Document:

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                                                                   EXHIBIT 10.18

                        SETTLEMENT AGREEMENT AND RELEASE

         The "parties" to this Settlement Agreement and Release ("Settlement
Agreement"), which was made and entered into as of February 11, 2002, are Image
Sensing Systems, Incorporated ("ISS") and William L. Russell ("Russell").

         WHEREAS, Russell has been employed by ISS since on or about June 10,
1998 as its President.

         WHEREAS, ISS and Russell executed an Executive Employment Agreement
effective as of June 12, 2000. A copy of that Executive Employment Agreement is
attached hereto as Exhibit A.

         WHEREAS, the Executive Employment Agreement provides in part that ISS
and Russell "may terminate [the] Agreement at any time and upon any other terms
or conditions by mutual written agreement."

         WHEREAS, ISS alleges that it is not required to provide any termination
pay to Russell pursuant to the Executive Employment Agreement. Russell alleges
that he is entitled to termination pay pursuant to the Executive Employment
Agreement.

         WHEREAS, ISS and Russell recognize the inconvenience and expense of
litigation, and wish to avoid such inconvenience and expense. As a result, ISS
and Russell desire to terminate, compromise and settle any and all claims over
the amount of termination pay owed to Russell, pursuant to the following terms
and conditions.

         NOW, THEREFORE, in consideration of the promises contained herein, the
parties agree as follows:

<PAGE>

                              SETTLEMENT AGREEMENT

         1. Termination of Executive Employment Agreement. ISS and Russell
mutually agree that this Settlement Agreement supercedes and replaces the
Executive Employment Agreement. Moreover, pursuant to this Settlement Agreement,
ISS and Russell mutually agree to the termination of the Executive Employment
Agreement effective immediately, with the sole exception that Russell's
obligations pursuant to Article 6 (Confidential Information; Intellectual
Property) and Article 7 (Non-Competition and No Raid Covenants) shall survive
the termination of the Executive Employment Agreement in their entirety, and are
hereby incorporated into this Settlement Agreement and made a part hereof as if
fully set forth herein.

         2. Termination Payment to Russell. No later than ten days after the
execution of this Agreement by all parties, ISS shall pay to Russell $167,000,
minus any amounts withheld by ISS for applicable federal, state and local taxes,
including income taxes and FICA ("Termination Pay"). The amount paid to Russell
pursuant to this paragraph will be included on Russell's W-2 for 2002.
Termination Pay shall be forwarded to Russell by mail, at the following address:
1770 Delaware Street, West Saint Paul, MN 55118. Russell acknowledges the
adequacy and sufficiency of the Termination Pay as consideration for this
Settlement Agreement, including, but not limited to, provisions contained herein
related to the termination of the Executive Employment Agreement, the articles
which survive the termination of the Executive Employment Agreement, the
releases, and the numbered paragraphs of this Settlement Agreement. Payment is
effective upon mailing.

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         3. Mutual Termination of Employment. The parties agree that effective
immediately, Russell's employment with ISS shall terminate, and that there is no
longer an employment relationship between ISS and Russell.

         4. Resignation from All Positions. Russell hereby resigns from all
positions with the ISS, including, but not limited to, any and all positions he
holds as an officer and/or director of ISS.

         5. Nondisparagement. Russell agrees that he will not engage in any
verbal, written or other communications that in any way disparage, defame,
libel, slander, malign or otherwise cause harm or potential harm to the
reputation or goodwill of ISS or the officers, directors and employees of the
ISS.

         6. Irreparable Harm/Injunctive Relief: The parties to this Settlement
Agreement mutually agree that any breach of paragraph 5 of this Settlement
Agreement or of Articles 6 or 7 of the Executive Employment Agreement which,
pursuant to paragraph 1 above survive termination of the Executive Employment
Agreement, and are incorporated herein and made a part hereof, would result in
irreparable harm to ISS, entitling ISS, among other things, to immediate
injunctive relief.

