THIS WARRANT AND THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE
SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS OF
APRIL 29, 2005, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144
OR REGULATION S UNDER SUCH ACT.
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Right to
Purchase 17,524 Shares of Common Stock, par value $.001 per
share
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STOCK PURCHASE WARRANT
THIS CERTIFIES THAT , for value received, New Millennium
Capital Partners II, LLC or its registered assigns, is entitled to
purchase from Snocone Systems Inc., a Nevada corporation
(the “Company”), at any time or from time to time
during the period specified in Paragraph 2 hereof, Seventeen
Thousand Five Hundred and Twenty Four (17,524) fully paid and
nonassessable shares of the Company’s Common Stock, par value
$.001 per share (the “Common Stock”), at an exercise
price per share equal to $1.50 (the “Exercise Price”).
The term “Warrant Shares,” as used herein, refers to
the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as provided
in Paragraph 4 hereof. The term “Warrants” means this
Warrant and the other warrants issued pursuant to that certain
Securities Purchase Agreement, dated April 29, 2005, by and among
the Company and the Buyers listed on the execution page thereof
(the “Securities Purchase Agreement”), including any
additional warrants issuable pursuant to Section 4(l)
thereof.
This
Warrant is subject to the following terms, provisions, and
conditions:
1.
Manner of Exercise; Issuance of Certificates; Payment for
Shares. Subject to the provisions hereof, this Warrant may
be exercised by the holder hereof, in whole or in part, by the
surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the “Exercise
Agreement”), to the Company during normal business hours on
any business day at the Company’s principal executive offices
(or such other office or agency of the
Company as
it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check
or by wire transfer for the account of the Company of the Exercise
Price for the Warrant Shares specified in the Exercise Agreement or
(ii) if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the “Securities
Act”), provided that the failure to register the Warrant
Shares is not due to the Warrant holder’s failure to satisfy
its obligations under Section 4 of the Registration Rights
Agreement, delivery to the Company of a written notice of an
election to effect a “Cashless Exercise” (as defined in
Section 11(c) below) for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed
to be issued to the holder hereof or such holder’s designee,
as the record owner of such shares, as of the close of business on
the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement shall have been delivered, and payment
shall have been made for such shares as set forth above.
Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement,
shall be delivered to the holder hereof within a reasonable time,
not exceeding five (5) business days, after this Warrant shall have
been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall
be designated by such holder. If this Warrant shall have been
exercised only in part, then, unless this Warrant has expired, the
Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Warrant representing the
number of shares with respect to which this Warrant shall not then
have been exercised. In addition to all other available remedies at
law or in equity, if the Company fails to deliver certificates for
the Warrant Shares within five (5) business days after this Warrant
is exercised, then the Company shall pay to the holder in cash a
penalty (the “Penalty”) equal to 2% of the number of
Warrant Shares that the holder is entitled to multiplied by the
Market Price (as hereinafter defined) for each day that the Company
fails to deliver certificates for the Warrant Shares. For example,
if the holder is entitled to 100,000 Warrant Shares and the Market
Price is $2.00, then the Company shall pay to the holder $4,000 for
each day that the Company fails to deliver certificates for the
Warrant Shares. The Penalty shall be paid to the holder by the
fifth day of the month following the month in which it has
accrued.
Notwithstanding
anything in this Warrant to the contrary, in no event shall the
holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or
portions thereof) upon exercise of which the sum of (i) the number
of shares of Common Stock beneficially owned by the holder and its
affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised
Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Notes (as defined in the
Securities Purchase Agreement)) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon
exercise of the Warrants (or portions thereof) with respect to
which the determination described herein is being made, would
result in beneficial ownership by the holder and its affiliates of
more than 4.99% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder, except as otherwise provided in clause (i) of the
preceding sentence. Notwithstanding anything to the contrary
contained herein, the limitation on exercise of this Warrant set
forth herein may not be amended without (i) the written consent
of
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the holder
hereof and the Company and (ii) the approval of a majority of
shareholders of the Company.
2.
Period of Exercise . This Warrant is exercisable at any
time or from time to time on or after the date on which this
Warrant is issued and delivered pursuant to the terms of the
Securities Purchase Agreement and before 6:00 p.m., New York, New
York time on the fifth (5 th ) anniversary of the date
of issuance (the “Exercise Period”).
