Registrable Securities. The initial number of Registrable
Securities included in any Registration Statement and any increase in the number of Registrable
Securities included therein shall be allocated pro rata among the Investors based on the number of
Registrable Securities held by each Investor at the time the Registration Statement covering such
initial number of Registrable Securities or increase thereof is declared effective by the SEC. In
the event that an Investor sells or otherwise transfers any of such Investor’s Registrable
Securities, each transferee shall be allocated a pro rata portion of the then remaining number of
Registrable Securities included in such Registration Statement for such transferor. Any shares of
Common Stock included in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors which are covered by such Registration Statement. In no event shall the
Company include any securities other than Registrable Securities on any Registration Statement
without the prior written consent of the Required Holders.

     d. Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have the
right to select one legal counsel to review and oversee any registration pursuant to this Section
2 (“Legal Counsel”), which shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate with
each other in performing the Company’s obligations under this Agreement.

     e. Ineligibility for Form S-3. In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company shall (i) register the
resale of the Registrable Securities on another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as
such form is available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by the SEC.

     f. Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) or Section 2(b) is
insufficient to cover all of the Registrable Securities required to be covered by such
Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant
to Section 2(c), the Company shall amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or both, so as to
cover at least the Required Registration Amount as of the trading day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each case, as soon as
practicable, but in any event not later than fifteen (15) days after the necessity therefor
arises. The Company shall use its best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing thereof. For purposes
of the foregoing provision, the number of shares available under a Registration

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Statement shall be
deemed “insufficient to cover all of the Registrable Securities” if at any time the number of
shares of Common Stock available for resale under the Registration Statement is less than the
product determined by multiplying (i) the Required Registration Amount as of such time by (ii)
0.90. The calculation set forth in the foregoing sentence shall be made
without regard to any limitations on the conversion of the Notes or exercise of the Warrants
and such calculation shall assume that the Notes are then convertible into shares of common stock
at the then prevailing Conversion Rate (as defined in the Notes) and that the Warrants are then
exercisable for shares of Common Stock at the then prevailing Exercise Price (as defined in the
Warrants).

     g. Effect of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement. If (i) a Registration Statement covering all of the Registrable Securities
required to be covered thereby and required to be filed by the Company pursuant to this Agreement
is (A) not filed with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or
(B) not declared effective by the SEC on or before the respective Effectiveness Deadline (an
“Effectiveness Failure”) or (iii) on any day after the Effective Date sales of all of the
Registrable Securities required to be included on such Registration Statement cannot be made
(other than during an Allowable Grace Period (as defined in Section 3(r)) pursuant to such
Registration Statement or otherwise (including, without limitation, because of a failure to keep
such Registration Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement, to register a sufficient number of shares of
Common Stock or to maintain the listing of the Common Stock) (a “Maintenance Failure”) then, as
partial relief for the damages to any holder by reason of any such delay in or reduction of its
ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each holder of Registrable
Securities relating to such Registration Statement an amount in cash equal to one and one-half
percent (1.5%) of the aggregate Purchase Price (as such term is defined in the Securities Purchase
Agreement) of such Investor’s Registrable Securities whether or not included in such Registration
Statement, on each of the following dates: (i) the day of a Filing Failure; (ii) the day of an
Effectiveness Failure; (iii) the initial day of a Maintenance Failure; (iv) on every thirtieth day
after the day of a Filing Failure and thereafter (pro rated for periods totaling less than thirty
days) until such Filing Failure is cured; (v) on every thirtieth day after the day of an
Effectiveness Failure and thereafter (pro rated for periods totaling less than thirty days) until
such Effectiveness Failure is cured; and (vi) on every thirtieth day after the initial day of a
Maintenance Failure and thereafter (pro rated for periods totaling less than thirty days) until
such Maintenance Failure is cured. The payments to which a holder shall be entitled pursuant to
this Section 2(g) are referred to herein as “Registration Delay Payments.” Registration Delay
Payments shall be paid on the earlier of (I) the dates set forth above and (II) the third Business
Day after the event or failure giving rise to the Registration Delay Payments is cured. In the
event the Company fails to make Registration Delay Payments in a timely manner, such Registration
Delay Payments shall bear interest at the rate of one percent (1.0%) per month (prorated for
partial months) until paid in full.

