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ex4_7.htm

    
      

    

    
      

    

    
      Exhibit
        4.7

      CHEMBIO
        DIAGNOSTICS, INC.

      

      SECOND
        AMENDED AND RESTATED

      CERTIFICATE
        OF DESIGNATION OF PREFERENCES,

      RIGHTS
        AND LIMITATIONS

      OF

      SERIES
        B 9% CONVERTIBLE PREFERRED STOCK

      

      PURSUANT
        TO SECTION 78.1955 OF THE

      NEVADA
        REVISED STATUTES

      

      The
        undersigned, Richard J. Larkin, does hereby certify that:

      

      1.
        He is
        the Chief Financial Officer of Chembio Diagnostics, Inc., a Nevada corporation
        (the “Corporation”).

      

      2.
        The
        Corporation is authorized to issue 10,000,000 shares of preferred
        stock.

      

      3.
        The
        following resolutions were duly adopted by the Board of Directors:

      

      WHEREAS,
        the Articles of Incorporation of the Corporation provides for a class of
        its
        authorized stock known as preferred stock, comprised of 10,000,000 shares,
        $0.01
        par value, issuable from time to time in one or more series;

      

      WHEREAS,
        the Board of Directors of the Corporation is authorized to fix the dividend
        rights, dividend rate, voting rights, conversion rights, rights and terms
        of
        redemption and liquidation preferences of any wholly unissued series of
        preferred stock and the number of shares constituting any Series and the
        designation thereof, of any of them; and

      

      WHEREAS,
        it is the desire of the Board of Directors of the Corporation, pursuant to
        its
        authority as aforesaid, to fix the rights, preferences, restrictions and
        other
        matters relating to a series of the preferred stock, which shall consist
        of,
        except as otherwise set forth in the Purchase Agreement, up to 175 shares
        of the
        preferred stock which the Corporation has the authority to issue, as
        follows;

      

      WHEREAS,
        the Board of Directors with shareholder consent desires to amend certain
        provisions as follows;

      

      NOW,
        THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide
        for
        the issuance of a series of preferred stock for cash or exchange of other
        securities, rights or property and does hereby fix and determine the rights,
        preferences, restrictions and other matters relating to such series of preferred
        stock as follows:

      

      

      TERMS
        OF PREFERRED STOCK

      

      Section
        1.  Definitions. Capitalized terms used and not otherwise
        defined herein that are defined in the Purchase Agreement shall have the
        meanings given such terms in the Purchase Agreement. For the purposes hereof,
        the following terms shall have the following meanings:

      

      “Alternate
        Consideration” shall have the meaning set forth in Section
        7(e).

      
         

      

      “Bankruptcy
        Event” means any of the following events: (a) the Corporation or any
        Significant Subsidiary (as such term is defined in Rule 1.02(s) of Regulation
        S-X) thereof commences a case or other proceeding under any bankruptcy,
        reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
        insolvency or liquidation or similar law of any jurisdiction relating to
        the
        Corporation or any Significant Subsidiary thereof; (b) there is commenced
        against the Corporation or any Significant Subsidiary thereof any such case
        or
        proceeding that is not dismissed within 60 days after commencement; (c) the
        Corporation or any Significant Subsidiary thereof is adjudicated insolvent
        or
        bankrupt or any order of relief or other order approving any such case or
        proceeding is entered; (d) the Corporation or any Significant Subsidiary
        thereof
        suffers any appointment of any custodian or the like for it or any substantial
        part of its property that is not discharged or stayed within 60 days; (e)
        the
        Corporation or any Significant Subsidiary thereof makes a general assignment
        for
        the benefit of creditors; (f) the Corporation or any Significant Subsidiary
        thereof calls a meeting of its creditors with a view to arranging a composition,
        adjustment or restructuring of its debts; or (g) the Corporation or any
        Significant Subsidiary thereof, by any act or failure to act, expressly
        indicates its consent to, approval of or acquiescence in any of the foregoing
        or
        takes any corporate or other action for the purpose of effecting any of the
        foregoing.

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      “Base
        Conversion Price” shall have the meaning set forth in Section
        7(b).

      

      “Buy-In”
        shall have the meaning set forth in Section 6(d)(iii).

      

      “Change
        of Control Transaction” means the occurrence after the date hereof of any of
        (i) an acquisition after the date hereof by an individual or legal entity
        or
“group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
        effective control (whether through legal or beneficial ownership of capital
        stock of the Corporation, by contract or otherwise) of in excess of 50% of
        the
        voting securities of the Corporation, or (ii) the Corporation merges into
        or
        consolidates with any other Person, or any Person merges into or consolidates
        with the Corporation and, after giving effect to such transaction, the
        stockholders of the Corporation immediately prior to such transaction own
        less
        than 50% of the aggregate voting power of the Corporation or the successor
        entity of such transaction, or (iii) the Corporation sells or transfers its
        assets, as an entirety or substantially as an entirety, to another Person
        and
        the stockholders of the Corporation immediately prior to such transaction
        own
        less than 50% of the aggregate voting power of the acquiring entity immediately
        after the transaction, (iv) a replacement at one time or within a one year
        period of more than one-half of the members of the Corporation’s board of
        directors which is not approved by a majority of those individuals who are
        members of the board of directors on the date hereof (or by those individuals
        who are serving as members of the board of directors on any date whose
        nomination to the board of directors was approved by a majority of the members
        of the board of directors who are members on the date hereof), or (v) the
        execution by the Corporation of an agreement to which the Corporation is
        a party
        or by which it is bound, providing for any of the events set forth above
        in (i)
        or (iv).

      

      “Closing
        Date” means the Trading Day when all of the Transaction Documents have been
        executed and delivered by the applicable parties thereto, and all conditions
        precedent to (i) the Holders’ obligations to pay the Subscription Amount and
        (ii) the Corporation’s obligations to deliver the Securities have been satisfied
        or waived.

      

      “Commission”
        means the Securities and Exchange Commission.

      

      “Common
        Stock” means the Corporation’s common stock, par value $0.01 per share, and
        stock of any other class into which such shares may hereafter have been
        reclassified or changed.

      

      “Common
        Stock Equivalents” means any securities of the Corporation or the
        Subsidiaries which would entitle the holder thereof to acquire at any time
        Common Stock, including without limitation, any debt, preferred stock, rights,
        options, warrants or other instrument that is at any time convertible into
        or
        exchangeable for, or otherwise entitles the holder thereof to receive, Common
        Stock.

      

      “Conversion
        Amount” means the sum of the Stated Value at issue.

      

      “Conversion
        Date” shall have the meaning set forth in Section 6(a).

      

      “Conversion
        Price” shall have the meaning set forth in Section 6(b).

      

      “Conversion
        Shares” means, collectively, the shares of Common Stock into which the
        shares of Preferred Stock are convertible in accordance with the terms
        hereof.

      

      “Conversion
        Shares Registration Statement” means a registration statement that meets the
        requirements of the Registration Rights Agreement and registers the resale
        of
        all Conversion Shares by the Holder, who shall be named as a “selling
        stockholder” thereunder, all as provided in the Registration Rights
        Agreement.

      

      “Dividend
        Payment Date” shall have the meaning set forth in Section 3(a).

      

      “Dilutive
        Issuance” shall have the meaning set forth in Section 7(b).

      

      “Dilutive
        Issuance Notice” shall have the meaning set forth in Section
        7(b).

      

      “Effective
        Date” means the date that the Conversion Shares Registration Statement is
        declared effective by the Commission.

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      “Equity
        Conditions” shall mean, during the period in question, (i) the Corporation
        shall have duly honored all conversions scheduled to occur or occurring by
        virtue of one or more Notices of Conversion, if any, (ii) all liquidated
        damages
        and other amounts owing in respect of the Preferred Stock shall have been
        paid;
        (iii) there is an effective Conversion Shares Registration Statement pursuant
        to
        which the Holder is permitted to utilize the prospectus thereunder to resell
        all
        of the shares issuable pursuant to the Transaction Documents (and the
        Corporation believes, in good faith, that such effectiveness will continue
        uninterrupted for the foreseeable future), (iv) the Common Stock is trading
        on
        the Trading Market and all of the shares issuable pursuant to the Transaction
        Documents are listed for trading on a Trading Market (and the Corporation
        believes, in good faith, that trading of the Common Stock on a Trading Market
        will continue uninterrupted for the foreseeable future), (v) there is a
        sufficient number of authorized but unissued and otherwise unreserved shares
        of
        Common Stock for the issuance of all of the shares issuable pursuant to the
        Transaction Documents, (vi) there is then existing no Triggering Event or
        event
        which, with the passage of time or the giving of notice, would constitute
        a
        Triggering Event, (vii) all of the shares issued or issuable pursuant to
        the
        transaction proposed would not violate the limitations set forth in Sections
        6(c) and (viii) no public announcement of a pending or proposed Fundamental
        Transaction, Change of Control Transaction or acquisition transaction has
        occurred that has not been consummated.

      

      “Exchange
        Act” means the Securities Exchange Act of 1934, as amended.

      

      “Exempt
        Issuance” means the issuance of (a) shares of Common Stock or options to
        employees, officers, consultants, or directors of the Corporation pursuant
        to
        any stock or option plan or other resolution duly adopted by a majority of
        the
        non-employee members of the Board of Directors of the Corporation or a majority
        of the members of a committee of non-employee directors established for such
        purpose, up to a total of 400,000 shares of Common Stock in each of fiscal
        2005
        and 2006, subject in each case to adjustment for any subsequent stock splits
        or
        the like, (b) securities upon the exercise of or conversion of any Securities
        issued hereunder, convertible securities, options or warrants issued and
        outstanding on the date of this Agreement, provided that such securities
        have
        not been amended since the date of this Agreement to increase the number
        of such
        securities or to decrease the exercise or conversion price of any such
        securities (except pursuant to any anti-dilution adjustment contained therein),
        (c) securities issued pursuant to acquisitions or strategic transactions,
        provided any such issuance shall only be to a Person which is, itself or
        through
        its subsidiaries, an operating company in a business reasonably deemed by
        the
        Corporation’s Board of Directors to be strategically advantageous to the
        business of the Corporation and in which the Corporation receives benefits
        in
        addition to the investment of funds, but shall not include a transaction
        in
        which the Corporation is issuing securities primarily for the purpose of
        raising
        capital or to an entity whose primary business is investing in securities,
        (d)
        shares issued in Bona fide firm underwritten public offerings each of which
        has
        gross proceeds of at least equal to $20,000,000, (e) Securities underlying
        placement agent warrants issued in connection with this transaction, and
        (f)
        shares issued as dividend payments on the Series A and Series B
        Stock.

       

      “Final
        Plan Date” shall mean the date that is six months and twelve days after the
        Plan Closing Date.

      

      “Forced
        Conversion Date” shall have the meaning set forth in Section
        8(a).

      

      “Fundamental
        Transaction” shall have the meaning set forth in Section 7(e).

      

      “Holder”
        shall have the meaning given such term in Section 2.

      

      “Junior
        Securities” means the Common Stock and all other equity or equity equivalent
        securities of the Corporation other than those securities that are (a)
        outstanding on the Original Issue Date and (b) which are explicitly senior
        or
        pari passu in rights or liquidation preference to the Preferred
        Stock.

      

      “Liquidation”
        shall have the meaning given such term in Section 5.

      

      “New
        York Courts” shall have the meaning given such term in Section
        10(e).

      

      “Notice
        of Conversion” shall have the meaning given such term in Section
        6(a).

      

      “Original
        Issue Date” shall mean the date of the first issuance of any shares of the
        Preferred Stock regardless of the number of transfers of any particular shares
        of Preferred Stock and regardless of the number of certificates which may
        be
        issued to evidence such Preferred Stock.

      

      “Person”
        means a corporation, an association, a partnership, an organization, a business,
        an individual, a government or political subdivision thereof or a governmental
        agency.

