Document:

Exhibit 10.8

Execution Copy

Exhibit 10.8
SEPARATION AGREEMENT 

SEPARATION AGREEMENT dated the 13th day of September, 2012 between VALEANT PHARMACEUTICALS INTERNATIONAL, INC. (“Valeant”) and Rajiv De Silva (“Mr. De Silva” and together with Valeant, the "Parties"). 

WHEREAS, Mr. De Silva is serving as Valeant’s President and Chief Operating Officer, Specialty Pharmaceuticals, pursuant to an Agreement entered into on November 11, 2010 (the “2010 Agreement”); 

WHEREAS, the parties have agreed that Mr. De Silva’s employment with Valeant shall terminate, and he will cease to serve as President and Chief Operating Officer, Specialty Pharmaceuticals, effective as of the Termination Date (as defined below); 

WHEREAS, in connection with his ceasing to serve as President and Chief Operating Officer, Specialty Pharmaceuticals, Valeant has agreed to provide Mr. De Silva with certain payments and benefits; 

WHEREAS Valeant and Mr. De Silva desire to enter into this Separation Agreement (this “Agreement”) to set forth the Parties’ agreement as to Mr. De Silva’s entitlements and continuing obligations in connection with his termination of employment with Valeant. 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the Parties hereto agree as follows: 

		
	1.
	Capitalized Terms. Unless otherwise defined herein, capitalized terms shall have the meaning set forth in the 2010 Agreement.

		
	2.
	Termination Date; Interim Period. 

		
	(a)
	The parties agree that the Termination Date shall be January 15, 2013 and that Mr. De Silva’s employment with Valeant and service as President and Chief Operating Officer, Specialty Pharmaceuticals, shall terminate as of the Termination Date.  Effective as of the Termination Date, Mr. De Silva hereby resigns from all positions he holds as an officer, director, benefit plan trustee or otherwise with respect to Valeant and its subsidiaries.

		
	(b)
	During the period between the date hereof and the Termination Date (the "Transition Period"), Mr. De Silva's title and salary shall remain unchanged and his equity compensation awards shall remain outstanding and continue to vest in accordance with their existing terms, subject to this Section 3(b).  Upon the Termination Date, any of such equity compensation awards that are unvested shall 

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immediately terminate, except as specifically set forth in this Separation Agreement.  Any stock options which are vested as of the Termination Date shall be treated in accordance with their existing terms governing termination of employment.  The termination of employment shall be treated as a resignation for purposes of such stock options.  Notwithstanding the provisions of the grant of Performance Share Units granted to Mr. De Silva under the 2010 Agreement, the Parties hereby agree that the maximum vesting of such Performance Share Units which may occur during the Transition Period shall be the vesting of 87,952 Performance Share Units upon the attainment of a Per Share Price (as defined in the 2010 Agreement) exceeding $58.24.  For the avoidance of doubt, the “Per Share Price” shall take into account the $1.00 per share dividend that was payable to shareholders of Valeant common shares on December 22, 2010 as if such $1.00 were reinvested on such dividend payment date.
		
	(c)
	The Parties agree that, during the Transition Period, Valeant may implement changes to Mr. De Silva's duties and responsibilities, it being agreed that any such changes prior to the date hereof or during the Transition Period shall not constitute Good Reason under the 2010 Agreement or be the basis for any claim against Valeant or any of its affiliates.

		
	3.
	Remuneration Upon Termination. The parties acknowledge that in connection with Mr. De Silva’s termination of employment with Valeant, he shall be entitled to (or eligible for, as the case may be) the following:

		
	(a)
	any accrued but unpaid salary or vacation pay, which shall be paid to him in accordance with Valeant's policies with respect to such remuneration;

		
	(b)
	subject to Mr. De Silva executing the general release of claims attached hereto as Annex A (the “Release”), within 60 days following the Termination Date, and the applicable seven (7) calendar day revocation period expiring (the date upon which such revocation expires being referred to hereinafter as the "Effective Date"), a lump amount equal to US $1,600,000, such amount to be payable within ten days following the Effective Date (subject to Section 7 hereof);

		
	(c)
	subject to the occurrence of the Effective Date, Mr. De Silva will be eligible to receive the following incentive compensation payments:

		
	(i)
	a payment of US $500,000, which will be earned if the target described in Annex B is achieved; provided that, if such target is not achieved, Valeant's Chief Executive Officer shall have the discretion to pay part or all of this payment;

		
	(ii)
	a payment of US $500,000, which will be earned if the target described in Annex B is achieved; provided that, if such target is not achieved, Valeant's Chief Executive Officer shall have the discretion to pay part or all of this payment;

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	(iii)
	a payment of up to US $600,000, which will be payable in the discretion of Valeant's Chief Executive Officer, based on Mr. De Silva's successfully leading integration efforts relating to the Medicis Pharmaceutical Corporation transaction.

