PAGE>


                             FORM OF FINDER WARRANT

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES, BUT ANY PLEDGEE SHALL BE SUBJECT TO THE
REQUIREMENTS SET FORTH IN THIS WARRANT AS A HOLDER.

                          COMMON STOCK PURCHASE WARRANT

                  To Purchase 65,753 Shares of Common Stock of

                       INTERACTIVE SYSTEMS WORLDWIDE INC.

Warrant No. ____

                  THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies
that, for value received, Brandon Ross (the "Holder"), is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after August 3, 2005 (the "Initial Exercise Date")
and on or prior to the close of business on the fifth anniversary of the Initial
Exercise Date (the "Termination Date") but not thereafter, to subscribe for and
purchase from Interactive Systems Worldwide Inc., a corporation incorporated in
Delaware (the "Company"), up to 65,753 shares (the "Warrant Shares") of Common
Stock, par value $0.001 per share, of the Company (the "Common Stock"). The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be $4.38, subject to adjustment hereunder. The Exercise Price and
the number of Warrant Shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. CAPITALIZED TERMS USED AND NOT
OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH IN THAT CERTAIN
SECURITIES PURCHASE AGREEMENT (THE "PURCHASE AGREEMENT"), DATED AUGUST 3, 2005,
BETWEEN THE COMPANY AND THE PURCHASERS SIGNATORY THERETO.




                                       1
<PAGE>


                  1. Title to Warrant. Prior to the Termination Date and subject
to compliance with applicable laws and Section 7 of this Warrant, this Warrant
and all rights hereunder are transferable, in whole or in part (but if in part,
not in amounts less than the right to purchase 10,000 Warrant Shares), at the
office or agency of the Company by the Holder in person or by duly authorized
attorney, upon surrender of this Warrant together with the Assignment Form
annexed hereto properly endorsed, provided that any such transferee is an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act. Prior to any transfer, the transferee shall sign an investment letter in
form and substance reasonably satisfactory to the Company. Notwithstanding
anything to the contrary contained herein, no Holder may assign this Warrant or
any of its rights hereunder to a competitor or potential competitor of the
Company.

                  2. Authorization of Warrant Shares. The Company represents and
warrants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue or income taxes, if any, payable by the
Holder).

                  3. Exercise of Warrant.

                           (a) Exercise of the purchase rights represented by
         this Warrant may be made at any time or times on or after the Initial
         Exercise Date and on or before the Termination Date by delivery to the
         Company of a duly executed original or facsimile copy of the Notice of
         Exercise Form annexed hereto (or such other office or agency of the
         Company as the Company may designate by notice in writing to the
         registered Holder at the address of such Holder appearing on the books
         of the Company) together with payment of the aggregate Exercise Price
         (in cash except as provided in Section 3(d)) of the shares thereby
         purchased by wire transfer to an account designated by the Company or
         cashier's check drawn on a United States bank; provided, however, that
         within 3 Trading Days after the date such Notice of Exercise is
         delivered to the Company, the Holder shall surrender this Warrant to
         the Company. Certificates for shares purchased hereunder shall be
         delivered to the Holder within 5 Trading Days after the date on which
         the Notice of Exercise shall have been delivered by original or
         facsimile copy and payment of the aggregate Exercise Price shall have
         been received by the Company as set forth above ("Warrant Share
         Delivery Date"); provided, however, that in the event the Warrant is
         not surrendered by the Holder and received by the Company within 4
         Trading Days after the date on which the aggregate exercise price shall
         have been paid and the Notice of Exercise shall be delivered by
         facsimile copy, the Warrant Share Delivery Date shall be extended to
         the extent such 4 Trading Day period is exceeded. This Warrant shall be
         deemed to have been exercised on the date the Notice of Exercise is
         delivered to the Company and the aggregate Exercise Price shall have
         been paid. The Warrant Shares shall be deemed to have been issued, and
         Holder or any other person so designated to be named therein shall be
         deemed to have become a holder of record of such shares for all
         purposes, as of the date the Warrant has been exercised by payment to
         the Company of the Exercise Price and all taxes required to be paid by
         the Holder, if any, pursuant to