      

      “Plan”
        shall mean any action the Company takes, with any required approval of the
        holders thereof, on or before the Final Plan Date as contemplated by the
        Plan
        Summary and accompanying materials provided to holders on December 4, 2007,
        in
        connection with the reduction or other modification of terms of the Company's
        then-outstanding preferred stock, warrants and options, including, but not
        limited to, actions the Company takes to (i) facilitate the conversion of
        the
        Series A, B and C Convertible Preferred Stock; (ii) reduce the exercise price
        of
        any of the Company's outstanding warrants or options; (iii) offer the holders
        of
        the Company's warrants and options the opportunity to exercise such warrants
        and
        options on a cash and/or cashless basis; and (iv) make other amendments to
        the
        documents governing these securities to effect these modifications, and
        to  facilitate the conversion and exercise of these
        securities.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      “Plan
        Closing Date” shall mean December 19, 2007.

      

      “Purchase
        Agreement” means the Securities Purchase Agreement, dated as of the Original
        Issue Date, to which the Corporation and the original Holders are parties,
        as
        amended, modified or supplemented from time to time in accordance with its
        terms.

      

      “Registration
        Rights Agreement” means the Registration Rights Agreement, dated as of the
        date of the Purchase Agreement, to which the Corporation and the original
        Holder
        are parties, as amended, modified or supplemented from time to time in
        accordance with its terms.

      

      “Securities
        Act” means the Securities Act of 1933, as amended, and the rules and
        regulations promulgated thereunder.

      

      “Share
        Delivery Date” shall have the meaning given such term in Section
        6(d).

      

      “Stated
        Value” shall have the meaning given such term in Section 2.

      

      “Subscription
        Amount” shall mean, as to each Purchaser, the amount to be paid for the
        Preferred Stock purchased pursuant to the Purchase Agreement as specified
        below
        such Purchaser’s name on the signature page of the Purchase Agreement and next
        to the heading “Subscription Amount”, in United States Dollars and in
        immediately available funds.

      

      “Subsidiary”
        shall have the meaning given to such term in the Purchase
        Agreement.

      

      “Threshold
        Period” shall have the meaning set forth in Section 6(a).

      

      “Trading
        Day” means a day on which the Common Stock is traded on a Trading
        Market.

      

      “Trading
        Market” means the following markets or exchanges on which the Common Stock
        is listed or quoted for trading on the date in question: the OTC Bulletin
        Board,
        the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock
        Exchange or the Nasdaq National Market.

      “Transaction
        Documents” shall have the meaning set forth in the Purchase
        Agreement.

      

      “Triggering
        Event” shall have the meaning set forth in Section 9(a).

      

      “Triggering
        Redemption Amount” for each share of Preferred Stock means the sum of (i)
        the greater of (A) 130% of the Stated Value and (B) the product of (a) the
        VWAP
        on the Trading Day immediately preceding the date of the Triggering Event
        and
        (b) the Stated Value divided by the then Conversion Price, (ii) all accrued
        but
        unpaid dividends thereon and (iii) all liquidated damages and other amounts
        due
        in respect of the Preferred Stock.

      

      “Triggering
        Redemption Payment Date” shall have the meaning set forth in Section
        9(b).

      

      “VWAP”
        means, for any date, the price determined by the first of the following clauses
        that applies: (a) if the Common Stock is then listed or quoted on a Trading
        Market, the daily volume weighted average price of the Common Stock for such
        date (or the nearest preceding date) on the Trading Market on which the Common
        Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
        on
        a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b)
        if the
        Common Stock is not then listed or quoted on a Trading Market and if prices
        for
        the Common Stock are then reported in the “Pink Sheets” published by the Pink
        Sheets, LLC (or a similar organization or agency succeeding to its functions
        of
        reporting prices), the most recent bid price per share of the Common Stock
        so
        reported; or (c) in all other cases, the fair market value of a share of
        Common
        Stock as determined by an independent appraiser selected in good faith by
        the
        Purchasers and reasonably acceptable to the Corporation.

      

      Section
        2.  Designation, Rank, Amount and Par Value. The series of
        preferred stock shall be designated as its Series B 9% Convertible Preferred
        Stock (the “Preferred Stock”) and the number of shares so designated
        shall be 175 (which shall not be subject to increase without the consent
        of all
        of the holders of the Preferred Stock (each, a “Holder” and collectively,
        the “Holders”)). Each share of Preferred Stock shall have a par value of
        $0.01 per share and a stated value equal to $50,000 (the “Stated Value”).
        The Preferred Stock shall rank pari passu to the Corporation’s Series A
        Convertible Preferred Stock as to payment of dividends and liquidation
        preference. Capitalized terms not otherwise defined herein shall have the
        meaning given such terms in Section 1 hereof.

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      Section
        3.  Dividends.

      

      a)           Dividends
        in Cash or in
        Kind. Holders shall
        be
        entitled to receive and the Corporation shall pay, cumulative dividends at
        the
        rate per share (as a percentage of the Stated Value per share) of 9% per
        annum
        (subject to increase pursuant to Section 9(b)),
        payable semiannually on July 1 and
        January 1, beginning with the first such date after the Original Issue Date
        and
        on any Conversion Date (except that, if such date is not a Trading Day, the
        payment date shall be the next succeeding Trading Day)(“Dividend Payment
        Date”). The form of
        dividend payments to each Holder shall be made at the sole election of the
        Corporation, in cash, in shares of Preferred Stock, or in shares of Common
        Stock, provided,
        however, that any
        Holder of a majority of the issued and outstanding Preferred Stock at any
        Dividend Payment Date may elect whether to receive such dividend in cash,
        in
        Common Stock or in shares of Preferred Stock in its sole discretion. If the
        Company elects to pay a dividend in shares of Common Stock, the number of
        shares
        of Common Stock to be issued to the Holder shall be an amount equal to the
        quotient of (i) the dividend amount divided by (ii) the volume weighted average
        trading price (the “VWAP”)
        of the Common Stock for the 10
        trading days preceding the dividend record date. As used in this Certificate,
        the term “volume
        weighted average trading price”, or VWAP, shall
        mean, for any period
        of time, the sum of the purchases charged for all shares sold during that
        period
        of time divided by the number of shares sold during that period of time.
        If the
        Company elects to pay any dividend in shares of Preferred Stock, the number
        of
        shares of Preferred Stock to be issued to the holder shall be an amount equal
        to
        the quotient of (i) the amount of the dividend payment divided by (ii) the
        VWAP
        of the Common Stock for the 10 trading days preceding the dividend record
        date
        and then issuing that number of shares of Preferred Stock that would at the
        time
        of calculation be convertible into the number of shares determined by dividing
        the amount of the dividend payment by the 10-day VWAP. The Holders shall
        have
        the same rights and remedies with respect to the delivery of any such shares
        as
        if such shares were being issued pursuant to Section 6. On the Closing Date
        the
        Corporation shall have notified the Holders whether or not it may lawfully
        pay
        cash dividends. The Corporation shall promptly notify the Holders at any
        time
        the Corporation shall become able or unable, as the case may be, to lawfully
        pay
        cash dividends. The Corporation must provide the Holder with at least 15
        calendar days’ notice of its election to pay a regularly scheduled dividend in
        Preferred Stock or Common Stock. Dividends on the Preferred Stock shall be
        calculated on the basis of a 360-day year, shall accrue daily commencing
        on the
        Original Issue Date, and shall be deemed to accrue from such date whether
        or not
        earned or declared and whether or not there are profits, surplus or other
        funds
        of the Corporation legally available for the payment of dividends. Except
        as
        otherwise provided herein, if at any time the Corporation pays dividends
        partially in cash and partially in shares, then such payment shall be
        distributed ratably among the Holders based upon the number of shares of
        Preferred Stock held by each Holder. Any dividends, whether paid in cash
        or
        shares, that are not paid within three Trading Days following a Dividend
        Payment
        Date shall continue to accrue and shall entail a late fee, which must be
        paid in
        cash, at the rate of 18% per annum or the lesser rate permitted by applicable
        law (such fees to accrue daily, from the Dividend Payment Date through and
        including the date of payment).

      

      b)           So
        long as any Preferred Stock shall
        remain outstanding, neither the Corporation nor any Subsidiary thereof shall
        redeem, purchase or otherwise acquire directly or indirectly any Junior
        Securities. So long as any Preferred Stock shall remain outstanding, neither
        the
        Corporation nor any Subsidiary thereof shall directly or indirectly pay or
        declare any dividend or make any distribution (other than a dividend or
        distribution described in Section 6 or dividends due and paid in the ordinary
        course on preferred stock of the Corporation at such times when the Corporation
        is in compliance with its payment and other obligations hereunder) upon,
        nor
        shall any distribution be made in respect of, any Junior Securities so long
        as
        any dividends due on the Preferred Stock remain unpaid, nor shall any monies
        be
        set aside for or applied to the purchase or redemption (through a sinking
        fund
        or otherwise) of any Junior Securities or shares pari passu with the Preferred
        Stock.

      

      Section
        4.  Voting Rights. Except as otherwise provided herein and
        as otherwise required by law, the Preferred Stock shall have no voting rights.
        However, so long as any shares of Preferred Stock are outstanding, the
        Corporation shall not, without the affirmative vote of the Holders of 51%
        of the
        shares of the Preferred Stock then outstanding, (a) alter or change adversely
        the powers, preferences or rights given to the Preferred Stock or alter or
        amend
        this Certificate of Designation, (b) authorize or create any class of stock
        ranking as to dividends, redemption or distribution of assets upon a Liquidation
        (as defined in Section 5) senior to or otherwise pari passu with the Preferred
        Stock, (c) amend its articles of incorporation or other charter documents
        so as
        to affect adversely any rights of the Holders, (d) increase the authorized
        number of shares of Preferred Stock, or (e) enter into any agreement with
        respect to the foregoing. Notwithstanding the foregoing, so long as any shares
        of Preferred Stock are outstanding, the Corporation shall not, without the
        affirmative vote of the Holders of 75% of the shares of Preferred Stock then
        outstanding, (a) decrease the dividend rate of 9% per annum as provided in
        Section 3a, (b) amend the anti-dilution adjustment for subsequent equity
        sales
        as provided in Section 7b, or (c) amend the terms for a forced conversion
        as
        provided in Section 8a.

      

      Section
        5.  Liquidation. Upon any liquidation, dissolution or
        winding-up of the Corporation, whether voluntary or involuntary (a
“Liquidation”), the Holders shall be entitled to receive out of the
        assets of the Corporation, whether such assets are capital or surplus, for
        each
        share of Preferred Stock an amount equal to the Stated Value per share plus
        any
        accrued and unpaid dividends thereon and any other fees or liquidated damages
        owing thereon before any distribution or payment shall be made to the holders
        of
        any Junior Securities, and if the assets of the Corporation shall be
        insufficient to pay in full such amounts, then the entire assets to be
        distributed to the Holders shall be distributed among the Holders ratably
        in
        accordance with the respective amounts that would be payable on such shares
        if
        all amounts payable thereon were paid in full, pari passu with the Corporation’s
        Series A Convertible Preferred Stock treated together as a class based upon
        the
        liquidation preferences of each such series. A Fundamental Transaction or
        Change
        of Control Transaction shall not be treated as a Liquidation. The Corporation
        shall mail written notice of any such Liquidation, not less than 45 days
        prior
        to the payment date stated therein, to each record Holder.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      Section
        6.  Conversion.

