Document:

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

          THIS SECURITIES PURCHASE AGREEMENT
(this “Agreement”)
is made and entered into as of the 22nd day of April, 2009 (the “Effective
Date”) by and between PepperBall Technologies, Inc., a Colorado corporation
(the “Company”), and the investors set forth on Schedule I
attached hereto (each, an “Investor” and collectively, the “Investors”).

RECITAL

          WHEREAS, the Company desires to sell
to the
Investors, and the Investors desire to purchase from the Company, (i) an
aggregate amount of up to $1,500,000, but no less than $750,000, of Convertible
Promissory Notes (the “Notes”) which are convertible at the rate of
$0.10 per share into approximately 1,000,000 shares of the Company’s Common
Stock, no par value per share (the “Common Stock”) per $100,000
outstanding under the Notes, (ii) or at the option of the Investor shall be
convertible into approximately 1,000,000 shares of the Company’s non-voting
Series C Preferred Stock Common Stock, no par value per share (the “Preferred
Stock”) per $100,000 outstanding under the Notes (collectively, the “Securities”).

AGREEMENT

          NOW, THEREFORE, in consideration of
the
foregoing, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

          1.
AUTHORIZATION AND SALE OF SECURITIES.

               1.1
Purchase and Sale of Securities. At the Closing, the Company
shall sell to the Investors, and the Investors shall purchase from the Company,
the Securities, in the denominations set forth on Schedule I, in minimum
increments of $10,000, which may be reduced at the Company’s discretion, for
aggregate proceeds to the Company of up to $1,500,000 (the “Purchase Price”),
but in no event less than a total of $750,000.

               1.2
Closing. The closing of the purchase and
sale of the Securities (the “Closing”) will
take place at the offices of the Company on the Effective Date, or such other
time and location determined by the Company and the Investors (the “Closing Date”). At the Closing: (i)
the
Company shall issue and deliver to the Investors duly executed Notes in the
denominations set forth on Schedule I and
in the form attached hereto as Exhibit A;
and (ii) each Investor shall pay to the Company the applicable Purchase Price
for the Securities to be purchased by such Investor in the amounts set forth on
Schedule I by payment of check or wire
transfer of same day funds to the Company.

          2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to the
Investors as of the date hereof and as of the Closing Date:

               2.1
Organization and Qualification. The Company is an entity duly
incorporated, validly existing and in good standing under the laws of the State
of Colorado, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
The Company is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws. The Company is duly qualified to conduct business and
is in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have or result in (i) a material
adverse effect on the legality, validity or enforceability of this Agreement
and the Notes, (collectively, the “Transaction Documents”), (ii) a
material adverse effect on the business or financial condition of the Company
or (iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”). The
Company owns 100% of the outstanding capital stock of PepperBall – CA, Inc., a
Delaware corporation, Vizer Group, Inc., a Colorado corporation (“Vizer”).
Vizer owns 100% of the outstanding capital stock of Veritas Tactical, Inc. (“Veritas”).

               2.2
Authorization; Enforceability. The execution, delivery and performance
by the Company of the Transaction Documents, and the consummation of the
transactions contemplated thereby (including, but not limited to, the sale and
delivery of the Notes and Warrants, and the subsequent issuance of the Common
Stock (or Preferred Stock, as applicable) upon conversion of the Notes, the
Common Stock upon conversion of the Preferred Stock have been duly authorized,
and no additional corporate or stockholder action is required for the approval
thereof. The Common Stock underlying the Notes, and the Common Stock underlying
the Preferred Stock, as applicable (collectively, the “Conversion Shares”)
have been duly reserved for issuance by the Company. This Agreement and the
other Transaction Documents have been or, to the extent contemplated hereby or
by the Transaction Documents, will be duly executed and delivered and constitute,
or will constitute (as applicable), the legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with their terms,
except as may be limited by bankruptcy, reorganization, insolvency, moratorium
and similar laws of general application relating to or affecting the
enforcement of rights of creditors, and except as enforceability of its
obligations hereunder are subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). The Company has the requisite corporate power and authority to enter into
and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder.

               2.3
No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company’s Articles of Incorporation or Bylaws, or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company debt or otherwise) or other
understanding to which the Company is a party or by which any property or asset
of the Company is bound or affected, result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any property or
asset of the Company is bound or affected, except, in the cases of clauses (ii)
and (iii), where such conflict, default or violation would not have or result
in a Material Adverse Effect.

