TOMOTHERAPY INCORPORATED 2002 STOCK OPTION PLAN

EXHIBIT 10.18

TOMOTHERAPY INCORPORATED
2002 STOCK OPTION PLAN

      1.  Purpose . The purpose of the TomoTherapy Incorporated 2002 Stock Option Plan (the “Plan”) is to provide favorable opportunities to certain employees, members of the Board of Directors, and advisors of TomoTherapy Incorporated (the “Company”), to acquire or increase their stock ownership in the Company, to provide an incentive to such individuals to promote the financial success of the Company, and to attract and retain the personnel necessary for the Company’s continued growth and profitability.

     Pursuant to the Plan, options to purchase the Company’s common stock (“Options”) may be granted by the Company. Options granted under the Plan may be either “Incentive Stock Options,” as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”), or Options that do not meet the requirements of Section 422(b) of the Code (“Nonqualified Stock Options”).

      2.  Effective Date and Term of Plan . The Plan shall be effective as of August 16, 2002, and shall continue for a period of ten (10) years thereafter unless sooner terminated as provided in Paragraph 16.

      3.  Approval of Shareholders . The Plan is subject to the approval of the shareholders of the Company. If it is not so approved on or before one year after the date of adoption of the Plan by the Board of Directors, the Plan shall not come into effect and any Options granted pursuant to the Plan shall be deemed cancelled. No Option may be exercised prior to approval of the Plan by the shareholders.

      4.  Stock Subject to Plan . Only common stock, $0.01 par value per share, of the Company (“Common Stock”) may be issued pursuant to Options granted under the Plan. The maximum number of shares Common Stock that may be issued pursuant to the exercise of Options granted under the Plan is Five Thousand Nine Hundred Twenty-one (5,921) shares, subject to any adjustments provided in Paragraph 15 (the “Option Shares”), all of which may be reserved for issuance and issued pursuant to the exercise of Incentive Stock Options awarded under this Plan. The Option Shares may be authorized and unissued, or issued and reacquired, shares of Common Stock, as the Board of Directors may determine. Option Shares with respect to which Options are not exercised prior to termination shall be available for future grants under the Plan.

      5.  Administration . The Plan shall be administered by the Board of Directors of the Company or a committee of the Board of Directors (in either case, the “Administrator”). Subject to the express provisions of the Plan, the Administrator shall have complete authority in its discretion, to determine those persons (“Participants”) to whom Options shall be granted, the option price, the option periods and the number of shares to be subject to each Option. Subject to the express provisions of the Plan, the Administrator shall also have the authority in its discretion to prescribe the time or times at which Options may be exercised, the limitations upon

the exercise of Options (including limitations effective upon the death, disability or termination of employment of any Participant) and the restrictions, if any, to be imposed upon the transferability of shares acquired upon exercise of Options. In making such determinations, the Administrator may take into account the nature of the services rendered by the respective Participants, their present and potential contributions to the success of the Company and such other factors as the Administrator in its discretion shall deem relevant. Subject to the express provisions of the Plan, the Administrator shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective option agreements (which need not be identical), to determine whether the shares delivered upon exercise of Options will be treasury shares or will be authorized but previously unissued shares and to make all other determinations necessary or advisable for the administration of the Plan. The Administrator’s determinations on the matters referred to in this paragraph shall be conclusive. Options granted pursuant to the Plan shall be evidenced by stock option agreements between the Company and the Participant to whom the Options are granted (the “Option Agreement”), in such form as the Administrator shall from time to time adopt.

      6.  Eligibility . An Option may be granted under the Plan to those current or prospective employees, directors, and advisors designated as eligible to participate by the Administrator (the “Participants”). The Administrator shall inform each individual so designated of his or her eligibility to participate in the Plan. Participation in the Plan shall be entirely voluntary. The foregoing notwithstanding, only employees of the Company are eligible to receive Incentive Stock Options.

      7.  Exercise Price . The exercise price per Option Share under any Option will be determined by the Administrator at the time each Option is granted, but the exercise price for Option Shares under an Incentive Stock Option shall not be less than 100% of the fair market value of a share of Common Stock on the date of grant, as determined by the Administrator. If an Incentive Stock Option is granted to a person who owns, directly or indirectly, stock representing more than 10% of the total combined voting power of all classes of stock of the Company on the date of the grant, the exercise price per Option Share shall not be less than 110% of the fair market value of a share of Common Stock on such date.

