ex10-55.htm


    EXHIBIT
10.55

     

    
      THIRD AMENDMENT TO SECURED
PROMISSORY NOTE

       

      This
Third Amendment to Secured Promissory Note (this "Amendment") is made
as of October 5, 2009, by and between Imageware Systems, Inc., a Delaware
corporation ("Borrower"), and BET
Funding LLC, a Delaware limited liability company ("Lender").

       

      BACKGROUND

       

      A.           On
February 12, 2009, Borrower issued to Lender a secured promissory note (the
"Original
Note") in the original principal amount of Five Million Dollars
($5,000,000).  On such date, Lender made to Borrower an initial
advance under the Note of One Million Dollars ($1,000,000).  The Note
and all instruments, documents and agreements executed in connection therewith,
or related thereto, are referred to herein collectively as the "Financing
Documents".  All capitalized terms not otherwise defined herein
shall have the meaning ascribed thereto in the Note.

       

      B.           On
June 9, 2009, Borrower and Lender entered into that certain Waiver and Amendment
Agreement (the "Waiver
and Amendment Agreement") in order to (i) waive certain existing events
of default under the Note and (ii) amend certain terms of the Note.

       

      C.           On
June 22, 2009, Borrower and Lender entered into that certain Amendment to
Promissory Note (the "Second Amendment")
pursuant to which (i) Lender made a subsequent advance to Borrower under the
Note in the principal amount of Three Hundred Fifty Thousand Dollars ($350,000),
and (ii) certain terms of the Note were amended.  The Original Note,
as amended by the Waiver and Amendment Agreement and the Second Amendment, is
hereinafter referred to as the "Note".

       

      D.           Lender
has agreed to make one or more subsequent advances under the Note in an
aggregate amount of up to One Million Dollars ($1,000,000) (collectively, the
"Additional
Advances" and each, an "Additional Advance")
on the terms and conditions set forth in this Amendment.  In
connection therewith, Borrower and Lender have agreed to amend certain terms of
the Note as evidenced herein.

       

      E.           In
consideration for agreeing to make the Additional Advances, Borrower shall pay,
execute and deliver to Lender, as a loan origination fee, the following: (i) a
warrant (the "Additional Warrant")
to acquire 200,000 shares of Common Stock (the "Additional Warrant
Shares") at an exercise price of ________ cents ($0.__ per share (the
"Additional Warrant
Exercise Price"), in substantially the form of Exhibit A attached
hereto, and (ii) an assignment of U.S. Patent No. 5,345,313 (dated September 6,
1994), U.S. Patent No. 5,469,536 (dated November 21, 1995), U.S. Patent No.
5,577,179 (dated November 19, 1996) and U.S. Patent No. 5,687,306 (dated
November 11, 1997) (collectively, the "Patents"), in
substantially the form of Exhibit B attached
hereto, pursuant to which Lender shall acquire all of Borrower's right, title
and interest in such patents (the "Assignment of
Patents").

       

      NOW
THEREFORE, with the foregoing Background deemed incorporated by reference and
for good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, covenant and
agree as follows:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      SECTION
1.  ACKNOWLEDGMENT OF INDEBTEDNESS, ETC.

       

      1.1           Note.  Borrower
hereby acknowledges and confirms that as of the close of business on October 1,
2009, Borrower is indebted to Lender, without defense, setoff, claim or
counterclaim under the Financing Documents, in the aggregate principal amount of
$1,350,000, together with accrued and unpaid interest in the amount of
$65,412.50 and all other unreimbursed fees, costs and expenses (including
attorneys' fees) incurred to date in connection with the Financing
Documents.

       

      1.2           Fees and
Expenses.  Borrower acknowledges and agrees that it is liable
for all fees, costs and expenses (including attorneys' fees) incurred by Lender
in connection with the documentation, preparation, interpretation and
negotiation of this Amendment and the Financing Documents, and any amendment,
modification or supplement to this Amendment or to the Financing Documents, the
consummation and administration of the transactions contemplated hereby and
thereby and the enforcement, preservation, protection or defense of any of
Lender's rights and remedies hereunder and under the Financing Documents,
including, without limitation any costs for appraisals, searches or filing fees
incurred by Lender.  All such fees, costs and expenses are referred to
herein as "Expenses."  All
Expenses will be payable within 15 days after Lender gives notice
thereof.  Lender reserves the right to add some or all of its Expenses
to the outstanding principal balance of the Note upon notice to
Borrower.  Any such amount added to the principal balance of the Note
by Lender for payment of its Expenses shall be deemed to have been loaned to
Borrower under the terms of the Note.