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          3. Related Obligations.

          At such time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a), 2(b), 2(e) or 2(f), the Company will use its best efforts to effect the
registration of the Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:

     a. The Company shall promptly prepare and file with the SEC a Registration Statement with
respect to the Registrable Securities and use its best efforts to cause such Registration
Statement relating to the Registrable Securities to become effective as soon as practicable after
such filing (but in no event later than the Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) the
date as of which the Investors may sell all of the Registrable Securities covered by such
Registration Statement without restriction pursuant to Rule 144(k) (or any successor thereto)
promulgated under the 1933 Act or (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the “Registration Period”). The
Company shall ensure that each Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the circumstances in which they
were made) not misleading. The term “best efforts” shall mean, among other things, that the
Company shall submit to the SEC, within two (2) Business Days after the later of the date that (i)
the Company learns that no review of a particular Registration Statement will be made by the staff
of the SEC or that the staff has no further comments on a particular Registration Statement, as
the case may be, and (ii) the approval of Legal Counsel pursuant to Section 3(c) (which approval
is immediately sought), a request for acceleration of effectiveness of such Registration Statement
to a time and date not later than two (2) Business Days after the submission of such request. The
Company shall respond in writing to comments made by the SEC in respect of a Registration
Statement as soon as practicable, but in no event later than fifteen (15) days after the receipt
of comments by or notice from the SEC that an amendment is required in order for a Registration
Statement to be declared effective.

     b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K or
any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the
Company shall have incorporated such report by reference into such Registration Statement, if
applicable, or shall

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file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend or supplement such
Registration Statement.

     c. The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration
Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments
and supplements to all Registration Statements (except for Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or
successor reports) within a reasonable number of days prior to their filing with the SEC, and (B)
not file any Registration Statement or amendment or supplement thereto in a form to which Legal
Counsel reasonably objects. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement thereto without the prior
approval of Legal Counsel, which consent shall not be unreasonably withheld. The Company shall
furnish to Legal Counsel, without charge, (i) copies of any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to any Registration Statement,
(ii) promptly after the same is prepared and filed with the SEC, one copy of any Registration
Statement and any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, and all exhibits and
(iii) upon the effectiveness of any Registration Statement, one copy of the prospectus included in
such Registration Statement and all amendments and supplements thereto. The Company shall
reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to this
Section 3.

     d. The Company shall furnish to each Investor whose Registrable Securities are included in
any Registration Statement, without charge, (i) promptly after the same is prepared and filed with
the SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by reference, if requested
by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.

     e. The Company shall use its best efforts to (i) register and qualify, unless an exemption
from registration and qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky” laws of all
applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in connection therewith
or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself

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to general taxation
in any such jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable Securities for sale
under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such purpose.

     f. The Company shall notify Legal Counsel and each Investor in writing of the happening of
any event, as promptly as practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an untrue statement
of a material fact or omission to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material, nonpublic
information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request). The Company shall also promptly notify
Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile or e-mail on the same day of such effectiveness and by
overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would be appropriate.

     g. The Company shall use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension
is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment
and to notify Legal Counsel and each Investor who holds Registrable Securities being sold of the
issuance of such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.

     h. If any Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter, at the reasonable request of such Investor, the Company
shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request (i) a letter,
dated such date, from the Company’s independent certified public accountants in form and substance
as is customarily given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering, addressed to the
Investors.

     i. If any Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter, the Company shall make available for inspection

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by (i)
such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by
the Investors (collectively, the “Inspectors”), all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively, the “Records”), as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or
other information which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of competent jurisdiction,
or (c) the information in such Records has been made generally available to the public other than
by disclosure in violation of this Agreement. Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit the Investors’ ability to
sell Registrable Securities in a manner which is otherwise consistent with applicable laws and
regulations.

     j. The Company shall hold in confidence and not make any disclosure of information concerning
an Investor provided to the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction, or (iv) such information has been made
generally available to the public other than by disclosure in violation of this Agreement or any
other agreement. The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to such Investor and allow such
Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

     k. The Company shall use its best efforts either to (i) cause all of the Registrable
Securities covered by a Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such exchange or (ii)
secure the inclusion for quotation of all of the Registrable Securities on The NASDAQ Global
Select Market or (iii) if, despite the Company’s best efforts, the Company is unsuccessful in
satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on The NASDAQ
Global Market, the New York Stock Exchange or the American Stock Exchange for such Registrable
Securities and, without limiting the generality of the foregoing, to use its best efforts to
arrange for at least two market makers to register with the National Association of Securities
Dealers, Inc. (“NASD”) as such with respect to such

