Exhibit 10.2
THIS PROMISSORY NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ ACT ”), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO, OR DELIVERY
TO THE COMPANY OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT OR UNLESS
SOLD IN FULL COMPLIANCE WITH RULE 144 UNDER THE ACT.
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$__________________
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San Diego, California
September 19, 2008
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PEPPERBALL TECHNOLOGIES, INC.
CONVERTIBLE PROMISSORY NOTE
PepperBall
Technologies, Inc., a Colorado corporation (the “
Company ”), for value received, hereby promises to pay
to ____________________ (the “ Holder ”), the
principal amount of ____________________________ dollars and no/100
($____________), together with interest on the unpaid amount
thereof in accordance with the terms hereof, from the date hereof
until paid in accordance with the terms hereof.
1.
Terms of the
Convertible Promissory Note (the “Note”)
.
1.1
Payment . Principal and accrued interest hereon
shall be payable on the fifteen month anniversary of the date
hereof (the “ Maturity Date ”). Payments
hereunder shall be made by the Company to the Holder in lawful
money of the United States of America. Interest shall accrue with
respect to the unpaid principal amount hereof from the date of this
Note until such principal is paid at the rate of ten percent (10%)
per annum (computed on the basis of actual calendar days elapsed
and a year of 360 days) or, if less, at the highest rate of
interest then permitted under applicable law.
1.2
Prepayment . All or a portion of the Issue Price
and any accrued but unpaid interest relating thereto may be prepaid
by the Company at any time without penalty. Any prepayment shall be
made at the offices or residence of the Holder, or at such other
place as the Holder shall have designated to the Company in
writing, in lawful money of the United States of
America.
1.3
Acceleration . The principal outstanding
hereunder and all accrued and unpaid interest shall be due and
payable in full within ten (10) days after notice delivered to the
Company after (a) a decree or order is entered by a court
having jurisdiction adjudging the Company bankrupt or insolvent, or
approving a petition seeking reorganization of the Company is
entered, (b) a voluntary case under relevant bankruptcy law is
commenced, or the Company consents to the commencement of a
bankruptcy or insolvency proceeding against it or to the
appointment of a receiver, liquidator, assignee, trustee or similar
official, (c) any material portion of the Company’s assets is
attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver
or person acting in a similar capacity and such attachment,
seizure, writ or distress warrant or levy has not been removed,
discharged or rescinded within thirty (30) days, (d) a judgment or
other claim becomes a lien or encumbrance upon any material portion
of the Company’s assets and such lien is not satisfied within
ninety (90) days, (e) a notice of lien, levy, or assessment is
filed of record with respect to any of the Company’s assets
by the United States Government or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or
governmental agency, and the same is not paid within ninety (90)
days after the Company receives notice thereof, or (f) an
assignment of any of the Company’s assets is made for the
benefit of one or more creditors; provided, however, that none of
the foregoing conditions (a) through (f) shall be deemed met where
such action or event is stayed or an adequate bond has been posted
pending a good faith contest by the Company.
Page 1
1.4
Agreement and Plan of Merger and Reorganization
. This Note is issued by the Company in connection with
that certain Agreement and Plan of Merger and Reorganization dated
[ ], 2008 among PepperBall Technologies, Inc., a Delaware
corporation, Security With Advanced Technology, Inc., a Colorado
corporation, and PTI Acquisition Corp., a Delaware corporation (the
“ Agreement ”). This Note is one of a series of
notes (the “ Notes ”) having like tenor and
effect (except for variations necessary to express the name of the
holder, the principal amount of each of the Notes and the date on
which each Note is issued) issued by the Company in accordance with
the terms of the Agreement. The Notes shall rank equally without
preference or priority of any kind over one another, and all
payments on account of principal and interest with respect to any
of the Notes shall be applied ratably and proportionately on the
outstanding Notes on the basis of the principal amount of the
outstanding indebtedness represented thereby.
2.
Conversion .
2.1
At the Option of the Holder . Holder shall have
the right, upon surrender to the Company of this Note at the
principal office of the Company accompanied by a written conversion
request notice, to convert all or any portion of the indebtedness
owing under this Note into shares of the Company’s Common
Stock at a conversion price equal to the average closing price of
the Company’s Common Stock on the Nasdaq Capital Market (or
such other exchange or quotation service on which the
Company’s Common Stock is listed or quoted at such time, as
the case may be) for the six-month period ended on the trading day
immediately prior to the date the Holder requests such conversion.
Prior to the execution of this Note, the Company shall have
reserved and set aside for issuance to Holder such number of shares
of Common Stock as would be issuable upon conversion of this Note.
Notwithstanding the provisions of this Section 2.1 , the
Company shall not be required to honor any conversion request that
relates to the conversion of less than the lesser of (i) $100,000,
or (ii) the full amount of principal and accrued interest under
this Note.
2.2
Effectiveness of Conversion . Any conversion
pursuant to Section 2.1 shall be deemed to have been
effected as of the close of
