Document:

CONSULTING SVC AGREEMENT DATED MAY 1, 2000

 

 EXHIBIT 10.4

 

CONSULTING SERVICES AGREEMENT FOR PROFESSIONAL/ADMINISTRATIVE SERVICES

 

        This Consulting Services Agreement (“Agreement”) is made and entered into as of the 1st day of May, 2000 (the “
Effective Date”), by and between Peritus Software Services, Inc. (“Peritus”), a Massachusetts corporation, with its principal place of business at 112 Turnpike Road, Suite 111, Westborough, MA 01581 and Rocket Software, Inc. (“
Client”), a Massachusetts corporation, with its principal place of business at Two Apple Hill Drive, Natick, Massachusetts 01760.

 

        Peritus and Client agree that the following terms and conditions will apply to the services provided by Peritus for Client as
specified in Statement of Work No. 1, attached hereto and incorporated herein by reference, and any future Statement of Work which may be agreed to in writing between the parties (collectively, the “Services”).

 

        1.    Term and Termination.    The Agreement shall commence as of the Effective
Date and shall remain in effect unless terminated in accordance with the provisions of this paragraph. Either party may terminate this Agreement or any Statement or Work attached hereto for any reason upon written notice to the other party. Peritus’
performance of Services hereunder shall continue until the effective date of termination and Client shall be obligated to pay Peritus for all Services performed through such termination date. Upon the expiration or termination of this Agreement or any
Statement or Work hereunder, each party shall promptly return to the other all data, material, and other properties of the other party which relate to the Agreement or such expired or terminated Statement(s) of Work, as the case may be.

 

        2.    Site of Services.    The Services provided under this Agreement shall be
performed either at the offices of Peritus in Westborough, MA or at the Client’s site designated in the applicable Statement of Work, unless otherwise agreed upon in writing by the parties.

 

        3.    Fees and Payment Terms.    In consideration of the Services rendered by
Peritus hereunder, Client will pay to Peritus a fee(s) as set forth in the applicable Statement of Work. Such fee(s) will be invoiced upon completion of the Services (or on a monthly basis if Services are being performed for longer than a month) and shall
be due upon receipt of such invoice(s).

 

        4.    Expenses.    Any out-of-pocket expenses incurred by Peritus shall be paid
by Client promptly after receipt of an invoice therefor. Out-of-pocket expenses shall mean any reasonable and documented expenses incurred in connection with the performance of the Services under this Agreement such as travel, meals and lodging expenses,
in the event the Services are to be performed at a location other than the offices of Peritus. All travel by Peritus staff shall be in accordance with Peritus’ standard policies governing travel and business expenses.

 

        5.    Confidentiality.    Peritus agrees to treat any information received from
Client during the performance of Services hereunder which has been identified in writing as confidential or proprietary in the same manner as it would treat its own confidential or proprietary information of a similar nature and shall not disclose such
information except to those employees or agents with a need to know. The foregoing shall not apply to information which (i) is publicly known through no breach of the confidentiality provisions of this Agreement by Peritus, (ii) was previously known by or
in the possession of Peritus without use of confidential or proprietary information obtained though the performance of Services under this Agreement, (iii) is independently developed by Peritus without use of confidential or proprietary information
obtained through the performance of Services under this Agreement, (iv) is approved for release by written authorization by Client, or (v) is released by Peritus pursuant to a good faith adherence to a court order. The confidentiality obligations imposed
herein shall extend for a period of three (3) years following disclosure of the confidential and proprietary information to Peritus.

 

        6.    Ownership Rights.    Client shall retain all right, title or interest in
and to any materials furnished by Client to Peritus under this Agreement.

 

         Except as set forth in the previous paragraph, Peritus retains all right, title and interest in and to any software, methods,
techniques, systems, data and materials used or developed by it in the performance of the Services. Peritus shall retain all rights to and be entitled to use, disclose, and otherwise employ any and all ideas, concepts, know-how, knowledge bases, methods,
techniques, processes, skills, and adaptations, including generalized features of sequence, structure, and organization, in conducting its business, providing the Services or pertaining to its software or methodologies. Nothing in this Agreement shall be
deemed to implicitly or explicitly grant any license or other right to Client to use, possess, copy or own any of Peritus’ software, products, processes, techniques, methodologies, knowledge bases or intellectual property. This Agreement shall not
limit Peritus’ ability to market, develop and provide functionally comparable deliverables, work products or services to others based on the same general concepts, techniques and routines as are used hereunder. This Agreement shall not preclude
Peritus from developing or providing deliverables, work products or services which are competitive to deliverables, work products or services which might be provided to Client, irrespective of their similarity.

 

        7.    Limitation of Liability.    Peritus’ liability for any and all
claims of damages arising out of this Agreement shall be limited to direct damages and shall not exceed the amount paid to Peritus for the performance of Services hereunder.

