Document:

Exhibit 4.1
                                                               Execution Version

                          THIRD SUPPLEMENTAL INDENTURE

            This THIRD SUPPLEMENTAL INDENTURE (the "Supplemental Indenture")
dated as of November 30, 2004 among OMNICOM GROUP INC., a New York corporation
(the "Company"), OMNICOM CAPITAL INC., a Connecticut corporation ("OCI"),
OMNICOM FINANCE INC., a Delaware corporation ("OFI" and together with the
Company and OCI, the "Issuers"), and JPMORGAN CHASE BANK, N.A., as trustee under
the indenture referred to below (the "Trustee").

                              W I T N E S S E T H:

            WHEREAS, the Issuers and the Trustee have heretofore executed and
delivered to the Trustee an Indenture dated February 7, 2001, as amended by the
First Supplemental Indenture, dated February 13, 2004 (as so amended, the
"Indenture"), providing for the issuance of an aggregate principal amount of up
to $850,000,000 of Liquid Yield Option(TM) Notes due 2031 (the "Securities"),
all of which have been issued and $847,031,000 of which are outstanding on the
date hereof;

            WHEREAS, the Issuers desire (i) to surrender their right to pay
Securityholders who are converting their Securities pursuant to Article 10 of
the Indenture with shares of Common Stock and (ii) to modify the method by which
Contingent Cash Interest is determined;

            WHEREAS, it is in the best interests of the Issuers to surrender
such rights and to modify the method by which Contingent Cash Interest is
determined;

            WHEREAS, Sections 9.02(2) and 9.02(5) of the Indenture provides that
the Issuers and the Trustee may amend or supplement the Indenture only with the
consent of affected Securityholders;

            WHEREAS, all Securityholders have consented to this Supplemental
Indenture and all outstanding Notes shall be bound by it;

            WHEREAS, an Opinion of Counsel has been delivered to the Trustee
under Section 9.02; and

            WHEREAS, pursuant to Sections 9.02 and 9.06 of the Indenture, the
Trustee and the Company are authorized to execute and deliver this Supplemental
Indenture;

            NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Issuers and the Trustee mutually covenant and
agree for the equal and ratable benefit of the holders of the Securities as
follows:

1.    Definitions. All capitalized terms used but not defined herein shall have
the meanings given to such terms set forth in the Indenture.

2.    Amendments. The Indenture be and hereby is amended as follows:

<PAGE>

      2.1   Section 10.02 of the Indenture is hereby amended and restated in its
entirety to read as follows:

"SECTION 10.02 Conversion Procedure.

            To convert a Security a Holder must satisfy the requirements in
paragraph 9 of the Securities. The date on which the Holder satisfies all those
requirements is the conversion date (the "Conversion Date").

            As soon as practicable following the Conversion Date, the Issuers
will deliver, directly or through the Conversion Agent, an amount in cash (the
"Cash Amount") equal to the Issue Price of the Securities surrendered for
conversion. The difference, if positive, between the Conversion Value and the
Issue Price of the Securities surrendered for conversion (the "Premium") may be
satisfied, at the option of the Issuers, exercisable at any time or from time to
time, by an instrument in writing signed by the Issuers, by delivering to a
Converting Holder, in addition to the Cash Amount, either (i) an amount in cash
equal to the Premium or (ii) the number of whole shares of Common Stock equal to
the quotient of (x) the Premium for such Securities divided by (y) the last
reported Sales Price of the Company's Common Stock on the Conversion Date (if
the Conversion Date is not a Business Day, then on the Business Day immediately
preceding the Conversion Date), plus a cash payment for fractional shares
determined pursuant to Section 10.03. At any time after which the Securities
could be converted by action of the Holder, at the written request of a Holder,
the Company will, within five calendar days of receipt of such request, notify
such Holder whether the Premium will be satisfied in cash or Company Common
Stock as aforesaid. Any such notice by the Company will be irrevocable for 60
calendar days (or such longer period as the Company may specify on the notice),
and then may only be revoked after ten additional calendar days notice. All
elections or notices contemplated to be given by the Company in this paragraph
will be made or given by delivery of written notice to the Trustee as herein
provided and to the Holder.

            In the event that the Issuers elect to satisfy the Premium with
Common Shares, the person in whose name the certificate is registered shall be
treated as a stockholder of record on and after the Conversion Date; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
or persons entitled to receive the shares of Common Stock upon such conversion
as the record holder or holders of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the person or persons entitled
to receive such shares of Common Stock as the record holder or holders thereof
for all purposes at the close of business on the next succeeding day on which
such stock transfer books are open; such conversion shall be at the Conversion
Rate in effect on the date that such Security shall have been surrendered for
conversion, as if the stock transfer books of the Company had not been closed.
Upon conversion of a Security, such person shall no longer be a Holder of such
Security.

            No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Common Stock except as provided in this
Article 10. On conversion of a Security, that portion of accrued Contingent
Additional Principal attributable to the period from the Issue Date of the
Security through the Conversion Date and (except as provided below) accrued
Contingent Cash Interest with respect to the converted Security shall not be
cancelled,

                                      -2-
<PAGE>

extinguished or forfeited, but rather shall be deemed to be paid in full to the
Holder thereof through delivery of the Cash Amount, together with cash or Common
Stock in respect of the Premium, in exchange for the Security being converted
pursuant to the provisions hereof; and the fair market value of such cash or
Common Stock in respect of the Premium shall be treated as delivered, to the
extent thereof, in exchange for Contingent Additional Principal accrued through
the Conversion Date and accrued Contingent Cash Interest, and the Cash Amount
shall be treated as delivered in exchange for the Issue Price of the Security
being converted pursuant to the provisions hereof.

            If the Holder converts more than one Security at the same time, the
Cash Amount, together with the cash or Common Stock in respect of the Premium,
issuable upon the conversion shall be based on the total Principal Amount at
Maturity of the Securities converted.

            If the last day on which a Security may be converted is a Legal
Holiday, the Security may be surrendered on the next succeeding day that is not
a Legal Holiday.

            Upon surrender of a Security that is converted in part, the Issuers
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security in an authorized denomination equal in Principal Amount at Maturity
to the unconverted portion of the Security surrendered."

      2.2   Section 10.05 of the Indenture is hereby amended and restated in its
entirety to read as follows:

"SECTION 10.05 Company to Provide Stock.

            The Company shall, prior to issuance of any Securities under this
Article 10, and from time to time as may be necessary, reserve out of its
authorized but unissued Common Stock a sufficient number of shares of Common
Stock to permit satisfaction of the Premium with Common Stock upon the
conversion of the Securities.

            All shares of Common Stock delivered upon conversion of the
Securities shall be newly issued shares on treasury shares, shall be duly and
validly issued and fully paid and nonassessable and shall be free from
preemptive rights and free of any lien or adverse claim.

      The Company will endeavor promptly to comply with all federal and state
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Securities, if any, and will list or cause to have quoted such
shares of Common Stock on each national securities exchange or in the
over-the-counter market or such other market on which the Common Stock is then
listed or quoted."

      2.3   A new subparagraph (d), to read in its entirety as follows, will be
added to the existing Section 10.08 of the Indenture:

SECTION 10.08 Adjustment for Other Distributions.

                                      -3-
<PAGE>

            "(d) if the Company pays any Regular Cash Dividend during any
quarterly fiscal period for which Contingent Cash Interest is payable, the
Conversion Rate will be adjusted as of the record date for such Regular Cash
Dividend based on the following formula:

                          CR' = CRo x     SPo
                                      ------------
                                        SPo - C

      CR0 = the Conversion Rate in effect immediately prior to the record date
            for such Regular Cash Dividend

      CR' = the Conversion Rate in effect immediately after the record date for
            such Regular Cash Dividend; provided that (1) CR' shall not be less
            than 9.09 (except as adjusted pursuant to other provisions of this
            Indenture); and (2) when, if not for clause (1) CR' would be less
            than 9.09, CR0 will be equal to such CR' for purposes of making the
            next quarterly adjustment calculation.

      SP0 = the average of the last reported Sale Prices of the Common Stock for
            the ten consecutive Trading Days prior to the Business Day
            immediately preceding the record date of such Regular Cash Dividend

      C   = the difference of (x) the amount in cash per share paid to holders
            of Common Stock in any quarterly period minus (y) the amount set
            forth for such quarterly fiscal period in Section 5 of the Notes
            divided by 9.09 (appropriately adjusted from time to time for any
            share dividends on, or subdivisions of, the Common Stock)

            Notice of any adjustment to the Conversion Rate as provided in this
Section 10.08(d) need not be given to any Holder unless such adjustment,
together with all prior adjustments pursuant to this Section 10.08(d) for which
notice has not previously been given, would require an increase or decrease of
at least 1% in the Conversion Rate; provided that the Company shall give Holders
annual notice, within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 2006), of all adjustments
made pursuant to this Section 10.08(d) during such fiscal year.

            "Regular Cash Dividends" means quarterly or other periodic cash
dividends on the Company's Common Stock as declared by the Board of Directors as
part of its cash dividend payment practices and that are not designated by the
Board of Directors as extraordinary or special or other nonrecurring dividends.

      2.4   Section 10.09 of the Indenture is hereby amended and restated in its
entirety to read as follows:

"SECTION 10.09 When Adjustment May Be Deferred.

            "Except for adjustments calculated pursuant to Section 10.08(d), no
adjustment in the Conversion Rate need be made unless the adjustment would
require an increase or decrease

                                      -4-
<PAGE>

of at least 1% in the Conversion Rate. Any adjustments that are not made shall
be carried forward and taken into account in any subsequent adjustment. "

      2.5   Section 5 of Exhibit A-1 to the Indenture is hereby amended and
restated in its entirety to read as follows:

            "5. Contingent Cash Interest.

            Subject to the record date provisions specified in this paragraph 5,
the Issuers shall pay, jointly and severally, contingent cash interest
("Contingent Cash Interest") to the Holder of this Security during any six-month
period (each a "Contingent Interest Period") from February 8 to August 7 or from
August 8 to February 7, commencing on or after February 8, 2006, if the average
of the LYON Market Prices for each of the days in the Five-Day Period with
respect to such Contingent Interest Period equals or exceeds 120% of the Issue
Price at Maturity of this Security.

            Contingent Cash Interest, if any, will accrue from the first day of
the applicable six-month period and be payable quarterly on January 31, April
30, July 31 and October 31 (each a "Contingent Interest Payment Date") of the
relevant six-month period to Holders of the Security on the record date, which
will be each April 15, July 15, October 15 and January 15, immediately preceding
each applicable payment date set forth below.

