Document:

ex10-2

Exhibit 10.2

 

DEBT EXCHANGE AGREEMENT

 

This
DEBT EXCHANGE AGREEMENT
(this “Agreement”) is made as of
November 12, 2020 (the “Agreement Date”) between
ImageWare Systems, Inc., a Delaware corporation (the
“Company”), and
Neal Goldman (the “Lender”).

 

RECITALS

 

WHEREAS, Lender made certain loans to
the Company in the aggregate amount of Four Hundred Fifty Thousand
Dollars and No Cents ($450,000.00) (the “Principal”), as evidenced by that
certain Convertible Promissory Note dated July 24, 2020 (the
“Note”),
whereby Company promised to pay Lender the Principal, together with
interest thereon at a rate equal to five percent (5%) per annum, on
or before October 14, 2020;

 

WHEREAS, the current outstanding
principal amount of the indebtedness, together with accrued
interest, under the Note is Four Hundred Sixty Three Thousand One
Hundred Thirty Dollars and Thirty-Seven Cents ($463,130.137) (the
"Accrued Loan
Amount");

 

WHEREAS, the Company has requested that
the Lender exchanges fifty percent (50%) of the Accrued Loan
Amount, totalling Two Hundred Thirty-One Thousand Five Hundred
Sixty-Five Dollars and Nineteen Cents ($231,565.19) (the
"Indebtedness") for shares
of newly created Series D Convertible Preferred Stock of the
Company (“Preferred
Stock”), as described below (the “Exchange”);

 

WHEREAS, the Exchange is being made in
connection with, and as a condition to, that certain Securities
Purchase Agreement dated September 28, 2020 (the
“Purchase
Agreement”) by and between the Company and certain
accredited investors as set forth on the signature page thereto
(collectively, the “Purchasers”); and

 

WHEREAS, the Lender is willing to
consummate the Exchange upon the terms and subject to the
conditions set forth below.

 

NOW, THEREFORE, in consideration of the
premises and the mutual representations and covenants hereinafter
set forth, the parties hereto do hereby agree as
follows:

 

AGREEMENT

 

1.

Terms and Conditions of
Exchange. 

 

1.1.

Exchange of
Indebtedness.

 

1.1.1. Exchange.
Subject to the terms and conditions hereinafter set forth, the
Lender hereby agrees to consummate the Exchange, pursuant to which
the entire Indebtedness shall be exchanged for that number of
shares of Preferred Stock (the “Shares”) equal to the total
Indebtedness divided by One Thousand and 00/100 Dollars
($1,000.00), which amount represents the liquidation preference of
each Share of Preferred Stock (“Liquidation Preference”). Each
Share shall be convertible into that number of shares of Common
Stock (“Conversion
Shares”) as determined by the conversion ratio set
forth in the Certificate of Designations of Rights, Powers, and
Privileges of the Series D Convertible Preferred Stock (the
“Series D
Certificate”). Subject to the terms and conditions
contained herein, the Lender hereby subscribes for, and agrees to
accept from the Company, the Shares, in lieu of repayment of all
amounts due under the terms of the Note, and the Company agrees to
issue the Shares to the Lender. Against delivery of the Shares
issued in the name of the Lender in accordance with the procedures
more fully described in Section 1.2(ii) below, the Lender shall
deliver to the Company that certain Satisfaction and Release,
substantially in the form attached hereto as Exhibit A (the
“Satisfaction and
Release”).

 

 

 

 

1.1.2. Closing.
Subject to the terms and conditions of this Agreement, the
consummation of the Exchange shall take place at a closing (the
“Closing”) to
be held on November 12, 2020 (the “Closing Date”), or such later
date as agreed to by the parties in writing.

 

1.2. Deliveries
by the Lender. At the Closing, the Lender
shall:

 

(i) Date, complete and
execute this Agreement and the Satisfaction and Release;
and

 

(ii) Deliver
to the Company settlement instructions (“Settlement Instructions”), which
Settlement Instructions shall set forth the Lender’s election
to receive the Shares in the form of book-entry notations in the
records of the Company’s transfer agent.

  

1.3.

