Document:

Exhibit 4.1

                              SETTLEMENT AGREEMENT

            THIS SETTLEMENT AGREEMENT (this "Agreement"), dated as of April 12,
2002, is by and among GYRODYNE COMPANY OF AMERICA, INC. (the "Company"), on the
one hand, and SPECIAL K CAPITAL OFFSHORE MASTER FUND (U.S. DOLLAR), L.P.
("Special K Fund"), K CAPITAL OFFSHORE MASTER FUND (U.S. DOLLAR), L.P. ("K
Capital Fund" and together with Special K Fund, the "K Capital Investment
Funds"), K CAPITAL PARTNERS, LLC ("K Capital"), HARWICH CAPITAL PARTNERS, LLC
("Harwich"), THOMAS KNOTT and ABNER KURTIN (each of Special K Fund, K Capital
Fund, K Capital, Harwich, Messrs. Knott and Kurtin, a "K Capital Party" and
collectively, the "K Capital Parties"), on the other hand.

                                    RECITALS

            WHEREAS, Special K Fund is the beneficial owner of 27,781 shares of
the common stock, par value $1.00 per share, of the Company (the "Common Stock")
and K Capital Fund is the beneficial owner of 181,569 shares of Common Stock;

            WHEREAS, K Capital is principally engaged in the business of
providing investment management services to the K Capital Investment Funds and
Harwich's principal business is serving as managing member of K Capital.

            WHEREAS, Messrs. Knott and Kurtin are managing members of Harwich;

            WHEREAS, K Capital has notified the Company that it intends to
nominate Richard S. Frary and Marvin L. Olshan for election to the Company's
board of directors at the Company's 2002 annual meeting of stockholders (the
"Annual Meeting") and has filed preliminary proxy materials with the Securities
and Exchange Commission to solicit proxies in support of its nominees;

            WHEREAS, the Company and the K Capital Parties have determined that
the interests of the Company and its shareholders would best be served by
avoiding the substantial expense and disruption that could be expected to result
from a proxy contest and any related litigation;

            NOW, THEREFORE, in consideration of the covenants and conditions set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
<PAGE>
                                    ARTICLE I
                           SALE AND PURCHASE OF SHARES
                           ---------------------------

            Section 1.01 Transfer of Shares. Subject to the terms and conditions
of this Agreement, at the closing referred to in Section 2.1 (the "Closing"),
the K Capital Investment Funds shall, sell, assign, transfer, convey and deliver
to the Company, and the Company shall purchase, acquire and accept from the K
Capital Investment Funds, 111,000 shares of Common Stock (the "Shares"), free
and clear of all Encumbrances.

            Section 1.02 Purchase Price. The purchase price per Share (the
"Purchase Price") shall be $20.25. The Purchase Price shall be paid by the
Company at the Closing by wire transfer of immediately available funds to
Citibank, New York, Account #388-90774.

                                   ARTICLE II
                                    CLOSING
                                    -------

            Section 2.01  Date of Closing. The Closing shall take place and may
be effected through delivery of documents via facsimile transmission on the date
that this Agreement is executed and delivered by all parties hereto. The date on
which the Closing is held is referred to in this Agreement as the "Closing
Date". At the Closing, the parties shall execute and deliver the documents
referred to in Sections 2.2 and 2.3.

            Section 2.02  Documents to Be Delivered by the K Capital Investment
Funds. At the Closing, the K Capital Investment Funds shall deliver, or cause to
be delivered, to the Company the following:

            (a) a Notice of Guaranteed Delivery in the form of Exhibit A hereto,
duly executed and completed.

            (b) a letter from the K Capital Investment Funds to the Company in
the form of Exhibit B hereto, duly executed by the K Capital Investment Funds
and dated as of the Closing Date.

            Section 2.03 Documents to Be Delivered by the Company. At the
Closing, the Company shall deliver to the K Capital Investment Funds the
following:

            (a) payment and evidence of the wire transfer referred to in Section
1.2.

                                  ARTICLE III
            REPRESENTATIONS AND WARRANTIES OF THE K CAPITAL PARTIES
            -------------------------------------------------------

            The K Capital Parties jointly and severally represent and warrant to
the Company that:

            Section 3.01 Legal Power; Organization; Qualification. Each K
Capital Party is a natural person or a legal entity of the type set forth
opposite such K Capital Party's name on Exhibit C hereto. Each K Capital Party
who is a natural person is competent and has all requisite power and authority
to execute and deliver this Agreement and to consummate the Transactions. Each K
Capital Party which is not a natural person has been duly organized, and is
validly existing and in good standing, under the laws of its jurisdiction of
formation, has all requisite power and authority to execute and deliver this
Agreement and to consummate the Transactions, and has taken all necessary
corporate or other action to authorize the execution, delivery and performance
of this Agreement.

            Section 3.02 Authorization of Agreement. This Agreement has been
duly executed and delivered by each K Capital Party and, assuming due and valid
authorization, execution and delivery by the Company, this Agreement constitutes
a legal, valid and binding obligation of each K Capital Party, enforceable
against such K Capital Party in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws of general application affecting enforcement
of creditors' rights generally and (ii) the availability of the remedy of
specific performance or injunctive or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
court before which any proceeding therefor may be brought.

            Section 3.03 No Conflicts. Neither the execution and delivery of
this Agreement nor the consummation by any K Capital Party of any of the
Transactions will result in a violation of, or a default under, or conflict
with, or require any consent, approval or notice under, any governing or
constitutional document (if such K Capital Party is not a natural person),
contract, trust, commitment, agreement, obligation, understanding, arrangement
or restriction of any kind to which any K Capital Party is a party or by which
any K Capital Party is bound or to which the Shares are subject. Consummation by
each K Capital Party of the Transactions will not violate, or require any
consent, approval or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to any K Capital Party or the
Shares.

            Section 3.04 Ownership of Shares. Special K Fund is the beneficial
owner of 27,781 shares of Common Stock and K Capital Fund is the beneficial
owner of 181,569 shares of Common Stock, in each case free and clear of any
Encumbrances. Such shares are all of the shares of Common Stock beneficially
owned by any of the K Capital Parties or any of their Affiliates. At the
Closing, the K Capital Investment Funds will transfer and deliver to the Company
good and marketable title to all the Shares, free and clear of any Encumbrances.

                                   ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
                 ---------------------------------------------

            The Company represents and warrants to the K Capital Parties as
follows:

            Section 4.01  Legal Power; Organization; Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has the full corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions, and has
taken all necessary corporate or other action to authorize the execution,
delivery and performance of this Agreement.

            Section 4.02 Authorization of Agreement. This Agreement has been
duly executed and delivered by the Company and, assuming due and valid
authorization, execution and delivery by each of the K Capital Parties, this
Agreement constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought.

            Section 4.03 No Conflicts. Neither the execution and delivery of
this Agreement nor the consummation by the Company of any of the Transactions
will result in a violation of, or a default under, or conflict with, or require
any consent, approval or notice under, any governing or constitutional document,
contract, trust, commitment, agreement, obligation, understanding, arrangement
or restriction of any kind to which the Company is a party or by which the
Company is bound. Consummation by the Company of the Transactions will not
violate, or require any consent, approval or notice under, any provision of any
judgment, order, decree, statute, law, rule or regulation applicable to the
Company.

                                   ARTICLE V
                             ADDITIONAL AGREEMENTS
                             ---------------------

            Section 5.01 Termination of Proxy Contest. The K Capital Parties
will not nominate Mr. Frary or Mr. Olshan for election as directors at the
Annual Meeting and hereby withdraw the letter dated January 11, 2002 notifying
the Company of the K Capital Parties' intention to so nominate Messrs. Frary and
Olshan. The K Capital Parties shall cease all solicitation efforts on behalf of
Messrs. Frary and Olshan, or any other Person in connection with the Annual
Meeting, and shall not vote any proxies which any K Capital Party has solicited
in connection with such efforts. Messrs. Frary and Olshan will not stand for
election at the Annual Meeting. The K Capital Parties hereby withdraw any and
all other demands, requests or notices that they have made to the Company, as
applicable, including (but not limited to) the demands set forth in the letters
from the K Capital Parties to the Company, dated August 10, 2001, August 17,
2001, August 23, 2001 and February 13, 2002 and any demands made by the K
Capital Parties pursuant to Section 624 of the New York Business Corporation
Law. The K Capital Parties shall promptly file an amendment to the K Capital
Parties' Schedule 13D to reflect the termination of the proxy contest and the
other provisions of this Agreement. Notwithstanding the K Capital Parties'
beneficial ownership of the Shares as of the record date previously set for the
Annual Meeting, the K Capital Parties hereby agree that they will not vote any
shares of Common Stock beneficially owned by them on any matter submitted to a
vote of the stockholders of the Company at any time.

            Section 5.02 Standstill. Each of the K Capital Parties jointly and
severally agrees that, without the prior written consent of the Board of
Directors of the Company expressed in a resolution adopted by a majority of the
directors, it shall not, and will cause each of its Affiliates not to, directly
or indirectly, by purchase or otherwise, during the period from the date hereof
through the tenth anniversary of the date of this Agreement:

            (a) acquire or agree, offer, seek or propose to acquire, or cause to
      be acquired, ownership (including, but not limited to, beneficial
      ownership as defined in Rule 13d-3 under the Securities Exchange Act of
      1934, as amended (the "Exchange Act")) of any of the assets or businesses
      of the Company or any securities of the Company (including, without
      limitation, any debt, equity or convertible securities) or any rights or
      options to acquire any such ownership from any Person;

            (b) make, or in any way participate in, directly or indirectly, any
      "solicitation" of "proxies" (as such terms are used in the proxy rules of
      the Securities and Exchange Commission) to vote, or written consents of
      shareholders with respect to, securities of the Company, or seek to
      advise, encourage or influence in any manner whatsoever any Person with
      respect to the voting of any securities of the Company;

            (c) form, join, or in any way participate in a "group" (within the
      meaning of Section 13d(3) of the Exchange Act) with respect to any voting
      securities of the Company;

            (d) arrange, or in any way participate in, any financing for the
      purchase of any securities or assets of the Company or securities
      convertible or exchangeable into any securities or assets of the Company;

            (e) otherwise act, whether alone or in concert with others, to seek
      to propose (with or without conditions) to the Company, or any of its
      stockholders, any merger, consolidation, business combination, tender or
      exchange offer, restructuring, recapitalization, liquidation or similar
      transaction to or with any other Person or otherwise act, whether alone or
      in concert with others, to seek to control, change or influence the
      management, shareholders, board of directors, or policies of the Company;

            (f) solicit, negotiate with, or provide any information to, any
      Person with respect to a merger, consolidation, business combination,
      tender or exchange offer, recapitalization, or liquidation of the Company
      or any other acquisition of the Company, any acquisition of securities or
      any of the assets of the Company or any other similar transaction;

            (g) call or participate in calling, any special meeting of the
      stockholders of the Company, or nominate any person for election as a
      director of the Company, or make any proposal to be considered and/or
      voted upon at any meeting of the stockholders of the Company, or induce or
      attempt to induce any other person to initiate any stockholder proposal or
      director nomination, or discuss or communicate with respect to any matter
      related to the business or affairs of the Company with the stockholders of
      the Company;

            (h) execute any written consent as shareholder with respect to the
      Company or its securities;

            (i) announce an intention to, or enter into any discussion,
      negotiations, arrangements or understandings with any third party with
      respect to, any of the foregoing matters;

            (j) disclose any intention, plan or arrangement inconsistent with
      any of the foregoing provisions;

            (k) advise, assist, encourage or participate with any other Person
      in connection with any action inconsistent with any of the foregoing
      provisions; or

            (l) publicly disclose any request to amend, waive or terminate any
      provision of this Agreement.

            Section 5.03  Mutual Releases. In consideration of the provisions of
this Agreement:

            (a) Each of the K Capital Parties (on behalf of itself, each of its
Affiliates and each of their respective successors and assigns) hereby releases
and forever discharges the Company and each and all of its directors, officers,
employees, subsidiaries, agents, representatives, legal and financial advisors
and Affiliates, and any heirs, executors, administrators, successors and assigns
of any such Persons, from all actions, causes of action, proceedings, suits,
claims, debts, damages, judgments, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, injuries, harms, remedies, extents, executions, liens,
liabilities and demands whatsoever, in law or equity, whether known or unknown,
which any of the K Capital Parties and their Affiliates, successors or assigns
ever had, now has or hereafter can, shall or may have, for, upon, or by reason
of any matter, cause or thing whatsoever from the beginning of the world to the
date of this Agreement, other than any claims arising out of or relating to the
negotiation, execution or performance of this Agreement.

            (b) The Company (on behalf of itself, each of its Affiliates and
each of their respective successors and assigns) hereby releases and forever
discharges each of the K Capital Parties and each and all of their respective
directors, officers, employees, subsidiaries, agents, managers, representatives,
legal and financial advisors and Affiliates, and any heirs, executors,
administrators, successors and assigns of any such Persons, from all actions,
causes of action, proceedings, suits, claims, debts, damages, judgments, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, injuries, harms,
remedies, extents, executions, liens, liabilities and demands whatsoever, in law
or equity, whether known or unknown, which the Company and its Affiliates ever
had, now has or hereafter can, shall or may have, for, upon, or by reason of any
matter, cause or thing whatsoever from the beginning of the world to the date of
this Agreement, other than any claims arising out of or relating to the
negotiation, execution or performance of this Agreement.

            (c) Nothing in this Agreement shall be deemed to limit, release or
waive the right of any party hereto to enforce any and all terms of this
Agreement.

