Document:

EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this 23rd day of December, 2002, to be effective as of the 23rd day of December,
2002, by and between INSIGNIA SYSTEMS, INC., a corporation organized and
existing under the laws of the State of Minnesota with its principal office
located at 5025 Cheshire Lane North, Plymouth, Minnesota 55446, referred to as
"Employer", and PAUL A. RICHARDS, whose address is c/o 50 Merritt Street, Port
Chester, New York 10573, referred to as "Employee".

                                    Recitals
                                    --------

         A. Employer is engaged in the business of developing and marketing
in-store promotional products and services to retailers and consumer goods
manufacturers.

         B. Employee is qualified to be engaged in the business of Employer as a
Vice President, Coupon Systems, POPS Division of Insignia Systems, Inc.

         C. Employer wishes to employ Employee and Employee wishes to be
employed by Employer on the terms and conditions set forth in this Agreement.

         In consideration of the mutual promises and such other enumerated
consideration as is set forth in this Agreement, the parties hereto agree as
follows:

                                   Section One
                                   Employment
                                   ----------

         Employer employs Employee, and Employee accepts employment with
Employer, on the terms and conditions set forth in this Agreement.

                                   Section Two
                               Term of Employment
                               ------------------

         This Agreement is effective on December 23, 2002 and shall remain in
effect for a five (5) year term or until terminated by either party pursuant to
the termination provisions of this Agreement or unless otherwise agreed upon in
writing between the parties.

<PAGE>

                                  Section Three
                                     Duties
                                     ------

         Employee's title shall be Vice President, Coupon Systems, POPS Division
of Insignia Systems, Inc. Employee shall report to Tom Wilkolak, Executive Vice
President (or his successor), and Mr. Wilkolak's immediate superior. Employer
has the power to determine Employee's specific duties, and the manner in which
Employee carries out his duties, provided they are consistent with his title and
position. Employee shall be specifically responsible for development of the
ValuStix (R) brand within the service offering of Insignia POPS and,
furthermore, shall be responsible for the management of creative and operational
services required in the delivery of the ValuStix (R) products and services to
its end users. Employee agrees to devote substantially his full business time
and attention to perform Employee's duties hereunder, provided, however, that
Employee is entitled to engage in graphics and design on a part-time basis as
long as such conduct does not interfere with the performance of his duties
hereunder. Employee shall be located in Port Chester, New York or its vicinity.

                                  Section Four
                                  Compensation
                                  ------------

         A. During the term of this Agreement and for services performed on
Employer's behalf, Employer shall pay Employee the sum of One Hundred Fifty
Thousand and 00/Dollars ($150,000) computed on an annual basis and payable in
twenty-four (24) equal payments on each of the 15th and last days of each month.

         B. For services performed on Employer's behalf, Employer may also pay
Employee an annual bonus in an amount of up to Twenty-five Thousand and 00/100
Dollars ($25,000). The bonus will be based upon Employee's achievement of
pre-determined goals which are mutually agreed upon by Employer and Employee
before January 1 of each year during the term of this Agreement. Any bonus
payable to Employee is due on or before 60 days after the end of each year.

                                  Section Five
                                    Benefits
                                    --------

         During the term of this Agreement, Employee shall be entitled to
receive four weeks of paid vacation per year. Employee shall also be entitled to
receive such life, disability, medical, dental and other insurance benefits, and
shall be entitled to participate in such pension or other retirement plans, and
to receive such other fringe benefits and perquisites, as are being provided by
Employer to other employees in comparable executive positions to that of
Employee but only to the extent that Employee's age, position, medical
condition, or other factors qualify Employee for coverage at standard rates as
other comparably positioned employees of Employer.

                                       2
<PAGE>

                                   Section Six
                              Expense Reimbursement
                              ---------------------

         Employee shall be entitled to reimbursement for those expenses incurred
by Employee which benefit Employer, including those relating to travel,
entertainment, customer maintenance, and vehicle usage reimbursement.