            For any six-month period, the amount of Contingent Cash Interest
payable on any Contingent Interest Payment Date per $1,000 Issue Price thereof
in respect of any Contingent Interest Period shall equal the amounts set forth
below per $1,000 Issue Price for each applicable six-month period.

                             Quarterly                                 Quarterly
Payment Date                  Interest    Payment Date                  Interest
April 30, 2006.............    $1.87      October 31, 2018...........    $3.39
July 31, 2006..............    $1.87      January 31, 2019...........    $3.39
October 31, 2006...........    $1.99      April 30, 2019.............    $3.39
January 31, 2007...........    $1.99      July 31, 2019..............    $3.39
April 30, 2007.............    $1.99      October 31, 2019...........    $3.51
July 31, 2007..............    $1.99      January 31, 2020...........    $3.51
October 31, 2007...........    $2.11      April 30, 2020.............    $3.51
January 31, 2008...........    $2.11      July 31, 2020..............    $3.51
April 30, 2008.............    $2.11      October 31, 2020...........    $3.63
July 31, 2008..............    $2.11      January 31, 2021...........    $3.63
October 31, 2008...........    $2.22      April 30, 2021.............    $3.63
January 31, 2009...........    $2.22      July 31, 2021..............    $3.63
April 30, 2009.............    $2.22      October 31, 2021...........    $3.75
July 31, 2009..............    $2.22      January 31, 2022...........    $3.75
October 31, 2009...........    $2.34      April 30, 2022.............    $3.75
January 31, 2010...........    $2.34      July 31, 2022..............    $3.75
April 30, 2010.............    $2.34      October 31, 2022...........    $3.86
July 31, 2010..............    $2.34      January 31, 2023...........    $3.86
October 31, 2010...........    $2.46      April 30, 2023.............    $3.86
January 31, 2011...........    $2.46      July 31, 2023..............    $3.86
April 30, 2011.............    $2.46      October 31, 2023...........    $3.98
July 31, 2011..............    $2.46      January 31, 2024...........    $3.98
October 31, 2011...........    $2.57      April 30, 2024.............    $3.98

                                      -5-
<PAGE>

January 31, 2012...........    $2.57      July 31, 2024..............    $3.98
April 30, 2012.............    $2.57      October 31, 2024...........    $4.10
July 31, 2012..............    $2.57      January 31, 2025...........    $4.10
October 31, 2012...........    $2.69      April 30, 2025.............    $4.10
January 31, 2013...........    $2.69      July 31, 2025..............    $4.10
April 30, 2013.............    $2.69      October 31, 2025...........    $4.21
July 31, 2013..............    $2.69      January 31, 2026...........    $4.21
October 31, 2013...........    $2.81      April 30, 2026.............    $4.21
January 31, 2014...........    $2.81      July 31, 2026..............    $4.21
April 30, 2014.............    $2.81      October 31, 2026...........    $4.33
July 31, 2014..............    $2.81      January 31, 2027...........    $4.33
October 31, 2014...........    $2.93      April 30, 2027.............    $4.33
January 31, 2015...........    $2.93      July 31, 2027..............    $4.33
April 30, 2015.............    $2.93      October 31, 2027...........    $4.45
July 31, 2015..............    $2.93      January 31, 2028...........    $4.45
October 31, 2015...........    $3.04      April 30, 2028.............    $4.45
January 31, 2016...........    $3.04      July 31, 2028..............    $4.45
April 30, 2016.............    $3.04      October 31, 2028...........    $4.56
July 31, 2016..............    $3.04      January 31, 2029...........    $4.56
October 31, 2016...........    $3.16      April 30, 2029.............    $4.56
January 31, 2017...........    $3.16      July 31, 2029..............    $4.56
April 30, 2017.............    $3.16      October 31, 2029...........    $4.68
July 31, 2017..............    $3.16      January 31, 2030...........    $4.68
October 31, 2017...........    $3.28      April 30, 2030.............    $4.68
January 31, 2018...........    $3.28      July 31, 2030..............    $4.68
April 30, 2018.............    $3.28      October 31, 2030...........    $4.80
July 31, 2018..............    $3.28      January 31, 2031...........    $4.80

            "Five-Day Period" means, with respect to any Contingent Interest
Period, the five trading days ending on the second trading day immediately
preceding the first day of such Contingent Interest Period; provided, however,
if the Company shall have declared a Regular Cash Dividend on its Common Stock
that is payable during such Contingent Interest Period but for which the record
date for determining stockholders entitled thereto precedes the first day of
such Contingent Interest Period, then "Five-Day Period" shall mean, with respect
to such Contingent Interest Period, the five trading days ending on the second
trading day immediately preceding such record date.

            "Regular Cash Dividends" means quarterly or other periodic cash
dividends on the Company's Common Stock as declared by the Board of Directors as
part of its cash dividend payment practices and that are not designated by the
Board of Directors as extraordinary or special or other nonrecurring dividends.

            "LYON Market Price" means, as of any date of determination, the
average of the secondary market bid quotations per $1,000 Principal Amount at
Maturity obtained by the Bid Solicitation Agent for $10 million Principal Amount
at Maturity of Securities at approximately 4:00 p.m., New York City time, on
such determination date from three independent nationally recognized securities
dealers in The City of New York (none of which shall be an Affiliate of the
Issuers) selected by the Issuers; provided, however, if (a) at least three such
bids are not obtained by the Bid Solicitation Agent or (b) in the Issuers'
reasonable judgment, the bid quotations are not indicative of the secondary
market value of the Securities as of such determination date, then the LYON
Market Price for such determination date shall equal (i) the Conversion Rate in
effect

                                      -6-
<PAGE>

as of such determination date multiplied by (ii) the average of the Sale Prices
of the Common Stock for each of the five trading days ending on such
determination date, appropriately adjusted to take into account the occurrence,
during the period commencing on the first of such trading days during such five
trading day period and ending on such determination date, of any event described
in Section 10.06, 10.07 or 10.08 (subject to the conditions set forth in
Sections 10.09 and 10.10) of the Indenture.

            The Issuers will determine every six months, commencing February 8,
2006, whether the conditions to the payment of Contingent Cash Interest have
been satisfied and, if so, the Issuers shall promptly notify the Holders of this
Security of such determination and shall use their reasonable best efforts to
post this information on their web site or, at their option, otherwise publicly
disclose this information.

      2.6   Section 9 of Exhibit A-1 to the Indenture is hereby amended and
restated in its entirety to read as follows:

"9.   Conversion.

            Holders may surrender Securities for conversion only if at least one
of the conditions described in (a) through (d) below is satisfied. In addition,
a Security for which a Holder has delivered a Purchase Notice or a Change in
Control Purchase Notice requiring the Issuers to purchase the Security may be
surrendered for conversion only if such notice is withdrawn in accordance with
the Indenture.

            The initial Conversion Rate is 9.09 shares per $1,000 Issue Price of
a Security, subject to adjustment upon the occurrence of certain events
described in the Indenture. A Holder otherwise entitled to a fractional share
will receive cash in an amount equal to the value of such fractional share based
on the Sale Price on the trading day immediately preceding the Conversion Date.

            The ability to surrender Securities for conversion will expire at
the close of business on February 7, 2031.

(a) Before February 7, 2021, Holders may surrender a Security for conversion
during any calendar quarter, commencing after March 31, 2001 if the average
Conversion Value of the Security for each of the last 20 trading days in the
preceding calendar quarter is greater than or equal to a specified percentage of
the Issue Price; 125% for the quarter ending June 30, 2001, and increasing 5%
per quarter for each quarter thereafter up to a maximum of 220% of the Issue
Price of the Security for the quarter ending June 30, 2006. Thereafter, this
percentage shall remain at 220%. On or after February 7, 2021 Holders may
surrender a Security for conversion during any calendar quarter if the average
of the Conversion Values of the Security for each of the last 20 trading days in
the preceding calendar quarter is greater than or equal to 110% of the Principal
Amount at Maturity of the Security. If either of the foregoing conditions is
satisfied, then the Securities will become and remain convertible at any time
thereafter at the option of the Holder, through maturity.

            On February 7, 2021, if the average of the Conversion Values of the
Security for each of the preceding 20 trading days of a Security is greater than
or equal to 220% of the Issue

                                      -7-
<PAGE>

Price of the Security, then the Security will become and remain convertible at
any time thereafter at the option of the Holder, through maturity.

(b) Holders may also surrender a Security for conversion any time after the
credit rating assigned to the Securities is reduced to Baa3 or lower by Moody's
Investors Service, Inc. or BBB or lower by Standard & Poor's Ratings Services,
even if the credit rating assigned has subsequently been changed to a higher
rating.

(c) A Holder may surrender for conversion a Security with respect to which the
Issuers have mailed a Redemption Notice at any time prior to the close of
business on the second Business Day prior to the Redemption Date, even if it is
not otherwise convertible at that time.

(d) If the Company elects to

            o     distribute to all Holders of Common Stock certain rights
                  entitling them to purchase, for a period expiring within 60
                  days, Common Stock at less than the Sale Price at the time, or

            o     distribute to all Holders of Common Stock assets, debt
                  securities or certain rights to purchase securities of the
                  Company, which distribution has a per share value as
                  determined by the Company's Board of Directors exceeding 15%
                  of the closing price of the Common Stock on the day preceding
                  the declaration date for such distribution,

the Company must notify the Holders of Securities at least 20 days prior to the
Ex-Dividend Date for such distribution. Once the Company has given such notice,
Holders may surrender their Securities for conversion at any time thereafter
until the earlier of the close of business on the Business Day prior to the
Ex-Dividend Date or the Company's announcement that such distribution will not
take place.

            Contingent Cash Interest will not be paid on Securities that are
converted; provided, however that Holders of Securities surrendered for
conversion during the period from the close of business on any record date for
determining an obligation to pay Contingent Cash Interest to the opening of
business on the date on which such Contingent Cash Interest is payable, shall be
entitled to receive such Contingent Cash Interest on the date on which such
Contingent Cash Interest is payable. Except Securities with respect to which the
Issuers have mailed a Notice of Redemption, Securities surrendered for
conversion during such periods must be accompanied by payment of an amount equal
to the Contingent Cash Interest with respect thereto that the registered Holder
is to receive.

