Exhibit
        4.2

    

     

    AMENDED
      AND RESTATED

    CERTIFICATE
      OF DESIGNATION OF THE RELATIVE RIGHTS AND 

    PREFERENCES

    OF
      THE

    SERIES
      A CONVERTIBLE PREFERRED STOCK

    OF

    INTERNATIONAL
      IMAGING SYSTEMS, INC.

    


    The
      undersigned, the Chairman of the Board of International Imaging Systems. Inc.,
      a
      Delaware corporation (the “Company”),
      in
      accordance with the provisions of the Delaware General Corporation Law, does
      hereby certify that, pursuant to the authority conferred upon the Board of
      Directors by the Certificate of Incorporation of the Company (the “Certificate
      of Incorporation”),
      the
      Board of Directors has taken action by written consent on October ___. 2007,
      to
      amend and restate the designations, powers, preferences and relative and other
      special rights set forth in its Certificate of Designations of its Series A
      Preferred Stock, par value $0.001 per share, authorized in Article IV of the
      Certificate of Incorporation (the “Preferred
      Stock”)
      as
      follows:

    


    1.  Designation
      and Rank.
      The
      designation of such series of the Preferred Stock shall be the Series A
      Convertible Preferred Stock, par value $0.001 per share (the “Series
      A Preferred Stock”).
      The
      maximum number of shares of Series A Preferred Stock shall be 1,000,000 shares.
      The Series A Preferred Stock shall rank senior to the Company’s common stock,
      par value $0.001 per share (the “Common
      Stock”),
      and
      to all other classes and series of equity securities of the Company which by
      their terms do not rank senior to the Series A Preferred Stock (“Junior
      Stock”).
      The
      Series A Preferred Stock shall be subordinate to and rank junior to all
      indebtedness of the Company now or hereafter outstanding.

     

    2.  Intentionally
      Left Blank.

     

    3.  Voting
      Rights.

    


    (a)  Class
      Voting Rights.
      The
      Series A Preferred Stock shall have the following class voting rights (in
      addition to the voting rights set forth in Section 3(b) hereof). So long as
      any
      shares of the Series A Preferred Stock remain outstanding, the Company shall
      not, without the affirmative vote or consent of (1) the shareholder whose name
      is set forth on Exhibit A to the Purchase Agreement, as hereinafter defined
      (assuming such shareholder owns any shares of the Series A Preferred Stock
      at
      the time of such vote or consent) (the “Initial Holder”) and (2) the holders of
      twenty-five percent (25%) of the shares of the Series A Preferred Stock
      outstanding at the time, the calculation of which shall include the Initial
      Holder’s percentage of ownership of the Series A Preferred Stock outstanding at
      the time, given in person or by proxy, either in writing or at a meeting in
      which the holders of the Series A Preferred Stock vote separately as a class:
      (i) authorize, create, issue or increase the authorized or issued amount of
      any
      class or series of Preferred Stock, which class or series, in any such case,
      ranks pari passu or senior to the Series A Preferred Stock, with respect to
      the
      Distribution of assets on liquidation, dissolution or winding up; (ii) amend,
      alter or repeal the provisions of the Series A Preferred Stock, whether by
      merger, consolidation or otherwise, so as to adversely affect any right,
      preference, privilege or voting power of the Series A Preferred Stock;
provided,
      however,
      that
      any creation and issuance of another series of Junior Stock shall not be deemed
      to adversely affect such rights, preferences, privileges or voting powers;
      (iii)
      repurchase, redeem or pay dividends on, shares of Common Stock or any other
      shares of the Company's Junior Stock (other than de minimus repurchases from
      employees of the Company in certain circumstances or repurchases pursuant to
      a
      plan approved by the Board); (iv) amend the Certificate of Incorporation or
      By-Laws of the Company so as to affect materially and adversely any right,
      preference, privilege or voting power of the Series A Preferred Stock;
provided,
      however,
      that
      any creation and issuance of another series of Junior Stock shall not be deemed
      to adversely affect such rights, preferences, privileges or voting powers;
      (v)
      effect any Distribution with respect to Junior Stock other than as permitted
      hereby; (vi) reclassify the Company's outstanding securities; (vii) voluntarily
      file for bankruptcy, liquidate the Company’s assets or make an assignment for
      the benefit of the Company’s creditors; or (viii) materially change the nature
      of the Company’s business. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)  General
      Voting
      Rights.
      Except
      with respect to transactions upon which the Series A Preferred Stock shall
      be
      entitled to vote separately as a class pursuant to Section 3(a) above and except
      as otherwise required by Delaware law, the Series A Preferred Stock shall have
      no voting rights. The Common Stock into which the Series A Preferred Stock
      is
      convertible shall, upon issuance, have all of the same voting rights as other
      issued and outstanding Common Stock of the Company, and none of the rights
      of
      the Preferred Stock.

     

    4.  Liquidation
      Preference.

     

    (a)  In
      the
      event of the liquidation, dissolution or winding up of the affairs of the
      Company, whether voluntary or involuntary, the holders of shares of Series
      A
      Preferred Stock then outstanding shall be entitled to receive, out of the assets
      of the Company available for Distribution to its stockholders, an amount equal
      to $10.00 per share of the Series A Preferred Stock (the “Series A Liquidation
      Preference Amount”) before any payment shall be made or any assets distributed
      to the holders of the Common Stock or any other Junior Stock. If the assets
      of
      the Company are not sufficient to pay in full the Series A Liquidation
      Preference Amount payable to the holders of outstanding shares of the Series
      A
      Preferred Stock and any series of Preferred Stock or any other class of stock
      ranking pari passu, as to rights on liquidation, dissolution or winding up,
      with
      the Series A Preferred Stock, then all of said assets will be distributed among
      the holders of the Series A Preferred Stock and the other classes of stock
      ranking pari passu with the Series A Preferred Stock, if any, ratably in
      accordance with the respective amounts that would be payable on such shares
      if
      all amounts payable thereon were paid in full. The liquidation payment with
      respect to each outstanding fractional share of Series A Preferred Stock shall
      be equal to a ratably proportionate amount of the liquidation payment with
      respect to each outstanding share of Series A Preferred Stock. All payments
      for
      which this Section 4(a) provides shall be in cash, property (valued at its
      fair
      market value as determined by an independent appraiser chosen by the Company
      and
      reasonably acceptable to the holders of a majority of the Series A Preferred
      Stock) or a combination thereof; provided,
      however,
      that no
      cash shall be paid to holders of Junior Stock unless each holder of the
      outstanding shares of Series A Preferred Stock has been paid in cash the full
      Series A Liquidation Preference Amount to which such holder is entitled as
      provided herein. 

     

    
      
         

      

      
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    (b)  A
      consolidation or merger of the Company with or into any other corporation or
      corporations, or a sale of all or substantially all of the assets of the
      Company, or the effectuation by the Company of a transaction or series of
      related transactions in which more than 50% of the voting shares of the Company
      is disposed of or conveyed, shall not be deemed to be a liquidation,
      dissolution, or winding up within the meaning of this Section 4. In the event
      of
      the merger or consolidation of the Company with or into another corporation,
      the
      Series A Preferred Stock shall maintain its relative powers, designations and
      preferences provided for herein and no merger shall result which is inconsistent
      therewith.

     

    (c)  The
      Company shall provide written notice of any redemption, voluntary or involuntary
      liquidation, dissolution or winding up of the affairs of the Company, stating
      a
      payment date and the place where the distributable amounts shall be payable,
      by
      mail, postage prepaid, no less than forty-five (45) days prior to the payment
      date stated therein, to the holders of record of the Series A Preferred Stock
      at
      their respective addresses as the same shall appear on the books of the Company,
      which notice shall also state the amount per share of Series A Preferred Stock
      that will be paid or distributed on such redemption or liquidation, dissolution
      or winding up, as the case may be.

     

    5.  Conversion.
      The
      holder of Series A Preferred Stock shall have the following conversion rights
      (the “Conversion
      Rights”):

     

    (a)  Right
      to Convert.
      At any
      time on or after the date of the initial issuance of the Series A Preferred
      Stock (the “Issuance
      Date”),
      the
      holder of any such shares of Series A Preferred Stock may, at such holder's
      option, subject to the limitations set forth in Section 7 herein, elect to
      convert (a “Voluntary
      Conversion”)
      all or
      any portion of the shares of Series A Preferred Stock held by such person into
      a
      number of fully paid and nonassessable shares of Common Stock equal to the
      quotient of (i) the Series A Liquidation Preference Amount of the shares of
      Series A Preferred Stock being converted divided by (ii) the Conversion Price
      (as defined in Section 5(d) below) in effect as of the date of the delivery
      by
      such holder of its notice of election to convert. In the event of a notice
      of
      redemption of any shares of Series A Preferred Stock pursuant to Section 8
      hereof, the Conversion Rights of the shares designated for redemption shall
      terminate at the close of business on the last full day preceding the date
      fixed
      for redemption, unless the redemption price is not paid on such redemption
      date,
      in which case the Conversion Rights for such shares shall continue until such
      price is paid in full. In the event of a liquidation, dissolution or winding
      up
      of the Company, the Conversion Rights shall terminate at the close of business
      on the last full day preceding the date fixed for the payment of any such
      amounts distributable on such event to the holders of Series A Preferred Stock.
      

