Document:

EXHIBIT
4.1

     

    COMSTOCK
MINING INC.

    

    CERTIFICATE
OF DESIGNATION OF PREFERENCES,

    RIGHTS
AND LIMITATIONS

    OF

    7
1⁄2% SERIES A-1 CONVERTIBLE PREFERRED STOCK

    

    PURSUANT
TO SECTION 78.1955 OF THE

    NEVADA
REVISED STATUTES

     

    The
undersigned, Corrado De Gasperis, does hereby certify that:

    

    1.  He
is the President and Chief Executive Officer of Comstock Mining Inc., a Nevada
corporation (the “Corporation”).

    

    2.    The
Corporation is authorized to issue up to 50,000,000 shares of its preferred
stock, none of which have been issued.

    

    3.    The
following resolutions were duly adopted by the board of directors of the
Corporation (the “Board of
Directors”):

    

    WHEREAS,
the certificate of incorporation of the Corporation provides for a class of its
authorized stock known as the “Preferred Stock,”
consisting of up to 50,000,000 shares, $0.000666 par value per share, issuable
from time to time in one or more series;

    

    WHEREAS,
the Board of Directors 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 the 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, 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 up to
1,500,000 shares of the Preferred Stock which the Corporation has the authority
to issue, to be designated as “7 1⁄2% Series A-1 Convertible Preferred Stock,” 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 7 1⁄2% SERIES A-1 CONVERTIBLE PREFERRED STOCK

    

    Section
1.      Definitions. For the
purposes hereof, the following terms shall have the following
meanings:

    

    “Additional Dividend”
shall have the meaning set forth in Section
3(b).

    

    “Additional Shares of Common
Stock” shall have the meaning set forth in Section
7(b).

    
      
         

      

      
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    EXHIBIT
4.1

     

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 of the Securities Act.

    

     “Aggregate
Consideration” received by the Corporation with respect to any issuance
of Additional Shares of Common Stock shall: (a) to the extent it consists of
cash, be computed at the gross amount of cash received by the Corporation before
deduction of any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection with such issuance
and without deduction of any expenses payable by the Corporation, (b) to the
extent it consists of property other than cash, be computed at the fair value of
that property as determined in good faith by the Board of Directors, and (c)
with respect to Common Stock Equivalents, the purchase price or other
consideration received by the Corporation in connection with the issuance of
such Common Stock Equivalents, together with the amount of any exercise price or
other additional consideration payable to the Corporation in connection with the
exercise or conversion (as applicable) of such Common Stock
Equivalents.

    

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

    

    “Bankruptcy
Proceeding” means (i)(a) a voluntary case, action, proceeding or petition
or (b) the consent to the institution of, or failure to contest in a timely and
appropriate manner, any involuntary case, action, proceeding or petition seeking
the liquidation, reorganization or other relief in respect of the
Corporation, or of a substantial part of its assets, under any Federal or state
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the application or consent to the appointment of a receiver, interim
receiver, receiver manager, trustee, custodian, sequestrator, conservator or
similar official for the Corporation or for a substantial part of its assets
and, in any such case, such case, action, proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered.

    

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

    

    “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (a) an
acquisition after the date hereof by any Person 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 a majority of the voting securities of the Corporation
(other than by means of conversion or exercise of Series A-1 Preferred Stock and
the Parity Securities or upon conversion of any currently outstanding
convertible securities in accordance with the terms thereof as in effect on the
date hereof), (b) 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 as
of immediately prior to such transaction do not own a majority of the aggregate
voting power of the Corporation or the successor entity of such transaction, (c)
the Corporation sells or transfers all or substantially all of its assets to
another Person and the stockholders of the Corporation as of immediately prior
to such transaction do not own a majority of the
aggregate voting power of the acquiring entity immediately after the
transaction, (d)
the Corporation, directly or indirectly, transfers a majority of the asset value
and/or enterprise value of the Corporation (whichever is lower) to another
Person and the stockholders of the Corporation as of immediately prior to such
transaction do not own a majority of the
aggregate voting power of the acquiring entity immediately after the
transaction, or (e) a replacement at one time or within a one year period of
more than one-half of the members of the Board of Directors which is not
approved by the Winfield Group or a majority of those individuals who are
members of the Board of Directors on the Closing Date (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 the Winfield Group or a
majority of the members of the Board of Directors who are members on the Closing
Date), in each case that has been approved by the stockholders of the
Corporation as required under: (i) the Nevada corporate law, (ii) the
Corporation’s certificate of incorporation, (iii) this Certificate of
Designation or (iv) any other agreement to which the Corporation is a party, as
applicable.  Notwithstanding the foregoing, none of the following
shall constitute a Change of Control Transaction: (a) any pledge, mortgage,
grant of security interest, sale-leaseback or similar transaction (excluding any
foreclosure sale), (b) any transaction or series of transactions principally for
bona fide equity financing purposes in which cash is received by the Corporation
or any successor to the Corporation and no acquiring Person or group acquires
20% or more of the outstanding voting securities of the Corporation in such
transaction or transactions, or (c) any transaction or series of transactions
principally for the bona fide acquisition of another Person after which no
Person or group acquires 20% or more of the outstanding voting securities of the
Corporation.

    
      
         

      

      
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    EXHIBIT
4.1

     

    “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section 2.1 of the
Purchase Agreement.

    

    “Closing Date” means
the date on which the Closing occurs pursuant to Section 2.1 of the Purchase
Agreement.

    

    “Common Stock” means
the Corporation’s common stock, par value $0.000666 per share, and stock of any
other class of securities into which such common stock may hereafter be
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 exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

    

    “Confidential
Information” means any non-public information regarding the Corporation
or the Subsidiaries (whether in oral or written form), including, but not
limited to, business plans and business prospects, financial information, sales,
sales categories, operating methods, inventory, gross margin, profit, expense or
other data, reports, surveys or similar information.

    

    “Conversion Date”
means an Elective Conversion Date.

    

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

    

    “Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of the
shares of Series A-1 Preferred Stock in accordance with the terms
hereof.

    

    “Conversion Shares
Registration Statement” means a registration statement that registers the
resale of all Conversion Shares, so long as such Conversion Shares are
Registrable Securities (as such term is defined in the Registration Rights
Agreement) of the Holders, who shall be named as “selling stockholders”
therein,and meets the requirements of the Registration Rights
Agreement.

    

    “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).

    
      
         

      

      
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    EXHIBIT
4.1

     

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

    

    “Effective Date” has
the meaning set forth in the Purchase Agreement.

    

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

    

    “Equity Conditions”
means, as of the date in question: (a) the Corporation shall have duly honored
all conversions of Series A-1 Preferred Stock occurring pursuant to one or more
Notices of Elective Conversion provided by the applicable Holder to the
Corporation, if any; (b) the Corporation shall have paid all amounts owing to
the applicable Holder under this Certificate of Designation in respect of its
Series A-1 Preferred Stock, if any; (c) the Common Stock is 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); (d) there is a sufficient number of authorized, but unissued and
otherwise unreserved, shares of Common Stock for the issuance of all of the
Conversion Shares; (e) there has been no public announcement of a pending or
proposed Fundamental Transaction or Change of Control Transaction that has not
been consummated; (f) the applicable Holder is not in possession of any
information provided by the Corporation that constitutes, or may constitute,
material non-public information; and (g) a Bankruptcy Proceeding shall not
be pending against the Corporation.

    

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

    

    “Exempt Issuance”
shall have the meaning set forth in the Purchase Agreement.

    

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

    

    “GAAP” means United
States generally accepted accounting principles.

    

    “Holder” shall have
the meaning given such term in Section 3(a).

    

    “Indebtedness” means
(a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Corporation’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (c) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.

    

    “Junior Securities”
means the Common Stock and all other Common Stock Equivalents of the Corporation
other than those securities that are explicitly senior or pari passu to the Series A-1
Preferred Stock in dividend rights or liquidation preference.

    

    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

    

    “Liquidation” shall
have the meaning set forth in Section
5.

    

    “New York Courts”
shall have the meaning set forth in Section 11(d).

    

    “Notice of COC” shall have the
meaning set forth in Section
5.

    
      
         

      

      
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    EXHIBIT
4.1

     

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

    

    “Originally Issued”
means that number of shares of the Series A-1 Preferred Stock issued on the date
of the first issuance of such shares, regardless of the number of transfers of
any particular shares of Series A-1 Preferred Stock thereafter and regardless of
the number of certificates which may be issued to evidence such Series A-1
Preferred Stock.

    

    “Parity Securities”
means the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and all
other capital stock of the Corporation, whether now or hereafter authorized,
that is explicitly stated to be pari passu with the Series
A-1 Preferred Stock and the Series A-2 Preferred Stock in dividend rights or
liquidation preference.

    

    “Participation
Maximum” shall have the meaning set forth in Section
9(a).

    

    “Permitted
Indebtedness” means, with respect to the Corporation, any: (a) indebtedness and
other obligations arising in the ordinary course of operations or business such
as those in respect of business expense reimbursements, workers’ compensation
claims, bid or performance bonds, reclamation or appeal bonds, surety bonds or
letters of credit, leases or deferred purchase price of equipment, trade credit,
endorsement of checks, and completion guarantees, (b) indebtedness under a
revolving credit facility from banks or similar financial institutions in a
principal amount of up to $5,000,000, (c) indebtedness incurred to finance the
acquisition, construction or improvement of any newly acquired business,
property or asset so long as recourse with respect to such indebtedness is
limited solely to such newly acquired business, property or asset; and (d)
indebtedness existing as of immediately after the Closing that is set forth on
the Disclosure Schedule to the Purchase Agreement.

    

    “Permitted Lien” means
Liens incurred in connection with Permitted Indebtedness.

    

    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

    

    “Pre-Notice” shall
have the meaning set forth in Section
9(b).

    

    “Pro Rata Portion”
shall have the meaning set forth in Section
9(e).

    

    “Purchase Agreement”
means Securities Purchase Agreement, dated on or about the Closing Date, among
the Corporation and the original Holders, 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, among the Corporation and the original Holders, in
the form of Exhibit
B attached to the Purchase Agreement, as amended, modified or
supplemented from time to time in accordance with its terms.

    

    “Securities” has the
meaning set forth in the Purchase Agreement.

    

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

    

    “Series A-1 Preferred
Stock” shall have the meaning set forth in Section
2.

    
      
         

      

      
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    EXHIBIT
4.1

     

    “Series A-2 Preferred
Stock” means the Series A-2 Convertible Preferred Stock of the
Corporation, with the rights, preferences and privileges set forth in the
Certificate of Designation of Preferences, Rights and Limitations of 7 1⁄2% Series
A-2 Convertible Preferred Stock, filed contemporaneously herewith in the Office
of the Secretary of State of the State of Nevada.

    

    “Stated Value” shall
have the meaning set forth in Section 2.

    

    “Subsequent Financing”
shall have the meaning set forth in Section
9(a).

    

    “Subsequent Financing
Notice” shall have the meaning set forth in Section
9(b).

    

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

    

    “Successor Entity”
shall have the meaning set forth in Section 7(d).

    

    “Trading Day” means a
day on which the principal Trading Market is open for business.

    

    “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the American Stock Exchange, the
Toronto Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin
Board (or any successors to any of the foregoing).

    

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

    

     “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 L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin
Board is not a Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin Board,
(c) if the Common Stock is not then listed or quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink OTC Markets, Inc. (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 (d) 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 Holders of a majority in interest of the
Securities then outstanding and reasonably acceptable to the Corporation, the
fees and expenses of which shall be paid by the Corporation.

    

    “Winfield Group” means
John V. Winfield, his heirs, personal representatives and family trusts created
and controlled by Mr. Winfield, any individual retirement accounts held by Mr.
Winfield, Santa Fe Financial Corporation, Portsmouth Square, Inc., and
InterGroup Corporation, and any Affiliates of Mr. Winfield; provided, that the Winfield
Group shall also include all transferees and assigns of the Winfield Group at
any time that a default has occurred under Section 4.2 of the
Purchase Agreement and such default has not been cured pursuant to Section 5.13(b) of
the Purchase Agreement.

    

    Section
2.      Designation, Amount and Par
Value. The series of Preferred Stock designated by this Certificate of
Designation shall be the Corporation’s 7 1⁄2% Series A-1 Convertible Preferred
Stock (the “Series A-1
Preferred Stock”) and the authorized number of shares so designated shall
be up to 1,500,000. Each share of Series A-1 Preferred Stock shall have a par
value of $0.000666 per share and a stated value equal to $1,000 (the “Stated
Value”).

    
      
         

      

      
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    EXHIBIT
4.1

     

    Section
3.      Dividends.

    

    a)           Dividends in Cash or in
Kind. Subject to Section 3(f) below,
Holders of Series A-1 Preferred Stock (each, a “Holder” and
collectively, the “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 7 1⁄2% per
annum, payable semiannually on January 1 and July 1, commencing on January 1,
2011 and on each Conversion Date (with respect only to Series A-1 Preferred
Stock being converted) (each such date, a “Dividend Payment
Date”) (if any Dividend Payment Date is not a Trading Day, the applicable
payment shall be due on the next succeeding Trading Day), as set forth
below in this Section
3(a).  The form of dividend payments to each Holder shall be,
at the election of the Corporation: (i) if funds are legally available for the
payment of dividends, in cash, (ii) subject to the satisfaction of the Equity
Conditions, in shares of Common Stock, which shall be valued solely for such
purpose at the average of the VWAPs for the 5 consecutive Trading Days ending on
the Trading Day that is immediately prior to the applicable Dividend Payment
Date, (iii) subject to the satisfaction of the Equity Conditions, in additional
shares (including, without limitation, fractional shares) of Series A-1
Preferred Stock, in an amount equal to the dollar amount of such dividend
payment divided by the Stated Value per share, or (iv) subject to the
satisfaction of the Equity Conditions, in any combination of the property
described in the foregoing clauses (i), (ii), and (iii).  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 upon conversion of Series
A-1 Preferred Stock pursuant to Section
6.

