EXHIBIT 10.54









Modified
Form of OFFICE BUILDING LEASE Developed by PORTLAND METROPOLITAN ASSOCIATION OF
BUILDING OWNERS AND MANAGERS




OFFICE
LEASE




This
lease, made and entered into at Clackamas, Oregon. This 2nd day of October 2009
by and between




LANDLORD:
ALLEN W. WOODDELL, SUCCESSOR TRUSTEE OF THE MARGARET D. ROSS TRUST DATED
SEPTEMBER 3, 1975, AS AMENDED AND LINDA E. ROSS TRUSTEE OF THE LINDA E. ROSS
TRUST




And




TENANT:
IMAGEWARE SYSTEMS, INC.


Landlord
      hereby leases to Tenant the Following: Suite 230
              (the
      Premises),in
      Two Town Center, 10135 SE Sunnyside Road
              (the
      Building),




at
Clackamas, Oregon, containing approximately 6,024 rentable square feet as shown
on the attached floor plan,




calculated
using a load factor of fifteen percent. Tenant's Proportion Share for purposes
of Section 29 shall be 16.52%.




This
lease is for a term commencing November 1, 2009 (Lease Commencement Date) and
continuing through October 31, 2012 at a Monthly Base Rental as
follows:





11/01/2009
to 10/31/2010 = $11,044.00


11/01/2010
to 10/31/2011 = $11,375.32


11/01/2011
to 10/31/2012 = $11,716.58




Rent is
payable in advance on the 1ST day of each month commencing November 1,
2009.




Landlord
and Tenant covenant and agree as follows:




1.1
Delivery of Possession.


Should
Landlord be unable to deliver possession of the Premises on the date fixed for
the commencement of the term, commencement will be deferred and Tenant shall owe
no rent until notice from Landlord tendering possession to Tenant If possession
is not so tendered within 90 days following commencement of the term, then
Tenant may elect to cancel this lease by notice to Landlord within 10 days
following expiration of the 90-day period. Landlord shall have no liability to
Tenant far delay in delivering possession, nor shall such delay extend the term
of this lease in any manner unless the parties execute a written extension
agreement




2.1 Rent
Payment.


Tenant
shall pay the Monthly Base Rent for the Premises and any additional rent
provided herein without deduction or offset. Rent for any partial month during
the lease term shall be prorated to reflect the number of days during the month
that Tenant occupies the Premises. Additional rent means amounts determined
under Section 19 of this Lease and any other sums payable by Tenant to Landlord
under this Lease. Rent not paid when due shall bear interest at the rate of
one-and-one-half percent per month until paid. Landlord may at its option impose
a late charge of $.05 for each $1 of rent for rent payments made more than 10
days late in lieu of interest for the first month of delinquency, without
waiving any other remedies available for default. Failure to impose a late
charge shall not be a waiver of Landlord's rights hereunder.




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15





3.1 Lease
Consideration.


Upon
execution of the lease Tenant has paid the Base Rent for the first full month of
the lease term for which rent is payable, and in addition has paid the sum of
511,716.58 as lease consideration. Landlord may apply the lease consideration to
pay the cost of performing any obligation which Tenant fails to perform within
the time required by this lease, but such application by Landlord shall not be
the exclusive remedy for Tenant's default. If the lease consideration is applied
by Landlord, Tenant shall on demand pay the sum necessary to replenish the lease
consideration to its original amount. To the extent cot applied by Landlord to
cure defaults by Tenant, the lease consideration shall be applied against the
rent payable for the last month of the term. The lease consideration shall not
be refundable.




4.1
Use.


Tenant
shall use the Premises as an identity management software and technology company
and for no other purpose without Landlord's written consent. In connection with
its use, Tenant shall at its expense promptly comply and cause the Premises to
comply with all applicable laws, ordinances, rules and regulations of any public
authority and shall not annoy, obstruct, or interfere with the rights of other
tenants of the Building. Tenant shall create no nuisance nor allow any
objectionable fumes, noise, or vibrations to be emitted from the Premises.
Tenant shall not conduct any activities that will increase Landlord's insurance
rates for any portion of the Building or that will in any manner degrade or
damage the reputation of the Building.




4.2
Equipment.


Tenant
shall install in the Premises only such office equipment as is customer/ for
general office use and shall not overload the floors or electrical circuits of
the Premises or Building or alter the plumbing or wiring of the Premises or
Building Landlord must approve in advance the location of and manner of
installing any wiring or electrical, heat generating or communication equipment
or exceptionally heavy articles. All telecommunications equipment, conduit, cab
k s and wiring, additional dedicated circuits and any additional air
conditioning required because of heat generating equipment or special lighting
installed by Tenant shall be installed and operated Tenant’s expense. Landlord
shall have no obligation to permit the installation of equipment by any
telecommunications provider whose equipment is not then servicing the
Building.




4.3
Signs.


No signs,
awnings, antennas, or other apparatus shall be painted on or attached tote B
eliding or anything placed on any glass or woodwork of the Premises or
positioned so as to be visible from outside the Premises without Landlord's
written approval as to design, size, location, and color. All signs installed by
Tenant shall comply with Landlords standards for signs and all applicable codes
and all signs and sign hardware shall be removed upon termination of this lease
with the sign Location restored to its former state unless Landlord elects to
retain all or any portion thereof.