     

    (b)  Mechanics
      of Voluntary Conversion.
      The
      Voluntary Conversion of Series A Preferred Stock shall be conducted in the
      following manner:

     

    (i)  Holder's
      Delivery Requirements.
      To
      convert Series A Preferred Stock into full shares of Common Stock on any date
      (the “Voluntary
      Conversion Date”),
      the
      holder thereof shall (A) transmit by facsimile (or otherwise deliver), for
      receipt on or prior to 5:00 p.m., New York time on such date, a copy of a fully
      executed notice of conversion in the form attached hereto as Exhibit
      I
      (the
“Conversion
      Notice”),
      to
      the Company at International Imaging Systems, Inc., c/o Xi’an Baorun Industrial
      Development Co., Ltd., Dongxin Century Square, 7th
      floor,
      Xi’an East City High-tech Industrial Development Park, Shanxi Province, PRC,
      Attention: Chief Executive Officer, and (B) surrender to a common carrier for
      delivery to the Company as soon as practicable following such Voluntary
      Conversion Date the original certificates representing the shares of Series
      A
      Preferred Stock being converted (or an indemnification undertaking with respect
      to such shares in the case of their loss, theft or destruction) (the
“Preferred
      Stock Certificates”)
      and
      the originally executed Conversion Notice.

     

    
      
         

      

      
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    (ii)  Company's
      Response.
      Upon
      receipt by the Company of a facsimile copy of a Conversion Notice, the Company
      shall immediately send, via facsimile, a confirmation of receipt of such
      Conversion Notice to such holder. Upon receipt by the Company of a copy of
      the
      fully executed Conversion Notice and the Preferred Stock Certificates, the
      Company or its designated transfer agent (the “Transfer
      Agent”),
      as
      applicable, shall, within three (3) trading days following the date of receipt
      by the Company of the fully executed Conversion Notice, issue and deliver to
      the
      Depository Trust Company (“DTC”)
      account on the holder’s behalf via the Deposit Withdrawal Agent Commission
      System (“DWAC”)
      as
      specified in the Conversion Notice, certificates registered in the name of
      the
      holder or its designee, representing the number of shares of Common Stock to
      which the holder shall be entitled.
      Notwithstanding the foregoing to the contrary, the Company or its Transfer
      Agent
      shall only be obligated to issue and deliver the shares to the DTC on a holder’s
      behalf via DWAC if a registration statement providing for the resale of the
      shares of Common Stock issuable upon conversion of the Series A Preferred Stock
      is effective. If the number of shares of Preferred Stock represented by the
      Preferred Stock Certificate(s) submitted for conversion is greater than the
      number of shares of Series A Preferred Stock being converted, then the Company
      shall, as soon as practicable and in no event later than three (3) business
      days
      after receipt of the Preferred Stock Certificate(s) and at the Company's
      expense, issue and deliver to the holder a new Preferred Stock Certificate
      representing the number of shares of Series A Preferred Stock not
      converted.

     

    (iii)  Dispute
      Resolution.
      In the
      case of a dispute as to the arithmetic calculation of the number of shares
      of
      Common Stock to be issued upon conversion, the Company shall cause its Transfer
      Agent to promptly issue to the holder the number of shares of Common Stock
      that
      is not disputed and shall submit the arithmetic calculations to the holder
      via
      facsimile as soon as possible, but in no event later than two (2) business
      days
      after receipt of such holder's Conversion Notice. If such holder and the Company
      are unable to agree upon the arithmetic calculation of the number of shares
      of
      Common Stock to be issued upon such conversion within one (1) business day
      of
      such disputed arithmetic calculation being submitted to the holder, then the
      Company shall within one (1) business day thereafter submit via facsimile the
      disputed arithmetic calculation of the number of shares of Common Stock to
      be
      issued upon such conversion to the Company’s independent, outside accountant.
      The Company shall cause the accountant to perform the calculations and notify
      the Company and the holder of the results no later than seventy-two (72) hours
      from the time it receives the disputed calculations. Such accountant's
      calculation shall be binding upon all parties absent manifest error. The
      reasonable expenses of such accountant in making such determination shall be
      paid by the Company, in the event the holder's calculation was correct, or
      by
      the holder, in the event the Company's calculation was correct, or equally
      by
      the Company and the holder in the event that neither the Company's or the
      holder's calculation was correct. The period of time in which the Company is
      required to effect conversions or redemptions under this Certificate of
      Designation shall be tolled with respect to the subject conversion or redemption
      pending resolution of any dispute by the Company made in good faith and in
      accordance with this Section 5(b)(iii).

     

    
      
         

      

      
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    (iv)  Record
      Holder.
      The
      person or persons entitled to receive the shares of Common Stock issuable upon
      a
      conversion of the Series A Preferred Stock shall be treated for all purposes
      as
      the record holder or holders of such shares of Common Stock from and after
      the
      Conversion Date.

     

    (v)  
      Company's Failure to Timely Convert.
      If
      within three (3) business days, in the event shares of Common Stock are being
      issued, and within five business days in the event a new Preferred Stock
      Certificate is being issued, after the Company's receipt of an executed copy
      of
      the Conversion Notice (so long as the applicable Preferred Stock Certificates
      and original Conversion Notice are received by the Company on or before such
      third business day and there are no disputes regarding such calculation) (the
      “Delivery
      Date”)
      the
      Transfer Agent shall fail to issue and deliver to a holder the number of shares
      of Common Stock to which such holder is entitled upon such holder's conversion
      of the Series A Preferred Stock or the Company shall fail to issue a new
      Preferred Stock Certificate representing the number of shares of Series A
      Preferred Stock to which such holder is entitled pursuant to Section 5(b)(ii)
      (a
“Conversion
      Failure”),
      in
      addition to all other available remedies which such holder may pursue hereunder
      and under the Series A Convertible Preferred Stock Purchase Agreement (the
      “Purchase
      Agreement”)
      among
      the Company and the initial holders of the Series A Preferred Stock (including
      indemnification pursuant to Section 6 thereof), the Company shall pay additional
      damages to such holder on each business day after such third (3rd)
      business day that such conversion is not timely effected in an amount equal
      to
      0.5% of the product of (A) the sum of the number of shares of Common Stock
      not
      issued to the holder on a timely basis pursuant to Section 5(b)(ii) and to
      which
      such holder is entitled and, in the event the Company has failed to deliver
      a
      Preferred Stock Certificate to the holder on a timely basis pursuant to Section
      5(b)(ii), the number of shares of Common Stock issuable upon conversion of
      the
      shares of Series A Preferred Stock represented by such Preferred Stock
      Certificate, as of the last possible date which the Company could have issued
      such Preferred Stock Certificate to such holder without violating Section
      5(b)(ii) and (B) the Closing Bid Price (as defined in Section 5(b)(vii) below)
      of the Common Stock on the last possible date which the Company could have
      issued such Common Stock and such Preferred Stock Certificate, as the case
      may
      be, to such holder without violating Section 5(b)(ii). If the Company fails
      to
      pay the additional damages set forth in this Section 5(b)(v) within five (5)
      business days of the date incurred, then such payment shall bear interest at
      the
      rate of 2.0% per month (pro rated for partial months) until such payments are
      made.

