Exhibit 10.3


 


LIMITED
EXCLUSIVE LICENSE AGREEMENT


 


Effective when all Parties sign (the “Effective Date”), this Limited
Exclusive License Agreement (“Agreement”) is made between ImageWare Systems, Inc.,
a California corporation (“IMAGEWARE”) and Boston Equities Corporation, a
Nevada corporation (“LICENSEE”), with respect to the following facts:


 


(A)                              IMAGEWARE
has developed valuable technology for analysis and processing of digital
images;


 


(B)                                  IMAGEWARE
is owner of all rights, title, and interest in and to U.S. Patent No. 5,577,179
entitled “Image Editing System”;


 


(C)                                  LICENSEE
desires to license the Licensed Patent for its exclusive use in defined
Fields-of-Use with right to sublicense in defined Fields-of-Use as specified in
Schedule A attached hereto; and


 


(D)                                 IMAGEWARE
intends to enter into other Exclusive License Agreements with unrelated third
parties in alternate Fields-of-Use.


 


NOW THEREFORE, in consideration of the mutual promises made herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, it is mutually agreed:


 


Article I


Definitions


 


1.                                       Defined
Terms.  Terms defined in Article I
and elsewhere, parenthetically, in this Agreement, shall have the same meaning
throughout the Agreement.  Defined terms
may be used in the singular or plural.


 


2.                                       “Effective
Date” shall mean the date of execution by the last party to sign this
Agreement.


 


3.                                       “Field
of Use” shall mean the category or categories described in Schedule A.


 


4.                                       “Licensed
Patent” shall mean U.S. Patent Number 5,577,179 entitled “Image Editing System”,
issued November 19, 1996.


 


5.                                       “LICENSEE
Consideration” means all considerations received by LICENSEE from any
Sub-Licensee in return for the authorization to use, in any form including but
not necessarily limited to assignment, license, sub-license, transfer, convey
or encumber the Licensed Patent or forego, forgive or waive rights to enforce
the Licensed Patent.


 


6.                                       “Quarterly
Statement” shall mean the reporting letter provided to IMAGEWARE by LICENSEE.


 


7.                                       “
Sub-Licensee” shall mean an entity that acquires from LICENSEE rights to
practice a method that is covered by claims in the Licensed Patent; provided,
however,


 





















 


that Sub-Licensee shall not include any entity controlling, controlled
by, or under common control with LICENSEE.


 


Article II


Patent License Grant


 


1.                                       Grant.  IMAGEWARE hereby grants to LICENSEE an
exclusive license under the Licensed Patent, specifically including the right
to make, have made, use, sell, or offer to sell a product or to practice, sell
or offer to sell services using a method that is covered by one or more claims
of the Licensed Patent, subject to the Field-of-Use limitations defined
hereinafter.  This grant shall be
perpetual, royalty-free and shall extend to any entity controlling, controlled
by, or under common control with LICENSEE; provided, however that it shall not
apply to an entity acquired by LICENSEE if the entity was practicing a claim
under the Licensed Patent prior to its acquisition by LICENSEE.


 


1.1.                              Field-of-Use.  The license granted by IMAGEWARE in Article II,
section 1 is limited to LICENSEE’s specific Field-of-Use as defined in Schedule A.


 


1.2.                              Life of Grant.  This license shall terminate upon expiration
of the Licensed Patent.


 


1.3.                              Territory.  The Licensed Patent is patented in the United
States and accordingly, the license is granted in the United States and its
territories.  Notwithstanding the
foregoing, nothing contained herein shall preclude LICENSEE from selling a
product practicing a method that is covered by a claim in the Licensed Patent
anywhere in the world.


 


2.                                       Sub-License
Rights.  IMAGEWARE also grants to
LICENSEE the right to grant sublicenses to Sub-Licensees, conveying the right
to make, have made, use, sell or offer to sell products or to practice, sell or
offer to sell services using methods covered by the Licensed Patent within that
portion of LICENSEE’s Field-of-Use identified as Sub-Licensable field of use in
Schedule A within all or any portion of the Territory specified in Section 1.3.  Any sublicense will be granted only pursuant
to the terms of a written Sublicense Agreement, in a form reasonably acceptable
to IMAGEWARE.


 


3.                                       Limitation.  The parties expressly agree that LICENSEE
shall not have or acquire any right, title or interest in the Licensed Patent,
except in accordance with the provisions of this Agreement.