5.1
Utilities and Services.


Landlord
will furnish water and electricity to the Building at all times and will furnish
heat and air conditioning (if the Building is air conditioned) during the normal
Building hours as established by Landlord. Janitorial service will be provided
in accordance with the regular schedule of the Building, which schedule and
service may change from time to time. Tenant shall comply with all government
laws or regulations regarding the use or reduction of use of utilities on the
Premises. Interruption of services or utilities shall not be deemed an eviction
or disturbance of Tenant's use and possession of the Premises, render Landlord
liable to Tenant for damages, or relieve Tenant from performance of Tenant's
obligations under this lease. Landlord shall take all reasonable steps to
correct any interruptions in service. Electrical service furnished will be 114
volts unless different service already exists in the Premises. Tenant shall
provide its own surge protection for power furnished to the
Premises.




5.2 Extra
Usage.


If Tenant
uses excessive amounts of utilities or services of any kind because of operation
outside of normal Building hours, high demands from office machinery and
equipment, nonstandard lighting, or any other cause. Landlord may impose a
reasonable charge for supplying such extra utilities or services, which charge
shall be payable monthly by Tenant in conjunction with rent payments. in cast of
dispute over any extra charge under this paragraph, Landlord shall designate a
qualified independent engineer whose decision shall be conclusive on both
parties. Landlord and Tenant shall each pay one-half of the cost of such
determination.




5.3
Security.


Landlord
may but shall have no obligation to provide security service or to adopt
security measures regarding the Premises, and Tenant shall cooperate with all
reasonable security measures adopted by Landlord. Tenant may install a security
system within the leased Premises with Landlord's written consent which will not
be unreasonably withheld. Landlord will be provided with an access code to any
security system and shall not have any liability for accidentally setting off
Tenant's security system. Landlord may modify the type or amount of security
measures or services provided to the Building or the Premises at any
time.




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6.1
Maintenance and Repair.


Landlord
shall have no liability for failure to perform required maintenance and repair
unless written notice of such maintenance or repair is given by Tenant and
Landlord fails to commence efforts to remedy the problem in a reasonable time
and meaner. Landlord shall have the right to erect scaffolding and other
apparatus necessary for the purpose of making repairs, and Landlord shall have
no liability for interference with Tenant's use because of repairs and
installations. Tenant shall have no claim against Landlord for any interruption
or reduction of services or interference with Tenant's occupancy, and no such
interruption or reduction shall be construed as a constructive or other eviction
of Tenant. Repair of damage caused by negligent or intentional acts or breach of
this lease by Tenant, its employees or invitees shall be at Tenant's
expense.




6.2
Alterations.


Tenant
shall not make any alterations, additions, or improvements to the Premises,
change the color of the interior, or install any wall or floor covering without
Landlord's prior written consent which may be withheld in Landlord's sole
discretion. Any such improvements, alterations, wiring, cables or conduit
installed by Tenant shall at once become part of the Premises and belong to
Landlord except for removable machinery and unattached movable trade fixtures.
Landlord may at its option require that Tenant remove any improvements,
alterations, wiring, cables or conduit installed by or for Tenant and restore
the Premises to the original condition upon termination of this lease. Landlord
shall have the right to approve the contractor used by Tenant for any work in
the Premises, and to post notices of non responsibility in connection with work
being performed by Tenant in the Premises. Work by Tennant shall comply with all
laws then applicable to the Premises.




7.1
Indemnity.


Tenant
shall not allow any liens to attach to the Building or Tenant's interest in the
Premises as a result of its activities. Tenant shall indemnify and defend
Landlord and its managing agents from any claim, liability, damage, or loss
occurring on the Premises, arising out o f any activity by Tenant, its agents,
or invitees or resulting from Tenant's failure to comply with any term of this
lease. Neither Landlord nor its managing agent shall have any liability to
Tenant because of loss or damage to Tenant's property or for death or bodily
injury caused by the acts or omissions of other Tenants of the Building, or by
third parties (including criminal acts).




7.2
Insurance.


Tenant
shall carry liability insurance with limits of not less than Two Million Dollars
($2,000,000) combined Single limit bodily injury and property damage which
insurance shall have an endorsement naming Landlord and Landlord's managing
agent, if any, as an additional insured, cover the liability insured under
paragraph 7.1 of this lease and be in form and with companies reasonably
acceptable to Landlord. Prior to occupancy, Tenant shall furnish a certificate
evidencing such insurance which shall state that the coverage shall not be
cancelled or materially changed without 10 days advance notice to Landlord and
Landlord's managing agent, if any. A renewed certificate shall be furnished at
least 10 days prior to expiration of any policy.




8.1 Fire
or Casualty.


"Major
Damage" means damage by fire or other casualty to the Building or the Premises
which causes the Premises or any substantial portion of the Building to be
unusable, or which will cost more than 25 percent of the pre-damage value of the
Budding to repair, or which is not covered by insurance. In case of Major
Damage, Landlord may elect to terminate this lease by notice in writing to the
Tenant within 30 days after such date. if this lease is not terminated following
Major Damage, or if damage occurs which is not Major Damage, Landlord shall
promptly restore the Premises to the condition existing just prior to the
damage. Tenant shall promptly restore all damage to tenant improvements or
alterations installed by Tenant or pay the cost of such restoration to Landlord
if Landlord elects to do the restoration of such improvements, Rent shall be
reduced from the date of damage until the date restoration work being performed
by Landlord is substantially complete, with the reduction to be in proportion to
the area of the Premises not useable by Tenant.


