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<TYPE>8-K
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<ITEMS>1.01
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<FILING-DATE>20101221
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<CONFORMED-NAME>PepperBall Technologies, Inc.
<CIK>0001216199
<ASSIGNED-SIC>3480
<IRS-NUMBER>201978398
<STATE-OF-INCORPORATION>CO
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<FILE-NUMBER>001-32566
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<STREET1>6142 NANCY RIDGE DRIVE
<STREET2>SUITE 101
<CITY>SAN DIEGO
<STATE>CA
<ZIP>92121
<PHONE>858-638-0236
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<DATE-CHANGED>20061010
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<div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On December 20, 2010, PepperBall Technologies, Inc., a Colorado corporation (the &#8220;Company&#8221;) entered into a Note and Warrant Purchase Agreement (the &#8220;Note and Warrant Purchase Agreement&#8221;) with investors for the private placement of Convertible Promissory Notes (the &#8220;Notes&#8221;) having a principal amount of $145,000.&#160;&#160;Subject to the conversion provisions set forth in the Notes, the outstanding principal amount under the Notes is due and payable on December 31, 2012 (the &#8220;Maturity Date&#8221;).&#160;&#160;The Notes bear simple interest at the rate of 10% per annum, and interest shall be paid quarterly in arrears beginning with the quarter ended December 31, 2010, with such interest to be paid by the tenth day of the month following quarter end.&#160;&#160;As security for the Company&#8217;s obligations, the Company granted the purchasers of the Notes a security interest in all of the Company&#8217;s personal property located in the State of California (the &#8220;Security Interest&#8221;); provided that the Notes and the Security Interest are subordinated to the obligations of the Company to Primary Funding Corporation, the James Simpson Foundation, and J.A. and G.L. Simpson Trust.&#160;&#160;Further, the purchasers of the Notes agreed that the Notes will be subordinate to any additional accounts receivable and/or inventory line of credit obtained by the Company in the future.&#160;&#160;The Notes were issued on December 20, 2010 and may be prepaid at any time upon thirty days&#8217; notice.</font></div>

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<div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At the sole discretion of the holder, the outstanding principal amount of the Notes and any accrued but unpaid interest thereon may be converted into shares of the Company&#8217;s Common Stock (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Common Stock</font>") or non-voting Series C Preferred Stock (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Preferred Stock</font>") at a conversion price of $0.05 per share, provided that conversion requests must be made in minimum amounts of the greater of $25,000 or the then remaining balance of a holder&#8217;s Note.</font></div>

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<div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As additional consideration for the issuance of the Notes, warrants to purchase shares of the Company&#8217;s Common Stock, (or at the option of the Investor exercisable into shares of Preferred Stock) will be issued.&#160;&#160;The number of Warrants to purchase said Common Stock or Preferred Stock shall be equal to the amount of the Notes divided by $0.05.</font></div>

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<div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company plans to use the proceeds of the Notes to make payments on the amounts outstanding under Loan Agreements with James Simpson Foundation and J.A. and G.L. Simpson Trust, to fund sales and marketing and inventory expenses, and for other working capital purposes.</font></div>

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<div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Notes and the securities issuable upon conversion of the Notes have not been and will not be registered under the Securities Act in reliance upon an exemption from registration provided by Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder.&#160;&#160;Such securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.</font></div>

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<div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The description of the transaction set forth above is qualified in its entirety by reference to the Note and Warrant Purchase Agreement, Convertible Promissory Note, and Warrant, forms of which are filed with this current report as Exhibits 10.1, 10.2, and 10.3, respectively.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item 2.03&#160;&#160;&#160;&#160;&#160;Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet<font id="TAB1" style="MARGIN-LEFT: 12pt"></font>Arrangement of a Registrant</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The information set forth above under <font style="DISPLAY: inline; FONT-STYLE: italic">Item 1.01, Entry into a Material Definitive Agreement</font>, is hereby incorporated by reference into this Item 2.03.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item 3.02&#160;&#160;&#160;&#160;&#160;Unregistered Sales of Equity Securities</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The information set forth above under <font style="DISPLAY: inline; FONT-STYLE: italic">Item 1.01, Entry into a Material Definitive Agreement</font>, is hereby incorporated by reference into this Item 3.02.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item 7.01&#160;&#160;&#160;&#160;Regulation FD Disclosure</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="justify">
<div style="DISPLAY: block; TEXT-INDENT: 9pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On September 26, 2008, five purported shareholders filed a lawsuit in California Superior Court for Los Angeles County against PepperBall Technologies, Inc. (f/k/a Security With Advanced Technology, Inc.) and certain of its officers and/or directors, which was subsequently revised and amended. On December 15, 2010, the trial for the case was concluded with the jury finding of no false statements of any kind and no qualifications to their verdict in favor of defendants.</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Company issued a press release on December 20, 2010, entitled, &#8220;PEPPERBALL TECHNOLOGIES ANNOUNCES LITIGATION VICTORY WITH JURY&#8217;S DECISION&#8221;</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item 9.01&#160;&#160;&#160;&#160;Financial Statements and Exhibits.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d) <font style="DISPLAY: inline; FONT-STYLE: italic">Exhibits</font>.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10.2</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">10.3</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">99.1</font></div>
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<td align="left" valign="top" width="70%">
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PepperBall Technologies, Inc.</font></div>
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<div style="TEXT-ALIGN: right">Exhibit 10.1</div>

