EXHIBIT
10.47




IMAGEWARE SYSTEMS, INC.
  SECURITY
AGREEMENT
  This
Security Agreement (as amended, modified or otherwise supplemented from time to
time, this “Security
Agreement”), dated as of February 12, 2009, is executed by ImageWare
Systems, Inc., a Delawarecorporation (“Company”), in favor of BET
Funding LLC, a Delaware limited liability company (together with its successors
and assigns, “Lender”).
  RECITALS
  A.           Company
has issued to Lender a promissory note (the “Note”), dated as of the date
hereof in an aggregate principal amount of up to $5,000,000 in favor of
Lender.
  B.           In
order to induce Lender to extend the credit evidenced by the Note, Company has
agreed to enter into this Security Agreement and to grant Lender, the security
interest in the Collateral described below.
  AGREEMENT
  NOW,
THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Company hereby agrees with Lender as follows:
  1.           Definitions and
Interpretation.  When used in this Security Agreement, the
following terms have the following respective meanings:
  “Collateral” has the meaning
given to that term in Section 2 hereof.
  “Event of
Default”  shall have the meaning ascribed to such term in the
Note.
  “Financing Documents” shall
have the meaning ascribed to such term in the Note.
  “Liens” means any mortgage,
pledge, security interest, encumbrance, lien or charge of any kind (including,
without limitation, any conditional sale or other title retention agreement or
lease in the nature thereof), any sale of receivables with recourse against
Company, any filing or agreement to file a financing statement as debtor under
the UCC or any similar statute or any subordination arrangement in favor of
another person.
  “Obligations” means all loans,
advances, debts, liabilities and obligations, howsoever arising, owed by Company
to Lender of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), now existing or
hereafter arising, under or pursuant to the terms of the Note, this Security
Agreement or the other Financing Documents, including, all interest, fees,
charges, expenses, attorneys’ fees and costs and accountants’ fees and costs
chargeable to and payable by Company hereunder and thereunder, in each case,
whether direct or indirect, absolute or contingent, due or to become due, and
whether or not arising after the commencement of a proceeding under Title 11 of
the United States Code (11 U.S.C. Section 101 et seq.), as amended from time to
time (including post-petition interest) and whether or not allowed or allowable
as a claim in any such proceeding.
  
 “Permitted Liens” means (a)
Liens for taxes not yet delinquent or Liens for taxes being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established; and (b) Liens in favor of Lender.
  “UCC” means the Uniform
Commercial Code as in effect in the State of Delaware from time to
time.
  All
capitalized terms not otherwise defined herein shall have the respective
meanings given in the Note. Unless otherwise defined herein, all terms defined
in the UCC have the respective meanings given to those terms in the
UCC.
  2.           Grant of Security
Interest.  As security for the Obligations, Company hereby
pledges to Lender and grants to Lender a first priority lien on and security
interest in and to all right, title and interests of Company in and to the
property described in Attachment 1 hereto,
whether now existing or hereafter from time to time acquired (collectively, the
“Collateral”).
  3.           General Representations and
Warranties.  Company represents and warrants to Lender that
(a) Company is the owner of the Collateral (or, in the case of
after-acquired Collateral, at the time Company acquires rights in the
Collateral, will be the owner thereof) and that no other Person has (or, in the
case of after-acquired Collateral, at the time Company acquires rights therein,
will have) any right, title, claim or interest (by way of Lien or otherwise) in,
against or to the Collateral, other than Permitted Liens; (b) upon the
filing of UCC-1 financing statements in the appropriate filing offices, Lender
has (or in the case of after-acquired Collateral, at the time Company acquires
rights therein, will have) a first priority perfected security interest in the
Collateral to the extent that a security interest in the Collateral can be
perfected by such filing, except for Permitted Liens; (c) all Inventory has
been (or, in the case of hereafter produced Inventory, will be) produced in
compliance with applicable laws, including the Fair Labor Standards Act;
(d) all accounts receivable and payment intangibles are genuine and
enforceable against the party obligated to pay the same; (e) the originals of
all documents evidencing all accounts receivable and payment intangibles of
Company and the only original books of account and records of Company relating
thereto are, and will continue to be, kept at the address of Company set forth
in Section 7 of this Security Agreement.
  4.           Covenants Relating to
Collateral.
