Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into
as of March 9, 2007 among ImageWare Systems, Inc., a Delaware corporation (the
“Company”), and the several purchasers signatory hereto (each such purchaser, a
“Purchaser” and collectively, the “Purchasers”).

This Agreement is made pursuant to the Securities Purchase Agreement, dated as
of the date hereof, between the Company and each Purchaser (the “Purchase
Agreement”).

The Company and each Purchaser hereby agrees as follows:

1.             DEFINITIONS.  CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED
HEREIN THAT ARE DEFINED IN THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN
SUCH TERMS IN THE PURCHASE AGREEMENT.  AS USED IN THIS AGREEMENT, THE FOLLOWING
TERMS SHALL HAVE THE FOLLOWING MEANINGS:

“Advice” shall have the meaning set forth in Section 6(d).

“Effectiveness Date” means, with respect to the initial Registration Statement
required to be filed hereunder, the 90th calendar day following the date hereof
(the 135th calendar day in the case of a review by the Commission of the initial
Registration Statement) and, with respect to any additional Registration
Statements which may be required pursuant to Section 3(c), the 90th calendar day
following the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement is required hereunder;
provided, however, that in the event the Company is notified by the Commission
that one of the above Registration Statements will not be reviewed or is no
longer subject to further review and comments, the Effectiveness Date as to such
Registration Statement shall be the fifth Trading Day following the date on
which the Company is so notified if such date precedes the dates required above.

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

“Event” shall have the meaning set forth in Section 2(b).

“Event Date” shall have the meaning set forth in Section 2(b).

“Filing Date” means, with respect to the initial Registration Statement required
hereunder, the 45th calendar day following the date hereof and, with respect to
any additional Registration Statements which may be required pursuant to Section
3(c), the 30th calendar day following the date on which the Company first knows,
or reasonably should have known that such additional Registration Statement is
required hereunder.

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“Holder” or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.

“Indemnified Party” shall have the meaning set forth in Section 5(c).

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

“Losses” shall have the meaning set forth in Section 5(a).

“Plan of Distribution” shall have the meaning set forth in Section 2(a).

“Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means all of (i) the Underlying Shares and (ii) any
shares of Common Stock issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event contemplated by Rule 416
of the Securities Act with respect to the foregoing; provided, however, that
“Registrable Securities” shall not include any such shares that have been sold
pursuant to a Registration Statement or Rule 144 or are eligible for sale
pursuant to Rule 144(k).

“Registration Statement” means the registration statements required to be filed
hereunder and any additional registration statements contemplated by Section
3(c), including (in each case) the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same purpose and effect as such Rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same purpose and effect as such Rule.

“Selling Shareholder Questionnaire” shall have the meaning set forth in
Section 3(a).

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2.             SHELF REGISTRATION.

(A)           ON OR PRIOR TO EACH FILING DATE, THE COMPANY SHALL PREPARE AND
FILE WITH THE COMMISSION A “SHELF” REGISTRATION STATEMENT COVERING THE RESALE OF
100% OF THE REGISTRABLE SECURITIES ON SUCH FILING DATE FOR AN OFFERING TO BE
MADE ON A CONTINUOUS BASIS PURSUANT TO RULE 415.  THE REGISTRATION STATEMENT
SHALL BE ON FORM S-3 (EXCEPT IF THE COMPANY IS NOT THEN ELIGIBLE TO REGISTER FOR
RESALE THE REGISTRABLE SECURITIES ON FORM S-3, IN WHICH CASE SUCH REGISTRATION
SHALL BE ON ANOTHER APPROPRIATE FORM IN ACCORDANCE HEREWITH) AND SHALL CONTAIN
(UNLESS OTHERWISE DIRECTED BY AT LEAST AN 85% MAJORITY IN INTEREST OF THE
HOLDERS) SUBSTANTIALLY THE “PLAN OF DISTRIBUTION” ATTACHED HERETO AS ANNEX A;
PROVIDED THAT SUCH PLAN OF DISTRIBUTION SECTION OF THE REGISTRATION STATEMENT
SHALL BE AMENDED TO THE EXTENT REQUIRED TO RESPOND TO COMMENTS RECEIVED BY THE
COMPANY FROM THE COMMISSION.  SUBJECT TO THE TERMS OF THIS AGREEMENT, THE
COMPANY SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS TO CAUSE A REGISTRATION
STATEMENT TO BE DECLARED EFFECTIVE UNDER THE SECURITIES ACT AS PROMPTLY AS
POSSIBLE AFTER THE FILING THEREOF, BUT IN ANY EVENT PRIOR TO THE APPLICABLE
EFFECTIVENESS DATE, AND SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS TO KEEP
SUCH REGISTRATION STATEMENT CONTINUOUSLY EFFECTIVE UNDER THE SECURITIES ACT
UNTIL ALL REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT HAVE
BEEN SOLD, OR MAY BE SOLD WITHOUT VOLUME RESTRICTIONS PURSUANT TO RULE 144(K),
AS DETERMINED BY THE COUNSEL TO THE COMPANY PURSUANT TO A WRITTEN OPINION LETTER
TO SUCH EFFECT, ADDRESSED AND ACCEPTABLE TO THE COMPANY’S TRANSFER AGENT AND THE
AFFECTED HOLDERS (THE “EFFECTIVENESS PERIOD”).  THE COMPANY SHALL REQUEST
EFFECTIVENESS OF A REGISTRATION STATEMENT AS OF 5:00 P.M. NEW YORK CITY TIME ON
A TRADING DAY.  THE COMPANY SHALL IMMEDIATELY NOTIFY THE HOLDERS VIA ELECTRONIC
MAIL OR FACSIMILE OF THE EFFECTIVENESS OF A REGISTRATION STATEMENT ON THE SAME
TRADING DAY THAT THE COMPANY TELEPHONICALLY CONFIRMS EFFECTIVENESS WITH THE
COMMISSION, WHICH SHALL BE THE DATE REQUESTED FOR EFFECTIVENESS OF A
REGISTRATION STATEMENT.  THE COMPANY SHALL, BY 9:30 A.M. NEW YORK CITY TIME ON
THE TRADING DAY AFTER THE EFFECTIVE DATE (AS DEFINED IN THE PURCHASE AGREEMENT),
FILE A FINAL PROSPECTUS WITH THE COMMISSION AS REQUIRED BY RULE 424.  FAILURE TO
SO NOTIFY THE HOLDER WITHIN ONE TRADING DAY OF SUCH NOTIFICATION OF
EFFECTIVENESS OR FAILURE TO FILE A FINAL PROSPECTUS AS AFORESAID SHALL BE DEEMED
AN EVENT UNDER SECTION 2(B).

(B)           IF: (I) A REGISTRATION STATEMENT IS NOT FILED ON OR PRIOR TO ITS
FILING DATE (IF THE COMPANY FILES A REGISTRATION STATEMENT WITHOUT AFFORDING THE
HOLDERS THE OPPORTUNITY TO REVIEW AND COMMENT ON THE SAME AS REQUIRED BY SECTION
3(A) HEREIN, THE COMPANY SHALL BE DEEMED TO HAVE NOT SATISFIED THIS CLAUSE (I)),
OR (II) THE COMPANY FAILS TO FILE WITH THE COMMISSION A REQUEST FOR ACCELERATION
IN ACCORDANCE WITH RULE 461 PROMULGATED UNDER THE SECURITIES ACT, WITHIN FIVE
TRADING DAYS OF THE DATE THAT THE COMPANY IS NOTIFIED (ORALLY OR IN WRITING,
WHICHEVER IS EARLIER) BY THE COMMISSION THAT A REGISTRATION STATEMENT WILL NOT
BE “REVIEWED,” OR NOT SUBJECT TO FURTHER REVIEW, OR (III) A REGISTRATION
STATEMENT FILED OR REQUIRED TO BE FILED HEREUNDER IS NOT DECLARED EFFECTIVE BY
THE COMMISSION BY ITS EFFECTIVENESS DATE, OR (IV) AFTER THE EFFECTIVENESS DATE,
A REGISTRATION STATEMENT CEASES FOR ANY REASON TO REMAIN CONTINUOUSLY EFFECTIVE
AS TO ALL REGISTRABLE SECURITIES FOR WHICH IT IS REQUIRED TO BE EFFECTIVE, OR
THE HOLDERS ARE OTHERWISE NOT PERMITTED TO UTILIZE THE PROSPECTUS THEREIN TO
RESELL SUCH REGISTRABLE SECURITIES, FOR MORE THAN 10 CONSECUTIVE CALENDAR DAYS
OR MORE THAN AN AGGREGATE OF 15 CALENDAR DAYS DURING

