THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND ITS SALE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. NEITHER THIS WARRANT NOR THE
SECURITIES ISSUABLE UPON THE EXERCISE HEREOF NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM.
Merger Warrant No.39 Void after January 20, 2002
IMAGEWARE SOFTWARE, INC.
MERGER WARRANT
(Initially to Purchase 13,000 Shares of Common Stock)
This Merger Warrant (the "Warrant") is issued, for good and valuable
consideration, receipt of which is hereby acknowledged, to _______________ by
ImageWare Software, Inc., a California corporation (the "Company").
1. PURCHASE OF SHARES; PURCHASE PRICE. Subject to the terms and conditions
hereinafter set forth, the holder of this Warrant ("Holder") is entitled,
upon surrender of this Warrant at the office of the Company at ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as the
Company shall notify the holder hereof in writing), to purchase from the
Company Thirteen Thousand (13,000) shares of Common Stock of the Company at a
purchase price equal to the lesser of $4.00 per share, or the price at which
the Company sells its Common Stock (or the equivalent per share price if
other equity securities are sold, e.g., Preferred Stock) in the Company's
first financing following the Merger transaction involving the Company and
XImage Corporation. The shares of Common stock of the Company issuable upon
exercise of this Warrant are hereinafter referred to as the "Shares".
The Company shall send the Holder written notice of the per share price at
which the Company sells its securities in such first financing within ten
days after such sale is consummated.
2. EXERCISE PERIOD. This Warrant is exercisable at any time from the date
hereof until 5 o'clock P.M., San Diego, California time on January 20, 2002,
at which time this Warrant shall expire.
3. METHOD OF EXERCISE. During the period this Warrant remains outstanding
and exercisable in accordance with Section 2 above, the holder may exercise
this Warrant, in whole or in part, by:
(a) surrendering this Warrant, together with a duly executed copy of the
form of Subscription attached hereto, to the Secretary of the Company at its
principal offices; and
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(b) paying to the Company an amount equal to the aggregate Exercise
Price of the number of Shares being purchased; provided that the Holder may
elect to pay the Exercise Price of the Warrants to the Company out of the
proceeds of the sale of the Shares, when sold, in which event, (i) the Shares
will not be issued by the Company until they are sold, and (ii) the Shares
will not be delivered to the purchaser of such Shares until satisfactory
provision is made for paying the Warrant Price to the Company with respect to
such Shares.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number of Shares
purchasable upon exercise of this Warrant and the Exercise Price shall be
subject to adjustment from time to time only as follows:
(a) The Exercise Price of this Warrant and the number of Shares issuable
upon exercise of this Warrant shall be appropriately adjusted to reflect any
stock dividend, stock split, combination of shares of stock,
reclassification, recapitalization or other similar event affecting the
number of outstanding shares of Common Stock, as follows:
(i) The Exercise Price in effect at the time of such event shall be
adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock of the Company outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common
Stock of the Company outstanding immediately after giving effect to such
event. Such adjustment shall be made successively whenever any event
specified above shall occur.
(ii) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subparagraph (i) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the initial Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(b) In case the Company shall make or issue, or shall fix a record date
for the determination of eligible holders entitled to receive, a dividend or
other distribution with respect to the shares payable in (i) securities of
the Company (other than Shares of Common Stock) or (ii) assets (excluding
cash dividends paid or payable solely out of retained earnings), then in each
case, the holder of this Warrant on exercise hereof at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares issuable on such exercise prior to such date, the
securities or other assets of the Company to which such holder would have
been entitled upon such date if such holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in
this Warrant).
(c) In case of any merger of the Company with or into any other
corporation, entity or person, or any corporate reorganization, in which the
Company shall not be the continuing or surviving entity of such reorganization
or merger, or any sale of all or substantially all of the assets of the
Company (and such transaction being hereinafter referred to as a
"Reorganization"), then, in each case, (i) the holder of this Warrant shall
be provided with written notice of the
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proposed Reorganization at least thirty (30) days prior to the proposed
Reorganization date, and (ii) the holder of this Warrant, on exercise hereof
at any time after the consummation or effective date of such Reorganization
(the "Effective Date"), shall receive, in lieu of the Shares issuable on such
exercise prior to the Effective Date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
the Effective Date if such Holder had exercised this Warrant immediately
prior thereto (all subject to further adjustment as provided in this Warrant).