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15


8.2
Waiver of Subrogation.


Tenant
shall be responsible for insuring its personal property and trade (latrines
located on the Premises and any alterations or tenant improvements it has made
to the Premises. Neither Landlord, its managing agent nor Tenant shall be liable
to the other for any loss or damage caused by water damage, sprinkler leakage,
or any of the risks that are or could be covered by a special all risk property
insurance policy, or for any business interruption, and there shall be no
subrogated claim by one parry's insurance carrier against the other party
arising out of any such loss. This waiver is binding only if it does not
invalidate the insurance coverage of either party hereto.




9.1
Eminent Domain.


If a
condemning authority takes title by eminent domain or by agreement in lieu
thereof to the entire Building or a portion sufficient to render the Premises
unsuitable for Tenant's use, then either party may elect to terminate this lease
effective on the date that possession is taken by the condemning authority. Rent
shall be reduced for the remainder of the term in an amount proportionate to the
reduction in area of the Premises caused by the taking. All condemnation
proceeds shall belong to Landlord, and Tenant shall have no claim against
Landlord or the condemnation award because of the taking.




10.1
Assignment and Subletting.


This
least shall bind and inure to the benefit of the parties, their respective
heirs, successors, and assigns, provided that Tenant shall not assign its
interest under this lease or sublet all or any portion of the Premises without
fire: obtaining Landlord's consent in writing. This provision shall apply to all
transfers by operation of law including but not limited to mergers and changes
in control of Tenant. No assignment shall relieve Tenant of its obligation to
pay rent or perform other obligations required by this lease, and no consent to
one assignment or subletting shall be a consent to any further assignment or
subletting. Landlord shall not unreasonably withhold its consent to any
assignment or subletting provided the effective rental paid by the subtenant or
assignee is not less than the current scheduled rental rate of the Building for
comparable space and the proposed Tenant is compatible with Landlord's normal
standards for the Building. If Tenant proposes a subletting or assignment to
which Landlord is required to consent under this paragraph, Landlord shall have
the option of terminating this lease and dealing directly with the proposed
subtenant or assignee, or any third party. If an assignment or subletting is
permitted, any cash profit, or the net value of any other consideration received
by Tenant as a mush of such transaction shall be paid to Landlord promptly
following its receipt by Tenant. Tenant shall pay any casts incurred b1 Landlord
in connection with e request for assignment or subletting, including reasonable
attorneys' fees.




11.1
            Default.


Any of
the following shall constitute a default by Tenant under this
lease:


(a)
            Tenant's
      failure to pay rent when due, or any other charge under this lease within
      10 days after it is due, or failure to comply with any other term or
      condition within 20 days following written notice from Landlord specifying
      the noncompliance. If such noncompliance cannot be cured within the 20-day
      period, this provision shall be satisfied if Tenant commences correction
      within such period and thereafter proceeds in good4aith and with
      reasonable diligence to effect compliance as soon as possible. Time is of
      the essence of this lease.


(b)
            Tenant's
      insolvency, business failure or assignment for the benefit of its
      creditors. Tenant's commencement of proceedings under any provision of any
      bankruptcy or insolvency law or failure to obtain dismissal of any
      petition filed against it under such laws within the time required to
      answer, or the appointment of a receiver for all or any portion of
      Tenant's properties or financial
records.


(c)
            Assignment
      or subletting by Tenant in violation of paragraph
  10.1.


(d)
            Vacation
      or abandonment of the Premises without the written consent of Landlord or
      failure to occupy the Premises within 20 days after notice from Landlord
      tendering possession.




11.2
Remedies for Default


In case
of default as described in paragraph 11.1 Landlord shall have the right to the
following remedies which are intended to be cumulative and in addition to any
other remedies provided under applicable law:


(a)
            Landlord
      may at its option terminate the lease by notice to Tenant. With or without
      termination, Landlord may retake possession of the Premises and may use or
      rein the Premises without accepting a surrender or waiving the right to
      damages. Following such retaking of possession, efforts by Landlord to
      reel the Premises shall be sufficient if Landlord follows its usual
      procedures for finding tenants for the space at rates not less than the
      current rates for other comparable space in the Building. If Landlord has
      other vacant space in the Building, prospective tenants may be placed in
      such other space without prejudice to Landlord's claim to damages or loss
      of rentals from Tenant.


(b)
            Landlord
      may recover all damages caused by Tenant’s default which shall include an
      amount equal to rentals lost because of the default, lease commissions
      paid for this lease, and the unamortized cost of any -tenant
      improvements installed by Landlord to meet Tenant's special requirements.
      Landlord may sue periodically to recover damages as they occur throughout
      the lease term, and no action for accrued damages shall bar a later action
      for damages subsequently accruing. Landlord may elect in any one action to
      recover accrued damages plus damages attributable to the remaining term of
      the lease. Such damages shall be measured by the difference between the
      rent under this lease and the reasonable rental value of the Premises for
      the remainder of the term, discounted to the time of judgment at the
      prevailing interest rate on
judgments.


(c)
            Landlord
      may make any payment or perform any obligation which Tenant has failed to
      perform, in which case Landlord shall be entitled to recover from Tenant
      upon demand all amounts so expended, plus interest from the date of the
      expenditure at the rate of one-and-one-half percent pc r month. Any such
      payment or performance by Landlord shall not waive Tenant's
      default.




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12.1
Surrender.