      

      a)           Conversions
        at Option of
        Holder. Each share of
        Preferred Stock shall be convertible into that number of shares of Common
        Stock
        (subject to the limitations set forth in Sections 6(c)) determined by dividing
        the Stated Value of such share of Preferred Stock by the Conversion Price,
        at
        the option of the Holder, at any time and from time to time from and after
        the
        Original Issue Date. Holders shall effect conversions by providing the
        Corporation with the form of conversion notice attached hereto as Annex A
        (a “Notice of Conversion”).
        Each Notice of Conversion shall
        specify the number of shares of Preferred Stock to be converted, the number
        of
        shares of Preferred Stock owned prior to the conversion at issue, the number
        of
        shares of Preferred Stock owned subsequent to the conversion at issue and
        the
        date on which such conversion is to be effected, which date may not be prior
        to
        the date the Holder delivers such Notice of Conversion to the Corporation
        by
        facsimile (the “Conversion Date”).
        If no Conversion Date is specified
        in a Notice of Conversion, the Conversion Date shall be the date that such
        Notice of Conversion to the Corporation is deemed delivered hereunder. The
        calculations and entries set forth in the Notice of Conversion shall control
        in
        the absence of manifest or mathematical error. To effect conversions, as
        the
        case may be, of shares of Preferred Stock, a Holder shall not be required
        to
        surrender the certificate(s) representing such shares of Preferred Stock
        to the
        Corporation unless all of the shares of Preferred Stock represented thereby
        are
        so converted, in which case the Holder shall deliver the certificate
        representing such share of Preferred Stock promptly following the Conversion
        Date at issue. Shares of Preferred Stock converted into Common Stock or redeemed
        in accordance with the terms hereof shall be canceled and may not be
        reissued.

      

      b)           Conversion
        Price.  The conversion price for the Preferred Stock shall equal
        $0.40 per share for the holders of the Preferred Stock on the Plan Closing
        Date
        (the “Conversion Price”), provided, however, that the Conversion Price
        for the Preferred Stock held by Lawrence A. Siebert shall be $0.48 per share
        on
        the Plan Closing Date.

      

      c)           Beneficial
        Ownership Limitation.  The Corporation shall not effect any
        conversion of the Preferred Stock, and the Holder shall not have the right
        to
        convert any portion of the Preferred Stock to the extent that after giving
        effect to such conversion, the Holder (together with the Holder’s affiliates),
        as set forth on the applicable Notice of Conversion, would beneficially own
        in
        excess of 4.99% of the number of shares of the Common Stock outstanding
        immediately after giving effect to such conversion.  For purposes of
        the foregoing sentence, the number of shares of Common Stock beneficially
        owned
        by the Holder and its affiliates shall include the number of shares of Common
        Stock issuable upon conversion of the Preferred Stock with respect to which
        the
        determination of such sentence is being made, but shall exclude the number
        of
        shares of Common Stock which would be issuable upon (A) conversion of the
        remaining, nonconverted Stated Value of Preferred Stock beneficially owned
        by
        the Holder or any of its affiliates and (B) exercise or conversion of the
        unexercised or nonconverted portion of any other securities of the Corporation
        (including the Warrants) subject to a limitation on conversion or exercise
        analogous to the limitation contained herein beneficially owned by the Holder
        or
        any of its affiliates.  Except as set forth in the preceding sentence,
        for purposes of this Section 6(c), beneficial ownership shall be calculated
        in
        accordance with Section 13(d) of the Exchange Act. To the extent that the
        limitation contained in this Section 6(c) applies, the determination of whether
        the Preferred Stock is convertible (in relation to other securities owned
        by the
        Holder together with any affiliates) and of which shares of Preferred Stock
        is
        convertible shall be in the sole discretion of such Holder, and the submission
        of a Notice of Conversion shall be deemed to be such Holder’s determination of
        whether the shares of Preferred Stock may be converted (in relation to other
        securities owned by such Holder) and which shares of the Preferred Stock
        is
        convertible, in each case subject to such aggregate percentage limitations.
        To
        ensure compliance with this restriction, the Holder will be deemed to represent
        to the Corporation each time it delivers a Notice of Conversion that such
        Notice
        of Conversion has not violated the restrictions set forth in this paragraph
        and
        the Corporation shall have no obligation to verify or confirm the accuracy
        of
        such determination. For purposes of this Section 6(c), in determining the
        number
        of outstanding shares of Common Stock, the Holder may rely on the number
        of
        outstanding shares of Common Stock as reflected in the most recent of the
        following: (A) the Corporation’s most recent Form 10-QSB or Form 10-KSB, as the
        case may be, (B) a more recent public announcement by the Corporation or
        (C) any
        other notice by the Corporation or the Corporation’s transfer agent setting
        forth the number of shares of Common Stock outstanding.  Upon the
        written or oral request of the Holder, the Corporation shall within two Trading
        Days confirm orally and in writing to the Holder the number of shares of
        Common
        Stock then outstanding.  In any case, the number of outstanding shares
        of Common Stock shall be determined after giving effect to the conversion
        or
        exercise of securities of the Corporation, including the Preferred Stock,
        by the
        Holder or its affiliates since the date as of which such number of outstanding
        shares of Common Stock was reported. The provisions of this Section 6(c)
        may be
        waived by the Holder upon, at the election of the Holder, not less than 61
        days’
prior notice to the Corporation, and the provisions of this Section 6(c)
        shall
        continue to apply until such 61st day (or such later date, as determined
        by the
        Holder, as may be specified in such notice of
        waiver).  Notwithstanding anything set forth in this Section 6(c), the
        4.99% beneficial ownership restriction set forth in this Section 6(c) shall
        not
        apply to Common Stock issuable upon conversion of the Preferred Stock in
        connection with the Plan.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      d)           Mechanics
        of
        Conversion

      

      i.           Delivery
        of Certificate Upon
        Conversion. Not later
        than three Trading Days after each Conversion Date (the “Share Delivery
        Date”), the Corporation
        shall deliver to
        the Holder (A) a certificate or certificates which, after the Effective Date,
        shall be free of restrictive legends and trading restrictions (other than
        those
        required by the Purchase Agreement) representing the number of shares of
        Common
        Stock being acquired upon the conversion of shares of Preferred Stock, and
        (B) a
        bank check in the amount of accrued and unpaid dividends (if the Corporation
        has
        elected or is required to pay accrued dividends in cash). After the Effective
        Date, the Corporation shall, upon request of the Holder, deliver any certificate
        or certificates required to be delivered by the Corporation under this Section
        electronically through the Depository Trust Corporation or another established
        clearing corporation performing similar functions if the Corporation’s transfer
        agent is a participant in such system. If in the case of any Notice of
        Conversion such certificate or certificates are not delivered to or as directed
        by the applicable Holder by the third Trading Day after the Conversion Date,
        the
        Holder shall be entitled to elect by written notice to the Corporation at
        any
        time on or before its receipt of such certificate or certificates thereafter,
        to
        rescind such conversion, in which event the Corporation shall immediately
        return
        the certificates representing the shares of Preferred Stock tendered for
        conversion.

      ii.           Obligation
        Absolute; Partial
        Liquidated Damages.
        The Corporation’s obligations to issue and deliver the Conversion Shares upon
        conversion of Preferred Stock in accordance with the terms hereof are absolute
        and unconditional, irrespective of any action or inaction by the Holder to
        enforce the same, any waiver or consent with respect to any provision hereof,
        the recovery of any judgment against any Person or any action to enforce
        the
        same, or any setoff, counterclaim, recoupment, limitation or termination,
        or any
        breach or alleged breach by the Holder or any other Person of any obligation
        to
        the Corporation or any violation or alleged violation of law by the Holder
        or
        any other person, and irrespective of any other circumstance which might
        otherwise limit such obligation of the Corporation to the Holder in connection
        with the issuance of such Conversion Shares. In the event a Holder shall
        elect
        to convert any or all of the Stated Value of its Preferred Stock, the
        Corporation may not refuse conversion based on any claim that such Holder
        or any
        one associated or affiliated with the Holder of has been engaged in any
        violation of law, agreement or for any other reason, unless, an injunction
        from
        a court, on notice, restraining and or enjoining conversion of all or part
        of
        this Preferred Stock shall have been sought and obtained and the Corporation
        posts a surety bond for the benefit of the Holder in the amount of 150% of
        the
        Stated Value of Preferred Stock outstanding, which is subject to the injunction,
        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
        to the
        extent it obtains judgment. In the absence of an injunction precluding the
        same,
        the Corporation shall issue Conversion Shares or, if applicable, cash, upon
        a
        properly noticed conversion. If the Corporation fails to deliver to the Holder
        such certificate or certificates pursuant to Section 6(e)(i) within two Trading
        Days of the Share Delivery Date applicable to such conversion, the Corporation
        shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
        for each $5,000 of Stated Value of Preferred Stock being converted, $50 per
        Trading Day (increasing to $100 per Trading Day after 3 Trading Days and
        increasing to $200 per Trading Day 6 Trading Days after such damages begin
        to
        accrue) for each Trading Day after the Share Delivery Date until such
        certificates are delivered. Nothing herein shall limit a Holder’s right to
        pursue actual damages for the Corporation’s failure to deliver certificates
        representing shares of Common Stock upon conversion within the period specified
        herein and such Holder shall have the right to pursue all remedies available
        to
        it hereunder, at law or in equity including, without limitation, a decree
        of
        specific performance and/or injunctive relief.

      

      iii.           Compensation
        for Buy-In on Failure
        to Timely Deliver Certificates Upon Conversion. If the Corporation
        fails to deliver
        to the Holder such certificate or certificates pursuant to Section 6(d)(i)
        by a
        Share Delivery Date, and if after such Share Delivery Date and prior to any
        subsequent delivery of the certificates to Holders the Holder purchases (in
        an
        open market transaction or otherwise) Common Stock to deliver in satisfaction
        of
        a sale by such Holder of the Conversion Shares which the Holder was entitled
        to
        receive upon the conversion relating to such Share Delivery Date (a
“Buy-In”),
        then the Corporation shall pay in
        cash to the Holder the amount by which (x) the Holder’s total purchase price
        (including brokerage commissions, if any) for the Common Stock so purchased
        exceeds (y) the product of (1) the aggregate number of shares of Common Stock
        that such Holder was entitled to receive from the conversion at issue multiplied
        by (2) the price at which the sell order giving rise to such purchase obligation
        was executed. 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 Preferred Stock with respect to which the aggregate
        sale
        price giving rise to such purchase obligation is $10,000, under clause (A)
        of
        the immediately preceding sentence the Corporation shall be required to pay
        the
        Holder $1,000. The Holder shall provide the Corporation 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
        Corporation. 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 Corporation’s failure to timely deliver certificates representing
        shares of Common Stock upon conversion of the shares of Preferred Stock as
        required pursuant to the terms hereof.

      

      iv.           Reservation
        of Shares Issuable Upon
        Conversion. The
        Corporation covenants that it will at all times after June 30, 2005 reserve
        and
        keep available out of its authorized and unissued shares of Common Stock
        solely
        for the purpose of issuance upon conversion of the Preferred Stock and payment
        of dividends for three years from any point in time on the Preferred Stock,
        each
        as herein provided, free from preemptive rights or any other actual contingent
        purchase rights of persons other than the Holders, not less than such number
        of
        shares of the Common Stock as shall (subject to any additional requirements
        of
        the Corporation as to reservation of such shares set forth in the Purchase
        Agreement) be issuable (taking into account the adjustments and restrictions
        of
        Section 7) upon the conversion of all outstanding shares of Preferred Stock.
        The
        Corporation covenants that all shares of Common Stock that shall be so issuable
        shall, upon issue, be duly and validly authorized, issued and fully paid,
        nonassessable and, if the Conversion Shares Registration Statement is then
        effective under the Securities Act, registered for public sale in accordance
        with such Conversion Shares Registration Statement.

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      v.           Fractional
        Shares. Upon a conversion
        hereunder, the
        Corporation shall not be required to issue stock certificates representing
        fractions of shares of the Common Stock, but may if otherwise permitted,
        make a
        cash payment in respect of any final fraction of a share based on the VWAP
        at
        such time. If the Corporation elects not, or is unable, to make such a cash
        payment, the Holder shall be entitled to receive, in lieu of the final fraction
        of a share, one whole share of Common Stock.