(d) In case of any adjustment or readjustment in the price or kind of
securities issuable on the exercise of this Warrant, the Company will
promptly give written notice thereof to the holder of this Warrant in the
form of a certificate, certified and confirmed by the Board of Directors of
the Company, setting forth such adjustment or readjustment and showing in
reasonable detail the computation of such adjustment.
5. DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will at all times reserve and
keep available a number of its authorized Shares of Common Stock, free from
all preemptive rights therein, which will be sufficient to permit the
exercise of this Warrant and (b) shall take all such action as may be
necessary or appropriate in order that all Shares as may be issued pursuant
to the exercise of this Warrant will, upon issuance, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
6. PRE-EXERCISE RIGHTS. Prior to the exercise of this Warrant, the holder
shall not be entitled to any rights of a shareholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of shareholder meetings, and such holder shall not be entitled to
any notice or other communication concerning the business or affairs of the
Company, except as set forth herein.
7. RESTRICTED SECURITIES. The holder understands that this Warrant and the
Shares purchasable hereunder constitute "restricted securities" under the
federal securities laws inasmuch as they have been, or will be, acquired from
the Company in transactions not involving a public offering and accordingly
may not, under such laws and applicable regulations, be resold or transferred
without registration under the Securities Act of 1933, as amended, or an
applicable exemption from registration. The holder further acknowledges that
the Shares and any other securities issued upon exercise of this Warrant
shall bear a legend substantially in the form of the legend appearing on the
face hereof.
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8. CERTIFICATION OF INVESTMENT PURPOSE. Unless a current registration
statement under the Securities Act of 1933, as amended (the "Act"), shall be
in effect with respect to the offer and sale of the securities to be issued
upon exercise of this Warrant, the holder of this Warrant covenants and
agrees that, at the time of exercise hereof, such holder will deliver to the
Company a written certification that the securities acquired by the holder
upon exercise hereof are for the account of the holder, are being acquired
for investment purposes only and are not being acquired with a view to, or
for sale in connection with, any public distribution thereof.
9. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
(a) The Holder agrees that prior to making any disposition of the
Warrants or the Shares, the Holder shall give written notice to the Company
describing briefly the manner in which any such proposed disposition is to be
made; and no such disposition shall be made if the Company has notified the
Holder that in the opinion of its counsel, a registration statement or
post-effective amendment thereto (hereinafter collectively a "Registration
Statement") under the Act is required with respect to such disposition and no
such Registration Statement has been filed by the Company with, and declared
effective by, the Securities and Exchange Commission (the "Commission").
(b) (i) At any time commencing after the closing of the Company's
initial public offering of its securities and prior to November 30, 2003, the
Company will, as promptly as practicable (but in any event within 60 days),
after written request by a person or persons holding (or having the right to
acquire by virtue of holding the Warrants) at least 50% of the Shares which
have been (or may be) issued upon exercise of all of the Warrants that were
issued to the shareholders of XImage upon the acquisition of XImage by
ImageWare, prepare and file at the Company's expense a Registration Statement
with the Commission and appropriate Blue Sky authorities sufficient to permit
the public offering of the Shares (but not the Warrants) and will use its best
efforts through its officers, directors, auditors and counsel, in all matters
necessary or advisable, to cause such Registration Statement to become
effective as promptly as practicable and to keep such registration effective
for a period of the lesser of 90 days or the date of completion of the
distribution described in the Registration Statement; provided, however, that
the Company shall only be obligated to file one such Registration Statement
under this Section 9(b)(i).