         7. Release by ISS. ISS hereby releases, any and all claims, causes of
actions, obligations or liabilities, solely in connection with the amount of
Termination Pay to be paid to Russell. ISS covenants and agrees that it will not
file or pursue any claim or cause of action against Russell solely in connection
with the amount of Termination Pay to be paid to Russell. If ISS breaches this
covenant, it shall pay the attorneys' fees and costs of the party against whom
the claim, or cause of action was asserted, related to securing dismissal of
said claim or cause, or cause of action.

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         8. Release by Russell. Russell, for and on behalf of himself and his
heirs, administrators, executors, successors and assigns hereby releases,
acquits and forever discharges ISS, its parents, subsidiaries, related
companies, affiliates, and assigns, and its current and former directors,
officers, agents, attorneys, and employees, from any and all claims, charges,
causes of actions, obligations or liabilities, known and unknown, which arise on
or before the effective date of this Settlement Agreement . By way of
illustration only, this Release encompasses, but is not limited to: any claim or
allegations stemming from the Executive Employment Agreement, his termination,
the Termination Pay, and claims, charges, or causes of action that could be
brought under Title VII of the Civil Rights Act of 1964, 42 U.S.C.ss.2000(e) et
seq., as amended; the Civil Rights Act of 1866, as amended; the Equal Pay Act,
as amended; United States Executive Orders 11246 and 11375; The Regulations of
the Office of Federal Contract Compliance Programs, as amended; the
Rehabilitation Act of 1973, as amended, 29 U.S.C.ss.701, et. seq.; the Age
Discrimination in Employment Act (including the Older Workers Benefit Protection
Act), 29 U.S.C.ss. 621 et seq.; the Americans With Disabilities Act, 42 U.S.C.
ss.ss. 12101-12213; the Employee Retirement Income Security Act (ERISA), 29
U.S.C.ss. 1001, et seq. ; the Fair Labor Standards Act, 29 U.S.C.ss. 201, et
seq.; the National Labor Relations Act, 29 U.S.C.ss. 151, et seq., the Worker
Adjustment Retraining and Notification Act, 29 U.S.C.ss. 2101, et seq., the
Minnesota Human Rights Act, Minn. Stat.ss.363.01, et seq.; any and all statutes
providing rights and protections of any kind for employees working in the state
of Minnesota, and any other federal, state, or local statute, ordinance,
regulation or rule, including any attorneys' fees, liquidated damages, punitive
damages, and any costs or disbursements that could be awarded in connection with
these or any other statutory claims; and claims, charges or causes of action
which could be brought based on contract, quasi-contract, implied contract,

                                      -4-
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wrongful or constructive discharge, breach of the covenant of good faith and
fair dealing, libel, defamation, slander, negligent or intentional infliction of
emotional distress, discrimination on any basis prohibited by statute, ordinance
or public policy, negligence, interference with business opportunity or with
contracts, or unfair insurance practices, and any other cause of action
whatsoever, any of which arise on or before the date of the effective date of
this Settlement Agreement.

         Russell, for and on behalf of himself and his heirs, administrators,
executors, successors and assigns hereby covenants and agrees that he will not
file or otherwise pursue any claim, charge, or cause of action against ISS, its
parents, subsidiaries, related companies, affiliates, or assigns, or against its
current and former directors, officers, agents, attorneys, or employees which
relates to the matters released in this paragraph. If Russell breaches this
covenant, he shall pay the attorneys' fees and costs of the party against whom
the claim, charge or cause of action was asserted, related to securing dismissal
of said claim, charge or cause of action.

         9. Assumption of Settlement Agreement Successors and Assignees. ISS's
rights and obligations under this Settlement Agreement will inure to the benefit
of and be binding upon ISS's successors and assignees. Russell's rights and
obligations under this Settlement Agreement will inure to the benefit of and be
binding upon his heirs, administrators, executors, successors and assigns.

         10. Oral Modification Not Binding. This instrument is the entire
Settlement Agreement of the parties. Oral changes will have no effect. It may be
altered only by a written agreement signed by both parties.

         11. Review of Settlement Agreement. The parties to this Settlement
Agreement, each affirm and acknowledge that each

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has read the foregoing Settlement Agreement and that each has either consulted
with or had the opportunity to consult with an attorney prior to signing this
Settlement Agreement. The parties to this Settlement Agreement further affirm
and agree that this Settlement Agreement is written in language understandable
to them and that each understands the meaning of the terms of this Settlement
Agreement and their effect.

