WARRANT AND UNIT AGREEMENT ("AGREEMENT")
ImageWare Systems, Inc., 00000 Xxxxxxxxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, a
California corporation ("Company"), and American Securities Transfer & Trust,
Inc. ("AST"), 00000 Xxxx Xxxxxxx Xxxxxxx, Xxxxx X-0, Xxxxxxxx, Xxxxxxxx 00000, a
Colorado corporation ("Transfer Agent"), agree as follows:
1. PURPOSE. The Company proposes to publicly offer and issue
2,156,250 units ("Units"). Each Unit will entitle the
registered holder of a Unit ("Unit Holder") to (i) one (1)
share of the Company's $0.01 par value common stock ("Shares")
and (ii) one (1) warrant permitting the purchase of one (1)
Share ("Warrant").
2. WARRANTS. Each Warrant will entitle the registered holder of a
Warrant ("Warrant Holder") to purchase from the Company one
(1) Share at one hundred twenty percent (120%) of the Initial
Public Offering price of the Units during the first year after
the offering and one hundred fifty percent (150%) of the
Initial Public Offering price of the Units thereafter
("Exercise Price"). A Warrant Holder may exercise all or any
number of Warrants resulting in the purchase of a whole number
of Shares.
3. EXERCISE PERIOD. The Warrants may be exercised at any time
during the period commencing thirty (30) days after the
Initial Public Offering ("Exercise Date") and ending at 3:00
p.m., Denver Colorado time on the fifth (5th) anniversary date
of the closing of the offering ("Expiration Date") except as
changed by Section 15 of this Agreement.
4. NON-DETACHABILITY. A Warrant Certificate (as defined below)
may not be detached from a Share certificate contained in a
Unit for at least thirty (30) days following the Initial
Public Offering. Until such time a Warrant Certificate may be
split up, combined, exchanged or transferred on the books of
the Transfer Agent only together with a Share certificate.
Xxxxxxx Investment Company, Inc. will then determine when the
Units separate, after which the common stock and public
warrants will trade separately.
5. CERTIFICATES. The Warrant certificates shall be in registered
form only and shall be substantially in the form set forth in
Exhibit A attached to this Agreement ("Warrant Certificate").
The Unit certificates shall be in registered form only and
shall be substantially in the form set forth in Exhibit B
attached to this Agreement ("Unit Certificate"). Warrant and
Unit Certificates shall be signed by, or shall bear the
facsimile signature of, the President or a Vice President of
the Company and the Secretary or an Assistant Secretary of the
Company and shall bear a facsimile of the Company's corporate
seal. If any person, whose facsimile signature has been placed
upon any Warrant or Unit Certificate or the signature of an
officer of the Company, shall have ceased to be such officer
before such Warrant or Unit Certificate is countersigned,
issued and delivered, such Warrant or Unit Certificate shall
be countersigned, issued and delivered with the same effect as
if such person had not ceased to be such officer. Any Warrant
or Unit Certificate may be signed by, or made to bear the
facsimile signature of, any person who at the actual date of
the preparation of such Warrant or Unit Certificate shall be a
proper officer of the Company to sign such Warrant or Unit
Certificate, even though such person was not such an officer
upon the date of the Agreement.
6. ISSUANCE OF NEW CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or the several Warrant or Unit
Certificates to the contrary, the
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Company may, at its option, issue new Warrant or Unit
Certificates in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Exercise
Price or the number or kind of shares purchasable under the
several Warrant or Unit Certificates made in accordance with
the provisions of this Agreement.
7. COUNTERSIGNING. Warrant and Unit Certificates shall be
manually countersigned by the Transfer Agent and shall not be
valid for any purpose unless so countersigned. The Transfer
Agent hereby is authorized to countersign and deliver to, or
in accordance with the instructions of, any Warrant or Unit
Holder any Warrant or Unit Certificate, respectively, which is
properly issued.
8. REGISTRATION OF TRANSFER AND EXCHANGES. The Transfer Agent
will keep or cause to be kept books for registration of
ownership or transfer of Warrant and Unit Certificates issued
hereunder. Such registers shall show the names and addresses
of the respective holders of the Warrant and Unit Certificates
and the number of Warrants and Units evidenced by each such
Warrant or Unit Certificate. Subject to the provisions of
Section 4, the Transfer Agent shall from time to time register
the transfer of any outstanding Warrant or Unit Certificate
upon records maintained by the Transfer Agent for such purpose
upon surrender of such Warrant or Unit Certificate to the
Transfer Agent for transfer, accompanied by appropriate
instruments of transfer in form satisfactory to the Company
and the Transfer Agent and duly executed by the Warrant or
Unit Holder or a duly authorized attorney. Upon any such
registration of transfer, a new Warrant or Unit Certificate
shall be issued in the name of and to the transferee and the
surrendered Warrant or Unit Certificate shall be cancelled.
