# UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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# FORM 8-K

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# CURRENT REPORT

# Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934

Date of Report:   April 7, 2006(Date of earliest event reported)

IMAGE SENSING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

Commission File Number: 0-26056

| | Minnesota |  | 41-1519168 | 
| | --------- |  | ---------- | 

| | (State or other jurisdiction of incorporation) |  | (IRS Employer Identification No.) | 
| | ---------------------------------------------- |  | --------------------------------- | 

500 Spruce Tree Centre
1600 University Avenue West
St. Paul, Minnesota 55104
(Address of principal executive offices, including zip code)

(651) 603-7700
(Registrants telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

|o |  | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|- |  | -------------------------------------------------------------------------------------

|o |  | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|- |  | --------------------------------------------------------------------------------------

|o |  | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|- |  | ------------------------------------------------------------------------------------------------------

|o |  | Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
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# Item 1.01   Entry into a Material Definitive Agreement.

On April 7, 2006, Image Sensing Systems, Inc. (the Company) and
James Murdakes entered into an employment agreement (the Employment Agreement), providing that Mr. Murdakes will serve
at will as the Companys Chief Executive Officer and President from January 1, 2006 through December 31, 2006
(the Employment Term). Pursuant to the Employment Agreement, Mr. Murdakes will be paid a salary of $145,000 for the
Employment Term, subject to adjustment by the Companys Compensation Committee in its sole and absolute discretion. In
addition, the Employment Agreement provides that Mr. Murdakes will receive four weeks vacation per year on an accrual basis and
will be eligible for any bonus awarded for achieving Company financial and strategic objectives as set forth by the Board of
Directors.

In the event Mr. Murdakess employment is terminated by the Company
without cause (as defined in the Employment Agreement), the Employment Agreement provides that Mr. Murdakes will be entitled to
receive six months severance pay. The Company also agreed to pay Mr. Murdakes twelve months salary in the event that over 50% of
the Companys common stock changes hands, substantially all of the assets of the Company are sold or the Board of Directors
of the Company, in its sole and absolute discretion, determines that there has been a sufficient change in stock ownership of the
Company to constitute a change in control of the Company.

The Employment Agreement supersedes Mr. Murdakess Consulting Agreement
with the Company dated March 23, 2004.

The foregoing description of the Employment Agreement is not complete and is
qualified in its entirety by reference to the Employment Agreement, a copy of which is filed as Exhibit 10.1 to this Current
Report on Form 8-K and is incorporated herein by reference.

# Item 9.01   Financial Statements and Exhibits.

(d)    Exhibits.

| | 10.1 |  | Employment Agreement between the Company and James Murdakes dated
April 7, 2006.
| | ---- |  | --------------------------------------------------------------------------------

# SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

| | IMAGE SENSING SYSTEMS, INC.
| | ---------------------------
|
| | By:                        
| |                            

Date:   April 10, 2006

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# EXHIBIT INDEX

|ExhibitNumber |  | Description                                                                     
|------------- |  | --------------------------------------------------------------------------------
|             
|10.1          |  | Employment Agreement between the Company and James Murdakes dated
April 7, 2006.

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