Document:

EX-10.3 REGISTRATION RIGHTS AGREEMENT

 

Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of
January 25, 2007, among Stinger Systems, Inc., a Nevada corporation (the “Company”), and
the several purchasers signatory hereto (each such purchaser is a “Purchaser” and
collectively, the “Purchasers”).

          This Agreement is made pursuant to the Amendment and Exercise Agreement dated as of the date
hereof (the “Amendment”) between the Company and each of the Purchasers.

          The Company and each Purchaser hereby agrees as follows:

     1. Definitions

          Capitalized terms used and not otherwise defined herein that are defined in the Warrants shall
have the meanings given such terms in the Warrants. As used in this Agreement, the following terms
shall have the following meanings:

     “Advice” shall have the meaning set forth in Section 6(d).

     “Commission” means the Securities and Exchange Commission.

     “Effectiveness Date” means, with respect to the initial Registration Statement
required to be filed hereunder, the 180th calendar day following the date hereof
and, with respect to any additional Registration Statements which may be required pursuant
to Section 3(c), the 90th calendar day following the date on which the Company
first knows, or reasonably should have known, that such additional Registration Statement is
required hereunder; provided, however, in the event the Company is notified
by the Commission that one of the above Registration Statements will not be reviewed or is
no longer subject to further review and comments, the Effectiveness Date as to such
Registration Statement shall be the fifth Trading Day following the date on which the
Company is so notified if such date precedes the dates required above.

     “Effectiveness Period” shall have the meaning set forth in Section 2(a).

     “Event” shall have the meaning set forth in Section 2(b).

     “Event Date” shall have the meaning set forth in Section 2(b).

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

     “Filing Date” means, with respect to the initial Registration Statement
required hereunder, the earlier of (a) the 120th calendar day following the date
hereof and (b) the

1

 

date of the filing of an initial registration statement with respect to any securities
issued in the Next Financing, and, with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 30th day following the date
on which the Company first knows, or reasonably should have known that such additional
Registration Statement is required hereunder.

     “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section 5(c).

     “Indemnifying Party” shall have the meaning set forth in Section 5(c).

     “Losses” shall have the meaning set forth in Section 5(a).

     “Next Financing” means the Company’s issuance of up to 1,000,000 shares of
Common Stock after the date hereof and prior to June 30, 2007.

     “Plan of Distribution” shall have the meaning set forth in Section 2(a).

     “Prior Warrants” means collectively the Common Stock Purchase Warrants dated as
of December 30, 2004 to be exercised by the Purchasers pursuant to the Amendment, as amended
by the Amendment.

     “Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such Prospectus.

     “Registrable Securities” means (i) all Warrant Shares, (ii) any additional
 shares issuable in connection with any anti-dilution provisions in the Warrants (without
giving effect to any limitations on exercise set forth in the Warrant) and (iii) any
securities issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing. “Registrable Securities”
shall not include the Warrants.

     “Registration Statement” means the registration statements required to be filed
hereunder and any additional registration statements contemplated by Section 3(c), including
(in each case) the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in such
registration statement.

2

 

     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.

     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.

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

     “Selling Shareholder Questionnaire” shall have the meaning set forth in Section
3(a).

     “Warrants” means collectively the Common Stock Purchase Warrants, in the form
of Exhibit A to the Amendment, delivered to the Purchasers in accordance with the
Amendment.

     “Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants and issued upon exercise of the Prior Warrants.

     2. Shelf Registration

     (a) On or prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of 150% of the Registrable
Securities on such Filing Date for an offering to be made on a continuous basis pursuant to
Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3, in which case
such registration shall be on another appropriate form in accordance herewith) and shall
contain (unless otherwise directed by at least an 85% majority in interest of the Holders)
substantially the “Plan of Distribution” attached hereto as Annex A.
Subject to the terms of this Agreement, the Company shall use its best efforts to cause a
Registration Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the applicable Effectiveness
Date, and shall use its best efforts to keep such Registration Statement continuously
effective under the Securities Act until all Registrable Securities covered by such
Registration Statement have been sold, or may be sold without volume restrictions pursuant
to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the Company’s transfer agent and the
affected Holders (the “Effectiveness Period”). The Company shall telephonically
request effectiveness of a Registration Statement as of 5:00 pm Eastern Time on a Trading
Day. The Company shall immediately notify the Holders via facsimile or e-mail of the
effectiveness of a Registration Statement on the same Trading Day that the Company
telephonically confirmed effectiveness with the Commission,

3

 

which shall be the date requested for effectiveness of a Registration Statement. The
Company shall, by 9:30 am Eastern Time on the Trading Day after the Effectiveness Date, file
a final Prospectus with the Commission as required by Rule 424. Failure to so notify the
Holder within 1 Trading Day of such notification of effectiveness or failure to file a final
Prospectus as a foresaid shall be deemed an Event under Section 2(b).