<div>&#160;</div>

<div>&#160;</div>

<div><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>

<div style="TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE AND WARRANT PURCHASE AGREEMENT</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">THIS NOTE AND WARRANT PURCHASE AGREEMENT</font> (this "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Agreement</font>") is made and entered into as of the ____ day ________, 2010 (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Effective Date</font>") by and between PepperBall Technologies, Inc., a Colorado corporation with its principal place of business in California (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Company</font>"), and __________________________________ ("<font style="DISPLAY: inline; TEXT-DECORATION: underline">Investor</font>").</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">A.</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Company desires to sell to the Investor, and the Investor desires to purchase from the Company, (i) an aggregate amount of $______________ of Convertible Promissory Notes (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Notes</font>") which are convertible at the rate of $0.05 per share into ___________ shares of the Company's Common Stock, no par value per share (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Common Stock</font>"), (ii) or at the option of the Investor shall be convertible into approximately _______________ shares of the Company's non-voting Series&#160;C Preferred Stock, no par value per share (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Preferred Stock</font>") (collectively, the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Securities</font>").</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">AGREEMENT</font></font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOW, THEREFORE</font>, 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:</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">AUTHORIZATION&#160;AND&#160;SALE OF SECURITIES AND WARRANTS</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase&#160;and&#160;Sale of Securities and Warrants</font>.&#160;&#160;At the Closing, the Company shall sell to the Investors, and the Investors shall purchase from the Company, the Securities and Warrants, in the denominations set forth in Sections A and B.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.2&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Allocation of Purchase Price to the Warrants</font>.&#160;&#160;The company hereby allocates to the Warrants a purchase price of $0.001 for each share of Common Stock or Preferred Stock that each Warrant is exercisable into and such purchase price shall be retained from the interest that accrues on such Investor&#8217;s Note by the Company at the time such Investor&#8217;s Note is paid in full.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Closing</font>.&#160;&#160;The closing of the purchase and sale of the Securities (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Closin</font>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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Closing Date</font>").&#160;&#160;At the Closing: (i) the Company shall issue and deliver to the Investors duly executed Notes and Warrants in the denominations set forth in Sections A and B and in the form attached hereto as <font style="DISPLAY: inline; TEXT-DECORATION: underline">Exhibit A and Exhibit B</font>; and (ii) each Investor shall pay to the Company the applicable Purchase Price for the Securities and Warrants to be purchased by such Investor in the amounts set forth in Sections A and B by payment of check or wire transfer of same day funds to the Company.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">REPRESENTATIONS&#160;AND&#160;WARRANTIES&#160;OF&#160;THE&#160;COMPANY.</font>&#160;&#160;The Company hereby makes the following representations and warranties to the Investors as of the date hereof and as of the Closing Date:</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Organization and Qualification</font>.&#160;&#160;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.&#160;&#160;The Company is not in violation of any of the provisions of its Articles of Incorporation or Bylaws.&#160;&#160;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 and Warrants, (collectively, the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Transaction Documents</font>"), (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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Material Adverse Effect</font>").&#160;&#160;The Company owns 100% of the outstanding capital stock of PepperBall &#8211; CA, Inc., a Delaware corporation, Vizer Group, Inc., a Colorado corporation ("<font style="DISPLAY: inline; TEXT-DECORATION: underline">Vizer</font>").&#160;&#160;Vizer owns 100% of the outstanding capital stock of Veritas Tactical, Inc. ("<font style="DISPLAY: inline; TEXT-DECORATION: underline">Veritas</font>").&#160;&#160;Effective 12/31/09 Vizer and Veritas became discontinued operations and PepperBall &#8211; CA, Inc., is the sole operating company of the Company.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Authorization; Enforceability</font>.&#160;&#160;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 and upon exercise of the Warrants, and 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.&#160;&#160;The Common Stock underlying the Notes and the Warrants, and the Common Stock underlying the Preferred Stock, as applicable (collectively, the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Conversion and Warrant Shares</font>") have been duly reserved for issuance by the Company.&#160;&#160;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).&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">No Conflicts</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Issuance of the Securities and Warrants</font>.&#160;&#160;The Securities and Warrants and the Conversion and Warrant 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.&#160;&#160;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 and Warrant Shares.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Capitalization</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The authorized and outstanding capitalization of the Company is as described on <font style="DISPLAY: inline; TEXT-DECORATION: underline">Schedule&#160;I</font> attached hereto.&#160;&#160;The Company has not issued any capital stock since such filing.&#160;&#160;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.&#160;&#160;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.&#160;&#160;There are no dividends which have accrued or been declared but are unpaid on the capital stock of the Company.&#160;&#160;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.&#160;&#160;All securities of the Company have been issued in all material respects in accordance with the provisions of all applicable securities and other laws.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.&#160;&#160;Except as a result of the purchase and sale of the Securities and except for outstanding Series A and Series B Preferred Shares and&#160;&#160;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&#8217;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 ("<font style="DISPLAY: inline; TEXT-DECORATION: underline">Common Stock Equivalents</font>").&#160;&#160;Except as provided&#160;&#160;under the terms of the Merger Agreement dated as of May 27, 2008 between the Company and PepperBall &#8211; 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 &#8211; 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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Litigation</font>.&#160;&#160;Except as disclosed in the Company&#8217;s public filings, specifically the Vahe&#8217; matter, 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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Action</font>") 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.&#160;&#160;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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Labor Relations</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.9</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Intellectual Property</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Rights</font>") 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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Intellectual Property</font>"), 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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">(e)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">REPRESENTATIONS AND WARRANTIES&#160;OF THE INVESTORS</font>.&#160;&#160;Each Investor, severally and not jointly, hereby represents and warrants to the Company that:</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Authorization</font>.&#160;&#160;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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Investor Suitability</font>.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Act</font>").</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The Investor is an "accredited investor" within the meaning of Rule 501 of the Act.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(g)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.&#160;&#160;The Investor has consulted with his, her or its own advisors with respect to an investment in the Company.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(h)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">CONDITIONS&#160;TO&#160;CLOSING</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Payment&#160;of&#160;Purchase&#160;Price</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Issuance and Delivery of the Notes and Warrants</font>.&#160;&#160;On the Closing Date, the Company shall issue and deliver to the Investors duly executed Notes and Warrants in the denominations set forth in Sections A and B.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Proceedings&#160;and&#160;Documents</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">ADDITIONAL AGREEMENTS OF THE PARTIES</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">No Material Non-Public Information</font>.&#160;&#160;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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cooperation in Issuance of Securities. </font>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 (&#8220;freely tradable&#8221;) common shares as quickly as reasonably possible.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Indemnification</font>.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 99pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Company Indemnification</font>.&#160;&#160;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.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 99pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<font style="DISPLAY: inline; TEXT-DECORATION: underline">Investor Indemnification</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">MISCELLANEOUS</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Survival of Representations and Warranties</font>.&#160;&#160;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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Successors and Assigns</font>.&#160;&#160;This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.&#160;&#160;The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Investor.&#160;&#160;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."</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Governing Law</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Counterparts</font>.&#160;&#160;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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Headings</font>.&#160;&#160;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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notices</font>.&#160;&#160;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:</font></div>

