Exhibit 3.1
CERTIFICATE
OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES
G CONVERTIBLE PREFERRED STOCK
OF
IMAGEWARE
SYSTEMS, INC.
The
undersigned, the Chief Executive Officer of ImageWare Systems,
Inc., a Delaware corporation (the “
Company
”), does hereby certify
that, pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Company, as
amended, the following resolution creating a series of Series G
Convertible Preferred Stock, was duly adopted on December 27,
2016.
RESOLVED
, that pursuant to the authority
expressly granted to and vested in the Board of Directors of the
Company by provisions of the Certificate of Incorporation of the
Company, as amended (the “
Certificate of Incorporation
”),
there hereby is created out of the Company’s shares of
Preferred Stock, par value $0.01 per share (the “
Preferred Stock
”), authorized for
issuance in Section 4(a) of the Company’s Certificate of
Incorporation, a series of Preferred Stock, to be named
“Series G Convertible Preferred Stock,” consisting of
Six Thousand, One Hundred, Twenty (6,120) shares, which series
shall have the following designations, powers, preferences and
relative and other special rights and the following qualifications,
limitations and restrictions:
1.
Designation
and Rank
.
(a) The
designation of such series of the Preferred Stock shall be the
Series G Convertible Preferred Stock, par value $0.01 per share
(the “
Series G
Preferred
”). The maximum number of shares of Series G
Preferred shall be Six Thousand, One Hundred Twenty (6,120) shares.
The Series G Preferred shall rank senior to the Company’s
common stock, par value $0.01 per share (the “
Common Stock
”), and except as
provided in Section 1(b) below, to all other classes and series of
equity securities of the Company which by their terms rank junior
to the Series G Preferred (“
Junior Stock
”).
(b) The
Series G Preferred shall be subordinate to and rank junior to the
Company’s Series B Convertible Redeemable Preferred Stock
(“
Series B
Preferred
”), Series E Convertible Preferred Stock
(“
Series E
Preferred
”), Series F Convertible Preferred Stock
(“
Series F
Preferred
”) and all indebtedness of the Company now or
hereafter outstanding. The date of original issuance of the Series
G Preferred is referred to herein as the “
Issuance Date
”.
2.
Dividends
.
(a)
Payment
of Dividends
.
(i) The
holders of record of shares of Series G Preferred shall be entitled
to receive, out of any assets at the time legally available
therefor, cumulative dividends at the rate of ten percent (10%) of
the stated Liquidation Preference Amount (as defined in Section 4
below) per share per annum, commencing on the Issuance Date and
payable quarterly in arrears on each of March 31, June 30,
September 30 and December 31 (each, a “
Dividend Payment Date
”), payable
through the issuance of shares of Common Stock. T
he number of shares of
Common Stock to be issued to each applicable holder shall be
determined by dividing the total dividend then being paid by the
Price Per Share (as defined below) as of the applicable Dividend
Payment Date, and rounding up to the nearest whole
share. As used herein, “
Price
Per Share
” means, with
respect to a share of Common Stock, (a) if such Common Stock is
listed on a national securities exchange in the United States, the
average closing price of the Company’s Common Stock for the
three (3) consecutive trading days prior to the Dividend Payment
Date, as published by the
Wall
Street Journal
or other reliable
publication, (b) if a public market exists for such shares of
Common Stock but such shares are not listed on a national
securities exchange in the United States, the average closing sales
price of the Company’s Common Stock for the three (3)
consecutive trading days prior to the Dividend Payment Date, as
reported on the OTCQB Marketplace or other over-the-counter market,
or (c) if such Common Stock is not then listed on a national
securities exchange and not traded in an over-the-counter market,
the price per share of Common Stock determined in good faith by the
Company’ Board of Directors in consultation with the holders
of Series G Preferred
(the “
Dividend Shares
”).
(ii) In
the event the Company elects to pay any dividends hereunder in
Dividend Shares, it shall use its best efforts to register the
Dividend Shares pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the
“
Securities
Act
”), which is then available for the immediate
resale of the Dividend Shares by the recipients thereof. A
registration statement shall not be required in the event the
Dividend Shares are freely tradable without restriction under Rule
144 of the Securities Act, without volume or manner-of-sale
restrictions or current public information requirements, as
determined by counsel to the Company as set forth in a written
opinion letter to such effect, addressed and acceptable to the
Company’s transfer agent.
(b) In
the event of a Voluntary Conversion (as defined in Section 5(a)
below), all accrued but unpaid dividends on the Series G Preferred
being converted shall be payable in shares of Common Stock within
five (5) business days of such Voluntary Conversion Date (as
defined in Section 5(b)(i) below). Dividends on the Series G
Preferred are prior and in preference to any declaration or payment
of any distribution on any outstanding shares of Junior Stock. Such
dividends shall accrue on each share of Series G Preferred from day
to day, whether or not earned or declared, so that if such
dividends with respect to any previous dividend period have not
been paid on, or declared and set apart for, all shares of Series G
Preferred at the time outstanding, the deficiency shall be fully
paid on, or declared and set apart for, such shares on a pro rata
basis with all other equity securities of the Company ranking on a
parity with the Series G Preferred as to the payment of dividends
before any distribution shall be paid on, or declared and set apart
for Junior Stock.
(c)
So long as any shares of
Series G Preferred are outstanding, the Company shall not declare,
pay or set apart for payment any dividend or make any distribution
on any Junior Stock (other than dividends or distributions payable
in additional shares of Junior Stock), unless at the time of such
dividend or distribution the Company shall have paid all accrued
and unpaid dividends on the outstanding shares of Series G
Preferred.
(d)
In the event of a
dissolution, liquidation or winding up of the Company, all accrued
and unpaid dividends on the Series G Preferred shall be payable on
the day immediately preceding the date of payment of the
preferential amount to the holders of Series G Preferred, in
accordance with Section 4 below. In the event of the
Company’s exercise of its optional redemption right set forth
in Section 7 below or conversion set forth in Section 5, all
accrued and unpaid dividends on the Series G Preferred shall be
payable on the day immediately preceding the date of such
redemption or conversion, as the case may be.
(e)
For purposes hereof, unless
the context otherwise requires, “distribution” shall
mean the transfer of cash or property without consideration,
whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other Junior securities, or the purchase
or redemption of shares of the Company (other than redemptions set
forth in Section 7 below or repurchases of Common Stock held by
employees or consultants of the Company upon termination of their
employment or services pursuant to agreements providing for such
repurchase or upon the cashless exercise of options held by
employees or consultants) for cash or property.