9. EXERCISE OF WARRANTS.
a. Any one Warrant or any multiple of one Warrant
evidenced by any Warrant Certificate may be exercised
on or after the Exercise Date, and on or before the
Expiration Date. A Warrant shall be exercised by the
Warrant Holder by surrendering to the Transfer Agent
the Warrant Certificate evidencing such Warrant with
the exercise form on the reverse of such Warrant
Certificate duly completed and executed and
delivering to the Transfer Agent, by good check or
bank draft payable to the order of the Company, the
Exercise Price for each Share to be purchased.
b. Upon receipt of a Warrant Certificate with the
exercise form thereon duly executed together with
payment in full of the Exercise Price (and an amount
equal to any applicable taxes or government charges)
for the Shares for which Warrants are then being
exercised, the Transfer Agent shall requisition from
any transfer agent for the Shares, and upon receipt
shall make delivery of, certificates evidencing the
total number of whole Shares for which Warrants are
then being exercised in such names and denominations
as are required for delivery to, or in accordance
with the instructions of, the Warrant Holder. Such
certificates for the Shares shall be deemed to be
issued, and the person whom such Shares are issued of
record shall be deemed to have become a holder of
record of such Shares, as of the date of the
surrender of such Warrant Certificate and payment of
the Exercise Price (and an amount equal to any
applicable taxes or government charges), whichever
shall
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last occur, provided that if the books of the Company
with respect to the Shares shall be deemed to be
issued, and the person to whom such Shares are issued
of record shall be deemed to have become a record
holder of such Shares, as of the date on which such
books shall next be open (whether before, on or after
the Expiration Date) but at the Exercise Price (and
an amount equal to any applicable taxes or government
charges), whichever shall have last occurred, to the
Transfer Agent. The Company covenants and agrees that
it shall not cause its stock transfer books to be
closed for a period of more than twenty (20)
consecutive business days except upon consolidation,
merger, sale of all of its assets, dissolution or
liquidation or as otherwise provided by law.
c. In addition, if it is required by law and upon
instruction by the Company, the Transfer Agent will
deliver to each Warrant Holder a prospectus that
complies with the provisions of Section 5 of the
Securities Act, as amended, and the Company agrees to
supply the Transfer Agent with a sufficient number of
prospectuses to effectuate that purpose.
d. Any Warrant Certificate or Certificates may be
exchanged at the option of the holder thereof for
another Warrant Certificate or Certificates of
different denominations, of like tenor and
representing in the aggregate the same number of
Warrants, upon surrender of such Warrant Certificate
or Certificates, with the Form of Assignment duly
filled in and executed, to the Transfer Agent, at any
time or from time-to-time after the close of business
on the date hereof and prior to the close of business
on the Expiration Date. The Transfer Agent shall
promptly cancel the surrendered Warrant Certificate
and deliver the new Warrant Certificate pursuant to
the provisions of this Section.
e. If less than all the Warrants evidenced by a Warrant
Certificate are exercised upon a single occasion, a
new Warrant Certificate for the balance of the
Warrants not so exercised shall be issued and
delivered to, or in accordance with, transfer
instructions properly given by the Warrant Holder
until the Expiration Date.
f. All Warrant Certificates surrendered upon exercise of
the Warrants shall be cancelled.
g. Upon the exercise, or conversion of any Warrant, the
Transfer Agent shall account promptly to the Company
with respect to Warrants exercised and concurrently
pay to the Company all moneys received by the
Transfer Agent for the purchase of securities or
other property through the exercise of such Warrants.
h. Expenses incurred by American Securities Transfer &
Trust, Inc. while acting in the capacity as Transfer
Agent, in accordance with this Agreement, will be
paid by the Company. A detailed accounting statement
relating to the number of shares exercised, names of
registered Warrant Holder(s) and the net amount of
exercised funds remitted will be given to the Company
with the payment of each exercise amount.
