Document:

exv10w2

 

Exhibit 10.2

LOAN AGREEMENT

DATED AS OF FEBRUARY 11, 1999

BY AND AMONG

VENTURE INVESTORS EARLY STAGE FUND II LIMITED PARTNERSHIP

AND

TOMOTHERAPY INCORPORATED

 

 

     TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I DEFINITIONS AND TERMS
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	1.2 Interpretation
	 	 	7	 
	1.3 Other Terms
	 	 	8	 
	 
	 	 	 	 
	ARTICLE II AMOUNTS AND TERMS OF CREDIT
	 	 	8	 
	2.1 Revolving Loans
	 	 	8	 
	2.2 Effect of Regulatory Change
	 	 	9	 
	 
	 	 	 	 
	ARTICLE III CONDITIONS TO CLOSING
	 	 	9	 
	3.1 Loan Documents
	 	 	9	 
	3.2 Opinion of Counsel
	 	 	10	 
	3.3 Company Officers’ Certificate
	 	 	10	 
	3.4 Corporate Resolutions
	 	 	10	 
	3.5 Amendments to Articles of Incorporation.
	 	 	10	 
	3.6 Proceedings and Documents
	 	 	10	 
	3.7 Life Insurance Policies
	 	 	10	 
	3.8 Organization, Good Standing and Authority
	 	 	11	 
	3.9 Financial Statements; Budget; Projections
	 	 	11	 
	3.10 Securities Law Matters; Investment Representations
	 	 	11	 
	3.11 No Litigation
	 	 	11	 
	3.12 Consents
	 	 	11	 
	3.13 UCC Search
	 	 	11	 
	3.14 No Material Adverse Effect
	 	 	12	 
	3.15 Representations and Warranties
	 	 	12	 
	3.16 Nondisclosure, Noncompetition and Assignment Agreement
	 	 	12	 
	3.17 WARF License Agreement
	 	 	12	 
	3.18 Subsequent Revolving Loans
	 	 	12	 
	 
	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES
	 	 	13	 
	4.1 Existence and Rights
	 	 	13	 
	4.2 Agreement Authorized
	 	 	13	 
	4.3 Capitalization
	 	 	13	 
	4.4 Subsidiaries, Other Investments
	 	 	14	 
	4.5 Litigation
	 	 	14	 
	4.6 Financial Statements
	 	 	14	 
	4.7 Title to Properties
	 	 	14	 
	4.8 Intellectual Property
	 	 	15	 
	4.9 No Undisclosed Liabilities
	 	 	15	 
	4.10 Contracts
	 	 	15	 
	4.11 Compliance with Other Instruments, Laws, Etc
	 	 	16	 
	4.12 Securities Laws
	 	 	16	 

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	 	 	Page
	4.13 Use of Proceeds
	 	 	16	 
	4.14 Brokers
	 	 	16	 
	4.15 Taxes
	 	 	16	 
	4.16 Insurance
	 	 	17	 
	4.17 Federal Reserve Regulations
	 	 	17	 
	4.18 Investment Company Act: Public Utility Holding Company Act
	 	 	17	 
	4.19 Year 2000 Problem
	 	 	17	 
	4.20 Survival of Representations and Warranties
	 	 	17	 
	 
	 	 	 	 
	ARTICLE V AFFIRMATIVE COVENANTS
	 	 	18	 
	5.1 Taxes
	 	 	18	 
	5.2 Maintain Corporate Existence and Rights
	 	 	18	 
	5.3 Insurance
	 	 	18	 
	5.4 Life Insurance
	 	 	18	 
	5.5 Financial Reports
	 	 	19	 
	5.6 Inspection and Samples
	 	 	19	 
	5.7 Maintain Properties
	 	 	20	 
	5.8 Disclosures
	 	 	20	 
	5.9 Conduct of Businesses
	 	 	21	 
	5.10 Tax Returns
	 	 	21	 
	5.11 Notice to Shareholders; Attendance at Meetings
	 	 	21	 
	5.12 Notice to Directors; Attendance at Meetings
	 	 	21	 
	5.13 Compliance with Instruments, Laws, Etc
	 	 	21	 
	5.14 Payment of Certain Expenses
	 	 	21	 
	5.15 Information Regarding Effect of Financing
	 	 	21	 
	5.16 Section 1202 Capital Gains Treatment
	 	 	22	 
	 
	 	 	 	 
	ARTICLE VI NEGATIVE COVENANTS
	 	 	22	 
	6.1 Restricted Payments
	 	 	22	 
	6.2 Investments, Loans and Advances
	 	 	22	 
	6.3 Acquisition or Sale of Business; Merger or Consolidation
	 	 	22	 
	6.4 Change Capital Structure
	 	 	23	 
	6.5 Shareholder-Employees’ Salaries
	 	 	23	 
	6.6 Amend, Violate Charter, Etc.
	 	 	23	 
	6.7 Compliance With Securities Laws
	 	 	23	 
	6.8 Dealings With Affiliates
	 	 	23	 
	6.9 Management
	 	 	23	 
	6.10 Pension and Profit-Sharing Plan or Arrangements
	 	 	23	 
	6.11 Permitted Indebtedness
	 	 	23	 
	6.12 Liens
	 	 	24	 
	6.13 Expenditures
	 	 	24	 
	6.14 Changes in Business
	 	 	24	 
	 
	 	 	 	 
	ARTICLE VII EVENTS OF DEFAULT AND REMEDIES THEREFOR
	 	 	24	 
	7.1 Events of Default
	 	 	24	 
	7.2 Notice to Lender
	 	 	26	 

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	 	 	Page
	7.3 Remedies
	 	 	26	 
	7.4 Expenses
	 	 	26	 
	 
	 	 	 	 
	ARTICLE VIII CONVERSION OF REVOLVING LOANS
	 	 	26	 
	8.1 Mandatory Conversion
	 	 	26	 
	8.2 Optional Conversion/Participation Rights
	 	 	26	 
	8.3 Other Option Conversion Rights
	 	 	27	 
	8.4 Rights to Receive Common Shares
	 	 	27	 
	 
	 	 	 	 
	ARTICLE IX ADDITIONAL PROVISIONS
	 	 	28	 
	9.1 Expenses
	 	 	28	 
	9.2 Successors and Assigns
	 	 	29	 
	9.3 Notices
	 	 	29	 
	9.4 No Waiver; Remedies Cumulative
	 	 	29	 
	9.5 Amendments and Waivers
	 	 	30	 
	9.6 Severability
	 	 	30	 
	9.7 Headings
	 	 	30	 
	9.8 Governing Law
	 	 	30	 
	9.9 Counterparts
	 	 	30	 
	9.10 Further Assurances
	 	 	30	 
	9.11 WAIVER OF JURY TRIAL
	 	 	30	 

EXHIBITS:

	 	 	 	 	 
	 

	 	Exhibit A
	 	Form of Borrowing Request
	 

	 	Exhibit B
	 	Form of Collateral Assignment
	 

	 	Exhibit C
	 	Form of Guaranty
	 

	 	Exhibit D
	 	Form of Nondisclosure, Noncompetition and Assignment Agreement
	 

	 	Exhibit E
	 	Form of Revolving Note
	 

	 	Exhibit F
	 	Form of Security Agreement
	 

	 	Exhibit G
	 	Term Sheet for Investment in Preferred Shares
	 

	 	Exhibit H
	 	Form of Warrant

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	SCHEDULES:	 	 
	 
	 	 	 	 
	 

	 	Schedule 3.2
	 	Opinion of Counsel
	 

	 	Schedule 3.5
	 	Amendments to Articles of Incorporation
	 

	 	Schedule 4.2
	 	Articles of Incorporation and Bylaws
	 

	 	Schedule 4.3(a)
	 	Issued and Outstanding Stock
	 

	 	Schedule 4.3(b)
	 	Outstanding Subscriptions, Options, Warrants or Other Rights, Restrictions or Agreements
	 

	 	Schedule 4.4
	 	Subsidiaries or Other Investments
	 

	 	Schedule 4.6
	 	Financial Statements
	 

	 	Schedule 4.6(a)
	 	Disclosures to Financial Statements
	 

	 	Schedule 4.8
	 	Intellectual Property
	 

	 	Schedule 4.9
	 	Undisclosed Liabilities
	 

	 	Schedule 4.10
	 	Contracts
	 

	 	Schedule 6.5
	 	Shareholder-Employees’ Salaries

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LOAN AGREEMENT

     This LOAN AGREEMENT, dated as of February 11, 1999 (this “Agreement”), is by and among
Venture Investors Early Stage Fund II Limited Partnership, a Wisconsin limited partnership (the
“Lender”), and TomoTherapy Incorporated, a Wisconsin corporation (the “Company”).

RECITALS

     WHEREAS, the Lender desires to lend to the Company, upon the terms and subject to the
conditions set forth herein, up to $250,000;

     NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND TERMS

     1.1 Definitions. As used in the Loan Documents, the following terms have the
following meanings:

     “Affiliate” of a Person shall mean any Person (other than a wholly owned Subsidiary)
directly or indirectly controlling or controlled by, or under direct or indirect common control
with, another Person. A Person shall be deemed to control another Person for the purposes of this
definition if the controlling Person directly or indirectly, either individually or together with
(in the case of an individual) his spouse, lineal descendants and ascendants and brothers or
sisters by blood or adoption or spouses of such descendants, ascendants, brothers and sisters, owns
ten percent or more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct, or cause the direction of, the management or policies
of the second Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise.

     “Agreement” shall mean this Loan Agreement, as amended, restated, supplemented or
otherwise modified from time to time.

     “Borrowing Date” shall have the meaning assigned in Section 2.1(e).

     “Borrowing Request” shall mean borrowing request for Revolving Loans, substantially in
the form of Exhibit A hereto.

     “Business Day” shall mean a day other than a Saturday or Sunday on which banks are
open for business in Madison, Wisconsin.

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     “Capitalized Lease Obligations” shall mean, for any period, the aggregate discounted
present value of the obligations of the Company as lessee under any lease of Property which would
properly be classified as a capitalized lease in the Financial Statements of the Company.

     “Closing Date” shall mean February 16, 1999, or such other date as may be agreed upon
by the Company and the Lender; provided that all conditions set forth in Article
III must be satisfied on the Closing Date..

     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

     “Collateral” shall mean all of Company’s Property granted to the Lender as collateral
under the Loan Documents.

     “Collateral Assignment” shall mean the collateral assignment of contract rights of
even date herewith from the Company to the Lender, substantially in the form of Exhibit B
hereto, pursuant to which the Company assigns its rights under the WARF License Agreement, as
amended, supplemented or modified from time to time.

     “Common Shares” shall mean shares of the Company’s common stock, par value $0.01 per
share.

     “Company” shall have the meaning set forth in the first paragraph to this Agreement.

     “Conversion Gain” shall have the meaning assigned in Section 8.4(c).

     “Conversion Shares” shall have the meaning assigned in Section 8.4(a).

     “Default” shall mean an event which with the giving of notice or the passage of time
or both would constitute an Event of Default.

     “Default Rate” shall have the meaning assigned in Section 2.1(c).

     “Employee Plan” shall mean any savings, profit sharing, or retirement plan or any
deferred compensation contract or other plan maintained for employees of the Company and covered by
Title IV of ERISA, including, without limitation, any “multiemployer plan” as defined in ERISA.

     “Environmental Law” shall mean any local, state or federal law or other statute, law,
ordinance, rule, code, regulation, decree or order governing, regulating or imposing liability or
standards of conduct concerning the use, treatment, generation, storage, disposal or other handling
or release of any hazardous substance, including without limitation, any pollutant, contaminant,
waste or toxic or hazardous chemicals, wastes or substances, including, without limitation,
asbestos, urea formaldehyde insulation, petroleum, PCB’s, air pollutants, water pollutants, and
other substances defined as hazardous substances or toxic substances in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,

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42 U.S.C. ‘ 9061 et
seq., Hazardous Materials Transportation Act, 49 U.S.C. ‘ 1802, the Resource
Conservation and Recovery Act, 42 U.S.C. ‘ 6901 et seq., the Toxic Substance Control Act of
1976, as amended, 15 U.S.C. ‘ 2601 et seq., the Solid Waste Disposal Act, 42 U.S.C. ‘ 3251 et seq.,
the Clean Air Act, 42 U.S.C. ‘ 1857 et seq., the Clean Water Act, 33 U.S.C. ‘ 1251 et seq, Chapter
144 of the Wisconsin Statutes, or any other statute, rule, regulation or order of any Government
Authority having jurisdiction over the control of such wastes or substances, including without
limitation the United States Environmental Protection Agency, the United States Nuclear Regulatory
Agency, the State of Wisconsin and the Dane County Department of Health.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute, together with the regulations and published interpretations thereunder,
in each case as in effect from time to time.

     “Event of Default” shall have the meaning assigned in Section 7.1.

     “Exit Period” shall have the meaning assigned in Section 8.4(d).

     “Exit Period Rights” shall have the meaning assigned in Section 8.4(b).

     “Financial Statements” shall mean, for any Person, the balance sheet, the statement of
income, the statement of cash flows, and the statement of shareholders’ equity, and all notes and
schedules thereto, prepared on a consolidated basis, in accordance with GAAP.

     “GAAP” shall mean those generally accepted accounting principles and practices which
are recognized as such by the American Institute of Certified Public Accountants acting through
appropriate boards or committees thereof and which are consistently applied for all periods so as
to properly reflect the financial condition, results of operations, and cash flows of the Company.

     “Government Authority” shall mean any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any corporation or other
entity owned or controlled through stock or capital ownership or otherwise, by any of the
foregoing.

     “Guaranty” shall mean the guaranty of payment of even date herewith made by each of
the Principals in favor of the Lender, substantially in the form of Exhibit C hereto, as
amended, restated, supplemented or otherwise extended from time to time.

     “Indebtedness” shall mean all: (a) indebtedness for borrowed money; (b) indebtedness
for the deferred purchase price of property or services for which the Company is liable, primarily,
contingently or otherwise, as obligor, guarantor or otherwise; (c) any commitment by which the
Company assures a creditor against loss, including, without limitation, contingent reimbursement
obligations with respect to letters of credit; (d) obligations which are evidenced by notes,
acceptances or other instruments; (e) indebtedness and other obligations arising under acceptance
facilities and the face amount of all letters of credit issued for the account of the Company;

- 8 -

 

(f) indebtedness guarantied in any manner by the Company, including without limitation guaranties in
the form of an agreement to repurchase or reimburse; (g) Capitalized Lease Obligations, for
which obligations the Company is liable, primarily, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations the Company assures a creditor against
loss; (h) any unfunded obligation of the Company to an Employee Plan; (i) all Liabilities secured
by any Lien on any Property owned by the Company whether or not the Company has assumed or
otherwise become liable for the payment thereof; and (j) indebtedness or other obligations arising
under interest-rate swap agreements and other interest-rate hedging arrangements.

     “Institutional Investor” means a partnership, corporation, limited liability company,
firm, enterprise, business trust, joint stock company or trust organized for the primary purpose of
making venture capital investments and which is managed on a full-time basis by professional
investors.

     “Intellectual Property” shall have the meaning assigned in Section 4.8.

     “Lender” shall have the meaning assigned in the first paragraph of this Agreement.

     “Liability” means any liability or obligation (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to be come due), including, without limitation, any
guaranties of Indebtedness, liabilities or other obligations.

     “Liens” shall mean any mortgage, pledge, lien, encumbrance, charge or other security
interest of any kind.

     “Loan Documents” shall mean the Revolving Note, the Security Agreement, the Collateral
Assignment, the Guaranty, the UCC Financing Statements, the Warrants, and all other certificates,
resolutions, or other documents required or contemplated hereunder.

     “Mandatory Conversion” shall have the meaning assigned in Section 8.1.

     “Material Adverse Effect” shall mean (a) a Default, (b) a material adverse change in
the business, prospects or condition (financial or otherwise) of the Company or in any Property,
(c) the termination of the WARF License Agreement, (d) any material impairment of the right to
carry on the business as now or proposed to be conducted by the Company, or (e) any material
impairment of the ability of the Company to perform its obligations under this Agreement or the
other Loan Documents.

     “Maturity Date” shall mean December 31, 1999, or such earlier date on which the
Revolving Loan Commitment is terminated and the Revolving Note shall mature and become fully due
and payable as provided in Section 7.3.

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     “Maximum Available Commitment” shall mean an amount equal to the excess (if any) of
(a) the Revolving Loan Commitment minus (b) the aggregate unpaid principal amount
outstanding of all Revolving Loans made by the Lender.

     “Nondisclosure, Noncompetition and Assignment Agreement” shall mean the Nondisclosure,
Noncompetition and Assignment Agreement of even date herewith between the Company and each of the
Principals, substantially in the form of Exhibit D hereto, as amended, restated,
supplemented or otherwise modified from time to time.

     “Obligations” shall mean the Revolving Loans, including all accrued interest thereon,
and all other obligations and liabilities of the Company to the Lender, including without
limitation, all Indebtedness whether primary, secondary, direct, contingent, fixed, or otherwise,
whether now and/or hereafter owing, due, or payable, and whether arising under this Agreement, the
Loan Documents, by operation of law or otherwise.

     “Participation Amount” shall have the meaning assigned in Section 8.2.

     “Participation Financing” shall have the meaning assigned in Section 8.2.

     “Participation Notice” shall have the meaning assigned in Section 8.2.

     “Participation Right” shall have the meaning assigned in Section 8.2.

     “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.

     “Permitted Liens” shall mean: (a) Liens imposed by law and incurred in the ordinary
course of the Company’s business for Indebtedness not yet due to carriers, warehousemen, laborers,
or materialmen and the like; and (b) Liens in respect of pledges or deposits under worker’s
compensation laws or similar legislation; and (c) Liens for property taxes, assessments or
governmental charges not yet subject to penalties for nonpayment.

     “Person” shall mean an individual, partnership, corporation, limited liability
company, firm, enterprise, business trust, joint stock company, trust, unincorporated association,
joint venture, Government Authority or other entity of whatever nature.

     “Preferred Shares” shall mean shares of the Company’s Series A Convertible Preferred
Stock, par value $1.00 per share.

     “Principals” shall mean, collectively, Dr. Thomas Rockwell Mackie and Paul J.
Reckwerdt.

     “Property” shall mean any interest of the Company of any kind in property or assets,
whether real, personal, mixed, tangible or intangible, wherever located, and whether now owned

- 10 -

 

or
subsequently acquired or arising and in the products, proceeds, additions and accessions thereof or
thereto.

     “Regulatory Change” shall mean the adoption or amendment, after the date of this
Agreement, of any federal or state law, regulation, interpretation, direction, policy, guideline or
court decision applicable to the Lender which increases the cost to the Lender of making or
maintaining the Revolving Loans or reduces the rate of return to the Lender (by reduction of
principal, interest or otherwise) on the Revolving Loans by subjecting the Lender to any tax, duty
or other charge with respect to the Revolving Loans, imposing any reserve requirement, affecting
the treatment of the Revolving Loans for purposes of calculating the appropriate amount of capital
to be maintained by the Lender or any Person controlling the Lender, or imposing on the Lender any
other condition affecting the Revolving Loans.

     “Requirements of Law” shall mean as to any matter or Person, the Certificate or
Articles of Incorporation and Bylaws or other organizational or governing documents of such Person,
and any law (including, without limitation, any Environmental Law), ordinance, treaty, rule,
regulation, order, decree, determination or other requirement having the force of law relating to
such matter or Person and, where applicable, any interpretation thereof by any Government
Authority.

     “Restricted Payments” shall mean: (a) dividends or other distributions by the Company
based upon the stock of the Company (except dividends payable solely in stock of the Company); (b)
purchases, redemptions or other acquisitions, direct or indirect, by the Company, of stock of the
Company, whether now or hereafter outstanding; (c) any other distribution by the Company in respect
of stock of the Company, whether now or hereafter outstanding, either directly or indirectly,
whether in cash or property or otherwise; and (d) payment of management fees by the Company to any
Affiliate, either directly or indirectly, whether in cash or property or otherwise.

     “Revolving Loan Commitment” shall mean an aggregate principal amount not to exceed
$250,000.

     “Revolving Loan Request” shall have the meaning assigned in Section 2.1(e).

     “Revolving Loans” shall have the meaning assigned in Section 2.1(a).

     “Revolving Note” shall mean the promissory note from the Company to the Lender,
substantially in the form of Exhibit E hereto, evidencing the Revolving Loans, as amended,
restated, supplemented or otherwise modified from time to time.

     “Right(s)” shall have the meaning assigned in Section 8.4(a).

     “Securities Act” shall mean the Securities Act of 1933, as amended, and any successor
statute, together with the rules and regulations thereunder, in each case as in effect from time to
time.

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     “Security Agreement” shall mean the security agreement of even date herewith between
the Company and the Lender, substantially in the form of Exhibit F hereto, pursuant to
which the Company grants a Lien to the Lender in substantially all of the Company’s Property, as
amended, restated, supplemented or otherwise modified from time to time.

     “Share Price Rights” shall have the meaning assigned in Section 8.4(b).

     “Subsidiary” shall mean, as to any Person, a corporation of which shares of stock
having voting power (other than stock having such power only by reason of the happening of a
contingency that has not occurred) sufficient to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

     “Term Sheet” shall mean that certain Term Sheet dated as of November 11, 1998, between
the Lender and the Company, a copy of which is attached hereto as Exhibit G.

     “Transaction Documents” shall mean the Loan Documents and the Nondisclosure,
Noncompetition and Assignment Agreements.

     “Triggering Event” shall have the meaning assigned in Section 8.4(a).

     “UCC” shall mean the Uniform Commercial Code of the State of Wisconsin, as amended
from time to time.

     “UCC Financing Statements” shall mean that certain UCC-1 financing statement and that
certain UCC-3 financing statement executed by the Company, as debtor, in favor of the Lender, as
secured party, describing the Collateral.

     “Underlying Shares” shall mean, collectively, the Preferred Shares issuable upon
conversion of the Revolving Loans as provided in Article VIII and the Common Shares
issuable upon conversion of the Preferred Shares.

     “Warrant” shall mean that certain Preferred Shares Purchase Warrant of even date
herewith issued by the Company to the Lender, substantially in the form of Exhibit H
hereto, providing Lender with the right to purchase Preferred Shares on the terms and for the price
therein contained.

     “WARF License Agreement” shall mean that certain License Agreement dated as of
February [___], 1999 between the Company and the Wisconsin Alumni Research Foundation, as the same
may be amended, restated, supplemented or otherwise modified from time to time.

     “Year 2000 Problem” shall have the meaning assigned in Section 4.19.

     1.2 Interpretation. Unless otherwise expressly provided or unless the context
requires otherwise, (a) all references in this Agreement to Articles, Sections, Schedules and
Exhibits shall

- 12 -

 

mean and refer to Articles, Sections, Schedules and Exhibits of this Agreement; (b)
all references to statutes and related regulations shall include all amendments of the same and any
successor or replacement statutes and regulations; (c) words using the singular or plural number
also shall include the plural and singular number, respectively; (d) references to “hereof,”
“herein,” “hereby” and similar terms shall refer to this entire Agreement (including the Schedules
and Exhibits hereto); and (e) references to any Person shall be deemed to mean and include the
successors and permitted assigns of such Person (or, in the case of a Government Authority, Persons
succeeding to the relevant functions of such Person).

     1.3 Other Terms. Except as otherwise specifically provided, each accounting term used
herein shall have the meaning given to it under GAAP, and all other terms contained in this
Agreement (and which are not otherwise specifically defined herein) shall have the meanings
provided in the UCC to the extent the same are used or defined therein unless the context otherwise
requires.

ARTICLE II

AMOUNTS AND TERMS OF CREDIT

     2.1 Revolving Loans.

          (a) Amount. Prior to the Maturity Date and so long as no Event of Default has
occurred and is continuing, or would be created thereby, the Lender agrees on the terms and
conditions set forth in this Agreement to extend to the Company revolving credit loans (the
“Revolving Loans”) from time to time in amounts not to exceed the Revolving Loan Commitment
at any one time outstanding. The Revolving Loans made by the Lender shall be evidenced by the
Revolving Note.

          (b) Interest Rate Prior to an Event of Default. Prior to the Maturity Date, and so
long as no Event of Default has occurred and is continuing, interest shall accrue on the aggregate
unpaid principal amount outstanding under the Revolving Note at a rate per annum equal to eight
percent (8%). Interest shall be computed and adjusted daily based on the actual number of days
elapsed in a year of 360 days.

          (c) Interest Rate After an Event of Default. After an Event of Default and so long as
the same is continuing, interest shall accrue on the aggregate unpaid principal amount outstanding
under the Revolving Note at a rate per annum equal to five percent (5.0%) in excess of the rate
otherwise applicable under Section 2.1(b) (the “Default Rate”). In no event shall
the interest rate under the Revolving Note exceed the highest rate permitted by law.

          (d) Payments. All outstanding unpaid principal and accrued interest on the Revolving
Loans shall be due and payable on the Maturity Date, and may be prepaid in whole or in part at any
time prior to the Maturity Date without penalty. All amounts paid shall be applied first to
outstanding interest and the balance to principal.

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          (e) Disbursement of Revolving Loans. The Company may obtain Revolving Loans by making
a request (the “Revolving Loan Request”) therefor to the Lender, orally or in writing. The
Revolving Loan Request shall specify a Business Day prior to the Maturity Date on which such
Revolving Loans are to be made (the “Borrowing Date”), shall be received by the Lender by
12:00 Noon (Madison, Wisconsin time) of the Borrowing Date, and shall specify the amount of the
Revolving Loans requested; provided, however, that within three (3) days after any
oral request for a Revolving Loan, the Lender shall receive from the Company a written confirmation
in form acceptable to the Lender confirming the Revolving Loan Request, and the Lender’s obligation
to make further Revolving Loans hereunder shall be suspended until such confirmation has been
received by the Lender. In the event of any inconsistency between the
telephonic notice and the written confirmation thereof, the telephonic notice shall control.
The Company shall be obligated to repay all Revolving Loans notwithstanding the failure of the
Lender to receive written confirmation, and notwithstanding the fact that the person requesting the
Revolving Loan was not in fact authorized to do so. No Revolving Loan Request shall be modified,
altered or amended without the prior written consent of the Lender. Each Revolving Loan shall be
in the principal amount equal to or greater than Twenty-Five Thousand Dollars ($25,000);
provided, that the aggregate amount of all Revolving Loans shall not exceed the Maximum
Available Commitment.

     2.2 Effect of Regulatory Change. In the event of a Regulatory Change deemed by the
Lender in good faith to be material, the Company shall pay to the Lender (within ten (10) days
after notice by the Lender to the Company of such Regulatory Change) such amounts as the Lender
deems reasonably necessary to compensate the Lender for the increase in the cost of making or
maintaining the Revolving Loans or the reduction in the rate of return to the Lender on the
Revolving Loans resulting from the Regulatory Change.

ARTICLE III

CONDITIONS TO CLOSING

     In addition to the terms and conditions otherwise contained herein, the obligation of the
Lender to extend credit hereunder is conditional on the Lender receiving and the Company covenants
and agrees to deliver, prior to the Closing Date, each of the following items in form, detail and
content satisfactory to the Lender:

     3.1 Loan Documents. The Lender shall have received the following Loan Documents:

          (a) the executed Revolving Note;

          (b) the executed Security Agreement;

          (c) the executed Guaranty;

          (d) the executed UCC Financing Statements;

- 14 -

 

          (e) the executed Collateral Assignment; and

          (f) the executed Warrant.

     3.2 Opinion of Counsel. The Lender shall have received from counsel for the Company a
favorable opinion addressed to the Lender dated the Closing Date and incorporating all those
matters set forth in the form attached hereto and incorporated by reference as Schedule
3.2.

     3.3 Company Officers’ Certificate. The Company shall have delivered to the Lender a
certificate signed by the Company’s president and secretary that:

          (a) as of the Closing Date, there does not exist any state of facts which would constitute an
Event of Default as defined in Article VII or would, with notice or lapse of time as
provided herein, or both, constitute such an Event of Default;

          (b) all representations and warranties contained in Article IV are true and correct as
of the Closing Date;

          (c) the Company is in compliance with all of the affirmative and negative covenants set forth
in Article V and Article VI; and

          (d) all conditions set forth in Article III to be performed by the Company have been
satisfied.

     3.4 Corporate Resolutions. A certified copy of the resolutions adopted by the
shareholders and/or Board of Directors of the Company:

          (a) amending the Company’s Articles of Incorporation to create a class of Preferred Shares;
and

          (b) authorizing and approving (i) this Agreement, (ii) the other Transaction Documents and
(iii) the transactions contemplated hereby and thereby

shall have been delivered to the Lender.

     3.5 Amendments to Articles of Incorporation. The Company shall have filed with the
Department of Financial Institutions of the State of Wisconsin an Amended and Restated Articles of
Incorporation creating the Preferred Shares as set forth on Schedule 3.5.