3.
Voting
Rights
. Each holder of Series G Preferred shall be entitled
to vote on all matters, together with the holders of Common Stock,
on an as-converted basis.
4.
Liquidation,
Dissolution, Winding-Up or Distribution
.
(a) In
the event of the liquidation, dissolution, winding up of the
affairs of the Company or any other event that causes the Company
to make a distribution (as such term is used in Section 2(e)
above), whether voluntary or involuntary, the holders of shares of
the Series G Preferred then outstanding shall be entitled to
receive, out of the assets of the Company available for
distribution to its stockholders, an amount equal to $1,000 per
share (the “
Liquidation
Preference Amount
”) plus all accrued and unpaid
dividends before any payment shall be made or any assets
distributed to the holders of the Common Stock or any other Junior
Stock. If the assets of the Company are not sufficient to pay in
full the Liquidation Preference Amount payable to the holders of
outstanding shares of Series G Preferred and any other series of
Preferred Stock ranking on a parity, as to rights on liquidation,
dissolution or winding up, with the Series G Preferred, then all of
said assets will be distributed among the holders of the Series G
Preferred and the holders of the other Preferred Stock on a parity
with the Series G Preferred, if any, ratably in accordance with the
respective amounts that would be payable on such shares if all
amounts payable thereon were paid in full. The liquidation payment
with respect to each outstanding fractional share of Series G
Preferred shall be equal to a ratably proportionate amount of the
liquidation payment with respect to each whole outstanding share of
Series G Preferred. All payments for which this Section 4(a)
provides shall be in cash, property (valued at its fair market
value as determined reasonably and in good faith by the Board of
Directors of the Company) or a combination thereof;
provided
,
however
, that no cash shall be paid to
holders of Junior Stock unless each holder of the outstanding
shares of Series G Preferred has been paid in cash the full
Liquidation Preference Amount to which such holder is entitled, as
provided herein. After payment of the full Liquidation Preference
Amount to which each holder is entitled, such holders of shares of
Series G Preferred will not be entitled to any further
participation as such in any distribution of the assets of the
Company.
(b) Written
notice of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable,
shall, to the extent possible, be given by mail, postage prepaid,
no less than twenty (20) days prior to the payment date stated
therein, to the holders of record of the Series G Preferred at
their respective addresses as recorded on the books of the
Company.
5.
Conversion
.
The holder of Series G Preferred shall have the following
conversion rights (the “
Conversion Rights
”):
(a)
Voluntary
Conversion
. At any time on or after the Issuance Date, the
holder of any shares of Series G Preferred may, at such holder's
option, elect to convert (a “
Voluntary Conversion
”) all or any
portion of the shares of Series G Preferred held into a number of
fully paid and nonassessable shares of Common Stock equal to the
quotient of (i) the Liquidation Preference Amount of the shares of
Series G Preferred being converted, divided by (ii) the Conversion
Price (as defined in Section 5(c) below) in effect as of the date
the holder delivers to the Company their notice of election to
convert (the “
Conversion
Shares
”). In the event the Company issues a notice of
redemption pursuant to Section 7 hereof, the Conversion Rights of
the shares designated for redemption shall terminate at the close
of business on the last full day preceding the date fixed for
redemption, unless the redemption price is not paid on such
redemption date, in which case the Conversion Rights for such
shares shall continue until the redemption price is paid in full.
In the event of such a redemption, the Company shall provide to
each holder of shares of Series G Preferred notice of such
redemption or liquidation, dissolution or winding up, which notice
shall (i) be sent at least fifteen (15) days prior to the
termination of the Conversion Rights and (ii) state the amount per
share of Series G Preferred that will be paid or distributed on
such redemption or liquidation, dissolution or winding up, as the
case may be.
(b)
Mechanics
of Voluntary Conversion
. The Voluntary Conversion of Series
G Preferred shall be conducted in the following
manner:
(i)
Holder's
Delivery Requirements
. To convert Series G Preferred into
Conversion Shares on any date (the “
Voluntary Conversion Date
”), the
holder thereof shall transmit by facsimile (or otherwise deliver),
for receipt on or prior to 5:00 p.m., New York time on such date, a
copy of a fully executed notice of conversion in the form attached
hereto as Exhibit I (the “
Conversion Notice
”), to the
Company. As soon as practicable following such Voluntary Conversion
Date, the holder shall surrender to a common carrier for delivery
to the Company the original certificates representing the shares of
Series G Preferred being converted (or an indemnification
undertaking with respect to such shares in the case of their loss,
theft or destruction) (the “
Preferred Stock Certificates
”)
and the originally executed Conversion Notice.
(ii)
Company's
Response
. Upon receipt by the Company of a copy of the fully
executed Conversion Notice, the Company or its designated transfer
agent (the “
Transfer
Agent
”), as applicable, shall within five (5) business
days following the date of receipt by the Company of a copy of the
fully executed Conversion Notice, issue and deliver to the
Depository Trust Company (“
DTC
”) account on the holder's
behalf via the Deposit Withdrawal Agent Commission System
(“
DWAC
”) as
specified in the Conversion Notice, registered in the name of the
holder or its designee, for the number of Conversion Shares to
which the holder shall be entitled. Notwithstanding the foregoing
to the contrary, the Company or its Transfer Agent shall only be
required to issue and deliver the Conversion Shares to DTC on a
holder's behalf via DWAC if (i) the Conversion Shares may be issued
without restrictive legends and (ii)
the Company and the Transfer Agent are
participating in DTC through the DWAC system
. If all of the
conditions set forth in clauses (i) and (ii) above are not
satisfied, the Company shall deliver physical certificates to the
holder or its designee. If the number of shares of Series G
Preferred represented by the Preferred Stock Certificate(s)
submitted for conversion is greater than the number of shares of
Series G Preferred being converted, then the Company shall, as soon
as practicable and in no event later than five (5) business days
after receipt of the Preferred Stock Certificate(s) and at the
Company's expense, issue and deliver to the holder a new Preferred
Stock Certificate representing the number of shares of Series G
Preferred not converted.
