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                                  EXHIBIT 10.2


September 10, 1999


Dr. Fred H. Deindoerfer
[ADDRESS OMITTED]


    Re: Transition Upon Retirement

Dear Fred:

    This letter is intended to memorialize the terms under which you ("YOU")
have agreed, in connection with your planned retirement, to assist with the
transition of your responsibilities as a member of the Office of the Chief
Executive Officer, President and Chairman of International Remote Imaging
Systems, Inc. (the "COMPANY") to Dr. John A. O'Malley, your successor and the
newly elected CEO and incoming Chairman.

    1. Term of Agreement. In order to facilitate a smooth transition of your
duties to your successor, the Company agrees to employ You, and You accept
employment with the Company, on the terms set forth in this Agreement for a
period commencing as of August 1, 1999 (the "START DATE") and terminating on
December 31, 2001 (such period of time constituting the "TERM"), unless
terminated sooner in accordance with the provisions of paragraph 7.

    2. Title and Duties. Effective as of the Start Date, You began reporting to
Dr. O'Malley who assumed full and exclusive responsibility for the general
supervision, direction and control of the business and officers of the Company.
At the next meeting of the Board of Directors, You will officially begin the
transition by submitting a written resignation from your positions as President
and a member of the Office of the Chief Executive (as well as all director and
officer positions with the Company's subsidiaries), and the Office of the Chief
Executive will be dissolved. You will concurrently submit a separate written
resignation, to take effect December 31, 1999, from your position as Chairman of
the Board of Directors. You will continue as a member of the Board of Directors
and, effective January 1, 2000, You will be appointed to the honorary position
of Founding Chairman (Retired). From the Start Date through December 31, 2000,
You will report directly to the Chairman and Chief Executive Officer (Dr.
O'Malley) and under his direction you will be available to assist him as and to
the extent requested up to a full-time basis. From January 1, 2001 through
December 31, 2001, you will not be required to render services to the Company.

    3. Salary. During the Term, the Company will pay You a base salary at your
current rate of $216,300 per year, payable in accordance with the Company's
normal payroll practices. Beginning January 1, 2001, you will also be eligible
for compensation under the Non-Employee Director Compensation Plan as in effect
at that time, but the base salary in this paragraph already includes the annual
cash retainer for that year. The payment of any bonus, stock options, retirement
or other benefits beyond those contained in this Agreement will be at the sole
discretion of the Board of Directors.

    4. Stock Options. Your outstanding stock options will continue to vest
during the Term and will be exercisable in accordance with their terms.

    5. Effect of Sale or Merger. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company or a similar event that the Board determines, in good faith, would
materially alter the structure of the Company or its ownership, this Agreement
will survive such event and the Company will continue to make all of the
payments required hereunder as if such event had not occurred.

    6. Benefits. Until December 31, 2000 and while your services are required
to be available full time (full-time employee status), the Company will continue
to provide You with, or pay to or reimburse You for, the following benefits:

        6.1 the continued use of the Company car currently assigned to You and
reasonable reimbursement for the cost of gasoline, maintenance, and insurance
for the automobile;

        6.2 participation in the Company's group health plan or, at your
election, reimbursement to You for the purchase of Medicare supplemental
insurance coverage up to a maximum reimbursement equal to the Company's cost of
including You in its group health plan;

        6.3 participation in the Company's other group insurance programs,
excluding long-term disability insurance;


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        6.4 participation in the Employee Stock Purchase Plan based on your
compensation under this Agreement; and

        6.5 an allowance of 6 weeks vacation per annum which must be taken at
the convenience of the Company and will not be payable as cash in lieu of
vacation.

    7. Termination, Death and Disability. The Company and You acknowledge that
the relationship under this Agreement may be terminated at any time by either
party without cause. If the Company terminates You for cause or You resign
before the end of the Term, the Company will have no further payment obligations
under this Agreement. If the Company terminates You without cause (or You die or
become disabled as that term is defined under the Company's group disability
insurance policy) before the end of the Term, the Company will make all of the
payments required hereunder as if the relationship had not terminated. For
purposes of this Agreement, the Company shall be deemed to have terminated You
with "cause" if such termination is based primarily upon any of the following:
(a) your continued failure to follow the reasonable instructions of the Chief
Executive Officer (Dr. O'Malley) or the Board after written notice and a
reasonable opportunity to cure; (b) your breach of any material provision of
this Agreement (or the Company's Employee Acknowledgment Form referred to in
paragraph 8) after written notice and a reasonable opportunity to cure; or (c)
your final conviction (after exhaustion of appeals) of, or plea of nolo
contendere or guilty to, a felony or any criminal theft from the Company.

    8. Confidentiality and Related Matters. You reaffirm your obligations under
the Employee Acknowledgement Form (or any similarly titled agreement) signed by
you and understand that your obligations under that agreement continue during
and after the Term.

    9. Standard Release of Claims.

        9.1 Release. You (for yourself and on behalf of your spouse, heirs and
assigns) hereby forever relieve, release and discharge each person in the
Company Group (as defined below) from any and all Claims (as defined below) that
you may now have against any of them arising out your employment relationship or
your retirement. This release will not affect your rights under any outstanding
stock options or under your Indemnification Agreement with the Company or any
rights you may have with respect to indemnification as an officer or director
under the Company's charter documents or under applicable insurance policies.

