Sample Business Contracts

Consulting Agreement - John G. Callen and ImageWare Systems Inc.

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                           JOHN G. CALLEN-CONSULTING
                     121 MONTVALE ROAD - WESTON MA - 02493
                  PHONE: (781) 642 7997 - FAX: (781) 894 3661

November 14, 2000

Mr. Jim Miller
Chairman and CEO
ImageWare Systems, Inc.
10883 Thornmint Road
San Diego, CA 921217

Dear Jim:

John G. Callen - Consulting (JGC) is pleased to present this proposal to assist
ImageWare Systems, Inc. (IWS) with the development of a Diversification
Strategy, First Draft.


"JWS develops, sells and supports a suite of modular software products known as
C.R.I.M.E.S.(R) used by law enforcement and public safety agencies to manage
criminal digital images and data. IWS's software systems and associated hardware
allow customers to quickly capture, archive, search, retrieve and share digital
photographs and criminal history records. Through its ITC and Goddard
subsidiaries, IWS also develops, sells and supports software used to create
identification cards and documents."

IWS has achieved the leading market position in the law enforcement imaging
space and continues to see long term growth opportunities in this vertical
market estimated at $1.2 billion in the U.S. Yet, management has determined that
in order to grow rapidly and at a more constant rate than is possible in a
volatile government contracts sector, IWS must diversify its customer base and
corresponding product offerings and penetrate additional imaging markets.
Accordingly, the company has recently begun to expand upon its core law
enforcement product offerings into identification (ID) imaging markets estimated
at $8.5 billion, through its acquisition of ITC and Goddard. Further penetration
of ID markets may be achieved through additional acquisitions, strategic
partnerships and/or new product development.

IWS is well positioned for its diversification from Business to Government (B to
G) markets to Business to Business (B to B) markets, based on its proprietary
imaging software and competitive ID product offerings. Expansion into Business
to Consumer (B to C) markets may present additional growth opportunities and new
recurring revenue models.


IWS wishes to continue its diversification beyond its core markets and product
offerings and is faced with many opportunities to do so. In particular,
Web-based imaging applications present many attractive new technological
approaches as well as access to millions of potential customers. Yet, this
inchoate marketplace is teeming with competitive activity and has yet to
demonstrate convincing business models.

In its desire to develop and implement a successful diversification strategy,
IWS must explore and evaluate its opportunities and is seeking the professional
and objective assistance of JGC in doing so.


JGC will work closely with IWS management to develop the company's
diversification strategy. Work will be undertaken in four basic phases:

1.       Examination and evaluation of IWS current condition and core
         competencies; technology, product, people, market, customers,
         competition, profitability, growth, etc.

2.       Exploration of a broad range of digital imaging market trends;
         competition, applications, channels, product/technology innovations,
         foreign markets, etc.

3.       Determination of most attractive core-value based diversification
         directions, opportunities and options, i.e. combine learnings of Phases
         One and Two.

4.       First draft diversification strategy and desired approaches to
         execution, e.g. product development, licensing, partnering,
         acquisition, etc.


Upon commencement of the project, JGC will convene a project kick-off conference
with key management, outlining and discussing the project approach. Consensus on
project objectives and directions will be reached. Tasks will be specified and

Phase One tasks will be based on individual interviews with key management (CEO,
CFO, CTO, Marketing, Sales executives, etc.), key customers, partners, vendors,
etc. as deemed appropriate.

Phase Two tasks will entail an industry scan, based on secondary research and
discreet interviews with key industry sources. IWS management opinions gleaned
them Phase One interviews will also be valued.

Phase Three will entail a presentation of preliminary findings from Phase One
and Two to IWS management in a workshop, during which time a consensus on
diversification direction will be reached.

Phase Four will require JGC's preparation of a Diversification Strategy - First
Draft, in Power Point, suitable for presentation to the Board of Directors if so
desired by the CEO.



The Diversification Strategy-First Draft will be completed by December 13, 2000,
(subject to approval of this proposal by 11/17 and availability to IWS
management for interviewing, workshop attendance, etc.) It is anticipated that
JGC will spend up to 100 hours working with IWS management towards the
development of the Draft. (Based on current availability, appx. 12 days; 11/20,
21, 22, 28, 29, 30, 12/1 in Boston, 12/4-6 in San Diego, 12/11-12 in San Diego.)
Project travel will be required to IWS offices in San Diego for the Workshop,
w/o 12/4. A second trip will be co-incidental to the IWS Board of Directors
meeting w/o 12/11.


JGC will provide the services described herein, at the hourly rate of $300 per
hour, on a time and materials basis for a total estimated amount not to exceed
$30,000.00, exclusive of any travel cost. For anticipated travel (one trip to
San Diego), JGC will require reimbursement from IWS for reasonable out-of-pocket
expenses at actual cost.

JGC will invoice IWS for an installment of $15,000 on December 1, 2000, such
payment due on December 15. This will be followed by a second invoice for the
final amount of fees not to exceed an additional $15,000, plus expenses, on
December 15, such payment due on January 2, 2001.


If IWS or JGC should desire to recommend an addition, modification or change to
the services to be provided under this letter, the party desiring the addition,
modification or change shall submit a request for it in writing to the other
party. The request will describe in reasonable detail the addition, modification
or change. Promptly following receipt of the request, IWS and JGC will seek in
good faith for a reasonable period of time (not to exceed 5 days) to reach
agreement on an amendment to this letter based upon the request. If agreement is
reached, the change will be reflected in an amendment to this letter (signed by
the parties) which will specify the changes to this letter.


JGC is well known to IWS management as a professional independent business
strategy consultant and digital imaging industry expert. He currently serves on
IWS's Board of Directors and was engaged by IWS in prior consulting capacities
in 1997 and 1998. He served as Polaroid's Director of Entertainment Imaging
until 1997 and briefly worked for Polaroid as a consultant on Internet strategy
in July 2000. He is the owner of the Internet domain names ""
and "" and owns the concept business and ITU trademark filing for
"ePicture." He serves as an Advisor to the Internet PhotoBooth company,
Photerra, Inc. He worked as a contract consultant to PricewaterhouseCoopers
primarily for their client, the United States Postal Services, from 1997 through
June 2000.



This letter may be terminated by either party without cause upon 10 days
advanced written notice to the other party.

Please indicate your agreement with this letter by signing in the space provided
below and returning to my attention the additional copy I have included. I am
grateful that you have chosen JGC and look forward to working with you on this
important endeavor.


John G. Callen - Consulting

By         /s/ John G. Callen
Name:      John G. Callen
Title:     Principal

Agreed and accepted as of the date of this letter:

ImageWare Systems, Inc.

By         /s/ Jim Miller
Name:      Jim Miller
Title:     Chairman and CEO