            The Conversion Rate will not be adjusted for accrued Contingent
Additional Principal, if any, or Contingent Cash Interest, if any. As soon as
practicable following the Conversion Date, the Issuers will deliver through the
Conversion Agent, the Cash Amount, together with cash or a certificate for the
number of full shares of Common Stock into which the Premium of any Security is
converted and any cash payment for fractional shares. Delivery to the Holder of
the Cash Amount, together with such cash or shares of Common Stock deliverable

                                      -8-
<PAGE>

in connection with the Premium, will be deemed to satisfy the Issuers'
obligation to pay the Principal Amount at Maturity of and any accrued Contingent
Principal Amount on the Security.

            Subject to the provisions of this paragraph 9 and notwithstanding
the fact that any other condition to conversion has not been satisfied, in the
event the Company is a party to a consolidation, merger or binding share
exchange pursuant to which the Common Stock would be converted into cash,
securities or other property as set forth in Section 10.14 of the Indenture, the
Securities may be surrendered for conversion at any time from and after the date
which is 15 days prior to the date the Company announces the anticipated
effective time until 15 days after the actual effective date of such
transaction, and at the effective time of such transaction the right to convert
a Security into Common Stock will be deemed to have changed into a right to
convert it into the kind and amount of cash, securities or other property which
the Holder would have received if the Holder had converted its Security
immediately prior to the transaction. If the transaction also constitutes a
Change in Control, the Holder will be able to require the Company to purchase
all or a portion of its Securities as described under paragraph 7 herein.

            To convert a Security, a Holder must (1) complete and manually sign
the conversion notice below (or complete and manually sign a facsimile of such
notice) and deliver such notice to the Conversion Agent, (2) surrender the
Security to the Conversion Agent, (3) furnish appropriate endorsements and
transfer documents if required by the Conversion Agent, the Issuers or the
Trustee and (4) pay any transfer or similar tax, if required. The "Conversion
Date" as used herein refers to the date on which all of the foregoing
requirements have been satisfied.

            A Holder may convert a portion of a Security if the Issue Price of
such portion is $1,000 or an integral multiple of $1,000. No payment or
adjustment will be made for dividends on the Common Stock except as provided in
the Indenture. On conversion of a Security, that portion of accrued Contingent
Additional Principal attributable to the period from the Issue Date through the
Conversion Date and (except as provided above) accrued Contingent Cash Interest
with respect to the converted Security shall not be cancelled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the Holder thereof
through the delivery of the Cash Amount, together with cash or Common Stock in
respect of the Premium, in exchange for the Security being converted pursuant to
the terms hereof; and the fair market value of such cash or Common Stock in
respect of the Premium, shall be treated as delivered to the extent thereof, in
exchange for Contingent Additional Principal accrued through the Conversion Date
and accrued Contingent Cash Interest, and the Cash Amount shall be treated as
delivered in exchange for the Issue Price of the Security being converted
pursuant to the provisions hereof.

            The Conversion Rate will be adjusted as provided in Article 10 of
the Indenture. However, no adjustment need be made if Securityholders may
participate in the transaction or in certain other cases. The Company from time
to time may voluntarily increase the Conversion Rate."

3.   Separability Clause. In case any provision in this Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

                                      -9-
<PAGE>

4.   Modification, Amendment and Waiver. The provisions of this Supplemental
Indenture may not be amended, supplemented, modified or waived except by a
execution of a Supplemental Indenture executed by the Issuers, the Company and,
to the extent such amendment, supplement or waiver limits or impairs the rights
of any Securityholder, by such Securityholder. Any such amendment shall comply
with Article 9 of the Indenture. Until an amendment, waiver or other action by
Securityholders becomes effective, a consent thereto by a Securityholder of a
Security hereunder is a continuing consent by the Securityholder and every
subsequent Securityholder of that Security or portion of the Security that
evidences the same obligation as the consenting Securityholder's Security, even
if notation of the consent, waiver or action is not made on the Security.
However, any such Securityholder or subsequent Securityholder may revoke the
consent, waiver or action as to such Securityholder's Security or portion of the
Security if the Trustee receives the notice of revocation before the date the
amendment, waiver or action becomes effective. After an amendment, waiver or
action becomes effective, it shall bind every Securityholder.

5.   Ratification of Indenture; Supplemental Indenture Part of Indenture. Except
as expressly amended hereby, the Indenture is in all respects ratified and
confirmed and all the terms, conditions and provisions thereof shall remain in
full force and effect. In the event of a conflict between the terms and
conditions of the Indenture and the terms and conditions of this Supplemental
Indenture, then the terms and conditions of this Supplemental Indenture shall
prevail. This Supplemental Indenture shall form a part of the Indenture for all
purposes, and every holder of Securities heretofore or hereafter authenticated
and delivered shall be bound hereby.

6.   Trust Indenture Acts Controls. If any provision of this Supplemental
Indenture limits, qualifies or conflicts with any provision of the Trust
Indenture Act of 1939, as amended ("TIA"), that is required under the TIA to be
part of and govern any provision of this Supplemental Indenture, the provision
of the TIA shall control. If any provision of this Supplemental Indenture
modifies or excludes any provisions of the TIA that may be so modified or
excluded, the provisions of the TIA shall be deemed to apply to the Indenture as
so modified or to be excluded by this Supplemental Indenture, as the case may
be.

7.   Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICTS OF LAW.

8.   Trustee Makes No Representation. The statements herein are deemed to be
those of the Company, OCI or OFI, as applicable. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.

9.   Multiple Originals. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Supplemental Indenture.

                                      -10-
<PAGE>

10.   Effect of Headings. The Section headings herein are for convenience only
and shall not effect the construction thereof.

11.   Notices. Any request, demand, authorization, notice, waiver, consent or
communication to any of the parties shall be made as set forth in Section 12.02
of the Indenture, as said Section may be amended hereby.

12.   Successors. All agreements of each of the Company, OCI and OFI in respect
of this Supplemental Indenture shall bind its successor.

                            [Signature page follows]

                                      -11-
<PAGE>

      IN WITNESS WHEREOF, this Supplemental Indenture has been duly executed by
the Company, OCI and the Trustee as of the date first written above.

                                          OMNICOM GROUP INC.

                                          By: /s/ RANDALL J. WEISENBURGER
                                              ----------------------------------
                                              Name:  Randall J. Weisenburger
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

                                          OMNICOM CAPITAL INC.

                                          By: /s/ MICHAEL J. O'BRIEN
                                              ----------------------------------
                                              Name:  Michael J. O'Brien
                                              Title: Secretary

                                          OMNICOM FINANCE INC.

                                          By: /s/ RANDALL J. WEISENBURGER
                                              ----------------------------------
                                              Name:  Randall J. Weisenburger
                                              Title: Chief Executive Officer

                                          JPMORGAN CHASE BANK, N.A., as Trustee

                                          By: /s/ CAROL NG
                                              ----------------------------------
                                              Name:  Carol Ng
                                              Title: Vice President

                                      -12-EXHIBIT 4.1

                        SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "Agreement") is dated as of
December 1, 2004, among Insignia Systems, Inc., a Minnesota corporation (the
"Company"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers"); and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to $2,490,000 of shares of Common
Stock on the Closing Date.

         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:

                                  ARTICLE I.
                                  DEFINITIONS

     1.1  Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:

          "Action" shall have the meaning ascribed to such term in Section
     3.1(j).

          "Affiliate" means any Person that, directly or indirectly through one
     or more intermediaries, controls or is controlled by or is under common
     control with a Person as such terms are used in and construed under Rule
     144. With respect to a Purchaser, any investment fund or managed account
     that is managed on a discretionary basis by the same investment manager as
     such Purchaser will be deemed to be an Affiliate of such Purchaser.

          "Closing" means the closing of the purchase and sale of the Common
     Stock pursuant to Section 2.1.

          "Closing Date" means the Trading Day when all of the Transaction
     Documents have been executed and delivered by the applicable parties
     thereto, and all conditions precedent to (i) the Purchasers' obligations to
     pay the Subscription Amount and (ii) the Company's obligations to deliver
     the Securities have been satisfied or waived.

          "Closing Price" means on any particular date (a) the last reported
     closing bid price per share of Common Stock on such date on the Trading
     Market (as reported by Bloomberg L.P. at 4:15 PM (New York time) as the
     last reported closing bid price for regular session trading on such day),
     or (b) if there is no such price on such date, then the closing bid price
     on the Trading Market on the date nearest preceding such date (as reported
     by Bloomberg L.P. at 4:15 PM (New York time) as the closing bid price for

                                       1

<PAGE>

     regular session trading on such day), or (c) if the Common Stock is not
     then listed or quoted on the Trading Market and if prices for the Common
     Stock are then reported in the "pink sheets" published by the National
     Quotation Bureau Incorporated (or a similar organization or agency
     succeeding to its functions of reporting prices), the most recent bid price
     per share of the Common Stock so reported, or (d) if the shares of Common
     Stock are not then publicly traded the fair market value of a share of
     Common Stock as determined by an appraiser selected in good faith by the
     Purchasers of a majority in interest of the Shares then outstanding.

          "Commission" means the Securities and Exchange Commission.

          "Common Stock" means the common stock of the Company, par value $0.01
     per share, and any securities into which such common stock may hereafter be
     reclassified.

          "Common Stock Equivalents" means any securities of the Company or the
     Subsidiaries which would entitle the holder thereof to acquire at any time
     Common Stock, including without limitation, any debt, preferred stock,
     rights, options, warrants or other instrument that is at any time
     convertible into or exchangeable for, or otherwise entitles the holder
     thereof to receive, Common Stock

          "Company Counsel" means Best & Flanagan LLP.

          "Disclosure Schedules" means the Disclosure Schedules of the Company
     delivered concurrently herewith.

          "Discounted Purchase Price" shall have the meaning ascribed to such
     term in Section 4.15.

          "Effective Date" means the date that the Registration Statement is
     first declared effective by the Commission.

          "Escrow Agent" shall have the meaning set forth in the Escrow
     Agreement.

          "Escrow Agreement" shall mean the Escrow Agreement in substantially
     the form of Exhibit C hereto executed and delivered contemporaneously with
     this Agreement.

          "Evaluation Date" shall have the meaning ascribed to such term in
     Section 3.1(r).

          "Exchange Act" means the Securities Exchange Act of 1934, as amended.

