Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “
Agreement ”) is made and entered into as of the 22
nd 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 “ Closin g”) 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 .
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