            Section 5.04 Press Release. Upon execution of this Agreement, the
Company shall issue a press release substantially in the form attached hereto
with such changes as may be mutually agreed to by the Company and the
Representative (as such term is hereinafter defined). None of the parties hereto
will make any public statements (including any statements in any filing with the
Securities and Exchange Commission or any other governmental agency) that are
inconsistent with, or are otherwise contrary to, the statements in the press
release.

                                   ARTICLE VI
                                 INDEMNIFICATION
                                 ---------------

            Section 6.01 Indemnification by the Company. Subject to the other
terms and conditions of this Agreement, the Company shall indemnify, defend and
hold the K Capital Parties harmless from and against any and all Losses based
upon, arising out of or resulting from the Company's purchase of the Shares
pursuant to this Agreement (other than liability for taxes) or any other matter
relating to the negotiation, execution or performance of this Agreement or any
of the Transactions.

            Section 6.02  Indemnification Procedures.

            (a) Any K Capital Party seeking indemnification hereunder shall give
to the Company written notice of any claim or matter which gives rise to a claim
for indemnification hereunder, promptly upon becoming aware of a fact, condition
or event for which indemnification is provided under this Article VI, but in any
event within thirty (30) days after such K Capital Party has actual knowledge of
the facts constituting the basis for indemnification; provided, however, that
the failure of a K Capital Party to give such notice shall not relieve the
Company of its obligations under this Agreement, except to the extent that such
failure materially prejudices the rights of the Company.

            (b) The Company shall have the right to control and direct, through
counsel of its own choosing (which such counsel shall be reasonably acceptable
to the K Capital Party), the defense or settlement of any claim, action, suit or
proceeding brought by a person who is not a party or an Affiliate of a party to
this Agreement (a "Third Party Claim"). The K Capital Party may participate in
such defense, but in such case the expenses of the K Capital Party shall be paid
by the K Capital Party; provided, however, that the K Capital Party shall have
the right to employ, at the Company's expense, one counsel of its choice to
represent the K Capital Party, if the K Capital Party is advised by counsel
reasonably satisfactory to the Company that there exists any actual or potential
conflict of interest between the Company and the K Capital Party. The K Capital
Party shall provide the Company with access to its records and personnel
relating to any Third Party Claim during normal business hours and shall
otherwise cooperate fully with the Company in the defense or settlement thereof,
and the Company shall reimburse the K Capital Party for all its reasonable
out-of-pocket expenses in connection therewith. If the Company elects to direct
the defense of a Third Party Claim, then the K Capital Party shall not pay,
permit to be paid, or settle any part of any claim or demand arising from such
asserted liability, unless the Company consents in writing to such payment or
unless the Company, subject to the last sentence of this Section 6.2(b),
withdraws from the defense of such asserted liability, or unless a final
judgment from which no appeal may be taken by or on behalf of the Company is
entered against the K Capital Party for such liability. The Company will not
settle any claim without the consent of the K Capital Party (such consent not to
be unreasonably withheld). If the Company shall fail to defend, or if, after
commencing or undertaking any such defense, fails to prosecute or withdraws from
the defense of a Third Party Claim, then the K Capital Party shall have the
right to undertake the defense or settlement thereof, at the Company's expense.
If the K Capital Party assumes the defense of any such claim or proceeding
pursuant to this Section 6.2(b) and proposes to settle such claim or proceeding
prior to a final judgment thereon or to forego appeal with respect thereto, then
the K Capital Party shall give the Company prompt written notice thereof, and
the Company shall have the right to participate in the settlement or assume or
reassume the defense of such claim or proceeding.

            Section 6.03 Limitations.

            (a) In any claim for indemnification under this Agreement, the
Company shall not be required to indemnify any K Capital Party for special,
exemplary or consequential damages or for any tax (including, without
limitation, any excise tax) imposed with respect to payments made under this
Agreement, including, without limitation, payment of the Purchase Price for the
Shares and any indemnification payment hereunder.

            (b) In any case where a K Capital Party recovers from a Third Party
any amount in respect of a matter with respect to which the Company has
indemnified it pursuant to this Agreement, such K Capital Party shall promptly
pay over to the Company the amount so recovered (after deducting therefrom the
full amount of the expenses incurred by it in procuring such recovery), but not
in excess of the sum of (i) any amount previously so paid by the Company to or
on behalf of the K Capital Party in respect of such matter, and (ii) any amount
expended by the Company in pursuing or defending any claim arising out of such
matter.

                                  ARTICLE VII
                                 MISCELLANEOUS
                                 -------------

            Section 7.01 Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof, and
supersedes any and all prior agreements or understandings among the parties
arising out of or relating to the subject matter hereof. This Agreement may only
be changed by written agreement executed by the parties.

            Section 7.02 Governing Law. This Agreement and all disputes
hereunder shall be governed by the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.

            Section 7.03 Equitable Relief. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.

            Section 7.04 No Admissions. Neither this Agreement nor any action or
acts taken in connection herewith shall constitute an admission of liability or
wrongdoing by any of the parties hereto. This Agreement shall be inadmissible
for any purpose in any proceeding of any kind, except one to enforce its terms.

            Section 7.05 Expenses. Each party shall pay its own costs incident
to the negotiation, preparation, performance, and execution of this Agreement,
and all fees and expenses of its or his counsel, accountants, and other
consultants, advisors and representatives for all activities of such persons
undertaken in connection with the negotiation, preparation, performance and
execution of this Agreement. In the event of a dispute regarding the performance
of this Agreement, the non-prevailing party shall reimburse the prevailing party
the amount the prevailing party's reasonable attorneys' fees, costs and
expenses, in addition to any other relief to which the prevailing party may be
entitled.

            Section 7.06 Further Assurances. At any time or from time to time
after the Closing, the K Capital Parties shall execute and deliver to the
Company such other documents and instruments, provide such materials and
information and take such other actions as the Company may reasonably request to
vest title to the Shares more effectively in the Company.

            Section 7.07 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties. Copies of executed
counterparts transmitted by telecopy or other electronic transmission service
shall be considered original executed counterparts, provided receipt of such
counterparts is confirmed.

            Section 7.08 Time is of the Essence. The parties hereto agree and
acknowledge that time is of the essence in the performance of this Agreement.

            Section 7.09  No Assignments. No party hereto may assign any of its
respective rights or delegate any of its respective obligations under this
Agreement without the prior written consent of the other parties hereto.

            Section 7.10 Consent to Jurisdiction of Service of Process; Venue.
Each party hereto hereby irrevocably and unconditionally (i) consents to the
submission to the exclusive jurisdiction of the courts of the State of New York
and of the United States of America located in the County of New York in the
State of New York (or any appeals court thereof), for any action, claim,
complaint, investigation, petition, suit or other proceeding, whether civil or
criminal, in law or equity, or by or before any governmental authority
("Actions") arising out of or relating to the Transactions, this Agreement or
the breach, termination or validity thereof, (ii) agrees not to commence any
Action relating to the Transactions or this Agreement except in such courts and
in accordance with the provisions of this Agreement, (iii) agrees that service
of any process, summons, notice, or document by U.S. registered mail or as
otherwise provided in this Agreement shall be effective service of process for
any Action brought in any such court, (iv) waives any objection to the laying of
venue of any Action arising out of this Agreement or the Transactions in the
courts of the State of New York and of the United States of America located in
the County of New York in the State of New York (or any appeals courts thereof)
and (v) agrees not to plead or claim in any such court that any such Action
brought in any such court has been brought in an inconvenient forum.

            Section 7.11 Nondisparagement. None of the parties hereto shall make
any public statement which is calculated to have the effect or purpose of
maligning or disparaging the integrity, management or services of any of the
other parties hereto or any of their respective directors, officers, managers,
stockholders, limited partners, members or affiliates.

            Section 7.12 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when mailed, delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by such party by like notice):

if to any of the K Capital Parties, to:

                  K Capital Partners, LLC
                  75 Park Plaza, Box 11
                  Boston, MA 02116
                  Attention: Chief Administrative Officer
                  Telephone:  (617) 646-7700
                  Telecopy: (617) 646-7777

with a copy to:
                  Goodwin Procter LLP
                  53 State Street
                  Boston, MA 02109
                  Attention: Joseph L. Johnson III, P.C.
                  Telephone:  (617) 570-1633
                  Telecopy:  (617) 523-1231

if to the Company, to:

                  Gyrodyne Company of America, Inc.
                  102 Flowerfield Street
                  St. James, NY 11780
                  Attention:
                  Telephone:
                  Telecopy:

with a copy to:

                  Cadwalader, Wickersham & Taft
                  100 Maiden Lane
                  New York, NY  10038
                  Attention:  Dennis J. Block, Esq.
                  Telephone:  (212) 504-5555
                  Telecopy:  (212) 504-5557

            Section 7.13 K Capital Representative. Each of the K Capital Parties
hereby irrevocably appoints Abner Kurtin as such party's attorney-in-fact and
representative (the "Representative"), in such party's place and stead, to do
any and all things and to execute any and all documents and give and receive any
and all notices or instructions in connection with this Agreement and the
transactions contemplated hereby. The Company shall be entitled to rely, as
being binding on each member of the K Capital parties, upon any action taken by
the Representative or upon any document, notice, instruction or other writing
given or executed by the Representative.

            Section 7.14 Definitions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context clearly requires
otherwise:

            "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under the Securities Exchange Act of 1934.

            "Encumbrances" shall mean any and all liens, charges, security
interests, options, claims, mortgages, pledges, proxies, voting trusts or
agreements, obligations, understandings or arrangements or other restrictions on
title or transfer of any nature whatsoever.

            "Governmental Entity" shall mean a court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency.

            "Losses" shall mean any and all losses, costs, claims, obligations,
liabilities, awards, judgments, fines, penalties, damages or expenses
(including, without limitation, reasonable attorneys' fees).

            "Person" shall mean a natural person, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Entity or other entity
or organization.

            "Third Party" shall mean any person other than the Company, a K
Capital Party or any of their respective Affiliates.

            "Transactions" shall mean all the transactions provided for or
contemplated by this Agreement.

      [Remainder of page intentionally left blank; signature page follows]

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.

                            GYRODYNE COMPANY OF AMERICA, INC.

                                 By: /s/ Stephen V. Maroney
                                     --------------------------------
                                     Name: Stephen V. Maroney
                                     Title: President

                            SPECIAL K CAPITAL OFFSHORE MASTER FUND
                               (U.S. DOLLAR), L.P
                            By:  K Capital Partners, LLC, its General Partner
                            By:  Harwich Capital Partners, LLC, its Managing
                                 Member

                                 By: /s/  Robert Needham
                                     -------------------------------
                                     Name:  Robert Needham
                                     Title: CAO

                            K CAPITAL OFFSHORE MASTER FUND (U.S. DOLLAR), L.P.
                            By:  K Capital Partners, LLC, its General Partner
                            By:  Harwich Capital Partners, LLC, its Managing
                                 Member

                                 By: /s/  Robert Needham
                                     -------------------------------
                                     Name:  Robert Needham
                                     Title: CAO

                            K CAPITAL PARTNERS, LLC
                            By:  Harwich Capital Partners, LLC, its Managing
                                 Member

                                 By: /s/  Robert Needham
                                     -------------------------------
                                     Name:  Robert Needham
                                     Title: CAO

                            HARWICH CAPITAL PARTNERS, LLC

                               By: /s/  Robert Needham
                                   ---------------------------------
                                   Name:  Robert Needham
                                   Title: CAO

                                   /s/ Thomas Knott
                                   ---------------------------------
                                       THOMAS KNOTT

                                   /s/ Abner Kurtin
                                   ---------------------------------
                                       ABNER KURTIN<PAGE>

                                                                    Exhibit 10.1

                REFRESHED SOFTWARE LICENSE AND SUPPORT AGREEMENT
                            dated as of March 1, 2002
                                 by and between
                                PEGASYSTEMS INC.
                                       and
                            FIRST DATA RESOURCES INC.

<PAGE>

                REFRESHED SOFTWARE LICENSE AND SUPPORT AGREEMENT

This Refreshed Software License and Support Agreement (this "Agreement") is
entered into as of March 1, 2002, by and between PEGASYSTEMS INC., a
Massachusetts corporation with its principal place of business at 101 Main
Street, Cambridge, Massachusetts 02142-1590 ("Pegasystems"), and FIRST DATA
RESOURCES INC., a Delaware corporation with its principal place of business at
7302 Pacific Street, Omaha, Nebraska 68114 ("FDR").

     WHEREAS, Pegasystems is in the business of inter alia developing,
marketing, licensing, and installing customer service management software to
automate customer interactions, including the Software (as hereafter defined);
and

     WHEREAS, FDR and its Affiliates are in the business of providing
information processing products and services to a broad range of financial
institutions and other commercial enterprises;

     WHEREAS, Pegasystems and FDR are parties to a Software License and Support
Agreement, dated as of June 27, 1997 (the "1997 Agreement"), under the terms of
which FDR and its Affiliates obtained from Pegasystems: (i) the right to use the
Software to create Derivative Works (as hereinafter defined); (ii) the right to
use the Software and the Derivative Works in connection with the development,
provision, and delivery of Products (as hereinafter defined); (iii) the right to
market, distribute, and sublicense the Software and Derivative Works to clients
of FDR and its Affiliates, and; (iv) certain maintenance, upgrade, enhancement
and support services for the Software;

     WHEREAS, Pegasystems and FDR wish to terminate the 1997 Agreement, the OPCF
Agreement (defined below), the letter agreement between the parties dated
February 1, 2000, and the letter agreement between the parties dated September
25, 1998, and to entirely refresh their agreements and understandings with
respect to the subject matters covered by those agreements;

     NOW THEREFORE, in consideration of the premises, covenants,
representations, and warranties contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pegasystems and FDR agree as follows:

                                   DEFINITIONS

     Unless the context shall otherwise require, the capitalized terms used
herein shall have the respective meanings specified below:

     "AAA" means the American Arbitration Association.
      ---

     "AAA Rules" means AAA's then-current Commercial Arbitration Rules.
      ---------

                                       1

<PAGE>

     "Acquirer" means a Person which has an arrangement with a Merchant to
      --------
obtain Tickets from such Merchant and present the Tickets to an Issuer for
payment.

