Document:

Exhibit 10.3

COMMITMENT LETTER

May 7, 2014

Mr. Kris B.
Tufto

President and CEO

Image Sensing Systems, Inc.

1600 West University Ave., Suite 500

St. Paul, MN 55104

	
  

 	
  

 
	
 Re:

 	
 $5,000,000.00 Revolving Line of Credit Loan

 

Dear Mr. Tufto:

Alliance Bank (the “Lender”) hereby agrees to make a loan (the
“Loan”)
to Image Sensing Systems, Inc., a Minnesota corporation (the “Borrower”).
The Loan shall be a revolving line of credit loan in the original principal
amount of $5,000,000.00, and shall be utilized to provide the Borrower with
working capital.

The basic terms of the Loan, as set forth below, shall be contained in
a Promissory Note to be executed by the Borrower, payable to the order of the
Lender and dated the date of closing (the “Note”):

	
  

 	
  

 	
  

 
	
  

 	
 A.

 	
 LOAN AMOUNT: The sum of up to the amount of Five Million
 and no/100 ($5,000,000.00) Dollars (the “Loan
 Amount”).

 
	
  

 	
  

 	
  

 
	
  

 	
 B.

 	
 INTEREST RATE: The
 rate of interest on the Note shall be a
 fixed rate equal to three and ninety-five one hundredths percent (3.95%) per annum. Interest shall be calculated on the basis of
 the actual number of days elapsed and a 360 day year.

 
	
  

 	
  

 	
  

 
	
  

 	
 C.

 	
 PAYMENT SCHEDULE: The Note shall be payable in consecutive monthly
 installments of all accrued
 interest to date of payment commencing thirty (30) days after the date of the
 Note and continuing on the same day of each and every month thereafter until
 one (1) year after the date of the Note, at which time the entire unpaid principal balance plus accrued and
 unpaid interest shall be due and payable in full (the “Maturity Date”).

 
	
  

 	
  

 	
  

 
	
  

 	
 D.

 	
 PREPAYMENT: The
 Note may be prepaid in whole or in part at any time without penalty.

 

	
  

 	
  

 	
  

 
	
  

 	
 E.

 	
 LATE CHARGE: If
 any installment or payment of principal, interest or otherwise on or relating
 to the Note, including any final balloon installment or payment, is not paid
 within ten (10) days of the due date thereof, the Borrower shall pay to the
 Lender a late charge equal to five percent (5%) of the amount of such
 installment or payment, including any final balloon installment or payment.
 The Borrower acknowledges that the late payment fee is not imposed as a
 charge for the use of money, but to permit the Lender to offset its
 administrative expenses and other costs in dealing with loans not paid on
 time. The late payment fee shall in no way be deemed an interest charge. This provision shall
 not be deemed to excuse a late payment or be deemed a waiver of any other rights the
 Lender may have, including the right to declare the entire unpaid principal
 and interest immediately due
 and payable.

 
	
  

 	
  

 	
  

 
	
  

 	
 F.

 	
 RATE INCREASE:
 Upon the occurrence of and during the continuance of an Event of Default (as
 defined in the Note), the rate of interest on the Note shall, at the option
 of the Lender, automatically increase by five percent (5%) per annum. Any increase
 in the rate of interest pursuant to this paragraph shall be in addition to
 and not in lieu of any of the charges which become due pursuant to Paragraph
 E above.

 
	
  

 	
  

 	
  

 
	
  

 	
 G.

 	
 ACCOUNT
 MAINTENANCE: Until such time as the Note is fully
 paid, the Borrower shall maintain the Borrower’s primary operating accounts
 and all of the money market accounts with the Lender or an affiliate of the
 Lender. If the Borrower fails to maintain
 or cause to be maintained all such operating
 and money market accounts with the Lender or an affiliate of the Lender, then
 such failure to maintain or cause to maintain all such accounts shall
 constitute an Event of Default. Notwithstanding anything to the
 contrary herein, at all times during the term of the Loan, the funds in the
 Borrower’s money market account and operating account must be maintained at a
 level sufficient to cover any advances made under the Loan. 