 


4.                                       Reservation.  Except for the license rights expressly
granted in this Agreement, IMAGEWARE hereby reserves all other rights with
respect to the Licensed Patent.   IMAGEWARE hereby expressly reserves the right
to make, have made, use, sell, and offer to sell products or to practice, sell,
or offer to sell services covered by one or more claims of the Licensed Patent
for any purpose and further that IMAGEWARE shall have the right to authorize
others to use the products and services that are provided to customers of
IMAGEWARE for use by their customers.


 


2





















 


Article III


Patent License Payments


 


1.                                       Royalties.  As consideration for the license granted to
LICENSEE, LICENSEE shall pay IMAGEWARE a paid up fee of FIVE HUNDRED THOUSAND
DOLLARS ($500,000).  The fee shall be
paid FIFTY THOUSAND DOLLARS ($50,000) upon execution hereof and FOUR HUNDRED
FIFTY THOUSAND DOLLARS ($450,000) on or before December 1, 2005.


 


2.                                       Sub-Licensee
Fee.  LICENSEE shall pay to IMAGEWARE
thirty-five percent (35%) of all LICENSEE Consideration received.


 


3.                                       Form of
Payment.  All monies due under this
Agreement are payable in United States dollars.


 


4.                                       Decision
of Invalidity of Licensed Patent. If the Licensed Patent is held invalid in a
final decision by a court of competent jurisdiction and last resort and from
which no appeal has or can be taken, all obligation to pay royalties based on
the Licensed Patent will cease as of the date of final decision.  LICENSEE will not be relieved of payment of
royalties that have accrued prior to the date of final decision.


 


Article IV


Accounting and Reporting


 


1.                                       Quarterly
Statement.  LICENSEE shall submit to
IMAGEWARE a quarterly statement in sufficient detail to substantiate all
LICENSEE Consideration received by LICENSEE for said preceding quarter and the
total amount of Sub-Licensee Fees due IMAGEWARE.


 


1.1                                 Payment of the
Sub-Licensee Fees consideration shall be made contemporaneous with the
quarterly statement.


 


2.                                       Records.  LICENSEE shall keep accurate books and
records showing: all LICENSEE consideration for each and every Sublicense
Agreement.  Books and records must be
preserved for and during the term of this Agreement.


 


3.                                       Audit.   LICENSEE shall, and shall require any
Sub-Licensee to, upon written request, provide access to books and records for
inspection by representatives or agents of IMAGEWARE at reasonable times.  IMAGEWARE shall bear the fees and expenses of
examination except as provided in Section 3.1 below.


 


3.1.                              Underpayment. In the
event the audit reveals an underpayment of fees due hereunder, LICENSEE shall
immediately pay such underpayment plus nine percent (9%) interest on the
underpaid amount.  If the amount of the
underpayment exceeds five percent (5%) of the amount due, then the underpaying
LICENSEE shall also pay IMAGEWARE all costs and expenses associated with the
audit.


 


3





















 


Article V


Representations and Warranties


 


1.                                       LICENSEE.  LICENSEE makes the following representations
and warranties to IMAGEWARE:


 


1.1.                              LICENSEE will not
directly or indirectly cooperate with any third party in an attempt to
invalidate or challenge, in any way, the Licensed Patent.


 


1.2.                              LICENSEE will notify
IMAGEWARE within ten (10) business days of the sale, transfer or other
disposition of all or substantially all of the assets of the LICENSEE.


 


2.                                       IMAGEWARE.  IMAGEWARE represents and warrants to LICENSEE
that IMAGEWARE has the right to license the Licensed Patent.


 


2.1.                              Except as otherwise
provided, IMAGEWARE shall undertake all actions necessary for prosecution and
maintenance of the Licensed Patent, including, but not limited to, payment of
maintenance as required by the patent office. Such undertaking may be delegated
by IMAGEWARE to a third party; provided, however, any such delegation shall not
relieve IMAGEWARE from its responsibility to LICENSEE to take all actions
necessary for the prosecution and maintenance of the Licensed Patent under this
paragraph.


 


2.2.                              IMAGEWARE represents on
its information and belief that it is the lawful owner of the Licensed Patent
and has the right to license the Licensed Patent under this terms of this
Agreement.   The transactions contemplated
by this Agreement do not conflict with any other material contract to which
IMAGEWARE is a party, or by which the Licensed Patent or IMAGEWARE’s assets are
bound.  There is no third party consent
required to be obtained from a governmental authority or any third party in
order to authorize or approve the transactions contemplated herein.


 


2.3.                              IMAGEWARE represents on
its information and belief that it the Licensed Patent is valid.  There is no present claim pending or
threatened that purports that the Licensed Patent is invalid, and IMAGEWARE is
not aware of any basis for such a claim.