     

    (vi)  Buy-In
      Rights.
      In
      addition to any other rights available to the holders of Series A Preferred
      Stock, if the Company fails to cause its Transfer Agent to transmit to the
      holder a certificate or certificates representing the shares of Common Stock
      issuable upon conversion of the Series A Preferred Stock on or before the
      Delivery Date, and if after such date the holder is required by its broker
      to
      purchase (in an open market transaction or otherwise) shares of Common Stock
      to
      deliver in satisfaction of a sale by the holder of the shares of Common Stock
      issuable upon conversion of Series A Preferred Stock which the holder
      anticipated receiving upon such conversion (a “Buy-In”),
      then
      the Company shall (1) pay in cash to the holder the amount by which (x) the
      holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of shares of Common Stock issuable upon conversion
      of
      Series A Preferred Stock that the Company was required to deliver to the holder
      in connection with the conversion at issue times (B) the price at which the
      sell
      order giving rise to such purchase obligation was executed (such amount to
      be
      offset by any payment already made to holder under Section 5(b)(v)), and (2)
      at
      the option of the holder, either reinstate the shares of Series A Preferred
      Stock and equivalent number of shares of Common Stock for which such conversion
      was not honored or deliver to the holder the number of shares of Common Stock
      that would have been issued had the Company timely complied with its conversion
      and delivery obligations hereunder. For example, if the holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted conversion of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (1) of the
      immediately preceding sentence the Company shall be required to pay to the
      holder $1,000. The holder shall provide the Company written notice indicating
      the amounts payable to the holder in respect of the Buy-In, together with
      applicable confirmations and other evidence reasonably requested by the Company.
      Nothing herein shall limit a holder’s right to pursue any other remedies
      available to it hereunder, at law or in equity including, without limitation,
      a
      decree of specific performance and/or injunctive relief with respect to the
      Company’s failure to timely deliver certificates representing shares of Common
      Stock upon conversion of the Series A Preferred Stock as required pursuant
      to
      the terms hereof. 

     

    
      
         

      

      
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    (vii)  The
      term
      "Closing Bid Price" shall mean, for any security as of any date, the last
      closing bid price of such security on the NASDAQ or other principal exchange
      on
      which such security is traded as reported by Bloomberg, or, if no closing bid
      price is reported for such security by Bloomberg, the last closing trade price
      of such security as reported by Bloomberg, or, if no last closing trade price
      is
      reported for such security by Bloomberg, the average of the bid prices of any
      market makers for such security as reported in the "pink sheets" by the National
      Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
      security on such date on any of the foregoing bases, the Closing Bid Price
      of
      such security on such date shall be the fair market value as mutually determined
      by the Company and the holders of a majority of the outstanding shares of Series
      A Preferred Stock.

    


    (c)  Intentionally
      Omitted.

     

    
      
         

      

      
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    (d)  Conversion
      Price.
      

     

    (i)  The
      term
“Conversion
      Price”
shall
      mean $2.20 per share subject to adjustment under Section 5(e) hereof.
      Notwithstanding any adjustment hereunder, at no time shall the Conversion Price
      be greater than $2.20 per share except if it is adjusted pursuant to Section
      5(e)(i). 

     

    (ii)  Notwithstanding
      the foregoing to the contrary, if during any period (a “Black-out
      Period”),
      a
      holder of Series A Preferred Stock is unable to trade any Common Stock issued
      or
      issuable upon conversion of the Series A Preferred Stock immediately due to
      the
      delay or suspension of effectiveness of the Registration Statement or because
      the Company has otherwise informed such holder of Series A Preferred Stock
      that
      an existing prospectus cannot be used at that time in the sale or transfer
      of
      such Common Stock (provided that such postponement, delay, suspension or fact
      that the prospectus cannot be used is not due to factors solely within the
      control of the holder of Series A Preferred Stock or due to the Company
      exercising its rights under Section 3(n) of the Registration Rights Agreement
      (as defined in the Purchase Agreement), such holder of Series A Preferred Stock
      shall have the option but not the obligation on any Conversion Date within
      ten
      (10) trading days following the expiration of the Black-out Period of using
      the
      Conversion Price applicable on such Conversion Date or any Conversion Price
      selected by such holder of Series A Preferred Stock that would have been
      applicable had such Conversion Date been at any earlier time during the
      Black-out Period or within the ten (10) trading days thereafter. 

     

    (e)  Adjustments
      of Conversion Price.

     

    (i)  Adjustments
      for Stock Splits and Combinations.
      If the
      Company shall, at any time or from time to time after the Issuance Date, effect
      a split of the outstanding Common Stock, the Conversion Price shall be
      proportionately decreased. If the Company shall, at any time or from time to
      time after the Issuance Date, combine the outstanding shares of Common Stock,
      the Conversion Price shall be proportionately increased. Any adjustments under
      this Section 5(e)(i) shall be effective at the close of business on the date
      the
      stock split or combination becomes effective.

     

    (ii)  Adjustments
      for Certain Dividends and Distributions.
      If the
      Company shall, at any time or from time to time after the Issuance Date, make
      or
      issue or set a record date for the determination of holders of Common Stock
      entitled to receive a dividend or other Distribution payable in shares of Common
      Stock, then, and in each event, the Conversion Price shall be decreased as
      of
      the time of such issuance or, in the event such record date shall have been
      fixed, as of the close of business on such record date, by multiplying the
      Conversion Price then in effect by a fraction:

     

    (1)  the
      numerator of which shall be the total number of shares of Common Stock issued
      and outstanding immediately prior to the time of such issuance or the close
      of
      business on such record date; and

     

    (2)  the
      denominator of which shall be the total number of shares of Common Stock issued
      and outstanding immediately prior to the time of such issuance or the close
      of
      business on such record date plus the number of shares of Common Stock issuable
      in payment of such dividend or Distribution.

     

    
      
         

      

      
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    (iii)  Adjustment
      for Other Dividends and Distributions.
      If the
      Company shall, at any time or from time to time after the Issuance Date, make
      or
      issue or set a record date for the determination of holders of Common Stock
      entitled to receive a dividend or other Distribution payable in securities
      of
      the Company other than shares of Common Stock, then, and in each event, an
      appropriate revision to the applicable Conversion Price shall be made and
      provision shall be made (by adjustments of the Conversion Price or otherwise)
      so
      that the holders of Series A Preferred Stock shall receive upon conversions
      thereof, in addition to the number of shares of Common Stock receivable thereon,
      the number of securities of the Company which they would have received had
      their
      Series A Preferred Stock been converted into Common Stock on the date of such
      event and had such holder thereafter, during the period from the date of such
      event to and including the Conversion Date, retained such securities (together
      with any Distributions payable thereon during such period), giving application
      to all adjustments called for during such period under this Section 5(e)(iii)
      with respect to the rights of the holders of the Series A Preferred Stock;
      provided,
      however,
      that if
      such record date shall have been fixed and such dividend is not fully paid
      or if
      such Distribution is not fully made on the date fixed therefor, the Conversion
      Price shall be adjusted pursuant to this paragraph as of the time of actual
      payment of such dividends or Distributions; and provided further,
      however,
      that no
      such adjustment shall be made if the holders of Series A Preferred Stock
      simultaneously receive (i) a dividend or other Distribution of shares of
      Common Stock in a number equal to the number of shares of Common Stock as they
      would have received if all outstanding shares of Series A Preferred Stock had
      been converted into Common Stock on the date of such event or (ii) a
      dividend or other Distribution of shares of Series A Preferred Stock which
      are
      convertible, as of the date of such event, into such number of shares of Common
      Stock as is equal to the number of additional shares of Common Stock being
      issued with respect to each share of Common Stock in such dividend or
      Distribution.

     

    (iv)  Adjustments
      for Reclassification, Exchange or Substitution.
      If the
      Common Stock issuable upon conversion of the Series A Preferred Stock at any
      time or from time to time after the Issuance Date shall be changed to the same
      or different number of shares of any class or classes of stock, whether by
      reclassification, exchange, substitution or otherwise (other than by way of
      a
      stock split or combination of shares or stock dividends provided for in Sections
      5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale
      of
      assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
      revision to the Conversion Price shall be made and provisions shall be made
      (by
      adjustments of the Conversion Price or otherwise) so that the holder of each
      share of Series A Preferred Stock shall have the right thereafter to convert
      such share of Series A Preferred Stock into the kind and amount of shares of
      stock and other securities receivable upon reclassification, exchange,
      substitution or other change, by holders of the number of shares of Common
      Stock
      into which such share of Series A Preferred Stock might have been converted
      immediately prior to such reclassification, exchange, substitution or other
      change, all subject to further adjustment as provided herein.

     

    (v)  Adjustments
      for Reorganization, Merger, Consolidation or Sales of Assets.
      If at
      any time or from time to time after the Issuance Date there shall be a capital
      reorganization of the Company (other than by way of a stock split or combination
      of shares or stock dividends or Distributions provided for in Section 5(e)(i),
      (ii) and (iii), or a reclassification, exchange or substitution of shares
      provided for in Section 5(e)(iv)), or a merger or consolidation of the Company
      with or into another corporation where the holders of the Company’s outstanding
      voting securities prior to such merger or consolidation do not own over 50%
      of
      the outstanding voting securities of the merged or consolidated entity,
      immediately after such merger or consolidation, or the sale of all or
      substantially all of the Company's properties or assets to any other person
      (an
“Organic
      Change”),
      then
      as a part of such Organic Change an appropriate revision to the Conversion
      Price
      shall be made if necessary and provision shall be made if necessary (by
      adjustments of the Conversion Price or otherwise) so that the holder of each
      share of Series A Preferred Stock shall have the right thereafter to convert
      such share of Series A Preferred Stock into the kind and amount of shares of
      stock and other securities or property of the Company or any successor
      corporation resulting from Organic Change. In any such case, appropriate
      adjustment shall be made in the application of the provisions of this Section
      5(e)(v) with respect to the rights of the holders of the Series A Preferred
      Stock after the Organic Change to the end that the provisions of this Section
      5(e)(v) (including any adjustment in the Conversion Price then in effect and
      the
      number of shares of stock or other securities deliverable upon conversion of
      the
      Series A Preferred Stock) shall be applied after that event in as nearly an
      equivalent manner as may be practicable.