                                       2
<PAGE>


         Section 5 prior to the issuance of such shares, have been paid. If the
         Company fails to deliver to the Holder a certificate or certificates
         representing the Warrant Shares pursuant to this Section 3(a) by the
         2nd Trading Day following the Warrant Share Delivery Date, then the
         Holder will have the right to rescind such exercise. In addition to any
         other rights available to the Holder, if the Company fails to deliver
         to the Holder a certificate or certificates representing the Warrant
         Shares pursuant to an exercise on or before the Warrant Share Delivery
         Date, and if after such date the Holder is required by its broker to
         purchase (in an open market transaction or otherwise) shares of Common
         Stock to deliver in satisfaction of a sale by the Holder of the Warrant
         Shares which the Holder anticipated receiving upon such exercise (a
         "Buy-In"), then the Company shall (1) pay in cash to the Holder the
         amount by which (x) the Holder's total purchase price (including
         brokerage commissions, if any) for the shares of Common Stock so
         purchased exceeds (y) the amount obtained by multiplying (A) the number
         of Warrant Shares that the Company was required to deliver to the
         Holder in connection with the exercise at issue times (B) the price at
         which the sell order giving rise to such purchase obligation was
         executed, and (2) at the option of the Holder, either reinstate the
         portion of the Warrant and equivalent number of Warrant Shares for
         which such exercise was not honored or deliver to the Holder the number
         of shares of Common Stock that would have been issued had the Company
         timely complied with its exercise and delivery obligations hereunder.
         For example, if the Holder purchases Common Stock having a total
         purchase price of $11,000 to cover a Buy-In with respect to an
         attempted exercise of shares of Common Stock with an aggregate sale
         price giving rise to such purchase obligation of $10,000, under clause
         (1) of the immediately preceding sentence the Company shall be required
         to pay the Holder $1,000. The Holder shall provide the Company written
         notice indicating the amounts payable to the Holder in respect of the
         Buy-In, together with applicable confirmations and other evidence
         reasonably requested by the Company. Nothing herein shall limit a
         Holder's right to pursue any other remedies available to it hereunder,
         at law or in equity including a decree of specific performance and/or
         injunctive relief with respect to the Company's failure to timely
         deliver certificates representing shares of Common Stock upon exercise
         of the Warrant as required pursuant to the terms hereof.

                           (b) If this Warrant shall have been exercised in
         part, the Company shall promptly deliver to Holder a new Warrant
         evidencing the rights of Holder to purchase the unpurchased Warrant
         Shares called for by this Warrant, which new Warrant shall in all other
         respects be identical with this Warrant.

                           (c) The Company shall not effect any exercise of this
         Warrant, and the Holder shall not have the right to exercise any
         portion of this Warrant, pursuant to Section 3(a) or otherwise, to the
         extent that after giving effect to such issuance after exercise, the
         Holder (together with the Holder's Affiliates), as set forth on the
         applicable Notice of Exercise, would beneficially own in excess of
         4.99% of the number of shares of the Common Stock outstanding
         immediately after giving effect to such issuance. For purposes of the
         foregoing sentence, the number of shares of Common Stock beneficially
         owned by the Holder and its Affiliates shall include the number of
         shares of Common Stock issuable upon exercise of this Warrant with
         respect to which the determination of such sentence is being made, but
         shall exclude the number of shares of Common Stock


                                       3
<PAGE>

         which would be issuable upon (A) exercise of the remaining,
         nonexercised portion of this Warrant or any other warrant or Capital
         Shares Equivalents beneficially owned by the Holder or any of its
         Affiliates and (B) payment by the Company in shares of Common Stock of
         the principal of, or interest on, any debentures held by the Holder or
         its Affiliates, and (ii) dividends on the shares of Preferred Stock, or
         exercise or conversion of the unexercised or nonconverted portion of
         any other securities of the Company (including any other shares of
         Preferred Stock or Warrants) subject to a limitation on conversion or
         exercise analogous to the limitation contained herein beneficially
         owned by the Holder or any of its Affiliates. Except as set forth in
         the preceding sentence, for purposes of this Section 3(c), beneficial
         ownership shall be calculated in accordance with Section 13(d) of the
         Exchange Act. (To the extent that the limitation contained in this
         Section 3(c) applies, the determination of whether this Warrant is
         exercisable (in relation to other securities owned by the Holder,
         together with any of its Affiliates) and of which portion of this
         Warrant is exercisable shall be in the sole discretion of such Holder,
         and the submission of a Notice of Exercise shall be deemed to be such
         Holder's determination of whether this Warrant is exercisable (in
         relation to other securities owned by such Holder, together with any of
         its Affiliates) and of which portion of this Warrant is exercisable, in
         each case subject to such aggregate percentage limitation.) To ensure
         compliance with this restriction, the Holder will be deemed to
         represent to the Company each time it delivers a Notice of Exercise
         that such Notice of Exercise has not violated the restrictions set
         forth in this paragraph and the Company shall have no obligation to
         verify or confirm the accuracy of such determination. For purposes of
         this Section 3(c), in determining the number of outstanding shares of
         Common Stock, the Holder may rely on the number of outstanding shares
         of Common Stock as reflected in the most recent of the following: (x)
         the Company's Form 10-QSB or Form 10-KSB, as the case may be, (y) a
         public announcement by the Company or (z) any other notice by the
         Company or the Company's Transfer Agent setting forth the number of
         shares of Common Stock outstanding. Upon the written or oral request of
         the Holder, the Company shall within two Trading Days confirm orally
         and in writing to the Holder the number of shares of Common Stock then
         outstanding. In any case, the number of outstanding shares of Common
         Stock shall be determined after giving effect to the conversion or
         exercise of securities of the Company, including this Warrant, by the
         Holder or its Affiliates since the date as of which such number of
         outstanding shares of Common Stock was reported. The provisions of this
         Section 3(c) may be waived by the Holder upon, at the election of the
         Holder, not less than 61 days' prior notice to the Company, and the
         provisions of this Section 3(c) shall continue to apply until such 61st
         day (or such later date, as determined by the Holder, as may be
         specified in such notice of waiver). The provisions of this paragraph
         shall be implemented in a manner otherwise than in strict conformity
         with the terms of this Section 3(c) to correct this paragraph (or any
         portion hereof) which may be defective or inconsistent with the
         intended 4.99% beneficial ownership limitation herein contained or to
         make changes or supplements necessary or desirable to properly give
         effect to such 4.99% limitation. The limitations contained in this
         paragraph shall apply to a successor holder of this Warrant. The
         holders of Common Stock of the Company shall be third party
         beneficiaries of this Section 3(c) and the Company may not waive this
         Section 3(c) without the consent of holders of a majority of its Common
         Stock.


