Document:

Exhibit 10.1

 

Exhibit 10.1

FACILITY AGREEMENT

     FACILITY AGREEMENT (this “Agreement”), dated as of December 10, 2007, between Third
Wave Technologies, Inc., a Delaware corporation (the “Borrower”), and Deerfield Private
Design Fund, L.P., a Delaware limited partnership (“Deerfield Private Design Fund”) and
Deerfield Private Design International, L.P., a limited partnership organized under the laws of the
British Virgin Islands (“Deerfield Private Design International”, the “Offshore
Lender”), (Deerfield Private Design Fund, and the Offshore Lender are referred to collectively
herein as the “Lenders” and, together with the Borrower, as, the “Parties”).

W I T N E S S E T H:

     WHEREAS, the Borrower wishes to borrow from the Lenders up to twenty-five million Dollars
($25,000,000) for the purpose described in Section 2.1; and

     WHEREAS, the Lenders desire to make loans to the Borrower from time to time for such purpose;

     NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the Lenders and
the Borrower agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1 General Definitions. Wherever used in this Agreement, the Exhibits or the
Schedules attached hereto, unless the context otherwise requires, the following terms have the
following meanings:

     “Additional Amounts” has the meaning given to it in Section 2.6(b).

     “Affiliate” means, with respect to any Person, (a) any other Person directly or
indirectly controlling, controlled by, or under common control with that Person; (b) any other
Person owning beneficially or controlling ten percent (10%) or more of the equity interest in such
Person; (c) any officer, director, partner, member, or shareholder of such Person; or (d) any
spouse, parent, sibling (natural born or adopted) or child (natural born or adopted) of such
Person. As used in this definition of “Affiliate,” the term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities or partnership or other
ownership interest, by contract, or otherwise.

     “Business Day” means a day on which banks are open for business in the City of New
York.

     “Cash and Cash Equivalents” means the amount shown as such on the consolidated balance
sheet of the Borrower and its Subsidiaries at the time such balance sheet is filed with the SEC
on Form 10-Q or Form 10-K under the Exchange Act or otherwise made available to the Borrower’s
stockholders.

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     “Code” means the Internal Revenue Code of 1986, as amended, and any Treasury
Regulations promulgated thereunder.

     “Commitment Period Expiration Date” means the earliest to occur of (a) the date on
which any Commitment Termination Event occurs, and (b) the third anniversary of the date of this
Agreement.

     “Commitment Termination Event” means the occurrence of any Event of Default.

     “Common Stock” means the common stock, par value $0.001 per share, of the Borrower.

     “Contingent Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.

     “Default” means any event which, at the giving of notice, lapse of time or fulfillment
of any other applicable condition (or any combination of the foregoing), would constitute an Event
of Default.

     “Disbursement” has the meaning given to it in Section 2.2(a).

     “Disbursement Date” means the date on which a Disbursement occurs.

     “Disbursement Request” has the meaning given to it in Section 2.2(a).

     “Dollars” and the “$” sign mean the lawful currency of the United States of
America.

     “Event of Default” has the meaning given to it in Section 5.5.

     “Evidence of Disbursement” has the meaning given to it in Section 2.2(a).

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

     “Excluded Taxes” means all income taxes, minimum or alternative minimum income taxes,
withholding taxes imposed on gross amounts, any tax determined based upon income, capital gains,
gross income, sales, net profits, windfall profits or similar items, franchise taxes (or any other
tax measured by capital, capital stock or net worth), gross receipts taxes, branch profits taxes,
margin taxes (or any other taxes imposed on or measured by net income, or imposed in lieu of net
income) payable by the Lenders in any jurisdiction to any Government Authority (or political
subdivision or taxing authority thereof) in connection with any payments received under this
Agreement by the Lenders, or any such tax imposed in connection with the execution and delivery of,
and the performance of its obligations under, this Agreement.

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     “Final Payment” means such amount as may be necessary to repay the outstanding
principal of the Loan (together with any other amounts accrued and unpaid under this Agreement to
the Lenders pursuant to this Agreement.

     “Final Payment Date” means the earlier of (i) the date on which the Borrower repays
the outstanding principal of the Loan (together with any other amounts accrued and unpaid under
this Agreement) to the Lenders pursuant to this Agreement and (ii) the fifth anniversary of the
date of this Agreement.

     “Financing Documents” means this Agreement, the Notes, the Registration Rights
Agreement, the Warrants and any other document or instrument delivered in connection with any of
the foregoing whether or not specifically mentioned herein or therein.

     “Funds Availability Return” means the product of (a) 2% per annum and (b) the
difference between $25,000,000 and the aggregate amount of the Disbursements that have not been
repaid by the Borrower.

     “Government Authority” means any government, governmental department, ministry,
cabinet, commission, board, bureau, agency, tribunal, regulatory authority, instrumentality,
judicial, legislative, fiscal, or administrative body or entity, domestic or foreign, federal,
state or local having jurisdiction over the matter or matters and Person or Persons in question,
including, without limitation, the SEC.

     “Indebtedness” of any Person means, without duplication (i) all indebtedness for
borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services, including (without limitation) “capital leases” in accordance with
generally accepted accounting principles (other than trade payables entered into in the ordinary
course of business), (iii) all reimbursement or payment obligations with respect to letters of
credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses, (v) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property), (vi) all monetary obligations under any leasing
or similar arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of
such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the payment of such indebtedness, and
(viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.

     “Indemnified Person” has the meaning given to it in Section 6.11.

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     “Indemnity” has the meaning given to it in Section 6.11.

     “Interest Rate” means 7.75% per annum; provided, however, that on and after the date
the principal amount of the Senior Debt has been repaid, or the Senior Debt is otherwise no longer
outstanding, “Interest Rate” shall mean 7% per annum.

     “Lien” means any lien, pledge, preferential arrangement, mortgage, security interest,
deed of trust, charge, assignment, hypothecation, title retention, privilege or other encumbrance
on or with respect to property or interest in property having the practical effect of constituting
a security interest with respect to the payment of any obligation with, or from the proceeds of,
any asset or revenue of any kind.

     “Loan” means the loan to be made available by the Lenders to the Borrower pursuant to
Section 2.2 in the maximum aggregate amount of twenty-five million Dollars ($25,000,000) or, as the
context may require, the principal amount thereof from time to time outstanding.

     “Loss” has the meaning given to it in Section 6.11.

     “Major Transaction” means any of the following:

     (a) a consolidation, merger, exchange of shares, recapitalization, reorganization,
business combination or other similar event, (1) following which the holders of Common Stock
immediately preceding such consolidation, merger, exchange, recapitalization,
reorganization, combination or event either (a) no longer hold a majority of the shares of
Common Stock or (b) no longer have the ability to elect a majority of the board of directors
of the Company or (2) as a result of which shares of Common Stock shall be changed into (or
the shares of Common Stock become entitled to receive) the same or a different number of
shares of the same or another class or classes of stock or securities of another entity
(collectively, a “Change of Control Transaction”);

     (b) the sale or transfer of significant assets of the Company which shall for purposes
of this subsection (b) mean a sale or transfer of assets in one transaction or a series of
related transactions for a purchase price of more than $75,000,000 or a sale or transfer of
more than 48% of the Company’s assets in one transaction or series of related transactions;
or

     (c) a purchase, tender or exchange offer made to the holders of outstanding shares of
Common Stock, such that following such purchase, tender or exchange offer a Change of
Control Transaction shall have occurred.

     “Material Adverse Effect” means a material adverse effect on (a) the business,
operations, prospects, condition (financial or otherwise) or property of the Borrower, (b) the
validity or enforceability of any provision of any Financing Document, (c) the ability of the
Borrower to timely perform its Obligations or (d) the rights and remedies of the Lenders under any
Financing Document.

     “Notes” means the notes issued to the Lenders in the forms attached hereto as Exhibit
A-1 and Exhibit A-2.

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     “Obligations” means all obligations (monetary or otherwise) of the Borrower arising
under or in connection with the Financing Documents.

     “Organizational Documents” means the Certificate of Incorporation and By-laws of the
Borrower.

     “Person” shall mean and include an individual, a partnership, a corporation, a limited
liability company, a business trust, a joint stock company, a trust, an unincorporated association,
a joint venture or other entity or a governmental authority.

     “Permitted Indebtedness” means: the principal of (and premium, if any), interest on,
and all fees and other amounts (including, without limitation, any reasonable out-of-pocket costs,
enforcement expenses (including reasonable out-of-pocket legal fees and disbursements), collateral
protection expenses and other reimbursement or indemnity obligations relating thereto) payable by
Borrower and/or its subsidiaries under or in connection with (i) Indebtedness of Borrower in favor
of the Lenders arising under this Agreement or any other Financing Document; (ii) the Senior Debt;
(iii) the Borrower’s and/or its subsidiaries other existing term loans, equipment leases and loans,
and letters of credit, (iv) future working capital loans, including working capital revolving lines
of credit, in an aggregate amount not exceeding $3,000,000 at any given time and letters of credit
in an aggregate amount not exceeding $1,000,000 at any given time and (v) Indebtedness secured by
Liens (A) upon or in any equipment acquired or held by the Borrower or any of its subsidiaries to
secure the purchase price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time
of its acquisition, provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment; (vi) Indebtedness (not including the
Loan) secured by a lien described in clause (v) of the defined term “Permitted Liens,” provided
such Indebtedness does not exceed the lesser of the cost or fair market value of the equipment
financed with such Indebtedness; (vii) Subordinated Debt, (viii) Indebtedness to trade creditors
incurred in the ordinary course of business; and (ix) extension, refinancings and renewals of any
items of Permitted Indebtedness, provided that the principal amount is not increased or the terms
modified to impose more burdensome terms upon Borrower.

     “Permitted Liens” means: (i) any Liens that, by operation of contract or law or
otherwise, arise from the Senior Debt and any other Liens existing on the date hereof that are
disclosed on Exhibit B hereof; (ii) Liens in favor of the Lenders; (iii) statutory Liens created by
operation of applicable law; (iv) Liens arising in the ordinary course of business and securing
obligations that are not overdue or are being contested in good faith by appropriate proceedings;
(v) Liens securing purchase money or capitalized lease equipment financing; (vi) Liens arising from
judgments, decrees or attachments in circumstances not constituting an Event of Default; (vii)
non-exclusive licenses or sublicenses and exclusive licenses granted in the ordinary course of
Borrower’s business and, with respect to any licenses where Borrower is the licensee or
sublicensee, any interest or title of a licensor or sublicensor under any such license or
sublicense; (viii) deposits to secure the performance of bids, trade contracts (other than for
borrowed money), contracts for the purchase of property, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each case, incurred in
the ordinary course of business and not representing an obligation for borrowed money; (ix) Liens
in

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favor of financial institutions arising in connection with Borrower’s accounts maintained in
the ordinary course of Borrower’s business held at such institutions to secure standard fees for
services charged by, but not financing made available by, such institutions; and (x) Liens for
Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings.

     “Person” means and includes any natural person, individual, partnership, joint
venture, corporation, trust, limited liability company, limited company, joint stock company,
unincorporated organization, government entity or any political subdivision or agency thereof, or
any other entity.

     “Registration Rights Agreement” means the Registration Rights Agreement, dated as of
the date hereof, by and between the Borrower and the Lenders.

     “SEC” means the United States Securities and Exchange Commission.

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

     “Senior Debt” means the Borrower’s Convertible Senior Subordinated Zero Coupon
Promissory Note in the principal amount of $20,000,000.00, issued pursuant to the terms of that
certain Securities Purchase Agreement dated December 18, 2006, as amended from time to time.

     “Subordination Agreement” means the Subordination Agreement by and between the Lenders
and Stark Onshore Master Holding LLC dated the date of this Agreement.

     “Subordinated Debt” means any debt incurred by Borrower that is subordinated in right
of payment to the debt owing by Borrower to Lenders pursuant to a subordination agreement in
substantially the form of the Subordination Agreement.

     “Subsidiary or Subsidiaries: means, as to the Borrower, any entity of which securities
or other ownership interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly or indirectly
owned by the Borrower.

     “Taxes” means all deductions or withholdings for any and all present and future taxes,
levies, imposts, stamp or other duties, fees, assessments, deductions, withholdings, all other
governmental charges, and all liabilities with respect thereto.

     “Warrants” means the warrants attached hereto as part of Exhibit C issued pursuant to
Section 2.11.

     Section 1.2 Interpretation. In this Agreement, unless the context otherwise requires, all
words and personal pronouns relating thereto shall be read and construed as the number and gender
of the party or parties requires and the verb shall be read and construed as agreeing with the
required word and pronoun; the division of this Agreement into Articles and Sections and the use of
headings and captions is for convenience of reference only and shall not modify or affect the
interpretation or construction of this Agreement or any of its provisions; the words “herein,”

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“hereof,” “hereunder,” “hereinafter” and “hereto” and words of similar import refer to this
Agreement as a whole and not to any particular Article or Section hereof; the words “include,”
“including,” and derivations thereof shall be deemed to have the phrase “without limitation”
attached thereto unless otherwise expressly stated; references to a specified Article, Exhibit,
Section or Schedule shall be construed as a reference to that specified Article, Exhibit, Section
or Schedule of this Agreement; and any reference to any of the Financing Documents means such
document as the same shall be amended, supplemented or modified and from time to time in effect.

     Section 1.3 Business Day Adjustment. If the day by which a payment is due to be made is not a
Business Day, that payment shall be made by the next succeeding Business Day unless that next
succeeding Business Day falls in a different calendar month, in which case that payment shall be
made by the Business Day immediately preceding the day by which such payment is due to be made.

ARTICLE II

AGREEMENT FOR THE LOAN

     Section 2.1 Use of Proceeds. The Borrower shall use the Loan for general corporate purposes.

     Section 2.2 Disbursements.

     (a) Subject to satisfaction of the conditions contained in Article IV, a disbursement
of a portion of the Loan (each a “Disbursement”) shall be made upon the Borrower’s
request (a “Disbursement Request”) in the form of Schedule 1, delivered to
the Lenders not less than eighteen calendar days prior to the proposed date of such
Disbursement. The minimum amount of each Disbursement shall be $1,000,000. Against each
Disbursement, the Borrower shall deliver to the Lenders a completed receipt (the
“Evidence of Disbursement”) in the form of Schedule 2, which receipt shall
not be effective until the Disbursement is actually advanced to the Borrower.

     (b) The Lenders shall not be required to make any Loan if (a) the Commitment Period
Expiration Date shall have occurred, or (b) after giving effect thereto, the aggregate
outstanding principal amount of the Loan would exceed $25,000,000.

     Section 2.3 Repayment. The Borrower shall remit the Final Payment to the Lenders on the
earlier to occur of (i) the Final Payment Date and (ii) a Commitment Termination Event, it being
understood that a repayment after a Commitment Termination Event will be within three (3) Business
Days of the occurrence of such Commitment Termination Event.

     Section 2.4 Transaction Fee. On the date hereof, the Borrower has paid to Deerfield
Management Company, L.P. a transaction fee of $625,000.

     Section 2.5 Payments. Payments of any amounts due to the Lenders under this Agreement shall
be made in Dollars in immediately available funds prior to 11:00 a.m. New York

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City time on such date that any such payment is due, at such bank or places, as Deerfield
Private Design Fund shall from time to time designate in writing. The Borrower shall pay all and
any costs (administrative or otherwise) imposed by banks, clearing houses, or any other financial
institution, in connection with making any payments under any of the Financing Documents, except
for any costs imposed by the Lenders’ banking institutions.

     Section 2.6 Taxes, Duties and Fees.

     (a) The Borrower shall pay or cause to be paid all present and future Taxes (other than
Excluded Taxes, if any), duties, fees and other charges of whatsoever nature, if any, now or
at any time hereafter levied or imposed by any Government Authority, by any department,
agency, political subdivision or taxing or other authority thereof or therein, by any
organization of which the applicable Government Authority is a member, or by any
jurisdiction through which the Borrower makes payments hereunder, on or in connection with
the payment of any and all amounts due under this Agreement, and all payments of principal
and other amounts due under this Agreement shall be made without deduction for or on account
of any such Taxes, duties, fees and other charges, except for Excluded Taxes, which may be
deducted or withheld from payments made by the Borrower only if such deduction or
withholding is required by applicable law.