               2.4
Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than (i) the Consent by Agility Capital, LLC to the Offering, which is expected
to be provided upon the Investors execution of the Agility Subordination
Agreement, (ii) a Form D and applicable state “Blue Sky” filings, (iii) such as
have already been obtained or such exemptive filings as are required to be made
under applicable securities laws and which will be timely made prior to the Closing
Date.

               2.5
Issuance of the Securities. The Securities and the Conversion Shares are
duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens, other than any Liens created by or
imposed on the holders thereof through no action of the Company. The Company
has reserved from its duly authorized capital stock the maximum number of
shares of Common Stock issuable pursuant to the Securities and the Conversion
Shares.

               2.6
Capitalization. 

                    (a)
The authorized and outstanding capitalization of the Company is as described on
Schedule II attached hereto. The Company has not issued any capital
stock since such filing. All shares of the Company’s issued and outstanding
capital stock have been duly authorized, are validly issued and outstanding,
and are fully paid and nonassessable. No securities issued by the Company from
the date of its incorporation to the date hereof were issued in violation of
any statutory or common law preemptive rights. There are no dividends which
have accrued or been declared but are unpaid on the capital stock of the
Company. All taxes required to be paid by the Company in connection with the
issuance and any transfers of the Company’s capital stock have been paid. All
securities of the Company have been issued in all material respects in
accordance with the provisions of all applicable securities and other laws.

                    (b)
No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except for outstanding Series A and Series B
Preferred Shares and employee and director stock options under the Company’s
equity compensation plans and other options and warrants totaling approximately
the right to 7,740,000 common shares which would be issued upon their exercise,
(ii) approximately 1,492,600 shares of Common Stock reserved for options that
have not yet been granted, but have been authorized under the Company’s Plans,
and (iii) such number of Common Shares issuable under the Existing Notes as
herein defined, there are no outstanding options, warrants, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock (“Common
Stock Equivalents”). Except as provided under the terms of the Merger
Agreement dated as of May 27, 2008 between the Company and PepperBall – CA, for
the issuance of up to approximately 12,000,000 shares of Common Stock that
would be issued to the common stockholders of pre-merger PepperBall – CA under
an anti-dilution provision of the merger agreement between the two companies,
the issue and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities.

               2.7
Litigation. Except as disclosed in the Company’s public filings,
specifically the Vahe’ and Sutton matters, there is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the Knowledge
of the Company, threatened against the Company or any of its properties before
or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have or result
in a Material Adverse Effect. Neither the Company nor to the Knowledge of the
Company, any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. To the Knowledge of the
Company, there has not been and there is not pending or contemplated, any
investigation by the Securities and Exchange Commission involving the Company
or any current or former director or officer of the Company.

               2.8
Labor Relations. No material labor dispute exists or, to the Knowledge
of the Company, is imminent with respect to any of the employees of the Company
which could have or result in a Material Adverse Effect.

               2.9
Compliance. The Company (i) is not in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company), nor has the Company
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is not
in violation of any order of any court, arbitrator or governmental body, or
(iii) is not or has not been in violation of any statute, rule or regulation of
any governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business, except in the case of clauses
(i) and (iii) as would not have or reasonably be expected to result in a
Material Adverse Effect.

               2.10
Intellectual Property. 

                    (a)
The Company, as further described in its public filings, to the best of its
Knowledge has the right to use or is the sole and exclusive owner of all right,
title and interest in and to all foreign and domestic patents, patent rights,
trademarks, service marks, trade names, brands and copyrights (whether or not
registered and, if applicable, including pending applications for registration)
owned, used or controlled by the Company (collectively, the “Rights”)
and in and to each material invention, software, trade secret, technology,
product, composition, formula and method of process used by the Company (the
Rights and such other items, the “Intellectual Property”), and, to the
Knowledge of the Company, has the right to use the same, free and clear of any
claim or conflict with the rights of others. 

                    (b)
Except as disclosed in its public filings, no royalties or fees (license or
otherwise) are payable by the Company to any Person by reason of the ownership
or use of any of the Intellectual Property.

                    (c)
Except as disclosed in its public filings, there have been no claims made
against the Company asserting the invalidity, abuse, misuse, or
unenforceability of any of the Intellectual Property, and, to the best of the
Knowledge of the Company, there are no reasonable grounds for any such claims.

                    (d)
Except as disclosed in its public filings, the Company has not made any claim
of any violation or infringement by others of its rights in the Intellectual
Property, and to the best of the Knowledge of the Company, no reasonable
grounds for such claims exist.

                    (e)
Except as disclosed in its public filings the Company has not received notice
that it is in conflict with or infringing upon the asserted rights of others in
connection with the Intellectual Property.

