PROPOSAL THREE

AMENDMENT OF CERTIFICATES OF DESIGNATION FOR
SERIES B, C, D, E, F AND G PREFERRED STOCK

    The Board of Directors has approved and is proposing to the stockholders an amendment to each of the Certificates of Designation for Series B, C, D, E, F and G Preferred Stock to provide that, in the event of the automatic conversion of Preferred Stock to Common Stock because of a public offering of Common Stock that is registered under the Securities Act of 1933 (an "IPO"), the Company will be entitled to pay accrued dividends on the Preferred Stock in the form of shares of Common Stock. The proposed amendment to each of the Certificates of Designation would add a provision to the end of Section 4.3 of each Certificate of Designation for Series B, C, D, E, F and G. The added language would read as follows:

    "The Corporation may, at the option of the Corporation's Board of Directors, pay such accumulated dividends under this Section 4.3 in either cash or in shares of the Corporation's Common Stock, or in a combination of cash and Common Stock. If the accumulated dividends are

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paid in the form of Common Stock, the holders of Preferred Stock will be entitled to receive the number of shares equal to: (1) the dollar amount of the dividend which the holder is entitled to receive, divided by (2) the selling price to the public in the underwritten public offering that triggers the conversion. If this calculation would result in the issuance of a fraction of a share of Common Stock, the Corporation shall, in lieu of issuing any fractional share, pay the holder a sum in cash equal to the value of the fraction (as determined by multiplying the fraction by the selling price to the public in the offering). The payment of accrued dividends in the form of Common Stock under this Section 4.3 will not be deemed a stock dividend that would require an adjustment to the Conversion Price under Section 4.4 of this Certificate."

    The Certificates of Designation that govern Series B, C, D, E, F and G Preferred Stock are generally parallel in their terms and each currently provides that each of these Series of Preferred Stock will automatically convert into shares of Common Stock in the event the Company consummates an IPO with proceeds of at least $7 million, and that at that time the accumulated dividends on the Preferred Stock shall be paid. Although the Certificates do not specifically state the form of payment, the Company believes that it is not clear under the current Certificates of Designation whether the dividends could be paid in Common Stock. The Board of Directors believes that payment of the dividend in the form of Common Stock in that circumstance may be advantageous to and in the best interests of the Company by conserving the Company's cash. Thus the Board of Directors recommends the amendment of each of the Certificates of Designation in the manner set forth above.

    As of December 31, 2000, the accumulated dividends on the outstanding Series B through G Preferred Stock totaled $9,185,205. None of the accumulated dividends have been declared payable by the Board of Directors.

    The Certificates of Designation for the outstanding Series A and Series H Preferred Stock are not being amended at this time. The Series A Preferred Stock is not convertible and, consequently, there is no requirement that those shares convert to Common Stock and that accumulated dividends be paid in the event of an IPO. The Series H Certificate of Designation does not require clarification or amendment because it clearly states that, in the event of conversion to Common Stock in connection with an IPO, all accrued dividends will be extinguished.

    If proposals 3B, 3C, 3D, 3E, 3F and 3G are adopted, and the Board of Directors determines to pay the accrued dividends in the form of Common Stock in connection with a qualifying IPO, the issuance of the Common Stock may be dilutive to other stockholders. However, the issuance of the shares would discharge the Company's obligations to the accrued dividends in cash.

    The Company believes that the receipt of Common Stock in discharge of the accumulated dividends may be advantageous to the holders of Preferred Stock. The Company has been advised that, the receipt of either cash or Common Stock in satisfaction of accrued dividends would be treated as a Section 301 distribution under the Internal Revenue Code which would not be treated as a taxable dividend to the recipient preferred stockholders if the Company has no current or accumulated earnings or profits at the time of the distribution and the amount of the dividend is not greater than the individual shareholder's basis in the shares of Preferred Stock. If there are no current or accumulated earnings or profits at the time of the initial public offering, the Section 301 distribution would be treated as a non-taxable return of capital to the extent of the holder's tax basis in the Preferred Stock and any excess would be treated as capital gain. This conclusion is based on the Internal Revenue Code of 1986, as amended, and regulations, rulings and decisions in effect on the date of this Proxy Statement, all of which are subject to change. This summary does not discuss any aspect of state, local or foreign taxation and does not discuss all the tax considerations that may be relevant to particular BioNebraska stockholders in light of their personal investment circumstances, or to certain types of stockholders that may be subject to special tax rules, such as financial institutions, tax-exempt organizations, insurance companies, dealers in stock or securities, and foreign corporations

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and individuals who are not citizens or residents of the United States. Holders of the Company's Preferred Stock should consult their own tax advisors to determine the specific tax consequences of any dividend, including the application of the principles discussed in this paragraph, including the effects of any foreign, state, local or other tax laws.

    Amendment of each of the Certificates of Designation requires the affirmative vote of a majority of all voting power and a majority of the particular series of Preferred Stock, voting separately as a class. Consequently, some of the proposals may obtain the requisite votes and others may not. If less than all of the Proposals to amend the Certificates of Designation are approved by the requisite number of votes, the Board of Directors has reserved the right to abandon the amendment of one or more of the Certificates of Designation. The Board of Directors will have the discretion to determine whether the Corporation should file the amendments to the Certificates of Designation with the Secretary of State of Delaware.

    The following table includes information as of the Record Date regarding the holders of record of more than five percent of the outstanding shares of each class of Preferred Stock that has voting rights. No single holder of record owns more than 5% of the outstanding shares of Series C Preferred Stock. The following record holders may not have sole voting and investment power with respect to the shares indicated.

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(1)

Based on the following number of shares outstanding in each class: Series B—16,365 shares; Series C—21,000 shares; Series D—60,739 shares; Series E—17,070 shares; Series F—109,268 shares; Series G—50,000 shares and Series H—80,000 shares.

Vote Required

    Approval of the Amendment to each of the Certificates of Designation requires the affirmative vote of a majority of the votes entitled to be cast by the holders of all of Common Stock and Series B, C, D, E, F, G and H Preferred Stock, voting together, as well as the affirmative vote of a majority of the voting power of each of the Series B, C, D, E, F and G Preferred Stock, voting separately as a class with respect to their own Certificates. Stockholders should complete the Proxy as to all series, even if they own Common Stock or only one series of Preferred Stock.

The Board of Directors Recommends that Stockholders Vote "For"
the foregoing Proposal Three