     (b) If: (i) a Registration Statement is not filed on or prior to its Filing Date (if
the Company files a Registration Statement without affording the Holders the opportunity to
review and comment on the same as required by Section 3(a), the Company shall not be deemed
to have satisfied this clause (i)), or (ii) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not be
“reviewed,” or not subject to further review, or (iii) prior to its Effectiveness Date, the
Company fails to file a pre-effective amendment and otherwise respond in writing to comments
made by the Commission in respect of such Registration Statement within 20 calendar days
after the receipt of comments by or notice from the Commission that such amendment is
required in order for a Registration Statement to be declared effective, or (iv) a
Registration Statement filed or required to be filed hereunder is not declared effective by
the Commission by its Effectiveness Date, or (v) after the Effectiveness Date, a
Registration Statement ceases for any reason to remain continuously effective (including to
amend the table of selling stockholders with the Registration Statement to reflect
transfers of the Securities by Holders and with respect to the Company’s undertakings as set
forth in the Registration statement and in Item 512 of Regulation S-K under the Securities
Act) as to all Registrable Securities for which it is required to be effective, or the
Holders are otherwise not permitted to utilize the Prospectus therein to resell such
Registrable Securities for more than 20 consecutive calendar days or more than an aggregate
of 35 calendar days during any 12-month period (which need not be consecutive calendar days)
(any such failure or breach being referred to as an “Event”, and for purposes of
clause (i) or (iv) the date on which such Event occurs, or for purposes of clause (ii) the
date on which such five Trading Day period is exceeded, or for purposes of clause (iii) the
date which such 20 calendar day period is exceeded, or for purposes of clause (v) the date
on which such 20 or 35 calendar day period, as applicable, is exceeded being referred to as
“Event Date”), then in addition to any other rights the Holders may have hereunder
or under applicable law, on each such Event Date and on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.5% of the aggregate exercise
price paid or payable with respect to any Registrable Securities then held by such Holder.
If the Company fails to pay any partial liquidated damages pursuant to this Section in full
within seven days after the date payable, the Company will pay interest thereon at a rate of
18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law)
to the Holder, accruing daily from the date such partial liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full. The partial liquidated
damages

4

 

pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a
month prior to the cure of an Event.

          3. Registration Procedures.

          In connection with the Company’s registration obligations hereunder, the Company shall:

     (a) Not less than five Trading Days prior to the filing of each Registration Statement
and not less than one Trading Day prior to the filing of any related Prospectus or any
amendment or supplement thereto, the Company shall, (i) furnish to each Holder copies of all
such documents proposed to be filed, which documents (other than those incorporated or
deemed to be incorporated by reference) will be subject to the review of such Holders, and
(ii) cause its officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to each Holder to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement or any such Prospectus
or any amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith, provided that, the Company is
notified of such objection in writing no later than 5 Trading Days after the Holders have
been so furnished copies of a Registration Statement or 1 Trading Day after the Holders have
been so furnished copies of any related Prospectus or amendments or supplements thereto.
Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached
to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) not
less than two Trading Days prior to the Filing Date or by the end of the fourth Trading Day
following the date on which such Holder receives draft materials in accordance with this
Section.

     (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the terms of this
Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and as promptly as reasonably
possible, upon request, provide the Holders true and complete copies of all correspondence
from and to the Commission relating to a Registration Statement (provided that the Company
may excise any information contained therein which would constitute material non-public
information as to any Holder which has not executed a confidentiality agreement with the
Company); and (iv) comply in all material respects with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all Registrable Securities covered
by a Registration Statement during the applicable period in accordance (subject to the terms
of

5

 

this Agreement) with the intended methods of disposition by the Holders thereof set
forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

     (c) If during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 75% of the number of shares of Common Stock then registered in a Registration
Statement, then the Company shall file as soon as reasonably practicable but in any case
prior to the applicable Filing Date, an additional Registration Statement covering the
resale by the Holders of not less than 150% of the number of such Registrable Securities.

     (d) Notify the Holders of Registrable Securities to be sold (which notice shall,
pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been made) as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than one Trading Day prior
to such filing) and (if requested by any such Person) confirm such notice in writing no
later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in writing on such Registration
Statement; and (C) with respect to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii) of the issuance by the
Commission or any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any
event or passage of time that makes the financial statements included in a Registration
Statement ineligible for inclusion therein or any statement made in a Registration Statement
or Prospectus or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to a Registration Statement,
Prospectus or other documents so that, in the case of a Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; and (vi) the occurrence or existence of any pending corporate development with
respect to the Company that the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest of the Company to allow
continued availability of a Registration Statement or Prospectus; provided that any and all
of such information shall remain confidential to each Holder until such information
otherwise becomes public, unless disclosure by a Holder is required by law;
provided, further, notwithstanding each Holder’s agreement to keep such
information confidential, the Holders make no acknowledgement that any such information is
material, non-public information.

6

 

     (e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

     (f) Furnish to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by reference to
the extent requested by such Person, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.