 


Article VI


Patent Marking and Infringement


 


1.                                       Patent
Marking.  LICENSEE shall mark all
products made, used or sold, or, if marking the product is not practical, their
containers and documentation included in product packaging shall be marked in
accordance with the applicable patent marking laws.  All materials describing or advertising
products or services made, used or sold under the terms of this Agreement,
shall be marked in accordance with the applicable patent marking laws.


 


2.                                       Patent
Infringement.  If LICENSEE learns of an
infringement of the Licensed Patent in its Field-of-Use, LICENSEE shall provide
written notice of such alleged infringement to IMAGEWARE with reasonable
evidence thereof.  Neither party will
notify a third party of infringement of any of the Licensed Patent without
first obtaining consent of the other party, which consent will not be
unreasonably withheld.


 


4





















 


2.1.                              LICENSEE shall have the
right to take legal action against any third party to protect against
infringement of the Licensed Patent in the Fields of Use.  All costs associated with and relating to
such an enforcement or to the defense of the Licensed Patent including costs,
fees and expenses shall, with respect to actions initiated pursuant to this
Agreement, be the responsibility of LICENSEE. 
If LICENSEE fails to initiate an enforcement action is not initiated
within four (4) months following the date of notice of infringement,
IMAGEWARE shall have the right to enforce the License Patent. LICENSEE shall
reimburse any and all costs, fees and expenses of IMAGEWARE incurred in
connection with the enforcement or defense of the Licensed Patent during the
term of this Agreement within not more than 30 days of tender of request for
such payments.


 


2.2.                              If, upon or in
preparation of initiation of legal action for patent infringement, it is
determined that standing to bring suit necessitates the joinder of a party not
bringing the suit, that party shall join in the suit at the expense of
LICENSEE, and shall fully cooperate with, the party bringing the suit.


 


2.3.                              Recoveries resulting from
such legal actions shall be used to reimburse all costs, fees and expenses of
the action and any excess recovery shall be considered LICENSEE Consideration
subject to the Sub-Licensing Fees identified above.


 


2.4.                              Each party shall
cooperate with the other(s) in litigation proceedings instituted
hereunder.  Litigation will be controlled
by the party bringing the suit except that counsel for LICENSEE shall be
subject to the reasonable approval of IMAGEWARE.


 


Article VII


Indemnification


 


1.                                       IMAGEWARE
agrees to indemnify, defend and hold harmless LICENSEE against any and all
claims, losses, costs, demands, expenses (including attorneys’ fees, and
including attorneys’ fees to enforce this indemnity), and liabilities
whatsoever arising from, in connection with, or based on (i) any breach by
IMAGEWARE of any representation, warranty or covenant of this Agreement.  IMAGEWARE will specifically pay any damages
and costs awarded against LICENSEE or paid in settlement and reimburse the
expenses LICENSEE incurs in providing assistance to IMAGEWARE or defending
against the claim.  IMAGEWARE shall have
the sole right to conduct the defense of any such claim or action and all
negotiations for its settlement, unless the parties agree otherwise in
writing.  LICENSEE shall give IMAGEWARE
prompt written notice of any written threat, warning, or notice of any claim or
action that would reasonably appear to trigger the foregoing indemnity and will
cooperate with IMAGEWARE in its defense. 
LICENSEE shall not be responsible for any settlement entered into
without its consent.  LICENSEE must approve
the terms of any settlement or compromise that may impose any unidentified or
no monetary liability on LICENSEE or its customers.


 


2.                                       LICENSEE
agrees to indemnify, defend and hold harmless IMAGEWARE, its officers,
directors and shareholders against any and all claims, losses, costs, demands,
expenses (including attorneys’ fees, and including attorneys’ fees to enforce
this


 


5





















 


indemnity) resulting from or arising out of exercise of this license by
LICENSEE or any Sub-License. This indemnification includes, but is not limited
to product liability or infringement by LICENSEE or Sub-Licensee of a third
party’s patent. LICENSEE shall have the sole right to conduct the defense of
any such claim or action and all negotiations for its settlement, unless the
parties to this Agreement agree otherwise in writing.  LICENSEE shall not be responsible for any
settlement entered into without its consent.