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ANY 12-MONTH PERIOD (WHICH NEED NOT BE CONSECUTIVE CALENDAR DAYS) (ANY SUCH
FAILURE OR BREACH BEING REFERRED TO AS AN “EVENT”, AND FOR PURPOSES OF CLAUSE
(I) OR (III) THE DATE ON WHICH SUCH EVENT OCCURS, OR FOR PURPOSES OF CLAUSE (II)
THE DATE ON WHICH SUCH FIVE TRADING DAY PERIOD IS EXCEEDED, OR FOR PURPOSES OF
CLAUSE (IV) THE DATE ON WHICH SUCH 10 OR 15 CALENDAR DAY PERIOD, AS APPLICABLE,
IS EXCEEDED BEING REFERRED TO AS “EVENT DATE”), THEN, IN ADDITION TO ANY OTHER
RIGHTS THE HOLDERS MAY HAVE HEREUNDER OR UNDER APPLICABLE LAW, ON EACH SUCH
EVENT DATE AND ON EACH MONTHLY ANNIVERSARY OF EACH SUCH EVENT DATE (IF THE
APPLICABLE EVENT SHALL NOT HAVE BEEN CURED BY SUCH DATE) UNTIL THE APPLICABLE
EVENT IS CURED, THE COMPANY SHALL PAY TO EACH HOLDER AN AMOUNT IN CASH, AS
PARTIAL LIQUIDATED DAMAGES AND NOT AS A PENALTY, EQUAL TO 1% OF THE AGGREGATE
PURCHASE PRICE PAID BY SUCH HOLDER PURSUANT TO THE PURCHASE AGREEMENT FOR ANY
REGISTRABLE SECURITIES THEN HELD BY SUCH HOLDER.  THE PARTIES AGREE THAT (1) IN
NO EVENT SHALL THE COMPANY BE LIABLE FOR LIQUIDATED DAMAGES UNDER THIS AGREEMENT
IN EXCESS OF 1% OF THE AGGREGATE SUBSCRIPTION AMOUNT OF THE HOLDERS IN ANY
30-DAY PERIOD AND (2) THE MAXIMUM AGGREGATE LIQUIDATED DAMAGES PAYABLE TO A
HOLDER UNDER THIS AGREEMENT SHALL BE TWELVE PERCENT (12%) OF THE AGGREGATE
SUBSCRIPTION AMOUNT PAID BY SUCH HOLDER PURSUANT TO THE PURCHASE AGREEMENT. IF
THE COMPANY FAILS TO PAY ANY PARTIAL LIQUIDATED DAMAGES PURSUANT TO THIS SECTION
IN FULL WITHIN SEVEN DAYS AFTER THE DATE PAYABLE, THE COMPANY WILL PAY INTEREST
THEREON AT A RATE OF 18% PER ANNUM (OR SUCH LESSER MAXIMUM AMOUNT THAT IS
PERMITTED TO BE PAID BY APPLICABLE LAW) TO THE HOLDER, ACCRUING DAILY FROM THE
DATE SUCH PARTIAL LIQUIDATED DAMAGES ARE DUE UNTIL SUCH AMOUNTS, PLUS ALL SUCH
INTEREST THEREON, ARE PAID IN FULL. THE PARTIAL LIQUIDATED DAMAGES PURSUANT TO
THE TERMS HEREOF SHALL APPLY ON A DAILY PRO-RATA BASIS FOR ANY PORTION OF A
MONTH PRIOR TO THE CURE OF AN EVENT.

3.             REGISTRATION PROCEDURES

In connection with the Company’s registration obligations hereunder, the Company
shall:

(A)           NOT LESS THAN FIVE TRADING DAYS PRIOR TO THE FILING OF EACH
REGISTRATION STATEMENT AND NOT LESS THAN ONE TRADING DAY PRIOR TO THE FILING OF
ANY RELATED PROSPECTUS OR ANY AMENDMENT OR SUPPLEMENT THERETO (INCLUDING ANY
DOCUMENT THAT WOULD BE INCORPORATED OR DEEMED TO BE INCORPORATED THEREIN BY
REFERENCE), (I) FURNISH TO EACH HOLDER COPIES OF ALL SUCH DOCUMENTS PROPOSED TO
BE FILED, WHICH DOCUMENTS (OTHER THAN THOSE INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE) WILL BE SUBJECT TO THE REVIEW OF SUCH HOLDERS
(PROVIDED, HOWEVER, AS TO ANY RELATED PROSPECTUS, AMENDMENT OR SUPPLEMENT
THERETO PROPOSED TO BE FILED, THE COMPANY SHALL ONLY BE REQUIRED TO PROVIDE THE
HOLDERS WITH COPIES OF SUCH DOCUMENTS PRIOR TO THE FILING THEREOF TO THE EXTENT
THERE ARE CHANGES TO THE SELLING STOCKHOLDER TABLE OR PLAN OF DISTRIBUTION
CONTAINED THEREIN FROM SUCH SECTIONS INCLUDED IN THE INITIAL REGISTRATION
STATEMENT FILED HEREUNDER), AND (II) CAUSE ITS OFFICERS AND DIRECTORS, COUNSEL
AND INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO RESPOND TO SUCH INQUIRIES AS
SHALL BE NECESSARY, IN THE REASONABLE OPINION OF RESPECTIVE COUNSEL TO EACH
HOLDER, TO CONDUCT A REASONABLE INVESTIGATION WITHIN THE MEANING OF THE
SECURITIES ACT.  THE COMPANY SHALL NOT FILE A REGISTRATION STATEMENT OR ANY SUCH
PROSPECTUS OR ANY AMENDMENTS OR SUPPLEMENTS THERETO TO WHICH THE HOLDERS OF A
MAJORITY OF THE REGISTRABLE SECURITIES SHALL REASONABLY OBJECT IN GOOD FAITH,
PROVIDED THAT, THE COMPANY IS NOTIFIED OF SUCH OBJECTION IN WRITING NO LATER
THAN THREE TRADING DAYS AFTER

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THE HOLDERS HAVE BEEN SO FURNISHED COPIES OF A REGISTRATION STATEMENT OR ONE
TRADING DAY AFTER THE HOLDERS HAVE BEEN SO FURNISHED COPIES OF ANY RELATED
PROSPECTUS OR AMENDMENTS OR SUPPLEMENTS THERETO.  EACH HOLDER AGREES TO FURNISH
TO THE COMPANY A COMPLETED QUESTIONNAIRE IN THE FORM ATTACHED TO THIS AGREEMENT
AS ANNEX B (A “SELLING SHAREHOLDER QUESTIONNAIRE”) NOT LESS THAN THREE TRADING
DAYS PRIOR TO THE FILING DATE OR BY THE END OF THE THIRD TRADING DAY FOLLOWING
THE DATE ON WHICH SUCH HOLDER RECEIVES DRAFT MATERIALS IN ACCORDANCE WITH THIS
SECTION.

(B)           (I) PREPARE AND FILE WITH THE COMMISSION SUCH AMENDMENTS,
INCLUDING POST-EFFECTIVE AMENDMENTS, TO A REGISTRATION STATEMENT AND THE
PROSPECTUS USED IN CONNECTION THEREWITH AS MAY BE NECESSARY TO KEEP A
REGISTRATION STATEMENT CONTINUOUSLY EFFECTIVE AS TO THE APPLICABLE REGISTRABLE
SECURITIES FOR THE EFFECTIVENESS PERIOD AND PREPARE AND FILE WITH THE COMMISSION
SUCH ADDITIONAL REGISTRATION STATEMENTS IN ORDER TO REGISTER FOR RESALE UNDER
THE SECURITIES ACT ALL OF THE REGISTRABLE SECURITIES; (II) CAUSE THE RELATED
PROSPECTUS TO BE AMENDED OR SUPPLEMENTED BY ANY REQUIRED PROSPECTUS SUPPLEMENT
(SUBJECT TO THE TERMS OF THIS AGREEMENT), AND AS SO SUPPLEMENTED OR AMENDED TO
BE FILED PURSUANT TO RULE 424; (III) RESPOND AS PROMPTLY AS REASONABLY POSSIBLE
TO ANY COMMENTS RECEIVED FROM THE COMMISSION WITH RESPECT TO A REGISTRATION
STATEMENT OR ANY AMENDMENT THERETO AND PROVIDE AS PROMPTLY AS REASONABLY
POSSIBLE TO THE HOLDERS TRUE AND COMPLETE COPIES OF ALL CORRESPONDENCE FROM AND
TO THE COMMISSION RELATING TO A REGISTRATION STATEMENT (PROVIDED THAT THE
COMPANY MAY EXCISE ANY INFORMATION CONTAINED THEREIN WHICH WOULD CONSTITUTE
MATERIAL NON-PUBLIC INFORMATION AS TO ANY HOLDER WHICH HAS NOT EXECUTED A
CONFIDENTIALITY AGREEMENT WITH THE COMPANY); AND (IV) COMPLY IN ALL MATERIAL
RESPECTS WITH THE PROVISIONS OF THE SECURITIES ACT AND THE EXCHANGE ACT
APPLICABLE TO THE COMPANY WITH RESPECT TO THE DISPOSITION OF ALL REGISTRABLE
SECURITIES COVERED BY A REGISTRATION STATEMENT DURING THE APPLICABLE PERIOD IN
ACCORDANCE (SUBJECT TO THE TERMS OF THIS AGREEMENT) WITH THE INTENDED METHODS OF
DISPOSITION BY THE HOLDERS THEREOF SET FORTH IN SUCH REGISTRATION STATEMENT AS
SO AMENDED OR IN SUCH PROSPECTUS AS SO SUPPLEMENTED.