     "Active Account" means, for any month, a cardholder account (or its
      --------------
equivalent) of an Active Account Client maintained on the Omaha Platform that
has debit or credit activity or a balance during such month and for which a
statement (or its equivalent) is issued or made available to the related
cardholders.

     "Active Account Client(s)" has the meaning specified in Section 5.1(d).
      ------------------------                               --------------

     "Active Account Credit" has the meaning specified in Section 5.1(d).
      ---------------------                               --------------

     "Active Account Fee" has the meaning specified in Section 5.1(d).
      ------------------                               --------------

     "Affiliate" means, with respect to any Person, any other Person which,
      ---------
directly or indirectly, owns or controls, is owned or controlled by, or is under
common control with, such Person, provided, however, that Alan Trefler shall not
be considered an Affiliate. As used herein, "control" means the power to direct
the management or affairs of a Person and "ownership" means the beneficial
ownership of more than 50% of the equity securities of the Person.

     "Arbitrators" has the meaning specified in Section 12.3(b)(ii).
      -----------                               -------------------

     "Basic Qualifications" has the meaning specified in Section 12.3(b)(ii).
      --------------------                               -------------------

     "Cards" has the meaning specified in Exhibit B.
      -----                               ---------

     "Confidential Information" has the meaning specified in Section 10.1.
      ------------------------                               ------------

     "Derivative Works" means derivative works (as defined in ss. 101 of the
      ----------------
Copyright Act) of the Software that were created in whole or in part by or on
behalf of FDR or its Affiliates and owned by FDR pursuant to the terms of the
1997 Agreement, and for purposes of this Agreement consist of all or any portion
of the Evolve Applications or the OPCF Application, including any further
modifications, enhancements, updates or upgrades of any of the foregoing created
pursuant to this Agreement.

     "Dispute" has the meaning specified in Section 12.3(a).
      -------                               ---------------

     "Documentation" has the meaning specified in Section 4.5.
      -------------                               -----------

     "Effective Date" shall mean March 1, 2002.
      --------------

     "Encumbrance" shall mean any lien, claim, charge, security interest,
      -----------
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, covenant or other restrictions of any kind which could
materially impair the ability of FDR or any of its Affiliates to use or exploit
the item that is so encumbered.

                                       2

<PAGE>

     "End User" means any Third Party who is authorized by FDR or an Affiliate
      --------
of FDR to use the Software or a Derivative Work pursuant to an End User
Agreement, whether such use is on a system maintained by the Third Party, or on
a system maintained by FDR or an Affiliate and accessed remotely by the Third
Party through the Internet or other public or private network.

     "End User Agreement" means an agreement between FDR or an Affiliate of FDR
      ------------------
and an End User pursuant to which such End User is granted limited rights to use
the Software or a Derivative Work, and including, where applicable to use of the
Software, the terms and conditions set forth in Exhibit E.
                                                ---------

     "Escrow Agreement" has the meaning specified in Section 11.1.
      ----------------                               ------------

     "Evolve Applications" means collectively the E-Customer Service
      -------------------
Application, Evolve Collections Application, Evolve Customer Service Application
and Evolve Credit Application.

     "Evolve Collections Application" means a Derivative Work that delivers
      ------------------------------
account collections functionality and is currently marketed by FDR under the
brand name "Evolve Collections".

     "Evolve Credit Application" means a Derivative Work that delivers account
      -------------------------
credit functionality and is currently marketed by FDR under the brand name
"Evolve Credit".

     "Evolve Customer Service Application" means a Derivative Work that delivers
      -----------------------------------
customer service functionality and is currently marketed by FDR under the brand
name "Evolve Customer Service".

     "E-Customer Service Application" means a Derivative Work that delivers
      ------------------------------
customer service functionality in an e-commerce environment and is currently
marketed by FDR under the brand name "e-Customer Service" or "Evolve E-Customer
Service".

     "Exhibit I Clients" has the meaning set forth in Exhibit I.
      -----------------                               ---------

     "Expenses" means any and all expenses incurred in connection with
      --------
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against under the Agreement (including,
without limitation, court filing fees, court costs, arbitration fees or costs,
witness fees and reasonable fees and expenses of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).

     "FDR Client" means a customer of FDR which is then currently using the
      ----------
Evolve Collections Application, the Evolve Customer Service Application or the
Evolve Credit Application.

     "Intellectual Property Right" means the intangible legal right or interests
      ---------------------------
evidenced by or embodied in: (i) any idea, design, concept, technique,
invention, discovery, or improvement, regardless of patentability, but including
patents, letters patent, patent applications, trade secrets,

                                       3

<PAGE>

and know-how; (ii) any work of authorship, regardless of copyrightability, but
including copyrights and any moral rights recognized by law; (iii) any
trademark, trade name, or service mark; and (iv) any other similar rights.

     "Issuer" means an issuer of Cards.
      ------

     "Losses" means any and all losses, costs, obligations, liabilities,
      ------
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.

     "MasterCard" means MasterCard International, Inc., and its successors and
      ----------
assigns.

     "Merchant" means a Person which has the right to acquire or otherwise
      --------
acquire a Ticket as payment for goods, services or otherwise.

     "1997 Agreement" has the meaning given in the recitals to this Agreement.
      --------------

     "New Releases" means any enhancements, upgrades, or new releases of the
      ------------
Software.

     "Omaha Platform" means the transaction processing systems presently located
      --------------
in Omaha, Nebraska, Tulsa, Oklahoma, and Sidney, Australia, and related call
centers, wherever located, or the successors to any such systems wherever
located; provided this definition does not include the transaction processing
systems of PaySys International Inc. or First Data Europe.

     "OPCF Agreement" means the letter agreement between the parties dated June
      --------------
30, 2001, concerning the development and use of the OPCF Application.

     "OPCF Application" means a Derivative Work developed by the parties and
      ----------------
licensed to FDR under the OPCF Agreement, which work provides product control
file functionality that is maintained by FDR on servers operated by FDR and
accessed remotely by a Third Party through the Internet or other public or
private network.

     "Payee" has the meaning specified in Section 5.3.
      -----                               -----------

     "Payer" has the meaning specified in Section 5.3.
      -----                               -----------

     "Payments" has the meaning specified in Section 5.3.
      --------                               -----------

     "Pegasystems Application" means a Card application proprietary to
      -----------------------
Pegasystems or in which Pegasystems has a financial or ownership interest, which
has substantially similar functionality to the Evolve Collections Application,
the Evolve Customer Service Application or the Evolve Credit Application.

     "Pegasystems Client" shall mean a customer of Pegasystems which is then
      ------------------
currently using a Pegasystems Application.

                                       4

<PAGE>

     "Person" means any general partnership, limited partnership, corporation,
      ------
limited liability company, bank or other financial institution, joint venture,
trust, business trust, governmental agency, cooperative, association, individual
or other entity, and the heirs, executors, administrators, legal
representatives, successors and assigns of such Person as the context may
require.

     "Product" has the meaning specified in Exhibit B.
      -------                               ---------

     "Relationship Manager" has the meaning specified in Article 3.
      --------------------                               ---------

     "Senior Level Policy Team" has the meaning specified in Section 12.3(a).
      ------------------------                               ---------------

     "Service Bureau Processing" means the processing by FDR or any of its
      -------------------------
Affiliates of data of FDR, any of its Affiliates, or any customers of FDR or any
of its Affiliates.

     "Software" means the Pegasystems' application development architecture,
      --------
including the core software components, tools, templates, rules, definitions,
documentation and other materials which are identified in Exhibit A.
                                                          ---------

     "Software License Fees" has the meaning set forth in Section 5.1(a).
      ---------------------                               --------------

     "Software Maintenance Fees" has the meaning set forth in Section 5.1(b).
      -------------------------                               --------------

     "Support and Maintenance Period" has the meaning set forth in Section
4.2(d).

     "Templates" has the meaning specified in Exhibit A.
      ---------                               ---------

     "Term" shall have the meaning set forth in Section 9.1.
      ----                                      -----------

     "Third Party" means any Person other than FDR, Pegasystems, or their
      -----------
respective Affiliates.

     "Ticket" means a record (whether paper, magnetic, electronic or otherwise)
      ------
which is created to evidence the use of a Card as payment for goods, services,
cash advances or otherwise for a credit or refund or otherwise performs in a
similar payment authorization function.

     "Visa" means, individually or collectively, as appropriate, VISA U.S.A.,
      ----
Inc., and/or VISA International, Inc., and either of their successors or
assigns.

Each definition in this Agreement includes the singular and the plural, and
reference to the neuter gender includes the masculine and feminine where
appropriate. The headings to the Articles and Sections hereof are for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement. Except as otherwise stated, reference to Articles, Sections, and
Exhibits mean the Articles, Sections, and Exhibits of this Agreement. Any
Exhibits are hereby incorporated by reference into and shall be deemed a part of
this Agreement. Unless the context clearly indicates otherwise, the word
"including" means "including but not limited to."

                                       5

<PAGE>

                                    ARTICLE 1
                       TERMINATION OF EXISTING AGREEMENTS

     The 1997 Agreement, the OPCF Agreement, the letter agreement between the
parties dated February 1, 2000, and the letter agreement between the parties
dated September 25, 1998, are terminated as of March 1, 2002, and replaced in
their entirety with the terms and conditions of this Agreement.

                                    ARTICLE 2
                                  LICENSE GRANT

     2.1. License to Use Software. (a) Pegasystems hereby grants to FDR and its
          -----------------------
Affiliates a nontransferable (except as provided herein), nonexclusive,
worldwide license to: (i) use the Software in connection with the development,
provision and delivery of Derivative Works for Products that may be used on or
in connection with the Omaha Platform or by End Users who process on the Omaha
Platform; (ii) use, modify, enhance, update and upgrade the Derivative Works or
any portion thereof in connection with the development, provision and delivery
of Derivative Works for Products on the Omaha Platform; and (iii) market,
distribute and sublicense the Software and/or all or any portion of the
Derivative Works (but not the Software alone) to such End Users in connection
with the development, provision and delivery of Derivative Works for Products on
the Omaha Platform; provided, however, that FDR may not use the Software under
subparts (i) through (iii) hereof to provide or deliver Derivative Works for
Products in connection with any Card portfolio in which the majority of
cardholder accounts do not have account addresses in North America, South
America or Australia, if such Card portfolio is not receiving transaction
processing services on or from the Omaha Platform as of the Effective Date.
Notwithstanding anything in this Agreement to the contrary, FDR's rights in the
Derivative Works shall not be construed to provide ownership rights in the
Software or its design. Upon payment in full of the Software License Fees set
forth in Section 5.1(a), the licenses granted under this Section 2.1(a) shall
         --------------                                  --------------
become perpetual and irrevocable.

          (b) Without limiting Section 2.1(a), the license rights granted
                               --------------
hereunder include: (i) the right to use the Software and Derivative Works for
the provision of Service Bureau Processing for customers of FDR and its
Affiliates solely in connection with Products; (ii) the right to make such
copies of the Software and Derivative Works and install the Software and
Derivative Works at such locations as FDR and its Affiliates reasonably deem
necessary to effectuate this Section 2.1, provided that Pegasystems' proprietary
                             -----------
notices are reproduced on any copies of the Software; and (iii) the right to use
the Software and Derivative Works for data storage back-up, archival, and
disaster recovery purposes.

          (c) (i) Except pursuant to the Escrow Agreement, neither FDR nor any
of its Affiliates (nor any Person under its Control or employ) shall, directly
or indirectly, reverse engineer, disassemble, decompile, or take or permit to be
taken any similar action, or in any way use the Software's source code, object
code or Documentation to create any Intellectual Property Right that provides
functionality similar to that of the Software. If FDR obtains access to the
source code or other Deposit Materials (as defined in the Escrow Agreement)
under the terms of

                                       6

<PAGE>

the Escrow Agreement, FDR's right therein shall be coextensive with the rights
granted under this Section 2.1.
                   -----------

              (ii)  FDR will immediately advise Pegasystems in writing once FDR
or any of its Affiliates has reason to believe that any provision of this
Section 2.1(c) has been violated.
--------------

              (iii) Notwithstanding any other provision of this Agreement, any
breach or violation of Section 2.1(c)(i) by FDR or any of its Affiliates shall
                       -----------------
constitute a material breach permitting Pegasystems to terminate this Agreement
in accordance with the provisions of Section 9.3(a).
                                     --------------

          (d) Nothing herein shall be deemed to prevent or preclude FDR from
developing, licensing, using, marketing or selling software (other than the
Software or any Derivative Work) that, from an architectural point of view
(i.e., an integrated application development architecture containing a rules
engine and work-flow automation) performs the same function or a substantially
similar function as the Software.

          (e) FDR agrees that neither FDR nor its Affiliates shall distribute or
sublicense the Software to any Third Party unless such Third Party has signed an
End User Agreement.

     2.2. Sublicense of Evolve Applications. In the event Pegasystems desires to
          ---------------------------------
license the Evolve Applications for sublicensing to customers, Pegasystems and
FDR will enter into a separate license agreement with appropriate terms and
conditions, including provision for a license fee to FDR of five million dollars
($5,000,000), payable immediately upon signing of such license agreement, and an
ongoing royalty to FDR of fifteen percent (15%).

