REGISTRATION RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT (this "Agreement"), dated as of
February 12, 2009, by and between ImageWare Systems, Inc., a corporation organized
under the laws of the State of Delaware (the "Company"), and BET Funding
LLC, a Delaware limited liability company (the "Lender").
WHEREAS:
A. In
connection with the Secured Promissory Note of even date herewith in the
principal amount of $5,000,000 issued by the Company to the Lender (the "Note"), the Company has
agreed, upon the terms and subject to the conditions contained therein, to issue
to the Lender a warrant (the "Warrant") to acquire 4,500,000
shares of Common Stock. The shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrant are referred to herein as the
"Warrant
Shares."
B. To
induce the Lender to make the loan evidenced by the Note, the Company has agreed
to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "Securities Act"), and
applicable state securities laws.
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Lender hereby agree as
follows:
1. DEFINITIONS.
a. As
used in this Agreement, the following terms shall have the following
meanings:
(i) "Common Stock" means shares of
common stock, par value $0.01 per share, of the Company.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "Registrable Securities" means
(a) the Warrant Shares and (b) any shares of capital stock issued or issuable,
from time to time (with any adjustments), as a distribution on or in exchange
for or otherwise with respect to the foregoing, whether as default payments or
otherwise.
(v) "Registration Statement" means
a registration statement of the Company under the Securities Act.
b. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Note.
2. REGISTRATION.
a. Mandatory Registration. The
Company shall prepare promptly and file with the SEC as soon as practicable, but
in no event later than the earlier of (i) two (2) weeks after the Company
receives or is granted a contract of $4,000,000 or more and (ii) September 1,
2009 (either such date, the "Filing Date"), a Registration Statement on Form S-3
(or, if Form S-3 is not then available, on such form of Registration Statement
as is then available to effect a registration of all of the Registrable
Securities, subject to the consent of the Lender) covering the resale of all of
the Registrable Securities. The Registration Statement filed
hereunder, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon exercise of the Warrants to prevent dilution
resulting from stock splits, stock dividends or similar
transactions. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of) the Lender and its counsel
prior to its filing or other submission.
b. Underwritten
Offering. If any offering pursuant to the Registration
Statement pursuant to Section 2(a) hereof
involves an underwritten offering, the Lender shall have the right to select one
legal counsel to represent the Lender and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the
Company. In the event that the Lender elects not to participate in
such underwritten offering, the Registration Statement covering all of the
Registrable Securities shall contain appropriate plans of distribution
reasonably satisfactory to the Lender.
c. Registration
Deadline. The Company shall cause the Registration Statement
required to be filed pursuant to Section 2(a) hereof
to become effective as soon as practicable, but in no event later than the
sixtieth (60th) day following the Filing Date (the "Registration
Deadline"). At the time of effectiveness, the Company shall
ensure that such Registration Statement covers all of the Registrable Securities
issuable pursuant to the Warrant (including, if necessary, by filing an
amendment prior to the effective date of the Registration Statement to increase
the number of shares covered thereby). If (i) (A) the Registration
Statement required to be filed by the Company pursuant to Section 2(a) hereof
is not filed with the SEC prior to the Filing Date or declared effective by the
SEC on or before the Registration Deadline or (B) any Registration Statement
required to be filed by the Company pursuant to Section 3(b) hereof
is not declared effective by the SEC within sixty (60) days after the applicable
Registration Trigger Date (as defined in Section 3(b) hereof),
or (ii) if, after any such Registration Statement has been declared effective by
the SEC, sales of any of the Registrable Securities required to be covered by
such Registration Statement (including any Registrable Securities required to be
registered pursuant to Section 3(b) hereof)
cannot be made pursuant to such Registration Statement (by reason of a stop
order or the Company's failure to update the Registration Statement or any other
reason outside the control of the Lender), then the Company shall be considered
in default under the Note (with no required additional notice or cure period)
and the Lender shall have all rights and remedies set forth therein (upon an
Event of Default (as defined in the Note)).
