Document:

ex4-20.htm

    EXHIBIT 4.20

    
      

      NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

      

      COMMON
STOCK PURCHASE WARRANT

      

      IMAGEWARE
SYSTEMS, INC.

       

      
        	
                Warrant
      Shares: [_____]

              	
                Initial
      Exercise Date: November 14, 2008

              
	
                Warrant
      No. 08-[___]

              	
                Issue
      Date: November 14, 2008

              

      

      

      THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, [_______] (the “Holder”), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial Exercise
Date”) and on or prior to the close of business on the 5 year anniversary
of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from ImageWare Systems, Inc.,
a Delaware corporation (the “Company”), up to
[_____] shares (the “Warrant Shares”) of
common stock, par value $0.01 per share, of the Company (the “Common
Stock”).  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

       

      Section 1. Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain 7% Convertible Note (the “Note”),
dated November 14, 2008, among the Company and the purchasers
signatory thereto. 

       

      Section 2. Exercise.

       

      a)      Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form
annexed  hereto (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of
such Holder appearing on the books of the Company); and, within 3 Trading Days
of the date said Notice of Exercise is delivered to the Company, the Company
shall have received  payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank.  Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant to the Company
until the Holder has purchased all of the Warrant Shares available hereunder and
the Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within 3 Trading Days of
the date the final Notice of Exercise is delivered to the
Company.  Partial exercises of this Warrant resulting in purchases of
a portion of the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased.  The Holder and the Company shall maintain records showing
the number of Warrant Shares purchased and the date of such
purchases.  The Company shall deliver any objection to any Notice of
Exercise Form within 1 Business Day of receipt of such notice.  The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the amount stated on
the face hereof.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      b)      Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $0.55, subject to adjustment hereunder (the “Exercise
Price”).

       

      c)      Cashless
Exercise.  If at any time after one year from the date of
issuance of this Warrant there is no effective Registration Statement
registering, or no current prospectus available for, the resale of the Warrant
Shares by the Holder, then this Warrant may also be exercised at such time by
means of a “cashless exercise” in which the Holder shall be entitled to receive
a certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

       

      (A) = the
VWAP on the Trading Day immediately preceding the date of such
election;

      

      (B) = the
Exercise Price of this Warrant, as adjusted; and

      

      (X) = the
number of Warrant Shares issuable upon exercise of this Warrant in accordance
with the terms of this Warrant by means of a cash exercise rather than a
cashless exercise.

       

      Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section
2(c).

       

      d)      Mechanics of
Exercise.

       

      i.      Authorization of Warrant
Shares.  The Company covenants that all Warrant Shares which
may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges created by the Company in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue). 

       

      ii.     Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is a participant in such system, and otherwise by physical delivery to
the address specified by the Holder in the Notice of Exercise within 3 Trading
Days from the delivery to the Company of the Notice of Exercise Form, surrender
of this Warrant (if required) and payment of the aggregate Exercise Price as set
forth above (“Warrant
Share Delivery Date”).  This Warrant shall be deemed to have
been exercised on the date the Exercise Price is received by the
Company.  The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the Exercise Price
(or by cashless exercise, if permitted) and all taxes required to be paid by the
Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of such
shares, have been paid. 

       

      iii.    Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant. 

       

      iv.    Rescission
Rights.  If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date,
then the Holder will have the right to rescind such exercise. 

       

       

      
        
          
          

        

        
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      v.     Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

       

      vi.    No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share. 

       

      vii.   Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental
thereto. 

       

      viii.  Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof. 

       

      Section 3. Certain
Adjustments.

       

      a)      Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(A) pays a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this
Warrant), (B) subdivides outstanding shares of Common Stock into a larger number
of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted.  Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

       

       

      
        
          
          

        

        
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      b)      Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall sell or grant any option to
purchase or sell or grant any right to reprice its securities, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to
equal the Base Share Price.  Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are
issued.  Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 3(b) in respect of an Exempt
Issuance.  The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 3(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.