          "Exempt Issuance" means the issuance of (a) shares of Common Stock or
     options to employees, officers or directors of the Company pursuant to any
     stock or option plan duly adopted by a majority of the non-employee members
     of the Board of Directors of the Company or a majority of the members of a
     committee of non-employee directors established for such purpose, (b)
     securities upon the exercise of or conversion of any securities issued
     hereunder, convertible securities, options or warrants issued and
     outstanding on the date of this Agreement, provided that such securities
     have not been amended since the date of this Agreement to increase the
     number of such securities or to

                                       2

<PAGE>

     decrease the exercise or conversion price of any such securities or to
     decrease the exercise or conversion price of any such securities, and (c)
     securities issued pursuant to acquisitions or strategic transactions,
     provided any such issuance shall only be to a Person which is, itself or
     through its subsidiaries, an operating company in a business synergistic
     with the business of the Company and in which the Company receives benefits
     in addition to the investment of funds, but shall not include a transaction
     in which the Company is issuing securities primarily for the purpose of
     raising capital or to an entity whose primary business is investing in
     securities.

          "FW" means Feldman Weinstein LLP with offices located at 420 Lexington
     Avenue, Suite 2620, New York, New York 10170-0002.

          "GAAP" shall have the meaning ascribed to such term in Section 3.1(h).

          "Intellectual Property Rights" shall have the meaning ascribed to such
     term in Section 3.1(o).

          "Issuable Maximum" shall have the meaning ascribed to such term in
     Section 4.15.

          "Legend Removal Date" shall have the meaning ascribed to such term in
     Section 4.1(c).

          "Liens" means a lien, charge, security interest, encumbrance, right of
     first refusal, preemptive right or other restriction.

          "Material Adverse Effect" shall have the meaning ascribed to such term
     in Section 3.1(b).

          "Material Permits" shall have the meaning ascribed to such term in
     Section 3.1(m).

          "Per Share Purchase Price" equals $1.00, subject to adjustment for
     reverse and forward stock splits, stock dividends, stock combinations and
     other similar transactions of the Common Stock that occur after the date of
     this Agreement.

          "Person" means an individual or corporation, partnership, trust,
     incorporated or unincorporated association, joint venture, limited
     liability company, joint stock company, government (or an agency or
     subdivision thereof) or other entity of any kind.

          "Pre-Notice" shall have the meaning ascribed to such term in Section
     4.13.

          "Proceeding" means an action, claim, suit, investigation or proceeding
     (including, without limitation, an investigation or partial proceeding,
     such as a deposition), whether commenced or threatened.

          "Purchaser Party" shall have the meaning ascribed to such term in
     Section 4.9.

                                       3

<PAGE>

          "Registration Rights Agreement" means the Registration Rights
     Agreement, dated as of the date of this Agreement, among the Company and
     each Purchaser, in the form of Exhibit A hereto.

          "Registration Statement" means a registration statement meeting the
     requirements set forth in the Registration Rights Agreement and covering
     the resale by the Purchasers of the Shares.

          "Required Approvals" shall have the meaning ascribed to such term in
     Section 3.1(e).

          "Rule 144" means Rule 144 promulgated by the Commission pursuant to
     the Securities Act, as such Rule may be amended from time to time, or any
     similar rule or regulation hereafter adopted by the Commission having
     substantially the same effect as such Rule.

          "SEC Reports" shall have the meaning ascribed to such term in Section
     3.1(h).

          "Securities" means the Shares.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Shareholder Approval" means such approval as may be required by the
     applicable rules and regulations of the Trading Market (or any successor
     entity) from the shareholders of the Company with respect to the
     transactions contemplated by the Transaction Documents, including the
     issuance of all of the Shares and shares of Common Stock issuable pursuant
     to Section 4.15.

          "Shares" means the shares of Common Stock issued or issuable to each
     Purchaser pursuant to this Agreement.

          "Subscription Amount" means, as to each Purchaser, the amounts set
     forth below such Purchaser's signature block on the signature page hereto,
     in United States dollars and in immediately available funds.

          "Subsequent Financing" shall have the meaning ascribed to such term in
     Section 4.13.

          "Subsequent Financing Notice" shall have the meaning ascribed to such
     term in Section 4.13.

          "Subsidiary" shall mean the subsidiaries of the Company, if any, set
     forth on Schedule 3.1(a).

          "Trading Day" means a day on which the Common Stock is traded on a
     Trading Market.

                                       4

<PAGE>

                  "Trading Market" means the following markets or exchanges on
         which the Common Stock is listed or quoted for trading on the date in
         question: the Nasdaq SmallCap Market, the American Stock Exchange, the
         New York Stock Exchange or the Nasdaq National Market.

                  "Transaction Documents" means this Agreement, the Escrow
         Agreement and the Registration Rights Agreement and any other documents
         or agreements executed in connection with the transactions contemplated
         hereunder.

                                  ARTICLE II.
                               PURCHASE AND SALE

     2.1  Closing. On the Closing Date, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price. The
aggregate Subscription Amounts for the Shares sold hereunder shall be up to
$2,490,000. Upon satisfaction of the conditions set forth in Section 2.3, the
Closing shall occur at the offices of the Escrow Agent or such other location as
the parties shall mutually agree.

     2.2  Deliveries.

          (a) On the Closing Date, the Company shall deliver or cause to be
     delivered to the Escrow Agent the following:

               (i)   this Agreement duly executed by the Company;

               (ii)  a certificate evidencing a number of Shares equal to such
          Purchaser's Subscription Amount divided by the Per Share Purchase
          Price, registered in the name of such Purchaser;

               (iii) the Registration Rights Agreement duly executed by the
          Company;

               (iv)  the Escrow Agreement duly executed by the Company; and

               (v)   a legal opinion of Company Counsel, in the form of Exhibit
          B attached hereto.

          (b) On the Closing Date, each Purchaser shall deliver or cause to be
     delivered to the Escrow Agent the following:

               (i)   this Agreement duly executed by such Purchaser;

               (ii)  such Purchaser's Subscription Amount by wire transfer to
          the account of the Escrow Agent; and

               (iii) the Registration Rights Agreement duly executed by such
          Purchaser.

                                       5

<PAGE>

     2.3  Closing Conditions.

          (a) The obligations of the Company hereunder in connection with the
     Closing are subject to the following conditions being met:

               (i)   the accuracy in all material respects when made and on the
          Closing Date of the representations and warranties of the Purchasers
          contained herein;

               (ii)  all obligations, covenants and agreements of the Purchasers
          required to be performed at or prior to the Closing Date shall have
          been performed; and

               (iii) the delivery by the Purchasers of the items set forth in
          Section 2.2(b) of this Agreement.

          (b) The respective obligations of the Purchasers hereunder in
     connection with the Closing are subject to the following conditions being
     met:

               (i)   the accuracy in all material respects on the Closing Date
          of the representations and warranties of the Company contained herein;

               (ii)  all obligations, covenants and agreements of the Company
          required to be performed at or prior to the Closing Date shall have
          been performed;

               (iii) the delivery by the Company of the items set forth in
          Section 2.2(a) of this Agreement;

               (iv)  there shall have been no Material Adverse Effect with
          respect to the Company since the date hereof; and

               (v)   From the date hereof to the Closing Date, trading in the
          Common Stock shall not have been suspended by the Commission (except
          for any suspension of trading of limited duration agreed to by the
          Company, which suspension shall be terminated prior to the Closing),
          and, at any time prior to the Closing Date, trading in securities
          generally as reported by Bloomberg Financial Markets shall not have
          been suspended or limited, or minimum prices shall not have been
          established on securities whose trades are reported by such service,
          or on any Trading Market, nor shall a banking moratorium have been
          declared either by the United States or New York State authorities nor
          shall there have occurred any material outbreak or escalation of
          hostilities or other national or international calamity of such
          magnitude in its effect on, or any material adverse change in, any
          financial market which, in each case, in the reasonable judgment of
          each Purchaser, makes it impracticable or inadvisable to purchase the
          Shares at the Closing.

                                       6

<PAGE>

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1  Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser:

          (a)  Subsidiaries. All of the direct and indirect subsidiaries of the
     Company are set forth on Schedule 3.1(a). The Company owns, directly or
     indirectly, all of the capital stock or other equity interests of each
     Subsidiary free and clear of any Liens, and all the issued and outstanding
     shares of capital stock of each Subsidiary are validly issued and are fully
     paid, non-assessable and free of preemptive and similar rights to subscribe
     for or purchase securities. If the Company has no subsidiaries, then
     references in the Transaction Documents to the Subsidiaries will be
     disregarded.

          (b)  Organization and Qualification. Each of the Company and the
     Subsidiaries is an entity duly incorporated or otherwise organized, validly
     existing and in good standing under the laws of the jurisdiction of its
     incorporation or organization (as applicable), with the requisite power and
     authority to own and use its properties and assets and to carry on its
     business as currently conducted. Neither the Company nor any Subsidiary is
     in violation or default of any of the provisions of its respective
     certificate or articles of incorporation, bylaws or other organizational or
     charter documents. Each of the Company and the Subsidiaries is duly
     qualified to conduct business and is in good standing as a foreign
     corporation or other entity in each jurisdiction in which the nature of the
     business conducted or property owned by it makes such qualification
     necessary, except where the failure to be so qualified or in good standing,
     as the case may be, could not have or reasonably be expected to result in
     (i) a material adverse effect on the legality, validity or enforceability
     of any Transaction Documents, (ii) a material adverse effect on the results
     of operations, assets, business, prospects or financial condition of the
     Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
     effect on the Company's ability to perform in any material respect on a
     timely basis its obligations under any Transaction Documents (any of (i),
     (ii) or (iii), a "Material Adverse Effect") and no Proceeding has been
     instituted in any such jurisdiction revoking, limiting or curtailing or
     seeking to revoke, limit or curtail such power and authority or
     qualification.

          (c)  Authorization; Enforcement. The Company has the requisite
     corporate power and authority to enter into and to consummate the
     transactions contemplated by each of the Transaction Documents and
     otherwise to carry out its obligations thereunder. The execution and
     delivery of each of the Transaction Documents by the Company and the
     consummation by it of the transactions contemplated thereby have been duly
     authorized by all necessary action on the part of the Company and no
     further action is required by the Company in connection therewith other
     than in connection with the Required Approvals. Each Transaction Documents
     has been (or upon delivery will have been) duly executed by the Company
     and, when delivered in accordance with the terms hereof, will constitute
     the valid and binding obligation of the Company enforceable against the
     Company in accordance with its terms except (i) as limited by applicable

                                       7

<PAGE>

     bankruptcy, insolvency, reorganization, moratorium and other laws of
     general application affecting enforcement of creditors' rights generally
     and (ii) as limited by laws relating to the availability of specific
     performance, injunctive relief or other equitable remedies.