     (b) If the Borrower is required to withhold any such amount or is prevented by
operation of law or otherwise from paying or causing to be paid such Taxes, duties, fees or
other charges as aforesaid except for Excluded Taxes, the principal or other amounts due
under this Agreement (as applicable) shall be increased to such amount as shall be necessary
to yield and remit to the Lenders the full amount it would have received taking into account
any such Taxes (except for Excluded Taxes), duties, fees or other charges payable on amounts
payable by the Borrower under this Section 2.6(b) had such payment been made without
deduction of such Taxes, duties, fees or other charges (all and any of such additional
amounts, herein referred to as the “Additional Amounts”).

     (c) If Section 2.6(b) above applies and the Lenders so require the Borrower shall
deliver to the Lenders official tax receipts evidencing payment (or certified copies of
them) of the Additional Amounts within thirty (30) days of the date of payment.

     (d) If any Lender receives a refund from a Government Authority to which the Borrower
has paid withholding Taxes pursuant to this Section 2.6, such Lender shall pay such refund
to the Borrower.

     Section 2.7 Costs, Expenses and Losses. If, as a result of any failure by the Borrower to pay
any sums due under this Agreement on the due date therefor, or to borrow in accordance with a
Disbursement Request made pursuant to Section 2.2, the Lenders shall incur costs, expenses and/or
losses, by reason of the liquidation or redeployment of deposits from third parties or in
connection with obtaining funds to make or maintain any Disbursement, the Borrower shall pay to the
Lenders upon request by the Lenders, the amount of such costs, expenses and/or losses within
fifteen (15) days after receipt by it of a certificate from the Lenders setting forth in reasonable
detail such reasonable documented costs, expenses and/or losses along with supporting
documentation. For the purposes of the preceding sentence, “costs, expenses

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and/or losses” shall include, without limitation, any interest paid or payable to carry any
unpaid amount and any loss, premium, penalty or expense which may be incurred in obtaining,
liquidating or employing deposits of or borrowings from third parties in order to make, maintain or
fund the Loan or any portion thereof.

     Section 2.8 Interest Rate. The principal amount outstanding under the Loan shall bear
interest at the Interest Rate (calculated on the basis of the actual number of days elapsed in each
month and pro rated if the Interest Rate changes between interest payment dates). Interest shall
be paid quarterly in arrears commencing on February 28, 2008 and on the last Business Day of each
May, August, November and February thereafter.

     Section 2.9 Funds Availability Return. The Borrower shall pay the Funds Availability Return
(calculated on the basis of the actual number of days elapsed in each month and pro rated if the
obligation to pay the Funds Availability Return terminates between Funds Availability Return
payment dates) quarterly in arrears commencing on February 28, 2008 and on the last Business Day of
each May, August, November and February thereafter up to and including the third anniversary of the
date of this Agreement, on which date such obligation to pay the Funds Availability Return shall
terminate.

     Section 2.10 Interest on Late Payments. Without limiting the remedies available to the
Lenders under the Financing Documents or otherwise, to the maximum extent permitted by applicable
law, if the Borrower fails to make any payment of principal, interest or Funds Availability Return
with respect to the Loan when due, the Borrower shall pay, in respect of the outstanding principal
amount and interest of the Loan and the outstanding amount of the Funds Availability Return,
interest at the rate per annum equal to the Interest Rate plus five hundred (500) basis points for
so long as such late payment remains outstanding. Such interest shall be payable on demand.

     Section 2.11 Delivery of Warrants. On the date hereof, the Borrower shall issue to the
Lenders Warrants to purchase the number of shares of Common Stock set forth in Exhibit C (subject
to adjustment as set forth in the Warrants) at an initial Exercise Price (as defined in the
Warrants) of $8.36.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     Section 3.1 Representations and Warranties of the Borrower. The Borrower represents and
warrants as of the date hereof and as of each Disbursement Date as follows:

     (a) The Borrower is a corporation duly incorporated and validly existing under the laws
of the State of Delaware.

     (b) The Borrower is conducting its business in compliance with its Organizational
Documents. The Organizational Documents of the Borrower (including all amendments thereto)
as currently in effect have been furnished to the Lenders and remain in full force and
effect with no defaults outstanding thereunder.

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     (c) The Borrower has full power and authority to enter into each of the Financing
Documents and to make the borrowings and the other transactions contemplated thereby.

     (d) All authorizations, consents, approvals, registrations, exemptions and licenses
with or from Government Authorities or other Persons that are necessary for the conduct of
its business as currently conducted and as proposed to be conducted, for the borrowing
hereunder, the execution and delivery of the Financing Documents and the performance by the
Borrower of its Obligations, have been obtained and are in full force and effect, except to
the extent any failure to so obtain for the conduct of the business as currently and
proposed to be conducted would not have a Material Adverse Effect; provided, however, that
the failure to receive an approval from Government Authorities for the development or sale
of any product shall not constitute a Material Adverse Effect or a violation of this Section
3.1(d).

     (e) Each Financing Document has been duly authorized, executed and delivered by the
Borrower and constitutes the valid and legally binding obligation of the Borrower,
enforceable in accordance with its terms, except as such enforceability may be limited by
(i) applicable insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors’ rights generally, and (ii) applicable equitable principles (whether
considered in a proceeding at law or in equity).

     (f) No Default or Event of Default (or any other default or event of default, however
described) has occurred under any of the Financing Documents.

     (g) Neither the entering into any of the Financing Documents nor the compliance with
any of its terms conflicts with, violates or results in a breach of any of the terms of, or
constitutes a default or event of default (however described) or requires any consent under,
any agreement or to which the Borrower is a party or by which it is bound, or violates any
of the terms of the Organizational Documents or any judgment, decree, resolution, award or
order or any statute, rule or regulation applicable to the Borrower or its assets.

     (h) The Borrower is not engaged in or the subject of any litigation, arbitration,
administrative regulatory compliance proceeding, or investigation, nor are there any
litigation, arbitration, administrative regulatory compliance proceedings or investigations
pending or, to the knowledge of the Borrower, threatened before any court or arbitrator or
before or by any Government Authority against the Borrower, that has not been publicly
disclosed and would materially impair Borrower’s ability to comply with the terms of this
Agreement and the Borrower is not aware of any facts likely to give rise to any such
proceedings.

     (i) The Borrower (i) is capable of paying its debts as they fall due, is not unable and
has not admitted its inability to pay debts as they fall due, (ii) is not bankrupt or
insolvent and (iii) has not taken action, and no such action has been taken by a third
party, for the Borrower’s winding up, dissolution, or liquidation or similar executory or
judicial proceeding or for the appointment of a liquidator, custodian, receiver, trustee,

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administrator or other similar officer for the Borrower or any or all of its assets or
revenues.

     (j) No Lien exists on Borrower’s property, except for Permitted Liens.

     (k) The obligation of the Borrower to make any payment under this Agreement (together
with all charges in connection therewith) is absolute and unconditional, and there exists no
right of setoff or recoupment, counterclaim, cross-claim or defense of any nature whatsoever
to any such payment.

     Section 3.2 Borrower Acknowledgment. The Borrower acknowledges that it has made the
representations and warranties referred to in Section 3.1 with the intention of persuading the
Lenders to enter into the Financing Documents and that the Lenders have entered into the Financing
Documents on the basis of, and in full reliance on, each of such representations and warranties.
The Borrower represents and warrants to the Lenders that none of such representations and
warranties omits any matter the omission of which makes any of such representations and warranties
misleading.

     Section 3.3 Representations and Warranties of the Lenders. Each of the Lenders represents and
warrants to the Borrower as of the date hereof and as of each date Warrants are granted pursuant to
this Agreement that:

     (a) It is acquiring the Warrants and the shares of Common Stock issued upon exercise of
the Warrants (the “Exercise Shares”) solely for its account for investment and not with a
view to or for sale or distribution of the Warrants or Exercise Shares or any part thereof.
Each of the Lenders also represents that the entire legal and beneficial interests of the
Warrants and Exercise Shares such Lender is acquiring is being acquired for, and will be
held for, its account only.

     (b) The Warrants and the Exercise Shares have not been registered under the Securities
Act on the basis that no distribution or public offering of the stock of the Borrower is to
be effected. Each of the Lenders realizes that the basis for the exemptions may not be
present, if notwithstanding its representations such Lender has a present intention of
acquiring the securities for a fixed or determinable period in the future, selling (in
connection with a distribution or otherwise), granting any participation in, or otherwise
distributing the securities. None of the Lenders has such present intention.

     (c) The Warrants and the Exercise Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption for such registration is
available. Each of the Lenders recognizes that the Borrower has no obligations to register
the Warrants, or, except as otherwise set forth in the Warrants, to comply with any
exemption from such registration.

     (d) Neither the Warrants nor the Exercise Shares may be sold pursuant to Rule 144
adopted under the Securities Act unless certain conditions are met, including, among other
things, the existence of a public market for the shares, the availability of certain current
public information about the Borrower, the resale following the required holding

11

 

period under Rule 144 and the number of shares being sold during any three month period
not exceeding specified limitation.

     (e) It will not make any disposition of all or any part of the Warrants or Exercise
Shares until:

     (i) The Borrower shall have received a letter secured by such Lender from the
SEC stating that no action will be recommended to the Commission with respect to the
proposed disposition;

     (ii) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance with
said registration statement; or

     (iii) Such Lender shall have notified the Borrower of the proposed disposition
and, in the case of a sale or transfer in a so called “4(1) and a half” transaction,
shall have furnished counsel for the Borrower with an opinion of counsel,
substantially in the form annexed as Exhibit C to the Warrant. The Borrower agrees
that it will not require an opinion of counsel with respect to transactions under
Rule 144 of the Securities Act.

     (f) It understands and agrees that all certificates evidencing the shares to be issued
to the Lenders may bear the following legend.

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144
OR 144A UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL
OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF”
SALE.”

“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT
DATED AS OF DECEMBER ___, 2007. AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF
ITS OUTSTANDING SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.”

     (g) Such Lender is an “accredited investor” as defined in Regulation D promulgated
under the Securities Act.

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     (h) Such Lender is a limited partnership duly organized and validly existing under the
laws of the jurisdiction of its formation.

     Section 3.4 Lenders Acknowledgement. Each of the Lenders acknowledges that it has made the
representations and warranties referred to in Section 3.3 with the intention of persuading the
Borrower to enter into the Financing Document and that the Borrower has entered into the Financing
Documents on the basis of, and in full reliance of, each of such representations and warranties.
Each of the Lenders also acknowledges that the representations and warranties made by the Borrower
in Section 3.1, to the extent that they pertain to the Warrants or the Registration Rights
Agreement (with the exception of Subsection (e) of Section 3.1), are made solely to the extent, and
will only survive for so long as, any of the Lenders remains a party to the Registration Rights
Agreement or the Warrant.

ARTICLE IV

CONDITIONS OF DISBURSEMENTS

     Section 4.1 Conditions to Initial Disbursement of the Loan. The obligation of the Lenders to
make the initial Disbursement shall be subject to the fulfillment of the following conditions:

     (a) Deerfield Private Design Fund shall have received a copy of all documents
authorizing the Borrower to execute, deliver and perform each of the Financing Documents and
to engage in the transactions contemplated thereby and an opinion of Borrower’s counsel in a
form customarily delivered in transactions similar to those contemplated by this Agreement.

     (b) Unless otherwise notified by the Borrower and without prejudice to the generality
of this Section 4.1, the right of the Lenders to require compliance with any condition under
this Agreement which may be waived by the Lenders in respect of any Disbursement is
expressly preserved for the purpose of any subsequent Disbursement.

ARTICLE V

PARTICULAR COVENANTS AND EVENTS OF DEFAULT

     Section 5.1 Affirmative Covenants. Unless the Lenders shall otherwise agree:

     (a) The Borrower shall (i) maintain its existence and qualify and remain qualified to
do its business as currently conducted, (ii) maintain all approvals necessary for the
Financing Documents to be in effect, and (iii) operate its business with due diligence,
efficiency and in conformity with sound business practices.

     (b) The Borrower shall comply in all material respects with all applicable laws,
rules, regulations and orders of any Government Authority, except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings or where the
failure to so comply, individually or in the aggregate, would not have a Material Adverse
Effect.

13

 

     (c) The Borrower shall obtain, make and keep in full force and effect all licenses,
contracts, consents, approvals and authorizations from and registrations with Government
Authorities that may be required to conduct its business.

     (d) The Borrower shall promptly notify the Lenders of the occurrence of (i) any Default
or Event of Default; or (ii) any claims, litigation, arbitration, mediation or
administrative or regulatory proceedings that are instituted or threatened against the
Borrower, except for matters that, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect; and (iii) each event which, at the giving of
notice, lapse of time, determination of materiality or fulfillment of any other applicable
condition (or any combination of the foregoing), would constitute an event of default
(however described) under any of the Financing Documents.

     (e) The Borrower shall comply with the terms of each of the Financing Documents.

     (f) (i) the Borrower will timely file with the SEC (subject to appropriate extensions
made under Rule 12b-25 of the Securities Exchange Act) any annual reports, quarterly
reports and other periodic reports pursuant to Section 13 or 15(d) of the Exchange Act
prepared by the Borrower as soon as available; and (ii) the Borrower and its Subsidiaries
will provide to Deerfield Private Design Fund copies of all reports, financial data and
other information as Deerfield Private Design Fund may reasonably request, and permit the
Lenders to visit the properties of the Borrower and its Subsidiaries, and to discuss its and
their affairs and finances with its and their officers, all at such times as Deerfield
Private Design Fund may reasonably request.

The Parties acknowledge that it may be necessary for the Borrower to disclose to the Lenders
certain material non-public information in connection with its obligations under clause (f)(ii)
above. In order for the Borrower to disclose such information in accordance with federal securities
laws, including Regulation FD promulgated by the SEC, the Lenders agree to refrain from trading in
the Borrower’s securities until such time as the information no longer constitutes material
non-public information.

     Section 5.2 Negative Covenants. Unless the Lenders shall otherwise agree:

     (a) The Borrower shall not liquidate or dissolve.

     (b) The Borrower shall not: (i) create, incur or suffer any Lien upon any of its
assets, now owned or hereafter acquired, except Permitted Liens; or (ii) assign, sell
transfer or otherwise dispose of, any of the Financing Documents, or the rights and
obligations thereunder.

     (c) The Borrower shall not create, incur assume, guarantee or be or remain liable with
respect to any Indebtedness, other than Permitted Indebtedness, or prepay any indebtedness,
other than Permitted Indebtedness, or take any actions which impose on the Borrower an
obligation to prepay any Indebtedness, except Permitted Indebtedness.

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     (d) Except as permitted by the Subordination Agreement, the Borrower shall not amend or
waive any term or condition of the Senior Debt or the documents evidencing the Senior Debt
that directly or indirectly increases the amounts payable under Senior Debt or the dates
when payments under the Senior Debt are due.

     Section 5.3 Reimbursement of Taxes. The Borrower shall pay all Taxes, duties, fees or other
charges payable on or in connection with the execution, issue, delivery, registration, notarization
or enforcement of the Financing Documents and shall, upon notice from the Lenders, reimburse the
Lenders for any such Taxes, duties, fees or other charges paid by the Lenders thereon; provided,
however, that notwithstanding the foregoing, under no circumstances shall the Borrower have any
obligation to reimburse the Lenders for Excluded Taxes.

     Section 5.4 Major Transaction. Upon consummation by Borrower of a Major Transaction, the
Lenders, in the exercise of their sole discretion, may deliver a written notice to the Borrower
(the “Put Notice”), that the outstanding principal of, and accrued and unpaid interest
on, the Notes, together with any other amounts accrued or payable under the Financing Documents
(together, the “Put Price”) shall be thereafter due and payable, with a prepayment premium
equal to 10% of such principal. If the Lenders deliver a Put Notice, then on the date specified in
the Put Notice that is at least (10) Business Days following the date of Borrower’s receipt of the
Put Notice, the Borrower shall pay the Put Price to the Lenders and the Obligations shall
terminate.