     3.6 Proceedings and Documents. All proceedings to be taken prior to or on the Closing
Date in connection with the transactions contemplated by this Agreement shall have been
consummated, and all documents, schedules, exhibits, opinions and certificates related thereto
shall each be satisfactory in form and substance to the Lender, and the Lender shall have

- 15 -

 

received
copies of all such documents which the Lender reasonably has requested in connection with said
transactions.

     3.7 Life Insurance Policies. The Company shall have delivered to the Lender copies of
each life insurance policy described in Section 5.4 (or, if any such policy has not been
issued, a copy of a commitment for the issuance of same), and a duly executed assignment thereof by
the Company to the Lender (in form and substance reasonably satisfactory to it). Life insurance
shall be held for the mutual benefit of the Company and the Lender and may be used to pay all
Obligations if the Lender so decides. If the Lender decides to use payment under the life
insurance policies to satisfy the Obligations, the Obligations (including the Revolving Loans)
shall be considered paid in full to the extent of such life insurance proceeds.

     3.8 Organization, Good Standing and Authority. The Company shall be a corporation
duly organized, validly existing and in good standing under the laws of the State of Wisconsin, and
shall have all requisite corporate power and authority to conduct its business as it is now
conducted, to enter into and carry out the provisions of this Agreement and the other Loan
Documents and to perform its obligations hereunder and thereunder. Copies of the Company’s
Articles of Incorporation (including all amendments) and certificates of status of recent date,
both certified by the Department of Financial Institutions of the State of Wisconsin, and a copy of
the respective Bylaws of the Company (including all amendments) and a copy of the stock ledger of
the Company, certified by the secretary of the Company, shall have been delivered to the Lender.
The Company shall have complied with and shall not be in violation of any term or provision of its
Articles of Incorporation and Bylaws. The Company shall be qualified to do business as a foreign
corporation in all jurisdictions where the conduct of its business or the nature of its activities
requires such qualification and where the failure to qualify would have a Material Adverse Effect.

     3.9 Financial Statements; Budget; Projections. The Company shall have delivered to
the Lender: (a) unaudited financial statements (including balance sheet, income statement and
statement of cash flows) as of the fiscal year ended December 31, 1998; (b) a detailed budget for
the fiscal year ended December 31, 1999; (c) detailed monthly projections for the fiscal year ended
December 31, 1999; and (d) detailed quarterly projections for the fiscal year ended December 31,
2000.

     3.10 Securities Law Matters; Investment Representations. The Company shall not be in
violation of any provision of federal or state securities laws applicable to this transaction.

     3.11 No Litigation. There shall be no action, proceeding or investigation pending or,
to the knowledge of the Company, threatened which might result in any Material Adverse Effect.

     3.12 Consents. There shall have been secured from each governmental or regulatory
agency having jurisdiction over the transactions described herein, and from each person whose
consent to the transactions described herein is required, all consents, approvals and permits as

- 16 -

 

shall be necessary or, in the opinion of counsel for the Lender, appropriate, for the consummation
of the transactions described herein.

     3.13 UCC Search. The Company shall have delivered to the Lender a UCC search,
prepared by a reputable title company acceptable to the Lender, of the records of the Dane County
Register of Deeds, the Department of Financial Institutions of the State of Wisconsin and the
filing offices of any other jurisdiction in which the Company has substantial assets, properties,
inventories or business operations, disclosing that all personal property, equipment and fixtures
of the Company are free and clear of all Liens (except Permitted Liens).

     3.14 No Material Adverse Effect. There shall not be in existence any event, including
any judicial or administrative proceeding which, in the opinion of the Lender, would have a
Material Adverse Effect.

     3.15 Representations and Warranties. All representations and warranties in this
Agreement and the other Loan Documents shall be true and correct in all respects as of and at the
Closing Date with the same force and effect as though said representations and warranties had been
again made on the Closing Date.

     3.16 Nondisclosure, Noncompetition and Assignment Agreement. Each of the Principals
and other employees of the Company shall have entered into a Nondisclosure, Noncompetition and
Assignment Agreement.

     3.17 WARF License Agreement. The Company shall have entered into the WARF License
Agreement on terms and conditions satisfactory to the Lender.

     3.18 Subsequent Revolving Loans. In addition to the terms and conditions otherwise
contained herein, the obligation of the Lender to make or incur subsequent Revolving Loans is
subject to the satisfaction, on the date of making or incurring each such Revolving Loan, of the
following conditions:

          (a) All of the representations, warranties and acknowledgments of the Company contained in
this Agreement and the Loan Documents shall be true and accurate as if made on such date, and each
request by the Company for credit shall constitute an affirmation by the Company that such
representations, warranties and acknowledgements are then true and accurate;

          (b) There shall not exist on such date any Default or Event of Default and no Default or Event
of Default shall occur as the result of the making or incurring of such credit;

          (c) The aggregate principal amount of all Revolving Loans outstanding, together with the
amount of any Revolving Loan requested shall not exceed the Revolving Loan Commitment;

- 17 -

 

          (d) The Lender shall have received executed loan requests for all Revolving Loans previously
requested by the Company and the matters certified therein and herein shall have been true, correct
and complete on the date thereof and shall continue to be true and correct on the date of the
requested Revolving Loans or other credit; and

          (e) Each of the Transaction Documents shall remain in full force and effect.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     In order to induce the Lender to execute and deliver this Agreement and the Loan Documents,
the Company represents, warrants and covenants, as of the date hereof and as of the Closing Date
and each Borrowing Date, that each of the representations and warranties contained herein is and
shall be true, complete and correct and acknowledges that each representation and warranty is
independently material to, and relied upon by, the Lender:

     4.1 Existence and Rights. The Company is a corporation duly organized and existing
under the laws of the State of Wisconsin, without limit as to the duration of its existence. The
Company has all corporate powers, authority and rights to own its properties, and, to the best of
the Company’s knowledge, the licenses, franchises and rights to carry on its business; and is now,
and will from time to time hereafter promptly become and remain, duly qualified and in good
standing in each State or other jurisdiction in which the character of the properties owned by it
therein or the conduct of its present or proposed business makes such qualification necessary. The
Company has all corporate power and authority to enter into and perform this Agreement and the
other Transaction Documents. The Company has all corporate power and authority to issue the
Preferred Shares upon conversion of the Revolving Loans or pursuant to an investment specified in
Article VIII. The Company has all corporate power and authority to issue the Common Shares
upon conversion of the Preferred Shares.

     4.2 Agreement Authorized. Neither the execution and delivery by the Company of this
Agreement or the other Transaction Documents, nor the performance by the Company of its obligations
hereunder or thereunder, is in contravention of, or in conflict with, any law or regulation or any
term or provision of the Company’s Articles of Incorporation or Bylaws, true, correct and complete
copies of which are attached hereto as Schedule 4.2, and this Agreement and the other
Transaction Documents have been duly authorized and do not require the consent or approval of any
Government Body. All corporate action and all necessary approvals and consents for the due
execution and delivery of this Agreement and the other Transaction Documents, and the performance
of all other transactions contemplated hereby and thereby, have been duly and validly obtained or
taken. No right of the Company is illegally impaired or infringed upon by its execution and/or
performance of this Agreement and the other Transaction Documents. This Agreement and the other
Transaction Documents have been duly executed and delivered and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance with its terms,
subject only to bankruptcy, insolvency and

- 18 -

 

other laws which limit or qualify the rights of
creditors generally, and to the availability of specific performance, injunctive relief or other
equitable remedies.

     4.3 Capitalization.

          (a) The entire authorized, issued and outstanding capital stock of the Company is as set forth
on Schedule 4.3(a). The issued and outstanding stock is owned by the Persons identified in
Schedule 4.3(a) in the amounts shown therein. All rights to acquire stock in the Company
presently existing, including but not limited to, the conversion of promissory notes or other
indebtedness or receipt of stock in exchange for royalty, compensation or other payments are set
forth on Schedule 4.3(a). All of the outstanding Company’s capital stock is duly and
validly issued, fully paid and nonassessable (subject to ‘ 180.0622 of the Wisconsin Statutes) and
in compliance with all applicable state and federal securities laws concerning the issuance of
securities. All of the Underlying Shares issuable upon conversion of the Revolving Loans or the
Preferred Shares, as applicable, have been duly and validly reserved for issuance and, when issued
upon conversion of the Revolving Loans or Preferred Shares, as applicable, will be duly and validly
issued, fully paid and nonassessable (subject to ‘ 180.0622 of the Wisconsin Statutes).

          (b) Except as described in Schedule 4.3(b), the Company does not have any outstanding
subscriptions, options, warrants or other rights, restrictions or agreements pertaining to the
issuance, purchase, transfer, or registration of any shares of the Company’s capital stock, or any
securities convertible into or exchangeable for any shares of Company’s capital stock, or any
understandings or commitments of any kind except as contemplated by this Agreement or the other
Loan Documents.

     4.4 Subsidiaries, Other Investments. Except as described in Schedule 4.4, the
Company does not have any Subsidiaries or other investments in any other Person.

     4.5 Litigation. There is no litigation or other proceeding pending or, to the
Company’s knowledge, threatened against or affecting the Company, and the Company is not in default
with respect to any order, writ, judgment, decree or demand of any court or other governmental or
regulatory authority.

     4.6 Financial Statements. Except as disclosed on Schedule 4.6(a), the
financial statements of the Company delivered to the Lender pursuant to Section 3.9 and
attached hereto as Schedule 4.6 were prepared in accordance with GAAP and fairly present
the financial condition of the Company as of the dates indicated therein. Since December 31, 1998,
there has not been:

          (a) any Material Adverse Effect;

          (b) any material damage, destruction or loss (whether or not covered by insurance) adversely
affecting the properties, business or earnings prospects of the Company; or

- 19 -

 

          (c) except for the transactions contemplated by this Agreement, any transaction outside the
ordinary course of the Company’s business.

     4.7 Title to Properties. The Company owns and has good marketable title to all of its
material Property reflected on the balance sheets referred to in Sections 3.9 and
4.6. The Property is not subject to any mortgage, pledge, lien, conditional sales
agreement, easement, encumbrance or charge except for Permitted Liens.

     4.8 Intellectual Property. Schedule 4.8 lists all of the:

          (a) patents and patent applications;

          (b) trademarks, trade names and applications therefor and service marks; and

          (c) licenses and franchises

currently used or employed or proposed to be used or employed by the Company (the “Intellectual
Property”). The Company owns (or has valid and enforceable rights to use) all of the
Intellectual Property listed on Schedule 4.8. Schedule 4.8 includes copies of all
legal opinions rendered to the Company pertaining to the patentability of the Intellectual Property
and a summary of all material comments, inquiries or objections from any filing agency which have been
received by the Company. Schedule 4.8 lists for each item of Intellectual Property which
the Company has, or intends to file a patent application, the location of each foreign, federal or
state agency or office where the Company has or intends to file such an application and, if
applicable, the registration number and the date of registration. Except as otherwise described on
Schedule 4.8, the Company is the sole owner of all right, title and interest in the
Intellectual Property which it purports to own and, with respect to Intellectual Property licensed
by the Company, the Company has valid, binding and enforceable rights to use such Intellectual
Property. There are no interference, opposition or cancellation proceedings pending or, to the
knowledge of the Company, threatened against the Company or the Intellectual Property. To the best
knowledge of the Company, the use of the Intellectual Property and of any trade secrets, secret
processes, inventions, processes or formulas used or employed by the Company does not infringe upon
the rights of any Person. In the event that it is determined that access to other intellectual
property not already owned by or licensed to the Company is needed for the Company’s business, the
Company will make reasonable good faith efforts to acquire such intellectual property. No claim,
suit or action is pending or, to the Company’s knowledge, threatened alleging that the Company is
infringing upon the intellectual property rights of others. Except by virtue of the ownership of
Company’s capital stock, no shareholder, director, officer or employee of the Company owns, or
claims to own, directly or indirectly, in whole or in part, any Intellectual Property.

     4.9 No Undisclosed Liabilities. The Company does not have any Liabilities except
those reflected or reserved against on the Financial Statements delivered to the Lender or
described in Schedule 4.9.

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     4.10 Contracts. The Company does not have any existing contracts, purchase orders,
service agreements, commission arrangements, loan agreements, leases or other contractual
obligations whatsoever which either (i) extend beyond June 30, 1999, or (ii) involve total payments
or expenditures to any single person of more than Five Thousand Dollars ($5,000) on any single
contract, except for those terminable by the Company without cost or penalty upon thirty (30) days
notice, or except as are listed on Schedule 4.10.

     Except as described in Schedule 4.10, the Company does not have, nor is it a party to,
any:

          (a) employment or other contracts with employees, consultants or similar individuals or
entities;

          (b) pension, profit or similar employee benefit plans, including but not limited to, employee
pension benefits plans and employee welfare benefit plans as defined in sections 3(2) and 3(1) of
ERISA;

          (c) outstanding loans or borrowing contracts, indentures, mortgages or leases under which the
Company is obligated; and

          (d) contract or agreement, including a joint venture or joint development agreement with
another party that relates to the Company’s research or product development activities.

     4.11 Compliance with Other Instruments, Laws, Etc. The Company is not in violation of
its Articles of Incorporation or Bylaws, as amended; and is not in violation of any applicable law,
statute or regulation of any federal, state, municipal or other governmental or quasi-governmental
agency, board, bureau or body relating to the conduct of its business and maintenance, ownership or
operation of its properties, or in violation or default with respect to any order, license,
regulation or demand of any governmental agency, or in default under any indenture, mortgage,
lease, agreement or other instrument under which the Company is obligated. Neither the execution
nor the delivery of this Agreement or the Transaction Documents, nor the consummation of the
transactions contemplated hereby or thereby, nor the fulfillment of the terms hereof or thereof,
will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute
a default under any agreement, instrument or Lien under which the Company is bound or obligated.

     4.12 Securities Laws. The making of the Revolving Loans and the issuance of the
Underlying Shares upon conversion of the Revolving Loans and the Preferred Shares will be exempt
from the requirement of registration under the Securities Act and state “Blue Sky” laws, and such
Securities Act and “Blue Sky” laws will not be violated by the Company by the execution of this
Agreement or the consummation of the transactions contemplated hereby.

     4.13 Use of Proceeds. The proceeds from the Revolving Loans will be used for the
Company’s general corporate purposes as set forth in the budget described in Section 3.9.

- 21 -

 

     4.14 Brokers. The Company is not liable for any finders’ fees, brokerage fees or
similar fees or expenses in connection with entering into the transactions contemplated by this
Agreement or other Transaction Documents.

     4.15 Taxes. The Company has filed or caused to be filed all tax returns which are
required to be filed by it and has paid and discharged all lawful taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or upon any of its
properties, real, personal or mixed; and no tax Liens have been filed and no claims are being
asserted with respect to any such taxes, fees or other charges.

     4.16 Insurance. The respective assets of the Company are adequately insured against
all such liabilities, hazards and risks, and in at least such amounts as are usually carried by
Persons engaged in the same line of business (in the case of property casualty insurance, at least
replacement cost). All premiums on policies due to date have been paid, and no notice has been
received, nor has the Company any reason to believe, that any such insurance will be canceled or
not renewed.

     4.17 Federal Reserve Regulations. The Company will not, directly or indirectly, use
the proceeds from the Revolving Loans for the purpose of purchasing or carrying any “margin
stock” within the meaning of Regulations G, U, T or X of the Board of Governors of the Federal
Reserve System (12 C.F.R. Parts 221 and 224, as amended), or otherwise take or permit any action
which would involve a violation of any regulation of the Board of Governors of the Federal Reserve
System.

     4.18 Investment Company Act: Public Utility Holding Company Act. The Company is not:
(a) an “investment company” or a company “controlled by an investment company” within the meaning
of the Investment Company Act of 1940, as amended; or (b) a “holding company” or a “subsidiary” of
a “holding company” or an “affiliate of a “holding company” or a “subsidiary” of a “holding
company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

     4.19 Year 2000 Problem. The Company has (a) initiated a review and assessment of all
areas within its business and operations (including, to the best information and knowledge of the
Company, those affected by suppliers and vendors) that could be adversely affected by the “Year
2000 Problem” (that is, the risk that computer applications used by the Company (or to the best
information and knowledge of the Company, suppliers and vendors of the Company) may be unable to
recognize and perform properly date-sensitive functions involving certain dates prior to and any
date after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis and (c) to date, implemented that plan generally in accordance with that
timetable. The Company reasonably believes that all computer applications (including to the best
information and knowledge of the Company, those of suppliers and vendors of the Company) that are
material to its business and operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000

- 22 -

 

(that is, be Year 2000
compliant), except to the extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.

     4.20 Survival of Representations and Warranties. All representations and warranties
contained herein or made by or on behalf of the Company in writing in connection with the
transactions contemplated herein, for purposes of Article VII of this Agreement and
Lender’s rights and remedies thereunder (whether for establishing damages caused by such Event of
Default or exercising the right of optional redemption), shall survive the consummation of the
transactions contemplated hereby and continue in effect at all times while any of the Revolving
Loans are outstanding or the Lender holds any Capital Stock. All statements contained in any
certificate or other instrument or schedule attached hereto or delivered by or on behalf of the
Company pursuant hereto, or in connection with the transactions contemplated herein, shall
constitute representations and warranties by the Company hereunder. The foregoing representations
and warranties do not contain any materially untrue statement of material fact or omit to state any
material fact necessary to make the statements therein not misleading.

ARTICLE V

AFFIRMATIVE COVENANTS

     In order to induce the Lender to execute this Agreement, the Company covenants and agrees that
from the Closing Date, and so long as the Revolving Loans are outstanding, it will comply, unless
the Lender shall otherwise consent in writing, with the following provisions:

     5.1 Taxes. The Company shall promptly pay and discharge all lawful taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits, or upon any of
its properties, real, personal or mixed; provided, however, that the Company shall
not be required to pay or cause to be paid any such tax, assessment, charge or levy if the same
shall not at the time be due and payable or if the validity thereof shall concurrently be contested
in good faith by appropriate proceedings and if the Company shall have established adequate
reserves on its books with respect to such tax, assessment, charge or levy; provided
further, however, that the Company will pay all such taxes, assessments, charges or
levies forthwith whenever, as the result of proceedings to foreclose any Lien which attached as
security therefor, foreclosure on such Lien appears imminent, or (at the election of the Company)
will obtain a surety bond or take such other steps as will prevent such foreclosure.

     5.2 Maintain Corporate Existence and Rights. The Company shall maintain and preserve
its corporate existence and such rights, franchises, and qualifications to do business and other
authorities as are adequate to the conduct of its business and ownership of its properties, if the
failure to maintain and preserve such rights, franchises and qualifications would have a Material
Adverse Effect.

     5.3 Insurance. The Company shall maintain such insurance against liabilities, hazards
and risk, and in at least such amounts (at least replacement cost), as are usually carried by

- 23 -

 

persons engaged in the same or similar businesses. All such insurance shall be effected under
valid and enforceable policies issued by insurers of recognized responsibility, except that the
Company may effect worker’s compensation or similar insurance in respect of operations in any state
or other jurisdictions through an insurance fund operated by such state or other jurisdiction.

     5.4 Life Insurance. The Company shall maintain in effect at all times life insurance
on each of the Principals in an amount of not less than Two Hundred Fifty Thousand Dollars
($250,000).

     5.5 Financial Reports. The following financial reports shall be provided to the
Lender:

          (a) Within twenty (20) days after the end of each month, unaudited consolidated and
consolidating financial statements (including balance sheet, statement of cash flow, income
statement, and statement of shareholders’ equity) of the Company for such fiscal quarter and for
the then current fiscal year to date, all in reasonable detail as requested by the Lender prepared
in accordance with generally accepted accounting principles consistently applied.

          (b) Within ninety (90) days after the last day of each fiscal year of the Company, unaudited
consolidated and consolidating financial statements (including a balance sheet, income
statement, statement of cash flows and a statement of shareholders’ equity) of the Company for
such year, prepared in accordance with generally accepted accounting principles applied on a
consistent basis and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by the independent public accountants regularly
employed by the Company.

          (c) With each delivery of the financial statements required by Section 5.5(a) and
(b), above, an officer’s certificate executed by the President of the Company stating that
the President has no knowledge, after due investigation and inquiry, of the existence of any
condition or event which constitutes an Event of Default hereunder or which after notice or lapse
of time or both, would constitute an Event of Default hereunder; or if any such condition or event
existed or exists, specifying the nature and period of existence thereof and what action the
Company has taken, is taking or proposes to take with respect thereto.

          (d) The Lender’s representatives shall have a right at any time to ask questions of and
receive answers from the Company’s independent accountants and auditors with respect to the
Company’s business, operations, properties, financial and other conditions, and the Company shall
waive any confidentiality requirements applicable to such accountants or auditors as necessary to
fulfill this covenant.

     5.6 Inspection and Samples. The Lender shall have the right to visit and inspect any
of the properties, books and records of the Company (and to make copies and take extracts
therefrom) and to discuss the Company’s business, operations, properties, financial and other
conditions with its directors and officers at such reasonable times and intervals as the Lender

- 24 -

 

may
desire. After the occurrence of an Event of Default, the Company shall pay all expenses of
inspection and audit incurred by the Lender. All information, copies and extracts made or received
by the Lender during any such visit, inspection or discussion shall be held in confidence and, in
the case of copies and extracts, shall be returned to the Company upon its request at any time
after the Lender has sold the Shares acquired by it pursuant to this Agreement; provided,
however, that the obligation of confidentiality contained in this sentence shall not apply
if, after the occurrence of an Event of Default, the use and/or disclosure of any information,
copies or extracts made or received by the Lender shall be necessary or advisable, in the Lender’s
discretion, to enforce its rights as provided herein.

     5.7 Maintain Properties. The Company shall keep its properties in reasonable repair,
working order and condition, and from time to time make all prudent, needful or proper repairs,
replacements, extensions, additional betterments and improvements thereto, so that the respective
businesses carried on by the Company may be properly conducted at all times in accordance with
sound business management. The Company shall take all reasonable and prudent action to maintain
the proprietary, protectable nature of its Intellectual Property and, specifically, shall require
all employees and consultants to execute agreements substantially identical to the Nondisclosure,
Noncompetition and Assignment Agreements.

     5.8 Disclosures.

          (a) The Company shall give immediate written notice, and include copies thereof, to the
Lender of (i) any letters, notices or writings received by the Company alleging default or
demanding payment from third-party lenders or (ii) any suit, action, proceeding or investigation
that has been filed or instituted against the Company, or any of its properties, or is threatened
against the Company or any of its properties that would cause any representation or warranty of the
Company contained in this Agreement or the other Loan Documents to be untrue or which would have a
Material Adverse Effect. The Company shall provide the Lender with all details thereof and shall
send a copy to the Lender of any answer, response or other communication received or sent by the
Company with respect to such matter.

          (b) The Company shall give written notice to the Lender within fifteen (15) days of any event
which requires an action or response by the Company which, if not acted upon or responded to, would
have a Material Adverse Effect.

          (c) The Company shall immediately disclose to the Lender all substantive offers or inquiries
of whatever kind (whether written or oral) which it receives from any person concerning the
possible sale, merger or other acquisition of the assets, stock, or business of the Company. The
Company shall also immediately disclose to the Lender any offers or inquiries it receives
concerning a possible transaction pertaining to any portion of its assets, stock or business,
including, but not limited to sale or licensing of any assets or intellectual property, if the
transaction involves an amount that is greater than Five Thousand Dollars ($5,000) or ten percent
(10%) of the value of the assets of the Company as reflected on its most recent unaudited balance
sheet (whichever is lesser) or pertains to marketing or licensing rights of the Company

- 25 -

 

that
potentially would involve an employment or consulting contract entered into by a
shareholder-employee in which the shareholder-employee and not the Company would be the
beneficiary.

          (d) The Company shall provide the Lender with any annual report, proxy statement or other
report or communications when and as sent to its shareholders generally.

          (e) The Company shall further provide the Lender such other information respecting the
financial condition or operations of the Company as the Lender, may, from time to time, reasonably
request.

     5.9 Conduct of Businesses. The Company shall conduct its business in an ordinary
manner without voluntary interruption and engage in business of the same general type as now
conducted by it and comply with all applicable and material provisions of federal, state and local
laws.

     5.10 Tax Returns. The Company shall accurately prepare and file all income tax
returns required by law to be filed and promptly provide the Lender with copies of such tax
returns.

     5.11 Notice to Shareholders; Attendance at Meetings. At the time any notice, report,
written action taken without a meeting, or other communication (written or oral) or document is
sent to, or acted upon by, shareholders of the Company in their capacity as shareholders, the
Company shall send a copy thereof to the Lender. The Lender shall have the right to attend all
meetings of the Company’s shareholders.

     5.12 Notice to Directors; Attendance at Meetings. At the time any notice, report,
written action taken without a meeting, or other communication (written or oral) or document is
sent to, or acted upon by, directors of the Company in their capacity as shareholders, the Company
shall send a copy thereof to the Lender. The Lender shall have the right to attend all meetings of
the Company’s board of directors.

     5.13 Compliance with Instruments, Laws, Etc. The Company shall comply with the terms,
requirements, restrictions and limitations contained in its Articles of Incorporation and Bylaws,
each as amended. The Company also shall so comply with all applicable laws, statutes or
regulations of any federal, state, municipal or other governmental or quasi-governmental agency,
board, bureau or body materially relating to the conduct of its business and maintenance and
operation of its properties, and shall further comply with and perform the material terms,
conditions and covenants contained in any mortgage, lease, agreement or other instrument under
which the Company obligated.

     5.14 Payment of Certain Expenses. Within thirty (30) days of the submission to the
Company of a reimbursement or payment request by the Lender, the Company shall pay directly or
reimburse the Lender for reasonable out-of-pocket expenses, including, without limitation,
attorney’s fees, accounting fees and travel expenses incurred by the Lender to attend to
post-

- 26 -

 

closing matters to complete the transactions contemplated by this Agreement and the other Loan
Documents; to comply with special requests of the Company, e.g., to waive enforcement of
remedies by the Lender or to amend this Agreement; to enforce the Lender’s rights upon the
occurrence of a potential or actual Event of Default under this Agreement; and expenses related to
or arising as a result of the Lender’s investment in the Company.

     5.15 Information Regarding Effect of Financing. Within ten (10) days after the end of
each month and at any other time upon the request of the Lender, the Company shall furnish to the
Lender information concerning the economic impact of the financing provided by the Lender,
including updates relating to the development of the Company’s technology and the Company’s
strategic relationships.

     5.16 Section 1202 Capital Gains Treatment. The Company shall take necessary steps to
ensure that the Underlying Shares will be “qualified small business stock” as defined in Section
1202 of the Code.

ARTICLE VI

NEGATIVE COVENANTS

     In order to induce the Lender to execute this Agreement, the Company covenants and agrees that
from the Closing Date and so long as the Revolving Loans are outstanding, unless the Lender shall
otherwise consent in writing, the Company shall not:

     6.1 Restricted Payments. Make any Restricted Payments.

     6.2 Investments, Loans and Advances. Make or have outstanding any loans or advances
to, or investments in (through the acquisition of securities or stock or otherwise), any Person
except:

          (a) advances in the ordinary course of business to suppliers in respect to the purchase of
supplies or equipment;

          (b) by endorsement of negotiable instruments for deposit or collection in the ordinary course
of business;

          (c) investments in obligations of the United States Government or certificates of deposit of
banks;

          (d) travel advances to employees in the ordinary course of business; or

          (e) investments in money market funds as may be approved by the Lender.

     6.3 Acquisition or Sale of Business; Merger or Consolidation.

- 27 -

 

          (a) Purchase or otherwise acquire the stock, shares, or other securities, or a substantial
part of all the assets of the business (as a going concern), of any Person;

          (b) Liquidate, dissolve, merge or consolidate, reorganize, recapitalize or otherwise alter its
legal status or commence any proceedings therefor; or

          (c) Sell, lease, transfer, or dispose of, in any way (in one or a series of transactions), any
personal or real property assets (including patents, trademarks, or license agreements), now owned
or hereafter acquired, with a total fair market value in excess of the lesser of Five Thousand
Dollars ($5,000) or ten percent (10%) of the value of all the assets of the Company, as such values
are reflected on the most recent balance sheet of the Company; provided, that all payments
and prepayments of the Obligations shall be permitted.

     6.4 Change Capital Structure. Increase or decrease the kind, class or number of its
authorized shares of stock, or vary or alter the preferences, limitations, designations or relative
rights of any class or type of stock; or issue, grant or sell, or agree to issue, grant or sell to
any Person any stock or securities, or options, warrants or other rights to acquire or that are
convertible into stock or other securities of the Company, except (a) options and Common Stock
issuable upon the conversion thereof pursuant to the Company’s Incentive Stock Option and
Nonqualified Stock Option Plan set forth on Schedule 4.3(b) and (b) to the Lender pursuant
to this Agreement and the other Loan Documents pursuant to a Participation Financing;
provided that the Company shall give the Lender the requisite notices set forth in
Sections 8.1 and 8.2.