          (d)  No Conflicts. The execution, delivery and performance of the
     Transaction Documents by the Company, the issuance and sale of the Shares
     and the consummation by the Company of the other transactions contemplated
     thereby do not and will not (i) conflict with or violate any provision of
     the Company's or any Subsidiary's certificate or articles of incorporation,
     bylaws or other organizational or charter documents, or (ii) conflict with,
     or constitute a default (or an event that with notice or lapse of time or
     both would become a default) under, result in the creation of any Lien upon
     any of the properties or assets of the Company or any Subsidiary, or give
     to others any rights of termination, amendment, acceleration or
     cancellation (with or without notice, lapse of time or both) of, any
     agreement, credit facility, debt or other instrument (evidencing a Company
     or Subsidiary debt or otherwise) or other understanding to which the
     Company or any Subsidiary is a party or by which any property or asset of
     the Company or any Subsidiary is bound or affected, or (iii) subject to the
     Required Approvals, conflict with or result in a violation of any law,
     rule, regulation, order, judgment, injunction, decree or other restriction
     of any court or governmental authority to which the Company or a Subsidiary
     is subject (including federal and state securities laws and regulations),
     or by which any property or asset of the Company or a Subsidiary is bound
     or affected; except in the case of each of clauses (ii) and (iii), such as
     could not have or reasonably be expected to result in a Material Adverse
     Effect.

          (e)  Filings, Consents and Approvals. The Company is not required to
     obtain any consent, waiver, authorization or order of, give any notice to,
     or make any filing or registration with, any court or other federal, state,
     local or other governmental authority or other Person in connection with
     the execution, delivery and performance by the Company of the Transaction
     Documents, other than (i) filings required pursuant to Section 4.4 of this
     Agreement, (ii) the filing with the Commission of the Registration
     Statement, (iii) application(s) to each applicable Trading Market for the
     listing of the Shares for trading thereon in the time and manner required
     thereby, and (iv) the filing of Form D with the Commission and such filings
     as are required to be made under applicable state securities laws
     (collectively, the "Required Approvals").

          (f)  Issuance of the Securities. The Shares are duly authorized and,
     when issued and paid for in accordance with the Transaction Documents, will
     be duly and validly issued, fully paid and nonassessable, free and clear of
     all Liens imposed by the Company other than restrictions on transfer
     provided for in the Transaction Documents. The Company has reserved from
     its duly authorized capital stock the maximum number of shares of Common
     Stock issuable pursuant to this Agreement.

          (g)  Capitalization. The capitalization of the Company is as described
     in the Company's most recent periodic report filed with the Commission. The
     Company has not issued any capital stock since such filing other than
     pursuant to the exercise of employee stock options under the Company's
     stock option plans, the issuance of shares of Common Stock to employees
     pursuant to the Company's employee stock purchase

                                       8

<PAGE>

     plan and pursuant to the conversion or exercise of outstanding Common Stock
     Equivalents. No Person has any right of first refusal, preemptive right,
     right of participation, or any similar right to participate in the
     transactions contemplated by the Transaction Documents. Except as a result
     of the purchase and sale of the Securities, there are no outstanding
     options, warrants, script rights to subscribe to, calls or commitments of
     any character whatsoever relating to, or securities, rights or obligations
     convertible into or exchangeable for, or giving any Person any right to
     subscribe for or acquire, any shares of Common Stock, or contracts,
     commitments, understandings or arrangements by which the Company or any
     Subsidiary is or may become bound to issue additional shares of Common
     Stock or Common Stock Equivalents. The issue and sale of the Securities
     will not obligate the Company to issue shares of Common Stock or other
     securities to any Person (other than the Purchasers) and will not result in
     a right of any holder of Company securities to adjust the exercise,
     conversion, exchange or reset price under such securities. All of the
     outstanding shares of capital stock of the Company are validly issued,
     fully paid and nonassessable, have been issued in compliance with all
     federal and state securities laws, and none of such outstanding shares was
     issued in violation of any preemptive rights or similar rights to subscribe
     for or purchase securities. No further approval or authorization of any
     stockholder, the Board of Directors of the Company or others is required
     for the issuance and sale of the Shares. There are no stockholders
     agreements, voting agreements or other similar agreements with respect to
     the Company's capital stock to which the Company is a party or, to the
     knowledge of the Company, between or among any of the Company's
     stockholders.

          (h)  SEC Reports; Financial Statements. The Company has filed all
     reports required to be filed by it under the Securities Act and the
     Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
     two years preceding the date hereof (or such shorter period as the Company
     was required by law to file such material) (the foregoing materials,
     including the exhibits thereto, being collectively referred to herein as
     the "SEC Reports") on a timely basis or has received a valid extension of
     such time of filing and has filed any such SEC Reports prior to the
     expiration of any such extension. As of their respective dates, the SEC
     Reports complied in all material respects with the requirements of the
     Securities Act and the Exchange Act and the rules and regulations of the
     Commission promulgated thereunder, and none of the SEC Reports, when filed,
     contained any untrue statement of a material fact or omitted to state a
     material fact required to be stated therein or necessary in order to make
     the statements therein, in light of the circumstances under which they were
     made, not misleading. The financial statements of the Company included in
     the SEC Reports comply in all material respects with applicable accounting
     requirements and the rules and regulations of the Commission with respect
     thereto as in effect at the time of filing. Such financial statements have
     been prepared in accordance with United States generally accepted
     accounting principles applied on a consistent basis during the periods
     involved ("GAAP"), except as may be otherwise specified in such financial
     statements or the notes thereto and except that unaudited financial
     statements may not contain all footnotes required by GAAP, and fairly
     present in all material respects the financial position of the Company and
     its consolidated subsidiaries as of and for the dates thereof and the
     results of operations and cash flows for the periods then ended, subject,
     in the case of unaudited statements, to normal, immaterial, year-end audit
     adjustments.

                                       9

<PAGE>

          (i)  Material Changes. Since the date of the latest audited financial
     statements included within the SEC Reports, except as specifically
     disclosed in the SEC Reports, (i) there has been no event, occurrence or
     development that has had or that could reasonably be expected to result in
     a Material Adverse Effect, (ii) the Company has not incurred any
     liabilities (contingent or otherwise) other than (A) trade payables and
     accrued expenses incurred in the ordinary course of business consistent
     with past practice and (B) liabilities not required to be reflected in the
     Company's financial statements pursuant to GAAP or required to be disclosed
     in filings made with the Commission, (iii) the Company has not altered its
     method of accounting, (iv) the Company has not declared or made any
     dividend or distribution of cash or other property to its stockholders or
     purchased, redeemed or made any agreements to purchase or redeem any shares
     of its capital stock and (v) the Company has not issued any equity
     securities to any officer, director or Affiliate, except pursuant to
     existing Company stock option plans. The Company does not have pending
     before the Commission any request for confidential treatment of
     information.

          (j)  Litigation. There is no action, suit, inquiry, notice of
     violation, proceeding or investigation pending or, to the knowledge of the
     Company, threatened against or affecting the Company, any Subsidiary or any
     of their respective properties before or by any court, arbitrator,
     governmental or administrative agency or regulatory authority (federal,
     state, county, local or foreign) (collectively, an "Action") which (i)
     adversely affects or challenges the legality, validity or enforceability of
     any of the Transaction Documents or the Securities or (ii) could, if there
     were an unfavorable decision, have or reasonably be expected to result in a
     Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
     director or officer thereof, is or has been the subject of any Action
     involving a claim of violation of or liability under federal or state
     securities laws or a claim of breach of fiduciary duty. There has not been,
     and to the knowledge of the Company, there is not pending or contemplated,
     any investigation by the Commission involving the Company or any current or
     former director or officer of the Company. The Commission has not issued
     any stop order or other order suspending the effectiveness of any
     registration statement filed by the Company or any Subsidiary under the
     Exchange Act or the Securities Act.

          (k)  Labor Relations. No material labor dispute exists or, to the
     knowledge of the Company, is imminent with respect to any of the employees
     of the Company which could reasonably be expected to result in a Material
     Adverse Effect.

          (l)  Compliance. Neither the Company nor any Subsidiary (i) is in
     default under or in violation of (and no event has occurred that has not
     been waived that, with notice or lapse of time or both, would result in a
     default by the Company or any Subsidiary under), nor has the Company or any
     Subsidiary received notice of a claim that it is in default under or that
     it is in violation of, any indenture, loan or credit agreement or any other
     agreement or instrument to which it is a party or by which it or any of its
     properties is bound (whether or not such default or violation has been
     waived), (ii) is in violation of any order of any court, arbitrator or
     governmental body, or (iii) is or has been in violation of any statute,
     rule or regulation of any governmental authority, including

                                      10

<PAGE>

     without limitation all foreign, federal, state and local laws applicable to
     its business except in each case as could not have a Material Adverse
     Effect.

          (m)  Regulatory Permits. The Company and the Subsidiaries possess all
     certificates, authorizations and permits issued by the appropriate federal,
     state, local or foreign regulatory authorities necessary to conduct their
     respective businesses as described in the SEC Reports, except where the
     failure to possess such permits could not have or reasonably be expected to
     result in a Material Adverse Effect ("Material Permits"), and neither the
     Company nor any Subsidiary has received any notice of proceedings relating
     to the revocation or modification of any Material Permit.

          (n)  Title to Assets. The Company and the Subsidiaries have good and
     marketable title in fee simple to all real property owned by them that is
     material to the business of the Company and the Subsidiaries and good and
     marketable title in all personal property owned by them that is material to
     the business of the Company and the Subsidiaries, in each case free and
     clear of all Liens, except for Liens as do not materially affect the value
     of such property and do not materially interfere with the use made and
     proposed to be made of such property by the Company and the Subsidiaries
     and Liens for the payment of federal, state or other taxes, the payment of
     which is neither delinquent nor subject to penalties. Any real property and
     facilities held under lease by the Company and the Subsidiaries are held by
     them under valid, subsisting and enforceable leases of which the Company
     and the Subsidiaries are in compliance.

          (o)  Patents and Trademarks. The Company and the Subsidiaries have, or
     have rights to use, all patents, patent applications, trademarks, trademark
     applications, service marks, trade names, copyrights, licenses and other
     similar rights necessary or material for use in connection with their
     respective businesses as described in the SEC Reports and which the failure
     to so have could have a Material Adverse Effect (collectively, the
     "Intellectual Property Rights"). Neither the Company nor any Subsidiary has
     received a written notice that the Intellectual Property Rights used by the
     Company or any Subsidiary violates or infringes upon the rights of any
     Person. To the knowledge of the Company, all such Intellectual Property
     Rights are enforceable and there is no existing infringement by another
     Person of any of the Intellectual Property Rights of others.

