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                                UNIT CERTIFICATE
                      EACH UNIT CONSISTING OF ONE SHARE OF
                    COMMON STOCK, PAR VALUE $0.01 PER SHARE,
                               AND ONE COMON STOCK
                                PURCHASE WARRANT

U-_____                                                           _________Units

                             IMAGEWARE SYSTEMS, INC.
               ORGANIZED UNDER THE LAWS OF THE STATE OF CALIFORNIA

                                CUSIP 45245S 20 7

         THIS CERTIFIES THAT

or registered assigns (the "Registered Holder") is the owner of the number of
Units specified above, each of which consists of one share of common stock, par
value $0.01 per share, of ImageWare Systems, Inc. (the "Company") and one Common
Stock Purchase Warrant to purchase one share of Common Stock (the "Warrant"). On
or prior to the Separation Time (as defined herein), this Certificate may be
combined, exchanged or transferred only as Units, and the Common Stock and
Warrants evidenced by this Certificate may not be split up, exchanged or traded
separately. The Units may separate into shares of Common Stock and Warrants as
of the close of business on ______________________, 2000 [thirty days after the
consummation of the initial public offering of Units], or at any time after that
date, in the discretion of Paulson Investment Company, Inc. (the "Separation
Time"). The shares of Common Stock and Warrants comprising the Units shall be
separately tradeable commencing on the first day after the Separation Time on
which The American Stock Exchange is open for trading. The Warrants comprising
part of the Units are issued under and pursuant to a certain Warrant and Unit
Agreement dated as of March 10, 2000 (the "Warrant Agreement"), between the
Company and American Stock Transfer & Trust Company, as Transfer Agent (the
"Transfer Agent"), and are subject to the terms and provisions contained therein
and on the face of the certificates covered thereby, to all of which terms and
provisions the holder of this Unit Certificate consents by acceptance hereof.
The Warrant Agreement provides for adjustment in the number of shares of Common
Stock to be delivered upon the exercise of Warrants evidenced hereby and to the
exercise price of such Warrants in certain events therein set forth. Subject to
the foregoing, the number of Warrants and the number of shares of Common Stock
comprising the Units are equal.

         Copies of the Warrant Agreement are available for inspection at the
stock transfer office of the Transfer Agent or may be obtained upon written
request addressed to the Company at 10883 Thornmint Road, San Diego, California
92127, Attention: Chief Financial Officer.

         This Unit Certificate is not valid unless countersigned by the Transfer
Agent and Registrar of the Company.


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         IN WITNESS WHEREOF, the Company has caused this Unit Certificate to be
duly executed manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.



Dated:_____________________________

                                          IMAGEWARE SYSTEMS, INC.


                                          By: ________________________________
                                               Chief Executive Officer

                                          Attest: ______________________________
                                                  Secretary

Countersigned

American Stock Transfer & Trust Company


By: ________________________________
     Authorized Officer


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                             IMAGEWARE SYSTEMS, INC.


         The Registered Holder hereby is entitled, at any time after the close
of business on ______________________, 2000, to exchange the Units represented
by this Unit Certificate for Common Stock Certificate(s) representing one share
of Common Stock, for each Unit represented by this Unit Certificate, and Warrant
Certificate(s) representing one Warrant, for each unit represented by this Unit
Certificate upon surrender of this Unit Certificate to the Transfer Agent
together with any documentation required by such Agent.

         REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON THE FRONT
SIDE HEREOF AND THE PROVISIONS OF SUCH WARRANT AGREEEMNT SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FACE OF THIS CERTIFICATE.
COPIES OF THE WARRANT AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE
TRANSFER AGENT, AMERICAN STOCK TRANSFER & TRUST COMPANY.

         The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.

                    TEN COM   -       as tenants in common
                    TEN ENT   -       as tenants by the entireties
                    JT TEN    -       as joint tenant with right of survivorship
                                      and not as tenants in common
                    COM PROP  -       as community property

UNIF GIFT MIN ACT             -       _________________Custodian________________
                                            (Cust)                  (minor)
                                      under Uniform Gifts to Minors Act

                                      ------------------------------------------
                                                     (State)


UNIF TRF MIN ACT              -       _________________Custodian________________
                                            (Cust)                  (minor)
                                      under Uniform Gifts to Minors Act

                                      ------------------------------------------
                                                     (State)


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                               FORM OF ASSIGNMENT
                       (TO BE SIGNED ONLY UPON ASSIGNMENT)

FOR VALUE RECEIVED, the undersigned Registered Holder (                 )

------------------------
(Please  insert  Social  Security or other  identification  number of Registered
Holder)

hereby sells, assigns and transfers unto

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
               (Please Print Name and Address including Zip Code)

Units evidenced by the within Unit Certificate, and irrevocably constitutes and
appoints
______________________________________________________________________Attorney
to transfer this Unit Certificate on the books of ImageWare Systems, Inc. with
the full power of substitution in the premises.

Dated:__________________, ________

Signature:

__________________________________

(Signature must conform in all respects to the name of Registered Holder as
specified on the face of this Unit Certificate in every particular, without
alteration or any change whatsoever, and the signature must be guaranteed in the
usual manner.)

Signature Guaranteed:

__________________________________

The signature should be guaranteed by an eligible institution (Banks,
Stockbrokers, Savings and Loan Association and Credit Union with membership in
an approved signature Medallion Program), pursuant to S.E.C. Rule 17Ad-15.