Unassociated Document


    Exhibit
      4.2

     

    NON
      TRANSFERABLE WARRANT

     

    THE
      WARRANT REPRESENTED BY THIS CERTIFICATE AND AGREEMENT AND THE SHARES ISSUABLE
      UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
      AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
      NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
      TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
      EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
      COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH
      COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
      SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
      CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
      APPLICABLE STATE SECURITIES LAWS.

     

    INTERACTIVE
      SYSTEMS WORLDWIDE INC.

     

    Warrant
      for the Purchase of Shares of Common Stock,

    par
      value
      $.001 per share


     

    This
      Warrant Expires at 5 p.m., New York City time, May 15, 2009

     

    
      	
              No.
                22

            	 	
              150,000
                Shares

            


    

     

    THIS
      CERTIFIES that, for value received, Faraway Partners LLC, a New Jersey LLC
      with
      an address at 700 East Palisade Avenue, Englewood Cliffs, New Jersey 07632
      (the
“Holder”), is entitled to subscribe for and purchase from Interactive Systems
      Worldwide Inc. a Delaware corporation (the “Company”), upon the terms and
      conditions set forth herein, at any time, or from time to time, commencing
      on
      July 1, 2006 (except as hereinafter provided), and before 5:00 p.m. on May
      15,
      2009, New York City time (the “Exercise Period”), 150,000 shares of the
      Company’s Common Stock, par value $.001 per share (“Common Stock”), at a price
      equal to $2.13 per share (“Exercise Price”). As used herein the term “Warrant”
shall mean and include this Warrant and any Warrant or Warrants hereafter issued
      as a consequence of the exercise or transfer of this Warrant in whole or in
      part. In accordance with the terms of a letter agreement dated May 15, 2006
      between the Holder and the Company, the number of shares subject to this Warrant
      may be reduced to a Warrant to purchase 75,000 of the Company’s Common Stock
      under certain circumstances.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      number of shares of Common Stock issuable upon exercise of the Warrants (the
      “Warrant Shares”), the Exercise Price and the Exercise Period may be adjusted
      from time to time as hereinafter set forth.

     

    1. This
      Warrant may be exercised during the Exercise Period, as to the whole or any
      lesser number of whole Warrant Shares, but in no event less than 10,000 Warrant
      Shares, unless less than 10,000 Warrant Shares remain exercisable on the
      Exercise Date, by the surrender of this Warrant (with the “election to exercise”
at the end hereof duly executed) to the Company at its office at 2 Andrews
      Drive, 2nd
      Floor,
      West Patterson, New Jersey 07424, or at such other place as is designated in
      writing by the Company. Such executed election must be accompanied by payment
      in
      an amount (the “Stock Purchase Price”) equal to the Exercise Price multiplied by
      the number of Warrant Shares for which this Warrant is being exercised. Such
      payment shall be made by certified or bank cashier’s check payable to the order
      of the Company.

     

    2. Upon
      each
      exercise of the Holder’s rights to purchase Warrant Shares, the Holder shall be
      deemed to be the holder of record of the Warrant Shares issuable upon such
      exercise, notwithstanding that the transfer books of the Company shall then
      be
      closed or certificates representing such Warrant Shares shall not then have
      been
      actually delivered to the Holder. As soon as practicable after each such
      exercise of this Warrant, the Company shall issue and deliver to the Holder
      a
      certificate or certificates for the Warrant Shares issuable upon such exercise,
      registered in the name of the Holder or its designee. If this Warrant should
      be
      exercised in part only, the Company shall, upon such exercise, execute and
      deliver a new Warrant evidencing the right of the Holder to purchase the balance
      of the Warrant Shares subject to purchase hereunder.

     

    3. (a) Any
      Warrant issued upon exercise in part of this Warrant shall be numbered and
      shall
      be registered in a warrant register (the “Warrant Register”) as they are issued.
      The Company shall be entitled to treat the registered holder of the Warrant
      on
      the Warrant Register as the owner in fact thereof for all purposes and shall
      not
      be bound to recognize any equitable or other claim to or interest in such
      Warrant on the part of any other person, and shall not be liable for any
      registration or transfer of Warrants which are registered or to be registered
      in
      the name of a fiduciary or the nominee of a fiduciary unless made with the
      actual knowledge that a fiduciary or nominee is committing a breach of trust
      in
      requesting such registration or transfer, or with the knowledge of such facts
      that its participation therein amounts to bad faith. This Warrant shall not
      be
      transferable by the Holder except as herein specifically provided or by the
      Holder’s authorized attorney or representative, or accompanied by proper
      evidence of succession, assignment (in accordance with the terms hereof), or
      authority to transfer. In all cases of transfer by an attorney, executor,
      administrator, guardian, or other legal representative, duly authenticated
      evidence of his or its authority shall be produced. Upon any registration of
      transfer, the Company shall deliver a new Warrant or Warrants to the person
      entitled thereto. This Warrant may be exchanged, at the option of the Holder
      thereof, for another Warrant, or other Warrants of different denominations,
      of
      like tenor and representing in the aggregate the right to purchase a like number
      of Warrant Shares (or portions thereof), upon surrender to the Company or its
      duly authorized agent; provided that Warrants exercisable for less than 10,000
      Warrant Shares may not be issued, unless that is the remaining number of Warrant
      Shares for which the Warrant is exercisable. Notwithstanding the foregoing,
      the
      Company shall have no obligation to cause Warrants to be transferred on its
      books to any person if, in the opinion of counsel to the Company, such transfer
      does not comply with the provisions of the Securities Act of 1933, as amended
      (the “Act”), and the rules and regulations thereunder.

