Document:

ex_407466.htm

 

Exhibit 10.1

 

SECURED PROMISSORY NOTE

 

	$_____________  	, 2022
	 	San Diego, California

                  

 

FOR VALUE RECEIVED, ImageWare Systems, Inc., a Delaware corporation having its principal office at 11440 W. Bernardo Court, Suite 300, San Diego, California, 92127 ("Borrower"), hereby unconditionally promises to pay to the order of                    having an office at           or its assigns ("Lender"), the principal amount of $                            (the "Loan Amount") at Lender's office, or at such other place as Lender may from time to time designate in writing, in lawful money of the United States, together with all accrued interest thereon as provided in this Promissory Note (this "Note"), and all other amounts and Secured Indebtedness (as defined below) due and payable under this Note, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with their terms.

 

1.    Payment of Interest and Principal. Interest and principal under this Note shall be payable as follows:

 

1.1.    Interest. Except as otherwise provided in this Note, the outstanding Loan Amount shall accrue a fixed, minimum interest equal to 10% of the Loan Amount (the “Guaranteed Interest”). The Guaranteed Interest shall accrue and be fully earned upon the advance by the Lender of the Loan Amount.

 

1.2.    Payment Date. Within three (3) business days of Borrower’s receipt of payment (the "Scheduled Maturity Date") of the debt due to Borrower by Four Points Technology, L.L.C. (the “Four Points Debt”), a payment in the aggregate amount of the then outstanding and unpaid Loan Amount, together with the applicable Guaranteed Interest thereon, shall become immediately due and payable in full, unless, prior to the Scheduled Maturity Date, Lender exercises its right to allocate the Loan Amount and Guaranteed Interest to the Exchange.

 

1.3.    Prepayment. Borrower may prepay all or any portion of the outstanding and unpaid Loan Amount, together with the applicable Guaranteed Interest.

 

2.    Series D Exchange. In the event Borrower enters into any arm’s-length agreement with an unaffiliated third-party pursuant to which Borrower will (i) merge or consolidate with any other Person (regardless of which Person is the surviving entity); (ii) sell or dispose of substantially all of its assets; or (iii) sell more than 50% of its outstanding equity securities, then, in each case, Lender shall have the right, but not the obligation, to allocate the outstanding principal amount of the Loan and the applicable Guaranteed Interest advanced to Borrower into the exchange of such Lender’s shares of Borrower’s Series D Convertible Preferred Stock, par value $0.01 per share (“Series D Preferred”), into an equivalent amount of secured debt (the “Exchange”), on substantially the same terms as set forth in that certain Exchange Agreement, Waiver, and Amendment, by and between Borrower and certain funds and accounts managed by Nantahala Capital Management, LLC.

 

3.    Commitment to Repayment. Upon receipt by Borrower of the Four Points Debt, Borrower covenants to Lender that, unless Lender exercises its right to allocate the Loan Amount and Guaranteed Interest to the Exchange, Borrower shall first pay the Loan Amount and Guaranteed Interest due under this Note (and the principal and interest due pursuant to any other promissory notes issued as an advance on the Four Points Debt (together with the Note, the “Four Points Notes”) out of the proceeds of the Four Points Debt, prior to Borrower’s use of such proceeds for any other purpose.

 

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4.    Events of Default. In the event Borrower fails to pay: (a) any principal amount of the Loan when due; or (b) the Guaranteed Interest or any other amount when due and such failure continues for five (5) days after the original due date shall constitute an event of default ("Event of Default") under this Note.

 

5.    Remedies. Upon the occurrence of an Event of Default and at any time thereafter, Lender may at its option by written notice to Borrower: (a) declare the entire principal amount of this Note, together with Guaranteed Interest, immediately due and payable; and (b) exercise any or all of its rights, powers, or remedies under this Note or applicable law or available in equity.

 

6.    Late Charge. Borrower acknowledges that if any amount is not paid when due, Lender will incur additional costs. Consequently, Borrower agrees to and shall pay Lender a late charge equal to five percent (5%) of any outstanding principal plus adjustments and interest. The late charge will become immediately due ten (10) days after the delinquency of the payment.

 

7.    Lawful Money, Waiver, Etc. The Loan Amount will be paid in lawful money of the United States of America. Every party who is now or hereafter becomes liable for the payment of this Note: (a) waives diligence, presentment, protest, demand for payment, notice of protest, dishonor and notice of nonpayment of this Note; (b) expressly agrees that this Note, or any payment under this Note, may be unilaterally extended by Lender from time to time; (c) consents that Lender may (but will not be required to) release all or any part of the property encumbered by the security agreements; and (d) consents to the acceptance of additional security for this Note, all without in any way affecting the liability of any party.