     2.3. Reservation of Rights. Each party reserves for its sole benefit all
          ---------------------
rights not specifically granted to the other party under this Agreement.
Specifically:

          (a) Pegasystems reserves all ownership rights in the Software,
interfaces and standard exits which Pegasystems has developed to enhance the
capabilities and interoperability of the Software and the Products, and the
parties agree that such Software, interfaces and exits (identified in Exhibit A)
                                                                      ---------
shall not be deemed a "joint work" under the Copyright Act. Except as expressly
provided in this Agreement, Pegasystems does not transfer or license any
Intellectual Property Right to FDR or its Affiliates.

          (b) FDR reserves all ownership rights in the Derivative Works and
Products and the interfaces and standard exits FDR developed to enhance the
interoperability of the Software and the Derivative Works and Products, and the
parties agree that neither the Products, the Derivative Works, or such
interfaces and exits shall be deemed a "joint work" under the Copyright Act. FDR
does not transfer or license any Intellectual Property Right to Pegasystems with
respect to the Evolve Applications, OPCF or any Derivative Works or Products.

                                        7

<PAGE>

     2.4. Resources. Pegasystems shall provide resources for development work on
          ---------
a time and materials basis as set forth in Exhibit G, less a discount of 15%.
                                           ---------

     2.5. Use of Trademarks. FDR may, at its sole option, use Pegasystems' name
          -----------------
or trademarks in advertisements or promotional materials for the Software,
Derivative Works, or Products, provided that FDR shall not incorporate any
Pegasystems trademark into the name of any Derivative Work or Product without
Pegasystems' consent. FDR shall in each such case comply with Pegasystems'
reasonable policies regarding the use of Pegasystems' trademarks.

                                    ARTICLE 3
                             RELATIONSHIP MANAGEMENT

     Both parties shall designate one of its employees to be its relationship
manager (the "Relationship Manager"). Each Relationship Manager's
responsibilities shall include, without limitation: (i) having direct
responsibility for the overall performance of its party under this Agreement;
(ii) interacting with the other party's Relationship Manager; and (iii)
supervising the performance of such party's obligations under this Agreement.
The Relationship Managers of the parties shall meet telephonically or in person,
as needed, but no less often than quarterly to review and resolve issues
relating to this Agreement.

                                    ARTICLE 4
                             SUPPORT AND MAINTENANCE

     4.1. Support and Maintenance. During the Support and Maintenance Period,
          -----------------------
Pegasystems shall: (i) maintain and support the Software for the purposes for
which it is designed; and (ii) support the Software in any hardware or software
operating environment supported by Pegasystems. FDR shall be offered any New
Release of the Software when it is released generally to other Pegasystems
customers.

     4.2. Support and Maintenance for FDR and its Affiliates. (a) Pegasystems
          --------------------------------------------------
shall provide to FDR and its Affiliates during the Support and Maintenance
Period, the support and maintenance services set forth in Exhibit D.
                                                          ---------

          (b) FDR will be responsible for providing primary customer support to
End Users for Derivative Works. During the Support and Maintenance Period,
Pegasystems' customer support obligation with respect to Derivative Works for
End Users shall be to consult with FDR regarding specific support issues which
FDR has made best efforts to resolve, but has been unable to resolve, and at the
request of FDR, Pegasystems shall interact with the End User.

          (c) During the Support and Maintenance Period, Pegasystems will be
responsible for providing primary customer support to End Users for the Software
according to the terms set forth in Exhibit D.
                                    ---------

          (d) For the purposes of this Agreement, the "Support and Maintenance
Period" shall be the years 2002 through 2003, and thereafter during any year in
which FDR elects to

                                        8

<PAGE>

receive Support and Maintenance services and pays the Software Maintenance Fees
set forth in Section 5.1(b).
             --------------

     4.3. Training. Pegasystems shall provide training to FDR according to the
          --------
terms set forth in Exhibit D.
                   ---------

     4.4. Resources. The parties shall provide personnel and other resources for
          ---------
support and maintenance according to the terms set forth in Exhibit D.
                                                            ---------

     4.5. Documentation. Pegasystems has previously furnished and shall continue
          -------------
to furnish in electronic form to FDR documentation relating to the Software,
training and maintenance ("Documentation") during the Support and Maintenance
Period. The Documentation shall be consistent with industry practice for
software similar to the Software for uses similar to the uses authorized
hereunder. FDR may reproduce such documentation in hardcopy form, for its use
and for its End Users, provided that FDR reproduces Pegasystems' proprietary
notices.

                                    ARTICLE 5
                                     PAYMENT

     5.1. Fees. (a) FDR shall pay to Pegasystems the Software License Fees shown
          ----
in Exhibit H. FDR shall pay the Software License Fees in the monthly amounts
   ---------
shown in Exhibit H on the twenty-first day of each month (e.g., the payment for
         ---------
April 2002 will occur on April 21, 2002). Upon the final payment of the fees
under this Section, as reflected in Exhibit H, FDR's license in the Software and
                                    ---------
Derivative Works under this Agreement shall become perpetual and irrevocable as
set forth in Section 2.1.
             -----------

          (b) In addition to the Software License Fees, FDR shall pay to
Pegasystems annual Software Maintenance Fees in the amount of $900,000, payable
on January 21 of 2003, and of any year after 2003 in which FDR elects to receive
Support and Maintenance Services. If the Support and Maintenance Period is
allowed to lapse, then FDR may not reinstate a Support and Maintenance Period
without paying for all missed Support and Maintenance Periods.

          (c) If this Agreement is fully executed by Pegasystems on or before
March 31, 2002, FDR shall pay a signing bonus of $940,000.00 immediately upon
execution.

          (d) In addition to the Software License Fees and Software Maintenance
Fees, an annualized fee, payable monthly, will be calculated based upon the
number of Active Accounts of any (i) Exhibit I Clients or (ii) Pegasystems
Client (A) which begins using the Evolve Collections Application, the Evolve
Customer Service Application or the Evolve Credit Application, and (B) such use
of the Evolve Application causes Pegasystems to incur diminished revenue from
the respective Pegasystems Application (collectively, "Active Account Clients"),
that have subscribed to and are using the Evolve Collections Application, the
Evolve Customer Service Application or the Evolve Credit Application (the
"Active Account Fee"). The Active Account Fee shall be [* - confidential
information filed separately by the SEC] per Active Account, per Evolve
Application subscribed to by an Active Account Client; provided, however, no
Active Account of an Active Account Client shall be counted more than twice
regardless of the number of Evolve Applications subscribed to by the Active
Account Client for such Active Account. (For example, the monthly amount of
Active Account Fees for 10 million Active Accounts of one Active Account Client
using the Evolve Customer Service Application and Evolve Collections Application
would be as follows: 10 million Active Accounts times [* - Confidential
information filed separately with the SEC] times 2 = [* - Confidential
information filed separately with the SEC], divided by 12 = [* - Confidential
information filed separately with the SEC]. The same amount would result if such
Active Account Client used the Evolve Credit Application in addition to the
Evolve Collections Application and Evolve Customer Service Application). From
the Effective Date, the Active

                                        9

<PAGE>

Account Fee with respect to Exhibit I Clients will be calculated monthly and
                            ---------
aggregated toward a credit to FDR in the amount of $2,500,000 (the "Active
Account Credit"). The month after the amount of aggregated Active Account Fees
for Exhibit I Clients is equal to or greater than the Active Account Credit, FDR
    ---------
shall begin paying the Active Account Fee to Pegasystems as incurred and
calculated each month going forward; provided, however, FDR will pay Active
Account Fees for Pegasystems Clients included within the Active Account Clients,
regardless of whether the Active Account Credit has been fully satisfied. For
the avoidance of doubt, except as expressly provided herein with respect to a
Pegasystems Client, no Active Account Fees will be due and payable, and FDR
shall not be liable to Pegasystems for Active Account Fees, unless and until the
amount of aggregated Active Account Fees calculated hereunder with respect to
Exhibit I Clients from and after the Effective Date is equal to or greater than
---------
$2,500,000. As applicable, the Active Account Fee will be payable on a monthly
basis on the twenty-first day of the month based on the number of Active
Accounts for the month preceding, determined as of the last day of such month.
The calculation of the Active Account Fees shall be adjusted as follows: the
Active Account Fee shall be calculated on 33% of Active Accounts of an Active
Account Client thirty days after the day the Evolve Application is first
installed for such Active Account Client and has passed applicable acceptance
tests or is first used in production (the "Installation Date"); 66% of Active
Accounts of an Active Account Client sixty days after the Installation Date; and
100% of Active Accounts for an Active Account Client ninety days after the
Installation Date and for each month thereafter so long as such Evolve
Application is installed. Notwithstanding the foregoing, if FDR allows a
customer to use the Evolve Application in a production environment without
paying revenue to FDR for such use, the Installation Date for such Evolve
Application shall be the earlier of: (x) the date on which FDR begins to receive
revenue from such Active Account Client for the use of such Evolve Application;
or (y) ninety days after the date on which the Active Account Client began to
use the Evolve Application in a production environment.

     5.2. Fixed Fees. The Software License Fees set forth in Section 5.1(a) and
          ----------                                         --------------
the Active Account Fees set forth in Section 5.1(d) shall be fixed, and shall
                                     --------------
not be subject to adjustment for changes in the Consumer Price Index or for any
other reason. Starting in 2005, the Software Maintenance Fees may be subject to
change at Pegasystems' election based upon percentage increases in the Consumer
Price Index for All Urban Workers ("CPI-U"), as published by the U.S. Department
of Labor. Pegasystems may increase the Software Maintenance Fees once per year
(effective for the Software Maintenance Fees paid in January of a year) by a
percentage amount equal to the percentage change in the CPI-U during a period
described below up to three percent (3%). For increases in the CPI-U for the
given time period which exceed three percent (3%), Pegasystems may increase the
Software Maintenance by an additional amount not to exceed one-half (1/2) of the
percentage by which the percentage change in the CPI-U for such period exceeds
three percent (3%). (For example, if the CPI-U for 2005 increases by 9%,
Pegasystems may increase the Software Maintenance Fees payable January 21, 2006
by 6% [3 + (1/2 times 6) = 6]. Pegasystems shall notify FDR of the percentage
change in the CPI-U which shall be calculated by comparing the CPI-U at the
beginning and end of a twelve month period ending three months prior to the
effective date of any such increase. Notwithstanding the foregoing, the Software
Maintenance Fees may increase up to the percentage increase in CPI-U in the
event FDR elects not to receive Support and Maintenance for one year or more.

     5.3. Taxes. FDR shall pay or hold Pegasystems harmless from any and all
          -----
taxes, value added taxes, charges, duties, and the like arising from any End
User's use of the Software or Products, excluding only any taxes based upon the
net income or net worth of Pegasystems or any taxes imposed in lieu of such
taxes on net income or net worth. In addition to any amounts ("Payments")
payable under this Agreement by one party ("Payer") to the other party
("Payee"),

                                       10

<PAGE>

the Payer shall be responsible for any value added taxes, sales taxes, and other
transfer-based taxes imposed on such Payments, excluding, however, all taxes
based upon the net income or net worth of Payee or any taxes imposed in lieu of
such taxes on net income or net worth. In all events, Payer (or, with respect to
taxes specified in the first sentence of this Section 5.3, FDR) shall have the
                                              -----------
right to control any proceeding involving any taxes described herein for which
Payer is responsible and shall receive the reasonable cooperation of Payee in
respect thereof.

     5.4. Equalization of Fees. In the event (i) an FDR Client begins using a
          --------------------
Pegasystems Application and (ii) FDR should incur diminished revenue from the
respective Evolve Application due to the usage of the Pegasystems Application by
such FDR Client, Pegasystems will pay to FDR fifteen percent (15%) of the
software license fees (or other fees attributable to the usage of the
Pegasystems Application) and maintenance fees received by Pegasystems from such
client with respect to the Pegasystems Application, payable as earned by
Pegasystems.

     5.5. Audit. Each party shall, upon request, provide to the other party
          -----
information reasonably pertaining to the disclosing party's compliance with the
terms of this Agreement, but only to the extent the disclosure of such
information does not violate confidentiality obligations of the disclosing
party.

                                    ARTICLE 6
                                   WARRANTIES

     6.1. Warranties of FDR. FDR represents and warrants that:
          -----------------

          (a) It is a corporation validly organized and existing under the laws
of the State of Delaware;

          (b) It has full power and authority under its organizational documents
and the laws of the State of Delaware to execute and deliver this Agreement and
to perform its obligations hereunder;

          (c) It has by proper action duly authorized the execution and delivery
of this Agreement, when validly executed and delivered, this Agreement shall
constitute legal, valid, and binding agreement of FDR enforceable in accordance
with its respective terms; and

          (d) The execution, delivery and performance of this Agreement does not
and will not conflict in any material respect with or constitute a material
default under its organizational documents or under the terms and conditions of
any documents, agreements (oral or written) or other writings to which it is a
party.