Deliveries by the Company. At
the Closing, the Company shall:

 

(i) Date, complete and
execute this Agreement; and

 

(ii) Within
three (3) business days following the Closing, provide for
book-entry notations in the records of the Company’s transfer
agent, in either case, according the Settlement Instructions, which
Settlement Instructions shall be delivered to the Company’s
transfer agent at the Closing, together with irrevocable
instructions to the transfer agent directing the transfer agent to
issue duly authorized, validly issued, fully paid and
non-assessable Shares to the Lender.

 

2. Representations and Warranties of the
Lender. The Lender hereby represents and warrants to the
Company as set forth below.

 

2.1.           Investment
Risk. The Lender recognizes that the investment in the
Shares in connection with the Exchange involves a high degree of
risk. Such risks include, but are not limited to, the risks
associated with the business of the Company, as more particularly
set forth in the Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other filings (“Company SEC Filings”) with the
U.S. Securities and Exchange Commission (“SEC”) which have been made
available to the Lender.

 

2.2.           Accredited
Investor. The Lender is an “accredited investor”
as defined under Rule 501 of Regulation D, promulgated under the
Securities Act of 1933, as amended (the “Securities Act”).

 

2.3.           Investment
Purposes. The Lender will be acquiring the Shares for its
own account, for investment purposes, and not with a view to any
resale or distribution in whole or in part, in violation of the
Securities Act or any applicable securities laws; provided, however, that notwithstanding
the foregoing, the Lender does not covenant to hold the Series D
Preferred for any minimum period of time except as set forth in the
Series D Certificate.

 

2.3           Investigation.
The Lender has been afforded the opportunity to ask questions of
and receive answers from the Company regarding the terms and
conditions of this Agreement and about the Company; provided, however, that no
investigation performed by or on behalf of the Lender regarding the
terms and conditions of this Agreement or the Company shall limit
or otherwise affect its right to rely on the representations and
warranties of the Company contained herein.

 

2.4           Professional
Counsel. To the extent necessary, the Lender has
obtainedprofessional advice regarding the investment, tax and legal
merits and consequences of the Exchange and an investment in the
Shares and the Conversion Shares issuable upon conversion of the
Shares (together with the Shares, the “Exchange
Securities”).

 

2.5           Authority,
Enforceability. The Lender represents that the Lender has
full power and authority (corporate, statutory and otherwise) to
execute and deliver this Agreement and to consummate the Exchange.
Subject to the foregoing and once executed and delivered by all
parties hereto, this Agreement will constitute the legal, valid and
binding obligation of the Lender, enforceable against the Lender in
accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy. If
the Lender is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement
account, or other tax-exempt entity, it is authorized and qualified
to invest in the Company and the person signing this Agreement on
behalf of such entity has been duly authorized by such entity to do
so.

 

 

 

 

3. Representations and Warranties of the
Company. The Company hereby represents and warrants to the
Lender as set forth below.

 

3.1.           Organization
and Qualification. The Company has been duly incorporated
and is validly existing and in good standing under the laws of the
state of Delaware, with full corporate power and authority to own,
lease and operate its properties and to conduct its business as
currently conducted, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where
the failure to register or qualify would not have a Material
Adverse Effect. For purposes of this Agreement, “Material Adverse Effect” shall
mean any event, occurrence, fact, condition or change that,
individually or in the aggregate, results, or would reasonably be
likely to result, in a material adverse effect on (i) the Shares or
the Conversion Shares, (ii) the ability of the Company to perform
its obligations under this Agreement or (iii) the condition
(financial or otherwise) or in the earnings, prospects, business,
properties, surplus or results of operations of the
Company.

 

3.2.           Power
and Authorization. The Shares have been duly authorized by
all necessary corporate action and, when paid for or issued in
accordance with the terms hereof, the Shares shall be validly
issued and outstanding, fully paid and nonassessable, free and
clear of all liens, encumbrances and rights of refusal of any
kind.

 

3.3.           Valid
and Enforceable Agreement; No Violations. This Agreement has
been duly authorized, validly executed and delivered on behalf of
the Company and is a valid and binding agreement and obligation of
the Company enforceable against the Company in accordance with its
terms, subject to limitations on enforcement by general principles
of equity and by bankruptcy or other laws affecting the enforcement
of creditors’ rights generally, and the Company has full
power and authority to execute and deliver the Agreement and the
other agreements and documents contemplated hereby and to perform
its obligations hereunder and thereunder.

 

3.4.           Compliance.
The Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer,
issuance and delivery of the Exchange Securities
hereunder.

