Imagis Technologies Inc. Exhibit 10.3


EXHIBIT 10.3

PRODUCT DEVELOPMENT AND MARKETING
AGREEMENT

     This Product Development and Marketing
Agreement (this "Agreement") is entered into as of July 8, 2002 by and
between OSI Systems, Inc., a California corporation ("OSI"), and
Imagis Technologies Inc., a British Columbia, Canada corporation
("Imagis"), with reference to the following facts:

     A.     OSI (through
its wholly-owned subsidiaries)
is in the business of developing, manufacturing, marketing and selling security
products.

     B.     Imagis is in
the business of developing,
marketing and selling biometric systems, including facial recognition
systems.

     C.     OSI desires
that Imagis develop
transportation security products based on its facial recognition system to work
together with OSI's security products, and that OSI retain the exclusive right
to manufacture, market and sell the Products.  Imagis desires to undertake such
product development, and to retain OSI to manufacture, market and sell the
Products in the transportation security market.

     Therefore, the parties agree as
follows:

1     STRATEGIC ALLIANCE.  It is the goal of
the parties to form a strategic alliance to develop mutually agreed integrated
airport and transportation security products using Imagis' facial recognition
technologies and OSI's security products, with functionalities including
identity verification and confirmation, together with physical passenger and
luggage scanning (the resulting products referred to herein as the
"Products").

2     PRODUCT DEVELOPMENT AND SUPPORT.

          2.1.  
Imagis shall develop the Products, including versions of its facial recognition
systems adapted for applications within the airport and transportation security
markets, with all commercial diligence.  Imagis will expend a minimum of
$250,000 on such product development and the operation of an Airport Security
Group who will sell the Products in conjunction with OSI Sales and Marketing
into the OSI airport customer and prospect base. 

          2.2.  
Upon Imagis' reasonable request, OSI shall provide advice regarding the
transportation security market, as needed to facilitate Imagis' product
development.

          2.3.  
Imagis shall comply with OSI's reasonable requests regarding the design of the
Products, in order to facilitate efficient manufacturing of the Products and to
maximize sales of the Products.

          2.4.  
OSI shall have primary responsibility for introducing Imagis to OSI customers
and prospects. Imagis shall have primary responsibility for demonstrating
Product capabilities and marketing with regard to Product capabilities.  Imagis
will locate a software technician trained in the Products such that on-site
support can normally be provided, if requested, within 24 hours of request.  As
an example, if the Product is ordered by the British Airport Authority for a
major U.K. airport, Imagis will locate a technician in the U.K.

          2.5.  
Imagis shall maintain documents tracking and confirming its expenditure of funds
on the development of the Products calculated at standard cost rates.  Imagis
shall provide OSI with regular reports, no less frequently than monthly, of
progress in its development of the Products, and the amount of funds Imagis has
expended on such development.  Upon OSI's reasonable request, Imagis shall
provide OSI with access to the Products in development, and to the documents
tracking and confirming its expenditures on such development, for reasonable
inspection for the purpose of assessing development progress and confirming
expenditures.

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3     IMAGIS' GRANT OF LICENSE.  On the terms
set forth herein, Imagis hereby grants OSI a license to manufacture, market,
distribute, and otherwise commercially exploit the Products, subject to the
following exclusivities:

          3.1.  
During the term of this Agreement, OSI shall have the exclusive (even as to
Imagis) right to manufacture, aggregate or integrate, subject to the terms of
this Agreement, the hardware embodiments of the intellectual property,
functionalities and applications developed by Imagis that are unique to the
Products (shared with no other Imagis-developed system or product).  Imagis, for
itself and its licensees, agrees not to sell Products unless hardware components
for such Products are purchased from OSI at a price (the "Hardware
Price") equal to 154% of OSI's cost.  Imagis shall not enter into any
license of the right to sell Products unless the licensee thereof agrees to
OSI's exclusivity rights hereunder.

          3.2.  
During the term of this Agreement, OSI shall have the exclusive right to sell
the Products in airport and transportation (including freight) security
installations in which OSI is the prime bidder.  However, Imagis shall be free
to sell the Products in retrofit upgrades of existing installations.

