UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): June 29, 2020
IMAGEWARE SYSTEMS, INC.
(Exact name of Registrant as specified in its Charter)
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Delaware
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001-15757
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33-0224167
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(State
or other jurisdiction
of
incorporation)
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(Commission
File No.)
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(IRS
Employer
Identification
No.)
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13500
Evening Creek Drive N., Suite 550
San Diego, California 92127
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(Address
of principal executive offices)
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(858)
673-8600
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(Registrant’s
Telephone Number)
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Not
Applicable
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(Former
name or address, if changed since last report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
☐
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
☐
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
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Trading
Symbol(s)
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Name
of exchange on which registered
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None
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IWSY
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N/A
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (17
CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR 240.12b-2) ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act ☐
Item
2.03 Creation of a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement
of a Registrant.
On June 29, 2020, ImageWare Systems, Inc.
(the "Company") entered into promissory notes (the
"Notes") in the principal amounts of $450,000 and
$100,000, payable to Neal
Goldman and to S. James,
Miller, respectively, members of the Company's Board of Directors.
The Notes evidence amounts advanced to the Company by Messrs.
Goldman and Miller in April 2020, and are convertible into shares
of the Company’s common stock, par value $0.01 per share, for
$0.16 per share. The promissory notes bear interest at the rate of
5% per annum, and mature on the earlier to occur of October 13,
2020 or on such date that the Company consummates a debt and/or
equity financing resulting in net proceeds to the Company of at
least $3.0 million.
As of
the date of this Current Report on Form 8-K, an aggregate of
$550,000 principal amount remained outstanding under the terms of
the Notes.
The
foregoing
description of the Notes does not purport to be complete, and is
qualified in its entirety by reference to the Notes attached hereto
as Exhibits 10.1 and 10.2, respectively, and are incorporated by
reference herein.
Item 9.01 Financial Statements and
Exhibits
(d)
Exhibits
Exhibit
Index
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Convertible
Promissory Note issued by the
Company to Neal Goldman, dated June 29,
2020
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Convertible
Promissory Note issued by the
Company to S. James Miller, dated June 29,
2020
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SIGNATURES
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.
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IMAGEWARE SYSTEMS, INC.
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Date:
July 6, 2020
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By:
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/s/
Jonathan Morris
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Jonathan
Morris
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Chief
Financial Officer
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Exhibit
10.1
THIS PROMISSORY NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THIS PROMISSORY NOTE MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
CONVERTIBLE PROMISSORY NOTE
$450,000
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June 29, 2020
San Diego,
California
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FOR VALUE RECEIVED, ImageWare Systems,
Inc., a Delaware corporation, (the “Company”), promises to pay to the
order of Neal Goldman, or its registered assigns
(“Holder”), the
principal sum of Four Hundred Fifty Thousand Dollars ($450,000) on
October 13, 2020, or such earlier date as more particularly set
forth in Section 2 below (the “Maturity Date”), together with
interest thereon as provided in Section 3 of this Convertible
Promissory Note (this “Note”).
1. Definitions. For purposes of
this Note, the following terms shall have the following
meanings:
“Business Day” means any
day which is not a Saturday or Sunday or a legal holiday on which
national banks are authorized or required to be
closed.
“Governmental Authority”
means any federal, state, local or other governmental department,
commission, board, bureau, agency or other instrumentality or
authority, domestic or foreign, exercising executive, legislative,
judicial, regulatory or administrative authority or functions of or
pertaining to government.
“Material Adverse Effect”
means any event, matter, condition or circumstance which (i) has or
would reasonably be expected to have a material adverse effect on
the business, properties, operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken
as a whole; (ii) would materially impair the ability of the Company
or any other Person to perform or observe their respective
obligations under or in respect of this Note; (iii) would
materially impair the rights and remedies of Holder under this
Note; or (iv) affects the legality, validity, binding effect or
enforceability of this Note.
“Organic Document” means,
relative to any Person, its articles or certificate of
incorporation, or certificate of limited partnership or formation,
its bylaws, partnership or operating agreement or other
organizational documents, and all stockholders agreements, voting
trusts and similar arrangements applicable to any of its capital
stock, partnership interests or other ownership
interests.
“Outstanding Balance”
means the outstanding principal balance of this Note together with
all accrued but unpaid interest hereunder.
