Settlement of Agreement And Mutual Release

EXHIBIT 10.2

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (" Agreement" ), effective as of June 22, 2006 (the " Effective Date" ), is entered into by and among (i) Insignia Systems, Inc. (" Insignia" ), on the one hand; and (ii) Paul A. Richards, Inc., (" Richards, Inc." ); and (iii) Paul Richards (" Richards" ), on the other hand. Insignia, Richards, Inc., and Richards are referred to sometimes herein collectively as " Settling Parties" or " parties," and each individually as a " Settling Party" or " party." Richards, Inc. and Richards are sometimes referred to as " the Richards Parties."

BACKGROUND

A. In 2002, Richards, Inc. sold to Insignia a business known as " ValuStix," consisting of multiple-coupon " on-package" folder booklets to affix to in-store products (the " ValuStix Transaction" ).

B. Insignia sued the Richards Parties in the United States District Court for the District of Minnesota in an action captioned Insignia Systems, Inc. v. Paul A. Richards, Inc. et al. , Civil No. 05-2136 (the " Action" ), claiming in part that the Richards Parties made negligent representations and engaged in fraudulent conduct in connection with the sale of ValuStix to Insignia. The Richards Parties counterclaimed against Insignia, claiming, among other things, breach of an agreement between Richards and Insignia dated on or about December 23, 2002 (the " Employment Agreement" ). Each of Insignia and the Richards Parties has denied the substantive allegations against it, and denies all liability as alleged in the Action.

C. Insignia has also explored, and has rights to, a business, sometimes called " RxStix." Similar to ValuStix, the RxStix product concept was developed by Richards while he was an employee of Insignia, and involves affixing to pharmacy bags or packaged-good consumer products pressure-sensitive materials containing healthcare information and/or related promotional offers. All of the assets, both tangible and intangible, heretofore owned or used by Insignia for creating, developing, marketing and selling such health-care-related pressure-sensitive materials are listed on Exhibit A and referred to in this Agreement as " RxStix Assets."


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D. Insignia and the Richards Parties desire to settle all claims and disputes between them as set forth in this Agreement, including without limitation: (i) the Action, including all its claims and counterclaims, and (ii) all claims Insignia and the Richards Parties may have against each other arising out of all business relationships between them before the date of this Agreement, as well as any claims that Insignia has or may have against the Richards Parties in connection with RxStix Assets. As part of this Agreement, Richards, Inc. intends to purchase RxStix Assets, as defined herein, from Insignia.

NOW THEREFORE, in consideration of the premises and the mutual agreements herein contained and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree as follows:

ARTICLE I

PURCHASE AND SALE OF BUSINESS ASSETS

Section 1.1 Purchase and Sale of RxStix . Insignia hereby sells to Richards, Inc., and Richards, Inc. hereby buys from Insignia, all RxStix Assets, as of the Effective Date. Richards, Inc. will not assume any obligations, commitments or liabilities of Insignia in connection with any RxStix Assets.

Section 1.2 Price . Richards, Inc. agrees to pay to Insignia $100,000 on the Effective Date in consideration for the RxStix Assets.

Section 1.3 Representations and Warranties of Insignia . Insignia hereby represents and warrants to Richards, Inc. that (a) Insignia hereby conveys to Richards, Inc. good and valid title to the RxStix Assets, free of any mortgages, security interests, pledges, liens easements, encumbrances, or claims of any kind whatsoever; and except for the RxStix Assets, Insignia is not aware of any other assets owned or used by it and which are intended to be used primarily for RxStix; (b) Insignia is not in default under any material contract, agreement, lease, or other instrument relating to RxStix. In all other respects, the RxStix Assets are hereby conveyed to Richards, Inc. " AS-IS."

Section 1.4 Non Compete . Insignia hereby agrees that, beginning on the Effective Date, it will not intentionally interfere with any communications or business relationships relating solely to the RxStix business that Richards, Inc. may hereafter establish with customers or manufacturers with which Insignia has a business relationship. Insignia also hereby agrees that it will not, for a period of six (6) years after the Effective Date, enter into or complete in the business involving the affixing to pharmacy bags or packaged consumer products pressure-sensitive materials containing healthcare information and/or related promotional offers.

Section 1.5 Further Assurances . Insignia and Richards, Inc. will cooperate with each other from and after the Effective Date to take such steps as either party reasonably requests to effect the transfer of the RxStix Assets and to further the intent of the provision in this Article I.


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Section 1.6 Termination of Contracts . W ...