      

      vi.           Transfer
        Taxes. The issuance
        of certificates for
        shares of the Common Stock on conversion of the Preferred Stock shall be
        made
        without charge to the Holders thereof for any documentary stamp or similar
        taxes
        that may be payable in respect of the issue or delivery of such certificate,
        provided that the Corporation shall not be required to pay any tax that may
        be
        payable in respect of any transfer involved in the issuance and delivery
        of any
        such certificate upon conversion in a name other than that of the Holder
        of such
        shares of Preferred Stock so converted and the Corporation shall not be required
        to issue or deliver such certificates unless or until the person or persons
        requesting the issuance thereof shall have paid to the Corporation the amount
        of
        such tax or shall have established to the satisfaction of the Corporation
        that
        such tax has been paid.

       

      Section
        7.  Certain Adjustments.

      

      a)           Stock
        Dividends and Stock
        Splits. If the
        Corporation, at any time while the Preferred Stock is outstanding: (A) shall
        pay
        a stock dividend or otherwise make a distribution or distributions on shares
        of
        its Common Stock or any other equity or equity equivalent securities payable
        in
        shares of Common Stock (which, for avoidance of doubt, shall not include
        any
        shares of Common Stock issued by the Corporation pursuant to this Preferred
        Stock or the Series A Convertible Preferred Stock), (B) subdivide outstanding
        shares of Common Stock into a larger number of shares, (C) combine (including
        by
        way of reverse stock split) outstanding shares of Common Stock into a smaller
        number of shares, or (D) issue by reclassification of shares of the Common
        Stock
        any shares of capital stock of the Corporation, then the Conversion Price
        shall
        be multiplied by a fraction of which the numerator shall be the number of
        shares
        of Common Stock (excluding treasury shares, if any) outstanding before such
        event and of which the denominator shall be the number of shares of Common
        Stock
        outstanding after such event. Any adjustment made pursuant to this Section
        7(a)
        shall become effective immediately after the record date for the determination
        of stockholders entitled to receive such dividend or distribution and shall
        become effective immediately after the effective date in the case of a
        subdivision, combination or re-classification.

       

      b)           Subsequent
        Equity
        Sales. If the
        Corporation or any Subsidiary thereof, as applicable, at any time while
        Preferred Stock is outstanding, shall offer, sell, grant any option to purchase
        or offer, sell or grant any right to reprice its securities, or otherwise
        dispose of or issue (or announce any offer, sale, grant or any option to
        purchase or other disposition) any Common Stock or Common Stock Equivalents
        entitling any Person to acquire shares of Common Stock, at an effective price
        per share less than the then Conversion Price (such lower price, the
“Base Conversion
        Price” and such
        issuances collectively, a “Dilutive Issuance”),
        as adjusted hereunder (if the
        holder of the Common Stock or Common Stock Equivalents so issued shall at
        any
        time, whether by operation of purchase price adjustments, reset provisions,
        floating conversion, exercise or exchange prices or otherwise, or due to
        warrants, options or rights per share which is issued in connection with
        such
        issuance, be entitled to receive shares of Common Stock at an effective price
        per share which is less than the Conversion Price, such issuance shall be
        deemed
        to have occurred for less than the Conversion Price), then the Conversion
        Price
        shall be reduced to equal the Base Conversion Price. The Corporation shall
        notify the Holder in writing, no later than the Business Day following the
        issuance of any Common Stock or Common Stock Equivalents subject to this
        section, indicating therein the applicable issuance price, or of applicable
        reset price, exchange price, conversion price and other pricing terms (such
        notice the “Dilutive
        Issuance Notice”). For
        purposes of clarification, whether or not the Corporation provides a Dilutive
        Issuance Notice pursuant to this Section 7(b), upon the occurrence of any
        Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
        entitled to receive a number of Conversion Shares based upon the Base Conversion
        Price regardless of whether the Holder accurately refers to the Base Conversion
        Price in the Notice of Conversion.

       

      c)           Subsequent
        Rights
        Offerings. If the
        Corporation, at any time while the Preferred Stock is outstanding, shall
        issue
        rights, options or warrants to all holders of Common Stock (and not to Holders)
        entitling them to subscribe for or purchase shares of Common Stock at a price
        per share less than the VWAP at the record date mentioned below, then the
        Conversion Price shall be multiplied by a fraction, of which the denominator
        shall be the number of shares of the Common Stock outstanding on the date
        of
        issuance of such rights or warrants plus the number of additional shares
        of
        Common Stock offered for subscription or purchase, and of which the numerator
        shall be the number of shares of the Common Stock outstanding on the date
        of
        issuance of such rights or warrants plus the number of shares which the
        aggregate offering price of the total number of shares so offered (assuming
        receipt by the Corporation in full of all consideration payable upon exercise
        of
        such rights, options or warrants) would purchase at such VWAP. Such adjustment
        shall be made whenever such rights or warrants are issued, and shall become
        effective immediately after the record date for the determination of
        stockholders entitled to receive such rights, options or
        warrants.

      

      d)           Pro
        Rata
        Distributions. If the
        Corporation, at any time while Preferred Stock is outstanding, shall distribute
        to all holders of Common Stock (and not to Holders) evidences of its
        indebtedness or assets or rights or warrants to subscribe for or purchase
        any
        security, then in each such case the Conversion Price shall be determined
        by
        multiplying such Conversion Price in effect immediately prior to the record
        date
        fixed for determination of stockholders entitled to receive such distribution
        by
        a fraction of which the denominator shall be the VWAP determined as of the
        record date mentioned above, and of which the numerator shall be such VWAP
        on
        such record date less the then fair market value at such record date of the
        portion of such assets or evidence of indebtedness so distributed applicable
        to
        one outstanding share of the Common Stock as determined by the Board of
        Directors in good faith. In either case the adjustments shall be described
        in a
        statement provided to the Holders of the portion of assets or evidences of
        indebtedness so distributed or such subscription rights applicable to one
        share
        of Common Stock. Such adjustment shall be made whenever any such distribution
        is
        made and shall become effective immediately after the record date mentioned
        above.

      

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      e)           Fundamental
        Transaction. If, at
        any time while this Preferred Stock is outstanding, (A) the Corporation effects
        any merger or consolidation of the Corporation with or into another Person,
        (B)
        the Corporation effects any sale of all or substantially all of its assets
        in
        one or a series of related transactions, (C) any tender offer or exchange
        offer
        (whether by the Corporation or another Person) is completed pursuant to which
        holders of Common Stock are permitted to tender or exchange their shares
        for
        other securities, cash or property, or (D) the Corporation effects any
        reclassification of the Common Stock or any compulsory share exchange pursuant
        to which the Common Stock is effectively converted into or exchanged for
        other
        securities, cash or property (in any such case, a “Fundamental
        Transaction”), then
        upon any subsequent conversion of this Preferred Stock, the Holder shall
        have
        the right to receive, for each Conversion Share that would have been issuable
        upon such conversion absent such Fundamental Transaction, the same kind and
        amount of securities, cash or property as it would have been entitled to
        receive
        upon the occurrence of such Fundamental Transaction if it had been, immediately
        prior to such Fundamental Transaction, the holder of one share of Common
        Stock
        (the “Alternate
        Consideration”). For
        purposes of any such conversion, the determination of the Conversion Price
        shall
        be appropriately adjusted to apply to such Alternate Consideration based
        on the
        amount of Alternate Consideration issuable in respect of one share of Common
        Stock in such Fundamental Transaction, and the Corporation shall apportion
        the
        Conversion Price among the Alternate Consideration in a reasonable manner
        reflecting the relative value of any different components of the Alternate
        Consideration. If holders of Common Stock are given any choice as to the
        securities, cash or property to be received in a Fundamental Transaction,
        then
        the Holder shall be given the same choice as to the Alternate Consideration
        it
        receives upon any conversion of this Preferred Stock following such Fundamental
        Transaction. To the extent necessary to effectuate the foregoing provisions,
        any
        successor to the Corporation or surviving entity in such Fundamental Transaction
        shall file a new Certificate of Designations with the same terms and conditions
        and issue to the Holder new preferred stock consistent with the foregoing
        provisions and evidencing the Holder’s right to convert such preferred stock
        into Alternate Consideration. The terms of any agreement pursuant to which
        a
        Fundamental Transaction is effected shall include terms requiring any such
        successor or surviving entity to comply with the provisions of this Section
        7(e)
        and insuring that this Preferred Stock (or any such replacement security)
        will
        be similarly adjusted upon any subsequent transaction analogous to a Fundamental
        Transaction.

      

      f)           Exempt
        Issuance. Notwithstanding
        the foregoing, no
        adjustment will be made under this Section 7 in respect of an Exempt
        Issuance.

      

      g)           Calculations.
        All calculations under this Section 7
        shall be made to the nearest cent or the nearest 1/100th of a share, as the
        case
        may be. The number of shares of Common Stock outstanding at any given time
        shall
        not include shares owned or held by or for the account of the Corporation,
        and
        the description of any such shares of Common Stock shall be considered on
        issue
        or sale of Common Stock. For purposes of this Section 7, the number of shares
        of
        Common Stock deemed to be issued and outstanding as of a given date shall
        be the
        sum of the number of shares of Common Stock (excluding treasury shares, if
        any)
        issued and outstanding.

      

      h)           Notice
        to Holders.

      

      i.           Adjustment
        to Conversion
        Price. Whenever the
        Conversion Price is adjusted pursuant to any of this Section 7, the Corporation
        shall promptly mail to each Holder a notice setting forth the Conversion
        Price
        after such adjustment and setting forth a brief statement of the facts requiring
        such adjustment. If the Corporation issues a variable rate security, despite
        the
        prohibition thereon in the Purchase Agreement, the Corporation shall be deemed
        to have issued Common Stock or Common Stock Equivalents at the lowest possible
        conversion or exercise price at which such securities may be converted or
        exercised in the case of a Variable Rate Transaction (as defined in the Purchase
        Agreement), or the lowest possible adjustment price in the case of an MFN
        Transaction (as defined in the Purchase Agreement).

       

      ii.           Notice
        to Allow Conversion by
        Holder. If (A) the
        Corporation shall declare a dividend (or any other distribution) on the Common
        Stock; (B) the Corporation shall declare a special nonrecurring cash dividend
        on
        or a redemption of the Common Stock; (C) the Corporation shall authorize
        the
        granting to all holders of the Common Stock rights or warrants to subscribe
        for
        or purchase any shares of capital stock of any class or of any rights; (D)
        the
        approval of any stockholders of the Corporation shall be required in connection
        with any reclassification of the Common Stock, any consolidation or merger
        to
        which the Corporation is a party, any sale or transfer of all or substantially
        all of the assets of the Corporation, of any compulsory share exchange whereby
        the Common Stock is converted into other securities, cash or property; (E)
        the
        Corporation shall authorize the voluntary or involuntary dissolution,
        liquidation or winding up of the affairs of the Corporation; then, in each
        case,
        the Corporation shall cause to be filed at each office or agency maintained
        for
        the purpose of conversion of the Preferred Stock, and shall cause to be mailed
        to the Holders at their last addresses as they shall appear upon the stock
        books
        of the Corporation, at least 20 calendar days prior to the applicable record
        or
        effective date hereinafter specified, a notice stating (x) the date on which
        a
        record is to be taken for the purpose of such dividend, distribution,
        redemption, rights or warrants, or if a record is not to be taken, the date
        as
        of which the holders of the Common Stock of record to be entitled to such
        dividend, distributions, redemption, rights or warrants are to be determined
        or
        (y) the date on which such reclassification, consolidation, merger, sale,
        transfer or share exchange is expected to become effective or close, and
        the
        date as of which it is expected that holders of the Common Stock of record
        shall
        be entitled to exchange their shares of the Common Stock for securities,
        cash or
        other property deliverable upon such reclassification, consolidation, merger,
        sale, transfer or share exchange; provided,
        that the failure to mail such notice
        or any defect therein or in the mailing thereof shall not affect the validity
        of
        the corporate action required to be specified in such notice. Holders are
        entitled to convert the Conversion Amount of Preferred Stock during the 20-day
        period commencing the date of such notice to the effective date of the event
        triggering such notice.