         12. Knowing and Voluntary Settlement Agreement: Russell acknowledges
that he has entered into this Settlement Agreement knowingly and voluntarily.
Russell further acknowledges that he has had a reasonable period of time within
which to consider this Settlement Agreement. Russell further acknowledges that
he has had the opportunity to retain and be represented by counsel in connection
with this Settlement Agreement, whether or not he has elected to retain counsel.

         13. Instrument. The parties agree that this Settlement Agreement may be
executed in any number of counterparts, each of which may be deemed an original,
and all of which when taken together shall constitute one and the same
instrument.

         14. Choice of Forum. The parties agree that any dispute arising over
this Settlement Agreement shall be brought exclusively in the appropriate courts
in the State of Minnesota.

Dated: February 12, 2002               IMAGE SENSING SYSTEMS, INCORPORATED
                --

                                       By   /s/ Richard P. Braun
                                         -------------------------------
                                            Its:   Chair, Compensation Committee
                                                  ------------------------------

Dated: February 12, 2002               WILLIAM L. RUSSELL
                --

                                       /s/ William L. Russell
                                       ----------------------

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                                                                   EXHIBIT 10.19

         Anthony H. Gould's employment arrangement with Image Sensing Systems
currently is governed through an agreement with Grove Place Limited, a
consulting company of which Mr. Gould is an employee, except that in 2000 his
compensation increased from a total of $16,200 per month, as set forth in
Schedule II of the agreement, to $16,950 per month, and on February 12, 2002, he
became President and Chief Executive Officer of Image Sensing Systems.

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                             DATED 1ST DECEMBER 1998

                           IMAGE SENSING SYSTEMS, INC.

                                      -AND-

                               GROVE PLACE LIMITED
                                ANTHONY H. GOULD

                              CONSULTANCY AGREEMENT

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                              CONSULTANCY AGREEMENT

         THIS AGREEMENT is made the 1st day of December l998 BETWEEN Image
Sensing Systems, Inc., 1600 University Avenue West, 500 Spruce Tree Centre, St
Paul, MN 55104 (hereinafter called "the Company") of the one part and Grove
Place Limited Shelton Building, P.O. Box 3136, Main Street, Road Town, Tortola,
British Virgin Islands (hereinafter called "the Consultant") of the other part.

         WHEREBY IT IS AGREED as follows:

1. APPOINTMENT. The Company appoints the Consultant and the Consultant agrees to
serve the Company with effect from 1st December 1998. This Agreement may be
terminated by either party giving the other party 6 months notice in writing.

         The Consultant shall without any further remuneration other than is
hereinafter mentioned, perform his duties as hereinafter mentioned and as set
forth in Schedule I attached hereto, wither at the offices of Grove Place
Limited the company in Bangkok or elsewhere as the Company may in its reasonable
discretion from time to time require.

2. REMUNERATION AND BENEFITS. The Consultant shall be paid by way of
remuneration for his services during his employment hereunder a salary and
benefits as set out in Schedule II or otherwise as may be agreed in writing from
time to time between each of the parties hereto. The Consultant's salary shall
be reviewed annually and any increases resulting from the review will be
effective as from the first day of the month following the review.

3. DUTIES OF THE CONSULTANT.

         (a) The Consultant shall unless prevented by incapacity

                  (i) under this Agreement devote the whole of his time
         attention and ability to the carrying out of his duties set out in the
         Agreement and in all respects comply with directions and regulations
         given or made and shall well and faithfully serve the Company and Group
         Companies;

                  (ii) faithfully and diligently perform those duties and
         exercise such powers consistent with them which are from time to time
         assigned to or vested in him;

                  (iii) obey all lawful and reasonable directions of the
         company,

                  (iv) use his best endeavors to promote the interests of the
         Company and Group companies;

                  (v) if and for so long as the Company requires, act as an
         officer of and carry out duties for any Group company or hold any other
         appointment or office as nominee or representative of the Company or
         and Group company.