 

        IN NO EVENT SHALL PERITUS BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING ANY DAMAGES RESULTING FROM THE
LOSS OF USE, LOSS OF DATA, LOSS OF PROFITS, OR LOSS OF BUSINESS, EVEN IF PERITUS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

        8.    Warranty of Performance.    Peritus warrants that the Services performed
under this Agreement will be performed in a good and workmanlike manner, subject to the supervision and instructions provided by Client, and that the Services will be performed substantially as specified under this Agreement.

 

        THE EXPRESS WARRANTY SET FORTH IN THIS SECTION 8 IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

        9.    Non-Solicitation.    The parties agree that during the performance of
Services by Peritus hereunder and for a period of one year thereafter, neither party shall directly or indirectly solicit, hire or otherwise retain as an employee or independent contractor, a staff member of the other party or a former staff member who
was assigned to such Services, without the prior written consent of such other party.

 

        10.    Independent Contractors.    The relationship between Peritus and Client
is that of independent contractors, and nothing in this Agreement shall be construed to create a relationship of employer and employee, agency, joint venturers or partners between the parties. Neither party shall have the right, power or authority to
enter into agreements of any kind on behalf of the other party, or to create any obligation or responsibility, express or implied, on behalf of or in the name of the other party.

 

        11.    Assignment.    This Agreement may not be assigned by either party,
whether by merger, consolidation, sale of assets or otherwise, without the prior written consent of the other party.

 

        12.    General.    The provisions of paragraphs 1, 5, 6, 7, 8, 9 and 12 shall
survive any termination or expiration of this Agreement. This Agreement and any fully executed Statement of Work attached hereto set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersede any and
all oral and prior written agreements, understandings and quotations relating thereto. No alteration, modification, or cancellation of any of the provisions of this Agreement shall be binding unless made in writing and signed by officers of the parties.
Printed terms and conditions on Client’s purchase order(s) shall not apply to the Services performed hereunder. This Agreement will be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of
Massachusetts, U.S.A.

 

         The Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted
assigns and legal representatives.

 

	 Client: Rocket Software, Inc.

 

By

(Authorized Signature)

 

Name:

 

Title:

 

Date:

 

		 Peritus Software Services, Inc.

 

By:

(Authorized Signature)

 

Name:

 

Title:

 

Date:<PAGE>

                                                                   EXHIBIT 10.35

                                    CONTRACT NO. 359820

                                    FEDERAL ID. NO. 04-3320515

                                   CONTRACT

                         COMMONWEALTH OF PENNSYLVANIA
                         DEPARTMENT OF TRANSPORTATION
                                      AND
                              Viisage Technology

This Contract, made this 19th day of June, 2000, at Harrisburg, Pennsylvania,
and governed by the laws of Commonwealth of Pennsylvania, between the
Commonwealth of Pennsylvania, acting through the Department of Transportation,
hereinafter referred to as the COMMONWEALTH,

                                      AND

Viisage Technology located at 30 Porter Road, Littleton, Massachusetts 01460,
and acting through its proper officials, hereinafter referred to as the
CONTRACTOR, covers the conduct of work on Project Number 98-20, "PennDOT Digital
Driver Licensing System".

Both the COMMONWEALTH and the CONTRACTOR, when used together, are hereinafter
referred to as the PARTIES.
<PAGE>

                                  WITNESSETH:

1.   GENERAL

     The CONTRACTOR will conduct work in accordance with the Project
     Requirements referred to as The Request for Proposals titled, "PennDOT
     Digital Driver Licensing System", dated August 16, 1999, Addendum #1, Dated
     September 28, 1999 and Addendum #2, "Renewed Solicitation", dated October
     29, 1999 and the Preproposal Presentation and/or Questions and Answers,
     dated September 13, 1999, and Response to Additional Questions, dated
     September 22, 1999, the Contractors Proposal titled, "PennDOT Digital
     Driver Licensing System", dated November 18, 1999, the Demonstration
     Materials titled, "Demonstration of the proposed PennDOT Digital Driver
     Licensing System, dated January 22, 2000 and the Contractor's Proposal
     Addendum titled, "PennDOT RFP 98-20 Questions and Viisage's Response -Final
     Rev. 1", dated May 8, 2000, all hereby incorporated by reference as though
     set forth in full herein.

     The CONTRACTOR agrees that the services will be performed both during the
     unpaid implementation and set up phases, that will begin with issuance of
     the notice to proceed for this Contract by the COMMONWEALTH and are
     anticipated to be complete within twelve (12) months of the notice to
     proceed, and continue through the paid card issuance period that will be
     sixty (60) months beginning at the date of the issuance of the first paid
     driver license/identification card.

