IMAGEWARE
SYSTEMS
, INC .
SECURITY
AGREEMENT
This
Security Agreement (as amended, modified or otherwise supplemented
from time to time, this “ Security Agreement ”),
dated as of February 12, 2009, is executed by ImageWare Systems,
Inc., a Delaware corporation (“ Company
”), in favor of BET Funding LLC, a Delaware limited liability
company (together with its successors and assigns, “
Lender ”).
RECITALS
A.
Company has issued to Lender a
promissory note (the “ Note ”), dated as of the
date hereof in an aggregate principal amount of up to $5,000,000 in
favor of Lender.
B.
In order to induce Lender to extend
the credit evidenced by the Note, Company has agreed to enter into
this Security Agreement and to grant Lender, the security interest
in the Collateral described below.
AGREEMENT
NOW,
THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Company hereby agrees with Lender as
follows:
1.
Definitions and
Interpretation . When used in this Security
Agreement, the following terms have the following respective
meanings:
“
Collateral ” has the meaning given to that term in
Section 2 hereof.
“
Event of Default ” shall have the meaning
ascribed to such term in the Note.
“
Financing Documents ” shall have the meaning ascribed
to such term in the Note.
“
Liens ” means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without
limitation, any conditional sale or other title retention agreement
or lease in the nature thereof), any sale of receivables with
recourse against Company, any filing or agreement to file a
financing statement as debtor under the UCC or any similar statute
or any subordination arrangement in favor of another
person.
“
Obligations ” means all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Company to
Lender of every kind and description (whether or not evidenced by
any note or instrument and whether or not for the payment of
money), now existing or hereafter arising, under or pursuant to the
terms of the Note, this Security Agreement or the other Financing
Documents, including, all interest, fees, charges, expenses,
attorneys’ fees and costs and accountants’ fees and
costs chargeable to and payable by Company hereunder and
thereunder, in each case, whether direct or indirect, absolute or
contingent, due or to become due, and whether or not arising after
the commencement of a proceeding under Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.), as amended from time
to time (including post-petition interest) and whether or not
allowed or allowable as a claim in any such proceeding.
“
Permitted Liens ” means (a) Liens for taxes not yet
delinquent or Liens for taxes being contested in good faith and by
appropriate proceedings for which adequate reserves have been
established; and (b) Liens in favor of Lender.
“
UCC ” means the Uniform Commercial Code as in effect
in the State of Delaware from time to time.
All
capitalized terms not otherwise defined herein shall have the
respective meanings given in the Note. Unless otherwise defined
herein, all terms defined in the UCC have the respective meanings
given to those terms in the UCC.
2.
Grant of Security
Interest . As security for the Obligations, Company
hereby pledges to Lender and grants to Lender a first priority lien
on and security interest in and to all right, title and interests
of Company in and to the property described in Attachment 1
hereto, whether now existing or hereafter from time to time
acquired (collectively, the “ Collateral
”).
3.
General Representations and
Warranties . Company represents and warrants to
Lender that (a) Company is the owner of the Collateral (or, in
the case of after-acquired Collateral, at the time Company acquires
rights in the Collateral, will be the owner thereof) and that no
other Person has (or, in the case of after-acquired Collateral, at
the time Company acquires rights therein, will have) any right,
title, claim or interest (by way of Lien or otherwise) in, against
or to the Collateral, other than Permitted Liens; (b) upon the
filing of UCC-1 financing statements in the appropriate filing
offices, Lender has (or in the case of after-acquired Collateral,
at the time Company acquires rights therein, will have) a first
priority perfected security interest in the Collateral to the
extent that a security interest in the Collateral can be perfected
by such filing, except for Permitted Liens; (c) all Inventory
has been (or, in the case of hereafter produced Inventory, will be)
produced in compliance with applicable laws, including the Fair
Labor Standards Act; (d) all accounts receivable and payment
intangibles are genuine and enforceable against the party obligated
to pay the same; (e) the originals of all documents evidencing all
accounts receivable and payment intangibles of Company and the only
original books of account and records of Company relating thereto
are, and will continue to be, kept at the address of Company set
forth in Section 7 of this Security Agreement.
4.
Covenants Relating to Collateral
.
(a) Company
hereby agrees (a) to perform all acts that may be necessary to
maintain, preserve, protect and perfect the Collateral, the Lien
granted to Lender therein and the perfection and priority of such
Lien, except for Permitted Liens; (b) not to have any other
Liens, except Permitted Liens, placed on the Collateral; (c) not to
use or permit any Collateral to be used (i) in violation in
any material respect of any applicable law, rule or regulation, or
(ii) in violation of any policy of insurance covering the
Collateral; (d) to pay promptly when due all taxes and other
governmental charges, all Liens and all other charges now or
hereafter imposed upon or affecting any Collateral;
(e) without 30 days’ written notice to Collateral Agent,
(i) not to change Company’s name or place of business
(or, if Company has more than one place of business, its chief
executive office), or the office in which Company’s records
relating to accounts receivable and payment intangibles are kept,
(ii) not to change Company’s state of incorporation, or
(f) to procure, execute and deliver from time to time any
endorsements, assignments, financing statements and other writings
reasonably deemed necessary or appropriate by Lender to perfect,
maintain and protect its Lien hereunder and the priority thereof
and to deliver promptly upon the request of Lender all originals of
Collateral consisting of instruments.
(b) Company
hereby further agrees to (i) notify Lender, in writing, at such
time or times that Company enters into a Material Contract and (ii)
perform all acts that may be necessary to maintain, preserve,
protect and perfect a security interest in such Material Contract,
the Lien granted to Lender therein and the perfection and priority
of such Lien. Upon Lender's request, Company shall
provide copies of any Material Contracts to Lender. For
purposes of this Section 4(b) , " Material Contract "
means any agreement not made in the ordinary course of Company's
business or an agreement that requires payments of $100,000 or
more, in which Company or any subsidiary of Company is a party or
has a beneficial interest.
5.
Authorized Action by Lender . Company hereby
irrevocably appoints Lender, or any Person that Lender may
designate, as its attorney-in-fact (which appointment is coupled
with an interest), at Company’s expense, and agrees that
Lender may perform (but Lender shall not be obligated to and shall
incur no liability to Company or any third party for failure so to
do) any act which Company is obligated by the Note or this Security
Agreement to perform, and to exercise such rights and powers as
Company might exercise with respect to the Collateral, including
the right to (a) collect by legal proceedings or otherwise and
endorse, receive and receipt for all dividends, interest, payments,
proceeds and other sums and property now or hereafter payable on or
on account of the Collateral; (b) enter into any extension,
reorganization, deposit, merger, consolidation or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other
property in exchange for the Collateral; (c) make any
compromise or settlement, and take any action it deems advisable,
with respect to the Collateral; (d) pay any indebtedness of
Company relating to the Collateral; (e) insure, process and
preserve the Collateral; and (f) file UCC financing statements
and execute other documents, instruments and agreements required
hereunder; provided , however , that Lender shall not
exercise any such powers granted pursuant to subsections (a)
through (d) prior to the occurrence of an Event of Default and
shall only exercise such powers during the continuance of an Event
of Default. Company agrees to reimburse Lender upon
demand for any reasonable costs and expenses, including
attorneys’ fees, Lender may incur while acting as
Company’s attorney-in-fact hereunder, all of which costs and
expenses are included in the Obligations. It is further
agreed and understood between the parties hereto that such care as
Lender gives