       

      c)      Subsequent Rights
Offerings.  If the Company, at any time while the Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the VWAP at the record date
mentioned below, then the Exercise Price shall be multiplied by a fraction, of
which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number
of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Company in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such
VWAP.  Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.

       

      d)      Pro Rata
Distributions.  If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.

       

      
        
          
          

        

        
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      e)      Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder, (a) upon exercise of this
Warrant, the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate
Consideration”) receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event or (b) if the Company is acquired in an all cash
transaction, cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes option pricing formula.  For purposes of any
such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction.  To
the extent necessary to effectuate the foregoing provisions, any successor to
the Company or surviving entity in such Fundamental Transaction shall issue to
the Holder a new warrant consistent with the foregoing provisions and evidencing
the Holder’s right to exercise such warrant into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this Section 3(e) and insuring that this Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction. 

       

      f)      Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding. 

       

      g)      Voluntary Adjustment By
Company. The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time
deemed appropriate by the Board of Directors of the Company.

       

      h)      Notice to
Holder.

       

      i.      Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. If the Company enters into a
Variable Rate Transaction, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised.

       

      ii.      Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 10 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.  The Holder is
entitled to exercise this Warrant during the 10-day period commencing on the
date of such notice to the effective date of the event triggering such notice;
provided that in no event shall the Holder be entitled to exercise this Warrant
after the Termination Date.

       

      
        
          
          

        

        
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      Section 4. Transfer of
Warrant.

       

      a)      Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof, this Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable only to an
Affiliate of the Holder, in whole or in part, upon surrender of this Warrant at
the principal office of the Company or its designated agent, together with a
written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to pay
any transfer taxes payable upon the making of such transfer.  Upon
such surrender and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination or denominations specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled.  A Warrant, if properly assigned, may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant
issued.

       

      b)      New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.

       

      c)      Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

       

      d)      Transfer
Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall
not be registered pursuant to an effective registration statement under the
Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer, that (i) the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, and (ii) the Holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company, and (iii) the transferee be an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a “qualified institutional buyer”
as defined in Rule 144A(a) promulgated under the Securities Act.

       

      Section 5. Miscellaneous.

       

      a)      No Rights as Shareholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(ii). 

       

      b)      Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

       

      c)      Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.

       

      
        
          
          

        

        
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      d)      Authorized
Shares.

       

      The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.

       

      Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this
Warrant. 

       

      Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

       

      e)      Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of
the Warrant Agreement, contained herein.

       

      f)      Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

       

      g)     Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      h)     Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Note. 

       

      i)      Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company. 

       

      j)      Remedies.  Holder,
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant.  The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be
adequate. 

       

      k)      Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by any such Holder or holder of Warrant
Shares. 

       

      l)      Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder. 

       

      m)    Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

       

      n)     Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

       

      ********************

      

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.

       

      

      

       

      
        	 
      	
                IMAGEWARE
      SYSTEMS, INC.

                 

                 

              
	 
      	
                By:__________________________________________

                     Name:

                     Title:

                 

              

      

      

      

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      

      NOTICE
OF EXERCISE

      

      TO:           IMAGEWARE
SYSTEMS, INC.

      

      (1)           The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any. 

       

      (2)           Payment
shall take the form of (check applicable box):

       

      [  ]
in lawful money of the United States; or

       

      [  ]
[if permitted] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).

       

      (3)           Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified
below: 

       

      _______________________________

      

      

      The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

      

      _______________________________

      

      _______________________________

      

      _______________________________

      

      (4)           Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

       

      [SIGNATURE
OF HOLDER]

      

      Name of
Investing Entity:
________________________________________________________________________

      Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

      Name of
Authorized Signatory:
___________________________________________________________________

      Title of
Authorized Signatory:
____________________________________________________________________

      Date:
________________________________________________________________________________________

      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      ASSIGNMENT
FORM

      

      (To
assign the foregoing warrant, execute

      this form
and supply required information.

      Do not
use this form to exercise the warrant.)