     The COMMONWEALTH's Contracting Officer may renew this contract by mutual
     agreement of the COMMONWEALTH and the CONTRACTOR, for a period of up to
     one-hundred and twenty (120) months incrementally in two (2) sixty (60)
     month periods by written notification provided to the CONTRACTOR by the
     COMMONWEALTH's Contracting Officer.

     No Federal funding is used to support the work governed by this Contract
     and all references to the Federal Representative in this Contract do not
     apply.

2.   INCORPORATION BY REFERENCE

     The following designated Contract provisions, and subsequent amendments,
     are hereby incorporated by reference as though set forth in full herein:
     the Contractor Responsibility Provisions and Offset Provisions, dated April
     16, 1999; Contractor Integrity Provisions, dated December 20, 1991; the
     Provisions Concerning the Americans with Disabilities Act, dated February
     3, 1993; Travel Policies, dated December 21, 1999; the Commonwealth
     Nondiscrimination / Sexual Harassment Clause, dated June 30, 1999; and, if
     federally funded, the Federal Nondiscrimination and Equal Employment
     Opportunity Clauses, dated January 1976; and the Audit Clause, dated
     September 8, 1997.

                                     Page 2
<PAGE>

3.   DELIVERABLES

     The CONTRACTOR will provide the COMMONWEALTH with all products and services
     stated in the Proposal, as may be modified by the Proposal Addendum, if
     applicable, and as specified by the Project Requirements.

4.   SUBCONTRACTS

     Any subcontract must first be approved by the COMMONWEALTH. Subcontracts
     shall include the following provisions from this Contract in their terms
     and conditions: Section 2, Incorporation by Reference; Section 6, Review
     Rights; Section 8, Travel, if applicable; Section 9, Overhead, if
     applicable; Section 16, Federal Assurance, if federally funded; Section 23,
     Beneficial Interests; Section 25, Accounting Records, and Section 26, Year
     2000 Compliance.

     Any subcontract must also contain a provision that the subcontract may be
     terminated by the CONTRACTOR if the CONTRACTOR's contract is terminated by
     the COMMONWEALTH for any reason. Additionally, every subcontract must
     include a statement that the CONTRACTOR is required to make payment to the
     subcontractor within 10 (ten) calendar days from receipt of payment from
     the COMMONWEALTH for the subcontractor's work.

     All contracts containing SERB participation must also include a provision
     requiring the contractor to meet and maintain those commitments made to
     SERBs at the time of submittal or contract negotiation, unless a change in
     the commitment is approved by the contracting Commonwealth agency upon
     recommendation by the BCABD. All contracts containing SERB participation
     must include a provision requiring SERB subcontractors and SERBs in a joint
     venture to incur at least 50% of the cost of the subcontract or SERB
     portion of the joint venture, not including materials.

     Commitments to MBE and WBE firms made at the time of bidding must be
     maintained throughout the term of the contract. Any proposed change must be
     submitted to BCABD, which will make a recommendation as to a course of
     action to the contracting officer.

     If your firm has been awarded the resultant contract, the following
     information must be submitted to the Bureau of Contract Administration and
     Business Development (BCABD):

     The Prime Contractor's Quarterly Utilization Report (or similar type
     document containing the same information) must be completed and submitted
     to the contracting officer of the agency that awarded the contract and the
     BCABD within ten (10) working days at the end of each quarter the contract
     is in force. If there was no activity, the form must also be completed,
     stating "No activity in this quarter." This information will be used to
     determine the actual dollar amount paid to SERB Sub-contractors, Suppliers
     and Joint Ventures. Also, it is a record of compliance to the commitment
     your firm made and for which it received SERB points.

                                     Page 3
<PAGE>

5.   OWNERSHIP RIGHTS

     The PARTIES agree to the following ownership rights:

     The PARTIES understand and agree that the work performed under this
     Contract shall be considered a work made for hire by an independent
     contractor within the meaning of the Copyright Law Revision Act of 1976, 17
     U.S.C. Sections 101 and 201 (b). In such event, the parties agree that all
     documents, designs, computer programs, data, computer documentation and
     other tangible materials authored and prepared by CONTRACTOR for
     COMMONWEALTH as the work product covered in the scope of work are the sole
     and exclusive property of COMMONWEALTH free and clear from all claims of
     any nature relating to contributions and other efforts. CONTRACTOR
     understands and agrees that COMMONWEALTH will thereby have the right to
     register all copyrights in its own name as author in the United States and
     in foreign countries.

     In the event such works do not fall within the specifically enumerated
     works that constitute works made for hire under the United States copyright
     laws, CONTRACTOR hereby agrees to expressly assign all copyrights,
     proprietary rights, trade secrets, and other right, title and interest in
     and to such works to COMMONWEALTH.

     The COMMONWEALTH shall retain all ownership rights to any software or
     modifications thereof and any associated documentation that is designed
     developed or installed. The COMMONWEALTH shall also retain ownership rights
     to all working papers, files and other documentation relating to this
     Contract; and upon completion or termination of this Contract, all working
     papers, files and other documentation shall immediately be delivered by the
     CONTRACTOR to the COMMONWEALTH.