      8.  Option Periods . The term of each Option will be for such period as the Administrator shall determine; provided, however, that for an Incentive Stock Option, the term shall not exceed ten (10) years from the date of grant, and further provided that if an Incentive Stock Option is granted to a person who owns, directly or indirectly, stock representing more than 10% of the total combined voting power of all classes of stock of the Company on the date of the grant, the term of such Incentive Stock Option shall not exceed five (5) years from the date of grant. An Option shall be considered granted on the date the Administrator acts to grant the Option or such later date as the Administrator shall specify. Each Option shall be subject to earlier termination as described under Paragraphs 13 and 16 of this Plan.

      9.  Exercise of Options . Each Option may be exercised at any time during the option period for such Option (subject to the restrictions in this Paragraph 9, in Paragraph 13, and in the Option Agreement) by written notice delivered to an officer of the Company, stating

the number of Option Shares with respect to which the Option is being exercised. In no event shall the Company be required to issue fractional shares to a Participant.

      10.  Payment for Option Shares . The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely (i) cash or check, (ii) other shares of Common Stock that have been held by the Participant for more than six months, have not been used within the prior six-month period to exercise an option, either directly or by attestation, and that have an aggregate fair market value on the date of exercise equal to the aggregate exercise price of the Option Shares being purchased, (iii) any combination of the foregoing methods of payment; or (iv) such other consideration and method of payment as may be permitted by the Administrator. Shares of Common Stock tendered under clause (ii), above, shall be duly endorsed in blank or accompanied by stock powers duly endorsed in blank. An Option shall be deemed exercised when the Company receives from the Participant (A) written notice of exercise (in accordance with the Option Agreement), (B) executed copies of any shareholder agreement or other documents then required by the Company and/or the Option Agreement applicable to the Option Shares, and (C) full payment for the Option Shares for which the Option is being exercised, which payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and/or the Plan. Upon exercise of an Option pursuant to this Paragraph 10 and subject to the Participant’s satisfaction of all tax withholding obligations as provided in Paragraph 14, below, the Company shall deliver a certificate for the Option Shares purchased by such exercise to the Participant. Such certificates shall bear a legend on the reverse side reflecting the transfer restrictions described in Paragraph 11, below. A holder of an Option shall have none of the rights of a shareholder of the Company until exercise of the Option in accordance with the provisions of this Paragraph 10 and the provisions of the Participant’s Option Agreement and until a certificate for the Option Shares has been issued to him or her.

      11.  Transfer Restrictions . Options are not transferable by a Participant other than by will or the laws of descent or distribution, and may be exercised during the lifetime of a Participant only by such Participant. Upon exercise in full or in part of any Option, the Option Shares purchased thereby shall be governed by, and may not be sold or otherwise disposed of except in compliance with, (i) the Company’s Bylaws; (ii) the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws (unless such transaction is, in the opinion of counsel for the Company, exempt from registration under such Act and laws), and (iii) the restrictions on transfer and other terms set forth in any shareholder agreement between the Participant and the Company and applicable to the Option Shares.

      12.  Exercise Limits . In the case of Incentive Stock Options, if the aggregate fair market value, as of the date the Incentive Stock Options were granted, of all Option Shares (whether pursuant to Incentive Stock Options awarded to the Participant under this Plan or any other plan of the Company that provides for the grant of Incentive Stock Options) that become exercisable for the first time by the Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000) or such other limit as may be required by the Code, then that portion of any Incentive Stock Option awarded under this Plan equal to the first $100,000 of

such Option Shares will be an Incentive Stock Option, and the remaining portion of the Incentive Stock Option for the amount in excess of $100,000 that becomes exercisable in that calendar year will thereupon be deemed a Nonqualified Stock Option.