(iii)
Dispute
Resolution
. In the case of a dispute as to the arithmetic
calculation of the number of Conversion Shares to be issued upon
conversion, the Company shall cause its Transfer Agent to promptly
issue to the holder the number of Conversion Shares that is not
disputed and shall submit the arithmetic calculations to the holder
via electronic mail or facsimile as soon as possible, but in no
event later than two (2) business days after receipt of such
holder's Conversion Notice. If such holder and the Company are
unable to agree upon the arithmetic calculation of the number of
Conversion Shares to be issued within two (2) business days of such
disputed arithmetic calculation being submitted to the holder, then
the Company shall, within two (2) business days, submit via
electronic mail or facsimile the disputed arithmetic calculation of
the number of Conversion Shares to be issued to the Company's
independent, outside accountant (the “
Accountant
”). The Company shall
cause the Accountant to perform the calculations and notify the
Company and the holder of the results no later than five (5)
business days from the time it receives the disputed calculations.
The Accountant's calculation shall be binding upon all parties
absent manifest error. The reasonable expenses of such Accountant
in making such determination shall be paid by the Company, in the
event the holder's calculation was correct, or by the holder, in
the event the Company's calculation was correct, or equally by the
Company and the holder in the event that neither the Company's or
the holder's calculation was correct. The period of time in which
the Company is required to effect conversions or redemptions under
this Certificate of Designations shall be tolled with respect to
the subject conversion or redemption pending resolution of any
dispute by the Company made in good faith and in accordance with
this Section 5(b)(iii).
(iv)
Record
Holder
. The person or persons entitled to receive Conversion
Shares shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion
Date.
(c)
Conversion
Price
.
(i) The
term “Conversion Price” shall mean $1.50 per share,
subject to adjustment under Section 5(d) hereof.
(ii)
Notwithstanding the foregoing to the contrary, if during any period
(a “
Black-Out
Period
”), a holder of Series G Preferred is unable to
trade any Conversion Shares immediately because the Company has
informed such holder that an existing prospectus cannot be used at
that time in the sale or transfer of such Conversion Shares
(provided that such postponement, delay, suspension or fact that
the prospectus cannot be used is not due to factors solely within
the control of the holder of Series G Preferred) such holder of
Series G Preferred shall have the option but not the obligation on
any Conversion Date within ten (10) trading days following the
expiration of the Black-Out Period of using the Conversion Price
applicable on such Conversion Date or any Conversion Price selected
by such holder of Series G Preferred that would have been
applicable had such Conversion Date been at any earlier time during
the Black-Out Period.
(d)
Adjustments
of Conversion Price
.
(i)
Adjustments
for Stock Splits and Combinations
. If the Company shall at
any time or from time to time after the Issuance Date, effect a
stock split of its outstanding Common Stock, the Conversion Price
shall be proportionately decreased. If the Company shall at any
time or from time to time after the Issuance Date, combine its
outstanding shares of Common Stock, the Conversion Price shall be
proportionately increased. Any adjustments under this Section
5(d)(i) shall be effective at the close of business on the date the
stock split or combination becomes effective.
(ii)
Adjustments
for Certain Dividends and Distributions
. If the Company
shall at any time or from time to time after the Issuance Date,
make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other
distribution payable in shares of Common Stock, then, and in each
event, the Conversion Price shall be decreased as of the time of
such issuance or, in the event such record date shall have been
fixed, as of the close of business on such record date, by
multiplying the Conversion Price then in effect by a
fraction:
(1) the
numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date;
and
(2) the
denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, plus the
number of shares of Common Stock issuable in payment of such
dividend or distribution;
provided
,
however
, that no such adjustment shall
be made if the holders of Series G Preferred simultaneously receive
(i) a dividend or other distribution of shares of Common Stock in a
number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series G Preferred had
been converted into Conversion Shares on the date of such event or
(ii) a dividend or other distribution of shares of Series G
Preferred which are convertible, as of the date of such event, into
Conversion Shares as is equal to the number of additional shares of
Common Stock being issued with respect to each share of Common
Stock in such dividend or distribution.
(iii)
Adjustment
for Other Dividends and Distributions
. If the Company shall
at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution
payable in securities of the Company other than shares of Common
Stock, then, and in each event, an appropriate revision to the
applicable Conversion Price shall be made and provision shall be
made (by adjustments of the Conversion Price or otherwise) so that
the holders of Series G Preferred shall receive upon conversions
thereof, in addition to the Conversion Shares receivable thereon,
the number of securities of the Company which they would have
received had their Series G Preferred been converted into
Conversion Shares on the date of such event and had thereafter,
during the period from the date of such event to and including the
Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving
application to all adjustments called for during such period under
this Section 5(d)(iii) with respect to the rights of the holders of
the Series G Preferred;
provided
,
however
, that if such record date shall
have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the
Conversion Price shall be adjusted pursuant to this paragraph as of
the time of actual payment of such dividends or
distributions.
(iv)
Adjustments
for Reclassification, Exchange or Substitution
. If the
Conversion Shares issuable upon conversion of the Series G
Preferred at any time or from time to time after the Issuance Date
shall be changed to the same or different number of shares of any
class or classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Sections
5(d)(i), (ii) and (iii), or a reorganization, merger,
consolidation, or sale of assets provided for in Section 5(d)(v)),
then, and in each event, an appropriate revision to the Conversion
Price shall be made and provisions shall be made (by adjustments of
the Conversion Price or otherwise) so that the holder of each share
of Series G Preferred shall have the right thereafter to convert
such share of Series G Preferred into the kind and amount of shares
of stock and other securities receivable upon reclassification,
exchange, substitution or other change, by holders of the number of
Conversion Shares into which such share of Series G Preferred might
have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further
adjustment as provided herein.