Valeant shall make any performance determinations required under this Section 3(c) in its good faith discretion.  Any payment made pursuant to this Section 3(c) shall be payable within ten days following the Effective Date (subject to Section 7 hereof);
		
	(d)
	subject to the occurrence of the Effective Date, Mr. De Silva will be entitled to a payment of US $2,500,000, which amount shall be shall be payable within ten days following the Effective Date (subject to Section 7 hereof); provided, however, that if the grant of Performance Share Units granted to Mr. De Silva under the 2010 Agreement shall vest on or prior to the Termination Date as a result of the attainment of a Per Share Price exceeding $58.34 (as determined pursuant to the 2010 Agreement, as modified by Section 2(b) hereof), Mr. De Silva shall not be entitled to the payment described in this Section 3(d);

		
	(e)
	subject to the occurrence of the Effective Date, Mr. De Silva will be entitled to an annual bonus in respect of 2012 (at target) in the amount of US $637,000.  Any payment made pursuant to this Section 3(e) shall be payable within ten days following the Effective Date (subject to Section 7 hereof); and

		
	(f)
	subject to the occurrence of the Effective Date, Mr. De Silva and his eligible dependents will continue to be covered under any health, medical, dental and vision care plan in which he was eligible to participate immediately prior to the Termination Date for 12 months following the Termination Date on terms no less favorable to Mr. De Silva and his dependents (including with respect to payment for the costs thereof) than those in effect immediately prior to the Termination Date.

		
	4.
	Covenant Not to Solicit

		
	(a)
	To protect the confidential information and other trade secrets of Valeant and its affiliates as well as its goodwill, Mr. De Silva hereby agrees, that for a period of twelve (12) months following the Termination Date, not to solicit, attempt to solicit, or participate in or assist in any way in the solicitation or attempted solicitation of any employees or independent contractors of Valeant or any its affiliates. For purposes of this covenant, “solicit” or “solicitation” means directly or indirectly influencing or attempting to influence employees of Valeant or any of its affiliates to become employed with any other person, partnership, firm, corporation or other entity regardless of which party first contacted the other. Mr. De Silva agrees that the covenants contained in this paragraph are reasonable and necessary to protect the confidential information and other trade secrets of Valeant and its affiliates, provided, that solicitation through general advertising or the 

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provision of references shall not constitute a breach of such obligations.  Notwithstanding the foregoing, the foregoing restrictive provisions shall not apply with respect to the person indentified on Annex C to this Separation Agreement.
		
	(b)
	It is the intent and desire of Mr. De Silva and Valeant (and its affiliates) that the restrictive provisions in this subsection be enforced to the fullest extent permissible under the laws and public policies as applied in each jurisdiction in which enforcement is sought. If any particular provision in this subsection shall be determined to be invalid or unenforceable, such covenant shall be amended, without any action on the part of either party hereto, to delete therefrom the portion so determined to be invalid or unenforceable, such deletion to apply only with respect to the operation of such covenant in the particular jurisdiction in which such adjudication is made. Mr. De Silva acknowledges that Valeant or its affiliates will suffer irreparable injury, not readily susceptible of valuation in monetary damages, if Mr. De Silva breaches his obligations under this subsection. Accordingly, Mr. De Silva agree that Valeant and its affiliates will be entitled, in addition to any other available remedies, to obtain injunctive relief against any breach or prospective breach by Mr. De Silva of his obligations under this subsection in any Federal or state court sitting in the State of New Jersey, or, at Valeant’s (or its affiliate’s) election, in any other state or jurisdiction in which Mr. De Silva maintains his principal residence or his principal place of business. Mr. De Silva agrees that Valeant or its affiliates may seek the remedies described in the preceding sentence notwithstanding any arbitration or mediation agreement that Mr. De Silva may enter into with Valeant or any of its affiliates. Mr. De Silva hereby submits to the non-exclusive jurisdiction of all those courts for the purposes of any actions or proceedings instituted by Valeant or its affiliates to obtain that injunctive relief, and Mr. De Silva agrees that process in any or all of those actions or proceedings may be served by overnight courier (including Federal Express), addressed to the last address provided by Mr. De Silva to Valeant, or in any other manner authorized by law.

		
	5.
	Non-Disparagement.  Mr. De Silva agrees not to make written or oral statements about Valeant or the Releasees described in the Release that are negative or disparaging.  Valeant shall require its directors and executive officers not to make written or oral statements Mr. De Silva that are negative or disparaging. Notwithstanding the forgoing, nothing in this Agreement shall preclude either Party (and, in the case of Valeant, its directors and executive officers) from communicating or testifying truthfully to the extent required by law to any federal, state, provincial or local governmental agency or in response to a subpoena to testify issued by a court of competent jurisdiction.

		
	6.
	Other Company Policies. Mr. De Silva agrees that he shall continue to be bound by and comply with the terms of  your confidentiality obligations to Valeant, the Standards of Business Conduct and any other policies of Valeant and its affiliates that survive termination of employment.

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	7.
	Indemnification. From and after the date hereof, Mr. De Silva shall be indemnified by Valeant as provided in its by-laws.