<PAGE>

         The Consultant is expected to work such hours as are necessary properly
         to undertake the duties assigned to him and, so far as practicable, to
         adhere to the normal hours of his place of employment.

         (b) Subject to any regulations from time to time issued by the Company
which may apply to him, the Consultant shall not receive or obtain directly or
indirectly any discount rebate commission or other inducement in respect of any
sale or purchase of any goods or services effected or other business transaction
(whether or not by him) by or on behalf of the company or any Group company and
if he (or any form or company in which; he is directly or indirectly engaged,
concerned or interested) shall obtain any such discount rebate commission or
inducement he shall immediately account to the Company for the amount received
by him or the amount received by such firm company.

4. CONFLICT OF INTEREST. During the continuance of his employment the Consultant
shall not (unless otherwise agreed in writing by the Company) undertake any
other business or profession or be or become an employee or agent of any other
company firm or person or assist in any other business or profession. However,
nothing in this paragraph shall preclude the Consultant from holding or
acquiring by way of bona fide investment only shares representing no more than 2
percent of the issued equity capital of any quoted company unless the Company
shall require him not to do so in any particular case on the ground that such
other company is or may be carrying on a business competing or intending to
compete with the business of the Company or any Group Company.

5. SHARE DEALINGS. The Consultant shall comply with the Code for Transactions as
defined by the United States Securities and Exchange Commission in the Shares of
Image Sensing Systems, Inc.

6. CONFIDENTIALITY.

         (a) The Consultant shall not either during his appointment or at any
time after its termination disclose to any person or persons (except to those
authorized by the Company to know) or use for his own purposes or for any
purposes other than those of the Company any private, confidential or secret
information of the Company (including in particular lists or details of
customers of the Company or relating to the working of any process or invention
carried on of used by the Company) of which be has obtained by virtue of his
appointments or in respect of which the Company is bound by an obligation of
confidence to a third party. These restrictions shall cease to apply to
information or knowledge which may (otherwise than through the default of the
Consultant) become available to the public generally.

         (b) The provisions of sub-clause a) Shall apply mutatis mutandis in
relation to the private, confidential or secret information of each Group
company which the Consultant may have received or obtained during his
appointment and the Consultant shall upon request enter into an enforceable
agreement with any such company to the like effect.

         (c) All notes, memoranda, books, documents, records and writing made by
the Consultant relating to the business of the Company or Group companies shall
be and remain the property of the company or Group company to whose business
they relate and shall be returned

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by him together with any credit cards, keys or other property of or relating to
the business of the Company or Group companies upon request and immediately upon
the termination for any reason of this Agreement

7. MEDICAL EXAMINATION. The Consultant shall at the expense of the Company
submit periodically to a medical examination by a registered medical by a
registered medical practitioner nominated by the Company and shall authorize
such medical practitioner to disclose to and discuss with the Company's
authorized officer the results of the examination and the matters which arise
from it so that the Company's authorized officer can notify the Company of any
matters he considers might impair the Consultant from properly discharging his
duties provided that no such disclosure is made prior to the Consultant being
properly counseled by the medical practitioner.

8. INCAPACITY.

         (a) If the Consultant shall be prevented by illness (including mental
disorder) accident or other incapacity from properly performing his duties
hereunder he shall report this fact forthwith to the Company and if the
Consultant is so prevented shall provide a medical practitioner's statement on
the sixth day and weekly thereafter. Immediately following his return to work
after a period of absence the Consultant shall complete appropriate
documentation detailing the reason for his absence.

         (b) If the Consultant shall be absent from his duties hereunder due to
illness (including mental disorder) accident or other incapacity duly certified
in accordance with the provisions of sub-clause a) hereof he shall be paid his
base salary hereunder for up to 180 days absence in any period of 12 months and
thereafter such remuneration if any as the Board shall in its discretion from
time to time allow provided that there shall be deducted from or set off against
such remuneration any Statutory Sick Pay to which the Consultant is entitled and
Social Security Sickness Benefit or other benefits recoverable by the Consultant
whether or not recovered.

