Document:

Unassociated Document

    
      Exhibit
        4.1

    

     

    THIS
      WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES
      ACT”),
      OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
      DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
      STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
      REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
      UNDER
      THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
      LAWS
      IS NOT REQUIRED.

    

    SERIES
      A-1 WARRANT TO PURCHASE

    

    SHARES
      OF
      COMMON STOCK

    

    OF

    

    INTERNATIONAL
      IMAGING SYSTEMS, INC.

    

    Expires
      October [__], 2012

     

    
      	
              No.:
                W-A-1-07- __

            	
              Number
                of Shares: ___________

            
	
              Date
                of Issuance: October [__], 2007

            	 

    

     

    FOR
      VALUE
      RECEIVED, the undersigned, INTERNATIONAL
      IMAGING SYSTEMS, INC.,
      a
      Delaware corporation (together with its successors and assigns, the
“Issuer”),
      hereby
      certifies that__________________________
      or its
      registered assigns is entitled to subscribe for and purchase, during the Term
      (as hereinafter defined), up to ____________________________________
      (_____________) shares (subject to adjustment as hereinafter provided) of the
      duly authorized, validly issued, fully paid and non-assessable Common Stock
      of
      the Issuer, at an exercise price per share equal to the Warrant Price then
      in
      effect, subject, however, to the provisions and upon the terms and conditions
      hereinafter set forth. Capitalized terms used in this Warrant and not otherwise
      defined herein shall have the respective meanings specified in Section
      9
      hereof.

    

    1. Term.
      The
      term of this Warrant shall commence on October [__], 2007 and shall expire
      at
      6:00 p.m., Eastern Time, on October [__], 2012 (such period being the
“Term”).

    

    
      
        2.
          Method
          of Exercise; Payment; Issuance of New Warrant; Transfer and
          Exchange.

      

    

    

    (a) Time
      of Exercise.
      The
      purchase rights represented by this Warrant may be exercised in whole or in
      part
      during the Term. 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    (b) Method
      of Exercise.
      The
      Holder hereof may exercise this Warrant, in whole or in part, by the surrender
      of this Warrant (with the exercise form attached hereto duly executed) at the
      principal office of the Issuer, and by the payment to the Issuer of an amount
      of
      consideration therefor equal to the Warrant Price in effect on the date of
      such
      exercise multiplied by the number of shares of Warrant Stock with respect to
      which this Warrant is then being exercised, payable at such Holder's election
      (i) by certified or official bank check or by
      wire
      transfer to an account designated by the Issuer,
      (ii) by
“cashless exercise” in accordance with the provisions of subsection (c) of this
Section
      2,
      but
      only when a registration statement under the Securities Act providing for the
      resale of the Warrant Stock and the Common Stock underlying the preferred stock
      issued pursuant to the Purchase Agreement is not then in effect, or (iii) by
      a
      combination of the foregoing methods of payment selected by the Holder of this
      Warrant.

    

    (c) Cashless
      Exercise.
      Notwithstanding any provision herein to the contrary, but subject to
Section
      2(b)(ii)
      hereof,
      and commencing twenty-four (24) months following the Original Issue Date if
      the
      Per Share Market Value of one share of Common Stock is greater than the Warrant
      Price (at the date of calculation as set forth below), in lieu of exercising
      this Warrant by payment of cash, the Holder may exercise this Warrant by a
      cashless exercise by surrender of this Warrant at the principal office of the
      Issuer together with the properly endorsed Notice of Exercise, in which event
      the Issuer shall issue to the Holder a number of shares of Common Stock computed
      using the following formula:

    

    X
      = Y -
(A)(Y)

                  
      B

    

    
      	
              Where

            	
              X
                =

            	
              the
                number of shares of Common Stock to be issued to the
                Holder.

            

      	 	 	 

      	 	
              Y
                =

            	
              the
                number of shares of Common Stock purchasable upon exercise of all
                of the
                Warrant or, if only a portion of the Warrant is being exercised,
                the
                portion of the Warrant being exercised.

            

    

    

    
      	 	
              A
                =

            	
              the
                Warrant Price. 

            

      	 	 	 

      	 	B =	the Per Share Market Value of one share of Common
              Stock.

    

    

    (d) Issuance
      of Stock Certificates.
      In the
      event of any exercise of this Warrant in accordance with and subject to the
      terms and conditions hereof, certificates for the shares of Warrant Stock so
      purchased shall be dated the date of such exercise and delivered to the Holder’s
      Prime Broker as specified in the Holder’s exercise form within a reasonable
      time, not exceeding five (5) Trading Days after such exercise (the “Delivery
      Date”)
      or, at
      the request of the Holder (provided that a registration statement under the
      Securities Act providing for the resale of the Warrant Stock is then in effect
      or that the shares of Warrant Stock are otherwise exempt from registration),
      issued and delivered to the Depository Trust Company (“DTC”)
      account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
      System (“DWAC”)
      within
      a reasonable time, not exceeding five (5) Trading Days after such exercise,
      and
      the Holder hereof shall be deemed for all purposes to be the holder of the
      shares of Warrant Stock so purchased as of the date of such exercise.
      Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent
      shall only be obligated to issue and deliver the shares to the DTC on a holder’s
      behalf via DWAC if such exercise is in connection with a sale or other exemption
      from registration by which the shares may be issued without a restrictive legend
      and the
      Issuer and its transfer agent are participating in DTC through the DWAC
      system.
      The
      Holder shall deliver this original Warrant, or an indemnification reasonably
      acceptable to the Issuer undertaking with respect to such Warrant in the case
      of
      its loss, theft or destruction, at such time that this Warrant is fully
      exercised. With respect to partial exercises of this Warrant, the Issuer shall
      keep written records for the Holder of the number of shares of Warrant Stock
      exercised as of each date of exercise.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
       

      Exhibit
        4.1

       

    

    (e) Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.
      In
      addition to any other rights available to the Holder, if the Issuer fails to
      cause its transfer agent to transmit to the Holder a certificate or certificates
      representing the Warrant Stock pursuant to an exercise on or before the second
      business day following the Delivery Date, and if after such date the Holder
      is
      required by its broker to purchase (in an open market transaction or otherwise)
      shares of Common Stock to deliver in satisfaction of a sale by the Holder of
      the
      Warrant Stock which the Holder anticipated receiving upon such exercise (a
      “Buy-In”),
      then
      the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of shares of Warrant Stock that the Issuer was
      required to deliver to the Holder in connection with the exercise at issue
      times
      (B) the price at which the sell order giving rise to such purchase obligation
      was executed, and (2) at the option of the Holder, either reinstate the portion
      of the Warrant and equivalent number of shares of Warrant Stock for which such
      exercise was not honored or deliver to the Holder the number of shares of Common
      Stock that would have been issued had the Issuer timely complied with its
      exercise and delivery obligations hereunder. For example, if the Holder
      purchases Common Stock having a total purchase price of $11,000 to cover a
      Buy-In with respect to an attempted exercise of shares of Common Stock with
      an
      aggregate sale price giving rise to such purchase obligation of $10,000, under
      clause (1) of the immediately preceding sentence the Issuer shall be required
      to
      pay the Holder $1,000. The Holder shall provide the Issuer written notice
      indicating the amounts payable to the Holder in respect of the Buy-In, together
      with applicable confirmations and other evidence reasonably requested by the
      Issuer. 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
      Issuer’s failure to timely deliver certificates representing shares of Common
      Stock upon exercise of this Warrant as required pursuant to the terms
      hereof.

     

    (f) Transferability
      of Warrant.
      Subject
      to Section
      2(h)
      hereof,
      this Warrant may be transferred by a Holder, in whole or in part, without the
      consent of the Issuer. If transferred pursuant to this paragraph, this Warrant
      may be transferred on the books of the Issuer by the Holder hereof in person
      or
      by duly authorized attorney, upon surrender of this Warrant at the principal
      office of the Issuer, properly endorsed (by the Holder executing an assignment
      in the form attached hereto) and upon payment of any necessary transfer tax
      or
      other governmental charge imposed upon such transfer. This Warrant is
      exchangeable at the principal office of the Issuer for Warrants to purchase
      the
      same aggregate number of shares of Warrant Stock, each new Warrant to represent
      the right to purchase such number of shares of Warrant Stock as the Holder
      hereof shall designate at the time of such exchange. All Warrants issued on
      transfers or exchanges shall be dated the Original Issue Date and shall be
      identical with this Warrant except as to the number of shares of Warrant Stock
      issuable pursuant thereto.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    (g) Continuing
      Rights of Holder.
      The
      Issuer will, at the time of or at any time after each exercise of this Warrant,
      upon the request of the Holder hereof, acknowledge in writing the extent, if
      any, of its continuing obligation to afford to such Holder all rights to which
      such Holder shall continue to be entitled after such exercise in accordance
      with
      the terms of this Warrant, provided
      that if
      any such Holder shall fail to make any such request, the failure shall not
      affect the continuing obligation of the Issuer to afford such rights to such
      Holder.