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<td width="20%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">If to the Investors, at:&#160;&#160;&#160;</font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">The addresses set forth on signature page.</font></font></div>
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<td valign="top" width="20%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">If to the Company, at:&#160;&#160;</font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PepperBall Technologies, Inc.</font></font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6142 Nancy Ridge Drive, Suite 101</font></font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">San Diego, CA 92121</font></font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Attn:&#160;&#160;President</font></font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or at such other address as any Investor or the Company may designate by giving 10 days advance written notice to all other parties.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: normal; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Finder's Fees</font>.&#160;&#160;Except for up to a 6% consulting fee payable by the Company to certain finder&#8217;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.&#160;&#160;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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.8</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Attorneys' Fees</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.9</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Costs and Expenses</font>.&#160;&#160;Each party to this Agreement shall be responsible for its own fees and expenses in connection with this transaction.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.10</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Amendments and Waivers</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.11</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Severability</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.12</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Entire Agreement</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.13</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Further Assurances</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.14</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Defined Terms</font>.&#160;&#160;The following terms shall have the following assigned meanings:</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">"<font style="DISPLAY: inline; TEXT-DECORATION: underline">Knowledge</font>", 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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">"<font style="DISPLAY: inline; TEXT-DECORATION: underline">Lien</font>" 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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">"<font style="DISPLAY: inline; TEXT-DECORATION: underline">Person</font>" 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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.15</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Mutual Drafting</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase Agreement as of the Effective Date.</div>

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<td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="top" width="43%">
<div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="FONT-WEIGHT: bold"><font style="FONT-WEIGHT: normal"><font style="DISPLAY: inline; FONT-WEIGHT: normal; TEXT-DECORATION: underline">THE COMPANY</font>:</font></font></font></font></font></div>