       

      SECTION
2.  AMENDMENTS TO NOTE

       

      2.1           Amendments to Note.
The Note is hereby amended as follows:

       

      (a)           Preamble.  The
second paragraph of the Preamble of the Note is hereby amended and restated in
full as follows:

       

      
        
          
          

        

        
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      "The
parties hereto acknowledge that this credit facility is for a total of up to
Five Million Dollars ($5,000,000).  The initial advance under this
Note on the date hereof shall be One Million Dollars
($1,000,000).  The parties acknowledge that an additional advance in
the principal amount of Three Hundred Fifty Thousand Dollars ($350,000) was made
on or about June 22, 2009 in accordance with the terms of that certain Amendment
to Secured Promissory Note, dated as of June 22, 2009.  Further,
pursuant to that certain Third Amendment to Secured Promissory Note, dated as of
October 5, 2009 (the "Third Amendment"),
Lender has agreed to make additional advances in an aggregate amount of up to
One Million Dollars ($1,000,000) (the "Third Amendment
Advances") on the following terms: (i) $300,000 of the Third Amendment
Advances will be funded on the date of the Third Amendment (the "Initial Third Amendment
Advance"), (ii) the Third Amendment Advances may only be used for the
purpose of compromising Company's outstanding vendor payables reflected on
Company's accounts payable exhibit attached to the Third Amendment (the "Vendor Payables") or
paying for the audit of Company's financial statements (the "Audit"), (iii) Lender
must approve, in advance, the use of any Third Amendment Advance for payment of
the Audit, (iv) the terms on which the Vendor Payables may be compromised must
be approved, in advance, by the Lender in its sole discretion, (v) prior to
compromising any Vendor Payables with the Initial Third Amendment Advance,
Company must obtain Lender's approval and deliver a signed vendor agreement (a
"Vendor
Agreement") in substantially the form of Exhibit C attached to
the Third Amendment, pursuant to which, among other things, the applicable
vendor shall agree to release its claim against Company in exchange for the
payment to vendor that will be funded from the Initial Third Amendment Advance,
(vi) in order to receive a Third Amendment Advance following the Initial Third
Amendment Advance, Company must deliver to Lender a bring-down certificate, in a
form acceptable to Lender (which shall include a certification by Company that
each representation and warranty made by Company herein and elsewhere in each of
the other Financing Documents, are true and correct on and as of the date of
such future advance (or, if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such specific date)),
together with either (x) a Vendor Agreement or (y) a signed certification from
the Company that such Third Amendment Advance will be used solely in connection
with the Audit.  Lender shall fund on behalf of Company the amount
payable by Company under any vendor agreement approved by Lender in its sole
discretion pursuant to the terms set forth above.

       

      Thereafter,
subsequent advances (other than Third Amendment Advances) shall be in such
increments as may be agreed to by Lender and will be subject to the sole
discretion of Lender, it being understood and acknowledged that Lender shall be
under no obligation to make additional loans, advances and/or extensions of
credit to or for the benefit of Company under this Note or
otherwise.  The parties agree that the future advances, if any, will
be on the same terms and conditions as the initial advances unless otherwise
provided herein or agreed to in writing by Lender and
Company.  Company shall execute and deliver a bring-down certificate,
in a form acceptable to Lender, in connection with any future advance pursuant
to which Company will certify that each representation and warranty made by
Company herein and elsewhere in each of the other Financing Documents, are true
and correct on and as of the date of such future advance (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date)."

       

      
        
          
          

        

        
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      (b)           
Section
2(a).  Section 2(a) of the Note is hereby amended by adding the
following sentence at the end thereof:

       

      "Notwithstanding
the forgoing, Company shall repay Lender in full the amount of any and all Third
Amendment Advances, together with all accrued and unpaid interest thereon, on or
before January 31, 2010."