     

    
      
         

      

      
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    (vi)  Adjustments
      for Issuance of Additional Shares of Common Stock.
      For a
      period of one (1) year following the Issuance Date (the “Full
      Ratchet Period”),
      in
      the event the Company shall issue or sell any additional shares of Common Stock
      (otherwise than as provided in the foregoing subsections (i) through (v) of
      this
      Section 5(e) or pursuant to (X) Common Stock Equivalents (as hereafter defined)
      granted or issued prior to the Issuance Date or (Y) subsection (xii) below)
      (“Additional
      Shares of Common Stock”)
      at a
      price per share less than the Conversion Price then in effect or without
      consideration, then the Conversion Price upon each such issuance shall be
      reduced to a price equal to the consideration per share paid for such Additional
      Shares of Common Stock.

     

    (vii)  Issuance
      of Common Stock Equivalents.
      The
      provisions of this Section 5(e)(vii) shall apply if the Company during the
      Full
      Ratchet Period, shall (a) issue any securities convertible into or exchangeable
      for, directly or indirectly, Common Stock (“Convertible
      Securities”),
      other
      than the Series A Preferred Stock, or (b) issue or sell any rights or warrants
      or options to purchase any such Common Stock or Convertible Securities
      (collectively, the “Common
      Stock Equivalents”).
      If
      the price per share for which Additional Shares of Common Stock may be issuable
      pursuant to any such Convertible Securities or Common Stock Equivalent shall
      be
      less than the applicable Conversion Price then in effect, or if, after any
      such
      issuance of Common Stock Equivalents, the price per share for which Additional
      Shares of Common Stock may be issuable thereafter is amended or adjusted, and
      such price as so amended shall be less than the applicable Conversion Price
      in
      effect at the time of such amendment or adjustment, then the applicable
      Conversion Price upon each such issuance or amendment shall be adjusted as
      provided in the first sentence of subsection (vi) of this Section 5(e). No
      adjustment shall be made to the Conversion Price upon the issuance of any Common
      Stock pursuant to the exercise, conversion or exchange of any Convertible
      Security or Common Stock Equivalent where an adjustment to the Conversion Price
      was made as a result of the issuance or purchase of such Convertible Security
      or
      Common Stock Equivalent.

     

    
      
         

      

      
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    (viii)  Subsequent
      Common Stock and Common Stock Equivalents Issues.
      In the
      event the Company shall, for a period of thirty-six (36) months after the Full
      Ratchet Period, issue or sell any Additional Shares of Common Stock or Common
      Stock Equivalents (otherwise than as provided in the foregoing subsections
      (i)
      through (v) of this Section 5(e)) at a price per share less than the
      then-applicable Conversion Price, or without consideration, the Conversion
      Price
      shall be adjusted to that price (rounded to the nearest cent) determined by
      multiplying the Conversion Price by a fraction: (1) the numerator of which
      shall
      be equal to the sum
      of (A)
      the number of shares of Outstanding Common Stock immediately prior to the
      issuance of such Additional Shares of Common Stock plus
      (B) the
      number of shares of Common Stock (rounded to the nearest whole share) which
      the
      aggregate consideration for the total number of such Additional Shares of Common
      Stock so issued would purchase at a price per share equal to the outstanding
      Conversion Price in effect immediately prior to such issuance; and (2) the
      denominator of which shall be equal to the number of shares of Outstanding
      Common Stock immediately after the issuance of such Additional Shares of Common
      Stock. No adjustment of the Conversion Price shall be made upon the issuance
      of
      any Additional Shares of Common Stock which are issued pursuant to the exercise
      of any warrants or other subscription or purchase rights or pursuant to the
      exercise of any conversion or exchange rights in any Common Stock Equivalents,
      if any such adjustment shall previously have been made upon the issuance of
      such
      warrants or other rights or upon the issuance of such Common Stock Equivalents
      (or upon the issuance of any warrant or other rights therefore). 

     

    (ix)  Superseding
      Adjustment.
      If, at
      any time after any adjustment of the Conversion Price then in effect shall
      have
      been made pursuant to Section 5(e)(vi), (vii) or (viii) as the result of any
      issuance of Common Stock Equivalents, and such Common Stock Equivalents, or
      the
      right of conversion or exchange in such Common Stock Equivalents, shall expire,
      and all of such or the right of conversion or exchange with respect to all
      of
      such Common Stock Equivalents shall not have been converted or exercised, then
      such previous adjustment shall be rescinded and annulled and the Conversion
      Price then in effect shall be adjusted to the Conversion Price in effect
      immediately prior to the issuance of such Common Stock Equivalents, subject
      to
      any further adjustments pursuant to this Section 5.

     

    (x)  Consideration
      for Stock.
      In case
      any shares of Common Stock or Convertible Securities other than the Series
      A
      Preferred Stock, or any rights or warrants or options to purchase any such
      Common Stock or Convertible Securities, shall be issued or sold:

     

    (1)  in
      connection with any merger or consolidation in which the Company is the
      surviving corporation (other than any consolidation or merger in which the
      previously outstanding shares of Common Stock of the Company shall be changed
      to
      or exchanged for the stock or other securities of another corporation), the
      amount of consideration therefore shall be deemed to be the fair value, as
      determined reasonably and in good faith by the Board of Directors of the
      Company, of such portion of the assets and business of the nonsurviving
      corporation as such Board may determine to be attributable to such shares of
      Common Stock, Convertible Securities, rights or warrants or options, as the
      case
      may be; or

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (2)  in
      the
      event of any consolidation or merger of the Company in which the Company is
      not
      the surviving corporation or in which the previously outstanding shares of
      Common Stock of the Company shall be changed into or exchanged for the stock
      or
      other securities of another corporation, or in the event of any sale of all
      or
      substantially all of the assets of the Company for stock or other securities
      of
      any corporation, the Company shall be deemed to have issued a number of shares
      of its Common Stock for stock or securities or other property of the other
      corporation computed on the basis of the actual exchange ratio on which the
      transaction was predicated, and for a consideration equal to the fair market
      value on the date of such transaction of all such stock or securities or other
      property of the other corporation. If any such calculation results in adjustment
      of the applicable Conversion Price, or the number of shares of Common Stock
      issuable upon conversion of the Series A Preferred Stock, the determination
      of
      the applicable Conversion Price or the number of shares of Common Stock issuable
      upon conversion of the Series A Preferred Stock immediately prior to such
      merger, consolidation or sale, shall be made after giving effect to such
      adjustment of the number of shares of Common Stock issuable upon conversion
      of
      the Series A Preferred Stock. In the event any consideration received by the
      Company for any securities consists of property other than cash, the fair market
      value thereof at the time of issuance or as otherwise applicable shall be as
      determined in good faith by the Board of Directors of the Company. In the event
      Common Stock is issued with other shares or securities or other assets of the
      Company for consideration which covers both, the consideration computed as
      provided in this Section (5)(e)(x) shall be allocated among such securities
      and
      assets as determined in good faith by the Board of Directors of the
      Company.

     

    (xi)  Record
      Date.
      In case
      the Company shall take record of the holders of its Common Stock or any other
      Preferred Stock for the purpose of entitling them to subscribe for or purchase
      Common Stock or Convertible Securities, then the date of the issue or sale
      of
      the shares of Common Stock shall be deemed to be such record date.

     

    (xii)  Certain
      Issues Excepted.
      Anything herein to the contrary notwithstanding, the Company shall not be
      required to make any adjustment to the Conversion Price upon (i) securities
      issued (other than for cash) in connection with a merger, acquisition, or
      consolidation, (ii) securities issued pursuant to the conversion or exercise
      of
      convertible or exercisable securities issued or outstanding on or prior to
      the
      date of the Purchase Agreement or issued pursuant to the Purchase Agreement
      (so
      long as the terms governing the conversion or exercise price in such securities
      are not amended to lower such price and/or adversely affect the holders of
      the
      Series A Preferred Stock); (iii) securities issued in connection with bona
      fide
      strategic license agreements or other partnering arrangements so long as such
      issuances are not for the purpose of raising capital and so long as such
      agreements and arrangements are pre-approved in writing by the Purchasers,
      (iv)
      Common Stock issued or the issuance or grants of options to purchase Common
      Stock pursuant to the Company’s stock option plans and employee stock purchase
      plans outstanding as they exist on the date of the Purchase Agreement, and
      (v)
      securities issued to any placement agent and its respective designees for the
      transactions contemplated by the Purchase Agreement. 