“Person” means an
individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision
thereof.
2. Maturity. This Note shall be
repaid on the earlier to occur of the Maturity Date or such date
that the Company consummates a debt and/or equity financing
resulting in net proceeds to the Company of at least
$3.0
million (“Qualified
Financing”).
3.
Payment of
Interest.
Interest Generally. Interest
shall accrue on the outstanding principal amount of this Note
beginning on April 13, 2020 at a rate equal to 5% per annum
(computed on the basis of actual calendar days elapsed and a year
of 365 days) and shall be payable in kind, as an addition to the
outstanding principal amount due hereunder, monthly in arrears on
the last day of each calendar month (each such date, an
“InterestPayment
Date”). The Company may elect to pay interest in cash
on the outstanding principal balance of this Note on any Interest
Payment Date.
(a) Default Interest. Upon the
occurrence and during the continuance of any Event of Default, the
Outstanding Balance under this Note shall bear interest at a rate
per annum equal to 2% plus the rate otherwise applicable to this
Note. Such incremental interest (i.e., the additional 2% added
during the continuance of an Event of Default) shall be payable in
cash.
4. Payments.
(a) Form of Payment. All payments
of cash interest and principal shall be in lawful money of the
United States of America by a check drawn on the account of the
Company and sent via overnight courier service to Holder at such
address as previously provided to the Company in writing (which
address, in the case of Holder as of the date of issuance hereof,
shall initially be the address for Holder as set forth in this
Note); provided, that
Holder may elect to receive a payment of cash via wire transfer of
immediately available funds by providing the Company with prior
written notice setting out such request and Holder’s wire
transfer instructions. All payments shall be applied first to
accrued interest, and thereafter to principal.
(b) No
Set-Off. The Company agrees to make all payments under this
Note without set-off or deduction and regardless of any
counterclaim or defense.
(c) Prepayment.
The Company shall have the right to prepay the Outstanding Balance
owed under this Note in whole or in part at any time.
5. Conditions Precedent. Holder
shall not be obligated to make any advance under this Note if any
Event of Default shall have occurred and is
continuing.
6. Conversion.
At any time prior to the Maturity Date, the Outstanding Balance may
be converted at the election of the Holder into shares of fully
paid, non-assessible shares of Common Stock of the Company at the
conversion price equal to $0.16 per share (“Conversion Shares”), which
conversion shall be affected by the delivery by the Holder to the
Company of a notice of election to convert.
7. Piggyback
Registration Rights. If, at any
time prior to the Maturity Date, the Company shall propose to file
with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended
(“Securities
Act”) (other than on
Forms S-4 or S-8 or any successor to such forms) providing for the
resale of securities by selling stockholders, and the inclusion of
the Conversion Shares in such registration statement is not
prohibited by a negative covenant set forth in any binding
agreement of the Company, the Company shall give notice to Holder
and include in such registration statement all or any part of the
Conversion Shares that Holder requests to be registered;
provided,
however, that the Company shall
not be required to register any Conversion Shares pursuant to this
Section 7 that are eligible for resale pursuant to Rule 144 under
the Securities Act without any requirement for the Company to
maintain current public information and without any limitation on
volume or manner of sale. The Company shall use best efforts to
cause such registration statement to become effective as soon as
practicable.
8.
Representations and Warranties.
The Company hereby makes the following representations and
warranties to Holder:
(a) Organization,
Good Standing and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, and has all requisite power
and authority to execute, deliver and perform its obligations under
this Note. The Company is qualified to do business and is in good
standing in each jurisdiction in which the failure so to qualify or
be in good standing would have a Material Adverse Effect, and has
all requisite power and authority to own its assets and carry on
its business.
(b) Corporate Power and Authorization;
Consents. The execution, delivery and performance by the
Company of this Note have been duly authorized by all necessary
action of the Company and do not and will not (i) contravene the
terms of the Company’s Organic Documents; (ii) result in a
breach of, 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 lease, instrument, contract or other agreement to which the
Company is a party or by which its properties may be bound or
affected; (iii) necessitate the consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any Governmental Authority or any third
party; or (iv) violate any provision of any law, rule, regulation,
order, judgment, decree or the like binding on or affecting the
Company, except in the case of each of clauses (ii), (iii) and
(iv), such as would not result in a Material Adverse
Effect.