      

      Section
        8.  Forced Conversion.

      

      a)           As
        used herein, the “Forced Conversion Date” shall be the Plan Closing
        Date.

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      b)           One
        minute after this Second Amended and Restated Certificate is effective with
        the
        Nevada Secretary of State (the “Conversion Time”) on the Forced Conversion Date,
        each share of Preferred Stock outstanding, automatically and without any
        action
        on the part of the holder thereof, shall convert into a number of fully paid
        and
        nonassessable shares of Common Stock equal to the quotient of (i) the Stated
        Value of the shares of Preferred Stock outstanding on the Forced Conversion
        Date
        divided by (ii) the Conversion Price in effect at the Conversion Time on
        the
        Forced Conversion Date.  Any accrued but unpaid dividends on the
        Preferred Stock outstanding at the Conversion Time on the Forced Conversion
        Date
        will be issued by the Company at the Conversion Time on the Forced Conversion
        Date in shares of Common Stock, with the number of shares of Common Stock
        to be
        issued equal to the quotient of (i) the accrued unpaid dividend divided by
        (ii)
        the Conversion Price in effect at the Conversion Time on the Forced Conversion
        Date.

      c)           As
        soon as practicable after the Forced Conversion Date, the Corporation will
        send
        a notice to all Holders stating (i) the date as of which the Forced Conversion
        Date occurred, and (ii) how many shares of Common Stock the Holder’s Preferred
        Stock was converted into.

      

      Section
        9.  Redemption Upon Triggering Events.

      

      a)           “Triggering
        Event” means any one
        or more of the
        following events (whatever the reason and whether it shall be voluntary or
        involuntary or effected by operation of law or pursuant to any judgment,
        decree
        or order of any court, or any order, rule or regulation of any administrative
        or
        governmental body):

      

      i.           the
        failure of a Conversion Shares
        Registration Statement to be declared effective by the Commission on or prior
        to
        the 210th
        day after the Original Issue
        Date;

      

      ii.           if,
        during the Effectiveness Period,
        the effectiveness of the Conversion Shares Registration Statement lapses
        for any
        reason for more than an aggregate of 25 calendar days (which need not be
        consecutive days) during any 12 month period, or the Holder shall not be
        permitted to resell Registrable Securities under the Conversion Shares
        Registration Statement for more than an aggregate of 25 calendar days (which
        need not be consecutive days) during any 12 month period, and in each case
        the
        shares of Common Stock into which such Holder’s Preferred Stock can be converted
        cannot be sold in the public securities market pursuant to Rule 144(k) under
        the
        Securities Act, provided, that the cause of such lapse or unavailability
        is not
        due to factors solely within the control of such holder of Preferred
        Stock;

      

      iii.           the
        Corporation shall fail to deliver
        certificates representing Conversion Shares issuable upon a conversion hereunder
        that comply with the provisions hereof prior to the 9th
        Trading Day after such shares are
        required to be delivered hereunder, or the Corporation shall provide written
        notice to any Holder, including by way of public announcement, at any time,
        of
        its intention not to comply with requests for conversion of any shares of
        Preferred Stock in accordance with the terms hereof;

      

      iv.           one
        of the Events (as defined in the
        Registration Rights Agreement) described in subsections (i), (ii) or (iii)
        of
        Section 2(b) of the Registration Rights Agreement shall not have been cured
        to
        the satisfaction of the Holders prior to the expiration of 30 days from the
        Event Date (as defined in the Registration Rights Agreement) relating thereto
        (other than an Event resulting from a failure of a Conversion Shares
        Registration Statement to be declared effective by the Commission on or prior
        to
        the 210th day after the Original Issue Date, which shall be covered by Section
        9(a)(i));

       

      v.           the
        Corporation shall fail for any
        reason to pay in full the amount of cash due pursuant to a Buy-In within
        15 days
        after notice therefor is delivered hereunder or shall fail to pay all amounts
        owed on account of an Event within 15 days of the date due;

      

      vi.           the
        Corporation shall fail to have
        available a sufficient number of authorized and unreserved shares of Common
        Stock to issue to such Holder upon a conversion hereunder;

      

      vii.           the
        Corporation shall fail to observe
        or perform any other covenant, agreement or warranty contained in, or otherwise
        commit any breach of the Transaction Documents, and such failure or breach
        shall
        not, if subject to the possibility of a cure by the Corporation, have been
        remedied within 30 calendar days after the date on which written notice of
        such
        failure or breach shall have been given;

      

      viii.           the
        Corporation shall redeem more than
        a de minimis number of Junior Securities;

      

      ix.           the
        Corporation shall be party to a
        Change of Control Transaction;

      

      x.           there
        shall have occurred a Bankruptcy Event; or

      

      xi.           the
        Common Stock shall fail to be
        listed or quoted for trading on a Trading Market for more than 7 Trading
        Days,
        which need not be consecutive Trading Days.

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      b)           Upon
        the occurrence of a Triggering
        Event, each Holder shall (in addition to all other rights it may have hereunder
        or under applicable law) have the right, exercisable at the sole option of
        such
        Holder, to require the Corporation to redeem all of the Preferred Stock then
        held by such Holder for a redemption price, in cash, equal to the Triggering
        Redemption Amount. The Triggering Redemption Amount, if in cash or in shares,
        shall be due and payable or issuable, as the case may be, within 5 Trading
        Days
        of the date on which the notice for the payment therefor is provided by a
        Holder
        (the “Triggering
        Redemption Payment Date”). If the Corporation
        fails to pay the
        Triggering Redemption Amount hereunder in full pursuant to this Section on
        the
        date such amount is due in accordance with this Section (whether in cash
        or
        shares of Common Stock), the Corporation will pay interest thereon at a rate
        of
        18% per annum (or such lesser amount permitted by applicable law), accruing
        daily from such date until the Triggering Redemption Amount, plus all such
        interest thereon, is paid in full. For purposes of this Section, a share
        of
        Preferred Stock is outstanding until such date as the Holder shall have received
        Conversion Shares upon a conversion (or attempted conversion) thereof that
        meets
        the requirements hereof or has been paid the Triggering Redemption Amount
        plus
        all accrued but unpaid dividends and all accrued but unpaid liquidated damages
        in cash.

      

      Section
        10.  Miscellaneous.

      

      a)           No
        Debt. So long as any
        shares of Preferred
        Stock are outstanding, the Corporation will not and will not permit any of
        its
        Subsidiaries to directly or indirectly enter into, create, incur, assume
        or
        suffer to exist (or allow any of its Subsidiaries to do so) any indebtedness
        or
        liens of any kind on or with respect to any of its property or assets now
        owned
        or hereafter acquired or any interest therein or any income or profits
        therefrom, other than (1) accounts payable, equipment leases, other current
        payables and other accrued liabilities incurred in connection with short-term
        operating liabilities, (2) accrued interest on the Corporation’s existing
        indebtedness as set forth on Schedule 4 hereto; (3) up to $1,000,000 for
        non-equity linked debt financing in the event the Corporation achieves at
        least
        $5,000,000 in contract revenues and an annualized gross profit of at least
        $2,250,000 as of any fiscal quarter of 2005 (as reported in the SEC Reports);
        and (4) an additional $1,000,000 for non-equity linked debt financing in
        the
        event the Corporation achieves at least $7,500,000 in contract revenues and
        at
        least a 45% corporate gross margin for any trailing 12 month period (as reported
        in the SEC Reports).

      

      b)           Notices.
        Any and all notices or other
        communications or deliveries to be provided by the Holders hereunder, including,
        without limitation, any Notice of Conversion, shall be in writing and delivered
        personally, by facsimile, sent by a nationally recognized overnight courier
        service, addressed to the Corporation, at the address set forth above, facsimile
        number 631-924-6033,
        Attn: Chief
        Financial Officer, Richard Larkin such other
        address or facsimile number
        as the Corporation may specify for such purposes by notice to the Holders
        delivered in accordance with this Section. Any and all notices or other
        communications or deliveries to be provided by the Corporation hereunder
        shall
        be in writing and delivered personally, by facsimile, sent by a nationally
        recognized overnight courier service addressed to each Holder at the facsimile
        telephone number or address of such Holder appearing on the books of the
        Corporation, or if no such facsimile telephone number or address appears,
        at the
        principal place of business of the Holder. Any notice or other communication
        or
        deliveries hereunder shall be deemed given and effective on the earliest
        of (i)
        the date of transmission, if such notice or communication is delivered via
        facsimile at the facsimile telephone number specified in this Section prior
        to
        5:30 p.m. (New York City time), (ii) the date after the date of transmission,
        if
        such notice or communication is delivered via facsimile at the facsimile
        telephone number specified in this Section later than 5:30 p.m. (New York
        City
        time) on any date and earlier than 11:59 p.m. (New York City time) on such
        date,
        (iii) the second Business Day following the date of mailing, if sent by
        nationally recognized overnight courier service, or (iv) upon actual receipt
        by
        the party to whom such notice is required to be given.

      

      c)           Absolute
        Obligation. Except as expressly
        provided herein,
        no provision of this Certificate of Designation shall alter or impair the
        obligation of the Corporation, which is absolute and unconditional, to pay
        the
        liquidated damages (if any) on, the shares of Preferred Stock at the time,
        place, and rate, and in the coin or currency, herein
        prescribed.

       

      d)           Lost
        or Mutilated Preferred Stock
        Certificate. If a
        Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or
        destroyed, the Corporation shall execute and deliver, in exchange and
        substitution for and upon cancellation of a mutilated certificate, or in
        lieu of
        or in substitution for a lost, stolen or destroyed certificate, a new
        certificate for the shares of Preferred Stock so mutilated, lost, stolen
        or
        destroyed but only upon receipt of evidence of such loss, theft or destruction
        of such certificate, and of the ownership hereof, and indemnity, if requested,
        all reasonably satisfactory to the Corporation.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      e)           Governing
        Law. All questions
        concerning the
        construction, validity, enforcement and interpretation of this Certificate
        of
        Designation shall be governed by and construed and enforced in accordance
        with
        the internal laws of the State of New York, without regard to the principles
        of
        conflicts of law thereof. Each party agrees that all legal proceedings
        concerning the interpretations, enforcement and defense of the transactions
        contemplated by any of the Transaction Documents (whether brought against
        a
        party hereto or its respective affiliates, directors, officers, shareholders,
        employees or agents) shall be commenced in the state and federal courts sitting
        in the City of New York, Borough of Manhattan (the “New York Courts”).
        Each party hereto hereby
        irrevocably submits to the exclusive jurisdiction of the New York Courts
        for the
        adjudication of any dispute hereunder or in connection herewith or with any
        transaction contemplated hereby or discussed herein (including with respect
        to
        the enforcement of any of the Transaction Documents), and hereby irrevocably
        waives, and agrees not to assert in any suit, action or proceeding, any claim
        that it is not personally subject to the jurisdiction of any such court,
        or such
        New York Courts are improper or inconvenient venue for such proceeding. Each
        party hereby irrevocably waives personal service of process and consents
        to
        process being served in any such suit, action or proceeding by mailing a
        copy
        thereof via registered or certified mail or overnight delivery (with evidence
        of
        delivery) to such party at the address in effect for notices to it under
        this
        Certificate of Designation and agrees that such service shall constitute
        good
        and sufficient service of process and notice thereof. Nothing contained herein
        shall be deemed to limit in any way any right to serve process in any manner
        permitted by law. Each party hereto hereby irrevocably waives, to the fullest
        extent permitted by applicable law, any and all right to trial by jury in
        any
        legal proceeding arising out of or relating to this Certificate of Designation
        or the transactions contemplated hereby. If either party shall commence an
        action or proceeding to enforce any provisions of this Certificate of
        Designation, then the prevailing party in such action or proceeding shall
        be
        reimbursed by the other party for its attorneys fees and other costs and
        expenses incurred with the investigation, preparation and prosecution of
        such
        action or proceeding.