 
	
  

 	
  

 	
  

 
	
  

 	
 H.

 	
 APPLICATION OF PAYMENTS:
 All payments and prepayments shall, at the option of the Lender, be applied
 first to any costs of collection, second to any late charges, third to
 accrued interest on the Note, and lastly to principal and, in the case of
 prepayments, to installments of principal in the inverse order of their
 maturity. Anything to the contrary herein or in the Loan documentation to
 follow notwithstanding, upon the occurrence of an Event of Default, the
 Lender shall have the right to apply all future payments and prepayments in
 such manner as the Lender shall solely determine.

 
	
  

 	
  

 	
  

 
	
  

 	
 I.

 	
 REVOLVING LINE OF
 CREDIT: The Note evidences a revolving line of credit
 loan under which advances, payments and re-advances may be made from time to time up to a maximum principal
 amount of $5,000,000.00. Subject to all
 further conditions and restrictions set forth in the Loan documentation incident hereto, the Borrower may
 borrow, repay and reborrow pursuant to the Note, as described in the
 preceding sentence.

 

2

The commitment of the Lender to make the Loan is based upon the
financial and other information furnished and representations made to the
Lender by or on behalf of the Borrower (as hereinafter defined), and said
commitment is subject to the truth and accuracy of said information and
representations as of the date of closing. In addition, the commitment of the
Lender to make said Loan is subject to certain conditions as specified below:

	
  

 	
  

 
	
  

 	
 1.     SECURITY AGREEMENT: To secure repayment
 of the Note, the Lender shall have received a Security Agreement (the “Security Agreement”) duly executed and
 delivered by the Borrower granting to the Lender a first position security
 interest (subject only to any existing security interests in favor of the
 Lender) in and to all Assets of the Borrower, including, but not limited to,
 the following (the “Collateral”):
 (a) all fixtures, equipment, vehicles and personal property of every kind and
 nature whatsoever now owned or hereafter owned, including all extensions,
 additions, improvements, betterments, renewals and replacements of any of the
 foregoing; (b) all Accounts (including, but not limited to, the Borrower’s
 operating accounts, money market accounts, and interest reserve account [as
 hereinafter defined] maintained with the Lender), Chattel Paper, Commercial
 Tort or other claims, and General Intangibles; (c) all inventory now owned or
 hereafter owned; (d) all insurance, condemnation and other products or
 proceeds of the foregoing. The Lender shall also have the right to file such
 UCC Financing Statements with respect to the Security Agreement as the Lender
 may require.

 
	
  

 	
  

 
	
  

 	
 2.     CROSS COLLATERALIZATION: The Borrower
 agrees that any security interest provided in Collateral hereunder, or any
 Collateral provided in connection with any and all other indebtedness of
 Borrower to Lender, whether or not such indebtedness is related by class or
 claim and whether or not contemplated by the parties at the time of executing
 each evidence of indebtedness, shall act as Collateral for all said
 indebtedness. This cross-collateralization provision shall not apply to any
 Collateral that is/are household goods or a principal dwelling.

 
	
  

 	
  

 
	
  

 	
 3.     INTEREST RESERVE ACCOUNT: The Borrower agrees that, during the term of
 the Loan and at the Lender’s sole option, an interest reserve account may be
 established wherein $200,000.00 of the Loan amount shall be held in reserve
 for a total of one year’s interest payments due on the Note. Until the Loan
 is fully paid, the Lender shall
 have a first position security
 interest in all amounts held within the interest reserve account.

 
	
  

 	
  

 
	
  

 	
 4.     INSURANCE:
 The Lender shall have received evidence that the following policies of
 insurance have been obtained and that the premiums for the current policy
 year have been paid, plus timely proof of payment of yearly premiums
 throughout the term of the Loan:

 

3

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (a)     Comprehensive General Public
 Liability Insurance, providing for limits of coverage of not less than
 $1,000,000.00/$1,000,000.00 and naming the Lender as an additional insured.

