EXHIBIT 10.42
NEITHER THIS SECURED CONVERTIBLE PROMISSORY NOTE NOR THE SECURITIES
TO BE ISSUED
UPON ITS CONVERSION
HAVE BEEN REGISTERED
UNDER THE SECURITIES
ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY
NOT BE OFFERED, SOLD
OR OTHERWISE
TRANSFERRED, PLEDGED
OR HYPOTHECATED UNLESS
(I) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR (II) IN
COMPLIANCE WITH
AN EXEMPTION THEREFROM
AND ACCOMPANIED,
IF REQUESTED BY THE
COMPANY, WITH AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH TRANSFER IS
IN COMPLIANCE WITH AN EXEMPTION THEREFROM.
$200,000.00
February 20, 2007
Boulder, Colorado
PATRON SYSTEMS, INC.
SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED,
the undersigned,
Patron Systems, Inc., a Delaware
corporation (the
"COMPANY"), hereby
promises to pay to Apex Investment Fund V,
L.P. ("HOLDER" and, together with the Company, the "PARTIES"), in
the manner and
at the place hereinafter provided, the principal sum of $200,000.00
(Two Hundred
Thousand Dollars).
From and after the date hereof, simple interest shall accrue
on the unpaid
principal balance from time to time outstanding until the
principal balance is
paid in full, at a rate of nine percent (9.00%) per annum.
Interest shall be
calculated
on the basis of a year of 365 or 366
days, as
applicable, and charged for the actual number of days elapsed.
1. DUE
ON DEMAND. The entire
unpaid principal balance of this
Note, together with accrued interest, shall be immediately due and
payable upon
receipt by Company
of written demand therefor from Holder, delivered in
accordance with the provisions of SECTION 6(A) below.
2.
MANNER OF PAYMENT. Principal, interest, and all other
amounts
due under this Note shall be payable, in lawful money of the United States of
America, to Holder at
such address as designated from time to time by Holder in
writing to Company or by electronic wire funds transfer of
immediately available
funds pursuant
to written
instructions
provided to Company by Holder. All
amounts due from Company to Holder under this Note shall be made
without benefit
of any setoff,
counterclaim or other
defense. Company shall
have the right to
prepay all or any portion of the outstanding principal amount
without premium or
penalty. All
payments on this Note shall be applied
first to the
payment of
accrued interest before being applied to the payment of
principal.
3.
CONVERSION. The entire principal amount and accrued but unpaid
interest under this
Note, or any portion
thereof, may be converted, at the
option of the Holder at any time, into that number of shares of the
Company's
voting common stock (the "CONVERSION SHARES"), either a) equal to the
quotient
of the principal and accrued interest being converted, divided by the
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offering price per
share ("Offering
Price") associated with any offering of
equity securities
made by the
Company or b) equal to the quotient of the
principal and accrued interest being converted, divided by the Fair
Market Value
of such shares. For
purposes of this Note,
the "Fair Market Value" shall equal
to the average of the
daily closing
price per share of the
Company's common
stock for the 10 consecutive trading days immediately
prior to such
conversion
date, as reported on
an exchange or the
over-the-counter
market or such other
system that the Company's common stock is listed or quoted on.
4.
DELIVERY OF NOTE. Upon
the Holder's election
to convert this
Note, the Holder shall
provide written
notice of such
election to the Company
pursuant to SECTION 6(A) below. Concurrently with the delivery of such
notice,
the Holder shall provide notice to the Company of the name or names
in which the
certificate or
certificates
for Co
