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Employment Agreement - ImageWare Software Inc. and S. James Miller Jr.

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                             IMAGEWARE SOFTWARE, INC.

                               EMPLOYMENT AGREEMENT
                             (AMENDED SEPTEMBER 1997)

     This EMPLOYMENT AGREEMENT ("Agreement"), which was entered into as of
January 1, 1996 by and between ImageWare Software, Inc., a California
Corporation (herein the "Company") and S. James Miller, Jr. (herein "Miller")
and replaced the Employment Agreement entered into with Miller as of January
1, 1995, is hereby amended to read in full as hereinafter set forth.

     It is hereby agreed as follows:

     1.  EMPLOYMENT AND TERM.  The Company hereby employs Miller as
President, Chief Executive Officer of the Company, and Miller agrees to his
employment by the Company as its President and Chief Executive Officer, the
term of which employment shall be a period of three years commencing January
1, 1996 and ending December 31, 1998.

     2.  DUTIES. During the term of this Agreement, Miller shall devote
substantially all of his working time, energies and skills to the management
of the Company's business. Miller shall render services consistent with those
of the Chief Executive Officer of a corporation and shall perform all duties
incident to such office and all such further similar duties that may from
time to time be assigned to him by the Board of Directors of the Company.

     3.  COMPENSATION.  Miller's compensation under this Agreement shall be
as follows:

             (a)  BASE SALARY.  The Company shall pay to Miller a base salary
(the "Base Salary") of $155,000.00 per year from January 1, 1996 through
December 31, 1998. In addition, each year during the term of this Agreement,
Miller shall receive a cost-of-living increase equal to the percentage by
which the Consumer Price Index applicable to the San Diego area increased
during the prior fiscal year. Such Base Salary shall be payable in
semi-monthly installments in accordance with the regular employee payment
practice of the Company. All payments shall be subject to the deduction of
payroll taxes and similar assessments as required by law.

             (b)  BONUS.  In addition to his Base Salary, Miller shall be
eligible to participate in any Company Bonus Plan, adopted from time to time
by the Board of Directors.

     4.  EXPENSES AND BENEFITS.  Miller is authorized to incur reasonable
expenses in connection with the business of the Company, including expenses
for entertainment, travel and similar matters. The Company will reimburse
Miller for such expenses upon presentation by

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Miller of such accounts and records as the Company shall from time to time
reasonably require. The Company also agrees to provide Miller with the
following benefits:

             (a)  AUTOMOBILE.  An automobile allowance of $750.00 per month
to reimburse him for use of his automobile in carrying on the business of the
Company.

             (b)  INSURANCE.  Major medical health insurance and disability
insurance which shall provide not less than two-thirds of Miller's then
current Base Salary in disability payments commencing three months after
permanent or partial disability occurs and life group or term life insurance
in an amount equal two times Miller's Base Salary.

             (c)  EMPLOYEE BENEFIT PLANS.  Participation in any other
employee benefit plans now existing or hereafter adopted by the Company for
its employees.

             (d)  VACATIONS.  Miller shall be entitled to a paid vacation for
a period in each calendar year of not less than four weeks, to be taken at
such times as mutually agreed with the Company.

             (e)  PHYSICAL EXAMINATION.  Not more than once every two years,
Miller shall be entitled to receive a physical examination at Company
expense; and at the Company's request, will take an a physical examination
annually and provide the results to the Company.

     5.  TERMINATION.  Except as otherwise provided herein, this Agreement
shall terminate upon the first to occur of the expiration of the term
provided for in Section 1 or the death of Miller. However, nothing contained
in this Section 5 shall be construed to abrogate the obligations of the
Company to Miller, or his personal representative, or his heirs, as the case
may be, in respect of all rights which shall accrue prior or subsequent to
termination.