                                       4
<PAGE>

                           (d) This Warrant may be exercised by means of a
         "cashless exercise" in which the Holder shall be entitled to receive a
         certificate for the number of Warrant Shares equal to the quotient
         obtained by dividing [(A-B) (X)] by (A), where:

                  (A)     = the VWAP on the Trading Day immediately preceding
                          the date of such election;

                  (B)     = the Exercise Price of this Warrant, as adjusted; and

                  (X)     = the number of Warrant Shares issuable upon exercise
                          of this Warrant in accordance with the terms of this
                          Warrant by means of a cash exercise rather than a
                          cashless exercise.

                             (e) In the event that this Warrant is exercised
prior to the Effective Date, the shares issuable upon such exercise shall bear
the legend set forth in Section 4.1(b) of the Purchase Agreement.

                  4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

                  5. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and the
Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.

                  6. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.

                  7. Transfer, Division and Combination.

                           (a) Subject to compliance with any applicable
         securities laws and the conditions set forth in Sections 1 and 7(e)
         hereof and to the provisions of Section 4.1 of the Purchase Agreement,
         this Warrant and all rights hereunder are transferable, in whole or in
         part, upon surrender of this Warrant at the principal office of the
         Company, together with a written assignment of this Warrant
         substantially in the form attached hereto duly executed by the Holder
         or its duly authorized agent or attorney and funds sufficient to pay
         any transfer taxes payable upon the making of such transfer. No such
         assignment shall be valid and enforceable unless such assignee is an
         "accredited investor" and until any such assignee shall have executed
         and delivered to the Company an accredited investor questionnaire. Upon
         such surrender and, if required, such payment, the Company shall
         execute and deliver a new Warrant or Warrants in the name of the
         assignee or assignees and in the denomination or denominations
         specified in such instrument of assignment, and shall issue to the
         assignor a new Warrant evidencing the portion of this Warrant not so
         assigned, and this Warrant shall promptly be cancelled. A Warrant, if
         properly assigned, may be exercised by a new holder for the purchase of
         Warrant Shares without having a new Warrant issued.


                                       5
<PAGE>

                           (b) This Warrant may be divided or combined with
         other Warrants upon presentation hereof at the aforesaid office of the
         Company, together with a written notice specifying the names and
         denominations in which new Warrants are to be issued, signed by the
         Holder or its duly authorized agent or attorney; provided, however,
         that Warrants to purchase less than 10,000 Warrant Shares need not be
         issued unless the total number of Warrant Shares for which the Warrant
         may be exercised is less than 10,000 Warrant Shares. Subject to
         compliance with Section 7(a), as to any transfer which may be involved
         in such division or combination, the Company shall execute and deliver
         a new Warrant or Warrants in exchange for the Warrant or Warrants to be
         divided or combined in accordance with such notice.

                           (c) The Company shall prepare, issue and deliver at
         its own expense (other than transfer taxes) the new Warrant or Warrants
         under this Section 7.

                           (d) The Company agrees to maintain, at its aforesaid
         office, books for the registration and the registration of transfer of
         the Warrants.

                           (e) If, at the time of the surrender of this Warrant
         in connection with any transfer of this Warrant, the transfer of this
         Warrant shall not be registered pursuant to an effective registration
         statement under the Securities Act and under applicable state
         securities or blue sky laws, the Company may require, as a condition of
         allowing such transfer (i) that the Holder or transferee of this
         Warrant, as the case may be, furnish to the Company a written opinion
         of counsel (which opinion shall be in form, substance and scope
         customary for opinions of counsel in comparable transactions and shall
         be reasonably satisfactory to the Company) to the effect that such
         transfer may be made without registration under the Securities Act and
         under applicable state securities or blue sky laws, (ii) that the
         holder or transferee execute and deliver to the Company an investment
         letter in form and substance acceptable to the Company and (iii) that
         the transferee be an "accredited investor" as defined in Rule 501(a)
         promulgated under the Securities Act.

                  8. No Rights as Shareholder Until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a shareholder of
the Company prior to the exercise hereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price (or by means of a cashless exercise
as provided in Section 3(d)) and all applicable taxes, if any, the Warrant
Shares so purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of the date
of such surrender or payment. The Company shall be entitled to treat the Holder
of the Warrant 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.


                                       6
<PAGE>

                  9. Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.

                  10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a Saturday, Sunday or legal holiday.