          3.
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor, severally and not jointly, hereby represents and warrants to the
Company that:

               3.1
Authorization. The Investor is duly authorized to execute the
Transaction Documents including this Agreement and when executed and delivered
by the Investor, the Transaction Documents will constitute legal, valid, and
binding obligations enforceable against the Investor in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors’ rights generally. The execution, delivery, and
performance of the Transaction Documents and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate or other necessary action on the part of the Investor.

               3.2
Investor Suitability.

                    (a)
The Securities subscribed for hereby are being acquired by the Investor for
his, her or its own account and for investment purposes only and not with a
view to any resale or distribution thereof, in whole or in part, to others, and
the Investor is not participating, directly or indirectly, in a distribution of
such Securities and will not take, or cause to be taken, any action that would
cause the Investor to be deemed an “underwriter” of such Securities as defined
in Section 2(11) of the Securities Act of 1933, as amended (the “Act”).

                    (b)
The Investor acknowledges that he, she or it has had the opportunity to seek
business, financial, and legal advice as the Investor deems necessary in order
to evaluate the merits and risks of purchasing the Securities.

                    (c)
The Investor has had an opportunity to ask questions of, and receive
satisfactory answers from, representatives of the Company concerning the terms
and conditions pursuant to which the offering of the Securities is being made
and all material aspects of the Company and its proposed business, and any
request for such information has been fully complied with to the extent the
Company possesses such information or can acquire it without unreasonable
effort or expense.

                    (d)
The Investor is an “accredited investor” within the meaning of Rule 501 of the Act.

                    (e)
The Investor is an investor who has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of an
investment in the Company based upon (i) the information furnished to him, her
or it by the Company; (ii) his, her or its personal knowledge of the business
and affairs of the Company; (iii) such additional information as he, she or it
may have requested and has received from the Company; and (iv) the independent
inquiries and investigations undertaken by him, her or it.

                    (f)
No person has given any information or made any representation not contained in
any disclosure documents referred to above or otherwise provided to the
Investor in writing by a person employed or authorized in writing by the
Company. The Investor understands and agrees that any information or
representation not contained therein must not, and will not, be relied upon and
that nothing contained therein should be construed as legal or tax advice to
the Investor.

                    (g)
No person has made any direct or indirect representation or warranty of any
kind to the Investor with respect to the economic return which may accrue to
the Investor. The Investor has consulted with his, her or its own advisors with
respect to an investment in the Company.

                    (h)
All information, representations and warranties contained herein or otherwise
given or made to the Company by the Investor in any other written statement or
document delivered in connection with the transactions contemplated hereby are
correct and complete as of the date of this Agreement and may be relied upon by
the Company, and, if there should be any material change in such information
prior to the Closing Date, the Investor will immediately furnish such revised
or corrected information to the Company.

          4.
CONDITIONS TO CLOSING.

               4.1
Payment of Purchase Price. On or before the Closing Date,
the Investors shall deliver to the Company the Purchase Price in accordance
with the provisions of Section 1 against delivery by the Company of the
Securities.

               4.2
Issuance and Delivery of the Notes. On the Closing Date, the Company
shall issue and deliver to the Investors duly executed Notes in the
denominations set forth on Schedule I. 

               4.3
Exchange of Outstanding Promissory Notes Due December 2009. As a
condition of Closing the holders of approximately $2.2 in convertible notes
plus any accrued interest to the Closing Date (Existing Notes”) shall, as of
Closing, exchange such Existing Notes for 2009 Convertible Notes in the form of
the Notes attached hereto at Exhibit A, except such Existing Notes shall not be
entitled to any security interest, but all other terms and conditions shall be
the same.

               4.4
Agility Consent to Offering. As a condition of Closing, the Company
shall have received from Agility Capital, LLC, Agility’s consent to the
Offering. 

               4.5
Closing Date and Minimum Offering Amount. Closing Date of the initial
minimum Offering amount of $750,000 shall be on or before March 31, 2009, which
in the Company’s sole discretion and determination can be extended until April
10, 2009. To the extent that the Closing of the initial minimum Offering amount
shall Close by such date or extended date, then the Offering may be extended in
the Company’s sole discretion and determination for up to an additional thirty
days. 

               4.6
Terminated Closing. If the Company is unable to Close the Offering under
the terms as described herein, any investment funds remitted by Investors,
shall be returned to such Investors without interest and without reduction or
set-off.

