Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Snocone Systems Inc. - Exhibit 4.1

 SECURITIES PURCHASE AGREEMENT 

     SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of April 29, 2005, by and among Snocone Systems Inc. (Who’s Your Daddy, Inc.), a Nevada corporation, with headquarters located at 1555
East Flamingo Road, Suite 440, Las Vegas, NV 89119 (the “Company”), and each of the purchasers set forth on the signature pages hereto (the “Buyers”). 

      WHEREAS:

      A. The Company and the
  Buyers are executing and delivering this Agreement in reliance upon the exemption
  from securities registration afforded by the rules and regulations as promulgated
  by the United States Securities and Exchange Commission (the “SEC”)
  under the Securities Act of 1933, as amended (the “1933 Act”); 

      B. Buyers desire
  to purchase and the Company desires to issue and sell, upon the terms and conditions
  set forth in this Agreement (i) 8% secured convertible notes of the Company,
  in the form attached hereto as Exhibit “A”, in the aggregate
  principal amount of Three Million Seven Hundred and Fifty Thousand Dollars ($3,750,000)
  (together with any note(s) issued in replacement thereof or as a dividend thereon
  or otherwise with respect thereto in accordance with the terms thereof, the
  “Notes”), convertible into shares of common stock, par value
  $.001 per share, of the Company (the “Common Stock”),
  upon the terms and subject to the limitations and conditions set forth in such
  Notes and (ii) warrants, in the form attached hereto as Exhibit “B”,
  to purchase 2,628,505 shares of Common Stock (the “Warrants”).

      C. Each Buyer
  wishes to purchase, upon the terms and conditions stated in this Agreement,
  such principal amount of Notes and number of Warrants as is set forth immediately
  below its name on the signature pages hereto; and 

      D.     
  Contemporaneous with the execution and delivery of this Agreement, the parties
  hereto are executing and delivering a Registration Rights Agreement, in the
  form attached hereto as Exhibit “C” (the “Registration
  Rights Agreement”), pursuant to which the Company has agreed to provide
  certain registration rights under the 1933 Act and the rules and regulations
  promulgated thereunder, and applicable state securities laws. 

      NOW THEREFORE, the Company
  and each of the Buyers severally (and not jointly) hereby agree as follows:

      1. PURCHASE AND SALE OF
  NOTES AND WARRANTS. 

      a. Purchase
  of Notes and Warrants. On the Closing Date (as defined below), the Company
  shall issue and sell to each Buyer and each Buyer severally agrees to purchase
  from the Company such principal amount of Notes and number of Warrants as is
  set forth immediately below such Buyer’s name on the signature pages hereto.

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      b. Form of Payment.
  On the Closing Date (as defined below), (i) each Buyer shall pay the purchase
  price for the Notes and the Warrants to be issued and sold to it at the Closing
  (as defined below) (the “Purchase Price”) by wire transfer
  of immediately available funds to the Company, in accordance with the Company’s
  written wiring instructions, against delivery of the Notes in the principal
  amount equal to the Purchase Price and the number of Warrants as is set forth
  immediately below such Buyer’s name on the signature pages hereto, and
  (ii) the Company shall deliver such Notes and Warrants duly executed on behalf
  of the Company, to such Buyer, against delivery of such Purchase Price.

     c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Notes
and the Warrants pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on April 29, 2005, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties. 

     2. BUYERS’ REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not jointly) represents and warrants to the Company solely as to such Buyer that: 

      a. Investment
  Purpose. As of the date hereof, the Buyer is purchasing the Notes and
  the shares of Common Stock issuable upon conversion of or otherwise pursuant
  to the Notes (including, without limitation, such additional shares of Common
  Stock, if any, as are issuable (i) on account of interest on the Notes, (ii)
  as a result of the events described in Sections 1.3 and 1.4(g) of the Notes
  and Section 2(c) of the Registration Rights Agreement or (iii) in payment of
  the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant
  to this Agreement, such shares of Common Stock being collectively referred to
  herein as the “Conversion Shares”) and the Warrants and the
  shares of Common Stock issuable upon exercise thereof (the “Warrant
  Shares” and, collectively with the Notes, Warrants and Conversion
  Shares, the “Securities”) for its own account and not with
  a present view towards the public sale or distribution thereof, except pursuant
  to sales registered or exempted from registration under the 1933 Act; provided,
  however, that by making the representations herein, the Buyer does not
  agree to hold any of the Securities for any minimum or other specific term and
  reserves the right to dispose of the Securities at any time in accordance with
  or pursuant to a registration statement or an exemption under the 1933 Act.

      b. Accredited
  Investor Status. The Buyer is an “accredited investor” as
  that term is defined in Rule 501(a) of Regulation D (an “Accredited
  Investor”). 

      c. Reliance
  on Exemptions. The Buyer understands that the Securities are being offered
  and sold to it in reliance upon 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 the Buyer’s compliance with, the representations,
  warranties, agreements, acknowledgments and understandings of the Buyer set
  forth herein in order to determine the availability of such exemptions and the
  eligibility of the Buyer to acquire the Securities. 

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      d. Information.
  The Buyer and its advisors, if any, have been, and for so long as the Notes
  and Warrants remain outstanding will continue to be, furnished with all materials
  relating to the business, finances and operations of the Company and materials
  relating to the offer and sale of the Securities which have been requested by
  the Buyer or its advisors. The Buyer and its advisors, if any, have been, and
  for so long as the Notes and Warrants remain outstanding will continue to be,
  afforded the opportunity to ask questions of the Company. Notwithstanding the
  foregoing, the Company has not disclosed to the Buyer any material nonpublic
  information and will not disclose such information unless such information is
  disclosed to the public prior to or promptly following such disclosure to the
  Buyer. Neither such inquiries nor any other due diligence investigation conducted
  by Buyer or any of its advisors or representatives shall modify, amend or affect
  Buyer’s right to rely on the Company’s representations and warranties
  contained in Section 3 below. The Buyer understands that its investment in the
  Securities involves a significant degree of risk. 

      e. Governmental
  Review. The Buyer understands that no United States federal or state
  agency or any other government or governmental agency has passed upon or made
  any recommendation or endorsement of the Securities. 

      f. Transfer
  or Re-sale. The Buyer understands that (i) except as provided in the
  Registration Rights Agreement, the sale or re-sale of the Securities has not
  been and is not being registered under the 1933 Act or any applicable state
  securities laws, and the Securities may not be transferred unless (a) the Securities
  are sold pursuant to an effective registration statement under the 1933 Act,
  (b) the Buyer shall have delivered to the Company an opinion of counsel that
  shall be in form, substance and scope customary for opinions of counsel in comparable
  transactions to the effect that the Securities to be sold or transferred may
  be sold or transferred pursuant to an exemption from such registration, which
  opinion shall be accepted by the Company, (c) the Securities are sold or transferred
  to an “affiliate” (as defined in Rule 144 promulgated under the
  1933 Act (or a successor rule) (“Rule 144”)) of the Buyer
  who agrees to sell or otherwise transfer the Securities only in accordance with
  this Section 2(f) and who is an Accredited Investor, (d) the Securities are
  sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation
  S under the 1933 Act (or a successor rule) (“Regulation S”),
  and the Buyer shall have delivered to the Company an opinion of counsel that
  shall be in form, substance and scope customary for opinions of counsel in corporate
  transactions, which opinion shall be accepted by the Company provided that it
  complies with the preceding requirements; (ii) any sale of such Securities made
  in reliance on Rule 144 may be made only in accordance with the terms of said
  Rule and further, if said Rule is not applicable, any re-sale of such Securities
  under circumstances in which the seller (or the person through whom the sale
  is made) may be deemed to be an underwriter (as that term is defined in the
  1933 Act) may require compliance with some other exemption under the 1933 Act
  or the rules and regulations of the SEC thereunder; and (iii) neither the Company
  nor any other person is under any obligation to register such Securities under
  the 1933 Act or any state securities laws or to comply with the terms and conditions
  of any exemption thereunder (in each case, other than pursuant to the Registration
  Rights Agreement). Notwithstanding the foregoing or anything else contained
  herein to the contrary, the Securities may be pledged as collateral in connection
  with a bona fide margin account or other lending arrangement.
  In the event that the Company does not accept the opinion of counsel provided
  by the Buyer that complies with the requirements of this Section 2(f) with respect
  to the transfer of Securities pursuant to an exemption from registration, such
  as Rule 144 or Regulation S, within 

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 three (3) business days of delivery of the opinion to the
  Company, the Company shall pay to the Buyer liquidated damages of three percent
  (3%) of the outstanding amount of the Notes per month plus accrued and unpaid
  interest on the Notes, prorated for partial months, in cash or shares at the
  option of the Company (“Standard Liquidated Damages Amount”).
  If the Company elects to be pay the Standard Liquidated Damages Amount in shares
  of Common Stock, such shares shall be issued at the Conversion Price at the
  time of payment. 

      g. Legends.
  The Buyer understands that the Notes and the Warrants and, until such time as
  the Conversion Shares and Warrant Shares have been registered under the 1933
  Act as contemplated by the Registration Rights Agreement or otherwise may be
  sold pursuant to Rule 144 or Regulation S without any restriction as to the
  number of securities as of a particular date that can then be immediately sold,
  the Conversion Shares and Warrant Shares may bear a restrictive legend in substantially
  the following form (and a stop-transfer order may be placed against transfer
  of the certificates for such Securities):

	 	"The securities represented by this certificate have not been registered
      under the Securities Act of 1933, as amended. The securities may not be
      sold, transferred or assigned in the absence of an effective registration
      statement for the 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 said Act or unless
      sold pursuant to Rule 144 or Regulation S under said Act."	 

     The legend set forth above shall
  be removed and the Company shall issue a certificate without such legend to
  the holder of any Security upon which it is stamped, if, unless otherwise required
  by applicable state securities laws, (a) such Security is registered for sale
  under an effective registration statement filed under the 1933 Act or otherwise
  may be sold pursuant to Rule 144 or Regulation S without any restriction as
  to the number of securities as of a particular date that can then be immediately
  sold, or (b) such holder provides the Company with an opinion of counsel, in
  form, substance and scope customary for opinions of counsel in comparable transactions,
  to the effect that a public sale or transfer of such Security may be made without
  registration under the 1933 Act, which opinion shall be accepted by the Company
  so that the sale or transfer is effected or (c) such holder provides the Company
  with reasonable assurances that such Security can be sold pursuant to Rule 144
  or Regulation S. The Buyer agrees to sell all Securities, including those represented
  by a certificate(s) from which the legend has been removed, in compliance with
  applicable prospectus delivery requirements, if any. 

      h. Authorization;
  Enforcement. This Agreement and the 

 Registration Rights Agreement have been duly and validly authorized.
  This Agreement has been duly executed and delivered on behalf of the Buyer,
  and this Agreement constitutes, and upon execution and delivery by the Buyer
  of the Registration Rights Agreement, such agreement will constitute, valid
  and binding agreements of the Buyer enforceable in accordance with their terms.

      i. Residency.
  The Buyer is a resident of the jurisdiction set forth immediately below such
  Buyer’s name on the signature pages hereto. 

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      j. Foreign Investor
  Representation. Each Buyer hereby represents that it has satisfied
  itself as to the full observance of the laws of its jurisdiction in connection
  with any invitation to subscribe for the Securities or any use of this Agreement,
  including (i) the legal requirements within its jurisdiction for the purchase
  of the Securities, (ii) any foreign exchange restrictions applicable to such
  purchase, (iii) any governmental or other consents that may need to be obtained,
  and (iv) the income tax and other tax consequences, if any, that may be relevant
  to the purchase, holding, redemption, sale or transfer of the Securities. The
  Buyer's subscription and payment for, and its continued beneficial ownership
  of the Securities, will not violate any applicable securities or other laws
  of its jurisdiction. The funds used to purchase the Securities do not violate
  the anti-money laundering provisions of the Money Laundering Control Act of
  1986 or the Bank Secrecy Act of 1970, as amended by the USA Patriot Act of 2001.

       3. REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY.

  Except as set forth in the Disclosure Schedule or in the SEC Documents (as defined
  in Section 3(g) below), and from and after the effective date of the merger
  (the “Merger Effective Date”) between Snocone Systems Inc.,
  WYD Acquisition Corp. and Who’s Your Daddy, Inc. pursuant to that Agreement
  and Plan of Merger dated April 1, 2005, the Company represents and warrants
  to each Buyer that: 

      a. Organization
  and Qualification. The Company and each of its Subsidiaries (as defined
  below), if any, is a corporation duly organized, validly existing and in good
  standing under the laws of the jurisdiction in which it is incorporated, with
  full power and authority (corporate and other) to own, lease, use and operate
  its properties and to carry on its business as and where now owned, leased,
  used, operated and conducted. Schedule 3(a) sets forth a list of all
  of the Subsidiaries of the Company and the jurisdiction in which each is incorporated.
  The Company and each of its Subsidiaries is duly qualified as a foreign corporation
  to do business and is in good standing in every jurisdiction in which its ownership
  or use of property or the nature of the business conducted by it makes such
  qualification necessary except where the failure to be so qualified or in good
  standing would not have a Material Adverse Effect. “Material Adverse
  Effect” means any of (i) a material and adverse effect on the legality,
  validity or enforceability of any document executed in connection with this
  financing, (ii) a material and adverse effect on the results of operations,
  assets, prospects, business or condition (financial or otherwise) of the Company
  and the Subsidiaries, taken as a whole, or (iii) an adverse impairment to the
  Company’s ability to perform under any of the documents executed in connection
  with this financing. “Subsidiaries” means any corporation
  or other organization, whether incorporated or unincorporated, in which the
  Company owns, directly or indirectly, any equity or other ownership interest.

      b. Authorization;
  Enforcement. (i) The Company has all requisite corporate power and authority
  to enter into and perform this Agreement, the Registration Rights Agreement,
  the Notes and the Warrants and to consummate the transactions contemplated hereby
  and thereby and to issue the Securities, in accordance with the terms hereof
  and thereof, (ii) the execution and delivery of this Agreement, the Registration
  Rights Agreement, the Notes and the Warrants by the Company and the consummation
  by it of the transactions contemplated hereby and thereby (including without
  limitation, the issuance of the Notes and the Warrants and the issuance and
  reservation for issuance of the Conversion Shares and Warrant Shares issuable

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 upon conversion or exercise thereof) have been duly authorized
  by the Company’s Board of Directors and no further consent or authorization
  of the Company, its Board of Directors, or its shareholders is required, (iii)
  this Agreement has been duly executed and delivered by the Company by its authorized
  representative, and such authorized representative is the true and official
  representative with authority to sign this Agreement and the other documents
  executed in connection herewith and bind the Company accordingly, and (iv) this
  Agreement constitutes, and upon execution and delivery by the Company of the
  Registration Rights Agreement, the Notes and the Warrants, each of such instruments
  will constitute, a legal, valid and binding obligation of the Company enforceable
  against the Company in accordance with its terms except: (i) as limited by applicable
  bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or
  other laws of general application relating to or affecting the enforcement of
  creditors' rights generally; (ii) as limited by laws relating to the availability
  of specific performance, injunctive relief, or other equitable remedies; or
  (iii) to the extent the indemnification provisions contained in the Registration
  Rights Agreement may be limited by applicable federal or state securities laws.

      c. Capitalization.
  As of the date hereof, the authorized capital stock of the Company consists
  of (i) 100,000,000 shares of Common Stock, of which 11,729,949 shares are issued
  and outstanding, 0 shares are reserved for issuance pursuant to the Company’s
  stock option plans, 0 shares are reserved for issuance pursuant to securities
  (other than the Notes and the Warrants) exercisable for, or convertible into
  or exchangeable for shares of Common Stock and 15,128,505 shares are reserved
  for issuance upon conversion of the Notes and exercise of the Warrants (subject
  to (i) the Stockholder Approval (as defined in Section 4(l) and (ii) adjustment
  pursuant to the Company’s covenant set forth in Section 4(h) below); and
  (iii) 20,000,000 shares of preferred stock, of which 0 shares are issued and
  outstanding. All of such outstanding shares of capital stock are, or upon issuance
  will be, duly authorized, validly issued, fully paid and nonassessable. No shares
  of capital stock of the Company are subject to preemptive rights or any other
  similar rights of the shareholders of the Company or any liens or encumbrances
  imposed through the actions or failure to act of the Company. Except as disclosed
  in Schedule 3(c), as of the effective date of this Agreement, (i) there
  are no outstanding options, warrants, scrip, rights to subscribe for, puts,
  calls, rights of first refusal, agreements, understandings, claims or other
  commitments or rights of any character whatsoever relating to, or securities
  or rights convertible into or exchangeable for any shares of capital stock of
  the Company or any of its Subsidiaries, or arrangements by which the Company
  or any of its Subsidiaries is or may become bound to issue additional shares
  of capital stock of the Company or any of its Subsidiaries, (ii) there are no
  agreements or arrangements under which the Company or any of its Subsidiaries
  is obligated to register the sale of any of its or their securities under the
  1933 Act (except the Registration Rights Agreement) and (iii) there are no anti-dilution
  or price adjustment provisions contained in any security issued by the Company
  (or in any agreement providing rights to security holders) that will be triggered
  by the issuance of the Notes, the Warrants, the Conversion Shares or Warrant
  Shares. The Company has furnished to the Buyer true and correct copies of the
  Company’s Articles of Incorporation as in effect on the date hereof (“Articles
  of Incorporation”), the Company’s By-laws, as in effect on the
  date hereof (the “Bylaws”), and the terms of all securities
  convertible into or exercisable for Common Stock of the Company and the material
  rights of the holders thereof in respect thereto. The Company shall provide
  the Buyer with a written update of this representation signed by the Company’s
  Chief Executive or Chief Financial Officer on behalf of the Company as of the
  Closing Date. 