     6.5 Shareholder-Employees’ Salaries. Increase the annual salaries of any
shareholder-employee of the Company in excess of the amount set forth on Schedule 6.5.

     6.6 Amend, Violate Charter, Etc. Violate or breach any of the provisions of its
Articles of Incorporation or Bylaws, or amend same, except as necessary to comply with the terms of
this Agreement.

     6.7 Compliance With Securities Laws. Directly or indirectly, sell any shares or other
securities of the Company, or otherwise approach or negotiate with any person or entity with
respect to any such transaction, except in compliance with applicable federal and state securities
laws, including without limitation the registration requirements of the Securities Act.

     6.8 Dealings With Affiliates. Enter into any agreement in which the Company or any
Affiliate of the Company has a material beneficial interest, unless such agreement has been
approved by the Lender.

     6.9 Management. Allow any management personnel to continue their employment with the
Company if they organize or become engaged in any business activity that is in competition with the
business of the Company. Except as approved by the Lender, the Company shall not make any change
in its officers or present management or make any significant change in its business.

- 28 -

 

     6.10 Pension and Profit-Sharing Plan or Arrangements. Without the approval of the
Lender, establish any employee pension benefit plan, or other pension or profit-sharing plan or
arrangement, whereby any part of the profits or earnings of the Company are shared with any person,
firm or corporation.

     6.11 Permitted Indebtedness. Create, incur, assume or permit to exist any
Indebtedness or Liability, or any guarantee with respect to any such Indebtedness or Liability,
except:

          (a) current trade payables;

          (b) rentals under leases for terms of three years or less of real or personal property leased
by the Company in the ordinary course of business not exceeding, in the aggregate, Ten Thousand
Dollars ($10,000) due in any fiscal year of the Company;

          (c) wages or other compensation due to its employees and agents for services actually
performed;

          (d) liabilities for customer deposits in reasonable amounts obtained in the ordinary course of
business; and

          (e) liabilities for taxes not yet due.

     6.12 Liens. Create, assume or suffer to exist any Lien other than Permitted Liens.

     6.13 Expenditures. Make or incur any expenditures (operating or capital expenditure)
or incur lease obligations for fixed assets, in excess of the amounts approved by the Lender in the
budget previously submitted to the Lender.

     6.14 Changes in Business. Enter into any business that is substantially different
from the business currently conducted by the Company.

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES THEREFOR

     7.1 Events of Default. Each of the following events, acts, occurrences or conditions
shall constitute an Event of Default under this Agreement, regardless of whether such event, act,
occurrence or condition is voluntary or involuntary or results from the operation of law or
pursuant to or as a result of compliance by any Person with any Requirement of Law or Government
Authority:

          (a) The Company shall fail to make payments when due under the Revolving Loans or other
Obligations as required by this Agreement or the other Loan Documents or the Lender does not have a
perfected first priority security interest in the Collateral.

- 29 -

 

          (b) The Company shall fail to perform or observe any other agreement, covenant or obligation
arising under this Agreement or the other Loan Documents and such nonperformance or nonobservance
shall continue for a period of greater than thirty (30) days.

          (c) Any representation or warranty made by the Company herein, or in any statement or
certificate furnished by the Company in connection with the Loan Documents, proves untrue in any
material respect as of the date of the issuance or making thereof.

          (d) The Company shall default in the payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) of any amount owing in respect of any indebtedness
in the aggregate principal amount of Five Thousand Dollars ($5,000) or more, or shall default in
the performance or observance of any obligation or condition with respect to any such indebtedness
or any other event shall occur or condition exist, if the effect of such default, event or
condition is to accelerate the maturity of any such indebtedness or to permit (without regard to
any required notice or lapse of time) the holder or holders thereof, or any trustee or agent for
such holders, to accelerate the maturity of any such indebtedness, or any such indebtedness shall
become or be declared to be due and payable prior to its stated maturity other than as a result of
a regularly scheduled payment.

          (e) (i) The Company shall commence a voluntary case concerning itself under the Bankruptcy
Code; (ii) an involuntary case is commenced against the Company and the petition is not
controverted within ten (10) days, or is not dismissed within thirty (30) days, after commencement
of the case; (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Company, or the Company commences any
other proceedings under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company, or there is commenced against the
Company any such proceeding which remains undismissed for a period of sixty (60) days; (iv) any
order of relief or other order approving any such case or proceeding is entered; (v) the Company is
adjudicated insolvent or bankrupt; (vi) the Company suffers any appointment of any custodian or the
like for it or any substantial part of its property to continue undischarged or unstayed for a
period of thirty (30) days; (vii) the Company makes a general assignment for the benefit of
creditors; (viii) the Company shall fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; (ix) the Company shall call a meeting of
its creditors with a view to arranging a composition or adjustment of its debts; (x) the Company
shall by any act or failure to act consent to, approve of or acquiesce in any of the foregoing;
(xi) any corporate action is taken by the Company for the purpose of effecting any of the
foregoing.

          (f) Any judgment, writ or warrant of attachment or of any similar post-judgment process in an
amount in excess of Five Thousand Dollars ($5,000) shall be entered or filed against the Company or
against any of its properties or assets and remain unpaid, unvacated, unbonded or unstayed for a
period of sixty (60) days.

          (g) The death of either of the Principals.

- 30 -

 

          (h) Either of the Principal’s full-time (in the case of Paul J. Reckwerdt) and part-time
(one-half day per week in the case of Dr. Thomas Rockwell Mackie) effort on the development of the
Company shall cease for any reason; provided, that Dr. Thomas Rockwell Mackie shall be
permitted to retain his existing faculty position at the University of Wisconsin-Madison.

     7.2 Notice to Lender. Upon the occurrence of any condition, event or act described in
Section 7.1, the Company shall give written notice thereof to the Lender within five (5)
Business Days of receiving knowledge of such condition, event or act.

     7.3 Remedies. Upon the occurrence of any Event of Default, the Lender may, at its
option and upon written notice to the Company, declare the Revolving Loans due and payable.

     7.4 Expenses. The Company shall pay to the Lender all reasonable costs and expenses,
including without limitation the fees and expenses of counsel, incurred in connection with any
Event of Default or the enforcement by the Lender of any of its rights or remedies with respect
thereto.

ARTICLE VIII

CONVERSION OF REVOLVING LOANS

     8.1 Mandatory Conversion. Upon the closing of a transaction by the Maturity Date in
which (a) the Company receives at least than $2,000,000 cash from one or more Institutional
Investors or (b) the Company receives at least $3,000,000 in cash or cash and equipment (of which
at least $1,000,000 shall be in cash) from a strategic partner within the Company’s
industry (the earlier of such transactions shall be the “Mandatory Conversion”), the
Revolving Loans shall automatically be converted into Preferred Shares at the same terms as given
to the Institutional Investor, or in the case of the strategic partner at a price equal to $221.42
per share. The Company shall give the Lender written notice of any transaction that would result
in a Mandatory Conversion at least thirty (30) days prior to the closing of such transaction.

     8.2 Optional Conversion/Participation Rights. At any time until the Mandatory
Conversion or the Maturity Date, whichever occurs first, the Lender has the right, in its sole
discretion, of (a) purchasing Preferred Shares at $221.42 per share, up to a maximum amount equal
to the sum of (i) the outstanding Revolving Loans (including all interest accrued thereon
plus (ii) $750,000 (such sum is the “Participation Amount”) on the terms and
conditions set forth in the Term Sheet or (b) investing up to the Participation Amount in the
Company at the same price and on the same terms as other participants in any equity financing of
the Company (the “Participation Right”). At least thirty (30) days prior to the closing of
any transaction that would result in the Company receiving a Participation Right (the
“Participation Financing”), the Company shall notify (the “Participation Notice”)
the Lender of its right to participate in the Participation Financing. The Lender may elect to
exercise its Participation Right by providing the Company with written notice of its intent to
participate in the Participation Financing within

- 31 -

 

twenty (20) days after receipt of the
Participation Notice. If the Holder elects to invest less than the Participation Amount in any
Participation Financing, the Holder shall have the right to invest in future Participation
Financings so long as the total amount invested by the Lender under all Participation Financings
does not exceed the Participation Amount.

     8.3 Other Option Conversion Rights. In the event that no Person (other than the
Lender and the Company’s strategic partners) has made an equity investment in the Company in an
amount of at least $1,000,000 on or before May 31, 1999, the Lender shall have the right, in its
sole discretion, to purchase up to 14,452 Preferred Shares (less the number of Preferred Shares
received by the Lender pursuant to Sections 8.1 and 8.2 of this Agreement) at
$221.42 per share on the terms and conditions set forth in the Term Sheet. Options with respect to
25% of the Preferred Shares under this Section 8.3 shall expire on each of June 30, 1999,
December 31, 1999, June 30, 2000 and December 31, 2000.

     8.4 Rights to Receive Common Shares.

          (a) Upon the receipt by the Lender of Preferred Shares pursuant to Sections 8.1,
8.2 or 8.3 (collectively, the “Conversion Shares”) the Lender shall have a
right (individually, an “Right”, and collectively, the “Rights”) to receive one
Common Share, at no cost, for each 2.86 Conversion Shares received by the Lender. The Rights shall
be exercisable by the Lender (or the Principals) upon the Triggering Event (as defined below), with
respect to each Conversion Share. The “Triggering Event”, with respect to each Conversion
Share, shall be the first to occur of the following: (i) a sale of all or substantially all of the
Company’s capital stock (including all of the Conversion Shares); (ii) a sale of all or
substantially all of the Company’s assets in which the Company received cash and/or securities
registered under the Securities Act and promptly distributes such proceeds to its shareholders; or
(iii) a registered public offering of the Conversion Shares.

          (b) Upon the Triggering Event, either the Lender or the Principals will be entitled to
exercise the Rights received pursuant to Section 8.4(a) in accordance with Sections
8.4(b) — (d). The determination of whether the Lender or the Principals shall be entitled to
exercise the Rights is to be determined as follows: (a) one-half of the Rights shall be determined
by the value per Conversion Share received by the Lender upon a Triggering Event (the “Share
Price Rights”) in accordance with Section 8.4(c); and (b) one-half of the Rights shall
be determined by the time between the receipt of the Conversion Shares and the Triggering Event
(the “Exit Period Rights”) in accordance with Section 8.4(d).

          (c) The Principals shall be entitled to exercise all of the Share Price Rights if the value
received by the Lender upon a Triggering Event (the “Conversion Gain”) is equal to or
greater than eight times the amount paid by the Lender for the Conversion Shares. The Lender shall
be entitled to exercise all of the Share Price Rights if the Conversion Gain is equal to or less
than six times the amount paid by the Lender for the Conversion Shares. If the Conversion Gain is
between six times and eight times the amount paid by the Lender for the Conversion Shares, the
Principals shall be entitled to exercise that number of Share Price Rights as determined by the

- 32 -

 

following formula: [(((Conversion Gain / price per share paid by the Lender for the Conversion
Shares) — 6) / 2) * Total number of Share Price Rights], with the Lender being entitled to exercise
the remaining Share Price Rights.

          (d) The Principals shall be entitled to exercise all of the Exit Period Rights if the time
between the Triggering Event and the date of receipt of the Conversion Shares (the “Exit
Period”) is equal to or less than five years. The Lender shall be entitled to exercise all of
the Exit Period Rights if the Exit Period is equal to or greater than seven years. If the Exit
Period is between five and seven years, the Principals shall be entitled to exercise that number of
Exit Period Rights as determined by the following formula: (((Exit Period — 5) / 2) * Total number
of Exit Period Rights), with the Lender being entitled to exercise the remaining Exit Period
Rights.

          (e) Notwithstanding anything else in this Agreement to the contrary, this Section 8.4
shall survive the Maturity Date and the payments of all Obligations hereunder.

ARTICLE IX

ADDITIONAL PROVISIONS

     9.1 Expenses.

          (a) The Company agrees to pay promptly all expenses incurred by it in connection with the
performance of its obligations hereunder. On the Closing Date, the Company shall pay all of the
Lender’s legal fees and expenses, accounting fees and other expenses incurred in connection with
this Agreement and the transactions contemplated hereby and any post-closing matters that may be
necessary.

          (b) The Company shall pay all governmental charges, stamp, issuance or other taxes that are
imposed, rated or determined at any time to be payable under any existing or hereafter adopted
federal or other laws in connection with the existence, execution, issuance or
delivery of the Transaction Documents, the making of the Revolving Loans or any of the
Underlying Shares to be issued to the Lender by the Company.

          (c) In the event of any Default or upon the occurrence of an Event of Default, the Lender,
without notice to the Company, and at the Lender’s sole option (but without any obligation) may
take such steps as in the Lender’s judgment are necessary or appropriate to correct or remedy any
such Default or Event of Default in whole or in part, and all reasonable costs and expenses
incurred by the Lender in taking such steps (including reasonable attorneys’ fees and any other
sums paid or payable by the Lender to third parties) shall, upon written demand by the Lender, be
paid by the Company, with interest thereon (payable on the first day of each calendar month) from
the time of incurrence thereof by the Lender at the Default Rate (or the maximum rate otherwise
allowed by law) until paid. The commencement of any such action shall not be deemed to be a waiver
by the Lender of any remedies to which it is otherwise entitled.

- 33 -

 

          (d) The Company shall pay promptly all out-of-pocket expenses reasonably incurred by the
Lender (including the reasonable fees and disbursements of counsel) in connection with any consent,
waiver, modification or amendment relating to this Agreement.

     9.2 Successors and Assigns. This Agreement shall be binding upon, and inure to the
benefit of, the Lender and the Company and their respective successors and assigns, and, except as
otherwise expressly provided in any particular provision hereof, any subsequent holder of the
Revolving Loans or Underlying Shares.

     9.3 Notices. All communication or notices required or permitted by this Agreement
shall be in writing and shall be deemed to have been given or made when delivered in hand,
deposited in the mail, or sent by facsimile. Communications or notices shall be delivered
personally or by certified or registered mail, return receipt requested and postage prepaid, or by
facsimile with evidence of transmission, and addressed as follows, unless and until either of such
parties notifies the other in accordance with this section of a change of address:

	 	 	 	 	 	 	 
	 

	 	(a)
	 	if to the Company:
	 	TomoTherapy Incorporated
	 

	 	 	 	 	 	P.O. Box 8024
	 

	 	 	 	 	 	Madison, WI 53708-8024
	 

	 	 	 	 	 	(608) 839-8009
	 

	 	 	 	 	 	(608) 839-8009 (fax)
	 
	 	 	 	 	 	 
	 

	 	 	 	copy to:
	 	Michael E. Skindrud, Esq.
	 

	 	 	 	 	 	LaFollette Sinykin, LLP
	 

	 	 	 	 	 	One East Main Street, Suite 500
	 

	 	 	 	 	 	Madison, WI 53703
	 

	 	 	 	 	 	(608) 257-3911
	 

	 	 	 	 	 	(608) 257-0609 (fax)
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	if to the Lender:
	 	Venture Investors Early Stage Fund
	 

	 	 	 	 	 	               II Limited Partnership
	 

	 	 	 	 	 	c/o Venture Investors Management LLC
	 

	 	 	 	 	 	565 Science Drive (until March 31, 1999)
	 

	 	 	 	 	 	505 South Rosa Drive (after March 31, 1999)
	 

	 	 	 	 	 	Madison, WI 53711
	 

	 	 	 	 	 	(608) 233-3070
	 

	 	 	 	 	 	(608) 238-5120 (fax)
	 
	 	 	 	 	 	 
	 

	 	 	 	with a copy to:
	 	Tod B. Linstroth, Esq.
	 

	 	 	 	 	 	Michael Best & Friedrich LLP
	 

	 	 	 	 	 	One South Pinckney Street, Suite 700
	 

	 	 	 	 	 	Madison, WI 53703
	 

	 	 	 	 	 	(608) 257-3501
	 

	 	 	 	 	 	(608) 283-2275 (fax)

- 34 -

 

     9.4 No Waiver; Remedies Cumulative. No delay on the part of the Lender or any other
holder of the Revolving Loans or Underlying Shares in exercising any right, power or privilege
under this Agreement or the other Loan Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder or thereunder preclude other
or further exercise thereof, or the exercise of any other right, power or privilege. The rights
and remedies provided in this Agreement or the other Loan Documents are cumulative and are in
addition to all rights or remedies which the Lender and such other holder otherwise may have in law
or in equity or by statute or otherwise. Without limiting the generality of the foregoing, nothing
in this Agreement or the other Loan Documents shall be deemed to preclude or be in lieu of any
right or remedy that either Lender or other holders may have in law or in equity or by statute or
otherwise against the Company or any other person based upon any fraud (whether or not the matter
to which the fraud related also constitutes an Event of Default hereunder).

     9.5 Amendments and Waivers. Any change or amendment to this Agreement or any waiver
hereunder shall be effective only if in writing and signed by the party or parties against whom
such change, amendment or waiver is sought to be enforced.

     9.6 Severability. If any provision of this Agreement is held for any reason to be
unenforceable, the remainder of this Agreement shall remain in full force and effect.

     9.7 Headings. The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or interpretation of this Agreement.

     9.8 Governing Law. This Agreement is made in the State of Wisconsin and shall be
governed by and construed in accordance with the internal laws of the State of Wisconsin, without
reference to principles of conflicts of law.

     9.9 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one and the same
instrument.

     9.10 Further Assurances. The Company agrees, and shall cause its officers, to execute
any other documents or take any other actions reasonably requested by the Lender to fulfill the
transactions described in and contemplated by this Agreement.

     9.11 WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT
OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

[signature page follows]

- 35 -

 

     IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as of the date first
written above.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	VENTURE INVESTORS EARLY STAGE FUND II LIMITED PARTNERSHIP	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Venture Investors Limited Partnership	 	 
	 	 	Its:	 	General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Venture Investors Management LLC	 	 
	 	 	Its:	 	General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Roger H. Ganser	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Roger H. Ganser	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Managing Partner	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	TOMOTHERAPY INCORPORATED	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Thomas Rockwell Mackie	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	Thomas Rockwell Mackie	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	President	 	 
	 

	 	 	 	 	 	 

- 36 -

 

EXHIBIT A

FORM OF BORROWING REQUEST

- 37 -

 

EXHIBIT B

FORM OF COLLATERAL ASSIGNMENT

- 38 -

 

EXHIBIT C

FORM OF GUARANTY

- 39 -

 

EXHIBIT D

FORM OF NONDISCLOSURE, NONCOMPETITION

AND ASSIGNMENT AGREEMENT

- 40 -

 

EXHIBIT E

FORM OF REVOLVING NOTE

- 41 -

 

EXHIBIT F

FORM OF SECURITY AGREEMENT

- 42 -

 

EXHIBIT G

TERM SHEET FOR INVESTMENT IN PREFERRED SHARES

- 43 -

 

EXHIBIT H

FORM OF WARRANT

- 44 -exv10w3

 

EXHIBIT 10.3

NOTE AND WARRANT PURCHASE AGREEMENT

DATED AS OF MAY 1, 2003

BY AND AMONG

TOMOTHERAPY INCORPORATED,

THOMAS ROCKWELL MACKIE, PAUL J. RECKWERDT,

AND

THE INVESTORS NAMED HEREIN

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE I DEFINITIONS AND TERMS	 	 	1	 
	 	1.1	 	 	Definitions
	 	 	1	 
	 	1.2	 	 	Interpretation
	 	 	9	 
	 	1.3	 	 	Other Terms
	 	 	9	 
	ARTICLE II ISSUE OF NOTES	 	 	10	 
	 	2.1	 	 	Loans
	 	 	10	 
	 	2.2	 	 	Note Conversion
	 	 	11	 
	 	2.3	 	 	Warrants
	 	 	12	 
	 	2.4	 	 	Closing Date
	 	 	13	 
	ARTICLE III CONDITIONS TO CLOSING	 	 	13	 
	 	3.1	 	 	Opinion of Counsel
	 	 	13	 
	 	3.2	 	 	Company Officers
	 	 	13	 
	 	3.3	 	 	Corporate Resolutions
	 	 	14	 
	 	3.4	 	 	Proceedings and Documents
	 	 	14	 
	 	3.5	 	 	Organization, Good Standing and Authority
	 	 	14	 
	 	3.6	 	 	Securities Law Matters; Investment Representations
	 	 	14	 
	 	3.7	 	 	No Litigation
	 	 	14	 
	 	3.8	 	 	Consents
	 	 	14	 
	 	3.9	 	 	Lien Search
	 	 	15	 
	 	3.10	 	 	No Material Adverse Effect
	 	 	15	 
	 	3.11	 	 	Representations and Warranties
	 	 	15	 
	 	3.12	 	 	No Default
	 	 	15	 
	 	3.13	 	 	Use of Proceeds
	 	 	15	 
	 	3.14	 	 	Conditions Precedent for Secondary Loans
	 	 	15	 
	 	3.15	 	 	SBIC Compliance Agreement
	 	 	16	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES	 	 	16	 
	 	4.1	 	 	Existence and Rights
	 	 	16	 
	 	4.2	 	 	Agreement Authorized
	 	 	17	 
	 	4.3	 	 	Capitalization
	 	 	17	 

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	 	 	 	 	 	 	Page
	 	4.4	 	 	Subsidiaries, Other Investments
	 	 	17	 
	 	4.5	 	 	Litigation
	 	 	18	 
	 	4.6	 	 	Financial Statements
	 	 	18	 
	 	4.7	 	 	Title to Properties
	 	 	18	 
	 	4.8	 	 	Intellectual Property
	 	 	18	 
	 	4.9	 	 	No Undisclosed Liabilities
	 	 	19	 
	 	4.10	 	 	Contracts
	 	 	19	 
	 	4.11	 	 	Compliance with Other Instruments, Laws, Etc
	 	 	20	 
	 	4.12	 	 	Securities Laws
	 	 	20	 
	 	4.13	 	 	Use of Proceeds
	 	 	20	 
	 	4.14	 	 	Brokers
	 	 	20	 
	 	4.15	 	 	Taxes
	 	 	20	 
	 	4.16	 	 	Insurance
	 	 	20	 
	 	4.17	 	 	Federal Reserve Regulations
	 	 	21	 
	 	4.18	 	 	Investment Company Act: Public Utility Holding Company Act
	 	 	21	 
	 	4.19	 	 	Nondisclosure, Noncompetition and Inventions Agreements; Employees
	 	 	21	 
	 	4.20	 	 	Small Business Matters.
	 	 	21	 
	 	4.21	 	 	Amendments to the Articles of Incorporation and Bylaws
	 	 	22	 
	 	4.22	 	 	No Default
	 	 	22	 
	 	4.23	 	 	Survival of Representations and Warranties
	 	 	22	 
	ARTICLE V AFFIRMATIVE COVENANTS	 	 	22	 
	 	5.1	 	 	Taxes
	 	 	23	 
	 	5.2	 	 	Maintain Corporate Existence and Rights
	 	 	23	 
	 	5.3	 	 	Insurance
	 	 	23	 
	 	5.4	 	 	Financial Reports
	 	 	23	 
	 	5.5	 	 	Inspection and Samples
	 	 	24	 
	 	5.6	 	 	Maintain Properties
	 	 	25	 
	 	5.7	 	 	Disclosures
	 	 	25	 
	 	5.8	 	 	Conduct of Businesses
	 	 	26	 

-ii-

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	5.9	 	 	Tax Returns
	 	 	26	 
	 	5.10	 	 	Notice to Shareholders; Attendance at Meetings
	 	 	26	 
	 	5.11	 	 	Compliance with Instruments, Laws, Etc
	 	 	26	 
	 	5.12	 	 	Payment of Certain Expenses
	 	 	26	 
	 	5.13	 	 	Section 1202 Capital Gains Treatment
	 	 	26	 
	 	5.14	 	 	Information Rights
	 	 	26	 
	 	5.15	 	 	Right to Purchase Additional Shares
	 	 	27	 
	 	5.16	 	 	Stock Option Plans
	 	 	27	 
	 	5.17	 	 	Projections
	 	 	27	 
	 	5.18	 	 	Amendment of Articles of Incorporation and Bylaws
	 	 	28	 
	ARTICLE VI NEGATIVE COVENANTS	 	 	28	 
	 	6.1	 	 	Restricted Payments
	 	 	28	 
	 	6.2	 	 	Investments, Loans and Advances
	 	 	28	 
	 	6.3	 	 	Acquisition or Sale of Business; Merger or Consolidation
	 	 	29	 
	 	6.4	 	 	Change Capital Structure
	 	 	29	 
	 	6.5	 	 	Shareholder-Employees’ Salaries
	 	 	29	 
	 	6.6	 	 	Amend, Violate Charter, Etc
	 	 	30	 
	 	6.7	 	 	Compliance With Securities Laws
	 	 	30	 
	 	6.8	 	 	Dealings With Affiliates
	 	 	30	 
	 	6.9	 	 	Management
	 	 	30	 
	 	6.10	 	 	Pension and Profit-Sharing Plan or Arrangements
	 	 	30	 
	 	6.11	 	 	Permitted Indebtedness
	 	 	30	 
	 	6.12	 	 	Liens
	 	 	30	 
	 	6.13	 	 	Expenditures
	 	 	31	 
	 	6.14	 	 	Changes in Business.
	 	 	31	 
	 	6.15	 	 	Registration Rights.
	 	 	31	 
	ARTICLE VII EVENTS OF DEFAULT AND REMEDIES THEREFOR	 	 	31	 
	 	7.1	 	 	Events of Default
	 	 	31	 
	 	7.2	 	 	Notice to Investors
	 	 	33	 

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	 	 	 	 	 	 	Page
	 	7.3	 	 	Remedies
	 	 	33	 
	 	7.4	 	 	Appointment of Advisors
	 	 	33	 
	 	7.5	 	 	Expenses
	 	 	33	 
	ARTICLE VIII TRANSFERABILITY	 	 	34	 
	 	8.1	 	 	Transferability
	 	 	34	 
	 	8.2	 	 	Representations and Warranties of the Investors
	 	 	34	 
	 	8.3	 	 	Restrictive Legends
	 	 	35	 
	 	8.4	 	 	Restrictions on Transfer
	 	 	35	 
	ARTICLE IX REGISTRATION RIGHTS	 	 	36	 
	 	9.1	 	 	Demand Registration
	 	 	36	 
	 	9.2	 	 	Piggyback Registration
	 	 	36	 
	 	9.3	 	 	Registration Procedures
	 	 	37	 
	 	9.4	 	 	Indemnification of the Rightholders
	 	 	40	 
	 	9.5	 	 	Indemnification of the Company
	 	 	42	 
	 	9.6	 	 	Rule 144 and Rule 144A
	 	 	42	 
	 	9.7	 	 	Transferability
	 	 	42	 
	 	9.8	 	 	No Further Grants of Registration Rights
	 	 	43	 
	ARTICLE X PUT OPTION; CO-SALE RIGHTS	 	 	43	 
	 	10.1	 	 	Grant of Put
	 	 	43	 
	 	10.2	 	 	Exercise of Put
	 	 	43	 
	 	10.3	 	 	Reasonable Actions
	 	 	44	 
	 	10.4	 	 	Adjustment of Purchase Price
	 	 	44	 
	 	10.5	 	 	Co-Sale Rights
	 	 	44	 
	ARTICLE XI INDEMNIFICATION	 	 	45	 
	 	11.1	 	 	Indemnification
	 	 	45	 
	 	11.2	 	 	Taxes
	 	 	46	 
	ARTICLE XII ADDITIONAL PROVISIONS	 	 	46	 
	 	12.1	 	 	Expenses
	 	 	46	 
	 	12.2	 	 	Successors and Assigns
	 	 	46	 

-iv-

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	12.3	 	 	Notices
	 	 	46	 
	 	12.4	 	 	No Waiver; Remedies Cumulative
	 	 	47	 
	 	12.5	 	 	Amendments and Waivers
	 	 	47	 
	 	12.6	 	 	Severability
	 	 	47	 
	 	12.7	 	 	Headings
	 	 	47	 
	 	12.8	 	 	Governing Law
	 	 	47	 
	 	12.9	 	 	Counterparts
	 	 	48	 
	 	12.10	 	 	Further Assurances
	 	 	48	 
	 	12.11	 	 	Waiver of Jury Trial
	 	 	48	 

APPENDIX

	 	 	 
	Appendix I

	 	List of Investors

EXHIBITS

	 	 	 
	Exhibit A

	 	Form of Borrowing Request
	Exhibit B

	 	Form of Collateral Assignment
	Exhibit C

	 	Form of Security Agreement
	Exhibit D

	 	Form of Note
	Exhibit E

	 	Form of Warrant
	Exhibit F

	 	Form of Opinion of Counsel

SCHEDULES

	 	 	 
	Schedule 1.1

	 	Permitted Transferees
	Schedule 2.1

	 	Loan Commitments
	Schedule 3.9

	 	Liens
	Schedule 4.3(a)

	 	Capital Stock
	Schedule 4.3(b)

	 	Outstanding Subscriptions, Options, Warrants and Other Rights,
Restrictions and Agreements
	Schedule 4.6

	 	Financial Statements
	Schedule 4.8

	 	Intellectual Property
	Schedule 4.9

	 	Undisclosed Liabilities
	Schedule 4.10

	 	Contracts
	Schedule 4.13

	 	Use of Proceeds

-v-

 

NOTE AND WARRANT PURCHASE AGREEMENT

     This NOTE AND WARRANT PURCHASE AGREEMENT, dated as of May 1, 2003, is by and among the
Investors listed in Appendix I (the “Investors”), TomoTherapy Incorporated, a
Wisconsin corporation (the “Company”), Dr. Thomas Rockwell Mackie (“Mackie”) and
Paul J. Reckwerdt (“Reckwerdt”; and together with Mackie, the “Principals”).