                  11. Adjustments of Exercise Price and Number of Warrant
Shares.

                           (a) Stock Splits, etc. The number and kind of
         securities purchasable upon the exercise of this Warrant and the
         Exercise Price shall be subject to adjustment from time to time upon
         the happening of any of the following. In case the Company, at any time
         while the Warrant is outstanding, shall (i) pay a dividend in shares of
         Common Stock or make a distribution in shares of Common Stock to all
         holders of its outstanding Common Stock, (ii) subdivide its outstanding
         shares of Common Stock into a greater number of shares, (iii) combine
         (including by way of reverse stock split) its outstanding shares of
         Common Stock into a smaller number of shares of Common Stock, or (iv)
         issue any shares of its capital stock in a reclassification of the
         Common Stock, then the number of Warrant Shares purchasable upon
         exercise of this Warrant immediately prior thereto shall be adjusted so
         that the Holder shall be entitled to receive the kind and number of
         Warrant Shares or other securities of the Company which it would have
         owned or have been entitled to receive had such Warrant been exercised
         in advance thereof. Upon each such adjustment of the kind and number of
         Warrant Shares or other securities of the Company which are purchasable
         hereunder, the Holder shall thereafter be entitled to purchase the
         number of Warrant Shares or other securities resulting from such
         adjustment at an Exercise Price per Warrant Share or other security
         obtained by multiplying the Exercise Price in effect immediately prior
         to such adjustment by the number of Warrant Shares purchasable pursuant
         hereto immediately prior to such adjustment and dividing by the number
         of Warrant Shares or other securities of the Company that are
         purchasable pursuant hereto immediately after such adjustment. An
         adjustment made pursuant to this paragraph shall become effective
         immediately after the effective date of such event retroactive to the
         record date, if any, for such event.


                                       7
<PAGE>

                           (b) Anti-Dilution Provisions. During the Exercise
         Period, the Exercise Price shall be subject to adjustment from time to
         time as provided in this Section 11(b). In the event that any
         adjustment of the Exercise Price as required herein results in a
         fraction of a cent, such Exercise Price shall be rounded up or down to
         the nearest cent.

                           (i) Adjustment of Exercise Price. If and whenever the
                  Company issues or sells, or in accordance with Section
                  11(b)(ii) hereof is deemed to have issued or sold, any shares
                  of Common Stock for a consideration per share of less than the
                  then Exercise Price, or for no consideration (such lower
                  price, the "Base Share Price" and such issuances collectively,
                  a "Dilutive Issuance"), then, the Exercise Price shall be
                  reduced to equal the Base Share Price; provided, however, that
                  it is acknowledged and agreed that this provision shall only
                  have the effect of reducing the Exercise Price of the Warrant.
                  Such adjustment shall be made whenever such shares of Common
                  Stock or Capital Shares Equivalent are issued as a Dilutive
                  Issuance, without duplication.

                           (ii) Effect on Exercise Price of Certain Events. For
                  purposes of determining the adjusted Exercise Price under
                  Section 11(b) hereof, the following will be applicable:

                                             (A) Issuance of Rights or Options.
                           If the Company in any manner issues or grants any
                           warrants, rights or options, whether or not
                           immediately exercisable, to subscribe for or to
                           purchase Common Stock or Capital Shares Equivalent
                           (such warrants, rights and options to purchase Common
                           Stock or Capital Shares Equivalent are hereinafter
                           referred to as "Options") and the effective price per
                           share for which Common Stock is issuable upon the
                           exercise of such Options is less than the Exercise
                           Price ("Below Base Price Options"), then the maximum
                           total number of shares of Common Stock issuable upon
                           the exercise of all such Below Base Price Options
                           (assuming full exercise, conversion or exchange of
                           Capital Shares Equivalent, if applicable) will, as of
                           the date of the issuance or grant of such Below Base
                           Price Options, be deemed to be outstanding and to
                           have been issued and sold by the Company for such
                           price per share and the maximum consideration payable
                           to the Company upon such exercise (assuming full
                           exercise, conversion or exchange of Capital Shares
                           Equivalent, if applicable) will be deemed to have
                           been received by the Company. For purposes of the
                           preceding sentence, the "effective price per share
                           for which Common Stock is issuable upon the exercise
                           of such Below Base Price Options" is determined by
                           dividing (i) the total amount, if any, received or
                           receivable by the Company as consideration for the
                           issuance or granting of all such Below Base Price
                           Options, plus the minimum aggregate amount of
                           additional consideration, if any, payable to the
                           Company upon the exercise of all such Below Base
                           Price Options,