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      d. Issuance
  of Shares. Subject to Stockholder Approval (as defined in Section 4(n)),
  the Conversion Shares and Warrant Shares are duly authorized and reserved for
  issuance and, upon conversion of the Notes and exercise of the Warrants in accordance
  with their respective terms, will be validly issued, fully paid and non-assessable,
  and free from all taxes, liens, claims and encumbrances with respect to the
  issue thereof and shall not be subject to preemptive rights or other similar
  rights of shareholders of the Company and will not impose personal liability
  upon the holder thereof. 

      e. Acknowledgment
  of Dilution. The Company understands and acknowledges the potentially
  dilutive effect to the Common Stock upon the issuance of the Conversion Shares
  and Warrant Shares upon conversion of the Note or exercise of the Warrants.
  The Company further acknowledges that its obligation to issue Conversion Shares
  and Warrant Shares upon conversion of the Notes or exercise of the Warrants
  in accordance with this Agreement, the Notes and the Warrants is absolute and
  unconditional regardless of the dilutive effect that such issuance may have
  on the ownership interests of other shareholders of the Company. 

      f. No Conflicts.
  Subject to Stockholder Approval, the execution, delivery and performance of
  this Agreement, the Registration Rights Agreement, the Notes and the Warrants
  by the Company and the consummation by the Company of the transactions contemplated
  hereby and thereby (including, without limitation, the issuance and reservation
  for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
  with or result in a violation of any provision of the Articles of Incorporation
  or By-laws or (ii) violate or conflict with, or result in a breach of any provision
  of, or constitute a default (or an event which with notice or lapse of time
  or both could become a default) under, or give to others any rights of termination,
  amendment, acceleration or cancellation of, any agreement, indenture, patent,
  patent license or instrument to which the Company or any of its Subsidiaries
  is a party, or (iii) result in a violation of any law, rule, regulation, order,
  judgment or decree (including federal and state securities laws and regulations
  and regulations of any self-regulatory organizations to which the Company or
  its securities are subject) applicable to the Company or any of its Subsidiaries
  or by which any property or asset of the Company or any of its Subsidiaries
  is bound or affected (except for such conflicts, defaults, terminations, amendments,
  accelerations, cancellations and violations as would not, individually or in
  the aggregate, have a Material Adverse Effect). Neither the Company nor any
  of its Subsidiaries is in violation of its Articles of Incorporation, By-laws
  or other organizational documents and neither the Company nor any of its Subsidiaries
  is in default (and no event has occurred which with notice or lapse of time
  or both could put the Company or any of its Subsidiaries in default) under,
  and neither the Company nor any of its Subsidiaries has taken any action or
  failed to take any action that would give to others any rights of termination,
  amendment, acceleration or cancellation of, any agreement, indenture or instrument
  to which the Company or any of its Subsidiaries is a party or by which any property
  or assets of the Company or any of its Subsidiaries is bound or affected, except
  for possible defaults as would not, individually or in the aggregate, have a
  Material Adverse Effect. The businesses of the Company and its Subsidiaries,
  if any, are not being conducted, and shall not be conducted so long as a Buyer
  owns any of the Securities, in violation of any law, ordinance or regulation
  of any governmental entity. Except as specifically contemplated by this Agreement
  and as required under the 1933 Act and any applicable state securities laws,
  the Company is not required to obtain any consent, authorization or order of,
  or make any filing or registration with, 

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 any court, governmental agency, regulatory agency, self regulatory
  organization or stock market or any third party in order for it to execute,
  deliver or perform any of its obligations under this Agreement, the Registration
  Rights Agreement, the Notes or the Warrants in accordance with the terms hereof
  or thereof or to issue and sell the Notes and Warrants in accordance with the
  terms hereof and to issue the Conversion Shares upon conversion of the Notes
  and the Warrant Shares upon exercise of the Warrants. Except as disclosed in
  Schedule 3(f), all consents, authorizations, orders, filings and registrations
  which the Company is required to obtain pursuant to the preceding sentence have
  been obtained or effected on or prior to the date hereof. The Company is not
  in violation of the listing requirements of the Over-the-Counter Bulletin Board
  (the “OTCBB”) and does not reasonably anticipate that the
  Common Stock will be delisted by the OTCBB in the foreseeable future. The Company
  and its Subsidiaries are unaware of any facts or circumstances which might give
  rise to any of the foregoing.

      g. SEC Documents;
  Financial Statements. Except as disclosed in Schedule 3(g), the
  Company has timely filed all reports, schedules, forms, statements and other
  documents required to be filed by it with the SEC pursuant to the reporting
  requirements of the Securities Exchange Act of 1934, as amended (the “1934
  Act”) (all of the foregoing filed prior to the date hereof and all
  exhibits included therein and financial statements and schedules thereto and
  documents (other than exhibits to such documents) incorporated by reference
  therein, being hereinafter referred to herein as the “SEC Documents”).
  As of the Merger Effective Date, the Company had reasonable belief that, as
  of their respective dates, the SEC Documents complied in all material respects
  with the requirements of the 1934 Act and the rules and regulations of the SEC
  promulgated thereunder applicable to the SEC Documents, and none of the SEC
  Documents, at the time they were filed with the SEC, contained any untrue statement
  of a material fact or omitted to state a material fact required to be stated
  therein or necessary in order to make the statements therein, in light of the
  circumstances under which they were made, not misleading. As of the Merger Effective,
  the Company is not aware that any of the statements made in any such SEC Documents
  is, or has been, required to be amended or updated under applicable law (except
  for such statements as have been amended or updated in subsequent filings prior
  the date hereof). As of the Merger Effective Date, the Company had reasonable
  belief that, as of their respective dates, the financial statements of the Company
  included in the SEC Documents complied as to form in all material respects with
  applicable accounting requirements and the published rules and regulations of
  the SEC with respect thereto. Such financial statements have been prepared in
  accordance with United States generally accepted accounting principles, consistently
  applied, during the periods involved (except (i) as may be otherwise indicated
  in such financial statements or the notes thereto, or (ii) in the case of unaudited
  interim statements, to the extent they may not include footnotes or may be condensed
  or summary statements) and fairly present in all material respects the consolidated
  financial position of the Company and its consolidated Subsidiaries as of the
  dates thereof and the consolidated results of their operations and cash flows
  for the periods then ended (subject, in the case of unaudited statements, to
  normal year-end audit adjustments). Except as set forth in the financial statements
  of the Company included in the SEC Documents, the Company has no liabilities,
  contingent or otherwise, other than (i) liabilities incurred in the ordinary
  course of business subsequent to December 31, 2003 and (ii) obligations under
  contracts and commitments incurred in the ordinary course of business and not
  required under generally accepted accounting principles to be reflected in such
  financial statements, which, individually or in the aggregate, are not material
  to the financial condition or operating results of the Company. 

 8 

      h. Absence
  of Certain Changes. Since the Merger Effective Date, there has been
  no material adverse change and no material adverse development in the assets,
  liabilities, business, properties, operations, financial condition, results
  of operations or prospects of the Company or any of its Subsidiaries. 

      i. Absence
  of Litigation. There is no action, suit, claim, proceeding, inquiry
  or investigation before or by any court, public board, government agency, self-regulatory
  organization or body pending or, to the knowledge of the Company or any of its
  Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries,
  or their officers or directors in their capacity as such, that could have a
  Material Adverse Effect. Schedule 3(i) contains a complete list and summary
  description of any pending or threatened proceeding against or affecting the
  Company or any of its Subsidiaries, without regard to whether it would have
  a Material Adverse Effect. The Company and its Subsidiaries are unaware of any
  facts or circumstances which might give rise to any of the foregoing. 

      j. Patents,
  Copyrights, etc.

      (i) The Company
  and each of its Subsidiaries owns or possesses the requisite licenses or rights
  to use all patents, patent applications, patent rights, inventions, know-how,
  trade secrets, trademarks, trademark applications, service marks, service names,
  trade names and copyrights (“Intellectual Property”) necessary
  to enable it to conduct its business as now operated (and, except as set forth
  in Schedule 3(j) hereof, to the Company’s knowledge, as presently
  contemplated to be operated in the future); there is no claim or action by any
  person pertaining to, or proceeding pending, or to the Company’s knowledge
  threatened, which challenges the right of the Company or of a Subsidiary with
  respect to any Intellectual Property necessary to enable it to conduct its business
  as now operated (and, except as set forth in Schedule 3(j) hereof, to
  the Company’s knowledge, as presently contemplated to be operated in the
  future); to the Company’s knowledge, the Company’s or its Subsidiaries’
  current and intended products, services and processes do not infringe on any
  Intellectual Property or other rights held by any person; and the Company is
  unaware of any facts or circumstances which might give rise to any of the foregoing.
  The Company and each of its Subsidiaries have taken reasonable security measures
  to protect the secrecy, confidentiality and value of their Intellectual Property.

      k. No Materially
  Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries
  is subject to any charter, corporate or other legal restriction, or any judgment,
  decree, order, rule or regulation which in the judgment of the Company’s
  officers has or is expected in the future to have a Material Adverse Effect.
  Neither the Company nor any of its Subsidiaries is a party to any contract or
  agreement which in the judgment of the Company’s officers has or is expected
  to have a Material Adverse Effect. 

      l. Tax Status.
  Except as set forth on Schedule 3(l), the Company and each of its Subsidiaries
  has made or filed all federal, state and foreign income and all other tax returns,
  reports and declarations required by any jurisdiction to which it is subject
  (unless and only to the extent that the Company and each of its Subsidiaries
  has set aside on its books provisions reasonably adequate for the payment of
  all unpaid and unreported taxes) and has paid all taxes and other governmental
  assessments and charges that are material in amount, shown or 

 9 

 determined to be due on such returns, reports and declarations,
  except those being contested in good faith and has set aside on its books provisions
  reasonably adequate for the payment of all taxes for periods subsequent to the
  periods to which such returns, reports or declarations apply. There are no unpaid
  taxes in any material amount claimed to be due by the taxing authority of any
  jurisdiction, and the officers of the Company know of no basis for any such
  claim. The Company has not executed a waiver with respect to the statute of
  limitations relating to the assessment or collection of any foreign, federal,
  state or local tax. Except as set forth on Schedule 3(l), none of the
  Company’s tax returns is presently being audited by any taxing authority.

      m. Certain
  Transactions. Except as set forth on Schedule 3(m) and except
  for arm’s length transactions pursuant to which the Company or any of
  its Subsidiaries makes payments in the ordinary course of business upon terms
  no less favorable than the Company or any of its Subsidiaries could obtain from
  third parties and other than the grant of stock options disclosed on Schedule
  3(c), none of the officers, directors, or employees of the Company is presently
  a party to any transaction with the Company or any of its Subsidiaries (other
  than for services as employees, officers and directors), including any contract,
  agreement or other arrangement providing for the furnishing of services to or
  by, providing for rental of real or personal property to or from, or otherwise
  requiring payments to or from any officer, director or such employee or, to
  the knowledge of the Company, any corporation, partnership, trust or other entity
  in which any officer, director, or any such employee has a substantial interest
  or is an officer, director, trustee or partner. 

      n. Disclosure.
  All information relating to or concerning the Company or any of its Subsidiaries
  set forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
  hereof and otherwise in connection with the transactions contemplated hereby
  is true and correct in all material respects and the Company has not omitted
  to state any material fact necessary in order to make the statements made herein
  or therein, in light of the circumstances under which they were made, not misleading.
  No event or circumstance has occurred or exists with respect to the Company
  or any of its Subsidiaries or its or their business, properties, prospects,
  operations or financial conditions, which, under applicable law, rule or regulation,
  requires public disclosure or announcement by the Company but which has not
  been so publicly announced or disclosed (assuming for this purpose that the
  Company’s reports filed under the 1934 Act are being incorporated into
  an effective registration statement filed by the Company under the 1933 Act).

      o. Acknowledgment
  Regarding Buyers’ Purchase of Securities. The Company acknowledges
  and agrees that the Buyers are acting solely in the capacity of arm’s
  length purchasers with respect to this Agreement and the transactions contemplated
  hereby. The Company further acknowledges that no Buyer is acting as a financial
  advisor or fiduciary of the Company (or in any similar capacity) with respect
  to this Agreement and the transactions contemplated hereby and any statement
  made by any Buyer or any of their respective representatives or agents in connection
  with this Agreement and the transactions contemplated hereby is not advice or
  a recommendation and is merely incidental to the Buyers’ purchase of the
  Securities. The Company further represents to each Buyer that the Company’s
  decision to enter into this Agreement has been based solely on the independent
  evaluation of the Company and its representatives. 

 10 

      p. No Integrated
  Offering. Neither the Company, nor any of its affiliates, nor any person
  acting on its or their behalf, has directly or indirectly made any offers or
  sales in any security or solicited any offers to buy any security under circumstances
  that would require registration under the 1933 Act of the issuance of the Securities
  to the Buyers. The issuance of the Securities to the Buyers will not be integrated
  with any other issuance of the Company’s securities (past, current or
  future) for purposes of any shareholder approval provisions applicable to the
  Company or its securities. 

      q. No Brokers.
  Except as set forth in Schedule 3(q), the Company has taken no action
  which would give rise to any claim by any person for brokerage commissions,
  transaction fees or similar payments relating to this Agreement or the transactions
  contemplated hereby.

      r. Permits;
  Compliance. The Company and each of its Subsidiaries is in possession
  of all franchises, grants, authorizations, licenses, permits, easements, variances,
  exemptions, consents, certificates, approvals and orders necessary to own, lease
  and operate its properties and to carry on its business as it is now being conducted
  (collectively, the “Company Permits”), and there is no action
  pending or, to the knowledge of the Company, threatened regarding suspension
  or cancellation of any of the Company Permits. Neither the Company nor any of
  its Subsidiaries is in conflict with, or in default or violation of, any of
  the Company Permits, except for any such conflicts, defaults or violations which,
  individually or in the aggregate, would not reasonably be expected to have a
  Material Adverse Effect. Since the Merger Effective Date, neither the Company
  nor any of its Subsidiaries has received any notification with respect to possible
  conflicts, defaults or violations of applicable laws, except for notices relating
  to possible conflicts, defaults or violations, which conflicts, defaults or
  violations would not have a Material Adverse Effect. 

      s. Environmental
  Matters. 

