Exhibit 10.1

	
  

 	
  

 
	
 

 	
 500 Spruce
 Tree Centre

 
	
 1600
 University Avenue West

 
	
 Saint Paul,
 Minnesota 55104-3828

 
	
  

 
	
 651.603.7700

 
	
 651.305.6402
 fax

 
	
 www.imagesensing.com

 


Confidential


October 21,
2010


Mr. Daniel W.
Skites

#### ####### ###

######, ## #####


Dear Dan:


On behalf of
Image Sensing Systems, Inc. (ISS), I am pleased to confirm our employment offer
to you as Vice President of Sales reporting to the Chief Executive Officer.
Listed below are the items related to your employment:


	
  

 	
  

 
	
 Start Date:

 	
 No later
 than November 16, 2010

 
	
  

 	
  

 
	
 Annual Base
 Salary:

 	
 $172,000

 
	
  

 	
  

 
	
 Signing
 Bonus:

 	
 $22,500. The
 bonus must be repaid to ISS if you voluntarily leave our employment within 90
 days of your start date.

 
	
  

 	
  

 
	
 Bonus
 Program 2010:

 	
 Non-recoverable
 draw at a rate of $200/calendar day from start date

 
	
  

 	
  

 
	
 Bonus
 Program 2011:

 	
 See Exhibit
 A

 
	
  

 	
  

 
	
 Stock
 options:

 	
 You will be
 recommended to the board of directors to receive an option grant of 15,000
 shares

 
	
  

 	
  

 
	
 Annual
 Vacation:

 	
 22 days paid
 time off in lieu of standard ISS vacation and sick time

 
	
  

 	
  

 
	
 Severance:

 	
 Upon a
 change in control of ISS, if your employment is involuntarily terminated
 within 18 months of the change in control, you will receive a lump sum
 payment equal to one year’s annual base salary

 
	
  

 	
  

 
	
 Other
 Benefits:

 	
 As a
 full-time employee, you will be eligible to participate in selected benefits
 as defined on the Benefits Summary document you receive separately. Your
 health and dental coverage will be effective the first day of the month
 following thirty (30) days of employment.

 










Skites page 2 of 2


The U.S.
Immigration Reform and Control Act requires employers to verify employment
eligibility for all new hires. You will be asked to provide documentation of
your identity and of your authorization to work in the United States within
three (3) days of your start date. Your employment may be contingent on
successful reference and background checks.


It is
important to note that neither this document, nor any other written or verbal
communication, should be construed as creating a contract for employment or a
warranty of benefits for any particular period of time, nor does it change the
“at will” employment relations between Image Sensing Systems, Inc. and any of
its employees. This means that employees have the right to terminate the
employment relationship with Image Sensing Systems, Inc. at any time, with or
without notice, for any reason. Image Sensing Systems, Inc. has the same right
to terminate the employment relationship at any time, with or without notice,
for any reason not prohibited by law.


This offer is
contingent upon your execution of our standard proprietary information and
inventions agreement which has been provided to you.


We are excited
to have you join the team at Image Sensing Systems, Inc. If you are in
agreement with this letter, please sign and date below and return to the
undersigned as soon as possible. If you have any questions at any time, please
feel free to contact me at 651-603-7700.


	
  



 	
  

 	
  



 
	
 Gregory R.
 Smith

 	
  

 	
 Applicant’s
 Signature              Date

 
	
 Chief
 Financial Officer

 	
  

 	
  

 



Attachment –
Exhibit A