       

      (c)           Section 6(c) of the
Note.  The first sentence of Section 6(c) of the Note is hereby
amended by replacing "July 15, 2009" in the second line thereof with "November
15, 2009".

       

      2.2           Incorporation of Amendment
into Note.  Borrower hereby directs Lender to attach an
original counterpart of this Amendment to the Note.  The Note and this
Amendment shall be deemed to constitute a single instrument.

       

      SECTION
3.  WARRANT AND ASSIGNMENT OF PATENTS

       

      3.1           Warrant and Assignment of
Patents.  In consideration of Lender's agreeing to make the
Additional Advances to Borrower, Borrower shall (i) issue to Lender the
Additional Warrant to acquire the Additional Warrant Shares at the Additional
Warrant Exercise Price and (ii) execute and deliver to Lender the Assignment of
Patents.

       

      3.2           Origination
Fee.  Borrower acknowledges the value to its business of the
Additional Advances.  Borrower's Board of Directors has determined
that Borrower would not be able to obtain financing in the amount and on the
same or better terms as the Additional Advances from a third
party.  Borrower acknowledges and confirms that the origination fee
that it has agreed to pay Lender in consideration for the Additional Advances
(i.e., the Additional Warrant and the Assignment of Patents) is fair and
reasonable in relation of the value of the Additional Advances to Borrower and
its business.

       

      3.3           Patents.  Borrower
covenants to use good faith efforts to assist Lender with Lender's utilization,
exploitation and operation of the Patents.   Following
satisfaction of all Obligations, Lender shall pay  to Borrower twenty
percent (20%) of the Net Cash Flow (as defined below) derived from the Patents
by Lender from and after the date on which all Obligations are
satisfied.  Such payment shall be made within sixty (60) days of
Lender's receipt of Net Cash Flow.  "Net Cash Flow" means,
with respect to any fiscal year or other period, the total cash gross receipts
of the Lender derived from the Patents during such period, less (i) all costs
and expenses of Lender paid during such period with respect to the Patents as
determined by Lender and (ii) amounts set aside by the Lender for the
restoration or creation of commercially reasonable reserves for the Patents as
determined by the Lender.  Notwithstanding the foregoing, nothing
herein shall require Lender to utilize or exploit the Patents or use any efforts
to generate income or revenue from the Patents.  This Section 3.3 shall
survive the satisfaction of the Obligations and the cancellation of the
Note.

       

      
        
          
          

        

        
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      SECTION
4.  COLLATERAL

       

      4.1           Affirmation of Existing
Collateral.  Borrower covenants, confirms and agrees that as
security for the repayment of the Obligations, Lender has, and shall continue to
have, and is hereby granted a continuing, perfected lien on and security
interest in the Collateral, all whether now owned or hereafter acquired, created
or arising, together with all proceeds, including insurance proceeds
thereof.  Borrower acknowledges and agrees that nothing herein
contained in any way impairs Lender's existing rights and priority in the
Collateral.

       

      4.2           Further
Assurances.  Upon execution of this Amendment, and thereafter
as Lender may from time to time request, Borrower shall further assist Lender in
effectuating the terms and intent of this Amendment and the Financing Documents
and in assuring continued, effective and proper perfection of Lender's liens and
security interests in the Collateral.  Borrower hereby authorizes
Lender to sign (if necessary) on Borrower's behalf and/or file, from time to
time, without signature of Borrower, any financing statements as Lender may
reasonably deem necessary to perfect, or maintain perfection, of Lender's
security interests.

       

      SECTION
5.  EFFECTIVENESS CONDITIONS

       

      5.1           Conditions.  Lender's
undertakings hereunder are subject to satisfactory completion, as determined by
Lender in its sole discretion (all documents to be in form and substance
satisfactory to Lender and its counsel) of the following conditions ("Effectiveness
Conditions"):

       

      (a)           Borrower's
execution and delivery of this Amendment, the Additional Warrant and the
Assignment of Patents;

       

      (b)           Borrower
shall have delivered to Lender resolutions of the Board of Directors of Borrower
authorizing the execution and delivery of this Amendment, the Additional Warrant
and the Assignment of Patents and the transactions herein and therein
contemplated;

       

      (c)           No
Default or Event of Default shall have occurred and be continuing under the
Financing Documents; and

       

      (d)           All
Expenses incurred by Lender shall have been paid by Borrower when
due.