(v)
Adjustments
for Reorganization, Merger, Consolidation or Sales of
Assets
. If at any time or from time to time after the
Issuance Date there shall be a capital reorganization of the
Company (other than by way of a stock split or combination of
shares or stock dividends or distributions provided for in Section
5(d)(i), (ii) and (iii), or a reclassification, exchange or
substitution of shares provided for in Section 5(d)(iv)), or a
merger or consolidation of the Company with or into another
corporation where the holders of outstanding voting securities
prior to such merger or consolidation do not own over fifty percent
(50%) of the outstanding voting securities of the merged or
consolidated entity, immediately after such merger or
consolidation, or the sale of all or substantially all of the
Company's properties or assets to any other person (an
“
Organic
Change
”), then as a part of such Organic Change an
appropriate revision to the Conversion Price shall be made if
necessary and provision shall be made if necessary (by adjustments
of the Conversion Price or otherwise) so that the holder of each
share of Series G Preferred shall have the right thereafter to
convert such share of Series G Preferred into the kind and amount
of shares of stock and other securities or property which such
holder would have had the right to receive had such holder
converted its shares of Series G Preferred immediately prior to the
consummation of such Organic Change. In any such case, appropriate
adjustment shall be made in the application of the provisions of
this Section 5(d)(v) with respect to the rights of the holders of
the Series G Preferred after the Organic Change to the end that the
provisions of this Section 5(d)(v) (including any adjustment in the
Conversion Price then in effect and the number of shares of stock
or other securities deliverable upon conversion of the Series G
Preferred) shall be applied after that event in as nearly an
equivalent manner as may be practicable.
(vi)
Consideration
for Stock
. In case any shares of Common Stock or Convertible
Securities other than the Series G Preferred, or any rights or
warrants or options to purchase any such Common Stock or
Convertible Securities, shall be issued or sold:
(1) in
connection with any merger or consolidation in which the Company is
the surviving corporation (other than any consolidation or merger
in which the previously outstanding shares of Common Stock of the
Company shall be changed to or exchanged for the stock or other
securities of another corporation), the amount of consideration
therefore shall be deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the
nonsurviving corporation as such Board may determine to be
attributable to such shares of Common Stock, Convertible
Securities, rights or warrants or options, as the case may be;
or
(2)
in the event of
any consolidation or merger of the Company in which the Company is
not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Company shall be changed
into or exchanged for the stock or other securities of another
corporation, or in the event of any sale of all or substantially
all of the assets of the Company for stock or other securities of
any corporation, the Company shall be deemed to have issued a
number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of
the actual exchange ratio on which the transaction was predicated,
and for a consideration equal to the fair market value on the date
of such transaction of all such stock or securities or other
property of the other corporation. If any such calculation results
in adjustment of the applicable Conversion Price, or the number of
shares of Conversion Shares issuable upon conversion of the Series
G Preferred, the determination of the applicable Conversion Price
or the number of Conversion Shares issuable upon conversion of the
Series G Preferred immediately prior to such merger, consolidation
or sale, shall be made after giving effect to such adjustment of
the number of Conversion Shares issuable upon conversion of the
Series G Preferred. In the event any consideration received by the
Company for any securities consists of property other than cash,
the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the
Board of Directors of the Company. In the event Common Stock is
issued with other shares or securities or other assets of the
Company for consideration which covers both, the consideration
computed as provided in this Section 5(d)(viii) shall be allocated
among such securities and assets as determined in good faith by the
Board of Directors of the Company.
(vii)
Record
Date
. In case the Company shall take record of the holders
of its Common Stock or any other Preferred Stock for the purpose of
entitling them to subscribe for or purchase Common Stock or
Convertible Securities, then the date of the issue or sale of the
shares of Common Stock shall be deemed to be such record
date.
(e)
No Impairment
. The
Company shall not, by amendment of its Certificate of Incorporation
or through any 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
hereunder by the Company, but will at all times in good faith,
assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
holders of the Series G Preferred against impairment. In the event
a holder shall elect to convert any shares of Series G Preferred as
provided herein, the Company cannot refuse conversion based on any
claim that such holder or any one associated or affiliated with
such holder has been engaged in any violation of law, unless (i) an
order from the Securities and Exchange Commission prohibiting such
conversion or (ii) an injunction from a court, on notice,
restraining and/or adjoining conversion of all or of said shares of
Series G Preferred shall have been issued and the Company posts a
surety bond for the benefit of such holder in an amount equal to
100% of the Liquidation Preference Amount of the Series G Preferred
such holder has elected to convert, which bond shall remain in
effect until the completion of arbitration/litigation of the
dispute and the proceeds of which shall be payable to such holder
in the event it obtains judgment. If the Company is the prevailing
party in any legal action or other legal proceeding relating to the
Conversion Rights of the holders of the Series G Preferred, then
the Company shall be entitled to recover from the holders of Series
G Preferred reasonable attorneys’ fees, costs and
disbursements (in addition to any other relief to which the Company
may be entitled).
(f)
Certificates as to
Adjustments
. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of Conversion Shares
issuable upon conversion of the Series G Preferred pursuant to this
Section 5, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of such Series G Preferred a certificate
setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. The
Company shall, upon written request of the holder of such affected
Series G Preferred, at any time, furnish or cause to be furnished
to such holder a like certificate setting forth such adjustments
and readjustments, the Conversion Price in effect at the time, and
the number of Conversion Shares and the amount, if any, of other
securities or property which at the time would be received upon the
conversion of a share of such Series G Preferred. Notwithstanding
the foregoing, the Company shall not be obligated to deliver a
certificate unless such certificate would reflect an increase or
decrease of at least one percent of such adjusted
amount.
(g)
Issue Taxes
. The
Company shall pay any and all issue and other taxes, excluding
federal, state or local income taxes, that may be payable in
respect of any issue or delivery of Conversion Shares upon
conversion of shares of Series G Preferred pursuant thereto;
provided
,
however
, that the Company shall not be
obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such
conversion.
(h)
Notices
. All
notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, by electronic mail,
by facsimile or three (3) business days following being mailed by
certified or registered mail, postage prepaid, return-receipt
requested, addressed to the holder of record at its address
appearing on the books of the Company. The Company will give
written notice to each holder of Series G Preferred at least thirty
(30) days prior to the date on which the Company closes its books
or takes a record (i) with respect to any dividend or distribution
upon the Common Stock, (ii) with respect to any pro rata
subscription offer to holders of Common Stock or (iii) for
determining rights to vote with respect to any Organic Change,
dissolution, liquidation or winding-up and in no event shall such
notice be provided to such holder prior to such information being
made known to the public. The Company will also give written notice
to each holder of Series G Preferred at least twenty (20) days
prior to the date on which any Organic Change, dissolution,
liquidation or winding-up will take place and in no event shall
such notice be provided to such holder prior to such information
being made known to the public.
(i)
Fractional
Shares
. No fractional shares of Common Stock shall be issued
upon conversion of the Series G Preferred. In lieu of any
fractional shares to which the holder would otherwise be entitled,
the Company shall pay cash equal to the product of such fraction
multiplied by the average of the closing sales price of the Common
Stock, as reported on the OTCQB Marketplace for the five (5)
consecutive trading immediately preceding the Voluntary Conversion
Date.