On
expiration or early termination of this lease Tenant shall deliver all keys
tot
Landlord and surrender the Premises vacuumed, swept, and free of debris and in
the same condition as at the commencement of the term subject only to reasonable
we from ordinary use. Tenant shall remove all of its furnishings and trade
fixtures that remain its property and repair all damage resulting from such
removal. Failure to remove shall beam abandonment of the property, and Landlord
may dispose of it in any manner without liability. If Tenant fails to vacate the
Premises when required, including failure to remove all its personal property,
Landlord may elect either (i) to treat Tenant as a tenant from month to month,
subject to the provisions of this lease except that rent shall be one hundred
fifty percent of the total rent being charged when the lease term expired, and
any option or other rights regarding extension of the term or expansion of the
Premises shall no longer apply; or (ii) to eject Tenant from the Premises and
recover damages caused by wrongful holdover.




13.1
Regulations.


Landlord
shall have the right but shall not be obligated to make, revise and enforce
regulations or policies consistent with this lease for the purpose of promoting
safety, health (including moving, use of common areas and prohibition of
smoking), order, economy, cleanliness, and good service to all tenants of the
Building. All such regulations and policies shall be complied with as if part of
this lease.




14.1
Access.


During
times other than normal Building hours Tenant's officers and employees or those
having business with Tenant may be required to identify themselves or show
passes in order to gain access to the Building. Landlord shall have no liability
for permitting or refusing to permit access by anyone. Landlord may regulate
access to any Building elevators outside of normal Building hours. Landlord
shall have the right to enter upon the Premises at any time by passkey or
otherwise to determine Tenant's compliance with this lease, to perform necessary
services, maintenance and repairs or alterations to the Building or the
Premises, or to show the Premises to any prospective tenant or purchasers.
Except in case of emergency such entry shall be at such times and in such manner
as to minimize interference with the reasonable business use of the Premises by
Tenant.




14.2
Furniture and Bulky Articles.


Tenant
shall move furniture and bulky articles in and out of the Building or make
independent use of the elevators only at times approved by Landlord following at
least 24 hours written notice to Landlord of the intended move. Landlord will
not unreasonably withhold its consent under this paragraph.




15.1
Notices.


Notices
between the parties relating to this lease shall be in writing, effective when
delivered, or if mailed, effective on the second day following mailing, postage
prepaid, to the address for the party stated in this lease or to such other
address as either party may specify by notice to the other. Notice to Tenant may
always be delivered to the Premises. Rent shall be payable to Landlord at the
same address and in the same manner, but shall be considered paid only when
received.




16.1
Subordination and Atonement.


This
lease shall be subject to and subordinate to any mortgages, deeds of trust, or
land sale contracts (here
after collectively referred to as encumbrances) now existing against the
Building. At Landlord's option this lease shall be subject and subordinate to
any future encumbrance hereafter placed against the Building (including the
underlying land) or any modifications of existing encumbrances, and Tenant shall
execute such documents as may reasonably be requested by Landlord or the holder
of the encumbrance to evidence this subordination. If any encumbrance is
foreclosed, then if the purchaser at foreclosure sale gives to Tenant a written
agreement to recognize Tenant's lease, Tenant shall attorn to such purchaser and
this Lease shall continue.




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16.2
Transfer of Building.


If the
Building is sold or otherwise transferred by Landlord or any successor, Tenant
shall attorn to the purchaser or transferee and recognize it as the lessor under
this lease, and, provided the purchaser or transferee assumes all obligations
hereunder, the transferor shall have no further liability
hereunder.




16.3
Estoppels.


Either
party will within 10 days after notice from the other execute, acknowledge and
deliver to the other party a certificate certifying whether or not this lease
has been modified and is in full fierce and effect; whether there ere any
modifications or alleged breaches by the other party; the dates to which rent
has been paid in advance, and the amount of any security deposit or prepaid
rent; and any other facts that may reasonably be requested Failure to deliver
the certificate within the specified time shall be conclusive upon the party of
whom the certificate was requested that the lease is in full force and effect
and has not been modified except as may be represented by the party requesting
the certificate. If requested by the holder of any encumbrance, or any ground
lessor, Tenant will agree to give such holder or lessor notice of and an
opportunity to cure any default by Landlord under this lease.




17.1
Attorneys' Fees.


In any
litigation arising out of this lease, the prevailing party shall be entitled to
recover attorneys' fees at trial and on any appeal. If Landlord incurs
attorneys' fees bemuse of a default by Tenant, Tenant shall pay all such fees
whether or not litigation is filed.




18.1
Quiet Enjoyment.


Landlord
warrants that so long as Tenant complies with all terms of this lease it shall
be entitled to peaceable and undisturbed possession of the Premises free from
any eviction or disturbance by Landlord. Neither Landlord nor its managing agent
shall have any liability to Tenant for loss or damages arising out of the acts,
including criminal acts, of other tenants of the Building or third parties, nor
any liability for any reason which exceeds the value of its interest in the
Building.




19.1
Additional Rent-Tax Adjustment.


Whenever
for any July 1 - June 30 tax year the real property taxes levied against the
Building and its underlying land exceed those levied for the 2009-2010 tax year,
then the monthly rental for the next succeeding calendar year shall be increased
by one-twelfth of such tax increase times Tenant's Proportionate Share., `Real
property taxes" as used herein means all taxes and assessments of any public
authority against the Building and the land on which it is located, the cost of
contesting any tax and any form of fee or charge imposed on Landlord as a direct
consequence of owning or teasing the Premises, including but not limited to rent
taxes, gross receipt taxes, leasing taxes, or any fee or charge wholly or
partially in lieu of or in substitution for ad valorem real property taxes or
assessments, whether now existing or hereafter enacted. If any portion of the
Building is occupied by a tax-exempt tenant so that the Building has a partial
lax exemption under ORS 307.112 or a similar statute, then real property taxes
shall Mean taxes computed as .f such partial exemption did not exist. If a
separate assessment or identifiable tax increase arises because of improvements
to the Premises, then Tenant shall pay 100 percent of such
increase.