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (b)     Hazard Insurance, with
 respect to the Collateral, insuring against loss by fire, lightning, theft,
 vandalism, malicious mischief and other risks customarily covered by a
 standard extended coverage endorsement, in an amount not less than the full
 insurable value thereof and naming the Lender as mortgagee and loss payee.

 
	
  

 	
  

 
	
  

 	
 All such insurance shall be written by a company or companies
 acceptable to the Lender licensed to do business in the State of Minnesota.
 Such policies of insurance shall be subject to the approval of the Lender as
 to form, substance and (except as expressly designated above) amount, and,
 without limiting the generality of the foregoing, each such policy shall
 provide that the insurer shall give the Lender at least thirty (30) days
 prior written notice of cancellation, termination, amendment or non-renewal
 thereof. All such policies shall be in an amount sufficient to prevent the
 insured from becoming a co-insurer thereunder

 
	
  

 	
  

 
	
  

 	
 5.     OPINION
 OF COUNSEL OF THE BORROWER: The Borrower acknowledges that the
 Lender has recommended that the Borrower obtain legal counsel to represent it
 in connection with the Loan. However, at the request of the Borrower, and due
 to the Borrower’s sophistication with respect to transactions of this type,
 the Lender has agreed to waive its customary requirement of an opinion of
 legal counsel of the Borrower.

 
	
  

 	
  

 	
  

 
	
  

 	
 6.          APPROVAL AND PREPARATION OF DOCUMENTS:
 All documents and agreements contemplated by this commitment shall be
 prepared and approved by, and all matters incident hereto shall be acceptable
 to and approved by, the Lender’s legal counsel.

 
	
  

 	
  

 
	
  

 	
 7.     OTHER
 DOCUMENTS: The Borrower and any other appropriate party shall have
 executed and delivered to the Lender such other documents, instruments and
 agreements as the Lender may reasonably request.

 
	
  

 	
  

 
	
  

 	
 8.     LOAN ORIGINATION FEE: The Lender shall
 have received an origination fee in the amount of Ten Thousand and no/100
 ($10,000.00) Dollars, which fee shall be in addition to all other amounts
 which the Borrower is required to pay hereunder, including, without
 limitation, reimbursement of the Lender for costs and expenses pursuant to
 Paragraph 9 hereof

 
	
  

 	
  

 
	
  

 	
 9.  EXPENSES:
 The Lender shall have been reimbursed by the Borrower for all out-of-pocket
 costs and expenses incurred by the Lender in connection with this Commitment
 Letter and the Loan transaction contemplated hereby, including, without
 limitation, Loan brokerage fees, attorneys’ fees of $1,000.00 plus
 out-of-pocket costs, closing charges, documentary or tax stamps, recording
 and filing fees. These expenses shall be paid by the Borrower at the time of
 closing. If the Loan does not close and as to expenses incurred after
 closing, these expenses shall be paid by the Borrower upon the Lender’s
 demand.

 

4

	
  

 	
  

 
	
  

 	
 10.  FINANCIAL
 STATEMENTS: The Borrower shall have delivered to the Lender such
 financial statements and other financial information/documentation as the
 Lender may reasonably require before and during the term of the Loan,
 including financial statements (on forms provided by the Lender) and Federal
 Income Tax Returns. The foregoing financial information/documentation shall
 be provided to the Lender in a timely manner as reasonably required by the
 Lender.

 
	
  

 	
  

 
	
  

 	
 11.  AUTHORITY DOCUMENTS:
 The Lender shall have received a Certificate of Good Standing from the
 Minnesota Secretary of State relative to the Borrower, and such other
 authority documents relating to the Borrower as the Lender may request.

 
	
  

 	
  

 
	
  

 	
 12. RESOLUTION: The
 Lender shall have received a Resolution of the Board of Directors of the
 Borrower authorizing the execution, delivery and performance of this
 Commitment Letter, the Note, the Security Agreement, and any and all other
 documents related thereto or required hereby.

