Document:

Exhibit
          4.9A Certificate of Designation Series B Preferred

        

          

          CHEMBIO
            DIAGNOSTICS, INC.

          

          AMENDED
            AND RESTATED

          CERTIFICATE
            OF DESIGNATION OF PREFERENCES, 

          RIGHTS
            AND LIMITATIONS

          OF

          SERIES
            B 9% CONVERTIBLE PREFERRED STOCK

          

          PURSUANT
            TO SECTION 78.1955 OF THE 

          NEVADA
            REVISED STATUTES

          

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

           

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          TERMS
            OF PREFERRED STOCK

          

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

          

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

           

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

          

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

          

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

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

          

          “Commission”
means
            the Securities and Exchange Commission.

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

          

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

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

           

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

           

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

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

          

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

          

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

          

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

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

           

          Section
            3.
             Dividends.

          

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

           

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

          

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

           

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          Section
            6.
             Conversion.

          

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

          

          b) Conversion
            Price.
            The
            conversion price for the Preferred Stock shall equal $0.61
            (the
            “Conversion
            Price”),
            subject to adjustment herein.

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

           

          d) Mechanics
            of Conversion

          

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

           

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

           

          iii. Compensation
            for Buy-In on Failure to Timely Deliver Certificates Upon
            Conversion.
            If the
            Corporation fails to deliver to the Holder such certificate or certificates
            pursuant to Section 6(d)(i) by a Share Delivery Date, and if after such
            Share
            Delivery Date and prior to any subsequent delivery of the certificates
            to
            Holders the Holder purchases (in an open market transaction or otherwise)
            Common
            Stock to deliver in satisfaction of a sale by such Holder of the Conversion
            Shares which the Holder was entitled to receive upon the conversion relating
            to
            such Share Delivery Date (a “Buy-In”),
            then
            the Corporation shall pay in cash to the Holder the amount by which (x)
            the
            Holder’s total purchase price (including brokerage commissions, if any) for
            the
            Common Stock so purchased exceeds (y) the product of (1) the aggregate
            number of
            shares of Common Stock that such Holder was entitled to receive from
            the
            conversion at issue multiplied by (2) the price at which the sell order
            giving
            rise to such purchase obligation was executed. For example, if the Holder
            purchases Common Stock having a total purchase price of $11,000 to cover
            a
            Buy-In with respect to an attempted conversion of shares of Preferred
            Stock with
            respect to which the aggregate sale price giving rise to such purchase
            obligation is $10,000, under clause (A) of the immediately preceding
            sentence
            the Corporation shall be required to pay the Holder $1,000. The Holder
            shall
            provide the Corporation written notice indicating the amounts payable
            to the
            Holder in respect of the Buy-In, together with applicable confirmations
            and
            other evidence reasonably requested by the Corporation. Nothing herein
            shall
            limit a Holder’s right to pursue any other remedies available to it hereunder,
            at law or in equity including, without limitation, a decree of specific
            performance and/or injunctive relief with respect to the Corporation’s failure
            to timely deliver certificates representing shares of Common Stock upon
            conversion of the shares of Preferred Stock as required pursuant to the
            terms
            hereof.

           

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

          

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

          

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

          

          Section
            7.
             Certain
            Adjustments.

          

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

           

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

           

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

           

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

           

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

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          h) Notice
            to Holders.

          

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

           

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

           

            Section
            8.
             Forced
            Conversion

           