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Registrable Securities. The Company shall pay
all fees and expenses in connection with satisfying its obligation under this Section 3(k).

     l. The Company shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be
in such denominations or amounts, as the case may be, as the Investors may reasonably request
and registered in such names as the Investors may request.

     m. If requested by an Investor, the Company shall as soon as practicable (i) incorporate in a
prospectus supplement or post-effective amendment such information as an Investor reasonably
requests to be included therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other terms of the offering
of the Registrable Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or
make amendments to any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

     n. The Company shall use its best efforts to cause the Registrable Securities covered by a
Registration Statement to be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such Registrable Securities.

     o. The Company shall make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under
the 1933 Act) covering a twelve-month period beginning not later than the first day of the
Company’s fiscal quarter next following the Effective Date of a Registration Statement.

     p. The Company shall otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.

     q. Within two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.

     r. Notwithstanding anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the
Company and its counsel, in the best interest of the Company

11

 

and, in the opinion of counsel to the
Company, otherwise required (a “Grace Period”); provided, that the Company shall promptly (i)
notify the Investors in writing of the existence of material, non-public information giving rise
to a Grace Period (provided that in each notice the Company will not disclose the content of such
material, non-public information to the Investors) and the date on which the Grace Period will
begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed five (5) consecutive days and during any three
hundred sixty five (365) day period
such Grace Periods shall not exceed an aggregate of twenty (20) days and the first day of any
Grace Period must be at least five (5) trading days after the last day of any prior Grace Period
(each, an “Allowable Grace Period”). For purposes of determining the length of a Grace Period
above, the Grace Period shall begin on and include the date the Investors receive the notice
referred to in clause (i) and shall end on and include the later of the date the Investors receive
the notice referred to in clause (ii) and the date referred to in such notice. The provisions of
Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first sentence of Section
3(f) with respect to the information giving rise thereto unless such material, non-public
information is no longer applicable. Notwithstanding anything to the contrary, the Company shall
cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement in connection with any
sale of Registrable Securities with respect to which an Investor has entered into a contract for
sale, prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor
has not yet settled.

     s. Neither the Company nor any Subsidiary or affiliate thereof shall identify any Buyer as an
underwriter in any public disclosure or filing with the SEC or any Principal Market (as defined in
the Securities Purchase Agreement) or Eligible Market and any Buyer being deemed an underwriter by
the SEC shall not relieve the Company of any obligations it has under this Agreement or any other
Transaction Document (as defined in the Securities Purchase Agreement); provided,
however, that the foregoing shall not prohibit the Company from including the disclosure
found in the “Plan of Distribution” section attached hereto as Exhibit B in the
Registration Statement.

          4. Obligations of the Investors.

     a. At least five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the information the
Company requires from each such Investor if such Investor elects to have any of such Investor’s
Registrable Securities included in such Registration Statement. It shall be a condition precedent
to the obligations of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such Investor shall furnish to
the Company such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it, as shall be reasonably
required to effect and maintain the effectiveness of the registration of such Registrable
Securities and shall execute such documents in connection with such registration as the Company
may reasonably request.

12

 

     b. Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement hereunder, unless such Investor has notified
the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement.

     c. Each Investor agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first sentence of 3(f),
such Investor will immediately discontinue disposition of Registrable Securities pursuant to
any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt
of the copies of the supplemented or amended prospectus contemplated by Section 3(g) or the first
sentence of 3(f) or receipt of notice that no supplement or amendment is required.
Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of
the Securities Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt
of a notice from the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f) and for which the Investor has not yet settled.

     d. Each Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with
sales of Registrable Securities pursuant to the Registration Statement.

          5. Expenses of Registration.

          All reasonable expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,
without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company shall be paid by the Company. The
Company shall also reimburse the Investors for the fees and disbursements of Legal Counsel in
connection with registration, filing or qualification pursuant to Sections 2 and 3 of this
Agreement which amount shall be limited to $20,000.