     If, in the conduct of work pursuant to this Contract, the CONTRACTOR
     produces patentable items, patents, processes, inventions or discoveries,
     the COMMONWEALTH shall have royalty free use of all such patentable items,
     patents, processes, inventions or discoveries.

     Notwithstanding the preceding language, The COMMONWEALTH agrees that it has
     no ownership rights to the CONTRACTOR's proprietary materials or
     methodologies brought by the CONTRACTOR to the project ("CONTRACTOR
     Property"). Any enhancements made to the CONTRACTOR Property using
     COMMOMWEALTH funds ("Enhancements") shall become the property of the
     COMMONWEALTH. The COMMONWEALTH agrees to provide the CONTRACTOR with a non-
     exclusive, royalty-free license to the Enhancements to run concurrent with
     the terms of this Contract. It is specifically understood by the CONTRACTOR
     that the COMMONWEALTH shall have unrestricted access to all images produced
     with the CONTRACTOR's materials under this Contract.

                                     Page 4
<PAGE>

     Unless otherwise required by law, each party agrees to keep the other
     party's proprietary materials and methodologies confidential and not to
     disclose any proprietary materials and methodologies ("Confidential
     Information") to any third party. The parties also agree to take reasonable
     precautions to protect Confidential Information from unauthorized
     disclosure. Either party may disclose Confidential Information to its
     employees or agents when disclosure is necessary to further the purposes of
     this Contract. Confidential Information shall not include any information
     in the public domain through no fault of either party nor information
     provided by a third party legally authorized to make a disclosure.

     If either party is legally compelled to disclose Confidential Information,
     the legally-compelled party agrees to provide the other party with prompt
     written notice of the compulsion to provide the other party with an
     opportunity (if available) to contest the propriety of the order or
     subpoena, or to arrange legally appropriate safeguards against future
     disclosure of Confidential Information. The CONTRACTOR acknowledges that
     the Proposal and this Contract, including any modifications, are considered
     public information under the Pennsylvania Right-to-Know Law, Act of June
     21, 1957, P.L. 390, as amended (65 P.S. (S)(S)66.1-.4), and no advance
     notice shall be necessary in connection with any requests for disclosure of
     this information.

6.   REVIEW RIGHTS

     The COMMONWEALTH and the Federal Representative, if appropriate, have the
     right to review and inspect all project activities at any time. If any
     CONTRACTOR personnel assigned to the project change from those specified in
     the Proposal, the CONTRACTOR shall notify the COMMONWEALTH, in writing, of
     such changes. All new project personnel must be approved in writing by the
     COMMONWEALTH.

7.   PAYMENT

     The COMMONWEALTH will pay the CONTRACTOR during the existence of this
     Contract, for work completed in accordance with the terms and conditions of
     the Contract, at the rates shown in the attached cost proposal, submitted
     with the technical proposal, dated November 18, 1999, for the time period
     set forth in Section 1 of this Contract. Payment shall be made in
     accordance with the conditions of the Project Requirements and Proposal.

     The CONTRACTOR may assign its payment rights under this Contract when
     necessary to obtain project financing, provided that the CONTRACTOR gives
     the COMMONWEALTH prior written notice of any such assignment. No assignment
     of payment shall relieve the CONTRACTOR of its performance obligations
     under the Contract.

8.   TRAVEL

     If the COMMONWEALTH reimburses for travel expenses, the COMMONWEALTH will
     approve travel expenses only for work actually involved in the project
     covered by this Contract. All travel expenses must comply with the Travel
     Policies, as amended. Travel

                                     Page 5
<PAGE>

     expenses not specified in the Project Requirements must have prior written
     approval of the COMMONWEALTH to be eligible for reimbursement.

9.   OVERHEAD (If Applicable)

     The CONTRACTOR's final overhead rate will be based on the actual overhead
     costs verified by an audit performed by an approved agency of the
     COMMONWEALTH upon completion of this Contract or at such time that this
     Contract is terminated.

10.  NOTICE OF BREACH; OPPORTUNITY TO CURE

     The COMMONWEALTH shall, prior to invoking the remedies available for
     default provided in paragraph 11 or the termination provisions provided in
     paragraph 13, provide CONTRACTOR with notice of any alleged breach under
     the Contract and allow CONTRACTOR a commercially reasonable opportunity to
     cure such breach before the COMMONWEALTH is entitled to declare CONTRACTOR
     in default and terminate the Contract.

