Document:

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                                UNIT CERTIFICATE
                      EACH UNIT CONSISTING OF ONE SHARE OF
                    COMMON STOCK, PAR VALUE $0.01 PER SHARE,
                               AND ONE COMON STOCK
                                PURCHASE WARRANT

U-_____                                                           _________Units

                             IMAGEWARE SYSTEMS, INC.
               ORGANIZED UNDER THE LAWS OF THE STATE OF CALIFORNIA

                                CUSIP 45245S 20 7

         THIS CERTIFIES THAT

or registered assigns (the "Registered Holder") is the owner of the number of
Units specified above, each of which consists of one share of common stock, par
value $0.01 per share, of ImageWare Systems, Inc. (the "Company") and one Common
Stock Purchase Warrant to purchase one share of Common Stock (the "Warrant"). On
or prior to the Separation Time (as defined herein), this Certificate may be
combined, exchanged or transferred only as Units, and the Common Stock and
Warrants evidenced by this Certificate may not be split up, exchanged or traded
separately. The Units may separate into shares of Common Stock and Warrants as
of the close of business on ______________________, 2000 [thirty days after the
consummation of the initial public offering of Units], or at any time after that
date, in the discretion of Paulson Investment Company, Inc. (the "Separation
Time"). The shares of Common Stock and Warrants comprising the Units shall be
separately tradeable commencing on the first day after the Separation Time on
which The American Stock Exchange is open for trading. The Warrants comprising
part of the Units are issued under and pursuant to a certain Warrant and Unit
Agreement dated as of March 10, 2000 (the "Warrant Agreement"), between the
Company and American Stock Transfer & Trust Company, as Transfer Agent (the
"Transfer Agent"), and are subject to the terms and provisions contained therein
and on the face of the certificates covered thereby, to all of which terms and
provisions the holder of this Unit Certificate consents by acceptance hereof.
The Warrant Agreement provides for adjustment in the number of shares of Common
Stock to be delivered upon the exercise of Warrants evidenced hereby and to the
exercise price of such Warrants in certain events therein set forth. Subject to
the foregoing, the number of Warrants and the number of shares of Common Stock
comprising the Units are equal.

         Copies of the Warrant Agreement are available for inspection at the
stock transfer office of the Transfer Agent or may be obtained upon written
request addressed to the Company at 10883 Thornmint Road, San Diego, California
92127, Attention: Chief Financial Officer.

         This Unit Certificate is not valid unless countersigned by the Transfer
Agent and Registrar of the Company.

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         IN WITNESS WHEREOF, the Company has caused this Unit Certificate to be
duly executed manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.

Dated:_____________________________

                                          IMAGEWARE SYSTEMS, INC.

                                          By: ________________________________
                                               Chief Executive Officer

                                          Attest: ______________________________
                                                  Secretary

Countersigned

American Stock Transfer & Trust Company

By: ________________________________
     Authorized Officer

<PAGE>

                             IMAGEWARE SYSTEMS, INC.

         The Registered Holder hereby is entitled, at any time after the close
of business on ______________________, 2000, to exchange the Units represented
by this Unit Certificate for Common Stock Certificate(s) representing one share
of Common Stock, for each Unit represented by this Unit Certificate, and Warrant
Certificate(s) representing one Warrant, for each unit represented by this Unit
Certificate upon surrender of this Unit Certificate to the Transfer Agent
together with any documentation required by such Agent.

         REFERENCE IS MADE TO THE WARRANT AGREEMENT REFERRED TO ON THE FRONT
SIDE HEREOF AND THE PROVISIONS OF SUCH WARRANT AGREEEMNT SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FACE OF THIS CERTIFICATE.
COPIES OF THE WARRANT AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE
TRANSFER AGENT, AMERICAN STOCK TRANSFER & TRUST COMPANY.

         The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.