10. REDEMPTION. Following six (6) months after the closing of the
Company's initial public offering, the Warrants outstanding at
the time of a redemption may be
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redeemed at the option of the Company, in whole or in part on
a pro-rata basis, at any time if, at the time notice of such
redemption is given by the Company as provided in subsection
a., below, the Daily Price has exceeded two hundred percent
(200%) of the Initial Public Offering Price for the ten (10)
consecutive trading days immediately preceding the date of
such notice, at a price of $0.25 per Warrant (the "Redemption
Price"). 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. On the redemption date the holders of record of
redeemed Warrants shall be entitled to payment of the
Redemption Price upon surrender of such redeemed Warrants to
the Company at the principal office of the Transfer Agent in
Denver, Colorado.
a. Notice of redemption of Warrants shall be given at
least thirty (30) days prior to the redemption date
by mailing, by registered or certified mail, return
receipt requested, a copy of such notice to the
Transfer Agent and by first class mail to all of
the holders of record of Warrants at their
respective addresses appearing on the books or
transfer records of the Company or such other
address designated in writing by the holder of
record to the Transfer Agent not less than forty
(40) days prior to the redemption date.
b. From and after the redemption date, all rights of the
Warrant Holders (except the right to receive the
Redemption Price) shall terminate, but only if (i) no
later than one day prior to the redemption date the
Company shall have irrevocably deposited with the
Transfer Agent as paying agent a sufficient amount to
pay on the redemption date the Redemption Price for
all Warrants called for redemption and (ii) the
notice of redemption shall have stated the name and
address of the Transfer Agent and the intention of
the Company to deposit such amount with the Transfer
Agent no later than one day prior to the redemption
date.
c. The Transfer Agent shall pay to the holders of record
of redeemed Warrants all monies received by the
Transfer Agent for the redemption of Warrants to
which the holders of record of such redeemed Warrants
who shall have surrendered their Warrants are
entitled.
d. Any amounts deposited with the Transfer Agent that
are not required for redemption of Warrants may be
withdrawn by the Company. Any amounts deposited with
the Transfer Agent that shall be unclaimed after six
(6) months after the redemption date may be withdrawn
by the Company, and thereafter the holders of the
Warrants called for redemption for which such funds
were deposited shall look solely to the Company for
payment. The Company shall be entitled to the
interest, if any, on funds deposited with the
Transfer Agent and the holders of redeemed Warrants
shall have no right to any such interest.
e. If the Company fails to make a sufficient deposit
with the Transfer Agent as provided above, the holder
of any Warrants called for redemption may at the
option of the holder (i) by notice to the Company
declare the notice of redemption a nullity as to such
holder, or (ii) maintain an action against the
Company for the Redemption Price. If the holder
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brings such an action, the Company will pay
reasonable attorneys' fees of the holder. If the
holder fails to bring an action against the Company
for the Redemption Price within sixty (60) days after
the redemption date, the holder shall be deemed to
have elected to declare the notice of redemption to
be a nullity as to such holder and such notice shall
be without any force or effect as to such holder.
Except as otherwise specifically provided in this
subsection e., a notice of redemption, once mailed by
the Company, as provided in subsection a., shall be
irrevocable.
11. TAXES. The Company will pay all taxes attributable to the
initial issuance of Shares upon exercise of Warrants. The
Company shall not, however, be required to pay any tax which
may be payable in respect to any transfer involved in any
issue of Warrant or Unit Certificates or in the issue of any
certificates of Shares in the name other than that of the
Warrant or Unit Holder upon the exercise of any Warrant or
Unit, as the case may be.
12. MUTILATED OR MISSING CERTIFICATES. If any Warrant or Unit
Certificate is mutilated, lost, stolen or destroyed, the
Company and the Transfer Agent may, on such terms as to
indemnity or otherwise as they may in their discretion impose
(which shall, in the case of a mutilated Warrant or Unit
Certificate, include the surrender thereof), and upon receipt
of evidence satisfactory to the Company and the Transfer Agent
of such mutilation, loss, theft or destruction, issue a
substitute Warrant or Unit Certificate, respectively, of like
denomination or tenor as the Warrant or Unit Certificate so
mutilated, lost, stolen or destroyed. Applicants for
substitute Warrant or Unit Certificates shall comply with such
other reasonable regulations and pay any reasonable charges as
the Company or the Transfer Agent may prescribe.
13. SUBSEQUENT ISSUE OF CERTIFICATES. Subsequent to their original
issuance, no Warrant or Unit Certificates shall be reissued
except (i) such Certificates issued upon transfer thereof in
accordance with Section 8 hereof, (ii) such Certificates
issued upon any combination, split-up or exchange of Warrant
or Unit Certificates pursuant to Section 8 hereof, (iii) such
Certificates issued in replacement of mutilated, destroyed,
lost or stolen Warrant or Unit Certificates pursuant to
Section 12 hereof, (iv) Warrant Certificates issued upon the
partial exercise of Warrant Certificates pursuant to Section 9
hereof, and (v) Warrant Certificates issued to reflect any
adjustment or change in the Exercise Price or the number or
kind of shares purchasable thereunder pursuant to Section 6
hereof. The Transfer Agent is hereby irrevocably authorized to
countersign and deliver, in accordance with the provisions of
said Sections 6, 8, 9 and 12, the new Warrant or Unit
Certificates, as the case may be, required for purposes
thereof, and the Company, whenever required by the Transfer
Agent, will supply the Transfer Agent with Warrant and Unit
Certificates duly executed on behalf of the Company for such
purposes.