     

    
      
        
        

      

      
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    (b) The
      Holder acknowledges that he has been advised by the Company that neither this
      Warrant nor the Warrant Shares have been registered under the Act, that this
      Warrant is being or has been issued and the Warrant Shares may be issued on
      the
      basis of the statutory exemption provided by Section 4(2) of the Act or
      Regulation D promulgated thereunder, or both, relating to transactions by an
      issuer not involving any public offering, and that the Company’s reliance
      thereon is based in part upon the representations made by the Holder in Exhibit
      A attached hereto. The Holder acknowledges that he has been informed by the
      Company of, or is otherwise familiar with, the nature of the limitations imposed
      by the Act and rules and regulations thereunder on the transfer of securities.
      In particular, the Holder agrees that no sale, assignment or transfer of this
      Warrant or the Warrant Shares issuable upon exercise hereof shall be valid
      or
      effective, and the Company shall not be required to give any effect to any
      such
      sale, assignment or transfer, unless (i) the sale, assignment or transfer of
      this Warrant or such Warrant Shares is registered under the Act, it being
      understood that neither this Warrant nor such Warrant Shares are currently
      registered for sale and that the Company has no obligation or intention to
      so
      register this Warrant or such Warrant Shares, except as specifically provided
      herein, or (ii) the Warrant Shares are sold, assigned or transferred in
      accordance with all the requirements and limitations of Rule 144 under the
      Act
      or (iii) such sale, assignment, or transfer is otherwise exempt form
      registration under the Act.

     

    4. The
      Company shall at all times reserve and keep available out of its authorized
      and
      unissued Common Stock, solely for the purpose of providing for the exercise
      of
      the rights to purchase all Warrant Shares granted pursuant to this Warrant,
      such
      number of shares of Common Stock as shall, from time to time, be sufficient
      therefor. The Company covenants that all shares of Common Stock issuable upon
      exercise of this Warrant, upon receipt by the Company of the full Exercise
      Price
      therefor, shall be validly issued, fully paid, nonasessable, and free of
      preemptive rights.

     

    5. (a) In
      case
      the Company shall at any time after the date the Warrant was first issued (i)
      subdivide the outstanding Common Stock, (ii) combine the outstanding Common
      Stock into a smaller number of shares, or (iii) issue any shares of its capital
      stock by reclassification of the Common Stock (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing corporation), then, in each case, the Exercise Price,
      and the number of Warrant Shares issuable upon exercise of this Warrant, in
      effect at the time of the effective date of such subdivision, combination,
      or
      reclassification, shall be proportionately adjusted so that the Holder after
      such time shall be entitled to receive the aggregate number and kind of shares
      which, if such Warrant had been exercised immediately prior to such time, such
      Holder would have owned upon such exercise and been entitled to receive by
      virtue of such dividend, subdivision, combination, or reclassification. Such
      adjustment shall be made successively whenever any event listed above shall
      occur.

     

    
      
        
        

      

      
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    (b) For
      the
      purpose of any computation under this Section 5, the Current Market Price
      per share of Common Stock on any date shall be deemed to be the average of
      the
      daily closing prices for the 15 consecutive trading days immediately preceding
      the date in question. The closing price for each day shall be the last reported
      sales price regular way or, in case no such reported sale takes place on such
      day, the closing bid price regular way, in either case on the principal national
      securities exchange (including, for purposes hereof, the NASDAQ National Market
      or Small Cap Market) on which the Common Stock is listed or admitted to trading
      or, if the Common Stock is not listed or admitted to trading on any national
      securities exchange, the highest reported bid price for the Common Stock as
      furnished by the National Association of Securities Dealers, Inc. through NASDAQ
      or a similar organization if NASDAQ is no longer reporting such information.
      If
      on any such date the Common Stock is not listed or admitted to trading on any
      national securities exchange and is not quoted by NASDAQ or any similar
      organization, the fair value of a share of Common Stock on such date, as
      determined in good faith by the Board of Directors of the Company, whose
      determination shall be conclusive absent manifest error, shall be
      used.

     

    (c) In
      any
      case in which this Section 5 shall require that an adjustment in the
      Exercise Price be made effective as of a record date for a specified event,
      the
      Company may elect to defer, until the occurrence of such event, issuing to
      the
      Holder, if the Holder exercised this Warrant after such record date, the shares
      of Common Stock, if any, issuable upon exercise on the basis of the Exercise
      Price in effect prior to such adjustment; provided, however, that the Company
      shall deliver to the Holder a due bill or other appropriate instrument
      evidencing the Holder’s right to receive such additional shares upon the
      occurrence of the event requiring such adjustment.

     

    (d) Whenever
      there shall be an adjustment as provided in this Section 5, the Company
      shall promptly cause written notice thereof to be sent by certified or
      registered mail, postage prepaid, to the Holder, at its address as it shall
      appear in the Warrant Register, which notice shall be accompanied by an
      officer’s certificate setting forth the number of Warrant Shares purchasable
      upon the exercise of this Warrant and the Exercise Price after such adjustment
      and setting forth a brief statement of the facts requiring such adjustment
      and
      the computation thereof, which officer’s certificate shall be conclusive
      evidence of the correctness of any such adjustment absent manifest
      error.