     Section 5.5 General Acceleration Provision upon Events of Default. If one or more of the
events specified in this Section 5.5 shall have happened and be continuing beyond the applicable
cure period, (each an “Event of Default”) the Lenders, by written notice to the Borrower,
may cancel the Borrower’s right to request Disbursements and declare the principal of, accrued and
unpaid interest on, the Notes or any part of any of them (together with any other amounts accrued
or payable under this Agreement) to be, and the same shall thereupon become, immediately due and
payable with a prepayment premium equal to 10% of such principal, without any further notice and
without any presentment, demand, or protest of any kind, all of which are hereby expressly waived
by the Borrower, and take any further action available at law or in equity, including, without
limitation, the sale of the Loan and all other rights acquired in connection with the Loan:

     (a) A Lender shall have failed to receive payment when due of (i) principal and
interest due under the Notes or Fund Availability Return or (ii) any other amounts due under
the Loan or the Notes within 5 Business Days of their due date.

     (b) The Borrower shall have failed to comply in any material respect with the due
observance or performance of any other covenant contained in this Agreement or any Note and
such failure shall not have been cured by Borrower within 15 days after receiving written
notice of such default or failure from Deerfield Private Design Fund.

     (c) Any representation or warranty made by the Borrower in any Financing Document shall
be have been incorrect, false or misleading in any material respect as of the date it was
made, deemed made, reaffirmed or confirmed.

15

 

     (d) (i) The Borrower shall generally not pay its debts as such debts become due, or
shall admit in writing its inability to pay its debts as they come due or shall make a
general assignment for the benefit of creditors; (ii) the Borrower shall declare a
moratorium on the payment of its debts; (iii) the commencement by the Borrower of
proceedings to be adjudicated bankrupt or insolvent, or the consent by it to the
commencement of bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization, intervention or other similar relief
under any applicable law, or the consent by it to the filing of any such petition or to the
appointment of an intervenor, receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) or of any substantial part of its assets; (iv) the commencement
against the Borrower or any substantial part of its assets of a proceeding in any court of
competent jurisdiction under any bankruptcy or other applicable law (as now or hereafter in
effect) seeking its liquidation, winding up, dissolution, reorganization, arrangement,
adjustment, or the appointment of an intervenor, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official), and any such proceeding shall continue
undismissed, or any order, judgment or decree approving or ordering any of the foregoing
shall continue unstayed or otherwise in effect, for a period of ninety (90) days; (v) the
making by the Borrower of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debt generally as they become due; or (vi) any other
event shall have occurred which under any applicable law would have an effect analogous to
any of those events listed above in this subsection.

     (e) One or more judgments against the Borrower taken as a whole or attachments against
any of its property, which in the aggregate exceed $500,000, or which could reasonably be
expected to have a Material Adverse Effect remain(s) unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of thirty (30) days from the date of
entry of such judgment.

     (f) Any license, permit or approval held by the Borrower from any Government Authority
shall have been suspended, canceled or revoked and such suspension, cancellation or
revocation could reasonably be expected to have a Material Adverse Effect, and such
suspension, cancellation or revocation shall not have been cured within 30 days.

     (g) Any authorization necessary for the execution, delivery or performance of any
Financing Document or for the validity or enforceability of any of the Obligations under any
Financing Document is not given or is withdrawn or ceases to remain in full force or effect.

     (h) The validity of or any Financing Document shall be contested by any legislative,
executive or judicial body of any jurisdiction, or any treaty, law, regulation, communiqué,
decree, ordinance or policy of any jurisdiction shall purport to render any material
provision of any Financing Document invalid or unenforceable or shall purport to prevent or
materially delay the performance or observance by the Borrower of the Obligations.

16

 

     (i) The Borrower has failed to comply with the requirements of the Securities Exchange
Act in a manner which could reasonably be expected to have a Material Adverse Effect.

     (j) There is a failure to perform in any agreement to which the Borrower is a party
with a third party or parties resulting in a right by such third party or parties to
accelerate the maturity of any Indebtedness in an amount in excess of $500,000, and such
acceleration right is exercised.

     (j) If Borrower makes any payment on account of Subordinated Debt, except to the extent
the payment is allowed under any subordination agreement entered into with the Lenders.

     (k) If an Event of Default pursuant to the Warrants (as such term is defined in the
Warrants) shall have occurred, but only if a Lender is a holder of any of the Warrants at
the time of such Event of Default.

     (l) If the Cash and Cash Equivalents is less than $18,500,000.

     Section 5.6 Automatic Acceleration on Dissolution or Bankruptcy. Notwithstanding any other
provisions of this Agreement, if an Event of Default under Section 5.5(d) shall occur, the
principal of the Loan (together with any other amounts accrued or payable under this Agreement)
shall thereupon become immediately due and payable without any presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the Borrower.

     Section 5.7 Recovery of Amounts Due. If any amount payable hereunder is not paid as and when
due, the Borrower hereby authorizes the Lenders to proceed, to the fullest extent permitted by
applicable law, without prior notice, by right of set-off, banker’s lien or counterclaim, against
any moneys or other assets of the Borrower to the full extent of all amounts payable to the Lender.

ARTICLE VI

MISCELLANEOUS

     Section 6.1 Notices. Any notice, request or other communication to be given or made under
this Agreement shall be in writing. Such notice, request or other communication shall be deemed to
have been duly given or made when it shall be delivered by hand, international courier (confirmed
by facsimile), or facsimile (with a hard copy delivered within two (2) Business Days) to the Party
to which it is required or permitted to be given or made at such Party’s address specified below or
at such other address as such Party shall have designated by notice to the other Parties.

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For the Borrower:

502 South Rosa Road

Madison, WI 53719

Attention: Kevin Conroy

Facsimile: (608) 633-7037

with a courtesy copy to:

Kennedy Covington Lobdell & Hickman, L.L.P.

4350 Lassiter at North Hills Avenue

Suite 300

Raleigh, North Carolina 27609

Attention: D. Scott Coward

Facsimile: (919) 516-2028

For the Lenders c/o:

Deerfield Private Design Fund, L.P.

780 Third Avenue, 37th Floor

New York, New York 10017

Attention: James E. Flynn

Facsimile: (212) 573-8111

with a courtesy copy to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022-2585

Facsimile: (212) 894-5827

Attention: Robert I. Fisher

     Section 6.2 Waiver of Notice. Whenever any notice is required to be given to the Lenders or
the Borrower under the any of the Financing Documents, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.

     Section 6.3 Reimbursement of Legal and Other Expenses. If any amount owing to the Lenders
under any Financing Document shall be collected through enforcement of this Agreement, any
refinancing or restructuring of the Loan in the nature of a work-out, settlement, negotiation, or
any process of law, or shall be placed in the hands of third Persons for collection, the Borrower
shall pay (in addition to all monies then due in respect of the Loan or otherwise payable under any
Financing Document) reasonable attorneys’ and other fees and expenses incurred in respect of such
collection.

     Section 6.4 Applicable Law and Consent to Non-Exclusive New York Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of New York, without
giving effect to the conflicts of laws principles thereof other than Sections 5-1401 and 5-1402 of
the General Obligations Law of such State.

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     (a) Any rights of the Lenders arising out of or relating to any Financing Document,
may, at the option of the Lenders, be enforced by the Lenders in the courts of the United
States of America located in the Southern District of the State of New York or in any other
courts having jurisdiction. For the benefit of the Lenders, the Borrower hereby irrevocably
agrees that any legal action, suit or other proceeding arising out of any Financing Document
may be brought in the courts of the State of New York or of the United States of America for
the Southern District of New York. By the execution and delivery of this Agreement, the
Borrower hereby irrevocably consents and submits to the jurisdiction of any such court in
any such action, suit or other proceeding. Final judgment against the Borrower in any such
action, suit or other proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment. Nothing contained in any Financing Document shall
affect the right of the Lenders to commence legal proceedings in any court having
jurisdiction, or concurrently in more than one jurisdiction, or to serve process, pleadings
and other legal papers upon the Borrower in any manner authorized by the laws of any such
jurisdiction.

     (b) The Borrower irrevocably waives, to the fullest extent permitted by applicable law,
any objection which it may now or hereafter have to the laying of venue of any action, suit
or other proceeding arising out of or relating to any Financing Document, brought in the
courts of the State of New York or in the United States District Court for the Southern
District of New York, and any claim that any such action, suit or other proceeding brought
in any such court has been brought in an inconvenient forum.

     (c) The Borrower hereby waives any and all rights to demand a trial by jury in any
action, suit or other proceeding arising out of any Financing Document or the transactions
contemplated by any Financing Document.

     (d) To the extent that the Parties may, in any suit, action or other proceeding brought
in any court arising out of or in connection with any Financing Document, be entitled to the
benefit of any provision of law requiring the Borrower or the Lenders, as applicable, in
such suit, action or other proceeding to post security for the costs of the Borrower or the
Lenders, as applicable, or to post a bond or to take similar action, the Parties hereby
irrevocably waive such benefit, in each case to the fullest extent now or hereafter
permitted under any applicable laws.

     Section 6.5 Successor and Assigns.

     (a) This Agreement shall bind and inure to the respective successors and assigns of the
Parties, except that the Borrower may not assign or otherwise transfer all or any part of
its rights under this Agreement or the Obligations without the prior written consent of the
Lenders and Lenders may not assign or otherwise transfer all or any part of their
obligations under this Agreement without the prior written consent of the Borrower (such
consent not to be unreasonably withheld). Notwithstanding the foregoing, nothing in this
Agreement is deemed to limit or otherwise restrict a merger, reorganization or sale of
substantially all of the assets of Borrower.

19

 

     (b) With respect to the Loan made by the Offshore Lender, an Affiliate of the Lenders
shall maintain, as agent to, and on behalf of the Borrower, a register for the recordation
of the names and addresses of each assignee and the principal amount of the Loan owing to
the Offshore Lender and each assignee from time to time (the “Register”). The
entries in the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower and the Offshore Lender may treat each Person whose name is recorded
in the Register as a “Lender” hereunder for the purposes of this Agreement. The Register
shall be available for inspection by the Borrower and the Offshore Lender at any reasonable
time and from time to time upon reasonable prior notice. Until the Offshore Lender has
notified the Borrower that a Note has been assigned and that the assignee’s name and address
and the principal amount of the Loan being assigned have been recorded in the Register, the
Borrower shall recognize the Offshore Lender as the “Lender” with respect to such Loan.

     (c) Notwithstanding anything to the contrary contained herein, if any assignment or
participation is to any Person that is not a “United States person” within the meaning of
Section 7701(a)(30) of the Code, then such Person shall submit to the Borrower, on or before
the date of such assignment or participation an IRS Form W-8BEN (or any successor form)
certifying as to such Person’s status for purposes of determining exemption from United
States withholding tax, information reporting and backup withholding with respect to all
payments to be made to such Person. Any attempted assignment or participation in violation
of this Section 6.5 shall be void and of no force and effect. Until there has been a valid
assignment of this Agreement and of all of the rights hereunder by a Lender in accordance
with this Section 6.5, the Borrower shall deem and treat such Lender as the absolute
beneficial owner and holder of this Agreement and of all of the rights hereunder for all
purposes.

     Section 6.6 Entire Agreement. The Financing Documents contain the entire understanding of the
Parties with respect to the matters covered thereby and supersede any and all other written and
oral communications, negotiations, commitments and writings with respect thereto. The provisions
of this Agreement may be waived, modified, supplemented or amended only by an instrument in writing
signed by the authorized officer of each Party.

     Section 6.7 Severability. If any provision contained in this Agreement shall be invalid,
illegal or unenforceable in any respect under any law, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby. The Parties shall
endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provision.

     Section 6.8 Counterparts. This Agreement may be executed in several counterparts, and by each
Party on separate counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.

     Section 6.9 Survival.

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     (a) This Agreement and all agreements, representations and warranties made in this
Agreement, and in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall be considered to have been relied upon by the other Parties and
shall survive the execution and delivery of this Agreement and the making of the Loan
hereunder regardless of any investigation made by any such other Party or on its behalf, and
shall continue in force until all amounts payable under this Agreement shall have been fully
paid in accordance with the provisions hereof and thereof, and the Lenders shall not be
deemed to have waived, by reason of making the Loan, any Default that may arise by reason of
such representation or warranty proving to have been false or misleading, notwithstanding
that the Lenders may have had notice or knowledge of any such Default or may have had notice
or knowledge that such representation or warranty was false or misleading at the time any
Disbursement was made hereunder.

     (b) The obligations of the Borrower under Section 2.7 and the obligations of the
Borrower and the Lenders under this Article VII hereof shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loan, or the termination of this Agreement or any provision hereof.

     Section 6.10 Waiver. Neither the failure of, nor any delay on the part of, any Party in
exercising any right, power or privilege hereunder, or under any agreement, document or instrument
mentioned herein, shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder, or under any agreement, document or instrument mentioned
herein, preclude other or further exercise thereof or the exercise of any other right, power or
privilege; nor shall any waiver of any right, power, privilege or default hereunder, or under any
agreement, document or instrument mentioned herein, constitute a waiver of any other right, power,
privilege or default or constitute a waiver of any default of the same or of any other term or
provision. No course of dealing and no delay in exercising, or omission to exercise, any right,
power or remedy accruing to the Lenders upon any default under this Agreement, or any other
agreement shall impair any such right, power or remedy or be construed to be a waiver thereof or an
acquiescence therein; nor shall the action of the Lenders in respect of any such default, or any
acquiescence by it therein, affect or impair any right, power or remedy of the Lenders in respect
of any other default. All rights and remedies herein provided are cumulative and not exclusive of
any rights or remedies otherwise provided by law.

     Section 6.11 Indemnity.

     (a) The Parties shall, at all times, indemnify and hold each other harmless (the
“Indemnity”) and each of their respective directors, partners, officers, employees,
agents, counsel and advisors (each, an “Indemnified Person”) in connection with any
losses, claims (including the cost of defending against such claims), damages, liabilities,
penalties, or other expenses arising out of, or relating to, this Agreement, the extension
of credit hereunder or the Loan or the use or intended use of the Loan, which an Indemnified
Person may incur or to which an Indemnified Person may become subject (each, a
“Loss”). The Indemnity shall not apply to the extent that a court or arbitral
tribunal with jurisdiction over the subject matter of the Loss, and over the Lenders or the

21

 

Borrower, as applicable, and such other Indemnified Person that had an adequate
opportunity to defend its interests, determines that such Loss resulted from the gross
negligence or willful misconduct of the Indemnified Person, which determination results in a
final, non-appealable judgment or decision of a court or tribunal of competent jurisdiction.
The Indemnity is independent of and in addition to any other agreement of any Party under
any Financing Document to pay any amount to the Lenders or the Borrower, as applicable, and
any exclusion of any obligation to pay any amount under this subsection shall not affect the
requirement to pay such amount under any other section hereof or under any other agreement.

     (b) Without prejudice to the survival of any other agreement of any of the Parties
hereunder, the agreements and the obligations of the Parties contained in this Section 6.11
shall survive the termination of each other provision hereof and the payment of all amounts
payable to the Lenders hereunder.

     Section 6.12 No Usury. The Financing Documents are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration or otherwise, shall the amount
paid or agreed to be paid to the Lenders for the Loan exceed the maximum amount permissible under
applicable law. If from any circumstance whatsoever fulfillment of any provision hereof, at the
time performance of such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit
of such validity, and if from any such circumstance the Lenders shall ever receive anything which
might be deemed interest under applicable law, that would exceed the highest lawful rate, such
amount that would be deemed excessive interest shall be applied to the reduction of the principal
amount owing on account of the Loan, or if such deemed excessive interest exceeds the unpaid
balance of principal of the Loan, such deemed excess shall be refunded to the Borrower. All sums
paid or agreed to be paid to the Lenders for the Loan shall, to the extent permitted by applicable
law, be deemed to be amortized, prorated, allocated and spread throughout the full term of the Loan
until payment in full so that the deemed rate of interest on account of the Loan is uniform
throughout the term thereof. The terms and provisions of this paragraph shall control and
supersede every other provision of this Agreement and the Notes.

     Section 6.13 Further Assurances. From time to time, the Borrower shall perform any and all
acts and execute and deliver to the Lenders such additional documents as may be necessary or as
requested by the Lenders to carry out the purposes of any Financing Document or any or to preserve
and protect the Lenders’ rights as contemplated therein.

