WARRANT CONVERSION AGREEMENT

Exhibit 4.1

WARRANT CONVERSION AGREEMENT

     THIS WARRANT CONVERSION AGREEMENT (this " Agreement ") is made and entered into as of the ___ day of September, 2007 (the " Effective Date ") by and between Security With Advanced Technology, Inc., a Colorado corporation (the " Company "), and the warrant holders set forth on the signature page hereto (each, a " Warrant Holder " and collectively, the " Warrant Holders ").

      RECITALS

     WHEREAS , the Company's Board of Directors has approved modifications to the terms of the outstanding “B” Warrants (the " 'B' War r ants ") issued by the Company in a private placement in October 2006 in order to encourage the exercise of such "B" Warrants and therefore generate cash proceeds to the Company (the " Offering ");

      WHEREAS , the modified terms of the "B" Warrants are set forth on Exhibit A attached hereto;

      WHEREAS , the Warrant Holders shall have a period of ten calendar days following the Effective Date (the " Conversion Period ") to exercise their "B" Warrants on the terms set forth on Exhibit A and any holder of "B" Warrants who does not so exercise his or its "B" Warrants during the Conversion Period shall thereafter no longer have the right to exercise his or its "B" Warrants on the terms set forth on Exhibit A and the terms of such "B" Warrants existing prior to the Effective Date shall remain unchanged;

      WHEREAS , each Warrant Holder who exercises his or its "B" Warrants in accordance with the terms of this Agreement and Exhibit A shall receive one "B" Replacement Warrant (the " 'B' Replacement Warrants ") for each "B" Warrant so exercised;

      WHEREAS , the terms of the "B" Replacement Warrants are set forth on Exhibit A and a form of the "B" Replacement Warrants is attached hereto as Exhibit B; and

      WHEREAS , the Company anticipates the proceeds from this Offering will be used as described on Exhibit C attached hereto.

      AGREEMENT

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

1.     The Recitals set forth above are hereby incorporated by reference into this Agreement and made a part hereof. Further, Exhibits A, B and C are hereby incorporated by reference into this Agreement and made a part hereof.

2.     At any time during the Conversion Period, each Warrant Holder may exercise his or its "B" Warrants in accordance with the terms set forth on Exhibit A by (a) delivering to the Company an executed copy of this Agreement, (b) delivering to the Company a duly executed copy of the Purchase Form attached to the "B" Warrants so exercised, (c) delivering to the Company each "B" Warrant exercised by the Warrant Holder as originally executed by the Company and delivered to the Warrant Holder in connection with the October 2006 private placement and (d) delivering to the Company the amount of cash required to pay the exercise price of the "B" Warrants so exercised in immediately available good funds as instructed by the Company. Upon such exercise of the "B" Warrants, the Company will deliver to each Warrant Holder a duly executed "B" Replacement Warrant in an amount equal to the number of "B" Warrants so exercised.

3.      Each Warrant Holder agrees that to the extent it exercises his or its "B " Warrants pursuant to this Agreement, all future rights and claims to such " B" Warrant rights are null and void, regardless of whether the original "B" Warrant agreement issued to the Warrant Holder in connection with the October 2006 private placement is surrendered.

5 .     Each Warrant Holder acknowledges and agrees that the "B" Warrants, the "B" Replacement Warrants and the securities underlying the "B" Warrants and the "B" Replacement Warrants are "restricted securities" as defined in Rule 144 of the Securities Act of 1933, as amended (the " Securities Act "). Accordingly, each Warrant Holder acknowledges and agrees that such securities cannot be assigned, sold, transferred or otherwise disposed of by such Warrant Holder (or any permitted assignee) without registration under the Securities Act or pursuant to an exemption from such registration established satisfactory to the Company and its counsel.