14. RESERVATION OF SHARES. For the purpose of enabling the Company
to satisfy all obligations to issue Shares upon exercise of
Warrants, the Company will at all times reserve and keep
available free from preemptive rights, out of the aggregate of
its authorized but unissued shares, the full number of Shares
which may be issued upon the exercise of the Warrants. The
Company covenants all shares which shall be so issuable, will
upon issue be fully paid and nonassessable by the Company and
free from all taxes, liens, charges and security interests
with respect to the issue thereof. In the case of a Warrant
exercisable solely for securities listed on a securities
exchange or for which
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there are at least two (2) independent market makers, in lieu
of obtaining such registration or approval, the Company may
elect to redeem Warrants submitted to the Transfer Agent for
exercise for a price equal to the difference between the
aggregate low asked price, or closing price, as the case may
be, of the securities for which such Warrant is exercisable on
the date of such submission and the Exercise Price of such
Warrants; in the event of such redemption, the Company will
pay to the holder of such Warrants the above-described
redemption price in cash within ten (10) business days after
receipt of notice from the Transfer Agent that such Warrants
have been submitted for exercise.
15. GOVERNMENTAL RESTRICTIONS. If any Shares issuable upon the
exercise of Warrants require registration or approval of any
governmental authority, the Company will use commercially
reasonable efforts to secure such registration or approval
and, to the extent practicable, take action in anticipation of
and prior to the exercise of the Warrants necessary to permit
a public offering of the securities underlying the Warrants
during the term of this Agreement; provided that in no event
shall such Shares be issued, and the Company shall have the
authority to suspend the exercise of all Warrants, until such
registration or approval shall have been obtained; but all
Warrants, the exercise of which is requested during any such
suspension, shall be exercisable at the Exercise Price. If any
such period of suspension continues past the Expiration Date,
all Warrants, the exercise of which have been requested on or
prior to the Expiration Date, shall be exercisable upon the
removal of such suspension until the close of business on the
business day immediately following the expiration of such
suspension.
16. ADJUSTMENTS OF NUMBER AND KIND OF SHARES PURCHASABLE AND
EXERCISE PRICE. The number and kind of securities or other
property purchasable upon exercise of a Warrant shall be
subject to adjustment from time to time upon the occurrence,
after the date hereof, of any of the following events:
a. In case the Company shall (i) pay a dividend in, or
make a distribution of, shares of capital stock on
its outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater
number of such shares or (iii) combine its
outstanding shares of Common Stock into a smaller
number of such shares, the total number of shares of
Common Stock purchasable upon the exercise of each
Warrant outstanding immediately prior thereto shall
be adjusted so that the holder of any Warrant
Certificate thereafter surrendered for exercise shall
be entitled to receive at the same aggregate Exercise
Price the number of shares of capital stock (of one
or more classes) which such holder would have owned
or have been entitled to receive immediately
following the happening of any of the events
described above had such Warrant been exercised in
full immediately prior to the record date with
respect to such event. Any adjustment made pursuant
to this subsection shall, in the case of a stock
dividend or distribution, become effective as of the
record date therefor and, in the case of a
subdivision or combination, be made as of the
effective date thereof. If, as a result of an
adjustment made pursuant to this subsection, the
holder of any Warrant Certificate thereafter
surrendered for exercise shall become entitled to
receive shares of two or more classes of capital
stock of the Company, the Board of Directors of the
Company (whose determination shall be conclusive and
shall be evidenced by a Board resolution filed with
the Transfer Agent) shall determine the allocation of
the adjusted
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Exercise Price between or among shares of such
classes of capital stock.
b. In the event of a capital reorganization or a
reclassification of the Common Stock (except as
provided in subsection a. above or subsection e.