13. Termination of Employment .

          (a) If the employment of a Participant terminates, or service to the Company by a non-employee terminates, other than for “Cause” (as defined in Paragraph 13(b), below), death, or “Disability” (as defined in Paragraph 13(d), below) pursuant to Paragraphs (b) through (d) of this Paragraph 13, the unvested portions, if any, of all of the Participant’s Options shall terminate immediately and the Option Shares reserved for issuance upon exercise of such unvested portions of the Participant’s Options shall immediately revert to the Plan. In the event of such a termination, the Participant’s right to exercise any Option with respect to those Option Shares that are vested but unexercised, deferred, or unpaid as of the date of such termination shall terminate on the date specified in the Option Agreement, provided that the Participant’s right to exercise any vested Incentive Stock Options shall terminate not later than three (3) months following the date on which the Participant’s employment or service to the Company terminated, unless the Administrator agrees to extend this period, in which case such extension will render the Options subject to such extension Nonqualified Stock Options. If the Option Agreement does not specify a time within which the vested portion of a Participant’s Option must be exercised following the date of termination of employment or service to the Company, the vested portion may be exercised not later than three (3) months after such date. In the event that any Options are not exercised within the time periods specified in the Option Agreement or this Paragraph 13, then all of the Participant’s rights under such Options shall be immediately forfeited and all of the Option Shares reserved for issuance upon exercise of such Options shall revert to the Plan. During the exercise periods described in this Paragraph 13(a), the Options shall be exercisable only to the extent provided in the Option Agreement. In all events, an Option will not be exercisable after the end of its term as set forth in the Option Agreement.

          (b) If termination of employment is a termination for “Cause,” as defined below, then none of the Participant’s Options, whether vested or unvested as of the date of such termination, may be exercised, all of the Participant’s rights in the Options shall be forfeited, and all of the Option Shares reserved for issuance upon exercise of the Participant’s Options shall revert to the Plan. For purposes of this Plan, “Cause” shall mean any of the following: (i) any act, failure to act, conduct, pattern of conduct, or condition injurious or potentially injurious to the business or reputation of the Company; (ii) any conviction for a misdemeanor or felony the circumstances of which the Administrator determines is substantially related to the circumstances of the Participant’s job; (iii) the willful and continued failure to perform substantially the Participant’s duties for the Company, which failure remains uncured fourteen (14) days after written notice from the Company of such failure; or (iv) theft or fraud by the Participant with respect to the business of the Company.

          (c) In the event of a Participant’s death, the Participant’s estate or beneficiaries shall have such period of time as is specified in the Option Agreement within which to exercise any vested Options held by the Participant under such terms, and to the extent, as

may be specified in the applicable Option Agreement. Rights to any such vested Options shall pass by will or the laws of descent and distribution.

          (d) In the event a Participant’s employment is terminated by reason of a “Disability,” as defined below, then the vested portions of the Participant’s Options shall be exercisable for the period, and to the extent, specified in the Option Agreement. For purposes of this Plan, “Disability” shall mean that a Participant is deemed by the Company to be disabled within the meaning of Section 22(e)(3) of the Code, as such Section may be amended or otherwise modified from time to time, and which currently provides that an individual is permanently and totally disabled if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months. In the event of such Disability, Options may be exercised by, and Option Shares delivered to, the Participant, if legally competent, or a legally designated guardian or representative if the Participant is legally incompetent by virtue of such Disability.

          (e) In the event of either uncertainty as to the interpretation or controversies concerning the application of this Paragraph 13, the Administrator’s determinations shall be binding and conclusive.

      14.  Tax Withholding . The Company shall have the right to (i) deduct applicable income and employment taxes from any Option payment, (ii) withhold, at the time of delivery or vesting of Option Shares under the Plan, an appropriate number of Option Shares for payment of such taxes, or (iii) take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Company may defer making delivery with respect to Option Shares pursuant to exercise of an Option hereunder until arrangements satisfactory to it have been made with respect to any such withholding obligation. If Common Stock is used to satisfy tax withholding, such stock shall be valued based on the fair market value when the tax withholding is required to be made.