(C)           [RESERVED]

(D)           NOTIFY THE HOLDERS OF REGISTRABLE SECURITIES TO BE SOLD (WHICH
NOTICE SHALL, PURSUANT TO CLAUSES (III) THROUGH (VI) HEREOF, BE ACCOMPANIED BY
AN INSTRUCTION TO SUSPEND THE USE OF THE PROSPECTUS UNTIL THE REQUISITE CHANGES
HAVE BEEN MADE) AS PROMPTLY AS REASONABLY POSSIBLE (AND, IN THE CASE OF (I)(A)
BELOW, NOT LESS THAN ONE TRADING DAY PRIOR TO SUCH FILING) AND (IF REQUESTED BY
ANY SUCH PERSON) CONFIRM SUCH NOTICE IN WRITING NO LATER THAN ONE TRADING DAY
FOLLOWING THE DAY:  (I)(A) WHEN A PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR
POST-EFFECTIVE AMENDMENT TO A REGISTRATION STATEMENT IS PROPOSED TO BE FILED;
(B) WHEN THE COMMISSION NOTIFIES THE COMPANY WHETHER THERE WILL BE A “REVIEW” OF
SUCH REGISTRATION STATEMENT AND WHENEVER THE COMMISSION COMMENTS IN WRITING ON
SUCH REGISTRATION STATEMENT; AND (C) WITH RESPECT TO A REGISTRATION STATEMENT OR
ANY POST-EFFECTIVE AMENDMENT THERETO, WHEN THE SAME HAS BECOME EFFECTIVE; (II)
OF ANY REQUEST BY THE COMMISSION OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL
AUTHORITY FOR AMENDMENTS OR SUPPLEMENTS TO A REGISTRATION STATEMENT OR
PROSPECTUS OR FOR ADDITIONAL INFORMATION RELATED THERETO; (III) OF THE ISSUANCE
BY THE COMMISSION OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL AUTHORITY OF ANY
STOP ORDER SUSPENDING THE

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EFFECTIVENESS OF A REGISTRATION STATEMENT COVERING ANY OR ALL OF THE REGISTRABLE
SECURITIES OR THE INITIATION OF ANY PROCEEDINGS FOR THAT PURPOSE; (IV) OF THE
RECEIPT BY THE COMPANY OF ANY NOTIFICATION WITH RESPECT TO THE SUSPENSION OF THE
QUALIFICATION OR EXEMPTION FROM QUALIFICATION OF ANY OF THE REGISTRABLE
SECURITIES FOR SALE IN ANY JURISDICTION, OR THE INITIATION OR THREATENING OF ANY
PROCEEDING FOR SUCH PURPOSE; (V) OF THE OCCURRENCE OF ANY EVENT OR PASSAGE OF
TIME THAT MAKES THE FINANCIAL STATEMENTS INCLUDED IN A REGISTRATION STATEMENT
INELIGIBLE FOR INCLUSION THEREIN OR ANY STATEMENT MADE IN A REGISTRATION
STATEMENT OR PROSPECTUS OR ANY DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED THEREIN BY REFERENCE UNTRUE IN ANY MATERIAL RESPECT OR THAT
REQUIRES ANY REVISIONS TO A REGISTRATION STATEMENT, PROSPECTUS OR OTHER
DOCUMENTS SO THAT, IN THE CASE OF A REGISTRATION STATEMENT OR THE PROSPECTUS, AS
THE CASE MAY BE, IT WILL NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR
OMIT TO STATE ANY MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING; AND (VI) THE OCCURRENCE OR EXISTENCE OF ANY PENDING
CORPORATE DEVELOPMENT WITH RESPECT TO THE COMPANY THAT THE COMPANY BELIEVES MAY
BE MATERIAL AND THAT, IN THE DETERMINATION OF THE COMPANY, MAKES IT NOT IN THE
BEST INTEREST OF THE COMPANY TO ALLOW CONTINUED AVAILABILITY OF A REGISTRATION
STATEMENT OR PROSPECTUS, PROVIDED THAT ANY AND ALL OF SUCH INFORMATION SHALL
REMAIN CONFIDENTIAL TO EACH HOLDER UNTIL SUCH INFORMATION OTHERWISE BECOMES
PUBLIC, UNLESS DISCLOSURE BY A HOLDER IS REQUIRED BY LAW; PROVIDED, FURTHER,
THAT NOTWITHSTANDING EACH HOLDER’S AGREEMENT TO KEEP SUCH INFORMATION
CONFIDENTIAL, THE HOLDERS MAKE NO ACKNOWLEDGEMENT THAT ANY SUCH INFORMATION IS
MATERIAL, NON-PUBLIC INFORMATION.

(E)           USE ITS COMMERCIALLY REASONABLE EFFORTS TO AVOID THE ISSUANCE OF,
OR, IF ISSUED, OBTAIN THE WITHDRAWAL OF (I) ANY ORDER SUSPENDING THE
EFFECTIVENESS OF A REGISTRATION STATEMENT, OR (II) ANY SUSPENSION OF THE
QUALIFICATION (OR EXEMPTION FROM QUALIFICATION) OF ANY OF THE REGISTRABLE
SECURITIES FOR SALE IN ANY JURISDICTION, AT THE EARLIEST PRACTICABLE MOMENT.

(F)            IF REQUESTED BY A HOLDER, FURNISH TO EACH HOLDER, WITHOUT CHARGE,
AT LEAST ONE CONFORMED COPY OF EACH SUCH REGISTRATION STATEMENT AND EACH
AMENDMENT THERETO, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, ALL DOCUMENTS
INCORPORATED OR DEEMED TO BE INCORPORATED THEREIN BY REFERENCE TO THE EXTENT
REQUESTED BY SUCH HOLDER, AND ALL EXHIBITS TO THE EXTENT REQUESTED BY SUCH
HOLDER (INCLUDING THOSE PREVIOUSLY FURNISHED OR INCORPORATED BY REFERENCE)
PROMPTLY AFTER THE FILING OF SUCH DOCUMENTS WITH THE COMMISSION.

(G)           SUBJECT TO THE TERMS OF THIS AGREEMENT, THE COMPANY HEREBY
CONSENTS TO THE USE OF SUCH PROSPECTUS AND EACH AMENDMENT OR SUPPLEMENT THERETO
BY EACH OF THE SELLING HOLDERS IN CONNECTION WITH THE OFFERING AND SALE OF THE
REGISTRABLE SECURITIES COVERED BY SUCH PROSPECTUS AND ANY AMENDMENT OR
SUPPLEMENT THERETO, EXCEPT AFTER THE GIVING OF ANY NOTICE PURSUANT TO SECTION
3(D).

(H)           IF NASDR RULE 2710 REQUIRES ANY BROKER-DEALER TO MAKE A FILING
PRIOR TO EXECUTING A SALE BY A HOLDER, THE COMPANY SHALL (I) MAKE AN ISSUER
FILING WITH THE NASDR, INC. CORPORATE FINANCING DEPARTMENT PURSUANT TO PROPOSED
NASDR RULE 2710(B)(10)(A)(I), (II) RESPOND WITHIN FIVE TRADING DAYS TO ANY
COMMENTS RECEIVED FROM

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NASDR IN CONNECTION THEREWITH, AND (III) PAY THE FILING FEE REQUIRED IN
CONNECTION THEREWITH.

