Exhibit 10.1      

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”) is made by and between Autoscope Technologies Corporation, a Minnesota corporation, and its subsidiaries and divisions (collectively, “AATC”), and Francis (Frank) G. Hallowell (“Hallowell”) as of the 1st day of February, 2022 (the “Effective Date”).

RECITALS:

A.                 Image Sensing Systems Inc., a Minnesota corporation which is the predecessor and now a wholly-owned subsidiary of AATC (“ISS”), offered and Hallowell accepted the position of Chief Financial Officer under an Employment Agreement dated as of April 29, 2019 by and between ISS and its subsidiaries and divisions (the “Original Employment Agreement”) and Hallowell.

B.                 The Boards of Directors of AATC and ISS have offered and Hallowell has accepted the new position of President and Chief Operating Officer of ISS.

C.                 The Boards of Directors of AATC and ISS have offered and Hallowell has agreed to continue as the Chief Financial Officer of AATC and ISS.

D.                 AATC, ISS and Hallowell have agreed to amend and replace the Original Employment Agreement under the terms set forth below.

NOW, THEREFORE, in consideration of the covenants and conditions contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, AATC and Hallowell agree as follows:

AGREEMENT

1.                  Employment; Definitions

a)                  Employment. Hallowell is an at-will employee, and his employment may be terminated by either Hallowell or AATC at any time, with or without cause.

b)                  Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

i)                    “Code” means the Internal Revenue Code, as amended, and the regulations, notices and other guidance of general applicability issued thereunder.

ii)                 “Fair Market Value” means the per share closing price of AATC’s common stock or any other securities into which AATC’s common stock has been converted that are subject to Options, awards of Restricted Stock, or Restricted Stock Units to be granted or held by Hallowell as quoted on the Nasdaq Stock Market or any other exchange on which such common stock or other securities are principally traded or, if such common stock or securities are not traded on any exchange, the fair market value of such common stock or securities as determined in good faith by the Board of Directors of AATC or its successor.

iii)               “Good Reason” means Hallowell has provided written notice to AATC within ninety (90) days following the occurrence of any of the following events, provided the event results in a negative change to Hallowell, which notice describes the event in reasonable detail and the facts and circumstances claimed by Hallowell to constitute Good Reason, and AATC has not cured the event within thirty (30) days after receiving such notice from Hallowell:

(A)             the assignment of Hallowell without Hallowell’s consent to a position with material responsibilities or duties of a lesser status or degree than the position of President and Chief Operating Officer and Chief Financial Officer;

(B)              the relocation of Hallowell’s principal office for AATC’s business, without Hallowell’s consent, to a location more than fifty (50) miles outside Hallowell’s work location as of the date of this Agreement;

(C)              a material reduction, in the aggregate, in base salary, variable pay opportunities or the employee benefits in which Hallowell is entitled to participate irrespective of any standard waiting periods with respect to the same, unless such material reduction is generally applicable to all employees of AATC with a similar ranking to Hallowell; or

(D)             a material breach or a material adverse modification of this Agreement by AATC without Hallowell’s consent.

Termination for “Good Reason” shall not include Hallowell’s death or a termination for any reason other than one of the events described in clauses (A) through (D) of this Section l(b)(iii).

iv)                “Termination Date” means the date upon which Hallowell’s “separation from service” with AATC within the meaning of Section 409A(a)(2)(A)(i) of the Code is effective (with “AATC” for purposes of this paragraph to include any business entity that is treated as a single employer with AATC under the rules of Section 414(b) and (c) of the Code).

v)                  “With Cause” means the occurrence of any of the following events:

(A)             the conviction of Hallowell of, or a plea of “guilty” or “no contest” by Hallowell to, a felony under the laws of the United States or any state thereof or the conviction of Hallowell of, or a plea of “guilty” or “no contest” by Hallowell to, any act involving moral turpitude;

(B)              Hallowell’s breach of fiduciary duty involving personal profit;

(C)              Hallowell’s willful and material misconduct in the performance of duties assigned to Hallowell as the President and Chief Operating Officer of ISS and the Chief Financial Officer of AATC and ISS;

(D)             Hallowell’s consistent failure to perform the reasonable stated duties assigned to Hallowell under this Agreement; or

(E)              Illegal or unethical business practices by Hallowell including, but not limited to, the commission of fraud, misappropriation, or embezzlement in connection with AATC’s business.