                                       8
<PAGE>


                           plus, in the case of Capital Shares Equivalent
                           issuable upon the exercise of such Below Base Price
                           Options, the minimum aggregate amount of additional
                           consideration payable upon the exercise, conversion
                           or exchange thereof at the time such Capital Shares
                           Equivalent first become exercisable, convertible or
                           exchangeable, by (ii) the maximum total number of
                           shares of Common Stock issuable upon the exercise of
                           all such Below Base Price Options (assuming full
                           conversion of Capital Shares Equivalent, if
                           applicable). No further adjustment to the Exercise
                           Price will be made upon the actual issuance of such
                           Common Stock upon the exercise of such Below Base
                           Price Options or upon the exercise, conversion or
                           exchange of Capital Shares Equivalent issuable upon
                           exercise of such Below Base Price Options.
                           Notwithstanding the foregoing, to the extent the
                           shares of Common Stock (or securities convertible
                           into or exchangeable for shares of Common Stock) are
                           not delivered, upon 5 Trading Days prior written
                           notice to the Holder, the Exercise Price shall be
                           readjusted after the expiration of such rights,
                           options, or warrants (but only with respect to
                           Warrants exercised after such expiration), to the
                           Exercise Price which would then be in effect had the
                           adjustments made upon the issuance of such rights,
                           options or warrants been made upon the basis of
                           delivery of only the number of shares of Common Stock
                           (or securities convertible into or exchangeable for
                           such shares of Common Stock) actually issued. In case
                           any subscription price may be paid in a consideration
                           part or all of which shall be in a form other than
                           cash, the value of such consideration shall be as
                           determined in good faith by the Board of Directors of
                           the Company, whose determination shall be conclusive
                           absent manifest error.

                                            (B) Issuance of Capital Shares
                           Equivalent. If the Company in any manner issues or
                           sells any Capital Shares Equivalent, whether or not
                           immediately convertible (other than where the same
                           are issuable upon the exercise of Options) and the
                           effective price per share for which Common Stock is
                           issuable upon such exercise, conversion or exchange
                           of such Capital Share Equivalents is less than the
                           Exercise Price, then the maximum total number of
                           shares of Common Stock issuable upon the exercise,
                           conversion or exchange of all such Capital Shares
                           Equivalent will, as of the date of the issuance of
                           such Capital Shares Equivalent, be deemed to be
                           outstanding and to have been issued and sold by the
                           Company for such price per share and the maximum
                           consideration payable to the Company upon such
                           exercise (assuming full exercise, conversion or
                           exchange of Capital Shares Equivalent, if applicable)
                           will be deemed to have been received by the Company.
                           For the purposes of the preceding sentence, the
                           "effective price per share for which Common Stock is
                           issuable upon such exercise, conversion or exchange"
                           is determined by dividing (i) the total amount, if
                           any, received or receivable by the Company as
                           consideration for the issuance or sale of all such
                           Capital Shares Equivalent, plus the minimum aggregate
                           amount of additional


                                       9
<PAGE>

                           consideration, if any, payable to the Company upon
                           the exercise, conversion or exchange thereof at the
                           time such Capital Shares Equivalent first become
                           exercisable, convertible or exchangeable, by (ii) the
                           maximum total number of shares of Common Stock
                           issuable upon the exercise, conversion or exchange of
                           all such Capital Shares Equivalent. No further
                           adjustment to the Exercise Price will be made upon
                           the actual issuance of such Common Stock upon
                           exercise, conversion or exchange of such Capital
                           Shares Equivalent. Notwithstanding the foregoing, to
                           the extent the shares of Common Stock (or securities
                           convertible into or exchangeable for shares of Common
                           Stock) are not delivered, upon 5 Trading Days prior
                           written notice to the Holder, the Exercise Price
                           shall be readjusted after the expiration of such
                           rights, options, or warrants (but only with respect
                           to Warrants exercised after such expiration), to the
                           Exercise Price which would then be in effect had the
                           adjustments made upon the issuance of such rights,
                           options or warrants been made upon the basis of
                           delivery of only the number of shares of Common Stock
                           (or securities convertible into or exchangeable for
                           such shares of Common Stock) actually issued. In case
                           any subscription price may be paid in a consideration
                           part or all of which shall be in a form other than
                           cash, the value of such consideration shall be as
                           determined in good faith by the Board of Directors of
                           the Company, whose determination shall be conclusive
                           absent manifest error.

                                            (C) Change in Option Price or
                           Conversion Rate. If there is a change at any time in
                           (i) the amount of additional consideration payable to
                           the Company upon the exercise of any Options; (ii)
                           the amount of additional consideration, if any,
                           payable to the Company upon the exercise, conversion
                           or exchange of any Capital Shares Equivalent; or
                           (iii) the rate at which any Capital Shares Equivalent
                           are convertible into or exchangeable for Common Stock
                           (in each such case, other than under or by reason of
                           provisions designed to protect against dilution), the
                           Exercise Price in effect at the time of such change
                           will be readjusted to the Exercise Price which would
                           have been in effect at such time had such Options or
                           Capital Shares Equivalent still outstanding provided
                           for such changed additional consideration or changed
                           conversion rate, as the case may be, at the time
                           initially granted, issued or sold. Notwithstanding
                           the foregoing, to the extent the shares of Common
                           Stock (or securities convertible into or exchangeable
                           for shares of Common Stock) are not delivered, upon 5
                           Trading Days prior written notice to the Holder, the
                           Exercise Price shall be readjusted after the
                           expiration of such rights, options, or warrants (but
                           only with respect to Warrants exercised after such
                           expiration), to the Exercise Price which would then
                           be in effect had the adjustments made upon the
                           issuance of such rights, options or warrants been
                           made upon the basis of delivery of only the number of
                           shares of Common Stock (or securities convertible
                           into or exchangeable for such shares of Common Stock)
                           actually issued. In case any subscription price may
                           be paid in a consideration part or all of which shall
                           be in a form other than cash, the value of such
                           consideration shall be as determined in good faith by
                           the Board of Directors of the Company, whose
                           determination shall be conclusive absent manifest
                           error.