3.
Certain Agreements of the Company . The Company hereby
covenants and agrees as follows:
(a)
Shares to be Fully Paid . Subject to Stockholder
Approval (as such term is defined in Section 4(n) of the Purchase
Agreement), all Warrant Shares will, upon issuance in accordance
with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof.
(b)
Reservation of Shares . During the Exercise Period, the
Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of
this Warrant.
(c)
Listing . The Company shall promptly secure the listing
of the shares of Common Stock issuable upon exercise of the Warrant
upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon exercise of this
Warrant) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange
or automated quotation system, as the case may be, and shall
maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d)
Certain Actions Prohibited . The Company will not, by
amendment of its charter 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 to be observed or
performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested
by the holder of this Warrant in order to protect the exercise
privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.
(e)
Successors and Assigns . This Warrant will be binding
upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or substantially all the Company’s
assets.
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4.
Antidilution Provisions . During the Exercise Period,
the Exercise Price and the number of Warrant Shares shall be
subject to adjustment from time to time as provided in this
Paragraph 4.
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 to the nearest cent.
(a)
Adjustment of Exercise Price and Number of Shares upon Issuance
of Common Stock . Except as otherwise provided in
Paragraphs 4(c) and 4(e) hereof, if and whenever on or after the
date of issuance of this Warrant, the Company issues or sells, or
in accordance with Paragraph 4(b) hereof is deemed to have issued
or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or
commissions or underwriting discounts or allowances in connection
therewith) less than the Market Price on the date of issuance (a
“Dilutive Issuance”), then immediately upon the
Dilutive Issuance, the Exercise Price will be reduced to a price
determined by multiplying the Exercise Price in effect immediately
prior to the Dilutive Issuance by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive
Issuance, plus (y) the quotient of the aggregate consideration,
calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance divided by the Market Price in
effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock
Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
Notwithstanding
the foregoing, the adjustments due to Dilutive Issuances shall not
apply to any transaction involving (i) securities issued in a firm
commitment underwritten public offering (excluding a continuous
offering pursuant to Rule 415 under the 1933 Act, an equity line of
credit or similar financing arrangement) resulting in net proceeds
to the Company of in excess of $1,500,000, (ii) securities issued
as consideration for a merger, consolidation or purchase of assets,
or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or
in connection with the disposition or acquisition of a business,
product or license by the Company, (iii) securities upon exercise
or conversion of the Borrower’s options, warrants or other
convertible securities outstanding as of the date hereof, or (iv)
securities not to exceed 500,000 shares of Common Stock issued or
issuable to directors, officers, employees, consultants or vendors
(if in transactions with primarily non-financing purposes) directly
or pursuant to stock option plans, restricted stock purchase
agreements, employment agreements and the like as approved by the
Company’s board of directors.
(b)
Effect on Exercise Price of Certain Events . For
purposes of determining the adjusted Exercise Price under Paragraph
4(a) hereof, the following will be applicable:
(i)
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 other securities convertible into or exchangeable for
Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as “Options”)
and the price per share for which Common Stock is issuable upon the
exercise of such Options is less than the
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Market
Price on the date of issuance or grant of such Options, then the
maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance
or grant of such Options, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the “price per share for
which Common Stock is issuable upon the exercise of such
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 Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options (assuming full conversion of
Convertible Securities, 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 Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
(ii)
Issuance of Convertible Securities . If the Company in
any manner issues or sells any Convertible Securities, whether or
not immediately convertible (other than where the same are issuable
upon the exercise of Options) and the price per share for which
Common Stock is issuable upon such conversion or exchange is less
than the Market Price on the date of issuance, then the maximum
total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding sentence,
the “price per share for which Common Stock is issuable upon
such 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 Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion
or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.
(iii) 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
conversion or exchange of any Convertible Securities; or (iii) the
rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock (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 Convertible Securities 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.
(iv)
Treatment of Expired Options and Unexercised Convertible
Securities . If, in any case, the total number of shares
of Common Stock issuable upon exercise
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of any
Option or upon conversion or exchange of any Convertible Securities
is not, in fact, issued and the rights to exercise such Option or
to convert or exchange such Convertible Securities shall have
expired o