     

    (f)  No
      Impairment.
      The
      Company shall not, by amendment of its Certificate of Incorporation or through
      any reorganization, transfer of assets, consolidation, merger, dissolution,
      issue or sale of securities or any other voluntary action, avoid or seek to
      avoid the observance or performance of any of the terms to be observed or
      performed hereunder by the Company, but will at all times in good faith assist
      in the carrying out of all the provisions of this Section 5 and in the taking
      of
      all such action as may be necessary or appropriate in order to protect the
      Conversion Rights of the holders of the Series A Preferred Stock against
      impairment. In the event a holder shall elect to convert any shares of Series
      A
      Preferred Stock as provided herein, the Company cannot refuse conversion based
      on any claim that such holder or anyone associated or affiliated with such
      holder has been engaged in any violation of law, unless (i) the Company receives
      an order from the Securities and Exchange Commission prohibiting such conversion
      or (ii) an injunction from a court, on notice, restraining and/or adjoining
      conversion of all or of said shares of Series A Preferred Stock shall have
      been
      issued and the Company posts a surety bond for the benefit of such holder in
      an
      amount equal to 120% of the Series A Liquidation Preference Amount of the shares
      of Series A Preferred Stock such holder has elected to convert, which bond
      shall
      remain in effect until the completion of arbitration/litigation of the dispute
      and the proceeds of which shall be payable to such holder in the event it
      obtains judgment.

     

    
      
         

      

      
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    (g)  Certificates
      as to Adjustments.
      Upon
      occurrence of each adjustment or readjustment of the Conversion Price or number
      of shares of Common Stock issuable upon conversion of the Series A Preferred
      Stock pursuant to this Section 5, the Company at its expense shall promptly
      compute such adjustment or readjustment in accordance with the terms hereof
      and
      furnish to each holder of Series A Preferred Stock a certificate setting forth
      such adjustment and readjustment, showing in detail the facts upon which such
      adjustment or readjustment is based. The Company shall, upon written request
      of
      the holder of such affected Series A Preferred Stock, at any time, furnish
      or
      cause to be furnished to such holder a like certificate setting forth such
      adjustments and readjustments, the Conversion Price in effect at the time,
      and
      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 the conversion of a share
      of such Series A Preferred Stock. Notwithstanding the foregoing, the Company
      shall not be obligated to deliver a certificate unless such certificate would
      reflect an increase or decrease of at least one percent of such adjusted amount;
      if the Company so postpones delivering a certificate, such prior adjustment
      shall be carried forward and made as soon as such adjustment, together with
      other adjustments required by this Section
      5
      and not
      previously made, would result in an adjustment of one percent or more.


     

    (h)  Issue
      Taxes.
      The
      Company shall pay any and all issue and other taxes, excluding federal, state
      or
      local income taxes, that may be payable in respect of any issue or delivery
      of
      shares of Common Stock on conversion of shares of Series A Preferred Stock
      pursuant hereto; provided,
      however,
      that
      the Company shall not be obligated to pay any transfer taxes resulting from
      any
      transfer requested by any holder in connection with any such
      conversion.

     

    (i)  Notices.
      All notices and other communications hereunder shall be in writing and shall
      be
      deemed given if delivered personally or by facsimile or three (3) business
      days
      following being mailed by certified or registered mail, postage prepaid,
      return-receipt requested, addressed to the holder of record at its address
      appearing on the books of the Company. The Company will give written notice
      to
      each holder of Series A Preferred Stock at least twenty (20) days prior to
      the
      date on which the Company closes its books or takes a record (I) with respect
      to
      any dividend or Distribution upon the Common Stock, (II) with respect to any
      pro
      rata subscription offer to holders of Common Stock or (III) for determining
      rights to vote with respect to any Organic Change, dissolution, liquidation
      or
      winding-up and in no event shall such notice be provided to such holder prior
      to
      such information being made known to the public. The Company will also give
      written notice to each holder of Series A Preferred Stock at least twenty (20)
      days prior to the date on which any Organic Change, dissolution, liquidation
      or
      winding-up will take place and in no event shall such notice be provided to
      such
      holder prior to such information being made known to the public.

     

    
      
         

      

      
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    (j)  Fractional
      Shares.
      No
      fractional shares of Common Stock shall be issued upon conversion of the Series
      A Preferred Stock. In lieu of any fractional shares to which the holder would
      otherwise be entitled, the Company shall round the number of shares to be issued
      upon conversion up to the nearest whole number of shares.

     

    (k)  Reservation
      of Common Stock.
      The
      Company shall, so long as any shares of Series A Preferred Stock are
      outstanding, reserve and keep available out of its authorized and unissued
      Common Stock, solely for the purpose of effecting the conversion of the Series
      A
      Preferred Stock, such number of shares of Common Stock
      equal to
      at least one hundred ten
      percent (110%) of the aggregate number of shares of Common Stock as shall from
      time to time be sufficient to effect the conversion of all of the shares of
      Series A Preferred Stock then outstanding. The initial number of shares of
      Common Stock reserved for conversions of the Series A Preferred Stock and any
      increase in the number of shares so reserved shall be allocated pro rata among
      the holders of the Series A Preferred Stock based on the number of shares of
      Series A Preferred Stock held by each holder of record at the time of issuance
      of the Series A Preferred Stock or increase in the number of reserved shares,
      as
      the case may be. In the event a holder shall sell or otherwise transfer any
      of
      such holder's shares of Series A Preferred Stock, each transferee shall be
      allocated a pro rata portion of the number of shares of Common Stock reserved
      for such transferor. Any shares of Common Stock reserved and which remain
      allocated to any person or entity which does not hold any shares of Series
      A
      Preferred Stock shall be allocated to the remaining holders of Series A
      Preferred Stock, pro rata based on the number of shares of Series A Preferred
      Stock then held by such holder. 

     

    (l)  Retirement
      of Series A Preferred Stock.
      Conversion of Series A Preferred Stock shall be deemed to have been effected
      on
      the Conversion Date. Upon conversion of only a portion of the number of shares
      of Series A Preferred Stock represented by a certificate surrendered for
      conversion, the Company shall issue and deliver to such holder, at the expense
      of the Company, a new certificate covering the number of shares of Series A
      Preferred Stock representing the unconverted portion of the certificate so
      surrendered as required by Section 5(b)(ii).

     

    (m)  Regulatory
      Compliance.
      If any
      shares of Common Stock to be reserved for the purpose of conversion of Series
      A
      Preferred Stock require registration or listing with or approval of any
      governmental authority, stock exchange or other regulatory body under any
      federal or state law or regulation or otherwise before such shares may be
      validly issued or delivered upon conversion, the Company shall, at its sole
      cost
      and expense, in good faith and as expeditiously as possible, endeavor to secure
      such registration, listing or approval, as the case may be.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    6.  No
      Preemptive Rights.
      Except
      as provided in Section 5 hereof and in the Purchase Agreement, no holder of
      the
      Series A Preferred Stock shall be entitled to rights to subscribe for, purchase
      or receive any part of any new or additional shares of any class, whether now
      or
      hereinafter authorized, or of bonds or debentures, or other evidences of
      indebtedness convertible into or exchangeable for shares of any class, but
      all
      such new or additional shares of any class, or any bond, debentures or other
      evidences of indebtedness convertible into or exchangeable for shares, may
      be
      issued and disposed of by the Board of Directors on such terms and for such
      consideration (to the extent permitted by law), and to such person or persons
      as
      the Board of Directors in their absolute discretion may deem
      advisable.

     

    7.  Conversion
      Restriction.
      Notwithstanding anything to the contrary set forth in Section 5 of this
      Certificate of Designation, at no time may a holder of shares of Series A
      Preferred Stock convert shares of the Series A Preferred Stock if the number
      of
      shares of Common Stock to be issued pursuant to such conversion would cause
      the
      number of shares of Common Stock owned by such holder at such time, when
      aggregated with all other shares of Common Stock owned by such holder at such
      time, result in such holder beneficially owning (as determined in accordance
      with Section 13(d) of the Securities Exchange Act of 1934, as amended, and
      the
      rules thereunder) in excess of 4.99% of the then issued and outstanding shares
      of Common Stock outstanding at such time; provided,
      however,
      that
      upon a holder of Series A Preferred Stock providing the Company with sixty-one
      (61) days notice (pursuant to Section 5(i) hereof) (the "Waiver
      Notice")
      that
      such holder would like to waive Section 7 of this Certificate of Designation
      with regard to any or all shares of Common Stock issuable upon conversion of
      Series A Preferred Stock, this Section 7 shall be of no force or effect with
      regard to those shares of Series A Preferred Stock referenced in the Waiver
      Notice. 