(I)            PRIOR TO ANY RESALE OF REGISTRABLE SECURITIES BY A HOLDER, USE
ITS COMMERCIALLY REASONABLE EFFORTS TO REGISTER OR QUALIFY OR COOPERATE WITH THE
SELLING HOLDERS IN CONNECTION WITH THE REGISTRATION OR QUALIFICATION (OR
EXEMPTION FROM THE REGISTRATION OR QUALIFICATION) OF SUCH REGISTRABLE SECURITIES
FOR THE RESALE BY THE HOLDER UNDER THE SECURITIES OR BLUE SKY LAWS OF SUCH
JURISDICTIONS WITHIN THE UNITED STATES AS ANY HOLDER REASONABLY REQUESTS IN
WRITING AND IF REQUIRED BY LAW, TO KEEP EACH REGISTRATION OR QUALIFICATION (OR
EXEMPTION THEREFROM) EFFECTIVE DURING THE EFFECTIVENESS PERIOD AND TO DO ANY AND
ALL OTHER ACTS OR THINGS REASONABLY NECESSARY TO ENABLE THE DISPOSITION IN SUCH
JURISDICTIONS OF THE REGISTRABLE SECURITIES COVERED BY EACH REGISTRATION
STATEMENT; PROVIDED, THAT THE COMPANY SHALL NOT BE REQUIRED TO QUALIFY GENERALLY
TO DO BUSINESS IN ANY JURISDICTION WHERE IT IS NOT THEN SO QUALIFIED, SUBJECT
THE COMPANY TO ANY MATERIAL TAX IN ANY SUCH JURISDICTION WHERE IT IS NOT THEN SO
SUBJECT OR FILE A GENERAL CONSENT TO SERVICE OF PROCESS IN ANY SUCH
JURISDICTION.

(J)            IF REQUESTED BY THE HOLDERS, COOPERATE WITH THE HOLDERS TO
FACILITATE THE TIMELY PREPARATION AND DELIVERY OF CERTIFICATES REPRESENTING
REGISTRABLE SECURITIES TO BE DELIVERED TO A TRANSFEREE PURSUANT TO A
REGISTRATION STATEMENT, WHICH CERTIFICATES SHALL BE FREE, TO THE EXTENT
PERMITTED BY THE PURCHASE AGREEMENT, OF ALL RESTRICTIVE LEGENDS, AND TO ENABLE
SUCH REGISTRABLE SECURITIES TO BE IN SUCH DENOMINATIONS AND REGISTERED IN SUCH
NAMES AS ANY SUCH HOLDERS MAY REASONABLY REQUEST.

(K)           UPON THE OCCURRENCE OF ANY EVENT CONTEMPLATED BY THIS SECTION 3,
AS PROMPTLY AS REASONABLY POSSIBLE UNDER THE CIRCUMSTANCES TAKING INTO ACCOUNT
THE COMPANY’S GOOD FAITH ASSESSMENT OF ANY ADVERSE CONSEQUENCES TO THE COMPANY
AND ITS STOCKHOLDERS OF THE PREMATURE DISCLOSURE OF SUCH EVENT, PREPARE A
SUPPLEMENT OR AMENDMENT, INCLUDING A POST-EFFECTIVE AMENDMENT, TO A REGISTRATION
STATEMENT OR A SUPPLEMENT TO THE RELATED PROSPECTUS OR ANY DOCUMENT INCORPORATED
OR DEEMED TO BE INCORPORATED THEREIN BY REFERENCE, AND FILE ANY OTHER REQUIRED
DOCUMENT SO THAT, AS THEREAFTER DELIVERED, NEITHER A REGISTRATION STATEMENT NOR
SUCH PROSPECTUS WILL CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO
STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE
STATEMENTS THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING.  IF THE COMPANY NOTIFIES THE HOLDERS IN ACCORDANCE WITH CLAUSES
(III) THROUGH (VI) OF SECTION 3(D) ABOVE TO SUSPEND THE USE OF ANY PROSPECTUS
UNTIL THE REQUISITE CHANGES TO SUCH PROSPECTUS HAVE BEEN MADE, THEN THE HOLDERS
SHALL SUSPEND USE OF SUCH PROSPECTUS.  THE COMPANY WILL USE ITS BEST EFFORTS TO
ENSURE THAT THE USE OF THE PROSPECTUS MAY BE RESUMED AS PROMPTLY AS IS
PRACTICABLE.  THE COMPANY SHALL BE ENTITLED TO EXERCISE ITS RIGHT UNDER THIS
SECTION 3(K) TO SUSPEND THE AVAILABILITY OF A REGISTRATION STATEMENT AND
PROSPECTUS, SUBJECT TO THE PAYMENT OF PARTIAL LIQUIDATED DAMAGES PURSUANT TO
SECTION 2(B), FOR A PERIOD NOT TO EXCEED 60 CALENDAR DAYS (WHICH NEED NOT BE
CONSECUTIVE DAYS) IN ANY 12 MONTH PERIOD.

(L)            DURING THE EFFECTIVENESS PERIOD, COMPLY WITH ALL APPLICABLE RULES
AND REGULATIONS OF THE COMMISSION THAT ARE APPLICABLE TO THE COMPANY.

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(M)          THE COMPANY MAY REQUIRE EACH SELLING HOLDER TO FURNISH TO THE
COMPANY A CERTIFIED STATEMENT AS TO THE NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED BY SUCH HOLDER AND, IF REQUIRED BY THE COMMISSION, THE
NATURAL PERSONS THEREOF THAT HAVE VOTING AND DISPOSITIVE CONTROL OVER THE
SHARES.  DURING ANY PERIODS THAT THE COMPANY IS UNABLE TO MEET ITS OBLIGATIONS
HEREUNDER WITH RESPECT TO THE REGISTRATION OF THE REGISTRABLE SECURITIES SOLELY
BECAUSE ANY HOLDER FAILS TO FURNISH SUCH INFORMATION WITHIN THREE TRADING DAYS
OF THE COMPANY’S REQUEST OR A COMPLETED SELLING SHAREHOLDER QUESTIONNAIRE AS
DESCRIBED IN SECTION 3(A) ABOVE, ANY LIQUIDATED DAMAGES THAT ARE ACCRUING AT
SUCH TIME AS TO SUCH HOLDER ONLY SHALL BE TOLLED AND ANY EVENT THAT MAY
OTHERWISE OCCUR SOLELY BECAUSE OF SUCH DELAY SHALL BE SUSPENDED AS TO SUCH
HOLDER ONLY, UNTIL SUCH INFORMATION AND/OR QUESTIONNAIRE IS DELIVERED TO THE
COMPANY, AND THE COMPANY SHALL BE PERMITTED TO EXCLUDE SUCH HOLDER FROM THE
REGISTRATION STATEMENT, PROVIDED THAT AS SOON AS SUCH INFORMATION AND/OR
QUESTIONNAIRE IS FURNISHED, THE COMPANY SHALL USE ITS BEST EFFORTS TO INCLUDE
SUCH HOLDER ON THE REGISTRATION STATEMENT AFTER FILING.