      

      

      

      FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

       

      

      _______________________________________________
whose address is

      

      _______________________________________________________________.

      

      

      

      _______________________________________________________________

      

      Dated:  ______________,
_______

      

      

      Holder’s
Signature:                           _____________________________

      

      Holder’s
Address:                            _____________________________

       

      _____________________________

      

      

      

      Signature
Guaranteed:  ___________________________________________

      

      

      NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

      

      11ex4-21.htm

    EXHIBIT
4.21

     

    
      

      REGISTRATION
RIGHTS AGREEMENT

      

      REGISTRATION
RIGHTS AGREEMENT (this "Agreement"), dated as of
February 12, 2009, by and between ImageWare Systems, Inc.,  a corporation organized
under the laws of the State of Delaware (the "Company"), and BET Funding
LLC, a Delaware limited liability company (the "Lender").

      

      WHEREAS:

       

      A.           In
connection with the Secured Promissory Note of even date herewith in the
principal amount of $5,000,000 issued by the Company to the Lender (the "Note"), the Company has
agreed, upon the terms and subject to the conditions contained therein, to issue
to the Lender a warrant (the "Warrant") to acquire 4,500,000
shares of Common Stock.  The shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrant are referred to herein as the
"Warrant
Shares."

      

      B.           To
induce the Lender to make the loan evidenced by the Note, the Company has agreed
to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "Securities Act"), and
applicable state securities laws.

      

      NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Lender hereby agree as
follows:

       

      1.           DEFINITIONS.

      

      a.           As
used in this Agreement, the following terms shall have the following
meanings:

      

      (i)           "Common Stock" means shares of
common stock, par value $0.01 per share, of the Company.

      

      (ii)           "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (iii)           "Registrable Securities" means
(a) the Warrant Shares and (b) any shares of capital stock issued or issuable,
from time to time (with any adjustments), as a distribution on or in exchange
for or otherwise with respect to the foregoing, whether as default payments or
otherwise.

      

      (v)           "Registration Statement" means
a registration statement of the Company under the Securities Act.

      

      b.           Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Note.

      

      2.           REGISTRATION.

      

      a.           Mandatory
Registration.  The Company shall prepare promptly and file with
the SEC as soon as practicable, but in no event later than the earlier of (i)
two (2) weeks after the Company receives or is granted a contract of $4,000,000
or more and (ii) September 1, 2009 (either such date, the "Filing Date"), a Registration
Statement on Form S-3 (or, if Form S-3 is not then available, on such form of
Registration Statement as is then available to effect a registration of all of
the Registrable Securities, subject to the consent of the Lender) covering the
resale of all of the Registrable Securities.  The Registration
Statement filed hereunder, to the extent allowable under the Securities Act and
the Rules promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants to
prevent dilution resulting from stock splits, stock dividends or similar
transactions.  The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of) the Lender and its counsel
prior to its filing or other submission.

      

      b.           Underwritten
Offering.  If any offering pursuant to the Registration
Statement pursuant to Section 2(a) hereof
involves an underwritten offering, the Lender shall have the right to select one
legal counsel to represent the Lender and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the
Company.  In the event that the Lender elects not to participate in
such underwritten offering, the Registration Statement covering all of the
Registrable Securities shall contain appropriate plans of distribution
reasonably satisfactory to the Lender.

       

      c.           Registration
Deadline.  The Company shall cause the Registration Statement
required to be filed pursuant to Section 2(a) hereof
to become effective as soon as practicable, but in no event later than the
sixtieth (60th) day following the Filing Date (the "Registration
Deadline").  At the time of effectiveness, the Company shall
ensure that such Registration Statement covers all of the Registrable Securities
issuable pursuant to the Warrant (including, if necessary, by filing an
amendment prior to the effective date of the Registration Statement to increase
the number of shares covered thereby).  If (i) (A) the Registration
Statement required to be filed by the Company pursuant to Section 2(a) hereof
is not filed with the SEC prior to the Filing Date or declared effective by the
SEC on or before the Registration Deadline or (B) any Registration Statement
required to be filed by the Company pursuant to Section 3(b) hereof
is not declared effective by the SEC within sixty (60) days after the applicable
Registration Trigger Date (as defined in Section 3(b) hereof),
or (ii) if, after any such Registration Statement has been declared effective by
the SEC, sales of any of the Registrable Securities required to be covered by
such Registration Statement (including any Registrable Securities required to be
registered pursuant to Section 3(b) hereof)
cannot be made pursuant to such Registration Statement (by reason of a stop
order or the Company's failure to update the Registration Statement or any other
reason outside the control of the Lender), then the Company shall be considered
in default under the Note (with no required additional notice or cure period)
and the Lender shall have all rights and remedies set forth therein (upon an
Event of Default (as defined in the Note)).