       

      f)           Waiver.
        Any waiver by the Corporation or the
        Holder of a breach of any provision of this Certificate of Designation shall
        not
        operate as or be construed to be a waiver of any other breach of such provision
        or of any breach of any other provision of this Certificate of Designation.
        The
        failure of the Corporation or the Holder to insist upon strict adherence
        to any
        term of this Certificate of Designation on one or more occasions shall not
        be
        considered a waiver or deprive that party of the right thereafter to insist
        upon
        strict adherence to that term or any other term of this Certificate of
        Designation. Any waiver must be in writing.

      

      g)           Severability.
        If any provision of this Certificate
        of Designation is invalid, illegal or unenforceable, the balance of this
        Certificate of Designation shall remain in effect, and if any provision is
        inapplicable to any person or circumstance, it shall nevertheless remain
        applicable to all other persons and circumstances. If it shall be found that
        any
        interest or other amount deemed interest due hereunder violates applicable
        laws
        governing usury, the applicable rate of interest due hereunder shall
        automatically be lowered to equal the maximum permitted rate of
        interest.

      

      h)           Next
        Business Day. Whenever any
        payment or other
        obligation hereunder shall be due on a day other than a Business Day, such
        payment shall be made on the next succeeding Business Day.

      

      i)           Headings.
        The headings contained herein are for
        convenience only, do not constitute a part of this Certificate of Designation
        and shall not be deemed to limit or affect any of the provisions
        hereof.

      

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

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

      

      RESOLVED,
        FURTHER, that the Chairman, the president or any vice-president, the Chief
        Financial Officer or the secretary or any assistant secretary, of the
        Corporation be and they hereby are authorized and directed to prepare and
        file
        an Amended and Restated Certificate of Designation of Preferences, Rights
        and
        Limitations in accordance with the foregoing resolution and the provisions
        of
        the Nevada Revised Statutes.

      

      IN
        WITNESS WHEREOF, the undersigned has executed this Amended and Restated
        Certificate this 19th day of
        December
        2007.

      

      __________________________

      Name:                      Richard
        J. Larkin

      Title:           Chief
        Financial Officer

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      ANNEX
        A

      

      NOTICE
        OF
        CONVERSION

      

      (TO
        BE
        EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED
        STOCK)

      

      The
        undersigned hereby elects to convert the number of shares of Series B 9%
        Convertible Preferred Stock indicated below, into shares of common stock,
        par
        value $0.01 per share (the “Common Stock”), of Chembio Diagnostics, Inc.,
        a Nevada corporation (the “Corporation”), according to the conditions
        hereof, as of the date written below. If shares are to be issued in the name
        of
        a person other than undersigned, the undersigned will pay all transfer taxes
        payable with respect thereto and is delivering herewith such certificates
        and
        opinions as reasonably requested by the Corporation in accordance therewith.
        No
        fee will be charged to the Holder for any conversion, except for such transfer
        taxes, if any.

      

      Conversion
        calculations:

      

      
        	
                Date
                  to Effect Conversion:
                  _____________________________________________

              
	
                Number
                  of shares of Preferred Stock owned prior to Conversion:
                  _______________

              
	
                Number
                  of shares of Preferred Stock to be Converted:
                  ________________________

              
	
                Stated
                  Value of shares of Preferred Stock to be Converted:
                  ____________________

              
	
                Number
                  of shares of Common Stock to be Issued:
                  ___________________________

              
	
                Applicable
                  Conversion
                  Price:____________________________________________

              
	
                Number
                  of shares of Preferred Stock subsequent to Conversion:
                  ________________

              
	
                 

                [HOLDER]

                 

                By:___________________________________

                Name:

                Title:ex4_9.htm

    
      

    

    
      

    

    
      Exhibit
        4.9

      EXHIBIT
        C

      

      NEITHER
        THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
        HAVE
        BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
        MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
        STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
        FROM,
        OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
        SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
        EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
        THE
        SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
        COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
        THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
        OR
        OTHER LOAN SECURED BY SUCH SECURITIES.

      

      COMMON
        STOCK PURCHASE WARRANT

      

      To
        Purchase__________ Shares of Common Stock of

      

      CHEMBIO
        DIAGNOSTICS, INC.

      

      

      
        	
                Original
                  Date of Issuance:  ___________

              	
                Reissuance
                  Date:  December 19, 2007

              
	
                Warrant
                  No.:  _______________

              	
                Expires:  ____________

              

      

      

      

      THIS
        COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
        received, ___________________ (the “Holder”), is entitled, upon the terms
        and subject to the limitations on exercise and the conditions hereinafter
        set
        forth, at any time on or after the original date of issuance (the “Initial
        Exercise Date”) and on or prior to the close of business on the fifth
        anniversary of the Initial Exercise Date (the “Termination Date”) but not
        thereafter, to subscribe for and purchase from Chembio Diagnostics, Inc.,
        a
        Nevada corporation (the “Company”), up to ______________ (______________)
        shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share,
        of the Company (the “Common Stock”).  The purchase price of one
        share of Common Stock under this Warrant shall be equal to the Exercise Price,
        as defined in Section 2(b).

      

      Section
        1.                                Definitions.  Capitalized
        terms used and not otherwise defined herein shall have the meanings set forth
        in
        that certain Securities Purchase Agreement (the “Purchase Agreement”),
        dated January 26, 2005, among the Company and the purchasers
        signatory thereto.

      

      Section
        2.                                Exercise.

       

      (a)           Exercise
        of Warrant.  Exercise of the purchase rights represented by this
        Warrant may be made, in whole or in part, at any time or times on or after
        the
        Initial Exercise Date and on or before the Termination Date by delivery to
        the
        Company of a duly executed facsimile copy of the Notice of Exercise Form
        annexed
        hereto (or such other office or agency of the Company as it may designate
        by
        notice in writing to the registered Holder at the address of such Holder
        appearing on the books of the Company); provided, however, within
        5 Trading Days of the date said Notice of Exercise is delivered to the Company,
        the Holder shall have surrendered this Warrant to the Company and the Company
        shall have received payment of the aggregate Exercise Price of the shares
        thereby purchased by wire transfer or cashier’s check drawn on a United States
        bank.  If the Holder is Crestview Capital Master, LLC or any Affiliate
        thereof, then such Holder shall give the Company 5 Trading Days advance notice
        of any such exercise for the purpose of enabling the Company to notify other
        holders of Warrants of such intended exercise.  If the Holder or its
        predecessor in interest received this Warrant as a result of the exercise
        of its
        rights to exchange securities purchased in connection with the Company’s
        issuance and sale of Series A Preferred Stock, then this Warrant shall not
        be
        exercisable until and unless the Holder has received notice of Crestview’s
        exercise pursuant to the previous sentence.  The restrictions of the
        foregoing two sentences shall not apply to any other category of
        Holder.

       

      (b)           Exercise
        Price.  The exercise price of the Common Stock under this Warrant
        shall be as follows, subject to adjustment hereunder (the “Exercise
        Price”):

       

      (i)           For
        the period 4:01p.m. eastern time (“ET”) through 9:59p.m. ET on the Plan
        Closing Date, $0.40 per share for all or any portion of this Warrant exercised
        for cash;

       

      (ii)           For
        the period 4:01p.m. ET through 9:59p.m. ET on the Plan Closing Date, $0.45
        per
        share for all or any portion of this Warrant exercised through a Cashless
        Exercise;

       

      (iii)           For
        the period beginning 10:00p.m. ET on the Plan Closing Date through 9:59p.m.
        ET
        on the Final Plan Date, $0.45 for all or any part of this Warrant exercised
        by a
        Holder who exercised at least 10% of all of such Holder’s warrants and options
        for cash at the Plan Closing Date;

       

      (iv)           For
        the period beginning 10:00p.m. ET on the Plan Closing Date, $0.61 per share
        for
        any Holder that did not exercise at least 10% of all of such Holder’s warrants
        and options for cash at an exercise price of $0.40 per share at the Plan
        Closing
        Date; and

       

      (v)           For
        the period beginning 10:00p.m. ET on the Final Plan Date, $0.61 per share
        for
        all or any portion of this Warrant that has not been exercised on or before
        9:59p.m. ET on the Final Plan Date.

       

      (c)           Cashless
        Exercise. 

       

      (i)           At
        the option of the Holder, this Warrant may be exercised by means of a “cashless
        exercise” (a “Cashless Exercise”) in which the Holder shall be entitled
        to receive a certificate for the number of Warrant Shares equal to the quotient
        obtained by dividing [(A-B) (X)] by (A), where:

       

      (A)
        = the
        VWAP for the ten-Trading Day period that ends on the first Trading Day
        immediately preceding the date of such election;

       

      (B)
        = the
        applicable Exercise Price of this Warrant in effect on the date of exercise,
        as
        adjusted; and

       

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

       

      (ii)           Notwithstanding
        anything herein to the contrary, for any Notice of Exercise Form dated on
        the
        Plan Closing Date received from a Holder who exercises its warrants on cashless
        basis at $0.45 per share before 10:00p.m. ET on the Plan Closing Date, the
        value
        of (A) in the equation set forth in Section 2(c)(i) above shall be equal
        to the
        greater of $0.53 or the VWAP for the ten-Trading Day period that ends on
        the
        second Trading Day prior to the date of the Notice of Exercise
        Form.

       

      (iii)           Notwithstanding
        anything herein to the contrary, for any Notice of Exercise Form dated between
        and inclusive of the Plan Closing Date and the Final Plan Date received from
        a
        Holder who exercises at least 10% of all of such Holder's warrants and options
        for cash before 10:00p.m. ET on the Plan Closing Date the value of (A) in
        the
        equation set forth in Section 2(c)(i) above shall be equal to the greater
        of
        $0.53 or the VWAP for the ten-Trading Day period that ends on the second
        Trading
        Day prior to the date of the Notice of Exercise Form. 

       

      (iv)           Notwithstanding
        anything herein to the contrary, a Holder who does not exercise (i) at least
        10%
        of all of such Holder's warrants and options issued by the Company for cash
        at
        an exercise price of $0.40 per share before 10:00p.m. ET on the Plan Closing
        Date, or (ii) its warrants on cashless basis at $0.45 per share by 10:00p.m.
        ET
        on the Plan Closing Date, shall not be permitted to exercise its Warrants
        on a
        cashless basis pursuant to Section 2(c)(i) above until April 1,
        2008.

       

      d)           Exercise
        Limitations.