11.  DEFAULT

     a.   The COMMONWEALTH may, subject to the provisions of Paragraph 12, Force
          Majeure, and in addition to its other rights under the Contract,
          declare the CONTRACTOR in default by written notice thereof to the
          CONTRACTOR, and terminate (as provided in Paragraph 13, Termination
          Provisions) the whole or any part of this Contract for any of the
          following reasons:

          1)   Failure to begin work within the time specified in the Contract
               or as otherwise specified;

          2)   Failure to perform the work with sufficient labor, equipment, or
               material to insure the completion of the specified work in
               accordance with the Contract terms;

          3)   Unsatisfactory performance of the work;

          4)   Failure or refusal to remove material, or remove and replace any
               work rejected as defective or unsatisfactory;

          5)   Discontinuance of work without approval;

          6)   Failure to resume work, which has been discontinued, within a
               reasonable time after notice to do so;

          7)   Insolvency or bankruptcy;

          8)   Assignment made for the benefit of creditors;

          9)   Failure or refusal within 10 days after written notice by the
               Contracting Officer, to make payment or show cause why payment
               should not be made, of any amounts due for materials furnished,
               labor supplied or performed, for equipment rentals, or for
               utility services rendered;

                                     Page 6
<PAGE>

          10)  Failure to protect, to repair, or to make good any damage or
               injury to property; or

          11)  Breach of any provision of this Contract.

     b.   In the event that the COMMONWEALTH terminates this Contract in whole
          or in part as provided in Subparagraph a. above, the COMMONWEALTH may
          procure, upon such terms and in such manner as it determines, services
          similar or identical to those so terminated, and the CONTRACTOR shall
          be liable to the COMMONWEALTH for any reasonable excess costs for such
          similar or identical services included within the terminated part of
          the Contract.

     c.   If the Contract is terminated as provided in Subparagraph a. above,
          the COMMONWEALTH, in addition to any other rights provided in this
          paragraph, may require the CONTRACTOR to transfer title and deliver
          immediately to the COMMONWEALTH in the manner and to the extent
          directed by the Issuing Office, such partially completed work,
          including, where applicable, reports, working papers and other
          documentation, as the CONTRACTOR has specifically produced or
          specifically acquired for the performance of such part of the Contract
          as has been terminated. Except as provided below, payment for
          completed work accepted by the COMMONWEALTH shall be at the Contract
          price. Except as provided below, payment for partially completed work
          including, where applicable, reports and working papers, delivered to
          and accepted by the COMMONWEALTH shall be in an amount agreed upon by
          the CONTRACTOR and Contracting Officer. The COMMONWEALTH may withhold
          from amounts otherwise due the CONTRACTOR for such completed or
          partially completed works, such sum as the Contracting Officer
          determines to be necessary to protect the COMMONWEALTH against loss.

     d.   The rights and remedies of the COMMONWEALTH provided in this paragraph
          shall not be exclusive and are in addition to any other rights and
          remedies provided by law or under this Contract.

     e.   The COMMONWEALTH's failure to exercise any rights or remedies provided
          in this paragraph shall not be construed to be a waiver by the
          COMMONWEALTH of its rights and remedies in regard to the event of
          default or any succeeding event of default.

     f.   Following exhaustion of the CONTRACTOR's administrative remedies as
          set forth in Paragraph 14, the CONTRACTOR's exclusive remedy shall be
          to seek damages in the Board of Claims.

12.  FORCE MAJEURE

     Neither party will incur any liability to the other if its performance of
     any obligation under this Contract is prevented or delayed by causes beyond
     its control and without the fault or negligence of either party. Causes
     beyond a party's control may include, but are not limited to, acts of God
     or war, changes in controlling law, regulations, orders or the requirements
     of any governmental entity, severe weather conditions, civil disorders,
     natural disasters, fire,

                                     Page 7
<PAGE>

     epidemics and quarantines, general strikes throughout the trade, and
     freight embargoes.

     The CONTRACTOR shall coordinate with the COMMONWEALTH in matters related to
     disaster recovery as stated in the RFP on page 46, second complete
     paragraph.

13.  TERMINATION PROVISIONS

     The COMMONWEALTH has the right to terminate this Contract for any of the
     following reasons. Termination shall be effective upon written notice to
     the CONTRACTOR.

     a.   TERMINATION FOR CONVENIENCE: The COMMONWEALTH shall have the right to
          terminate the Contract for its convenience if the COMMONWEALTH
          determines termination to be in its best interest. The CONTRACTOR
          shall be paid for work satisfactorily completed prior to the effective
          date of the termination, but in no event shall the CONTRACTOR be
          entitled to recover loss of profits.

     b.   NON-APPROPRIATION: The COMMONWEALTH's obligation to make payments
          during any Commonwealth fiscal year succeeding the current fiscal year
          shall be subject to availability and appropriation of funds. When
          funds (state and/or federal) are not appropriated or otherwise made
          available to support continuation of performance in a subsequent
          fiscal year period, the COMMONWEALTH shall have the right to terminate
          the Contract. The CONTRACTOR shall be reimbursed for the reasonable
          value of any nonrecurring costs incurred but not amortized in the
          price of the supplies or services delivered under this Contract. Such
          reimbursement shall not include loss of profit, loss of use of money,
          or administrative or overhead costs. The reimbursement amount may be
          paid from any appropriations available for that purpose.