     (g) Subject to the terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).

     (h) If NASDR Rule 2710 requires any broker-dealer to make a filing prior to executing a
sale by a Holder, the Company shall (i) make an Issuer Filing with the NASDR, Inc. Corporate
Financing Department pursuant to proposed NASDR Rule 2710(b)(10)(A)(i), (ii) respond within
five Trading Days to any comments received from NASDR in connection therewith, (iii) and pay
the filing fee required in connection therewith.

     (i) Prior to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States as any Holder
reasonably requests in writing, to keep each registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process in any such
jurisdiction.

     (j) If requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall be free of
all restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may request.

7

 

     (k) Upon the occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither a Registration Statement nor
such Prospectus will contain an 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
light of the circumstances under which they were made, not misleading. If the Company
notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to
suspend the use of any Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right under this Section 3(k) to
suspend the availability of a Registration Statement and Prospectus, subject to the payment
of partial liquidated damages pursuant to Section 2(b), for a period not to exceed 60
calendar days (which need not be consecutive days) in any 12 month period.

     (l) Comply with all applicable rules and regulations of the Commission.

     (m) The Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such Holder and,
if required by the Commission, the natural persons thereof that have voting and dispositive
control over the Shares. During any periods that the Company is unable to meet its
obligations hereunder with respect to the registration of the Registrable Securities solely
because any Holder fails to furnish such information within three Trading Days of the
Company’s request, any liquidated damages that are accruing at such time as to such Holder
only shall be tolled and any Event that may otherwise occur solely because of such delay
shall be suspended as to such Holder only, until such information is delivered to the
Company.

     4. Registration Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect to filings required
to be made with any Trading Market on which the Common Stock is then listed for trading, (B) in
compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect to any filing that
may be required to be made by any broker through which a Holder intends to make sales of
Registrable Securities with NASD Regulation, Inc. pursuant to the NASD Rule 2710, so long as the
broker is receiving no more than a customary brokerage

8

 

commission in connection with such sale, (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities) and of printing prospectuses if the
printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable
Securities included in a Registration Statement, (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if
the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by
the Company in connection with the consummation of the transactions contemplated by this Agreement.
In addition, the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any broker or similar commissions of
any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or
other costs of the Holders.

     5. Indemnification

     (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees (and any other Persons
with a functionally equivalent role of a Person holding such titles, notwithstanding a lack
of such title or any other title) of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, members, shareholders, partners, agents and employees (and any
other Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and
expenses (collectively, “Losses”), as incurred, arising out of or relating to any
untrue or alleged untrue statement of a material fact contained in a Registration Statement,
any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent, but only to
the extent, that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case
of an

9

 

occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 6(d). The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding arising from or in connection with
the transactions contemplated by this Agreement of which the Company is aware.

     (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all
Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities Act or (y) any
untrue or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary to make the
statements therein not misleading (i) to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so furnished in writing by such
Holder to the Company specifically for inclusion in such Registration Statement or such
Prospectus or (ii) to the extent that such information relates to such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration Statement (it being understood
that the Holder has approved Annex A hereto for this purpose), such Prospectus or such form
of Prospectus or in any amendment or supplement thereto or (ii) in the case of an occurrence
of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder of the
Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such indemnification
obligation.

     (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

10

 

     An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense thereof and the reasonable fees and expenses
of no more than one separate counsel shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.

     Subject to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within
ten Trading Days of written notice thereof to the Indemnifying Party; provided, that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such Indemnified Party is judicially
determined to be not entitled to indemnification hereunder.

     (d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless
for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this

11

 

Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party
in connection with any Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

     The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.

     The indemnity and contribution agreements contained in this Section are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties.

     6. Miscellaneous

     (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their
respective obligations under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for specific performance in
respect of such breach, it shall not assert or shall waive the defense that a remedy at law would
be adequate.

     (b) No Piggyback on Registrations. Except as set forth on Schedule 6(b)
attached hereto, neither the Company nor any of its security holders (other than the Holders in
such capacity pursuant hereto and the purchasers of any securities in the Next Financing) may
include securities of the Company in the initial Registration Statement other than the Registrable
Securities. The Company shall not file any other registration statements until the initial
Registration Statement required hereunder is declared effective by the Commission, provided that
this Section 6(b) shall not prohibit the Company from filing amendments to registration statements
already filed.

     (c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to a Registration Statement.

     (d) Discontinued Disposition. Each Holder agrees by its acquisition of Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of any event of the

12

 

kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure
that the use of the Prospectus may be resumed as promptly as it practicable. The Company agrees
and acknowledges that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the provisions of Section
2(b).