 

3.5.           Representations
and Warranties from Purchase Agreement. Each of the
representations and warranties as set forth in Article 3 of the
Purchase Agreement are hereby incorporated by reference herein and
made a part hereof, as if the same were specifically set forth in
this Section 3.

 

4.            

Conditions to Obligations of the
Lender.  The Lender’s obligation to consummate
the Exchange is subject to the fulfillment of the following
conditions at the Closing:

 

(a) The Company shall
have executed and delivered this Agreement;

 

(b) The representations
and warranties made by the Company in Article 3 hereof shall be
true and correct as of date of the Closing and all covenants,
agreements and conditions contained in this Agreement to be
performed by the Company on or prior to the date hereof shall have
been performed or complied with in all material respects;
and

 

(c) The Company shall
have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation
of the Exchange and the consummation of the other transactions
contemplated by this Agreement.

 

Notwithstanding the
forgoing, for the avoidance of doubt, the effectiveness of this
Agreement (and the Exchange) is contingent upon the consummation of
the transactions contemplated by the Purchase Agreement (the
"Closing"), and in the
event that the Closing does not occur, or the Purchase Agreement is
terminated, this Agreement shall be void ab initio.

 

5. Conditions to the Obligations of the
Company. The Company’s obligation to consummate the
Exchange is subject to the fulfillment of the following conditions
at the Closing:

 

(a) The Lender shall
have executed and delivered this Agreement and the Satisfaction and
Release;

 

(b) The representations
and warranties made by the Lender in Article 2 hereof shall be true
and correct as of date of the Closing and all covenants, agreements
and conditions contained in this Agreement to be performed by the
Lender on or prior to the date hereof shall have been performed or
complied with in all material respects; and

 

(c) The Company shall
have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation
of the Exchange and the consummation of the other transactions
contemplated by this Agreement.

 

 

 

 

6.

Miscellaneous.

 

6.1.          
Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended except by a writing signed by the
parties, and this Agreement may not be discharged except by
performance in accordance with its terms or by a writing signed by
the party to be charged. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right.

 

6.2.          
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal
representatives, successors and assigns. No party hereto may assign
its rights or obligations hereunder without the prior written
consent of the other party. Nothing in this Agreement shall create
or be deemed to create any rights in any person or entity not a
party to this Agreement.

 

6.3.          
This Agreement, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents,
exhibits and schedules.

 

6.4.          
All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the
State of California, United States, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other this Agreement (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees
or agents) shall be commenced exclusively in the state and federal
courts sitting in San Diego County, California. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in San Diego County, California for the
adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of this
Agreement), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is improper or is an inconvenient venue
for such proceeding.

 

6.5.          
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full
force and effect. If any provision of this Agreement shall be
declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, such
provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the
remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the
extent they are valid, legal and enforceable, and no provisions
shall be deemed dependent upon any other covenant or provision
unless so expressed herein.

  

6.6.          
The Lender and Company agree to execute and deliver all such
further documents, agreements and instruments and take such other
and further action as may be necessary or appropriate to carry out
the purposes and intent of this Agreement.

 

6.7.          
This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.

 

 

 

 

[Signature
page follows] 

 

 

 

 

 

 

IN WITNESS WHEREOF, the Lender and the Company have
caused this Debt Exchange Agreement to be duly executed as of the
date first written above.

 

 

“COMPANY”

	

 

	
ImageWare Systems,
Inc.

	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Kristin
Taylor 

	

 

	

 

	

 

	
Kristin
Taylor	

 

	

 

	

 

	Chief Executive
Officer	

 

 

“LENDER”

	

 

	
	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Neal Goldman

	

 

	

 

	

 

	
Neal
Goldman	

 

	

 

	

 

	
	

 

 

 

EXHIBIT A

SATISFACTION AND RELEASE

 

This SATISFACTION AND RELEASE
(“Agreement”) is made and entered into this 12th day of
November, 2020 (the “Effective
Date”), between ImageWare
Systems, Inc., a Delaware corporation (the
“Company”), and Neal Goldman, an individual (the
“Lender”). Capitalized terms not otherwise defined
herein shall have the meanings as set forth in that certain Debt
Exchange Agreement dated November 12, 2020 (the
“Exchange
Agreement”), by and
between the Company and Lender.