          3.3.  
During the term of this Agreement, Imagis shall not provide integrated facial
recognition/metal detector gate systems to any entity other than OSI without
OSI's prior written consent.  OSI will not work with any other image recognition
supplier other than Imagis without Imagis' prior written consent.  However, if a
customer notifies either OSI or Imagis that either OSI or Imagis' portion of the
Products does not comply with the customer's specifications, the exclusivities
provided hereby shall not prevent alternative sourcing for the non-complying
portions.

4     PRODUCT MANUFACTURING, MARKETING AND
DISTRIBUTION.

          4.1.  
Manufacturing.

            
      4.1.1.     Promptly
upon final development of any Products, and upon any reasonable request by OSI,
Imagis shall provide OSI with all designs, plans, specifications, documentation,
and other information necessary to manufacture the Products.

             
      4.1.2.     OSI shall
manufacture the Products at a standard of quality at least equal to its quality
standards for its other products, and in such quantities as are necessary and
appropriate to meet projected market demand in a timely manner.

          4.2.  
Product Markings.  In addition to OSI's customary markings for its
products, OSI shall include on the Products, at Imagis' reasonable request, an
Imagis marking of like size and conspicuousness.

          4.3.  
Marketing.  OSI and Imagis shall jointly develop and maintain a marketing
plan for the Products, including identification and development of marketing
channels, materials, descriptions, sales projections, and like matters.

          4.4.  
Sales and Distribution.  OSI shall use reasonable commercial diligence to
maximize aggregate long-term worldwide revenues from sales of the Products.
Imagis shall cooperate in such sales and distribution efforts.

          4.5.  
Service.  Imagis and OSI shall cooperate in providing reasonable
after-market service and support to buyers of the Products, including
availability and pricing of advice and replacement parts.  OSI shall be
responsible for service and support for hardware portions of the Products, and
Imagis shall be responsible for service and support for software portions of the
Products.

5     ROYALTIES.  Upon Sales of the Products,
OSI shall pay Imagis a royalty on such sale, on the terms set forth in this
Section 5.

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          5.1.  
Rate.  

            
      5.1.1.     The list
price for the facial recognition feature/upgrade will be agreed between the two
parties.   The amount of royalty payable by OSI to Imagis for each Product sold
shall be calculated by subtracting the Hardware Price for such Product from the
Net Price (as defined below), and multiplying the resulting difference by
0.7.

            
      5.1.2.    
 Definition of "Net Price".  Net Price shall be calculated as
receipts collected from the purchaser of a Product, less all of the
following:

a.     OSI sales commissions on Imagis added
value;

b.     Returns, credits and refunds;

c.     Third party royalties (other than those
provided hereunder); 

d.     Any non-recovered costs incurred in shipping
Imagis added value; and

e.     Taxes incurred in the sale other than income
taxes.


          5.2.  
Annual Support Agreements.  OSI will recommend to each customer that they
sign an Annual Support Agreement.  OSI will retain 100% of hardware support
revenues, while Imagis will retain 100% of support revenues on its added
value.

          5.3.  
Accounting.

            
      5.3.1.    
 Statements.  Seller shall provide Payee with royalty statements
within 30 days following the end of each calendar quarter in which Seller has
sales of Products.  Such statements shall set forth, in a reasonably detailed
manner, the Receipts during the quarter

            
      5.3.2.    
 Records and Audit.  At its principal offices, during the term of
this Agreement and for two years thereafter, Seller shall maintain books of
account concerning receipts generated from Seller's exploitation of Products.
Payee or Payee's representative may, during the term of this Agreement and for
two years thereafter, for the sole purpose of verifying royalty statements,
examine such books to the extent such books relate to such receipts.  Such
examinations may take place only during Seller's normal business hours, and only
with at least five business days' written notice, and Payee shall not undertake
such examinations more than once per statement period.  Payee shall have no
other right to examine Seller's books.

          5.4.  
Payments of Royalties.  Seller shall simultaneous with each royalty
statement pay any royalties payable to Payee pursuant to that royalty statement,
without reserves or withholdings of any kind.

6     OWNERSHIP.  

          6.1.  
Imagis shall retain ownership of all intellectual property that Imagis
contributes to the Products, and any improvements thereto.

          6.2.  
OSI shall retain ownership of all intellectual property that OSI contributes to
the Products, and any improvements thereto.