 

8.    Waivers. Borrower and every person who assumes the obligation of this Note with the consent of Lender: (a) consents and agrees to be bound by and comply with all promises, covenants, and provisions of this Note and promises absolutely and unconditionally to pay it when due, whether at maturity, by acceleration, or otherwise; (b) consents to all waivers contained in this Note; and (c) waives presentment, demand, protest, notice of protest, notice of dishonor, notice of non-payment (except as specifically provided in this Note), and notice of any kind with respect to this Note or the performance of the obligations under this Note.

 

9.    General Provisions. “Borrower” includes any successor or assignee of this Note. “Lender” includes any successor Lender of this Note. Captions in this Note are for convenience only and do not define, describe or limit the scope or intent of this Note.

 

10.    Security. This Note (together with all other Four Points Notes) will be secured by the Four Points Debt in an aggregate amount across all Four Points Notes not to exceed $675,000, and Lender shall have a first-priority interest in any proceeds received therefrom by Borrower in an aggregate amount across all Four Points Notes not to exceed $675,000 (the “Secured Indebtedness”).

 

11.    Third Party Beneficiaries. This Note shall inure to the benefit of, and shall be binding on, the assigns, successors in interest, personal representatives, estates, heirs, and legatees of each of the parties.

 

12.    Attorneys’ Fees and Costs. If any legal action or other proceeding is brought for the enforcement of this Note, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Note, the successful or prevailing party shall be entitled to recover reasonable attorney’s fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.

 

13.    Governing Law. All questions about the construction of this Note, and the rights and liabilities of the parties to this Note, shall be governed by the laws of the State of California.

 

14.    Entire Agreement. This Note contains the entire agreement of the parties, and supersedes any prior written or oral agreements between them concerning the subject matter of this Note. There are no representations, agreements, arrangements, or understandings, oral or written, among the parties, relating to the subject matter of this Note, that are not fully expressed in this Note.

 

	 	
			BORROWER:

			
	 	 
	 	 
	 	
			By:                                                                         

			
	 	
			Kristin Taylor, President and Chief Executive Officer

			
	 	 

 

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Exhibit 10.2

 

PARTIAL RELEASE OF COLLATERAL AND AMENDMENT NO. 3 TO THE LOAN AND SECURITY AGREEMENT

 

This PARTIAL RELEASE OF COLLATERAL AND AMENDMENT NO. 3 TO THE LOAN AND SECURITY AGREEMENT (this “Agreement”) is dated as of August 2, 2022, by and among ImageWare Systems, Inc., a Delaware corporation (the “Company”), and Nantahala Capital Management, LLC (“Nantahala”), and certain funds and separate accounts managed by Nantahala Capital (collectively, “Lenders” and, together with the Company, the “Parties”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement (defined below).

 

RECITALS

 

WHEREAS, the Company and Lenders are parties to that certain Loan and Security Agreement, dated as of December 29, 2021 (as amended, modified, or supplemented from time to time, the “Loan Agreement”), pursuant to which Lenders provided the Company with a secured loan facility and issued certain Loans thereunder;

 

WHEREAS, in connection with the Loan Agreement, the Company granted to the Lenders a continuing security interest in and to all right, title and interest of the Company in the Collateral; and

 

WHEREAS, the Collateral includes all right, title and interest of the Company to the items described on Schedule I attached hereto (such Collateral described on Schedule I, the “Released Collateral”).

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby agreed and acknowledged, the parties hereby agree as follows:

 

AGREEMENT

 

 

1.    Partial Release.

 

1.1.    Nantahala, on behalf of the Lenders and subject to Section 2.1 below, hereby releases its security interest in the Company’s right, title and interest in and to the Released Collateral. On the date hereof, the Released Collateral shall be deemed to be released and discharged from the security interest granted to Lenders pursuant to the Loan Agreement. This release is made without any representation, warranty or recourse of any kind. All Collateral other than the Released Collateral shall remain subject to the security interest granted pursuant to the Loan Agreement.

 

1.2.    Each of the Parties hereto also agrees that from time to time, at the expense of the Company, it will promptly, upon reasonable request, execute and deliver all further instruments and documents, and take all further action, in order to implement the terms of this Release including, with limitation, executing and filing such UCC amendments or termination statements, and such other instruments or notices, as the Company may reasonably determine to be necessary or appropriate. 

 

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2.    Amendments.