RECITALS

     WHEREAS, the Investors desire to make an investment in the Company, and the Company desires
such investment, upon the terms and subject to the conditions set forth herein, in the aggregate
amount of up to the amount specified in Schedule 2.1, which may be augmented from time to
time to time upon the consent of the Required Investors with the addition of new Investors, but
such amount shall not exceed $4,000,000.

     NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND TERMS

     1.1 Definitions. As used in this Agreement, the following terms have the following
meanings:

     “Advantage” shall mean Advantage Capital Wisconsin Partners I, Limited Partnership, a
Wisconsin limited partnership.

     “Affiliate” of a Person shall mean any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person. A Person shall be
deemed to control another Person for the purposes of this definition if the controlling Person
directly or indirectly, either individually or together with (in the case of an individual) his or
her spouse, lineal descendants and ascendants and brothers or sisters by blood or adoption or
spouses of such descendants, ascendants, brothers and sisters, owns ten percent or more of any
class of voting securities of the controlled Person or possesses, directly or indirectly, the power
to direct, or cause the direction of, the management or policies of the second Person, whether
through the ownership of voting securities, common directors, trustees or officers, by contract or
otherwise.

     “Agreement” shall mean this Note and Warrant Purchase Agreement, as amended, restated,
supplemented or otherwise modified from time to time.

 

 

     “Automatic Conversion” shall have the meaning assigned in Section 2.2(a).

     “Avalon” shall mean Avalon Technology, LLC, a Michigan limited liability company.

     “Borrowing Request” shall mean the borrowing request for Loans, substantially in the
form of Exhibit A hereto.

     “Business Day” shall mean a day other than a Saturday or Sunday on which banks are
open for business in Madison, Wisconsin.

     “Capital Stock” shall have the meaning assigned in Section 4.3(a).

     “Capitalized Lease Obligations” shall mean, for any period, the aggregate discounted
present value of the obligations of the Company as lessee under any lease of Property which would
properly be classified as a capitalized lease in the Financial Statements of the Company.

     “CAPCO” shall mean a “certified capital company” as that term is defined under Section
560.30(2) of the Wisconsin Statutes, as may be amended from time to time (including a successor
statute thereto).

     “Cause” shall have the meaning assigned in Section 7.1(i).

     “Claim” shall have the meaning assigned in Section 11.1.

     “Closing Date” shall have the meaning assigned in Section 2.4.

     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

     “Collateral” shall mean all of Company’s Property granted to the Investors as
collateral under the Loan Documents.

     “Collateral Assignment” shall mean the collateral assignment of contract rights of
even date herewith, from the Company to the Investors, substantially in the form of Exhibit
B hereto, pursuant to which the Company assigns its rights under the WARF License Agreement, as
amended, supplemented or modified from time to time.

     “Common Shares” shall mean shares of the Company’s common stock, par value $0.01 per
share.

     “Company” shall have the meaning assigned in the first paragraph to this Agreement.

     “Consent to Conversion” shall have the meaning assigned in Section 2.2(a).

     “Conversion Price” shall have the meaning assigned in Section 2.2(a).

-2-

 

     “Default” shall mean an event which with the giving of notice or the passage of time
or both would constitute an Event of Default.

     “Demand Registration” shall have the meaning assigned in Section 9.1(a).

     “Employee Plan” shall mean any savings, profit sharing, or retirement plan or any
deferred compensation contract or other plan maintained for employees of the Company and covered by
Title IV of ERISA, including, without limitation, any “multiemployer plan” as defined in ERISA.

     “The Endeavors Group” shall mean The Endeavors Group, LLC, a Wisconsin limited
liability company.

     “Environmental Law” shall mean any local, state or federal law or other statute, law,
ordinance, rule, code, regulation, decree or order governing, regulating or imposing liability or
standards of conduct concerning the use, treatment, generation, storage, disposal or other handling
or release of any hazardous substance, including without limitation, any pollutant, contaminant,
waste or toxic or hazardous chemicals, wastes or substances, including, without limitation,
asbestos, urea formaldehyde insulation, petroleum, PCB’s, air pollutants, water pollutants, and
other substances defined as hazardous substances or toxic substances in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9061 et
seq., Hazardous Materials Transportation Act, 49 U.S.C. Section 1802, the Resource Conservation and
Recovery Act, 42 U.S.C. § 6901 et seq., the Toxic Substance Control Act of 1976, as amended, 15
U.S.C. § 2601 et seq., the Solid Waste Disposal Act, 42 U.S.C. § 3251 et seq., the Clean Air Act,
42 U.S.C. § 1857 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq, Chapter 144 of the
Wisconsin Statutes, or any other statute, rule, regulation or order of any Governmental Authority
having jurisdiction over the control of such wastes or substances, including without limitation the
United States Environmental Protection Agency, the United States Nuclear Regulatory Agency, the
State of Wisconsin and the Dane County Department of Health.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute, together with the regulations and published interpretations thereunder,
in each case as in effect from time to time.

     “Event of Default” shall have the meaning assigned in Section 7.1.

     “Exercise Price” shall mean the Automatic Conversion Price if Series D Preferred
Shares are issuable upon exercise of a Warrant, or the Optional Conversion Price if Series C
Preferred Shares are issuable upon exercise of a Warrant, each price as may be adjusted from time
to time pursuant to Section 3 of the Warrant.

     “Fair Market Value” shall have the meaning assigned in Section 10.2(d).

     “Financial Statements” shall mean, for any Person, the balance sheet, the statement of
income, the statement of cash flows, and the statement of shareholders’ equity, and all notes and
schedules thereto, prepared on a consolidated basis, in accordance with GAAP.

-3-

 

     “GAAP” shall mean those generally accepted accounting principles in the United States
of America consistently applied for all periods so as to properly reflect the financial condition,
results of operations, and cash flows of the Company.

     “Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any corporation or other
entity owned or controlled through stock or capital ownership or otherwise, by any of the
foregoing.

     “Indebtedness” shall mean all: (a) indebtedness for borrowed money; (b) indebtedness
for the deferred purchase price of property or services for which the Company is liable, primarily,
contingently or otherwise, as obligor, guarantor or otherwise; (c) any commitment by which the
Company assures a creditor against loss, including, without limitation, contingent reimbursement
obligations with respect to letters of credit; (d) obligations which are evidenced by notes,
acceptances or other instruments; (e) indebtedness and other obligations arising under acceptance
facilities and the face amount of all letters of credit issued for the account of the Company; (f)
indebtedness guarantied in any manner by the Company, including without limitation guaranties in
the form of an agreement to repurchase or reimburse; (g) Capitalized Lease Obligations, for which
obligations the Company is liable, primarily, contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations the Company assures a creditor against loss; (h) any
unfunded obligation of the Company to an Employee Plan; (i) all Liabilities secured by any Lien on
any Property owned by the Company whether or not the Company has assumed or otherwise become liable
for the payment thereof; and (j) indebtedness or other obligations arising under interest-rate swap
agreements and other interest-rate hedging arrangements.

     “Indemnitees” shall have the meaning assigned in Section 11.1.

     “Initial Closing Date” shall have the meaning assigned in Section 2.4.

     “Initial Loan” and “Initial Loans” shall have the meaning assigned in
Section 2.1(a).

     “Initial Note” and “Initial Notes” shall have the meaning assigned in
Section 2.1(a).

     “Intellectual Property” shall have the meaning assigned in Section 4.8.

     “Investors” shall have the meaning assigned in the first paragraph to this Agreement.
Appendix I may be augmented from time to time upon the consent of the Required Investors.

     “Knowledge” when referring to the Company, shall mean the actual knowledge of any of
the following persons: any of the Principals, Chief Executive Officer, President, Chief Financial
Officer, Director of Research, Director of Product Development, Director of Regulatory Affairs, and
Scientific Director.

     “Lead Investor” shall mean VI.

-4-

 

     “Liability” means any liability or obligation (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to be come due), including, without limitation, any
guaranties of Indebtedness, liabilities or other obligations.

     “Liens” shall mean any mortgage, pledge, lien, encumbrance, charge or other security
interest of any kind.

     “Loan” and “Loans” shall have the meaning assigned in Section 2.1(b).

     “Loan Documents” shall mean this Agreement, the Notes, the Security Agreement, the
Collateral Assignment, the Warrants, and the UCC Financing Statements.

     “Mackie” shall have the meaning assigned in the first paragraph to this Agreement.

     “Material Adverse Effect” shall mean (a) a Default, (b) a material adverse change in
the business, prospects or condition (financial or otherwise) of the Company or in any Property,
(c) the termination of the WARF License Agreement, (d) any material impairment of the right to
carry on the business as now or proposed to be conducted by the Company, or (e) any material
impairment of the ability of the Company to perform its obligations under this Agreement or the
transactions contemplated hereby.

     “Maturity Date” shall have the meaning assigned in Section 2.1(c).

     “Minimum Investors” shall mean those Investors who, individually or with their
Affiliates, have committed to invest at least $250,000 of the outstanding principal amount of all
Loans, or if the Loans have been converted, shall mean the Investor or Investors holding at least
$250,000 of the equivalent number of Underlying Shares.

     “NASD” shall have the meaning assigned in Section 9.3(a).

     “Nondisclosure, Noncompetition and Inventions Agreement” shall mean the Nondisclosure,
Noncompetition and Inventions Agreement between the Company and each of the Principals, and each of
the Company’s other employees.

     “Note” and “Notes” shall have the meaning assigned in Section 2.1(b).

     “Open Prairie Ventures” shall mean Open Prairie Ventures I, L.P., an Illinois limited
partnership.

     “Optional Conversion” shall have the meaning assigned in Section 2.2(b).

     “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.

-5-

 

     “Permitted Liens” shall mean: (a) Liens imposed by law and incurred in the ordinary
course of the Company’s business for Indebtedness not yet due to carriers, warehousemen, laborers,
or materialmen and the like; (b) Liens in respect of pledges or deposits under worker’s
compensation laws or similar legislation; (c) Liens for property taxes, assessments or governmental
charges not yet subject to penalties for nonpayment; (d) Liens created in connection with
Indebtedness incurred in compliance with Section 6.11(b); (e) Liens granted to the
Investors pursuant to the Loan Documents; and (f) Liens disclosed on Schedule 3.9.

     “Permitted Transferee” shall have the meaning assigned in Schedule 1.1.

     “Person” shall mean an individual, partnership, corporation, limited liability
company, firm, enterprise, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.

     “Preferred Shares” shall mean, collectively, the Series A Preferred Shares, the Series
B Preferred Shares, the Series C Preferred Shares, and the Series D Preferred Shares.

     “Principals” shall have the meaning assigned in the first paragraph to this Agreement.

     “Property” shall mean any interest of the Company of any kind in property or assets,
whether real, personal, mixed, tangible or intangible, wherever located, and whether now owned or
subsequently acquired or arising and in the products, proceeds, additions and accessions thereof or
thereto.

     “Purchase Amount” shall have the meaning assigned in Section 10.2(a).

     “Put” shall have the meaning assigned in Section 10.1.

     “Put Shares” shall have the meaning assigned in Section 10.1.

     “Qualified Public Offering” shall mean an offering of equity securities of the Company
pursuant to an effective registration statement filed with the SEC under the Securities Act by an
underwriter selected in accordance with Section 9.1 and pursuant to a firm underwriting
agreement which raises gross proceeds to the Company of not less than $20,000,000 and where the
price per share is not less than $26.5704, subject to adjustments for subdivisions, stock splits,
combinations, recapitalizations or similar transactions.

     “Qualified Series D Financing” shall have the meaning assigned in Section
2.2(a).

     “Reckwerdt” shall have the meaning assigned in the first paragraph to this Agreement.

     “Repayment Notice” shall mean a written notice by the Company to all the Investors
then holding Notes of the Company’s intent to repay the Notes, which notice provides (i) that the
Company desires to repay the outstanding principal amount of all the outstanding Notes, plus all

-6-

 

accrued but unpaid interest on such principal amounts, (ii) that the Company has adequate funds to
repay such amounts (or access to immediately available and adequate funds to repay such amounts),
(iii) the proposed time, date and place of repayment, which date shall be no earlier than the
Maturity Date and shall not be less than thirty (30) days following such written notice being given
to all the Investors then holding Notes, and (iv) that the principal and interest due under the
Notes may be converted at any time prior to the proposed repayment date in accordance with the
terms and conditions of the Notes and this Agreement.

     “Required Investors” shall mean the Investor or Investors holding at least
seventy-five percent (75%) of the outstanding principal amount of all Loans, or if the Loans have
been converted, shall mean the Investor or Investors holding at least seventy-five percent (75%) of
the Underlying Shares (assuming conversion of all of the Loans into Underlying Shares) held by all
of the Investors from time to time.

     “Restricted Payments” shall mean: (a) dividends or other distributions by the Company
based upon the stock of the Company (except dividends payable solely in stock of the Company); (b)
purchases, redemptions or other acquisitions, direct or indirect, by the Company, of stock of the
Company, whether now or hereafter outstanding; (c) any other distribution by the Company in respect
of stock of the Company, whether now or hereafter outstanding, either directly or indirectly,
whether in cash or property or otherwise; and (d) payment of management or other fees by the
Company to any Affiliate, either directly or indirectly, whether in cash or property or otherwise,
unless the payment of such fees are approved by the Required Investors.

     “Rightholders” shall have the meaning assigned in Section 9.1(a).

     “SEC” shall have the meaning assigned in Section 8.2(a).

     “Secondary Loan” and “Secondary Loans” shall have the meaning assigned in
Section 2.1(b).

     “Secondary Note” and “Secondary Notes” shall have the meaning assigned in
Section 2.1(b).

     “Securities Act” shall mean the Securities Act of 1933, as amended, and any successor
statute, together with the rules and regulations thereunder, in each case as in effect from time to
time.

     “Securities Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and any successor statute, together with the rules and regulations thereunder, in each case as in
effect from time to time.

     “Security Agreement” shall mean the general business security agreement of even date
herewith, between the Company and the Investors, substantially in the form of Exhibit C
hereto, pursuant to which the Company grants a Lien to the Investors in substantially all of the
Company’s Property, as amended, restated, supplemented or otherwise modified from time to time.

-7-

 

     “Series A Investment Agreement” shall mean the Investment Agreement dated as of May
19, 1999, by and among Venture Investors Early Stage Fund II Limited Partnership, Avalon, the
Company and the Principals as amended on the date hereof and as it may be further amended,
restated, supplemented or otherwise modified from time to time.

     “Series A Preferred Shares” shall mean shares of the Company’s Series A Preferred
Stock, par value $1.00 per share.

     “Series B Investment Agreement” shall mean the Investment Agreement dated as of March
16, 2001, by and among the Company, the Principals, and the investors named therein, as amended on
the date hereof and as it may be further amended, restated, supplemented or otherwise modified from
time to time.

     “Series B Preferred Shares” shall mean shares of the Company’s Series B Preferred
Stock, par value $1.00 per share.

     “Series C Conversation Price” shall have the meaning assigned in Section
2.2(a).

     “Series C Investment Agreement” shall mean the Investment Agreement, dated as of
August 28, 2002, by and among the Company, the Principals, and the investors named therein, as
amended on the date hereof and as it may be further amended, restated, supplemented or otherwise
modified from time to time.

     “Series C Preferred Shares” shall mean shares of the Company’s Series C Preferred
Stock, par value $1.00 per share.

     “Series D Conversation Price” shall have the meaning assigned in Section
2.2(a).

     “Series D Preferred Shares” shall have the meaning assigned in Section 2.2(a).

     “Shareholders Agreement” shall mean the Shareholders Agreement, dated as of March 16,
2001, among the Company, the Principals, the investors under the Series A Investment Agreement, the
investors under the Series B Investment Agreement, and the investors under the Series C Investment
Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to
time.

     “Subject Shares” shall have the meaning assigned in Section 9.3(a).

     “Subsidiary” shall mean, as to any Person, a corporation or other Person of which
equity interests having voting power (other than equity interests having such power only by reason
of the happening of a contingency that has not occurred) sufficient to elect a majority of the
board of directors or other managers of such corporation or other Person are at the time owned, or
the management of which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.

-8-

 

     “UCC Financing Statements” shall mean that certain UCC-1 financing statement and that
certain UCC-3 financing statement with the Company, as debtor, and the Investors, as secured party,
describing the Collateral.

     “Underlying Shares” shall mean the Preferred Shares issuable upon conversion of the
Notes and exercise of the Warrants and the Common Shares issuable upon conversion of the Preferred
Shares.

     “VI” shall mean Venture Investors Early Stage Fund III Limited Partnership, a
Wisconsin limited partnership.

     “WARF License Agreement” shall mean that certain License Agreement dated as of
February 22, 1999 between the Company and the Wisconsin Alumni Research Foundation, as the same may
be amended, restated, supplemented or otherwise modified from time to time.

     “Warrants” shall have the meaning assigned in Section 2.3.

     1.2 Interpretation. Unless otherwise expressly provided or unless the context requires
otherwise, (a) all references in this Agreement to Articles, Sections, Schedules and Exhibits shall
mean and refer to Articles, Sections, Schedules and Exhibits of this Agreement; (b) all references
to statutes and related regulations shall include all amendments of the same and any successor or
replacement statutes and regulations; (c) words using the singular or plural number also shall
include the plural and singular number, respectively; (d) references to “hereof,” “herein,”
“hereby” and similar terms shall refer to this entire Agreement (including the Schedules and
Exhibits hereto); and (e) references to any Person shall be deemed to mean and include the
successors and permitted assigns of such Person (or, in the case of a Governmental Authority,
Persons succeeding to the relevant functions of such Person).

     1.3 Other Terms. Except as otherwise specifically provided, each accounting term used
herein shall have the meaning given to it under GAAP.

ARTICLE II

ISSUE OF NOTES

     2.1 Loans.

          (a) The Investors severally (but not jointly) agree, subject to the terms and conditions set
forth herein, to make a loan to the Company on the Initial Closing Date, in the aggregate amount of
fifty percent (50%) of the aggregate loan commitments specified in Schedule 2.1 (as of the
date of making such loan), each loaning an amount equal to its pro rata share of the aggregate loan
commitments as set forth in Schedule 2.1 (collectively the “Initial Loans”, and
each is an “Initial Loan”). The obligations of the Company to repay the Initial Loans
shall be evidenced

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by the Company’s 12% Convertible Notes in the form attached hereto as
Exhibit D, the terms for such form may be modified for Loans from CAPCOs in order to comply
with relevant statutes and regulations (collectively the “Initial Notes”, and each is an
“Initial Note”).

          (b) Upon not less than twenty (20) days’ prior written notice to the Investors by the
Company’s submission of a Borrowing Request, the Investors severally (but not jointly) agree,
subject to the terms and conditions set forth herein, to make in the aggregate up to two additional
Loans to the Company on the borrowing date set forth in the Company’s notice (but not earlier than
the twentieth (20th) day following the date such written notice is given), each such
Loan in an amount equal to their pro rata share of twenty five percent (25%) of the aggregate loan
commitments specified in Schedule 2.1 (as of the date of making such loan) (collectively
the “Secondary Loans”, and each is a “Secondary Loan”; the Secondary Loans and the
Initial Loans are collectively referred to as the “Loans”, and each as a “Loan”);
provided, if Schedule 2.1 is augmented by the addition of new Investors as contemplated in
the Recitals to this Agreement, an equitable adjustment will be made by the Required Investors (i)
to require that such new Investor contribute the same percentage of such new Investor’s total
commitment as that contributed cumulatively by the other Investors as of such date (e.g., if a new
Investor comes in after the Initial Loan but prior to the first Secondary Loan, such new Investor
will contribute 75% of such new Investor’s total commitment as part of the first Secondary Loan,
which percentage is equal to the cumulative total percentage of the amounts contributed by the
other Investors as of the date the first Secondary Loan is made), and (ii) to adjust the aggregate
amount available to be loaned to the Company to reflect the new Investor’s commitment. In no event
shall any Secondary Loan be made after March 1, 2004. The obligations of the Company to repay the
Secondary Loans shall be evidenced by the Company’s 12% Convertible Senior Subordinated Notes in
the form attached hereto as Exhibit D, the terms for such form may be modified for Loans
from CAPCOs in order to comply with relevant statutes and regulations (collectively the
“Secondary Notes”, and each is a “Secondary Note”; the Secondary Notes and the
Initial Notes are collectively referred to as the “Notes”, and each as a “Note”).

          (c) If any Investor required to fund any given Secondary Loan fails to fund such Secondary
Loan in accordance with Section 2.1(b), then such Investor shall not be issued any Warrants
with respect to any Loans previously made by such Investor.

          (d) No amount of the Loans that is repaid by the Company may be reborrowed hereunder.
Permitted repayments of the Loans shall be made pro rata among the Investors. Unless converted
pursuant to Section 2.2 or maturity is accelerated following an Event of Default, the
outstanding principal balance and all accrued and unpaid interest under the Notes shall be payable
in full in immediately available funds no earlier than April 30, 2004 (the “Maturity
Date”). The Company shall pay the outstanding principal amounts under the Notes, plus all
accrued but unpaid interest on such principal amounts, upon the earlier of (i) the date specified
by the Company that is on or after the Maturity Date and which date is no earlier than thirty (30)
days following the Company’s delivery of a Repayment Notice to all the Investors then holding
Notes, but subject to any earlier conversion of the Notes prior to the end of such thirty-day
period, or (ii) within three business days of a request to do so submitted by the Required
Investors (excluding therefrom, the vote or holdings of the CAPCOs), which repayment date shall be
no earlier than the Maturity Date.

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In order to submit a Repayment Notice to the Investors, the
Company shall have adequate funds (or access to immediately available and adequate funds) to repay
all the Notes in full at the time the Repayment Notice is delivered to the Investors and at the
time and date proposed for repayment. Interest on the Notes shall accrue and compound daily at the
rate of twelve percent (12.00%) per annum, with interest calculated based upon a year consisting of
365 days for actual days elapsed; provided, however, that at all times following
the occurrence and during the continuation of an Event of Default, interest shall accrue thereafter
at the rate of eighteen percent (18%) per annum. Notwithstanding anything to the contrary
contained in this Section 2.1(d), the terms for any Notes issued to a CAPCO may vary from
the provisions set forth herein in order to comply with applicable state statutes and regulations;
if the terms of a Note issued to a CAPCO conflict with the terms contained herein, the terms of the
Note issued to the CAPCO shall control.

     2.2 Note Conversion.

          (a) Upon (i) the Company’s receipt of not less than $5,000,000 in gross proceeds from the sale
of its Series D Convertible Preferred Stock (“Series D Preferred Shares”) from an
institutional investor or investors other than the Investors on or before the Maturity Date (a
“Qualified Series D Financing”), or (ii) the written consent of the Required Investors to
automatically convert all the Notes (“Consent to Conversion”) at or after the Maturity Date
(unless the Company has submitted to the Investors holding Notes a Repayment Notice, in which case
such Consent to Conversion may be submitted at any time following the submission of the Repayment
Notice but prior to the actual repayment date), then the outstanding principal balance and all
accrued and unpaid interest in respect of all of the Notes shall automatically be converted to
Series D Preferred Shares (an “Automatic Conversion”); provided however, if upon a
Consent to Conversion there is not any Series D Preferred Shares authorized, then the outstanding
principal balance and all accrued and unpaid interest in respect of the Notes shall automatically
be converted to Series C Preferred Shares; provided further, if upon a Consent to
Conversion there are any Series D Preferred Shares authorized, the Required Investors shall decide
in such written consent whether to convert the outstanding principal balance and all accrued and
unpaid interest in respect of the Notes into either Series D Preferred Shares or Series C Preferred
Shares. If the Notes are to be converted into Series D Preferred Shares, the conversion price
shall be equal to the
lowest price per share paid in the Qualified Series D Financing or if there has been no Qualified
Series D Financing, the lowest price paid for any Series D Preferred Shares (the “Series D
Conversion Price”). If the Notes are to be converted into Series C Preferred Shares, the
conversion price shall equal $8.178 per share (subject to the adjustments specified in the Notes)
(the “Series C Conversion Price”; the Series C Conversion Price and the Series D Conversion
Price are collectively referred to as the “Conversion Price”). Upon the request of the
Company following an Automatic Conversion, the Investors shall deliver the Notes to the Company for
cancellation, and the Company shall issue and deliver stock certificates representing the Series D
Preferred Shares or Series C Preferred Shares, as the case may be, in such converted amount to each
Investor. The Company and the Investors shall execute and deliver cross-receipts acknowledging
such Automatic Conversion. Upon a Qualified Series D Financing, each Investor shall be entitled to
(but shall not be obligated to) execute counterparts of, and become a party to, the investment
agreement and related agreements to be entered into in connection with the Qualified Series D
Financing; provided, that upon their execution of such investment agreement and related
agreements in connection

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with the Qualified Series D Financing or if an Investor refuses to execute
such investment agreement and related agreements, the Series D Preferred Shares held by such
Investor shall cease to be covered by this Agreement.

          (b) In the event that an Automatic Conversion has not occurred, after the Maturity Date, each
of the Investors, at the option of each Investor, shall (x) have a continuing option (but not the
obligation), exercisable at any time or from time to time, to convert all or any portion of the
outstanding principal amount and accrued and unpaid interest under the Notes into the Company’s
Series C Preferred Shares (an “Optional Conversion”) at a conversion price equal to the
Series C Conversion Price, and (y) continue to have their respective rights and remedies under the
Notes, at law and in equity, subject to the limitations of this Agreement and the other Loan
Documents. Upon an Optional Conversion, (i) each of the Investors requesting an Optional Conversion
shall deliver Note(s) to the Company for cancellation, (ii) the Company shall issue and deliver
stock certificate(s) representing the Series C Preferred Shares in such converted amount to each of
the Investors requesting an Optional Conversion, and (iii) if the Optional Conversion is in less
than the full amount of outstanding principal and accrued and unpaid interest under any Note, the
Company shall reissue such Note to each of the Investors requesting an Optional Conversion in an
amount equal to the then outstanding balance less the converted portion thereof. The Company and
each of the Investors who request an Optional Conversion shall execute and deliver cross-receipts
acknowledging any Optional Conversion.

     2.3 Warrants. As an inducement for the Investors to convert the Loans, but subject to
the provisions of Section 2.1(c), the Company shall issue and deliver to each Investor upon
the conversion of the Note or Notes held by such Investor, a warrant to purchase the number of
Series D Preferred Shares or Series C Preferred Shares, as the case may be, that is equal to the
quotient of the product of the principal amount of the Loans made by the Investor times .2 divided
by the Exercise Price at the time of issuance. Such warrants (the “Warrants”) shall be in
the form of Exhibit E. Upon such issuance and delivery, the Company shall have a
sufficient number of authorized Underlying Shares to effectuate the exercise of each Warrant and
the subsequent conversion of Preferred Shares issuable upon exercise of each such Warrant into
Common Shares.

     2.4 Closing Date. The closings for the purchase and sale of the Notes shall take
place at the offices of Michael Best & Friedrich LLP, One South Pinckney Street, Suite 700,
Madison, Wisconsin, at 10:00 A.M. (Madison, Wisconsin, local time) on May 1, 2003 with respect to
the purchase and sale of the Initial Notes and on the date and at the time designated by the
Company in the Borrowing Request, or on such other dates at such other times or place as the
parties hereto may agree (the date on which the purchase and sale of the Initial Note occurs is
referred to as the “Initial Closing Date” and also referred to, along with each subsequent
date on which the Secondary Notes are purchased and sold, as a “Closing Date”).