 

RECITALS

 

WHEREAS, the Lender
and the Company are parties to the Exchange Agreement pursuant to
which Lender has agreed to exchange Indebtedness for the Shares, as more particularly
set forth in the Exchange Agreement;

 

WHEREAS,
the Lender desires to accept the Shares in
full and complete satisfaction of the Indebtedness and to fully
release and discharge the Company for all matters and liabilities,
including from any and all further liability for repayment of such
Indebtedness under
the terms of the Note;

 

WHEREAS,
the Lender desires to accept the remainder of the Accrued Loan
Amount as a cash payment;

 

WHEREAS, the
Exchange Agreement provides that, at Closing, the Lender execute
and deliver this Agreement to the Company;

 

WHEREAS, the
Company is currently negotiating an equity financing with certain
accredited investors (the “Financing”), and the execution of
this Agreement by Lender is a condition to consummation of the
Financing; and

 

WHEREAS, this Agreement is the Satisfaction and
Release that is referred to in, and as is attached as
Exhibit
A to, the Exchange
Agreement.

 

NOW,
THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties
hereto do hereby agree as follows:

 

AGREEMENT

 

1. Confirmation
of Indebtedness.  The (i) principal amount of the
Indebtedness, including interest accruing thereon as of the
Effective Date is Two Hundred Thirty-One Thousand Five Hundred
Sixty-Five Dollars and Nineteen Cents ($231,565.19), and (ii) the
remaining Accrued Loan Amount, including interest accruing thereon
as of the Effective Date is Two Hundred Thirty-One Thousand Five
Hundred Sixty-Five Dollars and Nineteen Cents ($231,565.19) (the
"Cash Payment"), which such
amounts the Lender agrees constitutes all amounts due to the Lender
under the Note.

 

2. Delivery
of Preferred Stock in Satisfaction of
Indebtedness.  Subject to the terms and conditions
set forth in the Exchange Agreement, the Company agrees to deliver
(i) that number of Shares calculated in accordance with
Section 1.1.1 of the Exchange Agreement (“Settlement Shares”) in accordance
with the Settlement Instructions delivered by the Lender to the
Company on the Effective Date, and (ii) the Cash Payment in the
form of a wire transfer of immediately available funds to an
account designated by the Lender in writing to the Company on the
Closing Date.

 

3. Satisfaction
of Indebtedness.  Upon delivery of the Settlement
Shares and the Cash Payment by the Company in accordance with the
Settlement Instructions and wiring instructions, (a) the Lender
hereby agrees that the Accrued Loan Amount will have been fully and
completely satisfied; and (b) the Lender hereby compromises,
settles, resolves, discharges, and releases the Company, and its
successors and assigns, from the payment of any and all amounts due
and payable to the Lender under the Note.  

 

4. Termination.  This
Agreement shall automatically be terminated and be of no further
force and effect if the Company does not consummate the Financing
on or before November 30, 2020.

 

5. Entire
Agreement.  This Agreement, the Exchange
Agreement, and the Note represents the entire agreement between the
parties relating to the subject matter hereof.  There are
no other courses of dealing, understanding, agreements,
representations, or warranties, written or oral, except as set
forth herein.

 

 

 

 

6. Amendment or
Waiver.  Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether
conferred herein, at law, or in equity and may be enforced
concurrently herewith, and no waiver by any party of the
performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or
thereafter occurring or existing.  At any time prior to
the Closing Date, this Agreement may be amended by a writing signed
by all parties hereto, respecting any of the terms contained
herein, and any term or condition of this Agreement may be waived
or the time for performance thereof may be extended by a writing
signed by the party or parties for whose benefit the provision is
intended. 

 

7. Form of Execution;
Counterparts.  A valid and binding signature
hereto or on any notice or demand hereunder may be in the form of a
manual execution or a true copy made by photographic, xerographic,
conversion to portable document format (pdf), or other electronic
process that provides similar copy accuracy of a document that has
been executed, and such electronic signature or record shall be of
the same legal effect, validity, or enforceability as a manually
executed signature.  This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original
and all of which taken together shall be but a single
instrument.

 

8. Governing Law.  This
Agreement shall be governed by, and construed under and in
accordance with, the laws of the state of California without giving
effect to any choice or conflict of law provision or rule (whether
the state of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the
state of California.