     6.2. Warranties of Pegasystems. Pegasystems represents and warrants that:
          -------------------------

                                       11

<PAGE>

          (a) It is a corporation validly organized and existing under the laws
of the Commonwealth of Massachusetts;

          (b) It has full power and authority under its organizational documents
and the laws of the Commonwealth of Massachusetts to execute and deliver this
Agreement and to perform its obligations hereunder;

          (c) It owns all rights in the Software, free of Encumbrances or has
the necessary rights to license the Software to FDR, its Affiliates, and End
Users as provided herein;

          (d) It owns all property rights or has all rights and licenses
necessary to grant to FDR the rights granted hereunder and to perform
Pegasystems' obligations hereunder;

          (e) It has by proper action duly authorized the execution and delivery
of this Agreement and when validly executed and delivered, this Agreement shall
constitute a legal, valid, and binding agreement of Pegasystems enforceable in
accordance with its terms;

          (f) The execution, delivery and performance of this Agreement does not
and will not conflict in any material respect with or constitute a material
default under its organizational documents or under the terms and conditions of
any documents, agreements (oral or written) or other writings to which it is a
party;

          (g) It has used and will use its best efforts to ensure that no
computer viruses are coded or introduced into the Software or the Derivative
Works by Pegasystems or its employees. Pegasystems agrees that in the event that
a virus is found, it will use its best efforts to assist FDR in reducing the
effect of such virus. Pegasystems shall have no liability or obligation under
this Section 6.2(g) if FDR has not conducted commercially reasonable virus
     --------------
checking procedures in each instance before initially using or providing the
Derivative Works to each End User.

          (h) The Software shall be free of any disabling mechanism or device,
hidden program, time-out or lock-out mechanism;

          (i) (1) It possesses the equipment, personnel and other expertise
necessary to develop, support and maintain the Software and deliver the services
contemplated hereunder; (2) the development, support and maintenance of the
Software and the delivery of the services contemplated hereunder shall be in a
professional and workmanlike manner in accordance with the highest applicable
professional standards; and (3) the development, support and maintenance of the
Software and the delivery of the services contemplated hereunder shall not be
performed in violation of any applicable law, rule or regulation of any
jurisdictions in which Pegasystems does business;

          (j) The Software when used by FDR, its Affiliates and their End Users
as contemplated by this Agreement does not and shall not infringe any
Intellectual Property Right of any Third Party;

                                       12

<PAGE>

          (k) The Software: (i) is fully operable on all hardware and software
operating environments currently supported by Pegasystems in its lines of
business; and (ii) is the current version of all software of Pegasystems that
may be used for the purposes contemplated by this Agreement; and

          (l) The documentation for the Software shall be sufficient to describe
the use, operation and system and hardware requirements for the Software.

     6.3. No Other Warranties. THE WARRANTIES SET FORTH IN THIS ARTICLE 6 AND
          -------------------                                   ---------
ELSEWHERE IN THIS AGREEMENT ARE THE SOLE AND EXCLUSIVE WARRANTIES OF THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT. EXCEPT AS EXPRESSLY STATED
HEREIN, NEITHER PARTY MAKES TO THE OTHER ANY WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.

                                    ARTICLE 7
                                   INDEMNITIES

     7.1. FDR's Indemnification. FDR will indemnify Pegasystems, its Affiliates,
          ---------------------
and their respective officers, employees, and agents, from and against any
Losses and Expenses arising out of or relating to: (a) the use of Software or
Derivative Works by FDR, its Affiliates, and their End Users, except to the
extent that any such Loss or Expense (i) arises out of Pegasystems' material
breach of this Agreement or (ii) is a Loss or Expense for which Pegasystems is
required to indemnify FDR, its Affiliates, and their respective End Users
pursuant to Section 7.2(b); or (b) a material breach by FDR or its Affiliates of
            --------------
a material representation, warranty, or covenant contained in this Agreement.

     7.2. Pegasystems' Indemnification. (a) Pegasystems will indemnify FDR, its
          ----------------------------
Affiliates, and their respective officers, employees, and agents, from and
against any Losses and Expenses arising out of or relating to a material breach
by Pegasystems or its Affiliates of any material representation, warranty or
covenant contained this in Agreement.

          (b) Pegasystems will indemnify FDR, its Affiliates, and their
respective officers, employees, agents, and End Users, from and against any Loss
or Expense arising out of or relating to a claim that (i) the Software as used
by FDR, its Affiliates or their respective End Users as contemplated by this
Agreement or (ii) Pegasystems' name or trademarks infringes the Intellectual
Property Right of any Third Party, provided that the party seeking
indemnification promptly notifies Pegasystems of each claim that comes to such
party's attention, and cooperates fully with and permits Pegasystems to control
its disposition. FDR may at its own expense participate in any action arising
from any such infringement claim. To resolve any claim, Pegasystems may (i)
procure Intellectual Property Rights sufficient to resolve the claim or (ii)
replace or modify the allegedly infringing software so that it becomes
noninfringing, provided, however, that any such replacement or modification
shall not adversely affect the performance of

                                       13

<PAGE>

the Software or Pegasystems' obligations under this Agreement. Notwithstanding
anything to the contrary in this Section 7.2(b), Pegasystems' obligations under
                                 --------------
this Section 7.2(b) do not extend to claims of infringement to the extent that
     --------------
such claims are based on Derivative Works or modifications to the Software
developed by FDR.

                                    ARTICLE 8
                             LIMITATION OF LIABILITY

     8.1. Limitation of FDR's Liability. Except for the obligation to pay fees
          -----------------------------
to Pegasystems pursuant to Article 5, FDR's aggregate liability within any
                           ---------
calendar year to Pegasystems and its Affiliates for all matters arising from,
out of, or in connection with this Agreement, whether in contract, tort, or
otherwise, shall be limited to an amount not to exceed $ 9,250,000.

     8.2. Limitation of Pegasystems' Liability. Except for the liabilities of
          ------------------------------------
Pegasystems caused by breach of the warranty in Section 6.2(f) or provided for
                                                --------------
in Section 7.2(b), which liabilities shall be unlimited, Pegasystems' aggregate
   --------------
liability within any calendar year to FDR and its Affiliates for all matters
arising from, out of, or in connection with this Agreement, whether in contract,
tort, or otherwise, shall be limited to an amount not to exceed $9,250,000.

     8.3. No Special Damages. NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO
          ------------------
THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INCIDENTAL,
CONSEQUENTIAL, SPECIAL, INDIRECT, OR PUNITIVE DAMAGES.

                                    ARTICLE 9
                              TERM AND TERMINATION

     9.1. Term. This agreement shall commence on the Effective Date and shall
          ----
continue in effect until terminated in accordance with the provisions of this
Article 9.
---------

     9.2. Termination by FDR. Notwithstanding anything in this Agreement to the
          ------------------
contrary, FDR may terminate this Agreement:

          (a) If Pegasystems fails to maintain or support the Software, no
longer has as a principal line of business the development of workflow
automation engine software, or otherwise is in material breach of this
Agreement, and thirty (30) days after FDR gives notice of such breach (with
designation that such breach is grounds for termination) to Pegasystems,
Pegasystems has not: (i) cured such breach; or (ii) taken steps that would, in
FDR's reasonable judgement, cure such breach within an acceptable period of
time;

          (b) Immediately upon notice to Pegasystems if: (i) Pegasystems becomes
bankrupt, insolvent (either a deficit in net worth or the inability to pay debts
as they mature), or is dissolved; (ii) Pegasystems makes an assignment for the
benefit of its creditors or an offer of settlement, extension, or composition to
its unsecured creditors generally; (iii) Pegasystems has

                                       14

<PAGE>

ceased to do business, for any reason, for a period of at least ten (10) days;
or (iv) Pegasystems files a voluntary petition of bankruptcy, suffers or permits
the appointment of a receiver for its business or assets, or becomes subject to
any proceeding under any bankruptcy or insolvency law, whether domestic or
foreign, or has wound up or liquidated, voluntarily or otherwise, or a case is
commenced or a petition is filed against Pegasystems under any applicable
liquidation, conservatorship, bankruptcy, moratorium, insolvency, reorganization
or similar law for the relief of debtors from time to time in effect and
generally affecting the rights of creditors, and such filing is not dismissed
within sixty (60) days after being served on Pegasystems.

          (c) For convenience at any time by giving ninety (90) days advance
notice to Pegasystems. Fees paid and payable through the effective date of
termination under this Section 9.2(c) are non-refundable.
                       --------------

     9.3. Termination by Pegasystems. Notwithstanding anything in this Agreement
          --------------------------
to the contrary, Pegasystems may terminate this Agreement:

          (a) If FDR is in material breach of this Agreement, and thirty (30)
days after Pegasystems gives notice of such breach to FDR (with designation that
such breach is grounds for termination), if FDR has not: (i) cured such breach;
or (ii) taken steps that would, in Pegasystems' reasonable judgement, cure such
breach within an acceptable period of time; provided if the alleged breach is
the failure to pay any portion of the fees under Section 5.1, and FDR has
                                                 -----------
disputed its obligation to pay any such amount, non-payment shall not be grounds
for termination until thirty (30) days after FDR fails to pay any amount found
to be due pursuant to the dispute resolution procedures set forth in Section
                                                                     -------
12.3(a) in the event of a dispute under Sections 5.1(a)-(c), and Section 12.3 in
-------                                 -------------------      ------------
the event of a dispute under Section 5.1(d).
                             --------------

          (b) Immediately upon notice to FDR if: (i) FDR becomes bankrupt,
insolvent (either a deficit in net worth or the inability to pay debts as they
mature), or is dissolved; (ii) FDR makes an assignment for the benefit of its
creditors or an offer of settlement, extension, or composition to its unsecured
creditors generally; (iii) FDR has ceased to do business, for any reason, for a
period of at least ten (10) days; or (iv) FDR files a voluntary petition of
bankruptcy, suffers or permits the appointment of a receiver for its business or
assets, or becomes subject to any proceeding under any bankruptcy or insolvency
law, whether domestic or foreign, or has wound up or liquidated, voluntarily or
otherwise, or a case is commenced or a petition is filed against FDR under any
applicable liquidation, conservatorship, bankruptcy, moratorium, insolvency,
reorganization or similar law for the relief of debtors from time to time in
effect and generally affecting the rights of creditors, and such filing is not
dismissed within sixty (60) days after being served on FDR.

     9.4. Consequences of Termination. (a) If this Agreement is terminated by
          ---------------------------
Pegasystems under Section 9.3(a) on account of FDR's failure to pay the Software
                  --------------
License Fees due under Section 5.1(a), the licenses granted to FDR under this
                       --------------
Agreement shall be terminated, and FDR shall cease marketing the Software and
Derivative Works to new customers and shall immediately stop using the Software
and Derivative Works if an election for continued use is not made under Section
                                                                        -------
9.4(d). If, prior to making the final payment of the Software License Fee
------

                                       15

<PAGE>

under Section 5.1(a) this Agreement is terminated by Pegasystems under Section
      --------------                                                   -------
9.3 for any reason other than non-payment, FDR shall have the right to retain
---
the license under Section 2.1, and to have such license become perpetual and
                  -----------
irrevocable by paying the remaining balance of Software License Fees then due
within thirty (30) days of such termination.

          (b) If this Agreement is terminated by FDR under Section 9.2 before it
                                                           -----------
has paid all of the Software License Fees due under Section 5.1(a), FDR shall
                                                    --------------
have the right to retain its licenses under this Agreement by continuing to pay
such fees, and at such time as those fees are paid in full, FDR's license under
this Agreement shall become perpetual and irrevocable as set forth in Section
                                                                      -------
2.1. If FDR elects not to pay the remaining amounts due under Section 5.1(a),
---                                                           --------------
FDR's licenses under this Agreement shall cease.

          (c) If this Agreement is terminated by either party pursuant to
Sections 9.2 or 9.3 at any time after FDR has paid in-full the Software License
------------    ---
Fees under Section 5.1(a), FDR's licenses with respect to the Software and
           --------------
Derivative Works under this Agreement shall remain in full force and effect in
perpetuity.

          (d) In the event of termination of FDR's license in the Software and
Derivative Works for any reason prior to the time FDR has paid in full the
Software License Fees under Section 5.1(a), in addition to FDR's rights under
                            --------------
Sections 9.4(a) and 9.4(b), FDR may elect to continue use of the Software and
---------------     ------
Derivative Works as provided herein for a period of up to one hundred eighty
(180) days for purposes of transitioning existing End Users and of orderly
cessation of use of the Software and Derivative Works, by continuing to pay the
Software License Fees set forth in Exhibit H and Active Account Fees, if
                                   ---------
applicable, or applicable pro rata portions thereof, for the time period of such
use.

          (e) If: (i) this Agreement is terminated under Section 9.2(a) or
                                                         --------------
Section 9.2(b) or (ii) Pegasystems terminates Support and Maintenance for any
--------------
reason after FDR has paid in full the Software License Fee under Section 5.1(a),
                                                                 --------------
or prior to such payment if FDR subsequently elects to pay the Software License
Fees under Section 9.4(a) or Section 9.4(b) (except with respect to a
           --------------    --------------
termination under Section 9.2(c)), then such termination shall be deemed to be a
                  ---------------
release event under the Escrow Agreement, and FDR shall have a nontransferable,
nonexclusive, royalty-free license to use the source code to support the
Software and the Derivative Works.

          (f) Upon termination of this Agreement for any reason, each party will
promptly cease using and return to the other party: (i) all advertising and
promotional materials that bear a trademark or copyright notice of such other
party; and (ii) all items (whether tangible or electronic) that contain
Confidential Information of the other party, except (A) items that have been
properly sold or licensed to the other party, and (B) such materials as FDR may
deem necessary to exercise its continuing rights under this Agreement, including
the source code for the Software and Derivative Works to the extent FDR has
rights thereto under this Agreement.

          (g) In addition, nothing in this Section 9.4 shall limit the right of
                                           -----------
either party to seek injunctive relief, to the extent available in respect of
breaches of this Agreement.

