EMPLOYMENT AGREEMENT

This agreement is dated this 1^st day of May, 2003, between Duos Technologies, Inc., a Florida corporation, and any of its subsidiaries and affiliates (hereinafter referred to as “Employer”) and Gianni B. Arcaini (hereinafter referred to as “Employee”).

WITNESSETH

Employer hereby employs Employee and Employee hereby agrees to serve Employer in the initial capacity set forth in Exhibit A attached hereto (as might be modified in the future at Employer’s sole discretion), for the term and upon the conditions hereinafter set forth. Employee agrees to perform such reasonable executive functions commensurate with this office and such other duties as shall from time to time be assigned to him by Employer’s Board of Directors. Employee shall perform his duties faithfully, diligently, competently, and to the best of his ability, acting at all times in the best interest of Employer and to advance Employer’s interests. Employee shall perform his duties from the locations set forth in Section A.1 (b) of Exhibit A. Employee shall, at all times, devote his full working time, energy, attention, and good faith efforts to his duties and responsibilities under this Agreement, and shall not seek, accept, or engage in any other employment or business activity during the term hereof, regardless of whether it is pursued for compensation, gain, or profit. Employee, however, may invest his assets in other companies, so long as they do not require Employee’s time or services in the operation of their affairs. Employee’s duties during the term hereof shall specifically include, without limitation, those duties set forth in Section A.1 of Exhibit A attached hereto, to the extent further detailing is deemed necessary or appropriate to describe Employee’s duties with more particularity.

Employer may, from time to time, extend or curtail Employee’s precise services. Employee will be appointed as an officer of Employer and agrees to serve an initial term as a director of Employer. Furthermore, Employer may nominate Employee for director or officer of any subsidiary of Employer, Employee agrees to stand for election and if elected or appointed, to serve in such a capacity or capacities without additional compensation. Employer will maintain adequate Directors and Officers liability insurance policy, and Employee shall be an insured under such policy.

In addition to the terms and conditions set forth herein, Employee shall be bound to and comply with the specific Corporate Authorities and Responsibilities set forth in Exhibit “B” attached hereto and made a part hereof, as amended by the Board of Directors of Employer from time to time in its sole discretion.

The term of Employee’s employment shall be as set forth in Section A.2 of Exhibit A attached hereto. Unless terminated in accordance with the provisions hereinafter set forth, or unless either party shall give notice to the other of its intent to terminate at least sixty (60) days prior to the expiration of the applicable term, the term shall be automatically extended for successive additional one-year periods. If such a notice is given, Employee’s employment hereunder will terminate at the end of term, and Employee shall continue to render his services and shall be paid his regular compensation up to the end of the term.

Employee will be entitled to participate on the same basis as other employees in all of the employee benefit programs which may be adopted by Employer and in force from time to time, including any hospitalization, medical, health, and accident insurance programs, policies, and benefits and life insurance programs as may from time to time be in effect, at the sole discretion of the Board of Directors.

Except as otherwise specifically set forth herein or where applicable only to staff employees by its terms, Employee shall be bound by and subject to the policies, procedures, and guidelines contained in Employer’s Policy and Procedures Manual, as promulgated from time to time, setting forth, among other things, the Employer’s holidays for each year, insurance, disability, sick leave, funeral leave, expense reports and other general matters. In the event of a conflict between the terms of the Policy and Procedure Manual and the terms of this Agreement, the terms hereof shall control and supersede.

Employee shall be expected to work evenings, weekends, and holidays, to the extent necessary or required.

Employee shall have a private office, secretarial help, and such other facilities and services as are suitable to his position and appropriate to the performance of his duties.

Nothing in this Paragraph or Agreement shall be construed to prohibit Employee from pursuing any other remedies which may be available to Employer at law or in equity including the recovery of damages from the Employee. The provision of this Paragraph 6 shall survive the termination of this Agreement and Employee’s employment hereunder.

Upon termination of his employment under this Agreement, upon Employer’s reasonable request, Employee shall advise and consult with Employer as reasonably necessary regarding any projects with respect to which Employee played a material role. Employee shall make himself available for advice and consultation at his place of residence and shall not be required to travel or incur any expenses in performing his duties under this Paragraph. If Employer requests Employee to render services at a place other than his place of residence and he elects to do so, he shall be reimbursed for any expenses he may reasonably incur in rendering such services, including a daily consulting fee based upon the most recent rate of compensation in effect.

If Employee dies during the term of his employment, Employer shall pay the estate of Employee compensation which would otherwise be payable to Employee up to the end of the month in which his death occurs.

Employee shall be entitled to an annual vacation as set forth in Section A.9 of Exhibit A attached hereto, at full Base Compensation, at a time mutually satisfactory to Employer and Employee.