below), any Warrant Holder, upon exercise of
Warrants, shall be entitled to receive, in
substitution for the Common Stock to which he would
have become entitled upon exercise immediately prior
to such reorganization or reclassification, the
shares (of any class or classes) or other securities
or property of the Company (or cash) that he would
have been entitled to receive at the same aggregate
Exercise Price upon such reorganization or
reclassification if such Warrants had been exercised
immediately prior to the record date with respect to
such event; and in any such case, appropriate
provision (as determined by the Board of Directors of
the Company, whose determination shall be conclusive
and shall be evidenced by a certified Board
resolution filed with the Transfer Agent) shall be
made for the application of this Section with respect
to the rights and interests thereafter of the Warrant
Holders (including but not limited to the allocation
of the Exercise Price between or among shares of
classes of capital stock), to the end that this
Section (including the adjustments of the number of
shares of Common Stock or other securities
purchasable and the Exercise Price thereof) shall
thereafter be reflected, as nearly as reasonably
practicable, in all subsequent exercises of the
Warrants for any shares or securities or other
property (or cash) thereafter deliverable upon the
exercise of the Warrants.
c. Whenever the number of shares of Common Stock or
other securities purchasable upon exercise of a
Warrant is adjusted as provided in this Section, the
Company will promptly file with the Transfer Agent a
certificate signed by a Chairman or co-Chairman of
the Board or the President or a Vice President of the
Company and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary
of the Company setting forth the number and kind of
securities or other property purchasable upon
exercise of a Warrant, as so adjusted, stating that
such adjustments in the number or kind of shares or
other securities or property conform to the
requirements of this Section, and setting forth a
brief statement of the facts accounting for such
adjustments. Promptly after receipt of such
certificate, the Company, or the Transfer Agent at
the Company's request, will deliver, by first-class,
postage prepaid mail, a brief summary thereof (to be
supplied by the Company) to the registered holders of
the outstanding Warrant Certificates; provided,
however, that failure to file or to give any notice
required under this subsection, or any defect
therein, shall not affect the legality or validity of
any such adjustments under this Section; and
provided, further, that, where appropriate, such
notice may be given in advance and included as part
of the notice required to be given pursuant to
Section 18 hereof.
d. In case of any consolidation of the Company with, or
merger of the Company into, another corporation
(other than a consolidation or merger which does not
result in any reclassification or change of the
outstanding Common Stock), or in case of any sale or
conveyance to another corporation of the property of
the Company as an entirety or substantially as an
entirety, the corporation formed by such
consolidation or merger or the corporation which
shall have acquired such assets, as the case may be,
shall execute and deliver to the
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Transfer Agent a supplemental warrant agreement
providing that the holder of each Warrant then
outstanding shall have the right thereafter (until
the expiration of such Warrant) to receive, upon
exercise of such Warrant, solely the kind and amount
of shares of stock and other securities and property
(or cash) receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares
of Common Stock of the Company for which such Warrant
might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for
adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided in
this Section. The above provision of this subsection
shall similarly apply to successive consolidations,
mergers, sales or transfers.
The Transfer Agent shall not be under any
responsibility to determine the correctness of any
provision contained in any such supplemental warrant
agreement relating to either the kind or amount of
shares of stock or securities or property (or cash)
purchasable by holders of Warrant Certificates upon
the exercise of their Warrants after any such
consolidation, merger, sale or transfer or of any
adjustment to be made with respect thereto, but
subject to the provisions of Section 23 hereof, may
accept as conclusive evidence of the correctness of
any such provisions, and shall be protected in
relying upon, a certificate of a firm of independent
certified public accountants (who may be the
accountants regularly employed by the Company) with
respect thereto.
e. Irrespective of any adjustments in the number or kind
of shares issuable upon exercise of Warrants, Warrant
Certificates theretofore or thereafter issued may
continue to express the same price and number and
kind of shares as are stated in the similar Warrant
Certificates initially issuable pursuant to this
Agreement.
f. The Company may retain a firm of independent public
accountants of recognized standing, which may be the
firm regularly retained by the Company, selected by
the Board of Directors of the Company or the
Executive Committee of said Board, and not
disapproved by the Transfer Agent, to make any
computation required under this Section, and a
certificate signed by such firm shall, in the absence
of fraud or gross negligence, be conclusive evidence
of the correctness of any computation made under this
Section.
g. For the purpose of this Section, the term "Common
Stock" shall mean (i) the Common Stock or (ii) any
other class of stock resulting from successive
changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from
par value to no par value, or from no par value to
par value. In the event that at any time as a result
of an adjustment made pursuant to this Section, the
holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive any shares
of capital stock of the Company other than shares of
Common Stock, thereafter the number of such other
shares so receivable upon exercise of any Warrant
shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as
practicable to the provisions with respect to the
Common Stock contained in this Section, and all other
provisions of this Agreement,
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with respect to the Common Stock, shall apply on like
terms to any such other shares.
h. The Company may, from time to time and to the extent
permitted by law, reduce the exercise price of the
Warrants by any amount for a period of not less than
twenty (20) days. If the Company so reduces the
exercise price of the Warrants, it will give not less
than fifteen (15) days' notice of such decrease,
which notice may be in the form of a press release,
and shall take such other steps as may be required
under applicable law in connection with any offers or
sales of securities at the reduced price.