     (e) Piggy-Back Registrations. If at any time during the Effectiveness Period there is
not an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in connection with the stock
option or other employee benefit plans, then the Company shall send to each Holder a written notice
of such determination and, if within fifteen days after the date of such notice, any such Holder
shall so request in writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such Holder requests to be registered subject to customary
underwriter cutbacks applicable to all holders of registration rights; provided,
however, that, the Company shall not be required to register any Registrable Securities
pursuant to this Section 6(e) that are eligible for resale pursuant to Rule 144(k) promulgated
under the Securities Act or that are the subject of a then effective Registration Statement.

     (f) Amendments and Waivers. The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and each Holder of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of all of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.

     (g) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon
actual

13

 

receipt by the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached hereto.

     (h) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign (except by merger) its rights or obligations
hereunder without the prior written consent of all of the Holders of the then-outstanding
Registrable Securities. Each Holder may assign their respective tights hereunder to any Person to
whom such Holder assigns or transfers any Registrable Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Registrable Securities, by the provisions
of this Agreement that apply to the “Holders”.

     (i) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has
entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities, that would have
the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as set forth on Schedule 6(i), neither the Company nor
any of its subsidiaries has previously entered into any agreement granting any registration rights
with respect to any of its securities to any Person that have not been satisfied in full.

     (j) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data
file, such signature shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if such facsimile or
“.pdf” signature page were an original thereof.

     (k) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the principles of conflicts of
law thereof.

     (l) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive
of any other remedies provided by law.

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

14

 

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

     (o) Independent Nature of Holders’ Obligations and Rights. The obligations of each
Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and
no Holder shall be responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Holders are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled
to protect and enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose.

********************

15

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 	 	 
	 	 	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, Florida 33607	 	 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

16

 

[SIGNATURE PAGE OF HOLDERS TO STIY RRA]

Name of Holder: Bonanza Master Fund, Ltd.

Signature
of Authorized Signatory of Holder:
/s/ Brian
Ladin                     

Name of Authorized Signatory: Brian Ladin

Title of Authorized Signatory: Partner

Address: 300 Crescent Court

                Suite 250

                Dallas, TX 75201

Name of Holder: Tonga Partners, L.P.

Signature of Authorized Signatory of Holder: /s/ J. Carlo Cannell               

Name of Authorized Signatory: J. Carlo Cannell

Title of Authorized Signatory: General Partner

Address: 240 East Deloney Avenue

                P.O. Box 3459

                Jackson, WY 83001

Name of Holder: Anegada Master Fund, Ltd.

Signature of Authorized Signatory of Holder: /s/ J. Carlo Cannell                     

Name of Authorized Signatory: J. Carlo Cannell

Title of Authorized Signatory: Director

Address: 240 East Deloney Avenue

                P.O. Box 3459

                Jackson, WY 83001

Name of Holder: The Cuttyhunk Fund Limited

Signature of Authorized Signatory of Holder: /s/ Geoffrey M. Lewis                     

Name of Authorized Signatory: Geoffrey M. Lewis

Title of Authorized Signatory: Director

Address: 240 East Deloney Avenue

                P.O. Box 3459

                Jackson, WY 83001

[SIGNATURE PAGES CONTINUE]

17

 

Plan of Distribution

     Each Selling Stockholder (the “Selling Stockholders”) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the OTC Bulletin Board or any other stock exchange, market or
trading facility on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods
when selling shares:

	 	•	 	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;
	 
	 	•	 	settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
	 
	 	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
	 
	 	•	 	a combination of any such methods of sale; or
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with NASDR IM-2440.

18

 

     In connection with the sale of the common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).

     The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it
does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent (8%).

     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

     Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the Selling Stockholders.

     We agreed to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

     Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation

19

 

M, prior to the commencement of the distribution. In addition, the Selling Stockholders will
be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder,
including Regulation M, which may limit the timing of purchases and sales of shares of the common
stock by the Selling Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).

20

 

Annex B

STINGER SYSTEMS, INC.

Selling Securityholder Notice and Questionnaire

     The undersigned beneficial owner of common stock, par value $.001 per share (the “Common
Stock”), of Stinger Systems, Inc., a Nevada corporation (the “Company”), (the
“Registrable Securities”) understands that the Company has filed or intends to file with
the Securities and Exchange Commission (the “Commission”) a registration statement on Form
S-1 (the “Registration Statement”) for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities,
in accordance with the terms of the Registration Rights Agreement, dated as of January 25, 2007
(the “Registration Rights Agreement”), among the Company and the Purchasers named therein.
A copy of the Registration Rights Agreement is available from the Company upon request at the
address set forth below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.

     Certain legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

NOTICE

     The undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it and listed below in Item
3 (unless otherwise specified under such Item 3) in the Registration Statement.

21

 

The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

	 	 	 	 	 
	1.

	 	Name.	 	 
	 
