Exhibit 10.1

 
AMENDMENT TO CONVERTIBLE PROMISSORY NOTE

This Amendment to Convertible Promissory Note (the “Amendment”) is entered into
as of March 12, 2014 by and between ImageWare Systems, Inc., a Delaware
corporation (the “Company”), and Neal I. Goldman, or his registered assigns
(“Holder”). Unless otherwise specified herein, all capitalized terms set forth
in this Amendment shall have the meanings ascribed to them in the Note.

RECITALS

WHEREAS, On March 27, 2013, the Company issued to the Holder a Convertible
Promissory Note (the “Note”) in the principal amount of $2.5 million. A copy of
the Note is attached hereto as Exhibit A;

WHEREAS, pursuant to the terms and conditions of the Note, the Holder agreed to
make advances to the Company at the Company’s request, provided the aggregate
principal amount outstanding at any one time does not exceed $2.5 million (the
“Line of Credit”);

WHEREAS, in the event the Company consummates a Qualified Financing resulting in
gross proceeds of at least $2.5 million, the Outstanding Balance of the Note
shall become due and payable upon demand by the Holder;

WHEREAS, at any time prior to the Maturity Date, the Note is convertible into
that number of shares of the Company’s common stock, par value $0.001 per share
(“Common Stock”), equal to the Outstanding Balance, divided by $0.95.

WHEREAS, the Holder and the Company now desire to amend the Note to: (i)
increase the principal amount of the Note to $3.5 million, (ii) update the
definition of Qualified Financing to a debt and/or equity financing resulting in
gross proceeds of at least $3.5 million, and (iii) permit the Holder to convert
up to $2.5 million of the Outstanding Balance of the Note into shares of Common
Stock at $0.95 per share, with any remaining Outstanding Balance convertible
into shares of Common Stock at $2.25 per share; and

WHEREAS, as additional consideration for entering into this Amendment, the
Company desires to issue to the Holder a one-year warrant to purchase 177,778
shares of Common Stock for $2.25 per share.

AGREEMENT

NOW, THEREFORE, FOR VALUE RECEIVED, the undersigned parties agree as follows:

1. The principal sum of the Note is hereby increased to Three Million, Five
Hundred Thousand Dollars ($3,500,000).  Any reference to a principal amount of
$2,500,000, including but not limited to Sections 2(a) and 4(d), is hereby
replaced with the principal amount of $3,500,000.

2. Section 2(c) of the Note is hereby amended and replaced in its entirety with
the following:

(c)  This Line of Credit shall terminate, and no further advances shall be made,
upon 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 $3.5 million (“Qualified Financing”).  In the event of
consummation of a Qualified Financing, the Outstanding Balance under the terms
of this Note shall be due and payable on demand.

3. Section 6 of the Note is hereby amended and replaced in its entirety with the
following:

 
 

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6. Conversion.  At any time prior to the Maturity Date, the Holder shall have
the right and option to convert the Outstanding Balance into that number of
fully paid and non-assessable shares of the Company’s Common Stock as is equal
to the quotient obtained by dividing the Outstanding Balance by $0.95; provided,
however, that in the event the Holder has converted at least $2,500,000 of any
Outstanding Balance (plus any related accrued interest) into shares of the
Company’s Common Stock at $0.95, the Holder shall have the right and option to
convert any remaining Outstanding Balance into that number of fully paid and
non-assessable shares of the Company’s Common Stock as is equal to the quotient
obtained by dividing the Outstanding Balance by $2.25.

4. As additional consideration for entering into this Amendment, the Company
shall issue to Holder a warrant exercisable for 177,778 shares of Common Stock
(the “Warrant”).  The Warrant shall have a term of one year from the date of
issuance, and shall have an exercise price of $2.25 per share.
 
 
5. The provisions of the Note, as modified in this Amendment, shall remain in
full force and effect in accordance with their terms and are hereby ratified and
confirmed.  In the event of any conflict between the terms and conditions of
this Amendment and the terms and conditions set forth in the Note, the terms and
conditions set forth herein shall control.  This Amendment shall be governed by
the laws of the State of California without regard to the conflict of laws
provisions thereof.  

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IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to be duly
executed by its officers, thereunto duly authorized as of the date first above
written.
 
 

  THE COMPANY:         ImageWare Systems, INC.,         By: /s/ Wayne Wetherell
  Name: Wayne Wetherell   Title: CFO              
HOLDER:
        By: /s/ Neal I. Goldman   Name: Neal I. Goldman