  (a)           Company
hereby agrees (a) to perform all acts that may be necessary to maintain,
preserve, protect and perfect the Collateral, the Lien granted to Lender therein
and the perfection and priority of such Lien, except for Permitted Liens;
(b) not to have any other Liens, except Permitted Liens, placed on the
Collateral; (c) not to use or permit any Collateral to be used (i) in
violation in any material respect of any applicable law, rule or regulation, or
(ii) in violation of any policy of insurance covering the Collateral;
(d) to pay promptly when due all taxes and other governmental charges, all
Liens and all other charges now or hereafter imposed upon or affecting any
Collateral; (e) without 30 days’ written notice to Collateral Agent,
(i) not to change Company’s name or place of business (or, if Company has
more than one place of business, its chief executive office), or the office in
which Company’s records relating to accounts receivable and payment intangibles
are kept, (ii) not to change Company’s state of incorporation, or
(f) to procure, execute and deliver from time to time any endorsements,
assignments, financing statements and other writings reasonably deemed necessary
or appropriate by Lender to perfect, maintain and protect its Lien hereunder and
the priority thereof and to deliver promptly upon the request of Lender all
originals of Collateral consisting of instruments.
  2
 (b)           Company
hereby further agrees to (i) notify Lender, in writing, at such time or times
that Company enters into a Material Contract and (ii) perform all acts that may
be necessary to maintain, preserve, protect and perfect a security interest in
such Material Contract, the Lien granted to Lender therein and the perfection
and priority of such Lien.  Upon Lender's request, Company shall
provide copies of any Material Contracts to Lender.  For purposes of
this Section
4(b), "Material
Contract" means any agreement not made in the ordinary course of
Company's business or an agreement that requires payments of $100,000 or more,
in which Company or any subsidiary of Company is a party or has a beneficial
interest.
  5.           Authorized Action by
Lender.  Company hereby irrevocably appoints Lender, or any
Person that Lender may designate, as its attorney-in-fact (which appointment is
coupled with an interest), at Company’s expense, and agrees that Lender may
perform (but Lender shall not be obligated to and shall incur no liability to
Company or any third party for failure so to do) any act which Company is
obligated by the Note or this Security Agreement to perform, and to exercise
such rights and powers as Company might exercise with respect to the Collateral,
including the right to (a) collect by legal proceedings or otherwise and
endorse, receive and receipt for all dividends, interest, payments, proceeds and
other sums and property now or hereafter payable on or on account of the
Collateral; (b) enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral; (c) make any
compromise or settlement, and take any action it deems advisable, with respect
to the Collateral; (d) pay any indebtedness of Company relating to the
Collateral; (e)  insure, process and preserve the Collateral; and
(f) file UCC financing statements and execute other documents, instruments
and agreements required hereunder; provided, however, that Lender
shall not exercise any such powers granted pursuant to subsections (a) through
(d) prior to the occurrence of an Event of Default and shall only exercise such
powers during the continuance of an Event of Default.  Company agrees
to reimburse Lender upon demand for any reasonable costs and expenses, including
attorneys’ fees, Lender may incur while acting as Company’s attorney-in-fact
hereunder, all of which costs and expenses are included in the
Obligations.  It is further agreed and understood between the parties
hereto that such care as Lender gives to the safekeeping of its own property of
like kind shall constitute reasonable care of the Collateral when in Lender’s
possession; provided, however, that Lender
shall not be required to make any presentment, demand or protest, or give any
notice and need not take any action to preserve any rights against any prior
party or any other person in connection with the Obligations or with respect to
the Collateral.
  3
 6.           Default and
Remedies.
  (a)           Default.  Company
shall be deemed in default under this Security Agreement upon the occurrence and
during the continuance of an Event of Default.
  (b)           Remedies.  Upon
the occurrence and during the continuance of any such Event of Default, Lender
shall have the rights of a secured creditor under the UCC, all rights granted by
this Security Agreement and by law, including the right
to:  (a) enter Company’s premises and take possession of the
Collateral or dispose of the Collateral on the Premises, (b) require Company to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender; (c) prior to the disposition of the Collateral,
store, process, repair or recondition it or otherwise prepare it for disposition
in any manner and to the extent Lender deems appropriate; and (d) sell or
dispose of the Collateral pursuant to a sale under the UCC, if
applicable.  Company hereby agrees that ten (10) days’ notice of any
intended sale or disposition of any Collateral is reasonable.  In
furtherance of Lender’s rights hereunder, Company hereby grants to Lender an
irrevocable, non-exclusive license, exercisable without royalty or other payment
by Lender, and only in connection with the exercise of remedies hereunder, to
use, license or sublicense any patent, trademark, trade name, copyright or other
intellectual property in which Company now or hereafter has any right, title or
interest together with the right of access to all media in which any of the
foregoing may be recorded or stored.