 
	
  

 	
  

 
	
  

 	
 13. PROCEEDINGS: Except
 as may be disclosed in writing by the Borrower to the Lender, there shall, at
 the time of closing, be no action, proceeding or investigation pending or
 threatened (or any basis therefor) which might materially adversely affect
 the condition, business or prospect of the Borrower, the Collateral, or any
 other properties or assets of the Borrower, or which might adversely affect
 the ability of the Borrower to perform the Borrower’s obligations under the
 Loan documentation.

 
	
  

 	
  

 
	
  

 	
 14. NEGATIVE COVENANTS:
 The Borrower hereby covenants and agrees with the Lender that so long as the
 Note remains unpaid, the Borrower, without the Lender’s prior written
 consent, shall not: (a) sell, assign, transfer or otherwise convey a majority
 or controlling interest in the Borrower whether in one transaction or in a
 series of related transactions; (b) lease or sell all or substantially all of
 the Borrower’s property or business to any other entity or entities, whether
 in one transaction or in a series of related transactions; or (c) consolidate
 with or merge the Borrower into or with any other entity or entities.
 Notwithstanding the foregoing, the Lender will permit a sale, assignment,
 transfer, conveyance, lease, consolidation or merger provided the Lender’s
 Collateral position is not unduly impaired thereby.

 

5

	
  

 	
  

 
	
  

 	
 15.  NO ASSIGNMENT:
 This commitment is personal to the Borrower and may not be assigned by the
 Borrower in whole or in part without the prior written consent of the Lender.

 
	
  

 	
  

 
	
  

 	
 16.  SECONDARY FINANCING:
 There shall be no additional financing by the Borrower which is secured by a
 lien on the Collateral without the prior written consent of the Lender.

 
	
  

 	
  

 
	
  

 	
 17.  CROSS-DEFAULT:
 A default with respect to the Note shall
 also constitute a default with respect
 to any other indebtedness or liability of the Borrower to the Lender, whether any such other indebtedness is now
 existing or hereafter existing, and a default with respect to any such other
 indebtedness or liability of the Borrower to the Lender shall also
 constitute a default with respect to the Note.

 
	
  

 	
  

 
	
  

 	
 18.  EXPIRATION OF
 COMMITMENT: If the Loan transaction contemplated hereby has not
 been consummated prior thereto, this Commitment Letter and the commitment of
 the Lender hereunder shall expire May 15, 2014, unless extended in writing by
 the Lender.

 
	
  

 	
  

 
	
  

 	
 19.  THIRD PARTY LENDER
 AUTHORIZATION: The Borrower hereby authorizes the Lender, its
 officers, employees, attorneys and agents to obtain from or provide to,
 without further authorization from or notice to the Borrower, any and all
 financial and banking information that the Lender may desire to obtain from
 or provide to the Borrower’s third party lenders.

 
	
  

 	
  

 
	
  

 	
 20.  THE BORROWER HEREBY
 WAIVES ANY RIGHT TO A TRIAL BY JURY UNDER ANY ACTION OR PROCEEDING ARISING
 DIRECTLY OR INDIRECTLY OUT OF THIS COMMITMENT LETTER, THE LOAN TRANSACTION
 GENERALLY, AND ALL DOCUMENTS INCIDENT THERETO.

 

The Lender also understands, and by signing this commitment, the
Borrower hereby warrants and represents to the Lender that the following
matters are true and correct in all respects:

	
  

 	
  

 	
  

 
	
  

 	
 A.

 	
 Litigation. There is no action, suit or
 proceeding pending or threatened against or affecting the Borrower which, if
 adversely determined, would have a material adverse effect on the condition
 (financial or otherwise), properties or assets of the Borrower or which would
 question the validity of this Commitment Letter or any instrument, document
 or other agreement related thereto or required thereby, or impair the ability
 of the Borrower to perform the Borrower’s obligations hereunder or
 thereunder.

 
	
  

 	
  

 	
  

 
	
  

 	
 B.

 	
 Default. The Borrower is not in default of a
 material provision under any material agreement, instrument, decree or order
 to which the Borrower is a party or by which the Borrower or the Borrower’s
 property are bound or affected.