         (c) If the Consultant is incapacitated for a continuous period of 180
days or periods aggregating 125 working days in the preceding 12 months then the
company may terminate the Agreement on 4 months notice given either during or
not later than one month after the end of such period of incapacity.

9. GRIEVANCES. If the Consultant has any grievances relating to his employment
these should be raised with the President & CEO.

10. TERMINATION OF AGREEMENT.

         (a) The Agreement shall be terminable by notice as provided for in
Clause l.

         (b) Notwithstanding the provisions of Clause 1 hereof the company may
either suspend the Consultant pending investigation or at the discretion
terminate this Agreement with immediate effect if the Consultant.

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                  (i) commits any act of gross misconduct or repeats or
         continues (after written warning) any other serious breach of his
         obligations under the Agreement; or

                  (ii) is guilty of any conduct which in the reasonable opinion
         of the Board of the Company brings him, the Company or any Group
         company into disrepute; or

                  (iii) is convicted of any criminal offence; or

                  (iv) commits any act of dishonesty whether relating to the
         Company, and Group company. Any of its or their employees or otherwise;
         or

                  (v) becomes bankrupt or makes any arrangements or composition
         with his creditors generally.

                 On the termination of this Agreement for whatever reason, the
         Consultant shall at the request of the Company resign from all offices
         held by him in any Group company and from all other appointments or
         offices which he holds as nominee or representative of the company or
         any Group company and if he should fail to do so within seven days the
         Company is hereby irrevocably authorized to appoint some person in his
         name and on his behalf to sign any documents or do any things necessary
         or requisite to give effect to these. Such resignation(s) shall be
         without prejudice to any claims which the Consultant may have against
         any company arising out of this Agreement or the termination thereof.

                 It is understood that following termination of this Agreement
         and in accordance with normal ethical and professional standards the
         Consultant will refrain from taking any action of making statements,
         either written or oral, which are intended to and do disparage the
         goodwill or reputation of the Company, its Directors, Officers,
         Executives, or which could adversely affect the moral of other
         employees.

11. POST TERMINATION OBLIGATIONS OF THE CONSULTANT. For the purposes of this
clause Business shall be defined as businesses of the Company or any Group
company in which the Consultant has been involved to a material extent during
the period of twelve months prior to the termination of his employment
hereunder.

         (a) Non-competition. The Consultant shall not for a period of 12 months
after the termination of his employment (however that comes about and whether
lawful or not) in relation to the Business.

                  (i) be directly or indirectly engaged concerned or interested
         in any capacity whether as Director Principal Agent Partner Consultant
         Employee or otherwise in any other business of whatever kind which is
         wholly or partly in competition with the Business.

                  (ii) provide technical commercial or professional advice to
         any business concern which is wholly or partly in competition with the
         Business.

         (b) Non-solicitation. The Consultant shall not for a period of 12
months after the termination of his employment hereunder (howsoever that comes
about and whether lawfully or

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not) directly and indirectly and whether on his own behalf or on behalf of any
other body which is wholly or partly in competition with the Business:

                  (i) solicit custom, entice customers or interface with the
         relationship between customers for any products of services where such
         customers were carrying on trade with the Business at any time during
         the 12 months prior to such determination; or

                  (ii) solicit or endeavor to entice away, offer employment to
         or employ any person who at any time during 12 months prior to such
         determination was employed by the Business; or

                  (iii) interfere or seek to interfere or take such steps as may
         interfere with the continuance of supplies to the Business from any
         suppliers who have been supplying components materials of services to
         the Business at any time during the last 12 months of his employment
         hereunder.

         (c) The parties agree that the convenants set our in clauses a) and b)
above are separate and severable and enforceable accordingly and whilst the
restrictions are considered by the parties to be reasonable in all the
circumstances as at the date hereof it is acknowledge that restrictions of such
a nature may be invalid because of changing circumstances or other unforeseen
reasons and accordingly if any of the restrictions shall be adjudged to be void
or ineffective for whatever reason but would be adjudged to be valid and
effective if part of the wording thereof were deleted or the periods thereof
reduced or the area thereof reduced in scope, they shall apply with such
modifications as may be necessary to make them valid and effective.