      15.  Adjustments Upon Changes in Capitalization, Merger, or Asset Sale . In the event of any change in the outstanding Common Stock of the Company by reason of a stock split, reverse stock split, stock dividend, or reclassification of Common Stock, recapitalization, merger, or similar event, the Administrator may adjust proportionally (a) the number of Option Shares (i) reserved under the Plan, (ii) available for reservation and issuance pursuant to exercise of Incentive Stock Options, (iii) for which Options may be granted to an individual Participant under the Plan, and (iv) covered by outstanding Options; (b) the applicable exercise prices related to outstanding Options; and (c) the appropriate fair market value and other price determinations for such Options. In the event of any other change affecting the Common Stock or any distribution (other than normal cash dividends) to holders of Common Stock, such adjustments as may be deemed equitable by the Administrator, including adjustments to avoid fractional shares, shall be made to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Administrator shall be authorized to issue or assume stock options, whether or not in a transaction to which Section 424(a) of the Code applies, by means of substitution of new stock options for previously issued stock options or an assumption of previously issued stock options.

The determination of the Administrator as to any such adjustment or substitution shall be final and conclusive. No adjustment or substitution shall require the Company to issue or sell a fractional share and the total adjustment or substitution shall be limited accordingly.

      16.  Amendment, Suspension or Termination . The Board of Directors, without further approval of the shareholders, may from time to time amend, suspend or terminate the Plan in such respects as the Board may deem advisable, provided, however, that no amendment shall become effective without prior approval of the shareholders if such amendment would, with respect to Incentive Stock Options, (i) increase the aggregate number of Option Shares that may be issued pursuant to Options granted under the Plan, except as permitted under Paragraph 15, or (ii) increase the maximum number of Option Shares that may be issued pursuant to Incentive Stock Options granted under the Plan to any individual in any twelve month period. No amendment shall, without a Participant’s written consent, alter or impair any of the rights or obligations under any outstanding Options.

First Amendment
to

TOMOTHERAPY INCORPORATED
2002 STOCK OPTION PLAN

Second Amendment
to

TOMOTHERAPY INCORPORATED
2002 STOCK OPTION PLAN

Third Amendment
to

TOMOTHERAPY INCORPORATED
2002 STOCK OPTION PLAN

Fourth Amendment
to

TOMOTHERAPY INCORPORATED
2002 STOCK OPTION PLAN

TOMOTHERAPY INCORPORATED
STOCK OPTION AGREEMENT
(Incentive Stock Option)

     This Stock Option Agreement (this “ Agreement ”) is made as of (Grant Date) , by and between TomoTherapy Incorporated (the “ Company ”) and (Employee Name) (the “ Participant ”).

Background

     The Company has adopted the TomoTherapy Incorporated 2002 Stock Option Plan (the “ Plan ”) to encourage certain employees, directors, and advisors of the Company to acquire or increase their stock ownership in the Company, to provide an incentive to such individuals to promote the financial success of the Company, and to enable the Company to attract and retain personnel necessary for continued growth and profitability. Terms not otherwise defined in this Agreement have the meanings ascribed to them in the Plan.

     The Company considers it desirable and in its best interest to grant the Participant an option to purchase shares of the common stock, par value $0.01, of the Company (“ Common Stock ”).

     The option granted under this Agreement is intended by the parties to be, and shall be treated as, an “ Incentive Stock Option ,” as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the “ Code ”). To the extent, if any, that the option granted under this Agreement does not, as of the date of this Agreement or any date hereafter, qualify as an Incentive Stock Option under the terms of this Agreement, the Plan, or Section 422(b) of the Code, it is the intent of the parties that all or that portion of the option granted under this Agreement that does not so qualify shall be, and shall be treated and referred to in this Agreement as, a “ Nonqualified Stock Option ,” as that term is defined in the Plan.

Agreement

     In consideration of the mutual covenants set forth below, it is agreed as follows:

      1. Grant of Option . The Company hereby grants the Participant the option (the “ Option ”) to purchase up to (number of shares) shares of the Common Stock of the Company (the “ Option Shares ”), subject to the terms and conditions of this Agreement.

      2. Exercise Price . The purchase price for the Option Shares shall be $___ per share, which is the fair market value of the shares on the date of this Agreement (the “ Exercise Price ”).

      3. Term of the Option and Vesting .

           (a) In all events, if the Option is not terminated earlier pursuant to the provisions of Sections 8 or 10(b), below, the Option shall expire and all of the Participant’s rights under the

Option shall terminate as of 5 p.m. Central Time on the sixth (6 ^th ) anniversary of the date of this Agreement (the “ Option Termination Date ”).