     

    
      
         

      

      
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    8.  Redemption.

     

    (a)  Redemption
      Option Upon Major Transaction.
      In
      addition to all other rights of the holders of Series A Preferred Stock
      contained herein, simultaneous with the occurrence of a Major Transaction (as
      defined below), each holder of Series A Preferred Stock shall have the right,
      at
      such holder's option, to require the Company to redeem all or a portion of
      such
      holder's shares of Series A Preferred Stock at a price per share of Series
      A
      Preferred Stock equal to one hundred percent (100%) of the Series A Liquidation
      Preference Amount (the “Major
      Transaction Redemption Price”);
      provided that the Company shall have the sole option to pay the Major
      Transaction Redemption Price in cash or shares of Common Stock. If the Company
      elects to pay the Major Transaction Redemption Price in shares of Common Stock,
      the price per share shall be based upon the Conversion Price then
      in
      effect on the day preceding the date of delivery of the Notice of Redemption
      at
      Option of Buyer Upon Major Transaction (as hereafter defined) and the holder
      of
      such shares of Common Stock shall have demand registration rights with respect
      to such shares. 

     

    (b)   Redemption
      Option Upon Triggering Event.
      In
      addition to all other rights of the holders of Series A Preferred Stock
      contained herein, after a Triggering Event (as defined below), each holder
      of
      Series A Preferred Stock shall have the right, at such holder's option, to
      require the Company to redeem all or a portion of such holder's shares of Series
      A Preferred Stock at a price per share of Series A Preferred Stock equal to
      one
      hundred twenty percent (120%) of the Liquidation Preference Amount, plus any
      liquidated damages (the “Triggering
      Event Redemption Price”
and,
      collectively with the Major Transaction Redemption Price, the “Redemption
      Price”);
      provided that with respect to the Triggering Events described in clauses (i),
      (ii), (iii), (iv) and (vii) of Section 8(d), the Company shall have the sole
      option to pay the Triggering Event Redemption Price in cash or shares of Common
      Stock; and provided, further, that with respect to the Triggering Events
      described in clauses (v) and (vi) of Section 8(d), the Company shall pay the
      Triggering Event Redemption Price in cash. If the Company elects to pay the
      Triggering Event Redemption Price in shares of Common Stock in accordance with
      this Section 8(b), the price per share shall be the lesser of (i) the Conversion
      Price in effect on the day preceding the date of delivery of the Notice of
      Redemption at Option of Buyer Upon Triggering Event or (ii) the Closing Bid
      Price on the day preceding the date of delivery of the Notice of Redemption
      at
      Option of Buyer Upon Triggering Event and the holder of such shares of Common
      Stock shall have demand registration rights with respect to such
      shares.

     

    (c)  Major
      Transaction.
      A
“Major
      Transaction”
shall
      be deemed to have occurred at such time as any of the following
      events:

     

    (i)  the
      consolidation, merger or other business combination of the Company with or
      into
      another Person (other than (A) pursuant to a migratory merger effected solely
      for the purpose of changing the jurisdiction of incorporation of the Company
      or
      (B) a consolidation, merger or other business combination in which holders
      of
      the Company's voting power immediately prior to the transaction continue after
      the transaction to hold, directly or indirectly, the voting power of the
      surviving entity or entities necessary to elect a majority of the members of
      the
      board of directors (or their equivalent if other than a corporation) of such
      entity or entities).

     

    
      
         

      

      
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    (ii)  the
      sale
      or transfer of more than 50% of the Company's assets other than inventory in
      the
      ordinary course of business in one or a related series of transactions;
      or

     

    (iii)  closing
      of a purchase, tender or exchange offer made to the holders of more than fifty
      percent (50%) of the outstanding shares of Common Stock in which more than
      fifty
      percent (50%) of the outstanding shares of Common Stock were tendered and
      accepted.

     

    (d)   Triggering
      Event.
      A
“Triggering
      Event”
shall
      be deemed to have occurred at such time as any of the following
      events:

     

    (i)  so
      long
      as any shares of Series A Preferred Stock are outstanding, the effectiveness
      of
      the Registration Statement, after it becomes effective, (i) lapses for any
      reason (including, without limitation, the issuance of a stop order) and such
      lapse continues for a period of twenty (20) consecutive trading days, or (ii)
      is
      unavailable to the holder of the Series A Preferred Stock for sale of the shares
      of Common Stock, and such lapse or unavailability continues for a period of
      twenty (20) consecutive trading days, and the shares of Common Stock into which
      such holder's Series A Preferred Stock can be converted cannot be sold in the
      public securities market pursuant to Rule 144(k) (“Rule
      144(k)”)
      under
      the Securities Act of 1933, as amended, provided
      that the
      cause of such lapse or unavailability is not due to factors solely within the
      control of such holder of Series A Preferred Stock; or

     

    (ii)  the
      suspension from listing or trading, without subsequent listing on any one of,
      or
      the failure of the Common Stock to be listed or traded on at least one of,
      the
      OTC Bulletin Board, the Nasdaq National Market, the Nasdaq Capital Market,
      the
      New York Stock Exchange, Inc. or the American Stock Exchange, Inc., for a period
      of five (5) consecutive trading days; or

     

    (iii)  the
      Company's notice to any holder of Series A Preferred Stock, including by way
      of
      public announcement, at any time, of its inability to comply (including for
      any
      of the reasons described in Section 9), or its intention not to comply, with
      proper requests for conversion of any Series A Preferred Stock into shares
      of
      Common Stock; or

     

    (iv)  the
      Company's failure to comply with a Conversion Notice tendered in accordance
      with
      the provisions of this Certificate of Designation within ten (10) business
      days
      after the receipt by the Company of the Conversion Notice and the Preferred
      Stock Certificates; or

     

    (v)  the
      Company deregisters its shares of Common Stock and as a result such shares
      of
      Common Stock are no longer publicly traded; or

     

    (vi)  the
      Company consummates a “going private” transaction and as a result the Common
      Stock is no longer registered under Sections 12(b) or 12(g) of the Securities
      Exchange Act of 1934, as amended; or

     

    (vii)  all
      of
      the following conditions are satisfied: (A) the Company breaches any
      representation, warranty, covenant or other term or condition of the Purchase
      Agreement, this Certificate of Designation or any other agreement, document,
      certificate or other instrument delivered in connection with the transactions
      contemplated thereby or hereby; (B) such breach gives rise to a Material Adverse
      Effect (as defined in the Purchase Agreement); and (C) if such breach relates
      to
      a covenant and is curable, such breach continues for a period of at least ten
      (10) business days.

     

    
      
         

      

      
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    (e)  Mechanics
      of Redemption at Option of Buyer Upon Major Transaction.
      No
      sooner than fifteen (15) days nor later than ten (10) days prior to the
      consummation of a Major Transaction, but not prior to the public announcement
      of
      such Major Transaction, the Company shall deliver written notice thereof via
      facsimile and overnight courier (“Notice
      of Major Transaction”)
      to
      each holder of Series A Preferred Stock. At any time after receipt of a Notice
      of Major Transaction (or, in the event a Notice of Major Transaction is not
      delivered at least ten (10) days prior to a Major Transaction, at any time
      within ten (10) days prior to a Major Transaction), any holder of Series A
      Preferred Stock then outstanding may require the Company to redeem, effective
      immediately prior to the consummation of such Major Transaction, all of the
      holder's Series A Preferred Stock then outstanding by delivering written notice
      thereof via facsimile and overnight courier (“Notice
      of Redemption at Option of Buyer Upon Major Transaction”)
      to the
      Company, which Notice of Redemption at Option of Buyer Upon Major Transaction
      shall indicate (i) the number of shares of Series A Preferred Stock that such
      holder is electing to redeem and (ii) the applicable Major Transaction
      Redemption Price, as calculated pursuant to Section 8(a) above.