          (p)  Insurance. The Company and the Subsidiaries are insured by
     insurers of recognized financial responsibility against such losses and
     risks and in such amounts as are prudent and customary in the businesses in
     which the Company and the Subsidiaries are engaged, including, but not
     limited to, directors and officers insurance coverage at least equal to the
     aggregate Subscription Amount. To the best of Company's knowledge, such
     insurance contracts and policies are accurate and complete. Neither the
     Company nor any Subsidiary has any reason to believe that it will not be
     able to renew its existing insurance coverage as and when such coverage
     expires or to obtain similar coverage from similar insurers as may be
     necessary to continue its business without a significant increase in cost.

          (q)  Transactions With Affiliates and Employees. Except as set forth
     in the SEC Reports, none of the officers or directors of the Company and,
     to the knowledge of

                                      11

<PAGE>

     the Company, none of the employees of the Company is presently a party to
     any transaction with the Company or any Subsidiary (other than for services
     as employees, officers and directors), including any contract, agreement or
     other arrangement providing for the furnishing of services to or by,
     providing for rental of real or personal property to or from, or otherwise
     requiring payments to or from any officer, director or such employee or, to
     the knowledge of the Company, any entity in which any officer, director, or
     any such employee has a substantial interest or is an officer, director,
     trustee or partner, in each case in excess of $60,000 other than (i) for
     payment of salary or consulting fees for services rendered, (ii)
     reimbursement for expenses incurred on behalf of the Company and (iii) for
     other employee benefits, including stock option agreements under any stock
     option plan of the Company.

          (r)  Sarbanes-Oxley; Internal Accounting Controls. The Company is in
     material compliance with all provisions of the Sarbanes-Oxley Act of 2002
     which are applicable to it as of the Closing Date. The Company and the
     Subsidiaries maintain a system of internal accounting controls sufficient
     to provide reasonable assurance that (i) transactions are executed in
     accordance with management's general or specific authorizations, (ii)
     transactions are recorded as necessary to permit preparation of financial
     statements in conformity with GAAP and to maintain asset accountability,
     (iii) access to assets is permitted only in accordance with management's
     general or specific authorization, and (iv) the recorded accountability for
     assets is compared with the existing assets at reasonable intervals and
     appropriate action is taken with respect to any differences. The Company
     has established disclosure controls and procedures (as defined in Exchange
     Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
     disclosure controls and procedures to ensure that material information
     relating to the Company, including its Subsidiaries, is made known to the
     certifying officers by others within those entities, particularly during
     the period in which the Company's most recently filed periodic report under
     the Exchange Act, as the case may be, is being prepared. The Company's
     certifying officers have evaluated the effectiveness of the Company's
     controls and procedures as of the date prior to the filing date of the most
     recently filed periodic report under the Exchange Act (such date, the
     "Evaluation Date"). The Company presented in its most recently filed
     periodic report under the Exchange Act the conclusions of the certifying
     officers about the effectiveness of the disclosure controls and procedures
     based on their evaluations as of the Evaluation Date. Since the Evaluation
     Date, there have been no significant changes in the Company's internal
     controls (as such term is defined in Item 307(b) of Regulation S-K under
     the Exchange Act) or, to the Company's knowledge, in other factors that
     could significantly affect the Company's internal controls.

          (s)  Certain Fees. No brokerage or finder's fees or commissions are or
     will be payable by the Company to any broker, financial advisor or
     consultant, finder, placement agent, investment banker, bank or other
     Person with respect to the transactions contemplated by this Agreement,.
     The Purchasers shall have no obligation with respect to any fees or with
     respect to any claims made by or on behalf of other Persons for fees of a
     type contemplated in this Section that may be due in connection with the
     transactions contemplated by this Agreement.

                                      12

<PAGE>

          (t)  Private Placement. Assuming the accuracy of the Purchasers
     representations and warranties set forth in Section 3.2, no registration
     under the Securities Act is required for the offer and sale of the
     Securities by the Company to the Purchasers as contemplated hereby. The
     issuance and sale of the Securities hereunder does not contravene the rules
     and regulations of the Trading Market.

          (u)  Investment Company. The Company is not, and is not an Affiliate
     of, and immediately after receipt of payment for the Shares, will not be or
     be an Affiliate of, an "investment company" within the meaning of the
     Investment Company Act of 1940, as amended. The Company shall conduct its
     business in a manner so that it will not become subject to the Investment
     Company Act.

          (v)  Registration Rights. No Person has any right to cause the Company
     to effect the registration under the Securities Act of any securities of
     the Company.

          (w)  Listing and Maintenance Requirements. The Company's Common Stock
     is registered pursuant to Section 12(g) of the Exchange Act, and the
     Company has taken no action designed to, or which to its knowledge is
     likely to have the effect of, terminating the registration of the Common
     Stock under the Exchange Act nor has the Company received any notification
     that the Commission is contemplating terminating such registration. The
     Company has not, in the 12 months preceding the date hereof, received
     notice from any Trading Market on which the Common Stock is or has been
     listed or quoted to the effect that the Company is not in compliance with
     the listing or maintenance requirements of such Trading Market. The Company
     is, and has no reason to believe that it will not in the foreseeable future
     continue to be, in compliance with all such listing and maintenance
     requirements.

          (x)  Application of Takeover Protections. The Company and its Board of
     Directors have taken all necessary action, if any, in order to render
     inapplicable any control share acquisition, business combination, poison
     pill (including any distribution under a rights agreement) or other similar
     anti-takeover provision under the Company's Certificate of Incorporation
     (or similar charter documents) or the laws of its state of incorporation
     that is or could become applicable to the Purchasers as a result of the
     Purchasers and the Company fulfilling their obligations or exercising their
     rights under the Transaction Documents, including without limitation the
     Company's issuance of the Securities and the Purchasers' ownership of the
     Securities.

          (y)  Disclosure. The Company confirms that, neither the Company nor
     any other Person acting on its behalf has provided any of the Purchasers or
     their agents or counsel with any information that constitutes or might
     constitute material, non-public information. The Company understands and
     confirms that the Purchasers will rely on the foregoing representations and
     covenants in effecting transactions in securities of the Company. All
     disclosure provided to the Purchasers regarding the Company, its business
     and the transactions contemplated hereby, including the Disclosure
     Schedules to this Agreement, furnished by or on behalf of the Company with
     respect to the representations and warranties made herein are true and
     correct with respect to such representations and warranties and do not
     contain any untrue statement of a material fact or omit to state any

                                      13

<PAGE>

     material fact necessary in order to make the statements made therein, in
     light of the circumstances under which they were made, not misleading. The
     Company acknowledges and agrees that no Purchaser makes or has made any
     representations or warranties with respect to the transactions contemplated
     hereby other than those specifically set forth in Section 3.2 hereof.

          (z)  No Integrated Offering. Assuming the accuracy of the Purchasers'
     representations and warranties set forth in Section 3.2, neither the
     Company, nor any of its affiliates, nor any Person acting on its or their
     behalf has, directly or indirectly, made any offers or sales of any
     security or solicited any offers to buy any security, under circumstances
     that would cause this offering of the Securities to be integrated with
     prior offerings by the Company for purposes of the Securities Act or any
     applicable shareholder approval provisions, including, without limitation,
     under the rules and regulations of any exchange or automated quotation
     system on which any of the securities of the Company are listed or
     designated.

          (aa)  Solvency. Based on the financial condition of the Company as of
     the Closing Date after giving effect to the receipt by the Company of the
     proceeds from the sale of the Securities hereunder, (i) the Company's fair
     saleable value of its assets exceeds the amount that will be required to be
     paid on or in respect of the Company's existing debts and other liabilities
     (including known contingent liabilities) as they mature; (ii) the Company's
     assets do not constitute unreasonably small capital to carry on its
     business for the current fiscal year as now conducted and as proposed to be
     conducted including its capital needs taking into account the particular
     capital requirements of the business conducted by the Company, and
     projected capital requirements and capital availability thereof; and (iii)
     the current cash flow of the Company, together with the proceeds the
     Company would receive, were it to liquidate all of its assets, after taking
     into account all anticipated uses of the cash, would be sufficient to pay
     all amounts on or in respect of its debt when such amounts are required to
     be paid. The Company does not intend to incur debts beyond its ability to
     pay such debts as they mature (taking into account the timing and amounts
     of cash to be payable on or in respect of its debt). The Company has no
     knowledge of any facts or circumstances which lead it to believe that it
     will file for reorganization or liquidation under the bankruptcy or
     reorganization laws of any jurisdiction within one year from the Closing
     Date. The SEC Reports set forth as of the dates thereof all outstanding
     secured and unsecured Indebtedness of the Company or any Subsidiary, or for
     which the Company or any Subsidiary has commitments. For the purposes of
     this Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed
     money or amounts owed in excess of $50,000 (other than trade accounts
     payable incurred in the ordinary course of business), (b) all guaranties,
     endorsements and other contingent obligations in respect of Indebtedness of
     others, whether or not the same are or should be reflected in the Company's
     balance sheet (or the notes thereto), except guaranties by endorsement of
     negotiable instruments for deposit or collection or similar transactions in
     the ordinary course of business; and (c) the present value of any lease
     payments in excess of $50,000 due under leases required to be capitalized
     in accordance with GAAP. Neither the Company nor any Subsidiary is in
     default with respect to any Indebtedness.

                                      14

<PAGE>

          (bb)  Form S-3 Eligibility. The Company is eligible to register the
     resale of its Common Stock by the Purchasers under Form S-3 promulgated
     under the Securities Act and the Company hereby covenants and agrees to use
     its best efforts to maintain its eligibility to use Form S-3 until the
     Registration Statement covering the resale of the Shares shall have been
     filed with, and declared effective by, the Commission.

          (cc)  Taxes. Except for matters that would not, individually or in the
     aggregate, have or reasonably be expected to result in a Material Adverse
     Effect, the Company and each Subsidiary has filed all necessary federal,
     state and foreign income and franchise tax returns and has paid or accrued
     all taxes shown as due thereon, and the Company has no knowledge of a tax
     deficiency which has been asserted or threatened against the Company or any
     Subsidiary.

          (dd)  General Solicitation. Neither the Company nor any person acting
     on behalf of the Company has offered or sold any of the Shares by any form
     of general solicitation or general advertising. The Company has offered the
     Shares for sale only to the Purchasers and certain other "accredited
     investors" within the meaning of Rule 501 under the Securities Act.