(c) Enforceability.
This Note constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms
9.
Covenants. So long as any
indebtedness under this Note remains outstanding, the Company shall
provide to Holder, as soon as possible and in any event within
three (3) days after the occurrence thereof, written notice of an
Event of Default, which notice sets forth the details of such event
and the action which is proposed to be taken by the Company with
respect thereto.
10. Use of Proceeds. The Company
shall use the proceeds from the amounts loaned to the Company under
this Note for general working capital and other lawful corporate
purposes.
11. Default.
(a) Events of Default. For purposes
of this Note, any of the following events which shall occur shall
constitute an “Event
of Default”:
(i) any indebtedness
under this Note is not paid when and as the same shall become due
and payable, whether at maturity, by acceleration, fifteen (15)
days following notice of prepayment or otherwise;
(ii) default
shall occur in the observance or performance of the covenant,
obligation or agreement of the Company contained in Section 8, or
(B) any other provision of this Note, and, in the case of this
clause (B), such default shall continue uncured for a period of
fifteen (15) days;
(iii) any
representation, warranty or certification made herein by or on
behalf of the Company or any of its Subsidiaries shall prove to
have been false or incorrect in any material respect on the date or
dates as of which made (any such falsity being a
“Representation
Default”);
(iv) the
Company shall (A) apply for or consent to the appointment of a
receiver, trustee, custodian or liquidator of itself or any part of
its property, (B) become subject to the appointment of a receiver,
trustee, custodian or liquidator for itself or any part of its
property, (C) make an assignment for the benefit of creditors, (D)
fail generally, become unable or admit in writing to its inability
to pay its debts as they become due, (E) institute any proceedings
under the United States Bankruptcy Code or any other federal or
state bankruptcy, reorganization, receivership, insolvency or other
similar law affecting the rights of creditors generally, or file a
petition or answer seeking reorganization or an arrangement with
creditors to take advantage of any insolvency law, or file an
answer admitting the material allegations of a bankruptcy,
reorganization or insolvency petition filed against it, or (F)
become subject to any involuntary proceedings under the United
States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law
affecting the rights of creditors generally;
(v) the Company shall
(i) liquidate, wind up or dissolve (or suffer any liquidation,
wind- up or dissolution), (ii) suspend its operations other than in
the ordinary course of business, or (iii) take any action to
authorize any of the actions or events set forth above in this
Section 10(a)(v); or
(vi) this
Note shall for any reason cease to be, or shall be asserted by the
Company not to be, a legal, valid and binding obligation of the
Company.
(b)
Consequences of Events of
Default.
(i) If
any Event of Default shall occur for any reason, whether voluntary
or involuntary, and be continuing, Holder may, upon notice or
demand, declare the Outstanding Balance under this Note to be due
and payable, whereupon the Outstanding Balance under this Note
shall be and become immediately due and payable, and the Company
shall immediately pay to Holder the entire Outstanding Balance.
Upon the occurrence of an actual or deemed entry of an order for
relief with respect to the Company under the United States
Bankruptcy Code, then the Outstanding Balance under this Note shall
automatically be due immediately without notice of any kind. The
Company agrees to pay Holder all out-of-pocket costs and expenses
incurred by Holder (including attorney’s fees) in connection
with the enforcement or protection of its rights in relation to
this Agreement, including any suit, action, claim or other activity
of Holder to collect the Outstanding Balance under this Note or any
portion thereof, or in connection with the transactions
contemplated hereby.
(ii) Holder
shall also have any other rights which Holder may have been
afforded under any contract or agreement at any time and any other
rights which Holder may have pursuant to applicable
law.
12.
Lost, Stolen, Destroyed or Mutilated
Note. In case this Note shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new Note of like date, tenor
and denomination and deliver the same in exchange and substitution
for and upon surrender and cancellation of such mutilated Note, or
in lieu of this Note being lost, stolen or destroyed, upon receipt
of evidence satisfactory to the Company of such loss, theft or
destruction.
13.
Waiver of Jury Trial. TO THE
EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE
COMPANY (BY ITS EXECUTION HEREOF) AND HOLDER (BY ITS ACCEPTANCE OF
THIS NOTE) WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN
ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION ARISING OUT OF OR BASED
UPON OR RELATING TO THIS NOTE OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
14.