     

    (e) The
      Company shall not be required to issue fractions of shares of Common Stock
      or
      other capital stock of the Company upon the exercise of this Warrant. If any
      fraction of a share would be issuable on the exercise of this Warrant (or
      specified portions thereof), the Company shall purchase such fraction for an
      amount in cash equal to the same fraction of the Current Market Price of such
      share of Common Stock on the date of exercise of this Warrant.

     

    6. (a) In
      case
      of any consolidation with or merger of the Company with or into another
      corporation or entity (other than a merger or consolidation in which the Company
      is the surviving or continuing corporation), or in case of any sale, lease
      or
      conveyance of all or substantially all of the property and assets of the
      Company, or of the property and assets of the Company as an entirety or
      substantially as an entirety, such successor, leasing, or purchasing corporation
      or entity, as the case may be, shall (i) execute with the Holder an
      agreement providing that the Holder shall have the right thereafter to receive
      upon exercise of this Warrant solely the kind and amount of shares of stock
      and
      other securities, property, cash, or any combination thereof receivable upon
      such consolidation, merger, sale, lease, or conveyance by a holder of the number
      of shares of Common Stock for which this Warrant might have been exercised
      immediately prior to such consolidation, merger, sale, lease, or conveyance,
      and
      (ii) make effective provision in its certificate of incorporation or
      otherwise, if necessary, to effect such agreement. Such agreement shall provide
      for adjustments which shall be as nearly equivalent as practicable to the
      adjustments in Section 5.

     

    
      
        
        

      

      
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    (b) In
      case
      of any reclassification or change of the shares of Common Stock issuable upon
      exercise of this Warrant (other than a change in par value or from no par value
      to a specified par value, or as a result of a subdivision or combination, but
      including any change in the shares into two or more classes or series of
      shares), or in case of any consolidation or merger of another corporation into
      the Company in which the Company is the continuing corporation and in which
      there is a reclassification or change (including a change to the right to
      receive cash or other property) of the shares of Common Stock (other than a
      change in par value, or from no par value to a specified par value, or as a
      result of a subdivision or combination, but including any change in the shares
      into two or more classes or series of shares), the Holder shall have the right
      thereafter to receive upon exercise of this Warrant solely the kind and amount
      of shares of stock and other securities, property, cash, or any combination
      thereof receivable upon such reclassification, change, consolidation, or merger
      by a holder of the number of shares of Common Stock for which this Warrant
      might
      have been exercised immediately prior to such reclassification, change,
      consolidation, or merger. Thereafter, appropriate provision shall be made for
      adjustments which shall be as nearly equivalent as practicable to the
      adjustments in Section 5.

     

    (c) Notwithstanding
      anything to the contrary herein contained, in the event of a transaction
      contemplated by Section 6(a) or similar transaction in which the surviving,
      continuing, successor, or purchasing person, corporation or entity demands
      that
      all outstanding Warrants be extinguished prior to the closing date of the
      contemplated transaction, the Company shall give prior notice (the “Merger
      Notice”) thereof to the Holder advising them of such transaction. The Holder
      shall have ten days after the date of the Merger Notice to elect to (i) exercise
      the Warrants in the manner provided herein or (ii) receive from the surviving,
      continuing, successor, or purchasing corporation the same consideration
      receivable by a holder of the number of shares of Common Stock for which this
      Warrant might have been exercised immediately prior to such consolidation,
      merger, sale, or purchase reduced by such amount of the consideration as has
      a
      market value equal to the Exercise Price, as determined by the Board of
      Directors of the Company, whose determination shall be conclusive and binding.
      If any Holder fails to timely notify the Company of its election, the Holder
      shall be deemed for all purposes to have elected the option set forth in (ii)
      above. Any amounts receivable by a Holder who has elected the option set forth
      in (ii) above shall be payable at the same time as amounts payable to
      stockholders in connection with any such transactions.

     

    
      
        
        

      

      
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    (d) The
      above
      provisions of this Section 6 shall similarly apply to successive
      reclassifications and changes of shares of Common Stock and to successive
      consolidations, mergers, sales, leases, or conveyances.

     

    7. In
      case
      at any time the Company shall propose to:

     

    (a) effect
      any reclassification or change of outstanding shares of Common Stock, or any
      consolidation, merger, sale, lease, or conveyance of property, described in
      Section 6; or

     

    (b) effect
      any liquidation, dissolution, or winding-up of the Company; or

     

    (c) take
      any
      other action which would cause an adjustment to the Exercise Price;

     

    then,
      and
      in any one or more of such cases, the Company shall give written notice thereof,
      by certified or registered mail, postage prepaid, to the Holder at the Holder’s
      address as it shall appear on the Warrant Register, mailed at least ten days
      prior to (i) the date as of which the holders of record of shares of Common
      Stock to be entitled to receive any such dividend, distribution, rights,
      warrants, or other securities are to be determined, (ii) the date on which
      any
      such reclassification, change of outstanding shares of Common Stock,
      consolidation, merger, sale, lease, conveyance of property, liquidation,
      dissolution, or winding-up is expected to become effective, and the date as
      of
      which it is expected that holders of record of shares of Common Stock shall
      be
      entitled to exchange their shares for securities or other property, if any,
      deliverable upon such reclassification, change of outstanding shares,
      consolidation, merger, sale, lease, conveyance of property, liquidation,
      dissolution, or winding-up, or (iii) the date of such action which would require
      an adjustment to the Exercise Price.