	 	 	 	 
	 

	 	(a)
	 	Full Legal Name of Selling Securityholder
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(b)
	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(c)
	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):
	 
	 	 	 	 
	 

	 	 	 	 

	2.	 	Address for Notices to Selling Securityholder:

	 	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 
	 
	Telephone:	 	 	 	 
	 	 	 	 	 
	Fax:
	 	 	 	 	 	 
	 	 	 
	Contact Person:	 	 
	 

	 	 	 	 	 	 

3. Beneficial Ownership of Registrable Securities:

	 	 	 	 	 
	 

	 	(a)
	 	Type and Principal Amount of Registrable Securities beneficially owned (not
including the Registrable Securities that are issuable pursuant to the Amendment):
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

22

 

4. Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

Yes           No

	 	(b)	 	If “yes” to Section 4(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company.

Yes            No

	 	Note: 	 	If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.
	 
	 	(c)	 	Are you an affiliate of a broker-dealer?

Yes           No

	 	(d)	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?

Yes           No

	 	Note: 	 	If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.

Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.

	 	 	 	 	 
	 

	 	(a)
	 	Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

23

 

6. Relationships with the Company:

	 	 	 
	 

	 	Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
	 
	 	 
	 

	 	State any exceptions here:
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

          The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.

          By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or supplements
thereto. The undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement and the related
prospectus.

          IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	 	 	Beneficial Owner:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	Title:	 	 	 	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:

24EX-10.1

 

Exhibit 10.1

INDEMNIFICATION AGREEMENT

     This Agreement made this ______day of ____________, 20___by and between Eaton Corporation, an
Ohio corporation (the “Company”), and _____________________, a Director of the Company (“Indemnitee”);

     WHEREAS, the Company and Indemnitee are each aware of the exposure to litigation of officers,
Directors and representatives of the Company as such persons exercise their duties to the Company;

     WHEREAS, the Company and Indemnitee are also aware of conditions in the insurance industry
that have affected and may affect in the future the Company’s ability to obtain appropriate
directors’ and officers’ liability insurance on an economically acceptable basis;

     WHEREAS, the Company desires to continue to benefit from the services of highly qualified,
experienced and otherwise competent persons such as Indemnitee; and

     WHEREAS, Indemnitee desires to serve or to continue to serve the Company as a Director of the
Company, or, if requested to do so by the Company, as a director, officer, trustee, employee,
representative or agent of another corporation, joint venture, trust or other enterprise, for so
long as the Company continues to provide on an acceptable basis adequate and reliable
indemnification against certain liabilities and expenses which may be incurred by Indemnitee;

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein
contained, the parties hereto agree as follows:

1. INDEMNIFICATION.

     (a) The Company shall indemnify Indemnitee to the fullest extent permitted by law with
respect to Indemnitee’s activities as a Director of the Company and/or as a person who is serving
or has served at the request of the Company as a director, officer, trustee, employee,
representative or agent of another corporation, joint venture, trust or other enterprise, domestic
or foreign, against expenses (including, without limitation, attorneys’ fees), judgments, fines,
and amounts paid in settlement, actually and reasonably incurred by Indemnitee (“Expenses”) in
connection with any claim against Indemnitee, whether or not such claim is brought by any party who
may be an “insured person” under the Company’s directors’ and officers’ liability insurance, which

- 1 -

 

is the subject of any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, investigative or otherwise and whether formal or informal (a
“Proceeding”), to which Indemnitee was, is, or is threatened to be made a party by reason of
anything done or not done by Indemnitee in any such capacity.

     (b) The rights of Indemnitee hereunder shall be in addition to any rights Indemnitee may now
or hereafter have to indemnification by the Company or otherwise. More specifically, the parties
hereto intend that Indemnitee shall be entitled to receive, as determined by Indemnitee, payment to
the maximum extent permitted by one or any combination of the following:

     (i) the payments provided by the Company’s Amended Regulations in effect on the date
hereof, a copy of the relevant portions of which are attached hereto as Exhibit I;

     (ii) the payments provided by the Articles of Incorporation, Code of Regulations, or
By-laws or their equivalent of the Company in effect at the time Expenses are incurred by
Indemnitee;

     (iii) the payments allowable under Ohio law in effect at the date hereof;

     (iv) the payments allowable under the law of the jurisdiction under which the Company
is incorporated at the time Expenses are incurred by Indemnitee;

     (v) the payments available under liability insurance obtained by the Company; and

     (vi) such other payments as are or may be otherwise available to Indemnitee.

     Combination of two or more of the payments provided by (I) through (vi) shall be available to
the extent that the Applicable Document, as hereafter defined, does not require that the payments
provided therein be exclusive of other payments. The document or law providing for any of the
payments listed in items (i) through (vi) above is referred to in this Agreement as the “Applicable
Document.” The Company hereby undertakes to use its best efforts to assist Indemnitee, in all
proper and legal ways, to obtain the payments selected by Indemnitee under items (i) through (vi)
above.