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d. Piggy-Back
Registrations. If at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall file with the SEC
a Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall send to the Lender written
notice of such determination and, if within fifteen (15) days after the date of
such notice, the Lender shall so request in writing, the Company shall include
in such Registration Statement all or any part of the Registrable Securities the
Lender requests to be registered, except that if, in connection with any
underwritten public offering, the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which the Lender has requested inclusion hereunder as the
underwriter shall permit. The Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not contractually entitled to inclusion of
such securities in such Registration Statement or are not contractually entitled
to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after
giving effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
contractual right to include such securities in the Registration Statement other
than holders of securities contractually entitled to inclusion of their
securities in such Registration Statement by reason of demand registration
rights. Notwithstanding the foregoing, no such reduction shall
reduce the amount of Registrable Securities included in the registration below
twenty-five (25%) of the total amount of securities included in such
registration. No right to registration of Registrable Securities
under this Section
2(d) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which the Lender is
entitled to registration under this Section 2(d) is an
underwritten offering, then the Lender shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
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3. OBLIGATIONS OF THE
COMPANY.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
a. The
Company shall respond promptly to any and all comments made by the staff of the
SEC to the Registration Statement required by Section 2(a), and
shall submit to the SEC before the close of business on the business day
immediately following the business day on which the Company learns (either by
telephone or in writing) that no review of such Registration Statement will be
made by the SEC or that the staff of the SEC has no further comments on such
Registration Statement, as the case may be, a request for acceleration of the
effectiveness of such Registration Statement to a time and date as soon as
practicable. The Company shall keep such Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which all of the Registrable Securities (in the reasonable opinion
of counsel to the Lender) may be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act or
any successor provision (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) (i) shall comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder
and (ii) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading. The financial statements of the
Company included in the Registration Statement or incorporated by reference
therein will comply as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements will be
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed on summary statements and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end adjustments)).
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement.
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c. The
Company shall furnish to the Lender and its legal counsel (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and, in the case of the Registration Statement referred to in Section 2(a), each
letter written by or on behalf of the Company to the SEC or the staff of the SEC
(including, without limitation, any request to accelerate the effectiveness of
the Registration Statement or amendment thereto), and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
the Registration Statement (other than any portion, if any, thereof which
contains information for which the Company has sought confidential treatment),
(ii) on the date of effectiveness of the Registration Statement or any amendment
thereto, a notice stating that the Registration Statement or amendment has been
declared effective, and (iii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as the Lender may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by the Lender.
d. The
Company shall use its best efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
"blue sky" laws of such jurisdictions in the United States as the Lender
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (a) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or (e) make any
change in its charter or bylaws, which in each case the Board of Directors
of the Company determines to be contrary to the best interests of the Company
and its stockholders.
e. In
the event the Lender selects underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
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f. As
promptly as practicable after becoming aware of such event, the Company shall
notify the Lender by telephone and facsimile of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and, use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to the Lender as the Lender may
reasonably request.
g. The
Company shall use its best efforts (i) to prevent the issuance of any stop order
or other suspension of effectiveness of a Registration Statement, and, if such
an order is issued, to obtain the withdrawal of such order at the earliest
practicable moment (including in each case by amending or supplementing such
Registration Statement) and (ii) to notify the Lender (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof (and if such Registration Statement is supplemented
or amended, deliver such number of copies of such supplement or amendment to the
Lender as the Lender may reasonably request).
h. The
Company shall permit a single firm of counsel designated by the Lender to review
the Registration Statement and all amendments and supplements thereto a
reasonable period of time prior to its filing with the SEC, and not file any
document in a form to which such counsel reasonably objects.
i. The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement.
j. At
the request of the Lender in the case of an underwritten public offering, the
Company shall furnish, on the date of effectiveness of the Registration
Statement (i) an opinion, dated as of such date, from counsel representing the
Company addressed to the Lender and in form, scope and substance as is
customarily given in an underwritten public offering and (ii) a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Lender.
k. The
Company shall make available for inspection by (i) the Lender, (ii) any
underwriter participating in any disposition pursuant to the Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Lender, and (iv) one firm of attorneys retained by all
such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that each
Inspector shall hold in confidence and shall not make any disclosure (except to
the Lender) of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company
shall not be required to disclose any confidential information in such Records
to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Lender agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit the Lender's
ability to sell Registrable Securities in a manner which is otherwise consistent
with applicable laws and regulations.
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l. The
Company shall hold in confidence and not make any disclosure of information
concerning the Lender provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement, or (v) the Lender consents to the form and content
of any such disclosure. The Company agrees that it shall, upon
learning that disclosure of such information concerning the Lender is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Lender prior to making such disclosure, and
allow the Lender, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such
information.
m. The
Company shall use its best efforts to promptly cause all of the Registrable
Securities covered by the Registration Statement to be listed on each national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange and, without
limiting the generality of the foregoing, to arrange for or maintain at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD")
as such with respect to such Registrable Securities.