2.                  Duties. Hallowell will devote his full professional time, attention and efforts to the business and affairs of AATC during his employment with AATC, and Hallowell 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. AATC will pay Hallowell a base salary at a rate of $12,500.00 per semi-monthly pay period, which is equal to $300,000.00 annualized, for the remainder of the 2022 calendar year or until the earlier termination of Hallowell’s employment under this Agreement, less all required withholdings and deductions, payable in accordance with AATC’s standard payroll procedures in effect from time to time. Hallowell’s performance and salary will be evaluated by AATC’s Board of Directors from time to time in its discretion but no less often than annually.

b)                  Grant of Options. On the Effective Date, AATC will grant to Hallowell incentive stock options with a term of ten years to purchase sixty thousand (60,000) shares of common stock of AATC under the terms of the Image Sensing Systems, Inc. 2014 Stock Option and Incentive Plan effective as April 9, 2014, as amended (the “Plan”) (which was assumed by AATC under the Assignment and Assumption Agreement by and between AATC and ISNS dated as of July 21, 2021), that will immediately vest. The grant of any future Restricted Stock, Restricted Stock Units, Options, or other Awards to Hallowell under the Plan or otherwise will be in the discretion of AATC’s Board of Directors, Compensation Committee or other person or party with authority to grant such future Restricted Stock, Restricted Stock Units, Options, or other Awards. For purposes of this Agreement, the terms “Option,” “Restricted Stock,” “Restricted Stock Units” and “Award” shall have the respective meanings set forth in the Plan or any successor or replacement plan of a similar nature.

c)                  Bonuses. Hallowell will be eligible to participate in an annual cash incentive award of a target bonus equal to 25% of Hallowell’s annual base salary for the previous calendar year, proportionately pro-rated for any portion of the previous calendar year that he worked. Such annual cash incentive award will be based on

the attainment of certain performance goals for the previous calendar year set by AATC’s Board of Directors, Compensation Committee or other person or party with authority to determine such bonus in its discretion and will be payable upon completion of the audit of AATC’s financial statements for the previous calendar year.

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

e)                  Vacation. Hallowell is entitled to vacation each year in accordance with AATC’s vacation policy in effect from time to time.

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

5.                  Confidentiality, Noncompetition, and Invention Assignment. Hallowell has reviewed and, on the Effective Date, has signed Appendix A to this Agreement.

6.                  Severance upon Termination of Employment.

a)                  Voluntary Termination. Should Hallowell terminate his employment for any reason other than for Good Reason as provided in Section l(b)(iii) of this Agreement, (i) AATC shall pay Hallowell all earned and unpaid amounts due to him for salary through the termination date; (ii) Hallowell shall have ninety (90) days after the date of the termination of his employment (or such shorter period as is provided in the Plan, or any successor or replacement plan of a similar nature, or an agreement governing an Option or other Award) to exercise all Options registered in Hallowell ‘s name that are exercisable as of such termination date; and (iii) any other Options, Restricted Stock, Restricted Stock Units and Awards registered in Hallowell’s name and that are not vested and not exercisable by Hallowell shall automatically terminate. Except as expressly provided herein, to the extent that there is any conflict between the provisions of this Section 6(a) and the provisions of the Plan or any agreement governing Options, Restricted Stock, Restricted Stock Units, or other Awards registered in Hallowell’s name, the provisions of this Section 6(a) shall govern.

b)                  Termination by AATC “With Cause”. Should AATC terminate Hallowell’s employment With Cause, Hallowell shall not be entitled to any severance, and all

of the Options, Restricted Stock and Restricted Stock Units registered in Hallowell’s name, whether or not vested and whether or not exercisable, shall automatically terminate; provided, however, that Hallowell shall have ten (10) days to cure any alleged breach, failure, or misconduct under Section l(b)(v)(D) of this Agreement if such alleged breach, failure or misconduct is curable, after AATC provides Hallowell with written notice of the actions or omissions constituting such breach, failure, or misconduct. Except as expressly provided herein, to the extent that there is any conflict between the provisions of this Section 6(b) and the provisions of the Plan or any agreement governing Options, Restricted Stock, Restricted Stock Units, or other Awards registered in Hallowell’s name, the provisions of this Section 6(b) shall govern.