           (b) Subject to the accelerated vesting provided in Sections 3(c) and 10(b), below, and subject to the limitations and termination provisions of Sections 7 and 8, below, the Option shall vest, and the Participant shall have the right to exercise the Option with respect to such vested Option Shares, according to the following schedule:

          (i) Twenty-five percent (25%) of the Option Shares shall vest on the first anniversary of the date of this Agreement; and,

          (ii) An additional twenty-five (25%) of the Option Shares shall vest thereafter on each of the subsequent three (3) annual anniversaries of such date, provided that as of each such date the Participant continues to be an employee of the Company.

           (c) Notwithstanding the foregoing vesting schedule in Section 3(b), above, all of the Option Shares shall vest and the Participant shall have the right to exercise the Option to purchase all of the Option Shares, including those Option Shares that would otherwise be unvested, upon the occurrence of any of the following:

          (i) the Participant’s Involuntary Termination within the period commencing three (3) months prior to and ending twelve (12) months after a Change in Control, as those terms are defined in Sections 3(d) and 3(e), respectively, below;

          (ii) the Participant’s death; or

          (iii) the Participant’s Disability, as defined in Section 3(f), below.

           (d) For purposes of this Agreement, the term “ Change in Control ” shall mean the occurrence of any of the following after the date of this Agreement:

          (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under such Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities, other than in a private financing transaction approved by the Board of Directors;

          (ii) the direct or indirect sale or exchange by the shareholders of the Company of all or substantially all of the outstanding capital stock, other than to an affiliate of the Company as determined by the Board of Directors of the Company;

          (iii) a merger or consolidation in which the Company is a party and in which the shareholders of the Company before such merger or consolidation do not retain, directly or indirectly, at least a majority of the beneficial interest in the voting stock of the Company after such transaction; or

          (iv) the sale or disposition by the Company of all or substantially all of the Company’s assets.

           (e) For purposes of this Section 3 of this Agreement, the term “ Involuntary Termination ” shall mean the occurrence of any of the following:

          (i) unless otherwise agreed in writing between the Participant and the Company, any termination by the Company of the Participant’s employment that is effected for any reason other than death, Disability, as defined below, or one or more of the reasons set forth in Section 8(b), below;

          (ii) without the Participant’s express written consent, a material reduction by the Company in the base compensation or overall employee benefits package of the Participant as in effect immediately prior to such reduction; or

          (iii) without the Participant’s express written consent, the relocation of the Participant to a facility or a location more than 50 miles from the Participant’s then present location.

           (f) For purposes of this Agreement, the term “ Disability ” shall mean that the Participant is deemed by the Company to be permanently and totally disabled as that term is defined in Section 22(e)(3) of the Code, as such Section may be amended from time to time and which currently provides that an individual is permanently and totally disabled if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

      4. Method of Exercise . Subject to the limitations in Sections 3 and 7 and the termination provisions of Sections 8 and 10(b), below, that portion of the Option that is vested may be exercised at any time from the date of this Agreement until 5 p.m. Central Time on the Option Termination Date, as defined in Section 3(a), above, by delivery of the Exercise Notice attached as Exhibit A to an officer of the Company, stating the number of Option Shares with respect to which the Option is being exercised. No partial exercise of such Option may be for less than one (1) share and in no event shall the Company be required to transfer fractional shares to the Participant.

      5. Payment for Option . At the time of exercise, the Participant shall make full payment of the Exercise Price (i) in cash; (ii) if permitted by the Administrator, by means of tendering shares of Common Stock that have been held by the Participant for more than six months and have not been used within the prior six-month period to exercise an option, either directly or by attestation, valued at fair market value on the date of exercise; or (iii) any combination of (i) and (ii). Shares of Common Stock tendered shall be duly endorsed in blank or accompanied by stock powers duly endorsed in blank. Upon the Company’s receipt of (a) the payment of the entire Exercise Price for the Option Shares so purchased, (b) a fully executed copy of the shareholder agreement as provided in Section 6, below, and (c) satisfactory proof of the Participant’s

payment of any income or employment tax withholding obligations, if any, as provided in Sections 7 and 11, below certificates for su