Exhibit 4.1


 


REGISTRATION RIGHTS AGREEMENT


 


THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of December 19, 2007, is entered into by and among ImageWare
Systems, a Delaware corporation (the “Company”),
Sol Logic, Inc., a California corporation (“Holder”),
and Wink Jones, in his capacity as the representative of Seller (the “Seller Representative”). All
capitalized terms used but not defined herein shall have the meanings ascribed
thereto in that certain Asset Purchase Agreement dated as of even date
herewith, by and among the Company, Holder and the Seller Representative (the “Purchase
Agreement”).


 


NOW, THEREFORE, each of the Company, Holder and the Seller
Representative hereby agrees as follows:


 


1.                                       In addition to those terms defined elsewhere
in this Agreement, the following terms shall have the following meanings
wherever used in this Agreement:


 


(a)                                  “Business Day” means a day Monday through Friday on which
banks are generally open for business in New York.


 


(b)                                 The terms “register,”  “registered”
and “registration” refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.


 


(c)                                  “Registrable Securities” means an aggregate of 306,185 Shares issued
to Holder pursuant to the Purchase Agreement, in any case only for so long as
all Shares (A) have not been disposed of pursuant to a registration
statement declared effective by the SEC, (B) have not been sold in a
transaction exempt from the registration and prospectus delivery requirements
of the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale, (C) are
not eligible to be sold under Rule 144 during any 90-day period without
any limitations as to volume or holding period.


 


(d)                                 “Registration Expenses” means the expenses incurred by the Company
in preparing the Registration Statement, including, without limitation, fees
and expenses of counsel for the Company, blue sky fees and expenses, the
registration fee for the Registration Statement, printing and delivery expenses
of the Registration Statement and the final prospectus related thereto filed
pursuant to Rule 424(b) of the Securities Act (the “Final Prospectus”), including any
supplement or amendment thereto, and the expense of any special audits incident
to or required by any such registration (but excluding all Selling Expenses).


 


(e)                                  “Selling Expenses” means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
expenses of legal counsel for Holder.


 


2.                                       As soon as practicable, but no later than
thirty (30) days from the date hereof, the Company will file a registration
statement covering the resale of the Registrable Securities on a Form S-1
or Form S-3 Registration Statement (the “Registration Statement”)
with the SEC (the “Filing Date”). The Company
will further use its commercially reasonable efforts to have the Registration
Statement declared effective by the SEC within a reasonable time after the
Filing Date. The Company shall not be obligated to enter into any underwriting
agreement for the sale of any of the Registrable Securities. The Company shall
be entitled to include in the Registration Statement shares of the capital
stock of the Company to be sold by the Company for its own account or for the
account of any other security holders of the Company.


 


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3.                                       All Registration Expenses shall be borne by
the Company. All Selling Expenses shall be borne the Seller.


 


4.                                       The Company further agrees to:


 


(a)                                  subject to Section 7 hereof, use its
commercially reasonable efforts to keep such registration, and any
qualification, exemption or compliance under state securities laws that the
Company determines to obtain, continuously effective until the earlier to occur
of: (i) such time as all of the Registrable Securities are sold,
transferred or otherwise disposed of by Holder; or (ii) one (1) year
following the Closing Date; provided that
Holder and the Seller Representative each hereby acknowledge that the Company
does not and cannot provide any assurance to Holder, the Seller Representative
or otherwise that the Registration Statement will be declared effective by the
SEC. The period of time during which the Company is required hereunder to keep
the Registration Statement continuously effective is referred to herein as the  “Registration Period.”


 


(b)                                 advise Holder within 15 Business Days:


 


(i)                                     of the filing of the Registration Statement
or any amendment thereto, and of the effectiveness of the Registration
Statement or any amendment thereto;


 


(ii)                                  of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for such purpose;


 


(iii)                               of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and


 


(iv)                              of the occurrence of any event that requires
the making of any changes in the Registration Statement or the Final Prospectus
so that, as of such date, the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Final Prospectus and any
amendment or supplement thereto, in the light of the circumstances under which
they were made) not misleading;


 


(c)                                  use its commercially reasonable efforts to
obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement;


 


(d)                                 furnish to Holder at least one copy of such
Registration Statement, including post-effective amendment thereto, and the
Final Prospectus, including any amendment or supplement thereto;


 


(e)                                  during the Registration Period, deliver to
Holder as many copies of the Final Prospectus, including any amendment or
supplement thereto, as Holder may reasonably request; and the Company
consents to the use, consistent with the provisions hereof and thereof, of the
Final Prospectus, including any amendment or supplement thereto, in connection
with the offering and sale by Holder of the Registrable Securities covered
thereby;


 


(f)                                    take such actions as may be necessary to
register or qualify the Registrable Securities or obtain an exemption for offer
and sale under the securities or blue sky laws of such jurisdictions as Holder
reasonably requests in writing, provided that the Company shall not for any
such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified as of the date
hereof, to consent to general service of process in any such jurisdiction or to
become subject to taxation in any jurisdiction in which it is not subject to
taxation as of the date hereof;