     6.  DISABILITY.  In the event that Miller becomes permanently disabled
during the term of this Agreement, then Miller shall continue in the employ
of the Company, but his compensation hereunder shall be limited to the amount
of his Base Salary then in effect, as set forth in Section 3(a) hereof, which
compensation shall be reduced by any amounts which Miller receives from
worker's compensation, social security, state disability programs or the
disability insurance provided by the Company to Miller. In such event,
Miller's employment hereunder shall continue after his permanent disability
and until the first to occur of (i) the expiration of the term specified in
Section 1, or (ii) the death of Miller; and during such period of time Miller
shall not be entitled to payment of expenses or benefits specified in Section
4 hereof, except that the Company shall continue to provide Miller with the
insurance benefits specified in Section 4(b) hereof.

             (a)  DEFINITION OF DISABILITY.  As used in this Agreement, the
term "permanent disability" shall mean three (3) months of substantially
continuous disability. Disability shall be deemed "substantially continuous"
if, as a practical matter, Miller by reason of his mental or physical health,
is unable to sustain reasonably long periods of substantial

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performance of his duties. Frequent long illnesses, though different from the
preceding illness and though separated by relatively short periods of
performance, may be deemed to be "substantially continuous." Disability shall
be determined in good faith by a vote of not less than 75% of the Board of
Directors of the Company, excluding Miller if he is a director, whose
decision shall be final and binding upon Miller. Miller hereby consents to
medical examinations by such physicians and medical consultants as the
Company shall from time to time require.

     7.  TERMINATION BY COMPANY FOR CAUSE.  The Company shall have the right
to terminate Miller's employment as President, Chief Executive Officer of the
Company for "Cause," in which event no compensation shall be paid or other
benefits furnished to Miller after termination for Cause. Whether Cause
exists shall be determined in good faith by the Board of Directors of Company
and shall require a vote of not less than 75% of such Directors, excluding
Miller if he is a director. Termination for Cause shall be effective
immediately upon notice being sent to Miller.

             (a)  DEFINITION OF CAUSE.  As used in this Agreement, the term
"Cause" shall mean (1) any material act of dishonesty by Miller against the
Company; or (2) willful misconduct or gross negligence by Miller in carrying
out his duties as President, Chief Executive Officer of the Company; or (3)
material breach of this Agreement by Miller; or (4) misconduct by Miller,
such as intoxication on the job, use of illegal drugs, insubordination or
other misconduct which has a substantial adverse effect on the business of
the Company, or (5) other circumstances indicative of Miller's failure
materially to comply with the terms of his employment and which have had or
may have a substantial adverse effect on the business of the Company.

     8.  TERMINATION BY COMPANY OTHER THAN FOR CAUSE.  The Company shall have
the right to terminate Miller's employment as of or prior to the expiration of
the term of his employment provided in this Agreement, without cause. In the
event Miller's employment is terminated effective prior to expiration of the
term of his employment, then the Company shall pay Miller in one lump sum, an
amount equal to the full amount of his Base Salary from the date of
termination through the remainder of the term of this Agreement.

     9.  RESIGNATION BY MILLER FOR CAUSE--CHANGE IN CONTROL OR DIMINUTION IN
DUTIES.  In the event that there is a change in Control of the Company or in
the event that the Board of Directors materially reduces the scope and/or
authority of Miller's duties as President, Chief Executive Officer of the
Company, then Miller, within 30 days of such Change in Control, may terminate
his employment as of a date not more than 60 days from the date of such
Change in Control, by giving the Company 30 days advance written notice. In
such event, Miller shall be entitled to payment of his entire unpaid Base
Salary for the remaining term of this Agreement, which Base Salary shall be
paid to him in one lump.