     c.   TERMINATION FOR CAUSE: The COMMONWEALTH shall have the right to
          terminate the Contract for CONTRACTOR default under Paragraph 11,
          Default, upon written notice to the CONTRACTOR. The COMMONWEALTH shall
          also have the right, upon written notice to the CONTRACTOR, to
          terminate the Contract for other cause as specified in this contract
          or by law. If it is later determined that the COMMONWEALTH erred in
          terminating the Contract for cause, then, at the COMMONWEALTH's
          discretion, the Contract shall be deemed to have been terminated for
          convenience under the Subparagraph 13.a.

14.  CONTRACT CONTROVERSIES

     In the event of a controversy or claim arising from the Contract, the
     CONTRACTOR must, within six months after the cause of action accrues, file
     a written notice of controversy or claim with the Contracting Officer for a
     determination. The Contracting Officer shall send his/her written
     determination to the CONTRACTOR. The decision of the Contracting Officer
     shall be final and conclusive unless, within thirty (30) days after receipt
     of such written determination, the CONTRACTOR files a claim with the
     Commonwealth Board of Claims. Pending a final judicial resolution of a
     controversy or claim, the CONTRACTOR shall proceed diligently with the
     performance of the Contract in a manner consistent with the

                                     Page 8
<PAGE>

     interpretation of the Contracting Officer and the COMMONWEALTH shall
     compensate the CONTRACTOR pursuant to the terms of the Contract.

15.  AUDITS (only if federally funded)

     The CONTRACTOR shall comply with the terms of Office of Management and
     Budget Circular A-128 or Office of Management and Budget Circular A-133 as
     applicable, as outlined in the Audit Clause, made part of this Contract by
     reference.

16.  FEDERAL ASSURANCE (only if federally funded)

     CONTRACTOR shall not discriminate on the basis of race, color, national
     origin, or sex in the performance of this contract. CONTRACTOR shall carry
     out applicable requirements of 49 C.F.R. Part 26 in the award and
     administration of United States Department of Transportation-assisted
     contracts. Failure by CONTRACTOR to carry out these requirements is a
     material breach of this contract, which may result in the termination of
     this contract or such other remedy as the COMMONWEALTH deems appropriate.
     If CONTRACTOR is providing services or supplies for the COMMONWEALTH
     pursuant to this contract, it must include this assurance in each
     subcontract that it signs with a subcontractor. If CONTRACTOR is a grantee
     or other recipient of funds from the COMMONWEALTH, it must include this
     assurance in each contract into which it enters to carry out the project or
     activities being funded by this contract.

17.  LIABILITY CLAUSE

     The CONTRACTOR shall comply with all Federal, State and local laws
     applicable to its work, and shall procure at its expense all licenses and
     permits necessary for the fulfillment of its obligations.

     The CONTRACTOR agrees to indemnify, defend, and hold harmless the
     COMMONWEALTH, its officers, agents, and employees from any and all claims,
     suits, actions, judgments, and losses accruing or resulting to any and all
     contractors, subcontractors, materialmen, laborers, and any other person,
     firm, or corporation furnishing or supply work, services, materials, or
     supplies in connection with the performance of this Contract, and from any
     and all claims, losses, costs, demands, expenses, and actions accruing or
     resulting to any person, firm, or corporation for injury, death, or
     property damage caused by acts or omissions of the CONTRACTOR, its
     employees, or agents in the performance of this Contract and against any
     liability cost, and expense for violation of proprietary rights or rights
     of privacy arising out of the publication, translation, reproduction,
     delivery, performance, use or disposition of any data furnished under this
     Contract or based on any libelous or other unlawful matter contained in
     such data. The COMMONWEALTH agrees to notify the CONTRACTOR within a
     reasonable time of any written claims or demands against the COMMONWEALTH
     for which the CONTRACTOR is responsible under this Section.

     In limitation of the foregoing, CONTRACTOR shall have no liability under
     this Contract for

                                     Page 9
<PAGE>

     any claim:

     a.   Resulting from the use of the software in a manner for which it was
          not designed; or

     b.   Arising from any infringement occasioned by the COMMONWEALTH (or by
          third parties at the direction of the COMMONWEALTH) modifying,
          decompiling, disassembling, translating, reverse engineering,
          marketing, copying (except as expressly authorized herein), or
          distributing the software or making the software available to any
          person other than employees or agents of the COMMONWEALTH, without the
          CONTRACTOR'S prior written consent.