          6. Indemnification.

          In the event any Registrable Securities are included in a Registration Statement under this
Agreement:

     a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend each Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within the meaning of the
1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid
in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or

13

 

governmental, administrative or other regulatory
agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as
such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise
out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other “blue sky” laws of
any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission
or alleged
omission to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or supplemented, if the
Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement
or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv)
being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with investigating or defending
any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person
arising out of or based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person for such Indemnified
Person expressly for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Indemnified Person and
shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

     b. In connection with any Registration Statement in which an Investor is participating, each
such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement and each Person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”),
against any Claim or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent, that such Violation
occurs in reliance upon and in conformity with written information furnished to the Company by
such Investor expressly for use in connection with such Registration Statement; and, subject to
Section 6(c), such Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in

14

 

connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall
be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such Indemnified Party and
shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

     c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not
more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party,
the representation by such counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or potential differing interests between
such Indemnified Person or Indemnified Party and any other party represented by such counsel in
such proceeding. In the case of an Indemnified Person, legal counsel referred to in the
immediately preceding sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall cooperate reasonably with the
indemnifying party in connection with any negotiation or defense of any such action or Claim by
the indemnifying party and shall furnish to the indemnifying party all information reasonably
available to the Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or proceeding effected
without its prior written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the
prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim or litigation, and
such settlement shall not include any admission as to fault on the part of the Indemnified Party.
Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to
all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.

15

 

The failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party
is prejudiced in its ability to defend such action.

     d. The indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received
or Indemnified Damages are incurred.

     e. The indemnity agreements contained herein shall be in addition to (i) any cause of action
or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

          7. Contribution.

          To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no Person involved in the sale of Registrable Securities which Person
is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale shall be entitled to contribution from any Person involved in such sale
of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution
by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to such Registration
Statement.

          8. Reports Under the 1934 Act.

          With a view to making available to the Investors the benefits of Rule 144 promulgated under
the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration (“Rule 144”), the
Company agrees to:

     a. make and keep public information available, as those terms are understood and defined in
Rule 144;

     b. file with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is required for the applicable
provisions of Rule 144; and

     c. furnish to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has complied with the
reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably

16

 

requested to permit the Investors
to sell such securities pursuant to Rule 144 without registration.

          9. Assignment of Registration Rights.

          The rights under this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such assignment; (ii) the
Company is, within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv)
at or before the time the Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein; and (v) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement.

          10. Amendment of Registration Rights.

          Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Required Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.

          11. Miscellaneous.

     a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or
is deemed to own of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or election received from
such record owner of such Registrable Securities.

     b. Any notices, consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

17

 

If to the Company:

Stinger Systems, Inc.

2701 N. Rocky Point Drive, Suite 1130

Tampa, FL 33608

Telephone: (410) 281-1061

Facsimile:   (813) 288-9148

Attention:  Chief Executive Officer

With a copy (for informational purposes only) to:

DLA Piper US LLP

6225 Smith Avenue

Baltimore, MD 21209-3600

Telephone: (410) 580-4170

Facsimile:   (410) 580-3170

Attention:  Jason Harmon, Esq.

If to the Transfer Agent:

Colonial Stock Transfer

66 Exchange Place

Salt Lake City, UT 84111

Telephone: (801) 355-5740 office

Facsimile:   (801) 355-6505

If to Legal Counsel:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone: (212) 756-2000

Facsimile:   (212) 593-5955

Attention:  Eleazer N. Klein, Esq.

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached
hereto, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to
such other address and/or facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other party five (5) days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a

18

 

nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii)
above, respectively.

     c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

     d. All questions concerning the construction, validity, enforcement and interpretation of
this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause the application of
the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New
York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.
Each party hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law. If any
provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     e. This Agreement, the other Transaction Documents (as defined in the Securities Purchase
Agreement) and the instruments referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.

     f. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and
be binding upon the permitted successors and assigns of each of the parties hereto.

     g. The headings in this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.