  (c)           Application of Collateral
Proceeds.  The proceeds and/or avails of the Collateral, or any
part thereof, and the proceeds and the avails of any remedy hereunder (as well
as any other amounts of any kind held by Lender at the time of, or received by
Lender after, the occurrence of an Event of Default) shall be paid to and
applied as follows:
  (i)      First, to the payment
of reasonable costs and expenses, including all amounts expended to preserve the
value of the Collateral, of foreclosure or suit, if any, and of such sale and
the exercise of any other rights or remedies, and of all proper fees, expenses,
liability and advances, including reasonable legal expenses and attorneys’ fees,
incurred or made hereunder by Collateral Agent;
  (ii)      Second, to the
payment to Lender of the amount then owing or unpaid on Lender’s Note, and in
case such proceeds shall be insufficient to pay in full the whole amount so
due;
  (iii)     Third, to the payment
of the surplus, if any, to Company, its successors and assigns, or to whomsoever
may be lawfully entitled to receive the same.
  7.           Miscellaneous.
  (a)           Notices.  Except
as otherwise provided herein, all notices, requests, demands, consents,
instructions or other communications to or upon Company or Lender under this
Security Agreement shall be in writing and faxed, mailed or delivered to each
party to the facsimile number or its address set forth below (or to such other
facsimile number or address as the recipient of any notice shall have notified
the other in writing).  All such notices and communications shall be
effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such
service; (b) when mailed, by registered or certified mail, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (c) when delivered by hand, upon delivery; and (d) when faxed,
upon confirmation of receipt.
  4
 Lender:
  BET
Funding LLC
 C/o 250
Gibraltar Road
 Horsham,
PA  19044
 Telephone:
215-938-8000
 Facsimile:  215-938-8019
  Company:
  ImageWare
Systems, Inc.
 10883
Thornmint Road
 San
Diego, CA 92127
 Attn: Mr.
Wayne Wetherell
 Telephone:
858-673-8600
 Facsimile:  858-673-0291
  (b)           Termination of Security
Interest.  Upon the payment, performance and satisfaction in
full of all Obligations, the security interest granted herein shall immediately
terminate and all rights to the Collateral shall revert to Company.
  (c)           Nonwaiver.  No
failure or delay on Lender’s part in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right.
  (d)           Amendments and
Waivers.  This Security Agreement may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by Company and Lender.  Each waiver or consent under any
provision hereof shall be effective only in the specific instances for the
purpose for which given.
  (e)           Assignments.  This
Security Agreement shall be binding upon and inure to the benefit of Lender and
Company and their respective successors and assigns; provided, however, that Company
may not sell, assign or delegate rights and obligations hereunder without the
prior written consent of Lender.
  (f)           Cumulative Rights,
etc.  The rights, powers and remedies of Lender under this
Security Agreement shall be in addition to all rights, powers and remedies given
to Lender by virtue of any applicable law, rule or regulation of any
governmental authority, any Financing Document or any other agreement, all of
which rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Lender’s rights
hereunder.  Company waives any right to require Lender to proceed
against any person or entity or to exhaust any Collateral or to pursue any
remedy in Lender ‘s power.
  5
 (g)           Payments Free of Taxes,
Etc.  All payments made by Company under the Financing
Documents shall be made by Company free and clear of and without deduction for
any and all present and future taxes, levies, charges, deductions and
withholdings.  In addition, Company shall pay upon demand any stamp or
other taxes, levies or charges of any jurisdiction with respect to the
execution, delivery, registration, performance and enforcement of this Security
Agreement.  Upon request by Lender, Company shall furnish evidence
satisfactory to Lender that all requisite authorizations and approvals by, and
notices to and filings with, governmental authorities and regulatory bodies have
been obtained and made and that all requisite taxes, levies and charges have
been paid.
  (h)           Partial
Invalidity.  If at any time any provision of this Security
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Security Agreement nor the legality, validity
or enforceability of such provision under the law of any other jurisdiction
shall in any way be affected or impaired thereby.