 
	
  

 	
  

 	
  

 
	
  

 	
 C.

 	
 Taxes. The Borrower has filed all tax
 returns required to be filed and has paid all taxes shown thereon to be due,
 including interest and penalties, which are not being contested in good faith
 and by appropriate proceedings, and has no information or knowledge of any
 objections to or claims for additional taxes in respect of federal or state
 income tax returns for prior years.

 

6

	
  

 	
  

 	
  

 
	
  

 	
 D.

 	
 Judgments. There are no judgments
 outstanding or docketed against the Borrower.

 

If the foregoing terms, conditions and agreements are acceptable, then
you should see that a copy of this letter is executed by the Borrower and
returned to the Lender. Thereupon, this Commitment Letter will become a binding
agreement among the Borrower and the Lender in accordance with its terms.

Sincerely,

ALLIANCE BANK

	
  

 	
  

 	
  

 
	
 By:

 	
 /s/ R. Scott
 Johnson

 	
  

 
	
  

 	
      R.
 Scott Johnson

 	
  

 
	
  

 	
      Its
 Vice President

 	
  

 

CONFIRMED AND ACCEPTED TO BE EFFECTIVE THE 12TH
DAY OF MAY, 2014.

BORROWER:

Image Sensing Systems, Inc.

	
  

 	
  

 	
  

 
	
 By:

 	
 /s/ Kris B. Tufto

 	
  

 
	
  

 	
      Kris B. Tufto

 	
  

 
	
  

 	
      Its President and CEO

 	
  

 

7Exhibit 10.4

SECURITY AGREEMENT

Image Sensing Systems, Inc., a Minnesota corporation (hereinafter
called the “Debtor”), whose
address is 1600 West University Avenue, Suite 500, St. Paul, Minnesota, 55104,
and Alliance Bank, a Minnesota banking corporation, whose address is 55 East
Fifth Street, Suite 115, St. Paul, Minnesota, 55101 (hereinafter called the “Secured Party”), agree as follows: The
Debtor grants to the Secured Party a first position security interest in the
property described below together with any additions and accessions thereto,
replacements thereof, and all insurance, condemnation and other products or
proceeds thereof, to secure prompt payment when due of all amounts owed by the
Debtor to the Secured Party whether now existing or hereafter existing,
including all amounts owed pursuant to that certain $5,000,000.00 Promissory
Note dated effective May 12, 2014, from the Debtor to the Secured Party (the “Note”) and any and all extensions,
modifications, renewals, amendments, and replacements thereof, and any and all
future advances made by the Secured Party to the Debtor at the Secured Party’s
option, together with all other liabilities of the Debtor to the Secured Party
(primarily, secondarily, direct, contingent, sole, joint, or several) due or to
become due or which may be hereafter contracted or acquired and the performance
of all of the terms and conditions of this Security Agreement:

	
  

 	
  

 	
  

 
	
  

 	
 all Assets of the Debtor, including, but not limited to, the
 following: (a) all fixtures, equipment, vehicles and personal property of
 every kind and nature whatsoever now owned or hereafter owned, including all
 extensions, additions, improvements, betterments, renewals and replacements
 of any of the foregoing; (b) all Accounts (including, but not limited to, the
 Debtor’s operating accounts, money market accounts, and interest reserve
 account maintained with the Secured Party), Chattel Paper, Commercial Tort or
 other claims, and General Intangibles; (c) all inventory now owned or
 hereafter owned.

 	
  

 

The above-described
property hereinafter referred to as the “Collateral”.

THE DEBTOR
HEREBY AGREES, WARRANTS AND COVENANTS THAT:

	
  

 	
  

 
	
 1.

 	
 The Secured Party may examine and inspect the Collateral at any time,
 wherever located.

 
	
  

 	
  

 
	
 2.

 	
 The Collateral is for business use and is specifically to be used in
 operation of the Debtor’s business.

 
	
  

 	
  

 
	
 3.