4.             REGISTRATION EXPENSES.  ALL FEES AND EXPENSES INCIDENT TO THE
PERFORMANCE OF OR COMPLIANCE WITH THIS AGREEMENT BY THE COMPANY SHALL BE BORNE
BY THE COMPANY WHETHER OR NOT ANY REGISTRABLE SECURITIES ARE SOLD PURSUANT TO A
REGISTRATION STATEMENT.  THE FEES AND EXPENSES REFERRED TO IN THE FOREGOING
SENTENCE SHALL INCLUDE, WITHOUT LIMITATION, (I) ALL REGISTRATION AND FILING FEES
(INCLUDING, WITHOUT LIMITATION, FEES AND EXPENSES) (A) WITH RESPECT TO FILINGS
REQUIRED TO BE MADE WITH ANY TRADING MARKET ON WHICH THE COMMON STOCK IS THEN
LISTED FOR TRADING, (B) IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS REASONABLY AGREED TO BY THE COMPANY IN WRITING (INCLUDING, WITHOUT
LIMITATION, FEES AND DISBURSEMENTS OF COUNSEL FOR THE COMPANY IN CONNECTION WITH
BLUE SKY QUALIFICATIONS OR EXEMPTIONS OF THE REGISTRABLE SECURITIES) AND (C) IF
NOT PREVIOUSLY PAID BY THE COMPANY IN CONNECTION WITH AN ISSUER FILING, WITH
RESPECT TO ANY FILING THAT MAY BE REQUIRED TO BE MADE BY ANY BROKER THROUGH
WHICH A HOLDER INTENDS TO MAKE SALES OF REGISTRABLE SECURITIES WITH NASD
REGULATION, INC. PURSUANT TO THE NASD RULE 2710, SO LONG AS THE BROKER IS
RECEIVING NO MORE THAN A CUSTOMARY BROKERAGE COMMISSION IN CONNECTION WITH SUCH
SALE, (II) PRINTING EXPENSES (INCLUDING, WITHOUT LIMITATION, EXPENSES OF
PRINTING CERTIFICATES FOR REGISTRABLE SECURITIES, (III) MESSENGER, TELEPHONE AND
DELIVERY EXPENSES, (IV) FEES AND DISBURSEMENTS OF COUNSEL FOR THE COMPANY, (V)
SECURITIES ACT LIABILITY INSURANCE, IF THE COMPANY SO DESIRES SUCH INSURANCE,
AND (VI) FEES AND EXPENSES OF ALL OTHER PERSONS RETAINED BY THE COMPANY IN
CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.  IN ADDITION, THE COMPANY SHALL BE RESPONSIBLE FOR ALL OF ITS
INTERNAL EXPENSES INCURRED IN CONNECTION WITH THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, ALL
SALARIES AND EXPENSES OF ITS OFFICERS AND EMPLOYEES PERFORMING LEGAL OR
ACCOUNTING DUTIES), THE EXPENSE OF ANY ANNUAL AUDIT AND THE FEES AND EXPENSES
INCURRED IN CONNECTION WITH THE LISTING OF THE REGISTRABLE SECURITIES ON ANY
SECURITIES EXCHANGE AS REQUIRED HEREUNDER.  IN NO EVENT SHALL THE COMPANY BE
RESPONSIBLE FOR ANY BROKER OR SIMILAR COMMISSIONS OF ANY HOLDER OR, EXCEPT TO
THE EXTENT PROVIDED FOR IN THE TRANSACTION DOCUMENTS, ANY LEGAL FEES OR OTHER
COSTS OF THE HOLDERS.

5.             INDEMNIFICATION.

(A)           INDEMNIFICATION BY THE COMPANY.  THE COMPANY SHALL,
NOTWITHSTANDING ANY TERMINATION OF THIS AGREEMENT, INDEMNIFY AND HOLD HARMLESS
EACH HOLDER, THE OFFICERS, DIRECTORS, MEMBERS, PARTNERS, AGENTS AND EMPLOYEES
(AND ANY OTHER PERSONS WITH

8

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A FUNCTIONALLY EQUIVALENT ROLE OF A PERSON HOLDING SUCH TITLES, NOTWITHSTANDING
A LACK OF SUCH TITLE OR ANY OTHER TITLE) OF EACH OF THEM, EACH PERSON WHO
CONTROLS ANY SUCH HOLDER (WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT
OR SECTION 20 OF THE EXCHANGE ACT) AND THE OFFICERS, DIRECTORS, MEMBERS,
SHAREHOLDERS, PARTNERS, AGENTS AND EMPLOYEES (AND ANY OTHER PERSONS WITH A
FUNCTIONALLY EQUIVALENT ROLE OF A PERSON HOLDING SUCH TITLES, NOTWITHSTANDING A
LACK OF SUCH TITLE OR ANY OTHER TITLE) OF EACH SUCH CONTROLLING PERSON, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, FROM AND AGAINST ANY AND ALL LOSSES,
CLAIMS, DAMAGES, LIABILITIES, COSTS (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS’ FEES) AND EXPENSES (COLLECTIVELY, “LOSSES”), AS DETERMINED BY A COURT
OF COMPETENT JURISDICTION IN A FINAL JUDGMENT NOT SUBJECT TO APPEAL OR REVIEW,
ARISING OUT OF OR RELATING TO (1) ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF A
MATERIAL FACT CONTAINED IN A REGISTRATION STATEMENT, ANY PROSPECTUS OR ANY FORM
OF PROSPECTUS OR IN ANY AMENDMENT OR SUPPLEMENT THERETO OR IN ANY PRELIMINARY
PROSPECTUS, OR ARISING OUT OF OR RELATING TO ANY OMISSION OR ALLEGED OMISSION OF
A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE
STATEMENTS THEREIN (IN THE CASE OF ANY PROSPECTUS OR FORM OF PROSPECTUS OR
SUPPLEMENT THERETO, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE)
NOT MISLEADING, OR (2) ANY VIOLATION OR ALLEGED VIOLATION BY THE COMPANY OF THE
SECURITIES ACT, EXCHANGE ACT OR ANY STATE SECURITIES LAW, OR ANY RULE OR
REGULATION THEREUNDER, IN CONNECTION WITH THE PERFORMANCE OF ITS OBLIGATIONS
UNDER THIS AGREEMENT, EXCEPT, IN EACH CASE, TO THE EXTENT, BUT ONLY TO THE
EXTENT, THAT (I) SUCH UNTRUE STATEMENTS OR OMISSIONS OR ALLEGED UNTRUE
STATEMENTS OR OMISSIONS ARE BASED UPON INFORMATION REGARDING SUCH HOLDER
FURNISHED IN WRITING TO THE COMPANY BY SUCH HOLDER EXPRESSLY FOR USE THEREIN, OR
TO THE EXTENT THAT SUCH INFORMATION RELATES TO SUCH HOLDER OR SUCH HOLDER’S
PROPOSED METHOD OF DISTRIBUTION OF REGISTRABLE SECURITIES AND WAS REVIEWED AND
EXPRESSLY APPROVED IN WRITING BY SUCH HOLDER EXPRESSLY FOR USE IN A REGISTRATION
STATEMENT, SUCH PROSPECTUS OR SUCH FORM OF PROSPECTUS OR IN ANY AMENDMENT OR
SUPPLEMENT THERETO (IT BEING UNDERSTOOD THAT THE HOLDER HAS APPROVED ANNEX A
HERETO FOR THIS PURPOSE), (II) IN THE CASE OF AN OCCURRENCE OF AN EVENT OF THE
TYPE SPECIFIED IN SECTION 3(D)(III)-(VI), THE USE BY SUCH HOLDER OF AN OUTDATED
OR DEFECTIVE PROSPECTUS AFTER THE COMPANY HAS NOTIFIED SUCH HOLDER IN WRITING
THAT THE PROSPECTUS IS OUTDATED OR DEFECTIVE AND PRIOR TO THE RECEIPT BY SUCH
HOLDER OF THE ADVICE CONTEMPLATED IN SECTION 6(D) OR (III) SUCH HOLDER ENGAGED
IN WILFULL MISCONDUCT.  THE COMPANY SHALL NOTIFY THE HOLDERS PROMPTLY OF THE
INSTITUTION, THREAT OR ASSERTION OF ANY PROCEEDING ARISING FROM OR IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OF WHICH THE COMPANY IS
AWARE.

(B)           INDEMNIFICATION BY HOLDERS.  EACH HOLDER SHALL, SEVERALLY AND NOT
JOINTLY, INDEMNIFY AND HOLD HARMLESS THE COMPANY, ITS DIRECTORS, OFFICERS,
AGENTS AND EMPLOYEES, EACH PERSON WHO CONTROLS THE COMPANY (WITHIN THE MEANING
OF SECTION 15 OF THE SECURITIES ACT AND SECTION 20 OF THE EXCHANGE ACT), AND THE
DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF SUCH CONTROLLING PERSONS, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, FROM AND AGAINST ALL LOSSES, AS
INCURRED, TO THE EXTENT ARISING OUT OF OR BASED UPON:  (X) SUCH HOLDER’S FAILURE
TO COMPLY WITH THE PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT OR (Y)
ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN ANY
REGISTRATION STATEMENT, ANY PROSPECTUS, OR ANY FORM OF PROSPECTUS, OR IN ANY
AMENDMENT OR SUPPLEMENT THERETO OR IN ANY PRELIMINARY PROSPECTUS, OR ARISING OUT
OF OR RELATING TO ANY OMISSION OR ALLEGED OMISSION OF A MATERIAL FACT REQUIRED
TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING
(I) TO THE EXTENT, BUT