                                       16

<PAGE>

     9.5.  Survival. The following provisions shall survive termination or
           --------
expiration of this Agreement: Section 2.1 (to the extent the license under that
                              -----------
Section is or becomes perpetual and irrevocable or FDR otherwise obtains access
to the source code or other Deposit Materials under the terms of the Escrow
Agreement), Sections 5.1(d), 5.3 and 5.4, Articles 7 and 8, Sections 9.4, 9.5,
            ---------------  ---     ---  ----------     -  ------------  ---
9.6, Articles 10 and 11, and Sections 12.2, 12.3, 12.4, and 12.11.
---  -----------     --      -------------  ----  ----      -----

     9.6.  Rights Cumulative. The rights of the parties to terminate this
           -----------------
Agreement under this Article 9 are cumulative and the existence of any right
                     ---------
under any provision or subsection is not exclusive of any right under any other
provision or subsection of this Agreement.

                                   ARTICLE 10
                                 CONFIDENTIALITY

     10.1. Definition. For the purposes of this agreement, the term
           ----------
"Confidential Information" shall mean: (a) any data or information that is
competitively sensitive material, and not generally known to the public,
including, but not limited to, product planning information, marketing
strategies, marketing or business plans, financial information, operating
details, customer relationships or profiles, sales estimates, and internal
performance results relating to past, present, or future business activities of
either FDR or Pegasystems, or either party's respective Affiliates, or any of
their customers, clients, or suppliers; (b) any scientific or technical
information, design, process, procedure, formula, or improvement that is
commercially valuable or nonpublic or secret in the sense that its
confidentiality affords the party from which it is derived a competitive
advantage over its competitors or possible competitors; or (c) any confidential
or proprietary concepts, documentation, reports, data, specifications, computer
software, source code, object code, flow charts, databases, innovations,
information, know-how, show-how, trade secrets (whether patentable or
copyrightable). Without limiting the scope of the foregoing, Confidential
Information includes, without limitation, all documents, inventions, substances,
engineering and laboratory notebooks, drawings, diagrams, specifications, bills
of material, equipment, prototypes, or models, and any other tangible or
intangible manifestations of any one or more of the foregoing (including
electronic records) which either now exist or come into the control or
possession of either party.

     10.2. Restrictions. Except as expressly authorized by the prior written
           ------------
consent of the other party, each party shall: (a) limit access to all
Confidential Information of the other party received by it to its employees who
have a bona fide need to know to consummate the transactions contemplated by
       ---------
this Agreement, and only for use in connection therewith; (b) advise those of
its employees, agents, or contractors having any access to the Confidential
Information of the other party of the proprietary nature thereof and its
obligations hereunder; (c) take all necessary action by instruction or agreement
with its employees to protect the confidential nature of the Confidential
Information of the other party and to fulfill its obligations under this
agreement; (d) safeguard all Confidential Information of the other party
received by it using the utmost degree of care (which standard of care shall not
be less than the degree of care used by it in safeguarding its own similar
information or material); (e) use all Confidential Information of the other
party received by it solely to consummate the transactions contemplated by this
agreement; (f) not disclose any Confidential Information of the other party to
third parties;

                                       17

<PAGE>

and (g) not disclose the terms of this Agreement or provide a copy of it to any
third party. Upon the request of either party at the expiration of the Term or
the termination of this Agreement, the other party shall surrender to the
requesting party all memoranda, notes, records, drawings, manuals, records, and
other documentation or materials (and all tangible or electronic copies of the
same) pertaining to or including Confidential Information of the requesting
party. Upon the return of such materials, an executive officer of the party
returning the materials agrees to certify in writing that the foregoing
materials have been duly surrendered to the requesting party.

     10.3. Exceptions. The requirements set forth in Section 10.2 shall not
           ----------                                ------------
apply to any Confidential Information that a party can demonstrate: (a) was in
the public domain prior to the date of this agreement or which subsequently
entered into the public domain through no fault or action of such demonstrating
party; (b) was lawfully received by the party from a third party which is not
bound by an obligation of confidence to such third party; (c) was already in the
possession of the party prior to receipt thereof, directly or indirectly, from
the other party; (d) is required to be disclosed in a judicial or administrative
proceeding or under a rule or regulation after all reasonable legal and
equitable remedies for maintaining such Confidential Information in confidence
have been exhausted, including, but not limited to, giving the other party as
much advance notice of the possibility of such disclosure (if permitted) as
practicable so that the other party may attempt to stop such disclosure to
obtain a protective order, an order to disclose such information in camera or
                                                                 ---------
other such relief concerning such disclosure; or (e) is subsequently or
independently developed by employees, consultants, or agents of the party
disclosing the Confidential Information without violation of the terms of this
Agreement.

     10.4. News Releases. Neither FDR nor Pegasystems shall release or publish
           -------------
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated hereunder without the prior
review and written approval of the other party, which approval shall not be
unreasonably withheld or delayed; provided, however, that either party may make
                                  --------  -------
such disclosures as are required by legal, accounting, or regulatory
requirements after making reasonable efforts in the circumstances to consult in
advance with the other party and comply generally with this Section 10.4.
                                                            ------------

     10.5. Injunctive Relief. Pegasystems and FDR agree that money damages would
           -----------------
not be a sufficient remedy for a breach of the confidentiality obligations set
forth in this Article 10. Accordingly, in addition to all other remedies at law
              ----------
or in equity that either party may have, such party shall be entitled to
specific performance and injunctive or other equitable relief arising from any
breach of such provisions.

                                   ARTICLE 11
                               SOURCE CODE ESCROW

     11.1. Source Code Escrow. Pegasystems and FDR are parties to a Source Code
           ------------------
Escrow Agreement dated October 9, 1997 (the "Escrow Agreement"). Within thirty
(30) days after the execution and delivery of this Agreement, Pegasystems, FDR
and Fort Knox Escrow Services, Inc. (or its successor) shall enter into a letter
agreement in the form set forth in Exhibit F with
                                   ---------

                                       18

<PAGE>

respect to continuation of the Escrow Agreement, with such changes in the form
as may be reasonably requested by Fort Knox Escrow Services, Inc. (or its
successor).

     11.2. Rights under Section 365(n) of the U.S. Bankruptcy Code. All rights
           -------------------------------------------------------
and licenses granted by Pegasystems to FDR and its Affiliates hereunder are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of rights to "intellectual property" as defined in
Section 101 of the Bankruptcy Code. The parties agree that FDR and its
Affiliates, as licensees of such rights under this Agreement, shall retain and
may fully exercise all of its rights and elections under the Bankruptcy Code.

                                   ARTICLE 12
                                     GENERAL

     12.1. Assignment and Change in Control. Neither party may assign this
           --------------------------------
Agreement or any interest in it, or delegate any of its obligations under this
Agreement, without the prior written consent of the other party, except that (i)
FDR may assign this Agreement to an Affiliate without such consent; and (ii)
either party may assign this Agreement without such consent to the surviving
entity in the event of a merger or consolidation of a party with another entity,
to the purchaser of substantially all of the stock of a party, or to a purchaser
of all or substantially all of the assets of the business to which the Agreement
relates. This Agreement shall be binding upon and inure to the benefit of each
party and their permitted successors and assigns.

     12.2. Relationship of Parties. Nothing in this Agreement shall be deemed by
           -----------------------
the parties, or by any Third Party, to create a partnership, joint venture or
similar relationship between the parties and, except as otherwise expressly
provided herein, no party shall be deemed to be the agent of the other party, it
being understood and agreed that neither the method of computing compensation
nor any other provision contained herein shall be deemed to create any
relationship between the parties hereto other than the relationship of
independent parties contracting for services. Neither party to this Agreement
has or shall hold itself out as having any authority to enter into any contract
or create any obligation or liability on behalf of, in the name of, or binding
upon the other party.

     12.3. Dispute Resolution. (a) Subject to Section 12.4, any material
           ------------------                 ------------
dispute, controversy or claim between FDR (or any affiliate of FDR) and
Pegasystems (or any affiliate of Pegasystems) arising from or in connection with
this Agreement, whether based on contract, tort, common law, equity, statute,
regulation, order or otherwise ("Dispute") shall be resolved in accordance with
                                 -------
this Section 12.3:
     ------------

          (i) Upon written request of FDR or Pegasystems, the issue shall be
     brought before a committee (the "Senior Level Policy Team") comprised of
                                      ------------------------
     Pam Schwalb and J. C. Dennis representing FDR, and Rick Jones and David
     Wells representing Pegasystems (or comparable level successors to such
     individuals, as appropriate). The Senior Level Policy Team shall meet as
     often as necessary to discuss the Dispute and negotiate in good faith to
     resolve the Dispute. The members of the

                                       19

<PAGE>

     Senior Level Policy Team may be substituted at the discretion of FDR or
     Pegasystems, as the case may be, upon five days' notice.

          (ii)  Arbitration for the resolution of a Dispute may not be commenced
     until the earlier of:

                 (A) the date on which the Senior Level Policy Team concludes in
          good faith that amicable resolution through continued negotiation of
          the matter does not appear likely; or

                 (B) fifteen days after the date the Dispute became subject to
          the review of the Senior Level Policy Team.

          (b)    Any Dispute that remains unresolved after compliance with the
provisions of Section 12.3(a), regardless of the magnitude thereof or the amount
              ---------------
in controversy or whether such Dispute would otherwise be considered justiciable
or ripe for resolution by a court or arbitral tribunal, may be submitted by
either party to, and finally determined by, arbitration in accordance with the
provisions of this Section 12.3(b). Arbitration under this Section 12.3(b) shall
                   ---------------                         ---------------
be the sole means for resolving any dispute under this Agreement.

          (i)   Any such arbitration shall be conducted by the AAA in accordance
     with the AAA Rules, except as the AAA Rules conflict with the provisions of
     this Article 12, in which event the provisions of this Article 12 shall
          ----------                                        ----------
     control.

          (ii)  The arbitration panel (the "Panel") shall consist of three
                                            -----
     arbitrators independent of the parties (the "Arbitrators"). The Arbitrators
                                                  -----------
     shall be appointed pursuant to AAA's Rules for selecting arbitrators. Each
     Arbitrator shall have at least ten years' experience as a senior manager in
     the software development or data processing industry (the "Basic
                                                                -----
     Qualifications").
     --------------

          (iii) Should an Arbitrator refuse or be unable to proceed with
     arbitration proceedings as called for by this Section 12.3(b), the
                                                   ---------------
     Arbitrator shall be replaced by the AAA. Each such replacement Arbitrator
     shall satisfy the Basic Qualifications. If an Arbitrator is replaced after
     the arbitration hearing has commenced, then a rehearing shall take place in
     accordance with the provisions of this Section 12.3(b) and the AAA Rules.
                                            ---------------

          (iv)  The arbitration shall be conducted in Chicago, Illinois, or in
     such other location as the parties may designate by mutual written consent;
     provided, however, that the Panel may from time to time convene, carry on
     --------  -------
     hearings, inspect property or documents, and take evidence at any location
     which the Panel deems appropriate.

                                       20

<PAGE>

          (v)    The Panel may in its discretion order a pre-hearing exchange of
     information including production of documents, exchange of summaries of
     testimony or exchange of statements of position, and shall schedule
     promptly all discovery and other procedural steps and otherwise assume case
     management initiative and control to effect an efficient and expeditious
     resolution of the Dispute.

          (vi)   At any oral hearing of evidence in connection with an
     arbitration pursuant to this Section 12.3(b), each party and its legal
                                  ---------------
     counsel shall have the right to examine its witnesses and to cross-examine
     the witnesses of the other party. No testimony of any witness shall be
     presented in written form unless the opposing party or parties shall have
     the opportunity to cross-examine such witness, except as the parties
     otherwise agree in writing or except under extraordinary circumstances
     where, in the opinion of the Panel, the interests of justice require a
     different procedure.

          (vii)  Within fifteen (15) days after the closing of the arbitration
     hearing, the Panel shall prepare and distribute to the parties a writing
     setting forth the Panel's findings of facts and conclusions of law relating
     to the Dispute, including the reasons for the giving or denial of any
     award.

          (viii) Except as necessary in court proceedings to enforce this
     arbitration provision or an award rendered hereunder, or to obtain interim
     relief, neither a party nor an Arbitrator may disclose the existence,
     content or results of any arbitration hereunder without the prior written
     consent of both parties.

          (ix)   A judgment upon the award rendered by the Panel may be entered
     in any court having jurisdiction thereof.

          (x)    FDR and Pegasystems agree to share equally the cost of any
     administrative fee, any compensation of the Arbitrators and any expenses of
     any witnesses or proof produced at the direct request of the Panel.

          (xi)   The parties shall each bear all their own costs of arbitration,
     including legal fees.

          (xii)  The Panel shall not have the power to award consequential
     damages.

          (xiii) The Federal Arbitration Act, 9 U.S.C. Sections 1 through 14,
     except as modified hereby, shall govern the interpretation and enforcement
     of this Section 12.3(b).
             ---------------

Notwithstanding the foregoing, the parties agree to continue performing their
respective obligations under this Agreement while the Dispute is being resolved
unless or until such obligations are terminated or expire in accordance with the
provisions hereof.

                                       21

<PAGE>

     12.4. Judicial Procedure. Nothing in Section 12.3 shall be construed to
           ------------------             ------------
prevent any party from seeking from a court a temporary restraining order or
other temporary or preliminary relief pending final resolution of a Dispute
pursuant to Section 12.3.
            ------------

     12.5. Notice. All notices from one party to the other shall be in writing
           ------
and shall be given by personal service, telecopy, registered mail or certified
mail (or its equivalent), or overnight courier to the other party at its
respective address or telecopy telephone number set forth below. Mailed notices
and notices by overnight courier shall be deemed to be given upon actual receipt
by the party to be notified. Notices delivered by telecopy shall be confirmed in
writing by overnight courier and shall be deemed to be given upon actual receipt
by the party to be notified.