                                  Section Seven
                                  Trade Secrets
                                  -------------

         Employee acknowledges that Employer has, and is expected to develop
certain concepts, information, designs, ideas and materials (regardless of form)
which are used in its business, have great value, and which give Employer an
opportunity to obtain an advantage over competitors who do not know, understand
or use these concepts, information, designs, ideas and materials (collectively
"Trade Secret Information").

         Employee agrees that except as may be required by the scope of
Employee's employment with Employer, or expressly agreed upon by Employer in
writing, that Employee will not, during or after Employee's employment with
Employer, use or disclose any Trade Secret Information or permit any person to
examine or copy any Trade Secret Information. This obligation not to use,
disclose, or copy shall survive the termination of this Agreement.

         In the event that Employee breaches this Section, Employer shall be
entitled to, among other remedies, injunctive relief prohibiting Employee from
disclosing such Trade Secret Information.

                                  Section Eight
                Disclosure and Ownership of Intellectual Property
                -------------------------------------------------

         Employee agrees to promptly disclose to Employer all discoveries,
improvements, formulas, techniques, know-how, writings, drawings, software, mask
works, and other inventions and works of authorship (whether patentable or
copyrightable) made, conceived, discovered, written, or created by Employee
during the period of his employment with Employer, which relate or result from
the actual or anticipated business of Employer or from the use of Employer's
premises or property (collectively, the "Intellectual Property"). Employee also
acknowledges that the items of Intellectual Property are works made for hire
which are the sole property of the Employer. To the extent any Intellectual
Property does not constitute a work made for hire, Employee assigns to Employer
all right and interest in the Intellectual Property. Employee also agrees to
assist Employer in every way at Employer's expense to protect the Intellectual
Property, and to execute all documents which Employer reasonably determines to
be necessary or convenient for the protection of the Intellectual Property,
including any documents required by the U. S. Patent and Trademark Office, or
the U. S. Copyright Office.

                                       3
<PAGE>

         NOTICE: Minnesota law exempts from this Agreement "AN INVENTION FOR
WHICH NO EQUIPMENT, SUPPLIES, FACILITY OR TRADE SECRET INFORMATION OF THE
EMPLOYER WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE'S OWN TIME,
AND (1) WHICH DOES NOT RELATE (a) DIRECTLY TO THE BUSINESS OF THE EMPLOYER OR
(b) TO THE EMPLOYER'S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR
DEVELOPMENT, OR (2) WHICH DOES NOT RESULT FROM ANY WORK PERFORMED BY THE
EMPLOYEE FOR THE EMPLOYER."

                                  Section Nine
                                 Non-Competition
                                 ---------------

         Employee agrees that during the course of Employee's employment with
Employer Employee will not engage, directly or indirectly, personally or as an
employee, associate, partner, manager, agent or otherwise, or by means of any
corporate identity or other legal device, in competition in the same or similar
businesses as that of Employer or in any way compete with Employer, nor make any
contact whatsoever with any of Employer's clients (other than on behalf of
Employer), nor will Employee, directly or indirectly, divulge, disclose or
communicate to any person, firm or corporation (other than on behalf of
Employer) relating to the business of Employer including, but not limited to,
names of clients, manner of operation, plans, processes, or other data of any
kind or nature whatsoever, anywhere within the continental United States.
Employee further agrees that for a period of five (5) years after termination of
Employee's employment by Employer (whether such termination of employment is
voluntary or involuntary), that Employee will not keep in Employee's possession
a list of clients of Employer, nor directly or indirectly, either verbally or in
writing, contact the clients of Employer for purposes of soliciting the business
of clients of Employer in connection with a product or program substantially
identical to the ValuStix (R) product or other products or programs offered by
Employer at the time of Employee's termination.

         Employee specifically acknowledges receipt of good and valuable
consideration sufficient to support this section and the preceding section of
this Agreement.