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ARTICLE III

CONDITIONS TO CLOSING

     The obligation of the Investors to enter into the Agreement and to make the Loans and perform
their obligations contemplated hereby is subject to the accuracy of all representations and
warranties by the Company contained herein, to the performance by the Company of all the terms and
conditions on either of their parts to be performed hereunder and to the satisfaction of the
following conditions precedent, any of which may be waived by the Required Investors in their sole
discretion by a written waiver specifically referencing the appropriate section:

     3.1 Opinion of Counsel. The Investors shall have received from counsel for the
Company a favorable opinion addressed to the Investors dated the Initial Closing Date and
incorporating all those matters set forth in the form attached hereto and incorporated by reference
as Exhibit F.

     3.2 Company Officers. The Company shall have delivered to the Investors a certificate
signed by the Company’s chief executive officer and president that as of the Initial Closing Date
(both before and after giving effect to the transactions contemplated by this Agreement):

          (a) there does not exist any state of facts which would constitute an Event of Default or
would, with notice or lapse of time as provided herein, or both, constitute such an Event of
Default;

          (b) all representations and warranties contained in Article IV are true and correct;

          (c) the Company is in compliance with all of the affirmative and negative covenants set forth
in Article V and Article VI; and

          (d) all conditions set forth in Article III to be performed by the Company have been
satisfied.

     3.3 Corporate Resolutions. The Company shall have delivered or made available to the
Investors a certificate signed by the Company’s chief executive officer and president as of the
Initial Closing Date, attaching a certified copy of the resolutions adopted by the shareholders
and/or Board of Directors of the Company authorizing and approving (i) this Agreement, (ii) the
incurrence of indebtedness under, the execution, delivery and issuance of, and the performance of
the Company’s obligations under, the Notes and the Warrants, (iii) conversion pursuant to Automatic
Conversions and Optional Conversions, and (iv) the other transactions contemplated hereby.

     3.4 Proceedings and Documents. All proceedings to be taken prior to or on a Closing
Date in connection with the transactions contemplated by this Agreement shall have been
consummated, and all documents, schedules, exhibits, opinions and certificates related thereto
shall each be satisfactory in form and substance to the Investors and the Investors shall have
received copies of all such documents which the Investors reasonably have requested in connection
with said transactions.

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     3.5 Organization, Good Standing and Authority. The Company shall be a corporation
duly organized, validly existing and in good standing under the laws of the State of Wisconsin, and
shall have all requisite corporate power and authority to conduct its business as it is now
conducted, to enter into and carry out the provisions of this Agreement and any other agreement
required hereunder and to perform its obligations hereunder and thereunder. Copies of the
Company’s Articles of Incorporation (including all amendments) and certificates of status of recent
date, both certified by the Department of Financial Institutions of the State of Wisconsin, and a
copy of the respective Bylaws of the Company (including all amendments) and a copy of the stock
ledger of the Company, certified by the secretary of the Company, shall have been delivered to the
Investors. The Company shall have complied with and shall not be in violation of any term or
provision of its Articles of Incorporation (as amended) and Bylaws. The Company shall be qualified
to do business as a foreign corporation in all jurisdictions where the conduct of its business or
the nature of its activities requires such qualification and where the failure to qualify would
have a Material Adverse Effect.

     3.6 Securities Law Matters; Investment Representations. The Company shall not be in
violation of any provision of federal or state securities laws applicable to this transaction, and
the making of the Loans and the issuance of the Notes and the Warrants shall be exempt from
registration under the Securities Act and all other applicable federal and state securities laws.

     3.7 No Litigation. There shall be no action, proceeding or investigation pending or,
to the Knowledge of the Company, threatened which might result in any Material Adverse Effect.

     3.8 Consents. There shall have been secured from each Governmental Authority having
jurisdiction over the transactions described herein, and from each Person whose consent to the
transactions described herein is required, all consents, approvals and permits as shall be
necessary or, in the opinion of counsel for the Investors, appropriate, for the consummation of the
transactions described herein.

     3.9 Lien Search . On the day of funding of the Initial Loan, the Company shall have
delivered to the Investors a lien search, prepared by a reputable title company acceptable to the
Investors, of the records of the Dane County Register of Deeds, the Department of Financial
Institutions of the State of Wisconsin and the filing offices of any other jurisdiction in which
the Company has substantial assets, properties, inventories or business operations, disclosing that
all personal property, equipment and fixtures of the Company are free and clear of all Liens
(except Permitted Liens and those Liens disclosed on Schedule 3.9 hereto).

     3.10 No Material Adverse Effect. There shall not be in existence any event, including
any judicial or administrative proceeding which, in the opinion of the Investors, would have a
Material Adverse Effect.

     3.11 Representations and Warranties. All representations and warranties of the
Company and the Principals in this Agreement shall be true and correct in all respects as of and

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at
the Closing Date with the same force and effect as though said representations and warranties had
been again made on the Closing Date.

     3.12 No Default. There shall be no Default or Event of Default under this Agreement
or any other Loan Document and no default or event of default under the Series A Investment
Agreement, Series B Investment Agreement, or Series C Investment Agreement.

     3.13 Use of Proceeds. The proceeds of the Loans shall be committed for use in the
manner described in Schedule 4.13 hereof.

     3.14 Conditions Precedent for Secondary Loans. The obligations of the Investors to
make each Secondary Loan, the Automatic Conversion and the Optional Conversion are subject to the
satisfaction or waiver of the following conditions:

          (a) There shall not be in existence any event, including any judicial or administrative
proceeding, which would have a Material Adverse Effect.

          (b) All representations and warranties in this Agreement shall be true and correct in all
respects as of and at the date of funding of such Secondary Loan or effectiveness of Automatic
Conversion or Optional Conversion with the same force and effect as though said representations and
warranties had been again made on such Closing Date or the date of such Automatic Conversion or
Optional Conversion, as the case may be.

          (c) There shall be no Default or Event of Default under this Agreement or any other Loan
Document and no Default or Event of Default will occur as the result of the making or incurring of
the Secondary Loan, the Automatic Conversion and the Optional Conversion, as the case may be.

          (d) The proceeds of the Loans shall be committed for use in the manner specified in the
borrowing notice under Section 2.1(b) hereof, which shall be consistent with Schedule
4.13.

          (e) The Company shall have delivered to the Investors a certificate signed by the Company’s
chief executive officer and president that as of the date of such Secondary Loan, Automatic
Conversion or Optional Conversion, as applicable (both before and after giving effect to the
transactions contemplated by thereby), that items (a) — (d) above are true and correct.

     3.15 SBIC Compliance Agreement. The Company shall have executed and delivered to Open
Prairie Ventures a letter agreement, in form satisfactory to Open Prairie Ventures, stating that
the Company is in compliance with certain provisions of the SBIC Act, as defined therein.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     In order to induce the Investors to execute and deliver this Agreement, the Company and the
Principals (only with respect to Sections 4.2, 4.5, 4.19 and 4.23),
severally and not jointly, represent, warrant and covenant, as of the date hereof and as of such
Closing Date, that each of the representations and warranties contained herein is and shall be
true, complete and correct and acknowledges that such representation and warranty is independently
material to, and relied upon by, the Investors:

     4.1 Existence and Rights. The Company is a corporation duly organized and existing
under the laws of the State of Wisconsin, without limit as to the duration of its existence. The
Company has all corporate powers, authority and rights to own its properties, and, to the best of
the Company’s Knowledge, the licenses, franchises and rights to carry on its business; and is now,
and will from time to time hereafter promptly become and remain, duly qualified and in good
standing in each State or other jurisdiction in which the character of the properties owned by it
therein or the conduct of its present or proposed business makes such qualification necessary.
Except to the extent of any actions that would be necessary to authorize the Qualified Series D
Financing and to authorize and issue the Underlying Shares, the Company has all corporate power and
authority to enter into and perform this Agreement and the transactions contemplated hereby. The
Company has all corporate power and authority to issue the Notes and Warrants issued pursuant
hereto. The Company has the power to reserve and issue the Underlying Shares, including the
Preferred Shares to be issued upon conversion of the Notes and exercise of the Warrants.

     4.2 Agreement Authorized. Neither the execution and delivery by the Company or the
Principals of this Agreement, nor the performance by the Company or the Principals of their
obligations hereunder, is in contravention of, or in conflict with, any law or regulation or any
term or provision of the Company’s Articles of Incorporation or Bylaws, each as amended, and this
Agreement has been duly authorized and does not require the consent or approval of any Governmental
Authority. All corporate action and all necessary approvals and consents for the due execution and
delivery of this Agreement, including the authorization and issuance of the Notes and the Warrants,
and the performance of all other transactions contemplated hereby (except for the actions necessary
to authorize the Qualified Series D Financing and to authorize and issue the Underlying Shares),
have been duly and validly obtained or taken. No right of the Company or any other Person is
illegally impaired or infringed upon by its execution and/or performance of this Agreement. This
Agreement has been duly executed and delivered and constitutes the legal, valid and binding
obligation of the Company and the Principals, enforceable against the Company and the Principals in
accordance with its terms, subject only to bankruptcy, insolvency and other laws which limit or
qualify the rights of creditors generally, and to the availability of specific performance,
injunctive relief or other equitable remedies.

     4.3 Capitalization.

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          (a) The entire authorized, issued and outstanding capital stock (“Capital Stock”) of
the Company is as set forth on Schedule 4.3(a). The issued and outstanding Capital Stock
is owned by the Persons identified in Schedule 4.3(a) in the amounts shown therein. All
rights to acquire stock in the Company presently existing, including but not limited to, the
conversion of promissory notes or other indebtedness or receipt of stock in exchange for royalty,
compensation or other payments are set forth on Schedule 4.3(a). All of the outstanding
Company’s capital stock is duly and validly issued, fully paid and nonassessable (subject to
Section 180.0622 of the Wisconsin Statutes) and in compliance with all applicable state and federal
securities laws concerning the issuance of securities. Except to the extent of any actions which
would be necessary to authorize the Qualified Series D Financing and to create, authorize and issue
the Underlying Shares, the Company has all power and authority to (i) issue the Notes, Warrants and
Series C Preferred Shares, (ii) effect Automatic Conversions and Optional Conversions, (iii)
convert the Notes into Series D Preferred Shares (if an Automatic Conversion) or Series C Preferred
Shares (if an Optional Conversion), (iv) convert the Warrants into Series D Preferred Shares or
Series C Preferred Shares, as applicable, and (v) reserve for future issuance, the Underlying
Shares issuable upon conversion of the Notes.

          (b) Except as described in Schedule 4.3(b), the Company does not have any outstanding
subscriptions, options, warrants or other rights, restrictions or agreements pertaining to the
issuance, purchase, transfer, or registration of any shares of the Company’s capital stock, or any
securities convertible into or exchangeable for any shares of the Company’s capital stock, or any
understandings or commitments of any kind except as contemplated by this Agreement.

     4.4 Subsidiaries, Other Investments. The Company does not have any Subsidiaries or
other investments in any other Person.

     4.5 Litigation. There is no litigation or other proceeding pending or, to the
Knowledge of the Company or the Principals, threatened against or affecting the Company or any of
its material property, and the Company is not in default with respect to any order, writ, judgment,
decree or demand of any court or other Governmental Authority.

     4.6 Financial Statements. The Financial Statements of the Company delivered to the
Investors and attached hereto as Schedule 4.6 were prepared in accordance with GAAP and
fairly present the financial condition of the Company as of the dates indicated therein, subject,
in the case of the Financial Statements dated as of December 31, 2002, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, have a material
adverse effect on the financial condition of the Company), adjustments to reflect liabilities
disclosed on Schedule 4.9, and the absence of notes (that if presented, would not differ
materially from those included in the 2001 Financial Statements). Since December 31, 2002, there
has not been:

          (a) any Material Adverse Effect;

          (b) any material damage, destruction or loss (whether or not covered by insurance) adversely
affecting the properties, business or earnings prospects of the Company; or

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          (c) except for the transactions contemplated by this Agreement, any transaction outside the
ordinary course of the Company’s business.

     4.7 Title to Properties. The Company owns and has good marketable title to all of its
material Property reflected in the Company’s Financial Statements contained in Schedule
4.6. The Property is not subject to any Liens, except for Permitted Liens.

     4.8 Intellectual Property. Schedule 4.8 lists all of the following:

          (a) patents and patent applications;

          (b) trade secrets, trademarks, trade names and applications therefor and service marks; and

          (c) licenses and franchises

currently used or employed or proposed to be used or employed by the Company (the “Intellectual
Property”). The Company owns (or has valid and enforceable rights to use) all of the
Intellectual Property. The Intellectual Property is all of the intellectual property that is used
in or necessary for the conduct of the Company’s business as presently conducted and as proposed to
be conducted. Except as otherwise described on Schedule 4.8, the Company is the sole owner
of all right, title and interest in the Intellectual Property which it purports to own and,
with respect to Intellectual Property licensed by the Company, the Company has valid, binding and
enforceable rights to use such Intellectual Property. Schedule 4.8 includes copies of all
legal opinions rendered to the Company pertaining to the patentability of the Intellectual Property
and a summary of all material comments, inquiries or objections from any filing agency which have
been received by the Company. Schedule 4.8 lists for each item of Intellectual Property
which the Company has, or intends to file a patent application, the location of each foreign,
federal or state agency or office where the Company has or intends to file such an application and,
if applicable, the registration number and the date of registration. There are no interference,
opposition or cancellation proceedings pending or, to the Knowledge of the Company, threatened
against the Company or the Intellectual Property. To the best Knowledge of the Company, the use of
the Intellectual Property and of any trade secrets, secret processes, inventions, processes or
formulas used or employed by the Company does not infringe upon the rights of any Person. In the
event that it is determined that access to other intellectual property not already owned by or
licensed to the Company is needed for the Company’s business, the Company will make reasonable good
faith efforts to acquire such intellectual property. No claim, suit or action is pending or, to
the Company’s Knowledge, threatened alleging that the Company is infringing upon the intellectual
property rights of others. Except by virtue of the ownership of Company’s Capital Stock, no
shareholder, director, officer or employee of the Company owns, or claims to own, directly or
indirectly, in whole or in part, any Intellectual Property.

     4.9 No Undisclosed Liabilities. Except as provided in Schedule 4.10 for
contracts entered into after December 31, 2002 and Schedule 4.9, the Company does not have
any

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Liabilities except those reflected or reserved against on the Company’s Financial Statements
attached hereto in Schedule 4.6.

     4.10 Contracts. The Company does not have any existing contracts, purchase orders,
service agreements, commission arrangements, loan agreements, leases or other contractual
obligations whatsoever which (i) extend beyond one year from the date hereof, (ii) involve total
payments or expenditures to any single Person of more than Twenty-Five Thousand Dollars ($25,000)
on any single contract, except for those terminable by the Company without cost or penalty upon
thirty (30) days notice, or except as are listed on Schedule 4.10 hereto or Schedule 4.10
to the Series C Investment Agreement, or (iii) are with Affiliates of the Company, except as listed
on Schedule 4.10 hereto or Schedule 4.10 to the Series C Investment Agreement.

     Except as described in Schedule 4.10 hereto or Schedule 4.10 to the Series C
Investment Agreement, the Company does not have, nor is it a party to, any:

          (a) employment or other contracts with employees, consultants or similar individuals or
entities;

          (b) pension, profit or similar employee benefit plans, including but not limited to, employee
pension benefits plans and employee welfare benefit plans as defined in sections 3(2) and 3(1) of
ERISA;

          (c) outstanding loans or borrowing contracts, indentures, mortgages or leases under which the
Company is obligated; and

          (d) contract or agreement, including a joint venture or joint development agreement with
another party that relates to the Company’s research or product development activities.

     4.11 Compliance with Other Instruments, Laws, Etc. The Company is not in violation of
its Articles of Incorporation or Bylaws, each as amended; and is not in violation of any applicable
law, statute or regulation of any Governmental Authority relating to the conduct of its business
and maintenance, ownership or operation of its properties, or in violation of or default with
respect to any order, license, regulation or demand of any Governmental Authority, or in violation
of or default under any indenture, mortgage, lease, agreement or other instrument under which the
Company is obligated. Neither the execution nor the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the fulfillment of the terms hereof, will
conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a
default under any agreement, instrument or Lien under which the Company is bound or obligated.

     4.12 Securities Laws. The issuance, sale, and delivery of the Notes and the Warrants
and the issuance, sale, and delivery of the Underlying Shares upon conversion of the Notes and
exercise of the Warrants will be exempt from the requirement of registration under the Securities
Act and state “Blue Sky” laws, and such Securities Act and “Blue Sky” laws will not be violated

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by
the Company by the execution of this Agreement or the consummation of the transactions contemplated
hereby. All issuances, sales, and deliveries of the Capital Stock by the Company prior to such
Closing Date were exempt from the requirements of registration under the Securities Act and state
“Blue Sky” laws and not in violation of such laws.

     4.13 Use of Proceeds. The funds to be loaned by the Investors to the Company pursuant
to this Agreement will be used for the purposes set forth in Schedule 4.13.

     4.14 Brokers. The Company is not liable for any finders’ fees, brokerage fees or
similar fees or expenses in connection with entering into the transactions contemplated by this
Agreement.

     4.15 Taxes. The Company has timely filed or caused to be timely filed all tax returns
which are required to be filed by it and has paid and discharged all lawful taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or upon any of its
properties, real, personal or mixed; and no tax Liens have been filed and no claims are being
asserted with respect to any such taxes, fees or other charges.

     4.16 Insurance. The respective assets of the Company are adequately insured against
all such liabilities, hazards and risks, and in at least such amounts as are usually carried by
Persons engaged in the same line of business (in the case of property casualty insurance, at
least replacement cost). All premiums on policies due to date have been paid, and no notice
has been received, nor has the Company any reason to believe, that any such insurance will be
canceled or not renewed.

     4.17 Federal Reserve Regulations. The Company will not, directly or indirectly use
funds loaned by the Investors hereunder for the purpose of purchasing or carrying any “margin
stock” within the meaning of Regulations G, U, T or X of the Board of Governors of the Federal
Reserve System (12 C.F.R. Parts 221 and 224, as amended), or otherwise take or permit any action
which would involve a violation of any regulation of the Board of Governors of the Federal Reserve
System.

     4.18 Investment Company Act: Public Utility Holding Company Act. The Company is not:
(a) an “investment company” or a company “controlled by an investment company” within the meaning
of the Investment Company Act of 1940, as amended; or (b) a “holding company” or a “subsidiary” of
a “holding company” or an “affiliate” of a “holding company” or a “subsidiary” of a “holding
company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

     4.19 Nondisclosure, Noncompetition and Inventions Agreements; Employees. Each of the
Company’s employees has entered into a nondisclosure, noncompetition and inventions agreement in
substantially the form attached to Schedule 4.19 of the Series C Investment Agreement and such
agreements are in full force and effect, and have not been amended, restated, supplemented or
otherwise modified, nor has any Principal or other employee of the Company breached its terms and
conditions. Except as to David Murray, the Company has no

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Knowledge of any employee who has
announced their intention to terminate their employment with the Company or who the Company has
reason to believe will terminate their employment with the Company.

     4.20 Small Business Matters. The Company, together with its “affiliates” (as that
term is defined in Title 13, Code of Federal Regulations, § 121.103), is a “small business concern”
within the meaning of the Small Business Investment Act of 1958 and the regulations thereunder,
including Title 13, Code of Federal Regulations, § 121.103. The information regarding the Company
and its affiliates set forth in the Small Business Administration Form 480, Form 652 and Parts A
and B of Form 1031 delivered at the Closing is accurate and complete. Copies of such forms shall
have been completed and executed by the Company and delivered at the Closing together with a
written statement of the Company regarding its planned use of the proceeds from the sale of the
Notes and the Warrants. The Company does not presently engage in, and it shall not hereafter
engage in, any activities, nor shall the Company use directly or indirectly the proceeds from the
sale of the Notes and the Warrants hereunder for any purpose, for which a Small Business Investment
Company is prohibited from providing funds by the Small Business Investment Act of 1958 and the
regulations thereunder (including Title 13, Code of Federal Regulations, § 107.720). The Company
acknowledges that Open Prairie Ventures is a federal licensee under the Small Business Investment
Act of 1958, as amended.

     4.21 Amendments to the Articles of Incorporation and Bylaws. Since August 28, 2002,
the Company has not amended or changed in any way its Articles of Incorporation or Bylaws, nor has
it filed any amendments thereto with the Wisconsin Department of Financial Institutions or any
other Governmental Authority.

     4.22 No Default. There exists no Default or Event of Default under this Agreement or
any other Loan Document and no default or event of default exists under the Series A Investment
Agreement, Series B Investment Agreement, or Series C Investment Agreement.

     4.23 Survival of Representations and Warranties. All representations and warranties
contained herein or made by or on behalf of the Company and/or the Principals in writing in
connection with the transactions contemplated herein, for purposes of Article VII of this
Agreement and Investors’ rights and remedies thereunder (whether for establishing damages caused by
such Event of Default or exercising the right of optional redemption), shall survive the
consummation of the transactions contemplated hereby and continue in effect at all times while any
Investor holds a Note, Warrant or any Capital Stock. All statements contained in any certificate
or other instrument or schedule attached hereto or delivered by or on behalf of the Company and/or
the Principals pursuant hereto, or in connection with the transactions contemplated herein, shall
constitute representations and warranties by the Company and/or the Principals hereunder. The
foregoing representations and warranties do not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements therein not misleading. There is
no fact known to the Company or the Principals which has not been disclosed to the Investors which
could reasonably be expected to have a Material Adverse Effect.

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ARTICLE V

AFFIRMATIVE COVENANTS

     In order to induce the Investors to execute this Agreement, the Company covenants and agrees
that from the Initial Closing Date, and for the benefit of each Investor,

(i) until the Loans are repaid in full or the Investors dispose of all of their shares of
Series D Preferred Shares acquired upon conversion of the Notes or exercise of the Warrants,
or

(ii) if the Loans are converted to Series C Preferred Shares pursuant to Section
2.2(b), until the earlier to occur of (w) such Investor owning less than twenty percent
(20%) of the number of Series C Preferred Shares owned by such Investor as of the Optional
Conversion Date, including shares issuable upon the exercise of any options, warrants or
other convertible securities owned by such Investor as of such date, adjusted for any stock
dividend, stock splits and the like as provided for in the Shareholders Agreement, (x) the
consummation of a Qualified Public Offering by the Company, (y) the sale of all or
substantially all of the Company’s Capital Stock through merger or otherwise (including all
Preferred Shares and Common Shares held by the Investors), or (z) the Company sells all or
substantially all of the Company’s assets for cash and/or securities registered under the
Securities Act and promptly distributes such proceeds to its shareholders,

it will comply, unless the Required Investors shall otherwise consent in writing, with the
following provisions:

     5.1 Taxes. The Company shall promptly pay and discharge all lawful taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits, or upon any of
its properties, real, personal or mixed; provided, however, that the Company shall
not be required to pay or cause to be paid any such tax, assessment, charge or levy if the same
shall not at the time be due and payable or if the validity thereof shall concurrently be contested
in good faith by appropriate proceedings and if the Company shall have established adequate
reserves on its books with respect to such tax, assessment, charge or levy; provided
further, that the Company will pay all such taxes, assessments, charges or levies forthwith
whenever, as the result of proceedings to foreclose any Lien which attached as security therefor,
foreclosure on such Lien appears imminent, or (at the election of the Company) will obtain a surety
bond or take such other steps as will prevent such foreclosure.

     5.2 Maintain Corporate Existence and Rights. The Company shall maintain and preserve
its corporate existence and such rights, franchises, qualifications and Intellectual Property as
are adequate to the conduct of its business and ownership of its properties, if the failure to
maintain and preserve such rights, franchises, qualifications and Intellectual Property would have
a Material Adverse Effect.

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     5.3 Insurance. The Company shall maintain such insurance against liabilities, hazards
and risk, and in at least such amounts (at least replacement cost), as are usually carried by
Persons engaged in the same or similar businesses. All such insurance shall be effected under
valid and enforceable policies issued by insurers of recognized responsibility, except that the
Company may effect worker’s compensation or similar insurance in respect of operations in any state
or other jurisdictions through an insurance fund operated by such state or other jurisdiction.

     5.4 Financial Reports. The following financial reports shall be provided to the
Investors or Minimum Investors, as the case may be, as set forth below:

          (a) Within twenty (20) days after the end of each month, to each Minimum Investor, unaudited
consolidated and consolidating financial statements (including balance sheet, statement of cash
flow, income statement, and statement of shareholders’ equity) of the Company for such fiscal month
and for the then current fiscal year to date, all in reasonable detail as requested by the Minimum
Investors prepared in accordance with GAAP.

          (b) To each Investor within forty-five (45) days after the end of each of the Company’s first
three fiscal quarters, unaudited consolidated and consolidating financial statements (including
balance sheet, statement of cash flow, income statement, and statement of shareholders’ equity) of
the Company for such fiscal quarter and for the then current fiscal year to date, all in reasonable
detail and prepared in accordance with GAAP.

          (c) To each Investor within ninety (90) days after the last day of each fiscal year of the
Company, audited consolidated and consolidating financial statements (including a balance sheet,
income statement, statement of cash flows and a statement of shareholders’ equity) of the Company
for such year, prepared in accordance with GAAP and setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail and certified by the independent
public accountants regularly employed by the Company.

          (d) With each delivery of the financial statements required by Section 5.4(a),
(b) and (c), above, a management report describing all material business and
financial developments during such period, and the development of the Company’s technology and the
Company’s strategic relationships, together with an officer’s certificate executed by the President
of the Company stating that the President has no knowledge, after due investigation and inquiry, of
the existence of any condition or event which constitutes an Event of Default hereunder or which
after notice or lapse of time or both, would constitute an Event of Default hereunder; or if any
such condition or event existed or exists, specifying the nature and period of existence thereof
and what action the Company has taken, is taking or proposes to take with respect thereto.

          (e) The Investors and their representatives shall have a right at any time to ask questions of
and receive answers from the Company’s independent accountants and auditors with respect to the
Company’s business, operations, properties, financial and other conditions, and the Company shall
waive any confidentiality requirements applicable to such accountants or auditors as necessary to
fulfill this covenant.

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     5.5 Inspection and Samples. Each Minimum Investor shall have the right to visit and
inspect any of the properties, books and records of the Company (and to make copies and take
extracts therefrom) and to discuss the Company’s business, operations, properties, financial and
other conditions with its directors and officers at such reasonable times and intervals as the
Investors may desire. After the occurrence of an Event of Default, the Company shall pay all
expenses of inspection and audit incurred by any Minimum Investor. All information, copies and
extracts made or received by any Minimum Investor during any such visit, inspection or discussion
shall be held in confidence and, in the case of copies and extracts, shall be returned to the
Company upon its request at any time after such Investor no longer holds the Notes or Warrants or
has sold the Underlying Shares acquired by it pursuant to the conversion of the Notes or exercise
of the Warrants; provided, however, that the obligation of confidentiality
contained in this sentence shall not apply if, after the occurrence of an Event of Default, the use
and/or disclosure of any information, copies or extracts made or received by such Investor shall be
necessary or advisable, in such Investor’s discretion, to enforce its rights as provided herein.

     5.6 Maintain Properties. The Company shall keep its properties in reasonable repair,
working order and condition, and from time to time make all prudent, needful or proper repairs,
replacements, extensions, additional betterments and improvements thereto, so that the respective
businesses carried on by the Company may be properly conducted at all times in accordance with
sound business management. The Company shall take all reasonable and prudent action to maintain
the proprietary, protectable nature of its Intellectual Property and, specifically, shall require
all employees and consultants to execute nondisclosure, noncompetition and inventions agreements in
substantially the form set forth in Schedule 4.19 of the Series C Investment Agreement.

     5.7 Disclosures.

          (a) The Company shall give immediate written notice, and include copies thereof, to the
Minimum Investors of (i) any letters, notices or writings received by the Company alleging default
or demanding payment from third-party lenders or (ii) any suit, action, proceeding or investigation
that has been filed or instituted against the Company, or any of its properties, or is threatened
against the Company or any of its properties that would cause any representation or warranty of the
Company contained in this Agreement to be untrue or which would have a Material Adverse Effect.
The Company shall provide the Minimum Investors with all details thereof and shall send a copy to
the Minimum Investors of any answer, response or other communication received or sent by the
Company with respect to such matter.

          (b) The Company shall give written notice to the Minimum Investors within fifteen (15) days of
any event which requires an action or response by the Company which, if not acted upon or responded
to, would have a Material Adverse Effect.

          (c) The Company shall immediately disclose to the Minimum Investors all substantive offers or
inquiries of whatever kind (whether written or oral) which it receives from any Person concerning
the possible sale, merger or other acquisition of the assets, stock, or business of

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the Company.
The Company shall also immediately disclose to the Minimum Investors any offers or inquiries it
receives concerning a possible transaction pertaining to any portion of its assets, stock or
business, including, but not limited to sale or licensing of any assets or intellectual property,
if the transaction involves an amount that is in excess of the greater of Twenty-Five Thousand
Dollars ($25,000) or ten percent (10%) of the value of the assets of the Company as reflected on
its most recent unaudited balance sheet or pertains to marketing or licensing rights of the Company
that potentially would involve an employment or consulting contract entered into by any
shareholder, director, officer, employee or other Affiliate of the Company in which such Person and
not the Company would be the beneficiary.