17. REDUCTION OF EXERCISE PRICE BELOW PAR VALUE. Before taking any
action that would cause an adjustment pursuant to Section 16
hereof reducing the portion of the Exercise Price required to
purchase one share of capital stock below the then par value
(if any) of a share of such capital stock, the Company will
use its best efforts to take any corporate action which, in
the opinion of its counsel, may be necessary in order that the
Company may validly and legally issue fully paid and
non-assessable shares of such capital stock.
18. NOTICE TO WARRANT HOLDERS. In case the Company after the date
hereof shall propose (i) to offer to the holders of Common
Stock, generally, rights to subscribe to or purchase any
additional shares of any class of its capital stock, any
evidences of its indebtedness or assets, or any other rights
or options or (ii) to effect any reclassification of Common
Stock (other than a reclassification involving merely the
subdivision or combination of outstanding shares of Common
Stock) or any capital reorganization, or any consolidation or
merger to which the Company is a party and for which approval
of any stockholders of the Company is required, or any sale,
transfer or other disposition of its property and assets
substantially as an entirety, or the liquidation, voluntary or
involuntary dissolution or winding-up of the Company, then, in
each such case, the Company shall file with the Transfer Agent
and the Company, or the Transfer Agent on its behalf, shall
mail (by first-class, postage prepaid mail) to all registered
holders of the Warrant Certificates notice of such proposed
action, which notice shall specify the date on which the books
of the Company shall close or a record be taken for such offer
of rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, voluntary or
involuntary dissolution or winding-up shall take place or
commence, as the case may be, and which shall also specify any
record date for determination of holders of Common Stock
entitled to vote thereon or participate therein and shall set
forth such facts with respect thereto as shall be reasonably
necessary to indicate any adjustments in the Exercise Price
and the number or kind of shares or other securities
purchasable upon exercise of Warrants which will be required
as a result of such action. Such notice shall be filed and
mailed in the case of any action covered by clause (i) above,
at least ten (10) days prior to the record date for
determining holders of the Common Stock for purposes of such
action or, if a record is not to be taken, the date as of
which the holders of shares of Common Stock of record are to
be entitled to such offering; and, in the case of any action
covered by clause (ii) above, at least twenty (20) days prior
to the earlier of the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, voluntary or involuntary dissolution
or winding-up is expected to become effective and the date on
which it is expected that holders of shares of Common Stock of
record on such date shall be entitled to exchange their shares
for securities or other property
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deliverable upon such reclassification, reorganization,
consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or
winding-up.
Failure to give any such notice or any defect therein shall
not affect the legality or validity of any transaction listed
in this Section.
19. NO FRACTIONAL WARRANTS, UNITS OR SHARES. The Company shall not
be required to issue fractions of Warrants or Units upon the
reissue of Warrants or Units, any adjustments as described in
Section 16 or otherwise; but the Company in lieu of issuing
any such fractional interest, shall adjust the fractional
interest by payment to the Warrant or Unit Holder an amount,
in cash, equal to the current market value of any such
fraction or interest. If the total Warrants or Units
surrendered by exercise would result in the issuance of a
fractional Share, the Company shall not be required to issue a
fractional Share but rather the resulting fractional interest
shall be adjusted by payment in an amount, in cash, equal to
the current market value of such fractional interest.
20. RIGHTS OF WARRANT HOLDERS. No Warrant Holder, as such, shall
have any rights of a shareholder of the Company, either at law
or equity, and the rights of the Warrant Holders, as such, are
limited to those rights expressly provided in this Agreement
or in the Warrant Certificates. The Company and the Transfer
Agent may treat the registered Warrant Holder in respect of
any Warrant Certificates as the absolute owner thereof for all
purposes notwithstanding any notice to the contrary.
21. RIGHT OF ACTION. All rights of action in respect to this
Agreement are vested in the respective registered holders of
the Warrant and Unit Certificates; and any registered holder
of any Warrant or Unit Certificate, without the consent of the
Transfer Agent or of any other holder of a Warrant or Unit
Certificate, may, in his own behalf for his own benefit,
enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, or
otherwise in respect of, his right to exercise the Warrants
evidenced by such Warrant Certificate, for the purchase of
shares of the Common Stock in the manner provided in the
Warrant Certificate and in this Agreement.