         Employee also specifically acknowledges and agrees that any violation
or breach of this part of this Agreement, or any part thereof, shall be a proper
subject for injunctive relief or any other remedy available in equity or at law.

                                   Section Ten
                                 Property Rights
                                 ---------------

         On termination of this Agreement, regardless of how or when termination
is effected, Employee shall immediately return to Employer all of Employer's
property, including, but not limited to, all computer programs, software, or
documentation designed, written, or otherwise developed by anyone other than
Employee during the scope of Employer's employment of Employee under and
pursuant to this Agreement.

                                       4
<PAGE>

         All right, title and interest of every kind and nature, whether known
or unknown, in and to any intellectual property, including but not limited to,
any inventions, patents, trademarks, service marks, copyrights, computer
programs, software, or other documentation invented, created, written,
developed, furnished, produced, or disclosed by anyone other than Employee, in
the course of rendering services to Employer under and pursuant to this
Agreement shall, as between Employer and Employee, be and retain the sole and
exclusive property of Employer for any and all purposes and uses, and Employee
shall have no right, title or interest of any kind or nature in and to such
property, or in or to any results and/or proceeds from such property.

                                 Section Eleven
                                   No Conflict
                                   -----------

         Employee represents and warrants to Employer that neither Employee's
execution and delivery of this Agreement nor the performance of or compliance
with the terms and conditions hereof will conflict with, or result in a breach
by Employee of, or constitute a default under, any of the terms, conditions or
provisions of any contract, agreement or other instrument to which Employee is a
party, or any writ, order, judgment, decree, statute, ordinance, regulation or
any other restriction of any kind or character to which Employee is subject, and
will not require the consent, approval or authorization of or notice to any
governmental instrumentality or to any third party.

                                 Section Twelve
                            Termination of Employment
                            -------------------------

         This Agreement and the employment relationship between Employer and
Employee shall terminate as hereinafter provided.

                  A. Termination Without Cause. If Employee's employment is
                  terminated by Employer without cause, Employer shall provide
                  Employee with no less than sixty (60) days written notice of
                  such termination.

                  B. Termination for Cause. If Employer terminates Employee's
                  employment at any time "for cause", such termination shall be
                  effective immediately upon written notice provided by Employer
                  to Employee. Termination shall be "for cause" where it is for
                  any of the following reasons:

                           1. Employee commits willful misconduct, fraud or
                           theft against Employer;

                           2. Employee refuses or fails in a material respect to
                           act in accordance with any material and lawful
                           direction or order of his superior that is reasonable
                           both in its scope and content and in its relationship
                           to the duties and responsibilities of Employee, which
                           failure or refusal is not cured within ten business
                           days after written

                                       5
<PAGE>

                           notice by Employer to Employee, or which reoccurs
                           after having been cured;

                           3. Employee is convicted of a felony and the Board
                           determines, in its sole discretion, that such
                           conviction inhibits Employee's ability to perform
                           services hereunder;

                           4. Employee takes any action in bad faith that has a
                           material, detrimental effect on the Employer's
                           reputation or business; or

                           5. Employee breaches any material term of this
                           Agreement (not covered by clauses 1-4 above) which is
                           not cured within ten business days after written
                           notice by Employer to Employee, or which reoccurs
                           after having been cured.

                  C. Voluntary Termination by Employee. If Employee's employment
                  is terminated voluntarily by Employee, Employee shall provide
                  Employer with sixty (60) days prior written notice of such
                  termination; provided, however, Employer may elect, in its
                  sole discretion, to terminate Employee's employment
                  immediately upon receipt of Employee's notice of termination.

                  D. Termination if Purchase Transaction Rescinded. If the
                  purchase and sale transaction between Paul A. Richards, Inc.
                  and Employer is rescinded, then Employee's employment shall
                  terminate immediately without any notice required by Employer
                  to Employee.