In the event that Employee fails to perform its duties hereunder and such failure continues for 30 days after written notice from Employer to Employee, or otherwise materially breaches this Agreement, or in the event that Employer becomes insolvent or bankrupt, sells substantially all of its assets or stock or elects to terminate its business or liquidate its assets, Employer may terminate this Agreement upon thirty (30) days written notice to Employee. In such event, Employee’s employment and activities under this Agreement shall cease immediately upon notice, however Employee shall be paid his regular Base Compensation through the end of the thirty (30) day period.

Employer shall have the right to terminate Employee immediately for misappropriation of funds, fraud, gross negligence, reckless, wanton or intentional misconduct, or similarly serious misfeasance, upon which termination, Employer’s obligations to Employee with respect to this Agreement shall cease and terminate. In such event, Employee shall immediately cease employment and activities under this Agreement and shall be paid his regular Compensation up to the date of termination.

In the event Employer fails to keep, observe or perform any material covenant, agreement, term or provision of this Agreement to be kept, observed or performed by Employer and such default continues for a period of thirty (30) days after written notice by Employee to Employer, which notice shall include, among other things, a reference to this Paragraph, then Employee, at its sole option, may terminate this Agreement immediately upon the expiration of such thirty (30) day period.

In the event of a material breach by Employer as set forth above or termination of Employee by Employer without cause, Employee shall be entitled to payment of the greater of: a) regular Base Compensation remaining to be paid under this Agreement for the remaining term of the Agreement, on the same payment schedule and terms as if the Agreement had not been terminated; or b) twelve (12) months of regular Base Compensation on the same payment schedule and terms as if the Agreement had not been terminated. Both parties acknowledge and agree that, because of the nature of the services to be rendered by Employee, the amount of damages in the event of a termination without cause by Employer would be impossible to measure or determine. Both parties agree that the amount specified in this Paragraph shall be deemed to be liquidated damages, is a fair and reasonable estimate of the compensation payable to Employee, and is not a penalty. The provisions of this Paragraph shall not apply in the event of termination by Employer upon sixty (60) days notice to Employee prior to the end of any term, as set forth in Paragraph 2 hereof.

In the event of a breach by Employee as set forth above, or termination without cause by Employee, Employer shall have the right to exercise any and all rights and remedies to which it may be entitled, at law or in equity. Both parties recognize that the services to be performed by Employee are special and unique, and that Employer may suffer damages if Employee breaches the terms and conditions of this Agreement or voluntarily leaves his employment. The provisions of this Paragraph shall not apply in the event of termination by Employee upon sixty (60) days notice to Employer prior to the end of any term, as set forth in Paragraph 2 hereof.

In the event that Employee is a director of Employer, and a) Employer terminates this Agreement in accordance with Sections 10 or 12 above, or b) Employee terminates this Agreement in accordance with Section 13 above, then the Employee shall cease to be a director as of the date of termination.

This Agreement is a personal Agreement and the rights and interests hereunder (except that of Employer) may not be sold, transferred, assigned, pledged or hypothecated. This Agreement shall be binding on the heirs, executors, and administrators of Employee and on the successors and assigns of Employer. During the Employee’s lifetime, the parties hereto, by mutual written agreement, may amend, modify or rescind this Agreement without the consent of any other person. This Agreement supersedes any and all employment or service negotiations, understandings or agreements between the parties prior to the date hereof.

If any of the provisions of this Agreement shall be held invalid, the remainder of this Agreement shall not be affected thereby.

This instrument contains the entire agreement between the parties and shall be governed by the laws of the State of Florida. As part of the mutual consideration for the execution of this Agreement, Employer and Employee agree that all actions or proceedings arising directly or indirectly from this Agreement shall be litigated only in courts having suits within the State of Florida, County of Duval, and Employer and Employee hereby consent to the venue and jurisdiction of any local, state or federal court located within the State of Florida, County of Duval.

No amendment, change or modification of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. Either parties’ waiver of a breach of any provision of this Agreement by the other party hereto shall not operate or be construed as a waiver of any subsequent breach by the waiving party.

Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent postage prepaid by certified or registered mail, return receipt requested, in the case of Employer and Employee to the addresses set forth in Section A.19 of Exhibit A attached hereto. Either party may designate a new address by written notice to the other.

The use of the singular shall include the use of the plural; where the context so requires and vice versa. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders as the context requires. Paragraph headings are for convenience and reference only and shall have no effect nor imply any meaning to the language hereunder.

IN WITNESS WHEREOF, the parties have executed this Agreement this day and year first above written.

Signed, sealed, and delivered in the presence of:

EXHIBIT A

EXHIBIT “B” to

Employment Agreement

Additional Corporate Authorities and Responsibilities

In accordance with the Bylaws of Duos Technologies, Inc.