                    TEN COM   -       as tenants in common
                    TEN ENT   -       as tenants by the entireties
                    JT TEN    -       as joint tenant with right of survivorship
                                      and not as tenants in common
                    COM PROP  -       as community property

UNIF GIFT MIN ACT             -       _________________Custodian________________
                                            (Cust)                  (minor)
                                      under Uniform Gifts to Minors Act

                                      ------------------------------------------
                                                     (State)

UNIF TRF MIN ACT              -       _________________Custodian________________
                                            (Cust)                  (minor)
                                      under Uniform Gifts to Minors Act

                                      ------------------------------------------
                                                     (State)

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                               FORM OF ASSIGNMENT
                       (TO BE SIGNED ONLY UPON ASSIGNMENT)

FOR VALUE RECEIVED, the undersigned Registered Holder (                 )

------------------------
(Please  insert  Social  Security or other  identification  number of Registered
Holder)

hereby sells, assigns and transfers unto

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
               (Please Print Name and Address including Zip Code)

Units evidenced by the within Unit Certificate, and irrevocably constitutes and
appoints
______________________________________________________________________Attorney
to transfer this Unit Certificate on the books of ImageWare Systems, Inc. with
the full power of substitution in the premises.

Dated:__________________, ________

Signature:

__________________________________

(Signature must conform in all respects to the name of Registered Holder as
specified on the face of this Unit Certificate in every particular, without
alteration or any change whatsoever, and the signature must be guaranteed in the
usual manner.)

Signature Guaranteed:

__________________________________

The signature should be guaranteed by an eligible institution (Banks,
Stockbrokers, Savings and Loan Association and Credit Union with membership in
an approved signature Medallion Program), pursuant to S.E.C. Rule 17Ad-15.<PAGE>

              VOID AFTER 5:00 P.M. PACIFIC TIME ON           , 2005
                                                   ----------

                        WARRANTS TO PURCHASE COMMON STOCK

W-                                                                     Warrants
  -----                                                       ---------

                             IMAGEWARE SYSTEMS, INC.

                                CUSIP 45245S 11 6

              THIS CERTIFIES THAT

or registered assigns, is the registered holder of the number of Warrants (the
"Warrants") set forth above. Each Warrant entitles the holder thereof to
purchase from ImageWare Systems, Inc., a corporation incorporated under the laws
of the State of California (the "Company"), subject to the terms and conditions
set forth hereinafter and in the Warrant and Unit Agreement hereinafter more
fully described (the "Warrant Agreement"), at any time on or before the close of
business on __________, 2005 or, if such Warrant is redeemed as provided in the
Warrant Agreement, at any time prior to the effective time of such redemption
(the "Expiration Date"), one fully paid and non-assessable share of Common Stock
of the Company (the "Common Stock") upon presentation and surrender of this
Warrant Certificate, with the instructions for the registration and delivery of
Common Stock filled in, at the stock transfer office in Denver, Colorado, of
American Stock Transfer & Trust Company, Transfer Agent of the Company (the
"Transfer Agent") or of its successor warrant agent or, if there be no successor
warrant agent, at the corporate offices of the Company, and upon payment of the
Exercise Price (as defined in the Warrant Agreement) and any applicable taxes
paid either in cash, or by certified or official bank check, payable in lawful
money of the United States of America to the order of the Company. Each Warrant
initially entitles the holder to purchase one share of Common Stock initially
for 120% of the Initial Public Offering price of the Units. The Exercise Price
shall be adjusted on the first anniversary of the closing of the Company's
initial public offering to 150% of the initial public offering price of the
Units. The number and kind of securities or other property for which the
Warrants are exercisable are subject to further adjustment in certain events,
such as mergers, splits, stock dividends, recapitalizations and the like, to
prevent dilution. After six months following the closing of the Company's
initial public offering, the Company may redeem any or all outstanding and
unexercised Warrants at any time if the Daily Price has exceeded 200% of the
Initial Public offering price of the Units for ten consecutive trading days
immediately preceding the date of notice of such redemption, upon 30 days
notice, at a price equal to $0.25 per Warrant. For the purpose of the foregoing
sentence, the term "Daily Price" shall mean, for any relevant day, the closing
bid price on that day as reported by the principal exchange or quotation system
on which prices for the Common Stock are reported. All Warrants not theretofore
exercised or redeemed will expire on _________, 2005.