 


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(g)                                 upon the occurrence of any event contemplated
by Section 4(b)(iv) above, use its commercially reasonable efforts to
prepare a post-effective amendment to the Registration Statement or an
amendment or supplement to the Final Prospectus, or file any other required
document so that the Final Prospectus will not include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;


 


(h)                                 otherwise use its commercially reasonable
efforts to comply with all applicable rules and regulations of the SEC
which affect the sale of the Registrable Securities by Holder in accordance
with the terms hereof; and


 


(i)                                     use
its commercially reasonable efforts to cause all Registrable Securities to be
listed on a national securities exchange or market, if any, on which the
Company’s common stock is then-listed or quoted.


 


5.


 


(a)                                  Holder shall indemnify the Company, each of
its directors and officers and each Person who controls the Company within the
meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Section 5(b) below), arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement, Final Prospectus, or any amendment or supplement of
either of the foregoing, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Final Prospectus and any
amendment or supplement thereto, in the light of the circumstances in which they
were made) not misleading, and will reimburse the Company, such directors and
officers and each Person controlling the Company for reasonable legal and any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action as incurred, in
each case to the extent, but only to the extent, that such untrue statement or
omission or allegation thereof is made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of Holder for use
in preparation of the Registration Statement, the Final Prospectus, or any
amendment or supplement of either of the foregoing. Notwithstanding the
foregoing, Holder’s aggregate liability pursuant to this subsection (a) and
subsection (c) below shall be limited to the net amount received by
Holder from the sale of the Registrable Securities.


 


(b)                                 The Company shall give notice to Holder
promptly after the Company has actual knowledge of any claim as to which
indemnity may be sought, and shall permit Holder (at its expense) to
assume the defense of any such claim or any litigation resulting therefrom
provided, however, that counsel for Holder, who shall conduct the defense of
such claim or litigation, shall be approved by the Company (whose approval
shall not be unreasonably withheld), and the Company may elect to
participate in such defense; and, provided further, that the failure of the
Company to give notice as provided herein shall not relieve Holder of its
obligations under this Agreement unless such failure is materially prejudicial
to Holder in defending such claim or litigation. Holder shall not be liable for
any settlement of an action or claim effected without its written consent
(which consent shall not be unreasonably withheld). Holder shall not, in its
defense of any such claim or litigation, except with the written consent of the
Company, consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Company of a release from all liability in respect to such
claim or litigation.


 


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(c)                                  If the
indemnification provided for in this Section 5 is held by a court of
competent jurisdiction to be unavailable to the Company with respect to any
loss, liability, claim, damage or expense referred to therein, then Holder, in
lieu of indemnifying the Company thereunder, shall contribute to the amount
paid or payable by the Company as a result of such loss, liability, claim,
damage or expense in such proportion as is appropriate to reflect the relative
fault of Holder, on the one hand, and of the Company, on the other hand, in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of Holder and of the Company shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by Holder or by the Company and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.


 


6.


 


(a)                                  The Company shall indemnify Holder, each of
its directors and officers and each Person who controls Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Section 6(b) below), arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement, Final Prospectus, or any amendment or supplement of
either of the foregoing, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Final Prospectus and any
amendment or supplement thereto, in the light of the circumstances in which
they were made) not misleading, and will reimburse Holder, each of its such
directors and officers and each Person controlling Holder for reasonable legal
and any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action as incurred, in
each case to the extent, but only to the extent, that such untrue statement or
omission or allegation thereof is made in reliance upon and in conformity with
written information furnished to Holder by or on behalf of the Company for use
in preparation of the Registration Statement, the Final Prospectus, or any
amendment or supplement of either of the foregoing.


 


(b)                                 Holder
shall give notice to the Company promptly after Holder has actual knowledge of
any claim as to which indemnity may be sought, and shall permit the
Company (at its expense) to assume the defense of any such claim or any
litigation resulting therefrom provided, however,
that counsel for the Company, who shall conduct the defense of such claim or
litigation, shall be approved by Holder (whose approval shall not be
unreasonably withheld), and Holder may elect to participate in such
defense; and, provided further, that the
failure of Holder to give notice as provided herein shall not relieve the
Company of its obligations under this Agreement unless such failure is
materially prejudicial to the Company in defending such claim or litigation. The
Company shall not be liable for any settlement of an action or claim effected
without its written consent (which consent shall not be unreasonably withheld).
The Company shall not, in its defense of any such claim or litigation, except
with the written consent of Holder, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to Holder of a release from all liability
in respect to such claim or litigation.


 


(c)                                  If the
indemnification provided for in this Section 6 is held by a court of
competent jurisdiction to be unavailable to the Company with respect to any
loss, liability, claim, damage or expense referred to therein, then the
Company, in lieu of indemnifying Holder thereunder, shall 


 


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contribute
to the amount paid or payable by Holder as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and of Holder, on the other
hand, in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of Holder and of the Company shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by Holder or by the Company and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.