     

    8. The
      issuance of any shares or other securities upon the exercise of this Warrant,
      and the delivery of certificates or other instruments representing such shares
      or other securities, shall be made without charge to the Holder for any tax
      or
      other charge in respect of such issuance. The Company shall not, however, be
      required to pay any tax which may be payable in respect of any transfer involved
      in the issue and delivery of any certificate in a name other than that of the
      Holder and the Company shall not be required to issue or deliver any such
      certificate unless and until the person or persons requesting the issue thereof
      shall have paid to the Company the amount of such tax or shall have established
      to the satisfaction of the Company that such tax has been paid, and the Company
      shall not be responsible to pay any income tax, if any, payable by the Holder
      upon exercise of this Warrant.

     

    
      
        
        

      

      
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    (a) If,
      at
      any time following the date of issuance of this Warrant, the Company shall
      file
      a registration statement (other than any registration statement on
      Form S-4, Form S-8, or any successor or comparable form) with the
      Securities and Exchange Commission (the “Commission”) while any Registrable
      Securities (as hereinafter defined) are outstanding, and for any reason any
      Eligible Holder (as hereinafter defined) will not otherwise have, as of the
      effective date of such registration statement, the benefit of an effective
      registration statement, registering for sale such Eligible Holders’ Registrable
      Securities, the Company shall give all such Eligible Holders at least ten days
      prior written notice of the filing of such registration statement. If requested
      by any such Eligible Holder in writing within five days after receipt of any
      such notice, the Company shall, at the Company’s sole expense (other than the
      fees and disbursements of counsel for such Eligible Holders and the underwriting
      discounts, if any, payable in respect of the Registrable Securities registered
      or sold by any such Eligible Holder), register or qualify all or, at each such
      Eligible Holder’s option, any portion of the Registrable Securities of any such
      Eligible Holders who shall have made such request, concurrently with the
      registration of such other securities, all to the extent requisite to permit
      the
      public offering and sale of such Eligible Holders’ Registrable Securities
      through the facilities of all appropriate securities exchanges and the
      over-the-counter market, and will use its commercially reasonable efforts
      through its officers, directors, auditors, and counsel to cause such
      registration statement to become effective as promptly as practicable.
      Notwithstanding the foregoing, if the managing underwriter of any such offering,
      if any, shall advise the Company in writing that, in its opinion, the
      distribution of all or a portion of the Registrable Securities requested to
      be
      included in the registration concurrently with the securities being registered
      by the Company would materially adversely affect the distribution of such
      securities by the Company for its own account, then any Eligible Holder who
      shall have requested registration of his or its Registrable Securities shall
      not
      be entitled to have such Eligible Holder’s Registrable Securities (or the
      portions thereof so designated by such managing underwriter, included in such
      registration statement, provided that no such exclusion or reduction shall
      be
      made as to any Registrable Securities if any securities of the Company are
      included in such registration statement for the account of any person other
      than
      the Company and any Eligible Holder unless the securities so included in such
      registration statement for each such other person or persons requesting
      registration shall have been reduced by the same proportion (based upon the
      total amount of securities for which each person has requested registration
      in
      such registration statement) as the Registrable Securities which were requested
      to be included in such registration were reduced. As used herein (i)
“Registrable Securities” shall mean the Warrant Shares, if any, which in each
      case, have not previously been sold pursuant to a registration statement or
      Rule
      144 promulgated under the Act and (ii) “Eligible Holders” shall mean the then
      holders of Registrable Securities.

     

    (b) In
      the
      event of a registration pursuant to the provisions of this Section 8, the
      Company shall use its commercially reasonable efforts to cause the Registrable
      Securities so registered to be registered or qualified for sale under the
      securities or blue sky laws of such jurisdictions as the Holder or such holders
      may reasonably request; provided, however, that the Company shall not by reason
      of this Section 8(b) be required to qualify to do business in any state in
      which
      it is not otherwise required to qualify to do business or to file a general
      consent to service process.

     

    
      
        
        

      

      
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    (c) The
      Company shall keep effective any registration or qualification contemplated
      by
      this Section 8 and shall from time to time amend or supplement each applicable
      registration statement, preliminary prospectus, final prospectus, application,
      document, and communication for such period of time as shall be required to
      permit the Eligible Holders to complete the offer and sale of the Registrable
      Securities covered thereby; provided, however, that the Company shall in no
      event be required to keep registration or qualification under Section 8(a)
      above
      in effect for more than two years from the effective date thereof; provided,
      however, that, if the Company is required to keep any such registration or
      qualification in effect with respect to securities other than the Registrable
      Securities beyond such period, the Company shall keep such registration or
      qualification in effect as it relates to the Registrable Securities for so
      long
      as such registration or qualification remains or is required to remain in effect
      in respect of such other securities.

     

    (d) In
      the
      event of a registration pursuant to the provisions of this Section 8, the
      Company shall furnish to each Eligible Holder such number of copies of the
      registration statement and of each amendment and supplement thereto (in each
      case, including all exhibits), such number of copies of each prospectus
      contained in such registration statement and each supplement or amendment
      thereto (including each preliminary prospectus), all of which shall conform
      to
      the requirements of the Act and the rules and regulations thereunder, and such
      other documents, as any Eligible Holder may reasonably request to facilitate
      the
      disposition of the Registrable Securities included in such
      registration.