19.2
Additional Rent-Cost-of-Living Adjustment.


Deleted.




19.3
Operating Expense Adjustment.


Tenant
shall pay as additional rent Tenant's Proportionate Share of the amount by which
operating expenses for the Building increase over those experienced by Landlord
during the calendar year 2009 (base year), Effective January 1 of each year
Landlord shall estimate the amount by which operating expenses are expected to
increase, if any, over those incurred in the base year. Monthly rental for that
year shall be increased by one-twelfth of Tenant's share of the estimated
increase provided that Landlord may revise its estimate during any year with
reasonable cause and the additional estimate shall be payable as equal
additions to rent for the remainder of the calendar year. Following the end of
each calendar year, Landlord shall compute the actual increase in operating
expenses and bill Tenant for any deficiency or credit Tenant with any excess
collected. Tenant shall pay any such deficiency within 30 days after Landlord's
billing, whether or not this lease shall have expired or terminated at the time
of such billing. As used herein "operating expenses" shall mean all costs of
operating and maintaining and repairing the Building as determined by standard
real estate accounting practice, including, but not limited to: all water and
sewer charges; the cost of natural gas and electricity provided to the Building;
janitorial and cleaning supplies and services; administration costs and
management fees; superintendent fees; security services, if any; insurance
premiums; licenses, permits for the operation and maintenance of the Building
and all of its component elements and mechanical systems; ordinary and emergency
repairs and maintenance, and a reserve equal to one-half percent (.05%) of gross
rental income for the Property to be expended on roof replacement, exterior
painting, asphalt resurfacing, and other miscellaneous matters not specified in
the preceding and the annual amortized capital improvement cost (amortized over
such a period as Landlord may select but not shorter than the life of the
improvement and at current market interest rate) for any capital improvements to
the Building required by any governmental authority or those which have a
reasonable probability of improving the operating efficiency of the Building.
"Operating Expenses" shall also include all assessments under recorded covenants
or master plans and/or by owner's associations. If electricity or other energy
costs increase between the date of this Lease and last day of the Base Year, (i)
Tenant shall pay to Landlord on a monthly basis as additional rent, its
Proportionate Share of such cost increase for the period from the date of such
increase until the first estimated payment due under this paragraph, and (ii)
Landlord may adjust the calculation of Base Year operating expenses by using the
energy costs in effect on the date of this Lease.




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19.4
Disputes.


If Tenant
disputes any computation of additional rent or rent adjustment under paragraphs
19.1 through 19.3 of this lease, it shall give notice to Landlord not later than
thirty days after the notice from Landlord describing the computation in
question, but in any event not later than 30 days after expiration or earlier
termination of this lease. If Tenant fails to give such a notice, the
computation by Landlord shall be binding and conclusive between the parties for
the period in question. If Tenant gives a timely notice, the dispute shall be
resolved by an independent certified public accountant selected by Landlord
whose decision shall be conclusive between the parties. Each party shall pay
one-half of the fee for making such determination except that if the adjustment
in favor of Tenant does not exceed ten percent of the escalation amounts for the
year in question, Tenant shall pay (i) the entire cost of any such third-party
determination; and (ii) Landlord's out-of-pocket costs and reasonable expenses
for personnel time in responding to the audit Nothing herein shall reduce
Tenants obligations to make all payments as required by this lease.




20.1
Mold.


Tenant
shall not allow or permit any conduct or omission at the Premises, or anywhere
on Landlord's property, that will promote or allow the production or growth of
mold, spores, fungus, or any other similar organism, and shall indemnify and
hold Landlord harmless from any claim, demand, cost, and expense (including
attorney fees) arising from or caused by Tenant's failure to strictly comply
with its obligations under this provision.




21.1
Complete Agreement; No Implied Covenants.


This
lease and the attached Exhibits and Schedules if any, constitute the entire
agreement of the parties and supersede all prior written and oral agreements and
representations and there are no implied covenants or other agreements between
the parties except as expressly set forth in this Lease. Neither Landlord nor
Tenant is relying on any representations other than those expressly set forth
herein.




21.2
Space Leased AS IS.




Unless
otherwise staled in this Lease, the Premises are leased AS IS in the condition
now existing with no alterations or other work to be performed by Landlord
except as stated in Exhibit C.




21.3
Captions.




The
titles to the paragraphs of this lease are descriptive only and are not intended
to change or influence the meaning of any paragraph or to be part of this
lease.




21.4
Nonwaiver.


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Failure
by Landlord to promptly enforce any regulation, remedy or right of any kind
under this Lease shall not constitute a waiver of the same and such right or
remedy may be asserted at any time after Landlord becomes entitled to the
benefit thereof notwithstanding delay in enforcement.





21.3
Contingency




All terms
and conditions of this Lease are subject to and are not binding until a fully
executed original is delivered to the Tenant




21.6
Exhibits.


The
following Exhibits are attached hereto and incorporated as a part of this
lease:




Exhibit A
- Floor Plan


Exhibit B
- Additional Provisions


Exhibit C
- Tenant Improvements


Exhibit D
- Rules & Regulations




IN
WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this lease as of the day and year first written above.


