IW Imageware Systems,

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

You may contact the Registrant in writing or orally to request copies of the above-referenced filings, without charge (not including exhibits to such documents unless such exhibits are specifically incorporated by reference into the information incorporated into this Registration Statement).  Requests for such information should be directed to:

Corporate Secretary

ImageWare Systems, Inc.

10883 Thornmint Road

San Diego, California  92127

(858) 673-8600

Section 174 of the Delaware General Corporation Law provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption may be held liable for such actions. A director who was either absent when the unlawful actions were approved, or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.

As permitted by the Delaware General Corporation Law, the Registrant has entered into indemnity agreements with each of its directors and executive officers that require the Registrant to indemnify such persons against any and all expenses including attorneys’, witness or other professional fees and related disbursements and other out-of-pocket costs incurred by such director or officer in connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under the indemnity agreements, Delaware General Corporation Law or otherwise, and amounts paid in settlement by or on behalf of such director or officer, but will not include any judgments, fines or penalties actually levied against such director or officer for such individual’s violations of law.   Proceedings that are covered by the indemnity agreements include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding (including an action by or in the Registrant’s right), and whether civil, criminal, administrative or investigative in nature to which such director or officer is, was or at any time will be involved as a party, or is threatened to be made a party, by reason of the fact: (i) that such director or officer is or was a director or officer; or (ii) that such director or officer is or was serving at the Registrant’s request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses may be provided under the indemnity agreements.

Such additional indemnity is not available, however, with respect to: (i) a final judgment rendered against such director or officer for an accounting, disgorgement or repayment of profits made from the purchase or sale by such individual of securities of the Registrant against such individual or in connection with a settlement by or on behalf of such individual to the extent it is acknowledged by him or her and the Registrant that such amount paid in settlement resulted from the individual’s conduct from which the individual received monetary personal profit, pursuant to the provisions of Section 16(b) of the Exchange Act or other provisions of any federal, state or local statute or rules and regulations thereunder; (ii) a final judgment that such director or officer’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct (but only to the extent of such specific determination); (iii) on account of conduct that is established by a final judgment as constituting a breach of such director or officer’s duty of loyalty to the Registrant or resulting in any personal profit or advantage to which such individual is not legally entitled; (iv) claims for which payment is actually made to such director or officer under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement; or (v) remuneration paid to such director or officer, if it is determined by final judgment that such remuneration was in violation of law (and, in this respect, both the Registrant and such individual have been advised that the Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication).  Nor do the indemnity agreements provide for additional indemnity with respect to proceedings or claims initiated or brought by such director or officer against the Registrant or its directors, officers, employees or other agents, except with respect to: (a) indemnification required by applicable law; (b) proceedings authorized by the Registrant’s board of directors; (c) indemnification provided by the Registrant in its sole discretion pursuant to its powers under the Delaware General Corporation Law; or (d) proceedings brought to enforce a right to indemnification under the indemnity agreements.  The indemnity agreements do not obligate the Registrant to pay for any amounts paid in settlement of a proceeding effected without the Registrant’s written consent.   The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.

The Registrant has an insurance policy covering its officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.

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(1)  Incorporated by reference to Exhibit 4.1 to the Registration Statement for Small Business Issuers, Form SB-2, filed December 20, 1999.

(2)  Incorporated by reference to Annex B to the Definitive Proxy Statement on Schedule 14A, filed November 15, 2005.

(3)  Incorporated by reference to Annex C to the Definitive Proxy Statement on Schedule 14A, filed November 15, 2005.

(4)  Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed November 20, 2006.

(5)  Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed March 15, 2007.

(6)  Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed November 20, 2006.

(7)  Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed November 20, 2006.

(8)  Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed March 15, 2007.

(9)  Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed March 15, 2007.

(10)  Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed September 26, 2007.

(11)  Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed September 26, 2007.

(12)  Incorporated by reference to Appendix B to the Definitive Proxy Statement on Schedule 14A, filed November 21, 2007.

(h) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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