WAIVER AND AMENDMENT AGREEMENT
EXHIBIT
10.52
This
Waiver and Amendment Agreement ("Agreement") is made
as of June 9, 2009, by and between Imageware Systems, Inc., a Delaware
corporation ("Borrower"), and BET
Funding LLC, a Delaware limited liability company ("Lender").
BACKGROUND
A. On
February 12, 2009, Borrower issued to Lender a secured promissory note (the
"Note") in the
original principal amount of Five Million Dollars ($5,000,000). On
such date, Lender made to the Company an initial advance under the Note of One
Million Dollars ($1,000,000). The Note and all instruments, documents
and agreements executed in connection therewith, or related thereto, are
referred to herein collectively as the "Financing
Documents". All capitalized terms not otherwise defined herein
shall have the meaning ascribed thereto in the Note.
B. Borrower
has informed Lender that certain Events of Default have occurred under the Note
due to Borrower's failure to comply with (i) Section 6(c) (Reporting Status) of
the Note for failing to bring all of Borrower's
SEC filings into compliance on or before May 1, 2009 and (ii) Section
6(s) (Notice of Default) of the Note for failing to provide Lender with prompt
written notice of the occurrence of an Event of Default (collectively,
the "Existing
Defaults").
C. Borrower
has requested that Lender (i) waive the Existing Defaults and (ii) amend certain
terms of the Note pursuant to this Agreement.
D. Borrower
and Lender desire to set forth their agreement in writing.
NOW
THEREFORE, with the foregoing Background deemed incorporated by reference and
for good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto, intending to be legally bound, covenant and
agree as follows:
SECTION
1. ACKNOWLEDGMENT OF INDEBTEDNESS, ETC.
1.1 Note. Borrower
hereby acknowledges and confirms that as of the close of business on June 8,
2009, Borrower is indebted to Lender, without defense, setoff, claim or
counterclaim under the Financing Documents, in the aggregate principal amount of
$1,000,000, together with accrued and unpaid interest in the amount of $29,000
and all other fees, costs and expenses (including attorneys' fees) incurred to
date in connection with the Financing Documents.
1.2 Existing
Defaults. Borrower acknowledges that as of this date, the
Existing Defaults have occurred and are continuing under the Financing Documents
and represents that no other Event(s) of Default or Default are
outstanding.
1.3 Fees and
Expenses. Borrower acknowledges and agrees that it is liable
for all fees, costs and expenses (including attorneys' fees) incurred by Lender
in connection with the documentation, preparation, interpretation and
negotiation of this Agreement and the Financing Documents, and any amendment,
modification or supplement to this Agreement or to the Financing Documents, the
consummation and administration of the transactions contemplated hereby and
thereby and the enforcement, preservation, protection or defense of any of
Lender's rights and remedies hereunder and under the Financing Documents,
including, without limitation any costs for appraisals, searches or filing fees
incurred by Lender. All such fees, costs and expenses are referred to
herein as "Expenses." All
Expenses will be payable within 15 days after Lender gives notice
thereof.
SECTION
2. WAIVER
2.1 Waiver. Upon
the effectiveness of this Agreement, Lender hereby waives the Existing
Defaults. Such waiver shall in no way constitute a waiver of any
other Event of Default or Default which may have occurred but which is not
specifically referenced as an "Existing Default," nor shall it obligate Lender
to provide any further waiver of any other Event of Default or Default (whether
similar or dissimilar, including any further Events of Default resulting from a
failure to comply with Sections 6(c) or 6(s) of the Note).
2.2 Warrant. In
consideration of Lender's agreeing to waive the Existing Defaults, Borrower
shall issue to Lender a warrant (the "Additional Warrant")
to acquire 1,000,000 shares of Common Stock (the "Additional Warrant
Shares") at an exercise price of fifty cents ($0.50).