    

               b)           Dividends Upon an Automatic
Conversion of Series A-2 Preferred Stock.    In the
event of the automatic conversion of Series A-2 Preferred Stock into shares of
Common Stock pursuant to Section 6(c) of the Series A-2 Certificate of
Designation (as defined in the Purchase Agreement), in each case prior to August
31, 2013, the Corporation shall also pay to the Holders of Series A-1 Preferred
Stock an additional dividend, for each share of Series A-1 Preferred Stock,
equal to: (i) the net present value as of the VWAP Automatic Conversion Date (as
defined in the Series A-2 Certificate of Designation) of such Series A-2
Preferred Stock of a payment equal to 22 1⁄2% of the Stated Value of one (1) share
of Series A-1 Preferred Stock occurring on August 31, 2013 (calculated assuming
a discount rate of 7 1⁄2%) minus (ii) the aggregate
amount of any semi-annual dividends paid on one (1) share of Series A-1
Preferred Stock before the VWAP Automatic Conversion Date (the “Additional
Dividend”); provided,
however, that in the event the Holders of Series A-1 Preferred Stock
receive an Additional Dividend payment, then dividends to be paid pursuant to
Section 3(a) hereof shall not resume to be paid until January 1st  of
the calendar year next following the Additional Dividend payment.

    

    c)           Corporation’s Payment of
Dividends in Cash or in Additional Shares of Stock.  The
Corporation shall promptly notify the Holders at any time the Corporation shall
become unable to legally pay semi-annual dividends in cash.  The
Corporation shall provide the Holders with at least 20 Trading Days’ notice of
its election to pay a semi-annual dividend in shares of Common Stock or
additional shares of Series A-1 Preferred Stock (the Corporation may indicate,
in any such notice, that the election contained in such notice shall continue
for later periods until revised by a subsequent notice).

    

    d)           Dividend
Calculations.  Dividends on the Series A-1 Preferred Stock
shall be calculated on the basis of a 360-day year, consisting of twelve 30
calendar day periods, and shall accrue daily commencing on the Closing 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.  Payment of dividends
in shares of Common Stock or additional shares of Series A-1 Preferred Stock (as
applicable) shall be made in a manner consistent with Section 6(d)(i)
herein and, solely for purposes of the payment of dividends in shares, the
Dividend Payment Date shall be deemed to be the Conversion
Date.  Dividends shall cease to accrue with respect to any Series A-1
Preferred Stock when converted.  Except as otherwise provided herein,
if at any time the Corporation pays dividends partially in cash and partially in
shares of Common Stock and/or Series A-1 Preferred Stock, then such payment
shall be distributed ratably among the Holders based upon the number of shares
of Series A-1 Preferred Stock held by each Holder on such Dividend Payment
Date.

    
      
         

      

      
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    EXHIBIT
4.1

     

    e)           Other Securities. So
long as any Series A-1 Preferred Stock shall remain outstanding: (i) neither the
Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities; and (ii) the Corporation
and any Subsidiaries thereof shall only redeem, repurchase or otherwise acquire,
directly or indirectly, any Parity Securities ratably with the Series A-1
Preferred Stock on a pari
passu basis.  So long as any Series A-1 Preferred Stock shall
remain outstanding: (i) neither the Corporation nor any Subsidiary thereof shall
directly or indirectly pay or declare any dividend or make any distribution upon
any Junior Securities (other than a dividend or distribution solely in
additional shares of Junior Securities), in each case as long as any dividends
due on the Series A-1 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; and (ii) the Corporation and any
Subsidiaries thereof shall only, directly or indirectly, pay or declare any
dividend or make any distribution upon any Parity Securities, or set aside or
apply any monies for the purchase or redemption (through a sinking fund or
otherwise) of any Parity Securities, if it simultaneously, on a pari passu basis and ratably
among the holders of the Series A-1 Preferred Stock and the holders of all
Parity Securities, pays or declares a dividend or distribution, or sets aside or
applies monies for the purchase or redemption (through a sinking fund or
otherwise), of the Series A-1 Preferred Stock.

    

    f)           Payment of Dividends in
Kind.  During the period commencing on the Closing Date and
ending on the eighteen (18) month anniversary of the Closing Date, in the event
on any Dividend Payment Date the Registration Statement (as defined in the
Registration Rights Agreement) has not been declared effective in accordance
with Section 2(b) of the Registration Rights Agreement, any dividend payable in
Common Stock or Series A-1 Preferred Stock shall accrue and be payable to the
Holders of the Series A-1 Preferred Stock within five (5) business days
following the date that such Registration Statement is declared
effective.  In the event on any Dividend Payment Date following the
eighteen (18) month anniversary of the Closing Date, the Registration Statement
has not been declared effective or the Corporation has failed to maintain its
effectiveness during the Effectiveness Period (as defined in the Registration
Rights Agreement), all dividends payable to the Holders of the Series A-1
Preferred Stock shall be payable, if funds are legally available for payment, in
cash only. If such funds are not legally available for payment, any dividend
payable shall accrue and be immediately payable to the Holders of the Series A-1
Preferred Stock in cash, when such funds become legally available, or, at the
option of the Corporation, subject to the effectiveness on such date of the
Registration Statement, as otherwise provided for herein; provided however, that
if such funds are not legally available and the Registration Statement is not
effective, the Holders of the Series A-1 Preferred Stock can waive the
requirement that the Registration Statement be effective and elect to received
dividend payments as otherwise provided for herein.

    
      
         

      

      
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    EXHIBIT
4.1

     

    Section
4.     Voting
Rights.

    

    a)           Except
as otherwise provided herein or as otherwise required by law, each Holder of
Series A-1 Preferred Stock shall: (i) be entitled to notice of any annual or
special meeting of the stockholders of the Corporation, at the same time and in
the same manner as of the holders of Common Stock in accordance with the by-laws
of the Corporation; and (ii) vote together with the Common Stock at any annual
or special meeting of the stockholders of the Corporation, or in any action by
written consent of stockholders of the Corporation in lieu of meeting, on an
as-converted to Common Stock basis, with each share of Series A-1 Preferred
Stock entitling its Holder to the number of votes equal to five (5) times the
number of shares of Common Stock into which such share of Series A-1 Preferred
Stock could be converted under this Certificate of Designation as of the close
of business on the record date fixed for such meeting or the effective date of
such written consent; provided, however, that any
share of Series A-1 Preferred Stock held by any Person other than a member of
the Winfield Group shall instead only entitle its holder to the number of votes
equal to the number of shares of Common Stock into which such share of Series
A-1 Preferred Stock could be converted under this Certificate of Designation as
of the close of business on the record date fixed for such meeting or the
effective date of such written consent.

    

    b)           Each
share of Series A-1 Preferred Stock shall entitle its holder to one (1) vote in
any matter submitted to vote of the holders of Preferred Stock, voting as a
separate class (as opposed to voting with the holders of Common Stock as
provided in Section
4(a)).

    

    Section
5.      Liquidation and Change of
Control Transactions.  Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”) or a
Change of Control Transaction, the Holders shall be entitled to receive out of
the assets, whether capital or surplus, of the Corporation in the case of a
Liquidation, or out of the aggregate consideration received by the Corporation
and its stockholders  in the case of a  Change of Control
Transaction, an amount equal to (i) the Stated Value, plus any accrued and
unpaid dividends on the Series A-1 Preferred Stock, together with any other fees
then due and owing thereon under this Certificate of Designation, for each share
of Series A-1 Preferred Stock, on a pari passu basis with any
distribution or payment upon a Liquidation or Change of Control Transaction to
the holders of Parity Securities and before any distribution or payment shall be
made to the holders of any Junior Securities, plus (ii) the amount
the Holders would have been entitled to receive as holders of the number of
shares of Common Stock for which the shares of Series A-1 Preferred Stock are
convertible immediately prior to such Liquidation or Change of Control
Transaction, on a pari
passu basis with any distribution or payment upon a Liquidation or Change
of Control Transaction to the holders of Parity Securities and Junior Securities
combined. If the assets of the Corporation or aggregate consideration received
shall be insufficient to pay in full the respective preference amounts to the
Holders of Series A-1 Preferred Stock and the holders of any Parity Securities
described in this Section 5, then the
entire assets of the Corporation or aggregate consideration shall be ratably
distributed among the Holders of Series A-1 Preferred Stock and the holders of
any Parity Securities, in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full.  The Corporation shall mail written notice of any Liquidation,
not less than 45 days prior to the payment date stated therein, to each Holder.
The Corporation shall provide each Holder with reasonable advance notice (a
“Notice of
COC”) of the occurrence of a Change of Control Transaction or potential
Change of Control Transaction, which shall specify, for each Holder, the number
of shares of Series A-1 Preferred Stock owned on the date of such Notice of COC,
the number of shares of Common Stock issuable upon conversion of such Series A-1
Preferred Stock and the date, if known, on which such Change of Control
Transaction is to be effected, which date may not be prior to the date the
Corporation delivers such Notice of COC to the Holders.  The
calculations and entries set forth in the Notice of COC shall control in the
absence of manifest or mathematical error.  Each Holder shall deliver
the certificate(s) representing the shares of Series A-1 Preferred Stock as
instructed in the Notice of COC.

    
 

    
      
         

      

      
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    EXHIBIT
4.1

     

    Section
6.     Conversion.

    

    a)           Conversions at Option of
Holder.  Each share of Series A-1 Preferred Stock shall be
convertible, at any time and from time to time from and after the Closing Date
at the option of the Holder thereof, into that number of shares of Common Stock
determined by dividing the Stated Value of such share of Series A-1 Preferred
Stock by the Conversion Price then in effect.  Holders shall
effect voluntary conversions pursuant to this Section 6(a) by
providing the Corporation with the form of conversion notice attached hereto as
Annex A (a
“Notice of
Elective
Conversion”).  Each
Notice of Elective Conversion shall specify the number of shares of Series A-1
Preferred Stock to be converted, the number of shares of Series A-1 Preferred
Stock owned prior to the conversion at issue, the number of shares of Series A-1
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 applicable Holder delivers such Notice of Conversion to the Corporation
(such date, the “Elective Conversion
Date”).  If no Elective Conversion Date is specified in a
Notice of Elective Conversion, the
Elective Conversion
Date shall be the date that such Notice of Elective Conversion is delivered
hereunder.  The calculations and entries set forth in the Notice of
Elective Conversion
shall control in the absence of manifest or mathematical error.  To
effect elective conversions of shares of Series A-1 Preferred Stock pursuant to
this Section
6(a), a Holder shall not be required to surrender the certificate(s)
representing the shares of Series A-1 Preferred Stock to the Corporation unless
all of the shares of Series A-1 Preferred Stock represented thereby are so
converted, in which case such Holder shall deliver the certificate representing
such shares of Series A-1 Preferred Stock promptly following the Elective
Conversion Date at issue.  Any certificate representing shares of
Series A-1 Preferred Stock that have been converted in whole or part by such
Holder shall be void and should be destroyed upon receipt of replacement
certificate(s) from the Corporation.  Shares of Series A-1 Preferred
Stock converted into Common Stock pursuant to this Section 6(a) shall be
canceled and shall not be reissued.

    

    b)           [RESERVED]

    

    c)           Conversion
Price.  The conversion price for the Series A-1 Preferred Stock
shall initially equal $0.6510, subject to adjustment
herein (the “Conversion
Price”).

    

    d)           Mechanics of
Conversion

    

    i.           Delivery of Certificate Upon
Conversion. Not later than three (3) Trading Days after each Conversion
Date, the Corporation shall deliver, or cause to be delivered, to the converting
Holder (A) a certificate or certificates representing the Conversion Shares
which, on or after the earlier of: (1) the one (1) year anniversary of the
Closing Date; or (2) the Effective Date, shall be free of restrictive legends
and trading restrictions (other than those which may then be required by the
Purchase Agreement) representing the number of Conversion Shares being acquired
upon the conversion of the Series A-1 Preferred Stock, and/or (B) a bank check
in the amount of accrued and unpaid dividends (to the extent that the
Corporation has elected to pay accrued dividends in cash).  On or
after the earlier of: (1) the one (1) year anniversary of the Closing Date or
(2) the Effective Date, the Corporation shall use commercially reasonable
efforts to deliver any certificate or certificates required to be delivered by
the Corporation under this Section 6
electronically through the Depository Trust Company or another established
clearing corporation performing similar functions.