(j)
Reservation of Common
Stock
. The Company shall, so long as any shares of Series G
Preferred are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series G Preferred, such number of
shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series G Preferred then
outstanding; provided that the number of shares of Common Stock so
reserved shall at no time be less than 100% of the number of shares
of Common Stock for which the shares of Series G Preferred are at
any time convertible. The initial number of shares of Common Stock
reserved as Conversion Shares and each increase in the number of
shares so reserved shall be allocated pro rata among the holders of
the Series G Preferred based on the number of shares of Series G
Preferred held by each holder of record at the time of issuance of
the Series G Preferred or increase in the number of reserved
shares, as the case may be. In the event a holder shall sell or
otherwise transfer any of such holder's shares of Series G
Preferred, each transferee shall be allocated a pro rata portion of
the number of reserved shares of Common Stock reserved for such
transferor. Any shares of Common Stock reserved and which remain
allocated to any person or entity which does not hold any shares of
Series G Preferred shall be allocated to the remaining holders of
Series G Preferred, pro rata based on the number of shares of
Series G Preferred then held by such holder.
(k)
Retirement
of Series G Preferred
. Conversion of shares of Series G
Preferred shall be deemed to have been effected on the applicable
Conversion Date. Upon conversion of only a portion of the number of
shares of Series G Preferred represented by a certificate
surrendered for conversion, the Company shall issue and deliver to
such holder, at the expense of the Company, a new certificate
covering the number of shares of Series G Preferred representing
the unconverted portion of the certificate so surrendered as
required by Section 5(b)(ii).
(l)
Regulatory
Compliance
. If any shares of Common Stock to be reserved as
Conversion Shares require registration or listing with or approval
of any governmental authority, stock exchange or other regulatory
body under any federal or state law or regulation or otherwise
before such shares may be validly issued or delivered upon
conversion, the Company shall, at its sole cost and expense, in
good faith and as expeditiously as possible, endeavor to secure
such registration, listing or approval, as the case may
be.
6.
No
Preemptive Rights
. Except as provided in Section 5 hereof,
no holder of the Series G Preferred shall be entitled to rights to
subscribe for, purchase or receive any part of any new or
additional shares of any class, whether now or hereinafter
authorized, or of bonds or debentures, or other evidences of
indebtedness convertible into or exchangeable for shares of any
class, but all such new or additional shares of any class, or any
bond, debentures or other evidences of indebtedness convertible
into or exchangeable for shares, may be issued and disposed of by
the Board of Directors on such terms and for such consideration (to
the extent permitted by law), and to such person or persons as the
Board of Directors in their absolute discretion may deem
advisable.
7.
Redemption
.
(a)
Redemption
Option Upon Change of Control
. In addition to any other
rights of the Company or the holders of Series G Preferred
contained herein, simultaneous with the occurrence of a Change of
Control (as defined below), the Company, at its option, shall have
the right to redeem all or a portion of the outstanding Series G
Preferred in cash at a price per share of Series G Preferred equal
to 115% of the Liquidation Preference Amount plus all accrued and
unpaid dividends (the “
Change of Control Redemption
Price
”). Notwithstanding the foregoing to the
contrary, the Company may effect a redemption pursuant to this
Section 7(a) only if
the Company is in
material compliance with the terms and conditions of this
Certificate of Designations
.
(b)
“Change
of Control”
. A “
Change of Control
” shall be
deemed to have occurred at such time as a third party not
affiliated with the Company on the Issuance Date or any holders of
the Series G Preferred shall have acquired, in one or a series of
related transactions, equity securities of the Company representing
more than fifty percent 50% of the outstanding voting securities of
the Company.
(c)
Mechanics
of Redemption at Option of Company Upon Change of Control
.
At any time within ten (10) days prior to a Change of Control
transaction, the Company may redeem, effective immediately prior to
the consummation of such Change of Control, all of the holder's
Series G Preferred then outstanding by delivering written notice
thereof via facsimile and overnight courier (“
Notice of Redemption at Option of Company Upon
Change of Control
”) to each holder of Series G
Preferred, which Notice of Redemption at Option of Company Upon
Change of Control shall indicate (i) the number of shares of Series
G Preferred that the Company is electing to redeem and (ii) the
Change of Control Redemption Price, as calculated pursuant to
Section 7(a) above. The Change of Control Redemption Price shall be
paid in cash in accordance with Section 7(a) of this Certificate of
Designations. On or prior to the Change of Control, the holders of
Series G Preferred shall surrender to the Company the certificate
or certificates representing such shares, in the manner and at the
place designated in the Notice of Redemption at Option of Company
Upon Change of Control. The Company shall deliver the Change of
Control Redemption Price immediately prior to or simultaneously
with the consummation of the Change of Control; provided that a
holder's Preferred Stock Certificates shall have been so delivered
to the Company (or an indemnification undertaking with respect to
such Preferred Stock Certificates in the event of their loss, theft
or destruction). From and after the Change of Control transaction,
unless there shall have been a default in payment of the Change of
Control Redemption Price, all rights of the holders of Series G
Preferred as a holder of such Series G Preferred (except the right
to receive the Change of Control Redemption Price without interest
upon surrender of their certificate or certificates) shall cease
with respect to any redeemed shares of Series G Preferred, and such
shares shall not thereafter be transferred on the books of the
Company or be deemed to be outstanding for any purpose whatsoever.
Notwithstanding the foregoing to the contrary, nothing contained
herein shall limit a holder’s ability to convert its shares
of Series G Preferred following the receipt of the Notice of
Redemption at Option of Company Upon Change of Control and prior to
the consummation of the Change of Control transaction.