 

9. Interpretation.  Section
headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.  

 

 

 

[The Remainder of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above. 

 

“COMPANY”

	

 

	
ImageWare Systems,
Inc.

	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Kristin
Taylor 

	

 

	

 

	

 

	
Kristin
Taylor	

 

	

 

	

 

	Chief Executive
Officer	

 

 

“LENDER”

	

 

	
	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Neal Goldman

	

 

	

 

	

 

	
Neal
Goldmanex10-3

  Exhibit
10.3

 

DEBT EXCHANGE AGREEMENT

 

This
DEBT EXCHANGE AGREEMENT
(this “Agreement”) is made as of
November 12, 2020 (the “Agreement Date”) between
ImageWare Systems, Inc., a Delaware corporation (the
“Company”), and
S. James Miller (the “Lender”).

 

RECITALS

 

WHEREAS, Lender made certain loans to
the Company in the aggregate amount of One Hundred Dollars and No
Cents ($100,000.00) (the “Principal”), as evidenced by that
certain Convertible Promissory Note dated July 24, 2020 (the
“Note”),
whereby Company promised to pay Lender the Principal, together with
interest thereon at a rate equal to five percent (5%) per annum, on
or before October 14, 2020;

 

WHEREAS, the current outstanding
principal amount of the indebtedness, together with accrued
interest, under the Note is One Hundred Two Thousand Eight Hundred
Eight Dollars and Twenty-Two Cents ($102,808.22), (the
"Indebtedness");

 

WHEREAS, the Company has requested that
the Lender exchanges the Indebtedness, for shares of newly created
Series D Convertible Preferred Stock of the Company
(“Preferred
Stock”), as described below (the “Exchange”);

 

WHEREAS, the Exchange is being in
connection with, and as a condition to, that certain Securities
Purchase Agreement dated September 23, 2020 (the
“Purchase
Agreement”) by and between the Company and certain
accredited investors as set forth on the signature page thereto
(collectively, the “Purchasers”); and

 

WHEREAS, the Lender is willing to
consummate the Exchange upon the terms and subject to the
conditions set forth below.

 

NOW, THEREFORE, in consideration of the
premises and the mutual representations and covenants hereinafter
set forth, the parties hereto do hereby agree as
follows:

 

AGREEMENT

 

1.

Terms and Conditions of
Exchange. 

 

1.1.

Exchange of
Indebtedness.

 

1.1.1. Exchange.
Subject to the terms and conditions hereinafter set forth, the
Lender hereby agrees to consummate the Exchange, pursuant to which
the entire Indebtedness shall be exchanged for that number of
shares of Preferred Stock (the “Shares”) equal to the total
Indebtedness divided by One Thousand and 00/100 Dollars
($1,000.00), which amount represents the liquidation preference of
each Share of Preferred Stock (“Liquidation Preference”). Each
Share shall be convertible into that number of shares of Common
Stock (“Conversion
Shares”) as determined by the conversion ratio set
forth in the Certificate of Designations of Rights, Powers, and
Privileges of the Series D Convertible Preferred Stock (the
“Series D
Certificate”). Subject to the terms and conditions
contained herein, the Lender hereby subscribes for, and agrees to
accept from the Company, the Shares, in lieu of repayment of all
amounts due under the terms of the Note, and the Company agrees to
issue the Shares to the Lender. Against delivery of the Shares
issued in the name of the Lender in accordance with the procedures
more fully described in Section 1.2(ii) below, the Lender shall
deliver to the Company that certain Satisfaction and Release,
substantially in the form attached hereto as Exhibit A (the
“Satisfaction and
Release”).

 

1.1.2. Closing.
Subject to the terms and conditions of this Agreement, the
consummation of the Exchange shall take place at a closing (the
“Closing”) to
be held on November 12, 2020 (the “Closing Date”), or such later
date as agreed to by the parties in writing.

 

1.2. Deliveries
by the Lender. At the Closing, the Lender
shall:

 

(i) Date, complete and
execute this Agreement and the Satisfaction and Release;
and

 

(ii) Deliver
to the Company settlement instructions (“Settlement Instructions”), which
Settlement Instructions shall set forth the Lender’s election
to receive the Shares in the form of book-entry notations in the
records of the Company’s transfer agent.

  

 

 

 

1.3.