           If to FDR:
                   First Data Resources Inc.
                   10825 Farnam Drive
                   Omaha, Nebraska 68154
                   Attention: President
                   Telephone Number: (402) 222-6950
                   Telecopy Number:  (402) 222-5094

           With a copy to:
                   First Data Resources Inc.
                   10825 Farnam Drive
                   Omaha, Nebraska 68154
                   Attention: General Counsel
                   Telephone Number: (402) 222-5556
                   Telecopy Number:  (402) 222-7700

           If to Pegasystems:
                   Pegasystems Inc.
                   101 Main Street

                                       22

<PAGE>

                           Cambridge, MA  02142
                           Attention: President
                           Telephone Number: (617) 374-9600
                           Telecopy Number: (617) 374-9620

                  With a copy to:

                           Pegasystems Inc.
                           101 Main Street
                           Cambridge, MA  02142
                           Attention:  Vice President and General Counsel
                           Telephone Number: (617) 374-9600
                           Telecopy Number: (617) 374-9620

A party may change its address or addresses set forth above by giving the other
party notice of the change in accordance with the provisions of this Section
                                                                     -------
12.5. Delivery to any party designated above to receive copies of notices shall
----
not, by itself, be considered notice to any party pursuant to this Section 12.5,
                                                                   ------------
and that failure to deliver a copy shall not, by itself, cause delivery of
notice to any other party to be insufficient or invalid.

     12.6. Waiver. Any term or provision of this Agreement may be waived, or the
           ------
time for its performance may be extended, by the party entitled to the benefit
thereof. Any such waiver shall be validly and sufficiently authorized for the
purposes of this Agreement if, as to any party, it is authorized in writing by
an authorized representative of such party. The failure of either

                                       23

<PAGE>

party hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.

     12.7.  Force Majeure. Neither party shall be responsible or liable for
            -------------
delays in its performance hereunder resulting from causes beyond its reasonable
control (such as government laws or regulations, acts of God, catastrophes,
weather difficulties, or labor or transportation problems). Any such cause shall
extend the performance of the delayed obligation to the extent of the delay so
incurred.

     12.8.  Severability. Wherever possible, each provision hereof shall be
            ------------
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.

     12.9.  Entire Agreement. This Agreement, including Exhibits, sets forth all
            ----------------
of the promises, agreements, conditions, and understandings between the parties
respecting the subject matter hereof and supersedes all negotiations,
conversations, discussions, correspondence, memorandums and agreements between
the parties concerning the subject matter. This Agreement may not be modified
except by a writing signed by authorized representatives of each party to this
Agreement. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

     12.10. Governing Law. This Agreement shall be governed by the laws of the
            -------------
Commonwealth of Massachusetts as to all matters including validity,
construction, effect, performance and remedies without giving effect to the
principles of choice of law thereof.

     12.11. Non-solicitation. During the Term and for one (1) year after the
            ----------------
expiration or other termination of this Agreement:

            (a) Neither FDR nor any of its Affiliates shall, without the prior
written consent of Pegasystems, directly or indirectly attempt to specifically
solicit any employee of Pegasystems or any of its Affiliates to became an
employee of FDR or any of its Affiliates or otherwise induce any such employee
to terminate his or her employment with Pegasystems or its Affiliates.

            (b) Neither Pegasystems nor any of its Affiliates shall, without the
prior written consent of FDR, directly or indirectly attempt to specifically
solicit any employee of FDR or any of its Affiliates to became an employee of
Pegasystems or any of its Affiliates or

                                       24

<PAGE>

otherwise induce any such employee to terminate his or her employment with FDR
or its Affiliates.

                                       25

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

PEGASYSTEMS INC                        FIRST DATA RESOURCES INC.

By: /s/ Alan Trefler                   By: /s/ Eula Adams
        Alan Trefler                           Eula Adams
        CEO                                    Senior Executive Vice President

Dated: 3/28/02                         Dated: 3/28/02

                                       26

<PAGE>

                                    EXHIBIT A

                                    SOFTWARE

FDR has received, accepted and delivered into a production environment the
following PegaCRM Software items:

     a) PegaWORKS core workflow management and rules-based engine comprised of:

        Item Processing

          . Interactive Tracking and Control

          . Prioritized Worklist

          . Audit Trail

          . Duplicate Searching and Selection

          . Electronic Folder

          . Flexible Unit Processing

          . Extended Duplicate and Offset Search

          . Work Manager

          . Centralized Workbaskets

          . Inbound Workbasket Security

          . Service Routing and Control

          . Quality Control Management

          . Multiple Edit Rules

          . High Volume Processing

          . Objective Based Processing

        Management and Reporting

          . Management Override Facilities

          . Timeliness Standards

          . Aging and Productivity Reports by Operator

          . Operator Group Reporting

          . Quality Reporting

          . Calendar Aging Reports

                                       27

<PAGE>

          .  Weekly Reporting

          .  Multiple Divisions

     b) PegaCONNECT Interface components:

          .  GEXT Go External Interface for C and C++ Programs

          .  GAPI/WFFAPI Interface for C_++ and JAVA

          .  SOAP/XML Interface

          .  MQ Interfacing for IBM MQ messaging

          .  GRDB Interactive Relational Database Interface for Imbedded SQL

          .  3270 Server Foreign Application Interface

          .  Customer Information File Interface

          .  Customer Information Query Interface

          .  Accounting Extract Interface

          .  External Security Interface

          .  Com-In and Com-out Structured Message Interfaces

          .  Formatted Message Processing Interface

     c) MOLINK Dialer API for Mosaix CTI/Outbound Dialer integration

     d) PegaWEB servlet engine for delivery of PegaWORKS user interface to
        Browser clients.

     e) PegaREACH client for delivery of PegaWORKS user interface to MS Windows
        based clients.

     f) PegaWORKBENCH development tool for the development of PegaWORKS rules
        objects and workflows.

                                 Template Access

Pegasystems has provided FDR the capabilities to access and develop template
workflow rule objects, which are visibly designated and are subject to special
processing in the rule base management routines such that customers cannot
modify Template workflow rule objects (or create new rules with the Template
designation). Pegasystems has provided FDR with the same developer-privileged
access to this Template mechanism (creation of Template workflow rule objects)
that Pegasystems provides to its internal developers.

                                       28

<PAGE>

                                    EXHIBIT B

                                    PRODUCTS

"Products" means any information processing services or products provided to any
Person in connection with: (i) any electronic payment system principally based
on access of accounts or their equivalents by credit cards, retail cards,
co-branding cards, corporate/commercial cards, affinity cards, proprietary or
private label cards, debit cards, stored value or prepaid cards, chip cards,
smart cards, any other instrument or device used to access an account, and the
successors of each of the foregoing (collectively, "Cards"); (ii) the use of
Cards in connection with home banking and payment systems; and (iii) electronic
payment systems marketed for use with Card applications, whether or not such
applications are for Card or non-Card accounts. Products shall not include: (i)
the development, provision or delivery of Acquirer front-end applications (work
station products and services in customer service call centers or through
Internet or other direct customer access); (ii) services or products provided in
connection with any systems or platforms used primarily for the provision of
products or services to oil or petroleum product retailers; or (iii) services or
products provided in connection with the current FDR Acquirer systems or
platforms (currently referred to as the "CES" or "North Platform" and the
"Nabanco" or "South Platform") or their successors which are used primarily for
the provision of products and services to Merchants and Acquirers.

Notwithstanding anything to the contrary in this Agreement, Products includes
services or products provided to a customer in connection with a system or
platform described in clause (ii) of the preceding paragraph and for whom FDR's
primary relationship is the provision of products or services for use in
connection with Visa or MasterCard Cards.

                                       29

<PAGE>

                                    EXHIBIT C

                   FDR PARTICIPATION IN STRATEGIC PLANNING FOR
              DEVELOPMENT OF FUTURE ENHANCEMENTS AND NEW RELEASES

     FDR shall be entitled to participate in all user groups, information
exchanges, client websites and other programs sponsored by Pegasystems for its
customers for the purposes of constructive information gathering and best
practices evaluation of system design and delivery. FDR agrees to not use this
access for direct or indirect selling or marketing of FDR products without the
express permission and consent of Pegasystems. Pegasystems will give
consideration to any ideas, suggestions or other comments FDR may offer from
time to time with respect to the Software, including enhancements or
improvements that FDR may suggest.

Pegasystems shall be entitled to participate in all user groups, information
exchanges, (FDR-hosted) client websites and other programs sponsored by FDR for
its customers for the purposes of constructive information gathering and best
practices evaluation of system design and delivery as applicable to Pegasystems'
obligations under this Agreement. Pegasystems agrees to not use this access for
direct or indirect selling or marketing of Pegasystems products without the
express permission and consent of FDR.

The terms of this Exhibit C shall be applicable only during the Support and
                  ---------
Maintenance Period.

                                       30

<PAGE>

                                    EXHIBIT D

                        SUPPORT AND MAINTENANCE; TRAINING

Pegasystems Resources:

Pegasystems shall make resources available to FDR for workflow architecture and
product development services when and as requested by FDR at the rates set forth
in Exhibit G, less a discount of 15%. As reasonably requested by FDR,
   ---------
Pegasystems will support FDR, including working directly with End Users or
prospects. Should resolving a problem dictate that a change to Software is
required, Pegasystems will be responsible for making a Software modification.

Software Maintenance and Enhancement Releases:

Pegasystems will support the evolution of the Software through its product
enhancement program that provides:

     .    Patch releases to address software errors and problems and are made
          --------------
          available on an as-needed basis. Pegasystems will address critical
          issues for FDR or End Users who need immediate response and then
          incorporate the changes in the next Maintenance or Version release.

     .    Maintenance releases to provide new functionality and fixes to address
          --------------------
          Software issues. Pegasystems anticipates two to four maintenance
          releases per year.

     .    Version releases to provide major enhancements to the functionality or
          ----------------
          the introduction of new capabilities. Pegasystems anticipates one
          version release per 9 to 12 months.

     .    Documentation releases updating documentation to reflect release or
          ----------------------
          version changes. Documentation releases include updates to Online Help
          and are provided on an as-needed basis with all Maintenance and
          Version releases. Pegasystems will make all documentation available to
          FDR in electronic format.

Technical Support:

Pegasystems will provide technical support and assistance to FDR's internal
users on both usage and technical issues. Pegasystems will establish a
high-quality, FDR specific support team responsible for:

     .    capacity planning and defining system & network topology

     .    identifying, designing and building interfaces

     .    setting up systems environment and installing applications

                                       31

<PAGE>

   . setting up operational and maintenance procedures for ongoing production

   . troubleshooting implementation and ongoing production issues

   . monitoring production and exploring options for improving operational
     productivity and efficiency

   . training the FDR staff to achieve a high level of self-sufficiency in the
     use, deployment and support of the Software

Pegasystems emergency technical support will be available on a 7 day, 24 hour
basis. The support team will make extensive use of telecommunications facilities
to diagnose and troubleshoot problems. If necessary and as reasonably requested
by FDR, Pegasystems will also provide on-site support (at either FDR facilities
or on End User premises) to address critical problems.

Pegasystems refers to its technical support philosophy as providing "Private
Banker" style individual service (as distinguished from a Help Desk or generic
support infrastructure). In addition to Private Banker support, Pegasystems will
provide

A.   Online Customer Support access to FDR staff to the ACTION! system used
     -----------------------
     within Pegasystems to manage and respond to customer issues.

B.   Newsletters to inform users of upcoming developments, known problems and
     -----------
     operational recommendations.

C.   Advisory Board access to consult with Pegasystems development staff on
     --------------
     enhancements or opportunities to improve the capability or resiliency of
     the system.

All Technical Support services rendered related to issues not attributed to the
Software shall be provided at Pegasystems regular rates set forth in Exhibit G,
                                                                     ---------
less a discount of 15%.

Training

When requested by FDR, Pegasystems will provide training and education services
to FDR that consist of:

A.   Training for Workflow Architects that instructs them in how to develop and
     --------------------------------
     maintain Templates.

B.   Training on system support and implementation including training on how to
     ---------------------------------------------
     install and configure Software and Derivative Works.

C.   Training on System Administration will be made available to technical
     ---------------------------------
     support staff.

                                       32

<PAGE>

D.   Training on Designing Workflows and Templates using PegaSTAR, Pegasystems'
     ---------------------------------------------
     Structured Technique for Analysis and Reengineering.

E.   Training on future system enhancements and releases.
     ---------------------------------------------------

The above training will be based on FDR access to Pegasystems standard Training
Courses, supplemented with specialized education from trainers and other staff.
Pegasystems will make its standard course material available to FDR in both hard
copy and electronic format for FDR to personalize as Evolve documentation.

In addition to the above formal training, if requested by FDR, Pegasystems will
provide consulting and education to FDR internal technical staff on the
technical and implementation architecture of the system. Pegasystems will also
provide design and technical assistance to facilitate FDR internal use of the
system.

All training services shall be provided at Pegasystems regular rates set forth
in Exhibit G, less a discount of 15%.
   ---------

Software and Platform Support

On FDR's request, Pegasystems will provide End User technical support to FDR
customers for Customer Support Services to handle issues or problems being
experienced by FDR staff or End Users. Such support shall include:

     .   Emergency telephone support

     .   Emergency dial-in support

     .   Software error resolution

     .   Software configuration troubleshooting

     .   Performance improvement recommendations

All such services shall be provided at Pegasystems regular rates set forth in
Exhibit G, less a discount of 15%.
---------

                                       33

<PAGE>

                                    EXHIBIT E

                     END USER AGREEMENT TERMS AND CONDITIONS

Every End User Agreement entered into by FDR with an End User for use of the
Software and Derivative Works on a computer operated by or for the End User,
shall include the following contractual provisions. These requirements shall not
apply to any End User Agreement for Evolve e-Customer Service, OPCF or other
Derivative Work where Software is not licensed for use by the End User on a
computer operated by or for the End User.