    

    ii.           Obligation
Absolute.  The Corporation’s obligation to issue and deliver
the Conversion Shares upon conversion of Series A-1 Preferred Stock in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by a Holder to enforce the same, any waiver or consent
with respect to any other 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 such
Holder or any other Person of any obligation to the Corporation or any violation
or alleged violation of law by such Holder or any other Person, and irrespective
of any other circumstance which might otherwise limit such obligation of the
Corporation to such Holder in connection with the issuance of such Conversion
Shares; provided,
however, that such delivery shall not operate as a waiver by the
Corporation of any such action that the Corporation may have against such Holder
or such other Person.  In the event a Holder shall elect to convert
any or all of its Series A-1 Preferred Stock, the Corporation may not refuse
conversion based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder,
restraining and/or enjoining conversion of all or part of the Series A-1
Preferred Stock of such Holder shall have been sought and
obtained.  In the absence of such injunction, the Corporation shall
issue Conversion Shares and, if applicable, cash, upon a properly noticed
conversion.  Nothing herein shall limit a Holder’s right to pursue
actual damages or all other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief.  The exercise of any such rights shall not prohibit
a Holder from seeking to enforce damages pursuant to any other Section hereof or
under applicable law.

    
      
         

      

      
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    EXHIBIT
4.1

     

    iii.           Liquidated
Damages.  If the Corporation fails to deliver to a Holder such
certificate or certificates representing Conversion Shares within five (5)
Trading Days after the Elective Conversion Date provided in a Notice of Elective
Conversion pursuant to Section 6(a), the Corporation shall pay to such Holder,
in cash, as liquidated damages and not as a penalty, for each share of Series
A-1 Preferred Stock elected to be converted, $50 per Trading Day for each
Trading Day after such fifth (5th) Trading Day after the Elective Conversion
Date until such certificates are delivered or such Holder is reimbursed in
accordance with Section 6(d)(iv).
Nothing herein shall limit a Holder’s right to pursue actual damages for the
Corporation’s failure to deliver Conversion Shares 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.  The exercise of any such rights shall not prohibit
a Holder from seeking to enforce damages pursuant to any other Section hereof or
under applicable law.

    

    iv.           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. If the
Corporation fails to deliver to a Holder the applicable certificate or
certificates within five (5) Trading Days after the Elective Conversion Date,
and if after such date such Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holder’s brokerage firm
purchases, shares of Common Stock to deliver in satisfaction of a sale by such
Holder of the Conversion Shares which such Holder was entitled to receive upon
the conversion relating to such Notice of Elective Conversion (a “Buy-In”), then the
Corporation shall (A) pay in cash to such Holder (in addition to any other
remedies available to or elected by such Holder) the amount by which (x) such
Holder’s total purchase price (including any brokerage commissions) for the
shares of 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 actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any
brokerage commissions) and (B) at the option of such Holder, either reissue (if
surrendered) the shares of Series A-1 Preferred Stock equal to the number of
shares of Series A-1 Preferred Stock submitted for conversion or deliver to such
Holder the number of shares of Common Stock that would have been issued if the
Corporation had timely complied with the Notice of Elective Conversion. For
example, if a Holder purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted conversion of
shares of Series A-1 Preferred Stock with respect to which the actual sale price
(including any brokerage commissions) giving rise to such purchase obligation
was a total of $10,000 under clause (A) of the immediately preceding sentence,
the Corporation shall be required to pay such Holder $1,000. The Holder shall
provide the Corporation written notice indicating the amounts payable to such
Holder in respect of the Buy-In and, upon request of the Corporation, evidence
of the amount of such loss. 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 Series A-1 Preferred Stock as required pursuant to the terms
hereof.

    
      
         

      

      
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    EXHIBIT
4.1

     

    v.           Reservation of Shares
Issuable Upon Conversion.  The Corporation covenants that it
will, at all times while any Series A-1 Preferred Stock: (A) remains outstanding
or (B) is reserved for issuance or otherwise issuable under any promissory note
or agreement to which the Corporation is a party, reserve and keep available out
of its authorized and unissued shares of Common Stock, for the sole purpose of
issuance upon conversion of such Series A-1 Preferred Stock, free from
preemptive rights or any other purchase rights of Persons other than the Holder
(and the other holders of the Series A-1 Preferred Stock), not less than 130% of
the aggregate number of shares of the Common Stock as shall be issuable (taking
into account the adjustments and restrictions of Section 7) upon: (A)
the conversion of such Series A-1 Preferred Stock; and (B) payment of dividends
on such Series A-1 Preferred Stock in shares of Common Stock
hereunder.  The Corporation covenants that it will, at all times while
any Series A-1 Preferred Stock: (A) remains outstanding or (B) is reserved for
issuance or otherwise issuable under any promissory note or agreement to which
the Corporation is a party, reserve and keep available out of its authorized and
unissued shares of Preferred Stock, for the sole purpose of issuance upon
payment of dividends on such Series A-1 Preferred Stock in additional shares of
Series A-1 Preferred Stock as herein provided, free from preemptive rights or
any other purchase rights of Persons other than the Holder (and the other
holders of the Series A-1 Preferred Stock), not less than 130% of the aggregate
number of shares of the Series A-1 Preferred Stock as shall (subject to the
terms and conditions set forth in the Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Section 7) upon the
payment of dividends on such Series A-1 Preferred Stock in additional shares of
Series A-1 Preferred Stock hereunder.  The Corporation covenants that
all shares of Common Stock and Series A-1 Preferred Stock that shall be so
issuable shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable and, if the Conversion Shares Registration Statement is then
effective under the Securities Act, shall be, with respect to such Common Stock
and the Common Stock issuable upon conversion of such Series A-1 Preferred
Stock, registered for public resale in accordance with such Conversion Shares
Registration Statement (subject to such Holder’s compliance with its obligations
under the Registration Rights Agreement).

    

    vi.           Fractional
Shares.  No fractional shares or scrip representing fractional
shares of Common Stock shall be issued upon the conversion of the Series A-1
Preferred Stock.   As to any fraction of a share of Common Stock,
which the Holder would otherwise be entitled to receive upon such conversion,
the Corporation shall at its election, either pay a cash adjustment in respect
of such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.  The Corporation
may issue fractional shares of Series A-1 Preferred Stock.

    

    vii.           
Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock upon conversion of the Series A-1 Preferred Stock shall be made without
charge to any Holder for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificates, 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 Holders of such shares of Series A-1
Preferred Stock 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.

    
      
         

      

      
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    EXHIBIT
4.1

     

    Section
7.    Certain
Adjustments.

    

    a)           Stock Dividends and Stock
Splits.  If the Corporation, at any time while any Series A-1
Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of
Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Corporation upon
conversion of, or payment of a dividend on, the Series A-1 Preferred Stock),
(ii) subdivides outstanding shares of Common Stock into a larger number of
shares, (iii) combines (including by way of a reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (iv) issues, in the
event of a 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 any treasury shares of the Corporation) outstanding immediately
before such event, and of which the denominator shall be the number of shares of
Common Stock outstanding immediately 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, at any time while any Series A-1 Preferred Stock is
outstanding, the Corporation or any Subsidiary, as applicable, sells or grants
any option to purchase or sells or grants any right to reprice, or otherwise
disposes of or issues (or announces any sale, grant or any option to purchase or
reprice or other disposition), any Common Stock or Common Stock Equivalents
(“Additional Shares of
Common Stock”) at an effective price per share of Common Stock that is
lower than the lower of: (i) 93% of the average of the VWAPs for the 10
consecutive Trading Days ending on the Trading Day that is immediately prior to
the date of issuance of the Additional Shares of Common Stock; or (ii) the then
effective Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”)
(if the holder of the Additional Shares of Common Stock 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 are issued in connection with
such issuance, be entitled to receive shares of Common Stock or Common Stock
Equivalents at an effective price per share that is lower than the Conversion
Price, such issuance shall be deemed to have occurred for less than the
Conversion Price on the date of the Dilutive Issuance), then the Conversion
Price shall be reduced to equal the price determined by multiplying the
Conversion Price in effect immediately prior to such issuance by a
fraction:

    

     i.           the
numerator of which shall be: (A) the number of shares of Common Stock issuable
upon the conversion of the Series A-1 Preferred Stock immediately prior to such
Dilutive Issuance, plus
(B) the number of shares of Common Stock or Common Stock Equivalents which the
Aggregate Consideration received or deemed to be received by the Corporation for
the total number of Additional Shares of Common Stock so issued would purchase
at such then-existing Base Conversion Price; and

    

     ii.           the
denominator of which shall be the number of shares of Common Stock issuable upon
the conversion of the Series A-1 Preferred Stock immediately prior to such
Dilutive Issuance plus
the total number of Additional Shares of Common Stock actually so
issued.

    

    Such
adjustment shall be made upon any issuance of Additional Shares of Common Stock;
provided, however, that
no adjustment will be made under this Section 7(b) in
respect of an Exempt Issuance.  The Corporation shall notify the
Holders in writing, no later than the Trading Day following the issuance of any
Additional Shares of Common Stock subject to this Section 7(b),
indicating therein the applicable issuance price, or 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, the Holders are entitled to receive a
number of Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether a Holder accurately refers
to the Base Conversion Price in the Notice of Conversion.

    
      
         

      

      
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    EXHIBIT
4.1

     

    c)           Pro Rata
Distributions.  If the Corporation, at any time while any
Series A-1 Preferred Stock is outstanding, distributes to all holders of Common
Stock (and not to the Holders) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for or
purchase any security (other than the Common Stock, which shall be subject to
Section 7(b)),
then in each such case the Conversion Price shall be adjusted 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 or rights or warrants so distributed
applicable to one outstanding share of Common Stock as determined by the Board
of Directors of the Corporation in good faith.  In either case the
adjustments shall be described in a statement delivered to the Holders
describing 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 any Series A-1 Preferred
Stock is outstanding, (i) the Corporation, directly or indirectly, in one or
more related transactions effects any merger or consolidation of the Corporation
with or into another Person, (ii) the Corporation, directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a series of
related transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Corporation or another Person) is
completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has
been accepted by the holders of 50% or more of the outstanding Common Stock,
(iv) the Corporation, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization 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, (v) the Corporation, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including
any shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business combination), in each
case other than a Change of Control Transaction (each, a “Fundamental
Transaction”), then, upon any subsequent conversion of Series A-1
Preferred Stock, the Holder shall have the right to receive, for each Conversion
Share that would have been issuable upon such conversion immediately prior to
the occurrence of such Fundamental Transaction, the number of shares of Common
Stock of the successor or acquiring corporation or of the Corporation, if it is
the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by
a holder of the number of shares of Common Stock for which Series A-1 Preferred
Stock is convertible immediately prior to such Fundamental
Transaction.  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
Series A-1 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 Designation with the same terms and conditions as those
hereof, and issue
to the Holders new Series A-1 Preferred Stock consistent with the foregoing
provisions and evidencing the Holders’ right to convert such Series A-1
Preferred Stock into Alternate Consideration.  The Corporation shall
cause any successor entity in a Fundamental Transaction in which the Corporation
is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Corporation under this
Certificate of Designation and the other Transaction Documents in accordance
with the provisions of this Section 7(d), pursuant to
written agreements in form and substance reasonably satisfactory to the Holders
of a majority (with such majority to include the Winfield Group as long as the
Winfield Group continues to hold Series A-1 Preferred Stock) of the then
outstanding shares of Series A-1 Preferred Stock issued pursuant to the Purchase
Agreement and approved by such Holders (without unreasonable
delay) prior to such Fundamental Transaction, and shall deliver to each Holder
in exchange for its Series A-1 Preferred Stock a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to the Series A-1 Preferred Stock which is convertible for a
corresponding number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of the Series A-1 Preferred Stock prior to such
Fundamental Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such conversion price being for the
purpose of protecting the economic value of the Series A-1 Preferred Stock
immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holders of a
majority (with such majority to include the Winfield Group as long as the
Winfield Group continues to hold Series A-1 Preferred Stock) of the then
outstanding shares of Series A-1 Preferred Stock issued pursuant to the Purchase
Agreement.  Upon the occurrence of any such Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this
Certificate of Designation and the other Transaction Documents referring to the
“Corporation” shall refer instead to the Successor Entity), and may exercise
every right and power of the Corporation and shall assume all of the obligations
of the Corporation under this Certificate of Designation and the other
Transaction Documents with the same effect as if such Successor Entity had been
named as the Corporation herein.

    
      
         

      

      
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    EXHIBIT
4.1

     

    e)           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.  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 any treasury
shares of the Corporation) issued and outstanding.

    

    f)           Notice to the
Holders.

    

    i.           Adjustment to Conversion
Price.  Whenever the Conversion Price is adjusted pursuant to
any provision of this Section 7, the
Corporation shall promptly deliver 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.

    
      
         

      

      
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    EXHIBIT
4.1

     

    ii.           Notice to Allow Conversion
by Holder.  If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) 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 of 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, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (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 Series A-1 Preferred Stock, and shall cause to
be delivered to each Holder at its last address as it shall appear upon the
stock books of the Corporation, at least twenty (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
deliver such notice or any defect therein or in the delivery thereof shall not
affect the validity of the corporate action required to be specified in such
notice.  To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Corporation or any
of the Subsidiaries, the Corporation shall, as required by applicable federal
securities law, file such notice with the Commission pursuant to a Current
Report on Form 8-K.  The Holder shall remain entitled to convert the
Series A-1 Preferred Stock during the 20-day period commencing on the date of
such notice through the effective date of the event triggering such notice,
except as may otherwise be expressly set forth herein.

    

    Section
8.   Negative Covenants.