          (ee)  Foreign Corrupt Practices. Neither the Company, nor to the
     knowledge of the Company, any agent or other person acting on behalf of the
     Company, has (i) directly or indirectly, used any corrupt funds for
     unlawful contributions, gifts, entertainment or other unlawful expenses
     related to foreign or domestic political activity, (ii) made any unlawful
     payment to foreign or domestic government officials or employees or to any
     foreign or domestic political parties or campaigns from corporate funds,
     (iii) failed to disclose fully any contribution made by the Company (or
     made by any person acting on its behalf of which the Company is aware)
     which is in violation of law, or (iv) violated in any material respect any
     provision of the Foreign Corrupt Practices Act of 1977, as amended.

          (ff)  Accountants. The Company's accountants are set forth on Schedule
     3.1(ff) of the Disclosure Schedule. To the Company's knowledge, such
     accountants, who the Company expects will express their opinion with
     respect to the financial statements to be included in the Company's Annual
     Report on Form 10-K for the year ending December 31, 2004 are a registered
     public accounting firm as required by the Securities Act.

          (gg)  Acknowledgment Regarding Purchasers' Purchase of Shares. The
     Company acknowledges and agrees that each of the Purchasers is acting
     solely in the capacity of an arm's length purchaser with respect to the
     Transaction Documents and the transactions contemplated hereby. The Company
     further acknowledges that no Purchaser is acting as a financial advisor or
     fiduciary of the Company (or in any similar capacity) with respect to this
     Agreement and the transactions contemplated hereby and any advice given by
     any Purchaser or any of their respective representatives or agents in
     connection with this Agreement and the transactions contemplated hereby is
     merely incidental to the Purchasers' purchase of the Shares. The Company
     further represents to each Purchaser that the Company's decision to enter
     into this Agreement has been based solely on the

                                      15

<PAGE>

     independent evaluation of the transactions contemplated hereby by the
     Company and its representatives.

     3.2  Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

          (a)  Organization; Authority. Such Purchaser is an entity duly
     organized, validly existing and in good standing under the laws of the
     jurisdiction of its organization with full right, corporate or partnership
     power and authority to enter into and to consummate the transactions
     contemplated by the Transaction Documents and otherwise to carry out its
     obligations thereunder. The execution, delivery and performance by such
     Purchaser of the transactions contemplated by this Agreement have been duly
     authorized by all necessary corporate or similar action on the part of such
     Purchaser. Each Transaction Documents to which it is a party has been duly
     executed by such Purchaser, and when delivered by such Purchaser in
     accordance with the terms hereof, will constitute the valid and legally
     binding obligation of such Purchaser, enforceable against it in accordance
     with its terms, except (i) as limited by general equitable principles and
     applicable bankruptcy, insolvency, reorganization, moratorium and other
     laws of general application affecting enforcement of creditors' rights
     generally, (ii) as limited by laws relating to the availability of specific
     performance, injunctive relief or other equitable remedies and (iii)
     insofar as indemnification and contribution provisions may be limited by
     applicable law.

          (b)  Purchaser Representation. Such Purchaser understands that the
     Securities are "restricted securities" and have not been registered under
     the Securities Act or any applicable state securities law and is acquiring
     the Securities as principal for its own account and not with a view to or
     for distributing or reselling such Securities or any part thereof, has no
     present intention of distributing any of such Securities and has no
     arrangement or understanding with any other persons regarding the
     distribution of such Securities (this representation and warranty not
     limiting such Purchaser's right to sell the Securities pursuant to the
     Registration Statement or otherwise in compliance with applicable federal
     and state securities laws). Such Purchaser is acquiring the Securities
     hereunder in the ordinary course of its business. Such Purchaser does not
     have any agreement or understanding, directly or indirectly, with any
     Person to distribute any of the Securities.

          (c)  Purchaser Status. At the time such Purchaser was offered the
     Securities, it was, and at the date hereof it is: (i) an "accredited
     investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
     under the Securities Act or (ii) a "qualified institutional buyer" as
     defined in Rule 144A(a) under the Securities Act. Such Purchaser is not
     required to be registered as a broker-dealer under Section 15 of the
     Exchange Act.

          (d)  Experience of Such Purchaser. Such Purchaser, either alone or
     together with its representatives, has such knowledge, sophistication and
     experience in business and financial matters so as to be capable of
     evaluating the merits and risks of the prospective investment in the
     Securities, and has so evaluated the merits and risks of such

                                      16

<PAGE>

     investment. Such Purchaser is able to bear the economic risk of an
     investment in the Securities and, at the present time, is able to afford a
     complete loss of such investment.

          (e)  General Solicitation. Such Purchaser is not purchasing the
     Securities as a result of any advertisement, article, notice or other
     communication regarding the Securities published in any newspaper, magazine
     or similar media or broadcast over television or radio or presented at any
     seminar or any other general solicitation or general advertisement.

     The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                 ARTICLE IV.
                        OTHER AGREEMENTS OF THE PARTIES

     4.1  Transfer Restrictions.

          (a)  The Securities may only be disposed of in compliance with state
     and federal securities laws. In connection with any transfer of Securities
     other than pursuant to an effective registration statement or Rule 144, to
     the Company or to an affiliate of a Purchaser or in connection with a
     pledge as contemplated in Section 4.1(b), the Company may require the
     transferor thereof to provide to the Company an opinion of counsel selected
     by the transferor and reasonably acceptable to the Company, the form and
     substance of which opinion shall be reasonably satisfactory to the Company,
     to the effect that such transfer does not require registration of such
     transferred Securities under the Securities Act. As a condition of
     transfer, any such transferee shall agree in writing to be bound by the
     terms of this Agreement and shall have the rights of a Purchaser under this
     Agreement and the Registration Rights Agreement.

          (b)  The Purchasers agree to the imprinting, so long as is required by
     this Section 4.1(b), of a legend on any of the Securities in the following
     form:

          THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
          EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
          RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
          BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
          STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
          EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
          REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
          STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
          THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
          REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE

                                      17

<PAGE>

          PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
          REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
          THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
          SECURITIES ACT.

          The Company acknowledges and agrees that a Purchaser may from time to
     time pledge pursuant to a bona fide margin agreement with a registered
     broker-dealer or grant a security interest in some or all of the Securities
     to a financial institution that is an "accredited investor" as defined in
     Rule 501(a) under the Securities Act and who agrees to be bound by the
     provisions of this Agreement and the Registration Rights Agreement and, if
     required under the terms of such arrangement, such Purchaser may transfer
     pledged or secured Securities to the pledgees or secured parties. Such a
     pledge or transfer would not be subject to approval of the Company and no
     legal opinion of legal counsel of the pledgee, secured party or pledgor
     shall be required in connection therewith. Further, no notice shall be
     required of such pledge. At the appropriate Purchaser's expense, the
     Company will execute and deliver such reasonable documentation as a pledgee
     or secured party of Securities may reasonably request in connection with a
     pledge or transfer of the Securities, including, if the Securities are
     subject to registration pursuant to the Registration Rights Agreement, the
     preparation and filing of any required prospectus supplement under Rule
     424(b)(3) under the Securities Act or other applicable provision of the
     Securities Act to appropriately amend the list of Selling Stockholders
     thereunder.

          (c)  Certificates evidencing the Shares shall not contain any legend
     (including the legend set forth in Section 4.1(b)), (i) while a
     registration statement (including the Registration Statement) covering the
     resale of such security is effective under the Securities Act, or (ii)
     following any sale of such Shares pursuant to Rule 144, or (iii) if such
     Shares are eligible for sale under Rule 144(k), or (iv) if such legend is
     not required under applicable requirements of the Securities Act (including
     judicial interpretations and pronouncements issued by the Staff of the
     Commission). The Company shall cause its counsel to issue a legal opinion
     to the Company's transfer agent promptly after the Effective Date if
     required by the Company's transfer agent to effect the removal of the
     legend hereunder. The Company agrees that following the Effective Date or
     at such time as such legend is no longer required under this Section
     4.1(c), it will, no later than three Trading Days following the delivery by
     a Purchaser to the Company or the Company's transfer agent of a certificate
     representing Shares issued with a restrictive legend (such date, the
     "Legend Removal Date"), deliver or cause to be delivered to such Purchaser
     a certificate representing such Securities that is free from all
     restrictive and other legends. The Company may not make any notation on its
     records or give instructions to any transfer agent of the Company that
     enlarge the restrictions on transfer set forth in this Section.

          (d)  In addition to such Purchaser's other available remedies, the
     Company shall pay to a Purchaser, in cash, as partial liquidated damages
     and not as a penalty, for each $1,000 of Shares (based on the Closing Price
     of the Common Stock on the date such Securities are submitted to the
     Company's transfer agent) subject to Section 4.1(c), $10 per Trading Day
     (increasing to $20 per Trading Day five (5) Trading Days after such

                                      18

<PAGE>

     damages have begun to accrue) for each Trading Day after the Legend Removal
     Date until such certificate is delivered. Nothing herein shall limit such
     Purchaser's right to pursue actual damages for the Company's failure to
     deliver certificates representing any Securities as required by the
     Transaction Documents, and such Purchaser shall have the right to pursue
     all remedies available to it at law or in equity including, without
     limitation, a decree of specific performance and/or injunctive relief.

          (e) Each Purchaser, severally and not jointly with the other
     Purchasers, agrees that the removal of the restrictive legend from
     certificates representing Securities as set forth in this Section 4.1 is
     predicated upon the Company's reliance that the Purchaser will sell any
     Securities pursuant to either the registration requirements of the
     Securities Act, including any applicable prospectus delivery requirements,
     or an exemption therefrom.

     4.2  Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

     4.3  Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

     4.4  Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a Current
Report on Form 8-K, reasonably acceptable to each Purchaser disclosing the
material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission

                                      19

<PAGE>

or any regulatory agency or Trading Market, without the prior written consent of
such Purchaser, except (i) as required by federal securities law in connection
with the registration statement contemplated by the Registration Rights
Agreement and (ii) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure permitted under subclause (i) or (ii).

     4.5  Shareholder Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

     4.6  Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

     4.7  Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem any Common Stock or
Common Stock Equivalents or to settle any outstanding litigation.

     4.8  Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.