 


7.                                       (a)                                  Holder agrees that, upon receipt of any
notice from the Company of the happening of any event requiring the preparation
of a supplement or amendment to the Final Prospectus relating to Registrable
Securities so that, as thereafter delivered to Holder, such Final Prospectus,
as supplemented or amended, shall not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
and the Final Prospectus until its receipt of copies of such supplement or
amendment from the Company.


 


(b)                                 Holder shall suspend, upon request of the
Company, any disposition of Registrable Securities pursuant to the Registration
Statement and Final Prospectus during any period, not to exceed a single 45-day
period per circumstance or development, if the Company notifies Holder in good
faith that offers and sales pursuant thereto should not be made by reason of
the presence of material undisclosed circumstances or developments with respect
to which the disclosure that would be required in the Final Prospectus is
premature or could have a material adverse effect on the Company. Holder shall
not disclose receipt of any such notice, or its contents, to any Person without
the prior written consent of the Company. In the event Holder is required to
suspend any disposition of Registrable Securities under this Section 7(b),
the Company shall keep the Registration Statement effective for a period equal
to the duration of the suspension up to a maximum period of 60 days.


 


(c)                                  As a condition to the inclusion of its
Registrable Securities and the Company’s obligation to file the Registration
Statement in accordance with Section 2, Holder shall furnish to the
Company such information regarding Holder and the distribution proposed by
Holder as the Company may request in writing, including completing a
Registration Statement Questionnaire in the form provided by the Company
concurrently herewith, and as shall otherwise be required in connection with
any registration referred to in this Agreement.


 


(d)                                 Holder hereby covenants with the Company (i) not
to make any sale of the Registrable Securities pursuant to the Registration
Statement or the Final Prospectus without effectively causing the prospectus
delivery requirements under the Securities Act to be satisfied, and (ii) if
such Registrable Securities are to be sold by any method or in any transaction
other than on a national securities exchange or in the over-the-counter market,
in privately negotiated transactions, or in a combination of such methods, to
notify the Company at least five Business Days prior to the date on which
Holder first offers to sell any such Registrable Securities.


 


(e)                                  Holder acknowledges and agrees that the
Registrable Securities sold pursuant to the Registration Statement are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Registrable Securities is accompanied by
a certificate reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been offered and sold in accordance with such
Registration Statement and (ii) the prospectus delivery requirements under
the Securities Act in connection with such offer and sale have been satisfied
in full by Holder.


 


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(f)                                    Holder agrees not to take any action with
respect to any distribution deemed to be made pursuant to such Registration
Statement that would constitute a violation of Regulation M under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or any other applicable rule, regulation or law.


 


(g)                                 At the end of the Registration Period, Holder
shall discontinue sales of any shares pursuant to such Registration Statement
upon receipt of notice from the Company of its intention to remove from
registration the shares covered by such Registration Statement that remain
unsold, and Holder shall notify the Company of the number of Shares registered
that remain unsold immediately, but in any event no later than five Business
Days after receipt of such notice from the Company.


 


8.                                       The benefits granted to Holders by the
Company under Section 2 may not be assigned. Any attempted transfer
shall cause all rights of Holder under this Agreement to be forfeited in their
entirety.


 


9.                                       All notices, requests, demands and other
communications required or permitted under this Agreement shall be given in
accordance with Section 6.5 of the Purchase Agreement.


 


10.                                 No waiver, amendment or modification of this
Agreement or of any provision hereof shall be valid unless evidenced by a
writing duly executed by the Company, Holder and the Seller Representative. No
waiver of any default hereunder shall be deemed a waiver of any other prior or
subsequent default hereunder.


 


11.                                 This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding its conflicts of laws principles.


 


12.                                 This Agreement, together with the Purchase
Agreement and the Escrow Agreement, constitutes the sole and entire agreement
and understanding between the parties hereto as to the subject matter hereof
and thereof, and supersedes all prior discussions, agreements and
understandings of every kind and nature between them as to such subject matter.


 


13.                                 Except as expressly provided herein, this
Agreement is not intended to confer upon any Person any rights or remedies
hereunder, except for the successors and assigns of the Company.


 


14.                                 This Agreement may be executed in one or
more counterparts, all of which when taken together shall be considered one and
the same instrument and shall become effective when counterparts have been
signed by each party and delivered to the other parties, it being understood
that all parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or electronic mail, such
signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect
as if such facsimile or electronic mail signature page were an original
thereof.


 


15.                                 This Agreement shall terminate upon the
expiration of the Registration Period; provided,
however, that Sections 3, 5, 6, 7, 11, 12, 13 and 15 hereof shall
survive any termination of this Agreement.


 


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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  IMAGEWARE SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  S. James Miller, Jr.

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOLDER:

  
	
   

  	
   

  
	
   

  	
  SOL LOGIC, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Frank Mitchell 

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SELLER REPRESENTATIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Wink Jones

  



 


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