                                       10
<PAGE>

                                            (D) Calculation of Consideration
                           Received. If any Common Stock, Options or Capital
                           Shares Equivalent are issued, granted or sold for
                           cash, the consideration received therefor for
                           purposes of this Warrant will be the amount received
                           by the Company therefor, before deduction of
                           reasonable commissions, underwriting discounts or
                           allowances or other reasonable expenses paid or
                           incurred by the Company in connection with such
                           issuance, grant or sale. In case any Common Stock,
                           Options or Capital Shares Equivalent are issued or
                           sold for a consideration part or all of which shall
                           be other than cash, the amount of the consideration
                           other than cash received by the Company will be the
                           fair market value of such consideration, except where
                           such consideration consists of securities, in which
                           case the amount of consideration received by the
                           Company will be the fair market value (the mean
                           between the closing bid and asked prices, if traded
                           on any market) thereof as of the date of receipt. In
                           case any Common Stock, Options or Capital Shares
                           Equivalent are issued in connection with any merger
                           or consolidation in which the Company is the
                           surviving corporation, the amount of consideration
                           therefor will be deemed to be the fair market value
                           of such portion of the net assets and business of the
                           non-surviving corporation as is attributable to such
                           Common Stock, Options or Capital Shares Equivalent,
                           as the case may be. The fair market value of any
                           consideration other than cash or securities will be
                           determined in good faith by the Board of Directors of
                           the Company.

                                            (E) Exceptions to Adjustment of
                           Exercise Price. Notwithstanding the foregoing, no
                           adjustment will be made under this Section 11(b) in
                           respect of (1) the granting or issuance of shares of
                           Common Stock or options (or exercise thereof) to or
                           by employees, officers, directors or consultants
                           (provided that in the case of consultants, such
                           issuance of Capital Shares and grants of Capital
                           Share Equivalents does not exceed, in the aggregate,
                           200,000 Capital Shares or Capital Shares Equivalents
                           convertible into or exchangeable for 200,000 Capital
                           Shares per any 12 month period) of the Company or any
                           Subsidiary pursuant to any stock option plan or
                           employee incentive plan or agreement duly adopted or
                           approved 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, or (2) the
                           conversion or exercise of the shares of Preferred
                           Stock or any other security issued by the Company in
                           connection with the offer and sale of this Company's
                           securities pursuant to the Purchase Agreement, (3)
                           the issuance of any Common Stock as dividends on the
                           shares of Preferred



                                       11
<PAGE>

                           Stock or as payment of principal or interest on the
                           debentures issued by the Company on November 24,
                           2003, or (4) the exercise of or conversion of any
                           Capital Shares Equivalent, Options, rights or
                           warrants issued and outstanding on the Closing Date,
                           including but not limited to the debentures,
                           preferred stock and warrants issued by the Company on
                           November 24, 2003 and November 12, 2004, provided
                           that the securities have not been amended in order to
                           reduce the exercise or conversion price thereof or
                           increase the number of shares issuable thereunder,
                           since the date of the Purchase Agreement except as a
                           result of the Purchase Agreement, or (5) issuances of
                           Capital Shares or Capital Share Equivalents in
                           connection with acquisitions, mergers, joint
                           ventures, strategic investments, or strategic
                           partnering arrangements the primary purpose of which
                           is not to raise capital, or the subsequent exercise
                           of any such Capital Share Equivalents.

                           (iii) Minimum Adjustment of Exercise Price. No
                  adjustment of the Exercise Price shall be made in an amount of
                  less than 1% of the Exercise Price in effect at the time such
                  adjustment is otherwise required to be made, but any such
                  lesser adjustment shall be carried forward and shall be made
                  at the time and together with the next subsequent adjustment
                  which, together with any adjustments so carried forward, shall
                  amount to not less than 1% of such Exercise Price.

                  12. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets.

                  (a) In case the Company shall reorganize its capital,
         reclassify its capital stock, consolidate or merge with or into another
         corporation (where the Company is not the surviving corporation or
         where there is a change in, or distribution with respect to, the Common
         Stock of the Company), or sell, transfer or otherwise dispose of all or
         substantially all of its property, assets or business to another
         corporation and, pursuant to the terms of such reorganization,
         reclassification, merger, consolidation or disposition of all or
         substantially all of its assets, shares of common stock of the
         successor or acquiring corporation, or any cash, shares of stock or
         other securities or property of any nature whatsoever (including
         warrants or other subscription or purchase rights) in addition to or in
         lieu of common stock of the successor or acquiring corporation ("Other
         Property"), are to be received by or distributed to the holders of
         Common Stock of the Company, then the Holder shall have the right
         thereafter to receive upon exercise of this Warrant, the number of
         shares of common stock of the successor or acquiring corporation or of
         the Company, if it is the surviving corporation, and Other Property
         receivable upon or as a result of such reorganization,
         reclassification, merger, consolidation or disposition of assets by a
         Holder of the number of shares of Common Stock for which this Warrant
         is exercisable immediately prior to such event. In case of any such
         reorganization, reclassification, merger, consolidation or disposition
         of assets, the successor or acquiring corporation (if other than the
         Company) shall expressly assume the due and punctual observance and
         performance of each and every covenant and condition of this Warrant to