     4.9  Indemnification of Purchasers. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders,

                                      20

<PAGE>

partners, employees and agents (each, a "Purchaser Party") harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of
the representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents or (b) any action
instituted against a Purchaser, or any of them or their respective Affiliates,
by any stockholder of the Company who is not an Affiliate of such Purchaser,
with respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of such Purchaser's
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings such Purchaser may have with any such stockholder
or any violations by the Purchaser of state or federal securities laws or any
conduct by such Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance). If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Company and
the position of such Purchaser Party. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected without the Company's prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.

     4.10  Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement.

     4.11  Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Closing Date) to
list all of the Shares on such Trading Market. The Company further agrees, if
the Company applies to have the Common Stock traded on any other Trading Market,
it will include in such application all of the Shares and will take such other
action as is necessary to cause all of the Shares to be listed on such other
Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market. In
addition, the Company shall hold a special meeting of shareholders (which may
also be at the annual meeting of shareholders) within 120 days after any
Subsequent Financing for the

                                      21

<PAGE>

purpose of obtaining Shareholder Approval, with the recommendation of the
Company's Board of Directors that such proposal be approved, and the Company
shall solicit proxies from its shareholders in connection therewith in the same
manner as all other management proposals in such proxy statement and all
management-appointed proxyholders shall vote their proxies in favor of such
proposal.

     4.12  Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

     4.13  Participation in Future Financing. From the date hereof until 12
months after the Effective Date, upon any financing by the Company of its Common
Stock or Common Stock Equivalents (a "Subsequent Financing"), each Purchaser
shall have the right to participate in up to their Pro-Rata Portion of such
Subsequent Financing. At least 5 Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing ("Pre-Notice"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a "Subsequent Financing Notice"). Upon the
request of a Purchaser, and only upon a request by such Purchaser, for a
Subsequent Financing Notice, the Company shall promptly, but no later than 1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser. The Subsequent Financing Notice shall describe in reasonable detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto. If by 6:30 p.m. (New York City time) on the second
Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Purchaser as of such 2nd Trading Day, such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate. The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 60 Trading Days after
the date of the initial Subsequent Financing Notice. "Pro Rata Portion" is the
ratio of (x) the Subscription Amount of Securities purchased by a participating
Purchaser and (y) the sum of the aggregate Subscription Amount of all
participating Purchasers. Notwithstanding the foregoing, this Section 4.13 shall
not apply in respect of an Exempt Issuance.

     4.14  Subsequent Equity Sales. From the date hereof until 90 days after the
Effective Date, neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common

                                      22

<PAGE>

Stock Equivalents; provided, however, the 90 day period set forth in this
Section 4.14 shall be extended for the number of Trading Days during such period
in which (y) trading in the Common Stock is suspended by any Trading Market, or
(z) following the Effective Date, the Registration Statement is not effective or
the prospectus included in the Registration Statement may not be used by the
Purchasers for the resale of the Shares. In addition to the limitations set
forth herein, from the date hereof until such time as no Purchaser holds any of
the Securities, the Company shall be prohibited from effecting or entering into
an agreement to effect any Subsequent Financing involving a "Variable Rate
Transaction" or an "MFN Transaction" (each as defined below). The term "Variable
Rate Transaction" shall mean a transaction in which the Company issues or sells
(i) any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock. The term "MFN Transaction" shall mean a transaction in which
the Company issues or sells any securities in a capital raising transaction or
series of related transactions which grants to an investor the right to receive
additional shares based upon future transactions of the Company on terms more
favorable than those granted to such investor in such offering. Any Purchaser
shall be entitled to obtain injunctive relief against the Company to preclude
any such issuance, which remedy shall be in addition to any right to collect
damages. Notwithstanding the foregoing, this Section 4.14 shall not apply in
respect of an Exempt Issuance, except that no Variable Rate Transaction or MFN
Transaction shall be an Exempt Issuance. In addition, unless Shareholder
Approval has been obtained and deemed effective, other than pursuant to an
Exempt Issuance, the Company shall not make any issuance whatsoever of Common
Stock or Common Stock Equivalents which would not permit the issuance in full of
additional shares of Common Stock to the Purchasers pursuant to Section 4.15.

     4.15  Per Share Purchase Price Protection. From the date hereof until 18
months following the Effective Date, if the Company or any subsidiary thereof
shall issue any Common Stock or Common Stock Equivalents entitling any person or
entity to acquire shares of Common Stock at a price per share less than the then
effective Per Share Purchase Price (subject to appropriate adjustments for
reverse and forward stock splits and the like and taking into consideration any
previous adjustments hereunder) (the "Discounted Purchase Price", as further
defined below), then in consideration of such Purchaser's covenants herein, the
Company shall issue to such Purchaser that number of additional shares of Common
Stock (subject to appropriate adjustment for reverse and forward stock splits
and the like occurring after the Closing) equal to (a) Per Share Purchase Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such shares of
Common Stock or such Common Stock Equivalents plus the number of shares of
Common Stock which the offering price for such shares of Common Stock or Common
Stock Equivalents would purchase at the Per Share Purchase Price, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of
Common Stock so issued or issuable; multiplied by (b) the actual total
Subscription Amount paid by each Purchaser; less (c) the Shares issued to such

                                      23

<PAGE>

Purchaser at the Closing pursuant to this Agreement and pursuant to this Section
4.15. The term "Discounted Purchase Price" shall mean the amount actually paid
by third parties for a share of Common Stock. The sale of Common Stock
Equivalents shall be deemed to have occurred at the time of the issuance of the
Common Stock Equivalents and the Discounted Purchase Price covered thereby shall
also include the actual exercise or conversion price thereof at the time of the
issuance of the Common Stock Equivalents (in addition to the consideration per
share of Common Stock underlying the Common Stock Equivalents received by the
Company upon such sale or issuance of the Common Stock Equivalents); provided
any future adjustments to such exercise or conversion prices shall result in
adjustments hereunder at such time as well. In the case of any Subsequent
Financing involving a Variable Rate Transaction, the Discounted Purchase Price
shall be deemed to be the lowest actual conversion or exercise price at which
such securities are converted or exercised in the case of a Variable Rate
Transaction. If shares are issued for a consideration other than cash, the per
share selling price shall be the fair value of such consideration as determined
in good faith by the Board of Directors of the Company. The Company may not
refuse to issue a Purchaser additional Shares hereunder based on any claim that
such Purchaser or any one associated or affiliated with such Purchaser has been
engaged in any violation of law, agreement or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining an issuance
hereunder shall have been sought and obtained and the Company posts a surety
bond for the benefit of such Purchaser in the amount of 150% of the market value
of such Shares (based on the Closing Price of the Common Stock on the date of
the event giving rise to the Company's obligation hereunder), which is subject
to the injunction, which bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be payable to the
Purchaser to the extent it obtains judgment. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to deliver
Shares hereunder and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. Notwithstanding anything to the
contrary herein, this Section 4.15 shall not apply to any Securities issued
pursuant to the terms and conditions of this Agreement or an Exempt Issuance.
Additionally, prior to any issuance hereunder, a Purchaser shall have the right
to irrevocably defer such issuance, in whole or in part, for a continuous period
of 75 days. Notwithstanding anything herein to the contrary, if the Company has
not obtained Shareholder Approval, if required by the applicable rules and
regulations of the Principal Market (or any successor entity), then the Company
may not issue under this Section 4.14, in the aggregate, in excess of (1)
19.999% of the number of shares of Common Stock outstanding as of the date
hereof, less (2) the sum of (a) the Shares issued at the Closing plus (b) any
shares of Common Stock of the Company issuable as a result of the issuance of
securities pursuant to this Agreement (such number of shares, the "Issuable
Maximum"). Each Purchaser shall be entitled to a portion of the Issuable Maximum
equal to the quotient obtained by dividing (x) the aggregate number of Shares
issued and sold to such Purchaser on the Closing Date by (y) the aggregate
number of Shares issued and sold by the Company on the Closing Date.

                              ARTICLE V.
                             MISCELLANEOUS

     5.1  Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before December 3,

                                      24

<PAGE>

2004; provided that no such termination will affect the right of any party to
sue for any breach by the other party (or parties).

     5.2  Fees and Expenses. The Company shall reimburse Bristol Investment
Fund, Ltd. ("Bristol") the sum of $10,000 for its legal fees and expenses.
Except as otherwise set forth in this Agreement, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Securities.

     5.3  Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

     5.4  Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

     5.5  Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

     5.6  Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

     5.6  Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in

                                      25

<PAGE>

writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".

     5.7  No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

     5.8  Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

     5.9  Survival. The representations and warranties herein shall survive the
Closing and delivery of the Shares.

     5.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

     5.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and

                                      26

<PAGE>

provisions of this Agreement shall not in any way be affected or impaired
thereby and the parties will attempt to agree upon a valid and enforceable
provision that is a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.

     5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Documents and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

     5.13 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

     5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate. Specifically, without limiting the foregoing,
the parties agree that monetary damages will not be adequate compensation for
any loss incurred by reason of a breach of the last sentence of Section 4.15.

     5.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Documents or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     5.16 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Documents. Nothing contained herein or in any
Transaction Documents, and no action taken by any Purchaser pursuant thereto,

                                      27

<PAGE>

shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Bristol, who has acted as placement agent to the
transaction. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.

     5.17 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, 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 the Transaction Documents or any amendments hereto or
thereto.

     5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

                         (SIGNATURE PAGE FOLLOWS)

                                      28

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

INSIGNIA SYSTEMS, INC.                           Address for Notice:
                                                 -------------------

By:  /s/ Scott Drill
   -------------------------
   Name:  Scott Drill
   Title: President and CEO

With a copy to (which shall not constitute notice):

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGES FOR PURCHASERS FOLLOW]

                                      29

<PAGE>

       [PURCHASER SIGNATURE PAGES TO ISIG SECURITIES PURCHASE AGREEMENT]

     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Investing Entity:   Bear Stearns Securities Corp. Inc., FBO J. Steven
                              Emerson Roth IRA
                            G. Tyler Runnels or Jasmine Niklas Runnels
                            TTEES The Runnels Family Trust dtd 1-11-2000
                            High Tide, LLC
                            JMG Capital Partners, LP
                            JMG Triton Offshore Fund, Ltd.
                            Bristol Investment Fund, Ltd
                            Potomac Capital Partners, LP
                            Pleiades Investment Partners-R, L.P.
                            Potomac Capital International Ltd.
                            Hammond Holdings, LLC
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Authorized Entity:_____________________________________________

Address for Notice of Investing Entity:

Address for Delivery of Securities for Investing Entity (if not same as above):

Subscription Amount:
Shares:

                         [SIGNATURE PAGES CONTINUE]

                                      30

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