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n. The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement.
o. The
Company shall cooperate with the Lender and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Lender may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Lender may request, and, within three (3) business
days after the Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Lender), an opinion of such counsel
in the form attached hereto as Exhibit 1.
p. At
the request of the Lender, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
q. The
Company shall comply with all applicable laws related to a Registration
Statement and offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection therewith (including,
without limitation, the Securities Act and the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the SEC.)
r. From
and after the date of this Agreement, the Company shall not, and shall not agree
to, allow the holders of any securities of the Company to include any of their
securities which are not Registrable Securities in the Registration Statement
under Section
2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof
without the consent of the Lender.
4. OBLIGATIONS OF THE
LENDER.
In
connection with the registration of the Registrable Securities, the Lender shall
have the following obligations:
a. It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities that the Lender shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least five trading days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
the Lender of the information the Company requires from the Lender.
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b. The
Lender, by its acceptance of the Registrable Securities, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless the
Lender has notified the Company in writing of the Lender's election to exclude
all of the Lender's Registrable Securities from such Registration
Statement.
c. In
the event the Lender determines to engage the services of an underwriter, the
Lender agrees to enter into and perform the Lender's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter(s) of such offering and the Company and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities.
d. The
Lender agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Sections 3(f) or
3(g), the Lender will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until the Lender's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 3(f) or 3(g)
and, if so directed by the Company, the Lender shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a certificate
of destruction) all copies in the Lender's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. Notwithstanding anything to the contrary, subject to
compliance with applicable laws, the Company shall cause the transfer agent for
the Registrable Securities to deliver unlegended shares of Common Stock to a
transferee of the Lender in connection with any sale of Registrable Securities
with respect to which the Lender has entered into a contract for sale prior to
receipt of such notice and for which the Lender has not yet
settled.
e. The
Lender may not participate in any underwritten distribution hereunder unless the
Lender (i) agrees to sell the Lender's Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, (iii) agrees to pay
its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to Section 5 below, and
(iv) complies with all applicable laws in connection
therewith. Notwithstanding anything in this Section 4(e) to the
contrary, this Section
4(e) is not intended to limit the Lender's rights under Sections 2(a) or 3(b)
hereof.
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5. EXPENSES OF
REGISTRATION. All reasonable expenses incurred by the Company
or the Lender in connection with registrations, filings or qualifications
pursuant to Sections 2
and 3 above, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, the fees and disbursements of one counsel selected by
the Lender, and the underwriting discounts and commissions shall be borne by the
Company. In addition, the Company shall pay all of the Lender's costs
and expenses (including legal fees) incurred in connection with the enforcement
of the rights of the Lender hereunder.
6. INDEMNIFICATION. In
the event any Registrable Securities are included in a Registration Statement
under this Agreement:
a. To
the extent permitted by law, the Company will indemnify, hold harmless and
defend (i) the Lender and (ii) the directors, officers, partners, members,
employees and agents of the Lender and each person who controls the Lender
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any, (each,
an "Indemnified
Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of them
may become subject insofar as such Claims arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(c) with
respect to the number of legal counsel, the Company shall reimburse the Lender
and each other Indemnified Person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i)
shall not apply to a Claim arising out of or based upon a Violation which occurs
in reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c)
hereof, and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Lender pursuant to Section 9
hereof.
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b. In
connection with any Registration Statement in which the Lender is participating,
the Lender agrees to indemnify, hold harmless and defend, to the same extent and
in the same manner set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, its employees, agents and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder within the meaning of the Securities Act or the
Exchange Act (collectively and together with an Indemnified Person, an "Indemnified Party"), against
any Claim to which any of them may become subject, under the Securities Act, the
Exchange Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by the Lender expressly for use in connection with such
Registration Statement; and subject to Section 6(c) the
Lender will reimburse any legal or other expenses (promptly as such expenses are
incurred and are due and payable) reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Lender, which consent shall
not be unreasonably withheld; provided, further, however, that the
Lender shall be liable under this Agreement (including this Section 6(b) and
Section 7) for
only that amount as does not exceed the net proceeds actually received by the
Lender as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Indemnified
Party and shall survive the transfer of the Registrable Securities by the Lender
pursuant to Section
9 hereof. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
11
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice
of the commencement of any action (including any governmental action), such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that such
indemnifying party shall not be entitled to assume such defense and an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and the indemnifying party and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are in conflict with those available to such indemnifying
party. The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as applicable,
and such legal counsel shall be selected by the Lender, if the Lender is
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6, except to
the extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To
the extent any indemnification by an indemnifying party is prohibited or limited
by law, the indemnifying party agrees to make the maximum contribution with
respect to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law as is appropriate to reflect the relative fault
of the indemnifying party, on the one hand, and the Indemnified Person or
Indemnified Party, as the case may be, on the other hand, with respect to the
Violation giving rise to the applicable Claim; provided, however, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 6, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
12
8. REPORTS UNDER THE EXCHANGE
ACT. With a view to making available to the Lender the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit the Lender to sell
securities of the Company to the public without registration ("Rule 144"), the Company agrees
to:
a. file
with the SEC in a timely manner and make and keep available all reports and
other documents required of the Company under the Securities Act and the
Exchange Act so long as the Company remains subject to such requirements and the
filing and availability of such reports and other documents is required for the
applicable provisions of Rule 144; and
b. furnish
to the Lender so long as the Lender owns the Warrant or Registrable Securities,
promptly upon request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Lender to
sell such securities under Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION
RIGHTS. The rights of the Lender hereunder, including the
right to have the Company register Registrable Securities pursuant to this
Agreement, shall be automatically assignable by the Lender to any transferee of
all or any portion of the Warrant or the Registrable Securities if: (i) the
Lender agrees in writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company after such assignment,
(ii) the Company is furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) the transferee or assignee agrees in writing for the
benefit of the Company to be bound by all of the provisions contained herein,
and (v) such transfer shall have been made in accordance with the applicable
requirements of the Warrant. In addition, and notwithstanding
anything to the contrary contained in this Agreement or the Warrant, the Warrant
may be pledged, and all rights of the Lender under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with the Lender's margin or brokerage account.