    

    (h) Compliance
      with Securities Laws.

    

    (i) The
      Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
      and
      the shares of Warrant Stock to be issued upon exercise hereof are being acquired
      solely for the Holder's own account and not as a nominee for any other party,
      and for investment, and that the Holder will not offer, sell or otherwise
      dispose of this Warrant or any shares of Warrant Stock to be issued upon
      exercise hereof except pursuant to an effective registration statement, or
      an
      exemption from registration, under the Securities Act and any applicable state
      securities laws.

    

    (ii) Except
      as
      provided in paragraph (iii) below, this Warrant and all certificates
      representing shares of Warrant Stock issued upon exercise hereof shall be
      stamped or imprinted with a legend in substantially the following
      form:

    

    THIS
      WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      OR
      ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
      OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
      SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
      REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
      UNDER
      THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
      LAWS
      IS NOT REQUIRED.

    

    (iii) The
      Issuer agrees to reissue this Warrant or certificates representing any of the
      Warrant Stock, without the legend set forth above, if at such time, prior to
      making any transfer of any such securities, the Holder shall give written notice
      to the Issuer describing the manner and terms of such transfer and demonstrating
      that the following conditions are satisfied. Such proposed transfer will not
      be
      effected until: (a) either (i) the Issuer has received an opinion of counsel
      reasonably satisfactory to the Issuer, to the effect that the registration
      of
      such securities under the Securities Act is not required in connection with
      such
      proposed transfer, or (ii) a registration statement under the Securities Act
      covering such proposed disposition has been filed by the Issuer with the
      Securities and Exchange Commission and has become and remains effective under
      the Securities Act, or (b) either (i) the Issuer has received an opinion of
      counsel reasonably satisfactory to the Issuer, to the effect that registration
      or qualification under the securities or “blue sky” laws of any state is not
      required in connection with such proposed disposition, or (ii) compliance with
      applicable state securities or “blue sky” laws has been effected or a valid
      exemption exists with respect thereto. The Issuer will respond to any such
      notice from a holder within three (3) Trading Days. In the case of any proposed
      transfer under this Section
      2(h),
      the
      Issuer will use reasonable efforts to comply with any such applicable state
      securities or “blue sky” laws, but shall in no event be required, (x) to qualify
      to do business in any state where it is not then qualified, (y) to take any
      action that would subject it to tax or to the general service of process in
      any
      state where it is not then subject, or (z) to comply with state securities
      or
“blue sky” laws of any state for which registration by coordination is
      unavailable to the Issuer. The restrictions on transfer contained in this
Section
      2(h)
      shall be
      in addition to, and not by way of limitation of, any other restrictions on
      transfer contained in any other section of this Warrant. Whenever
      a
      certificate representing the Warrant Stock is required to be issued to the
      Holder without a legend, in lieu of delivering physical certificates
      representing the Warrant Stock, the Issuer shall cause its transfer agent to
      electronically transmit the Warrant Stock to the Holder by crediting the account
      of the Holder or Holder's Prime Broker with DTC through its DWAC system (to
      the
      extent not inconsistent with any provisions of this Warrant or the Purchase
      Agreement). 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
       

      Exhibit
        4.1

    

     

    (i) Accredited
      Investor Status.
      In no
      event may the Holder exercise this Warrant in whole or in part unless the Holder
      is an “accredited investor” as defined in Regulation D under the Securities Act.

    

    3. Stock
      Fully Paid; Reservation and Listing of Shares; Covenants; Loss, Theft,
      Destruction.

    

    (a) Stock
      Fully Paid.
      The
      Issuer represents, warrants, covenants and agrees that all shares of Warrant
      Stock which may be issued upon the exercise of this Warrant or otherwise
      hereunder will, when issued in accordance with the terms of this Warrant, be
      duly authorized, validly issued, fully paid and non-assessable and free from
      all
      taxes, liens and charges created by or through the Issuer. The Issuer further
      covenants and agrees that during the period within which this Warrant may be
      exercised, the Issuer will at all times have authorized and reserved for the
      purpose of the issuance upon exercise of this Warrant a number of authorized
      but
      unissued shares of Common Stock equal to at least one hundred ten percent (110%)
      of the number of shares of Common Stock issuable upon exercise of this Warrant
      without regard to any limitations on exercise.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

       

    

    (b) Reservation.
      If any
      shares of Common Stock required to be reserved for issuance upon exercise of
      this Warrant or as otherwise provided hereunder require registration or
      qualification with any Governmental Authority under any federal or state law
      before such shares may be so issued, the Issuer will in good faith use its
      best
      efforts as expeditiously as possible at its expense to cause such shares to
      be
      duly registered or qualified. If the Issuer shall list any shares of Common
      Stock on any securities exchange or market it will, at its expense, list
      thereon, and maintain and increase when necessary such listing, of, all shares
      of Warrant Stock from time to time issued upon exercise of this Warrant or
      as
      otherwise provided hereunder (provided that such Warrant Stock has been
      registered pursuant to a registration statement under the Securities Act then
      in
      effect), and, to the extent permissible under the applicable securities exchange
      rules, all unissued shares of Warrant Stock which are at any time issuable
      hereunder, so long as any shares of Common Stock shall be so listed. The Issuer
      will also so list on each securities exchange or market, and will maintain
      such
      listing of, any other securities which the Holder of this Warrant shall be
      entitled to receive upon the exercise of this Warrant if at the time any
      securities of the same class shall be listed on such securities exchange or
      market by the Issuer.

    

    (c) Covenants.
      The
      Issuer shall not by any action including, without limitation, amending the
      Certificate of Incorporation or the by-laws of the Issuer, or through any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other action, avoid or seek to avoid the observance
      or
      performance of any of the terms of this Warrant, but will at all times in good
      faith assist in the carrying out of all such terms and in the taking of all
      such
      actions as may be necessary or appropriate to protect the rights of the Holder
      hereof against dilution (to the extent specifically provided herein) or
      impairment. Without limiting the generality of the foregoing, the Issuer will
      (i) not permit the par value, if any, of its Common Stock to exceed the then
      effective Warrant Price, (ii) not amend or modify any provision of the
      Certificate of Incorporation or by-laws of the Issuer in any manner that would
      adversely affect the rights of the Holders of the Warrants, (iii) take all
      such
      action as may be reasonably necessary in order that the Issuer may validly
      and
      legally issue fully paid and nonassessable shares of Common Stock, free and
      clear of any liens, claims, encumbrances and restrictions (other than as
      provided herein) upon the exercise of this Warrant, and (iv) use its best
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be reasonably
      necessary to enable the Issuer to perform its obligations under this
      Warrant.

    

    (d) Loss,
      Theft, Destruction of Warrants.
      Upon
      receipt of evidence satisfactory to the Issuer of the ownership of and the
      loss,
      theft, destruction or mutilation of any Warrant and, in the case of any such
      loss, theft or destruction, upon receipt of indemnity or security satisfactory
      to the Issuer or, in the case of any such mutilation, upon surrender and
      cancellation of such Warrant, the Issuer will make and deliver, in lieu of
      such
      lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
      representing the right to purchase the same number of shares of Common
      Stock.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    4. Adjustment
      of Warrant Price.
      The
      Warrant Price shall be subject to adjustment from time to time as set forth
      in
      this Section
      4.
      The
      Issuer shall give the Holder notice of any event described below which requires
      an adjustment pursuant to this Section
      4
      in
      accordance with the notice provisions set forth in Section
      5.

    

    (a) Recapitalization,
      Reorganization, Reclassification, Consolidation, Merger or Sale.

