Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Image Sensing
Systems, Inc., and its subsidiaries and divisions (collectively, “ISS”) and
James Murdakes (“Murdakes”) on this date, March 9, 2007, effective retroactively
to January 1, 2007. This Agreement replaces and supersedes any and all former
Employment Agreements, including but not limited to the Employment Agreement
between Image Sensing Systems, Inc. and James Murdakes dated April 7, 2006.

 

RECITALS:

 

A.           Murdakes has been employed by ISS as the Company’s Chief Executive
Officer, President, and Chairman of the Board of Directors.

B.           Murdakes wishes to retire from his roles as Chief Executive Officer
and President in 2007.

C.           Murdakes has been involved and will continue to be involved in the
transition of those roles to his successor.

D.           This Agreement is intended to assist with that transition and to
facilitate Murdakes’s smooth retirement.

E.           Murdakes and ISS mutually agree to the terms set forth in this
Agreement.

AGREEMENT:

1.           Employment. Murdakes has transitioned his role as President.
Murdakes will continue in his role as Chief Executive Officer through May 31,
2007, at which time, that role will similarly transition to his successor. For
the month of June 2007, Murdakes will continue his employment with ISS in the
capacity of Executive Consultant to the newly appointed CEO. Murdakes will
retire from his employment with ISS effective July 1, 2007. He will, however,
continue his role as Chairman of the Board of Directors thereafter, at the will
of the Board.

2.           Duties. Through June 30, 2007, Murdakes agrees to devote his full
professional time, attention and efforts to the business and affairs of ISS and
to the transition of his Chief Executive Officer duties, as well as to the
orientation and training of his successor. Murdakes further agrees that to the
best of his ability and experience, and at all times, he will conscientiously
perform the duties and obligations assigned to him.

3.           Compensation.

 

(a)

Salary. Retroactive to January 1, 2007, Murdakes’s base salary will be $155,000
per year. Murdakes will be paid his pro rata base salary through June 30, 2007,
in accordance with ISS’s regular payroll practices.

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(b)

Employee Benefits. Murdakes will continue to receive insurance and other
benefits in accordance with ISS’s standard and executive benefits, per his
current elections, through June 30, 2007.

 

Vacation. Murdakes will continue to accrue vacation through June 30, 2007, at a
pro rata share of four weeks per year. Upon Murdakes retirement on June 30,
2007, Murdakes will be paid for any unused vacation time he has accrued.

4.            Confidentiality, Noncompetition and Invention Assignment. Murdakes
expressly agrees that the Confidentiality, Noncompetition and Invention
Assignment Agreement which he signed on or about March 9, 2007, remains in
effect and survives his retirement.

5.            Severance upon Termination of Employment.

 

(a)

Retirement as of July 1, 2007. At the time he retires, Murdakes’s salary,
participation in ISS’s employee benefits plans, and receipt of employment
perquisites will cease; however, his signature on the form of Release attached
to this Agreement as Exhibit A, Murdakes will be entitled to continue to receive
a pro rata portion of his base salary, in accordance with ISS’s regular payroll
practices, through December 31, 2007. Murdakes thru this period will, at no
additional compensation, provide consultation to the new CEO, as required; and
will serve as the chairman of the Board of Directors of ISS with compensation
consistent with the ISS pay schedule for outside directors.

 

 

(b)

Termination by ISS “With Cause.” Should ISS terminate Murdakes’s employment for
any of the following reasons, Murdakes shall not be entitled to any severance:

 

 

(i)

Conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws
of the United States or any state thereof or conviction of, or a plea of
“guilty” or “no contest” to, any act involving moral turpitude;

 

 

(ii)

Breach of fiduciary duty involving personal profit;

 

 

(iii)

Willful and material misconduct in the performance of duties assigned to
Murdakes;

 

 

(iv)

Consistent failure to perform the reasonable stated duties assigned to Murdakes
under this Agreement; or

 

 

(v)

Illegal or unethical business practices, including but not limited to the
commission of fraud, misappropriation or embezzlement in connection with ISS’s
business.

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Murdakes shall have thirty (30) days to cure any alleged breach, failure, or
misconduct under Subsections (iii) and (iv), above, after ISS provides Murdakes
written notice of the actions or omissions constituting such breach, failure, or
misconduct.

 

6.            Miscellaneous.

 

 

(a)

Amendments. This Agreement may not be changed or modified in whole or in part
except by a writing signed by ISS and Murdakes.

 

(b)

Governing Law. This Agreement will be governed by and interpreted according to
the laws of the State of Minnesota.