          (d) The Company shall provide the Investors with any annual report, proxy statement or other
report or communications when and as sent to its shareholders generally.

          (e) The Company shall further provide any Minimum Investor such other information respecting
the financial condition or operations of the Company as such Minimum Investor, may, from time to
time, reasonably request.

     5.8 Conduct of Businesses. The Company shall conduct its business in an ordinary
manner without voluntary interruption and engage in business of the same general type as now
conducted by it and comply with all applicable and material provisions of federal, state and local
laws.

     5.9 Tax Returns. The Company shall accurately prepare and timely file all income tax
returns required by law to be filed and promptly provide the Investors with copies of such tax
returns.

     5.10 Notice to Shareholders; Attendance at Meetings. At the time any notice, report,
written action taken without a meeting, or other communication (written or oral) or document is
sent to, or acted upon by, shareholders of the Company in their capacity as shareholders, the
Company shall send a copy thereof to the Investors. The Investors shall have the right to attend
all meetings of the Company’s shareholders.

     5.11 Compliance with Instruments, Laws, Etc. The Company shall comply with the terms,
requirements, restrictions and limitations contained in its Articles of Incorporation and Bylaws,
each as amended. The Company also shall so comply with all applicable laws, statutes or
regulations of any Governmental Authority materially relating to the conduct of its business and
maintenance and operation of its properties, and shall further comply with and perform the material
terms, conditions and covenants contained in any mortgage, lease, agreement or other instrument
under which the Company is obligated.

     5.12 Payment of Certain Expenses. Within thirty (30) days of the submission to the
Company of a reimbursement or payment request by the Lead Investor, the Company shall pay directly
or reimburse the Lead Investor for reasonable out-of-pocket expenses, including, without
limitation, attorney’s fees of a single law firm (Michael Best & Friedrich LLP) representing the
Lead Investor, accounting fees and travel expenses incurred by the Lead

-25-

 

Investor to attend to
post-closing matters to complete the transactions contemplated by this Agreement. In addition, the
Company shall pay the Investors the expenses of the Investors pursuant to Sections 7.5 and 12.1
within thirty (30) days of the submission to the Company of a request thereof.

     5.13 Section 1202 Capital Gains Treatment. The Company shall take necessary steps to
ensure that the Underlying Shares will be “qualified small business stock” as defined in Section
1202 of the Code.

     5.14 Information Rights. Whether or not any Minimum Investor (or any of its
Affiliates) currently has the right, pursuant to subsection 5.14(a) of the Series C Investment
Agreement, to designate at least one member of the Company’s Board of Directors, each
Minimum Investor shall be notified of all Company Board and Board Committee meetings on or
prior to the date the directors receive notice, shall receive any advance information provided to
the directors, and a non-voting representative of each Minimum Investor shall have a right to
attend Board and Board Committee meetings of the Company. The Company shall furnish each Minimum
Investor with copies of the minutes of all Board and Board Committee meetings and shareholders’
meetings by including same with the notice of the immediately following Board of Directors or
shareholders’ meeting.

     5.15 Right to Purchase Additional Shares. Except for Common Shares issuable upon the
exercise of options permitted under Section 5.16, warrants existing on the date hereof, and
the performance shares granted pursuant to the Series A Investment Agreement, upon the conversion
of the Notes into Series D Preferred Shares or Series C Preferred Shares, or upon the exercise of
the Warrants, the Company shall provide each Investor with the full and equal right to maintain its
percentage ownership of Common Shares, or other securities convertible into Common Shares, by
acquiring unissued Common Shares or securities convertible into Common Shares. At least thirty
(30) days prior to the issuance of any such securities, each Investor shall be notified of its
right to purchase additional shares hereunder. Each Investor shall have the right, which it may
exercise before or within ninety (90) days after the closing of the Company’s issuance of such
securities, to subscribe for or acquire such shares (including, but not limited to, the right to
acquire such shares or securities issued to directors, officers or employees, or to acquire such
shares or securities issued for other than cash consideration, or to acquire treasury shares) on
terms and conditions, including, without limitation, with respect to price and method of payment,
at least as favorable to the Investors as are proposed to be offered to any other Person.

     5.16 Stock Option Plans. Following the closing referred to in Section 2.4,
the Company shall have the authority to increase by 77,731 the total number of Common Shares
available for issuance upon exercise of options granted after the date of this Agreement under the
Company’s Incentive Stock Option and Nonqualified Stock Option Plan.

     5.17 Projections. Not later than thirty (30) days prior to the first (1st) day of
each fiscal year, the Company shall furnish to the Minimum Investors its business plan (including
an operating and capital budget) for the succeeding fiscal year about to commence and projections
of (i) the

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balance sheet of the Company as of the end of the fiscal year about to commence; (ii)
statements of income and shareholders’ equity of the Company for each of the twelve (12) months of
the fiscal year about to commence; (iii) statements of cash flows of the Company for each of the
twelve (12) months of the fiscal year about to commence; and (iv) a schedule of capital
expenditures to be incurred by the Company for each of the twelve (12) months of the fiscal year
about to commence, all of the foregoing to be in reasonable detail as requested by the Board of
Directors and the Minimum Investors and certified by the President of the Company. The business
plan referred to above shall include management’s intentions with regard to anticipated significant
business developments or objectives of the Company. The budget referred to above shall be reviewed
and approved by the Company’s Board of Directors and the Required Investors.

     5.18 Amendment of Articles of Incorporation and Bylaws. Upon the closing of any
Qualified Series D Financing, the Company and the Principals and their respective transferees shall
take all actions necessary to cause the Company to amend its Articles of Incorporation to have a
sufficient number of Underlying Shares authorized to permit the conversion of the Notes and the
exercise of the Warrants; provided, that the terms and conditions of the Series D Preferred
Shares, including, but not limited to, the rights, dividends and liquidation preferences of the
Series D Preferred Shares, shall be acceptable to the Required Investors.

ARTICLE VI

NEGATIVE COVENANTS

     In order to induce the Investors to execute this Agreement, the Company covenants and agrees
that from the Initial Closing Date, and for the benefit of each Investor,

(i) until the Loans are repaid in full or the Investors dispose of all of their shares of
Series D Preferred Shares acquired upon conversion of the Notes or exercise of the Warrants,
or

(ii) if the Loans are converted to Series C Preferred Shares pursuant to Section
2.2(b), until the earlier to occur of (w) such Investor owning less than twenty percent
(20%) of the number of Series C Preferred Shares owned by such Investor as of the Optional
Conversion Date, including shares issuable upon the exercise of any options, warrants or
other convertible securities owned by such Investor as of such date, adjusted for any stock
dividend, stock splits and the like as provided for in the Shareholders Agreement, (x) the
consummation of a Qualified Public Offering by the Company, (y) the sale of all or
substantially all of the Company’s Capital Stock through merger or otherwise (including all
Preferred Shares and Common Shares held by the Investors), or (z) the Company sells all or
substantially all of the Company’s assets for cash and/or securities registered under the
Securities Act and promptly distributes such proceeds to its shareholders,

unless the Required Investors shall otherwise consent in writing, the Company shall not:

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     6.1 Restricted Payments. Make any Restricted Payments.

     6.2 Investments, Loans and Advances. Make or have outstanding any loans or advances
to, or investments in (through the acquisition of securities or stock or otherwise), any Person
except:

          (a) advances in the ordinary course of business to suppliers in respect to the purchase of
supplies or equipment;

          (b) by endorsement of negotiable instruments for deposit or collection in the ordinary course
of business;

          (c) investments in obligations of the United States Government or certificates of deposit of
banks;

          (d) travel advances to employees in the ordinary course of business; or

          (e) investments in money market funds containing only investments rated at least A-1 or the
equivalent thereof by Standard & Poor’s Rating Group and maturing within twelve (12) months of the
date of acquisition thereof.

     6.3 Acquisition or Sale of Business; Merger or Consolidation.

          (a) Purchase or otherwise acquire the stock, shares, or other securities, or a substantial
part of all the assets of the business, of any Person;

          (b) Liquidate, dissolve, merge or consolidate, reorganize, recapitalize or otherwise alter its
legal status or commence any proceedings therefor; or

          (c) Sell, lease, transfer, or dispose of, in any way (in one or a series of transactions), any
personal or real property assets (including patents, trademarks, or license agreements), now owned
or hereafter acquired, with a total fair market value in excess of the lesser of Fifty Thousand
Dollars ($50,000) or ten percent (10%) of the value of all the assets of the Company, as such
values are reflected on the most recent balance sheet of the Company.

     6.4 Change Capital Structure. Increase or decrease the kind, class or number of its
authorized shares of stock, or vary or alter the preferences, limitations, designations or relative
rights of any class or type of stock; or issue, grant or sell, or agree to issue, grant or sell to
any Person any stock or securities, or options, warrants or other rights to acquire or that are
convertible into stock or other securities of the Company, except (a) options and Common Shares
issuable upon the conversion thereof pursuant to the Company’s Incentive Stock Option and
Nonqualified Stock Option Plans set forth on Schedule 4.3(b), (b) to Venture Investors
Early Stage Fund II Limited Partnership and Avalon or the Principals pursuant to the terms and
conditions of Article VIII of the Series A Investment Agreement in effect as of the date
thereof, (c) the issuance of Series A Preferred Shares pursuant to the warrant issued to Venture
Investors Early Stage Fund II on February 11,

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1999, and (d) the issuance of Series B Preferred
Shares pursuant to the warrants issued to VI, Advantage and Avalon on November 14, 2000, and (e)
pursuant to the terms of the Notes and Warrants.

     6.5 Shareholder-Employees’ Salaries. Increase the annual salaries of any Principal or
executive officer of the Company in excess of the amount set forth on Schedule 6.5 to the Series C
Investment Agreement.

     6.6 Amend, Violate Charter, Etc. Amend, violate or breach any of the provisions of
its Articles of Incorporation, Bylaws, each as amended, any contract listed on Schedule
4.10 or any other material contract or amend the same.

     6.7 Compliance With Securities Laws. Directly or indirectly, sell any shares or other
securities of the Company, or otherwise approach or negotiate with any Person with respect to any
such transaction, except in compliance with applicable federal and state securities laws, including
without limitation the registration requirements of the Securities Act.

     6.8 Dealings With Affiliates. Enter into any agreement in which the Company or any
Affiliate of the Company unless such agreement has been approved by the Required Investors.

     6.9 Management. Allow any management personnel to organize or become engaged in any
business activity that is in competition with the business of the Company. The Company shall not
make any change in its officers or present management or make any significant change in its
business.

     6.10 Pension and Profit-Sharing Plan or Arrangements. Establish any Employee Plan
whereby any part of the profits or earnings of the Company are shared with any Person.

     6.11 Permitted Indebtedness. Create, incur, assume or permit to exist any
Indebtedness or Liability, or any guarantee with respect to any such Indebtedness or Liability,
except:

          (a) current trade payables;

          (b) rentals under leases with Persons who are not Affiliates of the Company for terms of three
years or less of real or personal property leased by the Company from Persons who are not
Affiliates of the Company in the ordinary course of business not exceeding, in the aggregate,
Twenty-Five Thousand Dollars ($25,000) due in any fiscal year of the Company;

          (c) wages or other compensation due to its employees and agents for services actually
performed;

          (d) Liabilities for customer deposits in reasonable amounts obtained in the ordinary course of
business;

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          (e) Liabilities for taxes not yet due; and

          (f) Indebtedness permitted under this Agreement.

     6.12 Liens. Create, assume or suffer to exist any Lien, other than Permitted Liens,
Liens set forth on Schedule 3.9.

     6.13 Expenditures. Make or incur any expenditures (operating or capital expenditure)
or incur lease obligations for fixed assets, in excess of the amounts approved by the Company’s
Board of Directors and Required Investors pursuant to Section 5.17.

     6.14 Changes in Business. Enter into any business that is substantially different
from the business currently conducted Company.

     6.15 Registration Rights. Except as set forth in Article IX, the Company
shall not grant registration or similar rights to any Person without the prior written consent of
the Required Investors.

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES THEREFOR

     7.1 Events of Default. Each of the following events, acts, occurrences or conditions
shall constitute an “Event of Default” under this Agreement, regardless of whether such
event, act, occurrence or condition is voluntary or involuntary or results from the operation of
law or pursuant to or as a result of compliance by any Person with any applicable law or
Governmental Authority:

          (a) The Company shall fail to pay when due any payment of principal or interest or any
distribution (in each case, whether or not funds are legally available therefor) payable under any
Note, Warrant or the Underlying Shares and such failure shall remain unremedied for ten (10) days.

          (b) The Company shall fail to perform or observe any agreement, covenant or obligation arising
under Sections 5.5, 5.7, 5.14, 10.2 or Article VI.

          (c) The Company shall fail to perform or observe any other agreement, covenant or obligation
arising under this Agreement or any of the Loan Documents and such nonperformance or nonobservance
shall continue for a period of greater than thirty (30) days after such failure to perform or
observe commenced.

          (d) Any representation or warranty made by the Company herein, or in any statement or
certificate furnished by the Company in connection with the transactions contemplated

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by this
Agreement, proves untrue in any material respect as of the date of the issuance or making thereof.

          (e) The Company shall default in the payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) of any amount owing in respect of any Indebtedness
in the aggregate principal amount of Fifty Thousand Dollars ($50,000) or more,
or shall default in the performance or observance of any obligation or condition with respect to
any such Indebtedness or any other event shall occur or condition exist, if the effect of such
default, event or condition is to accelerate the maturity of any such Indebtedness or to permit
(without regard to any required notice or lapse of time) the holder or holders thereof, or any
trustee or agent for such holders, to accelerate the maturity of any such Indebtedness, or any such
Indebtedness shall become or be declared to be due and payable prior to its stated maturity other
than as a result of a regularly scheduled payment.

          (f) (i) The Company shall commence a voluntary case concerning itself under the Bankruptcy
Code; (ii) an involuntary case is commenced against the Company and the petition is not
controverted within ten (10) days, or is not dismissed within thirty (30) days, after commencement
of the case; (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of the Company, or the Company commences any
other proceedings under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter
in effect relating to the Company, or there is commenced against the Company any such proceeding
which remains undismissed for a period of sixty (60) days; (iv) any order of relief or other order
approving any such case or proceeding is entered; (v) the Company is adjudicated insolvent or
bankrupt; (vi) the Company suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a period of thirty (30)
days; (vii) the Company makes a general assignment for the benefit of creditors; (viii) the Company
shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; (ix) the Company shall call a meeting of its creditors with a view to
arranging a composition or adjustment of its debts; (x) the Company shall by any act or failure to
act consent to, approve of or acquiesce in any of the foregoing; (xi) any corporate action is taken
by the Company for the purpose of effecting any of the foregoing.

          (g) Any judgment, writ or warrant of attachment or of any similar post-judgment process in an
amount in excess of Twenty-five Thousand Dollars ($25,000) shall be entered or filed against the
Company or against any of its properties or assets and remain unpaid, unvacated, unbonded or
unstayed for a period of sixty (60) days.

          (h) Until the earlier to occur of (x) the consummation of a Qualified Public Offering by the
Company, (y) the sale of all or substantially all of the Company’s Capital Stock through merger or
otherwise (including all Preferred Shares and Common Shares held by the Investors), or (z) the
Company sells all or substantially all of the Company’s assets for cash and/or securities
registered under the Securities Act and promptly distributes such proceeds to its shareholders, the
death of either of the Principals prior to June 30, 2005 and any time after June 30, 2005 if such
Principal is employed either full or part-time by the Company after such date.

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          (i) Until the earlier to occur of (x) the consummation of a Qualified Public Offering by the
Company, (y) the sale of all or substantially all of the Company’s Capital Stock through merger or
otherwise (including all Preferred Shares and Common Shares held by the Investors), or (z) the
Company sells all or substantially all of the Company’s assets for cash and/or
securities registered under the Securities Act and promptly distributes such proceeds to its
shareholders, either of the Principal’s full-time (in the case of Paul J. Reckwerdt) and part-time
(one-half day per week in the case of Dr. Thomas Rockwell Mackie) effort on the development of the
Company shall cease for any reason (other than termination by the Company without Cause) prior to
June 30, 2005; provided, that Dr. Thomas Rockwell Mackie shall be permitted to retain his
existing faculty position at the University of Wisconsin-Madison. For purposes of this Section
7.1(h), “Cause” shall mean a basis of termination of Reckwerdt based on Reckwerdt’s
willful and continued failure to substantially perform his legally assigned duties from the
Company, or based on Reckwerdt’s material breach of any agreement with the Company.
“Cause” also includes Reckwerdt’s engagement in conduct that is materially injurious to the
Company or is likely to result in material discredit to or material loss of business, reputation or
goodwill of the Company.

          (j) A Default or Event of Default (as each is defined in the Series A Investment Agreement)
occurs pursuant to the Series A Investment Agreement, or a Default or Event of Default (as each is
defined in the Series B Investment Agreement) occurs pursuant to the Series B Investment Agreement,
or a Default or Event of Default (as each is defined in the Series C Investment Agreement) occurs
pursuant to the Series C Investment Agreement.

     7.2 Notice to Investors. Upon the occurrence of any condition, event or act described
in Section 7.1, the Company shall give written notice thereof to the Investors within five
(5) Business Days of receiving knowledge of such condition, event or act.

     7.3 Remedies. Upon the occurrence of any Event of Default, (i) the entire unpaid
principal of the Notes and the interest then accrued thereon shall become and be immediately due
and payable without any further notice or demand of any kind or any presentment or protest, (ii)
the Required Investors may, at their option and upon written notice to the Company, require the
Company to reduce pro rata among all Investors, all or any portion of the outstanding principal and
accrued but unpaid interest on the Notes, and (iii) each Investor may, subject to the consent of
the Required Investors, exercise its Put in accordance with Article X. No remedy herein is
intended to be or shall be construed to be exclusive of any other remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other remedy given
hereunder, or now or hereafter existing at law or in equity or by statute.

     7.4 Appointment of Advisors. If any Event of Default shall continue for more than 15
days, the Required Investors under this Agreement, together with the Required Investors (as that
term is defined in the Series A Investment Agreement) under the Series A Investment Agreement, the
Required Investors (as that term is defined in the Series B Investment Agreement) under the Series
B Investment Agreement, and the Required Investors (as that term is defined in the Series C
Investment Agreement) under the Series C Investment Agreement, collectively, shall have the right

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to select accountants, legal counsel and other appropriate advisors who shall be immediately
retained by the Company to represent the Company in connection with all pending matters.

     7.5 Expenses. The Company shall pay to the Investors all reasonable costs and
expenses, including without limitation the fees and expenses of counsel, incurred in connection
with any Event of Default or the enforcement by the Investors of any of its rights or remedies with
respect thereto.

ARTICLE VIII

TRANSFERABILITY

     8.1 Transferability. Transfer of the Notes, Warrants, Series D Preferred Shares,
Series C Preferred Shares or any other Capital Stock of the Company shall be made in accordance
with this Agreement and the Shareholders Agreement and shall be made only on the books of the
Company by the holder of record thereof or by its legal representatives who shall furnish proper
evidence of authority to transfer, or by its attorney thereunto authorized by power of attorney
duly executed and filed with the secretary of the Company subject, in the case of Underlying
Shares, to the restrictions set forth in Sections 8.3 and 8.4 hereof. The holder
in whose name the Underlying Shares stand on the books of the Company shall be deemed by the
Company to be the owner thereof for all purposes. For purposes of any transfer permitted under
this Agreement, any certificate for shares of Capital Stock may be divided into denominations of
one share or multiples thereof, upon surrender of such existing certificate at the principal office
of the Company.

     8.2 Representations and Warranties of the Investors. Each Investor represents and
warrants, solely as to itself, to the Company as follows:

          (a) It has received and reviewed the Company’s Articles of Incorporation and Bylaws, as
amended, and the financial statements and projections referred to herein, and understands the
nature and risks of the investment contemplated hereby, and has relied upon such documents, its own
independent investigation and its independent advisors, if any, and has not relied upon any other
offering materials or oral representations.

          (b) It has been informed by the Company in writing that neither the Notes, Warrants nor the
Underlying Shares have been registered under the Securities Act or any applicable state securities
laws because the offer and sale thereof is exempt from such registration pursuant to Sections
3(a)(11), 3(b) or 4(2) of the Securities Act and the rules and regulations of the Securities and
Exchange Commission (the “SEC”) thereunder and certain limited offering exemptions under
state securities laws based in part upon its representations made herein.

          (c) It is undertaking the transactions contemplated herein for investment for its own account,
not on behalf of others, and not with a view to resell or otherwise distribute the Notes, Warrants
or Underlying Shares.

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          (d) It will not attempt to sell or otherwise distribute the Notes, Warrants or Underlying
Shares except in compliance with applicable federal and state securities laws, this Agreement and
the Shareholders Agreement.

          (e) Its current financial condition is adequate to bear the substantial economic risks of this
investment and, at the present time, it could afford a complete loss of such investment; it has
sufficient knowledge and experience in investment, tax, venture capital and business matters in
order to evaluate the merits and risks of such investment; and it is aware of the intended use of
proceeds of such investment and the risks involved in a speculative enterprise such as the Company.

          (f) To the knowledge of such Investor, all communications and information, written or oral,
concerning the Notes and the Warrants have been directed solely to Persons in, and have been
received solely in, the states of Wisconsin, Michigan, Minnesota, Illinois, Florida, Pennsylvania,
California, and the District of Columbia.

          (g) Such Investor is not liable for any finders’ fees, brokerage fees or similar fees or
expenses in connection with entering into the transactions contemplated hereby.

          (h) Such Investor is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D adopted by the SEC pursuant to the Securities Act.

     8.3 Restrictive Legends. Each stock certificate representing Underlying Shares issued
to the Investors shall contain or otherwise be imprinted with the legends set forth in the
Shareholders Agreement. Each Note and Warrant shall contain a legend that references the transfer
restrictions contained in this Agreement. The Company shall place “stop transfer” instructions on
its records and shall instruct any transfer agent to prevent the transfer of any Capital Stock
owned by the Investors except in conformity with this Agreement and the Shareholders Agreement.

     8.4 Restrictions on Transfer. Until the Notes, Warrants, Series D Preferred Shares,
Series C Preferred Shares or the Underlying Shares, as the case may be, have been registered under
the Securities Act for public sale, no holder thereof shall sell, assign, pledge or otherwise
dispose of any or all of such securities, except in accordance with this Agreement and the
Shareholders Agreement. No holder of the Notes or the Warrants may make a transfer thereof without
the prior written consent of the Company, except a transfer to (a) any Permitted Transferee, or (b)
any Person to which such holder is selling its entire interest in the Capital Stock in accordance
with the terms of the Shareholders Agreement.

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ARTICLE IX

REGISTRATION RIGHTS

     9.1 Demand Registration.

          (a) The holders of a majority of all Series A Preferred Shares, Series B Preferred Shares,
Series C Preferred Shares, Series D Preferred Shares, and Underlying Shares of the Company
(assuming that all Preferred Shares are converted into Common Shares), voting as a single class,
shall have the right, exercisable by giving notice to the Company, to require the Company to file a
registration statement under the Securities Act to register the offer and sale of all or any
portion of such holders’ (the “Rightholders”) Common Shares in the Company (a “Demand
Registration”); provided that the Company shall not be obligated to effect a
registration pursuant to this Section 9.1 (other than a registration on Form S-2, Form S-3
or any successor form from and after the time the Company is eligible to use Form S-2, Form S-3 or
any successor form, as applicable, as to which the Rightholders shall have unlimited rights to
require the Company to effect a registration) on more than two occasions. In the event of such a
demand, the Company and any other shareholders of the Company having registration rights shall have
the right to include in such offering authorized but unissued Common Shares and Common Shares held
by such shareholders, respectively, but only to the extent that, in the opinion of the managing
underwriter(s) for such offering, the inclusion of such shares will not adversely affect the sale
of shares by the Rightholders. The managing underwriter(s) for such offering shall be selected by
the Company with the prior written approval of the Rightholders holding a majority of the Common
Shares held by Rightholders to be offered for sale pursuant to the Demand Registration, which
approval shall not be unreasonably withheld. In the event the Company has not selected an
underwriter approved by such Rightholders within thirty (30) days of the Rightholders’ notice, the
Rightholders holding a majority of the Common Shares held by Rightholders to be offered for sale
pursuant to the Demand Registration may select the underwriter. The Company shall not be deemed to
have effected a Demand Registration pursuant to this Section 9.1 unless the Rightholders
shall have sold that number of shares representing at least fifty percent (50%) of the Preferred
Shares (or an equivalent number of shares of Underlying Shares) then held by the Rightholders.

          (b) The Company may postpone for up to 180 days the filing or effectiveness of a registration
statement with respect to a Demand Registration if the Company and the Rightholders holding a
majority of the Common Shares held by Rightholders to be offered for sale pursuant to the Demand
Registration agree that such Demand Registration might have an adverse effect on any proposed
acquisition, merger, consolidation, tender offer or similar transaction. In the event of
postponement, the Rightholders shall be entitled to withdraw such request and if withdrawn, such
Demand Registration shall not be deemed a Demand Registration for purposes of this Section
9.1.

     9.2 Piggyback Registration. If at any time the Company proposes or is required to
register any offering of Preferred Shares (now or hereafter issued) or Common Shares under the
Securities Act, the Company will give written notice thereof to the holders of Preferred Shares at
least thirty (30) days prior to the filing of a
registration statement. Each holder of Preferred Shares shall have the right to include in
such registration all or a portion of its Common Shares;

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provided that the managing
underwriter(s) for such offering agrees that inclusion of such holder’s shares will not adversely
affect the sale of shares by the Company. If the managing underwriter(s) advise(s) the
Rightholders in writing that marketing factors require a limitation of the number of Common Shares
to be underwritten, then the Company shall so advise all Rightholders participating and the number
of Common Shares that may be included in the registration and underwriting shall be allocated among
all Rightholders in proportion, as nearly as practicable, to the respective amounts of Common
Shares held by such Rightholders at the time of filing the registration statement. No Common
Shares excluded from the underwriting by reasons of the underwriters’ marketing limitation shall be
included in such registration. To facilitate the allocation of Common Shares in accordance with
the above provisions, the Company or the underwriters may round the number of Common Shares
allocated to any Rightholder to the nearest 100 shares.

     9.3 Registration Procedures.

          (a) Whenever the Company is required to effect the registration of any Common Shares under the
Securities Act pursuant to Sections 9.1 or 9.2 (the “Subject Shares”), the
Company will use its best efforts to effect the registration and sale of the Subject Shares in
accordance with the intended method of disposition thereof. Without limiting the generality of the
foregoing, the Company will as soon as practicable:

     (i) prepare and file with the SEC a registration statement with respect to the Subject
Shares in form and substance satisfactory to the Rightholders holding a majority of the
Common Shares held by Rightholders to be offered for sale pursuant to the Demand
Registration and use its best efforts to cause such registration statement to become
effective as soon as practicable, but not later than 120 days after notice of a demand
registration, and to maintain the effectiveness thereof until the Subject Shares have been
sold thereunder;

     (ii) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective for the applicable period and to comply with
the provisions of the Securities Act with respect to the disposition of all Subject Shares
covered by such registration statement; provided that, except to the extent
otherwise provided by the Rightholders, all such amendments and supplements shall be
provided to the Rightholders at least five days prior to filing and the Company shall not
file any such amendment or supplement to which the Rightholders shall reasonably object.