Deliveries by the Company. At
the Closing, the Company shall:

 

(i) Date, complete and
execute this Agreement; and

 

(ii) Within
three (3) business days following the Closing, provide for
book-entry notations in the records of the Company’s transfer
agent, in either case, according the Settlement Instructions, which
Settlement Instructions shall be delivered to the Company’s
transfer agent at the Closing, together with irrevocable
instructions to the transfer agent directing the transfer agent to
issue duly authorized, validly issued, fully paid and
non-assessable Shares to the Lender.

 

2. Representations and Warranties of the
Lender. The Lender hereby represents and warrants to the
Company as set forth below.

 

2.1.           Investment
Risk. The Lender recognizes that the investment in the
Shares in connection with the Exchange involves a high degree of
risk. Such risks include, but are not limited to, the risks
associated with the business of the Company, as more particularly
set forth in the Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other filings (“Company SEC Filings”) with the
U.S. Securities and Exchange Commission (“SEC”) which have been made
available to the Lender.

 

2.2.           Accredited
Investor. The Lender is an “accredited investor”
as defined under Rule 501 of Regulation D, promulgated under the
Securities Act of 1933, as amended (the “Securities Act”).

 

2.3.           Investment
Purposes. The Lender will be acquiring the Shares for its
own account, for investment purposes, and not with a view to any
resale or distribution in whole or in part, in violation of the
Securities Act or any applicable securities laws; provided, however, that notwithstanding
the foregoing, the Lender does not covenant to hold the Series D
Preferred for any minimum period of time except as set forth in the
Series D Certificate.

 

2.3           Investigation.
The Lender has been afforded the opportunity to ask questions of
and receive answers from the Company regarding the terms and
conditions of this Agreement and about the Company; provided, however, that no
investigation performed by or on behalf of the Lender regarding the
terms and conditions of this Agreement or the Company shall limit
or otherwise affect its right to rely on the representations and
warranties of the Company contained herein.

 

2.4           Professional
Counsel. To the extent necessary, the Lender has obtained
professional advice regarding the investment, tax and legal merits
and consequences of the Exchange and an investment in the Shares
and the Conversion Shares issuable upon conversion of the Shares
(together with the Shares, the “Exchange
Securities”).

 

2.5           Authority,
Enforceability. The Lender represents that the Lender has
full power and authority (corporate, statutory and otherwise) to
execute and deliver this Agreement and to consummate the Exchange.
Subject to the foregoing and once executed and delivered by all
parties hereto, this Agreement will constitute the legal, valid and
binding obligation of the Lender, enforceable against the Lender in
accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy. If
the Lender is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement
account, or other tax-exempt entity, it is authorized and qualified
to invest in the Company and the person signing this Agreement on
behalf of such entity has been duly authorized by such entity to do
so.

 

3. Representations and Warranties of the
Company. The Company hereby represents and warrants to the
Lender as set forth below.

 

3.1.           Organization
and Qualification. The Company has been duly incorporated
and is validly existing and in good standing under the laws of the
state of Delaware, with full corporate power and authority to own,
lease and operate its properties and to conduct its business as
currently conducted, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where
the failure to register or qualify would not have a Material
Adverse Effect. For purposes of this Agreement, “Material Adverse Effect” shall
mean any event, occurrence, fact, condition or change that,
individually or in the aggregate, results, or would reasonably be
likely to result, in a material adverse effect on (i) the Shares or
the Conversion Shares, (ii) the ability of the Company to perform
its obligations under this Agreement or (iii) the condition
(financial or otherwise) or in the earnings, prospects, business,
properties, surplus or results of operations of the
Company.

 

 

 

 

3.2.           Power
and Authorization. The Shares have been duly authorized by
all necessary corporate action and, when paid for or issued in
accordance with the terms hereof, the Shares shall be validly
issued and outstanding, fully paid and nonassessable, free and
clear of all liens, encumbrances and rights of refusal of any
kind.

 

3.3.           Valid
and Enforceable Agreement; No Violations. This Agreement has
been duly authorized, validly executed and delivered on behalf of
the Company and is a valid and binding agreement and obligation of
the Company enforceable against the Company in accordance with its
terms, subject to limitations on enforcement by general principles
of equity and by bankruptcy or other laws affecting the enforcement
of creditors’ rights generally, and the Company has full
power and authority to execute and deliver the Agreement and the
other agreements and documents contemplated hereby and to perform
its obligations hereunder and thereunder.