Landlord:
              Allen
      W. Wooddell, Successor Trustee
              By:
      __________________________________________________of
      the Margaret D. Ross Trust DatedSeptember
      3, 1975, as Amended andIain
      M. Ross Trustee of the Iain M. Ross Trust
              Title: _________________________________________________Address
      for notices:c/o
      Doug Bean & Associates, Inc.1211
      SW Fifth Avenue, Suite 1440Portland,
      OR 97204Tenant:
      ImageWare Systems, Inc.By: __________________________________________________Address
      for notices:
              Title:
      _________________________________________________10135
      S.E. Sunnyside RoadSuite
      230Clackamas,
      Oregon 97015
              By: __________________________________________________Title: _________________________________________________
  Page 8 of
15


EXHIBIT
A


Floor
Plan




[Missing
Graphic Reference]


Page 9 of
15


EXHIBIT
B


Additional
Provisions




21.1
            Additional
      Provisions as to Delivery of
Possession




The term
of the lease shall commence when the Premises have been tendered to Tenant ready
for occupancy. The Premises shall be deemed ready for occupancy when Landlord
has substantially completed the work designated to be performed by the Landlord
set forth in Exhibit C, the Tenant Improvements exhibit Substantially completed
shall mean completion of those items which are Landlord's responsibility, except
for those minor items which do not materially impair Tenant's usability of the
Premises or the Building and except for completion of those items which are
dependent upon work and installations to be performed by Tenant and which are
not yet performed. Upon the date the Premises are ready for occupancy, Tenant
shall be deemed to have accepted the Premises in their then condition unless on
or before said date Tenant has delivered to Landlord a “punch list" (as that
term is used in the construction industry) setting forth the deviations,
variations or omissions from the Tenant Improvements exhibit. The delivery of a
punch list shall not postpone the commencement of the term if the Premises are
ready for occupancy as defined herein. Following the commencement of the term,
Landlord shall complete any remaining items that are the responsibility of
Landlord with reasonable diligence.




23.1
            Parking




Parking
at the Building is based upon a ratio of 3.5 parking spaces per 1,000 rentable
square feet leased by Tenant, is unassigned and is on a first come, first served
basis at no additional charge to Tenant. Therefore, Tenant is entitled to
twenty-one (21) parking spaces. Parking in the parking areas shall be subject to
the Rules and Regulations attached hereto as Exhibit D, including Landlord's
right to amend and make other reasonable rules and regulations with respect to
parking as set forth in paragraph 13.1 of this lease.




24.1
            Hazardous
      Materials




During
the terns of this lease, Tenant shall not cause or permit any hazardous
Materials (as defined herein) to be placed, held, located or disposed of on, in
or under the Premises or to otherwise affect the Premises in any manner that
violates federal, state or local laws, ordinances, rules, regulations or
policies in effect hereafter adopted governing the use, storage, treatment,
transportation, manufacture, refinement, handling, production or disposal of
Hazardous Materials (collectively, the "Environmental Laws"). For purposes of
this paragraph, "Hazardous Materials" shall mean any flammable substances,
explosives, radioactive materials, medical wastes, hazardous materials,
hazardous wastes, toxic substances, pollutants, pollution or related materials
specified as such in, or regulated under, any of the Environmental Laws, At the
expiration or earlier termination of this lease, Tenant shall cause any
Hazardous Materials on or affecting the Premises in any manner that violate the
Environmental Laws to be cleaned Up and removed from the Premises at Tenant's
expense in such manner as to comply with the Environmental Laws. Tenant shall
indemnify, defend and hold Landlord harmless from and against any and all
losses, liabilities, claims and expenses (including reasonable attorney fees and
fees of environmental engineers) arising out of or in any way relating to any
default by Tenant pursuant to this paragraph. The foregoing indemnification
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any clean up, remedial, removal or
restoration work required under the Environmental Laws. The agreements and
indemnity by Tenant in this paragraph that survive the expiration or earlier
termination of this lease.




26.1
            No
      Brokers




Tenant
represents end warrants to Landlord that it has not engaged any broker, finder
or other person who would be entitled to any commission or fees in respect of
the negotiation, execution or delivery of this lease, and Tenant shall
indemnify, defend and hold Landlord harmless against any loss, cost, liability
or expense incurred by Landlord as a result of any claim asserted by any such
broker, finder or other person on the basis of any arrangements or agreements
made or alleged to have been made by or on behalf of Tenant. The provisions of
this paragraph shall not apply to brokers with whom
Landlord has an express written brokerage agreement.


Page 10
of 15




27.1
            Signage




Landlord
will provide its standard signage for Tenant on the Building lobby directory and
on Tenant's entrance door.




2.8.1
            Additional
      Provision as to Maintenance




Subject
to the provisions of paragraph 6.1, Landlord shall maintain the Building,
including public and common areas of the Building, in good condition and repair.
Except for the janitorial service to be provided by Landlord as provided in
paragraph 5.1, and subject to paragraph 8.1, the maintenance of the interior of
the Premises shall be the responsibility of Tenant and Tenant shall maintain the
Premises in good condition and repair during the term of this
lease.




29.1
            Additional
      Provision as to Assignment




If Tenant
is a corporation or a partnership, the transfer, assignment or change in the
ownership of any stock or partnership interest in the aggregate in excess of
forty-nine percent (49%) shall be deemed an assignment within the meaning of
paragraph 10.1.