 

2.1.    The definition of “Collateral” appearing in Exhibit A of the Loan Agreement shall be amended by deleting the period at the end of such definition and inserting the following proviso in lieu thereof “, provided, however, that, notwithstanding the foregoing (or any language in Exhibit B attached hereto), up to $675,000 in proceeds received by the Company from Four Points Technology LLC pursuant to that certain purchase order number 103148-100-01 shall not be deemed to be “Collateral” for purposes of this Agreement.”

 

3.    Additional Terms and Conditions. In consideration for Lenders’ agreement regarding the partial release and amendment described in Sections 1 and 2 herein, the Company further agrees as follows:

 

3.1.    All proceeds of the Released Collateral collected by the Company shall only be used to: (a) first, repay each of the Secured Promissory Notes, dated as of August 2, 2022, the form of which is attached as Schedule II hereto (the “Notes”), provided that if a holder of a Note elects to exchange its Note pursuant to the Exchange (as defined in the Notes), then such holder’s Note shall not be repaid with the proceeds of the Released Collateral; and (b) second, pay those expenses enumerated in the budget attached as Schedule III hereto (the “Budget”), as and when such expenses therein become due and payable.

 

3.2.    With respect to all proceeds of the Notes collected by the Company, the Company acknowledges and agrees that the Company shall only use such proceeds to pay those expenses enumerated in the Budget, as and when such expenses therein become due and payable.

 

3.3.    Notwithstanding the foregoing or anything to the contrary contained herein or in the Loan Documents: (a) the Company may pay expenses specified in the Budget on a line item basis during the term specified in the Budget, in each case in an amount not to exceed by more than ten percent (10%) the expenses shown on the Budget for such line item during such specified term; and (b) any proceeds received by the Company pursuant to Section 3.1 or Section 3.2 hereof shall not otherwise be expended by the Company without Lenders’ consent.

 

3.4.    Within thirty (30) days after the date of the Agreement, the Company shall obtain deposit account control agreements (or such other agreement in form and substance reasonably satisfactory to Lenders) from each bank at which the Company has a deposit account, establishing Lenders’ control over and lien in the deposit account.

 

3.5.    The breach by the Company of Sections 3.1 through 3.4 of this Agreement shall constitute an additional Event of Default by Borrower under the Loan Agreement.

 

4.    Effectiveness of Agreement. This Agreement shall be effective as of the date first set forth above once executed by all Parties hereto and upon receipt by each Party hereto of a fully executed version of the Agreement. 

 

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5.    Miscellaneous.

 

5.1.    Except as expressly set forth in this Agreement, all terms and conditions of the Loan Agreement, as amended, shall remain unaffected and shall continue in full force and effect.

 

5.2.    To the extent any provision of this Agreement conflicts with any prior agreement, understanding, representation, or negotiation between the Parties with respect to the subject matter of this Agreement, including the Loan Agreement, this Agreement’s provisions shall control and supersede the conflicting provision.

 

5.3.    This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. Each of the Parties consents to the exclusive jurisdiction of the courts whose districts encompass any part of the State of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each Party waives its right to a trial by jury. Each Party irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Party at its address set forth herein. Nothing herein shall affect the right of any Party to serve process in any other manner permitted by law.

 

5.4.    This Agreement may not be amended or any provision hereof waived in whole or in part, except by a written amendment signed by both of the Parties.

 

5.5.    This Agreement may be executed by facsimile signature and in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Signature pages follow.]

 

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

 

	 
	 
	
			IMAGEWARE SYSTEMS, INC.

			
	 
	
			By:

				
			/s/ Kristin Taylor

			
	 	
			Name:

				
			Kristin Taylor

			
	 	
			Title:

				
			Chief Executive Officer

			

 

 

 

 

 

 

 

 

 

 

[Company’s Signature Page]

 

 

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LENDERS:

 

 

 

____________________________

(Print or Type Name of Lender)

 

 

 

By:                                                       

Name:         

Title:

 

ADDRESS:                                          

                                      

                                      

 

 

Telephone:                            

Facsimile:                            

E-Mail:                            

Attention:                            

 

 

 

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SCHEDULE I

 

(Released Collateral)

 

 

Up to $675,000 in proceeds received by the Company from Four Points Technology LLC pursuant to that certain Purchaser Order No. 103148-100-01, dated July 20, 2022.

 

 

 

 

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SCHEDULE II

 

(Form of Note)

 

See attached.

 

 

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SCHEDULE III

 

(Budget)

 

[INTENTIONALLY OMITTED]

 

 

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