b. Conversion of Preferred Stock. Each share of Common Stock to which a holder of
Preferred Stock shall be entitled upon conversion of a share of Series A Preferred Stock shall be
determined by dividing the Series A Original Issue Price by the Series A Conversion Price (as
defined herein) in effect at the time that the certificate is surrendered for conversion.
c. Conversion Price. The conversion price for the Series A Preferred Stock shall
initially be $1.19, subject to adjustment as hereinafter provided (the Series A Conversion
d. Automatic Conversion. Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Conversion Price upon the earlier to occur
of: (i) the date specified by written consent or agreement of holders of at least a majority of
the shares of Preferred Stock then outstanding, voting together as a single class and on an
as-converted to Common Stock basis, or (ii) immediately upon the closing of the sale of the
corporations Common Stock in a firm commitment, underwritten public offering registered under the
Securities Act of 1933, as amended (the Securities Act), with aggregate offering proceeds to the
corporation (before deduction for underwriters discounts and expenses relating to the issuance) of
at least $30,000,000 and a public offering price per share that is not less than $3.60 (as adjusted
for any stock dividends, stock splits, recapitalizations or the like).
e. Mechanics of Conversion.
(i) Before any holder of Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, (or
comply with applicable lost certificate provisions) at the office of the corporation or of any
transfer agent for such stock, and shall give written notice to the corporation at such office that
he elects to convert the same and shall state therein the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder of Preferred Stock,
a certificate or certificates for the number of shares of Common Stock (together with a certificate
for any shares of Preferred Stock not converted, if applicable) to which he shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of
business on the date (i) of surrender of the shares of Preferred Stock to be converted or (ii)
specified in Section 5(d), and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(ii) If the conversion is in connection with an underwritten offering of securities pursuant
to the Securities Act, the conversion may, at the option of any holder tendering shares of
Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale
of securities pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock upon conversion of the Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of securities.
- 6 -