19

 

     h. This Agreement may be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this Agreement.

     i. Each party shall do and perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other agreements, certificates, instruments and
documents as any other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

     j. All consents and other determinations required to be made by the Investors pursuant to
this Agreement shall be made, unless otherwise specified in this Agreement, by the Required
Holders.

     k. The language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will be applied against
any party.

     l. This Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.

     m. The obligations of each Investor hereunder are several and not joint with the obligations
of any other Investor, and no provision of this Agreement is intended to confer any obligations on
any Investor vis-à-vis any other Investor. Nothing contained herein, and no action taken by any
Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated herein.

* * * * * *

[Signature Page Follows]

20

 

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Registration Rights Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	COMPANY:

STINGER SYSTEMS, INC.

 	 
	 	By:  	/s/ David J. Meador
 	 
	 	 	Name:  	David J. Meador 	 
	 	 	Title:  	Chief Financial Officer 	 

1

 

	 	 	 	 	 

     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Registration Rights Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	BUYERS:

CASTLERIGG MASTER INVESTMENTS LTD.

       By: Sandell Asset Management Corp.

 	 
	 	By:  	/s/ Timothy O’Brien
 	 
	 	 	Name:  	Timothy O’Brien 	 
	 	 	Title:  	Chief Financial Officer 	 

2

 

	 	 	 	 	 

SCHEDULE OF BUYERS

	 	 	 	 	 
	 	 	Buyer Address	 	Buyer’s Representative’s Address
	Buyer 	 	and Facsimile Number	 	and Facsimile Number
	Castlerigg Master Investments Ltd.

	 	c/o Sandell Asset Management
	 	Schulte Roth & Zabel LLP
	 

	 	40 West 57th St
	 	919 Third Avenue
	 

	 	26th Floor
	 	New York, NY 10022
	 

	 	New York, NY 10019
	 	Attn: Eleazer Klein, Esq.
	 

	 	Attention: Cem Hacioglu/Matthew Pliskin
	 	Facsimile: (212) 593-5955
	 

	 	Fax: 212-603-5710
	 	Telephone: (212) 756-2000
	 

	 	Telephone: 212-603-5700	 	 

3

 

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

Colonial Stock Transfer

66 Exchange Place

Salt Lake City, UT 84111

          Re: Stinger Systems, Inc.

Ladies and Gentlemen:

          [We are][I am] counsel to Stinger Systems Inc., a Nevada corporation (the “Company”), and have
represented the Company in connection with that certain Securities Purchase Agreement (the
“Securities Purchase Agreement”) entered into by and among the Company and the buyers named therein
(collectively, the “Holders”) pursuant to which the Company issued to the Holders senior secured
convertible notes (the “Notes”) which shall be convertible into the Company’s common stock, par
value $0.001 per share (the “Common Stock”) and warrants exercisable for shares of Common Stock
(the “Warrants”). Pursuant to the Securities Purchase Agreement, the Company also has entered into
a Registration Rights Agreement with the Holders (the “Registration Rights Agreement”) pursuant to
which the Company agreed, among other things, to register the Registrable Securities (as defined in
the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion
of the Notes and the shares of Common Stock issuable upon exercise of the Warrants, under the
Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations
under the Registration Rights Agreement, on ___, 200_, the Company filed a
Registration Statement on Form S-1 (File No. 333-___) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.

          In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has
advised [us][me] by telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that any proceedings for
that purpose are pending before, or threatened by, the SEC and the Registrable Securities are
available for resale under the 1933 Act pursuant to the Registration Statement.

          This letter shall serve as our standing instruction to you that the shares of Common Stock are
freely transferable by the Holders pursuant to the Registration Statement. You need not require
further letters from us to effect any future legend-free issuance or

1

 

reissuance of shares of Common Stock to the Holders as contemplated by the Company’s
Irrevocable Transfer Agent Instructions dated August 2, 2007.

	 	 	 	 	 
	 	Very truly yours,

[ISSUER’S COUNSEL]

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

CC: [LIST NAMES OF HOLDERS]

2

 

EXHIBIT B

SELLING STOCKHOLDERS

     The shares of common stock being offered by the selling stockholders are issuable upon
conversion of the convertible notes and upon exercise of the warrants. For additional information
regarding the issuance of those convertible notes and warrants, see “Private Placement of
Convertible Notes and Warrants” above. We are registering the shares of common stock in order to
permit the selling stockholders to offer the shares for resale from time to time. Except for the
ownership of the convertible notes and the warrants issued pursuant to the Securities Purchase
Agreement, the selling stockholders have not had any material relationship with us within the past
three years.