     

    (i)
      In
      case the Issuer after the Original Issue Date shall do any of the following
      (each, a “Triggering
      Event”):
      (a)
      consolidate or merge with or into any other Person and the Issuer shall not
      be
      the continuing or surviving corporation of such consolidation or merger, or
      (b)
      permit any other Person to consolidate with or merge into the Issuer and the
      Issuer shall be the continuing or surviving Person but, in connection with
      such
      consolidation or merger, any Capital Stock of the Issuer shall be changed into
      or exchanged for Securities of any other Person or cash or any other property,
      or (c) transfer all or substantially all of its properties or assets to any
      other Person, or (d) effect a capital reorganization or reclassification of
      its
      Capital Stock, then, and in the case of each such Triggering Event, proper
      provision shall be made to the Warrant Price and the number of shares of Warrant
      Stock that may be purchased upon exercise of this Warrant so that, upon the
      basis and the terms and in the manner provided in this Warrant, the Holder
      of
      this Warrant shall be entitled upon the exercise hereof at any time after the
      consummation of such Triggering Event, to the extent this Warrant is not
      exercised prior to such Triggering Event, to receive at the Warrant Price in
      effect at the time immediately prior to the consummation of such Triggering
      Event, in lieu of the Common Stock issuable upon such exercise of this Warrant
      prior to such Triggering Event, the Securities and property to which such Holder
      would have been entitled upon the consummation of such Triggering Event if
      such
      Holder had exercised the rights represented by this Warrant immediately prior
      to
      such Triggering Event (including the right of a shareholder to elect the type
      of
      consideration it will receive upon a Triggering Event), subject to adjustments
      (subsequent to such corporate action) as nearly equivalent as possible to the
      adjustments provided for elsewhere in this Section
      4; provided,
      however, the Holder at its option may elect to receive an amount in unregistered
      shares of the common stock of the surviving entity equal to the value of this
      Warrant calculated in accordance with the Black-Scholes formula; provided,
      further, such shares of Common Stock shall be valued at a twenty percent (20%)
      discount to the VWAP of the Common Stock for the twenty (20) Trading Days
      immediately prior to the Triggering Event. Immediately upon the occurrence
      of a
      Triggering Event, the Issuer shall notify the Holder in writing of such
      Triggering Event and provide the calculations used in determining the number
      of
      shares of Warrant Stock issuable upon exercise of the new warrant and the
      adjusted Warrant Price. Upon the Holder’s request, the continuing or surviving
      corporation as a result of such Triggering Event shall issue to the Holder
      a new
      warrant of like tenor evidencing the right to purchase the adjusted number
      of
      shares of Warrant Stock and the adjusted Warrant Price pursuant to the terms
      and
      provisions of this Section
      4(a)(i).
      Notwithstanding the foregoing to the contrary, this Section
      4(a)(i)
      shall
      only apply if the surviving entity pursuant to any such Triggering Event is
      a
      company that has a class of equity securities registered
      pursuant to the Securities Exchange Act of 1934, as amended, and its common
      stock is listed or quoted on a national securities exchange, national automated
      quotation system or the OTC Bulletin Board. In the event that the
      surviving entity pursuant to any such Triggering Event is not a public company
      that is
      registered pursuant to the Securities Exchange Act of 1934, as amended, or
      its
      common stock is not listed or quoted on a national securities exchange, national
      automated quotation system or the OTC Bulletin Board, then the Holder shall
      have
      the right to demand that the Issuer issue to the Holder that number of
      restricted shares of Common Stock the Holder would be entitled to upon
      the
      occurrence of such Triggering Event if such Holder had exercised the rights
      represented by this Warrant immediately prior to such Triggering
      Event
      at a
Warrant
      Price equal to the average of the VWAP for the twenty (20) trading days
      immediately prior to the occurrence of such Triggering Event. 

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
       

      Exhibit
        4.1

    

     

    (ii) In
      the
      event that the Holder has elected not to exercise this Warrant prior to the
      consummation of a Triggering Event and has also elected not to receive an amount
      of restricted shares of Common Stock at a Warrant Price equal to the average
      of
      the VWAP for the twenty trading days pursuant to the provisions of Section
      4(a)(i)
      above,
      so long as the surviving entity pursuant to any Triggering Event is a company
      that has a class of equity securities registered
      pursuant to the Securities Exchange Act of 1934, as amended, and its common
      stock is listed or quoted on a national securities exchange, national automated
      quotation system or the OTC Bulletin Board,
      the
      surviving entity and/or each Person (other than the Issuer) which may be
      required to deliver any Securities or property upon the exercise of this Warrant
      as provided herein shall assume, by written instrument delivered to, and
      reasonably satisfactory to, the Holder of this Warrant, (A) the obligations
      of
      the Issuer under this Warrant (and if the Issuer shall survive the consummation
      of such Triggering Event, such assumption shall be in addition to, and shall
      not
      release the Issuer from, any continuing obligations of the Issuer under this
      Warrant) and (B) the obligation to deliver to such Holder such Securities or
      property as, in accordance with the foregoing provisions of this subsection
      (a),
      such Holder shall be entitled to receive, and the surviving entity and/or each
      such Person shall have similarly delivered to such Holder an opinion of counsel
      for the surviving entity and/or each such Person, which counsel shall be
      reasonably satisfactory to such Holder, or in the alternative, a written
      acknowledgement executed by the President or Chief Financial Officer of the
      Issuer, stating that this Warrant shall thereafter continue in full force and
      effect and the terms hereof (including, without limitation, all of the
      provisions of this subsection (a)) shall be applicable to the Securities, cash
      or property which the surviving entity and/or each such Person may be required
      to deliver upon any exercise of this Warrant or the exercise of any rights
      pursuant hereto. 

    

    (b) Stock
      Dividends, Subdivisions and Combinations.
      If at
      any time the Issuer shall:

    

    (i) make
      or
      issue or set a record date for the holders of the Common Stock for the purpose
      of entitling them to receive, a dividend payable in, or other distribution
      of,
      shares of Common Stock, 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
       

      Exhibit
        4.1

    

     

    (ii)
       subdivide
      its outstanding shares of Common Stock into a larger number of shares of Common
      Stock, or

     

    (iii)
       combine
      its outstanding shares of Common Stock into a smaller number of shares of Common
      Stock,

    

    then
      (1)
      the number of shares of Common Stock for which this Warrant is exercisable
      immediately after the occurrence of any such event shall be adjusted to equal
      the number of shares of Common Stock which a record holder of the same number
      of
      shares of Common Stock for which this Warrant is exercisable immediately prior
      to the occurrence of such event would own or be entitled to receive after the
      happening of such event, and (2) the Warrant Price then in effect shall be
      adjusted to equal (A) the Warrant Price then in effect multiplied by the number
      of shares of Common Stock for which this Warrant is exercisable immediately
      prior to the adjustment divided by (B) the number of shares of Common Stock
      for
      which this Warrant is exercisable immediately after such
      adjustment.

    

    (c) Certain
      Other Distributions.
      If at
      any time the Issuer shall make or issue or set a record date for the holders
      of
      the Common Stock for the purpose of entitling them to receive any dividend
      or
      other distribution of:

    

    (i) cash,

    

    (ii) any
      evidences of its indebtedness, any shares of stock of any class or any other
      securities or property of any nature whatsoever, or

    

    (iii) any
      warrants or other rights to subscribe for or purchase any evidences of its
      indebtedness, any shares of stock of any class or any other securities or
      property of any nature whatsoever, 

    

    then
      (1)
      the number of shares of Common Stock for which this Warrant is exercisable
      shall
      be adjusted to equal the product of the number of shares of Common Stock for
      which this Warrant is exercisable immediately prior to such adjustment
      multiplied by a fraction (A) the numerator of which shall be the Per Share
      Market Value of Common Stock at the date of taking such record and (B) the
      denominator of which shall be such Per Share Market Value minus the amount
      allocable to one share of Common Stock of any such cash so distributable and
      of
      the fair value (as determined in good faith by the Board and supported by an
      opinion from an investment banking firm mutually agreed upon by the Issuer
      and
      the Holder) of any and all such evidences of indebtedness, shares of stock,
      other securities or property or warrants or other subscription or purchase
      rights so distributable, and (2) the Warrant Price then in effect shall be
      adjusted to equal (A) the Warrant Price then in effect multiplied by the number
      of shares of Common Stock for which this Warrant is exercisable immediately
      prior to the adjustment divided by (B) the number of shares of Common Stock
      for
      which this Warrant is exercisable immediately after such adjustment. A
      reclassification of the Common Stock (other than a change in par value, or
      from
      par value to no par value or from no par value to par value) into shares of
      Common Stock and shares of any other class of stock shall be deemed a
      distribution by the Issuer to the holders of its Common Stock of such shares
      of
      such other class of stock within the meaning of this Section
      4(c)
      and, if
      the outstanding shares of Common Stock shall be changed into a larger or smaller
      number of shares of Common Stock as a part of such reclassification, such change
      shall be deemed a subdivision or combination, as the case may be, of the
      outstanding shares of Common Stock within the meaning of Section
      4(b). 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    (d) Issuance
      of Additional Shares of Common Stock.
      For a
      period of one (1) year following the Original Issue Date (the “Full
      Ratchet Period”),
      in
      the event the Issuer shall issue any Additional Shares of Common Stock
      (otherwise than as provided in the foregoing subsections (a) through (c) of
      this
Section
      4),
      at a
      price per share less than the Warrant Price then in effect or without
      consideration, then the Warrant Price upon each such issuance shall be adjusted
      to a price equal to the consideration per share paid for such Additional Shares
      of Common Stock.