       

      SECTION
6.  REPRESENTATIONS, WARRANTIES AND COVENANTS

       

      Borrower
represents, warrants and covenants to Lender that:

       

      6.1           Prior
Representations.  By execution of this Amendment, except as
otherwise expressly set forth herein, Borrower reconfirms all warranties and
representations made to Lender under the Financing Documents and restates such
warranties and representations as of the date hereof all of which shall be
deemed continuing until all of the Obligations are paid and satisfied in
full.

       

      
        
          
          

        

        
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      6.2           No Conflict. The execution and
delivery by Borrower of this Amendment, the Additional Warrant and the
Assignment of Patents and the performance of the obligations of Borrower
hereunder and thereunder and the consummation by Borrower of the transactions
contemplated hereby and thereby: (i) are within the corporate powers of
Borrower; (ii) are duly authorized by the Board of Directors of Borrower and, if
necessary, its stockholders; (iii) are not in contravention of the terms of the
articles or certificate of incorporation or bylaws of Borrower or of any
indenture, contract, lease, agreement instrument or other commitment to which
Borrower is a party or by which Borrower or any of its property are bound;
(iv) do not require the consent, registration or approval of any
Governmental Authority or any other Person; (v) do not contravene any statute,
law, ordinance regulation, rule, order or other governmental restriction
applicable to or binding upon Borrower; and (vi) will not, except as
contemplated herein for the benefit of Lender, result in the imposition of any
Liens upon any property of Borrower.

       

      6.3           Stockholder
Authorization.  Neither the execution, delivery or performance
by Borrower of this Amendment, the Additional Warrant or the Assignment of
Patents nor the consummation by it of the transactions contemplated hereby or
thereby (including, without limitation, the issuance or reservation for issuance
of the Additional Warrant Shares) requires any consent or authorization of
Borrower's stockholders.

       

      6.4           Issuance of
Shares.  The Additional Warrant Shares are duly authorized and
reserved for issuance, and, upon exercise of the Additional Warrant in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and will
not be subject to preemptive rights, rights of first refusal or other similar
rights of stockholders of Borrower and will not impose personal liability upon
the holder thereof.  Neither the issuance of the Additional Warrant
nor the issuance of the Additional Warrant Shares upon the exercise thereof will
result in any adjustment in the number of shares of capital stock or other
securities of Borrower issuable upon conversion or exercise of any outstanding
warrants, options, rights or other convertible securities of Borrower or any
adjustment in the conversion or exercise thereof.

       

      6.5           Valid, Binding and
Enforceable.  This Amendment, the Additional Warrant and the
Assignment of Patents and any assignment or other instrument, document or
agreement executed and delivered in connection herewith or therewith, will be
valid, binding and enforceable in accordance with their respective terms with
respect to Borrower upon the execution and delivery by Borrower
thereof.

       

      6.6           Event of
Default.  No Default or Event of Default has occurred (other
than the Existing Defaults (as defined under the Waiver and Amendment
Agreement)) or is continuing under the Note or any of the other Financing
Documents.

       

      
        
          
          

        

        
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      6.7           Covenants.  Borrower
has performed and complied with all covenants, agreements, obligations and
conditions to be performed or complied with under the Note and the other
Financing Documents.

       

      6.8           Accounts
Payable.  Exhibit D attached
hereto sets forth a true and complete list of Borrower's current accounts
payable for trade payables (the "Vendor Payables"),
showing the name and address of the vendor, the date such trade payable was
incurred and the total amount due by Borrower.  Each Vendor Payable
was incurred in the ordinary course of Borrower's business.

       

      SECTION
7.  BORROWER'S EXISTING COVENANTS

       

      7.1           Existing
Covenants.  Borrower covenants that on and after the date of
execution of this Amendment and until the Obligations are indefeasibly paid and
satisfied in full that, except as expressly modified hereby, Borrower shall
continue to observe and maintain compliance with all covenants, representations
and warranties contained in, or arising in conjunction with, the Financing
Documents.