    

    a)  As
long as at least 25% of the Parity Securities that were Originally Issued are
still outstanding, the Corporation shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly, without the affirmative vote of the
holders of a majority of the then outstanding Parity Securities (which shall, as
long as the Winfield Group still holds at least 25% of the Parity Securities
that were Originally Issued, include the Winfield Group):

    

    i)           other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
suffer to exist any Indebtedness for borrowed money;

    

    ii)           other
than Permitted Liens, grant, assume or allow to exist any 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;

    

    iii)           repay,
repurchase or offer to repay, repurchase or otherwise acquire Common Stock
constituting more than 5% of the outstanding shares of Common Stock (measured as
of immediately after the Closing), other than as to (i) the Conversion Shares as
permitted or required under this Certificate of Designation or any other
Transaction Documents and (ii) repurchases of Common Stock or Common Stock
Equivalents of departing officers and directors of the Corporation, provided
that such repurchases shall not exceed an aggregate of $100,000 for all officers
and directors for so long as the Parity Securities are outstanding;

    

    iv)           enter
into any transaction with any Affiliate of the Corporation which would be
required to be disclosed in any public filing with the Commission, unless such
transaction is made on an arm’s-length basis and expressly approved by a majority
of the disinterested directors of the Corporation (even if less than a quorum
otherwise required for board approval);

    

    v)           enter
into any transaction with any Affiliate of an Officer or Director of the
Corporation, if such transaction provides for the payment of services in
Securities of the Corporation;

    
      
         

      

      
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    EXHIBIT
4.1

     

    vi)          amend
the Corporation’s certificate of incorporation, by-laws or the Certificate of
Designation of any of the Parity Securities in any manner that materially adversely affects any of
the rights,
preferences or privileges of the Holders of such Parity Securities;

    

    vii)         approve
the issuance of any Preferred Stock, other than the Series A-1 Preferred Stock
and the Series A-2 Preferred Stock issued in connection with the transactions
contemplated under the Transaction Documents;

    

    viii)        pay
any dividends or make any distributions on any Junior Securities (except in
additional shares of Junior Securities);

    

    ix)           adopt
an executive equity incentive plan which provides for the issuance of greater
than 6.0% of the fully diluted equity of the Corporation after taking into
account the transactions contemplated under the Transaction
Documents;

    

    x)           enter
into any transaction for the sale or pledge of a material asset of the
Corporation;

    

    xi)           approve
or consent to the initiation of a Bankruptcy Proceeding;

    

    xii)          issue
any securities of the Corporation in exchange for services to a consultant;
or

    

    xiii)         enter
into any agreement with respect to any of the foregoing.

    

    b)  As long as at least 25%
of the Parity Securities that were Originally Issued are still outstanding, and
as long as the Winfield Group still holds at least 25% of the Parity Securities
that were Originally Issued, the Corporation shall not, and shall not permit any
of the Subsidiaries to, directly or indirectly, without the affirmative vote of
the Winfield Group:

    

    i)           
enter into any transaction for the acquisition of any business, property or
asset pursuant to which the Corporation will incur Indebtedness to finance such
acquisition in principal amount in excess of $500,000;

    

    ii)           pay
any dividends pursuant to Section 3(a) hereof in cash in an amount to exceed
$500,000;

    

    iii)          engage
in a private placement of any Common Stock or Common Stock Equivalents of the
Corporation;

    

    iv)          enter
into any transaction that would constitute a Change of Control
Transaction;

    

    vii)         enter
into any transaction that would constitute a Fundamental Transaction;
or

    

    viii)        engage
in a registered offering of any Common Stock or Common Stock Equivalents of the
Corporation.

    

    c)           If
the Corporation defaults in complying with the covenants set out in subsection
(a) or (b) above, the Corporation shall have thirty (30) days following notice
by the holders of the Parity Securities and/or the Winfield Group, respectively,
specifying the nature of the such default, to remedy such default by (i) taking
all necessary corporate action to void the action that is the subject of such
default; (ii) obtaining the requisite approval of the holders of the Parity
Securities and/or the Winfield Group, respectively, for such action consistent
with the provisions of this Section 8; or (iii) obtaining a waiver of such
default from the holders of the Parity Securities and/or the Winfield Group,
respectively.

    
      
         

      

      
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    EXHIBIT
4.1

      

    Section
9.    Preemptive
Rights.

    

    a)           From
the date hereof until such time as all Holders no longer hold any shares
of  Series A-1 Preferred Stock, upon any issuance by the Corporation
or any of its Subsidiaries of Common Stock, Common Stock Equivalents for cash
consideration, or a combination of units hereof (a “Subsequent
Financing”), each Holder, collectively with all holders of Parity
Securities, shall have the right to participate in up to an amount of the
Subsequent Financing equal to 100% of the Subsequent Financing (the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.

     

    b)           
At least five (5) Trading Days prior to the closing of the Subsequent Financing,
the Corporation shall deliver to each Holder a written notice of its intention
to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Holder if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing
Notice”).  Upon the request of a Holder, and only upon a
request by such Holder, for a Subsequent Financing Notice, the Corporation shall
promptly, but no later than one (1) Trading Day after such request, deliver a
Subsequent Financing Notice to such Holder.  The Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Subsequent Financing is proposed to
be effected and shall include a term sheet or similar document relating thereto
as an attachment.

     

    c)           
Any Holder desiring to participate in such Subsequent Financing must provide
written notice to the Corporation by not later than 5:30 p.m. (New York City
time) on the fourth (4th)
Trading Day after all of the Holders have received the Pre-Notice that the
Holder is willing to participate in the Subsequent Financing, the amount of the
Holder’s participation, and representing and warranting that the Holder has such
funds ready, willing, and available for investment on the terms set forth in the
Subsequent Financing Notice.  If the Corporation receives no such
notice from a Holder as of such fourth (4th)
Trading Day, such Holder shall be deemed to have notified the Corporation that
it does not elect to participate.

     

    d)           If
by 5:30 p.m. (New York City time) on the fourth (4th) Trading
Day after all of the Holders have received the Pre-Notice, notifications by the
Holders and holders of Parity Securities of their willingness to participate in
the Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Corporation may effect the remaining portion of such Subsequent Financing on the
terms and with the Persons set forth in the Subsequent Financing
Notice.

     

    e)           If
by 5:30 p.m. (New York City time) on the fourth (4th)
Trading Day after all of the Holders have received the Pre-Notice, the
Corporation receives responses to a Subsequent Financing Notice from Holders and
holders of Parity Securities seeking to purchase more than the aggregate amount
of the Participation Maximum, each such Holder shall have the right to purchase
its Pro Rata Portion (as defined below) of the Participation
Maximum.  “Pro Rata Portion” of
a Holder means the ratio of: (x) the aggregate Stated Value of the Parity
Securities issued to such Holder on the Closing Date; and (y) the aggregate
Stated Value of the Parity Securities issued to all holders of Parity Securities
participating in such Subsequent Financing under this Section
9.

     

    f)           The
Corporation must provide the Holders with a second Subsequent Financing Notice,
and the Holders will again have the right of participation set forth above in
this Section 9,
if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent
Financing Notice within thirty (30) Trading Days after the date of the initial
Subsequent Financing Notice.

     

    
      
         

      

      
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    EXHIBIT
4.1
 

    g)           Notwithstanding
the foregoing, this Section 9 shall not
apply in respect of (i) an Exempt Issuance or (ii) an underwritten public
offering of Common Stock.

    

    Section
10.      Board Nomination
Rights.

    

    a)           Promptly
after the occurrence of the Closing Date (as defined in the Purchase
Agreement):

    

    (i)   the Corporation
shall take any and all actions so that John V. Winfield is elected as a member
of the Board; and

    

    (ii)  upon written request of
the Winfield Group, the Corporation shall, if the Winfield Group holds at least
25% of the Parity Securities Originally Issued at the time of such request, take
or cause to be taken any and all actions so that the Board Nominee (as defined
below) is elected by the Board as a member of the Board.  If the Board
Nominee ceases to be a member of the Board, and as long as the Winfield Group
shall have continuously held at least 25% of the Parity Securities Originally
Issued from the date of the first election of a Board Nominee through the date
of such request, the Winfield Group shall have the right, by written request of
the Winfield Group to the Corporation, to nominate another Board Nominee to
become a member of the Board.

    

    b)           “Board Nominee” means
a designee of the Winfield Group reasonably acceptable to the
Board.

    

    c)           If
John V. Winfield and the Board Nominee shall have been elected as a member of
the Board pursuant to Section 10(a), and as long as the Winfield Group shall
have continuously held at least 25% of the Parity Securities Originally Issued
from the date of such election through the December 31 immediately preceding
each meeting of stockholders of the Corporation at which directors are to be
re-elected, then the Corporation shall take or cause to be taken any and all
actions so that John V. Winfield and the Board Nominee are nominated and
recommended for re-election to the Board at each such meeting, in the same
manner and to the same extent that such action is taken in respect of the other
nominees of the Board.  Such right shall terminate immediately at such
time as the Winfield Group ceases for any reason to hold at least 25% of the
Parity Securities Originally Issued.  Upon and at any time following
termination of such right, the Corporation may in its sole discretion cease
taking any and all such actions, the Board may in its sole discretion withdraw
any nomination or recommendation for re-election previously made and John V.
Winfield and the Board Nominee may resign from the Board.

    

    d)           Actions
to be taken as described above include, as necessary, increasing the size of the
Board, nominating for election, recommending for election, and soliciting
proxies (and, if applicable written consents) for election.

    
      
         

      

      
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    EXHIBIT
4.1

     

    e)        Notwithstanding
anything contained herein to the contrary, (i) the Board Nominee shall not be
required to be elected, or nominated or recommended for re-election, to the
Board unless such Board Nominee meets the requirements for an “independent
director” under the listing rules of the principal exchange or market on which
Common Stock is then listed, satisfies the requirements set forth in the
Company’s Corporate Governance Guidelines and Nominating and Governance
Committee Charter as reasonably determined by the Nominating and Governance
Committee of the Board, is not prohibited from serving as a director of the
Corporation under Section 8 of the Clayton Antitrust Act or any other applicable
law and is not affiliated or associated with or related to (A) a material
competitor of the Corporation or (B) a customer, supplier or other supply
chain participant of the Corporation where membership of a Board Nominee on the
Board could reasonably be expected, in the reasonable judgment of the Board, to
result in a material burden or disadvantage to the Corporation, and
(ii) the Board Nominee shall resign from the Board upon request by the
Board if (A) the Board Nominee fails at any time to satisfy the criteria
set forth in the preceding sentence, (B) just cause for his removal exists or
(C) the Winfield Group ceases at any time for any reason to hold at least
25% of the Parity Securities Originally Issued.  Such a request by the
Board may be made at any time after the occurrence of an event described in
clause (ii) of the preceding sentence.  Nothing herein shall excuse
the Board Nominee from tendering his resignation from the Board or restrict the
Board from accepting any such resignation when and as provided in the Company’s
Corporate Governance Guidelines.  Notwithstanding the criteria in
(e)(i) herein, the Winfield Group may designate as the Board Nominee a member of
the Board existing as of the Closing Date.

    

    f)       John
V. Winfield and the Board Nominee, for so long as each serves as a member of the
Board and for three (3) years thereafter, shall keep all Confidential
Information of the Corporation confidential and not disclose or use any of such
Confidential Information except in connection with performing his duties as a
member of the Board.  At any time after he ceases to be a member of
the Board for any reason, upon written notice from the Corporation, John V.
Winfield and the Board Nominee shall, at his election, either (i) promptly
destroy at his expense all of such Confidential Information (in any form other
than oral) in his possession (including all copies) and confirm such destruction
to the Corporation in writing or (ii) promptly deliver to the Company at his
expense all of such Confidential Information (in any form other than oral) in
his possession (including all copies).  All of such Confidential
Information in oral form will continue to be subject to this Section
10(f).  If John V. Winfield or the Board Nominee becomes
required by law to disclose any of such Confidential Information, John V.
Winfield or the Board Nominee will, to the extent permitted by applicable law,
as promptly as possible give written notice to that effect to the
Corporation.  The Corporation, in its sole discretion, shall be
entitled to seek a protective order or other appropriate remedy.  If
the Corporation seeks such an order or remedy, John V. Winfield or the Board
Nominee will, upon request, use all reasonable efforts to fully cooperate with
the Corporation at its expense.  Regardless of whether such protective
order or other remedy is obtained, John V. Winfield or the Board Nominee will
furnish only that portion of such Confidential Information that he is legally
required to furnish.  If such a protective order or remedy is not
obtained, John V. Winfield or the Board Nominee will exercise reasonable best
efforts to obtain reliable assurance that confidential treatment will be
accorded such Confidential Information.  If such a protective order or
other remedy is obtained, John V. Winfield or the Board Nominee will exercise
reasonable efforts to obtain reliable assurance that such Confidential
Information is furnished in accordance with and subject to such protective order
or remedy.  To the extent that John V. Winfield or the Board Nominee
furnishes Confidential Information in accordance with this Section 10(f),
such furnishing will not constitute a breach of this Section 10(f).

    

    g)       John
V. Winfield and the Board Nominee, for so long as each serves as a member of the
Board, shall be entitled to the same rights, privileges and compensation as the
other members of the Board in their capacity as such, including with respect to
indemnification, insurance coverage and reimbursement for meeting participation
and related expenses.