      (i) Except as
  set forth in Schedule 3(s), there are, to the Company’s knowledge,
  with respect to the Company or any of its Subsidiaries or any predecessor of
  the Company, no past or present violations of Environmental Laws (as defined
  below), releases of any material into the environment, actions, activities,
  circumstances, conditions, events, incidents, or contractual obligations which
  may give rise to any common law environmental liability or any liability under
  the Comprehensive Environmental Response, Compensation and Liability Act of
  1980 or similar federal, state, local or foreign laws and neither the Company
  nor any of its Subsidiaries has received any notice with respect to any of the
  foregoing, nor is any action pending or, to the Company’s knowledge, threatened
  in connection with any of the foregoing. The term “Environmental Laws”
  means all federal, state, local or foreign laws relating to pollution or protection
  of human health or the environment (including, without limitation, ambient air,
  surface water, groundwater, land surface or subsurface strata), including, without
  limitation, laws relating to emissions, discharges, releases or threatened releases
  of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
  (collectively, “Hazardous Materials”) into the environment,
  or otherwise relating to the manufacture, processing, distribution, use, treatment,
  storage, disposal, transport or handling of Hazardous Materials, as well as
  all authorizations, codes, decrees, demands or demand letters, 

 11 

 injunctions, judgments, licenses, notices or notice letters,
  orders, permits, plans or regulations issued, entered, promulgated or approved
  thereunder. 

      (ii) Other than
  those that are or were stored, used or disposed of in compliance with applicable
  law, no Hazardous Materials are contained on or about any real property currently
  owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous
  Materials were released on or about any real property previously owned, leased
  or used by the Company or any of its Subsidiaries during the period the property
  was owned, leased or used by the Company or any of its Subsidiaries, except
  in the normal course of the Company’s or any of its Subsidiaries’
  business. 

      (iii) Except as
  set forth in Schedule 3(s), there are no underground storage tanks on
  or under any real property owned, leased or used by the Company or any of its
  Subsidiaries that are not in compliance with applicable law.

      t. Title
  to Property. The Company and its Subsidiaries have good and marketable
  title in fee simple to all real property and good and marketable title to all
  personal property owned by them which is material to the business of the Company
  and its Subsidiaries, in each case free and clear of all liens, encumbrances
  and defects except such as are described in Schedule 3(t) or such as
  would not have a Material Adverse Effect. Any real property and facilities held
  under lease by the Company and its Subsidiaries are held by them under valid,
  subsisting and enforceable leases with such exceptions as would not have a Material
  Adverse Effect. 

      u. Insurance.
  The Company and each of its Subsidiaries are insured by insurers of recognized
  financial responsibility against such losses and risks and in such amounts as
  management of the Company believes to be prudent and customary in the businesses
  in which the Company and its Subsidiaries are engaged. Neither the Company nor
  any such Subsidiary has any reason to believe that it will not be able to renew
  its existing insurance coverage as and when such coverage expires or to obtain
  similar coverage from similar insurers as may be necessary to continue its business
  at a cost that would not have a Material Adverse Effect. The Company has provided
  to Buyer true and correct copies of all policies relating to directors’
  and officers’ liability coverage, errors and omissions coverage, and commercial
  general liability coverage. 

      v. Internal
  Accounting Controls. The Company and each of its Subsidiaries maintain
  a system of internal accounting controls sufficient, in the judgment of the
  Company’s board of directors, to provide reasonable assurance that (i)
  transactions are executed in accordance with management’s general or specific
  authorizations, (ii) transactions are recorded as necessary to permit preparation
  of financial statements in conformity with generally accepted accounting principles
  and to maintain asset accountability, (iii) access to assets is permitted only
  in accordance with management’s general or specific authorization and
  (iv) the recorded accountability for assets is compared with the existing assets
  at reasonable intervals and appropriate action is taken with respect to any
  differences. 

      w. Foreign
  Corrupt Practices. Neither the Company, nor any of its Subsidiaries,
  nor any director, officer, agent, employee or other person acting on behalf
  of the 

 12 

 Company or any Subsidiary has, in the course of his actions
  for, or on behalf of, the Company, used any corporate funds for any unlawful
  contribution, gift, entertainment or other unlawful expenses relating to political
  activity; made any direct or indirect unlawful payment to any foreign or domestic
  government official or employee from corporate funds; violated or is in violation
  of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended,
  or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
  payment to any foreign or domestic government official or employee. 

      x. Solvency.
  The Company (after giving effect to the transactions contemplated by this Agreement)
  is solvent (i.e., its assets have a fair market value in excess of the
  amount required to pay its probable liabilities on its existing debts as they
  become absolute and matured) and currently the Company has no information that
  would lead it to reasonably conclude that the Company would not, after giving
  effect to the transaction contemplated by this Agreement, have the ability to,
  nor does it intend to take any action that would impair its ability to, pay
  its debts from time to time incurred in connection therewith as such debts mature.

      y. No Investment
  Company. The Company is not, and upon the issuance and sale of the Securities
  as contemplated by this Agreement will not be an “investment company”
  required to be registered under the Investment Company Act of 1940 (an “Investment
  Company”). The Company is not controlled by an Investment Company.

      z. Certain
  Registration Matters. Assuming the accuracy of the Buyers' representations
  and warranties set forth in Section 3, no registration under the Securities
  Act is required for the offer and sale of the Conversion Shares and Warrant
  Shares by the Company to the Buyers under the transaction documents. Except
  as specified in Schedule 3(z), the Company has not granted or agreed
  to grant to any Person any rights (including "piggy-back" registration rights)
  to have any securities of the Company registered with the Commission or any
  other governmental authority that have not been satisfied. 

      aa. Breach
  of Representations and Warranties by the Company. If the Company breaches
  any of the representations or warranties set forth in this Section 3, and in
  addition to any other remedies available to the Buyers pursuant to this Agreement,
  the Company shall pay to the Buyer the Standard Liquidated Damages Amount in
  cash or in shares of Common Stock at the option of the Company, until such breach
  is cured; provided, however, that the Company shall be entitled to update the
  representations and warranties set forth in Section3 for each closing of the
  subsequent investments as set forth in Section 4(l) and such updates shall not
  be considered breaches of the representations and warranties hereunder. If the
  Company elects to pay the Standard Liquidated Damages Amounts in shares of Common
  Stock, such shares shall be issued at the Conversion Price at the time of payment.

       4. COVENANTS.

      a. Best
  Efforts. The parties shall use their best efforts to satisfy timely
  each of the conditions described in Section 6 and 7 of this Agreement.

      b. Form
  D; Blue Sky Laws. The Company agrees to file a Form D with respect to
  the Securities as required under Regulation D and to provide a copy thereof
  to 

 13 

 each Buyer promptly after such filing. The Company shall,
  on or before the Closing Date, take such action as the Company shall reasonably
  determine is necessary to qualify the Securities for sale to the Buyers at the
  applicable closing pursuant to this Agreement under applicable securities or
  “blue sky” laws of the states of the United States (or to obtain
  an exemption from such qualification), and shall provide evidence of any such
  action so taken to each Buyer on or prior to the Closing Date unless such filings
  may be appropriately made after the Closing Date, and such filings shall be
  effected within the requisite time periods 

      c. Reporting
  Status; Eligibility to Use Form S-3, SB-2 or Form S-1. The Company’s
  Common Stock is registered under Section 12(g) of the 1934 Act. The Company
  represents and warrants that it meets the requirements for the use of Form S-3
  (or if the Company is not eligible for the use of Form S-3 as of the Filing
  Date (as defined in the Registration Rights Agreement), the Company may use
  the form of registration for which it is eligible at that time) for registration
  of the sale by the Buyer of the Registrable Securities (as defined in the Registration
  Rights Agreement). So long as the Buyer beneficially owns any of the Securities,
  the Company shall timely file all reports required to be filed with the SEC
  pursuant to the 1934 Act, and the Company shall not terminate its status as
  an issuer required to file reports under the 1934 Act even if the 1934 Act or
  the rules and regulations thereunder would permit such termination. The Company
  further agrees to file all reports required to be filed by the Company with
  the SEC in a timely manner so as to become eligible, and thereafter to maintain
  its eligibility, for the use of Form S-3. The Company shall issue a press release
  describing the material terms of the transaction contemplated hereby as soon
  as practicable following the Closing Date but in no event more than two (2)
  business days of the Closing Date, which press release shall be subject to prior
  review by the Buyers. The Company agrees that such press release shall not disclose
  the name of the Buyers unless expressly consented to in writing by the Buyers
  or unless required by applicable law or regulation, and then only to the extent
  of such requirement. 

      d. Use of
  Proceeds. The Company shall use the net proceeds from the sale of the
  Notes and the Warrants in the manner set forth in Schedule 4(d) attached
  hereto and made a part hereof and shall not, directly or indirectly, use such
  proceeds for (i) any loan to or investment in any other corporation, partnership,
  enterprise or other person (except in connection with its currently existing
  direct or indirect Subsidiaries); (ii) the satisfaction of any portion of the
  Company’s debt (other than payment of trade payables and accrued expenses
  in the ordinary course of the Company’s business and consistent with prior
  past practices), or (iii) the redemption of any Common Stock. 

      e. Future
  Offerings. Subject to the exceptions described below, the Company will
  not, without the prior written consent of a majority-in-interest of the Buyers,
  negotiate or contract with any party to obtain additional equity financing (including
  debt financing with an equity component) that involves (A) the issuance of Common
  Stock at a discount to the market price of the Common Stock on the date of issuance
  (taking into account the value of any warrants or options to acquire Common
  Stock issued in connection therewith) or (B) the issuance of convertible securities
  that are convertible into an indeterminate number of shares of Common Stock
  or (C) the issuance of warrants during the period (the “Lock-up Period”)
  beginning on the Closing Date and ending on the later of (i) two hundred seventy
  (270) days from the Closing Date and (ii) one hundred eighty (180) days from
  the date the Registration 

 14 

 Statement (as defined in the Registration Rights Agreement)
  is declared effective (plus any days in which sales cannot be made thereunder).
  In addition, subject to the exceptions described below, the Company will not
  conduct any equity financing (including debt with an equity component) (“Future
  Offerings”) during the period beginning on the Closing Date and ending
  two (2) years after the end of the Lock-up Period unless it shall have first
  delivered to each Buyer, at least twenty (20) business days prior to the closing
  of such Future Offering, written notice describing the proposed Future Offering,
  including the terms and conditions thereof and proposed definitive documentation
  to be entered into in connection therewith, and providing each Buyer an option
  during the fifteen (15) day period following delivery of such notice to purchase
  its pro rata share (based on the ratio that the aggregate principal amount of
  Notes purchased by it hereunder bears to the aggregate principal amount of Notes
  purchased hereunder) of the securities being offered in the Future Offering
  on the same terms as contemplated by such Future Offering (the limitations referred
  to in this sentence and the preceding sentence are collectively referred to
  as the “Capital Raising Limitations”).  In the event
  the terms and conditions of a proposed Future Offering are amended in any respect
  after delivery of the notice to the Buyers concerning the proposed Future Offering,
  the Company shall deliver a new notice to each Buyer describing the amended
  terms and conditions of the proposed Future Offering and each Buyer thereafter
  shall have an option during the fifteen (15) day period following delivery of
  such new notice to purchase its pro rata share of the securities being offered
  on the same terms as contemplated by such proposed Future Offering, as amended.
  The foregoing sentence shall apply to successive amendments to the terms and
  conditions of any proposed Future Offering. The Capital Raising Limitations
  shall not apply to any transaction involving (i) issuances of securities 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, or (ii) issuances of securities 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. The Capital Raising Limitations also shall not apply
  to the issuance of securities upon exercise or conversion of the Company’s
  options, warrants or other convertible securities outstanding as of the date
  hereof or to the grant of additional options or warrants, or the issuance of
  additional securities, under any Company stock option or restricted stock plan
  approved by the shareholders of the Company.

      f. Expenses.
  At the Closing, the Company shall reimburse Buyers for expenses incurred by
  them in connection with the negotiation, preparation, execution, delivery and
  performance of this Agreement and the other agreements to be executed in connection
  herewith (“Documents”), including, without limitation, attorneys’
  and consultants’ fees and expenses, transfer agent fees, fees for stock
  quotation services, fees relating to any amendments or modifications of the
  Documents or any consents or waivers of provisions in the Documents, fees for
  the preparation of opinions of counsel, escrow fees, and costs of restructuring
  the transactions contemplated by the Documents. When possible, the Company must
  pay these fees directly, otherwise the Company must make immediate payment for
  reimbursement to the Buyers for all fees and expenses immediately upon written
  notice by the Buyer or the submission of an invoice by the Buyer If the Company
  fails to reimburse the Buyer in full within three (3) business days of the written
  notice or submission of invoice by the Buyer, 

 15 

 the Company shall pay interest on the total amount of fees
  to be reimbursed at a rate of 15% per annum. 

      g. Financial
  Information. The Company agrees to send the following reports to each
  Buyer until such Buyer transfers, assigns, or sells all of the Securities: (i)
  within ten (10) days after the filing with the SEC, a copy of its Annual Report
  on Form 10-KSB its Quarterly Reports on Form 10-QSB and any Current Reports
  on Form 8-K; (ii) within one (1) day after release, copies of all press releases
  issued by the Company or any of its Subsidiaries; and (iii) contemporaneously
  with the making available or giving to the shareholders of the Company, copies
  of any notices or other information the Company makes available or gives to
  such shareholders. 

      h. Authorization
  and Reservation of Shares. Subject to Stockholder Approval, the Company
  shall at all times have authorized, and reserved for the purpose of issuance,
  a sufficient number of shares of Common Stock to provide for the full conversion
  or exercise of the outstanding Notes and Warrants and issuance of the Conversion
  Shares and Warrant Shares in connection therewith (based on the Conversion Price
  of the Notes or Exercise Price of the Warrants in effect from time to time)
  and as otherwise required by the Notes. The Company shall not reduce the number
  of shares of Common Stock reserved for issuance upon conversion of Notes and
  exercise of the Warrants without the consent of each Buyer. The Company shall
  at all times maintain the number of shares of Common Stock so reserved for issuance
  at an amount (“Reserved Amount”) equal to no less than two
  (2) times the number that is then actually issuable upon full conversion of
  the Notes and Additional Notes and upon exercise of the Warrants and the Additional
  Warrants (based on the Conversion Price of the Notes or the Exercise Price of
  the Warrants in effect from time to time). If at any time the number of shares
  of Common Stock authorized and reserved for issuance (“Authorized and
  Reserved Shares”) is below the Reserved Amount, the Company will promptly
  take all corporate action necessary to authorize and reserve a sufficient number
  of shares, including, without limitation, calling a special meeting of shareholders
  to authorize additional shares to meet the Company’s obligations under
  this Section 4(h), in the case of an insufficient number of authorized shares,
  obtain shareholder approval of an increase in such authorized number of shares,
  and voting the management shares of the Company in favor of an increase in the
  authorized shares of the Company to ensure that the number of authorized shares
  is sufficient to meet the Reserved Amount. If the Company fails to obtain such
  shareholder approval within thirty (30) days following the date on which the
  number of Reserved Amount exceeds the Authorized and Reserved Shares, the Company
  shall pay to the Borrower the Standard Liquidated Damages Amount, in cash or
  in shares of Common Stock at the option of the Buyer. If the Buyer elects to
  be paid the Standard Liquidated Damages Amount in shares of Common Stock, such
  shares shall be issued at the Conversion Price at the time of payment. In order
  to ensure that the Company has authorized a sufficient amount of shares to meet
  the Reserved Amount at all times, the Company must deliver to the Buyer at the
  end of every month (beginning the end of the month after Closing) a list detailing
  (1) the current amount of shares authorized by the Company and reserved for
  the Buyer; and (2) amount of shares issuable upon conversion of the Notes and
  upon exercise of the Warrants and as payment of interest accrued on the Notes
  for one year. If the Company fails to provide such list within five (5) business
  days of the end of each month, the Company shall pay the Standard Liquidated
  Damages Amount, in cash or in shares of Common Stock at the option of the Buyer,
  until the list is delivered. If the 

 16 

 Buyer elects to be paid the Standard Liquidated Damages Amount
  in shares of Common Stock, such shares shall be issued at the Conversion Price
  at the time of payment. 