		
	8.
	Section 409A; Other Tax Matters. The parties intend for the payments and benefits under this Agreement to be exempt from Section 409A or, if not so exempt, to be paid or provided in a manner which complies with the requirements of such section, and intend that this Agreement shall be construed and administered in accordance with such intention. Any payments that qualify for the “short-term deferral” exception or another exception under Section 409A shall be paid under the applicable exception. For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation.  Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all amounts that are required or authorized to be withheld, including, but not limited to, federal, state, local and foreign taxes required to be withheld by applicable laws or regulations.

		
	9.
	Entire Agreement.  This Agreement sets forth the entire agreement between Mr. De Silva and Valeant concerning the termination of Mr. De Silva’s employment, and supersedes any other written or oral promises concerning the subject matter of this Agreement, including, without limitation, those set forth in the 2010 Agreement. For the avoidance of doubt, all unvested Company equity awards granted to Mr. De Silva pursuant to the 2010 Agreement or otherwise shall be forfeited, without consideration, on the Termination Date. No waiver or amendment of this Agreement will be effective unless it is in writing, refers to this Agreement, and is signed by Mr. De Silva and the Chief Executive Officer of Valeant.

 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. 

VALEANT PHARMACEUTICALS
INTERNATIONAL, INC.

By:  /s/ J. Michael Pearson            

/s/ Rajiv De Silva                
Rajiv De Silva

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ANNEX A 

General Waiver & Release 

    
This Legal Release (“Release”) dated as of the last date executed below (the “Release Date”) is between Valeant Pharmaceuticals International, Inc. (the “Company”) and Rajiv De Silva (“Employee”). 

Employee Release.  Employee, on behalf of himself, and Employee’s heirs, executors, administrators, and/or assigns, does hereby RELEASE AND FOREVER DISCHARGE the Company, together with its parents, subsidiaries, affiliates, predecessors, and successor corporations and business entities, past, present and future, and its and their agents, directors, officers, employees, shareholders, insurers and reinsurers, and employee benefit plans (and the trustees, administrators, fiduciaries, agents, insurers, and reinsurers of such plans) past, present and future, and their heirs, executors, administrators, predecessors, successors, and assigns (collectively, the “RELEASEES”), of and from any and all legally waivable claims, causes of actions, suits, lawsuits, debts, promises, agreements and demands whatsoever in law or in equity, known or unknown, suspected or unsuspected, which Employee or which Employee’s heirs, executors administrators, or assigns hereafter ever had, now have, or may have, from the beginning of time to the date Employee executes this Release except as expressly set forth herein. This general waiver and release does not include any claims, causes of actions, suits, lawsuits, debts, and demands whatsoever in law or in equity, known or unknown, suspected or unsuspected which may come into existence post the date of this Release. 

The claims being waived and released include, without limitation: 

(a)    any and all claims of violation of any foreign or United States federal, state, provincial and local law arising from or relating to Employee’s recruitment, hire, employment and termination of employment with the Company; 

(b)    any and all claims of wrongful discharge, emotional distress, defamation, misrepresentation, fraud, detrimental reliance, breach of contractual obligations, promissory estoppel, negligence, assault and battery, and violation of public policy; 

(c)    all claims to disputed wages, compensation, and benefits, including any claims for violation of applicable state laws relating to wages and hours of work; 

(d)    any and all claims for violation of any state or federal statute or regulation relating to termination of employment, unlawful discrimination, harassment or retaliation under applicable federal, state and local constitutions, statutes, laws, and regulations (which includes, but is not limited to, the Age Discrimination in Employment Act, as amended (“ADEA”), Title VII of the Civil Rights Act of 1964, 42 U.S.C. 1981, the Employee Retirement Income Security Act (“ERISA”), 

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the Family and Medical Leave Act of 1993, the Americans with Disabilities Act, the Rehabilitation Act, the Equal Pay Act, the Worker Adjustment and Retraining Notification Act, the New Jersey Law Against Discrimination and Conscientious Employee Protection Act, the California Fair Employment and Housing Act and the California Family Rights Act), the Ontario Employment Standards Act, 2000, Human Rights Code, and Workplace Safety and Insurance Act; and 

(e)    any and all claims for monetary damages and any other form of personal relief. 

In waiving and releasing any and all claims against the Releasees, whether or not now known to Employee, Employee understands that this means that, if Employee later discovers facts different from or in addition to those facts currently known by Employee, or believed by Employee to be true, the waivers and releases of this Release will remain effective in all respects — despite such different or additional facts and Employee’s later discovery of such facts, even if Employee would not have agreed to this Release if Employee had prior knowledge of such facts. 

In order to waive and release any and all claims against the Releasees, whether or not now known, Employee expressly waives and releases all rights under California Civil Code section 1542 (or under any similar statute in any other jurisdiction) which states [NOTE TO DRAFT: Specific statutory languagelanguage to be added]: 

A general release does not extend to claims which the creditor (e.g., Employee) does not know or suspect to exist in his favor at the time of executing the release, which, if known by him, must have materially affected his settlement with the debtor (e.g., the Company). 