    
      
         

      

      
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    EXHIBIT
4.1

      

    h)      John
V. Winfield, the Board Nominee and the Winfield Group shall provide prompt
written notice at such time as any event occurs of which they are aware that
would reasonably be expected to terminate the obligation of the Corporation to
nominate or renominate John V. Winfield or the Board Nominee (including the
Board Nominee’s failure to meet the qualifications set forth in Section 10(e)).

    

    i)      The
obligations of the Corporation under this Section 10 shall
terminate upon the consummation of a Change in Control Transaction.

    

    Section
11.   Miscellaneous.

    

    a)           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, or sent by a nationally recognized
overnight courier service, addressed to the Corporation, at P.O. Box 1118, 1200
American Flat Road, Virginia City, NV 89440, Attention: President, or such other
address as the Corporation may specify for such purposes by notice to the
Holders delivered in accordance with this Section 11(a).  Any
and all notices or other communications or deliveries to be provided by the
Corporation hereunder shall be in writing and delivered personally, or sent by a
nationally recognized overnight courier service addressed to each Holder at the
address of such Holder appearing on the books of the Corporation, or if no such
address appears on the books of the Corporation, at the principal place of
business of such Holder, as set forth in the Purchase Agreement.  Any
notice or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or
(ii) upon actual receipt by the party to whom such notice is required to be
given.

    

    b)           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 accrued dividends on the shares of Series A-1
Preferred Stock at the time, place, and rate, and in the coin, currency or
shares (as applicable), herein prescribed.

    

    c)           Lost or Mutilated Series A-1
Preferred Stock Certificate.  If a Holder’s Series A-1
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
Series A-1 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 reasonably satisfactory to the
Corporation.

    

    d)           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 Nevada, without regard to the principles of conflict of laws
thereof.  The Corporation and each Holder agrees that all legal
proceedings concerning the interpretation, 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”).  The Corporation and each Holder 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 such New York Courts,
or such New York Courts are improper or inconvenient venue for such
proceeding.  The Corporation and each Holder 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 it 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 other manner permitted by applicable law. The
Corporation and each Holder 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 the Corporation or any Holder
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 in the investigation, preparation and
prosecution of such action or proceeding.

    
      
         

      

      
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    EXHIBIT
4.1

     

    e)           Waiver.  Any
waiver by the Corporation or a 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 or a waiver by any other Holders.  The
failure of the Corporation or a 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 (or any other Holder) of the right
thereafter to insist upon strict adherence to that term or any other term of
this Certificate of Designation on any other occasion.  Any waiver by
the Corporation or a Holder must be in writing.

    

    f)           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 the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law.

    

    g)           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.

    

    h)           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.

    

    i)           Status of Converted or
Redeemed Series A-1 Preferred Stock.  Shares of Series A-1
Preferred Stock may only be issued pursuant to the Transaction
Documents.  If any shares of Series A-1 Preferred Stock shall be
converted, redeemed or reacquired by the Corporation, such shares shall resume
the status of authorized but unissued shares of Preferred Stock and shall no
longer be designated as 7 1⁄2% Series A-1 Convertible Preferred
Stock.

    

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

    
      
         

      

      
        22EXHIBIT
4.2

     

    COMSTOCK
MINING INC.

    

    CERTIFICATE
OF DESIGNATION OF PREFERENCES,

    RIGHTS
AND LIMITATIONS

    OF

    7
1⁄2% SERIES A-2 CONVERTIBLE PREFERRED STOCK

    

    PURSUANT
TO SECTION 78.1955 OF THE

    NEVADA
REVISED STATUTES

     

    The
undersigned, Corrado De Gasperis, does
hereby certify that:

    

    1.  He
is the President and Chief Executive
Officer of Comstock Mining Inc., a Nevada corporation (the “Corporation”).

    

    2.    The
Corporation is authorized to issue up to 50,000,000 shares of its preferred stock, none of
which have been issued.

    

    3.    The
following resolutions were duly adopted by the board of directors of the
Corporation (the “Board of
Directors”):

    

    WHEREAS,
the certificate of incorporation of the Corporation provides for a class of its
authorized stock known as the “Preferred Stock,” consisting of up to 50,000,000 shares, $0.000666 par value per share, issuable from time
to time in one or more series;

    

    WHEREAS,
the Board of Directors 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 the 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, 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 up to
250,000 shares of the Preferred Stock which the Corporation has the authority to
issue, to be designated as “7 1⁄2% Series A-2 Convertible Preferred Stock,” 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 7 1⁄2% SERIES A-2 CONVERTIBLE PREFERRED STOCK

    

    Section 1.  Definitions. For the
purposes hereof, the following terms shall have the following
meanings:

    

    “Additional Shares of Common
Stock” shall have the meaning set forth in
Section
7(b).

    

    “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 of the Securities Act.

    

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

     

     “Aggregate
Consideration” received by the Corporation with respect to any issuance
of Additional Shares of Common Stock shall: (a) to the extent it consists of cash, be computed
at the gross amount of cash received by the Corporation before deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Corporation in connection with such issuance and without deduction of any
expenses payable by the Corporation, (b) to
the extent it consists of property other than cash, be computed at the fair
value of that property as determined in good faith by the Board of Directors,
and (c) with respect to Common Stock
Equivalents, the purchase price or other consideration received by the
Corporation in connection with the issuance of such Common Stock Equivalents,
together with the amount of any exercise price or other additional consideration
payable to the Corporation in connection with the exercise or conversion (as
applicable) of such Common Stock Equivalents.

    

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

    

    “Bankruptcy
Proceeding” means (i)(a) a voluntary case, action, proceeding or petition
or (b) the consent to the institution of, or failure to contest in a timely and
appropriate manner, any involuntary case, action, proceeding or petition seeking
the liquidation, reorganization or other relief in respect of the Corporation,
or of a substantial part of its assets, under any Federal or state bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
application or consent to the appointment of a receiver, interim receiver,
receiver manager, trustee, custodian, sequestrator, conservator or similar
official for the Corporation or for a substantial part of its assets and, in any
such case, such case, action, proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the foregoing
shall be entered.

    

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

    

    “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (a) an
acquisition after the date hereof by any Person 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 a majority of the
voting securities of the Corporation (other than by means of conversion or
exercise of Series A-2 Preferred Stock and the Parity Securities or upon
conversion of any currently outstanding convertible securities in accordance
with the terms thereof as in effect on the date hereof), (b) 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 as
of immediately prior to such
transaction do not own a majority of the aggregate voting power of the
Corporation or the successor entity of such transaction, (c) the Corporation
sells or transfers all or substantially all of its assets to another Person and
the stockholders of the Corporation as of
immediately prior to such transaction do
not own
a majority of the aggregate voting power of
the acquiring entity immediately after the transaction, (d) the Corporation,
directly or indirectly, transfers a majority of the asset value and/or
enterprise value of the Corporation (whichever is lower) to another Person and
the stockholders of the Corporation as of immediately prior to such transaction
do not own a majority of the aggregate voting power of the acquiring entity
immediately after the transaction, or (e) a replacement at one time or within a
one year period of more than one-half of the members of the Board of Directors
which is not approved by the Winfield Group or a majority of those individuals
who are members of the Board of Directors on the Closing Date (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 the Winfield Group or
a majority of the members of the Board of Directors who are members on the
Closing Date), in each case that has been approved
by the stockholders of the Corporation as required under: (i) the Nevada
corporate law, (ii) the Corporation’s certificate of incorporation, (iii) this
Certificate of Designation or (iv) any other agreement to which the
Corporation is a party, as
applicable.  Notwithstanding the foregoing, none of the
following shall constitute a Change of Control Transaction:  (a) any
pledge, mortgage, grant of security interest, sale-leaseback or similar
transaction (excluding any foreclosure sale), (b) any transaction or series of
transactions principally for bona fide equity financing purposes in which cash
is received by the Corporation or any successor to the Corporation and no
acquiring Person or group acquires 20% or more of the outstanding voting
securities of the Corporation in such transaction or transactions, or (c) any
transaction or series of transactions principally for the bona fide acquisition
of another Person after which no Person or group acquires 20% or more of the
outstanding voting securities of the Corporation.

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2
 

    “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section 2.1 of the
Purchase Agreement.

    

    “Closing Date” means
the date on which the Closing occurs pursuant to
Section
2.1 of the Purchase
Agreement.

    

    “Common Stock” means
the Corporation’s common stock, par value $0.000666 per share, and stock of any other class
of securities into which such common stock
may hereafter be 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 exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

    

    “Conversion Date”
means the Elective Conversion Date or VWAP Automatic Conversion Date, as
applicable.

    

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

    

    “Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of the
shares of Series A-2 Preferred Stock in accordance with the terms
hereof.

    

    “Conversion Shares
Registration Statement” means a registration statement that registers the
resale of all Conversion Shares, so long as such Conversion Shares are
Registrable Securities (as such term is defined in
the Registration Rights Agreement) of the Holders, who shall be named as
“selling stockholders” therein and meets the requirements of the Registration
Rights Agreement.

    

    “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).

    

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

    

    “Effective Date” has the meaning set forth in the Purchase Agreement.

    

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

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2 

     

    “Equity Conditions”
means, as of the date in question: (a) the Corporation shall have duly honored
all conversions of Series A-2 Preferred Stock occurring pursuant to one or more
Notices of Elective Conversion provided by the applicable Holder to the
Corporation, if any; (b) the Corporation shall have paid all amounts owing to
the applicable Holder under this Certificate of Designation in respect of its
Series A-2 Preferred Stock, if any; (c) the Common Stock is 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); (d) there is a sufficient number of authorized, but unissued and
otherwise unreserved, shares of Common Stock for the issuance of all of the
Conversion Shares; (e) there has been no public announcement of a pending or
proposed Fundamental Transaction or Change of Control Transaction that has not
been consummated; (f) the applicable Holder is not in possession of any
information provided by the Corporation that constitutes, or may constitute,
material non-public information; and (g) a Bankruptcy Proceeding shall not be
pending against the Corporation.

    

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

    

    “Exempt Issuance” shall have the meaning set forth in the Purchase
Agreement.

    

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

    

    “GAAP” means United
States generally accepted accounting principles.

    

    “Holder” shall have
the meaning given such term in Section 3(a).

    

    “Indebtedness” means
(a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Corporation’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (c) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.

    

    “Junior Securities”
means the Common Stock and all other Common Stock Equivalents of the Corporation
other than those securities that are explicitly senior or pari passu to the Series A-2
Preferred Stock in dividend rights or liquidation preference.

    

    “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

    

    “Liquidation” shall
have the meaning set forth in Section
5.

    

    “Make-Whole Payment”
shall have the meaning set forth in Section
3(a).

    

    “New York Courts”
shall have the meaning set forth in Section 10(d).

    

    “Notice of COC” shall have the meaning set forth in Section 5.

    

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

    

    “Notice of VWAP Automatic
Conversion” shall have the meaning set
forth in Section 6(c).

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    “Originally Issued”
means that number of shares of the Series A-2 Preferred Stock issued on the date
of the first issuance of such shares, regardless of the number of transfers of
any particular shares of Series A-2 Preferred Stock thereafter and regardless of
the number of certificates which may be issued to evidence such Series A-2
Preferred Stock.

    

    “Parity Securities”
means the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and all
other capital stock of the Corporation, whether now or hereafter authorized,
that is explicitly stated to be pari passu with the Series
A-1 Preferred Stock and the Series A-2 Preferred Stock in dividend rights or
liquidation preference.

    

    “Participation
Maximum” shall have the meaning set forth in Section
9(a).

    

    “Permitted
Indebtedness” means, with respect to the
Corporation, any: (a) indebtedness and other obligations arising in the
ordinary course of operations or business such as those in respect of business
expense reimbursements, workers’ compensation claims, bid or performance bonds,
reclamation or appeal bonds, surety bonds or letters of credit, leases or
deferred purchase price of equipment, trade credit, endorsement of checks, and
completion guarantees, (b) indebtedness under a revolving credit facility from
banks or similar financial institutions in a principal amount of up to
$5,000,000, (c) indebtedness incurred to finance the acquisition, construction
or improvement of any newly acquired business, property or asset so long as
recourse with respect to such indebtedness is limited solely to such newly
acquired business, property or asset; and
(d) indebtedness existing as of immediately after the Closing that is set forth
on the Disclosure Schedule to the Purchase Agreement.

    

    “Permitted Lien” means Liens incurred in connection with Permitted
Indebtedness.

    

    “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

    

    “Pre-Notice” shall
have the meaning set forth in Section
9(b).

    

    “Pro Rata Portion”
shall have the meaning set forth in Section
9(e).

    

    “Purchase Agreement”
means Securities Purchase Agreement, dated on or about the Closing Date, among
the Corporation and the original Holders, 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, among the Corporation and the original Holders, in
the form of Exhibit
B attached to the Purchase Agreement, as
amended, modified or supplemented from time to time in accordance with its
terms.

    

     “Securities” has the meaning
set forth in the Purchase Agreement.

    

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

    

    “Series A-1 Preferred
Stock” means the Series A-1 Convertible Preferred Stock of the
Corporation, with the rights, preferences and privileges set forth in the
Certificate of Designation of Preferences, Rights and Limitations of 7 1⁄2% Series
A-1 Convertible Preferred Stock, filed contemporaneously herewith in the Office
of the Secretary of State of the State of Nevada.