               4.7
Proceedings and Documents. All actions and other proceedings in
connection with the transactions contemplated at the Closing and all documents
and instruments incident thereto shall be reasonably satisfactory in form and
substance to the Company, the Investors and their respective legal counsel, and
the Company and the Investors shall have received all such counterpart
originals and certified or other copies of such documents as they may
reasonably request.

          5.
ADDITIONAL AGREEMENTS OF THE PARTIES.

               5.1
No Material Non-Public Information. Neither the Company nor any other
Person acting on its behalf has provided the Investor or its agents or counsel
with any information that will constitute material non-public information
following the public announcement of this Closing and the related Common Stock
financing. The Company understands and confirms that each Investor shall be
relying on the foregoing representation in effecting transactions in securities
of the Company in accordance with applicable law following the public
announcement of this Closing and the related Common Stock financing.

               5.2
Cooperation in Issuance of Securities. The parties agree and acknowledge
that it is the desire of the Investors that to the extent possible under the
then Rule 144 provisions, that the certificates to be issued in the event of a
conversion of principal or interest under the Notes as provided for under
Section 8 of the Note, would be issued as unrestricted, if then allowable for
such a cashless conversion, or the Company would cooperate with the Investor to
assist in securing such unrestricted (“freely tradable”) common shares as
quickly as reasonably possible. 

               5.3
Indemnification.

                    (a)
Company Indemnification. The Company agrees to indemnify and hold
harmless the Investors, their affiliates, each of their officers, directors,
partners, employees and agents and their respective successors and assigns,
from and against any losses, damages, or expenses which are caused by or arise
out of (i) any breach or default in the performance by the Company of any
covenant or agreement made by the Company in this Agreement or in any of the
Transaction Documents; (ii) any breach of warranty or representation made by
the Company in this Agreement or in any of the Transaction Documents (iii) any
and all third party actions, suits, proceedings, claims, demands, judgments,
costs and expenses (including reasonable legal fees and expenses) incident to
any of the foregoing.

                    (b)
Investor Indemnification. Each Investor, severally and not jointly,
agree to indemnify and hold harmless the Company, its affiliates, each of their
officers, directors, employees and agents and their respective successors and
assigns, from and against any losses, damages, or expenses which are caused by
or arise out of (i) any breach or default in the performance by the Investor of
any covenant or agreement made by the Investor in this Agreement or in any of
the Transaction Documents; (ii) any breach of warranty or representation made
by the Investor in this Agreement or in any of the Transaction Documents; and
(iii) any and all third party actions, suits, proceedings, claims, demands,
judgments, costs and expenses (including reasonable legal fees and expenses)
incident to any of the foregoing.

          6.
MISCELLANEOUS.

               6.1
Survival of Representations and Warranties. The representations,
warranties of the Company and the Investors contained in or made pursuant to
this Agreement shall survive the Closing Date for a period of one year.

               6.2
Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Investor. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Securities or Conversion Shares, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities or Conversion Shares, by the provisions hereof that apply to the
“Investors.”

               6.3
Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of California.

               6.4
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In the event that any
signature is delivered by facsimile transmission, 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
signature page were an original thereof.

               6.5
Headings. The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement. All references in this Agreement to sections, paragraphs,
exhibits and schedules shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits and schedules attached hereto, all of which
exhibits and schedules are incorporated herein by this reference.

               6.6
Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon deposit with
the United States Post Office, by registered or certified mail, postage prepaid
and addressed as follows:

	
 

	
 

	
 

	
If to the
  Investors, at:

	
 

	
The
  addresses set forth on Schedule I.

	
 

	
 

	
 

	
If to the
  Company, at:

	
 

	
PepperBall
  Technologies, Inc.

	
 

	
 

	
6142 Nancy
  Ridge Drive, Suite 101

	
 

	
 

	
San Diego,
  CA 92121

	
 

	
 

	
Attn: President

or at such
other address as any Investor or the Company may designate by giving 10 days
advance written notice to all other parties.

               6.7
Finder’s Fees. Except for up to a 6% consulting fee payable by the
Company to certain finder’s, including some who are Directors of the Company
(other than Directors shall not be compensated for investments made directly or
indirectly by themselves), each party represents that it neither is nor will be
obligated for any finder’s or broker’s fee or commission in connection with
this transaction. The Investors agree to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of
a finders’ or broker’s fee (and any asserted liability) for which the Investors
or any of their officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless the Investors
from any liability for any commission or compensation in the nature of a
finders’ or broker’s fee (and any asserted liability) for which the Company or
any of its officers, employees or representatives is responsible. 