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      d.           Piggy-Back
Registrations.  If at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall file with the SEC
a Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall send to the Lender written
notice of such determination and, if within fifteen (15) days after the date of
such notice, the Lender shall so request in writing, the Company shall include
in such Registration Statement all or any part of the Registrable Securities the
Lender requests to be registered, except that if, in connection with any
underwritten public offering, the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which the Lender has requested inclusion hereunder as the
underwriter shall permit.  The Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not contractually entitled to inclusion of
such securities in such Registration Statement or are not contractually entitled
to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after
giving effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
contractual right to include such securities in the Registration Statement other
than holders of securities contractually entitled to inclusion of their
securities in such Registration Statement by reason of demand registration
rights.   Notwithstanding the foregoing, no such reduction shall
reduce the amount of Registrable Securities included in the registration below
twenty-five (25%) of the total amount of securities included in such
registration.  No right to registration of Registrable Securities
under this Section
2(d) shall be construed to limit any registration required under Section 2(a)
hereof.  If an offering in connection with which the Lender is
entitled to registration under this Section 2(d) is an
underwritten offering, then the Lender shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      3.           OBLIGATIONS OF THE
COMPANY.

      

      In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:

      

      a.           The
Company shall respond promptly to any and all comments made by the staff of the
SEC to the Registration Statement required by Section 2(a), and
shall submit to the SEC before the close of business on the business day
immediately following the business day on which the Company learns (either by
telephone or in writing) that no review of such Registration Statement will be
made by the SEC or that the staff of the SEC has no further comments on such
Registration Statement, as the case may be, a request for acceleration of the
effectiveness of such Registration Statement to a time and date as soon as
practicable.  The Company shall keep such Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which all of the Registrable Securities (in the reasonable opinion
of counsel to the Lender) may be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act or
any successor provision (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) (i) shall comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder
and (ii) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.  The financial statements of the
Company included in the Registration Statement or incorporated by reference
therein will comply as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto.  Such financial statements will be
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed on summary statements and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end adjustments)).

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      b.           The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement.

      

      c.           The
Company shall furnish to the Lender and its legal counsel (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and, in the case of the Registration Statement referred to in Section 2(a), each
letter written by or on behalf of the Company to the SEC or the staff of the SEC
(including, without limitation, any request to accelerate the effectiveness of
the Registration Statement or amendment thereto), and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
the Registration Statement (other than any portion, if any, thereof which
contains information for which the Company has sought confidential treatment),
(ii) on the date of effectiveness of the Registration Statement or any amendment
thereto, a notice stating that the Registration Statement or amendment has been
declared effective, and (iii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as the Lender may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by the Lender.

      

      d.           The
Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
"blue sky" laws of such jurisdictions in the United States as the Lender
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (a) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or (e) make any
change in its charter or by­laws, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its stockholders.

      

      e.           In
the event the Lender selects underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      f.           As
promptly as practicable after becoming aware of such event, the Company shall
notify the Lender by telephone and facsimile of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and, use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to the Lender as the Lender may
reasonably request.

      

      g.           The
Company shall use its best efforts (i) to prevent the issuance of any stop order
or other suspension of effectiveness of a Registration Statement, and, if such
an order is issued, to obtain the withdrawal of such order at the earliest
practicable moment (including in each case by amending or supplementing such
Registration Statement) and (ii) to notify the Lender (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof (and if such Registration Statement is supplemented
or amended, deliver such number of copies of such supplement or amendment to the
Lender as the Lender may reasonably request).