    

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    “Series A-2 Preferred
Stock” shall have the meaning set forth in Section
2.

    

    “Stated Value” shall
have the meaning set forth in Section 2.

    

    “Subsequent Financing”
shall have the meaning set forth in Section
9(a).

    

    “Subsequent Financing
Notice” shall have the meaning set forth in Section
9(b).

    

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

    

    “Successor Entity”
shall have the meaning set forth in Section 7(d).

    

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

    

    “Trading Day” means a
day on which the principal Trading Market is open for business.

    

    “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the American Stock Exchange, the Toronto Stock
Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or
any successors to any of the foregoing).

    

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

    

    “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 L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (b)  if the
OTC Bulletin Board is not a Trading Market, the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading
on the OTC Bulletin Board and if prices for the Common Stock are then reported
in the “Pink Sheets” published by Pink OTC Markets, Inc. (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 (d) 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 Holders of a majority in
interest of the Securities then outstanding and reasonably acceptable to the
Corporation, the fees and expenses of which shall be paid by the
Corporation.

    

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

    

    “Winfield Group” means
John V. Winfield, his heirs, personal representatives and family trusts created
and controlled by Mr. Winfield, any individual retirement accounts held by Mr.
Winfield, Santa Fe Financial Corporation, Portsmouth Square, Inc. and InterGroup
Corporation, and any Affiliates of Mr. Winfield; provided, that the Winfield
Group shall also include all transferees and assigns of the Winfield Group at
any time that a default has occurred under Section 4.2 of the Purchase Agreement
and such default has not been cured pursuant to Section 5.13(b) of the Purchase
Agreement.

    

    Section
2.  Designation, Amount and Par
Value. The series of Preferred Stock designated by this Certificate of
Designation shall be the Corporation’s 7 1⁄2% Series A-2 Convertible Preferred
Stock (the “Series A-2
Preferred Stock”) and the authorized number of shares so designated shall
be up to 250,000. Each share of Series A-2 Preferred Stock shall have a par
value of $0.000666 per share and a stated
value equal to $1,000 (the “Stated
Value”).

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    Section
3.  Dividends.

    

    a)           Dividends in Cash or in
Kind. Subject to Section 3(e) below, Holders of Series A-2
Preferred Stock (each, a “Holder” and collectively, the “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 7 1⁄2% per annum, payable
semiannually on January 1 and July 1, commencing on January 1, 2011 and on each
Conversion Date (with respect only to Series A-2 Preferred Stock being
converted) (each such date, a “Dividend Payment
Date”) (if any Dividend Payment Date is not a Trading Day, the applicable
payment shall be due on the next succeeding Trading Day), as set forth below in this Section 3(a); provided, however, that in
the event of the automatic conversion of Series A-2 Preferred Stock into shares
of Common Stock pursuant to Section 6(c) prior to
August 31, 2013, the Corporation shall also pay to the Holders of Series A-2
Preferred Stock so converted an additional dividend, for each share of Series
A-2 Preferred Stock, equal to: (i) the net present value, as of the Conversion
Date, of a payment equal to 22 1⁄2% of the Stated Value of one (1) share of Series
A-2 Preferred Stock occurring on August 31, 2013 (calculated assuming a discount
rate of 7 1⁄2%), minus
(ii) the aggregate amount of any semi-annual dividends paid on one (1) share of
Series A-2 Preferred Stock before the Conversion Date (the “Make-Whole
Payment”).  The form of any semi-annual dividend payments or
any Make-Whole Payment to each Holder shall be, at the election of the
Corporation: (A) if funds are legally available for the payment of dividends, in
cash, (B) subject to
the satisfaction of the Equity Conditions, in shares of Common Stock, which
shall be valued solely for such purpose at the average of the VWAPs for the 5
consecutive Trading Days ending on the Trading Day that is immediately prior to:
(1) the applicable Dividend Payment Date; or (2) with respect to dividends paid
upon conversion of Series A-2 Preferred Stock into Common Stock, the Conversion
Date, (C) subject to
the satisfaction of the Equity Conditions, in additional shares (including, without limitation, fractional shares)
of Series A-2 Preferred Stock, in an amount
equal to the dollar amount of such dividend payment or Make-Whole Payment (as applicable) divided by the Stated Value per share, or
(D) subject to the
satisfaction of the Equity Conditions, in any combination of the property
described in the foregoing clauses (A), (B), and (C).

    

    b)           Corporation’s Payment of
Dividends in Cash or in Additional Shares of Stock.  The
Corporation shall promptly notify the Holders at any time the Corporation shall
become unable to legally pay semi-annual dividends or Make-Whole Payments in
cash.  The Corporation shall provide the Holders with at least 20
Trading Days’ notice of its election to pay a semi-annual dividend or Make-Whole
Payment in shares of Common Stock or additional shares of Series A-2 Preferred
Stock (the Corporation may indicate, in any such notice relating to semi-annual
dividends, that the election contained in such notice shall continue for later
periods until revised by a subsequent notice).

    

    c)           Dividend
Calculations.  Dividends on the Series A-2 Preferred Stock
shall be calculated on the basis of a 360-day year, consisting of twelve 30
calendar day periods, and shall accrue daily commencing on the Closing 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.  Payment of dividends
in shares of Common Stock or additional shares of Series A-2 Preferred Stock (as
applicable) shall be made in a manner consistent
with Section 6(e)(i)
herein and, solely for purposes of the payment of dividends in shares, the
Dividend Payment Date shall be deemed to be the Conversion
Date.  Dividends shall cease to accrue with respect to any Series A-2
Preferred Stock when converted.  Except as otherwise provided herein,
if at any time the Corporation pays dividends partially in cash and partially in
shares of Common Stock and/or Series A-2 Preferred Stock, then such payment
shall be distributed ratably among the Holders based upon the number of shares
of Series A-2 Preferred Stock held by each Holder on such Dividend Payment
Date.

    

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    d)           Other Securities. So
long as any Series A-2 Preferred Stock shall remain outstanding: (i) neither the
Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities; and (ii) the Corporation
and any Subsidiaries thereof shall only redeem, repurchase or otherwise acquire,
directly or indirectly, any Parity Securities ratably with the Series A-2
Preferred Stock on a pari
passu basis.  So long as any Series A-2 Preferred Stock shall
remain outstanding: (i) neither the Corporation nor any Subsidiary thereof shall
directly or indirectly pay or declare any dividend or make any distribution upon
any Junior Securities (other than a dividend or distribution solely in
additional shares of Junior Securities), in each case as long as any dividends
due on the Series A-2 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; and (ii) the Corporation and any
Subsidiaries thereof shall only, directly or indirectly, pay or declare any
dividend or make any distribution upon any Parity Securities, or set aside or
apply any monies for the purchase or redemption (through a sinking fund or
otherwise) of any Parity Securities, if it simultaneously, on a pari passu basis and ratably
among the holders of the Series A-2 Preferred Stock and the holders of all
Parity Securities, pays or declares a dividend or distribution, or sets aside or
applies monies for the purchase or redemption (through a sinking fund or
otherwise), of the Series A-2 Preferred Stock.

    

    e)           Payment of Dividends in
Kind.  During the period
commencing on the Closing Date and ending on the eighteen (18) month anniversary
of the Closing Date, in the event on any Dividend Payment Date the Registration
Statement (as defined in the Registration Rights Agreement) has not been
declared effective in accordance with Section 2(b) of the Registration Rights
Agreement, any dividend payable in Common Stock or Series A-2 Preferred Stock
shall accrue and be payable to the Holders of the Series A-2 Preferred Stock
within five (5) business days following the date that such Registration
Statement is declared effective.  In the event on any Dividend Payment
Date following the eighteen (18) month anniversary of the Closing Date, the
Registration Statement has not been declared effective or the Corporation has
failed to maintain its effectiveness during the Effectiveness Period (as defined
in the Registration Rights Agreement), all dividends payable to the Holders of
the Series A-2 Preferred Stock shall be payable, if funds are legally available
for payment, in cash only. If such funds are not legally available for payment,
any dividend payable shall accrue and be immediately payable to the Holders of
the Series A-2 Preferred Stock in cash, when such funds become legally
available, or, at the option of the Corporation, subject to the effectiveness on
such date of the Registration Statement, as otherwise provided for
herein; provided however, that if such
funds are not legally available and the Registration Statement is not effective,
the Holders of the Series A-2 Preferred Stock can waive the requirement that the
Registration Statement be effective and elect to received dividend payments as
otherwise provided for herein.

    

    Section
4.  Voting
Rights.

    

    a)           Except
as otherwise provided herein or as otherwise required by law, each Holder of
Series A-2 Preferred Stock shall: (i) be entitled to notice of any annual or
special meeting of the stockholders of the Corporation, at the same time and in
the same manner as of the holders of Common Stock in accordance with the by-laws
of the Corporation; and (ii) vote together with the Common Stock at any annual
or special meeting of the stockholders of the Corporation, or in any action by
written consent of stockholders of the Corporation in lieu of meeting, on an
as-converted to Common Stock basis, with each share of Series A-2 Preferred
Stock entitling its Holder to the number of votes equal the number of shares of
Common Stock into which such share of Series A-2 Preferred Stock could be
converted under this Certificate of Designation as of the close of business on
the record date fixed for such meeting or the effective date of such written
consent.

    

    
      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    b)           Each share of Series A-2
Preferred Stock shall entitle its holder to one (1) vote in any matter submitted
to vote of the holders of Preferred Stock, voting as a separate class (as opposed to voting with the holders
of Common Stock as provided in Section 4(a)).

    

    Section
5.  Liquidation and Change of
Control Transactions.  Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”) or a
Change of Control Transaction, the Holders shall be entitled to receive out of
the assets, whether capital or surplus, of the Corporation in the case of a
Liquidation, or out of the aggregate consideration received by the Corporation
and its stockholders  in the case of a  Change of Control
Transaction, an amount equal to (i) the Stated Value, plus any accrued and
unpaid dividends on the Series A-2 Preferred Stock, together with any other fees
then due and owing thereon under this Certificate of Designation, for each share
of Series A-2 Preferred Stock, on a pari passu basis with any
distribution or payment upon a Liquidation or Change of Control Transaction to
the holders of Parity Securities and before any distribution or payment shall be
made to the holders of any Junior Securities, plus (ii) the amount
the Holders would have been entitled to receive as holders of the number of
shares of Common Stock for which the shares of Series A-2 Preferred Stock are
convertible immediately prior to such Liquidation or Change of Control
Transaction, on a pari
passu basis with any distribution or payment upon a Liquidation or Change
of Control Transaction to the holders of Parity Securities and Junior Securities
combined. If the assets of the Corporation or aggregate consideration received
shall be insufficient to pay in full the respective preference amounts to the
Holders of Series A-2 Preferred Stock and the holders of any Parity Securities
described in this Section 5, then the
entire assets of the Corporation or aggregate consideration shall be ratably
distributed among the Holders of Series A-2 Preferred Stock and the holders of
any Parity Securities, in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full.  The Corporation shall mail written notice of any Liquidation,
not less than 45 days prior to the payment date stated therein, to each Holder.
The Corporation shall provide each Holder with
reasonable advance notice (a “Notice of COC”) of the occurrence of a Change of Control Transaction or potential Change of
Control Transaction, which shall specify,
for each Holder, the number of shares of Series A-2 Preferred Stock
owned on the date of such Notice of
COC, the number of shares of Common Stock
issuable upon conversion of such Series A-2 Preferred Stock
and the date, if known, on which such Change of Control Transaction is to be effected, which date may not be prior to the
date the Corporation delivers such Notice of COC to the
Holders.  The calculations and entries set forth in the Notice of
COC shall control in the absence of manifest or mathematical
error.  Each Holder shall deliver the certificate(s) representing
the
shares of Series A-2 Preferred Stock as
instructed in the Notice of COC.

    

    Section
6.  Conversion.

    

    a)           Conversions at Option of
Holder.  Each share of Series A-2 Preferred Stock shall be
convertible, at any time and from time to time from and after the Closing Date
at the option of the Holder thereof, into that number of shares of Common Stock
determined by dividing the Stated Value of such share of Series A-2 Preferred
Stock by the Conversion Price then in
effect.  Holders shall effect voluntary conversions pursuant to this Section 6(a) by providing the Corporation with the form
of conversion notice attached hereto as Annex A (a “Notice of Elective Conversion”).  Each
Notice of Elective Conversion shall specify
the number of shares of Series A-2 Preferred Stock to be converted, the number
of shares of Series A-2 Preferred Stock owned prior to the conversion at issue,
the number of shares of Series A-2 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 applicable Holder delivers such
Notice of Conversion to the Corporation (such date, the “Elective Conversion
Date”).  If no Elective Conversion Date is
specified in a Notice of Elective Conversion, the Elective Conversion Date shall be
the date that such Notice of Elective Conversion is delivered
hereunder.  The calculations and entries set forth in the Notice of
Elective Conversion shall control
in the absence of manifest or mathematical error.  To effect elective conversions of shares of Series A-2
Preferred Stock pursuant to this Section 6(a), a
Holder shall not be required to surrender the certificate(s) representing the
shares of Series A-2 Preferred Stock to the Corporation unless all of the shares
of Series A-2 Preferred Stock represented thereby are so converted, in which
case such Holder shall deliver the certificate representing such shares of
Series A-2 Preferred Stock promptly following the Elective Conversion Date at
issue.  Any certificate representing
shares of Series A-2 Preferred Stock that have been converted in whole or
part by such Holder shall be void and should be destroyed upon receipt of
replacement certificate(s) from the Corporation.  Shares of
Series A-2 Preferred Stock converted into Common Stock pursuant to this Section 6(a) shall be
canceled and shall not be reissued.