     

    (e) The
      Company agrees that, until all the Registrable Securities have been sold under
      a
      registration statement or pursuant to Rule 144 under the Act, it shall use
      its
      commercially reasonable efforts to keep current in filing all reports,
      statements and other materials required to be filed with the Commission to
      permit holders of the Registrable Securities to sell such securities under
      Rule
      144.

     

    9. (a) Subject
      to the conditions set forth below, the Company agrees to indemnify and hold
      harmless each Eligible Holder, its officers, directors, partners, employees,
      agents, and counsel, and each person, if any, who controls any such person
      within the meaning of Section 15 of the Act or Section 20(a) of the Securities
      and Exchange Act of 1934, as amended (the “Exchange Act”), from and against any
      and all loss, liability, charge, claim, damage, and expense whatsoever (which
      shall include, for all purposes of this Section 9, without limitation,
      reasonable attorneys’ fees and any reasonable expense incurred in investigating,
      preparing, or defending against any litigation, commenced or threatened, or
      any
      claim whatsoever, and any and all amounts paid in settlement of any claim of
      litigation), as and when incurred, arising out of, based upon, or in connection
      with (i) any untrue statement or alleged untrue statement of a material fact
      contained (A) in any registration statement, preliminary prospectus, or final
      prospectus (as from time to time amended and supplemented), or any amendment
      or
      supplement thereto, relating to the sale of any of the Registrable Securities,
      or (B) in any application or other document or communication (in this Section
      9
      collectively called an “application”) executed by or on behalf of the Company or
      based upon written information furnished by or on behalf of the Company filed
      in
      any jurisdiction in order to register or qualify any of the Registrable
      Securities under the securities or blue sky laws thereof or filed with the
      Commission or any securities exchange; or any omission or alleged omission
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading, unless such statement or omission was made
      in
      reliance upon and in conformity with written information furnished to the
      Company with respect to such Eligible Holder by or on behalf of such person
      expressly for inclusion in any registration statement, preliminary prospectus,
      or final prospectus, or any amendment or supplement thereto, or in any
      application, as the case may be, or (ii) any breach of any representation,
      warranty, covenant, or agreement of the Company contained in this
      Warrant.

     

    
      
        
        

      

      
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    If
      any
      action is brought against any Eligible Holder or any of its officers, directors,
      partners, employees, agents, or counsel, or any controlling persons of such
      person (an “indemnified party”) in respect of which indemnity may be sought
      against the Company pursuant to the foregoing paragraph, such indemnified party
      or parties shall promptly notify the Company in writing of the institution
      of
      such action and the Company shall promptly assume the defense of such action
      with counsel selected by the Company. Such indemnified party or parties shall
      have the right to employ its or their own counsel in any such case, but the
      fees
      and expenses of such counsel shall be at the expense of such indemnified party
      or parties unless the employment of such counsel shall have been authorized
      in
      writing by the Company in connection with the defense of such action or the
      Company shall not have employed counsel to have charge of the defense of such
      action or such indemnified party or parties shall have reasonably concluded
      that
      there may be one or more legal defenses available to it or them which are
      different from or in addition to those available to the Company, in any of
      which
      events such reasonable fees and expenses shall be borne by the Company and
      the
      Company shall not have the right to direct the defense of such action on behalf
      of the indemnified party or parties. Anything in this Section 9 to the contrary
      notwithstanding, the Company shall not be liable for any settlement of any
      such
      claim or action effected without its written consent, which shall not be
      unreasonably withheld. The Company agrees promptly to notify the Eligible
      Holders of the commencement of any litigation or proceedings against the Company
      or any of its officers or directors in connection with the sale of any
      Registrable Securities or any preliminary prospectus, prospectus, registration
      statement, or amendment or supplement thereto, or any application relating
      to
      any sale of any Registrable Securities.

     

    (b) The
      Holder agrees to indemnify and hold harmless the Company, each director of
      the
      Company, each officer of the Company who shall have signed any registration
      statement covering Registrable Securities held by the Holder, each other person,
      if any, who controls the Company within the meaning of Section 15 of the Act
      or
      section 20(a) of the Exchange Act, and its or their respective counsel, to
      the
      same extent as the foregoing indemnity from the Company to the Eligible Holders
      in Section 9(a), but only with respect to statements or omissions, if any,
      made
      in any registration statement, preliminary prospectus, or final prospectus
      or
      any amendment or supplement thereto, or in any application, in reliance upon
      and
      in conformity with written information furnished to the Company with respect
      to
      the Holder by or on behalf of the Holder expressly for inclusion in any such
      registration statement, preliminary prospectus, or final prospectus, or any
      amendment or supplement thereto, or in any application, as the case may be.
      If
      any action shall be brought against the Company or any other person so
      indemnified based on any such registration statement, preliminary prospectus,
      or
      final prospectus, or any amendment or supplement thereto, or in any application,
      and in respect of which indemnity may be sought against the Holder pursuant
      to
      this Section 9(b), the Holder shall have the rights and duties given to the
      Company, and the Company and each other person so indemnified shall have the
      rights and duties given to the indemnified parties, by the provisions of Section
      9(a).