Governing Law. This Note shall
be deemed to be a contract made under the laws of the State of
California and for all purposes shall be governed by, construed
under, and enforced in accordance with the laws of the State of
California.
15. Amendment and Waiver. Any term
of this Note may be amended and the observance of any term of this
Note may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written
consent of the Company and Holder.
16. Notices. Any notice or other
communication in connection with this Note may be made and is
deemed to be given as follows: (i) if in writing and delivered in
person or by courier, on the date when it is delivered; (ii) if by
facsimile, when received at the correct number (proof of which
shall be an original facsimile transmission confirmation slip or
equivalent); or (iii) if sent by certified or registered mail or
the equivalent (return receipt requested), on the date such mail is
delivered, unless the date of that delivery is not a Business Day
or that communication is delivered on a Business Day but after the
close of business on such Business Day in which case such
communication shall be deemed given and effective on the first
following Business Day. Any such notice or communication given
pursuant to this Note shall be addressed to the intended recipient
at its address or number (which may be changed by either party at
any time) specified as follows:
If to
the Company:
ImageWare Systems,
Inc.
13500
Evening Creek Drive,
Suite
550 San Diego, CA 92128
Telephone No.:
858-673-8600
Attention: Chief
Executive Officer
With a
copy to:
Daniel
W. Rumsey
Disclosure Law
Group
501
West Broadway,
Suite
800 San Diego, CA 92101
Facsimile No.:
619-330-2101
Telephone No.:
619-795-1134
If to
Holder:
Neal
Goldman
Telephone No.:
917-744-7296
Email:
17. Severability. If at any time
any provision of this Note shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon the
legality or enforceability of any other provision of this
Note.
18.
Assignment. The provisions of
this Note shall be binding upon and inure to the benefit of each of
the Company and Holder and their respective successors and assigns,
provided that the
Company shall not have the right to assign its rights and
obligations hereunder or any interest herein. This Note may be
endorsed, assigned and transferred in whole or in part by Holder to
any other Person.
19.
Remedies Cumulative; Failure or
Indulgence Not a Waiver. The remedies provided in this Note
shall be cumulative and in addition to all other remedies available
under this Note. No failure or delay on the part of Holder 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.
20.
Entire Agreement. This Note
contains the entire understanding of the parties with respect to
the subject matter hereof and supersedes all prior agreements,
understandings, discussions and representations, oral or written,
with respect to such matters, which the parties acknowledge have
been merged into this Note.
21. Waiver of Notice. To the extent
permitted by law, the Company hereby waives demand, notice, protest
and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this
Note.
[Remainder
of Page Intentionally Left Blank]
IN
WITNESS WHEREOF, each of the undersigned has caused this Note to be
duly executed by its officers, thereunto duly authorized as of the
date first above written.
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THE
COMPANY:
ImageWare
Systems, INC.,
By: /s/ Jonathan
Morris
Name: Jonathan Morris
Title: Chief Financial
Officer
HOLDER:
By: /s/ Neal I.
Goldman
Name: Neal I. Goldman
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THIS PROMISSORY NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THIS PROMISSORY NOTE MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
CONVERTIBLE PROMISSORY NOTE
$100,000
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June 29, 2020
San Diego,
California
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FOR VALUE RECEIVED, ImageWare Systems,
Inc., a Delaware corporation, (the “Company”), promises to pay to the
order of S. James Miller, or its registered assigns
(“Holder”), the
principal sum of One Hundred Thousand Dollars ($100,000) on October
14, 2020, or such earlier date as more particularly set forth in
Section 2 below (the “Maturity Date”), together with
interest thereon as provided in Section 3 of this Convertible
Promissory Note (this “Note”).
1.
Definitions. For purposes of
this Note, the following terms shall have the following
meanings:
“Business Day” means any
day which is not a Saturday or Sunday or a legal holiday on which
national banks are authorized or required to be
closed.
“Governmental Authority”
means any federal, state, local or other governmental department,
commission, board, bureau, agency or other instrumentality or
authority, domestic or foreign, exercising executive, legislative,
judicial, regulatory or administrative authority or functions of or
pertaining to government.