    

    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    b)           [RESERVED]

    

    c)           Automatic Conversion Upon
Sufficient VWAP.  If: (i)
the VWAP for each of any twenty (20) Trading Days during any thirty (30)
consecutive Trading Day period starting on or after the Effective Date (“Threshold Period”),
exceeds $4.50 (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Closing Date); and
(ii) all of the Equity Conditions have been met on each Trading Day during the
applicable Threshold Period through and including the later of the VWAP
Automatic Conversion Date and the Trading Day after the date that the Conversion
Shares issuable pursuant to such conversion are actually delivered to the
Holders pursuant to the Notice of VWAP Automatic Conversion, then all outstanding shares of Series A-2 Preferred Stock
shall automatically be converted into shares of Common Stock, based on the
then-effective Conversion Price.  The Corporation shall provide each
Holder with notice (a “Notice of VWAP Automatic
Conversion”) of the occurrence of an
automatic conversion of the Series A-2 Preferred Stock pursuant to this
Section
6(c) within one (1) Trading Day after the
end of any such Threshold Period, which shall specify, for each Holder, the
number of shares of Series A-2 Preferred Stock owned prior to the automatic
conversion at issue, the number of shares of Common Stock issuable upon
conversion of such Series A-2 Preferred Stock and the date on which such
automatic conversion is to be effected, which shall be the third Trading
Day following the date the Corporation delivers such Notice of VWAP Automatic
Conversion to the Holders (such date, the
“VWAP Automatic
Conversion Date”).  The
calculations and entries set forth in the Notice of VWAP Automatic Conversion
shall control in the absence of manifest or mathematical error.  Each
Holder shall deliver the certificate(s) representing all of its shares of Series
A-2 Preferred Stock to the Corporation promptly following the VWAP
Automatic Conversion
Date.  Shares of Series A-2 Preferred Stock
converted into Common Stock pursuant to this Section 6(c) shall be canceled and shall not be reissued.

    

    d)           Conversion
Price.  The conversion price for the Series A-2 Preferred Stock
shall initially equal $0.6510, subject to adjustment
herein (the “Conversion
Price”).

    

    e)           Mechanics of
Conversion

    

    i.           Delivery of Certificate Upon
Conversion. Not later than three (3) Trading Days after each Conversion
Date, the Corporation shall deliver, or cause to be delivered, to the converting
Holder (A) a certificate or certificates representing the Conversion Shares
which, on or after the earlier of: (1) the six (6)
month anniversary of the Closing Date; or (2) the Effective Date, shall
be free of restrictive legends and trading restrictions (other than those which
may then be required by the Purchase Agreement) representing the number of
Conversion Shares being acquired upon the conversion of the Series A-2 Preferred
Stock, and/or (B) a bank check in the amount of accrued and unpaid dividends
and, if applicable, the Make-Whole Payment (to the extent that the Corporation
has elected to pay accrued dividends or the Make-Whole Payment in
cash).  On or after the earlier of: (1) the six (6) month anniversary of the Closing Date or
(2) the Effective Date, the Corporation shall use commercially reasonable efforts to deliver any
certificate or certificates required to be delivered by the Corporation under
this Section 6
electronically through the Depository Trust Company or another established
clearing corporation performing similar functions.

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

    ii.           Obligation
Absolute.  The Corporation’s obligation to issue and deliver
the Conversion Shares upon conversion of Series A-2 Preferred Stock in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by a Holder to enforce the same, any waiver or consent
with respect to any other 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 such
Holder or any other Person of any obligation to the Corporation or any violation
or alleged violation of law by such Holder or any other Person, and irrespective
of any other circumstance which might otherwise limit such obligation of the
Corporation to such Holder in connection with the issuance of such Conversion
Shares; provided,
however, that such delivery shall not operate as a waiver by the
Corporation of any such action that the Corporation may have against such Holder
or such other Person.  In the event a Holder shall elect to convert
any or all of its Series A-2 Preferred Stock, the Corporation may not refuse
conversion based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder,
restraining and/or enjoining conversion of all or part of the Series A-2
Preferred Stock of such Holder shall have been sought and
obtained.  In the absence of such injunction, the Corporation shall
issue Conversion Shares and, if applicable, cash, upon a properly noticed
conversion.  Nothing herein shall limit a Holder’s right to pursue
actual damages or all other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.  The exercise
of any such rights shall not prohibit a Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.

    

    iii.           Liquidated
Damages.  If the Corporation
fails to deliver to a Holder such certificate or certificates representing
Conversion Shares within five (5) Trading Days after the Elective Conversion
Date provided in a Notice of Elective Conversion pursuant to Section 6(a), the
Corporation shall pay to such Holder, in cash, as liquidated damages and not as
a penalty, for each share of Series A-2 Preferred Stock
elected to be converted, $50 per Trading Day for each Trading Day after such
fifth (5th) Trading Day after the Elective Conversion Date until such
certificates are delivered or such Holder
is reimbursed in accordance with Section 6(e)(iv). Nothing herein shall limit a Holder’s right to pursue
actual damages for the Corporation’s failure to deliver Conversion Shares 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.  The exercise of any
such rights shall not prohibit a Holder from seeking to enforce damages pursuant
to any other Section hereof or under applicable law.

    

    iv.           Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. If the Corporation fails to deliver to a Holder the
applicable certificate or certificates within five (5) Trading Days after the
Elective Conversion Date, and if after such date such Holder is required by its
brokerage firm to purchase (in an open market transaction or otherwise), or the
Holder’s brokerage firm purchases, shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which such Holder
was entitled to receive upon the conversion relating to such Notice of Elective
Conversion (a “Buy-In”), then the Corporation shall (A) pay in cash to such
Holder (in addition to any other remedies available to or elected by such
Holder) the amount by which (x) such Holder’s total purchase price (including
any brokerage commissions) for the shares of 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 actual sale price at which the sell order giving rise to such purchase
obligation was executed (including any brokerage commissions) and (B) at the
option of such Holder, either reissue (if surrendered) the shares of Series A-2 Preferred Stock equal to the number of shares of Series
A-2
Preferred Stock submitted for conversion or deliver to such Holder the number of
shares of Common Stock that would have been issued if the Corporation had timely
complied with the Notice of Elective Conversion. For example, if a Holder
purchases shares of Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted conversion of shares of Series A-2
Preferred Stock with respect to which the actual sale price (including any
brokerage commissions) giving rise to such purchase obligation was a total of
$10,000 under clause (A) of the immediately preceding sentence, the Corporation
shall be required to pay such Holder $1,000. The Holder shall provide the
Corporation written notice indicating the amounts payable to such Holder in
respect of the Buy-In and, upon request of the Corporation, evidence of the
amount of such loss. 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 Series A-2 Preferred Stock as
required pursuant to the terms hereof.

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

    v.           Reservation of Shares
Issuable Upon Conversion.  The Corporation covenants that it
will, at all times while any Series A-2 Preferred
Stock: (A) remains outstanding or (B) is
reserved for issuance or otherwise issuable under any promissory note or
agreement to which the Corporation is a party, reserve and keep available out of its
authorized and unissued shares of Common Stock, for the sole purpose of issuance
upon conversion of such Series A-2 Preferred Stock, free from preemptive rights
or any other purchase rights of Persons other than the Holder (and the other
holders of the Series A-2 Preferred Stock), not less than 130% of the aggregate
number of shares of the Common Stock as shall be issuable (taking into account
the adjustments and restrictions of Section 7) upon: (A)
the conversion of such Series A-2
Preferred Stock; and (B) payment of dividends on such Series
A-2 Preferred Stock in shares of Common Stock
hereunder.  The Corporation covenants that it will, at all times while any Series A-2
Preferred Stock: (A) remains outstanding or (B) is reserved for issuance or
otherwise issuable under any promissory note or agreement to which the
Corporation is a party, reserve and keep available out of its authorized
and unissued shares of Preferred Stock, for the sole purpose of issuance upon
payment of dividends on such Series A-2
Preferred Stock in additional shares of Series A-2 Preferred Stock as
herein provided, free from preemptive rights or any other purchase rights of
Persons other than the Holder (and the other holders of the Series A-2 Preferred
Stock), not less than 130% of the aggregate number of shares of the Series A-2
Preferred Stock as shall (subject to the terms and conditions set forth in the
Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 7) upon the
payment of dividends on such Series A-2 Preferred Stock in additional shares of Series A-2
Preferred Stock hereunder.  The Corporation covenants that all
shares of Common Stock and Series A-2 Preferred Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable and, if the Conversion Shares Registration Statement is then
effective under the Securities Act, shall be, with respect to such Common Stock
and the Common Stock issuable upon conversion of such Series A-2 Preferred
Stock, registered for public resale in accordance with such Conversion Shares
Registration Statement (subject to such Holder’s compliance with its obligations
under the Registration Rights Agreement).

    

    vi.           Fractional
Shares.  No fractional shares or scrip representing fractional
shares of Common Stock shall be issued upon the conversion of the Series A-2
Preferred Stock.   As to any fraction of a share of Common Stock,
which the Holder would otherwise be entitled to receive upon such conversion,
the Corporation shall at its election, either pay a cash adjustment in respect
of such final fraction in an amount equal to such fraction multiplied by the
Conversion Price or round up to the next whole share.  The Corporation may issue fractional shares
of Series A-2 Preferred Stock.

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

    vii.           Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock upon conversion of the Series A-2
Preferred Stock shall be made without charge to any Holder for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificates, 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 Holders of such shares of Series A-2
Preferred Stock 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 any Series A-2 Preferred Stock is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions
payable in shares of Common Stock on shares of Common Stock or any Common Stock
Equivalents (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or payment of a
dividend on, the Series A-2 Preferred
Stock), (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, (iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues, in the event of a 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 any treasury shares of the Corporation) outstanding
immediately before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately 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, at any time while any Series A-2 Preferred Stock is outstanding,
the Corporation or any Subsidiary, as applicable, sells or grants any option to purchase or sells
or grants any right to reprice, or otherwise disposes of or issues (or announces
any sale, grant or any option to purchase or reprice or other disposition), any
Common Stock or Common Stock Equivalents (“Additional Shares of Common
Stock”) at an effective price per share of
Common Stock that is lower than the lower of: (i) 93% of the average of
the VWAPs for the 10 consecutive Trading Days ending on the Trading Day that is
immediately prior to the date of issuance of the Additional Shares of Common
Stock; or (ii) the then effective Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”)
(if the holder of the Additional Shares of Common Stock 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 are issued in connection with
such issuance, be entitled to receive shares of Common Stock or Common Stock
Equivalents at an effective price per share that is lower than the Conversion
Price, such issuance shall be deemed to have occurred for less than the
Conversion Price on the date of the Dilutive Issuance), then the Conversion
Price shall be reduced to equal the price determined by multiplying the
Conversion Price in effect immediately prior to such issuance by a
fraction:

    

     i.           the
numerator of which shall be: (A) the number of shares of Common Stock issuable upon the conversion of the Series A-1
Preferred Stock immediately prior to such Dilutive Issuance, plus (B) the number of shares
of Common Stock or Common Stock Equivalents
which the Aggregate Consideration received or deemed to be received by the
Corporation for the total number of Additional Shares of Common Stock so issued
would purchase at such then-existing Base Conversion Price; and

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

     ii.           the
denominator of which shall be the number of shares of Common
Stock issuable upon the conversion of the Series A-1
Preferred Stock immediately prior to such Dilutive Issuance plus the total number of
Additional Shares of Common Stock actually so issued.

    

    Such
adjustment shall be made upon any issuance of Additional Shares of Common
Stock; provided, however, that no adjustment will be made under this
Section 7(b) in
respect of an Exempt Issuance.  The Corporation shall notify the
Holders in writing, no later than the Trading Day following the issuance of any
Additional Shares of Common Stock subject to this Section 7(b),
indicating therein the applicable issuance price, or 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, the Holders are entitled to receive a
number of Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether a Holder accurately refers
to the Base Conversion Price in the Notice of Conversion.

    

    c)           Pro Rata
Distributions.  If the Corporation, at any time while any
Series A-2 Preferred Stock is outstanding, distributes to all holders of Common
Stock (and not to the Holders) evidences of its indebtedness or assets
(including cash and cash dividends) or rights or warrants to subscribe for or
purchase any security (other than the Common Stock, which shall be subject to
Section 7(b)),
then in each such case the Conversion Price shall be adjusted 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 or rights or warrants so distributed
applicable to one outstanding share of Common Stock as determined by the Board
of Directors of the Corporation in good faith.  In either case the
adjustments shall be described in a statement delivered to the Holders
describing 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.