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<div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="FONT-WEIGHT: normal">PEPPERBALL TECHNOLOGIES, INC.</font></font></font></div>
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<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By: </font></div>
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<td align="left" nowrap valign="top" width="35%" style="BORDER-BOTTOM: black 2px solid">&#160;/s/ Christin Lewis</td>
<td valign="top" width="12%" style="BORDER-BOTTOM: #ffffff solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="8%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Name:</font></td>
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<td valign="top" width="45%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="8%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Title:</font></td>
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<td valign="top" width="12%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="FONT-WEIGHT: bold"><font style="FONT-WEIGHT: normal"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">INVESTORS</font>:</font></font></font></font></font></font></div>
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<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="13%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Investor name:</font></td>
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<td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="30%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="13%" style="BORDER-BOTTOM: #ffffff solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By: </font></div>
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<td valign="top" width="12%" style="BORDER-BOTTOM: #ffffff solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="13%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Name:</font></td>
<td align="left" nowrap valign="bottom" width="30%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
<td valign="top" width="12%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="13%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Title:</font></td>
<td valign="top" width="30%" style="BORDER-BOTTOM: black 2px solid">&#160;</td>
<td valign="top" width="12%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<td valign="top" width="45%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="13%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Address:</font></td>
<td valign="top" width="30%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="12%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Schedule I</font></font></div>

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<div>&#160;</div>

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<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PepperBall Technologies, Inc.</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="104"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Cap Table</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Common</font></div>
</td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="104">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Preferred</font></div>
</td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Convertible</font></div>
</td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348" style="BORDER-BOTTOM: black 2px solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Oct 2010</font></font></div>
</td>
<td valign="bottom" width="46" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113" style="BORDER-BOTTOM: black 2px solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Shares</font></font></div>
</td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="104" style="BORDER-BOTTOM: black 2px solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Shares (1)</font></font></div>
</td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121" style="BORDER-BOTTOM: black 2px solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Notes (2)</font></font></div>
</td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113" style="BORDER-BOTTOM: black 2px solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Totals (3)</font></font></div>
</td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="2" valign="bottom" width="120" style="BORDER-BOTTOM: black 2px solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Current:</font></font></div>
</td>
<td nowrap valign="bottom" width="7" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td>
<td valign="bottom" width="46" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="104" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="4" valign="bottom" width="475">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Common shares</font></div>
</td>
<td align="right" valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">12,950,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="104"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="104"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="4" valign="bottom" width="475">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Preferred shares</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="104"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Equivalent common shares</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="right" valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,270,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="2" valign="bottom" width="120" style="BORDER-BOTTOM: black 2px solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline">Pro Forma:</font></font></font></div>
</td>
<td align="left" colspan="2" valign="bottom" width="355" style="PADDING-BOTTOM: 2px">&#160;</td>
<td valign="bottom" width="46" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="4" valign="bottom" width="475">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Convertible Notes - Equiv Common Shs.:</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="121"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Unsecured (@ $0.10 per share)</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="right" valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">25,722,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Secured (@ $ 0.10 per share)</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="right" valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">15,300,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="4" valign="bottom" width="475">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Dilutive C/S match to PTI S/H (4)</font></div>
</td>
<td align="right" valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">11,600,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="4" valign="bottom" width="475">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Warrants:</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">pre-merger old PTI (Agility)</font></div>
</td>
<td align="right" valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">90,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Agility Dec 2008</font></div>
</td>
<td align="right" valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">758,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="bottom" width="348">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Agility/Dec 2009 &amp; Simpson/Jan 2010</font></div>
</td>
<td align="right" valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">3,000,000</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" colspan="4" valign="bottom" width="475">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Options:</font></div>
</td>
<td valign="bottom" width="46"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" valign="bottom" width="348" style="PADDING-BOTTOM: 2px">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">pre-merger old PTI plan</font></div>
</td>
<td align="right" valign="bottom" width="46" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">223,000</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="bottom" width="113" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 2px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td colspan="2" valign="bottom" width="120" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td nowrap valign="bottom" width="7" style="PADDING-BOTTOM: 4px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="348" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160; </font></td>
<td align="right" valign="bottom" width="46" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">28,621,000</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 4px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="right" valign="bottom" width="8" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="96" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">4,270,000</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 4px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="right" valign="bottom" width="8" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="113" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">41,022,000</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 4px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="right" valign="bottom" width="8" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="8" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="bottom" width="105" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">73,913,000</font></td>
<td nowrap valign="bottom" width="8" style="PADDING-BOTTOM: 4px; TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr></table>

<div>&#160;</div>

<div>Notes:</div>

<div>&#160;</div>

<div>
<table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
<td align="right" style="WIDTH: 45pt">
<div>
<div style="TEXT-ALIGN: center">1.</div>
</div>
</td>
<td align="left">
<div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Preferred shares have no preferences or dividends and are convertible into common shares</font> at the option of each holder.</div>
</td>
</tr></table>
</div>