 	
 The Collateral shall not be attached to real estate without the
 Secured Party’s prior written consent. If any of the Collateral is or is to
 become a fixture, the Debtor agrees to furnish the Secured Party with a
 statement signed by all persons who have or claim an interest in the real
 estate concerned, which statement shall provide that the signer consents to
 the security interest created hereby and disclaims any interest in the Collateral
 as fixtures.

 

	
  

 	
  

 
	
 4.

 	
 Except for the security interest granted hereby and other security
 interests granted to the Secured Party that have been approved by the Secured
 Party, the Debtor is the owner of the Collateral, free and clear of all
 liens, security interests or encumbrances, and the Debtor will defend the
 Collateral against all claims and demands of all persons at any time claiming
 the same or any interest therein.

 
	
  

 	
  

 
	
 5.

 	
 The Debtor will not sell or offer to sell or otherwise transfer or
 encumber the Collateral except in the ordinary course of business without the
 prior written consent of the Secured Party, and will keep the Collateral in
 good order and repair, and will not waste or destroy the Collateral.

 
	
  

 	
  

 
	
 6.

 	
 No financing statement covering the Collateral is on file in any
 public office other than the financing statements filed by or at the
 direction of the Secured Party, and at the request of the Secured Party, the
 Debtor hereby authorizes the Secured Party to file one or more financing statements
 pursuant to the Uniform Commercial Code in form satisfactory to the Secured
 Party for filing in all public offices wherever filing is deemed necessary or
 desirable by the Secured Party.

 
	
  

 	
  

 
	
 7.

 	
 The Debtor will keep the Collateral insured at all times against loss
 by fire and other hazards concerning which, in the judgment of the Secured
 Party, insurance protection is necessary, in a company or companies
 satisfactory to the Secured Party and in amounts sufficient to protect the
 Secured Party against loss or damage to the Collateral, and will pay the
 premiums therefor. Such policy or policies of insurance will be delivered to
 and held by the Secured Party, together with loss payable clauses in favor of
 the Secured Party as its interest may appear, in form satisfactory to the
 Secured Party. The Secured Party may act as attorney-in-fact for the Debtor
 in obtaining, adjusting, settling and canceling such insurance and endorsing
 any drafts.

 
	
  

 	
  

 
	
 8.

 	
 At its option, upon default of the Debtor to do so, the Secured Party
 may discharge taxes, liens, or security interests or other encumbrances
 placed on the Collateral, may pay for insurance on the Collateral, and may
 pay for the maintenance and preservation of the Collateral. The Debtor agrees
 to reimburse the Secured Party on demand for any payment made, or any expense
 incurred by the Secured Party pursuant to the foregoing authorization.

 
	
  

 	
  

 
	
 9.

 	
 Until the occurrence of an Event of Default (as defined in the Note),
 the Debtor may retain possession of the Collateral, and use the same in any
 lawful manner not inconsistent with the agreements herein or with the terms
 and conditions of any policy of insurance thereon.

 

2

	
  

 	
  

 
	
 10.

 	
 Upon the occurrence of an Event of Default, the Secured Party shall
 have the right, at its option and without demand or notice, in addition to
 all other rights and remedies available in law and equity, to exercise all of
 the rights and remedies of a secured party under the Uniform Commercial Code
 or any other applicable law. The Debtor agrees that, upon an Event of
 Default, the Debtor will make the Collateral available to the Secured Party
 at a place to be designated by the Secured Party which is reasonably
 convenient. The Debtor further agrees to pay all costs and expenses of the Secured
 Party, including reasonable attorney’s fees, in collection of any amount due
 from the Debtor to the Secured Party herein or for the enforcement hereof. If
 any notice of sale, disposition or other intended action by the Secured Party
 is required by law to be given to the Debtor, such notice shall be deemed
 reasonably and properly given if mailed to the Debtor at such address of the
 Debtor as may be shown on the Secured Party’s records, at least ten (10) days
 before such sale, disposition or other intended action. Waiver of any default
 hereunder by the Secured Party shall not be a waiver of any other default or
 of the same default on a later occasion. No delay or failure by the Secured
 Party to exercise any right or remedy shall be a waiver of any such right or
 remedy and no single or partial exercise by the Secured Party of any right or
 remedy shall preclude other or further exercise thereof or the exercise of
 any other right or remedy at any time.