The only claims that are not being waived and released by Employee hereunder are claims Employee may have for: 

(a)    unemployment, state disability and/or paid family leave insurance benefits pursuant to the terms of applicable state law; 

(b)    continuation of existing participation in Company-sponsored group health benefit plans, at Employee’s full expense, under the United States federal law known as “COBRA” and/or under any applicable state counterpart law; 

(c)    any benefit entitlements that are vested as of the Separation Date pursuant to the terms of a Company-sponsored benefit plan governed by the United States federal law known as “ERISA;” 

(d)    stock and/or vested option shares pursuant to the written terms and conditions of Employee’s existing stock option or other equity award grants and agreements, existing as of the Termination Date; 

(e)    violation of any foreign or United States federal, state or local statutory and/or public policy right or entitlement that, by applicable law, is not waivable; 

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(f)    any claims, causes of actions, suits, lawsuits, debts, or demands whatsoever arising out of or relating to the Employee’s right to enforce the terms of this Release and the Separation Agreement dated September [ ], 2012 between the Employee and the Company (the "Separation Agreement"); and 

(g)    any wrongful act or omission occurring after the date Employee signs this Release. 

Nothing in this Release prevents or prohibits Employee from filing a claim with a government agency, such as the U.S. Equal Employment Opportunity Commission, that is responsible for enforcing a law. However, Employee understands that, because Employee is waiving and releasing all claims “for monetary damages and any other forms of personal relief” through the date upon which Employee signs this Release, Employee may not recover any monetary relief from such a claim and may only seek and receive non-personal forms of relief through any such claim. 

Confidentiality of this Release.  Employee agrees, covenants and promises that Employee has not communicated or disclosed, and will not hereafter communicate or disclose, the terms of this Release, to any persons with the exception of: (1) members of Employee’s immediate family, Employee’s attorneys, accountants, tax, or financial advisors, each of whom shall be informed of this confidentiality obligation and shall agree to be bound by its terms; (2) to the Internal Revenue Service or state or local taxing authority; (3) as is expressly required or protected by law; or (4) in any action to challenge or enforce the terms of this Release provided that such disclosure is protected from public disclosure by an appropriate confidentiality order to the maximum extent permitted by applicable authority. Employee agrees to be liable for any breach of this Paragraph by the individuals identified in clause (1) above. 

No Admission.  Nothing about the fact or content of this Release shall considered to be or treated by Employee or the Company as an admission of any wrongdoing, liability or violation of law by Employee or by any Releasee.
 
Consideration & Revocation Periods; Effective Date.  Employee acknowledges that (a) the Company has advised him of his right to consult with an attorney prior to signing this Release; (b) he has carefully read and fully understands all of the provisions of this Release, and (c) he is entering into this Release, including the releases set forth herein, knowingly, freely and voluntarily in exchange for good and valuable consideration (including, but not limited to, the payments to be made under Sections 3(b)-(g) of the Separation Agreement) to which he would not be entitled in the absence of signing this Release. Employee has forty-five (45) calendar days to consider this Release, although he may sign it sooner, but not before [January 15, 2013]. 

In addition, for the period of seven (7) calendar days after the date Employee signs this Release (“7-day Revocation Period”), Employee may revoke it by delivering written notice ofrevocation to the Company by hand-delivery or by facsimile or e-mail transmission using the street, facsimile or e-mail address for the Company stated below. 

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Because of this 7-day Revocation Period, this Release will not become effective and enforceable until the eighth calendar day after the date Employee signed it (the "Effective Date" referred to in the Separation Agreement), provided that Employee has delivered Employee’s signed Release to the Company, and Employee did not revoke the Release. 

Delivery to the Company.  Employee should return this Release, signed by Employee (and any notice of revocation, if applicable) to: 

Valeant Pharmaceuticals International, Inc. 
700 U.S. Highway 202/206
Bridgewater, NJ 08807
Attn: General Counsel 

Judicial Interpretation/Modification; Severability. In the event that this Release shall be held to be void, voidable, unlawful or, for any reason, unenforceable, the Release shall be voidable at the sole discretion of the Company. 

Changes to Release. No changes to this Release can be effective except by another written agreement signed by Employee and by the Chief Executive Officer. 

Complete Agreement. Except for the Separation Agreement, this Release, assuming it is executed and not revoked during the 7-day Revocation Period, cancels, supersedes and replaces any and all prior agreements (written, oral or implied-in-fact or in-law) between Employee and the Company regarding all of the subjects covered by this Release. This Release and the Separation Agreement (and the documents referenced therein) are the full, complete and exclusive agreement between Employee and the Company regarding all of the subjects covered by this Release and the Separation Agreement, and neither the Employee nor the Company is relying on any representation or promise that is not expressly stated in this Release or the Separation Agreement. 

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I HAVE READ THIS RELEASE. I UNDERSTAND THAT I AM GIVING UP IMPORTANT RIGHTS. I AM AWARE OF MY RIGHT TO CONSULT WITH AN ATTORNEY OF MY OWN CHOOSING DURING THE CONSIDERATION PERIOD, AND THAT THE COMPANY HAS ADVISED ME TO UNDERTAKE SUCH CONSULTATION BEFORE SIGNING THIS RELEASE. I SIGN THIS RELEASE FREELY AND VOLUNTARILY, WITHOUT DURESS OR COERCION. 