<div>&#160;</div>

<div>
<table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
<td style="WIDTH: 45pt; TEXT-ALIGN: center">
<div>2</div>
</td>
<td align="left">
<div>Convertible note amounts exclude ongoing accrued interest on notes accruing at 10%, annually.</div>
</td>
</tr></table>
</div>

<div>&#160;</div>

<div>
<table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
<td style="WIDTH: 45pt; TEXT-ALIGN: center">
<div>3</div>
</td>
<td align="left">
<div>Total excludes approximately 3.1 million options and warrants that are exercisable into common shares at average exercise prices greater than $0.50 above current market prices.</div>
</td>
</tr></table>
</div>

<div>&#160;</div>

<div>
<table border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr valign="top">
<td style="WIDTH: 45pt; TEXT-ALIGN: center">
<div>4&#160;</div>
</td>
<td align="left">
<div>As provided under the Merger Agreement between PepperBall and the former SWAT, additional shares of common stock were issuable to the common stockholders of pre-merger PepperBall - CA under an anti-dilution provision of the merger agreement between the two companies.</div>
</td>
</tr></table>
</div>
</div>
</div>

<div>&#160;</div>

<div>&#160;</div>

<div>&#160;</div>

<div>&#160;</div>

<div>&#160;</div>

<div>&#160;</div>
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<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex10x2.htm
<DESCRIPTION>EXHIBIT 10.2
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<div style="TEXT-ALIGN: right">Exhibit 10.2</div>

<div>&#160;</div>

<div>&#160;</div>

<div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.&#160;&#160;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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SECURED CONVERTIBLE PROMISSORY NOTE</font></div>

<div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>
</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">San Diego, California&#160;As of&#160;&#160;_______, 2010</font></div>

<div style="DISPLAY: block; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><br>
</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FOR VALUE RECEIVED, PepperBall Technologies, Inc., a Colorado corporation (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Company</font>"), hereby promises to pay to the order of <font style="DISPLAY: inline; FONT-WEIGHT: bold">[_________________________________]</font> (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Holder</font>"), in lawful money of the United States at the address of the Holder set forth herein, the principal amount of $<font style="DISPLAY: inline; FONT-WEIGHT: bold">[____________]</font> ("<font style="DISPLAY: inline; TEXT-DECORATION: underline">Principal Amount</font>"), together with Interest (as defined in Section&#160;2).&#160;&#160;This Promissory Note (this "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Note</font>") has been executed by the Company on the date set forth above (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Effective Date</font>") pursuant to the Note and Warrant Purchase Agreement entered into on the Effective Date by and between the Company and the Holder (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Purchase Agreement</font>").&#160;&#160;Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Purchase Agreement.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Principal Amount</font>.&#160;&#160;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, 2012 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.&#160;&#160;The Principal Amount shall be paid by the Company on the Maturity Date (as defined in Section&#160;3), unless earlier paid or converted.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Interest</font>.&#160;&#160;The outstanding Principal Amount shall bear simple interest ("<font style="DISPLAY: inline; TEXT-DECORATION: underline">Interest</font>") 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).&#160;&#160;Interest shall be paid quarterly in arrears beginning with the quarter ended December 31, 2010, with such Interest to be paid by the tenth day of the month following quarter end.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Maturity</font>.&#160;&#160;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, 2012 (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Maturity Date</font>").</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<div id="FTR">
<div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160; </font></div>
</div>

<div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
<div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160; </font></div>

<div style="WIDTH: 100%; TEXT-ALIGN: center">
<hr style="COLOR: black" noshade size="2">
</div>
</div>