(d)
Company's
Redemption Option
. Any time after the six-month period
following the Issuance Date, the Company may redeem all or a
portion of the Series G Preferred outstanding upon thirty (30)
calendar days prior written notice (the “
Company's Redemption Notice
”) in
cash at a price per share of Series G Preferred equal to 110% of
the Liquidation Preference Amount plus all accrued and unpaid
dividends (the “
Company’s Redemption
Price
”); provided, that if a holder has delivered a
Conversion Notice to the Company for all or a portion of the shares
of Series G Preferred, such shares of Series G Preferred designated
to be redeemed may be converted by such holder. The Company's
Redemption Notice shall state the date of redemption, which date
shall be thirty (30) calendar days after the Company has delivered
the Company's Redemption Notice (the “
Company's Redemption
Date
”), the Company's Redemption
Price and the number of shares to be redeemed by the Company. The
Company shall deliver the Company's Redemption Price to the
holder(s) within five (5) business days after the Company has
delivered the Company's Redemption Notice, provided, that if the
holder(s) delivers a Conversion Notice before the Company's
Redemption Date, then the portion of the Company's Redemption Price
which would be paid to redeem the shares of Series G Preferred
covered by such Conversion Notice shall be returned to the Company
upon delivery of Conversion Shares issuable in connection with such
Conversion Notice to the holder(s). On the Redemption Date, the
Company shall pay the Company's Redemption Price, subject to any
adjustment pursuant to the immediately preceding sentence, to the
holder(s) on a pro rata basis,
provided
,
however
, that upon receipt by the
Company of the Preferred Stock Certificates to be redeemed pursuant
to this Section 7(d), the Company shall, on the next business day
following the date of receipt by the Company of such Preferred
Stock Certificates, pay the Company's Redemption Price, subject to
any adjustment pursuant to the immediately preceding sentence, to
the holder(s) on a pro rata basis. Notwithstanding the foregoing to
the contrary, the Company may effect a redemption pursuant to this
Section 7(d) only if (A) the arithmetic average of the closing
sales price of the Common Stock, as reported on the OTCQB
Marketplace, is or was at least $2.50 for twenty (20) consecutive
trading days after the date that is six (6) months after the
Issuance Date, and immediately prior to the date of delivery of the
Company’s Redemption Notice, (B)
trading in the Common Stock shall not have been
suspended by
the Securities and
Exchange Commission or the OTCQB Marketplace (or other exchange or
market on which the Common Stock is trading), (C) the Company is in
material compliance with the terms and conditions of this
Certificate of Designations, and (D) the Company is not in
possession of any material non-public information
. Nothing
contained herein shall limit a holder’s ability to convert
its shares of Series G Preferred following the receipt of the
Company’s Redemption Notice and prior to the Company's
Redemption Date.
8.
Inability
to Fully Convert
.
(a)
Holder's
Option if Company Cannot Fully Convert
. In addition to any
other right that a holder of Series G Preferred Stock might have,
if, upon the Company's receipt of a Conversion Notice, the Company
cannot issue Conversion Shares issuable pursuant to such Conversion
Notice because the Company (x) does not have a sufficient number of
shares of Common Stock authorized and available or (y) is otherwise
prohibited by applicable law or by the rules or regulations of any
stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or
its securities from issuing all of the Conversion Shares to be
issued to a holder of Series G Preferred pursuant to a Conversion
Notice, then the Company shall issue as many Conversion Shares as
it is able to issue in accordance with such holder's Conversion
Notice and pursuant to Section 5(b)(ii) above and, with respect to
the unconverted Series G Preferred, the holder, solely at such
holder's option, can elect, within five (5) business days after
receipt of notice from the Company thereof to:
(i) if
the Company's inability to fully convert Series G Preferred is
pursuant to Section 8(a)(y) above, require the Company to issue
restricted shares of Common Stock in accordance with such holder's
Conversion Notice and pursuant to Section 5(b)(ii) above;
or
(ii)
void its Conversion Notice with respect to all or a portion of the
Conversion Shares covered by such Conversion Notice and retain or
have returned, as the case may be, the shares of Series G Preferred
that were to be converted pursuant to such holder's Conversion
Notice (provided that a holder's voiding its Conversion Notice
shall not effect the Company's obligations to make any payments
which have accrued prior to the date of such notice).
(b)
Mechanics
of Fulfilling Holder's Election
. The Company shall promptly
send via electronic mail or facsimile to a holder of Series G
Preferred, upon receipt of electronic mail or facsimile copy of a
Conversion Notice from such holder which cannot be fully satisfied
as described in Section 8(a) above, a notice of the Company's
inability to fully satisfy such holder's Conversion Notice (the
“
Inability to Fully Convert
Notice
”). Such Inability to Fully Convert Notice shall
indicate (i) the reason why the Company is unable to fully satisfy
such holder's Conversion Notice, and (ii) the number of Series G
Preferred which cannot be converted. Such holder shall notify the
Company of its election pursuant to Section 8(a) above by
delivering written notice via facsimile to the Company
(“
Notice in Response to
Inability to Convert
”).
(c)
Pro-Rata
Conversion and Redemption
. In the event the Company receives
a Conversion Notice from more than one holder of Series G Preferred
on the same day and the Company can convert and redeem some, but
not all, of the Series G Preferred pursuant to this Section 8, the
Company shall convert and redeem from each holder of Series G
Preferred electing to have Series G Preferred converted and
redeemed at such time an amount equal to such holder's pro-rata
amount (based on the number shares of Series G Preferred held by
such holder relative to the number shares of Series G Preferred
outstanding) of all shares of Series G Preferred being converted
and redeemed at such time.
9.
Protective
Provision
. So long as shares of the Series G Preferred
representing at least fifty percent (50%) of the total number of
shares of Series G Preferred issued on the Issuance Date remain
issued and outstanding, the Company shall not, without obtaining
the approval (by vote or written consent) of the holders of more
than fifty percent (50%) of the issued and outstanding shares of
Series G Preferred, issue any share of capital stock that ranks
senior to or on a parity with the Series G Preferred.
10.
Vote
to Change the Terms of or Issue Preferred Stock
. The
affirmative vote at a meeting duly called for such purpose, or the
written consent without a meeting, of the holders of not less than
two-thirds (2/3rds) of the then outstanding shares of Series G
Preferred, shall be required for any change to this Certificate of
Designations or the Company's Certificate of Incorporation which
would amend, alter, change or repeal, or otherwise adversely
affect, any of the powers, designations, preferences and rights of
the Series G Preferred.
11.
Lost
or Stolen Certificates
. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Preferred Stock Certificates
representing the shares of Series G Preferred, and, in the case of
loss, theft or destruction, of an indemnification undertaking by
the holder to the Company (in form and substance satisfactory to
the Company) and, in the case of mutilation, upon surrender and
cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new Preferred Stock Certificate(s) of
like tenor and date; provided, however, the Company shall not be
obligated to re-issue Preferred Stock Certificates if the holder
contemporaneously requests the Company to convert such shares of
Series G Preferred into Common Stock and complies with its
obligations to issue Conversion Shares set forth
herein.