      i. Listing.
  The Company shall promptly secure the listing of the Conversion Shares and Warrant
  Shares 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) and, so long as any Buyer owns any of the Securities, shall
  maintain, so long as any other shares of Common Stock shall be so listed, such
  listing of all Conversion Shares and Warrant Shares from time to time issuable
  upon conversion of the Notes or exercise of the Warrants. The Company will obtain
  and, so long as any Buyer owns any of the Securities, maintain the listing and
  trading of its Common Stock on the OTCBB or any equivalent replacement exchange,
  the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap
  Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”),
  or the American Stock Exchange (“AMEX”) and will comply in
  all respects with the Company’s reporting, filing and other obligations
  under the bylaws or rules of the National Association of Securities Dealers
  (“NASD”) and such exchanges, as applicable. The Company shall
  promptly provide to each Buyer copies of any notices it receives from the OTCBB
  and any other exchanges or quotation systems on which the Common Stock is then
  listed regarding the continued eligibility of the Common Stock for listing on
  such exchanges and quotation systems. 

      j. Corporate
  Existence. So long as a Buyer beneficially owns any Notes or Warrants,
  the Company shall maintain its corporate existence and shall not sell all or
  substantially all of the Company’s assets, except in the event of a merger
  or consolidation or sale of all or substantially all of the Company’s
  assets, where the surviving or successor entity in such transaction (i) assumes
  the Company’s obligations hereunder and under the agreements and instruments
  entered into in connection herewith and (ii) is a publicly traded corporation
  whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
  NYSE or AMEX. 

      k. No Integration.
  The Company shall not make any offers or sales of any security (other than the
  Securities) under circumstances that would require registration of the Securities
  being offered or sold hereunder under the 1933 Act or cause the offering of
  the Securities to be integrated with any other offering of securities by the
  Company for the purpose of any stockholder approval provision applicable to
  the Company or its securities. 

      l. Subsequent
  Investment. The Company and the Buyers agree that, upon the filing by
  the Company of the Registration Statement to be filed pursuant to the Registration
  Rights Agreement (the “Filing Date”), the Buyers shall purchase
  additional Notes (the “Filing Notes”) in the aggregate principal
  amount of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000)
  and additional warrants (the “Filing Warrants”) to purchase
  an aggregate of 876,168 shares of Common Stock, for an aggregate purchase price
  of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000), with
  the closing of such purchase to occur within five (5) days of the Filing Date;
  provided, however, that the obligation of each Buyer to purchase
  the Filing Notes and the Filing Warrants is subject to the satisfaction, at
  or before the closing of such purchase and sale, of the conditions set forth
  in Section 7. The Company and the Buyers further agree that, upon the declaration
  of effectiveness of the Registration Statement to be filed pursuant to the Registration
  Rights Agreement (the “Effective 

 17 

 Date”), the Buyers shall purchase additional
  notes (the “Effectiveness Notes” and, collectively with the
  Filing Notes, the “Additional Notes”) in the aggregate principal
  amount of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000)
  and additional warrants (the “Effectiveness Warrants” and,
  collectively with the Filing Warrants, the “Additional Warrants”)
  to purchase an aggregate of 876,168 shares of Common Stock, for an aggregate
  purchase price of One Million Two Hundred and Fifty Thousand Dollars ($1,250,000),
  with the closing of such purchase to occur within five (5) days of the Effective
  Date; provided, however, that the obligation of each Buyer to
  purchase the Additional Notes and the Additional Warrants is subject to the
  satisfaction, at or before the closing of such purchase and sale, of the conditions
  set forth in Section 7; and, provided, further, that there shall
  not have been a Material Adverse Effect as of such effective date. The terms
  of the Additional Notes and the Additional Warrants shall be identical to the
  terms of the Notes and Warrants, as the case may be, to be issued on the Closing
  Date. The Common Stock underlying the Additional Notes and the Additional Warrants
  shall be Registrable Securities (as defined in the Registration Rights Agreement)
  and shall be included in the Registration Statement to be filed pursuant to
  the Registration Rights Agreement. 

      m. Key Man
  Insurance. The Company shall use its best efforts to obtain,
  on or before ten (10) business days from the date hereof, key man life insurance
  on all of the Company’s key executive officers. 

      n. Stockholder
  Approval. The Company shall file a proxy or information statement with
  the SEC no later than June 1, 2005 and use its best efforts to obtain, on or
  before August 30, 2005, such approvals of the Company’s stockholders as
  may be required to issue all of the shares of Common Stock issuable upon conversion
  or exercise of, or otherwise with respect to, the Notes and the Warrants in
  accordance with Nevada law and any applicable rules or regulations of the OTCBB
  and Nasdaq, either through a reverse stock split of the Common Stock or an increase
  in authorized capital (the “Stockholder Approval”). The Company
  shall furnish to each Buyer and its legal counsel promptly (but in no event
  less than two (2) business days) before the same is filed with the SEC, one
  copy of the proxy or information statement and any amendment thereto, and shall
  deliver to each Buyer promptly each letter written by or on behalf of the Company
  to the SEC or the staff of the SEC, and each item of correspondence from the
  SEC or the staff of the SEC, in each case relating to such proxy or information
  statement (other than any portion thereof which contains information for which
  the Company has sought confidential treatment). The Company will promptly (but
  in no event more than three (3) business days) respond to any and all comments
  received from the SEC (which comments shall promptly be made available to each
  Buyer). The Company shall comply with the filing and disclosure requirements
  of Section 14 under the 1934 Act in connection with the Stockholder Approval.
  The Company represents and warrants that its Board of Directors has approved
  the proposal contemplated by this Section 4(l) and shall indicate such approval
  in the proxy or information statement used in connection with the Stockholder
  Approval. 

      o. Restriction
  on Short Sales. The Buyers agree that, so long as any of the Notes remain
  outstanding, but in no event less than two (2) years from the date hereof, the
  Buyers will not enter into or effect any “short sales” (as such
  term is defined in Rule 3b-3 of the 1934 Act) of the Common Stock or hedging
  transaction which establishes a net short position with respect to the Common
  Stock. 

 18 

      p. Breach
  of Covenants. If the Company breaches any of the covenants set
  forth in this Section 4, and in addition to any other remedies available to
  the Buyers pursuant to this Agreement, the Company shall pay to the Buyers the
  Standard Liquidated Damages Amount, in cash or in shares of Common Stock at
  the option of the Company, until such breach is cured. If the Company elects
  to pay the Standard Liquidated Damages Amount in shares, such shares shall be
  issued at the Conversion Price at the time of payment. 

      5. TRANSFER
  AGENT INSTRUCTIONS. The Company shall issue irrevocable instructions
  to its transfer agent to issue certificates, registered in the name of each
  Buyer or its nominee, for the Conversion Shares and Warrant Shares in such amounts
  as specified from time to time by each Buyer to the Company upon conversion
  of the Notes or exercise of the Warrants in accordance with the terms thereof
  (the “Irrevocable Transfer Agent Instructions”). Prior to
  registration of the Conversion Shares and Warrant Shares under the 1933 Act
  or the date on which the Conversion Shares and Warrant Shares may be sold pursuant
  to Rule 144 without any restriction as to the number of Securities as of a particular
  date that can then be immediately sold, all such certificates shall bear the
  restrictive legend specified in Section 2(g) of this Agreement. The Company
  warrants that no instruction other than the Irrevocable Transfer Agent Instructions
  referred to in this Section 5, and stop transfer instructions to give effect
  to Section 2(f) hereof (in the case of the Conversion Shares and Warrant Shares,
  prior to registration of the Conversion Shares and Warrant Shares under the
  1933 Act or the date on which the Conversion Shares and Warrant Shares may be
  sold pursuant to Rule 144 without any restriction as to the number of Securities
  as of a particular date that can then be immediately sold), will be given by
  the Company to its transfer agent and that the Securities shall otherwise be
  freely transferable on the books and records of the Company as and to the extent
  provided in this Agreement and the Registration Rights Agreement. Nothing in
  this Section shall affect in any way the Buyer’s obligations and agreement
  set forth in Section 2(g) hereof to comply with all applicable prospectus delivery
  requirements, if any, upon re-sale of the Securities. If a Buyer provides the
  Company with (i) an opinion of counsel in form, substance and scope customary
  for opinions in comparable transactions, to the effect that a public sale or
  transfer of such Securities may be made without registration under the 1933
  Act and such sale or transfer is effected or (ii) the Buyer provides reasonable
  assurances that the Securities can be sold pursuant to Rule 144, the Company
  shall permit the transfer, and, in the case of the Conversion Shares and Warrant
  Shares, promptly instruct its transfer agent to issue one or more certificates,
  free from restrictive legend, in such name and in such denominations as specified
  by such Buyer. The Company acknowledges that a breach by it of its obligations
  hereunder will cause irreparable harm to the Buyers, by vitiating the intent
  and purpose of the transactions contemplated hereby. Accordingly, the Company
  acknowledges that the remedy at law for a breach of its obligations under this
  Section 5 may be inadequate and agrees, in the event of a breach or threatened
  breach by the Company of the provisions of this Section, that the Buyers shall
  be entitled, in addition to all other available remedies, to an injunction restraining
  any breach and requiring immediate transfer, without the necessity of showing
  economic loss and without any bond or other security being required. 

 19 

      6. CONDITIONS
  TO THE COMPANY’S OBLIGATION TO SELL.

 The obligation of the Company hereunder to issue and sell
  the Notes and Warrants to a Buyer at the Closing is subject to the satisfaction,
  at or before the Closing Date of each of the following conditions thereto, provided
  that these conditions are for the Company’s sole benefit and may be waived
  by the Company at any time in its sole discretion: 

      a. The applicable
  Buyer shall have executed this Agreement and the Registration Rights Agreement,
  and delivered the same to the Company. 

      b. The applicable
  Buyer shall have delivered the Purchase Price in accordance with Section 1(b)
  above. 

      c. The representations
  and warranties of the applicable Buyer shall be true and correct in all material
  respects as of the date when made and as of the Closing Date as though made
  at that time (except for representations and warranties that speak as of a specific
  date), and the applicable Buyer shall have performed, satisfied and complied
  in all material respects with the covenants, agreements and conditions required
  by this Agreement to be performed, satisfied or complied with by the applicable
  Buyer at or prior to the Closing Date.

      d. No litigation,
  statute, rule, regulation, executive order, decree, ruling or injunction shall
  have been enacted, entered, promulgated or endorsed by or in any court or governmental
  authority of competent jurisdiction or any self-regulatory organization having
  authority over the matters contemplated hereby which prohibits the consummation
  of any of the transactions contemplated by this Agreement. 

 7. CONDITIONS TO EACH BUYER’S OBLIGATION
  TO PURCHASE. The obligation of each Buyer hereunder to
  purchase the Notes and Warrants at the Closing is subject to the satisfaction,
  at or before the Closing Date of each of the following conditions, provided
  that these conditions are for such Buyer’s sole benefit and may be waived
  by such Buyer at any time in its sole discretion: 

      a. The Company
  shall have executed this Agreement and the Registration Rights Agreement, and
  delivered the same to the Buyer. 

      b. The Company
  shall have delivered to such Buyer duly executed Notes (in such denominations
  as the Buyer shall request) and Warrants in accordance with Section 1(b) above.

      c. The Irrevocable
  Transfer Agent Instructions, in form and substance satisfactory to a majority-in-interest
  of the Buyers, shall have been delivered to and acknowledged in writing by the
  Company’s Transfer Agent. 

      d. The representations
  and warranties of the Company shall be true and correct in all material respects
  as of the date when made and as of the Closing Date as though made at such time
  (except for representations and warranties that speak as of a specific date),
  provided that the Company may update its Disclosure Schedule for each Closing
  pursuant to Section 4(l), and the Company shall have performed, satisfied and
  complied in all material respects with the covenants, agreements and conditions
  required by this Agreement to be 

 20 

 performed, satisfied or complied with by the Company at or
  prior to the Closing Date. The Buyer shall have received a certificate or certificates,
  executed by the chief executive officer of the Company, dated as of the Closing
  Date, to the foregoing effect and as to such other matters as may be reasonably
  requested by such Buyer including, but not limited to certificates with respect
  to the Company’s Articles of Incorporation, By-laws and Board of Directors’
  resolutions relating to the transactions contemplated hereby. 

      e. No litigation,
  statute, rule, regulation, executive order, decree, ruling or injunction shall
  have been enacted, entered, promulgated or endorsed by or in any court or governmental
  authority of competent jurisdiction or any self-regulatory organization having
  authority over the matters contemplated hereby which prohibits the consummation
  of any of the transactions contemplated by this Agreement. 

      f. No event shall
  have occurred which could reasonably be expected to have a Material Adverse
  Effect on the Company. 

      g. The Conversion
  Shares and Warrant Shares shall have been authorized for quotation on the OTCBB
  and trading in the Common Stock on the OTCBB shall not have been suspended by
  the SEC or the OTCBB. 

      h. The Buyer shall
  have received an opinion of the Company’s counsel, dated as of the Closing
  Date, in form, scope and substance reasonably satisfactory to the Buyer and
  in substantially the same form as Exhibit “D” attached hereto.

      i. The Buyer shall
  have received an officer’s certificate described in Section 3(c) above,
  dated as of the Closing Date. 

      8. GOVERNING
  LAW; MISCELLANEOUS.

      a. Governing
  Law. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
  ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
  AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
  OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION
  OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT
  TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN
  CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
  PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
  OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
  UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
  SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
  SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
  PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN
  ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
  JURISDICTIONS BY SUIT ON 

 21 

 SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH
  DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE
  FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE
  PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE. 

      b. Counterparts;
  Signatures by Facsimile. This Agreement may be executed in one or more
  counterparts, each of which shall be deemed an original but all of which shall
  constitute one and the same agreement and shall become effective when counterparts
  have been signed by each party and delivered to the other party. This Agreement,
  once executed by a party, may be delivered to the other party hereto by facsimile
  transmission of a copy of this Agreement bearing the signature of the party
  so delivering this Agreement. 

      c. Headings.
  The headings of this Agreement are for convenience of reference only and shall
  not form part of, or affect the interpretation of, this Agreement.

      d. Severability.
  In the event that any provision of this Agreement is invalid or unenforceable
  under any applicable statute or rule of law, then such provision shall be deemed
  inoperative to the extent that it may conflict therewith and shall be deemed
  modified to conform with such statute or rule of law. Any provision hereof which
  may prove invalid or unenforceable under any law shall not affect the validity
  or enforceability of any other provision hereof. 

      e. Entire
  Agreement; Amendments. This Agreement and the instruments referenced
  herein contain the entire understanding of the parties with respect to the matters
  covered herein and therein and, except as specifically set forth herein or therein,
  neither the Company nor the Buyer makes any representation, warranty, covenant
  or undertaking with respect to such matters. Except as otherwise expressly provided,
  any term of this Agreement may be amended or waived (either generally or in
  a particular instance and either retroactively or prospectively) only with the
  written consent of the Company and majority-in-interest of the Buyers. Any amendment
  or waiver effected in accordance with this Section 8(e) shall be binding upon
  each Buyer and each transferee of the Securities (prior to conversion into Common
  Stock of the Company), and the Company. 

      f. Notices.
  Any notices required or permitted to be given under the terms of this Agreement
  shall be sent by certified or registered mail (return receipt requested) or
  delivered personally or by courier (including a recognized overnight delivery
  service) or by facsimile and shall be effective five days after being placed
  in the mail, if mailed by regular United States mail, or upon receipt, if delivered
  personally or by courier (including a recognized overnight delivery service)
  or by facsimile, in each case addressed to a party. The addresses for such communications
  shall be: 

 22

	 	If to the Company: 

       Snocone Systems Inc. 

        3131 Camino del Rio, N, Suite 1650

        San Diego, CA 92108

        Attention: Chief Executive Officer

        Telephone: (619) 284-4807 

        Facsimile: (619) 284-4344

       With a copy to: 

       Fish & Richardson, P.C. 

        12390 El Camino Real 

        San Diego, CA 92130 

        Attention: Edith A. Bauer, Esq. 

        Telephone: 858-678-5070 

        Facsimile: 858-678-5099 

     If to a Buyer: To the address set forth immediately
  below such Buyer’s name on the signature pages hereto.