<div id="HDR">
<div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160; </font></div>
</div>
</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Security Interest</font>. 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&#8217;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 &#8220;Collateral&#8221;).&#160;&#160;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.&#160;&#160;Company shall take such steps as Holder may reasonable request to perfect the security interest granted hereunder.&#160;&#160;In all cases, such security interest shall be subject to the Subordination Agreement between the Company, its secured bridge or&#160;&#160;bank lender or lenders (&#8220;Senior Debt&#8221;) and Holder, executed as of the date of this Note.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Application of Payments</font>.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except as otherwise expressly provided herein, each payment under this Note shall be applied (i)&#160;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)&#160;then to the payment of Interest, and (iii)&#160;then to the reduction of the Principal Amount.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon payment in full of the Principal Amount and applicable accrued and unpaid Interest thereon or the conversion of such amount pursuant to Section&#160;6, this Note shall be marked "Paid in Full" and returned to the Company.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Prepayment</font>.&#160;&#160;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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Subordination.</font> The Holder hereby acknowledges and agrees that this Note is subject to and limited by the terms of a Subordination Agreement with Simpson Trust and Simpson Foundation, the Company&#8217;s bridge loan provider. Holder also agrees to execute subordination agreements at the Company&#8217;s reasonable request, to allow the Company to secure alternative bridge loan providers and working capital lines of credit.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Note Conversion</font>.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Conversion</font>.&#160;&#160;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 ("<font style="DISPLAY: inline; TEXT-DECORATION: underline">Preferred Stock</font>"), at a conversion price per share of Common Stock equal to $0.05 (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Conversion Price</font>") on the date of such conversion (the "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Conversion Date</font>").&#160;&#160;Conversion requests would be made in minimum increments of the greater of $25,000 or the remaining balance of the Holder&#8217;s Note.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Conversion Procedures</font>.&#160;&#160;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.&#160;&#160;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.&#160;&#160;No fractional shares of the Company's Common Stock shall be issued upon conversion of this Note.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Waiver of Notice</font>.&#160;&#160;The Company hereby waives diligence, notice, presentment, protest and notice of dishonor.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Covenants of the Company</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">No Amendment of Preferred Stock</font>.&#160;&#160;The Company shall not amend the terms of the Preferred Stock prior to the Conversion Date without the written approval of the Holder.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notice of Certain Events</font>.&#160;&#160;Prior to the earlier of (a)&#160;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)&#160;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)&#160;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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Asset Transfer</font>") or any voluntary or involuntary dissolution, liquidation or winding up of the Company or (iii)&#160;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 "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Acquisition</font>"), 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)&#160;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)&#160;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)&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Events of Default</font>.&#160;&#160;The occurrence of any of the following events (each an "<font style="DISPLAY: inline; TEXT-DECORATION: underline">Event of Default</font>"), not cured in the applicable cure period, if any, shall constitute an Event of Default of the Company:</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a &#160;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;</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the failure to make when due any payment described in this Note, whether on or after the Maturity Date, by acceleration or otherwise;</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)&#160;the application for the appointment of a receiver or custodian for the Company or the property of the Company, (ii)&#160;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)&#160;any assignment for the benefit of creditors by or against the Company, or (iv)&#160;the Company becomes insolvent; or</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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:&#160;&#160;(i)&#160;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)&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12. </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Miscellaneous</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Successors and Assigns</font>.&#160;&#160;This Note and the securities into which this Note is convertible may not transferred by the Holder without compliance with applicable securities laws.&#160;&#160;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.&#160;&#160;This Note may not be assigned by the Company without the written consent of the Holder.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Loss or Mutilation of Note</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Titles and Subtitles</font>.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Legend</font>.&#160;&#160;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:</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.&#160;&#160;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.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notices</font>.&#160;&#160;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:</font></div>

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<div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">if to the Company, to</font>:</font> </font></div>

<div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PepperBall Technologies, Inc.</font> </font></div>

<div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">6142 Nancy Ridge Drive, Suite 101</font> </font></div>

<div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">San Diego, CA 92121</font> </font></div>

<div><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Attn.:&#160;&#160;President</font></font></div>
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<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Attn:</font></td>
<td width="20%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Fax No.:</font></td>
<td width="20%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">with a copy to: </font></td>
<td width="20%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="20%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="20%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Attn:</font></td>
<td width="20%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Fax No.:</font></td>
<td width="20%" style="BORDER-BOTTOM: black 2px solid"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%" style="PADDING-BOTTOM: 2px"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="20%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td width="9%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="9%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="20%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td width="62%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr></table>
</div>

<div>&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Either party hereto may change the above specified recipient or mailing address by notice to the other party given in the manner herein prescribed.&#160;&#160;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).</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Note Holder Not Shareholder</font>.&#160;&#160;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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Governing Law</font>.&#160;&#160;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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
<div id="FTR">
<div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160; </font></div>
</div>

<div id="PN" style="PAGE-BREAK-AFTER: always; WIDTH: 100%">
<div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160; </font></div>

<div style="WIDTH: 100%; TEXT-ALIGN: center">
<hr style="COLOR: black" noshade size="2">
</div>
</div>