 

(c)

Severability. Murdakes and ISS recognize that the limitations contained in this
Agreement are reasonably and properly required for the adequate protection of
the interests of ISS. If for any reason a court of competent jurisdiction or
binding arbitration proceeding finds any provision of this Agreement, or the
application of any part of this Agreement, to be unenforceable, the remaining
provisions of this Agreement will be interpreted so as best to reasonably effect
the intent of the parties. The parties further agree that the court or
arbitrator shall replace any such invalid or unenforceable provisions with valid
and enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.

 

(d)

Entire Agreement. This Agreement (including its Appendices and any document
expressly referenced in this Agreement), which consists of two (2) identical
originals (except that they are numbered respectively “Original # 1” and
“Original # 2”), constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter of this Agreement and
supersedes all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect to the subject matter of this Agreement.

This Agreement is made and effective as of the Effective Date above.

 

Image Sensing Systems, Inc.

 

By:

/s/ Gregory R. L. Smith

 

/s/ James Murdakes

Its:

CFO and Treasurer

 

James Murdakes

 

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APPENDIX A

TO THE EMPLOYMENT AGREEMENT BETWEEN

IMAGE SENSING SYSTEMS, INC., AND JAMES MURDAKES

 

WHEREAS, the parties entered into an Employment Agreement which became effective
in January 2007; and

 

WHEREAS, in order to receive certain severance payments and related benefits
under Paragraph 5 of that Employment Agreement, the parties agreed that Murdakes
would be required to sign a release of claims at the time of the event
contemplated by that Paragraph; and

 

WHEREAS, the parties have agreed to a form of release substantially similar to
that set forth in this Appendix A; and

 

WHEREAS, under the terms of this Appendix A, Murdakes agrees to release all
claims – whether known or unknown – that he may have against ISS, or any of its
respective officers, directors, members, managers, employees or agents, parents
or affiliates, through the date of his signature on this Appendix A;

 

NOW, THEREFORE, it is mutually agreed by and between the parties for good and
valuable consideration as follows:

 

A.           Murdakes affirms that he is signing this Appendix A on or after
July 1 , 2007.

 

B.           Murdakes, for good and valuable consideration, does hereby fully
and completely release and waive any and all claims, complaints, causes of
action, demands, suits, and damages, of any kind or character, which he has or
may have against ISS, or any of its respective officers, directors, members,
managers, employees or agents, parents or affiliates arising out of any acts,
omissions, conduct, decisions, behavior, or events occurring up through the date
of his signature on this Appendix A.

 

Murdakes understands that he is giving up any and all claims (whether now known
or unknown) that he may have, including (without limitation) claims relating to
his employment with ISS, and the cessation of his employment with ISS,
including, but not limited to, any claims arising under or based upon the
Minnesota Human Rights Act; Title VII of the Civil Rights Act of 1964, as
amended; the Americans With Disabilities Act (“ADA”); the Family & Medical Leave
Act (“FMLA”); the Age Discrimination in Employment Act (“ADEA”); or any other
federal, state, or local statute, ordinance, or law. Murdakes also understands
that he is giving up all other claims, including those grounded in contract or
tort theories, including but not limited to breach of contract; tortious
interference with contractual relations; promissory estoppel; breach of manuals
or other policies; assault; battery; fraud; false imprisonment; invasion of
privacy; intentional or negligent misrepresentation; defamation, including
libel, slander, defamation and self-publication defamation; intentional or
negligent infliction of emotional distress; sexual harassment; or any other
theory.

 

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Murdakes further understands that he is releasing, and does hereby release, any
claims for damages, by administrative charge or otherwise, whether brought by
him or on his behalf by any other party, governmental or otherwise, and agrees
not to institute any claims for damages via administrative or legal proceedings
against ISS, or any of its respective officers, directors, members, managers,
employees or agents, parents or affiliates. Murdakes understands that, while he
retains his right to bring an administrative charge with the Equal Employment
Opportunity Commission or the Minnesota Department of Human Rights, he waives
and releases any and all rights to money damages or other legal relief awarded
by any governmental agency related to any charge or claim.

 

C.           Murdakes understands that he has the right to seek legal counsel
before entering into this Appendix A and that he has 21 days from the date of
his termination to execute this Appendix A.

 

D.          Murdakes understands that he may revoke this release (Appendix A)
(1) with respect to potential age-related claims within the seven-day period
following the date he signs it and (2) with respect to potential claims under
the Minnesota Human Rights Act within the fifteen-day period following the date
he signs it. Murdakes also understands that, if he does revoke this release
(Appendix A), he gives up any right to the consideration provided to him the
benefits described in Paragraph 5 of the Employment Agreement.

 

E.           Murdakes acknowledges that he has read this Appendix A, that he
understands it, and that he enters into Appendix A voluntarily.

 

Dated:  

 

 

By:

 

 

 

 

James Murdakes

 

 

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