	 	With copy to: 
	 	 

	 	Ballard Spahr Andrews & Ingersoll, LLP 

      1735 Market Street 

      51st Floor 

      Philadelphia, Pennsylvania 19103 

      Attention: Gerald J. Guarcini, Esq. 

      Telephone: 215-864-8625 

      Facsimile: 215-864-8999 

     Each party shall provide notice
  to the other party of any change in address. 

      g. Successors
  and Assigns. This Agreement shall be binding upon and inure to the benefit
  of the parties and their successors and assigns. Neither the Company nor any
  Buyer shall assign this Agreement or any rights or obligations hereunder without
  the prior written consent of the other. Notwithstanding the foregoing, subject
  to Section 2(f), any Buyer may assign its rights hereunder to any person that
  purchases Securities in a private transaction from a Buyer or to any of its
  “affiliates,” as that term is defined under the 1934 Act, without
  the consent of the Company. 

      h. Third
  Party Beneficiaries. This Agreement is intended for the benefit of the
  parties hereto and their respective permitted successors and assigns, and is
  not for the benefit of, nor may any provision hereof be enforced by, any other
  person. 

 23 

      i. Survival.
  The representations and warranties of the Company and the agreements and covenants
  set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder notwithstanding
  any due diligence investigation conducted by or on behalf of the Buyers. The
  Company agrees to indemnify and hold harmless each of the Buyers and all their
  officers, directors, employees and agents for loss or damage arising as a result
  of or related to any breach or alleged breach by the Company of any of its representations,
  warranties and covenants set forth in Sections 3 and 4 hereof or any of its
  covenants and obligations under this Agreement or the Registration Rights Agreement,
  including advancement of expenses as they are incurred. 

      j. Publicity.
  The Company and each of the Buyers shall have the right to review a reasonable
  period of time before issuance of any press releases, SEC, OTCBB or NASD filings,
  or any other public statements with respect to the transactions contemplated
  hereby; provided, however, that the Company shall be entitled,
  without the prior approval of each of the Buyers, to make any press release
  or SEC, OTCBB (or other applicable trading market) or NASD filings with respect
  to such transactions as is required by applicable law and regulations (although
  each of the Buyers shall be consulted by the Company in connection with any
  such press release prior to its release and shall be provided with a copy thereof
  and be given an opportunity to comment thereon). 

      k. Further
  Assurances. Each party shall do and perform, or cause to be done and
  performed, all such further acts and things, and shall execute and deliver all
  such other agreements, certificates, instruments and documents, as the other
  party may reasonably request in order to carry out the intent and accomplish
  the purposes of this Agreement and the consummation of the transactions contemplated
  hereby. 

      l. No Strict
  Construction. The language used in this Agreement will be deemed to
  be the language chosen by the parties to express their mutual intent, and no
  rules of strict construction will be applied against any party. 

      m. Remedies.
  The Company acknowledges that a breach by it of its obligations hereunder will
  cause irreparable harm to the Buyers by vitiating the intent and purpose of
  the transaction contemplated hereby. Accordingly, the Company acknowledges that
  the remedy at law for a breach of its obligations under this Agreement will
  be inadequate and agrees, in the event of a breach or threatened breach by the
  Company of the provisions of this Agreement, that the Buyers shall be entitled,
  in addition to all other available remedies at law or in equity, and in addition
  to the penalties assessable herein, to an injunction or injunctions restraining,
  preventing or curing any breach of this Agreement and to enforce specifically
  the terms and provisions hereof, without the necessity of showing economic loss
  and without any bond or other security being required. 

 24 

     IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this Agreement to be duly executed as of the date first above written. 

SNOCONE SYSTEMS INC. 

   /s/ Edon Moyal                                                         

  Edon Moyal 

  Chief Executive Officer

 AJW PARTNERS, LLC 

  By: SMS Group, LLC 

   /s/ Corey S. Ribotsky                                               

  Corey S. Ribotsky 

  Manager 

RESIDENCE: Delaware 

	 ADDRESS:  	 1044 Northern Boulevard  
	  	 Suite 302  
	  	 Roslyn, New York 11576  
	  	 Facsimile:  (516) 739-7115
	  	 Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT: 

	 	 Aggregate Principal Amount of Notes:  	 $_________
	 	 Number of Warrants:  	_________ 
	 	 Aggregate Purchase Price:  	 $ _________ 

 25 

 

	
AJW OFFSHORE, LTD. 
	
	 By: First Street Manager II, LLC
	 

	
	 

	
	   /s/ Corey S. Ribotsky                                                     
	
Corey S. Ribotsky 
	
	
Manager 
	

	 RESIDENCE: Cayman Islands  

	
ADDRESS: 
		
AJW Offshore, Ltd. 
	
	 

		
P.O. Box 32021 SMB 
	
	 

		
Grand Cayman, Cayman Island, B.W.I. 
	

AGGREGATE SUBSCRIPTION AMOUNT: 

	 	 Aggregate Principal Amount of Notes:  	 $ _______ 
	 	 Number of Warrants:  	_______ 
	 	 Aggregate Purchase Price:  	 $ _______ 

 26 

 AJW QUALIFIED PARTNERS, LLC 

  By: AJW Manager, LLC 

   /s/ Corey S. Ribotsky                                               

  Corey S. Ribotsky 

  Manager 

RESIDENCE: New York 

	 ADDRESS:  	 1044 Northern Boulevard  
	  	 Suite 302  
	  	 Roslyn, New York 11576  
	  	 Facsimile:  (516 )  739-7115  
	  	 Telephone:  (516 )  739-7110  

AGGREGATE SUBSCRIPTION AMOUNT: 

	
Aggregate Principal Amount of Notes: 
		 $________ 
	
Number of Warrants: 
		________ 
	
Aggregate Purchase Price: 
		 $________ 

 27 

 NEW MILLENNIUM CAPITAL PARTNERS II, LLC

  By: First Street Manager II, LLP 

    /s/ Corey S. Ribotsky                                 

  Corey S. Ribotsky

  Manager 

	 RESIDENCE:  New York  

	 ADDRESS:  	 1044 Northern Boulevard  
	  	 Suite 302  
	  	 Roslyn, New York 11576  
	  	 Facsimile:  (516 )  739-7115  
	  	 Telephone:  (516 )  739-7110  

AGGREGATE SUBSCRIPTION AMOUNT: 

	
Aggregate Principal Amount of Notes: 
		 $______ 
	
Number of Warrants: 
		______ 
	
Aggregate Purchase Price: 
		 $______ 

 28Filed by Automated Filing Services Inc. (604) 609-0244 - Snocone Systems Inc. - Exhibit 4.2

	 	
        THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
          UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).
          THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
          OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE 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 SAID ACT OR UNLESS SOLD PURSUANT TO RULE
          144 OR 

      
	 

REGULATION S UNDER SAID ACT. CALLABLE SECURED CONVERTIBLE
  NOTE  

	 San Diego, California  	  
	 April 29, 2005  	 $25,000  

      FOR VALUE RECEIVED,
  SNOCONE SYSTEMS INC., a Nevada corporation (hereinafter called the “Borrower”),
  hereby promises to pay to the order of New Millennium Capital Partners II, LLC
  or registered assigns (the “Holder”) the sum of $25,000,
  on April 29, 2008 (the “Maturity Date”), and to pay interest
  on the unpaid principal balance hereof at the rate of eight percent (8%) (the
  “Interest Rate”) per annum from April 29, 2005 (the “Issue
  Date”) until the same becomes due and payable, whether at maturity
  or upon acceleration or by prepayment or otherwise. Any amount of principal
  or interest on this Note which is not paid when due shall bear interest at the
  rate of fifteen percent (15%) per annum from the due date thereof until the
  same is paid (“Default Interest”). Interest shall commence
  accruing on the Issue Date, shall be computed on the basis of a 365-day year
  and the actual number of days elapsed and shall be payable quarterly provided
  that no interest shall be due and payable for any month in which the Trading
  Price (as such term is defined below) is greater than $1.3375 for each Trading
  Day (as such term is defined below) of the month. All payments due hereunder
  (to the extent not converted into common stock, $.001 par value per share
  (the “Common Stock”) in accordance with the terms hereof)
  shall be made in lawful money of the United States of America provided that
  interest due and payable for the first six (6) months following the Issue Date
  shall be paid on the date hereof. All payments shall be made at such address
  as the Holder shall hereafter give to the Borrower by written notice made in
  accordance with the provisions of this Note. Whenever any amount expressed to
  be due by the terms of this Note is due on any day which is not a business day,
  the same shall instead be due on the next succeeding day which is a business
  day and, in the case of any interest payment date which is not the date on which
  this Note is paid in full, the extension of the due date thereof shall not be
  taken into account for purposes of determining the amount of interest due on
  such date. As used in this Note, the term “business day” shall mean
  any day other than a Saturday, Sunday or a day on which commercial

1

 banks in the city of New York, New York are authorized or
  required by law or executive order to remain closed. Each capitalized term used
  herein, and not otherwise defined, shall have the meaning ascribed thereto in
  that certain Securities Purchase Agreement, dated April 29, 2005, pursuant to
  which this Note was originally issued (the “Purchase Agreement”).

      This Note is free from all taxes,
  liens, claims and encumbrances with respect to the issue thereof and shall not
  be subject to preemptive rights or other similar rights of shareholders of the
  Borrower and will not impose personal liability upon the holder thereof. The
  obligations of the Borrower under this Note shall be secured by that certain
  Security Agreement and Intellectual Property Security Agreement, each dated
  April 29, 2005 by and between the Borrower and the Holder. 

      The following terms shall apply
  to this Note:

 ARTICLE I. CONVERSION RIGHTS

      1.1 Conversion
  Right. The Holder shall have the right from time to time, and
  at any time on or prior to the earlier of (i) the Maturity Date and (ii) the
  date of payment of the Default Amount (as defined in Article III) pursuant to
  Section 1.6(a) or Article III, the Optional Prepayment Amount (as defined in
  Section 5.1 or any payments pursuant to Section 1.7, each in respect of the
  remaining outstanding principal amount of this Note to convert all or any part
  of the outstanding and unpaid principal amount of this Note into fully paid
  and non-assessable shares of Common Stock, as such Common Stock exists on the
  Issue Date, or any shares of capital stock or other securities of the Borrower
  into which such Common Stock shall hereafter be changed or reclassified at the
  conversion price (the “Conversion Price”) determined as provided
  herein (a “Conversion”); provided, however,
  that in no event shall the Holder be entitled to convert any portion of this
  Note in excess of that portion of this Note upon conversion of which the sum
  of (1) 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 unconverted portion of the Notes or the unexercised
  or unconverted portion of any other security of the Borrower (including, without
  limitation, the warrants issued by the Borrower pursuant to the Purchase Agreement)
  subject to a limitation on conversion or exercise analogous to the limitations
  contained herein) and (2) the number of shares of Common Stock issuable upon
  the conversion of the portion of this Note with respect to which the determination
  of this proviso 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
  and provided further that the Holder shall not be entitled to
  convert any portion of this Note during any month immediately succeeding a Determination
  Date on which the Borrower exercises its prepayment option pursuant to Section
  5.2 of this Note. For purposes of the proviso to 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 Regulations 13D-G thereunder,
  except as otherwise provided in clause (1) of such proviso. The number of shares
  of Common Stock to be issued upon each conversion of this Note shall be determined
  by dividing the Conversion Amount (as defined below) by the applicable Conversion
  Price then in effect on the date specified in the notice of conversion, in the
  form attached hereto as Exhibit A (the “Notice of Conversion”),
  delivered to the Borrower by the Holder in accordance with Section

 2

 1.4 below; provided that the Notice of Conversion is submitted
  by facsimile (or by other means resulting in, or reasonably expected to result
  in, notice) to the Borrower before 6:00 p.m., New York, New York time on such
  conversion date (the “Conversion Date”). The term “Conversion
  Amount” means, with respect to any conversion of this Note, the sum
  of (1) the principal amount of this Note to be converted in such conversion
  plus (2) accrued and unpaid interest, if any, on such principal amount
  at the interest rates provided in this Note to the Conversion Date plus
  (3) Default Interest, if any, on the amounts referred to in the immediately
  preceding clauses (1) and/or (2) plus (4) at the Holder’s option,
  any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
  pursuant to Section 2(c) of that certain Registration Rights Agreement, dated
  as of April 29, 2005, executed in connection with the initial issuance of this
  Note and the other Notes issued on the Issue Date (the “Registration
  Rights Agreement”). The term “Determination Date” means
  the last business day of each month after the Issue Date. 

      1.2 Conversion Price.
  

      (a) Calculation of Conversion
  Price. The Conversion Price shall be the lesser of (i) the Variable
  Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (as
  defined herein) (subject, in each case, to equitable adjustments for stock splits,
  stock dividends or rights offerings by the Borrower relating to the Borrower’s
  securities or the securities of any subsidiary of the Borrower, combinations,
  recapitalization, reclassifications, extraordinary distributions and similar
  events). The “Variable Conversion Price” shall mean the Applicable
  Percentage (as defined herein) multiplied by the Market Price (as defined herein).
  “Market Price” means the average of the lowest three (3)
  Trading Prices (as defined below) for the Common Stock during the twenty (20)
  Trading Day period ending one Trading Day prior to the date the Conversion Notice
  is sent by the Holder to the Borrower via facsimile (the “Conversion
  Date”). “Trading Price” means, for any security
  as of any date, the intraday trading price on the Over-the-Counter Bulletin
  Board (the “OTCBB”) as reported by a reliable reporting service
  mutually acceptable to and hereafter designated by Holders of a majority in
  interest of the Notes and the Borrower or, if the OTCBB is not the principal
  trading market for such security, the intraday trading price of such security
  on the principal securities exchange or trading market where such security is
  listed or traded or, if no intraday trading price of such security is available
  in any of the foregoing manners, the average of the intraday trading prices
  of any market makers for such security that are listed in the “pink sheets”
  by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated
  for such security on such date in the manner provided above, the Trading Price
  shall be the fair market value as mutually determined by the Borrower and the
  holders of a majority in interest of the Notes being converted for which the
  calculation of the Trading Price is required in order to determine the Conversion
  Price of such Notes. “Trading Day” shall mean any day on
  which the Common Stock is traded for any period on the OTCBB, or on the principal
  securities exchange or other securities market on which the Common Stock is
  then being traded. “Applicable Percentage” shall mean 60.0%
  . The “Fixed Conversion Price” shall mean $1.00. 

      (b) Conversion Price During Major Announcements.
  Notwithstanding anything contained in Section 1.2(a) to the contrary, in the
  event the Borrower (i) makes a public announcement that it intends to consolidate
  or merge with any other corporation (other than a merger in which the Borrower
  is the surviving or continuing corporation and its capital stock is unchanged)
  or sell or transfer all or substantially all of the

 3

 assets of the Borrower or (ii) any person, group or entity
  (including the Borrower) publicly announces a tender offer to purchase 50% or
  more of the Borrower’s Common Stock (or any other takeover scheme) (the
  date of the announcement referred to in clause (i) or (ii) is hereinafter referred
  to as the “Announcement Date”), then the Conversion Price
  shall, effective upon the Announcement Date and continuing through the Adjusted
  Conversion Price Termination Date (as defined below), be equal to the lower
  of (x) the Conversion Price which would have been applicable for a Conversion
  occurring on the Announcement Date and (y) the Conversion Price that would otherwise
  be in effect. From and after the Adjusted Conversion Price Termination Date,
  the Conversion Price shall be determined as set forth in this Section 1.2(a)
  . For purposes hereof, “Adjusted Conversion Price Termination Date”
  shall mean, with respect to any proposed transaction or tender offer (or takeover
  scheme) for which a public announcement as contemplated by this Section 1.2(b)
  has been made, the date upon which the Borrower (in the case of clause (i) above)
  or the person, group or entity (in the case of clause (ii) above) consummates
  or publicly announces the termination or abandonment of the proposed transaction
  or tender offer (or takeover scheme) which caused this Section 1.2(b) to become
  operative. 