30.1
            Additional
      Provisions as to Taxes




Where tax
increases as provided in paragraph 19.1 are applicable, the monthly rental for
the applicable fiscal tax year, commencing with July 1 of the fiscal year, shall
be increased by 1/12th of Tenant's share of the estimated increase Following the
end of the fiscal year (June 30), Landlord shall compute the actual increase and
bill Tenant for any deficiency or credit Tenant with any excess collected. When
the amount of the increase is known., Landlord may adjust the monthly estimate.
All real property taxes payable for a period, part of which shall be within the
lease term and pan of which shall be after the term, shall be prorated between
Landlord and Tenant at the expiration of the term or as soon thereafter as the
amount is determined.




31.1
            Force
      Majeure




Landlord
shall not be deemed in default for the nonperformance or for any interruption or
delay in performance of any of the terms, covenants and conditions of this lease
if the same shall be due to any labor dispute, strike, lock-out, civil commotion
or like operation, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, inability to obtain labor,
services or materials, or through act of God or causes beyond the reasonable
control of Landlord, provided such cause is not due to the willful act or
neglect of Landlord.




33.1
            Persons
      With Disabilities




Tenant
shall take all necessary action, at Tenant's expense, to cause the Premises to
be kept, maintained, used and occupied in compliance with the Americans with
Disabilities Act of 1990 and with all other federal, state and local laws,
ordinances, rules, regulations and requirements governing discrimination against
persons with disabilities as defined by applicable laws. The indemnity
provisions of paragraph 7.1 shall include, without limitation, Tenant's
obligation to indemnify, defend and hold Landlord and its managing agents
harmless from liability arising from Tenant's violation of any of the laws and
requirements above set forth in this paragraph.




34.1
            Contingency




All terms
and conditions of this Lease are subject to and are not binding until a fully
executed original is delivered to the Tenant.


Page 11
of 15


EXHIBIT
C


TENANT
IMPROVEMENTS




Landlord
shall improve the premises in accordance with the attached floor plan.
Landlord's work shall be restricted to construction documents, ceiling,
lighting, HVAC including the installation of two (2) 2-ton units in the server
room, electrical outlet, plumbing, wall construction, painting, carpet base and
fire life/safety work. Specifically excluded from the Landlord's work and cost
is all cabling for data, voice or telephone, or any other technology related
upgrade or retrofit, furniture and workstations.




All other
work shall be paid for by Tenant.




Page 12
of 15




EXHIBIT
D


RULES
AND REGULATIONS





1.
            The
      sidewalks, halls, passages, exits, entrances, and parking areas shall not
      be obstructed by Tenant or used by Tenant for any purpose other than
      access to the Leased Premises, Tenant shall not go on the roof of the
      building.





2.
            No
      awning, canopy, or other projection of any kind shall be installed over or
      around the windows and only such window coverings as are approved by
      Landlord shall be used in the Leased
premises.





3.
            The
      Leased Premises shall not be used for lodging or sleeping. Unless
      specifically authorized in Tenant's lease. no cooking shall be done or
      permitted by Tenant on the Leased Premises, except the preparation of
      coffee, tea, and similar items for Tenant and its employees, and use of a
      microwave.





4.
            Landlord
      will furnish Tenant with two keys to the Leased Premises, free of charge.
      No additional locking devices shall be installed without the prior written
      consent of Landlord, and Tenant shall furnish Landlord with a key for any
      such additional locking device. Tenant, upon termination of its tenancy,
      shall deliver to Landlord all keys to doors in the Leased
      Premises.





5.
            Tenant
      shall not use or keep in the Leased Premises or the building any kerosene,
      gasoline, or other flammable or combustible fluid or material or use any
      method of heating or air conditioning other than that supplied by Landlord
      provided, however, that Tenant shall be permitted to use or keep in the
      Leased premises any materials customarily used in its
      business.





6.
            In
      case of invasion, mob, riot, public excitement, or other circumstances
      rendering such action advisable in Landlord's opinion, Landlord reserves
      the right to prevent access to the building by such action as Landlord may
      deem appropriate, including closing entrances to the building, provided,
      however, that Landlord shall not be permitted to prevent access to the
      building due to a labor disturbance.
")





7.
            All
      perimeter doors to the building shall remain closed and securely lon4teci
      at all times after regular building hours. The doors of the Leased
      Premises shall remain closed and securely locked at such time as Tenant's
      employees leave the Leased Premises, after regular building
      hours.





8.
            The
      toilet rooms, toilets, urinals, wash bowls, and other apparatus in the
      Leased Premises and the building shall not be used for any purpose other
      than that for which they are intended, no foreign substance of any kind
      shall be deposited therein, and any damage resulting from Tenant's misuse
      shall be paid for by Tenant.





9.
            Except
      with the prior written consent of Landlord, the Leased Premises shall not
      be used for manufacturing of any kind, or for any business or other
      activity other than that specifically permitted under Tenants
      lease.





10.
            Tenant
      shall not install any radio, television, or similar antenna or aerial, nor
      any loudspeaker or other device, on the roof, exterior walls, or grounds
      of the building without obtaining prior written consent from
      Landlord.





11.
            Tenant
      shall not use in the Leased Premises or the building any hand-truck not
      equipped with rubber tires and side guards, nor any other
      material-handling equipment not approved in writing by Landlord. No other
      vehicles of any kind shall be brought by Tenant into the Leased Premises,
      including bicycles.





12.
            Tenant
      shall store its trash and garbage within the Leased Premises until daily
      removal as may be designated from time to time by Landlord. No material
      shall be placed in the building trash boxes or receptacles if such
      material may not be disposed of in the ordinary and customary manner in
      the Portland, Oregon metropolitan area without being in violation of any
      law or ordinance governing such
disposal.