 
	
  

 	
  

 
	
 11.

 	
 This Agreement and the security interest in the Collateral created
 hereby shall terminate when the Debtor has repaid the Secured Party the
 amount due on the Note and all other indebtedness and liability from the
 Debtor to the Secured Party whether now existing or hereafter existing.

 
	
  

 	
  

 
	
 12.

 	
 No waiver by the Secured Party of any default shall be effective
 unless in writing, nor operate as a waiver of any other default or of the
 same default on a future occasion.

 
	
  

 	
  

 
	
 13.

 	
 The Secured Party is hereby appointed the attorney-in-fact for the
 Debtor to do all things and acts necessary to perfect, and to continue to
 perfect, the security interest in the Collateral and to exercise its rights
 with respect to the Collateral.

 
	
  

 	
  

 
	
 14.

 	
 The Debtor waives demand, notice, protest, notice of acceptance of
 this Security Agreement, notice of loans made, credit extended, Collateral
 received or delivered or other action taken in reliance hereon and all other
 demands and notices of any description. With respect to both the obligations
 secured by the Security Agreement and the Collateral, the Debtor assents to
 any extension or postponement of the time of payment or any other indulgence,
 to any substitution, exchange or release of or failure to perfect any
 security interest in any Collateral, to the addition or release of any party
 or person primarily or secondarily liable, to the acceptance of partial
 payment thereon and the settlement, compromising or adjusting of any thereof,
 all in such manner and at such time or times as the Secured Party may deem
 advisable. The Secured Party shall have no duty as to the collection or
 protection of the Collateral or any income therefrom, the preservation of
 rights against prior parties, or the preservation of any rights pertaining
 thereto beyond the safe custody thereof. The Debtor further waives any and
 all other suretyship defenses.

 

3

	
  

 	
  

 
	
 15.

 	
 THE UNDERSIGNED
 ACKNOWLEDGES THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED AND THAT
 THE TIME AND EXPENSE REQUIRED FOR TRIAL BY A JURY MAY EXCEED THE TIME AND EXPENSE REQUIRED FOR TRIAL WITHOUT A JURY. THE
 UNDERSIGNED, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
 COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT
 OF SECURED PARTY AND THE UNDERSIGNED,
 WAIVE ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
 THE PERFORMANCE OR ENFORCEMENT OF, OR IN
 ANY WAY RELATED TO, THIS AGREEMENT, ANY RELATED AGREEMENTS OR OBLIGATIONS THEREUNDER. THE UNDERSIGNED HAVE READ ALL OF THIS AGREEMENT
 AND UNDERSTAND ALL OF THE
 PROVISIONS OF THIS AGREEMENT. THE UNDERSIGNED ALSO AGREE THAT COMPLIANCE BY SECURED PARTY WITH THE
 EXPRESS PROVISIONS OF THIS AGREEMENT SHALL CONSTITUTE GOOD FAITH AND SHALL BE
 CONSIDERED REASONABLE FOR ALL PURPOSES.

 

IN WITNESS
WHEREOF, the parties have signed this Agreement effective the 12th
day of May, 2014.

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 SECURED PARTY:

 	
  

 	
  

 	
 DEBTOR:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Alliance
 Bank

 	
  

 	
  

 	
 Image
 Sensing Systems, Inc.

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 By:

 	
 /s/ R. Scott
 Johnson

 	
  

 	
  

 	
 By:

 	
 /s/ Kris B.
 Tufto

 	
  

 
	
  

 	
     R. Scott
 Johnson

 	
  

 	
  

 	
     Kris B.
 Tufto

 
	
  

 	
     Its Vice
 President

 	
  

 	
  

 	
     Its President
 and CEO

 

4

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