12.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief
. The remedies provided in this Certificate of
Designations shall be cumulative and in addition to all other
remedies available under this Certificate of Designations, at law
or in equity (including a decree of specific performance and/or
other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to
such remedy and nothing herein shall limit a holder's right to
pursue actual damages for any failure by the Company to comply with
the terms of this Certificate of Designations. Amounts set forth or
provided for herein with respect to payments, conversion and the
like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable
harm to the holders of the Series G Preferred and that the remedy
at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach, the holders of the
Series G Preferred shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach or the
Series G Preferred holders' reasonable perception of a threatened
breach by the Company of the provisions of this Certificate of
Designations, without the necessity of showing economic loss and
without any bond or other security being required.
13.
Specific Shall Not Limit General;
Construction
. No specific provision contained in this
Certificate of Designations shall limit or modify any more general
provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all initial
purchasers of the Series G Preferred and shall not be construed
against any person as the drafter hereof.
14.
Failure
or Indulgence Not Waiver
. No failure or delay on the part of
a holder of Series G Preferred in the exercise of any power, right
or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any
other right, power or privilege.
IN
WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true this 27th day of
December, 2016.
IMAGEWARE SYSTEMS,
INC.
By:
/s/ S. James Miller,
Jr.
S.
James Miller, Jr.
Chief
Executive Officer
IMAGEWARE SYSTEMS,
INC.
CONVERSION
NOTICE
Reference is made
to the Certificate of Designations, Preferences and Rights of the
Series G Convertible Preferred Stock (“
Series G Preferred
”) of ImageWare
Systems, Inc. (the “
Certificate of Designations
”). In
accordance with and pursuant to the Certificate of Designations,
the undersigned hereby elects to convert the number of shares of
Series G Preferred, par value $0.01 per share (the
“
Preferred
Shares
”), of ImageWare Systems, Inc., a Delaware
corporation (the “
Company
”), indicated below into
shares of Common Stock, par value $0.01 per share (the
“
Common
Stock
”), of the Company, by tendering the stock
certificate(s) representing the share(s) of Series G Preferred
specified below as of the date specified below.
Date of
Conversion: _____________________________
Number of shares of
Series G Preferred to be converted:
__________________________________
Stock certificate
no(s). of Series G Preferred to be converted:
_____________________________________
Please
confirm the following information:
Conversion
Price: _____________________________
Number of shares of
Common Stock to be issued:
___________________________________
Number
of shares of Common Stock beneficially owned or deemed
beneficially owned
by the Holder on the Date of Conversion:
___________________________
Please
issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the
Company in the following name and to the following
address:
Issue
to: _________________________________
_________________________________________
_________________________________________
Facsimile
Number: _______________________________
Name of
bank/broker due to receive the underlying Common
Stock:
__________________________
Bank/broker's
four-digit “DTC” participant number
(obtained from the
receiving bank/broker):
__________________________
Authorization:
______________________________________
By:
Title:
Dated:
______________________
Exhibit 10.2
EXCHANGE AGREEMENT
This
Exchange Agreement (this “
Agreement
”) is dated as of
December __, 2016, by and among ImageWare Systems, Inc., a Delaware
corporation (the “
Company
”), and each of the
signatories to this Agreement (each, a “
Stockholder
” and, collectively,
the “
Stockholders
”).
RECITALS
WHEREAS
, the Stockholders previously
purchased shares of the Company’s Series E Convertible
Preferred Stock (“
Series E
Preferred
”) on or about January 29, 2015, and have
subsequently acquired shares of the Company’s common stock,
par value $0.01 per share (“
Common Stock
”), including shares
of Common Stock issued as payment of dividends accrued by shares of
Series E Preferred;
WHEREAS
, the Stockholders are preparing
to purchase shares of the Company’s newly created Series G
Convertible Preferred Stock (“
Series G Preferred
”) in a private
placement transaction (the “
Private Placement
”);
and
WHEREAS
, in connection with the Private
Placement, the Stockholders desire to cancel an aggregate total of
3,383,830 shares of the Company’s Common Stock currently held
by the Stockholders, in exchange for an aggregate total of
approximately 4,400 shares of Series G Preferred in accordance with
the terms and conditions set forth in this Agreement.
NOW, THEREFORE
, for good and valuable
consideration, the receipt and sufficiency of which are hereby
agreed and acknowledged, the parties hereby agree as
follows:
AGREEMENT
1.
Securities
Exchange
.
(a)
In consideration of
and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, each Stockholder
agrees to return to the Company that number of shares of the
Company’s Common Stock appearing on their respective
signature page to this Agreement (the “
Exchange Shares
”), in exchange
for that number of shares of Series G Preferred to each Stockholder
in the amounts indicated on their respective signature page to this
Agreement (the “
Preferred
Shares
”). In consideration for the foregoing, the
Company agrees to issue and deliver the Preferred Shares to each
Stockholder (the “
Exchange
”).
(b)
The closing under
this Agreement (the “
Closing
”) shall take place upon
the satisfaction of each of the conditions set forth in Sections 4
and 5 hereof (the “
Closing
Date
”)
(c)
Within five
business days after the Closing, the Company shall issue and
deliver to each Stockholder a certificate evidencing the Preferred
Shares.
2.
Representations,
Warranties and Covenants of the Stockholders
.
The Stockholders, individually and not
jointly, hereby make the following representations and warranties
to the Company, and covenants for the benefit of the
Company:
(a)
This Agreement has
been duly authorized, validly executed and delivered by each
Stockholder and is a valid and binding agreement and obligation of
each Stockholder enforceable against them in accordance with its
terms, subject to limitations on enforcement by general principles
of equity and by bankruptcy or other laws affecting the enforcement
of creditors’ rights generally, and each Stockholder has full
power and authority to execute and deliver the Agreement and the
other agreements and documents contemplated hereby and to perform
its obligations hereunder and thereunder.
(b)
Each Stockholder
understands that the Preferred Shares are being offered and sold in
reliance on specific provisions of Federal and state securities
laws, and that the Company is relying upon the truth and accuracy
of the representations, warranties, agreements, acknowledgments and
understandings of each Stockholder set forth herein for purposes of
qualifying for exemptions from registration under the Securities
Act of 1933, as amended (the “
Securities Act
”) and applicable
state securities laws.