       

      SECTION
8.  MISCELLANEOUS

       

      8.1           Default.

       

      (a)           In
addition to each of the Events of Default set forth in the Financing Documents,
the (i) failure of Borrower to comply with its representations, warranties,
covenants or other undertakings under this Amendment, or (ii) occurrence or
institution of any action or proceeding which may adversely affect Borrower's
ability to perform under this Amendment (as determined by Lender in its
discretion), shall be an Event of Default under the Financing Documents and upon
such failure, Lender's undertakings under this Amendment may at Lender's
discretion, and without notice to Borrower immediately terminate and Lender may
exercise its rights and remedies as granted under the Financing Documents and
under applicable law or in equity.

       

      (b)           Any
default by Borrower under any of the Financing Documents, shall be considered a
default and an Event of Default under all of the Financing Documents and upon
such default, Lender's undertakings under this Amendment may at Lender's
discretion, and without notice to Borrower immediately terminate and Lender may
exercise its rights and remedies as granted under the Financing Documents and
under applicable law or in equity.

       

      8.2           Integrated
Agreement.  This Amendment shall be deemed incorporated into
and made a part of the Financing Documents.  The Financing Documents
and this Amendment shall be construed as integrated and complementary of each
other, and as augmenting and not restricting the Lender's rights, remedies and
security.  If, after applying the foregoing, an inconsistency still
exists, the provisions of this Amendment shall control.

       

      8.3           Non-Waiver.  No
omission or delay by Lender in exercising any right or power under this
Amendment, or the Financing Documents or any related agreement will impair such
right or power or be construed to be a waiver of any default or Event of Default
or an acquiescence therein, and any single or partial exercise of any such right
or power will not preclude other or further exercise thereof or the exercise of
any other right, and no waiver will be valid unless in writing and signed by
Lender and then only to the extent specified.  Lender's rights and
remedies are cumulative and concurrent and may be pursued singly, successively
or together.

       

      
        
          
          

        

        
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      8.4           Headings.  The
headings of any paragraph of this Amendment are for convenience only and shall
not be used to interpret any provision of this Amendment.

       

      8.5           Survival.  All
warranties, representations and covenants made by Borrower herein, or in any
agreement referred to herein or on any certificate, document or other instrument
delivered by it or on its behalf under this Amendment, shall be considered to
have been relied upon by Lender. All statements in any such certificate or other
instrument shall constitute warranties and representations by Borrower
hereunder.  All warranties, representations, and covenants made by
Borrower hereunder or under any other agreement or instrument shall be deemed
continuing until the Obligations are indefeasibly paid and satisfied in
full.

       

      8.6           Successors and
Assigns.  This Amendment shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties
hereto.  No delegation by Borrower of any duty or obligation of
performance may be made or is intended to be made to Lender.  No
rights are intended to be created hereunder or under any related instruments,
documents or agreements for the benefit of any third party donee, creditor,
incidental beneficiary or affiliate of Borrower.

       

      8.7           GOVERNING
LAW.  THIS
AMENDMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AMENDMENT, SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE.  THE PROVISIONS OF THIS AMENDMENT, THE OTHER FINANCING
DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE
DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL
NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE
AND EFFECT.

       

      8.8           CONSENT
TO JURISDICTION.  BORROWER AND LENDER
HEREBY IRREVOCABLY CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN THE STATE OF DELAWARE IN ANY AND ALL ACTIONS AND
PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR
UNDERTAKING.  BORROWER WAIVES ANY OBJECTION TO IMPROPER VENUE AND
FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL RIGHTS TO TRANSFER
FOR ANY REASON.  BORROWER IRREVOCABLY AGREES TO SERVICE OF PROCESS BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED.

       

      8.9           WAIVER OF
JURY TRIAL.  BORROWER AND LENDER
HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH
ANY LITIGATION COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE FINANCING DOCUMENTS, WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE.