    

    (e) Issuance
      of Common Stock Equivalents.
      During
      the Full Ratchet Period, in the event the Issuer shall take a record of the
      holders of its Common Stock for the purpose of entitling them to receive a
      distribution of, or shall in any manner (whether directly or by assumption
      in a
      merger in which the Issuer is the surviving corporation) issue or sell, any
      Common Stock Equivalents, whether or not the rights to exchange or convert
      thereunder are immediately exercisable, and the price per share for which Common
      Stock is issuable upon such conversion or exchange shall be less than the
      Warrant Price in effect immediately prior to the time of such issue or sale,
      or
      if, after any such issuance of Common Stock Equivalents, the price per share
      for
      which Additional Shares of Common Stock may be issuable thereafter is amended
      or
      adjusted, and such price as so amended shall be less than the Warrant Price
      in
      effect at the time of such amendment or adjustment, then the Warrant Price
      then
      in effect shall be adjusted as provided in Section
      4(d).
      No
      further adjustments of the number of shares of Common Stock for which this
      Warrant is exercisable and the Warrant Price then in effect shall be made upon
      the actual issue of such Common Stock upon conversion or exchange of such Common
      Stock Equivalents.

    

    (f) Subsequent
      Common Stock and Common Stock Equivalents Issues.
      In the
      event the Issuer, shall, at any time during the thirty-six
      (36) months immediately after
      the
      Full Ratchet Period, issue or sell any Additional Shares of Common Stock or
      Common Stock Equivalents (otherwise than as provided in the foregoing
subsections
      (a) through (c) of this Section 4),
      at a
      price per share less than the Warrant Price, or without consideration, the
      Warrant Price then in effect upon each such issuance shall be adjusted to that
      price (rounded to the nearest cent) determined by multiplying the Warrant Price
      by a fraction: (1) the numerator of which shall be equal to the sum
      of (A)
      the number of shares of Outstanding Common Stock immediately prior to the
      issuance of such Additional Shares of Common Stock plus
      (B) the
      number of shares of Common Stock (rounded to the nearest whole share) which
      the
      aggregate consideration for the total number of such Additional Shares of Common
      Stock so issued would purchase at a price per share equal to the Warrant Price
      in effect immediately prior to such issuance; and (2) the denominator of which
      shall be equal to the number of shares of Outstanding Common Stock immediately
      after the issuance of such Additional Shares of Common Stock. No adjustment
      of
      the Warrant Price shall be made upon the issuance of any Additional Shares
      of
      Common Stock which are issued pursuant to the exercise of any warrants or other
      subscription or purchase rights or pursuant to the exercise of any conversion
      or
      exchange rights in any Common Stock Equivalents if any such adjustment shall
      previously have been made upon the issuance of such warrants or other rights
      or
      upon the issuance of such Common Stock Equivalents (or upon the issuance of
      any
      warrant or other rights therefore).
      

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    (g) Superseding
      Adjustment.
      If, at
      any time after any adjustment of the Warrant Price then in effect shall have
      been made pursuant to Section
      4(e) or 4(f)
      as the
      result of any issuance of Common Stock Equivalents, and such Common Stock
      Equivalents, or the right of conversion or exchange in such Common Stock
      Equivalents, shall expire, and all of such or the right of conversion or
      exchange with respect to all of such Common Stock Equivalents shall not have
      been converted or exercised, then such previous adjustment shall be rescinded
      and annulled and the Warrant Price then in effect shall be adjusted to the
      Warrant Price in effect immediately prior to the issuance of such Common Stock
      Equivalents, subject to any further adjustments pursuant to this Section
      4.

    

    (h) Other
      Provisions applicable to Adjustments under this Section.
      The
      following provisions shall be applicable to the making of adjustments of the
      number of shares of Common Stock for which this Warrant is exercisable and
      the
      Warrant Price then in effect provided for in this Section
      4:

    

    (i) Computation
      of Consideration.
      To the
      extent that any Additional Shares of Common Stock or any Common Stock
      Equivalents (or any warrants or other rights therefor) shall be issued for
      cash
      consideration, the consideration received by the Issuer therefor shall be the
      amount of the cash received by the Issuer therefor, or, if such Additional
      Shares of Common Stock or Common Stock Equivalents are offered by the Issuer
      for
      subscription, the subscription price, or, if such Additional Shares of Common
      Stock or Common Stock Equivalents are sold to underwriters or dealers for public
      offering without a subscription offering, the initial public offering price
      (in
      any such case subtracting any amounts paid or receivable for accrued interest
      or
      accrued dividends and without taking into account any compensation, discounts
      or
      expenses paid or incurred by the Issuer for and in the underwriting of, or
      otherwise in connection with, the issuance thereof). In connection with any
      merger or consolidation in which the Issuer is the surviving corporation (other
      than any consolidation or merger in which the previously outstanding shares
      of
      Common Stock of the Issuer shall be changed to or exchanged for the stock or
      other securities of another corporation), the amount of consideration therefor
      shall be deemed to be the fair value, as determined reasonably and in good
      faith
      by the Board, of such portion of the assets and business of the nonsurviving
      corporation as the Board may determine to be attributable to such shares of
      Common Stock or Common Stock Equivalents, as the case may be. The consideration
      for any Additional Shares of Common Stock issuable pursuant to any warrants
      or
      other rights to subscribe for or purchase the same shall be the sum of (A)
      the
      consideration received by the Issuer for issuing such warrants or other rights,
      plus (B) the additional consideration payable to the Issuer upon exercise of
      such warrants or other rights. The consideration for any Additional Shares
      of
      Common Stock issuable pursuant to the terms of any Common Stock Equivalents
      shall be the sum of (A) the consideration received by the Issuer for issuing
      warrants or other rights to subscribe for or purchase such Common Stock
      Equivalents, plus (B) the consideration paid or payable to the Issuer in respect
      of the subscription for or purchase of such Common Stock Equivalents, plus
      (C)
      the additional consideration, if any, payable to the Issuer upon the exercise
      of
      the right of conversion or exchange in such Common Stock Equivalents. In the
      event of any consolidation or merger of the Issuer in which the Issuer is not
      the surviving corporation or in which the previously outstanding shares of
      Common Stock of the Issuer shall be changed into or exchanged for the stock
      or
      other securities of another corporation, or in the event of any sale of all
      or
      substantially all of the assets of the Issuer for stock or other securities
      of
      any corporation, the Issuer shall be deemed to have issued a number of shares
      of
      its Common Stock for stock or securities or other property of the other
      corporation computed on the basis of the actual exchange ratio on which the
      transaction was predicated, and for a consideration equal to the fair market
      value on the date of such transaction of all such stock or securities or other
      property of the other corporation. In the event any consideration received
      by
      the Issuer for any securities consists of property other than cash, the fair
      market value thereof at the time of issuance or as otherwise applicable shall
      be
      as determined in good faith by the Board. In the event Common Stock is issued
      with other shares or securities or other assets of the Issuer for consideration
      which covers both, the consideration computed as provided in this Section
      4(g)(i)
      shall be
      allocated among such securities and assets as determined in good faith by the
      Board.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    (ii) When
      Adjustments to Be Made.
      The
      adjustments required by this Section
      4
      shall be
      made whenever and as often as any specified event requiring an adjustment shall
      occur, except that any adjustment of the number of shares of Common Stock for
      which this Warrant is exercisable that would otherwise be required may be
      postponed (except in the case of a subdivision or combination of shares of
      the
      Common Stock, as provided for in Section
      4(b))
      up to,
      but not beyond the date of exercise if such adjustment either by itself or
      with
      other adjustments not previously made adds or subtracts less than one percent
      (1%) of the shares of Common Stock for which this Warrant is exercisable
      immediately prior to the making of such adjustment. Any adjustment representing
      a change of less than such minimum amount (except as aforesaid) which is
      postponed shall be carried forward and made as soon as such adjustment, together
      with other adjustments required by this Section
      4
      and not
      previously made, would result in a minimum adjustment or on the date of
      exercise. For the purpose of any adjustment, any specified event shall be deemed
      to have occurred at the close of business on the date of its
      occurrence.