     (iii) furnish to any Rightholder, without charge, such number of conformed copies of
such registration statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus), such documents incorporated
by reference in such registration statement or prospectus, and such other documents, as such
Rightholder may reasonably request;

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     (iv) use all reasonable efforts to register or qualify the Subject Shares covered by
such registration statement under the securities or blue sky laws of such jurisdictions as
the managing underwriter(s) shall reasonably recommend, and do any and all other acts and
things which may be reasonably necessary or advisable to enable the Rightholders to
consummate the disposition in such jurisdictions of the Subject Shares covered by such
registration statement, except that the Company shall not for any such purpose be required
to (A) qualify generally to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified, (B) subject itself to taxation in any such jurisdiction wherein it
is not so subject, or (C) consent to general service of process in any such jurisdiction or
otherwise take any action that would subject it to the general jurisdiction of the courts of
any jurisdiction in which it is not so subject;

     (v) otherwise use its best efforts to comply with all applicable rules and regulations
of the SEC;

     (vi) furnish, at the Company’s expense, unlegended certificates representing ownership
of the securities being sold in such denominations as shall be requested and instruct the
transfer agent, if any, to release any stop transfer orders with respect to the Subject
Shares being sold;

     (vii) notify the Rightholders at any time when a prospectus relating to the Subject
Shares is required to be delivered under the Securities Act of the happening of any event as
a result of which the prospectus included in such registration statement contains any untrue
statement of a material fact or omits to state a material fact necessary to make the
statements therein (in the case of the prospectus or any preliminary prospectus, in light of
the circumstances under which they were made) not misleading, and the Company shall, as
promptly as practicable thereafter, prepare and file with the SEC and furnish a supplement
or amendment to such prospectus so that, as thereafter delivered to the purchasers of
Subject Shares such prospectus will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the
statements therein not misleading;

     (viii) enter into customary agreements (including an underwriting agreement in
customary form in the case of an underwritten offering); make such representations and
warranties to the Rightholders and the underwriters as in form and substance are customarily
made by issuers to underwriters in underwritten offerings and take such other actions as the
Rightholders or the managing underwriter(s) reasonably require in order to expedite or
facilitate the disposition of such Subject Shares;

     (ix) make available for inspection by the Rightholders (or any of them), any
underwriter or agent participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other similar professional advisor retained by
the Rightholders (or any of them) or any such underwriter or agent, all pertinent financial
and other records, pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence responsibility, and
cause

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the Company’s officers, directors and employees to supply all information reasonably
requested by any such inspector in connection with such registration statement;

     (x) obtain for delivery to the Company, any such underwriter or agent, with copies to
the Rightholders, a “cold comfort” letter from the Company’s independent public accountants
in customary form and covering such matters of the type customarily covered by “cold
comfort” letters as the Rightholder or the managing underwriter(s) reasonably request;

     (xi) obtain for delivery to the Rightholders and any such underwriter or agent an
opinion or opinions from counsel for the Company in customary form and reasonably
satisfactory to the Rightholders and such underwriters or agents and their counsel;

     (xii) make available to its security holders earnings statements, which need not be
audited, satisfying the provisions of Section 11(a) of the Securities Act no later than 90
days after the end of the 12-month period beginning with the first month of the Company’s
first quarter commencing after the effective date of such registration statement, which
earnings shall cover such 12-month period;

     (xiii) make every reasonable effort to prevent the issuance of any stop order
suspending the effectiveness of such registration statement or of any order preventing or
suspending the effectiveness of such registration statement at the earliest possible moment;

     (xiv) cause the Subject Shares to be registered with or approved by such other
Governmental Authority as may be necessary to enable the Rightholders or the underwriter or
underwriters to consummate the disposition of such securities;

     (xv) cooperate with the Rightholders and the managing underwriter(s) or any other
interested party (including any interested broker-dealer) in making any filings or
submission required to be made, and the furnishing of all appropriate information in
connection therewith, with the National Association of Securities Dealers, Inc.
(“NASD”);

     (xvi) cause all Subject Shares to be listed on such national securities exchange(s) or
the National Association of Securities Dealers National Market System as the Rightholders
may reasonably request and, if any similar securities issued by the Company are then listed
on any securities exchanges or national market systems, to also list all such Subject Shares
on such securities exchanges or national market systems, and enter into such customary
agreements, including a listing application and indemnification agreement in customary form,
provided that the applicable listing requirements are satisfied, and provide a transfer
agent and registrar for such Subject Shares covered by such registration statement no later
than the effective date of such registration statement; and

     (xvii) take all other steps necessary to effect the registration of the Subject Shares
contemplated hereby.

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          (b) The Rightholders shall provide all information and materials and take all action as may be
required in order to permit the Company to comply with all applicable requirements of the SEC and
any applicable state securities laws and to obtain any desired acceleration of the effective date
of any registration statement prepared and filed by the Company pursuant to this Agreement.

          (c) The Rightholders shall, if requested by the Company or the managing underwriter(s) in
connection with any proposed registration and distribution pursuant to this Agreement, (i) agree to
sell the Subject Shares on the basis provided in any underwriting arrangements entered into in
connection therewith that are customary for similar offerings and (ii) complete and execute all
questionnaires, powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings, all in form and substance reasonably satisfactory to such
Rightholder.

          (d) Upon receipt of any notice from the Company that the Company has become aware that the
prospectus (including any preliminary prospectus) included in any registration statement filed
pursuant to Sections 9.1 or 9.2, as then in effect, contains any untrue statement
of a material fact or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, the Rightholders shall forthwith discontinue
disposition of the Subject Shares pursuant to the registration statement covering the same until
the Rightholders’ receipt of copies of a supplemented or amended prospectus and, if so directed by
the Company, deliver to the Company (at the Company’s expense) all copies other than permanent file
copies then in the Rightholders’ possession, of the prospectus covering the Subject Shares that was
in effect prior to such amendment or supplement.

          (e) The Company shall pay all expenses incurred in connection with any registration statements
filed pursuant to this Agreement, including without limitation all SEC and blue sky registration
and filing fees (including NASD fees), printing expenses, transfer agents and registrars’ fees,
fees and disbursements of the Company’s counsel and accountants and fees and disbursements of
experts used by the Company in connection with such registration statement and the reasonable fees
and disbursements of counsel(s) to the Rightholders; provided that the Rightholders shall
pay their pro rata share of all underwriting discounts and commissions attributable to the Subject
Shares sold by the Rightholders pursuant to any such registration statement.

     9.4 Indemnification of the Rightholders.

          (a) In connection with any registration pursuant to Sections 9.1 or 9.2, the
Company shall agree to indemnify and hold harmless the Rightholders and each Person, if any, who
controls such Rightholder (or transferee of all the rights hereunder), within the meaning of
Section 15 of the Securities Act against (i) all loss, liability, claim, damage and expense whatsoever
arising out of or based upon any untrue or alleged untrue statement of a material fact contained in
any preliminary prospectus, the registration statement or the prospectus (as amended or
supplemented), or in any application or other document executed by the Company or based upon
written information furnished by the Company filed in any jurisdiction in order to qualify the
Subject Shares under the

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securities laws thereof or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements therein not
misleading, or any other violation of applicable federal or state statutory or regulatory
requirements or limitations relating to action or inaction by the Company in the course of
preparing, filing, or implementing such offering; provided that the Company shall not be
liable for any loss, liability, claim, damage or expense arising out of or based upon any such
untrue or alleged untrue statement or any such omission or alleged omission, if such statement or
omission was made in reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such Rightholder expressly for use in the preparation of the
registration statement and (ii) all loss, liability, claim, damage and expense whatsoever to the
extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue
statement or omission (including but not limited to any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against any such litigation or claim) if such
settlement is effected with the written consent of the Company.

          (b) The Company shall be entitled to participate at its own expense in the defense of any suit
brought to enforce any such claim, but if the Company elects to assume such defense, such defense
shall be conducted by counsel chosen by it; provided that such counsel is satisfactory to
the Rightholders. In the event that the Company elects to assume the defense of any such suit and
retain such counsel, the selling shareholders or controlling persons, and defendants in the suit,
shall, after the date they are notified of such election, bear the fees and expenses of any
additional counsel thereafter retained by them in connection with such action.

          (c) Each Principal in any registered offering pursuant to Sections 9.1 or 9.2
shall agree, severally and not jointly, to indemnify and hold harmless each of the Rightholders and
each of its officers and directors and agents, and each other Person, if any, who controls the
Rightholders within the meaning of Section 15 of the Securities Act against any and all such
losses, liabilities, claims, damages and expenses as are indemnified against by the Company under
Section 9.4(a)-(b), but only to the extent that such losses, liabilities, claims, damages
and expenses are based upon untrue statements or omissions in any document referred to in
Section 9.4(a)-(b) in reliance upon, and in conformity with, written information furnished
in respect of such shareholders by or on behalf of such Principal expressly for use therein. If
any action shall be brought against any Rightholder or any other Person for which indemnification
may be sought under this Section 9.4(c), such Principal shall have the rights and duties
identical to those of the Company, and the Company and each other Person so indemnified shall have
the rights and duties given to the Principal, pursuant to Section 9.4(a)-(b). Any Person
seeking indemnification pursuant to this Section 9.4(c) shall promptly notify the
applicable Principal after the assertion of such claim.

     9.5 Indemnification of the Company. Each Rightholder in any registered offering
pursuant to Sections 9.1 or 9.2 shall agree, severally and not jointly, to
indemnify and hold harmless the Company and each of the officers and directors and agents of it and
each other Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act against any and all such losses, liabilities, claims, damages and expenses as are
indemnified against by the Company under Section 9.4, but only to the extent that such
losses, liabilities, claims, damages and expenses are based upon untrue statements or omissions in
any document

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referred to in Section 9.4 in reliance upon, and in conformity with, written
information furnished in respect of such shareholders by or on behalf of such Rightholder expressly
for use therein. If any action shall be brought against the Company or any other Person for which
indemnification may be sought under this Section 9.5, such Rightholder shall have the
rights and duties identical to those of the Company, and the Company and each other Person so
indemnified shall have the rights and duties given to the Rightholder, pursuant to Section
9.4. Any Person seeking indemnification pursuant to this Section 9.5 shall promptly
notify the applicable Rightholder after the assertion of such claim.

     9.6 Rule 144 and Rule 144A. The Company shall file in a timely manner all reports
required to be filed by it under the Securities Act and the Securities Exchange Act (or, if the
Company is not required to file such reports, it will, upon the request of the Investors (as such
term is defined in this Agreement, the Series A Investment Agreement, the Series B Investment
Agreement, or the Series C Investment Agreement, as applicable), make publicly available other
information so long as necessary to permit sales under Rule 144 and Rule 144A under the Securities
Act), and it will take such further action as such Investors may reasonably request, all to the
extent required from time to time to enable any of such Investors to sell Capital Stock without
registration under the Securities Act within the limitation of the exemptions provided by Rule 144
and Rule 144A under the Securities Act, as such rules may be amended from time to time, or any
similar rule or regulations hereafter adopted by the SEC. Upon the request of any such Investor,
the Company will deliver to such Investor a written statement as to whether it has complied with
such requirements. In addition, the Company agrees that for a period of 18 months following the
date on which a registration statement filed pursuant to Sections 9.1 or 9.2 shall
have become effective, the Company shall not deregister such securities under Section 12 of the
Securities Exchange Act.

     9.7 Transferability. Each Rightholder may transfer its rights under Article
IX, but only in connection with a sale or transfer to the following Persons: (a) any Permitted
Transferee (as such term is defined in this Agreement or in the Series A Investment Agreement, the
Series B Investment Agreement, or the Series C Investment Agreement, as applicable), (b) any Person
if the Rightholder is selling the number of Subject Shares equal to at least ten percent (10%) of
the number of shares of Capital Stock owned by the Rightholder on the Closing Date (as such term is
defined in this Agreement or in the Series A Investment Agreement, the Series B Investment
Agreement, or the Series C Investment Agreement, as applicable), including shares issuable upon the
conversion of the Notes and the exercise of the Warrants and any other options, warrants or other
convertible securities owned by such Rightholder as of such date (or an equivalent number of shares
of Underlying Shares), adjusted for any stock dividend, stock splits
and the like as provided for in the Shareholder Agreement; and (c) any Person if the
Rightholder is selling its entire interest in the Capital Stock.

     9.8 No Further Grants of Registration Rights The Company will not grant to any
present or future shareholder any further registration rights without the consent of a majority of
the holders of the Preferred Shares, voting as a single class.

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ARTICLE X

PUT OPTION; CO-SALE RIGHTS

     10.1 Grant of Put. The Company hereby irrevocably grants and issues to each Investor
the right and option to sell to the Company (the “Put”) all or any portion of the Preferred
Shares issued upon the conversion of the Notes or exercise of the Warrants or the Common Shares
into which the Preferred Shares have been converted (the “Put Shares”) held by such
Investor, on the terms set forth in this Article X.

     10.2 Exercise of Put.

          (a) Subject to the provisions of Sections 10.2 and 10.3, at any time after
December 31, 2005, upon the consent of the holders of at least three-quarters (3/4) of the
Preferred Shares, voting as a single class, each Investor may, upon written notice to the Company,
require the Company to redeem all or any portion of the Put Shares held by the Investors. If any
Investor shall elect to have the Company redeem all or any portion of its Put Shares, the
redemption price shall be an amount equal to the greater of (i) (A) the Automatic Conversion Price
per share with respect to Series D Preferred Shares, or, if there is no Automatic Conversion, (B)
$8.178 per Put Share (subject to adjustment as provided in Section 10.4), plus all accrued
but unpaid dividends, if any (the “Purchase Amount”) and (ii) the Fair Market Value of the
Put Shares.

          (b) In addition to the Investors’ rights under Section 10.2(a), at any time following
the occurrence of any Event of Default and following the approval of the Required Investors as
provided in Section 7.3, each Investor may, at its option and upon written notice to the
Company, require the Company to redeem all or any portion of the Put Shares held by the Investor.
If any Investor shall elect to have redeemed all or a portion of its Put Shares the redemption
price shall be an amount equal to the greater of (i) the Purchase Amount or (ii) the Fair Market
Value of the Put Shares.

          (c) In the case of any redemption of Put Shares, the redemption price shall be paid by
certified check not more than ninety (90) days after the date of the Investor’s notice of election
to exercise the Put.

          (d) For purposes of this Article X, “Fair Market Value” shall mean the price
which a willing purchaser would pay and a willing seller would accept for the Put Shares, both
being fully informed of the relevant facts and neither being under a compulsion to purchase or
sell, without giving a discount for lack of liquidity, marketability or minority interest status
(if applicable). Fair Market Value shall be determined by an independent and qualified appraiser
mutually selected by the Company and holders of at least 75% of the then outstanding Put Shares.
If the Company and such shareholders cannot agree on an appraiser, such shareholders, collectively,
shall select one appraiser, and the Company shall select one appraiser. Such appraisers will then
select a third appraiser. All three appraisers shall then valuate the Put Shares in accordance
with this Section 10.2(d), and the Fair Market Value shall be the median valuation

-42-

 

of such
shares. All costs of any appraisal under this Section 10.2(d) shall be paid by the
Company.

     10.3 Reasonable Actions. In the event that any payment to be made by the Company is
prohibited by applicable provisions of corporate law or by any other applicable law, then such
payment shall be immediately made by the Company at the next earliest time, and to the extent
possible, when compliance with said law may be effected, and the Company agrees that it will
execute all such documents and take all such other steps as may be necessary to expedite and
effectuate to the extent possible such compliance. In that event, the Company agrees to support and
cooperate with the Investors and to take such actions from time to time as the Investors may
reasonably propose including, but not limited to, the sale of designated assets of the Company in
order to facilitate the repurchase of the Put Shares or to protect the investment of the Investors
in the Company; provided that such actions do not materially impair either the business
operations of the Company or the rights of the Company’s creditors to any significant extent or the
general rights that the holders of Common Shares have under law upon a liquidation of the Company
or sale of all or substantially all of the Company’s assets; provided, however,
that nothing contained herein shall be construed to require the contribution by the Principals or
the Investors of additional capital to the Company or otherwise create personal liability for the
Principals or the Investors.

     10.4 Adjustment of Purchase Price. In the event of any stock dividend, stock split,
combination of shares, subdivision or other recapitalization of the Put Shares or the Underlying
Shares, then the number of Put Shares and the purchase price per Put Share set forth in Section
10.2 shall be proportionately adjusted to take into account each of any such events, so that
upon the exercise of the Put provided for herein, the Investors shall be entitled to receive such
aggregate purchase price for all Put Shares, upon exercise of the Put, after the happening of any
such event as it would have been entitled to do or receive had the Put been exercised with respect
to all such Put Shares immediately prior to the happening of any such event.

     10.5 Co-Sale Rights. All rights of the Investors set forth in Article III of
the Shareholders Agreement shall apply to the Preferred Shares and Underlying Shares (which shall
be deemed to be outstanding for purposes of such Article III), in addition to any other
Capital Stock now owned or hereafter acquired by the Investors.

ARTICLE XI

INDEMNIFICATION

     11.1 Indemnification.

          (a) The Company agrees to indemnify, pay and hold each of the Investors and their members,
employees and agents and their respective Affiliates (collectively called the
“Indemnitees”) harmless from and against, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any
kind or

-43-

 

nature whatsoever including, without limitation, the fees and disbursements of counsel for
such Indemnitees in connection with any investigative, administrative or judicial proceeding,
whether or not such Indemnitees shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against such Indemnitee, as a result of the violation or breach of any
representation, warranty or covenant of the Company under this Agreement or the transactions
contemplated hereby or otherwise asserted against the Company or the Investors in connection with
the transactions contemplated by this Agreement (a “Claim”). If any indemnity provided for
in the preceding sentence is not available solely because it is found to be contrary to public
policy or otherwise unlawful, then the Company and the Indemnities shall contribute to the amount
payable in such proportion as is appropriate to reflect the relative faults and benefits and any
other relevant equitable considerations.

          (b) If any Claim or alleged Claim shall be brought against any Indemnitee in respect of which
such Indemnitee may be indemnified under this Section 11.1 by the Company, such Indemnitee
shall promptly notify the Company in writing. The Company at its option may assume the defense of
any action in respect of which it has acknowledged its obligation to indemnify such Indemnitee
under this Section 11.1. If the Company assumes the defense of any action, such Indemnitee
shall not be liable for any settlement thereof without its consent (but such consent will not be
unreasonably withheld). If the Company assumes the defense of any such action, such Indemnitee
shall have the right to employ separate counsel in such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be paid by such Indemnitee unless in the
reasonable opinion of such Indemnitee there may be a conflict between the positions of the Company
and of such Indemnitee in conducting the defense of such action or that there may be legal defenses
available to such Indemnitee different from or in addition to those which counsel to the Company
would be able to raise, in which event the fees and expenses of such counsel shall be paid by the
Company.

          (c) Without limiting the generality of the indemnity set out in Section 11.1(a) above,
the Company shall defend, protect, indemnify and hold harmless the Investors and all other
Indemnitees from and against any and all actions, causes of action, suits, losses, liabilities,
damages, injuries, penalties, fees, costs, expenses and claims of any and every kind whatsoever
paid, incurred or suffered by, or asserted against, the Investors or any other Indemnitee pursuant
to Environmental Laws with respect to the past, present or future operations or facilities of the
Company, any Subsidiary or any predecessors, successors, or Affiliates thereof.

     11.2 Taxes. The Company agrees to pay all governmental assessments, charges or taxes
(except income or other similar taxes imposed on the Investors), including any interest or
penalties thereon, at any time payable or ruled to be payable in respect of the existence,
execution, delivery or performance of this Agreement or the issuance or existence of the Shares, by
reason of an existing or hereafter enacted federal, state or local statute, and to indemnify and
hold the Investors harmless against liability in connection with any such assessments, charges or
taxes.

-44-

 

ARTICLE XII

ADDITIONAL PROVISIONS

     12.1 Expenses.

          (a) The Company agrees to pay promptly all expenses incurred by it in connection with the
performance of its obligations hereunder. On such Closing Date, the Company shall pay all of the
legal fees and expenses, accounting fees and other expenses incurred to date in connection with
this Agreement and the transactions contemplated hereby as set forth in Section 5.12.

          (b) The Company shall pay all governmental charges, stamp, issuance or other taxes that are
imposed, rated or determined at any time to be payable under any existing or hereafter adopted
federal or other laws in connection with the existence, execution, issuance or delivery of this
Agreement, the Notes, the Warrants or any of the Underlying Shares to be issued to the Investors by
the Company.

          (c) The Company shall pay promptly all out-of-pocket expenses reasonably incurred by the
Investors (including the reasonable fees and disbursements of counsel) in connection with any
consent, waiver, modification or amendment and any enforcement or other costs incurred upon an
Event of Default or otherwise relating to this Agreement.

     12.2 Successors and Assigns. This Agreement shall be binding upon, and inure to the
benefit of, the Investors and the Company and their respective successors and assigns, and, except
as otherwise expressly provided in any particular provision hereof, any subsequent holder of the
Notes, Warrants or Underlying Shares.

     12.3 Notices. All communication or notices required or permitted by this Agreement
shall be in writing and shall be deemed to have been given or made when delivered in hand,
deposited in the mail, or sent by facsimile. Communications or notices shall be delivered
personally or by certified or registered mail, return receipt requested and postage prepaid, or by
facsimile with evidence of transmission, and addressed as follows, unless and until such parties
notifies the other in accordance with this section of a change of address:

	 	 	 	 	 
	(a)

	 	if to the Company	 	 
	 

	 	or the Principals:
	 	TomoTheray Incorporated

1240 Deming Way

Madison, WI 53717-1954

(608) 824-2800

(608) 824-2996 (fax)

-45-

 

	 	 	 	 	 
	 

	 	copy to:
	 	Michael E. Skindrud, Esq.

LaFollette Godfrey & Kahn

One East Main Street, Suite 500

Madison, WI 53703

(608) 257-3911

(608) 257-0609 (fax)

(b) if to the Investors, at the addresses set forth on their respective signature
page hereto.

     12.4 No Waiver; Remedies Cumulative. No delay on the part of the Investors or any
other holder of the Notes, Warrants or Underlying Shares in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude other or further
exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement are cumulative and are in addition to all right or remedies which the
Investors and such other holders otherwise may have in law or in equity or by statute or otherwise.
Without limiting the generality of the of the foregoing, nothing in this Agreement shall be deemed
to preclude or be in lieu of any right or remedy that the Investors or other holders may have in
law or in equity or by statute or otherwise against the Company or any other Person based upon any
fraud (whether or not the matter to which the fraud related also constitutes an Event or Default
hereunder).

     12.5 Amendments and Waivers. Except as otherwise provided in this Agreement, any
change or amendment to this Agreement or any waiver hereunder shall be effective only if in writing
and signed by the Company, the Principals and the Required Investors.

     12.6 Severability. If any provision of this Agreement is held for any reason to be
unenforceable, the remainder of this Agreement shall remain in full force and effect.

     12.7 Headings. The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or interpretation of this Agreement.

     12.8 Governing Law. This Agreement is made in the State of Wisconsin and shall be
governed by and construed in accordance with the internal laws of the State of Wisconsin, without
reference to principles of conflicts of law.

     12.9 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute one and the same
instrument.

     12.10 Further Assurances. The Company agrees, and shall cause its officers, to
execute any other documents or take any other actions reasonably requested by the Investors to
fulfill the transactions described in and contemplated by this Agreement.

-46-

 

     12.11 Waiver of Jury Trial. THE COMPANY AND THE INVESTORS HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT
OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

[signature page follows]

-47-

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni	 	 
	 

	 	Chief Executive Officer	 	 

With respect to Sections 4.2, 4.5, 4.19 and 4.23, 5.18,
9.4(c), and 12.2-12.11.

	 	 	 
	/s/ Thomas Rockwell Mackie

	 	 
	 
	 	 
	Thomas Rockwell Mackie

	 	 
	 
	 	 
	/s/ Paul J. Reckwerdt
	 	 
	 
	 	 
	Paul J. Reckwerdt
	 	 

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

AVALON TECHNOLOGIES, LLC

By: Avtech Ventures, LLC, Managing Member

	 	 	 	 	 
	By:

	 	/s/ Gary L. Shields	 	 
	 

	 	 	 	 
	Name:
	 	Gary L. Shields	 	 
	 

	 	 	 	 
	Title:
	 	Managing Member	 	 
	 

	 	 	 	 

			
	Notices:          	 	Avalon Technology, LLC

c/o Avtech Ventures, LLC

1201 Camino Del Mar, Suite 215

Del Mar, CA 92014

Attn: Gary L. Shields

Phone: (858) 356-3560, ext. 301

Fax:(858) 356-3563
 

Email: gshields@avtechventures.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

OPEN PRAIRIE VENTURES I. L.P.

By: Open Prairie Venture Management I,

LLC, General Partner

By: Open Prairie Ventures, Inc., Manager

	 	 	 	 	 
	By:

	 	/s/ Dennis D. Spice	 	 
	 

	 	 	 	 
	Name:
	 	Dennis D. Spice	 	 
	 

	 	 	 	 
	Title:
	 	Vice President	 	 
	 

	 	 	 	 

			
	Notices:          	 	Open Prairie Ventures

115 North Neil Street, Suite 209

Champaign, IL 61820

Attn: Jim Schultz

Phone: (217) 351-7000

Fax: (217) 351-7051

Email: jschultz@openprairie.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

STATE OF WISCONSIN INVESTMENT

BOARD

	 	 	 	 	 
	By:

	 	/s/ Jon Vanderploeg	 	 
	 

	 	 	 	 
	Name:
	 	Jon Vanderploeg	 	 
	 

	 	 	 	 
	Title:
	 	Portfolio Manager	 	 
	 

	 	 	 	 

			
	Notices:          	 	State of Wisconsin Investment Board

121 East Wilson Street

Madison, WI 53702

Facsimile: (608) 266-2436

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

ADVANTAGE CAPITAL WISCONSIN

PARTNERS I, LIMITED PARTNERSHIP

By: Venture Investors LLC, Sub-Manager

	 	 	 	 	 
	By:

	 	/s/ John Neis	 	 
	 

	 	 	 	 
	Name:
	 	John Neis	 	 
	 

	 	 	 	 
	Title:
	 	Member	 	 
	 

	 	 	 	 

			
	Notices:          	 	c/o Venture Investors LLC
505 South Rosa Road, #100

Madison, WI 53719

Attn: John Neis, Managing Member

Phone: (608) 441-2700

Fax: (608) 441-2727

Email: john@ventureinvestors.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

VENTURE INVESTORS EARLY STAGE

FUND III LIMITED PARTNERSHIP

By: Venture Investors LLC, General Partner

	 	 	 	 	 
	By:

	 	/s/ John Neis	 	 
	 

	 	 	 	 
	Name:
	 	John Neis	 	 
	 

	 	 	 	 
	Title:
	 	Member	 	 
	 

	 	 	 	 

			
	Notices:          	 	c/o Venture Investors LLC

505 South Rosa Road, #100

Madison, WI 53719

Attn: John Neis, Managing Member

Phone: (608) 441-2700

Fax: (608) 441-2727

Email: john@ventureinvestors.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

BAIRD VENTURE PARTNERS I,

LIMITED PARTNERSHIP

By: Baird Venture Partners Management

Company I, L.L.C., General Partner

	 	 	 	 	 
	By:

	 	/s/ Gordon Pan	 	 
	 

	 	 	 	 
	Name:
	 	Gordon Pan	 	 
	 

	 	 	 	 
	Title:
	 	Director	 	 
	 

	 	 	 	 

			
	Notices:          	 	c/o Baird Venture Partners

227 West Monroe Street, 22nd Floor

Chicago, IL 60606

Attn: Gordon Pan

Phone: (312) 609-5498

Fax: (312) 609-4707

Email: gpan@rwbaird.com

Attn: Betsy Lazzara

Phone: (312) 609-4989

Email: elazzara@rwbaird.com

	 	 	 
	And          	 	c/o Baird Venture Partners

Suite 175C

505 South Rosa Road

Madison, WI 53719

Attn: Tim Mathison

Phone: (608) 441-2900

Fax” (608) 441-2901

Email: tmathison@rwbaird.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

MAYO FOUNDATION FOR MEDICAL

EDUCATION AND RESEARCH

	 	 	 	 	 
	By:

	 	/s/ Jonathan J. Oviatt	 	 
	 

	 	 	 	 
	Name:
	 	Jonathan J. Oviatt	 	 
	 

	 	 	 	 
	Title:
	 	Secretary	 	 
	 

	 	 	 	 

			
	Notices:          	 	Nathan L. Stacy

Mayo Medical Ventures

200 First Street S.W.

Rochester, MN 55905

Phone: (507) 538-1652

Fax: (507) 284-5410

Email:stacy.nathan@mayo.edu

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

780 PARTNERS

	 	 	 	 	 
	By:

	 	/s/ Richard J. Bliss	 	 
	 

	 	 	 	 
	Name:
	 	Richard J. Bliss	 	 
	 

	 	 	 	 
	Title:
	 	Managing Partner	 	 
	 

	 	 	 	 

			
	Notices:          	 	c/o Godfrey & Kahn, S.C.

780 North Water Street

Milwaukee, WI 53202-3590

Attn: Richard J. Bliss, Esq.