<div id="HDR">
<div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">&#160; </font></div>
</div>
</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.8</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Waiver and Amendment</font>.&#160;&#160;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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.9</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Remedies; Attorneys Fees</font>.&#160;&#160;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.&#160;&#160;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.&#160;&#160;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.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*&#160;&#160;*&#160;&#160;*&#160;&#160;*&#160;&#160;*</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name on the Effective Date.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">
<div>
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<tr>
<td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="3" valign="top" width="38%">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">PEPPERBALL TECHNOLOGIES, INC.</font></font></font></div>
</td>
<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td align="left" valign="top" width="50%" style="BORDER-BOTTOM: #ffffff solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></div>
</td>
<td valign="top" width="3%" style="BORDER-BOTTOM: #ffffff solid">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">By: </font></div>
</td>
<td align="left" colspan="2" nowrap valign="top" width="35%" style="BORDER-BOTTOM: black 2px solid">&#160;/s/ Christin Lewis</td>
<td valign="top" width="12%" style="BORDER-BOTTOM: #ffffff solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td valign="top" width="50%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="3%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" nowrap valign="bottom" width="5%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Name:</font></td>
<td align="left" nowrap valign="bottom" width="30%" style="BORDER-BOTTOM: black 2px solid">&#160;Christin Lewis</td>
<td valign="top" width="12%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td valign="top" width="50%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="3%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td align="left" nowrap valign="bottom" width="5%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Title:</font></td>
<td align="left" nowrap valign="bottom" width="30%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;Assistant Secretary</font></td>
<td valign="top" width="12%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="top" width="35%">&#160;</td>
<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
</tr><tr>
<td valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td colspan="2" valign="top" width="35%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
<td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;</font></td>
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<DOCUMENT>
<TYPE>EX-10.3
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<FILENAME>ex10x3.htm
<DESCRIPTION>EXHIBIT 10.3
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<div style="TEXT-ALIGN: right">Exhibit 10.3</div>

<div>&#160;</div>

<div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF OR IN ACCORDANCE WITH APPLICABLE LAW.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WARRANT TO PURCHASE STOCK</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>

<div align="center">
<table bgcolor="white" cellpadding="0" cellspacing="0" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td width="24%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Corporation:&#160;&#160;&#160;&#160;</font></td>
<td width="76%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;PEPPERBALL TECHNOLOGIES, INC.</font></td>
</tr><tr>
<td width="24%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Number of Shares:&#160;</font></td>
<td width="76%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;$________________/Warrant&#160;Price</font></td>
</tr><tr>
<td width="24%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Class of Stock:&#160;&#160;&#160;</font></td>
<td width="76%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;Common or Series C Preferred Stock</font></td>
</tr><tr>
<td width="24%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Initial Exercise Price:&#160;</font></td>
<td width="76%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;$0.05 per share</font></td>
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<td width="24%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Issue Date:&#160;</font></td>
<td width="76%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;____________, 2010</font></td>
</tr><tr>
<td width="24%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Expiration Date:&#160;&#160;</font></td>
<td width="76%"><font style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&#160;January 15, 2014</font></td>
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</div>

<div style="TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00 and for other good and valuable consideration, ________________________________________ or registered assignee (&#8220;Holder&#8221;) is entitled to purchase the number of fully paid and nonassessable shares (the &#8220;Shares&#8221;) of Common Stock of PEPPERBALL TECHNOLOGIES, INC. (the &#8220;Company&#8221;), in the number, at the price, and for the term specified above.&#160;&#160;This Warrant and the Warrant Shares shall not be subject to any agreements entered into between the Company and any person or entity that has the effect of reducing the number of Shares that Holder may acquire hereunder.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ARTICLE 1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">EXERCISE</font></font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify">&#160;</div>