     The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of common stock by each of the selling stockholders. The second column
lists the number of shares of common stock beneficially owned by each selling stockholder, based on
its ownership of the convertible notes and warrants, as of ___, 2007, assuming conversion of
all convertible notes and exercise of the warrants held by the selling stockholders on that date,
without regard to any limitations on conversions or exercise.

     The third column lists the shares of common stock being offered by this prospectus by the
selling stockholders.

     In accordance with the terms of a registration rights agreement with the selling stockholders,
this prospectus generally covers the resale of at least 130% of the sum of (i) the number of shares
of common stock issuable upon conversion of the convertible notes as of the trading day immediately
preceding the date the registration statement is initially filed with the SEC, (ii) as Interest
Shares pursuant to the terms of the Notes as of the trading day immediately preceding the date the
registration statement is initially filed with the SEC, and (iii) the number of shares of common
stock issuable upon exercise of the related warrants as of the trading day immediately preceding
the date the registration statement is initially filed with the SEC. Because the conversion price
of the convertible notes and the exercise price of the warrants may be adjusted, the number of
shares that will actually be issued may be more or less than the number of shares being offered by
this prospectus. The fourth column assumes the sale of all of the shares offered by the selling
stockholders pursuant to this prospectus.

     Under the terms of the convertible notes and the warrants, a selling stockholder may not
convert the convertible notes or exercise the warrants to the extent such conversion or exercise
would cause such selling stockholder, together with its affiliates, to beneficially own a number of
shares of common stock which would exceed 4.99% of our then outstanding shares of common stock
following such conversion or exercise, excluding for purposes of such determination shares of
common stock issuable upon conversion of the convertible notes which have not been converted and
upon exercise of the warrants which have not been exercised. The number of shares in the second
column does not reflect this limitation. The selling stockholders may sell all, some or none of
their shares in this offering. See “Plan of Distribution.”

3

 

	 	 	 	 	 	 	 	 	 
	 	 	Number of Shares of	 	Maximum Number of Shares	 	Number of Shares of
	 	 	Common Stock Owned	 	of Common Stock to be Sold	 	Common Stock Owned
	Name of Selling Stockholder	 	Prior to Offering	 	Pursuant to this Prospectus	 	After Offering
	Castlerigg Master Investments Ltd. (1)

	 	 	 	 	 	 	0	 

 

			
	(1)	 	Sandell Asset Management Corp. is the investment manager of Castlerigg Master Investment
Ltd. (“Castlerigg”) and has shared voting and dispositive power over the securities owned by
Castlerigg. Sandell Asset Management Corp. and Thomas E. Sandell, its sole shareholder, disclaim
beneficial ownership of the securities owned by Castlerigg.

1

 

PLAN OF DISTRIBUTION

     We are registering the shares of common stock issuable upon conversion of the convertible
notes and upon exercise of the warrants to permit the resale of these shares of common stock by the
holders of the convertible notes and warrants from time to time after the date of this prospectus.
We will not receive any of the proceeds from the sale by the selling stockholders of the shares of
common stock. We will bear all fees and expenses incident to our obligation to register the shares
of common stock.

     The selling stockholders may sell all or a portion of the shares of common stock beneficially
owned by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold through underwriters or
broker-dealers, the selling stockholders will be responsible for underwriting discounts or
commissions or agent’s commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,

	 	•	 	on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;

	 
	 	•	 	in the over-the-counter market;

	 
	 	•	 	in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

	 
	 	•	 	through the writing of options, whether such options are listed on an options
exchange or otherwise;

	 
	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;

	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;

	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;

	 
	 	•	 	privately negotiated transactions;

	 
	 	•	 	short sales made after the date this registration statement has been declared
effective;

	 
	 	•	 	sales pursuant to Rule 144;

 

 

	 	•	 	broker-dealers may agree with the selling securityholders to sell a specified number
of such shares at a stipulated price per share;

	 
	 	•	 	a combination of any such methods of sale; and

	 
	 	•	 	any other method permitted pursuant to applicable law.

     If the selling stockholders effect such transactions by selling shares of common stock to or
through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of common stock for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of common stock or otherwise,
the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short and deliver shares of
common stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling stockholders may also loan or pledge shares of
common stock to broker-dealers that in turn may sell such shares.