               6.8
Attorneys’ Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys’ fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

               6.9
Costs and Expenses. Each party to this Agreement shall be responsible for
its own fees and expenses in connection with this transaction.

               6.10
Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of (i) the Company and (ii) Investors holding a majority of
the principal amount of all outstanding Notes.

               6.11
Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.

               6.12
Entire Agreement. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.

               6.13
Further Assurances. From and after the date of this Agreement, upon the
request of a majority of the Investors or the Company, the Company and the
Investors shall execute and deliver such instruments, documents or other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

               6.14
Defined Terms. The following terms shall have the following assigned
meanings:

                    (a)
“Knowledge”, with respect to the Company, means the actual knowledge of
any director or executive officer of the Company without the requirement for
inquiry or investigation.

                    (b)
“Lien” means a lien, charge, security interest, encumbrance, right of
first refusal or other restriction, except for a lien for current taxes not yet
due and payable and a minor imperfection of title, if any, not material in
nature or amount and not materially detracting from the value or impairing the
use of the property subject thereto or impairing the operations or proposed
operations of the Company. 

                    (c)
“Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind. 

               6.15
Mutual Drafting. This Agreement is the result of the joint efforts of
the Company and the Investors, and each provision hereof has been subject to
the mutual consultation, negotiation and agreement of the parties and there
shall be no construction against any party based on any presumption of that
party’s involvement in the drafting thereof.

[Signature Page Follows]

IN WITNESS
WHEREOF, the parties hereto have executed this Securities Purchase Agreement as
of the Effective Date.

	
 

	
 

	
 

	
 

	
THE COMPANY:

	
 

	
PEPPERBALL
  TECHNOLOGIES, INC.

	
 

	
By: 

	
/s/ Chris Lewis 

	
 

	
 

	
Name: Chris Lewis  

	
 

	
 

	
Title: Assistant Secretary 

	
 

	
 

	
 

	
INVESTORS:

	
 

	
 

	
 

	
Investor name: __________________________

	
 

	
 

	
 

	
By:____________________________________

	
 

	
Name:

	
 

	
Title:

	
 

	
 

	
 

	
Investor
  name: __________________________

	
 

	
 

	
 

	
By:____________________________________

	
 

	
Name:

	
 

	
Title:

	
 

	
 

	
 

	
Investor
  name: __________________________

	
 

	
 

	
 

	
By:____________________________________

	
 

	
Name:

	
 

	
Title:

	
 

	
 

	
 

	
Investor
  name: __________________________

	
 

	
 

	
 

	
By:____________________________________

	
 

	
Name:

	
 

	
Title:

        Schedule I

        

         

        

        Investor names, addresses and Securities purchased

        

         

        

         

        

        

        	
                    Investor Names

                    

                    

                	
                    Principal Amount of Promissory Notes

                    

                    

                
	
                    Name: Dr. Eric P. Wenaas

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $100,000

                
	
                    Name: John C. Stiska

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $100,000

                
	
                    Name: Dr. Jeffrey M. Nash

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $50,000

                
	
                    Name: Gregory Pusey

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $50,000

                
	
                    Name: Jeffrey G. McGonegal

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $25,000

                
	
                    Name: Sherman Family Trust

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $50,000

                

        

        

         

        
            

        

         

        

        

        	
                    Name: Free Family Trust

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $100,000

                
	
                    Name: William C. Lusardi Family Trust

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $100,000

                
	
                    Name: The Page Trust

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $100,000

                
	
                    Name: James Mashburn IRA

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $50,000

                
	
                    Name: John Preis

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $50,000

                
	
                    Name: D. William and Edie H. Davis

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $25,000

                
	
                    Name: Conrad Sun

                    Address

                    Address

                    City, State, Zip

                    Tax ID #:________________

                    Fax #: ____________________ 

                	
                    $25,000

                
	
                    Totals

                	
                    $825,000

                

        

        

Schedule II

Capitalization

PepperBall Technologies,
Inc.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Current Cap Table

	
 

	
 

	
 

	
Mkt Cap @

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
# Outstanding

	
 

	
$ 0.10

	
 

	
 

	
 

	 

	
 

	 

	
 

	
Common shares

	
 

	
 

	
12,950,000 

	
 

	
$ 

	
1,295,000 

	
 

	
Preferred
  share rights

	
 

	
 

	
4,270,000

	
 

	
$

	
427,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
          Total

	
 

	
 

	
17,220,000

	
 

	
$

	
1,722,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Pro Forma Cap Table

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Pro Forma

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Dilutive

	
 

	
Total Shs. #

	
Offering
  at $1 million:

	
 

	
 

	
 