    

    (iii) Fractional
      Interests.
      In
      computing adjustments under this Section
      4,
      fractional interests in Common Stock shall be taken into account to the nearest
      one one-hundredth (1/100th)
      of a
      share.

    

    (iv) When
      Adjustment Not Required.
      If the
      Issuer shall take a record of the holders of its Common Stock for the purpose
      of
      entitling them to receive a dividend or distribution or subscription or purchase
      rights and shall, thereafter and before the distribution to stockholders
      thereof, legally abandon its plan to pay or deliver such dividend, distribution,
      subscription or purchase rights, then thereafter no adjustment shall be required
      by reason of the taking of such record and any such adjustment previously made
      in respect thereof shall be rescinded and annulled.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    (h) Form
      of Warrant after Adjustments.
      The
      form of this Warrant need not be changed because of any adjustments in the
      Warrant Price or the number and kind of Securities purchasable upon the exercise
      of this Warrant.

    

    (i) Escrow
      of Warrant Stock.
      If
      after any property becomes distributable pursuant to this Section
      4
      by
      reason of the taking of any record of the holders of Common Stock, but prior
      to
      the occurrence of the event for which such record is taken, and the Holder
      exer
      cises this Warrant, any shares of Common Stock issuable upon exercise by reason
      of such adjustment shall be deemed the last shares of Common Stock for which
      this Warrant is exercised (notwithstanding any other provision to the contrary
      herein) and such shares or other property shall be held in escrow for the Holder
      by the Issuer to be issued to the Holder upon and to the extent that the event
      actually takes place, upon payment of the current Warrant Price. Notwithstanding
      any other provision to the contrary herein, if the event for which such record
      was taken fails to occur or is rescinded, then such escrowed shares shall be
      cancelled by the Issuer and escrowed property returned.

    

    5. Notice
      of Adjustments.
      Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
      to
Section
      4
      hereof
      (for purposes of this Section
      5,
      each an
“adjustment”),
      the
      Issuer shall cause its Chief Financial Officer to prepare and execute a
      certificate setting forth, in reasonable detail, the event requiring the
      adjustment, the amount of the adjustment, the method by which such adjustment
      was calculated (including a description of the basis on which the Board made
      any
      determination hereunder), and the Warrant Price and Warrant Share Number after
      giving effect to such adjustment, and shall cause copies of such certificate
      to
      be delivered to the Holder of this Warrant promptly after each adjustment.
      Any
      dispute between the Issuer and the Holder of this Warrant with respect to the
      matters set forth in such certificate may at the option of the Holder of this
      Warrant be submitted to a national or regional accounting firm reasonably
      acceptable to the Issuer and the Holder, provided
      that the
      Issuer shall have ten (10) days after receipt of notice from such Holder of
      its
      selection of such firm to object thereto, in which case such Holder shall select
      another such firm and the Issuer shall have no such right of objection. The
      firm
      selected by the Holder of this Warrant as provided in the preceding sentence
      shall be instructed to deliver a written opinion as to such matters to the
      Issuer and such Holder within thirty (30) days after submission to it of such
      dispute. Such opinion shall be final and binding on the parties hereto. The
      costs and expenses of the initial accounting firm shall be paid equally by
      the
      Issuer and the Holder and, in the case of an objection by the Issuer, the costs
      and expenses of the subsequent accounting firm shall be paid in full by the
      Issuer.

    

    6. Fractional
      Shares.
      No
      fractional shares of Warrant Stock will be issued in connection with any
      exercise hereof, but in lieu of such fractional shares, the Issuer shall make
      a
      cash payment therefor equal in amount to the product of the applicable fraction
      multiplied by the Per Share Market Value then in effect.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    7. Ownership
      Cap and Exercise Restriction.
      The
      Issuer shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, to the extent that,
      after giving effect to the exercise set forth on the applicable Notice of
      Exercise, such Holder would beneficially own in excess of the Beneficial
      Ownership Limitation (as defined below). For purposes of this Section
      7,
      beneficial ownership shall be calculated in accordance with Section 13(d) of
      the
      Exchange Act and the rules and regulations promulgated thereunder. To the extent
      that the limitation contained in this Section
      7
      applies,
      the determination of whether the Warrant is exercisable and of how many shares
      of Warrant are exercised shall be in the sole discretion of such Holder, and
      the
      submission of a Notice of Exercise shall be deemed to be such Holder’s
      determination of whether the shares of this Warrant may be exercised and how
      many shares of the Warrant are exercisable, in each case subject to such
      aggregate percentage limitations. To ensure compliance with this restriction,
      each Holder will be deemed to represent to the Issuer each time it delivers
      a
      Notice of Exercise that such Notice of Exercise has not violated the
      restrictions set forth in this paragraph. In
      addition, a determination as to any group status as contemplated above shall
      be
      determined in accordance with Section 13(d) of the Exchange Act and
      the
      rules and regulations promulgated thereunder.
      For
      purposes of this Section
      7,
      in
      determining the number of outstanding shares of Common Stock, a Holder may
      rely
      on the number of outstanding shares of Common Stock as stated in the most recent
      of the following: (A) the Issuer’s most recent Form 10-QSB or Form 10-KSB, as
      the case may be, (B) a more recent public announcement by the Issuer or (C)
      a
      more recent notice by the Issuer or the Issuer’s transfer agent setting forth
      the number of shares of Common Stock outstanding. Upon the written or oral
      request of a Holder, the Issuer shall within two (2) Trading Days confirm orally
      and in writing to such Holder the number of shares of Common Stock then
      outstanding. In any case, the number of outstanding shares of Common Stock
      shall
      be determined after giving effect to the conversion or exercise of securities
      of
      the Issuer by such Holder since the date as of which such number of outstanding
      shares of Common Stock was reported. The “Beneficial
      Ownership Limitation”
shall
      be 4.99% of the number of shares of the Common Stock outstanding immediately
      after giving effect to the issuance of shares of Common Stock issuable upon
      conversion of Warrant held by the applicable Holder. The Beneficial Ownership
      Limitation provisions of this Section
      7
      may be
      waived by a Holder, at the election of such Holder, upon not less than 61 days’
prior notice to the Issuer (“Limitation Notice”); provided however, that if less
      than 61 days remains on the Warrant’s Term, the Beneficial Ownership Limitation
      provisions of this Section 7 shall remain in full force and effect until such
      time as the Holder submits a Limitation Notice to the Company, which such
      Limitation Notice may be provided at any time during such period and which
      shall
      be effective as of the date of such Limitation Notice for such number of shares
      as specified therein. The provisions of this paragraph shall be construed and
      implemented in a manner otherwise than in strict conformity with the terms
      of
      this Section
      7
      to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Beneficial Ownership Limitation herein contained
      or to make changes or supplements necessary or desirable to properly give effect
      to such limitation.
      The
      limitations contained in this paragraph shall apply to a successor holder of
      Warrant.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

    

     

    8. Registration
      Rights.
      

    

    The
      Holder of this Warrant is entitled to the benefit of certain registration rights
      with respect to the shares of Warrant Stock issuable upon the exercise of this
      Warrant, pursuant to that certain Registration Rights Agreement, of even date
      herewith, by and among the Issuer and Persons listed on Schedule I thereto
      (the
“Registration
      Rights Agreement”)
      and
      the registration rights with respect to the shares of Warrant Stock issuable
      upon the exercise of this Warrant by any subsequent Holder may only be assigned
      in accordance with the terms and provisions of the Registrations Rights
      Agreement.