Phone: (414) 273-3500

Fax: (414) 273-5198

Email: rbliss@gklaw.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

BVP I AFFILIATES FUND LIMITED

PARTNERSHIP

By: Baird Venture Partners Management

Company I, L.L.C., General Partner

	 	 	 	 	 
	By:

	 	/s/ Gordon Pan	 	 
	 

	 	 	 	 
	Name:
	 	Gordon Pan	 	 
	 

	 	 	 	 
	Title:
	 	Director	 	 
	 

	 	 	 	 

			
	Notices:          	 	c/o Baird Venture Partners

227 West Monroe Street, 22nd Floor

Chicago, IL 60606

Attn: Gordon Pan

Phone: (312) 609-5498

Fax: (312) 609-4707

Email: gpan@rwbaird.com

Attn: Betsy Lazzara

Phone: (312) 609-4989

Email: elazzara@rwbaird.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ Terry F. Kelly

	 	 
	 
	 	 
	 
	 	 
	/s/
Mary W. Kelly

	 	 
	 
	 	 
	Terry F. and Mary W. Kelly

	 	 

			
	Notices:          	 	Terry F. and Mary W. Kelly

1007 Hillside Avenue

Madison, WI 53705

Email:tkelly@wxc.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

DD&G PARTNERSHIP

	 	 	 	 	 
	By:

	 	/s/ David Hackworthy	 	 
	 

	 	 	 	 
	Name:
	 	David Hackworthy	 	 
	 

	 	 	 	 
	Title:
	 	Partner	 	 
	 

	 	 	 	 

			
	Notices:          	 	DD&G Partnership

c/o David C. Hackworthy

P.O. Box 392

Madison, WI 53701

Phone: (608) 251-2351

Email: dhackworthy@rwbaird.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ Paul Reckwerdt

	 	 
	 
	 	 
	Paul Reckwerdt

	 	 

			
	Notices:          	 	TomoTherapy Incorporated

Attention: Paul Reckwerdt

1240 Deming Way

Madison, WI 53717-1954

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

THE ENDEAVORS GROUP, LLC

	 	 	 	 	 
	By:

	 	/s/ Kevin Lindsey	 	 
	 

	 	 	 	 
	Name:
	 	Kevin Lindsey	 	 
	 

	 	 	 	 
	Title:
	 	Business Manager	 	 
	 

	 	 	 	 

			
	Notices:          	 	The Endeavors Group, LLC

Attn: Kevin Lindsey

9100 N. Swan Rd.

Milwaukee, WI 53224

Phone: (414) 355-3000

Fax: (414) 355-8060

Email: klindsey@execpc.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ John Barni

	 	 
	 
	 	 
	John Barni

	 	 

			
	Notices:          	 	TomoTherapy Incorporated

Attention: Jonn Barni

1240 Deming Way

Madison, WI 53717-1954

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ Steve Hathaway

	 	 
	 
	 	 
	Steve Hathaway

	 	 

			
	Notices:          	 	TomoTherapy Incorporated

Attention: Steve Hathaway

1240 Deming Way

Madison, WI 53717-1954

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ Michael G. Laskis

	 	 
	 
	 	 
	Michael G. Laskis

	 	 

			
	Notices:          	 	Michael G. Laskis

c/o Foley & Lardner

150 E. Gilman Street

Madison, WI 53703-2808

Phone: (608) 257-5035

Fax: (608) 258-4258

Email: mlaskis@foleylaw.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ Anne E. Ross

	 	 
	 
	 	 
	Anne E. Ross

	 	 

			
	Notices:          	 	Anne E. Ross

c/o Foley & Lardner

150 E. Gilman Street

Madison, WI 53703-2808

Phone: (608) 257-5035

Fax: (608) 258-4258

Email: aross@foleylaw.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ Dennis Skogen

	 	 
	 
	 	 
	Dennis Skogen

	 	 

			
	Notices:          	 	Dennis Skogen

3154 Wacheeta Trail

Madison, WI 53711

Phone: (608) 222-8600

Email: skogen@safetyengineering.com; or

           dennis@skogen.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:

	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer	 	 

	 	 	 
	/s/ Wade Fetzer III

	 	 
	 
	 	 
	Wade Fetzer III

	 	 

			
	Notices:          	 	Wade Fetzer III

			
		 	c/o Goldman, Sachs & Co.

4900 Sears Tower

Chicago, IL 60606

			
		 	Email: wade.fetzer@gs.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

TOMOTHERAPY INCORPORATED

	 	 	 	 	 
	By:
	 	/s/ John J. Barni	 	 
	 

	 	 	 	 
	 

	 	John J. Barni

Chief Executive Officer
	 	 

	 	 	 
	/s/ David G. Walsh

	 	 
	 
	 	 
	David G. Walsh

	 	 

			
	Notices:          	 	David G. Walsh

			
		 	c/o Foley & Lardner

150 E. Gilman Street

Madison, WI 53703-2808

Phone: (608) 257-5035

Fax: (608) 258-4258

Email: dwalsh@foleylaw.com

[Signature Page of Note and Warrant Purchase Agreement]

 

 

APPENDIX I

List of Investors

AVALON TECHNOLOGIES, LLC

OPEN PRAIRIE VENTURES I. L.P.

STATE OF WISCONSIN INVESTMENT BOARD

ADVANTAGE CAPITAL WISCONSIN PARTNERS I, LIMITED PARTNERSHIP

VENTURE INVESTORS EARLY STAGE FUND III LIMITED PARTNERSHIP

BAIRD VENTURE PARTNERS I, LIMITED PARTNERSHIP

MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH

780 PARTNERS

BVP I AFFILIATES FUND LIMITED PARTNERSHIP

DD&G PARTNERSHIP

PAUL RECKWERDT

THE ENDEAVORS GROUP, LLC

JOHN BARNI

STEVE HATHAWAY

MICHAEL G. LASKIS

ANNE E. ROSS

DENNIS SKOGEN

WADE FETZER III

DAVID G. WALSH

TERRY F. AND MARY W. KELLY

Appendix I-1

 

EXHIBIT A

FORM OF BORROWING REQUEST

A-1

 

EXHIBIT B

FORM OF COLLATERAL ASSIGNMENT

B-1

 

EXHIBIT C

FORM OF SECURITY AGREEMENT

C-1

 

EXHIBIT D

FORM OF NOTE

D-1

 

EXHIBIT E

FORM OF WARRANT

E-1

 

EXHIBIT F

FORM OF OPINION OF COUNSEL

F-1

 

SECOND AMENDMENT, WAIVER, AND CONSENT

TO

NOTE AND WARRANT PURCHASE AGREEMENTS

     This Second Amendment, Waiver, and Consent to Note and Warrant Purchase Agreements (this
“Second Amendment”) is dated as of February 18, 2004, and entered into by and among
TomoTherapy Incorporated, a Wisconsin corporation (the “Company”), Dr. Thomas Rockwell
Mackie (“Mackie”), Paul J. Reckwerdt (“Reckwerdt”; and together with Mackie, the
“Principals”), the undersigned holders (the “Bridge Round Investors”) of the
Company’s 12% Convertible Notes dated May 1, 2003 (the “Bridge Round Notes”) and issued
pursuant to that certain Note and Warrant Purchase Agreement among the parties dated May 1, 2003
(the “Bridge Round Investment Agreement”), and Advantage Capital Wisconsin Partners I,
Limited Partnership (“Advantage”) as the holder of that certain Unsecured Note issued by
the Company on October 23, 2003, pursuant to that certain Unsecured Note and Warrant Purchase
Agreement dated October 23, 2003, by and among the Company, the Principals, and Advantage (the
“Unsecured Note Agreement”). This Second Amendment amends certain terms of the Bridge
Round Investment Agreement and provides waivers to certain terms of both the Bridge Round
Investment Agreement and the Unsecured Note Agreement and consents to the transactions contemplated
by the certain Series D Investment Agreement of even date herewith by and among the Company and the
investors named therein (the “Series D Investment Agreement”).

     WHEREAS, the Company and the Principals have requested that the Bridge Round Investors amend
certain terms of the Bridge Round Investment Agreement and that the Bridge Round Investors and
Advantage waive certain covenants contained in each of the Bridge Round Investment Agreement and
the Unsecured Note Agreement, and provide certain consents, in connection with the transactions
contemplated by the Series D Investment Agreement; and

     WHEREAS, the terms of the Bridge Round Investment Agreement require the written approval of
the Company, the Principals, and the holders of not less than 75% of the outstanding principal
balance of all Bridge Round Notes to amend and waive certain provisions of that agreement and the
written approval of the holders of not less than 75% of the outstanding principal balance of all
Bridge Round Notes to waive certain other terms thereof; and

     WHEREAS, the terms of the Unsecured Note Agreement require the written approval of the
Company, the Principals, and Advantage to waive certain terms and the written approval of Advantage
to waive other provisions; and

     WHEREAS, the undersigned Bridge Round Investors, constituting the holders of at least 75% of
the outstanding principal balance of all Bridge Round Notes, Advantage, the Company, and the
Principals have agreed to amend certain terms of the Bridge Round Investment Agreement, waive
certain covenants of the Bridge Round Investment Agreement and the Unsecured Note Agreement, and
provide the requested consents in connection with the transactions contemplated by the Series D
Investment Agreement, subject to the terms and conditions set forth herein;

 

 

     NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

     1. Amendments to Bridge Round Investment Agreement. Section 2.2(a) of the Bridge
Round Investment Agreement is hereby amended and restated, in its entirety, to read as follows:

     “2.2 Note Conversion.

     (a) Upon (i) the Company’s receipt of not less than $5,000,000 in gross proceeds from
the sale of its Series D Convertible Preferred Stock (“Series D Preferred Shares”)
from an institutional investor and other investors on or before the Maturity Date (a
“Qualified Series D Financing”), or (ii) the written consent of the Required
Investors to automatically convert all the Notes (“Consent to Conversion”) at or
after the Maturity Date (unless the Company has submitted to the Investors holding Notes a
Repayment Notice, in which case such Consent to Conversion may be submitted at any time
following the submission of the Repayment Notice but prior to the actual repayment date),
then the outstanding principal balance and all accrued and unpaid interest in respect of all
of the Notes shall automatically be converted to Series D Preferred Shares (an
“Automatic Conversion”); provided however, if upon a Consent to Conversion
there is not any Series D Preferred Shares authorized, then the outstanding principal
balance and all accrued and unpaid interest in respect of the Notes shall automatically be
converted to Series C Preferred Shares; provided further, if upon a Consent
to Conversion there are any Series D Preferred Shares authorized, the Required Investors
shall decide in such written consent whether to convert the outstanding principal balance
and all accrued and unpaid interest in respect of the Notes into either Series D Preferred
Shares or Series C Preferred Shares. If the Notes are to be converted into Series D
Preferred Shares, the conversion price shall be equal to the lowest price per share paid in
the Qualified Series D Financing or if there has been no Qualified Series D Financing, the
lowest price paid for any Series D Preferred Shares (the “Series D Conversion
Price”). If the Notes are to be converted into Series C Preferred Shares, the
conversion price shall equal $8.178 per share (subject to the adjustments specified in the
Notes) (the “Series C Conversion Price”; the Series C Conversion Price and the
Series D Conversion Price are collectively referred to as the “Conversion Price”).
Upon the request of the Company following an Automatic Conversion, the Investors shall
deliver the Notes to the Company for cancellation, and the Company shall issue and deliver
stock certificates representing the Series D Preferred Shares or Series C Preferred Shares,
as the case may be, in such converted amount to each Investor. The Company and the
Investors shall execute and deliver cross-receipts acknowledging such Automatic Conversion.
Upon a Qualified Series D Financing, the amount of the accrued but unpaid interest to be
converted to Series D Preferred Shares under this Section 2.2(a) shall be determined
as of a conversion date on or within five (5) business days of the closing of the Qualified
Series D Financing, provided that (i) if such conversion date is prior to such closing, the
Company shall deliver to each Investor upon such closing a cash payment equal to the
interest that would otherwise have accrued with respect to each Investor’s Note between the
conversion date and the closing; and (ii) the Company shall provide the Investors with
advance notice of such conversion date not less than five (5) business days prior thereto.

2

 

Upon a Qualified Series D Financing, each Investor shall be entitled to (but shall not be
obligated to) execute counterparts of, and become a party to, the investment agreement and
related agreements to be entered into in connection with the Qualified Series D Financing;
provided, that upon their execution of such investment agreement and related
agreements in connection with the Qualified Series D Financing or if an Investor refuses to
execute such investment agreement and related agreements, the Series D Preferred Shares held
by such Investor shall cease to be covered by this Agreement.”

     2. Waiver and Consent – Series D Investment Agreement. Solely in connection with the
transactions contemplated under the Series D Investment Agreement and subject to the satisfaction
of the conditions set forth in Section 5 of this Second Amendment, the Bridge Round
Investors, Advantage, the Principals, and the Company hereby consent to the transactions
contemplated by the Series D Investment Agreement, including the transactions described in
Section 6, below, and waive, and consent to the waiver of, the Company’s compliance with
the following covenants contained in each of the Bridge Round Investment Agreement and the
Unsecured Note Agreement:

          (a) Delivery of Annual Financial Statements. For fiscal year 2003 only, the
requirement of the Company under Section 5.4(c) of both the Bridge Round Investment Agreement and
the Unsecured Note Agreement to provide each Bridge Round Investor and Advantage with audited
annual financial statements within ninety (90) days after the last day of each fiscal year,
provided, however, that the Company shall deliver such 2003 financial statements to each Bridge
Round Investor and Advantage no later than May 17, 2004.

          (b) Preemptive Rights. Other than with respect to that number of the Series D
Preferred Shares allocated and offered to the Bridge Round Investors and Advantage as shown on
Exhibit A attached hereto, the requirement of the Company to provide each Bridge Round
Investor and Advantage with their full and equal preemptive rights under Section 5.15 of the Bridge
Round Investment Agreement and Section 5.14 of the Unsecured Note Agreement to maintain their
respective percentage ownership of Common Shares, or other securities convertible into Common
Shares.

          (c) Change Capital Structure. The restriction on the Company under Section 6.4 of
both the Bridge Round Investment Agreement and the Unsecured Note Agreement not to increase or
decrease the kind, class or number of its authorized shares of stock, or vary or alter the
preferences, limitations, designations or relative rights of any class or type of stock; or issue,
grant or sell, or agree to issue, grant or sell to any Person any stock or securities, or options
or warrants or other rights to acquire or that are convertible into stock or other securities of
the Company.

          (d) Amend Articles of Incorporation. The restriction on the Company under Section 6.6
of both the Bridge Round Investment Agreement and Unsecured Note Agreement not to amend its
Articles of Incorporation.

          (e) Registration Rights. The Company’s restriction under Section 6.15 of both the
Bridge Round Investment Agreement and the Unsecured Note Agreement not to grant

3

 

registration or similar rights to any Person other than, in the case of the Bridge Round
Investment Agreement, as set forth in Article IX thereof.

     3. Waiver and Consent – M&I Loan Agreement. Subject to the satisfaction of the
conditions set forth in Section 5 of this Second Amendment, the Bridge Round Investors and
Advantage hereby consent to the transactions contemplated by that certain Revolving Line of Credit
Loan Agreement by and between the Company and M&I Bank dated February 17, 2004, providing the
Company with a line of credit up to $2,000,000.00 (the “M&I Loan Agreement”) and waive, and
consent to the waiver of, the Company’s compliance with the following covenants contained in each
of the Bridge Round Investment Agreement and the Unsecured Note Agreement, solely in connection
with the transactions contemplated under the M&I Loan Agreement:

          (a) Permitted Indebtedness. The restriction on the Company under Section 6.11 of both
the Bridge Round Investment Agreement and the Unsecured Note Agreement not to create, incur, assume
or permit to exist any Indebtedness or Liability except those Liabilities listed therein.

          (b) Liens. The restriction on the Company under Section 6.12 of both the Bridge Round
Investment Agreement and the Unsecured Note Agreement not to create, assume or suffer to exist any
Lien other than Permitted Liens and Liens to be released under the Loan Documents.

     4. Representations, Warranties and Covenants. To induce the Bridge Round Investors
and Advantage to enter into this Second Amendment, the Company represents, warrants and covenants
as follows:

          (a) Organization and Existence. The Company is duly organized and validly existing
under the laws of the State of Wisconsin, and has filed all annual reports required to be filed on
or before the date hereof with the Wisconsin Department of Financial Institutions (“DFI”).
The Company has not filed, or has authorized the filing of, articles of dissolution with DFI.

          (b) Authority, Authorization and Enforceability. The Company has the requisite power
and authority to perform its obligations hereunder and under each of the Bridge Round Investment
Agreement and Unsecured Note Agreement. The Company has duly authorized the execution and delivery
of this Second Amendment and the performance of its obligations hereunder and under each of the
Bridge Round Investment Agreement and Unsecured Note Agreement. The Bridge Round Investment
Agreement and the Unsecured Note Agreement are the legal, valid and binding obligations of the
Company and are enforceable against it in accordance with their respective terms.

          (c) No Violation of Law or Contract. After giving effect to this Second Amendment,
the Company’s performance of its obligations under the Bridge Round Investment Agreement and
Unsecured Note Agreement, do not and shall not conflict with the provisions of any statute,
regulation, ordinance or rule of law, or any agreement, contract or other document binding on the
Company.

4

 

          (d) No Default, Event of Default or Material Adverse Change. After giving effect to
the amendments, waivers, and consents set forth in Sections 1, 2, and 3, above, (a) no
Default or Event of Default has occurred and is continuing, and (b) no Material Adverse Effect
has occurred since the Closing Date, as those terms are defined, respectively, in each of the
Bridge Round Investment Agreement and the Unsecured Note Agreement.

     5. Conditions Precedent & Effectiveness. The waivers and consents of the Bridge Round
Investors and Advantage set forth herein are subject to the accuracy of all representations and
warranties by the Company contained herein and to the performance by the Company of all the terms
and conditions on its part to be performed hereunder. Upon the execution and delivery of this
Second Amendment by the holders of at least 75% of the outstanding principal balance of all Bridge
Round Notes, Advantage, the Principals, and the Company, and subject to the limitations of this
Section 5, (a) the waivers and consents set forth in Sections 2 and 3, above, of
this Second Amendment shall be deemed effective immediately prior to the earlier of (i) the closing
of the M&I Loan Agreement, or (ii) the closing of the transactions contemplated under the Series D
Investment Agreement as described below; and (b) the amendments set forth in Section 1,
above of this Second Amendment shall be deemed effective immediately prior to the Conversion Date,
as defined in the Series D Investment Agreement. The foregoing notwithstanding, this Second
Amendment shall be ineffective, and all of the amendments, waivers, and consents set forth herein
shall be null and void if the transactions contemplated by the Series D Investment Agreement do not
close within 45 days of the date hereof.

     6. Conversion of the Bridge Round Notes.

          (a) On the Closing Date. Pursuant to the terms of the Series D Investment Agreement
and on the Closing Date thereof, (i) the outstanding principal balance and all accrued interest
through the Conversion Date (as defined in the Series D Investment Agreement) in respect of all
Bridge Round Notes shall be converted as of the Conversion Date to Series D Preferred Shares in the
respective amounts and as set forth on Exhibit B hereto; and (ii) the Company shall deliver
to each Bridge Round Investor who is an Investor (as that term is defined in the Series D
Investment Agreement) (x) a certificate representing the number of Series D Preferred Shares
purchased by such Bridge Round Investor thereunder, including Series D Preferred Shares issued in
consideration of the conversion of the Bridge Round Investor’s Bridge Round Note, (y) a warrant,
exercisable for the purchase of that number of Series D Preferred Shares as provided in Section 2.3
of the Bridge Round Investment Agreement (a “Series D Warrant”), and (z) payment, by check,
for the interest, if any, accrued on such Bridge Round Investor’s Bridge Round Note between the
Conversion Date and the Closing Date.

          (b) On or After the Closing Date. Pursuant to the terms of the Series D Investment
Agreement and the Bridge Round Investment Agreement, on or after the conversion of the Bridge Round
Notes and the Closing Date, and upon the Company’s receipt from any Bridge Round Investor who is
not an Investor under the Series D Investment Agreement of his, her or its original Bridge Round
Note, the Company shall issue and deliver to each such Bridge Round Investor (i) a certificate
representing the number of Series D Preferred Shares to be issued to such Bridge Round Investor
pursuant to the terms of the Bridge Round Investment Agreement, (ii) a Series D Warrant, and (iii)
payment, by check, for the interest, if any, accrued on such Investor’s Bridge Round Note between
the Conversion Date and the Closing Date.

5

 

          (c) Prior Agreements Superceded. Subject to the provisions of this Section 6,
upon the conversion of the Bridge Round Notes and the closing of the transactions contemplated by
the Series D Investment Agreement, (i) the Bridge Round Investment Agreement shall be superceded,
(ii) none of the Bridge Round Investors shall have any further rights or obligations thereunder,
and (iii) Venture Investors Early Stage Fund III Limited Partnership as collateral agent for the
Bridge Round Investors shall deliver a UCC termination statement with respect to the collateral
securing the Bridge Round Notes. The foregoing notwithstanding, nothing in this Section 6
shall (x) limit the rights of the Bridge Round Investors to receive, or otherwise with respect to,
the Series D Warrants, or (y) extinguish or otherwise limit any claims of the Bridge Round
Investors with respect to a breach, occurring prior to the Closing Date, of any of the Company’s
representations and warranties in the Bridge Round Investment Agreement. In the event that
Advantage converts its unsecured note pursuant to Section 2.2 of the Unsecured Note
Agreement in connection with the closing of the transactions contemplated under the Series D
Investment Agreement, the Unsecured Note Agreement shall be superceded, and Advantage shall not
have any further rights or obligations thereunder.

     7. Expenses. For Advantage and those Bridge Round Investors who have executed and
delivered a Consent to Representation, the Company agrees to pay, upon demand, all expenses,
including reasonable attorneys’ and legal assistants’ fees, incurred by Advantage and such Bridge
Round Investors using a single legal counsel together with the holders of the Company’s Preferred
Shares in connection with the preparation, negotiation and execution of this Second Amendment and
any document required to be furnished herewith.

     8. No Waiver. Except as expressly set forth herein, the execution, delivery and
effectiveness of this Second Amendment shall not operate as a waiver of any other right, power or
remedy of the Bridge Round Investors under the Bridge Round Investment Agreement or Advantage under
the Unsecured Note Agreement.

     9. Governing Law. This Second Amendment is made in the State of Wisconsin and shall
be governed by and construed in accordance with the internal laws of the State of Wisconsin,
without reference to principles of conflicts of law.

     10. Counterparts. This Second Amendment may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall constitute one and the
same instrument.

[The balance of this page is intentionally left blank. Signature page follows.]

6

 

     IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment and Consent as of
the date first written above.

	 	 	 	 	 
	THE COMPANY:	 	TOMOTHERAPY INCORPORATED
	 
	 	 	 	 
	 

	 	By:	 	/s/ John J. Barni
	 

	 	 	 	 
	 

	 	 	 	John J. Barni
	 

	 	 	 	Chief Executive Officer
	 
	 	 	 	 
	THE PRINCIPALS:
	 	 	 	 
	 
	 	 	 	 
	 	 	/s/ Thomas Rockwell Mackie
	 	 	 
	 	 	Thomas Rockwell Mackie
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	/s/ Paul J. Reckwerdt
	 	 	 
	 	 	Paul J. Reckwerdt
	 
	 	 	 	 
	BRIDGE ROUND INVESTORS:	 	AVALON TECHNOLOGY, LLC
	 
	 	 	 	 
	 

	 	By:
	 	Avtech Ventures, LLC
	 

	 	Its:
	 	Managing Member
	 
	 	 	 	 
	 

	 	By:	 	/s/ Gary L. Shields
	 

	 	 	 	 
	 

	 	 	 	Gary L. Shields
	 

	 	 	 	Managing Member
	 
	 	 	 	 
	 	 	VENTURE INVESTORS EARLY STAGE FUND

 III LIMITED
PARTNERSHIP
	 
	 	 	 	 
	 

	 	By:
	 	Venture Investors LLC
	 

	 	Its:
	 	General Partner
	 
	 	 	 	 
	 

	 	By:	 	/s/ John Neis
	 

	 	 	 	 
	 

	 	 	 	John Neis, Member

[Signature page to Second Amendment, Waiver and Consent]

 

 

	 	 	 	 	 
	ADVANTAGE:	 	ADVANTAGE CAPITAL WISCONSIN

 PARTNERS I,
LIMITED PARTNERSHIP
	 
	 	 	 	 
	 

	 	By:
	 	Venture Investors LLC
	 

	 	Its:
	 	Sub-Manager
	 
	 	 	 	 
	 

	 	By:	 	/s/ John Neis
	 

	 	 	 	 
	 

	 	 	 	John Neis, Member
	 
	 	 	 	 
	 	 	OPEN PRAIRIE VENTURES I, L.P.
	 
	 	 	 	 
	 

	 	By:
	 	Open Prairie Ventures Management I, LLC
	 

	 	Its:
	 	General Partner
	 
	 	 	 	 
	 

	 	By:
	 	Open Prairie Ventures, Inc.
	 

	 	Its:
	 	Manager
	 
	 	 	 	 
	 

	 	By:	 	/s/ Jim Schultz
	 

	 	 	 	 
	 

	 	 	 	Jim Schultz
	 

	 	 	 	President
	 
	 	 	 	 
	 	 	MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH
	 
	 	 	 	 
	 

	 	By:	 	/s/ Rick F. Colvin
	 

	 	 	 	 
	 

	 	 	 	Rick F. Colvin
	 

	 	 	 	Assistant Treasurer
	 
	 	 	 	 
	 	 	780 PARTNERS
	 
	 	 	 	 
	 

	 	By:	 	/s/ Richard J. Bliss
	 

	 	 	 	 
	 

	 	 	 	Richard J. Bliss
	 

	 	 	 	Managing Partner

[Signature page to Second Amendment, Waiver and Consent]

 

 

	 	 	 	 	 
	 	 	BAIRD VENTURE PARTNERS I LIMITED

PARTNERSHIP
	 
	 	 	 	 
	 

	 	By:	 	/s/ Gordon G. Pan
	 

	 	 	 	 
	 

	 	 	 	Baird Venture Partners Management
	 

	 	 	 	Company I, L.L.C.
	 

	 	Its:
	 	General Partner
	 
	 	 	 	 
	 

	 	By:	 	/s/ Gordon G. Pan
	 

	 	 	 	 
	 

	 	 	 	Gordon G. Pan
	 

	 	 	 	Director
	 
	 	 	 	 
	 	 	BVP I AFFILIATES FUND LIMITED

PARTNERSHIP
	 
	 	 	 	 
	 

	 	By:	 	Baird Venture Partners Management
	 

	 	 	 	Company I, L.L.C.
	 

	 	Its:
	 	General Partner
	 
	 	 	 	 
	 

	 	By:	 	/s/ Gordon G. Pan
	 

	 	 	 	 
	 

	 	 	 	Gordon G. Pan
	 

	 	 	 	Director
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	/s/ Wade Fetzer III
	 	 	 
	 	 	Wade Fetzer III
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	/s/ Frank J. Gambino
	 	 	 
	 	 	Frank J. Gambino
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	/s/ David A. Hackworthy
	 	 	 
	 	 	David A. Hackworthy
	 
	 	 	 	 
	 	 	DAVID AND PATRICIA HACKWORTHY

 JOINT REVOCABLE TRUST
	 
	 	 	 	 
	 

	 	By:	 	/s/ Patricia A. Hackworthy
	 

	 	 	 	 
	 

	 	 	 	Patricia A. Hackworthy, Trustee

[Signature page to Second Amendment, Waiver and Consent]

 

 

	 	 	 	 	 
	 	 	/s/ Terry F. Kelly
	 	 	 
	 	 	Terry F. Kelly
	 
	 	 	 	 
	 	 	/s/ Mary W. Kelly
	 	 	 
	 	 	Mary W. Kelly
	 
	 	 	 	 
	 	 	/s/ Michael G. Laskis
	 	 	 
	 	 	Michael G. Laskis
	 
	 	 	 	 
	 	 	/s/ Anne E. Ross
	 	 	 
	 	 	Anne E. Ross
	 
	 	 	 	 
	 	 	/s/ Dennis Skogen
	 	 	 
	 	 	Dennis Skogen
	 
	 	 	 	 
	 	 	/s/ David G. Walsh
	 	 	 
	 	 	David G. Walsh
	 
	 	 	 	 
	 	 	THE ENDEAVORS GROUP, LLC
	 
	 	 	 	 
	 

	 	By:	 	/s/ Michael J. Cudahy
	 

	 	 	 	 
	 

	 	 	 	Michael J. Cudahy
	 

	 	 	 	Manager
	 
	 	 	 	 
	 	 	STATE OF WISCONSIN INVESTMENT

 BOARD
	 
	 	 	 	 
	 

	 	By:	 	/s/ Monica Jaehnig
	 

	 	 	 	 
	 

	 	 	 	Monica Jaehnig
	 

	 	 	 	Portfolio Manager

[Signature page to Second Amendment, Waiver and Consent]

 

 

	 	 	 	 	 
	 	 	/s/ Paul Reckwerdt
	 	 	 
	 	 	Paul Reckwerdt
	 
	 	 	 	 
	 	 	/s/ John Barni
	 	 	 
	 	 	John Barni
	 
	 	 	 	 
	 	 	/s/ Steve Hathaway
	 	 	 
	 	 	Steve Hathaway

[Signature page to Second Amendment, Waiver and Consent]

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