Date:       _________________________             _______________________________

10Exhibit 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
Kris B. Tufto (“Tufto”) on this date, October 30, 2012 (“Effective Date”),
effective on or about October 30, 2012.

RECITALS:

          A.        ISS
wishes to hire Tufto to serve as its President / CEO, and Tufto wishes to serve
in that capacity.

          B.        ISS
and Tufto have negotiated the terms of Tufto’s employment as President/CEO and
have memorialized those terms in this Agreement. 

          C.        ISS
and Tufto mutually agree to the terms set forth in this Agreement.

AGREEMENT:

          1.         Employment.
Tufto will be an at-will employee, and his employment may be terminated by
either party at any time, with or without cause. Tufto will serve as ISS’s
President and CEO. 

          2.         Duties.
Tufto will devote his full professional time, attention and efforts to the
business and affairs of ISS during his employment with ISS and Tufto 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.
Tufto’s base salary will be $260,000 per year, less all required withholdings
and deductions, payable in accordance with ISS’s standard payroll procedures
in effect from time to time. Tufto’s performance will be evaluated by the
Board from time to time in its discretion but no less often than annually. 

	
 

	
 

	
 

	
 

	
(b)

	
Bonuses.
Tufto is eligible to receive a bonus in an amount of up to $50,000, pursuant
to the terms of a bonus plan to be provided to Tufto by ISS on or before
October 30, 2012. When completed (and, subsequently, whenever amended), that
bonus plan will be incorporated into this Agreement by reference. 

	
 

	
 

	
 

	
 

	
(c)

	
Employee
Benefits. Tufto will be entitled to insurance and
other benefits in accordance with ISS’s standard and executive benefits in
effect from time to time. These benefits include several elections that must
be made by Tufto. Planbooks, Summary Plan Descriptions, and Plan Legal
Documents containing formal descriptions of all available benefits have been
or will be provided to Tufto. ISS is entitled to change, modify, or
discontinue such benefits at its sole discretion.

	
 

	
 

	
 

	
 

	
(d)

	
Vacation.
Tufto is entitled to up to three weeks of vacation each year.

          4.         Reimbursement
of Reasonable Travel and Business Expenses. ISS will, in accordance with
its policies in effect from time to time, reimburse Tufto for all reasonable
business expenses incurred by Tufto in connection with the performance of his
duties under this Agreement, upon submission of the necessary documentation
required pursuant to ISS’s standard policies and record keeping procedures.
Tufto also agrees that he will adhere to ISS’s current travel policy.

          5.         Confidentiality,
Noncompetition and Invention Assignment. Tufto expressly agrees to the
terms set forth in Appendix A, which the parties
understand and acknowledge to be a vital part of this Agreement. 

          6.         Severance
upon Termination of Employment.

	
 

	
 

	
 

	
 

	
 

	
(a)

	
Voluntary
Termination. Should Tufto terminate his employment
for any reason, ISS shall pay Tufto all earned and unpaid amounts due to him
for salary through the termination date and a pro-rata portion of any
incentive pay to which, at ISS’s discretion, Tufto would have been paid had
he remained in ISS’s employ.

	
 

	
 

	
 

	
 

	
(b)

	
Termination
by ISS “With Cause.” Should ISS terminate Tufto’s
employment for any of the following reasons, Tufto 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 Tufto as the
President/CEO of ISS;

	
 

	
 

	
 

	
 

	
 

	
 

	
(iv)

	
Consistent
failure to perform the reasonable stated duties assigned to Tufto 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.

	
 

	
 

	
 

	
 

	
 

	
 

	
Tufto shall
have thirty (30) days to cure any alleged breach, failure, or misconduct
under Subsection (iv) above, if such alleged breach, failure or misconduct is
curable, after ISS provides Tufto written notice of the actions or omissions
constituting such breach, failure, or misconduct.

	
 

	
 

	
 

	
 

	
 

	
(c)

	
Termination
by ISS “Without Cause.” Should ISS terminate Tufto’s
employment for any reason other than (1) those reasons set forth in
subparagraph (b) above, or (2) because of Tufto’s inability to perform his
duties because of death or disability, Tufto shall be entitled to 12 months
of salary continuation, without eligibility for bonus, upon entry into a
release agreement provided by ISS (in a form substantially similar to that
set forth at Appendix B to this Agreement). ISS
and Tufto have the ability, however, at any time, to terminate this Agreement
by mutual written agreement, with or without the severance benefit.

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7.

	
Miscellaneous.