      1.3 Authorized
  Shares. Subject to the Stockholder Approval (as defined in the
  Agreement), the Borrower covenants that during the period the conversion right
  exists, the Borrower will reserve from its authorized and unissued Common Stock
  a sufficient number of shares, free from preemptive rights, to provide for the
  issuance of Common Stock upon the full conversion of this Note and the other
  Notes issued pursuant to the Purchase Agreement. The Borrower is required at
  all times to have authorized and reserved two times the number of shares that
  is actually issuable upon full conversion of the Notes (based on the Conversion
  Price of the Notes or the Exercise Price of the Warrants in effect from time
  to time) (the “Reserved Amount”). The Reserved Amount shall
  be increased from time to time in accordance with the Borrower’s obligations
  pursuant to Section 4(h) of the Purchase Agreement. The Borrower represents
  that upon issuance, such shares will be duly and validly issued, fully paid
  and non-assessable. In addition, if the Borrower shall issue any securities
  or make any change to its capital structure which would change the number of
  shares of Common Stock into which the Notes shall be convertible at the then
  current Conversion Price, the Borrower shall at the same time make proper provision
  so that thereafter there shall be a sufficient number of shares of Common Stock
  authorized and reserved, free from preemptive rights, for conversion of the
  outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed
  its transfer agent to issue certificates for the Common Stock issuable upon
  conversion of this Note, and (ii) agrees that its issuance of this Note shall
  constitute full authority to its officers and agents who are charged with the
  duty of executing stock certificates to execute and issue the necessary certificates
  for shares of Common Stock in accordance with the terms and conditions of this
  Note. 

      If, at any time a Holder of
  this Note submits a Notice of Conversion, and the Borrower does not have sufficient
  authorized but unissued shares of Common Stock available to effect such conversion
  in accordance with the provisions of this Article I (a “Conversion
  Default”), subject to Section 4.8, the Borrower shall issue to the
  Holder all of the shares of Common Stock which are then available to effect
  such conversion. The portion of this Note which the Holder included in its Conversion
  Notice and which exceeds the amount which is then convertible into available
  shares of Common Stock (the “Excess Amount”) shall,

 4

 notwithstanding anything to the contrary contained herein,
  not be convertible into Common Stock in accordance with the terms hereof until
  (and at the Holder’s option at any time after) the date additional shares
  of Common Stock are authorized by the Borrower to permit such conversion, at
  which time the Conversion Price in respect thereof shall be the lesser of (i)
  the Conversion Price on the Conversion Default Date (as defined below) and (ii)
  the Conversion Price on the Conversion Date thereafter elected by the Holder
  in respect thereof. In addition, the Borrower shall pay to the Holder payments
  (“Conversion Default Payments”) for a Conversion Default
  in the amount of (x) the sum of (1) the then outstanding principal amount
  of this Note plus (2) accrued and unpaid interest on the unpaid principal
  amount of this Note through the Authorization Date (as defined below) plus
  (3) Default Interest, if any, on the amounts referred to in clauses (1) and/or
  (2), multiplied by (y) .24, multiplied by (z) (N/365), where N
  = the number of days from the day the holder submits a Notice of Conversion
  giving rise to a Conversion Default (the “Conversion Default Date”)
  to the date (the “Authorization Date”) that the Borrower
  authorizes a sufficient number of shares of Common Stock to effect conversion
  of the full outstanding principal balance of this Note. The Borrower shall use
  its best efforts to authorize a sufficient number of shares of Common Stock
  as soon as practicable following the earlier of (i) such time that the Holder
  notifies the Borrower or that the Borrower otherwise becomes aware that there
  are or likely will be insufficient authorized and unissued shares to allow full
  conversion thereof and (ii) a Conversion Default. The Borrower shall send notice
  to the Holder of the authorization of additional shares of Common Stock, the
  Authorization Date and the amount of Holder’s accrued Conversion Default
  Payments. The accrued Conversion Default Payments for each calendar month shall
  be paid in cash or shall be convertible into Common Stock (at such time as there
  are sufficient authorized shares of Common Stock) at the applicable Conversion
  Price, at the Borrower’s option, as follows: 

      (a) In the event
  Holder elects to take such payment in cash, cash payment shall be made to Holder
  by the fifth (5th) day of the month following the month in which
  it has accrued; and 

      (b) In the event
  Holder elects to take such payment in Common Stock, the Holder may convert such
  payment amount into Common Stock at the Conversion Price (as in effect at the
  time of conversion) at any time after the fifth day of the month following the
  month in which it has accrued in accordance with the terms of this Article I
  (so long as there is then a sufficient number of authorized shares of Common
  Stock). 

      The Holder’s election
  shall be made in writing to the Borrower at any time prior to 6:00 p.m., New
  York, New York time, on the third day of the month following the month in which
  Conversion Default payments have accrued. If no election is made, the Holder
  shall be deemed to have elected to receive cash. Nothing herein shall limit
  the Holder’s right to pursue actual damages (to the extent in excess of
  the Conversion Default Payments) for the Borrower’s failure to maintain
  a sufficient number of authorized shares of Common Stock, and each holder shall
  have the right to pursue all remedies available at law or in equity (including
  degree of specific performance and/or injunctive relief). 

      1.4 Method of Conversion.

 5

      (a) Mechanics
  of Conversion. Subject to Section 1.1, this Note may be converted
  by the Holder in whole or in part at any time from time to time after the Issue
  Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile
  or other reasonable means of communication dispatched on the Conversion Date
  prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b),
  surrendering this Note at the principal office of the Borrower.

      (b) Surrender
  of Note Upon Conversion. Notwithstanding anything to the contrary
  set forth herein, upon conversion of this Note in accordance with the terms
  hereof, the Holder shall not be required to physically surrender this Note to
  the Borrower unless the entire unpaid principal amount of this Note is so converted.
  The Holder and the Borrower shall maintain records showing the principal amount
  so converted and the dates of such conversions or shall use such other method,
  reasonably satisfactory to the Holder and the Borrower, so as not to require
  physical surrender of this Note upon each such conversion. In the event of any
  dispute or discrepancy, such records of the Borrower shall be controlling and
  determinative in the absence of manifest error. Notwithstanding the foregoing,
  if any portion of this Note is converted as aforesaid, the Holder may not transfer
  this Note unless the Holder first physically surrenders this Note to the Borrower,
  whereupon the Borrower will forthwith issue and deliver upon the order of the
  Holder a new Note of like tenor, registered as the Holder (upon payment by the
  Holder of any applicable transfer taxes) may request, representing in the aggregate
  the remaining unpaid principal amount of this Note. The Holder and any assignee,
  by acceptance of this Note, acknowledge and agree that, by reason of the provisions
  of this paragraph, following conversion of a portion of this Note, the unpaid
  and unconverted principal amount of this Note represented by this Note may be
  less than the amount stated on the face hereof. 

      (c) Payment
  of Taxes. The Borrower shall not be required to pay any tax which
  may be payable in respect of any transfer involved in the issue and delivery
  of shares of Common Stock or other securities or property on conversion of this
  Note in a name other than that of the Holder (or in street name), and the Borrower
  shall not be required to issue or deliver any such shares or other securities
  or property unless and until the person or persons (other than the Holder or
  the custodian in whose street name such shares are to be held for the Holder’s
  account) requesting the issuance thereof shall have paid to the Borrower the
  amount of any such tax or shall have established to the satisfaction of the
  Borrower that such tax has been paid. 

      (d) Delivery
  of Common Stock Upon Conversion. Upon confirmed receipt by the
  Borrower from the Holder of a facsimile transmission (or other reasonable means
  of communication) of a Notice of Conversion meeting the requirements for conversion
  as provided in this Section 1.4, the Borrower shall issue and deliver or cause
  to be issued and delivered to or upon the order of the Holder certificates for
  the Common Stock issuable upon such conversion within two (2) business days
  after such receipt (and, solely in the case of conversion of the entire unpaid
  principal amount hereof, surrender of this Note) (such second business day being
  hereinafter referred to as the “Deadline”) in accordance
  with the terms hereof and the Purchase Agreement (including, without limitation,
  in accordance with the requirements of Section 2(g) of the Purchase Agreement
  that certificates for shares of Common Stock issued on or after the effective
  date of the Registration Statement upon conversion of this Note shall not bear
  any restrictive legend). 

 6

      (e) Obligation
  of Borrower to Deliver Common Stock. Upon receipt by the Borrower
  of a Notice of Conversion, the Holder shall be deemed to be the holder of record
  of the Common Stock issuable upon such conversion, the outstanding principal
  amount and the amount of accrued and unpaid interest on this Note shall be reduced
  to reflect such conversion, and, unless the Borrower defaults on its obligations
  under this Article I, all rights with respect to the portion of this Note being
  so converted shall forthwith terminate except the right to receive the Common
  Stock or other securities, cash or other assets, as herein provided, on such
  conversion. If the Holder shall have given a Notice of Conversion as provided
  herein, the Borrower’s obligation to issue and deliver the certificates
  for Common Stock shall be absolute and unconditional, irrespective of the absence
  of any action by the Holder to enforce the same, any waiver or consent with
  respect to any provision thereof, the recovery of any judgment against any person
  or any action to enforce the same, any failure or delay in the enforcement of
  any other obligation of the Borrower to the holder of record, or any setoff,
  counterclaim, recoupment, limitation or termination, or any breach or alleged
  breach by the Holder of any obligation to the Borrower, and irrespective of
  any other circumstance which might otherwise limit such obligation of the Borrower
  to the Holder in connection with such conversion. The Conversion Date specified
  in the Notice of Conversion shall be the Conversion Date so long as the Notice
  of Conversion is received by the Borrower before 6:00 p.m., New York, New York
  time, on such date. 

      (f) Delivery
  of Common Stock by Electronic Transfer. In lieu of delivering
  physical certificates representing the Common Stock issuable upon conversion,
  provided the Borrower’s transfer agent is participating in the Depository
  Trust Company

 (“DTC”) Fast Automated Securities Transfer
  (“FAST”) program, upon request of the Holder and its compliance
  with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower
  shall use its best efforts to cause its transfer agent to electronically transmit
  the Common Stock issuable upon conversion to the Holder by crediting the account
  of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent
  Commission (“DWAC”) system. 

      (g) Failure
  to Deliver Common Stock Prior to Deadline. Without in any way
  limiting the Holder’s right to pursue other remedies, including actual
  damages and/or equitable relief, the parties agree that if delivery of the Common
  Stock issuable upon conversion of this Note is more than three (3) days after
  the Deadline (other than a failure due to the circumstances described in Section
  1.3 above, which failure shall be governed by such Section) the Borrower shall
  pay to the Holder $2,000 per day in cash, for each day beyond the Deadline
  that the Borrower fails to deliver such Common Stock. Such cash amount shall
  be paid to Holder by the fifth day of the month following the month in which
  it has accrued or, at the option of the Holder (by written notice to the Borrower
  by the first day of the month following the month in which it has accrued),
  shall be added to the principal amount of this Note, in which event interest
  shall accrue thereon in accordance with the terms of this Note and such additional
  principal amount shall be convertible into Common Stock in accordance with the
  terms of this Note. 

      1.5 Concerning
  the Shares. The shares of Common Stock issuable upon conversion
  of this Note may not be sold or transferred unless (i) such shares are sold
  pursuant to an effective registration statement under the Act or (ii) the Borrower
  or its transfer agent shall have been furnished with an opinion of counsel (which
  opinion shall be in form, substance and

 7

 scope customary for opinions of counsel in comparable transactions)
  to the effect that the shares to be sold or transferred may be sold or transferred
  pursuant to an exemption from such registration or (iii) such shares are sold
  or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
  144”) or (iv) such shares are transferred to an “affiliate”
  (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer
  the shares only in accordance with this Section 1.5 and who is an Accredited
  Investor (as defined in the Purchase Agreement). Except as otherwise provided
  in the Purchase Agreement (and subject to the removal provisions set forth below),
  until such time as the shares of Common Stock issuable upon conversion of this
  Note have been registered under the Act as contemplated by the Registration
  Rights Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
  as to the number of securities as of a particular date that can then be immediately
  sold, each certificate for shares of Common Stock issuable upon conversion of
  this Note that has not been so included in an effective registration statement
  or that has not been sold pursuant to an effective registration statement or
  an exemption that permits removal of the legend, shall bear a legend substantially
  in the following form, as appropriate:

	 	“THE SECURITIES REPRESENTED BY THIS CERTIFICATE
        HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
        THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
        OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE 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 SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER
        SAID ACT.” 
	 

     The legend set forth above shall
  be removed and the Borrower shall issue to the Holder a new certificate therefor
  free of any transfer legend if (i) the Borrower or its transfer agent shall
  have received an opinion of counsel, in form, substance and scope customary
  for opinions of counsel in comparable transactions, to the effect that a public
  sale or transfer of such Common Stock may be made without registration under
  the Act and the shares are so sold or transferred, (ii) such Holder provides
  the Borrower or its transfer agent with reasonable assurances that the Common
  Stock issuable upon conversion of this Note (to the extent such securities are
  deemed to have been acquired on the same date) can be sold pursuant to Rule
  144 or (iii) in the case of the Common Stock issuable upon conversion of this
  Note, such security is registered for sale by the Holder under an effective
  registration statement filed under the Act or otherwise may be sold pursuant
  to Rule 144 without any restriction as to the number of securities as of a particular
  date that can then be immediately sold. Nothing in this Note shall (i) limit
  the Borrower’s obligation under the Registration Rights Agreement or (ii)
  affect in any way the Holder’s obligations to comply with applicable prospectus
  delivery requirements upon the resale of the securities referred to herein.

      1.6 Effect
  of Certain Events. 

       (a) Effect
  of Merger, Consolidation, Etc. At the option of the Holder, the
  sale, conveyance or disposition of all or substantially all of the assets of
  the Borrower, the effectuation by the Borrower of a transaction or series of
  related transactions in

 8

 which more than 50% of the voting power of the Borrower is
  disposed of, or the consolidation, merger or other business combination of the
  Borrower with or into any other Person (as defined below) or Persons when the
  Borrower is not the survivor shall either: (i) be deemed to be an Event of Default
  (as defined in Article III) pursuant to which the Borrower shall be required
  to pay to the Holder upon the consummation of and as a condition to such transaction
  an amount equal to the Default Amount (as defined in Article III) or (ii) be
  treated pursuant to Section 1.6(b) hereof. “Person” shall
  mean any individual, corporation, limited liability company, partnership, association,
  trust or other entity or organization. 

      (b) Adjustment
  Due to Merger, Consolidation, Etc. If, at any time when this
  Note is issued and outstanding and prior to conversion of all of the Notes,
  there shall be any merger, consolidation, exchange of shares, recapitalization,
  reorganization, or other similar event, as a result of which shares of Common
  Stock of the Borrower shall be changed into the same or a different number of
  shares of another class or classes of stock or securities of the Borrower or
  another entity, or in case of any sale or conveyance of all or substantially
  all of the assets of the Borrower other than in connection with a plan of complete
  liquidation of the Borrower, then the Holder of this Note shall thereafter have
  the right to receive upon conversion of this Note, upon the basis and upon the
  terms and conditions specified herein and in lieu of the shares of Common Stock
  immediately theretofore issuable upon conversion, such stock, securities or
  assets which the Holder would have been entitled to receive in such transaction
  had this Note been converted in full immediately prior to such transaction (without
  regard to any limitations on conversion set forth herein), and in any such case
  appropriate provisions shall be made with respect to the rights and interests
  of the Holder of this Note to the end that the provisions hereof (including,
  without limitation, provisions for adjustment of the Conversion Price and of
  the number of shares issuable upon conversion of the Note) shall thereafter
  be applicable, as nearly as may be practicable in relation to any securities
  or assets thereafter deliverable upon the conversion hereof. The Borrower shall
  not effect any transaction described in this Section 1.6(b) unless (a) it first
  gives, to the extent practicable, thirty (30) days prior written notice (but
  in any event at least fifteen (15) days prior written notice) of the record
  date of the special meeting of shareholders to approve, or if there is no such
  record date, the consummation of, such merger, consolidation, exchange of shares,
  recapitalization, reorganization or other similar event or sale of assets (during
  which time the Holder shall be entitled to convert this Note) and (b) the resulting
  successor or acquiring entity (if not the Borrower) assumes by written instrument
  the obligations of this Section 1.6(b) . The above provisions shall similarly
  apply to successive consolidations, mergers, sales, transfers or share exchanges.