(c)
Each Stockholder is
an “accredited investor” as defined under Rule 501 of
Regulation D, promulgated under the Securities Act.
(d)
Each Stockholder
will be acquiring the Preferred Shares for their own account, for
investment purposes, and not with a view to any resale or
distribution in whole or in part, in violation of the Securities
Act or any applicable securities laws;
provided
,
however
, that notwithstanding
the foregoing, each Stockholder does not covenant to hold the
Preferred Shares for any minimum period of time.
(e)
The offer and sale
of the Preferred Shares is intended to be exempt from registration
under the Securities Act, by virtue of Section 3(a)(9) and/or 4(2)
thereof. Each Stockholder understands that the Preferred Shares
purchased hereunder are “restricted securities,” as
that term is defined in the Securities Act and the rules
thereunder, have not been registered under the Securities Act, and
that none of the Preferred Shares can be sold or transferred unless
they are first registered under the Securities Act and such state
and other securities laws as may be applicable or the Company
receives an opinion of counsel reasonably acceptable to the Company
that an exemption from registration under the Securities Act is
available (and then the Preferred Shares may be sold or transferred
only in compliance with such exemption and all applicable state and
other securities laws).
(f)
Each Stockholder
owns and holds, beneficially and of record, the entire right,
title, and interest in and to the Exchange Shares free and clear of
all rights and Encumbrances (as defined below), and each
Stockholder has full power and authority to transfer and dispose of
the Exchange Shares free and clear of any right or Encumbrance.
Other than the transactions contemplated by this Agreement, there
is no outstanding plan, pending proposal, or other right of any
person to acquire all or any of the Exchange Shares.
Encumbrances
shall mean any security or
other property interest or right, claim, lien, pledge, option,
charge, security interest, contingent or conditional sale, or other
title claim or retention agreement, interest or other right or
claim of third parties, whether perfected or not perfected,
voluntarily incurred or arising by operation of law, and including
any agreement (other than this Agreement) to grant or submit to any
of the foregoing in the future.
3.
Representations,
Warranties and Covenants of the Company
.
The Company represents and warrants
the Stockholders, and covenants for the benefit of the
Stockholders, as follows:
(a)
The Company has
been duly incorporated and is validly existing and in good standing
under the laws of the state of Delaware, with full corporate power
and authority to own, lease and operate its properties and to
conduct its business as currently conducted, and is duly registered
and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or
the conduct of its business requires such registration or
qualification, except where the failure to register or qualify
would not have a Material Adverse Effect. For purposes of this
Agreement, “
Material Adverse
Effect
” shall mean any material adverse effect on the
business, operations, properties, prospects, or financial condition
of the Company and its subsidiaries and/or any condition,
circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform any
of its obligations under this Agreement in any material
respect.
(b)
The Preferred
Shares have been duly authorized by all necessary corporate action
and, when paid for or issued in accordance with the terms hereof,
the Preferred Shares shall be validly issued and outstanding, fully
paid and nonassessable, free and clear of all liens, encumbrances
and rights of refusal of any kind.
(c)
This Agreement has
been duly authorized, validly executed and delivered on behalf of
the Company and is a valid and binding agreement and obligation of
the Company enforceable against the Company in accordance with its
terms, subject to limitations on enforcement by general principles
of equity and by bankruptcy or other laws affecting the enforcement
of creditors’ rights generally, and the Company has full
power and authority to execute and deliver the Agreement and the
other agreements and documents contemplated hereby and to perform
its obligations hereunder and thereunder.
(d)
The Company has
complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and delivery
of the Preferred Shares hereunder.
4.
Conditions
Precedent to the Obligation of the Company to Consummate the
Exchange
. The obligation hereunder of the Company to issue
and deliver the Preferred Shares to each Stockholder and consummate
the Exchange is subject to the satisfaction or waiver, at or before
the Closing Date, of each of the conditions set forth below. These
conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole
discretion.
(a)
Each Stockholder
shall have executed and delivered this Agreement.
(b)
Each Stockholder
shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by each
Stockholder at or prior to the Closing Date, including, but not
limited to delivering the Exchange Shares to the
Company.
(c)
The representations
and warranties of each Stockholder shall be true and correct in all
material respects as of the date when made and as of the Closing
Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which
shall be true and correct in all material respects as of such
date.
5.
Conditions
Precedent to the Obligation of the Stockholders to Consummate the
Exchange
. The obligation hereunder of the Stockholders to
accept the Preferred Shares and consummate the Exchange is subject
to the satisfaction or waiver, at or before the Closing Date, of
each of the conditions set forth below. These conditions are for
each Stockholder’s sole benefit and may be waived by any
Stockholder at any time in their sole discretion.
(a)
The Company shall
have executed and delivered this Agreement.
(b)
The Company shall
have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.
(c)
Each of the
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time, except for
representations and warranties that speak as of a particular date,
which shall be true and correct in all material respects as of such
date.
6.
Governing
Law; Consent to Jurisdiction
.
This Agreement shall be governed by
and interpreted in accordance with the laws of the State of
California without giving effect conflicts of law principles that
would result in the application of the substantive laws of another
jurisdiction. Each of the Parties consents to the exclusive
jurisdiction of the Federal courts whose districts encompass any
part of the State of California in connection with any dispute
arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection
based on
forum non
conveniens
, to the bringing of any such proceeding in such
jurisdictions. Each Party waives its right to a trial by jury. Each
Party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such Party at its
address set forth herein. Nothing herein shall affect the right of
any Party to serve process in any other manner permitted by
law.
7.
Entire
Agreement
.
This
Agreement constitutes the entire understanding and agreement of the
parties with respect to the subject matter hereof and supersedes
all prior and/or contemporaneous oral or written proposals or
agreements relating thereto all of which are merged herein. This
Agreement may not be amended or any provision hereof waived in
whole or in part, except by a written amendment signed by both of
the Parties.
8.
Counterparts
.
This Agreement may be executed by facsimile signature and in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same
instrument.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF
, this Agreement was
duly executed on the date first written above.
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IMAGEWARE
SYSTEMS, INC
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By:______________________________________
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Name:
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Title:
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STOCKHOLDER:
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By:______________________________________
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Name:
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Title:
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No. of Exchange
Shares to be delivered to the Company: _______________
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No. of Preferred
Shares to be issued to the Stockholder:
_______________
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