      

      h.           The
Company shall permit a single firm of counsel designated by the Lender to review
the Registration Statement and all amendments and supplements thereto a
reasonable period of time prior to its filing with the SEC, and not file any
document in a form to which such counsel reasonably objects.

      

      i.           The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.

      

      j.           At
the request of the Lender in the case of an underwritten public offering, the
Company shall furnish, on the date of effectiveness of the Registration
Statement (i) an opinion, dated as of such date, from counsel representing the
Company addressed to the Lender and in form, scope and substance as is
customarily given in an underwritten public offering and (ii) a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Lender.

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      k.           The
Company shall make available for inspection by (i) the Lender, (ii) any
underwriter participating in any disposition pursuant to the Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Lender, and (iv) one firm of attorneys retained by all
such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that each
Inspector shall hold in confidence and shall not make any disclosure (except to
the Lender) of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement.  The Company
shall not be required to disclose any confidential information in such Records
to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k).  Lender agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.  Nothing herein shall be deemed to limit the Lender's
ability to sell Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations.

      

      l.           The
Company shall hold in confidence and not make any disclosure of information
concerning the Lender provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement, or (v) the Lender consents to the form and content
of any such disclosure.  The Company agrees that it shall, upon
learning that disclosure of such information concerning the Lender is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Lender prior to making such disclosure, and
allow the Lender, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such
information.

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      m.           The
Company shall use its best efforts to promptly cause all of the Registrable
Securities covered by the Registration Statement to be listed on each national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange and, without
limiting the generality of the foregoing, to arrange for or maintain at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD")
as such with respect to such Registrable Securities.

      

      n.           The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement.

      

      o.           The
Company shall cooperate with the Lender and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Lender may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Lender may request, and, within three (3) business
days after the Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Lender), an opinion of such counsel
in the form attached hereto as Exhibit 1.

      

      p.           At
the request of the Lender, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.

      

      q.           The
Company shall comply with all applicable laws related to a Registration
Statement and offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection therewith (including,
without limitation, the Securities Act and the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the SEC.)

      

      r.           From
and after the date of this Agreement, the Company shall not, and shall not agree
to, allow the holders of any securities of the Company to include any of their
securities which are not Registrable Securities in the Registration Statement
under Section
2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof
without the consent of the Lender.

      

      4.           OBLIGATIONS OF THE
LENDER.

      

      In
connection with the registration of the Registrable Securities, the Lender shall
have the following obligations:

      

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      a.           It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities that the Lender shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.  At least five trading days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
the Lender of the information the Company requires from the Lender.

      

      b.           The
Lender, by its acceptance of the Registrable Securities, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless the
Lender has notified the Company in writing of the Lender's election to exclude
all of the Lender's Registrable Securities from such Registration
Statement.

      

      c.           In
the event the Lender determines to engage the services of an underwriter, the
Lender agrees to enter into and perform the Lender's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter(s) of such offering and the Company and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities.

      

      d.           The
Lender agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Sections 3(f) or
3(g), the Lender will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Lender's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 3(f) or 3(g)
and, if so directed by the Company, the Lender shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a certificate
of destruction) all copies in the Lender's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.  Notwithstanding anything to the contrary, subject to
compliance with applicable laws, the Company shall cause the transfer agent for
the Registrable Securities to deliver unlegended shares of Common Stock to a
transferee of the Lender in connection with any sale of Registrable Securities
with respect to which the Lender has entered into a contract for sale prior to
receipt of such notice and for which the Lender has not yet
settled.

      

      e.           The
Lender may not participate in any underwritten distribution hereunder unless the
Lender (i) agrees to sell the Lender's Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, (iii) agrees to pay
its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to Section 5 below, and
(iv) complies with all applicable laws in connection
therewith.  Notwithstanding anything in this Section 4(e) to the
contrary, this Section
4(e) is not intended to limit the Lender's rights under Sections 2(a) or 3(b)
hereof.

