Exhibit 10.36
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND IT MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND THE
RESPECTIVE RULES AND REGULATIONS THEREUNDER.
IMAGEWARE SOFTWARE, INC.
8.0% Convertible Note due June 15, 2000
$255,000 June 15, 1995
FOR VALUE RECEIVED, the undersigned ImageWare Software, Inc., a
corporation organized and existing under the laws of the State of California
(herein called the "Company"), hereby promises to pay to Patrick J. Downs, or
order, the principal sum of Two Hundred Fifty-Five Thousand Dollars
($255,000) on June 15, 2000 with interest (computed on the basis of a 360-day
year and 30-day month) on the unpaid balance thereof at the rate of 8.0% per
annum from the date hereof, payable monthly on the last day of each quarter,
commencing on September 30, 1995, until the principal hereof shall have
become due and payable or shall have been paid. At the option of either the
Company or the holder of this Note, interest may be allowed to accrue and be
added to principal, rather than be paid.
Payment of both principal and interest are to be made at the address
shown on the Company's books or at such other place as the holder hereof
shall designate to the Company in writing, in lawful money of the United
States of America.
This Note and any other promissory notes with identical terms shall, at
the option of the holder, be prepaid prorata to the extent of 20% of the
Company's pre-tax income earned subsequent to June 30, 1995.
In the event that interest or principal on this Note is not paid when
due, then the principal and accrued interest of this Note may be declared
immediately due and payable by the holder hereof. The Company agrees to pay,
and save the holder hereof harmless against any liability for, any expenses
arising in connection with the enforcement by the holder hereof of any of
its rights under this Note.
This Note shall be convertible into securities of the Company as follows:
The principal amount of this Note plus accrued but unpaid interest
thereon shall be convertible, at the option of the holder thereof, at any
time after date hereof, into Units of Series B Preferred Stock ("Preferred
Stock") and Common Stock Purchase Warrants ("Warrants") of the Company of the
type sold to purchasers in the $1,250,000 Unit
offering made pursuant to a Confidential Private Placement Memorandum dated
April 10, 1995, at $2.50 per Unit, subject to adjustment.
The conversion of this Note into Units shall be effected by the surrender
of this Note, duly endorsed in blank, at the office of the Corporation, with
written notice to the Corporation of the election to convert the same and
shall state therein the name or names in which the securities included in the
Units are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver to such holder certificates of Preferred Stock
and Warrants into which the Note was converted.
The Conversion Price of the Preferred Stock and the Exercise Price of
the Warrants included in the Units shall be subject to adjustment from time
to time as follows:
In the event the Corporation should at any time or from time to time
after the date of the issuance of any shares of Preferred Stock or Warrants
fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Preferred Stock and the Exercise Price of the Warrants shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of such Preferred Stock or exercise of each
Warrant shall be increased in proportion to such increase in the aggregate
number of shares of Common Stock outstanding and those issuable with respect
to Common Stock Equivalents or other rights or securities of the Corporation.
If the number of shares of Common Stock outstanding at any time after
the date of the issuance of any shares of Preferred Stock and Warrants is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion Price of the
Preferred Stock and the Exercise Price of the Warrants shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion
of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
In the event the Corporation shall declare a distribution with respect
to the outstanding shares of Common Stock payable in securities of other
persons, evidences of indebtedness issued by the Corporation or other
persons, assets or options or rights not referred to above, then, in each
such case for the purpose of this paragraph, the holders of the Preferred
Stock and the Warrants shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of
Common Stock of
the Corporation into which their shares of Preferred Stock are convertible or
their Warrants are exercisable as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
received such distribution.
If at any time or from time to time there shall be a capital
reorganization of the Corporation or any reclassification of the Common Stock
or in case of the consolidation or merger of the Corporation with any other
person or entity or in case of any sale, conveyance or disposition of all or
substantially all of the assets of the Corporation to an affiliate of the
Corporation (other than a subdivision, combination or Event of Liquidation or
Sale as provided for elsewhere herein), the Corporation and the person or
entity formed by such consolidation or resulting from such capital
reorganization, reclassification of capital stock or merger, as the case may
be, shall make provision in the articles or certificate of incorporation or
other governing instruments of such person such that each share of Preferred
Stock shall thereafter be convertible and each Warrant shall thereafter be
exercisable only into the kind and amount of shares of stock, other
securities, cash and other property receivable upon such capital
reorganization, reclassification of capital stock, consolidation, merger,
sale, conveyance or disposition, as the case may be, by a holder of the
number of shares of Common Stock into which such shares of Preferred Stock
were convertible or Warrants were exercisable immediately prior to such
capital reorganization, reclassification of capital stock, consolidation,
merger, sale, conveyance or disposition. In any such case, appropriate
adjustment shall be made in the application of the provisions of this
paragraph with respect to the rights of the holders of the Preferred Stock
and the holders of the Warrants after such capital reorganization,
reclassification of capital stock, consolidation, merger, sale, conveyance or
disposition to the end that the provisions of this paragraph (including
adjustment of the Conversion Price of the Preferred Stock and the Exercise
Price of the Warrants then in effect and the number of shares purchasable
upon conversion of the Preferred Stock or exercise of the Warrant) shall be
applicable after that event as nearly equivalent as may be practicable.
This Note shall be construed and enforced in accordance with the laws of
the State of California.
IMAGEWARE SOFTWARE, INC.
By: /s/ S. James Miller, Jr.
--------------------------------
S. James Miller, Jr., President
and CEO