     (c) For purposes of this Agreement, references to “other enterprises” shall include employee
benefit plans for employees of the Company or of any of its subsidiaries without regard to
ownership of such plans; references to “fines” shall include any excise taxes assessed on
Indemnitee with respect to any employee benefit plan; references to “serving at the request of the
Company” shall include any service as a director, officer, trustee, employee, representative or
agent of the Company which imposes duties on, or involves services by, Indemnitee with respect to
an employee

- 2 -

 

benefit plan, its participants or beneficiaries; references to the masculine shall include the
feminine; references to the singular shall include the plural and vice versa; and if Indemnitee
acted in good faith and in a manner that Indemnitee reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner consistent with the standards required for indemnification by the Company under
the Applicable Documents.

2. INSURANCE.

     The Company shall maintain directors’ and officers’ liability insurance which is at least as
favorable to Indemnitee as the policy in effect on the date hereof and for so long as Indemnitee’s
services are covered hereunder, provided and to the extent that such insurance is available on a
reasonable commercial basis. However, Indemnitee shall continue to be entitled to the
indemnification rights provided hereunder regardless of whether liability or other insurance
coverage is at any time obtained or retained by the Company. Any payments in fact made to
Indemnitee under an insurance policy obtained or retained by the Company shall reduce the
obligation of the Company to make payments hereunder by the amount of the payments made under any
such insurance policy. In the event that insurance becomes unavailable in the amount or scope of
coverage of the policy in effect on the date hereof on a reasonable commercial basis and the
Company foregoes maintenance of all or a portion of such insurance coverage, the Company shall
stand as a self-insurer with respect to the coverage, or portion thereof, not retained, and shall
indemnify Indemnitee against any loss arising out of the reduction or cancellation of such
insurance coverage.

3. PAYMENT OF EXPENSES.

     At Indemnitee’s request, the Company shall pay the Expenses as and when incurred by
Indemnitee, after receipt of written notice pursuant to Paragraph 6 hereof and an undertaking in
the form of Exhibit II attached hereto by or on behalf of Indemnitee (I) to repay such amounts so
paid on Indemnitee’s behalf if it shall ultimately be determined under the Applicable Document that
Indemnitee is required to repay such Expenses and (ii) to reasonably cooperate with the Company
concerning the Proceeding. That portion of Expenses which represents attorneys’ fees and other
costs incurred in defending any Proceeding shall be paid by the Company within thirty (30) days of
its receipt of such notice, together with reasonable documentation evidencing the amount and nature
of such Expenses.

4. ESCROW RESERVE.

     The Company shall dedicate up to an aggregate of ten million dollars ($10,000,000) as
collateral security for the initial funding of its obligations hereunder and under similar
agreements with other directors, officers and representatives by

- 3 -

 

depositing assets or bank letters of credit in escrow or reserving lines of credit that may be
drawn down by an escrow agent in the dedicated amount (the “Escrow Reserve”); provided, however,
that the terms of any such Escrow Reserve may provide that the cash, securities or letters or lines
of credit available therefor shall be utilized for the indemnification or advancement of expenses
provided for herein only in the event that there shall have occurred within the preceding five
years a Change in Control of the Company, as defined below. The Company shall promptly provide
Indemnitee with a true and complete copy of the agreement relating to the establishment and
operation of the Escrow Reserve, together with such additional documentation or information with
respect to the escrow as Indemnitee may from time to time reasonably request. The Company shall
promptly deliver an executed copy of this Agreement to the Escrow Reserve agent to evidence to the
agent that Indemnitee is a beneficiary of the Escrow Reserve and shall deliver to Indemnitee the
escrow agent’s signed receipt evidencing that delivery. For purposes of this Agreement, a “Change
in Control” of the Company shall have occurred if at any time any of the following events shall
occur:

     (i) a tender offer shall be made and consummated for the ownership of securities of the
Company representing 25% or more of the combined voting power of Company’s then outstanding
voting securities, (ii) the Company shall be merged or consolidated with another corporation
and as a result of such merger or consolidation less than 75% of the outstanding voting
securities of the surviving or resulting corporation shall be owned in the aggregate by the
former shareholders of the Company, other than affiliates (within the meaning of the
Securities Exchange Act of 1934 (the “Exchange Act”)) of any party to such merger or
consolidation, as the same shall have existed immediately prior to such merger or
consolidation, (iii) the Company shall sell substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of the Company, (iv) any person (as such
term is used in Sections 3(a)(9) and 13(d)(3) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company’s then outstanding securities; or (v)
during any period of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason to constitute at least
a majority thereof unless the election, or the nomination for election by the Company’s
shareholders, of each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the period. For
purposes of this Agreement, ownership of voting securities shall take into account and
include ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) of the
Exchange Act (as then in effect).

5. ADDITIONAL RIGHTS.

     The indemnification provided in this Agreement shall not be exclusive of any other
indemnification or right to which Indemnitee may be entitled and shall continue

- 4 -

 

after Indemnitee has ceased to occupy a position as an officer, director or representative as
described in Paragraph 1 above with respect to Proceedings relating to or arising out of
Indemnitee’s acts or omissions during Indemnitee’s service in such position.