22. AGREEMENT OF WARRANT AND UNIT HOLDERS. Every holder of a
Warrant or Unit Certificate by accepting the same consents and
agrees with the Company, the Transfer Agent and with every
other holder of a Warrant or Unit Certificate, respectively,
that:
a. The Warrant and Unit Certificates are transferable on
the registry books of the Transfer Agent only upon
the terms and conditions set forth in this Agreement;
and
b. The Company and the Transfer Agent may deem and treat
the person in whose name the Warrant or Unit
Certificate is registered as the absolute owner of
the Warrant or Unit, as the case may be,
(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.
23. TRANSFER AGENT. The Company hereby appoints the Transfer Agent
to act as the agent of the Company and the Transfer Agent
hereby accepts such
10
appointment upon the following terms and conditions by all of
which the Company and every Warrant and Unit Holder, by
acceptance of his Warrants or Units, shall be bound:
a. Statements contained in this Agreement and in the
Warrant and Unit Certificates shall be taken as
statements of the Company. The Transfer Agent assumes
no responsibility for the correctness of any of the
same except such as describes the Transfer Agent or
for action taken or to be taken by the Transfer
Agent.
b. The Transfer Agent shall not be responsible for any
failure of the Company to comply with any of the
Company's covenants contained in this Agreement or in
the Warrant or Unit Certificates.
c. The Transfer Agent may consult at any time with
counsel satisfactory to it (who may be counsel for
the Company) and the Transfer Agent shall incur no
liability or responsibility to the Company or to any
Warrant or Unit Holder in respect of any action
taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion or the
advice of such counsel, provided the Transfer Agent
shall have exercised reasonable care in the selection
and continued employment of such counsel.
d. The Transfer Agent shall incur no liability or
responsibility to the Company or to any Warrant or
Unit Holder for any action taken in reliance upon any
notice, resolution, waiver, consent, order,
certificate or other paper, document or instrument
believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
e. The Company agrees to pay to the Transfer Agent
reasonable compensation for all services rendered by
the Transfer Agent in the execution of this
Agreement, to reimburse the Transfer Agent for all
expenses, taxes and governmental charges and all
other charges of any kind or nature incurred by the
Transfer Agent in the execution of this Agreement and
to indemnify the Transfer Agent and save it harmless
against any and all liabilities, including judgments,
costs and counsel fees, for this Agreement except as
a result of the Transfer Agent's negligence, bad
faith or willful misconduct.
f. The Transfer Agent shall be under no obligation to
institute any action, suit or legal proceeding or to
take any other action likely to involve expense
unless the Company or one or more Warrant or Unit
Holders shall furnish the Transfer Agent with
reasonable security and indemnity for any costs and
expenses which may be incurred in connection with
such action, suit or legal proceeding, but this
provision shall not affect the power of the Transfer
Agent to take such action as the Transfer Agent may
consider proper, whether with or without any such
security or indemnity. All rights of action under
this Agreement or under any of the Warrants or Units
may be enforced by the Transfer Agent without the
possession of any of the Warrant or Unit Certificates
or the production thereof at any trial or other
proceeding relative thereto, and any such action,
suit or proceeding instituted by the Transfer Agent
shall be brought in its name as Transfer Agent, and
any recovery of judgement shall be for the ratable
benefit of the Warrant or Unit Holders as their
respective rights or interest may appear.
11
g. The Transfer Agent and any shareholder, director,
officer or employee of the Transfer Agent may buy,
sell or deal in any of the Warrants, Units or other
securities of the Company or become pecuniarily
interested in any transaction in which the Company
may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as
though it were not Transfer Agent under this
Agreement. Nothing herein shall preclude the Transfer
Agent from acting in any other capacity for the
Company or for any other legal entity.
24. SUCCESSOR TRANSFER AGENT. Any corporation into which the
Transfer Agent may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Transfer Agent shall
be a party, or any corporation succeeding to the corporate
trust business of the Transfer Agent, shall be the successor
to the Transfer Agent hereunder without the execution or
filing of any paper or any further act of a party or the
parties hereto provided such corporation is eligible to be
appointed under Section 25 below. In any such event or if the
name of the Transfer Agent is changed, the Transfer Agent or
such successor may adopt the countersignature of the original
Transfer Agent and may countersign such Warrant or Unit
Certificates either in the name of the predecessor Transfer
Agent or in the name of the successor Transfer Agent.