          a) Forced
            Conversion.
            Notwithstanding anything herein to the contrary, if after the Effective
            Date the
            VWAP for the Common Stock for each of any 20 consecutive Trading Days
            (“Threshold
            Period”),
            which
            20 consecutive Trading Day period shall have commenced only after the
            Effective
            Date, exceeds 328% of the then effective Conversion Price, and the Common
            Stock
            has an average daily trading volume during such Threshold Period of at
            least
            100,000 shares, the Corporation may, within 1 Trading Day after any such
            Threshold Period, deliver a notice to all Holders (a “Forced
            Conversion Notice”
and
            the
            date such notice is received by the Holders, the “Forced
            Conversion Notice Date”)
            to
            cause each Holder to immediately convert all or part of the Preferred
            Stock then
            held by such Holder. The Corporation may only effect a Forced Conversion
            Notice
            if all of the Equity Conditions have been met during the Threshold Period
            through the Forced Conversion Notice Date. Any Forced Conversion Notices
            shall
            be applied ratably to all of the Holders in proportion to each Holder’s initial
            purchases of Preferred Stock hereunder, provided that any voluntary conversions
            by a Holder shall be applied against such Holder’s pro-rata allocation thereby
            decreasing the aggregate amount forcibly converted hereunder. Notwithstanding
            anything herein to the contrary, in the event the Corporation issues
            a Forced
            Conversion Notice and because of the beneficial ownership limitation
            of Section
            6(c) it is unable to force the Holders to convert all of the Preferred
            Stock, as
            to any Preferred Stock outstanding, the Corporation shall not have the
            right to
            issue another Forced Conversion Notice for at least 30 days and at such
            time all
            conditions hereunder must again be met, including the pricing condition
            and the
            Equity Conditions.

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          Section
            9.
             Redemption
            Upon Triggering Events.

           

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

          

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

           

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

          

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

          

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

          

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

          

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

          

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

          

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

          

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

          

          x. there
            shall have occurred a Bankruptcy Event; or

          

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

          

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

          

          Section
            10.
             Miscellaneous.
            

          

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

          

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

           

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

           

          
            
               

            

            
               

              
                

              

            

            
               

            

          

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

          

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

           

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

           

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

          

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

          

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

          

          

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

          
             

            
              
              

              
                

              

            

            
              
              

            

          

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

          

          IN
            WITNESS WHEREOF, the undersigned has executed this Amended and Restated
            Certificate this _____ day of June 2006.

          

          __________________________

          Name: Richard
            J. Larkin

          Title: Chief
            Financial Officer   

          

          
            

          

          

          ANNEX
            A

          

          NOTICE
            OF
            CONVERSION

          

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

          

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

          

          Conversion
            calculations:

          

          
            	
                    Date
                      to Effect Conversion:
                      _____________________________________________

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

                  
	
                    Number
                      of shares of Preferred Stock to be Converted:
                      ________________________

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

                  
	
                    Number
                      of shares of Common Stock to be Issued:
                      ___________________________

                  
	
                    Applicable
                      Conversion
                      Price:____________________________________________

                  
	
                    Number
                      of shares of Preferred Stock subsequent to Conversion:
                      ________________

                  
	
                     

                    [HOLDER]

                     

                    By:___________________________________

                    Name:

                    Title:Specimen Stock Certificate

    

      Number                                                                                         Shares

       BOASHINN
        CORPORATION     

      INCORPORATED
        UNDER THE LAWS OF THE STATE OF NEVADA

      

      COMMON
        VOTING STOCK                           Cusip                                   COMMON
        VOTING
        STOCK 

                                                    PAR
        VALUE: $0.001                    FULLY
        PAID AND
        NON-ASSESSABLE

       

      THIS
        CERTIFIES THAT          SPECIMEN
        CERTIFICATE

       

      

      IS
        THE REGISTERED HOLDER OF 

      

      

      

      SHARES
        OF THE COMMON STOCK OF BOASHINN CORPORATION,
        a Nevada
        Corporation, transferable only on the books of the Corporation by the holder
        hereof in person or by Attorney upon surrender of the Certificate properly
        endorsed. Witness
        the
        facsimile Seal of the Corporation and the facsimile Signatures of its duly
        authorized officers. 

      

      

       Not
        Valid
        Unless

      Initialed
        by Transfer Agent

      By:
         Authorized
        Initial 

      

      

      MADISON
        STOCK TRANSFER INC.

      PO
        BOX
        145

      BROOKLYN,
        NY 11229

      

      Ricky
        Chiu               Boashinn
        Corporation              Ricky
        Chiu
   

      President
        & CEO                           Corporate
        Seal                         
        Secretary 

       NEVADA

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