     The selling stockholders may pledge or grant a security interest in some or all of the
convertible notes, warrants or shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may offer and sell the
shares of common stock from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the shares of common stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

     The selling stockholders and any broker-dealer participating in the distribution of the shares
of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of shares of common stock being
offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholders
and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

     Under the securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of common stock may not be sold unless such shares have been registered or qualified for

2

 

sale in such state or an exemption from registration or qualification is available and is
complied with.

     There can be no assurance that any selling stockholder will sell any or all of the shares of
common stock registered pursuant to the registration statement, of which this prospectus forms a
part.

     The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of common stock to engage in market-making
activities with respect to the shares of common stock. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of common stock.

     We will pay all expenses of the registration of the shares of common stock pursuant to the
registration rights agreement, estimated to be $[ ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts
and selling commissions, if any. We will indemnify the selling stockholders against liabilities,
including some liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under the Securities Act,
that may arise from any written information furnished to us by the selling stockholder specifically
for use in this prospectus, in accordance with the related registration rights agreement, or we may
be entitled to contribution.

     Once sold under the registration statement, of which this prospectus forms a part, the shares
of common stock will be freely tradable in the hands of persons other than our affiliates.

3EX-10.5 SECURITY AGREEMENT

 

Exhibit 10.5

EXECUTION COPY

SECURITY AGREEMENT

     SECURITY AGREEMENT, dated as of August 3, 2007 (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 Agreement, dated as of even date herewith (as
amended, restated or otherwise modified from time to time, the “Securities Purchase Agreement”).

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 “Buyers”) are parties to the Securities Purchase Agreement, pursuant to
which the Company shall be required to sell, and the Buyers shall purchase or have the right to
purchase, the “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
“Notes”);

     WHEREAS, it is a condition precedent to the Buyers purchasing the Notes pursuant to the
Securities Purchase Agreement that the Grantors shall have executed and delivered to the Collateral
Agent this Agreement providing for the grant to the Collateral Agent for the benefit of the Buyers
of a security interest in all personal property of each Grantor to secure all of the Company’s
obligations under the Securities Purchase Agreement, the Notes and the “Transaction Documents” (as
defined in the Securities Purchase Agreement) (the “Transaction Documents”); 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.

     NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Buyers to perform under the 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 Agreement 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 Agreement, 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.

     “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.

- 2 -

 

     “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
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

- 3 -

 

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;

     (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;

- 4 -

 

     (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).

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

- 5 -

 

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 Agreement, 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.

     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

- 6 -

 

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 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

- 7 -

 

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 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”).

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     (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
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

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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.

     (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.

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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.

          (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

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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.

          (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.

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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 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

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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 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

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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 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

- 15 -

 

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” 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).

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     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 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

- 17 -

 

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 Agreement 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.

     (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

- 18 -

 

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 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

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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 Agreement. 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.

     (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

- 20 -

 

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 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.

- 21 -

 

     (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.

     (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

- 22 -

 

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 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.

- 23 -

 

     (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.

[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/
David J. Meador
	 

	 	 	 	 
	 

	 	 	 	Name:  David J. Meador
	 

	 	 	 	Title:  Chief Financial
Officer
	 
	 	 	 	 
	 

	 	 	 	Address:  2701 North Rocky Point Drive
                Suite 1130

                Tampa, FL 33607
	 
	 	 	 	 
	 

	 	 	 	Facsimile: (813) 288-9148

	 	 	 	 	 
	ACCEPTED BY:	 	 
	 
	 	 	 	 
	CASTLERIGG MASTER INVESTMENTS LTD.,
	as Collateral Agent	 	 
	 
	By:
	 	  Sandell Asset Management Corp. 	 	 
	 
	By:  
	 	Timothy O’Brien	 	 
	 

	 	 	 	 
	 

	 	Name:      Timothy O’Brien	 	 
	 

	 	Title:        Chief Financial Officer
	 	 
	 
	 	 	 	 
	Address:	 	c/o Sandell Asset Management
Corp.

40 W. 57th Street, 26th Floor
New York, NY 10019 
	 
	 	 	 	 
	Facsimile:	 	(212) 603-5710
	Email:	 	legal@sandellmgmt.com (for legal
notices)

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