6. NOTICE TO COMPANY.

     Indemnitee shall provide to the Company prompt written notice of any Proceeding brought,
threatened, asserted or commenced against Indemnitee with respect to which Indemnitee may assert a
right to indemnification hereunder; provided that failure to provide such notice shall not in any
way limit Indemnitee’s rights under this Agreement.

7. COOPERATION IN DEFENSE AND SETTLEMENT.

     Indemnitee shall not make any admission or effect any settlement with respect to a Proceeding
without the Company’s written consent unless Indemnitee shall have determined to undertake his or
her own defense in such matter and has waived the benefits of this Agreement in writing delivered
to the Company. The Company shall not settle any Proceeding to which Indemnitee is a party in any
manner which would impose any Expense on Indemnitee without his or her written consent. Neither
Indemnitee nor the Company will unreasonably withhold consent to any proposed settlement.
Indemnitee and the Company shall cooperate to the extent reasonably possible with each other and
with the Company’s insurers, in attempts to defend or settle such Proceeding.

8. ASSUMPTION OF DEFENSE.

     Except as otherwise provided below, to the extent that it may wish, the Company jointly with
any other indemnifying party similarly notified will be entitled to assume Indemnitee’s defense in
any Proceeding, with counsel mutually satisfactory to Indemnitee and the Company. After notice
from the Company to Indemnitee of the Company’s election so to assume such defense, the Company
will not be liable to Indemnitee under this Agreement for Expenses subsequently incurred by
Indemnitee in connection with the defense thereof other than reasonable costs of investigation or
as otherwise provided below. Indemnitee shall have the right to employ counsel in such Proceeding,
but the fees and expenses of such counsel incurred after notice from the Company of its assumption
of the defense thereof shall be at Indemnitee’s expense unless:

     (a) the employment of counsel by Indemnitee has been authorized by the Company;

- 5 -

 

     (b) counsel employed by the Company initially is unacceptable or later becomes
unacceptable to Indemnitee and such unacceptability is reasonable under then existing
circumstances;

     (c) Indemnitee shall have reasonably concluded that there may be a conflict of interest
between Indemnitee and the Company in the conduct of the defense of such Proceeding; or

     (d) the Company shall not have employed counsel promptly to assume the defense of such
Proceeding.

In each of the cases set forth in items (a) through (d) above, the fees and expenses of counsel
shall be at the expense of the Company and subject to payment pursuant to this Agreement. The
Company shall not be entitled to assume the defense of Indemnitee in any Proceeding brought by or
on behalf of the Company or as to which Indemnitee shall have reached either of the conclusions
provided for in clauses (b) or (c) above.

9. ENFORCEMENT.

     In the event that any dispute or controversy shall arise under this Agreement between
Indemnitee and the Company with respect to whether Indemnitee is entitled to indemnification in
connection with any Proceeding or with respect to the amount of Expenses incurred, then with
respect to each such dispute or controversy Indemnitee may seek to enforce this Agreement through
legal action or, at Indemnitee’s sole option and request, through arbitration. If arbitration is
requested, such dispute or controversy shall be submitted by the parties to binding arbitration in
the City of Cleveland, State of Ohio, before a single arbitrator agreeable to both parties. If the
parties cannot agree on a designated arbitrator within fifteen (15) days after arbitration is
requested in writing by either of them, the arbitration shall proceed in the City of Cleveland,
State of Ohio, before an arbitrator appointed by the American Arbitration Association. In either
case, the arbitration proceeding shall commence promptly under the rules then in effect of that
Association and the arbitrator agreed to by the parties or appointed by that Association shall be
an attorney other than an attorney who has, or is associated with a firm having associated with it
an attorney which has, been retained by or performed services for the Company or Indemnitee at any
item during the five (5) years preceding the commencement of arbitration. The award shall be
rendered in such form that judgment may be entered thereon in any court having jurisdiction
thereof. The prevailing party shall be entitled to prompt reimbursement of any costs and expenses
(including, without limitation, reasonable attorney’s fees) incurred in connection with such legal
action or arbitration provided that Indemnitee shall not be obligated to reimburse the Company
unless the arbitrator or court which resolves the dispute determines that Indemnitee acted in bad
faith in bringing such action or arbitration.

- 6 -

 

10. EXCLUSIONS.

     Notwithstanding the scope of indemnification which may be available to Indemnitee from time to
time under any Applicable Document, no indemnification, reimbursement or payment shall be required
of the Company hereunder with respect to:

     (a) any claim or any part thereof as to which Indemnitee shall have been adjudged by a
court of competent jurisdiction from which no appeal is or can be taken, by clear and
convincing evidence, to have acted or failed to act with deliberate intent to cause injury
to the Company or with reckless disregard for the best interests of the Company;

     (b) any claim or any part thereof arising under Section 16(b) of the Exchange Act
pursuant to which Indemnitee shall be obligated to pay any penalty, fine, settlement or
judgment;

     (c) any obligation of Indemnitee based upon or attributable to Indemnitee gaining in
fact any personal gain, profit or advantage to which Indemnitee was not entitled; or

     (d) any Proceeding initiated by Indemnitee without the consent or authorization of the
Board of Directors of the Company, provided that this exclusion shall not apply with respect
to any claims brought by Indemnitee (i) to enforce Indemnitee’s rights under this Agreement
or (ii) in any Proceeding initiated by another person or entity whether or not such claims
were brought by Indemnitee against a person or entity who was otherwise a party to such
Proceeding.