	
Offering
  #

	
 

	
Match #

	
 

	
 O/S

	
 

	
 

	
 

	
 

	 

	
 

	 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 

	
0.10

	
 

	
10,000,000

	
 

	
10,000000

	
 

	
37,220,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Offering
  at $1.5:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$

	
 

	
0.10

	
 

	
15,000,000

	
 

	
11,610,000

	
 

	
43,830,000

	
 

	
 

	
 

	
(All
  amounts exclude conversion rights of outstanding convertible notes and
  accrued interest)

	
 

	
 

	
 

	
(All
  amounts exclude options and warrants)Exhibit 10.2

THE SECURITIES
REPRESENTED BY THIS NOTE AND ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
“1933 ACT”), OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE SECURITIES LAWS,
BUT HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF
INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE 1933 ACT, AND
UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES AND THE SECURITIES
ISSUED UPON EXERCISE HEREOF MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED,
NOR MAY THIS NOTE BE EXERCISED, EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
THE PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT.

SECURED CONVERTIBLE PROMISSORY NOTE

	
 

	
 

	
San Diego,
  California

	
As of April 22, 2009

          FOR VALUE
RECEIVED, PepperBall Technologies, Inc., a Colorado corporation (the “Company”),
hereby promises to pay to the order of [_________________________________] (the “Holder”),
in lawful money of the United States at the address of the Holder set forth
herein, the principal amount of $[____________] (“Principal Amount”),
together with Interest (as defined in Section 2). This Promissory Note
(this “Note”) has been executed by the Company on the date set forth
above (the “Effective Date”) pursuant to the Securities Purchase
Agreement entered into on the Effective Date by and between the Company and the
Holder (the “Purchase Agreement”). Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Purchase
Agreement.

          1.
Principal Amount. The Company hereby promises
to pay to the order of the Holder, in lawful money of the United States at the
address of the Holder set forth below, the Principal Amount, together with
Interest, which shall accrue from the date hereof (less any amounts paid under
Section 2 below) until December 31, 2010 the date of payment in full of the
aggregate Principal Amount together with any unpaid Interest, or the conversion
of this Note pursuant to the terms hereof. The Principal Amount shall be paid
by the Company on the Maturity Date (as defined in Section 3), unless
earlier paid or converted.

          2.
Interest. The outstanding Principal Amount shall bear simple interest (“Interest”)
at the rate of 10% per annum (calculated on the basis of the actual number of
days elapsed in a 360-day year) payable on the Maturity Date (unless earlier
paid or converted). Interest shall accrue until December 31, 2009 to be paid at
Maturity Date. Commencing January 1, 2010, Interest shall be paid quarterly in
arrears beginning with the quarter ended March 31, 2010, with such Interest to
be paid by the tenth day of the month following quarter end. 

          3.
Maturity. Unless this Note is earlier
accelerated, prepaid or converted as set forth below, the outstanding Principal
Amount and all unpaid Interest thereon shall be paid in full on December 31,
2010 (the “Maturity Date”). 

          4.
Security Interest. As security for all present
and future indebtedness of the Company to Holder, the Holder grants to Holder a
security interest in all of Company’s personal property located in California,
now owned or subsequently acquired, including without limitation all of the
following: all accounts, cash, patents, copyrights, trademarks, goodwill,
general intangibles, deposit accounts, inventory, fixtures and equipment, as
such terms are defined in Division 9 of the Uniform Commercial Code in effect
on the date hereof, but excluding any equipment subject to existing equipment
leases and such other equipment or motor vehicles acquired hereafter under such
facilities (collectively, the “Collateral”). Company authorizes Holder to
execute such documents and take such actions a Holder reasonably deems
appropriate from time to time to perfect or continue the security interest
granted hereunder. Company shall take such steps as Holder may reasonable
request to perfect the security interest granted hereunder. In all cases, such
security interest shall be subject to the Subordination Agreement between the
Company, Agility Capital, LLC and Holder, executed as of the date of this Note.

          5.
Application of Payments. 

          5.1
Except as otherwise expressly provided herein, each payment under this Note
shall be applied (i) first to the repayment of any sums incurred by the
Holder for the payment of any expenses in enforcing the terms of this Note,
(ii) then to the payment of Interest, and (iii) then to the reduction
of the Principal Amount.

          5.2
Upon payment in full of the Principal Amount and applicable accrued and unpaid
Interest thereon or the conversion of such amount pursuant to Section 6,
this Note shall be marked “Paid in Full” and returned to the Company.