 


Article VIII


Termination


 


1.                                       Automatic
Termination.  This Agreement shall
terminate automatically without need for notification by IMAGEWARE in the
following events:


 


1.1                                 LICENSEE files a
petition in bankruptcy or is adjudicated as bankrupt or insolvent, or makes an
assignment for the benefit of creditors, or an arrangement pursuant to any
bankruptcy law, or if LICENSEE discontinues or dissolves its business, or if a
receiver is appointed for LICENSEE or LICENSEE’s business and such receiver is
not discharged within sixty (60) days;


 


1.2                                 LICENSEE fails to pay
or is delinquent in the payment of the Sub-License Fee as required hereunder
for two consecutive quarters.


 


2.                                       Termination
by IMAGEWARE.  This Agreement may be
terminated by IMAGEWARE for “Cause” by providing written notice of termination
and notification of the Cause for such termination to LICENSEE.


 


2.1.                              Cause.  Cause includes any default of any material
provision of this Agreement, including any Field-of-Use violation by the
LICENSEE.


 


2.2.                              Discontinuation of
Use.  Upon termination for Cause,
LICENSEE shall immediately discontinue use of any product or method under the
Licensed Patent.


 


2.3.                              Cure.  Upon receipt of notice of termination
pursuant to this Agreement, the LICENSEE shall have thirty (30) calendar days
to cure the Cause identified in the termination notice.


 


2.4                                 Return of IMAGEWARE
Property. A terminated LICENSEE shall return all information relating to this
Agreement, including technical, financial and customer information.


 


3.                                       Termination
by LICENSEE.  LICENSEE shall have the
right at any time to terminate its participation in this Agreement in whole by
giving notice in writing to IMAGEWARE.


 


4.                                       Survival.  Notwithstanding any termination of this
Agreement, the following sections shall survive and continue to be in full
force and effect:  Article III, section 2;
Article IV, section 1-3;  Article VI,
section 2; Article VII; Article IX.   Upon termination of


 


6





















 


this Agreement, LICENSEE shall no longer have the right to grant
sublicenses to Sub-Licensees.


 


5.                                       Effect
of Termination. If IMAGEWARE terminates this License Agreement for Cause under Article VIII,
Section 2, then LICENSEE shall discontinue all use of the Licensed
Patent.  If this License Agreement
terminates under Article VIII, Section 1 or Section 3, then the
termination of the Agreement shall not cause the termination of LICENSEE’s
rights under Article II, Section 1. 
Upon termination of this License Agreement for any reason, then LICENSEE
shall no longer have the right to enter into Sublicense Agreements with
Sub-Licensees.  Without further action on
its part, LICENSEE shall be deemed to have assigned all of the outstanding
Sublicense Agreements with Sub-Licensees to IMAGEWARE.  IMAGEWARE shall, by operation of this
provision, be substituted in to each and every Sublicense Agreement, between
LICENSEE and any third party, with respect to this Agreement or the subject
matter of this Agreement, as Licensor (or Sub-Licensor), as the case may be, in
such Sublicense Agreements and such Sublicense Agreements shall continue
between IMAGEWARE and such Sub-Licensee in accordance with the terms of such
Sublicense Agreement.  IMAGEWARE shall be
entitled to retain all Sub-License Fees generated after the termination of this
License Agreement.


 


Article IX


General Terms and Conditions


 


1.                                       Interpretation.  The captions contained in this Agreement are
for convenience of reference only and are not to be considered in construing
this Agreement. The language of this Agreement shall be construed as to its fair
meaning and not strictly for or against any party.


 


2.                                       Entire
Agreement.  This Agreement and Schedule A
set forth the entire understanding of the parties with respect to the subject
matter hereof, supersede all existing agreements among them concerning such
subject matter, and may be modified only by a written instrument duly executed
by each party.


 


3.                                       Waiver.  Any waiver by either party of any obligation
under this Agreement must be in writing and shall not be deemed to constitute a
waiver of any other provision.  Any waiver
by either party shall not constitute a continuous waiver unless otherwise
expressly provided. A failure by either party to assert rights arising from any
breach or default of this Agreement shall not be regarded as a waiver of
rights.  No waiver or toleration implies
any continuing or future waiver of rights.


 


4.                                       Assignment
and Transfer.  Except for the right to
sublicense contained herein, LICENSEE shall not assign, transfer, convey or
encumber (hereinafter “Transfer”) this Agreement, any rights relating to this
Agreement or any rights in the subject matter of this Agreement without the
prior written consent of IMAGEWARE. 
Notwithstanding the foregoing, LICENSEE shall be permitted to assign its
rights under this Agreement to (i) an affiliate or subsidiary, or (ii) a
person or entity acquiring control of LICENSEE whether by merger, sale of
stock, or the sale of substantially all of the assets of


 


7





















 


LICENSEE; provided, in each case, that such transferee agrees to be
bound by all terms and conditions of this Agreement.