7     REPRESENTATIONS AND WARRANTIES.

          7.1.  
Imagis Representations and Warranties.  Imagis makes the following
representations, warranties and covenants:

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      7.1.1.     
Ownership of Intellectual Property.  Imagis has, and shall at all times
during the term of this Agreement have, the right to grant to OSI the
intellectual property licenses granted under this Agreement, and OSI's use of
such licenses will not infringe upon any third party's copyright, patent,
trademark or other intellectual property rights. 

            
      7.1.2.     
Authority.  Imagis has the required authority and capacity to enter into
this Agreement and all documents required to be entered into pursuant to this
Agreement.  All corporate and other actions required to be taken by Imagis to
authorize the execution, delivery and performance of this Agreement and all
transactions contemplated in this Agreement have been duly and effectively
taken.  Upon the full execution and delivery of this Agreement, this Agreement
will become a valid, binding and enforceable obligation upon Imagis.

            
      7.1.3.     
No Conflicts.  Imagis's execution and delivery of this Agreement will not
result in the breach of any term or provision of, or constitute a default under,
any agreement by which Imagis is bound, nor will such actions result in the
violation of any obligation, law, ordinance, regulation, order or decree
applicable to Imagis.

            
      7.1.4.     
Confidentiality.  Each of Imagis's employees and independent contractors
have signed, or shall have signed prior to being granted access to the Property,
a confidentiality agreement requiring the employee or independent contractor to
give the Property the same protections from disclosure to unauthorized parties
as given to Imagis's other intellectual property. 

          7.2.  
OSI's Representations and Warranties.  OSI makes the following
representations, warranties and covenants: 

            
      7.2.1.     
Ownership of Intellectual Property.  OSI has, and shall at all times
during the term of this Agreement have, the right to grant to Imagis the
intellectual property licenses granted under this Agreement, and Imagis' use of
such licenses will not infringe upon any third party's copyright, patent,
trademark or other intellectual property rights. 

            
      7.2.2.     
Authority.  OSI has the required authority and capacity to enter into
this Agreement and all documents required to be entered into pursuant to this
Agreement.  All corporate and other actions required to be taken by OSI to
authorize the execution, delivery and performance of this Agreement and all
transactions contemplated in this Agreement have been duly and effectively
taken.  Upon the full execution and delivery of this Agreement, this Agreement
will become a valid, binding and enforceable obligation upon OSI.

            
      7.2.3.     
No Conflicts.  OSI's execution and delivery of this Agreement will not
result in the breach of any term or provision of, or constitute a default under,
any agreement by which OSI is bound, nor will such actions result in the
violation of any obligation, law, ordinance, regulation, order or decree
applicable to OSI.

            
      7.2.4.     
Confidentiality.  Each party's employees and independent contractors have
signed, or shall have signed prior to being granted access to the confidential
intellectual property of the other party, a confidentiality agreement requiring
the employee or independent contractor to give the such confidential
intellectual property the same protections from disclosure to unauthorized
parties as given to the receiving party's other intellectual property. 

8     TERM AND TERMINATION.  

          8.1  
Term.  Unless earlier terminated, this Agreement shall expire on the
first anniversary of the date of first sale of Products. If this Agreement has
not been earlier terminated, the 


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Term will be automatically renewed for subsequent one (1) year periods,
unless either party notifies the other in writing of its decision to terminate
this Agreement, at least thirty (30) days prior to the expiration of the then
current Term.

          8.2  
Early Termination.  

            
     8.2.1     
If any covenant, representation or warranty contained in this Agreement is
breached or becomes untrue, and such breach or untruth remains uncured for 30
days after written notice from the non-breaching party to the breaching party,
the non-breaching party may terminate this Agreement.

            
      8.2.2     
If either party is dissolved, or is the subject of dissolution proceedings, or
is the subject of any proceedings under any bankruptcy laws, or consents to the
appointment of a trustee, custodian, receiver or liquidator, or makes an
assignment for the benefit of creditors, the other party may terminate this
Agreement.

          8.3  
Sell-Off.  Upon any termination of this Agreement prior to its
expiration, OSI shall have the right to: (a) sell off any inventory of the
Products or its components; (b) manufacture and sell a number of units of the
Products or components thereof to fill any orders standing, and complete any
projects existing, at the time of the notice of termination.