       

      (i)           Holder’s
        Restrictions.  The Holder shall not have the right to exercise any
        portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent
        that after giving effect to such issuance after exercise, the Holder (together
        with the Holder’s affiliates), as set forth on the applicable Notice of
        Exercise, would beneficially own in excess of 4.99% of the number of shares
        of
        the Common Stock outstanding immediately after giving effect to such
        issuance.  For purposes of the foregoing sentence, the number of
        shares of Common Stock beneficially owned by the Holder and its affiliates
        shall
        include the number of shares of Common Stock issuable upon exercise of this
        Warrant with respect to which the determination of such sentence is being
        made,
        but shall exclude the number of shares of Common Stock which would be issuable
        upon (A) exercise of the remaining, nonexercised portion of this Warrant
        beneficially owned by the Holder or any of its affiliates and (B) exercise
        or
        conversion of the unexercised or nonconverted portion of any other securities
        of
        the Company (including, without limitation, any other shares of Preferred
        Stock
        or Warrants) subject to a limitation on conversion or exercise analogous
        to the
        limitation contained herein beneficially owned by the Holder or any of its
        affiliates.  Except as set forth in the preceding sentence, for
        purposes of this Section 2(d), beneficial ownership shall be calculated in
        accordance with Section 13(d) of the Exchange Act, it being acknowledged
        by
        Holder that the Company is not representing to Holder that such calculation
        is
        in compliance with Section 13(d) of the Exchange Act and Holder is solely
        responsible for any schedules required to be filed in accordance
        therewith.  To the extent that the limitation contained in this
        Section 2(d) applies, the determination of whether this Warrant is exercisable
        (in relation to other securities owned by the Holder) and of which a portion
        of
        this Warrant is exercisable shall be in the sole discretion of such Holder,
        and
        the submission of a Notice of Exercise shall be deemed to be such Holder’s
        determination of whether this Warrant is exercisable (in relation to other
        securities owned by such Holder) and of which portion of this Warrant is
        exercisable, in each case subject to such aggregate percentage limitation,
        and
        the Company shall have no obligation to verify or confirm the accuracy of
        such
        determination.  For purposes of this Section 2(d), in determining the
        number of outstanding shares of Common Stock, the Holder may rely on the
        number
        of outstanding shares of Common Stock as reflected in (x) the Company’s most
        recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent
        public
        announcement by the Company or (z) any other notice by the Company or the
        Company’s Transfer Agent setting forth the number of shares of Common Stock
        outstanding.  Upon the written or oral request of the Holder, the
        Company shall within two Trading Days confirm orally and in writing to the
        Holder the number of shares of Common Stock then outstanding.  In any
        case, the number of outstanding shares of Common Stock shall be determined
        after
        giving effect to the conversion or exercise of securities of the Company,
        including this Warrant, by the Holder or its affiliates since the date as
        of
        which such number of outstanding shares of Common Stock was
        reported.  The provisions of this Section 2(d) may be waived by the
        Holder upon, at the election of the Holder, not less than 61 days’ prior notice
        to the Company, and the provisions of this Section 2(d) shall continue to
        apply
        until such 61st day (or such later date, as determined by the Holder, as
        may be
        specified in such notice of waiver).  Notwithstanding anything set
        forth in this Section 2(d), the 4.99% beneficial ownership restriction set
        forth
        in this Section 2(d) shall not apply to Common Stock issuable upon the exercise
        of Warrants in connection with the Plan.

       

      (e)           For
        purposes of this warrant, the term “Plan” shall mean any action the
        Company takes, with any required approval of the holders thereof, on or before
        the Final Plan Date as contemplated by the Plan Summary and accompanying
        materials provided to holders on December 4, 2007, in connection with the
        reduction or other modification of terms of the Company’s then-outstanding
        preferred stock, warrants and options, including, but not limited to, actions
        the Company takes to (i) facilitate the conversion of the Series A, B and
        C
        Convertible Preferred Stock; (ii) reduce the exercise price of any of the
        Company’s outstanding warrants or options; (iii) offer the holders of the
        Company’s warrants and options the opportunity to exercise such warrants and
        options on a cash and/or cashless basis; and (iv) make other amendments to
        the
        documents governing these securities to effect these modifications, and to
        facilitate the conversion and exercise of these securities.

       

      (f)           “Plan
        Closing Date” shall be December 19, 2007.

       

      (g)           “Final
        Plan Date” shall mean the date that is six months and twelve days after the
        Plan Closing Date.

       

      (h)           Mechanics
        of Exercise.

       

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

      

      (ii)           Delivery
        of Certificates Upon Exercise.  Certificates for shares purchased
        hereunder shall be transmitted by the transfer agent of the Company to the
        Holder by crediting the account of the Holder’s prime broker with the Depository
        Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”)
        system if the Company is a participant in such system, and otherwise by physical
        delivery to the address specified by the Holder in the Notice of Exercise
        within
        3 Trading Days from the delivery to the Company of the Notice of Exercise
        Form,
        surrender of this Warrant and payment of the aggregate Exercise Price as
        set
        forth above (“Warrant Share Delivery Date”).  This Warrant
        shall be deemed to have been exercised on the date the Exercise Price is
        received by the Company.  The Warrant Shares shall be deemed to have
        been issued, and Holder or any other person so designated to be named therein
        shall be deemed to have become a holder of record of such shares for all
        purposes, as of the date the Warrant has been exercised by payment to the
        Company of the Exercise Price and all taxes required to be paid by the Holder,
        if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares,
        have
        been paid.

      

      (iii)           Delivery
        of New Warrants Upon Exercise.  If this Warrant shall have been
        exercised in part, the Company shall, at the time of delivery of the certificate
        or certificates representing Warrant Shares, deliver to Holder a new Warrant
        evidencing the rights of Holder to purchase the unpurchased Warrant Shares
        called for by this Warrant, which new Warrant shall in all other respects
        be
        identical with this Warrant.

      

      (iv)           Rescission
        Rights.  If the Company fails to cause its transfer agent to
        transmit to the Holder a certificate or certificates representing the Warrant
        Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date,
        then the Holder will have the right to rescind such exercise.

      

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

      

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

      

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

      

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

      

      Section
        3.                                Certain
        Adjustments.

       

      (a)           Stock
        Dividends and Splits.  If the Company, at any time while this
        Warrant is outstanding:  (A) pays a stock dividend or otherwise make a
        distribution or distributions on shares of its Common Stock or any other
        equity
        or equity equivalent securities payable in shares of Common Stock (which,
        for
        avoidance of doubt, shall not include any shares of Common Stock issued by
        the
        Company pursuant to this Warrant, the Company’s Series A Convertible Preferred
        Stock or the Company’s Series B Convertible Preferred Stock), (B) subdivides
        outstanding shares of Common Stock into a larger number of shares, (C) combines
        (including by way of reverse stock split) outstanding shares of Common Stock
        into a smaller number of shares, or (D) issues by reclassification of shares
        of
        the Common Stock any shares of capital stock of the Company, then in each
        case
        the Exercise Price shall be multiplied by a fraction of which the numerator
        shall be the number of shares of Common Stock (excluding treasury shares,
        if
        any) outstanding before such event and of which the denominator shall be
        the
        number of shares of Common Stock outstanding after such event and the number
        of
        shares issuable upon exercise of this Warrant shall be proportionately
        adjusted.  Any adjustment made pursuant to this Section 3(a) shall
        become effective immediately after the record date for the determination
        of
        stockholders entitled to receive such dividend or distribution and shall
        become
        effective immediately after the effective date in the case of a subdivision,
        combination or re-classification.

      

      (b)           Subsequent
        Equity Sales.  If the Company or any Subsidiary thereof, as
        applicable, at any time while this Warrant is outstanding, shall offer, sell,
        grant any option to purchase or offer, sell or grant any right to reprice
        its
        securities, or otherwise dispose of or issue (or announce any offer, sale,
        grant
        or any option to purchase or other disposition) any Common Stock or Common
        Stock
        Equivalents entitling any Person to acquire shares of Common Stock, at an
        effective price per share less than the then Exercise Price (such lower price,
        the “Base Share Price” and such issuances collectively, a “Dilutive
        Issuance”), as adjusted hereunder (if the holder of the Common Stock or
        Common Stock Equivalents so issued shall at any time, whether by operation
        of
        purchase price adjustments, reset provisions, floating conversion, exercise
        or
        exchange prices or otherwise, or due to warrants, options or rights per share
        which is issued in connection with such issuance, be entitled to receive
        shares
        of Common Stock at an effective price per share which is less than the Exercise
        Price, such issuance shall be deemed to have occurred for less than the Exercise
        Price), then, the Exercise Price shall be reduced to equal the Base Share
        Price
        and the number of Warrant Shares issuable hereunder shall be increased such
        that
        the aggregate Exercise Price payable hereunder, after taking into account
        the
        decrease in the Exercise Price, shall be equal to the aggregate Exercise
        Price
        prior to such adjustment.  Such adjustment shall be made whenever such
        Common Stock or Common Stock Equivalents are issued.  The Company
        shall notify the Holder in writing, no later than the Trading Day following
        the
        issuance of any Common Stock or Common Stock Equivalents subject to this
        section, indicating therein the applicable issuance price, or of applicable
        reset price, exchange price, conversion price and other pricing terms (such
        notice the “Dilutive Issuance Notice”).  For purposes of
        clarification, whether or not the Company provides a Dilutive Issuance Notice
        pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance,
        after the date of such Dilutive Issuance the Holder is entitled to receive
        a
        number of Warrant Shares based upon the Base Share Price regardless of whether
        the Holder accurately refers to the Base Share Price in the Notice of
        Exercise.

      

      (c)           Pro
        Rata Distributions.  If the Company, at any time prior to the
        Termination Date, shall distribute to all holders of Common Stock (and not
        to
        Holders of the Warrants) evidences of its indebtedness or assets or rights
        or
        warrants to subscribe for or purchase any security other than the Common
        Stock
        (which shall be subject to Section 3(b)), then in each such case the Exercise
        Price shall be adjusted by multiplying the Exercise Price in effect immediately
        prior to the record date fixed for determination of stockholders entitled
        to
        receive such distribution by a fraction of which the denominator shall be
        the
        VWAP determined as of the record date mentioned above, and of which the
        numerator shall be such VWAP on such record date less the then per share
        fair
        market value at such record date of the portion of such assets or evidence
        of
        indebtedness so distributed applicable to one outstanding share of the Common
        Stock as determined by the Board of Directors in good faith.  In
        either case the adjustments shall be described in a statement provided to
        the
        Holders of the portion of assets or evidences of indebtedness so distributed
        or
        such subscription rights applicable to one share of Common
        Stock.  Such adjustment shall be made whenever any such distribution
        is made and shall become effective immediately after the record date mentioned
        above.

      

      (d)           Fundamental
        Transaction.  If, at any time while this Warrant is outstanding,
        (A) the Company effects any merger or consolidation of the Company with or
        into
        another Person, (B) the Company effects any sale of all or substantially
        all of
        its assets in one or a series of related transactions, (C) any tender offer
        or
        exchange offer (whether by the Company or another Person) is completed pursuant
        to which holders of Common Stock are permitted to tender or exchange their
        shares for other securities, cash or property, or (D) the Company effects
        any
        reclassification of the Common Stock or any compulsory share exchange pursuant
        to which the Common Stock is effectively converted into or exchanged for
        other
        securities, cash or property (in any such case, a “Fundamental
        Transaction”), then, upon any subsequent conversion of this Warrant, the
        Holder shall have the right to receive, for each Warrant Share that would
        have
        been issuable upon such exercise absent such Fundamental Transaction, at
        the
        option of the Holder, (a) upon exercise of this Warrant, the number of shares
        of
        Common Stock of the successor or acquiring corporation or of the Company,
        if it
        is the surviving corporation, and Alternate Consideration receivable upon
        or as
        a result of such reorganization, reclassification, merger, consolidation
        or
        disposition of assets by a Holder of the number of shares of Common Stock
        for
        which this Warrant is exercisable immediately prior to such event or (b)
        if the
        Company is acquired in an all cash transaction, cash equal to the value of
        this
        Warrant as determined in accordance with the Black-Scholes option pricing
        formula (the “Alternate Consideration”).  For purposes of any
        such exercise, the determination of the Exercise Price shall be appropriately
        adjusted to apply to such Alternate Consideration based on the amount of
        Alternate Consideration issuable in respect of one share of Common Stock
        in such
        Fundamental Transaction, and the Company shall apportion the Exercise Price
        among the Alternate Consideration in a reasonable manner reflecting the relative
        value of any different components of the Alternate Consideration.  If
        holders of Common Stock are given any choice as to the securities, cash or
        property to be received in a Fundamental Transaction, then the Holder shall
        be
        given the same choice as to the Alternate Consideration it receives upon
        any
        exercise of this Warrant following such Fundamental Transaction.  To
        the extent necessary to effectuate the foregoing provisions, any successor
        to
        the Company or surviving entity in such Fundamental Transaction shall issue
        to
        the Holder a new warrant consistent with the foregoing provisions and evidencing
        the Holder’s right to exercise such warrant into Alternate
        Consideration.  The terms of any agreement pursuant to which a
        Fundamental Transaction is effected shall include terms requiring any such
        successor or surviving entity to comply with the provisions of this Section
        3(d)
        and insuring that this Warrant (or any such replacement security) will be
        similarly adjusted upon any subsequent transaction analogous to a Fundamental
        Transaction.