c)                  Termination by AATC “Without Cause” or Termination by Hallowell for Good Reason. Should Hallowell terminate his employment for Good Reason or AATC terminate Hallowell’s employment for any reason other than (1) With Cause, or

(2) because of Hallowell’s inability to perform his duties because of death or disability, upon entry into a release agreement substantially in the form attached to this Agreement as Appendix B (the “Release Agreement”), (i) Hallowell shall be entitled to six (6) months of salary continuation, without eligibility for bonus; and (ii) he shall have ninety (90) days after the date of the termination of his employment (or such shorter period as is provided in the Plan, or any successor or replacement plan of a similar nature, or an agreement governing the Option) to exercise all Options registered in Hallowell’s name that are vested and exercisable as of such Termination Date. Any other Options, Restricted Stock, Restricted Stock Units and Awards registered in Hallowell’s name that are not vested and not exercisable shall automatically terminate upon termination of Hallowell’s employment under this Section 6(c). AATC and Hallowell have the ability, however, at any time, to terminate this Agreement by mutual written agreement, with or without the severance benefit. Except as expressly provided herein, to the extent that there is any conflict between the provisions of this Section 6(c) and the provisions of the Plan or any agreement governing Options, Restricted Stock, Restricted Stock Units, or other Awards owned by Hallowell, the provisions of this Section 6(c) shall govern.

d)                  Post-Termination Obligations and Conditions. In the event of the termination of Hallowell’s employment with AATC, the sole obligation of AATC to Hallowell will be AATC’s obligation to make any payments it is required to make to Hallowell as provided in this Agreement, and AATC will have no other obligation to Hallowell or to Hallowell’s beneficiary(ies) or estate.

i)                    Notwithstanding the provisions of Section 6(c) of this Agreement, AATC will not be obligated to make any payments to Hallowell under Section 6(c) unless: (A) Hallowell has signed the Release Agreement within twenty-one (21) days after the Release Agreement is provided to Hallowell; (B) any and all applicable rescission periods provided by law for releases of claims shall have expired and Hallowell shall have signed and not rescinded the release of claims; and (C) Hallowell is in strict

compliance with the terms of this Agreement as of the date(s) of such payments.

ii)                 Any salary continuation provided under Section 6(c) of this Agreement shall be paid in equal installments over the period in accordance with the normal payroll practices for AATC, with the first such installment to commence with the first normal payroll for AATC that follows the execution of the Release Agreement and expiration of all applicable rescission periods without rescission; provided that: (A) the first installment payment shall include all amounts that would otherwise have been paid to Hallowell during the period beginning on the Termination Date and ending on the first payment date if no delay had been imposed; and (B) if the period during which the first installment payment potentially could be made (as determined on the Termination Date) spans two calendar years, the first installment payment shall not be made until the first normal payroll for AATC in the second of the calendar years.

iii)               Immediately upon the termination of Hallowell’s employment with AATC for any reason, Hallowell will resign all positions then held as an officer, director, or manager of AATC and of affiliated entities of AATC.

e)                  Withholding Taxes. AATC shall be entitled to deduct from all payments or benefits provided for under this Agreement any federal, state, or local income and employment-related taxes required by law to be withheld with respect to such payments or benefits.

f)                   Compliance with Code Section 409A.

i)                    The parties to this Agreement intend that the payments described in Section 6(c) of this Agreement shall be excluded from deferred compensation as a “short-term deferral” under Treas. Reg. § l.409A-l (b)(4). The parties to this Agreement intend that the continuation of any health and dental benefits under this Agreement shall be excluded from deferred compensation pursuant to the medical benefits exception for separation pay plans under Treas. Reg. §l.409A-l(b)(9)(v)(B).

ii)                 The parties to this Agreement intend that the continuation of any life and disability insurance benefits under this Agreement shall be excluded from deferred compensation as separation pay due to an involuntary separation from service under Treas. Reg. § l.409A-l(b )(9)(iii), and the amounts payable for any such continuation of life and disability insurance coverage shall not exceed two times the lesser of (A) Hallowell’s annualized compensation based on the annual rate of pay for services to AATC for the calendar year prior to the calendar year in which the Termination Date occurs (adjusted for any increase during the year that was expected to continue indefinitely if Hallowell had not separated from service) or (B)

the compensation limit under Section 40l(a)(l 7) of the Code for the year in which the Termination Date occurs.

iii)               Notwithstanding the foregoing, if any of the payments described in Section 6(c) of this Agreement are subject to the requirements of Code Section 409A, and AATC determines that Hallowell is a “specified employee” as defined in Code Section 409A as of Hallowell’s Termination Date, such payments shall not be paid or commence earlier than the date that is six months after the Termination Date, but shall be paid or commence during the calendar year following the year in which the Termination Date occurs and within 30 days of the earliest possible date permitted under Code Section 409A.