<PAGE>

              This Warrant Certificate is subject to all of the terms,
provisions and conditions of the Warrant Agreement, dated as of January 20, 2000
(the "Warrant Agreement"), between the Company and the Transfer Agent, to all of
which terms, provisions and conditions the registered holder of this Warrant
Certificate consents by acceptance hereof. The Warrant Agreement is incorporated
herein by reference and made a part hereof and reference is made to the Warrant
Agreement for a full description of the rights, limitations of rights,
obligations, duties and immunities of the Transfer Agent, the Company and the
holders of the Warrant Certificates. Copies of the Warrant Agreement are
available for inspection at the stock transfer office of the Transfer Agent or
may be obtained upon written request addressed to the Company at 10883 Thornmint
Road, San Diego, CA 92127, Attention: Chief Financial Officer.

              The Company shall not be required upon the exercise of the
Warrants evidenced by this Warrant Certificate to issue fractions of Warrants,
Common Stock or other securities, but shall make adjustment therefor in cash on
the basis of the current market value of any fractional interest as provided in
the Warrant Agreement.

              In certain cases, the sale of securities by the Company upon
exercise of Warrants would violate the securities laws of the United States,
certain states thereof or other jurisdictions. The Company has agreed to use
commercially reasonable efforts to cause a registration statement to continue to
be effective during the term of the Warrants with respect to such sales under
the Securities Act of 1933, as amended, and to take such action under the laws
of various states as may be required to cause the sale of securities upon
exercise to be lawful. However, the Company will not be required to honor the
exercise of Warrants if, in the opinion of the Board of Directors, upon advice
of counsel, the sale of securities upon such exercise would be unlawful. In
certain cases, the Company may, but is not required to, purchase Warrants
submitted for exercise for a cash price equal to the difference between the
market price of the securities obtainable upon such exercise and the exercise
price of such Warrants.

              This Warrant Certificate, with or without other Warrant
Certificates, upon surrender to the Transfer Agent, any successor warrant agent
or, in the absence of any successor warrant agent, at the corporate offices of
the Company, may be exchanged for another Warrant Certificate or Certificates
evidencing in the aggregate the same number of Warrants as the Warrant
Certificate or Certificates so surrendered. If the Warrants evidenced by this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or
Certificates evidencing the number of Warrants not so exercised.

              No holder of this Warrant Certificate, as such, shall be entitled
to vote, receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose whatever, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder of this Warrant
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof or give or withhold consent to any corporate
action (whether upon any matter submitted to stockholders at any meeting
thereof, or give or withhold consent to any merger, recapitalization, issuance
of stock, reclassification of stock, change of par value or change of

<PAGE>

stock to no par value, consolidation, conveyance or otherwise) or to receive
notice of meetings or other actions affecting stockholders (except as provided
in the Warrant Agreement) or to receive dividends or subscription rights or
otherwise until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise thereof shall
have become deliverable as provided in the Warrant Agreement.

              If this Warrant Certificate shall be surrendered for exercise
within any period during which the transfer books for the Company's Common Stock
or other class of stock purchasable upon the exercise of the Warrants evidenced
by this Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.

              Every holder of this Warrant Certificate by accepting the same
consents and agrees with the Company, the Transfer Agent, and with every other
holder of a Warrant Certificate that:

              (a) This Warrant Certificate is transferable on the registry books
of the Transfer Agent only upon the terms and conditions set forth in the
Warrant Agreement; and

              (b) The Company and the Transfer Agent may deem and treat the
person in whose name this Warrant Certificate is registered as the absolute
owner hereof (notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Company or the Transfer Agent) for all purposes
whatever, and neither the Company nor the Transfer Agent shall be affected by
any notice to the contrary.