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ONLY TO THE EXTENT, THAT SUCH UNTRUE STATEMENT OR OMISSION IS CONTAINED IN ANY
INFORMATION SO FURNISHED IN WRITING BY SUCH HOLDER TO THE COMPANY SPECIFICALLY
FOR INCLUSION IN SUCH REGISTRATION STATEMENT OR SUCH PROSPECTUS OR (II) TO THE
EXTENT THAT SUCH INFORMATION RELATES TO SUCH HOLDER’S PROPOSED METHOD OF
DISTRIBUTION OF REGISTRABLE SECURITIES AND WAS REVIEWED AND EXPRESSLY APPROVED
IN WRITING BY SUCH HOLDER EXPRESSLY FOR USE IN A REGISTRATION STATEMENT (IT
BEING UNDERSTOOD THAT THE HOLDER HAS APPROVED ANNEX A HERETO FOR THIS PURPOSE),
SUCH PROSPECTUS OR SUCH FORM OF PROSPECTUS OR IN ANY AMENDMENT OR SUPPLEMENT
THERETO OR (III) IN THE CASE OF AN OCCURRENCE OF AN EVENT OF THE TYPE SPECIFIED
IN SECTION 3(D)(III)-(VI), THE USE BY SUCH HOLDER OF AN OUTDATED OR DEFECTIVE
PROSPECTUS AFTER THE COMPANY HAS NOTIFIED SUCH HOLDER IN WRITING THAT THE
PROSPECTUS IS OUTDATED OR DEFECTIVE AND PRIOR TO THE RECEIPT BY SUCH HOLDER OF
THE ADVICE CONTEMPLATED IN SECTION 6(D).  IN NO EVENT SHALL THE LIABILITY OF ANY
SELLING HOLDER HEREUNDER BE GREATER IN AMOUNT THAN THE DOLLAR AMOUNT OF THE NET
PROCEEDS RECEIVED BY SUCH HOLDER UPON THE SALE OF THE REGISTRABLE SECURITIES
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION.

(C)           CONDUCT OF INDEMNIFICATION PROCEEDINGS.  IF ANY PROCEEDING SHALL
BE BROUGHT OR ASSERTED AGAINST ANY PERSON ENTITLED TO INDEMNITY HEREUNDER (AN
“INDEMNIFIED PARTY”), SUCH INDEMNIFIED PARTY SHALL PROMPTLY NOTIFY THE PERSON
FROM WHOM INDEMNITY IS SOUGHT (THE “INDEMNIFYING PARTY”) IN WRITING, AND THE
INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO ASSUME THE DEFENSE THEREOF, INCLUDING
THE EMPLOYMENT OF COUNSEL REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY AND
THE PAYMENT OF ALL FEES AND EXPENSES INCURRED IN CONNECTION WITH DEFENSE
THEREOF; PROVIDED, THAT THE FAILURE OF ANY INDEMNIFIED PARTY TO GIVE SUCH NOTICE
SHALL NOT RELIEVE THE INDEMNIFYING PARTY OF ITS OBLIGATIONS OR LIABILITIES
PURSUANT TO THIS AGREEMENT, EXCEPT (AND ONLY) TO THE EXTENT THAT IT SHALL BE
FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION (WHICH DETERMINATION IS
NOT SUBJECT TO APPEAL OR FURTHER REVIEW) THAT SUCH FAILURE SHALL HAVE PREJUDICED
THE INDEMNIFYING PARTY.

An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if
the same counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying Party).  The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld.  No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement

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includes an unconditional release of such Indemnified Party from all liability
on claims that are the subject matter of such Proceeding.

Subject to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party, provided that the Indemnified Party shall promptly reimburse
the Indemnifying Party for that portion of such fees and expenses applicable to
such actions for which such Indemnified Party is judicially determined to be not
entitled to indemnification hereunder.

(D)           CONTRIBUTION.  IF THE INDEMNIFICATION UNDER SECTION 5(A) OR 5(B)
IS UNAVAILABLE TO AN INDEMNIFIED PARTY OR INSUFFICIENT TO HOLD AN INDEMNIFIED
PARTY HARMLESS FOR ANY LOSSES, THEN EACH INDEMNIFYING PARTY SHALL CONTRIBUTE TO
THE AMOUNT PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY, IN SUCH PROPORTION AS IS
APPROPRIATE TO REFLECT THE RELATIVE FAULT OF THE INDEMNIFYING PARTY AND
INDEMNIFIED PARTY IN CONNECTION WITH THE ACTIONS, STATEMENTS OR OMISSIONS THAT
RESULTED IN SUCH LOSSES AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS. 
THE RELATIVE FAULT OF SUCH INDEMNIFYING PARTY AND INDEMNIFIED PARTY SHALL BE
DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, WHETHER ANY ACTION IN QUESTION,
INCLUDING ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT OR OMISSION
OR ALLEGED OMISSION OF A MATERIAL FACT, HAS BEEN TAKEN OR MADE BY, OR RELATES TO
INFORMATION SUPPLIED BY, SUCH INDEMNIFYING PARTY OR INDEMNIFIED PARTY, AND THE
PARTIES’ RELATIVE INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND OPPORTUNITY TO
CORRECT OR PREVENT SUCH ACTION, STATEMENT OR OMISSION.  THE AMOUNT PAID OR
PAYABLE BY A PARTY AS A RESULT OF ANY LOSSES SHALL BE DEEMED TO INCLUDE, SUBJECT
TO THE LIMITATIONS SET FORTH IN THIS AGREEMENT, ANY REASONABLE ATTORNEYS’ OR
OTHER REASONABLE FEES OR EXPENSES INCURRED BY SUCH PARTY IN CONNECTION WITH ANY
PROCEEDING TO THE EXTENT SUCH PARTY WOULD HAVE BEEN INDEMNIFIED FOR SUCH FEES OR
EXPENSES IF THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION WAS AVAILABLE TO
SUCH PARTY IN ACCORDANCE WITH ITS TERMS.

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. 
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject or giving rise to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, except in
the case of fraud by such Holder.

The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

 

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6.             MISCELLANEOUS.

(A)           REMEDIES.  IN THE EVENT OF A BREACH BY THE COMPANY OR BY A HOLDER
OF ANY OF THEIR RESPECTIVE OBLIGATIONS UNDER THIS AGREEMENT, EACH HOLDER OR THE
COMPANY, AS THE CASE MAY BE, IN ADDITION TO BEING ENTITLED TO EXERCISE ALL
RIGHTS GRANTED BY LAW AND UNDER THIS AGREEMENT, INCLUDING RECOVERY OF DAMAGES,
SHALL BE ENTITLED TO SPECIFIC PERFORMANCE OF ITS RIGHTS UNDER THIS AGREEMENT. 
THE COMPANY AND EACH HOLDER AGREE THAT MONETARY DAMAGES WOULD NOT PROVIDE
ADEQUATE COMPENSATION FOR ANY LOSSES INCURRED BY REASON OF A BREACH BY IT OF ANY
OF THE PROVISIONS OF THIS AGREEMENT AND HEREBY FURTHER AGREES THAT, IN THE EVENT
OF ANY ACTION FOR SPECIFIC PERFORMANCE IN RESPECT OF SUCH BREACH, IT SHALL NOT
ASSERT OR SHALL WAIVE THE DEFENSE THAT A REMEDY AT LAW WOULD BE ADEQUATE.

(B)           NO PIGGYBACK ON REGISTRATIONS.  EXCEPT AS SET FORTH ON SCHEDULE
6(B) ATTACHED HERETO, NEITHER THE COMPANY NOR ANY OF ITS SECURITY HOLDERS (OTHER
THAN THE HOLDERS IN SUCH CAPACITY PURSUANT HERETO) MAY INCLUDE SECURITIES OF THE
COMPANY IN THE INITIAL REGISTRATION STATEMENT OTHER THAN THE REGISTRABLE
SECURITIES.  THE COMPANY SHALL NOT FILE ANY OTHER REGISTRATION STATEMENTS UNTIL
THE INITIAL REGISTRATION STATEMENT REQUIRED HEREUNDER IS DECLARED EFFECTIVE BY
THE COMMISSION, PROVIDED THAT THIS SECTION 6(B) SHALL NOT PROHIBIT THE COMPANY
FROM FILING AMENDMENTS TO REGISTRATION STATEMENTS FILED PRIOR TO THE DATE OF
THIS AGREEMENT, AND PROVIDED, FURTHER, THAT THE COMPANY SHALL BE PERMITTED TO
FILE ONE OR MORE REGISTRATION STATEMENTS ON FORM S-8 (RELATING TO SECURITIES
OFFERED PURSUANT TO THE COMPANY’S EMPLOYEE BENEFIT PLANS) OR FORM S-4 (RELATING
TO SECURITIES ISSUED IN CONNECTION WITH A BUSINESS COMBINATION).

(C)           COMPLIANCE.  EACH HOLDER COVENANTS AND AGREES THAT IT WILL COMPLY
WITH THE PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AS APPLICABLE TO
IT IN CONNECTION WITH SALES OF REGISTRABLE SECURITIES PURSUANT TO A REGISTRATION
STATEMENT.