1.   Restrict the End User's use of the Software or Derivative Work: (i) to
object code (subject to commercially-reasonable independent third party escrow
arrangements allowing the End User access to the source code only upon the
bankruptcy or insolvency of Pegasystems); and to use in connection with
Products.

2.   Prohibit any assignment, timesharing, rental, or hypothecation of the
Software or Derivative Work, or their use by any Third Party other than the End
User. 3. Prohibit the passing or transfer of any right, title, or interest to
the Software or the Derivative Work to the End User or any other Third Party
(except for the non-exclusive and non-transferable right to use the Software or
Derivative Work for the specific work processing purposes stated).

4.   Prohibit any reverse engineering, disassembly, recompilation, modification,
or duplication (except for back-up purposes) of the Software or Derivative Work.
5. For End Users located in the United States, specify that the law governing
such End User agreement shall be the law of any U.S. state or the District of
Columbia, and provide for a U.S. venue to adjudicate disputes arising
thereunder. For End Users located in Canada, specify that the law governing such
End User agreement shall be the law of any Canadian province, and provide for a
Canadian venue to adjudicate disputes arising thereunder.

6.   Except for Pegasystems' indemnity obligations pursuant to Section 8.2(b):
                                                               --------------
(i) disclaim in a conspicuous manner (and at least as conspicuous as FDR
disclaims its own liability), specifically mentioning Pegasystems, Pegasystems'
liability for all damages and claims, whether direct, indirect, incidental,
consequential, or punitive, and all attorneys' fees and costs, arising from the
End User's use of the Software or Derivative Work; (ii) limit the End User's and
a Third Party's rights to assert claims for damages against Pegasystems and,
without limiting the scope of the foregoing, disclaim the End User's or a Third
Party's rights to assert claims for damages against Pegasystems; and, (iii)
without limiting the scope of the foregoing, disclaim the End User's or a Third
Party's right to assert claims against Pegasystems as a third party beneficiary
of this Agreement, or otherwise.

7.   Require the End User, at the termination of its End User agreement with
FDR, to immediately discontinue use of the Software or Derivative Work, and
immediately return to FDR all copies of the Software or Derivative Work and any
documentation provided pursuant to an End User Agreement or otherwise.

8.   Prohibit publication or dissemination by the End User of any results of
benchmark or other testing run on the Software or Derivative Work.

9.   Require the End User to maintain the non-public and proprietary character
of the Software or Derivative Work.

10.  Require the End User to comply fully with all applicable laws and
regulations (including relevant export U.S. restrictions and regulations to
assure that the Software or Derivative Work are not, directly or indirectly,
exported in violation of U.S. law).

11.  If such End User Agreement permits the End User to develop work flows or
templates specific to it, limit such right to the terms of the End User
Agreement, and prohibit the End User from selling or reselling, licensing or
relicensing, or otherwise marketing or making available to any Third Party any
work flows or templates.

                                       34

<PAGE>

                                    EXHIBIT F

                  LETTER AGREEMENT WITH RESPECT TO CONTINUATION
                          OF EXISTING ESCROW AGREEMENT

                                  [Insert Date]

Michael C. Amiri
Fort Knox Escrow Services, Inc.
3539 A Church Street
Clarkson, Georgia 30021-1717

Dear Mr. Amiri:

          Fort Knox Escrow Services, Inc ("Escrow Agent"), Pegasystems Inc.
("Pegasystems") and First Data Resources Inc. ("FDR") are parties to a Source
Code Escrow Agreement dated October 9, 1997 ("Escrow Agreement"). This letter is
being sent to Escrow Agent jointly by Pegasystems and FDR to confirm the parties
mutual agreements and understandings with respect to the amendment of the Escrow
Agreement under Section 10(d) thereof.

          1. The Escrow Agreement was entered into pursuant the Software License
and Support Agreement between Pegasystems and FDR dated June 27, 1997 ("Original
Agreement"). Effective March 1, 2002, Pegasystems and FDR have mutually agreed
to terminate the Original Agreement, and to replace it with a Refreshed Software
License and Support Agreement dated as of March 1, 2002 ("Refreshed Agreement").

          2. Escrow Agent, Pegasystems and FDR hereby agree that the termination
of the Original Agreement shall not be deemed to be a event of termination under
Section 7(a) of the Escrow Agreement.

          3. Pegasystems and FDR acknowledge that the termination of the
Original Agreement shall not in any way be deemed to be a release event under
Section 5(b) of the Escrow Agreement.

          4. Escrow Agent, Pegasystems and FDR hereby agree that the Escrow
Agreement shall remain in full force and effect, except effective as of March 1,
2002 (i) the references to the Original Agreement in the following sections and
exhibit paragraphs of the

                                       35

<PAGE>

Escrow Agreement shall be deemed to be references to the Refreshed Agreement:
Section 2, Section 5(b), Section 7(a), Section 9, Exhibit A, first paragraph on
page A-1, Exhibit A, last paragraph on page A-3; and (ii) termination of the
Refreshed Agreement under the circumstances set forth in Section 9.4(e) thereof
shall be deemed to be a release event under Section 5(b) of the Escrow
Agreement.

If the foregoing accurately expresses our agreements and understandings, please
sign the attached copies of this letter and return one copy to Pegasystems and
the other copy to FDR, at the addresses indicated in Section 10(h) of the Escrow
Agreement.

Very truly yours,

Pegasystems Inc                    First Data Resources Inc.

By:  ___________________           By:  _____________________

AGREED and ACCEPTED:

Fort Knox Escrow Services, Inc.

By:  ________________________

Date:  _______________________

                                       36

<PAGE>

                                    EXHIBIT G

                          PEGASYSTEMS' PRICING SCHEDULE

Pegasystems will make resources available to FDR at its then-current regular and
published rates, less a discount of 15%. Rates for services are subject to
supplemental billing for reasonable and actual travel expenses. Rates may change
on ninety (90) days written notice, and Pegasystems agrees that its rates will
be in line with rates from comparable firms. Pegasystems will make available to
FDR slots in its standard training courses at Pegasystems' then-current rates
less 15%.

Any travel of Pegasystems personnel to be reimbursed by FDR shall be
approved in advance by FDR, and shall be undertaken in accordance with FDR's
established travel policy, a copy of which is attached hereto as Appendix G-1.
FDR may modify its travel policy from time to time at its discretion. Upon
completion of approved travel, Pegasystems shall provide to FDR an itemized
report of all transportation, hotel accommodation, and other reasonable and
necessary living expenses incurred in connection with such travel, and the
supporting documentation therefor.

                                       37

<PAGE>

                                  APPENDIX G-1

                                FDR TRAVEL POLICY

I.     Purpose -- Due to the financial responsibility related with business
     travel, First Data has established this Policy for travel expenditures and
     determination of need to travel. The Policy ensures operationally
     responsive and cost effective uses of business travel and maximizes Company
     gain from travelers' use of approved vendors.

II.    Purpose and Scope -- The First Data Smart Travel policy promotes
     alternatives to trips and cost-efficient travel. The policy currently
     applies to U.S.-based First Data employees only, and it is to be used in
     conjunction with the First Data Global Travel & Entertainment Guidelines.
     (Smart Travel details for international employees will be developed.)

III.   To stay in compliance with the Smart Travel Policy, all First Data
     employees must meet these requirements:

     A.  Consider the use of travel alternatives to accomplish your business
         objective. Alternatives include teleconferencing, Web conferencing,
         and/or video conferencing.
     B.  Consider use of First Data facility meeting rooms before seeking an
         off-site location.
     C.  Travel objectives should include revenue generation and/or expense
         savings for First Data.
     D.  Combine multi-purposes into a single trip when possible.
     E.  If you determine travel is essential, submit a Travel Authorization
         form.
     F.  Obtain travel approval from a member of the Executive Committee through
         the Travel Authorization form.
     G.  Book all corporate travel through the designated travel agencies.
     H.  Use the preferred suppliers offered by the designated travel agencies
         for airline tickets, hotels, and car rentals.*
     I.  Accept the lowest airfare offered by the designated travel agency.*
     J.  Purchase airline tickets as far in advance as possible--no less than
         seven days in advance of travel.*
     K.  Purchase non-refundable airline tickets that can be used for future
         travel if your original trip is changed or cancelled.*

For a list of preferred travel suppliers, please go to FirstWeb at
www.firstweb.1dc.com. Click on Tool Box on the top tool bar and then, under
--------------------
General Tools, choose Corporate Travel.

*See the following page for an example of price differences for airline ticket
purchases.

                                       38

<PAGE>

                         Example of Airline Ticket Fares

                     When Purchased Under Various Conditions

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
  Denver To LaGuardia        United      Frontier   American*           Best Fare**
----------------------------------------------------------------------------------------------
<S>                          <C>         <C>        <C>          <C>
Advance Purchase:  No        $1,686      $1,136     $1,531       Frontier lowest by $550
Saturday Stay:  No
Refundable
----------------------------------------------------------------------------------------------
Advance Purchase:  No           N/A      $  451        N/A       Frontier lowest by $1,235
Saturday Stay:  No
Nonrefundable
----------------------------------------------------------------------------------------------
Advance Purchase: 7 Day      $  536      $  451     $  606       Frontier lowest by $1,235
Saturday Stay:  No
Nonrefundable
----------------------------------------------------------------------------------------------
Advance:  14 Day             $  511      $  257     $  561       Frontier lowest by $1,429
Saturday Stay:  No
Nonrefundable
----------------------------------------------------------------------------------------------
Advance:  21 Day             $  411      $  230     $  468       Frontier lowest by $1,456
Saturday Stay:  No
Nonrefundable
----------------------------------------------------------------------------------------------
</TABLE>

*American has no direct flight from Denver to LaGuardia. Prices based on
connecting flights with a window of less than two hours.

**Best fare calculations based on highest fare noted of $1,686 (United: No
Advance/No Saturday stay over/Refundable).

                                       39

<PAGE>

Note 1: There are significant price differences in purchases less than 7 days in
        advance of travel versus purchases made at least 7 days before travel.
        Also, there are significant differences in less-than-7-day advance
        refundable and nonrefundable purchases.

Note 2: There is no price change if traveler stays over during the week. The
        only difference occurs with a Saturday stay over.

Note 3: The price break for a Saturday stay over is not significant if the
        ticket is purchased at least 7 days in advance of travel.

                                       40

<PAGE>

                                    EXHIBIT H

                              SOFTWARE LICENSE FEES

--------------------------------------------------------------------------------
                 MONTH                            AMOUNT OF PAYMENT
--------------------------------------------------------------------------------
March 2002                                         $  1,950,378.85
--------------------------------------------------------------------------------
April 2002                                            1,950,378.85
--------------------------------------------------------------------------------
May 2002                                              1,950,378.85
--------------------------------------------------------------------------------
June 2002                                             1,950,378.85
--------------------------------------------------------------------------------
July 2002                                             1,950,378.85
--------------------------------------------------------------------------------
August 2002                                           1,950,378.85
--------------------------------------------------------------------------------
September 2002                                        1,950,378.85
--------------------------------------------------------------------------------
October 2002                                          1,950,378.85
--------------------------------------------------------------------------------
November 2002                                         1,950,378.85
--------------------------------------------------------------------------------
December 2002                                         1,950,378.85
--------------------------------------------------------------------------------
January 2003                                          1,179,545.45
--------------------------------------------------------------------------------
February 2003                                         1,179,545.45
--------------------------------------------------------------------------------
March 2003                                            1,179,545.45
--------------------------------------------------------------------------------
April 2003                                            1,179,545.45
--------------------------------------------------------------------------------
May 2003                                              1,179,545.45
--------------------------------------------------------------------------------
June 2003                                             1,179,545.45
--------------------------------------------------------------------------------
July 2003                                             1,179,545.45
--------------------------------------------------------------------------------
August 2003                                           1,179,545.45
--------------------------------------------------------------------------------
September 2003                                        1,179,545.45
--------------------------------------------------------------------------------
October 2003                                          1,179,545.45
--------------------------------------------------------------------------------
November 2003                                         1,179,545.45
--------------------------------------------------------------------------------
December 2003                                         1,179,545.45
--------------------------------------------------------------------------------
2004+                                                           -0-
--------------------------------------------------------------------------------

                                       41

<PAGE>

                                    EXHIBIT I

                                EXHIBIT I CLIENTS

The term "Exhibit I Clients" shall mean and include the five (5) FDR customers
          ---------
with the largest number of Active Accounts, excluding [* - confidential
information filed separately with the SEC] and [* - confidential information
filed separately with the SEC] and the successor in interest to either of them.
Upon execution of this Agreement, FDR will provide Pegasystems a list of
the then-current Exhibit I Clients. Thereafter, during the term of this
                 ---------
Agreement, FDR will notify Pegasystems of any change in the Exhibit I Clients
within fifteen (15) days after the end of a calendar quarter during which such a
change occurred. For purposes of Section 5.1(d), for the three (3) year period
                                 ------- -----
beginning on the Effective Date, any usage of an Evolve Application by [* -
confidential information filed separately with the SEC] shall not count toward
the calculation of the Active Account Fee or the Active Account Credit.

In addition, until the Active Account Credit is fully satisfied, within fifteen
(15) days after the end of a calendar quarter, FDR shall provide a written
report to Pegasystems on the amount of unused Active Account Credit referenced
in Section 5.1(d) herein and a summary of the fees that would be applied to such
Active Account Credit.

                                       42

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00038-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00038-of-00352.parquet"}]]