              The Company shall not be required to issue or deliver any
certificate for shares of Common Stock or other securities upon the exercise of
Warrants evidenced by this Warrant Certificate until any tax which may be
payable in respect thereof by the holder of this Warrant Certificate pursuant to
the Warrant Agreement shall have been paid, such tax being payable by the holder
of this Warrant Certificate at the time of surrender.

              This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Transfer Agent.

              WITNESS the facsimile signatures of the proper officers of the
Company and its corporate seal.

Dated:

                                             IMAGEWARE SYSTEMS, INC.

                                             By:
                                                 -------------------------------
                                                   Chief Executive Officer

                                             Attest:
                                                     ---------------------------
                                                      Secretary

Countersigned

American Stock Transfer & Trust Company

By:
    --------------------------------
      Authorized Officer

<PAGE>

                          FORM OF ELECTION TO PURCHASE
        (TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE THE
                          WARRANTS IN WHOLE OR IN PART)

To: IMAGEWARE SYSTEMS, INC.

The undersigned Registered Holder  (                 )

--------------------------------------------------------------
(Please  insert  Social   Security  or  other   identification
number of Registered Holder)

hereby irrevocably elect(s) to exercise the right of purchase represented by the
within this Warrant Certificate for, and to purchase thereunder, _______________
shares of Common Stock provided for therein and tenders payment herewith to the
order of IMAGEWARE SYSTEMS, INC. in the amount of $________________.

The undersigned requests that certificates for such shares of Common Stock be
issued as follows:

Name:
     -------------------------------------------------------------------------
Address:
        ----------------------------------------------------------------------
Deliver to:
           -------------------------------------------------------------------
Address:
        ----------------------------------------------------------------------

and if said number of Warrants being exercised shall not be all the Warrants
evidenced by this Warrant Certificate, that a new Certificate for the balance of
such Warrants as well as the shares of Common Stock represented by this Warrant
Certificate be registered in the name of, and delivered to, the Registered
Holder at the address stated below:

Address:
        ----------------------------------------------------------------------
Dated:             ,
      -------------  -------

Signature

------------------------------------------
(Signature must conform in all respects to the name of Registered Holder as
specified in the case of this Warrant Certificate in every particular, without
alteration or any change whatever.)

Signature Guaranteed:

------------------------------------------
The signature should be guaranteed by an eligible institution (Banks,
Stockbrokers, Savings and Loan Association and Credit Union with membership in
an approved signature Medallion Program), pursuant to S.E.C. Rule 17Ad-15.

<PAGE>

                               FORM OF ASSIGNMENT
                       (TO BE SIGNED ONLY UPON ASSIGNMENT)

FOR VALUE RECEIVED, the undersigned Registered Holder (               )

--------------------------------------------------------------
(Please  insert  Social   Security  or  other   identification
number of Registered Holder)

hereby sells, assigns and transfers unto

------------------------------------------------------------------------------

------------------------------------------------------------------------------

------------------------------------------------------------------------------
             (Please Print Name and Address including Zip Code)

Warrants evidenced by the within Warrant Certificate, and irrevocably
constitutes and appoints_______________________________________________Attorney
to transfer this Warrant Certificate on the books of ImageWare Systems, Inc.
with the full power of substitution in the premises.

Dated:                  ,
      ------------------  --------

Signature:

---------------------------------------------------
(Signature must conform in all respects to the name
of Registered Holder as on the face of this Unit
Certificate ine very particular, without
alteration or anychange whatsoever, and the
signature must be guaranteed in the usual manner.)

Signature Guaranteed:

---------------------------------------------------

The signature should be guaranteed by an eligible
institution (Banks,Stockbrokers, Savings and Loan
Association and Credit Union with membership in
an approved signature Medallion Program),
pursuant to S.E.C. Rule 17Ad-15.

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