(ii) Whenever during the period ending on November 30, 2003, the
Company proposes to file with the Commission a Registration Statement (other
than as to securities issued pursuant to an employee benefit plan or as to a
transaction subject to Rule 145 promulgated under the Act or which a form S-4
Registration Statement could be used), it shall, promptly prior to each such
filing, give written notice of such proposed filing to the Holder and each
holder of Shares at their respective addresses as they appear on the records
of the Company, and shall offer to include and shall include in such filing
any proposed disposition of the Shares (but not the Warrants) upon receipt by
the Company, within 20 days after such written notice is given, of a request
therefor setting forth the facts with respect to such proposed disposition
and all other information with respect to such person reasonably necessary to
be included in such Registration Statement. If the registration for which the
Company gives notice is for a registered public
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offering involving an underwriting, the Company shall so advise as part of
the written notice given pursuant to this Section. In such event, the right
of any Holder or holder of Shares to registration pursuant to Section 9(b)(i)
shall be conditioned upon the participation in such underwriting of the
Holder or holder of Shares, and the inclusion of their Shares in the
underwriting shall be limited to the extent provided herein. All Holders or
holders of Shares proposing to distribute their Shares through such
underwriting shall enter into an underwriting agreement in customary form
with the managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 9(b), if the managing
underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, such underwriter may limit the amount of
securities to be included in the registration and underwriting by the holders
of Company securities exercising "piggyback" registration rights (including
the Holder and each holder of Shares). The Company shall so advise all such
holders of Company securities exercising "piggyback" registration rights, and
the number of shares of such securities that may be included in the
registration and underwriting shall be allocated among all of such holders,
in proportion, as nearly as practicable, to the respective amounts of
securities requested by such holders to be included in such registration
statement. Any securities excluded or withdrawn from such registration and
underwriting shall not be transferred prior to one hundred twenty (120) days
after the effective date of the registration statement relating thereto, or
such shorter period of time as the underwriters may require.
(iii) In the event that any such Registration Statement is utilized
for a public offering of any of the Shares to be received upon exercise of
the Warrants pursuant to this Section 9, the Holder may elect to pay the
Exercise Price of the Warrants to the Company out of the proceeds of the sale
of the Shares pursuant to the Registration Statement concurrently with the
closing of such sale of the Shares. In such event, (1) the Shares will not be
issued by the Company until they are sold, and (2) the Shares will not be
delivered to the purchaser of such Shares until satisfactory provision is
made for paying the Warrant Price to the Company with respect to such Shares.
(c) All fees, disbursements and out-of-pocket expenses (other than the
Holder's brokerage fees and commissions and legal fees of counsel to the
Holder, if any) in connection with the filing of any Registration statement
under Section 9(b) (or obtaining the opinion of counsel and any no-action
position of the Commission with respect to sales under Rule 144) and in
complying with applicable securities and Blue Sky laws shall be borne by the
Company. The Company at its expense will supply any Holder and any holder of
Shares with copies of such Registration Statement and the prospectus included
therein and other related documents any opinions and no-action letters in
such quantities as may be reasonably requested by the Holder or holder of
Shares.
(d) The Company shall not be required by this Section 9 to file such
Registration Statement if, in the opinion of counsel for the Holders and
holders of Shares and the Company (or, should they not agree, in the opinion
of another counsel experienced in securities law matters acceptable to
counsel for such holders and the Company), the proposed transfer as to which
such Registration Statement is requested is exempt from applicable federal
and state securities laws under Rule 144 promulgated under the Act.
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(e) The provisions of this Section 9 and Section 10 hereof shall apply
to the extent as provided herein if the Company chooses to file an Offering
Statement under Regulation A promulgated under the Act.
(f) The Company agrees that until all Shares have been sold under a
Registration Statement or pursuant to Rule 144 under the Act, it will use its
best efforts to keep current in filing all materials required to be filed with
the Commission in order to permit the holders of such securities to sell the
same under Rule 144.
(g) The Company shall be entitled, for a reasonable period of time
which in no event shall exceed 60 days (i) to postpone the filing of a
Registration Statement or any amendment or supplement thereto or to the
prospectus relating thereto otherwise required, or (ii) to suspend
effectiveness of the Registration Statement, if the Company (a) determines,
in its reasonable judgment, that the registration or sale of the Shares would
materially interfere with any pending or proposed financing, acquisition,
corporate reorganization or other material transaction involving the Company
or any of its subsidiaries, and (b) promptly gives those persons exercising
their registration right hereunder written notice of such determination.
(h) The Company may require those persons exercising their
registration rights hereunder to furnish to the Company such information
regarding the distribution of such Shares as the Company may from time to
time request in writing and such other information as may be legally required
in connection with such registration.
(i) At any time when a prospectus relating to a sale of the Shares is
required to be delivered under the Act, there occurs an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the Shares, such prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, then the Company will promptly make
available to any Holder any such supplement of amendment. Each Holder agrees
that, upon receipt of any notice from the Company of the happening of any
event of the kind described in the preceding sentence hereof, such Holder will
forthwith discontinue disposition of Shares pursuant to the Registration
Statement covering such Shares until the Holder's receipt of the copies of
the supplemented or amended prospectus, and, if so directed by the Company,
the Holder will deliver to the Company all copies, other than permanent file
copies then in the Holder's possession, of the prospectus covering such
Shares current at the time of receipt of such notice. If such amendments or
supplements are not made by the Company within ten (10) days of such notice
by the Company or if in the opinion of counsel to the Holders such amendments
or supplements to the prospectus, if made, are insufficient in light of the
requirements of the Act and other applicable law, the Holders shall not be
deemed to have exercised their demand registration rights pursuant to Section
9(b)(i) herein.