	
 

	
 

	
 

	
 

	
 

	
(a)

	
Notices.
Any and all notices permitted or required to be given under this Agreement
must be in writing. Notices will be deemed given (1) when personally received
or when sent by facsimile transmission (to the receiving party’s facsimile
number), (2) on the first business day after having been sent by commercial
overnight courier with written verification of receipt, or (3) on the third
business day after having been sent by registered
or certified mail from a location on the United States mainland, return
receipt requested, postage prepaid, whichever occurs first, at the address
set forth below or at any new address, notice of which will have been given
in accordance with this Paragraph:

	
 

	
 

	
 

	
 

	
 

	
 

	
If to ISS:

	
James W.
Bracke

	
 

	
 

	
 

	
500 Spruce
Tree Centre

	
 

	
 

	
 

	
1600
University Ave. West

	
 

	
 

	
 

	
St. Paul, MN
55104

	
 

	
 

	
 

	
(or other
address as is notified in writing from time to time by ISS to Tufto by return
receipt requested, postage prepaid post)

	
 

	
 

	
 

	
 

	
 

	
 

	
If to Tufto:

	
Kris B.
Tufto

	
 

	
 

	
 

	
2660
Christian Court

	
 

	
 

	
 

	
Chaska, MN
55318

	
 

	
 

	
 

	
(or other
address as is notified in writing from time to time by Tufto to ISS by return
receipt requested, postage prepaid post)

	
 

	
 

	
 

	
 

	
 

	
(b)

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

	
 

	
 

	
 

	
 

	
 

	
(c)

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

	
 

	
 

	
 

	
 

	
 

	
(d)

	
No Waiver.
The failure of either party to insist on strict compliance with any of the
terms of this Agreement in any instance or instances will not be deemed to be
a waiver of any term of this Agreement or of that party’s right to require
strict compliance with the terms of this Agreement in any other instance.

	
 

	
 

	
 

	
 

	
 

	
(e)

	
Severability.
Tufto 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.

	
 

	
 

	
 

	
 

	
 

	
(f)

	
Entire Agreement.
This Agreement (including its Appendices), which consists of two (2)
identical originals 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.

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Image Sensing Systems, Inc.

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ James W. Bracke

	
 

	
/s/ Kris B. Tufto

	
 

	
James W.
Bracke

	
 

	
Kris B. Tufto 

	
Its:

	
Chairman

	
 

	
 

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APPENDIX A
TO THE EMPLOYMENT AGREEMENT BETWEEN 

IMAGE SENSING SYSTEMS, INC., AND KRIS B. TUFTO

CONFIDENTIALITY, NONCOMPETITION AND 

INVENTION ASSIGNMENT AGREEMENT

          This
CONFIDENTIALITY, NONCOMPETITION, AND INVENTION ASSIGNMENT AGREEMENT (“Agreement”)
between Image Sensing Systems, Inc. (“ISS”), and Kris B. Tufto (“Employee”) is signed and dated on 30 October, 2012.  

          As
an express condition of Employee’s employment with ISS, for his receipt of ISS
benefits, and other valuable consideration, and in exchange for other premises
and mutual promises contained in this Agreement, ISS and Employee agree as
follows:

          1.          Confidential
and Proprietary Information.

                       (a)          Employee
understands and agrees that, during the course of his employment with ISS, he
will receive proprietary, confidential, and trade secret information – all of
which has special value to and constitutes a unique asset of ISS (collectively
referred to in this Agreement as “Confidential & Proprietary Information”).
Employee agrees that he will not disclose such Confidential & Proprietary
Information during the period of his employment or after the termination of his
employment for any reason whatsoever and that he will not use or share the same
with any person, firm, or corporation without first obtaining ISS’s written
consent.

                       (b)          For
these purposes, “Confidential and Proprietary Information” includes, but is not
limited to, confidential information relating to ISS’s business, products and
services, customers, or vendors; trade secrets, data, specifications,
developments, inventions, patents, patent materials, copyrightable subject
matter and ideas, processes, know-how, designs, computer systems, and research
activity; marketing and sales strategies, marketing and product plans,
information, pricing strategies, and techniques; long and short term business
plans; existing and prospective client, vendor, and employee lists, contacts,
and information; financial and personnel information; any information and/or
applications relating to ISS’s internal information systems; and any other
information concerning the business of ISS which is not disclosed to the
general public or known in the industry, except for disclosure necessary in the
course of Employee’s duties or with the express written consent of ISS. All
Confidential and Proprietary Information, including all copies, notes
regarding, correspondence and/or electronic communications regarding, and
replications of such Confidential and Proprietary Information will remain the
sole property of ISS and must be returned to ISS immediately upon termination
of Employee’s employment.

                       (c)          Employee
acknowledges that ISS’s Confidential and Proprietary Information constitutes a
unique and valuable asset of ISS and represents a substantial investment of
time and expense by ISS, and that any disclosure or use of such knowledge or
information other than for the sole benefit of ISS would be wrongful and would
cause irreparable harm to ISS. 

                       (d)          The
foregoing obligations of confidentiality do not apply to any knowledge or
information that is now published or which subsequently becomes generally
publicly known in the form in which it was obtained from ISS, other than as a
direct or indirect result of the breach of this Agreement by Employee.

          2.          Return
of Company Property. Upon termination of employment with ISS for whatever
reason, or at any other time at the request of ISS, Employee will deliver to a
designated Company representative all records, documents, hardware, software,
and all other Company property and all copies of such Company property in
Employee’s possession. Employee acknowledges and agrees that all such materials
are the sole property of ISS and that he will certify in writing to ISS at the
time of delivery that he has complied with this obligation.