10. AMENDMENT OF REGISTRATION
RIGHTS. Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with written consent of the
Company and the Lender or, in the case of a waiver, with the written consent of
the party charged with the enforcement of any such provision.
13
11. MISCELLANEOUS.
a. A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier or by confirmed telecopy, and shall be
effective five (5) days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the
Company:
ImageWare
Systems, Inc.
00000
Xxxxxxxxx Xxxx
Xxx
Xxxxx, XX 00000
Attn: Xx.
Xxxxx Xxxxxxxxx
Telephone:
000-000-0000
Facsimile: 000-000-0000
If to the
Lender:
BET
Funding LLC
c/o 000
Xxxxxxxxx Xxxx
Xxxxxxx,
XX 00000
Telephone:
000-000-0000
Facsimile: 000-000-0000
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.
d. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed in the State
of Delaware. The Company irrevocably consents to the jurisdiction of
the United States federal courts and the state courts located in the State of
Delaware in any suit or proceeding based on or arising under this Agreement and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or
proceeding. The Company further agrees that service of process
upon the Company, mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the Lender's right to serve
process in any other manner permitted by law. The Company agrees that
a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
14
e. This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject
to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
g. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j. Each
party to this Agreement has participated in the negotiation and drafting of this
Agreement. As such, the language used herein shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction will be applied against any party to this
Agreement.
k. For
purposes of this Agreement, the term "business day" any day except Saturday,
Sunday, any day which shall be a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
15
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
16
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as
of the date first above written.
|
IMAGEWARE
SYSTEMS, INC.
|
||
|
By:
|
/s/ S. Xxxxx Xxxxxx
|
|
|
S.
Xxxxx Xxxxxx, CEO
|
||
|
BET
FUNDING LLC
|
||
|
By:
|
/s/ Xxxx Xxxxxx
|
|
|
Name: Xxxx
Xxxxxx
|
||
|
Title:
|
||
EXHIBIT
1
to
Registration
Rights
Agreement
[Date]
[Name and
address of transfer agent]
RE: ImageWare
Systems, Inc.
Ladies
and Gentlemen:
We are
counsel to ImageWare Systems, Inc., a corporation organized under the laws of
the State of Delaware (the "Company"), and we understand
that BET Funding LLC (the "Holder") has been issued a
warrant to acquire 4,500,000 shares of the Company's common stock, par value
$.01 per share. Pursuant to a Registration Rights Agreement, dated as
of February __, 2009, by and among the Company and the Holder (the "Registration Rights
Agreement"), the Company agreed with the Holder, among other things, to
register the Registrable Securities (as that term is defined in the Registration
Rights Agreement) under the Securities Act of 1933, as amended (the "Securities Act"), upon the
terms provided in the Registration Rights Agreement. In connection
with the Company's obligations under the Registration Rights Agreement, on
__________, 200_, the Company filed a Registration Statement on Form S-___ (File
No. 333- _____________) (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") relating to the
Registrable Securities, which names the Holder as a selling stockholder
thereunder. The Registration Statement was declared effective by the
SEC on _____________, 200_.
[Other
customary introductory and scope of examination language to be
inserted]
Based on
the foregoing, we are of the opinion that the Registrable Securities have been
registered under the Securities Act.
[Other
customary language to be included.]
| Very truly yours, |
cc: BET
Funding LLC