     

    9. Definitions.
      For the
      purposes of this Warrant, the following terms have the following
      meanings:

    

    “Additional
      Shares of Common Stock”
means
      all shares of Common Stock issued by the Issuer after the Original Issue Date,
      and all shares of Other Common, if any, issued by the Issuer after the Original
      Issue Date, except: (i) the Warrant Stock,(ii) securities issued (other than
      for
      cash) in connection with a merger, acquisition, or consolidation, (iii)
      securities issued pursuant to the conversion or exercise of convertible or
      exercisable securities issued or outstanding on or prior to the date of the
      Purchase Agreement or issued pursuant to the Purchase Agreement (so long as
      the
      terms governing the conversion or exercise price in such securities are not
      amended to lower such price and/or adversely affect the Holders); (iii)
      securities issued in connection with bona fide strategic license agreements
      or
      other partnering arrangements so long as such issuances are not for the purpose
      of raising capital and so long as such agreements and arrangements are
      pre-approved in writing by the Holder, (iv) Common Stock issued or the issuance
      or grants of options to purchase Common Stock pursuant to the Company’s stock
      option plans and employee stock purchase plans outstanding as they exist on
      the
      date of the Purchase Agreement, and (v) securities issued to any placement
      agent
      and its respective designees for the transactions contemplated by the Purchase
      Agreement.

     

    “Board”
shall
      mean the Board of Directors of the Issuer.

    

    “Capital
      Stock”
means
      and includes (i) any and all shares, interests, participations or other
      equivalents of or interests in (however designated) corporate stock, including,
      without limitation, shares of preferred or preference stock, (ii) all
      partnership interests (whether general or limited) in any Person which is a
      partnership, (iii) all membership interests or limited liability company
      interests in any limited liability company, and (iv) all equity or ownership
      interests in any Person of any other type.

    

    “Certificate
      of Incorporation”
means
      the Amended and Restated Certificate of Incorporation of the Issuer as in effect
      on the Original Issue Date, and as hereafter from time to time amended,
      modified, supplemented or restated in accordance with the terms hereof and
      thereof and pursuant to applicable law. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

      Exhibit
        4.1

       

    

    “Common
      Stock”
means
      the Common Stock, $0.001 par value per share, of the Issuer and any other
      Capital Stock into which such stock may hereafter be changed.

    

    “Common
      Stock Equivalent”
means
      any Convertible Security or warrant, option or other right to subscribe for
      or
      purchase any Additional Shares of Common Stock or any Convertible
      Security.

    

    “Convertible
      Securities”
means
      evidences of indebtedness, shares of Capital Stock or other Securities which
      are
      or may be at any time convertible into or exchangeable for Additional Shares
      of
      Common Stock. The term “Convertible
      Security”
means
      one of the Convertible Securities.

    

    “Governmental
      Authority”
means
      any governmental, regulatory or self-regulatory entity, department, body,
      official, authority, commission, board, agency or instrumentality, whether
      federal, state or local, and whether domestic or foreign.

    

    “Holders”
mean
      the Persons who shall from time to time own any Warrant. The term “Holder”
means
      one of the Holders.

    

    “Independent
      Appraiser”
means
      a
      nationally recognized or major regional investment banking firm or firm of
      independent certified public accountants of recognized standing (which may
      be
      the firm that regularly examines the financial statements of the Issuer) that
      is
      regularly engaged in the business of appraising the Capital Stock or assets
      of
      corporations or other entities as going concerns, and which is not affiliated
      with either the Issuer or the Holder of any Warrant.

    

    “Initial
      Holder”
      means
      ________________.

    

    “Issuer”
means
      International Imaging Systems, Inc., a Delaware corporation, and its successors.
      

    

    “Majority
      Holders”
means
      at any time the Holders of Warrants exercisable for a majority of the shares
      of
      Warrant Stock issuable under the Warrants at the time outstanding.

    

    “Original
      Issue Date”
means
      October [__], 2007.

    

    “OTC
      Bulletin Board”
means
      the over-the-counter electronic bulletin board.

    

    “Other
      Common”
means
      any other Capital Stock of the Issuer of any class which shall be authorized
      at
      any time after the date of this Warrant (other than Common Stock) and which
      shall have the right to participate in the distribution of earnings and assets
      of the Issuer without limitation as to amount.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    
       

      Exhibit
        4.1

    

     

    “Outstanding
      Common Stock”
means,
      at any given time, the aggregate amount of outstanding shares of Common Stock,
      assuming full exercise, conversion or exchange (as applicable) of all Common
      Stock Equivalents that are outstanding at such time.

    

    “Person”
means
      an individual, corporation, limited liability company, partnership, joint stock
      company, trust, unincorporated organization, joint venture, Governmental
      Authority or other entity of whatever nature.

    

    “Per
      Share Market Value”
means
      on any particular date (a) the last closing bid price per share of the Common
      Stock on such date on the OTC
      Bulletin Board or
      another registered national stock exchange on which the Common Stock is then
      listed, or if there is no such price on such date, then the closing bid price
      on
      such exchange or quotation system on the date nearest preceding such date,
      or
      (b) if the Common Stock is not listed then on the OTC Bulletin Board or any
      registered national stock exchange, the last closing bid price for a share
      of
      Common Stock in the over-the-counter market, as reported by the OTC Bulletin
      Board or in the National Quotation Bureau Incorporated or similar organization
      or agency succeeding to its functions of reporting prices) at the close of
      business on such date, or (c) if the Common Stock is not then reported by the
      OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar
      organization or agency succeeding to its functions of reporting prices), then
      the average of the "Pink Sheet" quotes for the five (5) Trading Days preceding
      such date of determination, or (d) if the Common Stock is not then publicly
      traded the fair market value of a share of Common Stock as determined by an
      Independent Appraiser selected in good faith by the Initial Holder, or if the
      Initial Holder no longer owns any Warrants the Majority Holders; provided,
      however,
      that
      the Issuer, after receipt of the determination by such Independent Appraiser,
      shall have the right to select an additional Independent Appraiser, in which
      case, the fair market value shall be equal to the average of the determinations
      by each such Independent Appraiser; and provided,
      further
      that all
      determinations of the Per Share Market Value shall be appropriately adjusted
      for
      any stock dividends, stock splits or other similar transactions during such
      period. The determination of fair market value by an Independent Appraiser
      shall
      be based upon the fair market value of the Issuer determined on a going concern
      basis as between a willing buyer and a willing seller and taking into account
      all relevant factors determinative of value, and shall be final and binding
      on
      all parties. In determining the fair mket value of any shares of Common Stock,
      no consideration shall be given to any restrictions on transfer of the Common
      Stock imposed by agreement or by federal or state securities laws, or to the
      existence or absence of, or any limitations on, voting rights.

    

    "Preferred
      Stock"
      means
      shares of the Company’s Series A Convertible Preferred Stock issued to the
      Purchasers pursuant to the Purchase Agreement.

    

    “Purchase
      Agreement”
means
      the Series A Convertible Preferred Stock Purchase Agreement dated as of October
      [__], 2007, among the Issuer and the Purchasers.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    
       

      Exhibit
        4.1

    

     

    “Purchasers”
means
      the purchasers of the Series A Convertible Preferred Stock and the Warrants
      issued by the Issuer pursuant to the Purchase Agreement.

    

    “Securities”
means
      any debt or equity securities of the Issuer, whether now or hereafter
      authorized, any instrument convertible into or exchangeable for Securities
      or a
      Security, and any option, warrant or other right to purchase or acquire any
      Security. "Security" means one of the Securities.

    

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

    

    “Subsidiary”
means
      any corporation at least 50% of whose outstanding Voting Stock shall at the
      time
      be owned directly or indirectly by the Issuer or by one or more of its
      Subsidiaries, or by the Issuer and one or more of its Subsidiaries.

    

    “Term”
has
      the
      meaning specified in Section
      1
      hereof.

    

    “Trading
      Day”
means
      (a) a day on which the Common Stock is traded on the OTC Bulletin Board, or
      (b)
      if the Common Stock is not traded on the OTC Bulletin Board, a day on which
      the
      Common Stock is quoted in the over-the-counter market as reported by National
      Quotation Bureau Incorporated (or any similar organization or agency succeeding
      its functions of reporting prices); provided,
      however,
      that in
      the event that the Common Stock is not listed or quoted as set forth in (a)
      or
      (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
      any
      day which shall be a legal holiday or a day on which banking institutions in
      the
      State of New York are authorized or required by law or other government action
      to close.