     

    (f)  Mechanics
      of Redemption at Option of Buyer Upon Triggering Event.
      Within
      one (1) business day after the Company obtains knowledge of the occurrence
      of a
      Triggering Event, the Company shall deliver written notice thereof via facsimile
      and overnight courier (“Notice
      of Triggering Event”)
      to
      each holder of Series A Preferred Stock. At any time after the earlier of a
      holder's receipt of a Notice of Triggering Event and such holder becoming aware
      of a Triggering Event, any holder of Series A Preferred Stock then outstanding
      may require the Company to redeem all of such holder’s Series A Preferred Stock
      by delivering written notice thereof via facsimile and overnight courier
      (“Notice
      of Redemption at Option of Buyer Upon Triggering Event”)
      to the
      Company, which Notice of Redemption at Option of Buyer Upon Triggering Event
      shall indicate (i) the number of shares of Series A Preferred Stock that such
      holder is electing to redeem and (ii) the applicable Triggering Event Redemption
      Price, as calculated pursuant to Section 8(b) above

     

    (g)  Payment
      of Redemption Price.
      Upon
      the Company's receipt of a Notice(s) of Redemption at Option of Buyer Upon
      Triggering Event or a Notice(s) of Redemption at Option of Buyer Upon Major
      Transaction from any holder of Series A Preferred Stock, the Company shall
      immediately notify such holder of Series A Preferred Stock by facsimile of
      the
      Company's receipt of such Notice(s) of Redemption at Option of Buyer Upon
      Triggering Event or Notice(s) of Redemption at Option of Buyer Upon Major
      Transaction and each holder which has sent such a notice shall promptly submit
      to the Company such holder's Preferred Stock Certificates which such holder
      has
      elected to have redeemed. Other than with respect to the Triggering Event
      described in clauses (v) and (vi) of Section 8(d), the Company shall have the
      sole option to pay the Redemption Price in cash or shares of Common Stock in
      accordance with Sections 8(a) and (b) and Section 9 of this Certificate of
      Designation. The Company shall deliver the applicable Major Transaction
      Redemption Price immediately prior to the consummation of the Major Transaction;
      provided
      that a
      holder's Preferred Stock Certificates shall have been so delivered to the
      Company; provided further
      that if
      the Company is unable to redeem all of the Series A Preferred Stock to be
      redeemed, the Company shall redeem an amount from each holder of Series A
      Preferred Stock being redeemed equal to such holder's pro-rata amount (based
      on
      the number of shares of Series A Preferred Stock held by such holder relative
      to
      the number of shares of Series A Preferred Stock outstanding) of all Series
      A
      Preferred Stock being redeemed. If the Company shall fail to redeem all of
      the
      Series A Preferred Stock submitted for redemption (other than pursuant to a
      dispute as to the arithmetic calculation of the Redemption Price), in addition
      to any remedy such holder of Series A Preferred Stock may have under this
      Certificate of Designation and the Purchase Agreement, the applicable Redemption
      Price payable in respect of such unredeemed Series A Preferred Stock shall
      bear
      interest at the rate of 1.0% per month (prorated for partial months) until
      paid
      in full. Until the Company pays such unpaid applicable Redemption Price in
      full
      to a holder of shares of Series A Preferred Stock submitted for redemption,
      such
      holder shall have the option (the “Void
      Optional Redemption Option”),
      in
      lieu of redemption, to require the Company to promptly return to such holder(s)
      all of the shares of Series A Preferred Stock that were submitted for redemption
      by such holder(s) under this Section 8 and for which the applicable Redemption
      Price has not been paid, by sending written notice thereof to the Company via
      facsimile (the “Void
      Optional Redemption Notice”).
      Upon
      the Company's receipt of such Void Optional Redemption Notice(s) prior to
      payment of the full applicable Redemption Price to such holder, (i) the
      Notice(s) of Redemption at Option of Buyer Upon Major Transaction or Notice(s)
      of Redemption at Option of Buyer Upon Triggering Event (as applicable) shall
      be
      null and void with respect to those shares of Series A Preferred Stock submitted
      for redemption and for which the applicable Redemption Price has not been paid
      and (ii) the Company shall immediately return any Series A Preferred Stock
      submitted to the Company by each holder for redemption under this Section 8(d)
      and for which the applicable Redemption Price has not been paid and (iii) the
      Conversion Price of such returned shares of Series A Preferred Stock shall
      be
      adjusted to the lesser of (A) the Conversion Price and (B) the lowest Closing
      Bid Price during the period beginning on the date on which the Notice(s) of
      Redemption of Option of Buyer Upon Major Transaction or Notice(s) of Redemption
      of Option of Buyer Upon Triggering Event is delivered to the Company and ending
      on the date on which the Void Optional Redemption Notice(s) is delivered to
      the
      Company, provided
      that no
      adjustment shall be made if such adjustment would result in an increase of
      the
      Conversion Price then in effect. A holder's delivery of a Void Optional
      Redemption Notice and exercise of its rights following such notice shall not
      effect the Company's obligations to make any payments which have accrued prior
      to the date of such notice other than interest payments. Payments provided
      for
      in this Section 8 shall have priority to payments to other stockholders in
      connection with a Major Transaction. 

     

    
      
         

      

      
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    (h)  Demand
      Registration Rights.
      If the
      Redemption Price upon the occurrence of a Major Transaction or a Triggering
      Event is paid in shares of Common Stock and such shares have not been previously
      registered on a registration statement under the Securities Act, a holder of
      Series A Preferred Stock may make a written request pursuant to this Section
      8(h) for registration under the Securities Act of all of its shares of Common
      Stock issued upon such Major Transaction or Triggering Event. The Company shall
      use its reasonable best efforts to cause to be filed and declared effective
      as
      soon as reasonably practicable a registration statement under the Securities
      Act, providing for the sale of all of the shares of Common Stock issued upon
      such Major Transaction or Triggering Event by such holder. The Company agrees
      to
      use its reasonable best efforts to keep any such registration statement
      continuously effective for resale of the Common Stock for so long as such holder
      shall request, but in no event shall the Company be required to maintain the
      effectiveness of such registration statement later than the date that the shares
      of Common Stock issued upon such Major Transaction or Triggering Event may
      be
      offered for resale to the public pursuant to Rule 144(k).

     

    
      
         

      

      
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    9.  Inability
      to Fully Convert.

     

    (a)  Holder's
      Option if Company Cannot Fully Convert.
      If,
      upon the Company's receipt of a Conversion Notice, the Company cannot issue
      shares of Common Stock registered for resale under the Registration Statement
      for any reason, including, without limitation, because the Company (w) does
      not
      have a sufficient number of shares of Common Stock authorized and available,
      (x)
      is otherwise prohibited by applicable law or by the rules or regulations of
      any
      stock exchange, interdealer quotation system or other self-regulatory
      organization with jurisdiction over the Company or its securities from issuing
      all of the Common Stock which is to be issued to a holder of Series A Preferred
      Stock pursuant to a Conversion Notice or (y) subsequent to the effective date
      of
      the Registration Statement, fails to have a sufficient number of shares of
      Common Stock registered for resale under the Registration Statement, then the
      Company shall issue as many shares of Common Stock as it is able to issue in
      accordance with such holder's Conversion Notice and pursuant to Section 5(b)(ii)
      above and, with respect to the unconverted Series A Preferred Stock, the holder,
      solely at such holder's option, can elect, within five (5) business days after
      receipt of notice from the Company thereof to:

     

    (i)  require
      the Company to redeem from such holder those Series A Preferred Stock for which
      the Company is unable to issue Common Stock in accordance with such holder's
      Conversion Notice (“Mandatory
      Redemption”)
      at a
      price per share equal to the Major Transaction Redemption Price as of such
      Conversion Date (the “Mandatory
      Redemption Price”);
      provided that the Company shall have the sole option to pay the Mandatory
      Redemption Price in cash or, subject to Section 7 hereof, shares of Common
      Stock;

     

    (ii)  if
      the
      Company's inability to fully convert Series A Preferred Stock is pursuant to
      Section 9(a)(y) above, require the Company to issue restricted shares of Common
      Stock in accordance with such holder's Conversion Notice and pursuant to Section
      5(b)(ii) above;

     

    (iii)  void
      its
      Conversion Notice and retain or have returned, as the case may be, the shares
      of
      Series A Preferred Stock that were to be converted pursuant to such holder's
      Conversion Notice (provided that a holder's voiding its Conversion Notice shall
      not effect the Company's obligations to make any payments which have accrued
      prior to the date of such notice); or

     

    (iv)  exercise
      its Buy-In rights pursuant to and in accordance with the terms and provisions
      of
      Section 5(b)(vi) hereof.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    (b)  Mechanics
      of Fulfilling Holder's Election.
      The
      Company shall immediately send via facsimile or overnight courier to a holder
      of
      Series A Preferred Stock, upon receipt of an original or facsimile copy of
      a
      Conversion Notice from such holder which cannot be fully satisfied as described
      in Section 9(a) above, a notice of the Company's inability to fully satisfy
      such
      holder's Conversion Notice (the “Inability
      to Fully Convert Notice”).
      Such
      Inability to Fully Convert Notice shall indicate (i) the reason why the Company
      is unable to fully satisfy such holder's Conversion Notice, (ii) the number
      of
      Series A Preferred Stock which cannot be converted and (iii) the applicable
      Mandatory Redemption Price. Such holder shall notify the Company of its election
      pursuant to Section 9(a) above by delivering written notice via facsimile to
      the
      Company (“Notice
      in Response to Inability to Convert”).