                  E. Termination as a Result of Death or Disability. If Employee
                  dies or becomes disabled (as hereafter defined), Employee's
                  employment by Employer shall automatically terminate, such
                  termination to be effective upon the death or disability of
                  Employee. For purposes of this Agreement, Employee shall be
                  deemed to be "disabled" if Employee is diagnosed, in the
                  reasonable opinion of a qualified physician selected jointly
                  by Employer and Employee or his legal representative to have a
                  mental or physical impairment which renders Employee unable to
                  perform the essential functions of Employee's position with or
                  without reasonable accommodation, and which inability to
                  perform, in the reasonable opinion of such physician, will
                  continue for a period of not less than 90 consecutive days.

                  F. Severance. If Employee's employment is terminated by
                  Employer for any of the reasons set forth in paragraphs B, C,
                  D or E of this Section, Employee is not entitled to any
                  severance pay. If, on the other hand, Employee's employment is
                  terminated pursuant to the provisions of paragraph A of this
                  Section, Employee shall be entitled to severance pay in an
                  amount equal to the Employee's base salary amount (less
                  appropriate

                                       6
<PAGE>

                  employment tax withholdings) for a period equal to the greater
                  of one (1) year or the remaining portion of Employee's initial
                  five (5) year employment term.

                  G. Continuation of Benefits. If Employee's employment is
                  terminated for any of the reasons set forth in paragraphs B,
                  C, D, or E of this Section, Employee is not entitled to the
                  continuation of any Employer-provided benefits (for which
                  Employer is responsible for payment). If, on the other hand,
                  Employee's employment is terminated pursuant to the provisions
                  of paragraph A. of this Section, Employee shall be entitled to
                  the continuation of any Employer-provided benefits, for which
                  the Employee is eligible even though no longer employed by
                  Employer, for a period equal to the greater of one (1) year or
                  the remaining portion of Employee's initial five (5) year
                  employment term.

                                Section Thirteen
                                     Notice
                                     ------

         Any notice required pursuant to this Agreement shall be in writing, and
sent by registered or certified mail to Employer's principal office and
Employee's last known address.

                                Section Fourteen
                                  Governing Law
                                  -------------

         This Agreement shall be governed by the laws of the State of Minnesota.

                                Section Fifteen
                              Modification/Waivers
                              --------------------

         This Agreement represents the entire agreement between Employer and
Employee. No modification of this Agreement is valid unless it is in writing and
signed by the parties. The waiver of any right or remedy in respect of any
occurrence or event on one occasion shall not be deemed a waiver of such right
or remedy in respect of such occurrence or event on any other occasion.

                                 Section Sixteen
                                  Assignability
                                  -------------

         Except as provided in the Royalty Agreement between Employer and Paul
A. Richards, Inc., this Agreement is not assignable.

                                       7
<PAGE>

                                Section Seventeen
                                  Severability
                                  ------------

         If any provision of this Agreement is determined invalid, that
invalidity shall not impair the remaining provisions of this Agreement.

                                Section Eighteen
                                 Attorney's Fees
                                 ---------------

         In the event that any action is filed in relation to this Agreement,
the unsuccessful party shall pay to the successful party, in addition to all
sums that either party may be called upon to pay, a reasonable sum for the
successful party's attorneys' fees.

                                Section Nineteen
                                 Confidentiality
                                 ---------------

         Employee agrees to keep the terms of this Agreement confidential.

                                 Section Twenty
                                  Counterparts
                                  ------------

         This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall constitute the same
agreement.

                                       8
<PAGE>

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

                                                          INSIGNIA SYSTEMS, INC.
                                                          ("Employer")

                                               By:        /s/ Scott F. Drill
                                                     ---------------------------
                                                          Scott F. Drill, CEO

                                                          PAUL A. RICHARDS
                                                          ("Employee")

                                                          /s/ Paul A. Richards
                                                     ---------------------------

                                       9EXHIBIT 10.2

                                ROYALTY AGREEMENT

         THIS AGREEMENT is made and entered into as of this 23rd day of
December, 2002 (the "Effective Date"), by and between Insignia Systems, Inc., a
Minnesota corporation (the "Company"), and Paul A. Richards, Inc., a New York
corporation ("Richards").