 


IMAGEWARE may, without consent of LICENSEE,
Transfer this Agreement or rights relating to this Agreement or the subject
matter of this Agreement.


 


5.                                       Further
Acts.  At any time and from time to time,
each party agrees, at its expense, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the
purposes of this Agreement.


 


6.                                       Relationship.  The parties to this Agreement are licensor
and licensee and nothing in this Agreement shall be deemed or constructed as
creating a joint venture or partnership between the parties or confer upon one
party any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of the other.


 


7.                                       Severability.  The provisions of this Agreement are
independent of and severable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part. Further, if a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable as written, such court
may interpret, construe, rewrite or revise such provision, to the fullest
extent allowed by law, so as to make it valid and enforceable consistent with
the intent of the parties hereto.


 


8.                                       Counterparts.  This Agreement may be executed in
counterparts with the same effect as if all parties to this Agreement had
signed the same document and all counterparts shall be construed together and
constitute one and the same instrument.


 


9.                                       Written
Notice.  Any notice or other
communication required or permitted to be given hereunder shall be in writing
and shall be given by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by facsimile or similar
telecommunications equipment) against receipt to the party to whom it is to be
given at the address of such party set forth below (or to such other address as
the party shall have furnished in writing in accordance with the provisions of
this Section ) with a copy to each of the other party hereto. Any notice
or other communication shall be deemed given at the time of receipt thereof.


 


10.                                 Addresses.  Any written notice and all payments required
by this Agreement shall be provided as follows:


 


10.1.                        If to IMAGEWARE:


 


IMAGEWARE SYSTEMS, INC.


10883 Thornmint Road


San Diego, CA 
92127


ATTN: Jeff Hotze, Controller


 


10.2                           If to LICENSEE:


 


8





















 


Boston Equities Corporation


1660 Union Street, Suite 200


San Diego, CA 92101


ATTN: Ross Lyndon-James


 


10.3.                        Change in Address.  Each party shall promptly provide written
notice of any change in address to the other party.


 


11.                                 Choice
of Law.  This Agreement shall be
interpreted and enforced according to the laws of the State of California
without reference to conflict of laws principals.


 


12.                                 Dispute
Resolution.  In the event of a dispute
arising under this Agreement, the parties involved in the dispute shall first
make a good faith attempt to settle the dispute by mediation using a trained
mediator with experience in the area(s) to which the dispute pertains.  The parties may be represented by their
respective selected counsel, with each party being responsible for its own
attorney fees and costs.  The parties
agree to cooperate in good faith to select a mutually acceptable mediator and
location for the mediation.  If good
faith mediation fails to resolve the dispute, or upon expiration of 45 days
from the notice of dispute, the dispute may be submitted for binding
arbitration before a panel of three independent arbitrators pursuant to the
Commercial Rules of the American Arbitration Association.  The Arbitration panel shall be given the
equitable powers of specific performance and injunctive relief.  Any order or award of the panel may be
submitted to a court of competent jurisdiction for enforcement.


 


13.                                 Attorney
Fees.   Attorney’s fees shall not be
recoverable in any dispute related to this Agreement.


 


9





















 


IN WITNESS WHEREOF, the parties execute this
Agreement at the date, time and place indicated.


 


 


	
  IMAGEWARE SYSTEMS INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  S. James Miller

  	
   

  
	
   

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  September 30, 2005

  	
   

  
	
   

  	
   

  	
   

  
	
  Location: San Diego, California

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BOSTON EQUITIES CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Ross Lyndon-James

  	
   

  
	
   

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  September 30, 2005

  	
   

  
	
   

  	
   

  	
   

  
	
  Location: San Diego, California

  	
   

  
					



 


10





















 


SCHEDULE A


 


EXCLUSIVE FIELDS-OF-USE


 


I.                                         Licensed
Fields-of-Use:


 


A.                                   Computer
Video & Web Conferencing, including applications that operate on
servers, desktop and laptop computers, tablet PCs, personal digital assistants
(PDAs), mobile phones and other portable devices.


 


B.                                     Cellular
Telephone Applications.


 


No other Fields of Use are permitted.


 


 


II.                                     Sub-Licensable
Fields of Use:


 


A.                                   Computer
Video & Web Conferencing, including solutions that operate on servers,
desktop and laptop computers, tablet PCs, personal digital assistants (PDAs),
mobile phones and other portable devices.


 


 


No other Fields of Use are permitted.


 


11