          8.4  
Survival.  The following sections shall survive any expiration or
termination of this Agreement: Sections 5 through 11.

9     CONFIDENTIALITY.  In the course of, and
in furtherance of this Agreement, the parties will exchange Confidential
Information, as defined below.  The party receiving such information (the
"Receiving Party") from the disclosing party (the "Disclosing
Party") shall maintain the confidentiality of the Confidential Information,
on the terms set forth below.

          9.1.  
Non-Disclosure.  Receiving Party shall not disclose to any person,
partnership corporation, or any other entity or concern whatsoever (except
Disclosing Party and its designees), any Confidential Information (as defined
below) that may come into Receiving Party's possession. 

          9.2.  
Confidential Information.  For the purposes of this Agreement,
"Confidential Information" means all information that can reasonably
be construed to be confidential and that relates to Disclosing Party's business,
any marketing or sales information, and any trade secrets or any other
information or documents of or relating to Disclosing Party, including (without
limitation) data, computer programs, manuals, formulae, specifications,
processes, methods, intangible rights and other similar items.
"Confidential Information" does not include information that at the
time of disclosure Disclosing Party has previously made available to the general
public.  

          9.3.  
Permitted Disclosures.  After giving prior notice to Disclosing Party,
Receiving Party may use and disclose Confidential Information:  (a) to the
extent necessary to assert any right or defend against any claim arising under
this Agreement or pertaining to Confidential Information and its use or
disclosure; (b) to the extent necessary to comply with any applicable statute,
constitution, treaty, rule, regulation, ordinance or order; or (c) if Receiving
Party receives a request to disclose any Confidential Information under the
terms of a subpoena, order, civil investigative demand or similar process issued
by a court of competent jurisdiction or by a governmental body or agency
(provided, however, that Receiving Party shall promptly provide written notice
to Disclosing Party of such pending disclosure).

          9.4.  
Return of Confidential Information.  On termination of this Agreement,
and upon Disclosing Party's request, Receiving Party shall promptly deliver to
Disclosing Party all materials containing Confidential Information, including
(without limitation) memoranda, notes, records, reports, magnetic or optical
media that Receiving Party may then have in its possession or control.

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10     INDEMNIFICATION.  Each party agrees to
indemnify and hold harmless the other from all claims, suits, judgments,
damages, costs and expenses (including costs of suit and reasonable attorneys'
fees) as a result of the indemnifying party's breach or any third party's
allegation of the indemnifying party's breach of any of its representations,
warranties and covenants made in this Agreement.

11     MISCELLANEOUS.

          11.1.  
Amendments and Modifications.  No amendment or modification of this
Agreement shall be valid unless made in a writing executed by both parties.

          11.2.  
Applicable Law.  California law, without regard to conflicts or choice of
laws principles, shall govern the interpretation of this Agreement.

          11.3.  
Arbitration.  All disputes arising from this Agreement shall be submitted
to binding arbitration to take place in Los Angeles County, California under the
rules of the American Arbitration Association.

          11.4.  
Binding Effect.  All provisions of this Agreement shall inure to the
benefit of, and be binding upon, the parties and their successors-in-interest,
permitted assigns, administrators, and devisees.

          11.5.  
Counterparts.  This Agreement may be executed in counterparts.

          11.6.  
Descriptive Headings.  Descriptive headings in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.

          11.7.  
Entire Agreement.  This Agreement constitutes the entire agreement among
the parties with respect to the subject matter herein.

          11.8.  
Equitable Remedies.  The parties agree that the subject of certain
provisions of this Agreement are of a special, unique, unusual and extraordinary
nature, giving them peculiar value, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law, and that breach of any
such provision will cause the non-breaching party irreparable injury and damage.
The parties therefore agree that the non-breaching party shall be entitled to
injunctive and other equitable relief to cure or prevent the breach of the
provisions of this Agreement.  Resort to such equitable relief shall not,
however, be construed to constitute a waiver by the non-breaching party of any
of the other rights or remedies the non-breaching party may have against the
breaching party for damages or otherwise.  

          11.9.  
Further Documents.  Each party shall execute and deliver all such further
instruments, documents and papers, and shall perform any and all acts, necessary
to give full force and effect to all the terms and provisions of this
Agreement.