        9.2 Scope. Your release includes, but is not limited to, any and all
Claims based on, arising out of, or related to your employment relationship with
the Company (or any and all facts in any manner arising out of, related to or
connected with your employment relationship) or your retirement. Without
limiting the generality of the foregoing, the Claims released by this Agreement
include, but are not limited to, any Claims arising from rights under federal,
state, or local laws relating to the prohibition of discrimination on the basis
of race, national origin, sex, religion, age (including under the Age
Discrimination in Employment Act of 1967, 29 U.S. Code Section 626 et seq.),
marital status, handicap, ancestry, sexual orientation, or any other protected
classification, and any and all Claims arising under common law, including, but
not limited to, common law Claims for breach of contract, breach of the implied
covenant of good faith and fair dealing, wrongful termination, discrimination,
tortious interference with contract or with current or prospective economic
advantage, fraud, deceit, misrepresentation, violation of public policy, breach
of privacy, defamation, infliction of emotional distress, loss of consortium,
breach of fiduciary duty, Claims arising from any alleged breach of any alleged
employment agreement, or any other common law Claim of any kind whatsoever.

        9.3 Federal Age Discrimination Waiver. Notwithstanding your
resignations as Chairman, CEO, and President, since you are older than 40 years
of age, you are entitled to review this Agreement of continued employment for 21
days before signing it, but you may sign and return it earlier if you desire.
You also have the right to revoke this Agreement by giving the Company written
notice of revocation within seven (7) days after signing it.

        9.4 Waiver of Unknown Claims. You waive any rights that you may have
under Section 1542 of the Civil Code of California, as well as the provisions of
all similar statutes or similar principles of common law of California, of the
United States, or of the other states of the United States. Section 1542 of the
Civil Code of the State of California provides as follows:

        9.5 Filing of Claims. You promise that you will not file any litigation
or arbitration Claim against any person in the Company Group relating to your
employment with the Company or your retirement arising before the date hereof.

        9.6 Certain Definitions. "Claims" means any and all claims, charges,
demands, obligations, liabilities, damages and causes of action, of whatever
kind or nature, including, without limitation, any statutory, civil, criminal or
administrative claim, whether known or unknown, suspected or unsuspected, fixed
or contingent, apparent or concealed. "Company Group" means the Company and any
parent entity, subsidiaries, successors, affiliates, assigns, officers,
directors, agents, employees, representatives, attorneys and stockholders.


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    10. Announcements. The Company will prepare, in consultation with you, a
press release announcing your retirement. Except to the extent required by
applicable law, rules, regulations or court orders, the Company will not
knowingly make any public announcements or private statements inconsistent with
such press release.

    11. General.

        11.1 Complete Agreement. This Agreement and any agreements referred to
herein or executed contemporaneously herewith constitute the entire agreement
and understanding between the parties to this Agreement and supersede all prior
and contemporaneous negotiations and understandings between the parties, whether
oral or written. In the event of any inconsistency between this Agreement and
the Employee Acknowledgment Form, this Agreement shall control. This Agreement
may be amended, modified, superseded, cancelled, renewed or extended, and the
terms, conditions or covenants hereof may be waived, only by a written
instrument executed by both parties to this Agreement, or in the case of a
waiver, by the party waiving compliance.

        11.2 Notices. Unless otherwise specifically permitted by this Agreement,
all notices under this Agreement shall be in writing and shall be delivered by
personal service, facsimile, telegram, or certified mail (or, if certified mail
is not available, then by first class mail), postage prepaid, (a) to the Company
at its principal place of business, (b) to You at your last home address in the
employee records of the Company or (c) such other address as may be designated
from time to time by the relevant party. Any notice sent by certified mail shall
be deemed to have been given three (3) days after the date on which it is
mailed. All other notices shall be deemed given when received. No objection may
be made to the manner of delivery of any notice actually received in writing by
an authorized agent of a party.

    If this letter accurately reflects the terms for your retirement, please
sign and return the enclosed copy of this letter.

Sincerely,

/s/ Richard G. Nadeau
---------------------------
Dr. Richard G. Nadeau
IRIS Director and Authorized Signatory

ACCEPTED AND AGREED:

/s/ Fred H. Deindoerfer
---------------------------
Dr. Fred H. Deindoerfer

cc: IRIS Board of Directors


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September 10, 1999


Dr. Fred H. Deindoerfer
[ADDRESS OMITTED]


    Re: Transition Upon Retirement

Dear Fred:

    This letter supplements the letter dated of even date herewith (the
"AGREEMENT") between International Remote Imaging Systems, Inc. (the "COMPANY")
and you ("YOU") regarding the terms under which You have agreed, in connection
with your planned retirement, to assist with the transition of your
responsibilities to Dr. O'Malley.

    The Company will have the right until December 31, 1999 to review and accept
the Agreement and may revoke it without liability any time prior to such date by
written notice to You. The Company will be deemed to have accepted the Agreement
if it fails to give such notice to You by December 31, 1999.

    If this letter accurately reflects the supplemental terms to the Agreement,
please sign and return the enclosed copy of this letter.

Sincerely,

/s/ Richard G. Nadeau
---------------------------
Dr. Richard G. Nadeau
IRIS Director and Authorized Signatory

ACCEPTED AND AGREED:

/s/ Fred H. Deindoerfer
---------------------------
Dr. Fred H. Deindoerfer

cc: IRIS Board of Directors


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