13.
            All
      loading and unloading of merchandise, supplies, materials, garbage and
      refuse and delivery or removal of the same to or from the Leased Premises
      shall be made only through such entryways and at such time as Landlord may
      designate from time to time. Tenant shall not obstruct or permit the
      obstruction of any loading areas used by other tenants in the building,
      and at o time shall Tenants park vehicles in a loading area except for
      loading or unloading.  Page
13 of 15




14.
            Canvassing,
      soliciting, peddling, and distributing of handbills or other written
      material in the building is prohibited and Tenant shall cooperate to
      prevent same.





15.
            Tenant
      shall not permit the use or the operation of any operated machines on the
      Leased Premises, including without limitation vending machines, video
      games, pinball machines, or pay telephones, without the prior written
      consent of Landlord. However, Tenant shall be permitted to install inside
      its Leased Premises snack vending machines for the use of Tenant's
      employees and invitees.





16.
            Landlord
      may direct the use of pest extermination and scavenger contractors at such
      intervals as Landlord may
determine.





17.
            Tenant
      shall, immediately upon request from Landlord (which request need not be
      in writing), reduce its lighting in the Leased Premises for temporary
      periods designated by Landlord, when required in Landlord's judgment to
      prevent overloads of the mechanical or el electrical systems of the
      building; provided, however, that Tenant shall not be required to reduce
      its lighting if such reduction would interfere with Tenant's use of the
      Leased Premises for its business.





18.
            Tenant
      shall not refer to the building by any name(s) other than the name(s)
      selected by Landlord (as same may be changed from time to time) or the
      postal address (es) as designated by the United States Post Office. Tenant
      shall not use the name(s) of the building other than as the address of its
      operation. However, Tenant may, at its option, use the name of the
      building, or a variant thereof, in the name of its business in the
      building. Tenant shall not be required to change the name of its business
      if Landlord changes the name of the
building.





19.
            Employees
      of Landlord shall not perform any work for or on behalf of Tenant or do
      anything outside of their regular duties unless under special instructions
      from Landlord.





20.
            Tenant
      shall not park any vehicles in the business park overnight or permit any
      of its vehicles to remain at the business park after Tenant’s business
      hours; provided that any vehicle which is temporarily disabled or which
      cannot be moved due to inclement weather may be left at the business park
      for up to, but not more than, 24
hours.





21.
            Tenant’s
      employees shall park only in those areas of the building designated by
      Landlord from time to time for such purpose. Any vehicle improperly parked
      by an employee of Tenant may be towed or otherwise removed by
      Landlord.





22.
            Smoking
      is prohibited in all areas of the
building.





23.
            Tenant
      must provide, at its own expense, protection to the carpets from chair
      wheels or other abnormal wear, tear, or staining. Tenant shall be
      responsible for replacing carpet where damage has occurred due to lack of
      said protection, Tenant shall be responsible for heavy stain removal and
      periodic shampooing of carpet. It is recommended that carpets be shampooed
      at least annually.





24.
            If
      Tenant elects to install a monitored security system within its Leased
      Premises, neither the Landlord nor its contractors
      shall be held responsible for setting off the alarm mistakenly, or for any
      fines which may be levied.







25.
            The
      normal building hours are from 8:00 AM to 6:00 PM Monday through Friday
      except holidays.





26.
            All
      Tenant's Alterations shall be performed in accordance with Landlord's
      Conditions for Renovation.





27.
            Landlord
      may waive any one or more of these Rules and Regulations in favor of a
      particular tenant or tenants, but no such waiver by Landlord shall be
      construed as a waiver of these Rules and Regulations in favor of any other
      tenant, nor prevent Landlord from thereafter enforcing any such Rules and
      Regulations against any or all tenants of the
  building.




Page
14 of 15




28.
            The
      word "Tenant" as used in these Rules and Regulations shall mesa and
      include Tenant's assigns, agents, clerks, employees, licensees, invitees,
      and visitors. The word "Landlord" as used in these Rules and Regulations
      shall mean and include “Landlord's assigns, agents, clerks, employees,
      licensees, invitees, and visitors."





29.
            These
      Rules and Regulations are in addition to, and shall not be construed in
      any way to modify, alter, or amend, the conditions of Tenant's Lease. In
      the event of a conflict between these Rules and Regulations and Tenant's
      Lease, the Lease shall govern.





30.
            Landlord
      reserves the right to amend these Rules and Regulations and to make such
      other reasonable rules and regulations that in its judgment may from time
      to time be needed for Ole safety, cart, and cleanliness of the building
      and for the preservation of good order
therein.





31.
            Parking
      Rules & Regulations:





a.
            Parking
      is allowed only in designated (stripped) parking
stalls.b.
            No
      over-night parking is allowed.c.
            Vehicle
      owner and/or operator shall be responsible for damages or injuries caused
      by faulty operation or any other defect of vehicle or by failure of
      operator to set the vehicle's brake.d.
            Vehicle
      operator/parker assumes the risk of any loss or damage to the -vehicle or personal
      property left therein, including but not limited to damage caused by fire,
      theft, acts of God, acts of any third party or any other
      causes.e.
            Except
      for emergency repair by a licensed service, no vehicle repairer
      maintenance work is allowed in the parking lot without prior permission of
      the Landlord.f.
            All
      parking is unreserved on a first come first served
  basis.g.
            Landlord
      has the right to modify these rules and regulations as
      needed.­­






Page 15 of 15