Exhibit 10.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
ANY DISTRIBUTION THEREOF. NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED
CIRCUMSTANCES, AN OPINION OF COUNSEL FOR THE INVESTOR, REASONABLY ACCEPTABLE TO
THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
IMAGEWARE SYSTEMS, INC.
SECURED PROMISSORY NOTE
$250,000
March 17, 2006
San Diego, CA
FOR VALUE RECEIVED, ImageWare Systems, Inc., a Delaware corporation ("Company"),
promises to pay to Cranshire Capital, ("Investor") or its registered assigns, in
lawful money of the United States of America, the principal sum of Two Hundred
Fifty Thousand Dollars ($250,000) or such lesser amount as shall equal the
outstanding principal amount hereof together with interest from the date of this
Note on the unpaid principal balance at a rate equal to eight percent (8%) per
year, computed on the basis of a year consisting of 360 days and compounded
monthly on the last day of each calendar month. Unpaid principal, together with
any then unpaid and accrued interest and other amounts payable hereunder, shall
be due and payable on the earlier of
(i) the Maturity Date, or (ii) when, upon
or after the occurrence of an Event of Default (as defined below), such amounts
are declared due and payable by the Investor or made automatically due and
payable in accordance with the terms hereof. This Note is issued pursuant to the
Secured Promissory Note Purchase Agreement dated as of March 17, 2006 (as
amended, modified or supplemented, the "Note Purchase Agreement") among the
Company, the Investor and the other Purchasers identified therein.
THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT (THE
"SECURITY AGREEMENT"), DATED AS OF MARCH 17, 2006, AS AMENDED, AND EXECUTED BY
COMPANY IN FAVOR OF THE LENDERS' AGENT IDENTIFIED THEREIN FOR THE BENEFIT OF
INVESTOR AND THE OTHER PURCHASERS OF NOTES. THE OBLIGATIONS DUE UNDER THIS NOTE
ARE ALSO SECURED BY THE SUBSIDIARY GUARANTEES, WHICH IN TURN ARE SECURED BY THE
GUARANTOR SECURITY AGREEMENTS. ADDITIONAL RIGHTS OF INVESTOR ARE SET FORTH IN
1
THE SECURITY AGREEMENT, THE SUBSIDIARY GUARANTEES, THE GUARANTOR SECURITY
AGREEMENTS AND THE NOTE PURCHASE AGREEMENT.
The following is a statement of the rights of Investor and the conditions to
which this Note is subject, and to which Investor, by the acceptance of this
Note, agrees:
1.
DEFINITIONS. AS USED IN THIS NOTE, THE FOLLOWING CAPITALIZED
TERMS HAVE THE FOLLOWING MEANINGS (CAPITALIZED TERMS USED AND NOT DEFINED HEREIN
SHALL HAVE THE MEANINGS IN THE NOTE PURCHASE AGREEMENT):
(A)
"COMPANY" MEANS IMAGEWARE SYSTEMS, INC. A DELAWARE CORPORATION. AS
USED IN THIS AGREEMENT, THE TERM "COMPANY" SHALL ALSO INCLUDE, UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE SUBSIDIARIES OF THE COMPANY.
(B)
"EVENT OF