                                    RECITALS

         The Company has purchased from Richards substantially all of its
assets, relating to the ValuStix(R) system, which is comprised of a patent
application, service marks and related equipment, supplies and methods, for the
affixing of coupons and other promotional materials to retail products
(collectively referred to, together with modifications and enhancements, as
"ValuStix"). The parties wish to enter into an agreement whereby the Company
shall pay Richards a royalty on future sales by the Company of ValuStix.

                                    AGREEMENT

         1. ROYALTY PAYMENTS. The Company shall pay Richards a royalty on any
"net sales" of ValuStix for which the Company receives a binding purchase order
during the 60 months following the Effective Date. "Net sales" are defined as
revenues or other consideration actually received, minus commissions,
arms-length revenue sharing payments to retailers up to 15 percent, reasonable
discounts and allowances, rebates, returns, shipping and sales taxes.
         For each 12-month period beginning with the Effective Date or an
anniversary of the Effective Date ("contract year"), royalties shall be paid at
the following rates:

<PAGE>
                                                                    EXHIBIT 10.2

         Annual Net Sales                            Royalty Rate
         ----------------                            ------------

         $0 to $4,000,000                                 0%
         $4,000,001 to $6,000,000                         5%
         $6,000,001 to $10,000,000                       10%
         $10,000,001 to $15,000,000                      12.5%
         $15,000,001 and above                           15%

         The rate payable for net sales will be for annual amounts in excess of
$4,000,000 and sales shall revert to zero at the beginning of each contract
year. The royalty rate for each specific tier shall not be applied to any sales
below that specific tier level. For example, if annual net sales are $7,500,000
the royalty earned that year would be $250,000 which consists of (a) no royalty
on the initial $4,000,000, (b) royalty of $100,000 related to the net sales from
$4,000,000 to $6,000,000 ($2,000,000 at 5%) and (c) royalty of $150,000 for the
sales in excess of $6,000,000 ($1,500,000 at 10%). If total royalties reach
$15,000,000 at any time during the 60 months, each of the percentages in the
above table shall be reduced by 50 percent of such percentage for the remainder
of the 60-month period.
         Royalties shall be payable quarterly, within 15 days after the end of
each quarter. The Company shall keep accurate records of ValuStix sales, and
each royalty payment shall include a statement showing total net sales during
the most recent quarter and total net sales year-to-date. Richards shall have
the right, at its own expense, and not more than twice in any contract year, to
have an independent accountant examine the books and records of the Company to
verify the payment of royalties. If the examination reveals that the Company has
underpaid Richards by more than five percent during any quarterly period, the
Company shall pay the cost of the examination. The Company shall

<PAGE>
                                                                    EXHIBIT 10.2

be liable for costs of collection, including reasonable attorney's fees, and
interest at the rate of 1.5 percent per month, on any late payment.
         2. RIGHT OF OFFSET. The Company may reduce any amount payable to
Richards under this Agreement by any amount payable to the Company by Richards
under the indemnification provisions contained in the Asset Purchase Agreement
dated December 23, 2002, among the Company, Paul A. Richards and Richards. If
the Company elects to exercise its right of offset under this paragraph, it
shall deposit in an interest-bearing escrow account with Wells Fargo Bank, N.A.,
the amount it claims that is payable to it under said indemnification provision.
The amount shall remain in the escrow until the Company's claim is resolved by
agreement between the parties or final, nonappealable court order, when it shall
then be distributed in accordance with the agreement between the parties or
court order. The expenses of the escrow agent shall be paid first from the
earnings on the escrow account and then equally by the parties. Any excess
interest after the payment of expenses shall be allocated between the parties in
the same ratio as the allocation of the principal amount.
         3. OPTION TO PURCHASE. If the Company, at any time during the 60-month
period after the Effective Date, decides to discontinue selling ValuStix, but
not including a sale or other transfer, the Company shall promptly give Richards
a written notice describing the proposed action. If the Company receives gross
revenues from ValuStix in calendar year 2004, 2005, 2006 or 2007, of $1,000,000
or less in any such year, the Company shall give Richards written notice of that
fact within 60 days after the end of such year. In either case, Richards shall
then have the option to purchase from the Company any assets of the Company
dedicated exclusively to ValuStix (the "ValuStix

