NOTE AND WARRANT PURCHASE AGREEMENT

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

APPENDIX

EXHIBITS

SCHEDULES

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) .

     “ 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.

     “ 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.

     “ 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.

     “ 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

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.

     “ 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.

     “ 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

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 (20 ^th ) 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.

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

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 ”).

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.

     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

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.

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 .

          (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

          (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

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

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

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.

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.

     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.