       

      
        
          
          

        

        
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      8.10           RELEASE.  AS FURTHER CONSIDERATION
FOR THE LENDER'S AGREEMENT TO MAKE THE ADVANCE SET FORTH HEREIN, BORROWER HEREBY
WAIVES AND RELEASES AND FOREVER DISCHARGES LENDER AND ITS MEMBERS, OFFICERS,
DIRECTORS, ATTORNEYS, AGENTS AND EMPLOYEES FROM ANY LIABILITY, DAMAGE, CLAIM,
LOSS OR EXPENSE OF ANY KIND THAT BORROWER MAY NOW OR HEREAFTER HAVE AGAINST
LENDER ARISING OUT OF OR RELATING TO THE OBLIGATIONS, THIS AMENDMENT OR THE
FINANCING DOCUMENTS.

       

      8.11           Waivers.

       

      (a)           Borrower
will not, directly or indirectly, do any act or fail to do any act, which would
impair or affect Lender's security interest in any Collateral, nor will Borrower
upon any default or Event of Default under this Amendment or the other Financing
Documents, contest Lender's right to obtain judgment against Borrower or to
foreclose upon any Collateral pledged to Lender, nor will Borrower move to
vacate or enjoin such judgment or foreclosure.

       

      (b)           Borrower
waives and renounces all rights which are waivable under Article 9 of the
Uniform Commercial Code as such rights relate to Borrower's relationship with
Lender, whether such rights are waivable before or after default, including,
without limitation, those rights with respect to compulsory disposition of
collateral (U.C.C. §§9-610, 9-615 and 9-620), any right of redemption under
U.C.C. §9-623, and any right to notice relating to disposition of collateral
under U.C.C. §9-611.

       

      8.12           Advice of
Counsel.  Borrower acknowledges that it had the right to
consult with independent legal counsel concerning this Amendment and
specifically regarding the effect and implications of Sections 8.8, 8.9, 8.10 and 8.11 above and
Borrower knowingly and voluntarily hereby waives the rights described therein or
affected thereby.

       

      8.13           Signatories.  Each
individual signatory hereto represents and warrants that he or she is duly
authorized to execute this Amendment on behalf of his or her principal and that
he or she executes the Amendment in such capacity and not as a
party.

       

      8.14           Duplicate
Originals.  Two or more duplicate originals of this Amendment
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument.  This
Amendment may be executed in counterparts, all of which counterparts taken
together shall constitute one completed fully executed
document.  Signature by facsimile or PDF shall bind the parties
hereto.

       

      
        
          
          

        

        
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      8.15           Effect of
Amendment.  Except as expressly stated herein:  (a)
the Financing Documents are and shall be unchanged and remain in full force and
effect, and (b) this Amendment shall not constitute a waiver of any Default or
Event of Default or a waiver of the right of Lender to insist upon compliance
with any term, covenant, condition or provision of the Note and the other
Financing Documents, as amended hereby.  Except as specifically stated
herein, the execution and delivery of this Amendment shall in no way release,
diminish, impair, reduce or otherwise affect the respective obligations and
liabilities of Borrower or any other Person under any of the Financing
Documents, all of which as amended hereby, shall continue in full force and
effect.  Borrower hereby ratifies and confirms the existence of each
of the Financing Documents to which it is a party, each of the Liens created
pursuant to each such Financing Document and each and every term, condition,
obligation, liability, undertaking and covenant therein
contained.  Each of the Financing Documents is hereby amended and
modified to the extent necessary (and without any further action on behalf of
Borrower, Lender or any other Person) in order to give full force and effect to
this Amendment.  This Amendment constitutes a Financing
Document.

       

      


       

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      IN
WITNESS WHEREOF, the undersigned parties have executed this Third Amendment the
day and year first above written.

       

      IMAGEWARE
SYSTEMS, INC.

      


      


      


      By:           _________________________

      Name:   S. James
Miller

      Title: Chairman and CEO

      


      


      BET
FUNDING LLC

      


      


      By: ________________________

      Name:  Douglas
Topkis

      Title:  Member

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Exhibit
A


       

      Form of
Additional Warrant

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Exhibit
B


       

      Form of
Assignment of Patents

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Exhibit
C


       

      Form of
Vendor Agreement

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Exhibit
D


       

      Vendor
Payables