          11.10.  
Interpretation.  No uncertainty or ambiguity herein shall be construed or
resolved against any party, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been negotiated by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties.

          11.11.  
Legal Action.  Should any litigation or arbitration occur between the
parties respecting or arising out of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and other costs in
connection with such litigation, including reasonable attorneys' fees incurred
after a judgment has been rendered by a court of competent jurisdiction.  Any
judgment shall include an attorneys' fees clause that shall entitle the judgment
creditor to recover attorneys' fees 

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incurred to enforce a judgment on this
Agreement, which attorneys' fees shall be an element of post-judgment costs; the
parties agree that this attorneys' fee provision shall not merge into any
judgment.

          11.12.  
LIMITATION ON LIABILITY; REMEDIES. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OF
ANY KIND OR NATURE, INCLUDING, WITHOUT LIMITATION, THE BREACH OF THIS AGREEMENT
OR ANY TERMINATION OF THIS AGREEMENT, WHETHER SUCH LIABILITY IS ASSERTED ON THE
BASIS OF CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY), OR
OTHERWISE, EVEN IF EITHER PARTY HAS WARNED OR BEEN WARNED OF THE POSSIBILITY OF
ANY SUCH LOSS OR DAMAGE.

          11.13.  
Limitations on Waiver.  No waiver by any party of any term or condition
of this Agreement shall be construed to be a waiver of such term or condition in
the future, or of any preceding or subsequent breach of the same or any other
term or condition of this or any other agreement, nor shall any such waiver be
binding unless written.  All remedies, rights, undertakings, obligations and
agreements contained in this Agreement shall be cumulative, and none of them
shall be in limitation of any other remedy, right, undertaking, obligation or
agreement of any party to this Agreement.

          11.14.  
No Assignments.  Neither party may assign this Agreement, or any part of
this Agreement, without the other party's prior written consent.  For the
purposes of this Agreement, "assignment" shall be defined to include,
without limitation, any transaction or series of transactions by which parties
holding a majority of the outstanding voting securities of the assigning party
prior to such transaction or series of transactions no longer hold a majority of
the outstanding voting securities of the assigning party subsequent to the
transaction or series of transactions.  

          11.15.  
No Partnership or Joint Venture.  This Agreement does not create a
partnership or joint venture between the parties, and shall not be construed as
doing so.  This Agreement does not create any right by either party to bind the
other party.

          11.16.  
No Third Party Beneficiaries.  No person other than the parties hereto
and their permitted successors and assigns shall receive any benefits of this
Agreement.

          11.17.  
Notices.  All notices, statements and other documents that any party is
required or desires to give to any other party shall be given in writing and
shall be served in person, by express mail, by certified mail, by overnight
delivery, or by facsimile at the respective addresses set forth below, or at
such other addresses as may be designated in writing by such party.

If to Imagis:

Imagis Technologies Inc.

ATTN:  President & CEO

1630-1075 W. Georgia St.

Vancouver  BC

V6E 3C9

Facsimile 604- 684-9314


If to OSI:

OSI Systems, Inc.

ATTN:  Chief Executive Officer

12525 Chadron Avenue

Hawthorne, CA  90250

Facsimile (310) 978-3898


     Delivery shall be deemed conclusively made (i)
at the time of service, if personally served, (ii) five days after deposit in
the United States mail, properly addressed and postage 

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prepaid, if delivered by express mail or certified mail, (iii) upon
confirmation of delivery by the private overnight deliverer, if served by
overnight delivery, and (iv) at the time of electronic transmission (as
confirmed in writing), provided a copy is mailed within 24 hours after such
transmission.

          11.18.  
Severability.  Any provision of this Agreement that is found by a court
of competent jurisdiction to be void, invalid or unenforceable shall be
curtailed and limited only to the extent necessary to bring such provision
within the requirements of the law, and such finding and curtailment shall not
affect the validity or enforceability of any other provision of this
Agreement.

     In witness whereof, the parties have executed
this Agreement as of the date first above written. 

"Imagis"

Imagis Technologies Inc.



By:     /s/ Iain Drummond

"OSI"

OSI Systems, Inc.



By:     /s/ Deepak Chopra


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