          3.          Noncompetition
Covenant. ISS and Employee agree that, due to Employee’s position with ISS,
Employee will have access to ISS’s Confidential and Proprietary Information and
has developed and will continue to develop certain goodwill and relationships
on behalf of ISS. Employee acknowledges that ISS will only release its Confidential
and Proprietary Information, and will only permit Employee to continue to
generate this goodwill and these relationships, upon the receipt of assurances
that Employee will not use the information, goodwill, or relationships to ISS’s
disadvantage and, accordingly, agrees to the following provisions:

                       (a)          Agreement
Not to Compete. During the term of his employment with ISS, and for a
period of twelve
(12) months after the termination of such employment for any reason,
Employee will not, directly or indirectly, serve as an employee, agent,
consultant, director, stockholder or owner, or render services to any
Conflicting Organization. Employee also will not direct any other individual or
business enterprise to engage in such competition with ISS. For the purposes of
this Agreement, “Conflicting Organization” means companies and other
organizations engaged in or which have plans to engage in software-based
computer enabled detection products and solutions for the intelligent
transportation industry and adjacent security and law enforcement markets.

                       (b)          Nonsolicitation
of Customers or Suppliers. During the term of his employment with ISS, and
for a period of twelve (12) months after the termination of such employment
for any reason, Employee agrees that he will not, directly or indirectly,
divert, solicit, approach, contact, call upon, accept business from, or sell or
render services to any client/customer or prospective client/customer of ISS
who was solicited or serviced directly by Employee at any time during the
twelve (12) months prior to his termination from employment, or where he
supervised, directly or indirectly, in whole or in part, the solicitation or
service activities related to such clients or prospects during the same
twelve-month period. Employee also will not, directly or indirectly, aid or
assist any other person, firm, or corporation in doing what he himself cannot
do under the terms of this Agreement. Employee will not in any way interfere or
attempt to interfere with ISS’s relationships with any of its actual or
potential customers, suppliers, or subcontractors.

                       (c)          Nonsolicitation
of Employees. Employee recognizes that ISS’s work force constitutes an
important and vital aspect of its business. During the term of his employment
with ISS, and for a period of twelve (12) months after the termination of
such employment for any reason, Employee will not, directly or indirectly,
hire, solicit, employ, or attempt to employ, any employee or director of ISS,
or otherwise directly or indirectly interfere with or disrupt relationships,
contractual or otherwise, between ISS and any of its employees, directors, or
consultants.

                       (d)          Acknowledgment.
Employee agrees that the restrictions and agreements contained in this
Agreement (and particularly in this Paragraph 3) are reasonable and necessary
to protect the legitimate interests of ISS, and that any violation of this
Agreement will cause substantial and irreparable harm to ISS that would not be
quantifiable and for which no adequate remedy would exist at law. Employee
further acknowledges that he has had the opportunity to request that legal
counsel review this Agreement and, having exhausted such right, agrees to the
terms herein without reservation. Accordingly, Employee authorizes the issuance
of injunctive relief by any court of appropriate jurisdiction, without the
requirement of posting bond, for any violation of this Agreement, and agrees
that ISS shall be entitled to the recovery of reasonable attorneys’ fees
incurred in the enforcement of this Agreement.

2

          4.          Assignment
of Inventions. Employee agrees to promptly disclose to ISS inventions,
ideas, processes, writings, designs, developments and improvements, whether or
not protectable under the applicable patent, trademark or copyright statutes,
which Employee makes, conceives, reduces to practice, or learns during his/her
employment by ISS, either alone or jointly with others, relating to any
business in which ISS is or may be concerned (“Inventions”). Such disclosures
will be made by Employee to ISS in a written report, setting forth in detail
the structures, procedures and methodology employed and the results achieved.

                       (a)          To
the extent that any Invention qualifies as “work made for hire” as defined in
17 U.S.C. § 101 (1976), as amended, such Invention will be the exclusive
property of ISS. Moreover, Employee agrees to treat every work or idea created
or acquired by or on behalf of Employee for ISS as a “work made for hire.” It
is the intent of both Employee and ISS that ISS have unrestricted ownership in
all of such works and to any derivative works thereof, without further
compensation of any kind to Employee or to those with whom Employee may work. 

                       (b)          Consistent
with and to the extent permitted by law, Employee hereby assigns and agrees to
assign to ISS all rights in and to these Inventions, including, but not limited
to, applications for United States and foreign patents and resulting patents
and to further cooperate with ISS in maintaining, obtaining, and protecting
such proprietary rights. Employee shall execute all applications, assignments
and other papers necessary to enable ISS to obtain full protection and title to
such matter and inventions, and Employee hereby waives any claim of moral right
that Employee may have in or in connection with any such work.

                       (c)          Employee
further acknowledges that he received notice from ISS that his obligation to
assign rights in and to any Inventions does not apply to an Invention for which
no equipment, supplies, facility or trade secret information of ISS was used
and which was developed entirely on Employee’s own time, and (1) which does not
relate (A) directly to the business of ISS or (B) to ISS’s actual or
demonstrably anticipated research or development, or (2) which does not result
from any work performed by Employee for ISS.