(D)           DISCONTINUED DISPOSITION.  BY ITS ACQUISITION OF REGISTRABLE
SECURITIES, EACH HOLDER AGREES THAT, UPON RECEIPT OF A NOTICE FROM THE COMPANY
OF THE OCCURRENCE OF ANY EVENT OF THE KIND DESCRIBED IN SECTION 3(D), SUCH
HOLDER WILL FORTHWITH DISCONTINUE DISPOSITION OF SUCH REGISTRABLE SECURITIES
UNDER A REGISTRATION STATEMENT UNTIL IT IS ADVISED IN WRITING (THE “ADVICE”) BY
THE COMPANY THAT THE USE OF THE APPLICABLE PROSPECTUS (AS IT MAY HAVE BEEN
SUPPLEMENTED OR AMENDED) MAY BE RESUMED.  THE COMPANY WILL USE COMMERCIALLY
REASONABLE EFFORTS TO ENSURE THAT THE USE OF THE PROSPECTUS MAY BE RESUMED AS
PROMPTLY AS IS PRACTICABLE.  THE COMPANY AGREES AND ACKNOWLEDGES THAT ANY
PERIODS DURING WHICH THE HOLDER IS REQUIRED TO DISCONTINUE THE DISPOSITION OF
THE REGISTRABLE SECURITIES HEREUNDER SHALL BE SUBJECT TO THE PROVISIONS OF
SECTION 2(B).

(E)           PIGGY-BACK REGISTRATIONS.  IF AT ANY TIME DURING THE EFFECTIVENESS
PERIOD THERE IS NOT AN EFFECTIVE REGISTRATION STATEMENT COVERING ALL OF THE
REGISTRABLE SECURITIES AND THE COMPANY SHALL DETERMINE TO PREPARE AND FILE WITH
THE COMMISSION A REGISTRATION STATEMENT RELATING TO AN OFFERING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF OTHERS UNDER THE SECURITIES ACT OF ANY OF ITS EQUITY
SECURITIES, OTHER THAN ON FORM S-4 OR FORM S-8 (EACH AS PROMULGATED UNDER THE
SECURITIES ACT) OR THEIR THEN EQUIVALENTS RELATING TO EQUITY SECURITIES TO BE
ISSUED SOLELY IN CONNECTION WITH ANY ACQUISITION OF ANY ENTITY OR BUSINESS

12

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OR EQUITY SECURITIES ISSUABLE IN CONNECTION WITH THE STOCK OPTION OR OTHER
EMPLOYEE BENEFIT PLANS, THEN THE COMPANY SHALL SEND TO EACH HOLDER A WRITTEN
NOTICE OF SUCH DETERMINATION AND, IF WITHIN FIFTEEN DAYS AFTER THE DATE OF SUCH
NOTICE, ANY SUCH HOLDER SHALL SO REQUEST IN WRITING, THE COMPANY SHALL INCLUDE
IN SUCH REGISTRATION STATEMENT ALL OR ANY PART OF SUCH REGISTRABLE SECURITIES
SUCH HOLDER REQUESTS TO BE REGISTERED; PROVIDED, HOWEVER, THAT, THE COMPANY
SHALL NOT BE REQUIRED TO REGISTER ANY REGISTRABLE SECURITIES PURSUANT TO THIS
SECTION 6(E) THAT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144(K) PROMULGATED
UNDER THE SECURITIES ACT OR THAT ARE THE SUBJECT OF A THEN EFFECTIVE
REGISTRATION STATEMENT.

(F)            AMENDMENTS AND WAIVERS.  THE PROVISIONS OF THIS AGREEMENT,
INCLUDING THE PROVISIONS OF THIS SENTENCE, MAY NOT BE AMENDED, MODIFIED OR
SUPPLEMENTED, AND WAIVERS OR CONSENTS TO DEPARTURES FROM THE PROVISIONS HEREOF
MAY NOT BE GIVEN, UNLESS THE SAME SHALL BE IN WRITING AND SIGNED BY THE COMPANY
AND EACH HOLDER OF THE THEN-OUTSTANDING REGISTRABLE SECURITIES.  NOTWITHSTANDING
THE FOREGOING, A WAIVER OR CONSENT TO DEPART FROM THE PROVISIONS HEREOF WITH
RESPECT TO A MATTER THAT RELATES EXCLUSIVELY TO THE RIGHTS OF HOLDERS AND THAT
DOES NOT DIRECTLY OR INDIRECTLY AFFECT THE RIGHTS OF OTHER HOLDERS MAY BE GIVEN
BY HOLDERS OF ALL OF THE REGISTRABLE SECURITIES TO WHICH SUCH WAIVER OR CONSENT
RELATES; PROVIDED, HOWEVER, THAT THE PROVISIONS OF THIS SENTENCE MAY NOT BE
AMENDED, MODIFIED, OR SUPPLEMENTED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
THE IMMEDIATELY PRECEDING SENTENCE.

(G)           NOTICES.  ANY AND ALL NOTICES OR OTHER COMMUNICATIONS OR
DELIVERIES REQUIRED OR PERMITTED TO BE PROVIDED HEREUNDER SHALL BE DELIVERED AS
SET FORTH IN THE PURCHASE AGREEMENT.

(H)           SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL INURE TO THE BENEFIT
OF AND BE BINDING UPON THE SUCCESSORS AND PERMITTED ASSIGNS OF EACH OF THE
PARTIES AND SHALL INURE TO THE BENEFIT OF EACH HOLDER. THE COMPANY MAY NOT
ASSIGN ITS RIGHTS (EXCEPT BY MERGER) OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR
WRITTEN CONSENT OF ALL OF THE HOLDERS OF THE THEN-OUTSTANDING REGISTRABLE
SECURITIES. EACH HOLDER MAY ASSIGN THEIR RESPECTIVE RIGHTS HEREUNDER IN THE
MANNER AND TO THE PERSONS AS PERMITTED UNDER THE PURCHASE AGREEMENT.

(I)            NO INCONSISTENT AGREEMENTS.  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES HAS ENTERED, AS OF THE DATE HEREOF, NOR SHALL THE COMPANY OR ANY OF
ITS SUBSIDIARIES, ON OR AFTER THE DATE OF THIS AGREEMENT, ENTER INTO ANY
AGREEMENT WITH RESPECT TO ITS SECURITIES, THAT WOULD DIRECTLY CONFLICT WITH THE
PROVISIONS HEREOF.  EXCEPT AS SET FORTH ON SCHEDULE 6(B), NEITHER THE COMPANY
NOR ANY OF ITS SUBSIDIARIES HAS PREVIOUSLY ENTERED INTO ANY AGREEMENT GRANTING
ANY REGISTRATION RIGHTS WITH RESPECT TO ANY OF ITS SECURITIES TO ANY PERSON THAT
HAVE NOT BEEN SATISFIED IN FULL OR WAIVED.

(J)            EXECUTION AND COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN
TWO OR MORE COUNTERPARTS, ALL OF WHICH WHEN TAKEN TOGETHER SHALL BE CONSIDERED
ONE AND THE SAME AGREEMENT AND SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE
BEEN SIGNED BY EACH PARTY AND DELIVERED TO THE OTHER PARTY, IT BEING UNDERSTOOD
THAT BOTH PARTIES NEED NOT SIGN THE SAME COUNTERPART.  IN THE EVENT THAT ANY
SIGNATURE IS DELIVERED BY FACSIMILE TRANSMISSION OR BY E-MAIL DELIVERY OF A
“.PDF” FORMAT DATA FILE, SUCH SIGNATURE SHALL CREATE A VALID AND

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BINDING OBLIGATION OF THE PARTY EXECUTING (OR ON WHOSE BEHALF SUCH SIGNATURE IS
EXECUTED) WITH THE SAME FORCE AND EFFECT AS IF SUCH FACSIMILE OR “.PDF”
SIGNATURE PAGE WERE AN ORIGINAL THEREOF.

(K)           GOVERNING LAW.  ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE DETERMINED
IN ACCORDANCE WITH THE PROVISIONS OF THE PURCHASE AGREEMENT.

(L)            CUMULATIVE REMEDIES.  THE REMEDIES PROVIDED HEREIN ARE CUMULATIVE
AND NOT EXCLUSIVE OF ANY OTHER REMEDIES PROVIDED BY LAW.