    

    “Voting
      Stock”
means,
      as applied to the Capital Stock of any corporation, Capital Stock of any class
      or classes (however designated) having ordinary voting power for the election
      of
      a majority of the members of the Board of Directors (or other governing body)
      of
      such corporation, other than Capital Stock having such power only by reason
      of
      the happening of a contingency.

    

    “VWAP
      means” for
      any
      date, (i) the daily volume weighted average price of the Common Stock for such
      date on the OTC Bulletin Board as reported by Bloomberg Financial L.P. (based
      on
      a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
      (ii) if the Common Stock is not then listed or quoted on the OTC Bulletin
      Board and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (iii) in all other cases, the
      fair market value of a share of Common Stock as determined in accordance with
      the definition of Per Share Market Value.

    

    “Warrants”
means
      the Warrants issued and sold pursuant to the Purchase Agreement, including,
      without limitation, this Warrant and the Series A-2 Warrants (as defined in
      the
      Purchase Agreement), and any other warrants of like tenor issued in substitution
      or exchange for any thereof pursuant to the provisions of Section
      2(d),
      2(e)
      or
2(f)
      hereof
      or of any of such other Warrants. 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    
      Exhibit
        4.1

       

    

    “Warrant
      Price”
      initially means $3.00, as such price may be adjusted from time to time as shall
      result from the adjustments specified in this Warrant, including Section
      4
      hereto.

    

    “Warrant
      Share Number”
means
      at any time the aggregate number of shares of Warrant Stock which may at such
      time be purchased upon exercise of a Warrant, after giving effect to all prior
      adjustments and increases to such number made or required to be made under
      the
      terms hereof.

    

    “Warrant
      Stock”
means
      Common Stock issuable upon exercise of any Warrant or Warrants or otherwise
      issuable pursuant to any Warrant or Warrants.

    

    10. Other
      Notices.
      In case
      at any time:

    

    (i) the
      Issuer shall make any distributions to the holders of Common Stock;
      or

    

    (ii) the
      Issuer shall authorize the granting to all holders of its Common Stock of rights
      to subscribe for or purchase any shares of Capital Stock of any class or other
      rights; or

    

    (iii) there
      shall be any reclassification of the Capital Stock of the Issuer; or

    

    (iv) there
      shall be any capital reorganization by the Issuer; or

    

    (v) there
      shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
      transfer or other disposition of all or substantially all of the Issuer's
      property, assets or business (except a merger or other reorganization in which
      the Issuer shall be the surviving corporation and its shares of Capital Stock
      shall continue to be outstanding and unchanged and except a consolidation,
      merger, sale, transfer or other disposition involving a wholly-owned
      Subsidiary); or

    

    (vi) there
      shall be a voluntary or involuntary dissolution, liquidation or winding-up
      of
      the Issuer or any partial liquidation of the Issuer or distribution to holders
      of Common Stock;

    

    then,
      in
      each of such cases, the Issuer shall give written notice to the Holder of the
      date on which (i) the books of the Issuer shall close or a record shall be
      taken
      for such dividend, distribution or subscription rights or (ii) such
      reorganization, reclassification, consolidation, merger, disposition,
      dissolution, liquidation or winding-up, as the case may be, shall take place.
      Such notice also shall specify the date as of which the holders of Common Stock
      of record shall participate in such dividend, distribution or subscription
      rights, or shall be entitled to exchange their certificates for Common Stock
      for
      securities or other property deliverable upon such reorganization,
      reclassification, consolidation, merger, disposition, dissolution, liquidation
      or winding-up, as the case may be. Such notice shall be given at least twenty
      (20) days prior to the action in question and not less than ten (10) days prior
      to the record date or the date on which the Issuer's transfer books are closed
      in respect thereto. This Warrant entitles the Holder to receive copies of all
      financial and other information distributed or required to be distributed to
      the
      holders of the Common Stock.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    
      Exhibit
        4.1

       

    

    11. Amendment
      and Waiver.
      Any
      term, covenant, agreement or condition in this Warrant may be amended, or
      compliance therewith may be waived (either generally or in a particular instance
      and either retroactively or prospectively), by a written instrument or written
      instruments executed by (a) the Issuer, (b) the Initial Holder (assuming the
      Initial Holder still owns all or part of this Warrant), and (c) the Holders
      of
      twenty-five percent (25%) of the Warrants, the calculation of which shall
      include the Initial Holder’s percentage of ownership of the Warrants;
provided,
      however,
      that no
      such amendment or waiver shall reduce the Warrant Share Number, increase the
      Warrant Price, shorten the period during which this Warrant may be exercised
      or
      modify any provision of this Section
      11
      without
      the consent of the Holder of this Warrant. No consideration shall be offered
      or
      paid to any person to amend or consent to a waiver or modification of any
      provision of this Warrant unless the same consideration is also offered to
      all
      holders of the Warrants.

    

    12. Governing
      Law; Jurisdiction.
      This
      Warrant shall be governed by and construed in accordance with the internal
      laws
      of the State of New York, without giving effect to any of the conflicts of
      law
      principles which would result in the application of the substantive law of
      another jurisdiction. This Warrant shall not be interpreted or construed with
      any presumption against the party causing this Warrant to be drafted. The Issuer
      and the Holder agree that venue for any dispute arising under this Warrant
      will
      lie exclusively in the state or federal courts located in New York County,
      New
      York, and the parties irrevocably waive any right to raise forum
      non conveniens
      or any
      other argument that New York is not the proper venue. The Issuer and the Holder
      irrevocably consent to personal jurisdiction in the state and federal courts
      of
      the state of New York. The Issuer and the Holder consent to process being served
      in any such suit, action or proceeding by mailing a copy thereof to such party
      at the address in effect for notices to it under this Warrant and agrees that
      such service shall constitute good and sufficient service of process and notice
      thereof. Nothing in this Section
      12
      shall
      affect or limit any right to serve process in any other manner permitted by
      law.
      The Issuer and the Holder hereby agree that the prevailing party in any suit,
      action or proceeding arising out of or relating to this Warrant or the Purchase
      Agreement, shall be entitled to reimbursement for reasonable legal fees from
      the
      non-prevailing party. The parties hereby waive all rights to a trial by
      jury.

    

    13. Notices.
      Any
      notice, demand, request, waiver or other communication required or permitted
      to
      be given hereunder shall be in writing and shall be effective (a) immediately
      upon hand delivery, telecopy or facsimile at the address or number designated
      below (if delivered on a business day during normal business hours where such
      notice is to be received), or the first business day following such delivery
      (if
      delivered other than on a business day during normal business hours where such
      notice is to be received) or (b) on the second business day following the date
      of mailing by express courier service, fully prepaid, addressed to such address,
      or upon actual receipt of such mailing, whichever shall first occur. The
      addresses for such communications shall be:

     

    
      	
              If
                to the Issuer: 

            	International Imaging Systems,
              Inc. 
	 	
              c/oXi'an
                Baorun Industrial Development Co. Ltd.

              Dongxin
                Century Square,  7th Floor

              Xi'an
                East City High-tech Industrial Development Park

              Shannxi
                Province,  P.R. China

              Attn:
                Mr. Gao Xincheng

              Tel: 
                86 29 82682019

              Fax:
                86 29 82683629

            

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    
       

      Exhibit
        4.1

    

     

    with
      copies (which copies 

    shall
      not
      constitute notice)

     to:   

    Loeb
      & Loeb

    345
      Park
      Avenue

    New
      York,
      NY10154

    Attn:
      Mitchell S. Nussbaum

    Tel:
      212.407.4159

    Fax:
      212.407-4990

     

    
      	If to any Holder:	
              At
                the address of such Holder set forth on Exhibit
                A
                to
                this Agreement, with copies to Holder’s counsel as set forth on
                Exhibit
                A
                or
                as specified in writing by such
                Holder

            

    

     

    Any
      party
      hereto may from time to time change its address for notices by giving written
      notice of such changed address to the other party hereto.