“Material Adverse Effect”
means any event, matter, condition or circumstance which (i) has or
would reasonably be expected to have a material adverse effect on
the business, properties, operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken
as a whole; (ii) would materially impair the ability of the Company
or any other Person to perform or observe their respective
obligations under or in respect of this Note; (iii) would
materially impair the rights and remedies of Holder under this
Note; or (iv) affects the legality, validity, binding effect or
enforceability of this Note.
“Organic Document” means,
relative to any Person, its articles or certificate of
incorporation, or certificate of limited partnership or formation,
its bylaws, partnership or operating agreement or other
organizational documents, and all stockholders agreements, voting
trusts and similar arrangements applicable to any of its capital
stock, partnership interests or other ownership
interests.
“Outstanding Balance”
means the outstanding principal balance of this Note together with
all accrued but unpaid interest hereunder.
“Person” means an
individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision
thereof.
2. Maturity.
This Note shall be repaid on the earlier to occur of the Maturity
Date or such date that the Company consummates a debt and/or equity
financing resulting in net proceeds to the Company of at least $3.0
million (“Qualified
Financing”).
3.
Payment of
Interest.
(a) Interest Generally. Interest
shall accrue on the outstanding principal amount of this Note at a
rate equal to 5% per annum, calculated based on the date the
proceeds from the sale of this Note, as follows:
Principal Amount
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Date Received
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$50,000
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April
14, 2020
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$25,000
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April
22, 2020
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$25,000
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May 4,
2020
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Interest (computed
on the basis of actual calendar days elapsed and a year of 365
days) shall be payable in kind, as an addition to the outstanding
principal amount due hereunder, monthly in arrears on the last day
of each calendar month (each such date, an “Interest Payment Date”). The
Company may elect to pay interest in cash on the outstanding
principal balance of this Note on any Interest Payment
Date.
(b) Default
Interest. Upon the occurrence and during the continuance of
any Event of Default, the Outstanding Balance under this Note shall
bear interest at a rate per annum equal to 2% plus the rate
otherwise applicable to this Note. Such incremental interest (i.e.,
the additional 2% added during the continuance of an Event of
Default) shall be payable in cash.
4.
Payments.
(a) Form of Payment. All payments
of cash interest and principal shall be in lawful money of the
United States of America by a check drawn on the account of the
Company and sent via overnight courier service to Holder at such
address as previously provided to the Company in writing (which
address, in the case of Holder as of the date of issuance hereof,
shall initially be the address for Holder as set forth in this
Note); provided, that
Holder may elect to receive a payment of cash via wire transfer of
immediately available funds by providing the Company with prior
written notice setting out such request and Holder’s wire
transfer instructions. All payments shall be applied first to
accrued interest, and thereafter to principal.
(b)
No Set-Off. The Company agrees
to make all payments under this Note without set-off or deduction
and regardless of any counterclaim or defense.
(c)
Prepayment. The Company shall
have the right to prepay the Outstanding Balance owed under this
Note in whole or in part at any time.
5. Conditions
Precedent. Holder shall not be obligated to make any advance
under this Note if any Event of Default shall have occurred and is
continuing.
6. Conversion.
At any time prior to the Maturity Date, the Outstanding Balance may
be converted at the election of the Holder into shares of fully
paid, non-assessible shares of Common Stock of the Company at the
conversion price equal to $0.16 per share (“Conversion Shares”), which
conversion shall be affected by the delivery by the Holder to the
Company of a notice of election to convert.
7. Piggyback
Registration Rights. If, at any
time prior to the Maturity Date, the Company shall propose to file
with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933, as amended
(“Securities
Act”) (other than on
Forms S-4 or S-8 or any successor to such forms) providing for the
resale of securities by selling stockholders, and the inclusion of
the Conversion Shares in such registration statement is not
prohibited by a negative covenant set forth in any binding
agreement of the Company, the Company shall give notice to Holder
and include in such registration statement all or any part of the
Conversion Shares that Holder requests to be registered;
provided,
however, that the Company shall
not be required to register any Conversion Shares pursuant to this
Section 7 that are eligible for resale pursuant to Rule 144 under
the Securities Act without any requirement for the Company to
maintain current public information and without any limitation on
volume or manner of sale. The Company shall use best efforts to
cause such registration statement to become effective as soon as
practicable.