     The CONTRACTOR warrants that the hardware and software will perform
     substantially in accordance with the CONTRACTOR'S proposal. The warranty
     shall be void in the event of modification without the CONTRACTOR'S written
     consent, accident, neglect, misuse, failure to maintain a suitable
     operating environment, tampering, or any other event other than ordinary
     use. THE CONTRACTOR MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED
     INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABLILITY
     OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL THE CONTRACTOR BE
     LIABLE TO THE COMMONWEALTH FOR LOST PROFIT OR INDIRECT, INCIDENTAL, SPECIAL
     OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE
     PERFORMANCE OF THIS CONTRACT, EVEN IF THE CONTRACTOR HAS BEEN ADVISED OF
     THE POSSIBILITY OF SUCH DAMAGES.

18.  INSURANCE REQUIREMENTS

     The CONTRACTOR shall procure and maintain at its expense the following
     types of insurance issued by companies acceptable to the COMMONWEALTH and
     authorized to conduct such business under the laws of the COMMONWEALTH:

     a.   Worker's compensation insurance for all of the CONTRACTOR's employees
          and those of any subcontractor, engaged in work at the site of the
          project in accordance with the Worker's Compensation Act of 1915 and
          any supplements or amendments thereof.

     b.   Public liability and property damage insurance to protect the
          COMMONWEALTH, the CONTRACTOR, and any and all subcontractors from
          claims for damages for personal injury (including bodily injury),
          sickness or disease, accidental death, and damage to property,
          including loss of use resulting from any property damage, which may
          arise out of the services performed under this Contract, whether such
          performance be by the CONTRACTOR, by any subcontractor, or anyone
          directly or indirectly employed by either. The limits of such
          insurance shall be in an amount not less than two hundred fifty
          thousand ($250,000.00) dollars each person and one million
          ($1,000,000.00) dollars each occurrence, personal injury and property
          damage combined. Such policies shall be occurrence rather than claims-
          made policies and shall name the COMMONWEALTH of Pennsylvania as an
          additional

                                    Page 10
<PAGE>

          insured. The insurance shall not contain any endorsements or any other
          form designed to limit and restrict any action by the COMMONWEALTH, as
          an additional insured, against the insurance coverage in regard to
          work performed for the COMMONWEALTH.

19.  PERFORMANCE BOND

     The CONTRACTOR shall furnish a performance bond in the amount of 50% of the
     estimated yearly price to the COMMONWEALTH (1,300,000 times the per picture
     license/ID card price), within 10 working days of receipt of the notice to
     proceed. The cost of the bond shall be the responsibility of the
     CONTRACTOR. The bond must be issued by a corporate surety authorized to do
     business in the COMMONWEALTH, and made payable to the Commonwealth of
     Pennsylvania, Department of Transportation. The bond must be renewed for
     each year of the contract.

20.  MODIFICATIONS

     Any change to this Contract and cost and/or time as detailed in this
     Contract, the Proposal, the Proposal Addendum, if applicable, and the
     Project Requirements, other than the renewals permitted in Section 1, shall
     be in writing, approved by endorsement of appropriate CONTRACTOR and
     COMMONWEALTH representatives, and further approved by the Federal
     Representative, if federally funded. Upon such full execution, the letter
     shall become a supplement to this Contract.

21.  COMMONWEALTH CONTRACTING OFFICER

     The person designated to act for the COMMONWEALTH in administering and
     monitoring this Contract is designated as Catherine Swatek or her designee
     or replacement.

22.  RESOLUTION OF DISPUTES

     The CONTRACTOR agrees to be bound by the Act of May 20, 1937 (P.L. 728, No.
     193) as amended by the Act of October 5, 1978 (P.L. 1104, No. 260) and
     subsequent enactments, which provides, in substance, that the Board of
     Claims shall have jurisdiction of claims against the COMMONWEALTH arising
     from contracts and the power to order the interpleader or impleader of
     other parties, when necessary for a complete determination of any claim or
     counterclaim in which the COMMONWEALTH is a party.

23.  BENEFICIAL INTERESTS

     No member or delegate to the Congress of the United States shall be
     admitted to any share or part of this Contract or to any benefit arising
     therefrom.

                                    Page 11
<PAGE>

24.  CERTIFICATION OF CONTRACTOR (only if federally funded)

     The CONTRACTOR hereby certifies that the CONTRACTOR has not employed or
     retained for a commission, percentage, brokerage, contingent fee, or other
     consideration, any firm or person (other than a bona fide employee working
     solely for the CONTRACTOR) to solicit or secure this Contract.

     The CONTRACTOR further certifies that the CONTRACTOR has not agreed, as an
     express or implied condition for obtaining this Contract, to employ or
     retain the services of any firm or person in connection with carrying out
     this Contract. The CONTRACTOR has not paid, or agreed to pay, to any firm,
     organization, or person (other than a bona fide employee working solely for
     the CONTRACTOR) any fee, contribution, donation, or consideration of any
     kind for, or in connection with, procuring or carrying out this Contract.