SECTION
3. AMENDMENTS TO NOTE
3.1 Section 2(b) of the
Note. In consideration of Lender's agreeing to waive the
Existing Defaults, Section 2(b) of the Note is hereby amended and restated in
its entirety to read as follows:
"(b)
Interest shall accrue on the unpaid principal balance of this Note at a rate
equal to nine percent (9%) per year, computed on the basis of a year consisting
of 360 days. Upon and/or after and during the continuance of an Event
of Default, interest on the unpaid principal balance shall, at Lender's sole
discretion, accrue at a rate equal to fourteen percent (14%) per year computed
on the basis of a year consisting of 360 days. Interest shall accrue
at the applicable rate notwithstanding the occurrence of any Event of Default,
acceleration of the Obligations (as defined below), the entry of any judgment,
or the commencement of any bankruptcy, reorganization, receivership or other
proceedings."
The foregoing amendment shall be
retroactive from February 12, 2009, the date of the Note.
3.2 Section 6(c) of the
Note. In consideration of Lender's agreeing to waive the
Existing Defaults, the first sentence of Section 6(c) of the Note is hereby
amended by replacing "May 1, 2009" in the second line thereof with "July 15,
2009".
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3.3 Incorporation of Agreement
into Note. Borrower hereby directs Lender to attach an
original counterpart of this Agreement to the Note. The Note and this
Agreement shall be deemed to constitute a single instrument.
SECTION
4. COLLATERAL
4.1 Affirmation of Existing
Collateral. Borrower covenants, confirms and agrees that as
security for the repayment of the Obligations, Lender has, and shall continue to
have, and is hereby granted a continuing, perfected lien on and security
interest in the Collateral, all whether now owned or hereafter acquired, created
or arising, together with all proceeds, including insurance proceeds
thereof. Borrower acknowledges and agrees that nothing herein
contained in any way impairs Lender's existing rights and priority in the
Collateral.
4.2 Further
Assurances. Upon execution of this Agreement, and thereafter
as Lender may from time to time request, Borrower shall further assist Lender in
effectuating the terms and intent of this Agreement and the Financing Documents
and in assuring continued, effective and proper perfection of Lender's liens and
security interests in the Collateral. Borrower hereby authorizes
Lender to sign (if necessary) on Borrower's behalf and/or file, from time to
time, without signature of Borrower, any financing statements as Lender may
reasonably deem necessary to perfect, or maintain perfection, of Lender's
security interests.
SECTION
5. EFFECTIVENESS CONDITIONS
5.1 Conditions. Lender's
undertakings hereunder are subject to satisfactory completion, as determined by
Lender in its sole discretion (all documents to be in form and substance
satisfactory to Lender and its counsel) of the following conditions ("Effectiveness
Conditions"):
(a) Borrower's
execution and delivery of this Agreement and the Additional
Warrant;
(b) Borrower
shall have delivered to Lender resolutions of the Board of Directors of Borrower
authorizing the execution and delivery of this Agreement and the transactions
herein contemplated;
(c) No
Default or Event of Default (other than the Existing Defaults) shall have
occurred and be continuing under the Financing Documents; and
(d) All
Expenses incurred by Lender shall have been paid by Borrower when
due.
SECTION
6. REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower
represents, warrants and covenants to Lender that:
6.1 Prior
Representations. By execution of this Agreement, except as
otherwise expressly set forth herein, Borrower reconfirms all warranties and
representations made to Lender under the Financing Documents and restates such
warranties and representations as of the date hereof all of which shall be
deemed continuing until all of the Obligations are paid and satisfied in
full.
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6.2 No Conflict. The execution and
delivery by Borrower of this Agreement and the Additional Warrant and the
performance of the obligations of Borrower hereunder and thereunder and the
consummation by Borrower of the transactions contemplated hereby and thereby:
(i) are within the corporate powers of Borrower; (ii) are duly authorized by the
Board of Directors of Borrower and, if necessary, its stockholders; (iii) are
not in contravention of the terms of the articles or certificate of
incorporation or bylaws of Borrower or of any indenture, contract, lease,
agreement instrument or other commitment to which Borrower is a party or by
which Borrower or any of its property are bound; (iv) do not require the
consent, registration or approval of any Governmental Authority or any other
Person; (v) do not contravene any statute, law, ordinance regulation, rule,
order or other governmental restriction applicable to or binding upon Borrower;
and (vi) will not, except as contemplated herein for the benefit of Lender,
result in the imposition of any Liens upon any property of
Borrower.