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10. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement with
respect to the Shares pursuant to Section 9 hereof, the Company agrees to
indemnify and hold harmless the Holder or any holder of Shares and each
person, if any, who controls the Holder or any holder of Shares within the
meaning of the Act, against any losses, claims, damages or liabilities, joint
or several (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys'
fees), to which the Holder or any holder of Shares or controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any such Registration Statement or Prospectus included
therein, or amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Statement or
Prospectus or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by such Holder,
the holder of such Shares or the underwriters of such offering specifically
for use in the preparation thereof. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) The Holders and the holders of Shares agree that they will
indemnify and hold harmless the Company, each other person referred to in
subparts (1), (2) and (3) of Section 11(a) of the Act in respect of the
Registration Statement and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include but not
be limited to, all costs of defense and investigation and all attorneys'
fees) to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect hereof) arise out of or
are based upon any untrue statement of any material fact contained in such
Registration Statement or Prospectus included therein, or amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in
each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement or Prospectus included therein, or amendment or supplement thereto
in reliance upon, and in conformity with, written information furnished to
the Company by the Holder or holder of Shares specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Holder or holder of Shares may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 10, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
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the indemnifying party from any liability which it may have to any
indemnified party otherwise than as to the particular item as to which
indemnification is then being sought solely pursuant to this Section 10. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified,
reasonably assume the defense thereof, subject to the provisions herein
stated, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Section 10 for
any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof, other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to
its final conclusion. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is a Holder or a holder of
Shares or a person who controls a Holder or a holder of Shares within the
meaning of the Act, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has
been specifically authorized in writing by the indemnifying party of (ii) the
named parties to any such action, including any impleaded parties, include
both a Holder or a holder of Shares or such controlling person and the
indemnifying party and a Holder or a holder of Shares or such controlling
person shall have been advised by such counsel that there may be one or more
legal defenses available to a Holder or a holder of Shares or controlling
person which are not available to or in conflict with any legal defenses
which may be available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of a Holder or a holder of Shares or such controlling
person, it being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys for the Holders, the holders of
the Shares and controlling persons, which firm shall be designated in writing
by a majority in interest of such holders and controlling persons based upon
the value of the securities included in the Registration Statement). No
settlement of any action against an indemnified party shall be made without
the consent of the indemnified and the indemnifying parties, which shall not
be unreasonably withheld in light of all factors of importance to such
parties.
11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall, upon receipt of a
reasonable agreement to indemnify the Company, and, in the case of a
mutilated warrant, upon the surrender thereof, issue in the name requested a
new warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed.
12. SUCCESSORS AND ASSIGNS. The terms and provisions of this Warrant shall
inure to the benefit of, and be binding upon, the Company and the holders
hereof and their respective successors and permitted assigns.
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13. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the substantive laws of the State of California without
regard to principles of conflicts of laws.
January 21, 1998 IMAGEWARE SOFTWARE, INC.
By:
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S. ▇▇▇▇▇ ▇▇▇▇▇▇, Jr., President
By:
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Seecretary
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SUBSCRIPTION
ImageWare Software, Inc.
Attention: Corporate Secretary
The undersigned hereby elects to purchase, pursuant to the provisions of
this Merger Warrant issued by ImageWare Software, Inc. and held by the
undersigned, ________________ shares of Common Stock of ImageWare Software,
Inc. ("Shares").
Payment of the purchase price for such Shares provided in such Warrant
accompanies this Subscription, unless payment for the Shares is made from the
proceeds of the sale of the Shares, as permitted by Section 3(b) or Section
9(b)(iii) of the Merger Warrant.
The Undersigned hereby represents and warrants that the undersigned is
acquiring such Shares for its own account, for investment purposes only and
not for resale or with a view to distribution of such Shares or any part
thereof.
Date:
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Signature:
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Address:
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Name in which Shares should be registered:
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Address (if other than above):
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