     Nothing in this Paragraph 10 shall eliminate or diminish the Company’s obligations to advance
that portion of Indemnitee’s Expenses which represent attorneys’ fees and other costs incurred in
defending any Proceeding pursuant to Paragraph 3 of this Agreement.

11. EXTRAORDINARY TRANSACTIONS.

     The Company covenants and agrees that, in the event of any merger, consolidation or
reorganization in which the Company is not the surviving entity, any sale of all or substantially
all of the assets of the Company or any liquidation of the Company (each such event is hereinafter
referred to as an “extraordinary transaction”), the Company shall:

     (a) Have the obligations of the Company under this Agreement expressly assumed by the
survivor, purchaser or successor, as the case may be, in such extraordinary transaction; or

- 7 -

 

     (b) Otherwise adequately provide for the satisfaction of the Company’s obligations
under this Agreement, in a manner acceptable to Indemnitee.

12. NO PERSONAL LIABILITY.

     Indemnitee agrees that neither the Directors nor any officer, employee, representative or
agent of the Company shall be personally liable for the satisfaction of the Company’s obligations
under this Agreement, and Indemnitee shall look solely to the assets of the Company and the Escrow
Reserve referred to in Paragraph 4 hereof for satisfaction of any claims hereunder.

13. PERIOD OF LIMITATIONS.

     No legal action shall be brought and no cause of action shall be asserted by or on behalf of
the Company or any affiliate of the Company against Indemnitee, Indemnitee’s spouse, heirs,
executors or personal or legal representatives after the expiration of two (2) years from the date
of accrual of such cause of action, and any claim or cause of action of the Company or its
affiliate shall be extinguished and deemed released unless asserted by the timely filing of legal
action within such two-year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action such shorter period shall govern.

14. SEVERABILITY.

     If any provision, phrase, or other portion of this Agreement should be determined by any court
of competent jurisdiction to be invalid, illegal or unenforceable, in whole or in part, and such
determination should become final, such provision, phrase or other portion shall be deemed to be
severed or limited, but only to the extent required to render the remaining provisions and portions
of this Agreement enforceable, and this Agreement as thus amended shall be enforced to give effect
to the intention of the parties insofar as that is possible.

15. SUBROGATION.

     In the event of any payment under this Agreement, the Company shall be subrogated to the
extent thereof to all rights to indemnification or reimbursement against any insurer or other
entity or person vested in Indemnitee, who shall execute all instruments and take all other action
as shall be reasonably necessary for the Company to enforce such rights.

- 8 -

 

16. GOVERNING LAW.

     The parties hereto agree that this Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Ohio.

17. NOTICES.

     All notices, requests, demands and other communications hereunder shall be in writing and
shall be considered to have been duly given if delivered by hand and receipted for by the party to
whom the notice, request, demand or other communication shall have been directed, or mailed by
certified mail, return receipt requested, with postage prepaid:

	 	 	 	 	 
	(a) If to the Company, to:	 	EATON CORPORATION
	 	 	Eaton Center
	 	 	Cleveland, Ohio 44114-2584
	 

	 	Attention:
	 	Vice President and
	 

	 	 	 	General Counsel
	 
	 	 	 	 
	(b) If to Indemnitee, to:
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 

or to such other or further address as shall be designated from time to time by Indemnitee or the
Company to the other.

18. TERMINATION.

     This Agreement may be terminated by either party upon not less than sixty (60) days’ prior
written notice delivered to the other party, but such termination shall not in any way diminish the
obligations of the Company hereunder (including the obligation to maintain the Escrow Reserve
referred to in Paragraph 4 hereof) with respect to Indemnitee’s activities prior to the effective
date of the termination.

19. AMENDMENTS.

     This Agreement and the rights and duties of Indemnitee and the Company hereunder may not be
amended, modified or terminated except by written instrument signed and delivered by the parties
hereto.

- 9 -

 

20. BINDING EFFECT.

     This Agreement is and shall be binding upon and shall inure to the benefit of the parties
thereto and their respective heirs, executors, administrators, successors and assigns.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above
written.

	 	 	 	 	 
	INDEMNITEE	 	EATON CORPORATION

	 

	 	By	 	 
	 

	 	 	 	 
	Title: Director
	 	 	 	 
	 

	 	Title	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	And by	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title	 	 
	 

	 	 	 	 

- 10 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]