25. CHANGE OF TRANSFER AGENT. The Transfer Agent may resign or be
discharged by the Company from its duties under this Agreement
by the Transfer Agent or the Company, as the case may be,
giving notice in writing to the other, and by giving a date
when such resignation or discharge shall take effect, which
notice shall be sent at least thirty (30) days prior to the
date so specified. If the Transfer Agent shall resign, be
discharged or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Transfer Agent. If
the Company shall fail to make such appointment within a
period of thirty (30) days after it has been notified in
writing of such resignation or incapacity by the resigning or
incapacitated Transfer Agent or by any Warrant or Unit Holder
or after discharging the Transfer Agent, then the Company
agrees to perform the duties of the Transfer Agent hereunder
until a successor Transfer Agent is appointed. Any successor
Transfer Agent shall be a bank or a trust company, in good
standing, organized under the laws of any state of the United
States of America, having a combined capital and surplus of at
least $4,000,000.00 at the time of its appointment as Transfer
Agent. After appointment, the successor Transfer Agent shall
be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as
Transfer Agent without further act or deed, and the former
Transfer Agent shall deliver and transfer to the successor
Transfer Agent any property at the time held by it thereunder,
and execute and deliver any further assurance, conveyance, act
or deed necessary for effecting the delivery or transfer.
Failure to give any notice provided for in this Section,
however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Transfer
Agent or the appointment of the successor Transfer Agent, as
the case may be.
26. NOTICES. Any notice or demand authorized by this Agreement to
be given or made by the Transfer Agent or by any Warrant or
Unit Holder to or on the Company shall be sufficiently given
or made if sent by mail, first class, certified or registered,
postage prepaid, addressed (until another address is filed in
writing by the Company with the Transfer Agent), as follows:
12
ImageWare Systems, Inc.
00000 Xxxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Any notice or demand authorized by this Agreement to be given
or made by any Warrant or Unit Holder or by the Company to or
on the Transfer Agent shall be sufficiently given or made if
sent by mail, first class, certified or registered, postage
prepaid, addressed (until another address is filed in writing
by the Transfer Agent with the Company), as follows:
American Securities Transfer & Trust, Inc.
00000 Xxxx Xxxxxxx Xxxxxxx Xxxxx X-0
Xxxxxx, Xxxxxxxx 00000
Any distribution, notice or demand required or authorized by
this Agreement to be given or made by the Company or the
Transfer Agent to or on the Warrant or Unit Holders shall be
sufficiently given or made if sent by mail, first class,
certified or registered, postage prepaid, addressed to the
Warrant or Unit Holders at their last known addresses as they
shall appear on the registration books for the Warrant or Unit
Certificates maintained by the Transfer Agent.
27. SUPPLEMENTS AND AMENDMENTS. The Company and the Transfer Agent
may from time to time supplement or amend this Agreement
without the approval of any Warrant or Unit Holders in order
to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any
other provisions in regard to matters or questions arising
hereunder which the Company and the Transfer Agent may deem
necessary or desirable.
28. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Transfer Agent
shall bind and inure to the benefit of their respective
successors and assigns hereunder.
29. TERMINATION. This Agreement shall terminate at the close of
business on the Expiration Date or such earlier date upon
which all Warrants have been exercised; provided, however,
that if exercise of the Warrants is suspended pursuant to
Section 15 and such suspension continues past the Expiration
Date, this Agreement shall terminate at the close of business
on the business day immediately following expiration of such
suspension. The provisions of Section 23 shall survive such
termination.
30. GOVERNING LAW. This Agreement and each Warrant and Unit
Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of California and for all
purposes shall be construed in accordance with the laws of
said State.
31. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give any person or corporation other than the
Company, the Transfer Agent and the Warrant and Unit Holders
any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Transfer Agent and the
Warrant and Unit Holders.
32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of such counterparts shall for all purposes
be deemed to be an original and all such counterparts shall
together constitute but one and the
13
same instrument.
33. INTEGRATION. As of the date hereof, this Agreement contains
the entire and only agreement, understanding, representation,
condition, warranty or covenant between the parties hereto
with respect to the matters herein, supersedes any and all
other agreements between the parties hereto relating to such
matters, and may be modified or amended only by a written
agreement signed by both parties hereto pursuant to the
authority granted by Section 27.
34. DESCRIPTIVE HEADINGS. The descriptive headings of the Sections
of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of
the provisions hereof.
Date: January , 2000
------
ImageWare Systems, Inc.
a California corporation
By:
---------------------------------
Its President and CEO
SEAL
ATTEST:
----------------------------------
Secretary: Xxxx Xxxxxxxxx
American Securities Transfer & Trust,
Inc.
a Colorado corporation
By:
---------------------------------
Vice President:
SEAL
ATTEST:
----------------------------------
Secretary:
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EXHIBIT A
[WARRANT CERTIFICATE]
EXHIBIT B
[UNIT CERTIFICATE]