  (i)           Expenses.  Company
shall pay all reasonable fees and expenses, including reasonable attorneys’ fees
and expenses, actually incurred by Lender in connection with realization on, any
of the Collateral or the enforcement or attempt to enforce any of the
Obligations which is not performed as and when required by this Security
Agreement.
  (j)           Entire
Agreement.  This Security Agreement taken together with the
other Financing Documents constitute and contain the entire agreement of Company
and Lender and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
  (k)           Other Interpretive
Provisions.   References in this Security Agreement and
each of the other Financing Documents to any document, instrument or agreement
(a) includes all exhibits, schedules and other attachments thereto,
(b) includes all documents, instruments or agreements issued or executed in
replacement thereof, and (c) means such document, instrument or agreement,
or replacement or predecessor thereto, as amended, modified and supplemented
from time to time and in effect at any given time.  The words
“hereof,” “herein” and “hereunder” and words of similar import when used in this
Security Agreement or any other Financing Document refer to this Security
Agreement or such other Financing Document, as the case may be, as a whole and
not to any particular provision of this Security Agreement or such other
Financing Document, as the case may be.  The words “include” and
“including” and words of similar import when used in this Security Agreement or
any other Financing Document shall not be construed to be limiting or
exclusive.
  (l)           Governing
Law.  This Security Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without reference
to conflicts of law rules.  Company and Lender hereby consent to the
personal jurisdiction of the state and/or federal courts of the State of
Delaware for the resolution of any controversies arising out of or relating to
this Security Agreement, the Note of any of the other Financing
Documents.
  (m)           Counterparts. This
Security Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall be deemed to constitute
one instrument.
  6
 (n)           Jury
Trial Waiver.  COMPANY AND LENDER WAIVE ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, BETWEEN COMPANY AND LENDER ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS SECURITY AGREEMENT, THE NOTE OR ANY OTHER FINANCING
DOCUMENT.
  (o)           Seal.  This Security
Agreement is intended to take effect as an instrument under seal.
  7
 IN
WITNESS WHEREOF, Company has caused this Security Agreement to be executed as of
the day and year first above written.
  IMAGEWARE
SYSTEMS, INC.
  By:/s/  S.
James Miller
 S.
James Miller, CEO
   
 ATTACHMENT
1
  To Security Agreement
  All
right, title, interest, claims and demands of Company in and to the following
property:
  (i)      All
goods and equipment now owned or hereafter acquired, including, without
limitation, all laboratory equipment, computer equipment, office equipment,
machinery, fixtures, vehicles, and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
  (ii)           All
inventory now owned or hereafter acquired, including, without limitation, all
merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products including such inventory as is temporarily
out of Company’s custody or possession or in transit and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Company’s books relating to any of the
foregoing;
  (iii)           All
contract rights, general intangibles, health care insurance receivables, payment
intangibles and commercial tort claims, now owned or hereafter acquired,
including, without limitation, all patents, patent rights (and applications and
registrations therefor), trademarks and service marks (and applications and
registrations therefor), inventions, copyrights, mask works (and applications
and registrations therefor), trade names, trade styles, software and computer
programs, trade secrets, methods, processes, know how, drawings, specifications,
descriptions, and all memoranda, notes, and records with respect to any research
and development, goodwill, license agreements, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer disks, computer tapes, literature, reports,
catalogs, design rights, income tax refunds, payments of insurance and rights to
payment of any kind and whether in tangible or intangible form or contained on
magnetic media readable by machine together with all such magnetic
media;
  (iv)           All
now existing and hereafter arising accounts, contract rights, royalties, license
rights and all other forms of obligations owing to Company arising out of the
sale or lease of goods, the licensing of technology or the rendering of services
by Company (subject, in each case, to the contractual rights of third parties to
require funds received by Company to be expended in a particular manner),
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Company and Company’s books relating to any of the
foregoing;
  (v)           All
documents, cash, deposit accounts, letters of credit, letter of credit rights,
supporting obligations, certificates of deposit, instruments, chattel paper,
electronic chattel paper, tangible chattel paper and investment property,
including, without limitation, all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity contracts
and commodity accounts, and all financial assets held in any securities account
or otherwise, wherever located, now owned or hereafter acquired and Company’s
books relating to the foregoing; and
  (vi)           Any
and all claims, rights and interests in any of the above and all substitutions
for, additions and accessions to and replacements, products and proceeds
thereof, including, without limitation, insurance, condemnation, requisition or
similar payments and the proceeds thereof.