8. Representations and Warranties.
The Company hereby makes the following representations and
warranties to Holder:
(a) Organization, Good Standing and
Qualification. The Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation, and has all requisite power and authority to
execute, deliver and perform its obligations under this Note. The
Company is qualified to do business and is in good standing in each
jurisdiction in which the failure so to qualify or be in good
standing would have a Material Adverse Effect, and has all
requisite power and authority to own its assets and carry on its
business.
(b) Corporate
Power and Authorization; Consents. The execution, delivery
and performance by the Company of this Note have been duly
authorized by all necessary action of the Company and do not and
will not (i) contravene the terms of the Company’s Organic
Documents; (ii) result in a breach of, 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 lease, instrument, contract or other
agreement to which the Company is a party or by which its
properties may be bound or affected; (iii) necessitate the consent,
approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
Governmental Authority or any third party; or (iv) violate any
provision of any law, rule, regulation, order, judgment, decree or
the like binding on or affecting the Company, except in the case of
each of clauses (ii), (iii) and (iv), such as would not result in a
Material Adverse Effect.
(c) Enforceability.
This Note constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms
9.
Covenants. So long as any
indebtedness under this Note remains outstanding, the Company shall
provide to Holder, as soon as possible and in any event within
three (3) days after the occurrence thereof, written notice of an
Event of Default, which notice sets forth the details of such event
and the action which is proposed to be taken by the Company with
respect thereto.
10.
Use of Proceeds. The Company
shall use the proceeds from the amounts loaned to the Company under
this Note for general working capital and other lawful corporate
purposes.
11. Default.
(a) Events of Default. For purposes
of this Note, any of the following events which shall occur shall
constitute an “Event
of Default”:
(i) any indebtedness
under this Note is not paid when and as the same shall become due
and payable, whether at maturity, by acceleration, fifteen (15)
days following notice of prepayment or otherwise;
(ii) default
shall occur in the observance or performance of the covenant,
obligation or agreement of the Company contained in Section 8, or
(B) any other provision of this Note, and, in the case of this
clause (B), such default shall continue uncured for a period of
fifteen (15) days;
(iii) any
representation, warranty or certification made herein by or on
behalf of the Company or any of its Subsidiaries shall prove to
have been false or incorrect in any material respect on the date or
dates as of which made (any such falsity being a
“Representation
Default”);
(iv) the
Company shall (A) apply for or consent to the appointment of a
receiver, trustee, custodian or liquidator of itself or any part of
its property, (B) become subject to the appointment of a receiver,
trustee, custodian or liquidator for itself or any part of its
property, (C) make an assignment for the benefit of creditors, (D)
fail generally, become unable or admit in writing to its inability
to pay its debts as they become due, (E) institute any proceedings
under the United States Bankruptcy Code or any other federal or
state bankruptcy, reorganization, receivership, insolvency or other
similar law affecting the rights of creditors generally, or file a
petition or answer seeking reorganization or an arrangement with
creditors to take advantage of any insolvency law, or file an
answer admitting the material allegations of a bankruptcy,
reorganization or insolvency petition filed against it, or (F)
become subject to any involuntary proceedings under the United
States Bankruptcy Code or any other federal or state bankruptcy,
reorganization, receivership, insolvency or other similar law
affecting the rights of creditors generally;
(v) the Company shall
(i) liquidate, wind up or dissolve (or suffer any liquidation,
wind- up or dissolution), (ii) suspend its operations other than in
the ordinary course of business, or (iii) take any action to
authorize any of the actions or events set forth above in this
Section 10(a)(v); or
(vi) this
Note shall for any reason cease to be, or shall be asserted by the
Company not to be, a legal, valid and binding obligation of the
Company.
(b)
Consequences of Events of
Default.
(i) If any Event of
Default shall occur for any reason, whether voluntary or
involuntary, and be continuing, Holder may, upon notice or demand,
declare the Outstanding Balance under this Note to be due and
payable, whereupon the Outstanding Balance under this Note shall be
and become immediately due and payable, and the Company shall
immediately pay to Holder the entire Outstanding Balance. Upon the
occurrence of an actual or deemed entry of an order for relief with
respect to the Company under the United States Bankruptcy Code,
then the Outstanding Balance under this Note shall automatically be
due immediately without notice of any kind. The Company agrees to
pay Holder all out-of-pocket costs and expenses incurred by Holder
(including attorney’s fees) in connection with the
enforcement or protection of its rights in relation to this
Agreement, including any suit, action, claim or other activity of
Holder to collect the Outstanding Balance under this Note or any
portion thereof, or in connection with the transactions
contemplated hereby.