                                       12
<PAGE>

         be performed and observed by the Company and all the obligations and
         liabilities hereunder, subject to such modifications as may be deemed
         appropriate (as determined in good faith by resolution of the Board of
         Directors of the Company) in order to provide for adjustments of
         Warrant Shares for which this Warrant is exercisable which shall be as
         nearly equivalent as practicable to the adjustments provided for in
         this Section 12. For purposes of this Section 12, "common stock of the
         successor or acquiring corporation" shall include stock of such
         corporation of any class which is not preferred as to dividends or
         assets over any other class of stock of such corporation and which is
         not subject to redemption and shall also include any evidences of
         indebtedness, shares of stock or other securities which are convertible
         into or exchangeable for any such stock, either immediately or upon the
         arrival of a specified date or the happening of a specified event and
         any warrants or other rights to subscribe for or purchase any such
         stock. The foregoing provisions of this Section 12 shall similarly
         apply to successive reorganizations, reclassifications, mergers,
         consolidations or disposition of assets.

                  (b) Notwithstanding anything to the contrary herein contained,
         in the event of a transaction contemplated by Section 12(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 Holders advising them of such transaction. The Holders
         shall have ten calendar days after the date of the Merger Notice to
         elect to (i) exercise the Warrants in the manner provided herein, (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, or (iii) receive cash equal to the value of this Warrant as
         determined in accordance with the Black-Scholes option pricing formula
         using the method agreed upon among the parties at the Closing. 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.

                  13. Voluntary Adjustment by the Company. The Company may at
any time during the term of this Warrant reduce the then current Exercise Price
to any amount and for any period of time deemed appropriate by the Board of
Directors of the Company.

                  14. Notice of Adjustment. Whenever the number of Warrant
Shares or number or kind of securities or other property purchasable upon the
exercise of this Warrant or the Exercise Price is adjusted, as herein provided,
the Company shall give notice thereof to the Holder, which notice shall state
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.


                                       13
<PAGE>

                  15. Notice of Corporate Action. If at any time:

                           (a) the Company shall take a record of the holders of
         its Common Stock for the purpose of entitling them to receive a
         dividend or other distribution, or any right to subscribe for or
         purchase any evidences of its indebtedness, any shares of stock of any
         class or any other securities or property, or to receive any other
         right, or

                           (b) there shall be any capital reorganization of the
         Company, any reclassification or recapitalization of the capital stock
         of the Company or any consolidation or merger of the Company with, or
         any sale, transfer or other disposition of all or substantially all the
         property, assets or business of the Company to, another corporation;
         or,

                           (c) there shall be a voluntary or involuntary
         dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at
least 10 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 10
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).

                  16. Authorized Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.


                                       14
<PAGE>

                  Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (b) take all such action as may be reasonably necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.

                  Before taking any action which would result in an adjustment
in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

                  17. Miscellaneous.

                           (a) Governing Law; Venue; Waiver of Jury Trial. All
         questions concerning the construction, validity, enforcement and
         interpretation of this Warrant 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
         Warrant (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, borough of Manhattan (the "New York Courts").
         Each party hereby irrevocably submits to the exclusive jurisdiction of
         the New York Courts for the adjudication of any dispute hereunder or in
         connection herewith or with any transaction contemplated hereby or
         discussed herein, 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, or that the
         New York Courts are an 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 Warrant 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 hereto hereby irrevocably waive, to the fullest extent
         permitted by applicable law, any and all right to trial by jury in any
         legal proceeding arising out of or relating to this Warrant or the
         transactions contemplated thereby. If either party shall commence an
         action or proceeding to enforce any provisions of this Warrant, 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.


                                       15
<PAGE>

                           (b) Restrictions. The Holder acknowledges that the
         Warrant Shares acquired upon the exercise of this Warrant, if not
         registered, will have restrictions upon resale imposed by state and
         federal securities laws.

                           (c) Nonwaiver and Expenses. No course of dealing or
         any delay or failure to exercise any right hereunder on the part of
         Holder shall operate as a waiver of such right or otherwise prejudice
         Holder's rights, powers or remedies, notwithstanding all rights
         hereunder terminate on the Termination Date.

                           (d) Notices. Any notice, request or other document
         required or permitted to be given or delivered to the Holder by the
         Company shall be delivered in accordance with the notice provisions of
         the Purchase Agreement.

                           (e) Limitation of Liability. No provision hereof, in
         the absence of any affirmative action by Holder to exercise this
         Warrant or purchase Warrant Shares, and no enumeration herein of the
         rights or privileges of Holder, shall give rise to any liability of
         Holder for the purchase price of any Common Stock or as a stockholder
         of the Company, whether such liability is asserted by the Company or by
         creditors of the Company.

                           (f) Remedies. Holder, in addition to being entitled
         to exercise all rights granted by law, including recovery of damages,
         will be entitled to specific performance of its rights under this
         Warrant. The Company agrees that monetary damages would not be adequate
         compensation for any loss incurred by reason of a breach by it of the
         provisions of this Warrant and hereby agrees to waive the defense in
         any action for specific performance that a remedy at law would be
         adequate.