 

3.4.           Compliance.
The Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer,
issuance and delivery of the Exchange Securities
hereunder.

 

3.5.           Representations
and Warranties from Purchase Agreement. Each of the
representations and warranties as set forth in Article 3 of the
Purchase Agreement are hereby incorporated by reference herein and
made a part hereof, as if the same were specifically set forth in
this Section 3.

 

4.            

Conditions to Obligations of the
Lender.  The Lender’s obligation to consummate
the Exchange is subject to the fulfillment of the following
conditions at the Closing:

 

(a) The Company shall
have executed and delivered this Agreement;

 

(b) The representations
and warranties made by the Company in Article 3 hereof shall be
true and correct as of date of the Closing and all covenants,
agreements and conditions contained in this Agreement to be
performed by the Company on or prior to the date hereof shall have
been performed or complied with in all material respects;
and

 

(c) The Company shall
have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation
of the Exchange and the consummation of the other transactions
contemplated by this Agreement.

 

Notwithstanding the
foregoing, for the avoidance of doubt, the effectiveness of this
Agreement (and the Exchange) is contingent upon the consummation of
the transactions contemplated by the Purchase Agreement (the
"Financing Closing"), and
in the event that the Financing Closing does not occur, or the
Purchase Agreement is terminated, this Agreement shall be
void ab
initio.

 

5. Conditions to the Obligations of the
Company. The Company’s obligation to consummate the
Exchange is subject to the fulfillment of the following conditions
at the Closing:

 

(a) The Lender shall
have executed and delivered this Agreement and the Satisfaction and
Release;

 

(b) The representations
and warranties made by the Lender in Article 2 hereof shall be true
and correct as of date of the Closing and all covenants, agreements
and conditions contained in this Agreement to be performed by the
Lender on or prior to the date hereof shall have been performed or
complied with in all material respects; and

 

(c) The Company shall
have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation
of the Exchange and the consummation of the other transactions
contemplated by this Agreement.

 

 

 

 

6.

Miscellaneous.

 

6.1.          
Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended except by a writing signed by the
parties, and this Agreement may not be discharged except by
performance in accordance with its terms or by a writing signed by
the party to be charged. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of
any such right.

 

6.2.          
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and to their respective heirs, legal
representatives, successors and assigns. No party hereto may assign
its rights or obligations hereunder without the prior written
consent of the other party. Nothing in this Agreement shall create
or be deemed to create any rights in any person or entity not a
party to this Agreement.

 

6.3.          
This Agreement, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents,
exhibits and schedules.

 

6.4.          
All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the
State of California, United States, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other this Agreement (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees
or agents) shall be commenced exclusively in the state and federal
courts sitting in San Diego County, California. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in San Diego County, California for the
adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of this
Agreement), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is improper or is an inconvenient venue
for such proceeding.

 

6.5.          
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full
force and effect. If any provision of this Agreement shall be
declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, such
provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the
remaining conditions and provisions or portions thereof shall
nevertheless remain in full force and effect and enforceable to the
extent they are valid, legal and enforceable, and no provisions
shall be deemed dependent upon any other covenant or provision
unless so expressed herein.

  

6.6.          
The Lender and Company agree to execute and deliver all such
further documents, agreements and instruments and take such other
and further action as may be necessary or appropriate to carry out
the purposes and intent of this Agreement.

 

6.7.          
This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.

 

 

 

 

 

[Signature
page follows] 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the Lender and the Company have
caused this Debt Exchange Agreement to be duly executed as of the
date first written above.

 

 

“COMPANY”

	

 

	
ImageWare Systems,
Inc.

	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Kristin
Taylor 

	

 

	

 

	

 

	
Kristin
Taylor	

 

	

 

	

 

	Chief Executive
Officer	

 

 

“LENDER”

	

 

	
	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ James Miller

	

 

	

 

	

 

	
James
Miller
	

 

	

 

	

 

	
	

 

  

 

 

 

EXHIBIT A

SATISFACTION AND RELEASE

 

This SATISFACTION AND RELEASE
(“Agreement”) is made and entered into this 12th day of
November, 2020 (the “Effective
Date”), between ImageWare
Systems, Inc., a Delaware corporation (the
“Company”), and S. James Miller, an individual (the
“Lender”). Capitalized terms not otherwise defined
herein shall have the meanings as set forth in that certain Debt
Exchange Agreement dated November 12, 2020 (the
“Exchange
Agreement”), by and
between the Company and Lender.