     Section 6.14 Termination. Subject to the provisions of Section 6.9(b) upon repayment of all
outstanding principal of the Loan (together with any other amounts accrued and unpaid under this
Agreement), the Borrower may terminate this Agreement upon 10 days’ notice to the Lenders.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the Parties, acting through their duly authorized representatives, have
caused this Agreement to be signed in their respective names as of the date first above written.

	 	 	 	 	 	 	 
	BORROWER
	 	LENDER
	THIRD WAVE TECHNOLOGIES, INC.
	 	DEERFIELD PRIVATE DESIGN FUND, L.P.
	 

	By:

	 	/s/ Kevin Conroy
	 	By:
	 	/s/ James Flynn
	 

	 	 
	 	 	 	 
	 

	 	Name: Kevin Conroy
	 	 	 	Name James Flynn
	 

	 	Title    President and CEO
	 	 	 	Title    General Partner
	 
	 	 	 	 	 	 
	LENDER:

DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ James Flynn	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name James Flynn

Title   General Partner	 	 	 	 

23

 

SCHEDULE 1

FORM OF DISBURSEMENT REQUEST

[LETTERHEAD OF THE BORROWER]

[Date]

Ladies and Gentlemen:

     Request for Disbursement of the Loan

     1. Please refer to the Facility Agreement (the “Facility Agreement”), dated as of
December ___, 2007, between Third Wave Technologies, Inc. (the “Borrower”) and Deerfield
Private Design Fund, L.P., Deerfield Special Situations Fund, L.P., Deerfield Special Situations
Fund International Limited and Deerfield Private Design International, L.P. (together the
“Lenders”).

     2. Terms defined in the Facility Agreement shall have the same meanings herein.

     3. The Borrower hereby requests a Disbursement, on [date], of the amount of [amount of
drawdown], in accordance with the provisions of Section 2.2 of the Facility Agreement. You are
requested to pay the amount to the following account [account number] at [name of bank].

     4. Attached hereto is a signed but undated receipt for the amount hereby requested to be
disbursed, and we hereby authorize the Lenders to date such receipt as of the date of actual
disbursement by the Lenders of the funds hereby requested to be disbursed.

     5. The Borrower hereby certifies as follows:

     (a) The representations and warranties in Article III of the Facility Agreement are
true in all material respects on the date hereof with the same effect as though such
representations and warranties had been made on today’s date; and

24

 

     (b) All of the conditions set forth in Article IV of the Facility Agreement have been
satisfied.

     6. The above certifications are effective as of the date of this request for Disbursement and
will continue to be effective as of the Disbursement Date. If any of these certifications is no
longer valid as of or prior to the Disbursement Date, the Borrower will immediately notify the
Lenders and will repay the amount disbursed upon demand by the Lenders if Disbursement is made
prior to the receipt of such notice.

	 	 	 	 	 
	 

	 	THIRD WAVE TECHNOLOGIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

25

 

SCHEDULE 2

FORM OF EVIDENCE OF DISBURSEMENT

[LETTERHEAD OF THE BORROWER]

[Date]

Ladies and Gentlemen:

          Re:      Disbursement Receipt

     Third Wave Technologies, Inc. (the “Borrower”) hereby acknowledge receipt of the sum
of [insert amount of disbursement] disbursed to us by Deerfield Private Design Fund, L.P.,
Deerfield Special Situations Fund L.P., Deerfield Special Situations Fund International Limited and
Deerfield Private Design International, L.P. (together, the “Lenders”) under the Loan
provided for in the Facility Agreement, dated as of December ___, 2007, between the Borrower and the
Lenders.

	 	 	 	 	 
	 

	 	Yours faithfully,
	 
	 	 	 	 
	 

	 	THIRD WAVE TECHNOLOGIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title	 	 
	 

	 	 	 	 

26

 

EXHIBIT A-1

FORM OF PROMISSORY NOTE

PROMISSORY NOTE

	 	 	 
	$15,425,000.00

	 	December      , 2007

     FOR VALUE RECEIVED, THIRD WAVE TECHNOLOGIES, INC., a Delaware corporation (the
“Maker”), by means of this Promissory Note (this “Note”) hereby unconditionally
promises to pay to the order of DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P. (the “Payee”),
the principal sum of FIFTEEN MILLION FOUR HUNDRED TWENTY-FIVE THOUSAND AND 00/100 DOLLARS
(US$15,425,000.00) or so much thereof as may be advanced by the Payee from time to time hereunder
to or for the benefit of the Maker (the “Loan”), in lawful money of the United States of
America and in immediately available funds, on the dates provided in the Facility Agreement (as
defined below).

     The principal balance of this Note outstanding at any time shall bear interest from the date
of disbursement until full payment of the principal hereof as set forth in the Facility Agreement
dated as of December ___, 2007 among the Maker, the Payee and the other parties thereto (as modified
and supplemented and in effect from time to time, the “Facility Agreement”).

     Each Loan made by the Payee to the Maker pursuant to the Facility Agreement, and all payments
made on account of principal thereof, shall be recorded by the Payee and, prior to any transfer
hereof, endorsed on the grid attached hereto which is part of this Note; provided that the failure
of the Payee to make any such recordation or endorsement shall not affect the obligations of the
Payee hereunder or under the Facility Agreement.

     The Maker shall make all payments to the Payee of principal under this Note in the manner
provided in and otherwise in accordance with the Facility Agreement. The outstanding principal
balance of this Note shall be due and payable in full on the Final Payment Date.

     This Note is a “Note” referred to in the Facility Agreement with respect to the Loan made by
the Payee thereunder. Capitalized terms used herein and not expressly defined in this Note shall
have the respective meanings assigned to them in the Facility Agreement.

     If default is made in the punctual payment of principal or any other amount under this Note in
accordance with the Facility Agreement, or if any other Event of Default has occurred, this Note
shall, at the Payee’s option exercised at any time upon or after the occurrence of any such payment
default or other Event of Default, become immediately due and payable.

     All payments of any kind due to the Payee from the Maker pursuant to this Note shall be made
in the full face amount thereof, without setoff, counterclaim, or other defense. All such payments
will be free and clear of, and without deduction or withholding for, any present or future taxes.
The Maker shall pay all and any costs (administrative or otherwise) imposed by

27

 

banks, clearing houses, or any other financial institution, in connection with making any
payments hereunder, except for any costs imposed by the Payee’s banking institutions.

     The Maker shall pay all costs of collection, including, without limitation, all legal expenses
and attorneys’ fees, paid or incurred by the Payee in collecting and enforcing this Note.

     The Maker hereby expressly waives presentment, protest, demand, notice of dishonor or default,
and notice of any kind with respect to this Note and the Facility Agreement or the performance of
the obligations under this Note and/or the Facility Agreement. No renewal or extension of this
Note or the Facility Agreement, no release or surrender of any security for this Note or the
Facility Agreement, no release of any Person primarily or secondarily liable on this Note or the
Facility Agreement, including the Maker and any endorser, no delay in the enforcement of payment of
this Note or the Facility Agreement, and no delay or omission in exercising any right or power
under this Note or the Facility Agreement shall affect the liability of the Maker or any endorser
of this Note.

     No delay or omission by the Payee in exercising any power or right hereunder shall impair such
right or power or be construed to be a waiver of any default, nor shall any single or partial
exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any
other power or right. The provisions of this Note may be waived or amended only in a writing
signed by the Maker and the Payee. This Note may be prepaid in whole or in part without premium or
penalty.

     THIS NOTE, AND ANY RIGHTS OF THE PAYEE ARISING OUT OF OR RELATING TO THIS NOTE, MAY, AT THE
OPTION OF THE PAYEE, BE ENFORCED BY THE PAYEE IN THE COURTS OF THE UNITED STATES OF AMERICA LOCATED
IN THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK OR IN ANY OTHER COURTS HAVING JURISDICTION. FOR
THE BENEFIT OF THE PAYEE, THE MAKER HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION, SUIT OR OTHER
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND HEREBY CONSENTS
THAT PERSONAL SERVICE OF SUMMONS OR OTHER LEGAL PROCESS MAY BE MADE AS SET FORTH IN SECTION 6.1 OF
THE FACILITY AGREEMENT, WHICH SERVICE THE MAKER AGREES SHALL BE SUFFICIENT AND VALID. THE MAKER
HEREBY WAIVES ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED BY THIS NOTE.

     This Note shall be governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and to be performed in such State, without giving effect to the
conflicts of laws principles thereof other than Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York.

     Whenever this Note is held by a noteholder that is a “United States person” within the meaning
of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the “Code”), then it is
the intention of the Maker and such noteholder that (x) all interest accrued and paid on

28

 

this Note will qualify for exemption from United States withholding tax as “portfolio
interest” because this Note is an obligation which is in “registered form” within the meaning of
Sections 871(h)(2)(B) and 881(c)(2)(B) of the Code and the applicable Treasury Regulations
promulgated thereunder, and (y) as such, all interest accrued and paid on this Note will be exempt
from United States information reporting under Sections 6041 and 6049 of the Code and United States
backup withholding under Section 3406 of the Code. The parties agree to cooperate with one
another, and to execute and file such forms or other documents, or to do or refrain from doing such
other acts, as may be required, to secure such exemptions from United States withholding tax,
information reporting, and backup withholding. In furtherance of the foregoing, any such
transferee or assignee noteholder that is not a United States person shall represent, warrant and
covenant to the Maker that (i) such noteholder is not, and will not be as long as any amounts due
under this Note have not been paid in full, a “United States person,” within the meaning of Section
7701(a)(30) of the Code; (ii) such noteholder is not, and will not be as long as any amounts due
under this Note have not been paid in full, a person described in Section 881(c)(3) of the Code;
(iii) on or prior to the date of transfer or assignment and on or prior to each anniversary of such
date until all amounts due under this Note have been paid in full, such noteholder shall provide
the Maker with a properly executed U.S. Internal Revenue Service (“IRS”) Form W-8BEN,
Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (or any
successor form prescribed by the IRS), certifying as to such noteholder’s status for purposes of
determining exemption from United States withholding tax, information reporting and backup
withholding with respect to all payments to be made to such noteholder hereunder; (iv) if an event
occurs that would require a change in the exempt status of such noteholder or any of the other
information provided on the most recent IRS Form W-8BEN (or successor form) previously submitted by
such noteholder to the Maker hereunder, such noteholder will so inform the Maker in writing (or by
submitting to the Maker a new IRS Form W-8BEN or successor form) within 30 days after the
occurrence of such event; and (v) such noteholder will not assign or otherwise transfer this Note
or any of its rights hereunder except in accordance with the provisions hereof.

     Transfer of this Note may be effected only by (i) surrender of this Note to the Maker and the
re-issuance of this Note to the transferee, or the Maker’s issuance to the Payee of a new note in
the same form as this Note but with the transferee denoted as the Payee, or (ii) the recording by
the Payee of the identity of the transferee in a record of ownership of this Note maintained by an
Affiliate of the Payee as agent to, and on behalf of, the Maker. The terms and conditions of this
Note shall be binding upon and inure to the benefit of the Maker and the Payee and their permitted
assigns; provided, however, that if any such assignment, (whether by operation of law, by way of
transfer or participation, or otherwise) is to any noteholder that is not a “United States person”
within the meaning of Section 7701(a)(30) of the Code, then such noteholder shall submit to the
Maker on or before the date of such assignment an IRS Form W-8BEN (or any successor form)
certifying as to such noteholder’s status for purposes of determining exemption from United States
withholding tax, information reporting and backup withholding with respect to all payments to be
made to such noteholder under the new note (or other instrument). Any attempted transfer in
violation of the relevant provisions of this Note shall be void and of no force and effect. Until
there has been a valid transfer of this Note and of all of the rights hereunder by the Payee in
accordance with this Note, the Maker shall deem and treat the Payee as the absolute beneficial
owner and holder of this Note and of all of the rights hereunder for all

29

 

purposes (including, without limitation, for the purpose of receiving all payments to be made
under this Note).

     This Note is a registered instrument and is not a bearer instrument. This Note is registered
as to both principal and interest with the Maker and all payments hereunder shall be made to the
named Payee or, in the event of a transfer pursuant to Section 6.5(b) of the Facility Agreement, to
the transferee identified in the record of ownership of this Note maintained by the Payee on behalf
of the Maker. Transfer of this Note may not be effected except in accordance with the provisions
hereof.

     This Note is subject to the Subordination Agreement, dated as of December 10, 2007, among
Stark Onshore Master Holding LLC and the Maker, under which this Note and the Maker’s obligations
hereunder are subordinated in the manner and to the extent set forth therein to the Permitted
Senior Indebtedness as defined therein.

     IN WITNESS WHEREOF, an authorized representative of the Maker has executed this Note as of the
date first written above.

	 	 	 	 	 
	 

	 	THIRD WAVE TECHNOLOGIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:

Title:	 	 

30

 

DISBURSEMENT TO PROMISSORY NOTE

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Amount of	 	 	 	 
	 	Date	 	 	Disbursement	 	 	Payee’s Initials	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

31

 

EXHIBIT A-2

FORM OF PROMISSORY NOTE

PROMISSORY NOTE

	 	 	 
	$9,575,000.00

	 	December ___, 2007

     FOR VALUE RECEIVED, THIRD WAVE TECHNOLOGIES, INC., a Delaware corporation (the
“Maker”), by means of this Promissory Note (this “Note”) hereby unconditionally
promises to pay to the order of DEERFIELD PRIVATE DESIGN FUND, L.P. (the “Payee”), the
principal sum of NINE MILLION FIVE HUNDRED SEVENTY-FIVE THOUSAND AND 00/100 DOLLARS
(US$9,575,000.00) or so much thereof as may be advanced by the Payee from time to time hereunder to
or for the benefit of the Maker (the “Loan”), in lawful money of the United States of
America and in immediately available funds, on the dates provided in the Facility Agreement (as
defined below).

     The principal balance of this Note outstanding at any time shall bear interest from the date
of disbursement until full payment of the principal hereof as set forth in the Facility Agreement
dated as of December ___, 2007 among the Maker, the Payee and the other parties thereto (as
modified and supplemented and in effect from time to time, the “Facility Agreement”).

     Each Loan made by the Payee to Maker pursuant to the Facility Agreement, and all payments made
on account of principal thereof, shall be recorded by the Payee and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this Note; provided that the failure of the
Payee to make any such recordation or endorsement shall not affect the obligations of the Payee
hereunder or under the Facility Agreement.

     The Maker shall make all payments to the Payee of principal under this Note in the manner
provided in and otherwise in accordance with the Facility Agreement. The outstanding principal
balance of this Note shall be due and payable in full on the Final Payment Date.

     This Note is a “Note” referred to in the Facility Agreement with respect to the Loan made by
the Payee thereunder. Capitalized terms used herein and not expressly defined in this Note shall
have the respective meanings assigned to them in the Facility Agreement.

     If default is made in the punctual payment of principal or any other amount under this Note in
accordance with the Facility Agreement, or if any other Event of Default has occurred, this Note
shall, at the Payee’s option exercised at any time upon or after the occurrence of any such payment
default or other Event of Default, become immediately due and payable.

     All payments of any kind due to the Payee from the Maker pursuant to this Note shall be made
in the full face amount thereof, without setoff, counterclaim, or other defense. All such payments
will be free and clear of, and without deduction or withholding for, any present or future taxes.
The Maker shall pay all and any costs (administrative or otherwise) imposed by

32

 

banks, clearing houses, or any other financial institution, in connection with making any
payments hereunder, except for any costs imposed by the Payee’s banking institutions.

     The Maker shall pay all costs of collection, including, without limitation, all legal expenses
and attorneys’ fees, paid or incurred by the Payee in collecting and enforcing this Note.

     The Maker hereby expressly waives presentment, protest, demand, notice of dishonor or default,
and notice of any kind with respect to this Note and the Facility Agreement or the performance of
the obligations under this Note and/or the Facility Agreement. No renewal or extension of this
Note or the Facility Agreement, no release or surrender of any security for this Note or the
Facility Agreement, no release of any Person primarily or secondarily liable on this Note or the
Facility Agreement, including the Maker and any endorser, no delay in the enforcement of payment of
this Note or the Facility Agreement, and no delay or omission in exercising any right or power
under this Note or the Facility Agreement shall affect the liability of the Maker or any endorser
of this Note.