7.                  Miscellaneous.

a)                  Notices. All notices permitted or required to be given under this Agreement must be in writing. Notices will be deemed given (i) when personally received or when sent by facsimile transmission (to the receiving party’s facsimile number), (ii) on the first business day after having been sent by commercial overnight courier with written verification of receipt, or (iii) 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 AATC or ISS:

Andrew T. Berger,

Chief Executive Officer 

400 Spruce Tree Centre

1600 University Ave. West  

St. Paul, MN 55104

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

If to Hallowell:

Frank G. Hallowell

6957 Tartan Curve

Eden Prairie, MN 55346

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

b)                  Amendments. Except as provided in the next sentence, this Agreement may not be changed or modified in whole or in part except by a writing signed by AATC and Hallowell. Notwithstanding anything in this Agreement to the contrary, AATC and Hallowell agree that AATC has the right to amend this Agreement without Hallowell’s consent to the extent necessary or desirable to comply with Code Section 409A, provided that no such amendment may reduce the amount of any benefits payable to Hallowell without Hallowell’s consent.

c)                  Governing Law. This Agreement will be governed by and interpreted according to the laws of the State of Minnesota without regard to its conflicts law.

d)                  No Waiver. The failure of either party to this Agreement 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. Hallowell and AATC recognize that the limitations contained in this Agreement are reasonably and properly required for the adequate protection of the interests of AATC. 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 to this Agreement. The parties to this Agreement 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. With the exception of the Plan and any agreement or other document setting forth the terms of an “Award” granted to Hallowell under the Plan (as the term “Award” is defined in the Plan), this Agreement constitutes the entire understanding and agreement of the parties hereto with respect to the subject matter of this Agreement and, with the foregoing exceptions, supersedes all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, including, without limitation, the Original Employment Agreement, between the parties to this Agreement with respect to the subject matter of this Agreement.

g)                  Term of Agreement. This Agreement shall commence on the Effective Date and shall continue in effect until the date on which Hallowell’s employment with AATC terminates for any reason whatsoever; provided, that any rights and obligations accruing upon or prior to the termination or expiration of this Agreement shall survive to the extent necessary to enforce such rights and obligations.

h)                  Successors and Assigns. This Agreement shall inure to the benefit of and shall be enforceable by Hallowell, his heirs, and the personal representative(s) of his estate, and it shall be binding upon and inure to the benefit of AATC and its successors and assigns. AATC will require the transferee of any sale of all or substantially all of the business and assets of AATC or the survivor of any merger, consolidation, or other transaction expressly to agree to honor this Agreement in the same manner and to the same extent that AATC would be required to perform this Agreement if no such event had taken place. The failure of AATC to obtain such agreement before the effective date of such event shall be

a material breach of this Agreement by AATC within the meaning of Section l(b)(iii)(D) of this Agreement.

i)                    Captions. The headings or captions set forth in this Agreement are for convenience only and shall not affect the meaning or interpretation of this Agreement.

j)                    Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

k)                  Representation by Legal Counsel. Hallowell acknowledges that this Agreement was prepared for AATC by Winthrop & Weinstine, P.A., as legal counsel for AATC, which does not represent Hallowell; Hallowell has consulted with and has been represented by legal counsel of Hallowell’s own choice in connection with the meaning, interpretation, negotiation, drafting and effect of this Agreement or has had to opportunity to do so but has chosen not to do so; and the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

IN WITNESS WHEREOF, Hallowell, AATC and ISS have caused this Agreement to be duly executived and delivered as of the Effective Date.

Autoscope Technologies Corporation

By: /s/ Andrew T. Berger                    

      Andrew T. Berger

      President and Chief Executive Officer

By: /s/ Frank G. Hallowell                 

      Frank G. Hallowell

Image Sensing Systems, Inc.

By: /s/ Andrew T. Berger                   

      Andrew T. Berger

      Chief Executive Officer