6.3 Stockholder
Authorization. Neither the execution, delivery or performance
by Borrower of this Agreement or the Additional Warrant nor the consummation by
it of the transactions contemplated hereby or thereby (including, without
limitation, the issuance or reservation for issuance of the Additional Warrant
Shares) requires any consent or authorization of Borrower's
stockholders.
6.4 Issuance of
Shares. The Additional Warrant Shares are duly authorized and
reserved for issuance, and, upon exercise of the Additional Warrant in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and will
not be subject to preemptive rights, rights of first refusal or other similar
rights of stockholders of Borrower and will not impose personal liability upon
the holder thereof.
6.5 Valid, Binding and
Enforceable. This Agreement and the Additional Warrant and any
assignment or other instrument, document or agreement executed and delivered in
connection herewith, will be valid, binding and enforceable in accordance with
their respective terms.
SECTION
7. BORROWER'S EXISTING COVENANTS
7.1 Existing
Covenants. Borrower covenants that on and after the date of
execution of this Agreement and until the Obligations are indefeasibly paid and
satisfied in full that, except as expressly modified hereby, Borrower shall
continue to observe and maintain compliance with all covenants, representations
and warranties contained in, or arising in conjunction with, the Financing
Documents.
SECTION
8. MISCELLANEOUS
8.1 Default.
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(a) In
addition to each of the Events of Default set forth in the Financing Documents,
the (i) failure of Borrower to comply with its representations, warranties,
covenants or other undertakings under this Agreement, or (ii) occurrence or
institution of any action or proceeding which may adversely affect Borrower's
ability to perform under this Agreement (as determined by Lender in its
discretion), shall be an Event of Default under the Financing Documents and upon
such failure, Lender's undertakings under this Agreement may at Lender's
discretion, and without notice to Borrower immediately terminate and Lender may
exercise its rights and remedies as granted under the Financing Documents and
under applicable law or in equity.
(b) Any
default, other than the Existing Defaults, by Borrower under any of the
Financing Documents, shall be considered a default and an Event of Default under
all of the Financing Documents and upon such default, Lender's undertakings
under this Agreement may at Lender's discretion, and without notice to Borrower
immediately terminate and Lender may exercise its rights and remedies as granted
under the Financing Documents and under applicable law or in
equity.
8.2 Integrated
Agreement. This Agreement shall be deemed incorporated into
and made a part of the Financing Documents. The Financing Documents
and this Agreement shall be construed as integrated and complementary of each
other, and as augmenting and not restricting the Lender's rights, remedies and
security. If, after applying the foregoing, an inconsistency still
exists, the provisions of this Agreement shall control.
8.3 Non-Waiver. No
omission or delay by Lender in exercising any right or power under this
Agreement, or the Financing Documents or any related agreement will impair such
right or power or be construed to be a waiver of any default or Event of Default
or an acquiescence therein, and any single or partial exercise of any such right
or power will not preclude other or further exercise thereof or the exercise of
any other right, and no waiver will be valid unless in writing and signed by
Lender and then only to the extent specified. Lender's rights and
remedies are cumulative and concurrent and may be pursued singly, successively
or together.
8.4 Headings. The
headings of any paragraph of this Agreement are for convenience only and shall
not be used to interpret any provision of this Agreement.
8.5 Survival. All
warranties, representations and covenants made by Borrower herein, or in any
agreement referred to herein or on any certificate, document or other instrument
delivered by it or on its behalf under this Agreement, shall be considered to
have been relied upon by Lender. All statements in any such certificate or other
instrument shall constitute warranties and representations by Borrower
hereunder. All warranties, representations, and covenants made by
Borrower hereunder or under any other agreement or instrument shall be deemed
continuing until the Obligations are indefeasibly paid and satisfied in
full.
8.6 Successors and
Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties
hereto. No delegation by Borrower of any duty or obligation of
performance may be made or is intended to be made to Lender. No
rights are intended to be created hereunder or under any related instruments,
documents or agreements for the benefit of any third party donee, creditor,
incidental beneficiary or affiliate of Borrower.
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8.7 GOVERNING
LAW. THIS
AGREEMENT, AND ALL MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE. THE PROVISIONS OF THIS AGREEMENT, THE OTHER FINANCING
DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE
DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL
NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE
AND EFFECT.