25.  ACCOUNTING RECORDS

     The CONTRACTOR shall maintain accounting records and other verifiable
     evidence pertaining to the costs it incurs on this project. This CONTRACTOR
     shall also require its subcontractors to maintain accounting records and
     other verifiable evidence pertaining to the costs they incur on this
     project. These data will be made available for inspection by the
     COMMONWEALTH and the Federal Representative, if appropriate, or any
     authorized representative, at all reasonable times at the office of the
     CONTRACTOR and any subcontractor during the Contract period and for three
     years following the date of the final payment to the CONTRACTOR and copies
     thereof shall be furnished as requested.

26.  YEAR 2000 COMPLIANCE

     The CONTRACTOR represents and warrants that each hardware, software and
     firmware product delivered (or service performed) under the Field Purchase
     order, including enhancements, shall be able to accurately process, provide
     and/or receive date/time data (including, but not limited to, calculating,
     comparing and sequencing) from, into and between the 20th and 21st
     centuries and the year 1999 and 2000, including leap year calculations,
     when used in accordance with the product documentation provided by the
     CONTRACTOR, provided that all listed or unlisted products (e.g. hardware,
     software, firmware, etc.) used in combination with such product properly
     exchange date/time data with it.

     No hardware, software, firmware or service provided under the Field
     Purchase Order shall change the status of a hardware, software and firmware
     product from Year 2000 compliant to Year 2000 noncompliant. The CONTRACTOR
     must notify the COMMONWEALTH of any Year 2000 noncompliant hardware,
     software and firmware product located by the CONTRACTOR during the course
     of its performance of the Field Purchase Order.

     The CONTRACTOR shall not deliver any third-party hardware, software,
     firmware or service to the COMMONWEALTH which has not been represented and
     warranted in writing by the third-party manufacturer to be Year 2000
     compliant, as described above. The

                                    Page 12
<PAGE>

     CONTRACTOR shall pass through the third-party representation and warranty
     from the third-party manufacturer to the COMMONWEALTH.

     Any modifications or changes made by the COMMONWEALTH or any of its third
     parties to any hardware, software, or firmware pursuant to the Field
     Purchase order that alters Year 2000 compliance shall void the Year 2000
     warranty of the product.

     This Year 2000 Compliance representation and warranty shall be in effect
     until the later of December 31, 2002 or the termination of the Contract. In
     any event this representation and warranty shall survive termination of the
     Filed Purchase Order and shall run until December 31, 2002. In no event
     will the acceptance by the COMMONWEALTH of any hardware, software or
     firmware product or service delivered to the COMMONWEALTH, by or through
     the CONTRACTOR, or any payment by the COMMONWEALTH to the CONTRACTOR
     pursuant to the Field Purchase order limit the effectiveness or survival of
     this Year 2000 Compliance representation and warranty.

27.  NOTICES

     Any notices required or permitted by this Contract or given in connection
     herewith, shall be in writing and made by certified mail, overnight mail
     service, first-class mail, fax or personal delivery, postage paid to the
     following representatives of the PARTIES:

     As to the COMMONWEALTH:
     Catherine Swatek
     Bureau of Office Services
     Department of Transportation
     555 Walnut Street - 8/th/ floor
     Harrisburg, PA 17101-1900

     to the CONTRACTOR:
     Thomas J. Colatosti
     Viisage Technology
     30 Porter Road
     Littleton, Massachusetts 01460

     These notices include, but are not limited to, notice of termination,
     provision of the certificate of insurance, issues requiring resolution of a
     dispute, modifications to this Contract and any general issues concerning
     the interpretation of this Contract.

     Other points of contact which are necessary to complete the work conducted
     under the terms of this Contract and not concerning the items listed in the
     above paragraph, shall be identified by the PARTIES immediately after the
     notice to proceed given by the COMMONWEALTH.

                                    Page 13
<PAGE>

28.  ORDER OF PRECEDENCE

     If any conflicts or discrepancies should arise in the terms and conditions
     of this Contract, or the interpretation thereof, the order of precedence
     for resolution shall be: (a) the Contract; (b) the CONTRACTOR's Proposal
     Addendum dated May 8, 2000; if applicable, (c) the Preproposal Presentation
     and/or Questions and Answers dated September 13, 1999 and Responses to
     Additional Questions, dated September 22, 1999, (d) the Request for
     Proposals dated August 16, 1999, including Addendum #1 dated 9/28/99 and
     Addendum #2, dated October 29, 1999; (e) the Demonstration Materials
     titled, "Demonstration of the proposed PennDOT Digital Driver Licensing
     System, dated January 22, 2000 and (f) the CONTRACTOR'S Proposal dated
     November 18, 1999.

                                    Page 14

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