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      5.           EXPENSES OF
REGISTRATION.  All reasonable expenses incurred by the Company
or the Lender in connection with registrations, filings or qualifications
pursuant to Sections 2
and 3 above, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, the fees and disbursements of one counsel selected by
the Lender, and the underwriting discounts and commissions shall be borne by the
Company.  In addition, the Company shall pay all of the Lender's costs
and expenses (including legal fees) incurred in connection with the enforcement
of the rights of the Lender hereunder.

      

      6.           INDEMNIFICATION.  In
the event any Registrable Securities are included in a Registration Statement
under this Agreement:

      

      a.           To
the extent permitted by law, the Company will indemnify, hold harmless and
defend (i) the Lender and (ii) the directors, officers, partners, members,
employees and agents of the Lender and each person who controls the Lender
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any, (each,
an "Indemnified
Person"), against any joint or several losses, claims, damages,
liabilities or expenses  (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of them
may become subject insofar as such Claims arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations").  Subject
to the restrictions set forth in Section 6(c) with
respect to the number of legal counsel, the Company shall reimburse the Lender
and each other Indemnified Person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim.  Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i)
shall not apply to a Claim arising out of or based upon a Violation which occurs
in reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c)
hereof, and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it.  Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Lender pursuant to Section 9
hereof.

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      b.           In
connection with any Registration Statement in which the Lender is participating,
the Lender agrees to indemnify, hold harmless and defend, to the same extent and
in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, its employees, agents and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder within the meaning of the Securities Act or the
Exchange Act (collectively and together with an Indemnified Person, an "Indemnified Party"), against
any Claim to which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by the Lender expressly for use in connection with such
Registration Statement; and subject to Section 6(c) the
Lender will reimburse any legal or other expenses (promptly as such expenses are
incurred and are due and payable) reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Lender, which consent shall
not be unreasonably withheld; provided, further, however, that the
Lender shall be liable under this Agreement (including this Section 6(b) and
Section 7) for
only that amount as does not exceed the net proceeds actually received by the
Lender as a result of the sale of Registrable Securities pursuant to such
Registration Statement.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the Lender
pursuant to Section
9 hereof.  Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      c.           Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice
of the commencement of any action (including any governmental action), such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that such
indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and the indemnifying party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are in conflict with those available to such indemnifying
party.  The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such legal counsel shall be selected by the Lender, if the Lender is
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable.  The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6, except to
the extent that the indemnifying party is actually prejudiced in its ability to
defend such action.  The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

      

      7.           CONTRIBUTION.  To
the extent any indemnification by an indemnifying party is prohibited or limited
by law, the indemnifying party agrees to make the maximum contribution with
respect to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law as is appropriate to reflect the relative fault
of the indemnifying party, on the one hand, and the Indemnified Person or
Indemnified Party, as the case may be, on the other hand, with respect to the
Violation giving rise to the applicable Claim; provided, however, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      8.           REPORTS UNDER THE EXCHANGE
ACT.  With a view to making available to the Lender the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit the Lender to sell
securities of the Company to the public without registration ("Rule 144"), the Company agrees
to:

      

      a.           file
with the SEC in a timely manner and make and keep available all reports and
other documents required of the Company under the Securities Act and the
Exchange Act so long as the Company remains subject to such requirements and the
filing and availability of such reports and other documents is required for the
applicable provisions of Rule 144; and

      

      b.           furnish
to the Lender so long as the Lender owns the Warrant or Registrable Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Lender to
sell such securities under Rule 144 without registration.

      

      9.           ASSIGNMENT OF REGISTRATION
RIGHTS.  The rights of the Lender hereunder, including the
right to have the Company register Registrable Securities pursuant to this
Agreement, shall be automatically assignable by the Lender to any transferee of
all or any portion of the Warrant or the Registrable Securities if: (i) the
Lender agrees in writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company after such assignment,
(ii) the Company is furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) the transferee or assignee agrees in writing for the
benefit of the Company to be bound by all of the provisions contained herein,
and (v) such transfer shall have been made in accordance with the applicable
requirements of the Warrant.  In addition, and notwithstanding
anything to the contrary contained in this Agreement or the Warrant, the Warrant
may be pledged, and all rights of the Lender under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with the Lender's margin or brokerage account.