(M)          SEVERABILITY.  IF ANY TERM, PROVISION, COVENANT OR RESTRICTION OF
THIS AGREEMENT IS HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID,
ILLEGAL, VOID OR UNENFORCEABLE, THE REMAINDER OF THE TERMS, PROVISIONS,
COVENANTS AND RESTRICTIONS SET FORTH HEREIN SHALL REMAIN IN FULL FORCE AND
EFFECT AND SHALL IN NO WAY BE AFFECTED, IMPAIRED OR INVALIDATED, AND THE PARTIES
HERETO SHALL USE THEIR COMMERCIALLY REASONABLE EFFORTS TO FIND AND EMPLOY AN
ALTERNATIVE MEANS TO ACHIEVE THE SAME OR SUBSTANTIALLY THE SAME RESULT AS THAT
CONTEMPLATED BY SUCH TERM, PROVISION, COVENANT OR RESTRICTION.  IT IS HEREBY
STIPULATED AND DECLARED TO BE THE INTENTION OF THE PARTIES THAT THEY WOULD HAVE
EXECUTED THE REMAINING TERMS, PROVISIONS, COVENANTS AND RESTRICTIONS WITHOUT
INCLUDING ANY OF SUCH THAT MAY BE HEREAFTER DECLARED INVALID, ILLEGAL, VOID OR
UNENFORCEABLE.

(N)           HEADINGS.  THE HEADINGS IN THIS AGREEMENT ARE FOR CONVENIENCE
ONLY, DO NOT CONSTITUTE A PART OF THIS AGREEMENT, AND SHALL NOT BE DEEMED TO
LIMIT OR AFFECT ANY OF THE PROVISIONS HEREOF.

(O)           ADDITIONAL HOLDERS.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, IF THE COMPANY SHALL ISSUE ADDITIONAL REGISTRABLE SECURITIES
PURSUANT TO THE PURCHASE AGREEMENT, ANY PURCHASER OF SUCH REGISTRABLE SECURITIES
MAY BECOME A PARTY TO THIS AGREEMENT BY EXECUTING AND DELIVERING AN ADDITIONAL
COUNTERPART SIGNATURE PAGE TO THIS AGREEMENT AND SHALL BE DEEMED A “PURCHASER,”
A “HOLDER” AND A PARTY HEREUNDER.

(P)           INDEPENDENT NATURE OF HOLDERS’ OBLIGATIONS AND RIGHTS.  THE
OBLIGATIONS OF EACH HOLDER HEREUNDER ARE SEVERAL AND NOT JOINT WITH THE
OBLIGATIONS OF ANY OTHER HOLDER HEREUNDER, AND NO HOLDER SHALL BE RESPONSIBLE IN
ANY WAY FOR THE PERFORMANCE OF THE OBLIGATIONS OF ANY OTHER HOLDER HEREUNDER. 
NOTHING CONTAINED HEREIN OR IN ANY OTHER AGREEMENT OR DOCUMENT DELIVERED AT ANY
CLOSING, AND NO ACTION TAKEN BY ANY HOLDER PURSUANT HERETO OR THERETO, SHALL BE
DEEMED TO CONSTITUTE THE HOLDERS AS A PARTNERSHIP, AN ASSOCIATION, A JOINT
VENTURE OR ANY OTHER KIND OF ENTITY, OR CREATE A PRESUMPTION THAT THE HOLDERS
ARE IN ANY WAY ACTING IN CONCERT WITH RESPECT TO SUCH OBLIGATIONS OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH HOLDER SHALL BE ENTITLED TO
PROTECT AND ENFORCE ITS RIGHTS, INCLUDING WITHOUT LIMITATION THE RIGHTS ARISING
OUT OF THIS AGREEMENT, AND IT SHALL NOT BE NECESSARY FOR ANY OTHER HOLDER TO BE
JOINED AS AN ADDITIONAL PARTY IN ANY PROCEEDING FOR SUCH PURPOSE.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

IMAGEWARE SYSTEMS, INC.

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

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[SIGNATURE PAGE OF HOLDERS TO REGISTRATION RIGHTS AGREEMENT]

Name of Holder:

 

 

 

Signature of Authorized Signatory of Holder:

 

 

 

Name of Authorized Signatory:

 

 

 

Title of Authorized Signatory:

 

 

 

[SIGNATURE PAGES CONTINUE]

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ANNEX A

Plan of Distribution

Each Selling Stockholder (the “Selling Stockholders”) of the common stock and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of common stock on the American Stock
Exchange or any other stock exchange, market or trading facility on which the
shares are traded or in private transactions.  These sales may be at fixed or
negotiated prices.  A Selling Stockholder may use any one or more of the
following methods when selling shares:

·                  ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

·                  block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

·                  purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

·                  an exchange distribution in accordance with the rules of the
applicable exchange;

·                  privately negotiated transactions;

·                  settlement of short sales entered into after the effective
date of the registration statement of which this prospectus is a part;

·                  broker-dealers may agree with the Selling Stockholders to
sell a specified number of such shares at a stipulated price per share;

·                  through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;

·                  a combination of any such methods of sale; or

·                  any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the “Securities Act”), if available, rather
than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales.  Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

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In connection with the sale of the common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume.  The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions entered into after the effective
date of the registration statement of which this prospectus is a part, or loan
or pledge the common stock to broker-dealers that in turn may sell these
securities.  The Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).

The Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales.  In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.  Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock.  In no
event shall any broker-dealer receive fees, commissions and markups which, in
the aggregate, would exceed eight percent (8%).

The Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares.  The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

Because Selling Stockholders may be deemed to be “underwriters” within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder.  In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus.  There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the Selling
Stockholders.

We agreed to keep this prospectus effective until the earlier of (i) the date on
which the shares may be resold by the Selling Stockholders without registration
and without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities Act
or any other rule of similar effect.  The resale shares will be sold only
through registered or licensed brokers or dealers if required under applicable
state securities laws.  In addition, in certain states, the resale shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities

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with respect to the common stock for the applicable restricted period, as
defined in Regulation M, prior to the commencement of the distribution.  In
addition, the Selling Stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation
M, which may limit the timing of purchases and sales of shares of the common
stock by the Selling Stockholders or any other person.  We will make copies of
this prospectus available to the Selling Stockholders and have informed them of
the need to deliver a copy of this prospectus to each purchaser at or prior to
the time of the sale (including by compliance with Rule 172 under the Securities
Act).

 

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Annex B

IMAGEWARE SYSTEMS, INC.

Selling Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock (the “Registrable Securities”)
of ImageWare Systems, Inc., a Delaware corporation (the “Company”), understands
that the Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”) a registration statement (the “Registration
Statement”) for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the “Securities Act”), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement (the
“Registration Rights Agreement”) to which this document is annexed.  A copy of
the Registration Rights Agreement is available from the Company upon request at
the address set forth below.  All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Registration Rights Agreement.

Certain legal consequences arise from being named as a selling securityholder in
the Registration Statement and the related prospectus.  Accordingly, holders and
beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Registration Statement and the related
prospectus.

NOTICE

The undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it in
the Registration Statement.

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The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

QUESTIONNAIRE

1.

Name.

 

 

 

 

 

(a)

Full Legal Name of Selling Securityholder

 

 

 

 

 

 

 

 

 

 

 

 

 

(b)

Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities are held:

 

 

 

 

 

 

 

 

 

 

 

 

 

(c)

Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):

 

 

 

 

 

 

 

2.  Address for Notices to Selling Securityholder:

 

 

Telephone:

 

Fax:

 

Contact Person:

 

 

3.  Broker-Dealer Status:

 

(a)

Are you a broker-dealer?

 

 

 

 

 

Yes  o     No  o

 

 

 

 

(b)

If “yes” to Section 3(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company?

 

 

 

 

 

Yes  o    No  o

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Note:

If “no”, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration Statement.

 

 

 

 

(c)

Are you an affiliate of a broker-dealer?

 

 

 

 

 

Yes  o     No  o

 

 

 

 

(d)

If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

 

 

 

 

 

Yes  o     No  o

 

 

 

 

Note:

If “no”, the Commission’s staff has indicated that you should be identified as
an underwriter in the Registration Statement.

 

4.  Beneficial Ownership of Other Securities of the Company Owned by the Selling
Securityholder.

Except as set forth below in this Item 4, the undersigned is not the beneficial
or registered owner of any securities of the Company other than the securities
issuable pursuant to the Purchase Agreement.

(a)           Type and Amount of other securities beneficially owned by the
Selling Securityholder:

 

 

 

 

5.  Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has had
any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.

State any exceptions here:

 

 

 

 

 

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The undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the date
hereof at any time while the Registration Statement remains effective.

By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 5 and the inclusion of such
information in the Registration Statement and the related prospectus and any
amendments or supplements thereto.  The undersigned understands that such
information will be relied upon by the Company in connection with the
preparation or amendment of the Registration Statement and the related
prospectus.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.

Dated:

 

 

Beneficial Owner:

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

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