     No delay or omission by the Payee in exercising any power or right hereunder shall impair such
right or power or be construed to be a waiver of any default, nor shall any single or partial
exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any
other power or right. The provisions of this Note may be waived or amended only in a writing
signed by the Maker and the Payee. This Note may be prepaid in whole or in part without premium or
penalty.

     THIS NOTE, AND ANY RIGHTS OF THE PAYEE ARISING OUT OF OR RELATING TO THIS NOTE, MAY, AT THE
OPTION OF THE PAYEE, BE ENFORCED BY THE PAYEE IN THE COURTS OF THE UNITED STATES OF AMERICA LOCATED
IN THE SOUTHERN DISTRICT OF THE STATE OF NEW YORK OR IN ANY OTHER COURTS HAVING JURISDICTION. FOR
THE BENEFIT OF THE PAYEE, THE MAKER HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION, SUIT OR OTHER
PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND HEREBY CONSENTS
THAT PERSONAL SERVICE OF SUMMONS OR OTHER LEGAL PROCESS MAY BE MADE AS SET FORTH IN SECTION 6.1 OF
THE FACILITY AGREEMENT, WHICH SERVICE THE MAKER AGREES SHALL BE SUFFICIENT AND VALID. THE MAKER
HEREBY WAIVES ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED BY THIS NOTE.

     This Note shall be governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and to be performed in such State, without giving effect to the
conflicts of laws principles thereof other than Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York.

     This Note is subject to the Subordination Agreement, dated as of December 10, 2007, among
Stark Onshore Master Holding LLC and the Maker, under which this Note and the

33

 

Maker’s obligations hereunder are subordinated in the manner and to the extent set forth
therein to the Permitted Senior Indebtedness as defined therein.

     IN WITNESS WHEREOF, an authorized representative of the Maker has executed this Note as of the
date first written above.

	 	 	 	 	 
	 

	 	THIRD WAVE TECHNOLOGIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:

Title:	 	 

34

 

EXHIBIT B

SCHEDULE OF PERMITTED LIENS

35

 

EXHIBIT D

Allocation of Warrants

	 	 	 	 	 
	Deerfield Private	 	Deerfield Private Design	 	 
	Design Fund, L.P.	 	International, L.P.	 	Total
	 	 	 	 	 
	695,145
	 	1,119,855
	 	1,815,000

36Exhibit 10.2

 

Exhibit 10.2

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED
UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER,
SALE OR TRANSFER.

AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST RELY ON THEIR OWN
ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED.

SO LONG AS ANY OF THE SENIOR NOTES (AS DEFINED HEREIN) REMAIN OUTSTANDING EACH HOLDER OF THIS
WARRANT COVENANTS AND AGREES BY ACCEPTANCE OF THIS WARRANT THAT (I) THE COMPANY WILL NOT MAKE (AND
THE HOLDER HEREOF SHALL NOT BE ENTITLED TO RECEIVE) ANY CASH PAYMENT UNDER OR IN RESPECT OF THIS
WARRANT OTHER THAN A REDEMPTION PAYMENT IN CONNECTION WITH A MAJOR TRANSACTION PURSUANT TO SECTION
5 HEREOF IN THE EVENT THE HOLDER OF THE SENIOR NOTES DOES NOT ELECT TO REQUIRE THE REDEMPTION OF
THE SENIOR NOTES IN RESPECT OF SUCH MAJOR TRANSACTION (A “PERMITTED REDEMPTION PAYMENT”) AND (II)
THIS WARRANT MAY NOT BE AMENDED WITHOUT THE CONSENT OF THE CURRENT HOLDER OF THE SENIOR NOTES,
(III) THIS WARRANT AND THE PAYMENTS OF ANY AMOUNTS IN RESPECT HEREOF (OTHER THAN A PERMITTED
REDEMPTION PAYMENT) ARE EXPRESSLY SUBORDINATED AND JUNIOR TO THE SENIOR NOTES AND (IV) IT WILL NOT
ASSERT ANY CLAIMS OR CAUSES OF ACTION AGAINST THE COMPANY THAT WOULD REQUIRE THE PAYMENT BY THE
COMPANY TO THE HOLDER HEREOF OF ANY AMOUNT OTHER THAT A PERMITTED REDEMPTION PAYMENT.

	 	 	 
	Warrant to Purchase
	 	 
	 

	695,145 shares

	 	Warrant Number 1

Warrant to Purchase Common Stock

of

THIRD WAVE TECHNOLOGIES, INC.

THIS CERTIFIES that DEERFIELD PRIVATE DESIGN FUND, L.P. or any subsequent holder hereof (“Holder”)
has the right to purchase from THIRD WAVE TECHNOLOGIES, INC., a Delaware corporation, (the
“Company”), SIX HUNDRED NINETY-FIVE THOUSAND ONE HUNDRED FORTY-FIVE (695,145) fully paid and
nonassessable shares, of the Company’s common stock, $0.001 par value per share (“Common Stock”),
subject to adjustment as provided herein, at a price equal to the Exercise Price as defined in
Section 3 below, at any time during the Term (as defined below).

Holder agrees with the Company that this Warrant to Purchase Common Stock of the Company (this
“Warrant” or this “Agreement”) is issued and all rights hereunder shall be held subject to all of
the conditions, limitations and provisions set forth herein.

1. Date of Issuance and Term.

This Warrant shall be deemed to be issued on December 10, 2007 (“Date of Issuance”). The term of
this Warrant begins on the Date of Issuance and ends at 5:00 p.m., New York City time, on the date
that is five (5) years after the Date of Issuance (the “Term”). This Warrant was issued in
conjunction with that certain Facility Agreement (the “Facility Agreement”) and the Registration
Rights Agreement (“Registration Rights Agreement”) by and between the Company and Deerfield Private
Design Fund, L.P. and certain other parties, each dated December 10, 2007, entered into in
conjunction herewith.

Notwithstanding anything herein to the contrary, the Company shall not issue to the Holder, and the
Holder may not acquire, a number of shares of Common Stock upon exercise of this Warrant to the
extent that, upon such exercise, the number of shares of Common Stock then beneficially owned by
the Holder and its Affiliates and any other persons or entities whose beneficial ownership of
Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”) (including shares held by any “group” of which the Holder
is a member, but excluding shares beneficially owned by virtue of the ownership of securities or
rights to acquire securities that have limitations on the right to convert, exercise or purchase
similar to the limitation set forth herein) would exceed 9.98% of the total number of shares of
Common Stock of the Company then issued and outstanding. For purposes hereof, “group” has the
meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the Securities
and Exchange Commission (the “SEC”), and the percentage held by the Holder shall be determined in a
manner consistent with the provisions of Section 13(d) of the Exchange Act. Upon the written
request of the Holder, the Company

 

 

shall, within two (2) Trading Days confirm orally and in writing to the Holder the number of shares
of Common Stock then outstanding.

“Affiliate” means any person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a person or entity, as
such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended
(the “Securities Act”). With respect to a Holder of Warrants, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager as such Holder will
be deemed to be an Affiliate of such Holder.

“Holder” means Deerfield Private Design Fund, L.P. and any transferee or assignee pursuant to the
terms of this Warrant.

2. Exercise.

(a) Manner of Exercise. During the Term, this Warrant may be Exercised as to all or any lesser
number of full shares of Common Stock covered hereby (the “Warrant Shares” or the “Shares”) upon
surrender of this Warrant, with the Exercise Form attached hereto as Exhibit A (the
“Exercise Form”) duly completed and executed, together with the full Exercise Price (as defined
below, which may be satisfied by a Cash Exercise or a Cashless Exercise, as each is defined below)
for each share of Common Stock as to which this Warrant is Exercised, at the office of the Company,
Third Wave Technologies, Inc., 502 S. Rosa Road, Madison, WI 53719; Phone: (888) 898-2357, Fax:
(608) 663-7037, or at such other office or agency as the Company may designate in writing, by
overnight mail, with an advance copy of the Exercise Form sent to the Company and its transfer
agent (“Transfer Agent”) by facsimile (such surrender and payment of the Exercise Price hereinafter
called the “Exercise” of this Warrant).

(b) Date of Exercise. The “Date of Exercise” of the Warrant shall be defined as the date that the
Exercise Form attached hereto as Exhibit A, completed and executed, is sent by facsimile to
the Company, provided that the original Warrant and Exercise Form are received by the Company and
the Exercise Price is satisfied, each as soon as practicable and in any event within two (2)
business days thereafter. Alternatively, the Date of Exercise shall be defined as the date the
original Exercise Form is received by the Company and the Exercise Price is paid, if Holder has not
sent advance notice by facsimile. Upon delivery of the duly completed and executed Exercise Form to
the Company by facsimile or otherwise, the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which this Warrant has been
Exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or
the date of delivery of the certificates evidencing such Warrant Shares as the case may be.

(c) Delivery of Common Stock Upon Exercise. Within three (3) business days after any Date of
Exercise (the “Delivery Period”), the Company shall issue and deliver (or cause its Transfer Agent
so to issue and deliver) in accordance with the terms hereof to or upon the order of the Holder
that number of shares of Common Stock (“Exercise Shares”) for the portion of this Warrant Exercised
as shall be determined in accordance herewith. Upon the Exercise of this Warrant or any part
thereof, the Company shall, at its own cost and expense, take all necessary action, including
obtaining and delivering, an opinion of counsel to assure that the Transfer Agent shall issue stock
certificates in the name of Holder (or its nominee) or such other persons as designated by Holder
and in such denominations to be specified in the Exercise Form representing the number of shares of
Common Stock issuable upon such Exercise. Holder may not revoke its Exercise or alter its
designations following delivery of the Exercise Notice except as otherwise expressly provided
herein. The Company warrants that no instructions other than these instructions have been or will
be given to the Transfer Agent and that, unless waived by the Holder, this Warrant and the Exercise
Shares will be free-trading, and freely transferable, and will not contain a legend restricting the
resale or transferability of the Exercise Shares if the Unrestricted Conditions (as defined below)
are met.

(d) Delivery Failure. In addition to any other remedies which may be available to the Holder, in
the event that the Company fails to use its best efforts to effect delivery of the Exercise Shares
by the end of the Delivery Period (a “Delivery Failure”), the Holder will be entitled prior to
delivery of the Exercise Shares to revoke all or part of the relevant Exercise Form by delivery of
a notice to such effect to the Company whereupon the Company and the Holder shall each be restored
to their respective positions immediately prior to the delivery of such notice, except that the
liquidated damages described herein shall be payable through the date notice of revocation or
rescission is given to the Company.

(e) Legends.

(i) Restrictive Legend. The Holder understands that until such time as this Warrant and the
Exercise Shares have been registered under the Securities Act as contemplated by the Registration
Rights Agreement or otherwise may be sold pursuant to Rule 144 or Rule 144(k) under the Securities
Act or an exemption from registration under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold, this Warrant and
the Exercise Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such securities):

	 	 	“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM

2

 

	 	 	REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144 OR 144A
UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR INFORMAL
SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”
	 
	 	 	“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF
DECEMBER 10, 2007, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND A CERTAIN HOLDER OF
ITS OUTSTANDING SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.”

(ii) Removal of Restrictive Legends. This Warrant and certificates evidencing the Exercise
Shares shall not be required to contain any legend restricting the transfer thereof (including the
legend set forth above in subsection 2(e)(i)): (A) while a registration statement (including a
Registration Statement, as defined in the Registration Rights Agreement) covering the sale or
resale of such security is effective under the Securities Act, or (B) following any sale of such
Warrant and/or Exercise Shares pursuant to Rule 144, or (C) if such Warrant and/or Exercise Shares
are eligible for sale under Rule 144(k), or (D) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements issued by
the staff of the SEC) (collectively, the “Unrestricted Conditions”). Subject to Section 2(e)(iii),
the Company shall use best efforts to take all actions necessary to effect the issuance of this
Warrant and Exercise Shares without a restrictive legend or removal of the legend hereunder. If
the Unrestricted Conditions are met at the time of issuance of this Warrant and/or Exercise Shares,
then such Warrant and/or Exercise Shares shall be issued free of all legends. The Company agrees
that following the Effective Date or at such time as the Unrestricted Conditions are met or such
legend is otherwise no longer required under this Section 2(e), it will, no later than three (3)
Trading Days following the delivery (the “Unlegended Shares Delivery Deadline”) by the Holder to
the Company or the Transfer Agent of this Warrant and a certificate representing Exercise Shares,
as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Holder this Warrant and/or a certificate (or
electronic transfer) representing such shares that is free from all restrictive legends. For
purposes hereof, “Effective Date” shall mean the date that the Registration Statement that the
Company is required to file pursuant to the Registration Rights Agreement has been declared
effective by the SEC.

(iii) Sale of Unlegended Shares. Holder agrees that the removal of the restrictive legend
from this Warrant and any certificates representing Exercise Shares as set forth in Section 2(e)(i)
above is predicated upon the Company’s reliance that the Holder will sell this Warrant and/or any
Exercise Shares pursuant to either the registration requirements of the Securities Act, including
any applicable prospectus delivery requirements, or an exemption therefrom, and that if such
securities are sold pursuant to a Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein.

(f) Cancellation of Warrant. This Warrant shall be canceled upon the full Exercise of this Warrant,
and, as soon as practical after the Date of Exercise, Holder shall be entitled to receive Common
Stock for the number of shares purchased upon such Exercise of this Warrant, and if this Warrant is
not Exercised in full, Holder shall be entitled to receive a new Warrant (containing terms
identical to this Warrant) representing any unexercised portion of this Warrant in addition to such
Common Stock.

(g) Holder of Record. Except as set forth in Sections 5(a) and 5(j) hereof, nothing in this Warrant
shall be construed as conferring upon Holder any rights as a stockholder of the Company.

(h) Delivery of Electronic Shares. In lieu of delivering physical certificates representing the
Common Stock issuable upon Exercise or legend removal, provided the Company’s Transfer Agent is
participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”)
program and provided further that the Holder provides the Transfer Agent with information required
in order to issue shares of Common Stock to the Holder electronically, upon written request of the
Holder, the Company shall use its best efforts to cause its Transfer Agent to electronically
transmit the Common Stock issuable upon Exercise to the Holder by crediting the account of the
Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission (DWAC) system. The
time periods for delivery and penalties described herein shall apply to the electronic transmittals
described herein. Any delivery not effected by electronic transmission shall be effected by
delivery of physical certificates.

(i) Buy-In. In addition to any other rights available to the Holder, if the Company fails to
cause its Transfer Agent to transmit to the Holder a certificate or certificates, or electronic
shares through DWAC, representing the Exercise Shares pursuant to an Exercise on or before the
Delivery Period, and if after such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Exercise Shares which the
Holder was entitled to receive upon such Exercise (a “Buy-In”), then the Company shall (1) pay in
cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Exercise Shares that the Company was required to deliver to the
Holder in connection with the Exercise not later than the expiration of the Delivery Period, times
(B) the price at which the sell order giving rise to such purchase obligation was executed, and (2)
at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of
Exercise Shares for which such Exercise was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely complied with its
Exercise and delivery obligations under Section 2(c). For example, if the Holder purchases Common
Stock having a total purchase

3

 

price of $11,000 to cover a Buy-In with respect to an attempted Exercise to cover the sale of
Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock upon Exercise of the Warrant as
required pursuant to the terms hereof.

3. Payment of Warrant Exercise Price.

(a) Exercise Price. The Exercise Price (“Exercise Price”) shall initially equal $8.36 per share
subject to adjustment pursuant to the terms hereof, including but not limited to Section 5 below.

Payment of the Exercise Price may be made by either of the following, or a combination thereof, at
the election of Holder:

(i) Cash Exercise: The Holder may exercise this Warrant in cash, bank or cashier’s check or wire
transfer (a “Cash Exercise”); or

(ii) Cashless Exercise: The Holder, at its option, may exercise this Warrant in a cashless exercise
transaction. In order to effect a Cashless Exercise, the Holder shall surrender this Warrant at the
principal office of the Company together with notice of cashless election, in which event the
Company shall issue Holder a number of shares of Common Stock computed using the following formula
(a “Cashless Exercise”):

X = Y (A-B)/A

where: X = the number of shares of Common Stock to be issued to Holder.