8.8 CONSENT
TO JURISDICTION. BORROWER AND LENDER
HEREBY IRREVOCABLY CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN THE STATE OF DELAWARE IN ANY AND ALL ACTIONS AND
PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR
UNDERTAKING. BORROWER WAIVES ANY OBJECTION TO IMPROPER VENUE AND
FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL RIGHTS TO TRANSFER
FOR ANY REASON. BORROWER IRREVOCABLY AGREES TO SERVICE OF PROCESS BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED.
8.9 WAIVER OF
JURY TRIAL. BORROWER AND LENDER
HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH
ANY LITIGATION COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE FINANCING DOCUMENTS, WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE.
8.10 RELEASE. AS FURTHER CONSIDERATION
FOR THE LENDER'S AGREEMENT TO GRANT THE EXTENSION, ACCOMMODATIONS AND WAIVER SET
FORTH HEREIN, BORROWER HEREBY WAIVES AND RELEASES AND FOREVER DISCHARGES LENDER
AND ITS MEMBERS, OFFICERS, DIRECTORS, ATTORNEYS, AGENTS AND EMPLOYEES FROM ANY
LIABILITY, DAMAGE, CLAIM, LOSS OR EXPENSE OF ANY KIND THAT BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST LENDER ARISING OUT OF OR RELATING TO THE OBLIGATIONS,
THIS AGREEMENT OR THE FINANCING DOCUMENTS.
8.11 RELIEF
FROM AUTOMATIC STAY. BORROWER KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND AFTER THE OPPORTUNITY TO CONSULT WITH COUNSEL
AGREES WITH LENDER THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS AGREEMENT OR THE FINANCING DOCUMENTS, IN THE EVENT AN ORDER FOR RELIEF
UNDER ANY CHAPTER OF TITLE 11 OF THE UNITED STATES CODE, 11 U.S.C. §101, ET.
SEQ. (THE "BANKRUPTCY
CODE") IS ENTERED WITH
RESPECT TO BORROWER (IT BEING UNDERSTOOD THAT THIS AGREEMENT IS NOT INTENDED TO
PRECLUDE SUCH A FILING), THE FOLLOWING PROVISIONS SHALL BE
APPLICABLE:
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(a) LENDER SHALL BE ENTITLED TO THE
IMMEDIATE TERMINATION OF THE AUTOMATIC STAY PROVISIONS OF 11 U.S.C. §362 (AND
ANY OTHER RELEVANT PROVISIONS OF THE BANKRUPTCY CODE), AND GRANTED UNCONDITIONAL
RELIEF FROM THE AUTOMATIC STAY AND ALLOWED TO PURSUE ANY AND ALL RIGHTS,
REMEDIES AND RECOURSES AVAILABLE TO LENDER UNDER THIS AGREEMENT AND THE
FINANCING DOCUMENTS AND PURSUANT TO ANY PROVISIONS OF APPLICABLE
LAW. LENDER ONLY SHALL BE REQUIRED TO FILE A MOTION FOR RELIEF FROM
THE AUTOMATIC STAY PROVISIONS OF 11 U.S.C. §362 AND BORROWER HEREBY CONSENTS TO
AN EMERGENCY HEARING THEREON. BORROWER HEREBY WAIVES THE RIGHT TO
OPPOSE THE MOTION OR ASSERT ANY DEFENSE TO THE RELIEF REQUESTED BY
LENDER. LENDER IS AUTHORIZED TO SUBMIT AN AFFIDAVIT WITH THE MOTION
(A) IDENTIFYING THE EXISTING DEFAULTS AND ANY EVENTS OF DEFAULT HEREUNDER OR
UNDER THE OTHER FINANCING DOCUMENTS, (B) STATING THE AMOUNT OF THE OBLIGATIONS
AND (C) ADVISING THE BANKRUPTCY COURT OF BORROWER'S CONSENT TO UNCONDITIONAL
RELIEF FROM THE AUTOMATIC STAY.