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

    d)           Fundamental
Transaction.  If, at any time while any Series A-2 Preferred Stock is outstanding,
(i) the Corporation, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Corporation with or into another
Person, (ii) the Corporation, directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization 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, (v) the Corporation, directly
or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination),
in each case other than a Change of Control Transaction (each, a “Fundamental
Transaction”), then, upon any subsequent conversion of Series A-2
Preferred Stock, the Holder shall have the right to receive, for each Conversion
Share that would have been issuable upon such conversion immediately prior to
the occurrence of such Fundamental Transaction, the number of shares of Common
Stock of the successor or acquiring corporation or of the Corporation, if it is
the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by
a holder of the number of shares of Common Stock for which Series A-2 Preferred
Stock is convertible immediately prior to such Fundamental
Transaction.  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
Series A-2 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 Designation with the same terms and conditions as those hereof, and issue to the Holders
new Series A-2 Preferred Stock consistent with the foregoing provisions and
evidencing the Holders’ right to convert such Series A-2 Preferred Stock into
Alternate Consideration.  The Corporation shall cause any successor
entity in a Fundamental Transaction in which the Corporation is not the survivor
(the “Successor
Entity”) to assume in writing all of the obligations of the Corporation
under this Certificate of Designation and the other Transaction Documents in
accordance with the provisions of this Section 7(d), pursuant to written agreements in form and
substance reasonably satisfactory to the Holders
of a majority of the then outstanding shares of Series A-2 Preferred Stock
issued pursuant to the Purchase Agreement and approved by such
Holders (without unreasonable
delay) prior to such Fundamental Transaction, and shall deliver to each Holder in exchange for its Series A-2
Preferred Stock a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Series A-2
Preferred Stock which is convertible for a corresponding number of shares of
capital stock of such Successor Entity (or its parent entity) equivalent to the
shares of Common Stock acquirable and receivable upon conversion of the Series
A-2 Preferred Stock prior to such Fundamental Transaction, and with a conversion
price which applies the conversion price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of Common Stock
pursuant to such Fundamental Transaction and the value of such shares of capital
stock, such number of shares of capital stock and such conversion price being
for the purpose of protecting the economic value of the Series A-2 Preferred
Stock immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to the Holders of a majority of the then outstanding shares of
Series A-2 Preferred Stock issued pursuant to the Purchase
Agreement.  Upon the occurrence of any such Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Certificate of Designation and the other Transaction Documents referring to
the “Corporation” shall refer instead to the Successor Entity), and may exercise
every right and power of the Corporation and shall assume all of the obligations
of the Corporation under this Certificate of Designation and the other
Transaction Documents with the same effect as if such Successor Entity had been
named as the Corporation herein.

    

    e)           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.  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 any treasury
shares of the Corporation) issued and outstanding.

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

    f)           Notice to the
Holders.

    

    i.           Adjustment to Conversion
Price.  Whenever the Conversion Price is adjusted pursuant to
any provision of this Section 7, the
Corporation shall promptly deliver 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.

    

    ii.           Notice to Allow Conversion
by Holder.  If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) 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 of 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, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property or (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 Series A-2 Preferred Stock, and shall cause to
be delivered to each Holder at its last address as it shall appear upon the
stock books of the Corporation, at least twenty (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
deliver such notice or any defect therein or in the delivery thereof shall not
affect the validity of the corporate action required to be specified in such
notice.  To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Corporation or any
of the Subsidiaries, the Corporation shall, as
required by applicable federal securities law, file such notice with the
Commission pursuant to a Current Report on Form 8-K.  The Holder shall
remain entitled to convert the Series A-2 Preferred Stock during the 20-day
period commencing on the date of such notice through the effective date of the
event triggering such notice, except as may otherwise be expressly set forth
herein.

    

    Section 8.  Negative
Covenants. 

    

    a)           As long as at least 25% of the Parity Securities that
were Originally Issued are still outstanding, the Corporation shall not, and
shall not permit any of the Subsidiaries to, directly or indirectly, without the
affirmative vote of the holders of a majority of the then outstanding Parity
Securities (which shall, as long as the Winfield Group still holds at least 25%
of the Parity Securities that were Originally Issued, include the Winfield
Group):

    

    i)           other than Permitted Indebtedness, enter into, create,
incur, assume, guarantee or suffer to exist any Indebtedness for borrowed money;

    

    ii)           other than Permitted Liens, grant, assume or
allow to exist any
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;

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

    iii)           repay, repurchase or offer to repay, repurchase or
otherwise acquire Common Stock constituting more than 5% of the outstanding shares
of Common Stock (measured as of immediately after the Closing), other than as to
(i) the Conversion Shares as permitted or required under this Certificate of
Designation or any other Transaction Documents and (ii) repurchases of Common
Stock or Common Stock Equivalents of departing officers and directors of the
Corporation, provided that such repurchases shall not exceed an aggregate of
$100,000 for all officers and directors for so long as the Parity Securities are
outstanding;

    

    iv)           enter into any transaction with any Affiliate of the
Corporation which would be required to be disclosed in any public filing with
the Commission, unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of
the Corporation (even if less than a quorum
otherwise required for board approval);

    

    v)        
   enter into any transaction with
any Affiliate of an Officer or Director of the Corporation, if such transaction
provides for the payment of services in Securities of the Corporation;

    
 

    vi)           amend the Corporation’s certificate of incorporation,
by-laws or the Certificate of Designation of any of the Parity Securities in any
manner that materially adversely affects any of the rights, preferences or
privileges of the Holders of such Parity Securities;

    

    vii)          approve the issuance of any Preferred Stock, other than
the Series A-1 Preferred Stock and the Series A-2 Preferred Stock issued in
connection with the transactions contemplated under the Transaction
Documents;

    

    viii)         pay any dividends or make any distributions on any
Junior Securities (except in additional shares of Junior
Securities);

    

    ix)           adopt an executive equity incentive plan which provides
for the issuance of greater than 6.0% of the fully diluted equity of the
Corporation after taking into account the transactions contemplated under the
Transaction Documents;

    

    x)           enter into any transaction for the sale or pledge of a
material asset of the Corporation;

    

    xi)          approve or consent to the initiation of a Bankruptcy
Proceeding;

    

    xii)         issue any securities of the
Corporation in exchange for services to a consultant; or

    

    xiii)        enter into any agreement with respect to any of the
foregoing.

    

    b)           As long as at least 25% of the Parity Securities that
were Originally Issued are still outstanding, and as long as the Winfield Group
still holds at least 25% of the Parity Securities that were Originally Issued,
the Corporation shall not, and shall not permit any of the Subsidiaries to,
directly or indirectly, without the affirmative vote of the Winfield
Group:

    

    i)           enter into any transaction for the acquisition of any
business, property or asset pursuant to which the Corporation will incur
Indebtedness to finance such acquisition in principal amount in excess of
$500,000;

    

    ii)           pay any dividends pursuant to Section 3(a) hereof in
cash in an amount to exceed $500,000;

    

    
      
        
           

        

        
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    EXHIBIT
4.2

      

    iii)          engage in a private placement of any Common Stock or
Common Stock Equivalents of the Corporation;

    

    iv)          enter into any transaction that would constitute a
Change of Control Transaction;

    

    v)           enter into any transaction that would constitute a
Fundamental Transaction; or

    

    vi)          engage in a registered offering of any Common Stock or
Common Stock Equivalents of the Corporation.

    

    c)           If
the Corporation defaults in complying with the covenants set out in subsection
(a) or (b) above, the Corporation shall have thirty (30) days following notice
by the holders of the Parity Securities and/or the Winfield Group, respectively,
specifying the nature of the such default, to remedy such default by (i) taking
all necessary corporate action to void the action that is the subject of such
default; (ii) obtaining the requisite approval of the holders of the Parity
Securities and/or the Winfield Group, respectively, for such action consistent
with the provisions of this Section 8; or (iii) obtaining a waiver of such
default from the holders of the Parity Securities and/or the Winfield Group,
respectively.

    

    Section
9.  Preemptive
Rights.

    

    a)           From
the date hereof until such time as all Holders no longer hold any shares
of  Series A-2 Preferred Stock, upon any issuance by the Corporation
or any of its Subsidiaries of Common Stock, Common Stock Equivalents for cash
consideration, or a combination of units hereof (a “Subsequent
Financing”), each Holder, collectively with all holders of Parity
Securities, shall have the right to participate in up to an amount of the
Subsequent Financing equal to 100% of the Subsequent Financing (the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.

     

    b)           At
least five (5) Trading Days prior to the closing of the Subsequent Financing,
the Corporation shall deliver to each Holder a written notice of its intention
to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Holder if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing
Notice”).  Upon the request of a Holder, and only upon a
request by such Holder, for a Subsequent Financing Notice, the Corporation shall
promptly, but no later than one (1) Trading Day after such request, deliver a
Subsequent Financing Notice to such Holder.  The Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder and the
Person or Persons through or with whom such Subsequent Financing is proposed to
be effected and shall include a term sheet or similar document relating thereto
as an attachment.

     

    c)           Any
Holder desiring to participate in such Subsequent Financing must provide written
notice to the Corporation by not later than 5:30 p.m. (New York City time) on
the fourth (4th)
Trading Day after all of the Holders have received the Pre-Notice that the
Holder is willing to participate in the Subsequent Financing, the amount of the
Holder’s participation, and representing and warranting that the Holder has such
funds ready, willing, and available for investment on the terms set forth in the
Subsequent Financing Notice.  If the Corporation receives no such
notice from a Holder as of such fourth (4th)
Trading Day, such Holder shall be deemed to have notified the Corporation that
it does not elect to participate.

     

    d)           If
by 5:30 p.m. (New York City time) on the fourth (4th) Trading
Day after all of the Holders have received the Pre-Notice, notifications by the
Holders and holders of Parity Securities of their willingness to participate in
the Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Corporation may effect the remaining portion of such Subsequent Financing on the
terms and with the Persons set forth in the Subsequent Financing
Notice.

     

    
      
        
           

        

        
          18

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    e)           If
by 5:30 p.m. (New York City time) on the fourth (4th)
Trading Day after all of the Holders have received the Pre-Notice, the
Corporation receives responses to a Subsequent Financing Notice from Holders and
holders of Parity Securities seeking to purchase more than the aggregate amount
of the Participation Maximum, each such Holder shall have the right to purchase
its Pro Rata Portion (as defined below) of the Participation
Maximum.  “Pro Rata Portion” of
a Holder means the ratio of: (x) the aggregate Stated Value of the Parity
Securities issued to such Holder on the Closing Date; and (y) the aggregate
Stated Value of the Parity Securities issued to all holders of Parity Securities
participating in such Subsequent Financing under this Section
9.

     

    f)           The
Corporation must provide the Holders with a second Subsequent Financing Notice,
and the Holders will again have the right of participation set forth above in
this Section 9,
if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent
Financing Notice within thirty (30) Trading Days after the date of the initial
Subsequent Financing Notice.

     

    g)           Notwithstanding
the foregoing, this Section 9 shall not
apply in respect of (i) an Exempt Issuance or (ii) an underwritten public
offering of Common Stock.

    

    Section
10.        Miscellaneous.

    

    a)           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, or sent by a nationally recognized
overnight courier service, addressed to the Corporation, at P.O. Box 1118, 1200
American Flat Road, Virginia City, NV 89440,
Attention: President, or such other
address as the Corporation may specify for such purposes by notice to the
Holders delivered in accordance with this Section 10(a).  Any and all notices or other
communications or deliveries to be provided by the Corporation hereunder shall
be in writing and delivered personally, or sent by a nationally recognized
overnight courier service addressed to each Holder at the address of such Holder
appearing on the books of the Corporation, or if no such address appears on the
books of the Corporation, at the principal place of business of such Holder, as
set forth in the Purchase Agreement.  Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (ii) upon actual
receipt by the party to whom such notice is required to be given.

    

    b)           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 accrued dividends on the shares of Series A-2
Preferred Stock at the time, place, and rate, and in the coin, currency or
shares (as applicable), herein prescribed.

    

    c)           Lost or Mutilated Series A-2
Preferred Stock Certificate.  If a Holder’s Series A-2
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
Series A-2 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 reasonably satisfactory to the
Corporation.

    

    
      
        
           

        

        
          19

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    d)           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 Nevada, without regard to the principles of conflict of laws
thereof.  The Corporation and each Holder agrees that all legal
proceedings concerning the interpretation, 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”).  The Corporation and each Holder 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 such New York Courts,
or such New York Courts are improper or inconvenient venue for such
proceeding.  The Corporation and each Holder 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 it 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 other manner permitted by applicable law. The
Corporation and each Holder 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 the Corporation or any Holder
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 in the investigation, preparation and
prosecution of such action or proceeding.

    

    e)           Waiver.  Any
waiver by the Corporation or a 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 or a waiver by any other Holders.  The
failure of the Corporation or a 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 (or any other Holder) of the right
thereafter to insist upon strict adherence to that term or any other term of
this Certificate of Designation on any other occasion.  Any waiver by
the Corporation or a Holder must be in writing.

    

    f)           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 the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law.

    

    g)           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.

    

    h)           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.

    

    
      
        
           

        

        
          20

          
            

          

        

        
           

        

      

    

    EXHIBIT
4.2

      

    i)           Status of Converted or
Redeemed Series A-2 Preferred Stock.  Shares of Series A-2
Preferred Stock may only be issued pursuant to the Transaction
Documents.  If any shares of Series A-2 Preferred Stock shall be
converted, redeemed or reacquired by the Corporation, such shares shall resume
the status of authorized but unissued shares of Preferred Stock and shall no
longer be designated as 7 1⁄2% Series A-2 Convertible Preferred
Stock.

    

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

    

    
      
        
           

        

        
          21

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