          6.
Prepayment. This Note (including the Principal
Amount and all accrued Interest thereon) may be prepaid in full or in part at
any time with thirty days Notice by the Company to the Holder. 

          7.
Subordination. The Holder hereby
acknowledges and agrees that this Note is subject to and limited by the terms
of a Subordination Agreement with Agility Capital, LLC. To the extent that the
Agility Capital, LLC obligation is paid off, Holder agrees to execute a new
subordination agreement at the Company’s reasonable request, to allow the
Company to secure an accounts receivable and / or inventory line of credit
under reasonable commercial terms, to support its operations. 

          8.
Note Conversion.

          8.1
Conversion. At the sole discretion of the Holder, the outstanding
Principal Amount and any accrued but unpaid Interest thereon shall be
convertible into shares of the Company’s Common Stock (or at the sole option of
the Holder, shares of non-voting Series C Preferred Stock, no par value per
share (“Preferred Stock”), at a conversion price per share of Common
Stock equal to $0.10 (the “Conversion Price”) on the date of such
conversion (the “Conversion Date”). Conversion requests would be made in
minimum increments of the greater of $50,000 or the remaining balance of the
Holder’s Note. 

          8.2
Conversion Procedures. As promptly as practicable after the Conversion
Date, the Company, at its expense, will issue and deliver to the Holder a
certificate(s) for the number of full shares of Common Stock, or if applicable
Series C Preferred Stock issuable upon such conversion. Upon the conversion of
this Note, the Holder shall surrender this Note, duly endorsed, at the
principal office of the Company and the Company shall be forever released from
all its obligations and liabilities under this Note. No fractional shares of
the Company’s Common Stock shall be issued upon conversion of this Note. In
lieu of the Company issuing any fractional shares to the Holder upon the
conversion of this Note, the number of shares of Common Stock to be issued
shall be rounded to the nearest whole number of shares. 

          9.
Waiver of Notice. The Company hereby waives
diligence, notice, presentment, protest and notice of dishonor.

          10.
Covenants of the Company.

          10.1
No Amendment of Preferred Stock. The Company shall not amend the terms
of the Preferred Stock prior to the Conversion Date without the written
approval of the Holder.

          10.2
Notice of Certain Events. Prior to the earlier of (a) the conversion
of this Note to Common Stock or as applicable Series C Preferred Stock or (b)
the payment of all amounts due hereunder, upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other corporation, any
sale of all or substantially all the assets of the Company (an “Asset
Transfer”) or any voluntary or involuntary dissolution, liquidation or
winding up of the Company or (iii) an acquisition by an individual or
legal entity or “group” (as defined in Section 13(d) of the Exchange Act) of
more than 50% of the voting rights or equity interests in the Company, whether
in one transaction or in a series of related transactions (an “Acquisition”),
in each case the Company shall, subject to the Company’s requirements under the
disclosure requirements of federal and state securities laws, furnish to the
Holder at least 20 days prior to the record date specified therein a notice
specifying (1) the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective and (3) the
date, if any, that is to be fixed for determining the holders of record of
Common Stock (or other securities) that shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such Acquisition, reorganization, reclassification, transfer,
consolidation, merger, Asset Transfer, dissolution, liquidation or winding up.

          11.
Events of Default. The occurrence of any of the
following events (each an “Event of Default”), not cured in the
applicable cure period, if any, shall constitute an Event of Default of the
Company:

          11.1
a material breach of any covenant or other provision of this Note, which, if
capable of being cured, is not cured within five days following notice thereof
to the Company;

          11.12
the failure to make when due any payment described in this Note, whether on or
after the Maturity Date, by acceleration or otherwise;

          11.3
(i) the application for the appointment of a receiver or custodian for the
Company or the property of the Company, (ii) the entry of an order for
relief or the filing of a petition by or against the Company under the
provisions of any bankruptcy or insolvency law, (iii) any assignment for
the benefit of creditors by or against the Company, or (iv) the Company
becomes insolvent; or

          11.4
the Company is in material breach of any representation, warranty or covenant
provided set forth in any other agreement between the Holder and the Company
contained in the Purchase Agreement or any ancillary agreement between the
parties referenced therein.

          Upon
the occurrence of any Event of Default that is not cured within any applicable
cure period, the Holder may elect, by written notice delivered to the Company,
to take any or all of the following actions: (i) declare this Note to be
forthwith due and payable, whereupon the entire unpaid Principal Amount,
together with accrued and unpaid Interest thereon, and all other cash
obligations hereunder, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Company, anything contained herein or in any of
the Note to the contrary notwithstanding, and (ii) exercise any and all
other remedies provided hereunder or available at law or in equity upon the
occurrence and continuation of an Event of Default.