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      10.           AMENDMENT OF REGISTRATION
RIGHTS.  Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with written consent of the
Company and the Lender or, in the case of a waiver, with the written consent of
the party charged with the enforcement of any such provision.

      

      11.           MISCELLANEOUS.

      

      a.           A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities.  If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.

      

      b.           Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier or by confirmed telecopy, and shall be
effective five (5) days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party.  The addresses
for such communications shall be:

      

      If to the
Company:

      

      ImageWare
Systems, Inc.

      10883
Thornmint Road

      San
Diego, CA 92127

      Attn: Mr.
Wayne Wetherell

      Telephone:
858-673-8600

      Facsimile:  858-673-0291

       

      If to the
Lender:

       

      
        BET
Funding LLC

      

      
        c/o 250
Gibraltar Road

      

      
        Horsham,
PA  19044

      

      
        Telephone:
215-938-8000

      

      
        Facsimile:  215-938-8019

      

       

      c.           Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

                            d.           This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed in the State
of Delaware.  The Company irrevocably consents to the jurisdiction of
the United States federal courts and the state courts located in the State of
Delaware in any suit or proceeding based on or arising under this Agreement and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or
proceeding.   The Company further agrees that service of process
upon the Company, mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or
proceeding.  Nothing herein shall affect the Lender's right to serve
process in any other manner permitted by law.  The Company agrees that
a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.

      

      e.           This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof.  There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein.  This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.

      

      f.           Subject
to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.

      

      g.           The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

      

      h.           This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement.  This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

      

      i.           Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

      

      j.           Each
party to this Agreement has participated in the negotiation and drafting of this
Agreement.  As such, the language used herein shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party to this
Agreement.

      

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      k.           For
purposes of this Agreement, the term "business day" any day except Saturday,
Sunday, any day which shall be a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.

      

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

      

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

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

      

      

      IMAGEWARE
SYSTEMS, INC.

       

      By:           /s/ S. James
Miller

      S. James
Miller, CEO

       

       

      

      BET FUNDING LLC

      

      

      By:           /s/ Doug
Topkis

      Name:  Doug
Topkis

      Title:

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       EXHIBIT
1

       to

       Registration

       Rights

       Agreement

      [Date]

      [Name and
address

      of
transfer agent]

      

      RE:           ImageWare
Systems, Inc.

      

      Ladies
and Gentlemen:

       

      We are
counsel to ImageWare Systems, Inc., a corporation organized under the laws of
the State of Delaware (the "Company"), and we understand
that BET Funding LLC (the "Holder") has been issued a
warrant to acquire 4,500,000 shares of the Company's common stock, par value
$.01 per share.  Pursuant to a Registration Rights Agreement, dated as
of February __, 2009, by and among the Company and the Holder (the "Registration Rights
Agreement"), the Company agreed with the Holder, among other things, to
register the Registrable Securities (as that term is defined in the Registration
Rights Agreement) under the Securities Act of 1933, as amended (the "Securities Act"), upon the
terms provided in the Registration Rights Agreement.  In connection
with the Company's obligations under the Registration Rights Agreement, on
__________, 200_, the Company filed a Registration Statement on Form S-___ (File
No. 333- _____________) (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") relating to the
Registrable Securities, which names the Holder as a selling stockholder
thereunder.  The Registration Statement was declared effective by the
SEC on _____________, 200_.

      

      [Other
customary introductory and scope of examination language to be
inserted]

      

      Based on
the foregoing, we are of the opinion that the Registrable Securities have been
registered under the Securities Act.

      

      [Other customary language to be
included.]

      

      Very
truly yours,

      

      

      

      cc:   BET
Funding LLC

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