                       (d)          Employee
has attached a complete list of all existing patentable or non-patentable
inventions, original works of authorship, derivative works, trade secrets,
trademarks, copyrights, service marks, discoveries, patents, technology,
algorithms, computer software, application programming interfaces, protocols,
formulas, compositions, ideas, designs, processes, techniques, know-how, data,
and all improvements thereto to which Employee claims ownership as of the date
of this Agreement and which Employee desires to clarify are not subject to this
Agreement (“Excluded Inventions”). If no such list is attached to this
Agreement, Employee represents that he has no such Excluded Inventions at the
time of signing this Agreement.

                       (e)          Employee
further agrees that prior to separation from employment with ISS for any
reason, he will disclose to ISS, in a written report, all Inventions, the
rights to which he has agreed to assign to ISS under (a) and (b) above, and
which he has not previously disclosed.

                       (f)          In
the event of any dispute concerning whether an Invention made or conceived by
Employee is the property of ISS, such Invention will be presumed to be the property
of ISS, and Employee will bear the burden of establishing otherwise in any
arbitration, litigation, or similar proceeding.

3

          5.          Injunctive
Relief. Because the Confidential and Proprietary Information described
above and the products derived therefrom are unique, peculiar and of great
value to ISS, ISS shall be entitled to injunctive relief to restrain Employee
from violating or threatening to violate any provisions contained herein. The
parties also agree that, because of the unique nature of their relationship and
the information and products to which Employee has been exposed through this
relationship, ISS shall be entitled to an injunction to be issued by any Court
of competent jurisdiction enjoining and restraining Employee from committing
any violation of this Agreement, and Employee hereby consents to the issuance
of such injunction. Proceedings may be initiated against Employee or Employee’s
legal representatives or assigns. ISS shall be entitled to its reasonable costs
and attorneys’ fees incurred in enforcing this provision.

          6.          Miscellaneous.

                       (a)          At-will
Employment. Nothing in this Agreement creates any rights of employment.
Employee is, and remains, an “at-will” employee. 

                       (b)          Severability.
It is further agreed and understood by the parties that if any part, term or
provision of this Agreement should be unenforceable, invalid, or illegal under
any applicable law or rule, the offending term or provision will be struck and
the remaining provisions of the Agreement will not be affected or impaired
thereby. 

                       (c)          Assignability.
The terms, conditions, and covenants of this Agreement shall be assignable to
the successors and assigns of ISS. 

                       (d)          Waiver.
Failure of ISS at any time to enforce any provision of this Agreement shall not
be interpreted as a waiver of any provision of ISS’s rights under this
Agreement.

                       (e)          Entire
Agreement. This Agreement contains the entire understanding between the
parties hereto with respect to the subject matter hereof and supersedes any
prior understandings, agreements or representations, written or oral, relating
to such subject matter. 

                       (f)          Modification,
Amendment, Waiver or Termination. No provision of this Agreement may be
modified, amended, waived or terminated except by an instrument in writing
signed by the parties to this Agreement. No delay or waiver, express or
implied, by ISS of any right or any breach by Employee shall constitute a
waiver of any other right or breach by Employee.

                       (g)          Governing
Law. This Agreement will be governed by and interpreted according to the
substantive laws of the State of Minnesota without regard to such state’s
conflicts law. 

          IN
WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date memorialized in the first paragraph.

	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 Image
 Sensing Systems, Inc.

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
/s/ Kris B. Tufto

 	
  

 	
 By:

 	
/s/ James W. Bracke

 
	
  

 	
  

 	
  

 	
 Its:

 	
 Chairman  

 

4

APPENDIX B
TO THE EMPLOYMENT AGREEMENT BETWEEN 

IMAGE SENSING SYSTEMS, INC., AND KRIS B. TUFTO

          WHEREAS,
the parties entered into an Employment Agreement which became effective in
October, 2012; and

          WHEREAS,
in order to receive certain severance payments and related benefits under
Paragraph 6 of that Employment Agreement, the parties agreed that Tufto 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 B; and

          WHEREAS,
under the terms of this Appendix B, Tufto 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 B; 

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

          A.          Tufto
affirms that he is signing this Appendix B on or after the termination
of his employment, as described in Paragraph 6 of the Employment Agreement.

          B.          Tufto,
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
B.

          Tufto
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”), as amended by the
Older Workers Benefit Protection Act; or any other federal, state, or local
statute, ordinance, or law. Tufto 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.

          Tufto
further understands that he is releasing, and does hereby release, any claims
for damages, by 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. Tufto 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.          Tufto
understands that he has the right to seek legal counsel before entering into
this Appendix B and that he has 21 days from the date of his termination
to execute this Appendix B.

          D.          Tufto
understands that he may revoke this release (Appendix B) (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. Tufto also understands that, if he does revoke this release (Appendix
B), he gives up any right to the consideration provided to him the benefits
described in Paragraph 6 of the Employment Agreement.

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

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Dated:

 	
  

 	
  

 	
 By:

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 Kris B. Tufto

 

2

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