	 	 	Y = the number of shares of Common Stock for which this Warrant is being Exercised.
	 
	 	 	A = the Market Price of one (1) share of Common Stock (for purposes of this Section 3(ii),
where “Market Price,” as of any date, means the Volume Weighted Average Price (as defined
herein) of the Company’s Common Stock during the ten (10) consecutive Trading Day period
immediately preceding the date in question.
	 
	 	 	B = the Exercise Price.
	 
	 	 	As used herein, the “Volume Weighted Average Price” for any security as of any date means the
volume weighted average sale price on The NASDAQ Global Market (“NASDAQ”) as reported by, or
based upon data reported by, Bloomberg Financial Markets or an equivalent, reliable reporting
service mutually acceptable to and hereafter designated by holders of a majority in interest of
the Warrants and the Company (“Bloomberg”) or, if NASDAQ is not the principal trading market
for such security, the volume weighted average sale price of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by
Bloomberg, or, if no volume weighted average sale price is reported for such security, then the
last closing trade price of such security as reported by Bloomberg, or, if no last closing
trade price is reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security that are listed in the over the counter market by the National
Association of Securities Dealers or in the “pink sheets” by the National Quotation Bureau,
Inc. If the Volume Weighted Average Price cannot be calculated for such security on such date
in the manner provided above, the volume weighted average price shall be the fair market value
as mutually determined by the Company and the Holders of a majority in interest of the Warrants
being Exercised for which the calculation of the volume weighted average price is required in
order to determine the Exercise Price of such Warrants. “Trading Day” shall mean any day on
which the Common Sock is traded for any period on NASDAQ, or on the principal securities
exchange or other securities market on which the Common Stock is then being traded.

For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and
acknowledged that the Common Stock issuable upon Exercise of this Warrant in a cashless Exercise
transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it
is intended, understood and acknowledged that the holding period for the Common Stock issuable upon
Exercise of this Warrant in a cashless Exercise transaction shall be deemed to have commenced on
the date this Warrant was issued.

(b) Dispute Resolution. In the case of a dispute as to the determination of the closing
price or the Volume Weighted Average Price of the Company’s Common Stock or the arithmetic
calculation of the Exercise Price, Market Price or any Redemption Price, the Company shall submit
the disputed determinations or arithmetic calculations via facsimile within two (2) business days
of receipt, or deemed receipt, of the Exercise Notice or Redemption Notice, or other event giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable
to agree upon such determination or calculation within two (2) business days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the Company shall,
within two (2) business days submit via facsimile (i) the disputed determination of the closing
price or the Volume Weighted Average Price of the Company’s Common Stock to an independent,
reputable investment bank selected by the Company and approved by the Holder, which approval shall
not be unreasonably withheld or (ii) the disputed arithmetic calculation of the Exercise Price,
Market Price or any Major Transaction Warrant Redemption Price to the Company’s independent,
outside accountant. The Company shall cause the investment

4

 

bank or the accountant, as the case may be, to perform the determinations or calculations and
notify the Company and the Holder of the results no later than five (5) business days from the time
it receives the disputed determinations or calculations. If the determination or calculation of
such investment bank or accountant is equal to the determination or calculation of the Company,
then the expenses of the investment bank or accountant shall be borne by the Holder. Otherwise such
expenses shall be borne by the Company. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

4. Transfer and Registration.

(a) Transfer Rights. Subject to the provisions of Section 8 of this Warrant, this Warrant may be
transferred on the books of the Company, in whole or in part, in person or by attorney, upon
surrender of this Warrant properly completed and endorsed. This Warrant shall be canceled upon such
surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and
Holder shall be entitled to receive a new Warrant as to the portion hereof retained.

(b) Registrable Securities. The Common Stock issuable upon the Exercise of this Warrant have
registration rights pursuant to the Registration Rights Agreement.

5. Anti-Dilution Adjustments; Additional Adjustments; Purchase Rights.

(a) Participation. The Holder, as the holder of this Warrant, shall be entitled to receive such
dividends paid and distributions of any kind made to the holders of Common Stock of the Company to
the same extent as if the Holder had Exercised this Warrant into Common Stock (without regard to
any limitations on exercise herein or elsewhere and without regard to whether or not a sufficient
number of shares are authorized and reserved to effect any such exercise and issuance) and had held
such shares of Common Stock on the record date for such dividends and distributions. Payments under
the preceding sentence shall be made concurrently with the dividend or distribution to the holders
of Common Stock.

(b) Recapitalization or Reclassification. If the Company shall at any time effect a
recapitalization, reclassification or other similar transaction of such character that the shares
of Common Stock shall be changed into or become exchangeable for a larger or smaller number of
shares, then upon the effective date thereof, the number of shares of Common Stock which Holder
shall be entitled to purchase upon Exercise of this Warrant shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number of shares of Common
Stock by reason of such recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares, proportionally decreased and,
in the case of decrease in the number of shares, proportionally increased. The Company shall give
Holder the same notice it provides to holders of Common Stock of any transaction described in this
Section 5(b).

(c) Rights Upon Major Transaction.

(i) Major Transaction. In the event that a Major Transaction (as defined below) occurs, the Holder,
at its option, may require the Company to redeem the Holder’s outstanding Warrants in accordance
with Section 5(c)(iii) below. Otherwise, a Major Transaction shall be treated as an Assumption (as
defined below) in accordance with Section 5(c)(ii) below unless the Holder waives its rights under
this Section 5(c) with respect to that Major Transaction. Each of the following events shall
constitute a “Major Transaction”:

(A) a consolidation, merger, exchange of shares, recapitalization, reorganization, business
combination or other similar event, (1) following which the holders of Common Stock immediately
preceding such consolidation, merger, exchange, recapitalization, reorganization, combination or
event either (a) no longer hold a majority of the shares of Common Stock or (b) no longer have the
ability to elect a majority of the board of directors of the Company or (2) as a result of which
shares of Common Stock shall be changed into (or the shares of Common Stock become entitled to
receive) the same or a different number of shares of the same or another class or classes of stock
or securities of another entity (collectively, a “Change of Control Transaction”);

(B) the sale or transfer of significant assets of the Company, which shall for purposes of this
subsection (B) mean a sale or transfer of assets in one transaction or a series of related
transactions for a purchase price of more than $75,000,000 or a sale or transfer of more than 48%
of the Company’s assets in one transaction or a series of related transactions;

(C) a purchase, tender or exchange offer made to the holders of outstanding shares of Common Stock,
such that following such purchase, tender or exchange offer a Change of Control Transaction shall
have occurred;

(D) the liquidation, bankruptcy, insolvency, dissolution or winding-up (or the occurrence of any
analogous proceeding) affecting the Company; or

(E) the shares of Common Stock cease to be listed, traded or publicly quoted on the NASDAQ Global
Market and are not promptly re-listed or requoted on either the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Capital Market.

5

 

(ii) Assumption. The Company shall not enter into or be party to a Major Transaction (not including
one defined in subsection (i)(E) above, to which this subsection (ii) shall be inapplicable) unless
(i) any Person purchasing the Company’s assets or Common Stock, or any successor entity resulting
from such Major Transaction (in each case, a “Successor Entity”), assumes in writing all of the
obligations of the Company under this Warrant, the Facility Agreement and the Registration Rights
Agreement in accordance with the provisions of this Section 5(c)(ii) pursuant to written
agreements in form and substance satisfactory to the Holder and approved by the Holder prior to
such Major Transaction, including agreements to deliver to each holder of Warrants in exchange for
such Warrants a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to the Warrants, including, without limitation, representing the
appropriate number of shares of the Successor Entity, having similar exercise rights as the
Warrants (including but not limited to a similar Exercise Price and similar Exercise Price
adjustment provisions based on the price per share or conversion ratio to be received by the
holders of Common Stock in the Major Transaction) and similar registration rights as provided by
the Registration Rights Agreement, satisfactory to the Holder and (ii) any Successor Entity
(including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or
listed for trading on an Eligible Market. Upon the occurrence of any Major Transaction, any
Successor Entity shall succeed to, and be substituted for (so that from and after the date of such
Major Transaction, the provisions of this Warrant and the Registration Rights Agreement referring
to the “Company” shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company under this Warrant with
the same effect as if such Successor Entity had been named as the Company herein. Upon consummation
of the Major Transaction, the Successor Entity shall deliver to the Holder confirmation that there
shall be issued upon exercise or redemption of this Warrant at any time after the consummation of
the Major Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or
other property) issuable upon the exercise of the Warrants prior to such Major Transaction, such
shares of publicly traded common stock (or their equivalent) of the Successor Entity, as adjusted
in accordance with the provisions of this Warrant. The provisions of this Section shall apply
similarly and equally to successive Major Transactions and shall be applied without regard to any
limitations on the exercise of this Warrant other than any applicable beneficial ownership
limitations. Any assumption of Company obligations under this paragraph shall be referred to
herein as an “Assumption”. Notwithstanding anything in this Section 5(c)(ii) to the contrary, (i)
the Holder shall not have any rights under this Section 5(c)(ii) with respect to any Major
Transaction that is structured as a transaction in connection with which the Company or its
stockholders receive all cash and (ii) in the case of any Major Transaction that provides for the
payment of both cash and securities to the Company and its stockholders, the Holder shall only have
rights under this Section 5(c)(ii) with respect to the percentage of Warrants then owned by the
Holder equal to the percentage of the consideration represented by the non-cash portion of the
consideration.

(iii) Notice; Major Transaction Redemption Right. At least thirty (30) days prior to the
consummation of any Major Transaction, but, in any event, on the first to occur of (x) the date of
the public announcement of such Major Transaction if such announcement is made before 4:00 p.m.,
New York City time, or (y) the day following the public announcement of such Major Transaction if
such announcement is made on and after 4:00 p.m., New York City time, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a “Major Transaction
Notice”). At any time during the period beginning after the Holder’s receipt of a Major Transaction
Notice and ending five (5) Trading Days prior to the consummation of such Major Transaction, the
Holder may require the Company to redeem (a “Redemption Upon Major Transaction”) all or any portion
of this Warrant by delivering written notice thereof (“Major Transaction Redemption Notice”) to the
Company, which Major Transaction Redemption Notice shall indicate the portion of the principal
amount (the “Redemption Principal Amount”) of the Warrant that the Holder is electing to have
redeemed. The portion of this Warrant subject to redemption pursuant to this Section 5(c)(iii)
shall be redeemed by the Company in cash at a price (the “Major Transaction Warrant Redemption
Price”) equal to the calculation of the “Intrinsic Value” as determined in accordance with Schedule
I hereto of the remaining outstanding portion of the Warrant.

(iv) Escrow; Payment of Major Transaction Warrant Redemption Price. Following the receipt of a
Major Transaction Redemption Notice from the Holder, the Company shall not effect a Major
Transaction unless it shall first place into an escrow account with an independent escrow agent, at
least three (3) business days prior to the closing date of the Major Transaction (the “Major
Transaction Escrow Deadline”), an amount equal to the Major Transaction Warrant Redemption Price.
Concurrently upon closing of any Major Transaction, the Company shall pay or shall instruct the
escrow agent to pay the Major Transaction Warrant Redemption Price to the Holder. For purposes of
determining the amount required to be placed in escrow pursuant to the provisions of this
subsection (iv) and without affecting the amount of the actual Major Transaction Warrant Redemption
Price, the calculation of the price referred to in clause (1) of the first column of Schedule 1
hereto with respect to Stock Price shall be determined based on the Closing Market Price (as
defined herein) of the Common Stock on the Trading Day immediately preceding the date that the
funds are deposited with the escrow agent.

(v) Injunction. Following the receipt of a Major Transaction Redemption Notice from the Holder, in
the event that the Company attempts to consummate a Major Transaction without placing the Major
Transaction Warrant Redemption Price in escrow in accordance with subsection (iv) above or without
payment of the Major Transaction Warrant Redemption Price to the Holder upon consummation of such
Major Transaction, the Holder shall have the right to apply for an injunction in any state or
federal courts sitting in the City of New York, borough of Manhattan to prevent the closing of such
Major Transaction until the Major Transaction Redemption Price is paid to the Holder, in full.

Redemptions required by this Section 5(c) shall be made in accordance with the provisions of
Section 12 and shall have priority to payments to holders of Common Stock in connection with a
Major Transaction. To the extent redemptions required by this

6

 

Section 5(c)(iii) are deemed or determined by a court of competent jurisdiction to be prepayments of the
Warrant by the Company, such redemptions shall be deemed to be voluntary prepayments.
Notwithstanding anything to the contrary in this Section 5, until the Major Transaction Redemption
Price is paid in full, this Warrant may be exercised, in whole or in part, by the Holder into
shares of Common Stock, or in the event the Exercise Date is after the consummation of the Major
Transaction, shares of publicly traded common stock (or their equivalent) of the Successor Entity
pursuant to Section 5(c). The parties hereto agree that in the event of the Company’s redemption of
any portion of the Warrant under this Section 5(c), the Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 5(c) is intended by the parties to be,
and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty.

For purposes hereof:

“Eligible Market” means the over the counter Bulletin Board, the New York Stock Exchange, Inc., the
NYSE Arca, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market or
the American Stock Exchange.

“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed on an Eligible
Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of a Major
Transaction.

“Person” means an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

(d) Exercise Price Adjusted. As used in this Warrant, the term “Exercise Price” shall mean the
purchase price per share specified in Section 3 of this Warrant, until the occurrence of an event
stated in this Section 5 or otherwise set forth in this Warrant, and thereafter shall mean said
price as adjusted from time to time in accordance with the provisions of said subsection. No such
adjustment under this Section 5 shall be made unless such adjustment would change the Exercise
Price at the time by $.01 or more; provided, however, that all adjustments not so made shall be
deferred and made when the aggregate thereof would change the Exercise Price at the time by $.01 or
more. No adjustment made pursuant to any provision of this Section 5 shall have the net effect of
increasing the Exercise Price in relation to the split adjusted and distribution adjusted price of
the Common Stock. Notwithstanding anything to the contrary in this Warrant, so long as any of the
Company’s Convertible Senior Subordinated Zero-Coupon Promissory Notes issued in December 2006 (the
“Senior Notes”) continue to remain outstanding, if any adjustment to the Exercise Price pursuant to
Section 5 or otherwise set forth in this Warrant would otherwise result in an Exercise Price of
less than $6.00, then the Exercise Price shall be adjusted to $6.00; provided, however, the
foregoing limitation on adjustments to the Exercise Price shall not apply to adjustments pursuant
to Section 5(b) hereof.

(e) Adjustments: Additional Shares, Securities or Assets. In the event that at any time, as a
result of an adjustment made pursuant to this Section 5 or otherwise, Holder shall, upon Exercise
of this Warrant, become entitled to receive shares and/or other securities or assets (other than
Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets; and thereafter the
number of such shares and/or other securities or assets shall be subject to adjustment from time to
time in a manner and upon terms as nearly equivalent as practicable to the provisions of this
Section 5.

(f) Adjustment of Exercise Price upon Issuance of Common Stock, Options, Convertible Securities,
Etc. Subject to the limitations contained in Section 5(d) hereof (i) If at any time after the Date
of Issuance for so long as any Warrants are outstanding, the Company (A) issues or sells any Common
Stock, Convertible Securities, warrants, or Options or (B) directly or indirectly effectively
reduces the conversion, exercise or exchange price for any Convertible Securities or Options which
are currently outstanding, at or to an effective Per Share Selling Price (as defined below) which
is less than the greater of (I) the closing sale price per share of the Common Stock on the
Eligible Market which the Common Stock is traded on the Trading Day immediately preceding such
issue or sale (“Fair Market Price”), or (II) the Exercise Price, then in each such case the
Exercise Price in effect immediately prior to such issue or sale date, as applicable, shall be
automatically reduced effective concurrently with such issue or sale to an amount determined by
multiplying the Exercise Price then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or
sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by
the Company for such additional shares would purchase at such Fair Market Price or Exercise Price,
as the case may be, and (y) the denominator of which shall be the number of shares of Common Stock
of the Company outstanding immediately after such issue or sale. The foregoing provision shall not
apply to any issuances or sales of Common Stock, Convertible Securities or Options (i) pursuant to
any Convertible Securities or Options currently outstanding on the date hereof in accordance with
the terms of such Convertible Securities in effect on the date hereof provided that such securities
have not been amended since the date hereof to directly or indirectly effectively reduce the
conversion, exercise or exchange price for any Convertible Securities or Options which are
currently outstanding, or (ii) to the extent that the total number of shares of Common Stock and
the shares underlying all Convertible Securities and Options so issued in any 12 month period does
not exceed an amount equal to 15% of the number of shares of Common Stock issued and outstanding as
of the first day of such 12 month period, subject to appropriate adjustment to reflect any stock
splits, recapitalizations, reclassifications or other similar events occurring after the Date of
Issuance.