(ii) Holder
shall also have any other rights which Holder may have been
afforded under any contract or agreement at any time and any other
rights which Holder may have pursuant to applicable
law.
12.
Lost, Stolen, Destroyed or Mutilated
Note. In case this Note shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new Note of like date, tenor
and denomination and deliver the same in exchange and substitution
for and upon surrender and cancellation of such mutilated Note, or
in lieu of this Note being lost, stolen or destroyed, upon receipt
of evidence satisfactory to the Company of such loss, theft or
destruction.
13.
Waiver of Jury Trial. TO THE
EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE
COMPANY (BY ITS EXECUTION HEREOF) AND HOLDER (BY ITS ACCEPTANCE OF
THIS NOTE) WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN
ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION ARISING OUT OF OR BASED
UPON OR RELATING TO THIS NOTE OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
14.
Governing Law. This Note shall
be deemed to be a contract made under the laws of the State of
California and for all purposes shall be governed by, construed
under, and enforced in accordance with the laws of the State of
California.
15.
Amendment and Waiver. Any term
of this Note may be amended and the observance of any term of this
Note may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written
consent of the Company and Holder.
16. Notices. Any notice or other
communication in connection with this Note may be made and is
deemed to be given as follows: (i) if in writing and delivered in
person or by courier, on the date when it is delivered; (ii) if by
facsimile, when received at the correct number (proof of which
shall be an original facsimile transmission confirmation slip or
equivalent); or (iii) if sent by certified or registered mail or
the equivalent (return receipt requested), on the date such mail is
delivered, unless the date of that delivery is not a Business Day
or that communication is delivered on a Business Day but after the
close of business on such Business Day in which case such
communication shall be deemed given and effective on the first
following Business Day. Any such notice or communication given
pursuant to this Note shall be addressed to the intended recipient
at its address or number (which may be changed by either party at
any time) specified as follows:
If to
the Company:
ImageWare Systems,
Inc.
13500
Evening Creek Drive,
Suite
550 San Diego, CA 92128
Telephone
No.:
858-673-8600
Attention: Chief
Executive Officer
With a
copy to:
Daniel
W. Rumsey
Disclosure Law
Group
501
West Broadway, Suite 800
San
Diego, CA 92101
Facsimile No.:
619-330-2101
Telephone No.:
619-795-1134
If to
Holder:
S.
James Miller
Facsimile No.:
858-673-0291
Telephone No.:
858-722-8700
17. Severability. If at any time
any provision of this Note shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon the
legality or enforceability of any other provision of this
Note.
18.
Assignment. The provisions of
this Note shall be binding upon and inure to the benefit of each of
the Company and Holder and their respective successors and assigns,
provided that the
Company shall not have the right to assign its rights and
obligations hereunder or any interest herein. This Note may be
endorsed, assigned and transferred in whole or in part by Holder to
any other Person.
19. Remedies Cumulative; Failure or
Indulgence Not a Waiver. The remedies provided in this Note
shall be cumulative and in addition to all other remedies available
under this Note. No failure or delay on the part of Holder 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.
20. Entire Agreement. This Note
contains the entire understanding of the parties with respect to
the subject matter hereof and supersedes all prior agreements,
understandings, discussions and representations, oral or written,
with respect to such matters, which the parties acknowledge have
been merged into this Note.
21.
Waiver of Notice. To the extent
permitted by law, the Company hereby waives demand, notice, protest
and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this
Note.
[Remainder
of Page Intentionally Left Blank]
IN
WITNESS WHEREOF, each of the undersigned has caused this Note to be
duly executed by its officers, thereunto duly authorized as of the
date first above written.
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THE
COMPANY:
ImageWare
Systems, INC.,
By: /s/ Jonathan
Morris
Name: Jonathan Morris
Title: Chief Financial
Officer
HOLDER:
By: /s/ S. James
Miller
Name: S. James
Miller
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