      (c) Adjustment
  Due to Distribution. If the Borrower shall declare or make any
  distribution of its assets (or rights to acquire its assets) to holders of Common
  Stock as a dividend, stock repurchase, by way of return of capital or otherwise
  (including any dividend or distribution to the Borrower’s shareholders
  in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
  (i.e., a spin-off)) (a “Distribution”), then the Holder of
  this Note shall be entitled, upon any conversion of this Note after the date
  of record for determining shareholders entitled to such Distribution, to receive
  the amount of such assets which would have been payable to the Holder with respect
  to the shares of Common Stock issuable upon such conversion had such Holder
  been the holder of such shares of Common Stock on the record date for the determination
  of shareholders entitled to such Distribution. 

 9

      (d) Adjustment
  Due to Dilutive Issuance. If, at any time when any Notes are
  issued and outstanding, the Borrower issues or sells, or in accordance with
  this Section 1.6(d) 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 Fixed Conversion Price in effect on the
  date of such issuance (or deemed issuance) of such shares of Common Stock (a
  “Dilutive Issuance”), then immediately upon the Dilutive
  Issuance, the Fixed Conversion Price will be reduced to the amount of the consideration
  per share received by the Borrower in such Dilutive Issuance; provided
  that only one adjustment will be made for each Dilutive Issuance. 

      The Borrower shall be deemed
  to have issued or sold shares of Common Stock if the Borrower in any manner
  issues or grants any warrants, rights or options (not including employee stock
  option plans), 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
  Fixed Conversion Price then in effect, then the Fixed Conversion Price shall
  be equal to 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 Borrower as consideration for the issuance or
  granting of all such Options, plus the minimum aggregate amount of additional
  consideration, if any, payable to the Borrower 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 Conversion 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. 

      Additionally, the Borrower shall
  be deemed to have issued or sold shares of Common Stock if the Borrower 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 Fixed Conversion Price then in effect, then the
  Fixed Conversion Price shall be equal to 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 Borrower 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 Borrower
  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 Fixed Conversion Price
  will be made upon the actual issuance of such Common Stock upon conversion or
  exchange of such Convertible Securities. 

 10

      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 Borrower 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 Borrower, (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 Borrower’s board
  of directors.

      (e) Purchase
  Rights. If, at any time when any Notes are issued and outstanding,
  the Borrower issues any convertible securities or rights to purchase stock,
  warrants, securities or other property (the “Purchase Rights”)
  pro rata to the record holders of any class of Common Stock, then the Holder
  of this Note will be entitled to acquire, upon the terms applicable to such
  Purchase Rights, the aggregate Purchase Rights which such Holder could have
  acquired if such Holder had held the number of shares of Common Stock acquirable
  upon complete conversion of this Note (without regard to any limitations on
  conversion contained herein) immediately before the date on which a record is
  taken for the grant, issuance or sale of such Purchase Rights or, if no such
  record is taken, the date as of which the record holders of Common Stock are
  to be determined for the grant, issue or sale of such Purchase Rights. 

      (f) Notice
  of Adjustments. Upon the occurrence of each adjustment or readjustment
  of the Conversion Price as a result of the events described in this Section
  1.6, the Borrower, at its expense, shall promptly compute such adjustment or
  readjustment and prepare and furnish to the Holder of a certificate setting
  forth such adjustment or readjustment and showing in detail the facts upon which
  such adjustment or readjustment is based. The Borrower shall, upon the written
  request at any time of the Holder, furnish to such Holder a like certificate
  setting forth (i) such adjustment or readjustment, (ii) the Conversion Price
  at the time in effect and (iii) the number of shares of Common Stock and the
  amount, if any, of other securities or property which at the time would be received
  upon conversion of the Note. 

      1.7 Trading
  Market Limitations.  Unless permitted by the applicable rules
  and regulations of the principal securities market on which the Common Stock
  is then listed or traded, in no event shall the Borrower issue upon conversion
  of or otherwise pursuant to this Note and the other Notes issued pursuant to
  the Purchase Agreement more than the maximum number of shares of Common Stock
  that the Borrower can issue pursuant to any rule of the principal United States
  securities market on which the Common Stock is then traded (the “Maximum
  Share Amount”), which shall be 19.99% of the total shares outstanding
  on the Closing Date (as defined in the Purchase Agreement), subject to equitable
  adjustment from time to time for stock splits, stock dividends, combinations,
  capital reorganizations and similar events

 11

 relating to the Common Stock occurring after the date hereof.
  Once the Maximum Share Amount has been issued (the date of which is hereinafter
  referred to as the “Maximum Conversion Date”), if the Borrower
  fails to eliminate any prohibitions under applicable law or the rules or regulations
  of any stock exchange, interdealer quotation system or other self-regulatory
  organization with jurisdiction over the Borrower or any of its securities on
  the Borrower’s ability to issue shares of Common Stock in excess of the
  Maximum Share Amount (a “Trading Market Prepayment Event”),
  in lieu of any further right to convert this Note, and in full satisfaction
  of the Borrower’s obligations under this Note, the Borrower shall pay
  to the Holder, within fifteen (15) business days of the Maximum Conversion Date
  (the “Trading Market Prepayment Date”), an amount equal to
  130% times the sum of (a) the then outstanding principal amount
  of this Note immediately following the Maximum Conversion Date, plus
  (b) accrued and unpaid interest on the unpaid principal amount of this Note
  to the Trading Market Prepayment Date, plus (c) Default Interest, if
  any, on the amounts referred to in clause (a) and/or (b) above, plus
  (d) any optional amounts that may be added thereto at the Maximum Conversion
  Date by the Holder in accordance with the terms hereof (the then outstanding
  principal amount of this Note immediately following the Maximum Conversion Date,
  plus the amounts referred to in clauses (b), (c) and (d) above shall
  collectively be referred to as the “Remaining Convertible Amount”).
  With respect to each Holder of Notes, the Maximum Share Amount shall refer to
  such Holder’s pro rata share thereof determined in accordance
  with Section 4.8 below. In the event that the sum of (x) the aggregate number
  of shares of Common Stock issued upon conversion of this Note and the other
  Notes issued pursuant to the Purchase Agreement plus (y) the aggregate
  number of shares of Common Stock that remain issuable upon conversion of this
  Note and the other Notes issued pursuant to the Purchase Agreement, represents
  at least one hundred percent (100%) of the Maximum Share Amount (the “Triggering
  Event”), the Borrower will use its best efforts to seek and obtain
  Shareholder Approval (or obtain such other relief as will allow conversions
  hereunder in excess of the Maximum Share Amount) as soon as practicable following
  the Triggering Event and before the Maximum Conversion Date. As used herein,
  “Shareholder Approval” means approval by the shareholders
  of the Borrower to authorize the issuance of the full number of shares of Common
  Stock which would be issuable upon full conversion of the then outstanding Notes
  but for the Maximum Share Amount. 

      1.8 Status
  as Shareholder. Upon submission of a Notice of Conversion by
  a Holder, (i) the shares covered thereby (other than the shares, if any, which
  cannot be issued because their issuance would exceed such Holder’s allocated
  portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted
  into shares of Common Stock and (ii) the Holder’s rights as a Holder of
  such converted portion of this Note shall cease and terminate, excepting only
  the right to receive certificates for such shares of Common Stock and to any
  remedies provided herein or otherwise available at law or in equity to such
  Holder because of a failure by the Borrower to comply with the terms of this
  Note. Notwithstanding the foregoing, if a Holder has not received certificates
  for all shares of Common Stock prior to the tenth (10th) business day after
  the expiration of the Deadline with respect to a conversion of any portion of
  this Note for any reason, then (unless the Holder otherwise elects to retain
  its status as a holder of Common Stock by so notifying the Borrower) the Holder
  shall regain the rights of a Holder of this Note with respect to such unconverted
  portions of this Note and the Borrower shall, as soon as practicable, return
  such unconverted Note to the Holder or, if the Note has not been surrendered,
  adjust its records to reflect that such portion of this Note has not been converted.
  In

 12

all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any
subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note. 

 ARTICLE II. CERTAIN COVENANTS

      2.1 Distributions
  on Capital Stock. So long as the Borrower shall have any obligation
  under this Note, the Borrower shall not without the Holder’s written consent
  (a) pay, declare or set apart for such payment, any dividend or other distribution
  (whether in cash, property or other securities) on shares of capital stock other
  than dividends on shares of Common Stock solely in the form of additional shares
  of Common Stock or (b) directly or indirectly or through any subsidiary make
  any other payment or distribution in respect of its capital stock except for
  distributions pursuant to any shareholders’ rights plan which is approved
  by a majority of the Borrower’s disinterested directors. 

      2.2 Restriction
  on Stock Repurchases. So long as the Borrower shall have any
  obligation under this Note, the Borrower shall not without the Holder’s
  written consent redeem, repurchase or otherwise acquire (whether for cash or
  in exchange for property or other securities or otherwise) in any one transaction
  or series of related transactions any shares of capital stock of the Borrower
  or any warrants, rights or options to purchase or acquire any such shares, other
  than repurchases of stock issued to employees upon the termination of their
  employment 

      2.3 Borrowings.
  So long as the Borrower shall have any obligation under this Note, the Borrower
  shall not, without the Holder’s written consent, create, incur, assume
  or suffer to exist any liability for borrowed money, except (a) borrowings in
  existence or committed on the date hereof and of which the Borrower has informed
  Holder in writing prior to the date hereof, (b) indebtedness to trade creditors
  or financial institutions incurred in the ordinary course of business or (c)
  borrowings, the proceeds of which shall be used to repay this Note. 

      2.4 Sale
  of Assets. So long as the Borrower shall have any obligation
  under this Note, the Borrower shall not, without the Holder’s written
  consent, sell, lease or otherwise dispose of any significant portion of its
  assets outside the ordinary course of business. Any consent to the disposition
  of any assets may be conditioned on a specified use of the proceeds of disposition.

      2.5 Advances
  and Loans. So long as the Borrower shall have any obligation
  under this Note, the Borrower shall not, without the Holder’s written
  consent, lend money, give credit or make advances to any person, firm, joint
  venture or corporation, including, without limitation, officers, directors,
  employees, subsidiaries and affiliates of the Borrower, except loans, credits
  or advances (a) in existence or committed on the date hereof and which the Borrower
  has informed Holder in writing prior to the date hereof, (b) made in the ordinary
  course of business or (c) not in excess of $100,000. 

 13

      2.6 Contingent
  Liabilities. So long as the Borrower shall have any obligation
  under this Note, the Borrower shall not, without the Holder’s written
  consent, which shall not be unreasonably withheld, assume, guarantee, endorse,
  contingently agree to purchase or otherwise become liable upon the obligation
  of any person, firm, partnership, joint venture or corporation, except by the
  endorsement of negotiable instruments for deposit or collection and except assumptions,
  guarantees, endorsements and contingencies (a) in existence or committed on
  the date hereof and which the Borrower has informed Holder in writing prior
  to the date hereof, and (b) similar transactions in the ordinary course of business.

 ARTICLE III. EVENTS OF DEFAULT

 If any of the following events of default (each, an “Event
  of Default”) shall occur:

      3.1 Failure
  to Pay Principal or Interest. The Borrower fails to pay the principal
  hereof or interest thereon when due on this Note, whether at maturity, upon
  a Trading Market Prepayment Event pursuant to Section 1.7, upon acceleration
  or otherwise, and such failure shall continue for a period of ten (10) days
  after payment is due 

      3.2 Conversion
  and the Shares. The Borrower fails to issue shares of Common
  Stock to the Holder (or announces or threatens that it will not honor its obligation
  to do so) upon exercise by the Holder of the conversion rights of the Holder
  in accordance with the terms of this Note (for a period of at least sixty (60)
  days, if such failure is solely as a result of the circumstances governed by
  Section 1.3 and the Borrower is using its best efforts to authorize a sufficient
  number of shares of Common Stock as soon as practicable), fails to transfer
  or cause its transfer agent to transfer (electronically or in certificated form)
  any certificate for shares of Common Stock issued to the Holder upon conversion
  of or otherwise pursuant to this Note as and when required by this Note or the
  Registration Rights Agreement, or fails to remove any restrictive legend (or
  to withdraw any stop transfer instructions in respect thereof) on any certificate
  for any shares of Common Stock issued to the Holder upon conversion of or otherwise
  pursuant to this Note as and when required by this Note or the Registration
  Rights Agreement (or makes any announcement, statement or threat that it does
  not intend to honor the obligations described in this paragraph) and any such
  failure shall continue uncured (or any announcement, statement or threat not
  to honor its obligations shall not be rescinded in writing) for ten (10) days
  after the Borrower shall have been notified thereof in writing by the Holder;

      3.3 Failure
  to Timely File Registration or Effect Registration. The Borrower
  fails to file the Registration Statement within forty-five (45) days following
  the Closing Date (as defined in the Purchase Agreement) or obtain effectiveness
  with the Securities and Exchange Commission of the Registration Statement within
  one hundred thirty-five (135) days following the Closing Date (as defined in
  the Purchase Agreement) or such Registration Statement lapses in effect (or
  sales cannot otherwise be made thereunder effective, whether by reason of the
  Borrower’s failure to amend or supplement the prospectus included therein
  in accordance with the Registration Rights Agreement or otherwise) for more
  than ten (10) consecutive days or twenty (20) days in any twelve month period
  after the Registration Statement becomes effective; 

 14

      3.4 Breach
  of Covenants. The Borrower breaches any material covenant or
  other material term or condition contained in Sections 1.3, 1.6 or 1.7 of this
  Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase Agreement
  and such breach continues for a period of ten (10) days after written notice
  thereof to the Borrower from the Holder; 

      3.5 Breach
  of Representations and Warranties. Any representation or warranty
  of the Borrower made herein or in any agreement, statement or certificate given
  in writing pursuant hereto or in connection herewith (including, without limitation,
  the Purchase Agreement and the Registration Rights Agreement), shall be false
  or misleading in any material respect when made and the breach of which has
  (or with the passage of time will have) a material adverse effect on the rights
  of the Holder with respect to this Note, the Purchase Agreement or the Registration
  Rights Agreement; 

      3.6 Receiver
  or Trustee. The Borrower or any subsidiary of the Borrower shall
  make an assignment for the benefit of creditors, or apply for or consent to
  the appointment of a receiver or trustee for it or for a substantial part of
  its property or business, or such a receiver or trustee shall otherwise be appointed;

      3.7 Judgments.
  Any money judgment, writ or similar process shall be entered or filed against
  the Borrower or any subsidiary of the Borrower or any of its property or other
  assets for more than $100,000, and shall remain unvacated, unbonded or unstayed
  for a period of twenty (20) days unless otherwise consented to by the Holder,
  which consent will not be unreasonably withheld; 

      3.8 Bankruptcy.
  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings
  for relief under any bankruptcy law or any law for the relief of debtors shall
  be instituted by or against the Borrower or any subsidiary of the Borrower;

      3.9 Delisting
  of Common Stock. The Borrower shall fail to maintain the listing
  of the Common Stock on at least one of the OTCBB or an equivalent replacement
  exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York
  Stock Exchange, or the American Stock Exchange; or 

      3.10 Default
  Under Other Notes. An Event of Default has occurred and is continuing
  under any of the other Notes issued pursuant to the Purchase Agreement, then,
  upon the occurrence and during the continuation of any Event of Default specified
  in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option of the
  Holders of a majority of the aggregate principal amount of the outstanding Notes
  issued pursuant to the Purchase Agreement exercisable through the delivery of
  written notice to the Borrower by such Holders (the “Default Notice”),
  and upon the occurrence of an Event of Default specified in Section 3.6 or 3.8,
  the Notes shall become immediately due and payable and the Borrower shall pay
  to the Holder, in full satisfaction of its obligations hereunder, an amount
  equal to the greater of (i) 130% times the sum of (w) the then
  outstanding principal amount of this Note plus (x) accrued and unpaid
  interest on the unpaid principal amount of this Note to the date of payment
  (the “Mandatory Prepayment Date”) plus (y) Default
  Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus
  (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof
  or

 15

 pursuant to Section 2(c) of the Registration Rights Agreement
  (the then outstanding principal amount of this Note to the date of payment plus
  the amounts referred to in clauses (x), (y) and (z) shall collectively be known
  as the “Default Sum”) or (ii) the “parity value”
  of the Default Sum to be prepaid, where parity value means (a) the highest number
  of shares of Common Stock issuable upon conversion of or otherwise pursuant
  to such Default Sum in accordance with Article I, treating the Trading Day immediately
  preceding the Mandatory Prepayment Date as the “Conversion Date”
  for purposes of determining the lowest applicable Conversion Price, unless the
  Default Event arises as a result of a breach in respect of a specific Conversion
  Date in which case such Conversion Date shall be the Conversion Date), multiplied
  by (b) the highest Closing Price for the Common Stock during the period
  beginning on the date of first occurrence of the Event of Default and ending
  one day prior to the Mandatory Prepayment Date (the “Default Amount”)
  and all other amounts payable hereunder shall immediately become due and payable,
  all without demand, presentment or notice, all of which hereby are expressly
  waived, together with all costs, including, without limitation, legal fees and
  expenses, of collection, and the Holder shall be entitled to exercise all other
  rights and remedies available at law or in equity. If the Borrower fails to
  pay the Default Amount within five (5) business days of written notice that
  such amount is due and payable, then the Holder shall have the right at any
  time, so long as the Borrower remains in default (and so long and to the extent
  that there are sufficient authorized shares), to require the Borrower, upon
  written notice, to immediately issue, in lieu of the Default Amount, the number
  of shares of Common Stock of the Borrower equal to the Default Amount divided
  by the Conversion Price then in effect. 