7

 

For the purposes of the foregoing adjustments, in the case of the issuance of any Convertible
Securities or Options, the maximum number of shares of Common Stock issuable upon exercise,
exchange or conversion of such Convertible Securities or Options shall be deemed to be outstanding,
provided that no further adjustment shall be made upon the actual issuance of Common Stock upon
exercise, exchange or conversion of such Convertible Securities or Options, and provided further
that to the extent such Convertible Securities or Options expire or terminate unconverted or
unexercised, then at such time the Exercise Price shall be readjusted as if such portion of such
Convertible Securities or Options had not been issued.

For purposes of this Section 5(f), if an event occurs that triggers more than one of the above
adjustment provisions, then only one adjustment shall be made and the calculation method which
yields the greatest downward adjustment in the Exercise Price shall be used.

For purposes of determining the adjusted Exercise Price under this Section 5(f), the following
shall be applicable:

(i) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of
entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or
in Convertible Securities or (2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or sale of the Common
Stock deemed to have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of subscription or purchase, as
the case may be.

(ii) Other Events. If any event occurs of the type contemplated by the provisions of this Section
5(f) but not expressly provided for by such provisions (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the Exercise Price so as to
protect the rights of the Holder under this Warrant; provided that no such adjustment will increase
the Exercise Price as otherwise determined pursuant to this Section 5(f).

For purposes hereof:

“Convertible Securities” means any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for Common Stock.

“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.

“Per Share Selling Price” shall include the amount actually paid by third parties for each
share of Common Stock in a sale or issuance by the Company. A sale of shares of Common Stock shall
include the sale or issuance of Convertible Securities or Options, and in such circumstances the
Per Share Selling Price of the Common Stock covered thereby shall also include the exercise,
exchange or conversion price thereof (in addition to the consideration received by the Company upon
such sale or issuance). In case of any such security issued in a transaction in which the purchase
price or the conversion, exchange or exercise price is directly or indirectly subject to adjustment
or reset based on a future date, future trading prices of the Common Stock, specified or contingent
events directly or indirectly related to the business of the Company or the market for the Common
Stock, or otherwise (but excluding standard stock split anti-dilution provisions or
weighted-average anti-dilution provisions similar to that set forth herein, provided that any
actual reduction of such price under any such security pursuant to such weighted-average
anti-dilution provision shall be included and cause an adjustment hereunder), the Per Share Selling
Price shall be deemed to be the lowest conversion, exchange, exercise or reset price at which such
securities are converted, exchanged, exercised or reset or might have been converted, exchanged,
exercised or reset, or the lowest adjustment, as the case may be, over the life of such securities.
If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the
fair value of such consideration as determined in good faith by independent certified public
accountants mutually acceptable to the Company and the Holder. In the event the Company directly
or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible
Securities or Options which are currently outstanding, then the Per Share Selling Price shall equal
such effectively reduced conversion, exercise or exchange price .

(g) Subsequent Rights Offerings. Subject to the limitations contained in Section 5(d) hereof,
if the Company, at any time prior to the date that all of the Warrants have been Exercised,
redeemed or otherwise satisfied in accordance with their terms, 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 (the “Base Rights Offering Price”) that is
lower than the Volume Weighted Average Price on the record date referenced below, then the Exercise
Price then in effect shall be reduced to the Base Rights Offering Price. 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. No adjustment shall be made hereunder if such adjustment would result in an increase of
the Exercise Price then in effect.

(h) Additional Adjustment to Exercise Price. If on the 18 month anniversary of the Date of
Issuance, the Applicable Market Price is less than $6.00 per share, the Exercise Price shall be
reduced to $6.00. For purposes hereof “Applicable Market Price” means the average closing price of
the Common Stock on NASDAQ, or, if NASDAQ is not the principal trading market for the Common Stock,
the principal securities exchange or other securities market on which the Common Stock is then
being traded, for the 10 Trading Days immediately preceding the 18 month anniversary of the Date of Issuance. The provisions of this
subsection (h) shall be appropriately adjusted to reflect stock splits, recapitalizations,
reclassifications or other similar events.

8

 

(i) Notice of Adjustments. Whenever the Exercise Price is adjusted pursuant to the terms of this
Warrant, the Company shall promptly mail to the Holder a notice (an “Exercise Price Adjustment
Notice”) setting forth the Exercise Price after such adjustment and setting forth a statement of
the facts requiring such adjustment. The Company shall, upon the written request at any time of the
Holder, furnish to such Holder a like Warrant setting forth (i) such adjustment or readjustment,
(ii) the Exercise Price at the time in effect and (iii) the number of shares of Common Stock and
the amount, if any, of other securities or property which at the time would be received upon
Exercise of the Warrant. For purposes of clarification, whether or not the Company provides an
Exercise Price Adjustment Notice pursuant to this Section 5(i), upon the occurrence of any event
that leads to an adjustment of the Exercise Price, the Holders are entitled to receive a number of
Exercise Shares based upon the new Exercise Price, as adjusted, for exercises occurring on or after
the date of such adjustment, regardless of whether a Holder accurately refers to the adjusted
Exercise Price in the Exercise Form.

(j) Purchase Rights. In addition to any other adjustments described herein, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any class of shares of
Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the proportionate number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on the exercise of this
Warrant) immediately before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

6. Fractional Interests.

No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of
this Warrant, but on Exercise of this Warrant, Holder may purchase only a whole number of shares of
Common Stock. If, on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon Exercise shall be the next
higher number of shares.

7. Reservation of Shares.

From and after the date hereof, the Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted therefor as herein
above provided) as shall be sufficient for the Exercise of this Warrant and payment of the Exercise
Price. If at any time the number of shares of Common Stock authorized and reserved for issuance is
below the number of shares sufficient for the Exercise of this Warrant (a “Share Authorization
Failure”) (based on the Exercise Price in effect from time to time), the Company will promptly take
all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders to authorize additional shares to
meet the Company’s obligations under this Section 7, in the case of an insufficient number of
authorized shares, and using its best efforts to obtain stockholder approval of an increase in such
authorized number of shares. The Company covenants and agrees that upon the Exercise of this
Warrant, all shares of Common Stock issuable upon such Exercise shall be duly and validly issued,
fully paid and nonassessable and not subject to preemptive rights, rights of first refusal or
similar rights granted or provided by the Company to any person or entity.

8. Restrictions on Transfer.

(a) Registration or Exemption Required. Subject to the representations and warranties of the Holder
set forth in Section ___of the Facility Agreement, this Warrant has been issued in a transaction
exempt from the registration requirements of the Securities Act by virtue of Regulation D and
exempt from state registration under applicable state laws. The Warrant and the Common Stock
issuable upon the Exercise of this Warrant may not be pledged, transferred, sold or assigned except
pursuant to an effective registration statement or an exemption to the registration requirements of
the Securities Act and applicable state laws including, without limitation, a so-called “4(1) and a
half” transaction.

(b) Assignment. Subject to Section 8(a), the Holder may sell, transfer, assign, pledge or otherwise
dispose of this Warrant, in whole or in part. Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B, indicating the
person or persons to whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within three (3) business days
(the “Transfer Delivery Period”), and shall deliver to the assignee(s) designated by Holder a
Warrant or Warrants of like tenor and terms for the appropriate number of shares. This Warrant and
the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant, and shall be enforceable by any such Holder. For
avoidance of doubt, in the event Holder notifies the Company that such sale or transfer is a so
called “4(1) and half” transaction, the parties hereto agree that a legal opinion from outside
counsel for the Holder delivered to counsel
for the Company substantially in the form attached hereto as Exhibit C shall be the only
requirement to satisfy an exemption from registration under the Securities Act to effectuate such
“4(1) and half” transaction.

9

 

9. Noncircumvention. The Company hereby covenants and agrees that the Company will not, by
amendment of its certificate of incorporation, bylaws or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, and will at all times in good faith carry out all the provisions of this
Warrant and take all action as may be reasonably required to protect the rights of the Holder.
Without limiting the generality of the foregoing, the Company (i) shall not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price
then in effect, and (ii) shall take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.

10. Events of Failure; Definition of Black Scholes Value.

(a) Definition.

The occurrence of each of the following shall be considered to be an “Event of Failure.”

	 	 	(i) A Delivery Failure occurs, where a “Delivery Failure” shall be deemed to have
occurred if the Company fails to use its best efforts to deliver Exercise Shares to
the Holder within any applicable Delivery Period;
	 
	 	 	(ii) A Legend Removal Failure occurs, where a “Legend Removal Failure” shall be
deemed to have occurred if the Company fails to use its best efforts to issue this
Warrant and/or Exercise Shares without a restrictive legend, or fails to use its best
efforts to remove a restrictive legend, when and as required under Section 2(e)
hereof;
	 
	 	 	(iii) a Transfer Delivery Failure occurs, where a “Transfer Delivery Failure” shall
be deemed to have occurred if the Company fails to use its best efforts to deliver a
Warrant within any applicable Transfer Delivery Period; and
	 
	 	 	(iv) a Registration Failure (as defined below).

For purpose hereof, “Registration Failure” means that (A) the Company fails to file with the SEC on
or before the Filing Deadline (as defined in the Registration Rights Agreement) any Registration
Statement required to be filed pursuant to Section 2(a) of the Registration Rights Agreement, or
(B) the Company fails to use its best efforts to obtain effectiveness with the SEC, prior to the
Registration Deadline (as defined in the Registration Rights Agreement), and, if such Registration
Statement is not so filed prior to the Registration Deadline, as soon as possible thereafter, of
any Registration Statement (as defined in the Registration Rights Agreement) that is required to be
filed pursuant to Section 2(a) of the Registration Rights Agreement, or fails to use best efforts
to keep such Registration Statement current and effective as required in Section 3 of the
Registration Rights Agreement, (C) the Company fails to file any amendment to the Registration
Statement, or any additional Registration Statement required to be filed pursuant to Section 3(b)
of the Registration Rights Agreement within twenty (20) days of the applicable Registration Trigger
Date (as defined in the Registration Rights Agreement), or fails to use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as practicable
thereafter, or (iv) any Registration Statement required to be filed under the Registration Rights
Agreement, after its initial effectiveness and during the Registration Period (as defined in the
Registration Rights Agreement), lapses in effect or sales of all of the Registrable Securities (as
defined in the Registration Rights Agreement) cannot otherwise be made thereunder (whether by
reason of the Company’s failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement, the Company’s failure to file and use best
efforts to obtain effectiveness with the SEC of an additional Registration Statement or amended
Registration Statement required pursuant to Section 3 of the Registration Rights Agreement or
otherwise), or (D) the Company fails to provide a commercially reasonable written response to any
comments to any Registration Statement submitted by the SEC within twenty (20) days of the date
that such SEC comments are received by the Company.

(b) Failure Payments; Black-Scholes Determination. The Company understands that any Event of
Failure (as defined above) could result in economic loss to the Holder. In the event that any Event
of Failure occurs, as compensation to the Holder for such loss, the Company agrees to pay (as
liquidated damages and not as a penalty) to the Holder an amount payable (i) in cash, if the Senior
Notes are no longer outstanding, or (ii) if any of the Senior Notes are outstanding, in shares of
Common Stock that are valued for these purposes at 95% of the Volume Weighted Average Price on the
date of such calculation (“Failure Payments”), in each case, equal to 18% per annum (or the maximum
rate permitted by applicable law, whichever is less) of the Black-Scholes value (as determined
below) of the remaining unexercised portion of this Warrant on the date of such Event of Failure
(as recalculated on the first business day of each month thereafter for as long as Failure Payments
shall continue to accrue), which shall accrue daily from the date of such Event of Failure until
the Event of Failure is cured, accruing daily and compounded monthly, provided, however, in the
event the Failure Payments are paid in shares of Common Stock, the Holder shall receive up to such
amount of shares of Common Stock such that Holder and its Affiliates and any other persons or
entities whose beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of which the
Holder is a member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to convert, exercise
or purchase similar to the limitation set forth herein) shall not collectively beneficially own
greater than 9.98% of the total number of shares of the Common Stock then issued and outstanding.
For purposes of clarification, it is
agreed and understood that Failure Payments shall continue to accrue following any Event of Default
until the applicable Default Amount is paid in full.

10

 

Notwithstanding the above, in the event that the Company (i) has, by the Filing Deadline (as
defined the Registration Rights Agreement) filed a Registration Statement (as defined in the
Registration Rights Agreement) covering the number of shares required by the Registration Rights
Agreement, and (ii) has responded in writing to any comments to the Registration Statement that the
Company has received from the SEC, within seven (7) Business Days of such receipt, and nevertheless
the SEC has not declared effective a Registration Statement covering the full number of Warrant
Shares issuable upon exercise of the Warrants by the Registration Deadline (as defined in the
Registration Rights Agreement) then, the Failure Payments attributable to such late Registration
Effectiveness (if any, recognizing that no such Failure Payments shall be due if the Company used
its best efforts to obtain effectiveness with the SEC prior to the Registration Deadline) shall be
reduced from 18% to 15% (calculated as set forth above). The Company shall pay any payments
incurred under this Section in cash or cash equivalent upon demand or, if not demanded sooner,
within five business (5) days of the end of each calendar month. Failure Payments are in addition
to any Shares that the Holder is entitled to receive upon Exercise of this Warrant.

For purposes hereof, the “Black-Scholes” value of a Warrant shall be determined by use of the Black
Scholes Option Pricing Model using the criteria set forth on Schedule 1 hereto.

(c) Payment of Accrued Failure Payments. The accrued Failure Payments for each Event of Failure
shall be paid in immediately available funds on or before the fifth (5th) day of each month
following a month in which Failure Payments accrued. Except as provided in Section 11 hereof,
Failure Payments shall be the Company’s sole and exclusive liability and the Holder’s sole and
exclusive remedy, with respect to such Event of Failure. Notwithstanding the above, if a
particular Event of Failure results in an Event of Default pursuant to Section 11 hereof, then the
Failure Payment, for that Event of Failure only, shall be considered to have been satisfied upon
payment to the Holder of an amount equal to the greater of (i) the Failure Payment, or (ii) the
Default Amount, payable in accordance with Section 11, and, except as provided in Section 11
hereof, the payment by the Company of such greater amount shall constitute the Holder’s sole and
exclusive remedy, and the Company’s sole and exclusive liability, with respect to such Event of
Failure.

(d) Maximum Interest Rate. Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against amounts owed by the
Company to the Holder and thus refunded to the Company.

11. Default and Redemption.

(a) Events Of Default. Each of the following events shall be considered to be an “Event of
Default,” unless waived by the Holder:

(i) Registration Failure. A Registration Failure occurs and remains uncured for a period of more
than forty five (45) days;

(ii) Delivery Failure. A Delivery Failure (as defined above) occurs and remains uncured for a
period of more than twenty (20) days; or at any time, the Company announces or states in writing
that it will not honor its obligations to issue shares of Common Stock to the Holder upon Exercise
by the Holder of the Exercise rights of the Holder in accordance with the terms of this Warrant;

(iii) Legend Removal Failure. A Legend Removal Failure (as defined above) occurs and remains
uncured for a period of twenty (20) days; and

(iv) Corporate Existence; Major Transaction. The Company has effected a Major Transaction without
paying the Major Transaction Warrant Redemption Price to the Holder pursuant to Section 5(c)(iii)
or, if the Holder did not elect a Redemption Upon Major Transaction, the Company has failed to meet
the Assumption requirements of Section 5(c)(iii) prior to effecting a Major Transaction.

