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Exhibit
4.1
NOTE PURCHASE AGREEMENT
This
NOTE PURCHASE AGREEMENT dated as of January 14, 2008 (this
“
Agreement ”)
by and among Interactive Systems Worldwide Inc., a Delaware
corporation (the “
Company ”),
and each of the purchasers of the non-negotiable promissory notes
of the Company whose names are set forth on
Exhibit A attached
hereto (each a “
Purchaser ”
and collectively, the “
Purchasers ”).
The
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND WARRANTS
Section 1.1
Purchase and Sale of Notes .
(a) Upon
the terms and conditions set forth herein, the Company agrees to
issue and sell to the Purchasers, and the Purchasers, severally but
not jointly, agree to purchase (in the amounts set forth as
Exhibit A hereto)
from the Company, non-negotiable 14% promissory notes due July
31, 2008
in
substantially the form attached hereto as
Exhibit B (the
“
Notes ”),
in the aggregate principal amount of a minimum of One Hundred
Seventy-Five Thousand Dollars ($175,000) (the
“Minimum”) and a maximum of up to Five Hundred Thousand
Dollars ($500,000), at a purchase price equal to 100% of the
principal amount of the Notes being purchased. The Company and the
Purchasers are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities
registration afforded by Section 4(2) of the U.S. Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder (the “
Securities Act ”),
including Regulation D (“
Regulation D ”),
and/or upon such other exemption from the registration requirements
of the Securities Act as may be available with respect to the
investments to be made hereunder.
Section 1.2
Closing .
The
Notes may be sold and funded in separate closings (each a
“
Closing ”),
provided that each Purchaser executes a signature page hereto and
thereby agrees to be bound by and subject to the terms and
conditions hereof. The initial Closing under this Agreement (the
“
Initial Closing ”)
shall take place on or about January 14, 2008 (the “
Initial Closing Date ”)
and shall be funded in the amount of at least the Minimum. Each
subsequent Closing under this Agreement shall take place upon the
mutual agreement of the Company and such Purchasers, but in no
event later than February 29, 2008 (each, a “
Subsequent Closing Date ”).
The Initial Closing Date and each Subsequent Closing Date are
sometimes referred to in this Agreement as the “
Closing Date ”.
Each Closing shall take place at the offices of Friedman Kaplan
Seiler & Adelman LLP (“FKSA”), 1633 Broadway
(46
th Floor),
New York, New York 10019. At each Closing the Company shall deliver
to the Purchasers acquiring Notes at such Closing its Notes for the
principal amount set forth opposite the name of such Purchaser
on
Exhibit A hereto,
against payment of the purchase price therefor by wire transfer to
an account designated by the Company or by release of funds
previously delivered and held by FKSA in its escrow account. The
Company shall update Exhibit A hereto to reflect all Purchasers who
have entered into this Agreement. Each Note shall be dated the
applicable Closing Date.
Section 1.3
Release from Escrow .
Each
Purchaser who has escrowed funds with FKSA pursuant to a
letter from FKSA to such Purchaser, authorizes and directs
FKSA to release from the escrow at the Initial Closing such
Purchaser’s escrowed funds, for delivery to the
Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1
Representations and Warranties of the Company
.
The
Company represents and warrants to the Purchasers, as of the
date hereof and as of each Closing Date, that:
(a)
Organization, Good Standing and Power .
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has
the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now
being conducted.
(b)
Authorization and Power; Enforcement .
The Company has the requisite power and authority to enter into and
perform its obligations under this Agreement and the Notes (the
“Transaction Documents”). The execution, delivery and
performance of the Transaction Documents by the Company have been
duly and validly authorized by all necessary corporate action. When
executed and delivered by the Company, each of the Transaction
Documents shall constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and
remedies or by other equitable principles of general
application.
Section 2.2
Representations and Warranties of the Purchasers
.
Each
of the Purchasers represents and warrants to the Company with
respect solely to itself and not with respect to any other
Purchaser as of the date hereof and as of each Closing Date on
which it purchases Notes, that:
(a)
Organization and Standing of the Purchasers
. If the Purchaser is an entity, such Purchaser is a corporation,
limited liability company or partnership duly incorporated or
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization and has not
been organized for the specific purposes of purchasing the Notes
and is not prohibited from doing so.
2
(b)
Authorization and Power; Enforcement .
Such Purchaser has the requisite power and authority to enter into
and perform its obligations under this Agreement and to purchase
the Notes being sold to it hereunder. The execution, delivery and
performance of this Agreement by such Purchaser has been duly
authorized by all necessary corporate, partnership or limited
liability company action. When executed and delivered by such
Purchaser, this Agreement shall constitute valid and binding
obligations of such Purchaser enforceable against such Purchaser in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, conservatorship, receivership or similar
laws relating to, or affecting generally the enforcement of,
creditor's rights and remedies or by other equitable principles of
general application.
(c)
Investment Purpose .
Such Purchaser is acquiring the Notes as principal for its own
account for investment only and not with a view toward, or for
resale in connection with, the public sale or distribution
thereof.
(d)
Accredited Investor Status .
Such Purchaser is an “Accredited Investor” as that term
is defined in Rule 501(a)(3) of Regulation D, as further indicated
by his or its responses to the Purchaser Questionnaire which it has
submitted to the Company.
(e)
Reliance on Exemptions .
Such Purchaser understands that the Notes are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and
such Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such
Purchaser set forth herein in order to determine the availability
of such exemptions and the eligibility of such Purchaser to acquire
the Notes.
(f)
Information; Able to Bear Risk .
Such Purchaser specifically acknowledges that it has read the
Company’s Annual Report on Form 10-KSB for the year ended
September 30, 2006 and, if filed with the SEC prior to the date of
this Agreement, the Company’s Annual Report on Form 10-KSB
for the year ended September 30, 2007, including without limitation
the Risk Factors section set forth and therein, and the
Company’s Quarterly Reports on Form 10-QSB for the periods
ended December 31, 2006, March 31, 2007 and June 30, 2007, and all
Current Reports on Form 8-K since the filing of its Annual Report
on Form 10-KSB for the year ended September 30, 2006. Such
Purchaser and its advisors (and/or its counsel, if any) have been
furnished with all materials relating to the business, finances and
operations of the Company and information which it deemed material
to making an informed investment decision regarding its purchase of
the Notes, which have been requested by such Purchaser. Such
Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management.
Such Purchaser is not relying (for purposes of making any
investment decision or otherwise) upon any advice, information, or
representations from the Company, written or oral, other than the
representations set forth in this Agreement. Such Purchaser is
fully aware of the precarious financial condition of the Company
and understands that such Purchaser’s investment in the Notes
is speculative and involves an extremely high degree of risk, and
that the Company does not currently have the financial resources to
repay the Notes. Such Purchaser, either alone or with its
representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating
the merits and
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