       6.     Each Warrant Holder acknowledges and agrees that this Agreement and the transactions contemplated hereby constitute a private placement of securities under Section 4(2) of the Securities Act and Regulation D promulgated thereunder and the Company is relying upon the representations and warranties provided by the Warrant Holders in the Securities Purchase Agreement and Subscription Agreement (as the case may be) executed and delivered by the Warrant Holders in connection with the October 2006 private placement and each Warrant Holder therefore acknowledges and agrees that such representations and warranties are incorporated by reference herein and remade in their entirety in this Agreement.

         7.     This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Colorado without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. 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. This Agreement, together with all exhibits 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. From and after the date of this Agreement, upon the request of a majority of the Warrant Holders or the Company, the Company and the Warrant Holders 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. This Agreement is the result of the joint efforts of the Company and the Warrant Holders, 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.

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

                                                                        THE COMPANY :

 

                                                                    SECURITY WITH ADVANCED TECHNOLOGY, INC.

                                                                       By:     ___________________________________

                                                                                 Jeffrey G. McGonegal

                               Chief Financial Officer

 

 

WARRANT HOLDERS:

Attachments:
     Exhibit A: Summary Term Sheet
     Exhibit B: Form of Replacement "B" Warrant
     Exhibit C: Use of Proceeds

Exhibit A: Summary Term Sheet

SUMMARY OF THE WARRANT CONVERSION

      This term sheet is for discussion purposes only and does not represent an offer or commitment to purchase on the part of the Warrant Holde rs referenced herein, or an offer or commitment to sell on the part of Security With Advanced Technology, Inc. (the "Company"). Any such offer or commitment will be evidenced only by executed and definitive agreements among the parties. This term sheet is qualified in its entirety by, and should be read in conjunction with, the Company’s filings with the Securities and Exchange Commission (“SEC”). Prospective investors should carefully review this t erm shee t , the Warrant Conversion Agreement, the "B" Replacement Warrant and the Company's Articles of Incorporation, and may also request additional information from the Company.

(1)     The amounts outstanding before offering and after the conversion assume all Preferred Stock has been converted into Common Stock. The amounts do not include shares issuable upon exercise of outstanding warrants and options.

Exhibit B: Form of Replacement B Warrant

This Warrant and the underlying shares of Common Stock represented by this Certificate have not been registered under the Securities Act of 1933 (the "Act"), and are "restricted securities" as that term is defined in Rule 144 under the Act. The securities may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act, the availability of which is to be established to the reasonable satisfaction of the Company.
 

Warrant No.B Replacement-2006- __

WARRANT TO PURCHASE SHARES OF COMMON STOCK
 

Warrant to Purchase ____________ Shares

(subject to adjustment as set forth herein)
 

Exercise Price $ 4 . 30 Per Share

(subject to adjustment as set forth herein)
 

VOID AFTER 5 :00 P.M., MOUNTAIN TIME, ON SEPTEMBER __ , 20 10

         Section 1.       Definitions.

        The following terms used in this agreement shall have the following meanings (unless otherwise expressly provided herein):

         The "Act."   The Securities Act of 1933, as amended.

         The "Commission."   The Securities and Exchange Commission.

         The "Company."   Security With Advanced Technology, Inc.

         "Common Stock."   The Company's Common Stock.

         "Current Market Price."   The Current Market Price shall be determined as follows:

         “Expiration Date.” September __, 2010.

        “ Holder ” or “Warrantholder.” The person to whom this Warrant is issued, and any valid transferee thereof pursuant to Section 3.1 below.

         "NASD." The National Association of Securities Dealers, Inc.

         "Nasdaq." The automated quotation system operated by the Nasdaq Stock Market, Inc.

         “Person” means any individual, sole proprietorship, partnership, joint venture, trust, incorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

         “Termination of Business.” Any sale, lease or exchange of all, or substantially all, of the Company’s assets or business or any dissolution, liquidation or winding up of the Company.

         “Warrants.” The warrants issued in accordance with the terms of this Agreement and any Warrants issued in substitution for or replacement of such warrants, including those evidenced by a certificate or certificates originally issued or issued upon division, exchange, substitution or transfer pursuant to this Agreement.