 

RECITALS

 

WHEREAS, the Lender
and the Company are parties to the Exchange Agreement pursuant to
which Lender has agreed to exchange Indebtedness for the Shares, as more particularly
set forth in the Exchange Agreement;

 

WHEREAS,
the Lender desires to accept the Shares in
full and complete satisfaction of the Indebtedness and to fully
release and discharge the Company for all matters and liabilities,
including from any and all further liability for repayment of such
Indebtedness under
the terms of the Note;

 

WHEREAS, the
Exchange Agreement provides that, at Closing, the Lender execute
and deliver this Agreement to the Company;

 

WHEREAS, the
Company is currently negotiating an equity financing with certain
accredited investors (the “Financing”), and the execution of
this Agreement by Lender is a condition to consummation of the
Financing; and

 

WHEREAS, this Agreement is the Satisfaction and
Release that is referred to in, and as is attached as
Exhibit
A to, the Exchange
Agreement.

 

NOW,
THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties
hereto do hereby agree as follows:

 

AGREEMENT

 

1. Confirmation
of Indebtedness.  The principal amount of the
Indebtedness, including interest accruing thereon as of the
Effective Date is One Hundred Two Thousand Eight Hundred Eight
Dollars and Twenty-Two Cents ($102,808.22), which amount the Lender
agrees constitutes all amounts due to the Lender under the
Note.

 

2. Delivery
of Preferred Stock in Satisfaction of
Indebtedness.  Subject to the terms and conditions
set forth in the Exchange Agreement, the Company agrees to deliver
that number of Shares calculated in accordance with Section
1.1.1 of the Exchange Agreement (“Settlement Shares”) in accordance
with the Settlement Instructions delivered by the Lender to the
Company on the Effective Date.

 

3. Satisfaction
of Indebtedness.  Upon delivery of the Settlement
Shares by the Company in accordance with the Settlement
Instructions, (a) the Lender hereby agrees that the Indebtedness
will have been fully and completely satisfied; and (b) the Lender
hereby compromises, settles, resolves, discharges, and releases the
Company, and its successors and assigns, from the payment of any
and all amounts due and payable to the Lender under the
note.  

 

4. Termination.  This
Agreement shall automatically be terminated and be of no further
force and effect if the Company does not consummate the Financing
on or before November 30, 2020.

 

5. Entire
Agreement.  This Agreement and the Exchange
Agreement represents the entire agreement between the parties
relating to the subject matter hereof.  There are no
other courses of dealing, understanding, agreements,
representations, or warranties, written or oral, except as set
forth herein.

 

 

 

 

6. Amendment or
Waiver.  Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether
conferred herein, at law, or in equity and may be enforced
concurrently herewith, and no waiver by any party of the
performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or
thereafter occurring or existing.  At any time prior to
the Closing Date, this Agreement may be amended by a writing signed
by all parties hereto, respecting any of the terms contained
herein, and any term or condition of this Agreement may be waived
or the time for performance thereof may be extended by a writing
signed by the party or parties for whose benefit the provision is
intended. 

 

7. Form of Execution;
Counterparts.  A valid and binding signature
hereto or on any notice or demand hereunder may be in the form of a
manual execution or a true copy made by photographic, xerographic,
conversion to portable document format (pdf), or other electronic
process that provides similar copy accuracy of a document that has
been executed, and such electronic signature or record shall be of
the same legal effect, validity, or enforceability as a manually
executed signature.  This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original
and all of which taken together shall be but a single
instrument.

 

8. Governing Law.  This
Agreement shall be governed by, and construed under and in
accordance with, the laws of the state of California without giving
effect to any choice or conflict of law provision or rule (whether
the state of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the
state of California.

 

9. Interpretation.  Section
headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.  

 

 

 

[The Remainder of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above. 

 

 

“COMPANY”

	

 

	
ImageWare Systems,
Inc.

	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Kristin
Taylor 

	

 

	

 

	

 

	
Kristin
Taylor	

 

	

 

	

 

	Chief Executive
Officer	

 

 

“LENDER”

	

 

	
	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ James Miller

	

 

	

 

	

 

	
James
Miller

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