 ARTICLE IV. MISCELLANEOUS

      4.1 Failure
  or Indulgence Not Waiver. No failure or delay on the part of
  the Holder in the exercise of any power, right or privilege hereunder shall
  operate as a waiver thereof, nor shall any single or partial exercise of any
  such power, right or privilege preclude other or further exercise thereof or
  of any other right, power or privileges. All rights and remedies existing hereunder
  are cumulative to, and not exclusive of, any rights or remedies otherwise available.

      4.2 Notices.
  Any notice herein required or permitted to be given shall be in writing
  and may be personally served or delivered by courier or sent by United States
  mail and shall be deemed to have been given upon receipt if personally served
  (which shall include telephone line facsimile transmission) or sent by courier
  or three (3) days after being deposited in the United States mail, certified,
  with postage pre-paid and properly addressed, if sent by mail. For the purposes
  hereof, the address of the Holder shall be as shown on the records of the Borrower;
  and the address of the Borrower shall be 3131 Camino del Rio, N, Suite 1650,
  San Diego, CA 92108, facsimile number: (619) 284-4344. Both the Holder
  and the Borrower may change the address for service by service of written notice
  to the other as herein provided. 

      4.3 Amendments.
  This Note and any provision hereof may only be amended by an instrument
  in writing signed by the Borrower and the Holder. The term “Note”
  and all reference thereto, as used throughout this instrument, shall mean this
  instrument (and the other Notes issued pursuant to the Purchase Agreement) as
  originally executed, or if later amended or supplemented, then as so amended
  or supplemented. 

 16

      4.4 Assignability.
  This Note shall be binding upon the Borrower and its successors and assigns,
  and shall inure to be the benefit of the Holder and its successors and assigns.
  Each transferee of this Note must be an “accredited investor” (as
  defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note
  to the contrary, this Note may be pledged as collateral in connection with a
  bona fide margin account or other lending arrangement. 

      4.5 Cost
  of Collection. If default is made in the payment of this Note,
  the Borrower shall pay the Holder hereof costs of collection, including reasonable
  attorneys’ fees. 

      4.6 Governing
  Law. THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
  ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
  AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
  OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION
  OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT
  TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED INTO IN CONNECTION
  HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY
  WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
  PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY
  MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
  OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL
  AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
  BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
  SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
  BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES
  NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR
  ALL FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING
  PARTY IN CONNECTION WITH SUCH DISPUTE. 

      4.7 Certain
  Amounts. Whenever pursuant to this Note the Borrower is required
  to pay an amount in excess of the outstanding principal amount (or the portion
  thereof required to be paid at that time) plus accrued and unpaid interest plus
  Default Interest on such interest, the Borrower and the Holder agree that the
  actual damages to the Holder from the receipt of cash payment on this Note may
  be difficult to determine and the amount to be so paid by the Borrower represents
  stipulated damages and not a penalty and is intended to compensate the Holder
  in part for loss of the opportunity to convert this Note and to earn a return
  from the sale of shares of Common Stock acquired upon conversion of this Note
  at a price in excess of the price paid for such shares pursuant to this Note.
  The Borrower and the Holder hereby agree that such amount of stipulated damages
  is not plainly disproportionate to the possible loss to the Holder from the
  receipt of a cash payment without the opportunity to convert this Note into
  shares of Common Stock. 

 17

      4.8 Allocations
  of Maximum Share Amount and Reserved Amount. The Maximum Share
  Amount and Reserved Amount shall be allocated pro rata among the Holders of
  Notes based on the principal amount of such Notes issued to each Holder. Each
  increase to the Maximum Share Amount and Reserved Amount shall be allocated
  pro rata among the Holders of Notes based on the principal amount of such Notes
  held by each Holder at the time of the increase in the Maximum Share Amount
  or Reserved Amount. In the event a Holder shall sell or otherwise transfer any
  of such Holder’s Notes, each transferee shall be allocated a pro rata
  portion of such transferor’s Maximum Share Amount and Reserved Amount.
  Any portion of the Maximum Share Amount or Reserved Amount which remains allocated
  to any person or entity which does not hold any Notes shall be allocated to
  the remaining Holders of Notes, pro rata based on the principal amount of such
  Notes then held by such Holders. 

       4.9 Damages
  Shares. The shares of Common Stock that may be issuable to the
  Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section 2(c)
  of the Registration Rights Agreement (“Damages Shares”) shall
  be treated as Common Stock issuable upon conversion of this Note for all purposes
  hereof and shall be subject to all of the limitations and afforded all of the
  rights of the other shares of Common Stock issuable hereunder, including without
  limitation, the right to be included in the Registration Statement filed pursuant
  to the Registration Rights Agreement. For purposes of calculating interest payable
  on the outstanding principal amount hereof, except as otherwise provided herein,
  amounts convertible into Damages Shares (“Damages Amounts”)
  shall not bear interest but must be converted prior to the conversion of any
  outstanding principal amount hereof, until the outstanding Damages Amounts is
  zero. 

      4.10 Denominations.
  At the request of the Holder, upon surrender of this Note, the Borrower shall
  promptly issue new Notes in the aggregate outstanding principal amount hereof,
  in the form hereof, in such denominations of at least $50,000 as the Holder
  shall request. 

      4.11 Purchase
  Agreement. By its acceptance of this Note, each Holder agrees
  to be bound by the applicable terms of the Purchase Agreement. 

      4.12 Notice
  of Corporate Events. Except as otherwise provided below, the
  Holder of this Note shall have no rights as a Holder of Common Stock unless
  and only to the extent that it converts this Note into Common Stock. The Borrower
  shall provide the Holder with prior notification of any meeting of the Borrower’s
  shareholders (and copies of proxy materials and other information sent to shareholders).
  In the event of any taking by the Borrower of a record of its shareholders for
  the purpose of determining shareholders who are entitled to receive payment
  of any dividend or other distribution, any right to subscribe for, purchase
  or otherwise acquire (including by way of merger, consolidation, reclassification
  or recapitalization) any share of any class or any other securities or property,
  or to receive any other right, or for the purpose of determining shareholders
  who are entitled to vote in connection with any proposed sale, lease or conveyance
  of all or substantially all of the assets of the Borrower or any proposed liquidation,
  dissolution or winding up of the Borrower, the Borrower shall mail a notice
  to the Holder, at least twenty (20) days prior to the record date specified
  therein (or thirty (30) days prior to the consummation of the transaction or
  event, whichever is earlier), of the date on which any such record is to be
  taken for the purpose of such dividend, distribution, right or

 18

 other event, and a brief statement regarding the amount and
  character of such dividend, distribution, right or other event to the extent
  known at such time. The Borrower shall make a public announcement of any event
  requiring notification to the Holder hereunder substantially simultaneously
  with the notification to the Holder in accordance with the terms of this Section
  4.12. 

      4.13 Remedies.
  The Borrower acknowledges that a breach by it of its obligations hereunder will
  cause irreparable harm to the Holder, by vitiating the intent and purpose of
  the transaction contemplated hereby. Accordingly, the Borrower acknowledges
  that the remedy at law for a breach of its obligations under this Note will
  be inadequate and agrees, in the event of a breach or threatened breach by the
  Borrower of the provisions of this Note, that the Holder shall be entitled,
  in addition to all other available remedies at law or in equity, and in addition
  to the penalties assessable herein, to an injunction or injunctions restraining,
  preventing or curing any breach of this Note and to enforce specifically the
  terms and provisions thereof, without the necessity of showing economic loss
  and without any bond or other security being required. 

 ARTICLE V. CALL OPTION

      5.1 Call
  Option. Notwithstanding anything to the contrary contained in
  this Article V, so long as (i) no Event of Default or Trading Market Prepayment
  Event shall have occurred and be continuing, (ii) the Borrower has a sufficient
  number of authorized shares of Common Stock reserved for issuance upon full
  conversion of the Notes, then at any time after the Issue Date, and (iii) the
  Common Stock is trading at or below $1.10 per share, the Borrower shall
  have the right, exercisable on not less than ten (10) Trading Days prior written
  notice to the Holders of the Notes (which notice may not be sent to the Holders
  of the Notes until the Borrower is permitted to prepay the Notes pursuant to
  this Section 5.1), to prepay all or a portion of the outstanding Notes in accordance
  with this Section 5.1. In the event the Common Stock is trading above $1.10
  per share, the Borrower shall have the right, exercisable on not less than ten
  (10) Trading Days prior written notice to the Holders of the Notes to prepay
  all or a portion of the outstanding Notes as set forth in this Section 5.1 provided
  that Borrower makes an additional payment to the Holders equal to the difference
  between the trading price on the day immediately prior to the date of the notice
  and $1.10 per share for that number of shares this Note (or such portion
  of this Note being prepaid) would have converted into pursuant to Section 1.2(a)
  (the “Additional Payment”). Any notice of prepayment hereunder (an
  “Optional Prepayment”) shall be delivered to the Holders
  of the Notes at their registered addresses appearing on the books and records
  of the Borrower and shall state (1) that the Borrower is exercising its right
  to prepay all or a portion of the Notes issued on the Issue Date, (2) the date
  of prepayment and (3) the amount of the prepayment and the amount of any Additional
  Payment as applicable (the “Optional Prepayment Notice”).
  On the date fixed for prepayment (the “Optional Prepayment Date”),
  the Borrower shall make payment of the Optional Prepayment Amount (as defined
  below) to or upon the order of the Holders as specified by the Holders in writing
  to the Borrower at least one (1) business day prior to the Optional Prepayment
  Date. If the Borrower exercises its right to prepay the Notes, the Borrower
  shall make payment to the holders of an amount in cash (the “Optional
  Prepayment Amount”) equal to either (i) 120% (for prepayments occurring
  within thirty (30) days of the Issue Date), (ii) 130% for prepayments

 19

 occurring between thirty-one (31) and sixty (60) days of the
  Issue Date, or (iii) 145% (for prepayments occurring after the sixtieth (60th)
  day following the Issue Date), multiplied by the sum of (w) the then outstanding
  principal amount of this Note plus (x) accrued and unpaid interest on
  the unpaid principal amount of this Note to the Optional Prepayment Date plus
  (y) Default Interest, if any, on the amounts referred to in clauses (w) and
  (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3
  and 1.4(g) hereof or pursuant to Section 2(c) of the Registration Rights Agreement
  (the then outstanding principal amount of this Note to the date of payment plus
  the amounts referred to in clauses (x), (y) and (z) shall collectively be known
  as the “Optional Prepayment Sum”). Notwithstanding notice
  of an Optional Prepayment, the Holders shall at all times prior to the Optional
  Prepayment Date maintain the right to convert all or any portion of the Notes
  in accordance with Article I and any portion of Notes so converted after receipt
  of an Optional Prepayment Notice and prior to the Optional Prepayment Date set
  forth in such notice and payment of the aggregate Optional Prepayment Amount
  shall be deducted from the principal amount of Notes which are otherwise subject
  to prepayment pursuant to such notice. If the Borrower delivers an Optional
  Prepayment Notice and fails to pay the Optional Prepayment Amount due to the
  Holders of the Notes within two (2) business days following the Optional Prepayment
  Date, the Borrower shall forever forfeit its right to redeem the Notes pursuant
  to this Section 5.1. 

      5.2 Partial
  Call Option. Notwithstanding anything to the contrary contained in this
  Article V, in the event that the Average Daily Price of the Common Stock, as
  reported by the Reporting Service, for each day of the month ending on any Determination
  Date is below the Initial Market Price, the Borrower may, at its option, prepay
  a portion of the outstanding principal amount of the Notes equal to the principal
  amount hereof divided by thirty-six (36). The term “Initial Market
  Price” means shall mean the volume weighted average price of the Common
  Stock for the five (5) Trading Days immediately preceding the Closing which
  is $1.07. The term “Reporting Service” means a reliable
  reporting service mutually acceptable to and hereinafter designated by the Holder.

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 20

     IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this 29th day of April, 2005. 

	 	 SNOCONE SYSTEMS INC.  

	 	 By:  	   /s/ Edon Moyal                                    
    
	 	  	 Edon Moyal  
	 	  	 Chief Executive Officer  

 21

 EXHIBIT A

 NOTICE OF CONVERSION 

  (To be Executed by the Registered Holder

  in order to Convert the Notes) 

      The undersigned hereby irrevocably
  elects to convert $__________ principal amount of the Note (defined below)
  into shares of common stock, par value $.001 per share (“Common
  Stock”), of Snocone Systems Inc., a Nevada corporation (the “Borrower”)
  according to the conditions of the convertible Notes of the Borrower dated as
  of April 29, 2005 (the “Notes”), as of the date written below.
  If securities are to be issued in the name of a person other than the undersigned,
  the undersigned will pay all transfer taxes payable with respect thereto and
  is delivering herewith such certificates. No fee will be charged to the Holder
  for any conversion, except for transfer taxes, if any. A copy of each Note is
  attached hereto (or evidence of loss, theft or destruction thereof). 

      The Borrower shall electronically transmit the
  Common Stock issuable pursuant to this Notice of Conversion to the account of
  the undersigned or its nominee with DTC through its Deposit Withdrawal Agent
  Commission system (“DWAC Transfer”).

	 	Name of DTC Prime Broker: _______________________________________________________________
	 	Account Number: ______________________________________________________________________

     In lieu of receiving shares of Common Stock issuable
  pursuant to this Notice of Conversion by way of a DWAC Transfer, the undersigned
  hereby requests that the Borrower issue a certificate or certificates for the
  number of shares of Common Stock set forth below (which numbers are based on
  the Holder’s calculation attached hereto) in the name(s) specified immediately
  below or, if additional space is necessary, on an attachment hereto:

	 	Name: _______________________________________________________________________________
	 	 Address: _____________________________________________________________________________

     The undersigned represents and
  warrants that all offers and sales by the undersigned of the securities issuable
  to the undersigned upon conversion of the Notes shall be made pursuant to registration
  of the securities under the Securities Act of 1933, as amended (the “Act”),
  or pursuant to an exemption from registration under the Act.

	 	Date of Conversion: ___________________________
	 	Applicable Conversion Price: ____________________
	 	Number of Shares of Common Stock to be Issued Pursuant to
	 	Conversion of the Notes: ______________
	 	Signature: ___________________________________
	 	Name: ______________________________________
	 	Address: ____________________________________

22

 The Borrower shall issue and deliver shares of Common Stock
  to an overnight courier not later than three business days following receipt
  of the original Note(s) to be converted, and shall make payments pursuant to
  the Notes for the number of business days such issuance and delivery is late.

 23

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