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (c) To
      provide for just and equitable contribution, if (i) and indemnified party makes
      a claim for indemnification pursuant to Section 9(a) or 9(b) (subject to the
      limitations thereof) but it is found in a final judicial determination, not
      subject to further appeal, that such indemnification may not be enforced in
      such
      case, even though this Warrant expressly provides for indemnification in such
      case, or (ii) any indemnified or indemnifying party seeks contribution under
      the
      Act, the Exchange Act or otherwise, then the Company (including for this purpose
      any contribution made by or on behalf of any director of the Company, any
      officer of the Company who signed any such registration statement, any
      controlling person of the Company, and its or their respective counsel), as
      one
      entity, and the Eligible Holders of the Registrable Securities included in
      such
      registration in the aggregate (including for this purpose any contribution
      by or
      on behalf of an indemnified party), as a second entity, shall contribute to
      the
      losses, liabilities, claims, damages, and expenses whatsoever to which any
      of
      them may be subject, on the basis of relevant equitable considerations such
      as
      the relative fault of the Company and such Eligible Holders in connection with
      the facts which resulted in such losses, liabilities, claims, damages, and
      expenses. The relative fault, in the case of an untrue statement, alleged untrue
      statement, omission, or alleged omission, shall be determined by, among other
      things, whether such statement, alleged statement, omission, or alleged omission
      relates to information supplied by the Company or by such Eligible Holders,
      and
      the parties’ relative intent, knowledge, access to information, and opportunity
      to correct or prevent such statement, alleged statement, omission, or alleged
      omission. In no case shall any Eligible Holder be responsible for a portion
      of
      the contribution obligation imposed on all Eligible Holders in excess of its
      pro
      rata share based on the number of Registrable Securities owned by it and
      included in such registration as compared to the number of Registrable
      Securities owned by all Eligible Holders and included in such registration.
      No
      person guilty of a fraudulent misrepresentation (within the meaning of Section
      11(f) of the Act) shall be entitled to contribution from any person who is
      not
      guilty of such fraudulent representation. For purposes of this Section 9(c),
      each person, if any, who controls any Eligible Holder within the meaning of
      Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
      director, partner, employee, agent, and counsel of each such Eligible Holder
      or
      control person shall have the same rights to contribution as each Eligible
      Holder or control person and each person, if any, who controls the Company
      within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
      Act, each officer of the Company who shall have signed any such registration
      statement, each director of the Company, and its or their respective counsel
      shall have the same rights to contribution as the Company, subject in each
      case
      to the provisions of this Section 9(c). Anything in this Section 9(c) to the
      contrary notwithstanding, no party shall be liable for contribution with respect
      to the settlement of any claim or action effected without its written consent.
      This Section 9(c) is intended to supersede any right to contribution under
      the
      Act, the Exchange Act or otherwise.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    10. Unless
      registered pursuant to the provisions of Section 8 hereof, the Warrant Shares
      issued upon exercise of this Warrant shall be subject to a stop transfer order
      and the certificate or certificates evidencing such Warrant Shares shall bear
      the following legend:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND
      NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
      ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
      RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
      LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH
      SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
      COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
      TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.”

     

    In
      the
      event the Warrant Shares are registered pursuant to Section 8, the
      foregoing legend will be replaced by a legend reflecting the regulatory
      requirements applicable to the resale of registered shares.

     

    11. Upon
      receipt of evidence of satisfactory to the Company of the loss, theft,
      destruction, or mutilation of any Warrant (and upon surrender of any Warrant
      if
      mutilated), and upon reimbursement of the Company’s reasonable incidental
      expenses and indemnity reasonably satisfactory to the Company, the Company
      shall
      execute and deliver to the Holder thereof a new Warrant of like date, tenor,
      and
      denomination.

     

    12. The
      Holder of any Warrant shall not have solely on account of such status, any
      rights of a stockholder of the Company, either at law or in equity, or to any
      notice of meetings of stockholders or of any other proceedings of the Company,
      except as provided by this Warrant.

     

    13. This
      Warrant has been negotiated and consummated in the State of New York and
      shall be construed in accordance with the laws of the State of New York
      applicable to contracts made and performed within such State, without regard
      to
      principles governing conflicts of law.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    14. The
      Company and the Holders irrevocably consent to the jurisdiction of the courts
      of
      the State of New York and of any federal court located in such State in
      connection with any action or proceeding arising out of or relating to this
      Warrant, any document or instrument delivered pursuant to, in connection with
      or
      simultaneously with this Warrant, or a breach of this Warrant or any such
      document or instrument. In any such action or proceeding, the Company and the
      Holders waive personal service of any summons, complaint or other process and
      agrees that service thereof may be made in accordance with Section 15
      hereof.

     

    15. Any
      notice or other communication required or permitted to be given hereunder shall
      be in writing and shall be mailed by certified mail, return receipt requested,
      or by Federal Express, Express Mail or similar overnight delivery or courier
      service or delivered (in person or by telecopy, telex or similar
      telecommunications equipment) against receipt to the party to whom it is to
      be
      given, (i) if to the Company, at 2 Andrews Drive, 2nd
      Floor,
      West Paterson, New Jersey 07424, (fax: 973-256-8211) Attention: President,
      with
      a copy to Friedman Kaplan Seiler & Adelman LLP, 1633 Broadway,
      46th
      Floor,
      New York, New York 10019, (fax: 212 833-1250) Attention: Richard M. Hoffman,
      Esq., (ii) if to the Holder, at its address set forth on the first page hereof,
      or (iii) in either case, to such other address as the party shall have furnished
      in writing in accordance with the provisions of this Section 15. Notice to
      the
      estate of any party shall be sufficient if addressed to the party as provided
      in
      this Section 15. Any notice or other communication given by certified mail
      shall
      be deemed given at the time of certification thereof, except for a notice
      changing a party’s address which shall be deemed given at the time of receipt
      thereof. Any notice given by other means permitted by this Section 15 shall
      be
      deemed given at the time of receipt thereof.

