Image Sensing Systems, Inc. Exhibit 10.20 TO Form 10-KSB, dated 12-31-2005





EXHIBIT 10.20  



Consultant Agreement
Between
Image Sensing Systems,
Inc. and
James Murdakes 



WHEREAS James Murdakes (Murdakes) as
a consultant to Image Sensing Systems, Inc. (ISS or the “Company”) has served in
the capacity as the Chief Executive Officer and President of the Company since April 2002,
without a written agreement between the Company and Murdakes as to a monthly retainer for
his services, bonus payments awarded for achieving Company financial and strategic
objectives or severance payments in the event he is terminated without cause (as defined
below), or due to a change in control (as defined below) 



WHEREAS the Company believes a
consultancy agreement with Murdakes is in the best interests of the Company in order to
document the Company’s Compensation and Severance obligations to Murdakes 



NOW THEREFORE the Company agrees to
(1) pay Murdakes a retainer of $9,330 per month on the last day of each month for fiscal
year 2004, with the understanding that the Company may adjust this retainer amount at the
end of 2004 and each year thereafter if Murdakes remains as the Company’s Chief
Executive Officer and President; (2) pay Murdakes an annual bonus after the end of the
fiscal year for achieving the financial and strategic objectives agreed upon by the Board
of Directors of the Company and Murdakes at the beginning of such year, provided that,
such bonus shall be determined by the Compensation Committee and approved by the full
Board of Directors of the Company; (3) pay Murdakes severance pay in an amount equal to
Murdakes’ monthly retainer on the termination date multiplied by six months if the
Company terminates him without cause (as defined below) or to pay Murdakes severance pay
in an amount equal to Murdakes’ monthly retainer on the date of change of control (as
defined below) multiplied by twelve months in the event of a change in control (as defined
below) of the Company. 



Murdakes shall provide services on an
at-will basis. This consultancy agreement is not, and shall not be construed as, an
employment contract affecting in any way the duration of Murdakes’ services or any
terms and conditions thereof except those set forth herein. Murdakes and the Company may
terminate their consultancy relationship at any time, for any reason, or for no reason. 



“Cause” means: any
failure to perform assigned job responsibilities that continues unremedied for a period of
thirty (30) days after written notice to Murdakes by the Company; conviction of a felony
or misdemeanor or failure to contest prosecution for a felony or misdemeanor; the
Company’s reasonable belief that Murdakes engaged in a violation of any statute, rule
or regulation, any of which in the judgment of the Company is harmful to the
Company’s business or to the Company’s reputation; or the Company’s
reasonable belief that Murdakes engaged in unethical practices, dishonesty or disloyalty. 



“Change in Control”
means the occurrence of any of the following events: 



     (a)    
          Any “Person” (as such term is used in Sections 13(d) and 14(d) of the
          Securities Exchange Act of 1934, as amended) is or becomes the “Beneficial
          Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly,
          of securities of the Company representing more than fifty percent (50%) of the
          total voting power represented by the Company’s then outstanding voting
          securities without the approval of the Board of Directors of the Company, unless
          the Board of Directors specifically designates such acquisition to be a change
          of control; or 



     (b)    
          A merger or consolidation of the Company whether or not approved by the Board of
          Directors of the Company, other than a merger or consolidation which would
          result in the voting securities of the Company outstanding immediately prior
          thereto continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity) at least fifty percent
          (50%) of the total voting power represented by the voting securities of the
          Company or such surviving entity outstanding immediately after such merger or
          consolidation, or the shareholders of the Company approve a plan of complete
          liquidation of the Company or an agreement for the sale or disposition by the
          Company of all or substantially all of the Company’s assets. 



CONSULTANT 



AGREED:   /s/   James Murdakes
                
                
    Dated March 23, 2004

James Murdakes  




 



IMAGE SENSING SYSTEMS,
INC. 



AGREED:   /s/   Arthur J. Bourgeois
                
                Dated March 23, 2004

Arthur J. Bourgeois, Chief Financial Officer