<PAGE>
                                                                    EXHIBIT 10.2

Assets") for their appraised value in accordance with this Section 3. Within 15
days after its receipt of the Company's notice, Richards shall give the Company
a written notice stating whether Richards elects to exercise the option. If
Richards elects to exercise the option, then each party shall select an
independent qualified appraiser to calculate an appraised value within 30 days
of the receipt by the Company of Richards' notice. The Company shall cooperate
with both appraisers, subject to their agreement to keep any information they
receive strictly confidential. Each party shall immediately give a copy of its
appraisal to the other party upon completion. If the two appraisals differ by
less than 10%, the average of the two appraisals shall be the price at which
Richards may purchase the ValuStix Assets. If the two appraisals differ by more
than 10%, the two appraisers shall select a third independent qualified
appraiser to determine the appraised value. If they cannot agree, an appraiser
shall be selected by an arbitrator pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. The third appraiser shall complete his
appraisal within 30 days after being appointed. After the price has been
determined, Richards shall have a period of 15 days to decide whether it wishes
to purchase the ValuStix Assets for the appraised value. If it elects to
exercise the option and purchase the ValuStix Assets, a closing shall be held
within 15 days thereafter at which Richards shall pay the Company the appraised
value in cash, and in which the Company shall transfer all of the ValuStix
Assets to Richards, including the RayPress Corporation agreement, free and clear
of all claims, liens, and encumbrances. If Richards elects not to exercise its
option, or fails to complete the closing after exercising its option (through no
fault of the Company), the option shall automatically expire.

<PAGE>
                                                                    EXHIBIT 10.2

         4. ASSIGNMENT. The Company may assign this Agreement at any time,
provided the assignee expressly agrees to assume and perform all of the
obligations of the Company herein, and further provided that the Company shall
remain liable for the performance of this Agreement unless the assignee has
shareholders' equity or net worth of $5,000,000 or more at the time of
assignment. Richards may assign this Agreement to Paul A. Richards, and Richards
or Paul A. Richards may also assign the provisions of Section 1 to Richards'
heirs and representatives after his death. Subject to the foregoing, this
Agreement is binding upon, and shall inure to the benefit of, the successors and
assigns of the parties.
         Any separate sale by the Company of ValuStix, which is not part of a
merger or a sale by the Company of all or substantially all of its assets, shall
require the prior consent of Richards, which shall not be unreasonably withheld
or delayed. Any sale of ValuStix by the Company, including a sale that is part
of a merger or sale by the Company of all or substantially all of its assets,
shall include an assignment of this Agreement and Paul A. Richards' Employment
Agreement with the Company.
         5. MISCELLANEOUS. This Agreement shall be interpreted in accordance
with Minnesota law. This Agreement constitutes the entire agreement between the
parties on the subject matter hereof, superseding any and all prior oral or
written agreements. This Agreement can only be amended in a written document,
signed by both parties. This Agreement is binding upon, and shall inure to the
benefit of, the successors and assigns of the parties.

<PAGE>
                                                                    EXHIBIT 10.2

         6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same Agreement.

         IN WITNESS WHEREOF, the parties have caused the execution of this
Agreement as of the day and year first above written.

                                       INSIGNIA SYSTEMS, INC.

                                       By: /s/ Scott F. Drill
                                          --------------------------------------
                                           Scott F. Drill, CEO

                                       PAUL A. RICHARDS, INC.

                                       By: /s/ Paul A. Richards
                                          --------------------------------------
                                           Paul A. Richards, President and CEO

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