(b) Mandatory Redemption.

(i) Mandatory Redemption Amount. If any Events of Default shall occur then, unless waived by the
Holder, upon the occurrence and during the continuation of any Event of Default, at the option of
the Holder, such option exercisable through the delivery of written notice to the Company by such
Holder (the “Default Notice”), the outstanding amount of this Warrant shall be immediately redeemed
by the Company and the Company shall pay to the Holder (a “Mandatory Redemption”), in full
satisfaction of its obligations hereunder, an amount (A) in cash, if the Senior Notes are no longer
outstanding, or (B) if any of the Senior Notes are outstanding, in shares of Common Stock (the
“Mandatory Redemption Amount” or the “Default Amount”), in each case, equal to the greater of (1)
the Black-Scholes value (as determined in accordance with Section 10(b)) of the remaining
unexercised portion of this Warrant on the date of such Default Notice and (2) the Black-Scholes
value (also as determined in accordance with Section 10(b)) of the remaining unexercised portion of
this Warrant on the Trading Day immediately preceding the date that the Mandatory Redemption Amount
is paid to the Holder, provided, however, in the event the Mandatory Redemption Amount is paid in
shares of Common Stock, Holder shall receive up to such amount of shares of Common Stock such that
Holder and its Affiliates and any other persons or entities whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section
13(d) of the Exchange Act (including shares held by any “group” of which the Holder is a member,
but excluding shares beneficially owned by virtue of ownership of securities or rights to acquire
securities that have limitations on the right to convert, exercise or purchase

11

 

similar to the
limitation set forth herein) shall not collectively beneficially own greater than 9.98% of the
total number of shares of Common Stock then issued and outstanding.

The Mandatory Redemption Amount shall be payable, in cash or cash equivalent, within five (5)
business days of the Date of the applicable Default Notice.

(ii) Liquidated Damages. The parties hereto acknowledge and agree that the sums payable as Failure
Payments or pursuant to a Mandatory Redemption shall give rise to liquidated damages and not
penalties. The parties further acknowledge that (i) the amount of loss or damages likely to be
incurred by the Holder is incapable or is difficult to precisely estimate, (ii) the amounts
specified bear a reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Holder, and (iii) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm’s length.

The Default Amount, together with all other amounts payable hereunder, shall immediately become due
and payable, all without demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, legal fees and expenses, of collection, and
the Holder shall be entitled to exercise all other rights and remedies available at law or in
equity.

(c) Posting Of Bond. In the event that any Event of Default occurs hereunder, the Company may not
raise as a legal defense (in any Lawsuit, as defined below, or otherwise) or justification to such
Event of Default any claim that such Holder or any one associated or affiliated with such Holder
has been engaged in any violation of law, unless the Company has posted a surety bond (a “Surety
Bond”) for the benefit of such Holder in the amount of 130% of the aggregate Surety Bond Value (as
defined below) of all of the Holder’s Warrants (the “Bond Amount”), which Surety Bond shall remain
in effect until the completion of litigation of the dispute and the proceeds of which shall be
payable to such Holder to the extent Holder obtains judgment.

For purposes hereof, a “Lawsuit” shall mean any lawsuit, arbitration or other dispute resolution
filed by either party herein pertaining to any of this Warrant, the Facility Agreement and the
Registration Rights Agreement.

“Surety Bond Value,” for the Warrants shall mean 130% of the of the Black-Scholes value of the
remaining unexercised portion of this Warrant on the Trading Day immediately preceding the date
that such bond goes into effect).

(d) Injunction And Posting Of Bond. In the event that the Event of Default referred to in
subsection (c) above pertains to the Company’s failure to deliver unlegended shares of Common Stock
to the Holder pursuant to a Warrant Exercise, legend removal request, or otherwise, the Company may
not refuse such unlegended share delivery based on any claim that such Holder or any one associated
or affiliated with such Holder has been engaged in any violation of law, unless an injunction from
a court, on prior notice to Holder, restraining and or enjoining Exercise of all or part of said
Warrant shall have been sought and obtained by the Company and the Company has posted a Surety Bond
for the benefit of such Holder in the amount of the Bond Amount, which Surety Bond shall remain in
effect until the completion of litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent Holder obtains judgment.

(e) Remedies, Other Obligations, Breaches And Injunctive Relief. The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available under this Warrant, the
Facility Agreement and the Registration Rights Agreement, at law or in equity (including a decree
of specific performance and/or other injunctive relief). The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at
law for any such breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the Holder of this Warrant shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being required.

(f) Limitation on Issuance of Common Stock. Notwithstanding anything herein to the contrary, in no
event shall the number of shares of Common Stock issuable pursuant to this Warrant exceed 20% of
the total number of shares of Common Stock issued and outstanding on the Date of Issuance. The
restriction contained in the immediately preceding sentence shall be appropriately adjusted to
reflect any stock splits, reclassifications, recapitalizations or like events.

Section 12. Holder’s Redemptions.

(a) Mechanics of Holder’s Redemptions. In the event that the Holder has sent a Default Notice or a
Major Transaction Redemption Notice to the Company pursuant to Section 5(c) or a Default Notice
pursuant to Section 11(b)(i), respectively (each, a “Redemption Notice”), the Holder shall promptly
submit this Warrant to the Company. If the Holder has submitted a Major Transaction Redemption
Notice in accordance with Section 5(c)(iii), the Company shall deliver the applicable Major
Transaction Redemption Price to the Holder concurrently with the consummation of such Major
Transaction. In the event that the Company does not pay the applicable Major Transaction Warrant
Redemption Price to the Holder within the time period required, at any time thereafter and until
the Company pays such unpaid Major Transaction Warrant Redemption Price in full, the Holder shall
have the option, in lieu of redemption, to require the Company to promptly return to the Holder all
or any portion of this Warrant that was submitted for redemption and for which the applicable Major
Transaction Warrant Redemption Price (together with any late charges thereon) has not been paid.
Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and
void with respect to

12

 

such Redemption Principal Amount, (y) the Company shall immediately return
this Warrant, or issue a new Warrant to the Holder representing the portion of this Warrant that
was submitted for redemption and (z) the Exercise Price of this Warrant or such new Warrant shall
be adjusted to the lesser of (A) the Exercise Price as in effect on the date on which the
applicable Redemption Notice is voided and (B) subject to the limitations contained in Section 5(d)
hereof, the lowest closing price for the Common Stock on NASDAQ, or, if NASDAQ is not the principal
trading market for the Common Stock, the principal securities exchange or other securities market
on which the Common Stock is then being traded, during the period beginning on and including the
date on which the applicable Redemption Notice is delivered to the Company and ending on and
including the date on which the applicable Redemption Notice is voided. The Holder’s delivery of a
notice voiding a Redemption Notice and exercise of its rights following such notice shall not
affect the Company’s obligations to make any payments of Failure Payments which have accrued prior
to the date of such notice with respect to the Warrant subject to such notice.

13. Benefits of this Warrant.

Nothing in this Warrant shall be construed to confer upon any person other than the Company and
Holder any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be
for the sole and exclusive benefit of the Company and Holder.

14. Governing Law.

All questions concerning the construction, validity, enforcement and interpretation of this
Agreement 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 this Agreement (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein, 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, that such suit, action or
proceeding is improper or is an 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 Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. The parties hereby waive all rights to a trial by
jury. If either party shall commence an action or proceeding to enforce any provisions of this
Agreement, then the prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

15. Loss of Warrant.

Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver a new Warrant of like tenor and date.

16. Notice or Demands.

Notices or demands pursuant to this Warrant to be given or made by Holder to or on the Company
shall be sufficiently given or made if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed, until another address is designated in writing by the
Company, to the address set forth in Section 2(a) above. Notices or demands pursuant to this
Warrant to be given or made by the Company to or on Holder shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, to
the address of Holder set forth in the Company’s records, until another address is designated in
writing by Holder.

IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 10th day of
December, 2007.

	 	 	 
	THIRD WAVE TECHNOLOGIES, INC.

	 

	By:

	 	/s/ Kevin Conroy
	 

	 	 
	Print Name:

	 	Kevin Conroy
	Title:

	 	President and CEO

13

 

EXHIBIT A

EXERCISE FORM FOR WARRANT

TO: THIRD WAVE TECHNOLOGIES, INC.

The undersigned hereby irrevocably Exercises the right to purchase             of
the shares of Common Stock (the “Common Stock”) of THIRD WAVE TECHNOLOGIES, INC., a Delaware
corporation (the “Company”), evidenced by the attached warrant (the “Warrant”), and herewith makes
payment of the Exercise Price with respect to such shares in full, all in accordance with the
conditions and provisions of said Warrant.

1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any of the Common
Stock obtained on Exercise of the Warrant, except in accordance with the provisions of Section 8(a)
of the Warrant.

2. The undersigned requests that any stock certificates for such shares be issued free of any
restrictive legend, if appropriate, and a warrant representing any unexercised portion hereof be
issued, pursuant to the Warrant in the name of the undersigned and delivered to the undersigned at
the address set forth below.

3. The undersigned is exercising the attached Warrant pursuant to:

 ̈ Cash Exercise       ̈ Cashless Exercise

Dated:                               

 

Signature

 

Print Name

 

Address

NOTICE

The signature to the foregoing Exercise Form must correspond to the name as written upon the face
of the attached Warrant in every particular, without alteration or enlargement or any change
whatsoever.

 

 

EXHIBIT B

ASSIGNMENT

(To be executed by the registered holder

desiring to transfer the Warrant)

FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the “Warrant”) hereby sells,
assigns and transfers unto the person or persons below named the right to purchase
            
shares of the Common Stock of THIRD WAVE TECHNOLOGIES, INC., a Delaware corporation,
evidenced by the attached Warrant and does hereby irrevocably constitute and appoint 
 attorney to transfer the said Warrant on the books of the Company, with full power of
substitution in the premises.

	 	 	 	 	 
	Dated:
	 	 	 	 
	 	 	 
	 	 
	 

	 	 	 	Signature
	 
	 	 	 	 
	Fill in for new registration of Warrant:	 	 
	 
	 	 	 	 
	 	 	 
	Name	 	 
	 
	 	 	 	 
	 	 	 
	Address	 	 
	 
	 	 	 	 
	 	 	 
	Please print name and address
of assignee

(including zip code number)	 	 

NOTICE

The signature to the foregoing Assignment must correspond to the name as written upon the face of
the attached Warrant in every particular, without alteration or enlargement or any change
whatsoever.

 

 

EXHIBIT C

FORM OF OPINION

______, 20__

[___________]

Re: Third Wave Technologies, Inc. (the “Company”)

Dear Sir:

[______]
(“[______]”) intends to transfer ______ Warrants (the “Warrants”) of
the Company to ______ (“______”) without registration under the Securities Act of
1933, as amended (the “Securities Act”). In connection therewith, we have examined and
relied upon the truth of representations contained in an Investor Representation Letter
attached hereto and have examined such other documents and issues of law as we have
deemed relevant.

Based on and subject to the foregoing, we are of the opinion that the transfer of the
Warrants by ______ to
______ may be effected without registration under the Securities
Act, provided, however, that the Warrants to be transferred to ______
contain a legend restricting its transferability pursuant to the Securities Act and that
transfer of the Warrants is subject to a stop order.

The
foregoing opinion is furnished only to ______ and may not be used, circulated,
quoted or otherwise referred to or relied upon by you for any purposes other than the
purpose for which furnished or by any other person for any purpose, without our prior
written consent.

Very truly yours,

 

 

[FORM OF INVESTOR REPRESENTATION LETTER]

_____, 20__

[_________________]

Gentlemen:

______
(“______”) has agreed to purchase
______ Warrants (the “Warrants”) of Third Wave
Technologies, Inc. (the “Company”) from [______] (“[______]”). We understand that the
Warrants are “restricted securities.” We represent and
warrant that ______ is a sophisticated
institutional investor that would qualify as an “Accredited Investor” as defined in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the “Securities Act”).

______
represents and warrants as of the date hereof as follows:

		 	1. That it is acquiring the Warrants and the shares of common stock, $0.001 par value per
share underlying such Warrants (the “Exercise Shares”) solely for its account for investment
and not with a view to or for sale or distribution of said Warrants or Exercise Shares or any
part thereof. ______ also represents that the entire legal and beneficial interests of the
Warrants and Exercise Shares ______ is acquiring is being acquired for, and will be held
for, its account only;
	 
		 	2. That the Warrants and the Exercise Shares have not been registered under the Securities
Act on the basis that no distribution or public offering of the stock of the Company is to be
effected. ______ realizes that the basis for the exemption may not be present if,
notwithstanding its representations, ______ has a present intention of acquiring the
securities for a fixed or determinable period in the future, selling (in connection with a
distribution or otherwise), granting any participation in, or otherwise distributing the
securities. ______ has no such present intention;
	 
		 	3. That the Warrants and the Exercise Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such registration is
available. ______ recognizes that the Company has no obligation to register the Warrants,
or to comply with any exemption from such registration;
	 
		 	4. That neither the Warrants nor the Exercise Shares may be sold pursuant to Rule 144
adopted under the Securities Act unless certain conditions are met, including, among other
things, the existence of a public market for the shares, the availability of certain current
public information about Company, the resale following the required holding period under Rule
144 and the number of shares being sold during any three month period not exceeding specified
limitations;
	 
		 	5. That it will not make any disposition of all or any part of the Warrants or Exercise
Shares in any event unless and until:

	(i)	 	The Company shall have received a letter secured by
______ from the Securities and
Exchange Commission stating that no action will be recommended to the Securities and Exchange
Commission with respect to the proposed disposition;

	(ii)	 	There is then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with said registration
statement; or

	(iii)	 	______ shall have notified the Company of the proposed disposition and, in the case of a
sale or transfer in a so called “4(1) and a half” transaction, shall have furnished counsel to
the Company with an opinion of counsel, reasonably satisfactory to counsel to the Company.

We acknowledge that the Company will place stop orders with respect to the Warrants and the
Warrants, and if a registration statement is not effective, the Exercise Shares shall bear the
following restrictive legend:

	 	 	“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144 OR

 

 

	 	 	144A UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR
INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF” SALE.”
	 
	 	 	“THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF
DECEMBER ___, 2007, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF
ITS OUTSTANDING SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.”

At any
time and from time to time after the date hereof, ______ shall, without further
consideration, execute and deliver to [______] or the Company such other instruments or documents
and shall take such other actions as they may reasonably request to carry out the transactions
contemplated hereby.

Very truly yours,

 

 

Schedule 1

Calculation of Intrinsic Value and Black-Scholes Value

	 	 	 	 	 	 	 
	 	 	Calculation of Intrinsic Value	 	 	 	Calculation of Black-Scholes
	 	 	Under Section 5(c)(iii)	 	 	 	Under Section 10(b) or 11(b)
	 
	 	 	 	 	 	 
	Intrinsic Value

	 	The excess of the Stock Price
minus the then Exercise Price
at the time of calculation.
For avoidance of doubt, the
Intrinsic Value shall never
be less than zero.
	 	Remaining Term
	 	Number of calendar days
from date of the Event of
Failure until the last date
on which the Warrant may be
exercised.
	 
	 	 	 	 	 	 
	Stock Price

	 	The greater of (1) the
closing price of the Common
Stock on NASDAQ, or, if that
is not the principal trading
market for the Common Stock,
such principal market on
which the Common Stock is
traded or listed (the
“Closing Market Price”) on
the trading day immediately
preceding the date on which a
Major Transaction is
consummated, (2) the first
Closing Market Price
following the first public
announcement of a Major
Transaction, (3) the Volume
Weighted Average Price as of
the date immediately
preceding the first public
announcement of the Major
Transaction or (4) the per
share value of the
consideration to be received
by the Company and/or
stockholders in a Major
Transaction.
	 	Interest Rate

Volatility

Stock Price

Dividends
	 	A risk-free interest rate
corresponding to the US$
LIBOR/Swap rate for a
period equal to the
Remaining Term.

42%

The volume Weighted Average
Price on the date of such
calculation.

Zero.

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