     

    16. No
      course
      of dealing and no delay or omission on the part of the Holder in exercising
      any
      right or remedy shall operate as a waiver thereof or otherwise prejudice the
      Holder’s rights, powers or remedies. No right, power or remedy conferred by this
      Warrant upon the Holder shall be exclusive of any other right, power or remedy
      referred to herein or now or hereafter available at law, in equity, by statute
      or otherwise, and all such remedies may be exercised singly or
      concurrently.

     

    17. This
      Warrant may be amended or any of its provisions waived only by a written consent
      or consents executed by the Company and Holders of Warrants representing a
      majority of the shares underlying the Warrants. Any amendment or waiver shall
      be
      binding upon all existing and future Holders.

     

    18.  This
      Warrant is not assignable by the Holder hereof, except pursuant to the laws
      of
      descent and distribution and any attempted assignment without the Company’s
      prior written consent, shall be void.

     

    [remainder
      of page intentionally left blank]

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Dated:
      May 15, 2006

    
      	 	 	 
	 	
              INTERACTIVE
                SYSTEMS WORLDWIDE INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Bernard
              Albanese
	 	
              

              Name:
                Bernard Albanese

            
	 	
              Title:
                President

            


    

    
      	 	 	 
	 	 	 
	
            	By:  	/s/
              James
              McDade
	 	
              

              Name:
                James McDade

            
	 	
              Title:
                Chief Financial Officer

            


    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

     

    
      	To:	
              Interactive Systems Worldwide Inc.

              
                2
                  Andrews Drive, 2nd
                  Floor

                West
                  Paterson, New
                  Jersey  07424

              

            


    

       

    ELECTION
      TO EXERCISE

     

    The
      undersigned hereby exercises his or its rights to purchase ________ Warrant
      Shares covered by the within Warrant and tenders payment herewith in the amount
      of $_________________ in accordance with the terms thereof, and requests that
      certificates for such securities be issued in the name of, and delivered
      to:

     

    
      	            
              	 
	      
	 
	         
	 
	         
	 
	
              (Print
                Name, Address and Social Security or Tax Identification
                Number)

            	 


    

     

    and,
      if
      such number of Warrant Shares shall not be all the Warrant Shares covered by
      the
      within Warrant, that a new Warrant for the balance of the Warrant Shares covered
      by the within Warrant be registered in the name of, and delivered to, the
      undersigned at the address stated below.

     

     

    
      	
              Dated:_______________________ 

            	 	Name:_________________________
	 	 	 	
              (Print)

            
	 	 
	
              Address:

            	 
	 	 
	 	 	 	           
              
	 	 	 	
              (Signature)

            


    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    The
      undersigned hereby represents and warrants to, and agrees with, the Company
      as
      follows:

     

    (a) The
      undersigned is an “Accredited Investor” as that term is defined in Section (a)
      of Regulation D promulgated under the Securities Act of 1933, as amended (the
      “Act”). Specifically, the undersigned is (initial appropriate
      items(s)):

     

    _____ i)
      A bank
      as defined in Section 3(a)(2) of the Act, or a savings and loan association
      or
      other institution as defined in Section 3(a)(5)(A) of the Act, whether acting
      in
      its individual or fiduciary capacity; a broker or dealer registered pursuant
      to
      Section 15 of the Securities Exchange Act of 1934; an insurance company as
      defined in Section 2(13) of the Act; an investment company registered under
      the
      Investment Company Act of 1940 (the “Investment Company Act”) or a business
      development company as defined in Section 2(a)(48) of the Investment Company
      Act; a Small Business Investment Company licensed by the U.S. Small Business
      Administration under Section 301(c) or (d) of the Small Business Investment
      Act
      of 1958; a plan established and maintained by a state, its political
      subdivisions or any agency or instrumentality of a state or its political
      subdivisions for the benefit of its employees, if such plan has total assets
      in
      excess of $5,000,000; an employee benefit plan within the meaning of the
      Employee Retirement Income Security Act of 1974 (“ERISA”), if the investment
      decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA,
      which is either a bank, savings and loan association, insurance company, or
      registered investment advisor, or if the employee benefit plan has total assets
      in excess of $5,000,000 or, if a self-directed plan,
      with
      investment decisions made solely by persons that are accredited
      investors.

     

    _____ ii)
      A
      private business development company as defined in Section 202(a)(22) of the
      Investment Advisers Act of 1940.

     

    _____ iii)
      An
      organization described in Section 501(c)(3) of the Internal Revenue Code,
      corporation, Massachusetts or similar business trust, or partnership, not formed
      for the specific purpose of acquiring the securities offered, with total assets
      in excess of $5,000,000.

     

    _____ iv)
      A
      director or executive officer of the Company.

     

    _____ v)
      A
      natural person whose individual net worth, or joint net worth with that person’s
      spouse, at the time of his or her purchase exceeds $1,000,000.

     

    _____
       (vi)
      A
      natural person who had an individual income in excess of $200,000 in each of
      the
      two most recent years or joint income with that person’s spouse in excess of
      $300,000 in each of those years and has a reasonable expectation of reaching
      the
      same income level in the current year.