     

    (c)  Payment
      of Redemption Price.
      If such
      holder shall elect to have its shares redeemed pursuant to Section 9(a)(i)
      above, the Company shall pay the Mandatory Redemption Price to such holder
      within thirty (30) days of the Company's receipt of the holder's Notice in
      Response to Inability to Convert, provided
      that
      prior to the Company's receipt of the holder's Notice in Response to Inability
      to Convert the Company has not delivered a notice to such holder stating, to
      the
      satisfaction of the holder, that the event or condition resulting in the
      Mandatory Redemption has been cured and all Conversion Shares issuable to such
      holder can and will be delivered to the holder in accordance with the terms
      of
      Section 8(g). If the Company shall fail to pay the applicable Mandatory
      Redemption Price to such holder on a timely basis as described in this Section
      9(c) (other than pursuant to a dispute as to the determination of the arithmetic
      calculation of the Redemption Price), in addition to any remedy such holder
      of
      Series A Preferred Stock may have under this Certificate of Designation and
      the
      Purchase Agreement, such unpaid amount shall bear interest at the rate of 2.0%
      per month (prorated for partial months) until paid in full. Until the full
      Mandatory Redemption Price is paid in full to such holder, such holder may
      (i)
      void the Mandatory Redemption with respect to those Series A Preferred Stock
      for
      which the full Mandatory Redemption Price has not been paid, (ii) receive back
      such Series A Preferred Stock, and (iii) require that the Conversion Price
      of
      such returned Series A Preferred Stock be adjusted to the lesser of (A) the
      Conversion Price and (B) the lowest Closing Bid Price during the period
      beginning on the Conversion Date and ending on the date the holder voided the
      Mandatory Redemption. 

     

    (d)  Pro-rata
      Conversion and Redemption.
      In the
      event the Company receives a Conversion Notice from more than one holder of
      Series A Preferred Stock on the same day and the Company can convert and redeem
      some, but not all, of the Series A Preferred Stock pursuant to this Section
      9,
      the Company shall convert and redeem from each holder of Series A Preferred
      Stock electing to have Series A Preferred Stock converted and redeemed at such
      time an amount equal to such holder's pro-rata amount (based on the number
      shares of Series A Preferred Stock held by such holder relative to the number
      shares of Series A Preferred Stock then outstanding) of all shares of Series
      A
      Preferred Stock being converted and redeemed at such time.

     

    10.  Vote
      to Change the Terms of or Issue Preferred Stock.
      The
      affirmative vote at a meeting duly called for such purpose or the written
      consent without a meeting, of (1) the shareholder whose name is set forth on
      Exhibit A to the Purchase Agreement (assuming such shareholder owns any shares
      of the Series A Preferred Stock at the time of such vote or consent) (the
“Initial Holder”) and (2) the holders of twenty-five percent (25%) of the shares
      of the Series A Preferred Stock outstanding at the time, the calculation of
      which shall include the Initial Holder’s percentage of ownership of the Series A
      Preferred Stock outstanding at the time (in addition to any other corporate
      approvals then required to effect such action), shall be required (a) for any
      change to this Certificate of Designation or the Company's Certificate of
      Incorporation which would amend, alter, change or repeal any of the powers,
      designations, preferences and rights of the Series A Preferred Stock or (b)
      for
      the issuance of shares of Series A Preferred Stock other than pursuant to the
      Purchase Agreement.

     

    
      
         

      

      
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    11.  Lost
      or Stolen Certificates.
      Upon
      receipt by the Company of evidence satisfactory to the Company of the loss,
      theft, destruction or mutilation of any Preferred Stock Certificates
      representing the shares of Series A Preferred Stock, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the holder to the
      Company and, in the case of mutilation, upon surrender and cancellation of
      the
      Preferred Stock Certificate(s), the Company shall execute and deliver new
      preferred stock certificate(s) of like tenor and date; provided,
      however,
      that
      the Company shall not be obligated to re-issue Preferred Stock Certificates
      if
      the holder contemporaneously requests the Company to convert such shares of
      Series A Preferred Stock into Common Stock.

     

    12.  Remedies,
      Characterizations, Other Obligations, Breaches and Injunctive Relief.
      The
      remedies provided in this Certificate of Designation shall be cumulative and
      in
      addition to all other remedies available under this Certificate of Designation,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), no remedy contained herein shall be deemed a waiver of
      compliance with the provisions giving rise to such remedy and nothing herein
      shall limit a holder's right to pursue actual damages for any failure by the
      Company to comply with the terms of this Certificate of Designation. Amounts
      set
      forth or provided for herein with respect to payments, conversion and the like
      (and the computation thereof) shall be the amounts to be received by the holder
      thereof and shall not, except as expressly provided herein, be subject to any
      other obligation of the Company (or the performance thereof). The Company
      acknowledges that a breach by it of its obligations hereunder will cause
      irreparable harm to the holders of the Series A Preferred Stock and that the
      remedy at law for any such breach may be inadequate. The Company therefore
      agrees that, in the event of any such breach or threatened breach, the holders
      of the Series A Preferred Stock shall be entitled, in addition to all other
      available remedies, to an injunction restraining any breach, without the
      necessity of showing economic loss and without any bond or other security being
      required.

     

    13.  Specific
      Shall Not Limit General; Construction.
      No
      specific provision contained in this Certificate of Designation shall limit
      or
      modify any more general provision contained herein. This Certificate of
      Designation shall be deemed to be jointly drafted by the Company and all initial
      purchasers of the Series A Preferred Stock and shall not be construed against
      any person as the drafter hereof.

     

    14.  Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of a holder of Series A Preferred Stock 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 privilege.

     

    
      
         

      

      
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      remainder of this page is intentionally left blank]

     

    
      
         

      

      
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      Exhibit
        4.2

    

     

    IN
      WITNESS WHEREOF, the undersigned has executed and subscribed this Certificate
      and does affirm the foregoing as true this ___ day of August, 2007.

     

    
      	 	 	 
	 	
              INTERNATIONAL
                IMAGING SYSTEMS, INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                Mr. Gao Xincheng

            
	 	
              Title:
                CEO

            


    

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    


    EXHIBIT
      I

    


    INTERNATIONAL
      IMAGING SYSTEMS, INC.

    CONVERSION
      NOTICE

    


    Reference
      is made to the Certificate of Designation of the Relative Rights and Preferences
      of the Series A Convertible Preferred Stock of International Imaging Systems,
      Inc. (the “Certificate of Designation”). In accordance with and pursuant to the
      Certificate of Designation, the undersigned hereby elects to convert the number
      of shares of Series A Preferred Stock, par value $0.001 per share (the
“Preferred Shares”), of International Imaging Systems, Inc., a Delaware
      corporation (the “Company”), indicated below into shares of Common Stock, par
      value $0.001 per share (the “Common Stock”), of the Company, by tendering the
      stock certificate(s) representing the share(s) of Preferred Shares specified
      below as of the date specified below.

     

    
      	
              Date
                of Conversion:

            	 	
               

              
                

              

            


    

    Number
      of
      Preferred Shares to be converted: ____________________  

    


    Stock
      certificate no(s). of Preferred Shares to be converted:
      ____________________

    


    The
      Common Stock has been sold pursuant to the Registration Statement: YES
      ____ NO____

    


    Please
      confirm the following information:

     

    
      	
              Conversion
                Price:

            	 	 
	
            	 	
              
                

              

            
	
              Number
                of shares of Common Stock

              to
                be issued:

            	 	 
	
            	 	
              

            


    

    Number
      of
      shares of Common Stock beneficially owned or deemed beneficially owned by the
      Holder on the Date of Conversion: _________________________

    


    Please
      issue the Common Stock into which the Preferred Shares are being converted
      and,
      if applicable, any check drawn on an account of the Company in the following
      name and to the following address:

     

    
      	
              Issue
                to: 

               

              
                Facsimile
                  Number: 

              

            	 	
               

              
                
 

            
	 

              Authorization: 

            	 	
              
                

              

            
	
            	 	
              
                

              

            
	 	 	
            
	
            	 	
              

              By:

            
	 	 	
              
                

              

              Title:

            
	
              
                
                   

                

              

            	 	
              
                

              

            


    

    
      Dated:

    

     

    
      
         

      

      
        24