12. GENERAL.

         (a) Other Terms. The provisions of the company's standard terms and
conditions of employment (where applicable and as amended from time to time)
sha11 be the terms of the Consultant's employment except so far as they are
inconsistent with this Agreement.

         (b) Prior Agreements. This Agreement sets out the entire agreement and
understanding of the parties and is in substitution for any previous contracts
of employment or any agreements for the provision of services by the Consultant
to the Company or any of its Group companies (which shall be deemed to have been
terminated by mutual consent).

         (c) Accrued Rights. The expiration or termination of this Agreement
however arising shall not operate to affect such of the provisions of this
Agreement as are expressed to operate or have effect after then and shall be
without prejudice to any accrued rights or remedies of the parties.

         (d) Definitions. In this Agreement Group means any subsidiary or
associated company for the time being of the Company. "Group company" means all
or any subsidiary or Associated company for the time being the business of which
tire Consultant is concerned with by virtue of his duties hereunder. "Associated
company" means any company in which the Company and any of the Group companies
can together exercise more that twenty (20) percent of the voting rights of the
issued share capital of that company. "Board" means the Board of Directors of
the Company for the time being.

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         (e) Proper Law. The validity construction and performance of this
Agreement shall be governed by the Laws of the State of Minnesota, USA.

         (f) Notices. Any notice in writing to be served hereunder may be given
by the Company personally to the Consultant or by the Consultant to an
appropriate officer of the Company or may be posted to the Company (for the
attention of its Secretary) at its principal office for the time being or by the
Company to the Consultant either at this address given above or at his last
known address. Any such notice sent by post shall be deemed served forty-eight
hours after it is posted and in proving such service it shall be sufficient to
prove that the notice was properly addressed in the case of the Consultant to
his last known address and put in the post.

         As WITNESS whereof the Agreement has been executed by or on behalf of
the parties hereto the day and year first before written.

Signed by
For and on behalf of Image Sensing Systems, Inc.

/s/ William L. Russell

In the presence of

Signed by the Consultant

/s/ Anthony H. Gould

In the presence of

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<PAGE>
                                   SCHEDULE 1

Consultancy Agreement
Grove Place Ltd. - Mr. Anthony Gould

MISSION

To create an Asian presence for products developed or offered by Image Sensing
Systems, Inc. to include marketing, sales, and service in the near term with a
long term objective to develop a full line products supply, service and
integration business for the Traffic and Transportation sector within Asia.

POSITION

MANAGING DIRECTOR, ISS ASIA

REPORTS TO:  President & CEO, Image Sensing Systems, Inc.

DUTIES

1.       Develop a products business within ASIA for technology developed by
         Image Sensing Systems including software and hardware systems.

2.       Formulate an annul financial and operational business plan meeting or
         exceeding the requirements of the ISS BoD and agreed with the CEO.

3.       Participate in the annual Company Strategic Planning process.

4.       Organize, staff and manage the business unit consistent with ongoing
         needs of the business.

5.       Identify, appoint and manage a distribution network within the defined
         territory.

6.       Identify potential strategic or joint venture partners within Asia for
         projects or day to day business.

7.       Provide monthly management activity reports to the CEO.

8.       Otherwise perform duties that may be requested by the CEO or BoD from
         time to time.

<PAGE>
                                   SCHEDULE II

CONSULTANCY AGREEMENT
GROVE PLACE LTD --MR. ANTHONY GOULD

REMUNERATION AND BENEFITS

Consultant Fees:                    $15,000.00 US per month, includes office and
                                    secretarial expense.

Additional Benefit:                 $ 1,200.00 US per month to cover auto,
                                    health/medical.

Business Expense:                   Actual travel and entertainment expense paid
                                    within seven days of submission of expenses
                                    subject to approval.

Vacation:                           15 working days per year, 20 working days
                                    after 5 years.

Share Options:                      Subject to Board of Director approval an
                                    initial incentive share option grant of
                                    10,000 shares will be awarded in the name
                                    specified by the consultant.

Bonus:                              Participation in the annual management bonus
                                    plan designed to provide incentive to meet
                                    and exceed agreed budget objectives.

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