          12.
Miscellaneous.

          12.1
Successors and Assigns. This Note and the securities into which this
Note is convertible may not transferred by the Holder without compliance with
applicable securities laws. Subject to the terms and conditions contained
herein, this Note shall be binding on the Company and its successors and shall
inure to the benefit of the original Holder, its successors and assigns. This
Note may not be assigned by the Company without the written consent of the
Holder.

          12.2
Loss or Mutilation of Note. Upon receipt by the Company of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of this Note,
together with indemnity reasonably satisfactory to the Company, in the case of
loss, theft or destruction, or the surrender and cancellation of this Note, in
the case of mutilation, the Company shall execute and deliver to the Holder a
new Note of like tenor and denomination as this Note.

          12.3
Titles and Subtitles. The titles and subtitles of the Sections of this
Note are used for convenience only and shall not be considered in construing or
interpreting this agreement.

          12.4
Legend. Any certificate representing shares of the Company’s Common
Stock or at the option of the Holder Series C Preferred Stock issued upon
conversion of this Note or otherwise issued hereunder shall be stamped or
otherwise imprinted with a legend substantially in the following form:

THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “1933 ACT”), OR UNDER THE PROVISIONS OF ANY APPLICABLE
STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF
FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE
1933 ACT, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES AND
THE SECURITIES ISSUED UPON EXERCISE HEREOF MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR ASSIGNED, NOR MAY THIS NOTE BE EXERCISED, EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER THE PROVISIONS OF THE 1933 ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT.

          12.5
Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be delivered personally or by
facsimile (receipt confirmed electronically) or shall be sent by a reputable
express delivery service or by certified mail, postage prepaid with return
receipt requested, addressed as follows:

	
 

	
 

	
 

	
 

	
if to the
  Company, to:

	
 

	
 

	
PepperBall
  Technologies, Inc.

	
 

	
 

	
6142 Nancy
  Ridge Drive, Suite 101

	
 

	
 

	
San Diego,
  CA 92121

	
 

	
 

	
Attn.:
  President

	
 

	
 

	
 

	
 

	
 

	
if to the
  Holder, to:

	
 

	
 

	
_____________________________

	
 

	
 

	
_____________________________

	
 

	
 

	
Attn:
  ________________________

	
 

	
 

	
Fax No:
  ______________________

	
 

	
 

	
with a copy
  to:

	
 

	
 

	
_____________________________

	
 

	
 

	
_____________________________

	
 

	
 

	
Attn:_________________________

	
 

	
 

	
Fax
  No.:______________________

	
 

Either party
hereto may change the above specified recipient or mailing address by notice to
the other party given in the manner herein prescribed. All notices shall be
deemed given on the day when actually delivered as provided above (if delivered
personally or by facsimile, provided that any such facsimile is received during
regular business hours at the recipient’s location) or on the day shown on the
return receipt (if delivered by mail or delivery service).

          1.6
Note Holder Not Shareholder. This Note does not confer upon the Holder
any right to vote or to consent to or to receive notice as a shareholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a shareholder, prior to the conversion hereof.

          1.7
Governing Law. This Note shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of California.

          1.8
Waiver and Amendment. Any term of this Note may be amended, waived or
modified only with the written consent of the Company and the Holder of this
Note.

          1.9
Remedies; Attorneys Fees. No delay or omission by the Holder in
exercising any of its rights, remedies, powers or privileges hereunder or at
law or in equity and no course of dealing between the Holder and the
undersigned or any other person shall be deemed a waiver by the Holder of any
such rights, remedies, powers or privileges, even if such delay or omission is
continuous or repeated, nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise thereof by
the Holder or the exercise of any other right, remedy, power or privilege by
the Holder. The rights and remedies of the Holder described herein shall be
cumulative and not restrictive of any other rights or remedies available under
any other instrument, at law or in equity. If an Event of Default occurs, the
Company agrees to pay, in addition to the Principal Amount and Interest payable
thereon, reasonable attorneys’ fees and any other costs incurred by the Holder
in connection with its pursuit of its remedies under this Note.

* * * * *

          IN
WITNESS WHEREOF, the Company has caused this Note to be signed in its name on
the Effective Date.

	
 

	
 

	
 

	
 

	
PEPPERBALL
  TECHNOLOGIES, INC.

	
 

	
By:

	
________________________________

	
 

	
 

	
Name:
  __________________________

	
 

	
 

	
Title:
  ___________________________

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