      

      (e)           Exempt
        Issuance.  Notwithstanding the foregoing, no adjustments,
        Alternate Consideration nor notices shall be made, paid or issued under this
        Section 3 in respect of an Exempt Issuance or any issuance of Common Stock
        or
        Common Stock Equivalents upon conversion of the preferred stock or the exercise
        of warrants and/or options in connection with the Plan.

      

      (f)           Calculations.  All
        calculations under this Section 3 shall be made to the nearest cent or the
        nearest 1/100th of a share, as the case may be.  The number of shares
        of Common Stock outstanding at any given time shall not include shares of
        Common
        Stock owned or held by or for the account of the Company, and the description
        of
        any such shares of Common Stock shall be considered on issue or sale of Common
        Stock.  For purposes of this Section 3, the number of shares of Common
        Stock deemed to be issued and outstanding as of a given date shall be the
        sum of
        the number of shares of Common Stock (excluding treasury shares, if any)
        issued
        and outstanding.

      

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

      

      (h)           Notice
        to Holders.

      

      (i)           Adjustment
        to Exercise Price.  Whenever the Exercise Price is adjusted
        pursuant to this Section 3, the Company shall promptly mail to each Holder
        a
        notice setting forth the Exercise Price after such adjustment and setting
        forth
        a brief statement of the facts requiring such adjustment.  If the
        Company issues a variable rate security, despite the prohibition thereon
        in the
        Purchase Agreement, the Company shall be deemed to have issued Common Stock
        or
        Common Stock Equivalents at the lowest possible conversion or exercise price
        at
        which such securities may be converted or exercised in the case of a Variable
        Rate Transaction (as defined in the Purchase Agreement), or the lowest possible
        adjustment price in the case of an MFN Transaction (as defined in the Purchase
        Agreement.

      

      (ii)           Notice
        to Allow Exercise by Holder.  If (A) the Company shall declare a
        dividend (or any other distribution) on the Common Stock; (B) the Company
        shall
        declare a special nonrecurring cash dividend on or a redemption of the Common
        Stock; (C) the Company shall authorize the granting to all holders of the
        Common
        Stock rights or warrants to subscribe for or purchase any shares of capital
        stock of any class or of any rights; (D) the approval of any stockholders
        of the
        Company shall be required in connection with any reclassification of the
        Common
        Stock, any consolidation or merger to which the Company is a party, any sale
        or
        transfer of all or substantially all of the assets of the Company, of any
        compulsory share exchange whereby the Common Stock is converted into other
        securities, cash or property; (E) the Company shall authorize the voluntary
        or
        involuntary dissolution, liquidation or winding up of the affairs of the
        Company; then, in each case, the Company shall cause to be mailed to the
        Holder
        at its last addresses as it shall appear upon the Warrant Register of the
        Company, at least 20 calendar days prior to the applicable record or effective
        date hereinafter specified, a notice stating (x) the date on which a record
        is
        to be taken for the purpose of such dividend, distribution, redemption, rights
        or warrants, or if a record is not to be taken, the date as of which the
        holders
        of the Common Stock of record to be entitled to such dividend, distributions,
        redemption, rights or warrants are to be determined or (y) the date on which
        such reclassification, consolidation, merger, sale, transfer or share exchange
        is expected to become effective or close, and the date as of which it is
        expected that holders of the Common Stock of record shall be entitled to
        exchange their shares of the Common Stock for securities, cash or other property
        deliverable upon such reclassification, consolidation, merger, sale, transfer
        or
        share exchange; provided, that the failure to mail such notice or any
        defect therein or in the mailing thereof shall not affect the validity of
        the
        corporate action required to be specified in such notice.  The Holder
        is entitled to exercise this Warrant during the 20-day period commencing
        on the
        date of such notice to the effective date of the event triggering such
        notice.

      

      Section
        4.                                Transfer
        of Warrant.

      

      (a)           Transferability.  Subject
        to compliance with any applicable securities laws and the conditions set
        forth
        in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of
        the
        Purchase Agreement, this Warrant and all rights hereunder are transferable,
        in
        whole or in part, upon surrender of this Warrant at the principal office
        of the
        Company, together with a written assignment of this Warrant substantially
        in the
        form attached hereto duly executed by the Holder or its agent or attorney
        and
        funds sufficient to pay any transfer taxes payable upon the making of such
        transfer.  Upon such surrender and, if required, such payment, the
        Company shall execute and deliver a new Warrant or Warrants in the name of
        the
        assignee or assignees and in the denomination or denominations specified
        in such
        instrument of assignment, and shall issue to the assignor a new Warrant
        evidencing the portion of this Warrant not so assigned, and this Warrant
        shall
        promptly be cancelled.  A Warrant, if properly assigned, may be
        exercised by a new holder for the purchase of Warrant Shares without having
        a
        new Warrant issued.

      

      (b)           New
        Warrants.  This Warrant may be divided or combined with other
        Warrants upon presentation hereof at the aforesaid office of the Company,
        together with a written notice specifying the names and denominations in
        which
        new Warrants are to be issued, signed by the Holder or its agent or
        attorney.  Subject to compliance with Section 4(a), as to any transfer
        which may be involved in such division or combination, the Company shall
        execute
        and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
        to
        be divided or combined in accordance with such notice.

      

      (c)           Warrant
        Register.  The Company shall register this Warrant, upon records
        to be maintained by the Company for that purpose (the “Warrant
        Register”), in the name of the record Holder hereof from time to
        time.  The Company may deem and treat the registered Holder of this
        Warrant as the absolute owner hereof for the purpose of any exercise hereof
        or
        any distribution to the Holder, and for all other purposes, absent actual
        notice
        to the contrary.

      

      (d)           Transfer
        Restrictions.  If, at the time of the surrender of this Warrant in
        connection with any transfer of this Warrant, the transfer of this Warrant
        shall
        not be registered pursuant to an effective registration statement under the
        Securities Act and under applicable state securities or blue sky laws, the
        Company may require, as a condition of allowing such transfer (i) that the
        Holder or transferee of this Warrant, as the case may be, furnish to the
        Company
        a written opinion of counsel (which opinion shall be in form, substance and
        scope customary for opinions of counsel in comparable transactions) to the
        effect that such transfer may be made without registration under the Securities
        Act and under applicable state securities or blue sky laws, (ii) that the
        holder
        or transferee execute and deliver to the Company an investment letter in
        form
        and substance acceptable to the Company and (iii) that the transferee be
        an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
        (a)(8) promulgated under the Securities Act or a qualified institutional
        buyer
        as defined in Rule 144A(a) under the Securities Act.

      

      Section
        5.                                Miscellaneous.

      

      (a)           Title
        to Warrant.  Prior to the Termination Date and subject to
        compliance with applicable laws and Section 4 of this Warrant, this Warrant
        and
        all rights hereunder are transferable, in whole or in part, at the office
        or
        agency of the Company by the Holder in person or by duly authorized attorney,
        upon surrender of this Warrant together with the Assignment Form annexed
        hereto
        properly endorsed.  The transferee shall sign an investment letter in
        form and substance reasonably satisfactory to the Company.

      

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

      

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

      

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

      

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

      

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

      

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

      

      (f)           Jurisdiction.  All
        questions concerning the construction, validity, enforcement and interpretation
        of this Warrant shall be determined in accordance with the provisions of
        the
        Purchase Agreement.

      

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

      

      (h)           Nonwaiver
        and Expenses.  No course of dealing or any delay or failure to
        exercise any right hereunder on the part of Holder shall operate as a waiver
        of
        such right or otherwise prejudice Holder’s rights, powers or remedies,
        notwithstanding the fact that all rights hereunder terminate on the Termination
        Date.  If the Company willfully and knowingly fails to comply with any
        provision of this Warrant, which results in any material damages to the Holder,
        the Company shall pay to Holder such amounts as shall be sufficient to cover
        any
        costs and expenses including, but not limited to, reasonable attorneys’ fees,
        including those of appellate proceedings, incurred by Holder in collecting
        any
        amounts due pursuant hereto or in otherwise enforcing any of its rights,
        powers
        or remedies hereunder.

      

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

      

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

      

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

      

      (l)           Successors
        and Assigns.  Subject to applicable securities laws, this Warrant
        and the rights and obligations evidenced hereby shall inure to the benefit
        of
        and be binding upon the successors of the Company and the successors and
        permitted assigns of Holder.  The provisions of this Warrant are
        intended to be for the benefit of all Holders from time to time of this Warrant
        and shall be enforceable by any such Holder or holder of Warrant
        Shares.

      

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

      

      (n)           Severability.  Wherever
        possible, each provision of this Warrant shall be interpreted in such manner
        as
        to be effective and valid under applicable law, but if any provision of this
        Warrant shall be prohibited by or invalid under applicable law, such provision
        shall be ineffective to the extent of such prohibition or invalidity, without
        invalidating the remainder of such provisions or the remaining provisions
        of
        this Warrant.

      

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

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

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

      

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

      

      

      Dated:  December
        _____, 2007

       

      CHEMBIO
        DIAGNOSTICS, INC.

      

      

      By:                                                                

      Name:                      Lawrence
        A. Siebert

      Title:                      President

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

       

      
        	
                Original
                  Date of Issuance:  ___________

              	
                Reissuance
                  Date:  December 19, 2007

              
	
                Warrant
                  No.:  ______________

              	
                Expires:  ________________

              

      

      

       

      NOTICE
        OF EXERCISE

       

      

      TO:           CHEMBIO
        DIAGNOSTICS, INC.

      

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

      

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

      

      [
        ] in
        lawful money of the United States; or

      

      [
        ] the
        cancellation of such number of Warrant Shares as is necessary, in accordance
        with the formula set forth in subsection 2(c), to exercise this Warrant with
        respect to the maximum number of Warrant Shares purchasable pursuant to the
        cashless exercise procedure set forth in subsection 2(c).

      

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

      

      _______________________________

      

      The
        Warrant Shares shall be delivered to the following:

      

      _______________________________

      _______________________________

      _______________________________

      

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

      

      [SIGNATURE
        OF HOLDER]

       

      Name
        of
        Investing
        Entity:  _______________________________________________________

       

      Signature
        of Authorized Signatory of Investing
        Entity:  _________________________________

       

      Name
        of
        Authorized
        Signatory:  ___________________________________________________

       

      Title
        of
        Authorized
        Signatory:_____________________________________________________

       

      Date:_________________________________________________________________________

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	
                Original
                  Date of Issuance:  ___________

              	
                Reissuance
                  Date:  December 19, 2007

              
	
                Warrant
                  No.:  _________________

              	
                Expires:  ___________________

              

      

      

      

      ASSIGNMENT
        FORM

      

      (To
        assign the foregoing warrant, execute this form and supply required
        information.

      Do
        not
        use this form to exercise the warrant.)

      

      

      

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

      

      

      _______________________________________________
        whose address is

      

      _______________________________________________________________.

      

      

      

      _______________________________________________________________

      

      Dated:  ______________,
        _______

      

      

      Holder’s
        Signature:                                           _____________________________

      

      Holder’s
        Address:                                           __________________________________________________________

      

      

      

      Signature
        Guaranteed:  ___________________________________________

      

      

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

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