             (a)  As used in this Agreement, the term "Change of Control"
shall mean the occurrence of any of the following events during the term
hereof:

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          (i)     Any "person" (such as that term is used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, or securities of the Company
representing 50% or more of the total voting power represented by the
Company's then outstanding voting securities; or

          (ii)    Any merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent 50% or more of the total voting power represented by
the Company's then outstanding voting securities (either by remaining
outstanding or by being converted into voting securities of the Company or
such other surviving entity outstanding immediately after such merger or
consolidation); or

          (iii)   A majority of the directors of the Company which were not
nominated by the Company's management (or were nominated by management
pursuant to an agreement with persons that acquired sufficient voting
securities of the Company to de facto control it) are elected to the Board of
Directors by the Company's shareholders; or

          (iv)    the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.

     10.  EVERGREEN EXTENSION OF AGREEMENT. On each anniversary of this
Agreement, the term of this Agreement shall be automatically extended for an
additional period of one year if notice of termination has not been given by
the Company to Miller at least one year in advance of such anniversary date.
The effect of this provision shall be that Miller's term of employment under
this Agreement shall always be at least three years. For example, (a) if
notice of termination of this Agreement is not given by December 31, 1996,
then the term of Miller's employment shall be extended from December 31, 1998
until December 31, 1999; or (b) if notice of termination of this Agreement is
given on September 30, 1997 and Miller is asked to leave the Company at such
date, then the term of Miller's employment shall be extended from December
31, 1999 to December 31, 2000 and he shall be paid through December 31, 2000.

     11.  OFFICES IN SAN DIEGO. The Company agrees that if it moves its
principal office out of San Diego County, then Miller will have the right to
terminate this Agreement, in which event the Company shall pay Miller in one
lump sum, an amount equal to the full amount of his Base Salary through the
remainder of the term of this Agreement.

     12.  INDEMNIFICATION. The Company shall enter into an Officers and
Directors Indemnification Agreement with Miller that shall provide the
Executive with the maximum amount of protection allowed under the laws of
California to the extent that they are not inconsistent with the Company's
Articles of Incorporation or Bylaws with respect to such subject matter.

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     13.  NO PROSELYTIZING OF EMPLOYEES. During the term of Miller's
employment and for a period of 24 months following termination of his
employment (for whatever reason), Miller shall not, on his own behalf or on
behalf of any other person or entity, directly or indirectly, solicit or
encourage any person then an employee of the Company to leave the employ of
the Company for the purpose of forming or joining another business.

     14.  NO SOLICITATION OF CUSTOMERS. During the term of Miller's
employment and for a period of 24 months following termination of his
employment (for whatever reason), Miller shall not, on his own behalf or on
behalf of any other person or entity, directly or indirectly, solicit, entice
away or divert any person or entity then a client of customer of the Company
to become a client or customer of any other person or entity.

     15.  GENERAL PROVISIONS.

          (a)     NOTICES. Any notices to be given hereunder by either party
to the other shall be in writing and may be effected either by personal
delivery or by fax, private courier, or certified mail, postage prepaid with
return receipt requested. Mailed notices shall be addressed to the parties at
the addresses set forth below, but each party may change his or its address
by written notice in accordance with this Section 11(a). Notices delivered
personally shall be deemed communicated as of actual receipt; faxes, private
courier deliveries or mailed notices shall be deemed communicated as of one
day after faxing, delivery to a private courier or mailing.

          If to Miller--

                   Mr. S. James Miller, Jr.
                   14395 Trailwind Road
                   Poway, California  92064

          If to the Company--

                   ImageWare Software, Inc.
                   15373 Innovation Drive, Suite 120
                   San Diego, California  92128

          (b)  SEVERABILITY. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.

          (c)  LAW GOVERNING AGREEMENT. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.

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          (d)  ASSIGNMENT. This Agreement shall inure to the benefit of and
bind the parties hereto and their respective legal representatives,
successors and assigns.

          IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.

                              ImageWare Software, Inc.

                                   By /s/ William E. Guthner, Jr.
                                     -------------------------------------
                                          William E. Guthner, Jr.
                                     For the Compensation Committee of
                                           the Board of Directors


                                      /s/ S. James Miller, Jr.
                                     -------------------------------------
                                          S. James Miller, Jr.


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