     

    14. Warrant
      Agent.
      The
      Issuer may, by written notice to each Holder of this Warrant, appoint an agent
      having an office in New York, New York for the purpose of issuing shares of
      Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of
      Section
      2
      hereof,
      exchanging this Warrant pursuant to subsection (d) of Section
      2
      hereof
      or replacing this Warrant pursuant to subsection (d) of Section
      3
      hereof,
      or any of the foregoing, and thereafter any such issuance, exchange or
      replacement, as the case may be, shall be made at such office by such
      agent.

    

    15. Remedies.
      The
      Issuer stipulates that the remedies at law of the Holder of this Warrant in
      the
      event of any default or threatened default by the Issuer in the performance
      of
      or compliance with any of the terms of this Warrant are not and will not be
      adequate and that, to the fullest extent permitted by law, such terms may be
      specifically enforced by a decree for the specific performance of any agreement
      contained herein or by an injunction against a violation of any of the terms
      hereof or otherwise.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    
      Exhibit
        4.1

       

    

    16. Successors
      and Assigns.
      This
      Warrant and the rights evidenced hereby shall inure to the benefit of and be
      binding upon the successors and assigns of the Issuer, the Holder hereof and
      (to
      the extent provided herein) the Holders of Warrant Stock issued pursuant hereto,
      and shall be enforceable by any such Holder or Holder of Warrant
      Stock.

    

    17. Modification
      and Severability.
      If, in
      any action before any court or agency legally empowered to enforce any provision
      contained herein, any provision hereof is found to be unenforceable, then such
      provision shall be deemed modified to the extent necessary to make it
      enforceable by such court or agency. If any such provision is not enforceable
      as
      set forth in the preceding sentence, the unenforceability of such provision
      shall not affect the other provisions of this Warrant, but this Warrant shall
      be
      construed as if such unenforceable provision had never been contained
      herein.

    

    18. Headings.
      The
      headings of the Sections of this Warrant are for convenience of reference only
      and shall not, for any purpose, be deemed a part of this Warrant.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    Exhibit
      4.1

     

    IN
      WITNESS WHEREOF, the Issuer has executed this Series A-1 Warrant as of the
      day
      and year first above written.

    
      	 	 	 
	 	
              INTERNATIONAL
                IMAGING SYSTEMS, INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                

              Title:

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

       

      
        Exhibit
          4.1

         

      

    

    EXERCISE
      FORM

    SERIES
      A-1 WARRANT

    

    INTERNATIONAL
      IMAGING SYSTEMS, INC.

    

    The
      undersigned _______________, pursuant to the provisions of the accompanying
      Series A-1 Warrant, hereby elects to purchase _____ shares of Common Stock
      of
      INTERNATIONAL IMAGING SYSTEMS, INC. covered by the accompanying Series A-1
      Warrant.

    

    Dated:
      _________________   Signature ___________________________

    

    Address _____________________

     

    _____________________

    

    Number
      of
      shares of Common Stock beneficially owned or deemed beneficially owned by the
      Holder on the date of Exercise: _________________________

    

    The
      undersigned is an “accredited investor” as defined in Regulation D under the
      Securities Act of 1933, as amended.   □
      Yes   □
      No

     

    The
      undersigned intends that payment of the Warrant Price shall be made as (check
      one): 

     

    Cash
      Exercise_______ 

     

    Cashless
      Exercise_______

     

    If
      the
      Holder has elected a Cash Exercise, the Holder shall pay the sum of $________
      by
      certified or official bank check (or via wire transfer) to the Issuer in
      accordance with the terms of the Warrant. 

     

    If
      the
      Holder has elected a Cashless Exercise, a certificate shall be issued to the
      Holder for the number of shares equal to the whole number portion of the product
      of the calculation set forth below, which is ___________. The Issuer shall
      pay a
      cash adjustment in respect of the fractional portion of the product of the
      calculation set forth below in an amount equal to the product of the fractional
      portion of such product and the Per Share Market Value on the date of exercise,
      which product is ____________.

     

    X
      = Y -
(A)(Y)

    B

    

    Where: 

    

    The
      number of shares of Common Stock to be issued to the Holder is
      (“X”).

    

    The
      number of shares of Common Stock purchasable upon exercise of all of the Warrant
      or, if only a portion of the Warrant is being exercised, the portion of the
      Warrant being exercised is (“Y”). 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      Exhibit
        4.1

       

    

    The
      Warrant Price is (“A”). 

    

    The
      Per
      Share Market Value of one share of Common Stock is (“B”).

    

    ASSIGNMENT

    

    FOR
      VALUE
      RECEIVED, _________________ hereby sells, assigns and transfers unto
      __________________ the accompanying Series A-1 Warrant and all rights evidenced
      thereby and does irrevocably constitute and appoint _____________, attorney,
      to
      transfer said Series A-1 Warrant on the books of the corporation named
      therein.

    

    Dated:
      _________________  
Signature ___________________________

    

    Address _____________________

     

    _____________________

    

    PARTIAL
      ASSIGNMENT

    

    FOR
      VALUE
      RECEIVED, _________________ hereby sells, assigns and transfers unto
      __________________ the right to purchase _________ shares of Warrant Stock
      evidenced by the accompanying Series A-1 Warrant together with all rights
      therein, and does irrevocably constitute and appoint ___________________,
      attorney, to transfer that part of said Series A-1 Warrant on the books of
      the
      corporation named therein.

    

    Dated:
      _________________   Signature ___________________________

    

    Address _____________________

     

    _____________________

    

    FOR
      USE
      BY THE ISSUER ONLY:

    

    This
      Warrant No. W-A-1-07-___ canceled (or transferred or exchanged) this _____
      day
      of ___________, _____, shares of Common Stock issued therefor in the name of
      _______________, Warrant No. W-A-1-07-_____ issued for ____ shares of Common
      Stock in the name of _______________.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    
      	
              Name
                and Address of Holder 

            	 	
              Name
                and Address of Holder’s Counsel

            
	
               

              ________________________________

               

              ________________________________

               

              ________________________________

            	 	
               

              ________________________________

               

              ________________________________

               

              ________________________________Exhibit
        4.2

    

     

    AMENDED
      AND RESTATED

    CERTIFICATE
      OF DESIGNATION OF THE RELATIVE RIGHTS AND 

    PREFERENCES

    OF
      THE

    SERIES
      A CONVERTIBLE PREFERRED STOCK

    OF

    INTERNATIONAL
      IMAGING SYSTEMS, INC.

    

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

    

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

     

    2.  Intentionally
      Left Blank.

     

    3.  Voting
      Rights.

    

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    4.  Liquidation
      Preference.

     

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

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

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

     

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

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

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

    

    (c)  Intentionally
      Omitted.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (d)  Conversion
      Price.
      

     

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

     

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

     

    (e)  Adjustments
      of Conversion Price.

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

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

     

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

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

    
      
         

      

      
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    8.  Redemption.

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

    
      
         

      

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

     

    
      
         

      

      
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    9.  Inability
      to Fully Convert.

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

    14.  Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of a holder of Series A Preferred Stock in the
      exercise of any power, right or privilege hereunder shall operate as a waiver
      thereof, nor shall any single or partial exercise of any such power, right
      or
      privilege preclude other or further exercise thereof or of any other right,
      power or privilege.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

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      remainder of this page is intentionally left blank]

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    
      Exhibit
        4.2

    

     

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

     

    
      	 	 	 
	 	
              INTERNATIONAL
                IMAGING SYSTEMS, INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                Mr. Gao Xincheng

            
	 	
              Title:
                CEO

            

    

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    EXHIBIT
      I

    

    INTERNATIONAL
      IMAGING SYSTEMS, INC.

    CONVERSION
      NOTICE

    

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

     

    
      	
              Date
                of Conversion:

            	 	
               

              
                

              

            

    

    Number
      of
      Preferred Shares to be converted: ____________________  

    

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

    

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

    

    Please
      confirm the following information:

     

    
      	
              Conversion
                Price:

            	 	 
	
            	 	
              
                

              

            
	
              Number
                of shares of Common Stock

              to
                be issued:

            	 	 
	
            	 	
              

            

    

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

    

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

     

    
      	
              Issue
                to: 

               

              
                Facsimile
                  Number: 

              

            	 	
               

              
                
 

            
	 

              Authorization: 

            	 	
              
                

              

            
	
            	 	
              
                

              

            
	 	 	
            
	
            	 	
              

              By:

            
	 	 	
              
                

              

              Title:

            
	
              
                
                   

                

              

            	 	
              
                

              

            

    

    
      Dated:

    

     

    
      
         

      

      
        24

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