         “Warrant Securities (.)” The Common Stock purchasable upon exercise of a Warrant including the Common Stock underlying unexercised portions of a Warrant.

         Section 2.     Term of Warrants; Exercise of Warrant.

         2.1.        Exercise of Warrant. Subject to the terms of this Agreement, the Holder shall have the right, at any time beginning on March __, 2008 prior to 5:00 p.m., Mountain Time, on the Expiration Date, to purchase from the Company up to the number of fully paid and nonassessable Shares to which the Holder may at the time be entitled to purchase pursuant to this Agreement, upon surrender to the Company, at its principal office, of the Warrant to be exercised, together with the purchase form, attached hereto as Exhibit 1, duly filled in and signed, and upon payment to the Company of the Exercise Price for the number of Shares in respect of which such Warrants are then exercised, but in no event for less than 100 Shares (unless fewer than an aggregate of 100 shares are then purchasable under all outstanding Warrants held by a Holder). The aggregate Exercise Price for Warrant Securities being purchased hereunder may be paid either (i) by cash or wire transfer of immediately available funds or (ii) by surrender of a number of Warrant Securities which have a fair market value equal to the aggregate purchase price of the Warrant Securities being purchased (“Net Issuance”) as determined herein; provided, however, that the Net Issuance method shall only be available to the Holder commencing one year after the Exercise Date and prior to the Expiration Date. If the Holder elects the Net Issuance method of payment, the Company shall issue to Holder upon exercise a number of shares of Warrant Securities determined in accordance with the following formula:

        The Cashless Exercise Right may be exercised by the Holder by the surrender of the Warrant at the principal office of the Company or at the office of the Company’s stock transfer agent, if any, together with a written statement specifying that the Holder thereby intends to exercise the Cashless Exercise Right and indicating the number of Shares subject to the Warrant which are being surrendered on the reverse side of the Warrant in exercise of the Cashless Exercise Right.

        2.2.        Exercise Price. The exercise price (“Exercise Price”) is $4.30 per Share, as modified in accordance with Section 4, below.

        2.3.        Issuance of Shares. Upon such surrender of the Warrants and payment of such Exercise Price as aforesaid, the Company shall issue and cause to be delivered within three business days to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Shares so purchased upon the exercise of the Warrant, together with cash, as provided in Section 13 hereof, in respect of any fractional Shares otherwise issuable upon such surrender. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Securities, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Securities called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder.

        2.4.        Effect of Exercise . Upon receipt of the Warrant by the company as described in Section 2.1 above, the Holder shall be deemed to be the holder of record of the Shares issuable upon such exercise, notwithstanding that the transfer books of the Company may then be closed or that certificates representing such Shares may not have been prepared or actually delivered to the Holder.

        2.5        Restrictions on Exercise Amount .

        (a)        Unless a Holder delivers to the Company irrevocable written notice prior to the date of issuance hereof or 61 days prior to the effective date of such notice that this Section 2.5(a) shall not apply to such Holder, the Holder may not acquire a number of shares of Common Stock upon exercise of this Warrant to the extent that, upon such exercise, the number of shares of Common Stock then beneficially owned by such holder and its affiliates and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of which the holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) exceeds (9).99% of the total number of shares of Common Stock of the Company then issued and outstanding. For purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the Commission, and the percentage held by the holder shall be determined in a manner consistent with the provisions of Section 13(d) of the Securities Exchange Act of 1934, as amended. Each delivery of a notice of exercise by a Holder will constitute a representation by such Holder that it has evaluated the limitation set forth in this paragraph and determined, based on the most recent public filings by the Company with the Commission, that the issuance of the full number of shares of Common Stock requested in such notice of exercise is permitted under this paragraph.

        (b)        In the event the Company is prohibited from issuing shares of Warrant Securities as a result of any restrictions or prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or oth