                           (g) Successors and Assigns. Subject to applicable
         securities laws, this Warrant and the rights and obligations evidenced
         hereby shall inure to the benefit of and be binding upon the successors
         of the Company and the successors and permitted assigns of Holder;
         provided, however, that the Holder may not assign its rights to a
         competitor or potential competitor of the Company. The provisions of
         this Warrant are intended to be for the benefit of all Holders from
         time to time of this Warrant and shall be enforceable by any such
         Holder or holder of Warrant Shares.

                           (h) Amendment. This Warrant may be modified or
         amended or the provisions hereof waived with the written consent of the
         Company and the Holder.

                           (i) Severability. If any provision of this Warrant is
         held to be invalid or unenforceable in any respect, the validity and
         enforceability of the remaining terms and provisions of this Warrant
         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 Warrant.


                                       16
<PAGE>

                           (j) Construction. The headings herein are for
         convenience only, do not constitute a part of this Warrant and shall
         not be deemed to limit or affect any of the provisions hereof. The
         language used in this Warrant 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.

                           (k) Interpretation. Unless the context otherwise
         requires, the terms defined in this Section 17 shall have the meanings
         herein specified for all purposes of this Warrant, applicable to both
         the singular and plural forms of any of the terms defined herein. When
         a reference is made in this Warrant to a Section, such reference shall
         be to a Section of this Warrant unless otherwise indicated. Whenever
         the words "include," "includes" or "including" are used in this
         Warrant, they shall be deemed to be followed by the words "without
         limitation." The use of any gender herein shall be deemed to include
         the neuter, masculine and feminine genders wherever necessary or
         appropriate. When any matter is disclosed (i) in any Transaction
         Document (including any exhibit or schedule thereto), (ii) any place in
         the Disclosure Schedule, or (iii) except with respect to Sections
         3.1(g), 3.1(s), 3.1(u), 3.1(w), 3.1(dd), 3.1(ee), 3.1(gg), 3.1(hh),
         3.1(ii), 3.1(jj) and 3.1(kk) of the Purchase Agreement and with respect
         to Section 6(b) and Section 6(c) of the Registration Rights Agreement,
         in the Company's most recent Form 10-KSB, the Proxy Statement for the
         2005 Annual Meeting of Shareholders, the forms 10-QSB for the quarters
         ended December 31, 2004 and March 31, 2005, and all press releases
         issued after the filing of the Form 10-QSB for the quarter ended March
         31, 2005 and prior to the Closing Date, such matter shall be deemed to
         have been disclosed to the Holder for all purposes pursuant to all of
         the Transaction Documents. If any period of time for the performance
         under the Transaction Documents ends on a day that is not a Trading
         Day, such period of time shall be automatically extended to end at the
         end of the next succeeding Trading Day.

                           (l) Headings. The headings used in this Warrant are
         for the convenience of reference only and shall not, for any purpose,
         be deemed a part of this Warrant.




                                       17
<PAGE>

                  18. Piggy-Back Registration Rights. If at any time prior to
the Termination Date there is not an effective registration statement(s)
covering the resale of all of the Warrant Shares and the Company shall determine
to prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to the Holder
written notice of such determination and, if within five Trading Days after
receipt of such notice, the Holder shall so request in writing, the Company
shall include in such registration statement all or any part of such Warrant
Shares such holder requests to be registered; provided, that, the Company shall
not be required to register any Warrant Shares pursuant to this Section 18 that
are eligible for resale pursuant to Rule 144(k) promulgated under the Securities
Act or that are the subject of a then effective registration statement.



                              ********************



                                       18
<PAGE>


                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.


Dated: August 3, 2005
                                             INTERACTIVE SYSTEMS WORLDWIDE INC.



                                            By:________________________________
                                               Name: BERNARD ALBANESE
                                               Title: PRESIDENT



                                       19
<PAGE>


                               NOTICE OF EXERCISE

To:  INTERACTIVE SYSTEMS WORLDWIDE INC.

         (1) The undersigned hereby elects to purchase ________ Warrant
Shares of Interactive Systems Worldwide Inc. pursuant to the terms of the
attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.

         (2) Payment shall take the form of (check applicable box):

                           [ ] in lawful money of the United States; or

                           [ ] the cancellation of such number of Warrant Shares
                           as is necessary, in accordance with the formula set
                           forth in subsection 3(d), to exercise this Warrant
                           with respect to the maximum number of Warrant Shares
                           purchasable pursuant to the cashless exercise
                           procedure set forth in subsection 3(d).

         (3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:

                  ________________________________________

The Warrant Shares shall be delivered to the following:

                  ________________________________________

                  ________________________________________

                  ________________________________________

         (4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

                                      [PURCHASER]


                                      By: ______________________________
                                          Name:
                                          Title:

                                      Dated:  ________________________




<PAGE>


                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)


         FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.


________________________________________________________________


                                 Dated:  ______________, _______


                  Holder's Signature:  _________________________

                  Holder's Address:_____________________________

                                   _____________________________



Signature Guaranteed:  _________________________________________


NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.