<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Method of Exercise</font>.&#160;&#160;Holder may exercise this Warrant by delivering this Warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix&#160;1 to the principal office of the Company.&#160;&#160;&#160;&#160;Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Delivery of Certificate and New Warrant</font>.&#160;&#160;Promptly after Holder exercises or converts this Warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Replacement of Warrants</font>.&#160;&#160;On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ARTICLE 2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">ADJUSTMENTS TO THE SHARES</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Stock Dividends, Splits, Etc</font>.&#160;&#160;If the Company declares or pays a dividend on its common stock payable in common stock, or other securities, subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Reclassification, Exchange or Substitution</font>.&#160;&#160;Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event.&#160;&#160;Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company&#8217;s Certificate of Incorporation upon the closing of a registered public offering of the Company&#8217;s common stock.&#160;&#160;Upon the closing of any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company&#8217;s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction, the successor entity shall assume the obligations of this Warrant, and this Warrant thereafter shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing.&#160;&#160;The Warrant Price shall be adjusted accordingly.&#160;&#160;The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property.&#160;&#160;The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article&#160;2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant.&#160;&#160;The provisions of this Section&#160;2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Adjustments for Combinations, Etc</font>.&#160;&#160;If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">No Impairment</font>.&#160;&#160;The Company shall not, by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all the provisions of this Article&#160;2 and in taking all such action as may be necessary or appropriate to protect Holder&#8217;s rights under this Article against impairment.&#160;&#160;If the Company takes any action affecting the Shares or its common stock other than as described above that adversely affects Holder&#8217;s rights under this Warrant, the Warrant Price shall be adjusted downward and the number of Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Warrant Price of this Warrant is unchanged.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Certificate as to Adjustments</font>.&#160;&#160;Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based.&#160;&#160;The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ARTICLE 3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">REPRESENTATIONS AND COVENANTS OF THE COMPANY</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Representations and Warranties</font>.&#160;&#160;The Company hereby represents and warrants to the Holder as follows:</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of the Shares as of the date of this Warrant.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All Shares that may be issued upon the exercise of the purchase right represented by this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The capitalization table attached hereto correctly sets forth the authorized, issued and outstanding shares of capital stock of the Company and all options to acquire any such shares.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notice of Certain Events</font>.&#160;&#160;If the Company proposes at any time (a)&#160;to declare any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b)&#160;to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c)&#160;to effect any reclassification or recapitalization of common stock; (d)&#160;to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e)&#160;offer holders of registration rights the opportunity to participate in an underwritten public offering of the company&#8217;s securities for cash, then, in connection with each such event, the Company shall give Holder (1)&#160;at least 20&#160;days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; (2)&#160;in the case of the matters referred to in (c) and (d) above at least 20&#160;days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3)&#160;in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ARTICLE 4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">MISCELLANEOUS</font>.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Term</font>.&#160;&#160;This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the Expiration Date set forth above.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Legends</font>.&#160;&#160;This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR IN ACCORDANCE WITH APPLICABLE LAW.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Compliance with Securities Laws on Transfer</font>.&#160;&#160;This Warrant and the Shares issuable upon exercise this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Transfer Procedure</font>.&#160;&#160;Subject to the provisions of Section&#160;4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the Warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable), provided that no such notice shall be required for a transfer to an affiliate of Holder.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Notices</font>.&#160;&#160;All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Waiver</font>.&#160;&#160;This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; TEXT-ALIGN: justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Attorneys&#8217; Fees</font>.&#160;&#160;In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys&#8217; fees.</font></div>

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<div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.8</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160; </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Governing Law</font>.&#160;&#160;This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The undersigned hereby elects to purchase ______________ shares of the Common Stock of PEPPERBALL TECHNOLOGIES, INC.<font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:</font></div>

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<div style="TEXT-ALIGN: right">Exhibit 99.1</div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PEPPERBALL TECHNOLOGIES ANNOUNCES LITIGATION VICTORY WITH JURY&#8217;S DECISION</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">Jury Verdict in Three Hours Ends Plaintiffs&#8217; Securities Case</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold">SAN DIEGO, CA. &#8211; December 20, 2010</font> &#8211; PepperBall Technologies, Inc., (OTC: PBAL.PK), a leader in less lethal technologies with an established history of selling to law enforcement, military, and private security, today announced that the securities fraud case in Los Angeles State court against PepperBall and Greg Pusey, a Board member, has concluded with a jury finding of no false statements of any kind and no qualifications to their verdict in favor of defendants.&#160;&#160;The trial which lasted approximately six weeks concluded with an outcome in approximately three hours of deliberation by the jury panel.&#160;&#160;Defendants were represented by Jim Brosnahan of Morrison Foerster.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;The favorable resolution of this matter is very gratifying and will allow Pepperball to now focus all its attention on running its business and growing its sales, including sales of the HotShot&#8482; Personal Defense System,&#8221; said John Stiska, PepperBall Chief Executive officer.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PepperBall Technologies, Inc. develops, manufactures and distributes the PepperBall brand line of less-lethal solutions for governmental, military, corrections, private security, bail enforcement, law enforcement agencies and consumers.&#160;&#160;Products include a full line of system launchers and projectiles for a variety of less-lethal applications.&#160;&#160;PepperBall&#8217;s thousands of users include the Federal Bureau of Prisons, the United States Border Patrol, police and sheriff departments in major United States cities, as well as private entities, security services and bail enforcement agencies around the world.&#160;&#160;&#160;For more information on PepperBall Technologies, Inc., visit www.pepperball.com.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Forward-Looking Statements</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission (the "SEC"). All statements, other than statements of historical fact, included in the press release that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors the company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company and may not materialize, including, without limitation, the company&#8217;s history of losses, the company&#8217;s need to raise additional working capital, the efficacy of the company's products and services, the company's ability to secure its ownership of, right to use and protect its intellectual property and proprietary technology&#160;and the company's ability to complete development of, launch and achieve acceptable levels of sales and margins for its products and services. Investors are cautioned that any such statements are not guarantees of future performance. Actual results or developments may differ materially from those projected in the forward-looking statements as a result of many factors. Furthermore, the company does not intend (and is not obligated) to update publicly any forward-looking statements, except as required by law. The contents of this release should be considered in conjunction with the warnings and cautionary statements contained in the company's filings with the SEC, including its Risk Factors.</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Contact:&#160;</font></div>
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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">John Stiska, Chief Executive Officer</font></div>

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<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PepperBall Technologies, Inc.</font></div>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">858.638.0236</font></div>
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