     

    _____
       (vii)
      A
      trust, with total assets in excess of $5,000,000, not formed for the specific
      purpose of acquiring the securities offered, whose purchase is directed by
      a
      sophisticated person as described in Rule 506(b)(2)(ii) (i.e.,
      a person
      who has such knowledge and experience in financial and business matters that
      he
      is capable of evaluating the merits and risks of the prospective
      investment).

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    _____ viii)
      An
      entity in which all of the equity owners are accredited investors.

     

    (b) For
      California and Massachusetts individuals: If the subscriber is a California
      resident, such subscriber’s investment in the Company will not exceed 10% of
      such subscriber’s net worth (or joint net worth with his spouse). If the
      subscriber is a Massachusetts resident, such subscriber’s investment in the
      Company will not exceed 25% of such subscriber’s joint net worth with his spouse
      (exclusive of principal residence and its furnishings).

     

    (c) If
      a
      natural person, the undersigned is: a bona fide resident of the State contained
      in the address set forth on the signature page of this Agreement as the
      undersigned’s home address; at least 21 years of age; and legally competent to
      execute this Agreement. If an entity, the undersigned is duly authorized to
      execute this Agreement and this Agreement constitutes the legal, valid and
      binding obligation of the undersigned enforceable against the undersigned in
      accordance with its terms.

     

    (d) The
      undersigned is familiar with the Company’s business, plans and financial
      condition, the undersigned has received all materials which have been requested
      by the
      undersigned; has had a reasonable opportunity to ask questions of the Company
      and its representatives; and the Company has answered all inquiries that the
      undersigned or the undersigned’s representatives have put to it. The undersigned
      has had access to all additional information and has taken all the steps
      necessary to evaluate the merits and risks of an investment as proposed
      hereunder.

     

    (e) The
      undersigned has such knowledge and experience in finance, securities,
      investments and other business matters so as to be able to protect the interests
      of the undersigned in connection with this transaction, and the undersigned’s
      investment in the Company hereunder is not material when compared to the
      undersigned’s total financial capacity.

     

    (f) The
      undersigned understands the various risks of an investment in the Company as
      proposed herein and can afford to bear such risks, including, without
      limitation, the risks of losing the entire investment.

     

    (g) The
      undersigned acknowledges that no market for the Warrants presently exists and
      none may develop in the future and that the undersigned may find it impossible
      to liquidate the investment at a time when it may be desirable to do so, or
      at
      any other time.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    (h) The
      undersigned has been advised by the Company that none of the Warrants have
      been
      registered under the Act, that the Warrants will be issued on the basis of
      the
      statutory exemption provided by Section 4(2) of the Act or Regulation D
      promulgated thereunder, or both, relating to transactions by an issuer not
      involving any public offering and under similar exemptions under certain state
      securities laws, that this transaction has not been reviewed by, passed on
      or
      submitted to any Federal or state agency or self-regulatory organization where
      an exemption is being relied upon, and that the Company’s reliance thereon is
      based in part upon the representations made by the undersigned in this
      Agreement. The undersigned acknowledges that the undersigned has been informed
      by the Company of, or is otherwise familiar with, the nature of the limitations
      imposed by the Act and the rules and regulations thereunder on the transfer
      of
      securities, including the Warrants. In particular, the undersigned agrees that
      no sale, assignment or transfer of any of the Warrants shall be valid or
      effective, and the Company shall not be required to give any effect to such
      a
      sale, assignment or transfer, unless (i) the sale, assignment or transfer of
      such Warrants is registered under the Act, it being understood that the Warrants
      are not currently registered for sale and that the Company has no obligation
      or
      intention to so register the Warrants except as contemplated by the terms of
      the
      Warrants, or (ii) such Warrants are sold, assigned or transferred in accordance
      with all the requirements and limitations of Rule 144 under the Act, it being
      understood that Rule 144 is not available at the present time for the sale
      of
      the Securities, or (iii) such sale, assignment or transfer is otherwise exempt
      from registration under the Act. The undersigned further understands that an
      opinion of counsel and other documents may be required to transfer the
      securities as provided in the Warrants. The undersigned acknowledges that the
      Warrants shall be subject to a stop transfer order and the certificate or
      certificates evidencing any Warrants shall bear the following or a substantially
      similar legend or such other legend as may appear on the forms of Warrants
      and
      such other legends as may be required by state securities or blue sky
      laws:

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended (the “Act”), or any state securities laws and
      neither such securities nor any interest therein may be offered, sold, pledged,
      assigned or otherwise transferred unless (1) a registration statement with
      respect thereto is effective under the Act and any applicable state securities
      laws, or (2) the Company receives an opinion of counsel to the holder of such
      securities, which counsel and opinion are reasonably satisfactory to the
      Company, that such securities may be offered, sold, pledged, assigned or
      transferred in the manner contemplated without an effective registration
      statement under the Act or applicable state securities laws.”

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (i) The
      undersigned will acquire the Warrants for the undersigned’s own account for
      investment and not with a view to the sale or distribution thereof or the
      granting of any participation therein, and has no present intention of
      distributing or selling to others any of such interest or granting any
      participation therein.

     

    
      	
              Heller
                Capital Partners

            	 	 	 
	 	 	 	 
	
            	 	 	
            
	
              

              By:
                

            	 	 	
            
	
              Name:

            	 	 	
            
	
              Title:

            	 	 	 




    
      
        
        

      

      
        18