(b) BORROWER SHALL NOT, WITHOUT LENDER'S
WRITTEN CONSENT, SEEK AUTHORIZATION FROM THE BANKRUPTCY COURT TO USE CASH
COLLATERAL THAT IS SUBJECT TO LENDER'S LIEN AND SECURITY INTEREST PURSUANT TO 11
U.S.C. §363 OR ANY OTHER PROVISION OF THE BANKRUPTCY CODE, NOR SHALL BORROWER
SEEK TO OBTAIN FINANCING UNDER 11 U.S.C. §364 THAT WILL RESULT IN THE GRANTING
OF LIENS AND SECURITY INTERESTS IN THE COLLATERAL WITH PRIORITY OVER LENDER'S
LIENS AND SECURITY INTERESTS.
LENDER'S
ENTITLEMENT AS AFORESAID TO THE LIFTING OF THE AUTOMATIC STAY HEREUNDER BY THE
APPROPRIATE BANKRUPTCY COURT SHALL BE DEEMED "FOR CAUSE" PURSUANT TO §362(d)(1)
OF THE BANKRUPTCY CODE AS AMENDED FROM TIME TO TIME.
8.12 Waivers.
(a) Borrower
will not, directly or indirectly, do any act or fail to do any act, which would
impair or affect Lender's security interest in any Collateral, nor will Borrower
upon any default or Event of Default under this Agreement or the other Financing
Documents, contest Lender's right to obtain judgment against Borrower or to
foreclose upon any Collateral pledged to Lender, nor will Borrower move to
vacate or enjoin such judgment or foreclosure.
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(b) Borrower
waives and renounces all rights which are waivable under Article 9 of the
Uniform Commercial Code as such rights relate to Borrower's relationship with
Lender, whether such rights are waivable before or after default, including,
without limitation, those rights with respect to compulsory disposition of
collateral (U.C.C. §§9-610, 9-615 and 9-620), any right of redemption under
U.C.C. §9-623, and any right to notice relating to disposition of collateral
under U.C.C. §9-611.
8.13 Advice of
Counsel. Borrower acknowledges that it had the right to
consult with independent legal counsel concerning this Agreement and
specifically regarding the effect and implications of Sections 8.8, 8.9, 8.10, 8.11 and 8.12 above and
Borrower knowingly and voluntarily hereby waives the rights described therein or
affected thereby.
8.14 Signatories. Each
individual signatory hereto represents and warrants that he or she is duly
authorized to execute this Agreement on behalf of his or her principal and that
he or she executes the Agreement in such capacity and not as a
party.
8.15 Duplicate
Originals. Two or more duplicate originals of this Agreement
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument. This
Agreement may be executed in counterparts, all of which counterparts taken
together shall constitute one completed fully executed
document. Signature by facsimile or PDF shall bind the parties
hereto.
8.16 Effect of
Agreement. Except as expressly stated herein: (a)
the Financing Documents are and shall be unchanged and remain in full force and
effect, and (b) this Agreement shall not constitute a waiver of any Default or
Event of Default (other than the Existing Defaults) or a waiver of the right of
Lender to insist upon compliance with any term, covenant, condition or provision
of the Note and the other Financing Documents, as amended
hereby. Except as specifically stated herein, the execution and
delivery of this Agreement shall in no way release, diminish, impair, reduce or
otherwise affect the respective obligations and liabilities of Borrower or any
other Person under any of the Financing Documents, all of which as amended
hereby, shall continue in full force and effect. Borrower hereby
ratifies and confirms the existence of each of the Financing Documents to which
it is a party, each of the Liens created pursuant to each such Financing
Document and each and every term, condition, obligation, liability, undertaking
and covenant therein contained. Each of the Financing Documents is
hereby amended and modified to the extent necessary (and without any further
action on behalf of Borrower, Lender or any other Person) in order to give full
force and effect to this Agreement. This Agreement constitutes a
Financing Document.
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IN
WITNESS WHEREOF, the undersigned parties have executed this Waiver and Amendment
Agreement the day and year first above written.
IMAGEWARE
SYSTEMS, INC.
By: _________________________
Name: S. Xxxxx
Xxxxxx
Title: Chairman and CEO
BET
FUNDING LLC
By: ________________________
Name: Xxxxxxx
Xxxxxx
Title: Member
