Exhibit 4.2  


THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.


WARRANT
TO PURCHASE 


A NUMBER OF SHARES
OF SERIES C PREFERRED STOCK OF


VASCULAR
INNOVATIONS, INC.


(Void after July
5, 2008)


This certifies that VENTURE LENDING & LEASING
III, INC., a Maryland corporation, or its assignee(s) as set forth herein (the
“Holder”), for value received, is entitled to purchase from Vascular
Innovations, Inc., a Delaware corporation (the “Company”), Eighty Five Thousand
Seven Hundred Fourteen (85,714) fully paid and nonassessable shares (“Warrant
Shares”) of the Company’s Series C Preferred Stock (“Preferred Stock”) for cash
at a price of $2.80 per share (the “Stock Purchase Price”). In the event that
the aggregate, original principal amount of Term Loans advanced by Holder to
Company under that certain Loan and Security Agreement (“Loan Agreement”),
dated of even date herewith, between the Company and the Holder, exceeds
$2,400,000 (such amount being hereafter referred to as the “Excess Amount”)
then, in such event, the Warrant Shares shall increase automatically from time
to time by such number of shares as shall be equal to (x) the product of 10%
multiplied by the Excess Amount, divided by (ii) the Stock Purchase Price.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Loan Agreement.


This warrant may be exercised at any time or from time
to time up to and including the earlier of (i) 5:00 p.m. (Pacific time) on
July 5, 2008 (the “Expiration Date”), or (ii) the date of a
Qualified Corporate Event as described in Section 4.3, upon surrender to the
Company at its principal office at 171 Jefferson Drive, Menlo Park, California
94025, (or at such other location as the Company may advise Holder in writing)
of this Warrant properly endorsed with the Form of Subscription attached hereto
duly filled in and signed and upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being exercised
determined in accordance with the provisions hereof. The Stock Purchase Price
and the number of shares purchasable hereunder are subject to adjustment as
provided in Section 4 of this Warrant.


As soon as reasonably practicable after the occurrence
or non-occurrence of the latest event or condition necessary to determine the
actual number of shares of the Company’s stock issuable upon exercise of this
Warrant, the Company shall execute and deliver a supplement to this Warrant in
substantially the form of Exhibit “A”  attached hereto, completed with
such quantity and price terms and other information as have been determined as
a result of the occurrence or non-occurrence of such events or conditions. The
provisions of such supplement, once completed and executed, shall control the
interpretation and exercise of this Warrant.


This Warrant is subject to the following terms and
conditions:


          1.
          Exercise;
Issuance of Certificates; Payment for Shares.  


                      (a)          Unless
an election is made pursuant to clause (b) of this Section 1, this Warrant
shall be exercisable at the option of the Holder, at any time or from time to
time, on or before the Expiration Date for all or any portion of the shares of
Preferred Stock (but not for a fraction of a share) which may be purchased
hereunder







for the Stock Purchase Price multiplied by the number
of shares to be purchased. In the event, however, that pursuant to the Company’s
Certificate of Incorporation, as amended, an event causing automatic
conversion of the Company’s Preferred Stock shall have occurred prior to the
exercise of this Warrant, in whole or in part, then this Warrant shall be
exercisable for the number of shares of Common Stock of the Company into which
the Preferred Stock not purchased upon any prior exercise of the Warrant would
have been so converted (and, where the context requires, reference to
“Preferred Stock” shall be deemed to include such Common Stock). The Company
agrees that the shares of Preferred Stock purchased under this Warrant shall be
and are deemed to be issued to the holder hereof as the record owner of such
shares as of the close of business on the date on which the form of
subscription shall have been delivered and payment made for such shares. Subject
to the provisions of Section 2, certificates for the shares of Preferred Stock
so purchased, together with any other securities or property to which the
Holder hereof is entitled upon such exercise, shall be delivered to the Holder
hereof by the Company at the Company’s expense within a reasonable time after
the rights represented by this Warrant have been so exercised. Except as
provided in clause (b) of this Section 1, in case of a purchase of less than
all the shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver a new Warrant or Warrants of like
tenor for the balance of the shares purchasable under the Warrant surrendered
upon such purchase to the Holder hereof within a reasonable time. Each stock
certificate so delivered shall be in such denominations of Preferred Stock as
may be requested by the Holder hereof and shall be registered in the name of
such Holder or such other name as shall be designated by such Holder, subject
to the limitations contained in Section 2. Notwithstanding anything contained
herein to the contrary, this Warrant may not be exercised during the twenty
(20) day period immediately prior to the closing of the Company’s initial
public offering of its Common Stock.


                    (b)          The
Holder, in lieu of exercising this Warrant by the payment of the Stock Purchase
Price pursuant to clause (a) of this Section 1, may elect, at any time on or
before the Expiration Date, to receive that number of shares of Preferred Stock
equal to the quotient of: (i) the difference between (A) the Per Share Price
(as hereinafter defined) of the Preferred Stock, less (B) the Stock Purchase
Price then in effect, multiplied by the number of shares of Preferred Stock the
Holder would otherwise have been entitled to purchase hereunder pursuant to
clause (a) of this Section 1 (or such lesser number of shares as the Holder may
designate in the case of a partial exercise of this Warrant); over (ii) the Per
Share Price. Election to exercise under this section (b) may be made by
delivering a signed form of subscription to the Company via facsimile, to be
followed by delivery of the warrant.


                    (c)          For
purposes of clause (b) of this Section 1, “Per Share Price” means the product
of: (i) the greater of (A) the closing price of the Company’s Common Stock as
quoted by NASDAQ or listed on any exchange, whichever is applicable, as
published in the Western Edition of The Wall Street Journal  for the
trading day immediately prior to the date of the Holder’s election hereunder
or, (B) if applicable at the time of or in connection with this exercise under
clause (b) of this Section 1, the gross sales price of one share of the
Company’s Common Stock pursuant to a registered public offering or that amount
which stockholders of the Company will receive for each share of Common Stock
pursuant to a merger, reorganization or sale of assets (“Merger Payment”) and
in the event that such Merger Payment includes any earn-outs, deferred payments
or similar future contingent payments (“Future Payments”), the value of such
Future Payments for the purpose of calculating the Merger Payment shall be
determined in good faith by the Company’s Board of Directors; and (ii) that
number of shares of Common Stock into which each share of Preferred Stock is
convertible. If the Company’s Common Stock is not quoted by NASDAQ or listed on
an exchange and none of the above clauses apply, the Per Share Price of the
Preferred Stock (or the equivalent number of shares of Common Stock into which
such Preferred Stock is convertible)
shall be the price per share which the Company would obtain from a willing
buyer for shares sold by the Company from authorized but unissued shares as
such price shall be determined in good faith by the Company’s Board of
Directors.


          2.         Limitation
on Transfer.  


                    (a)          The
Warrant and the Preferred Stock shall not be transferable except upon the
conditions specified in this Section 2, which conditions are intended to insure
compliance with the provisions of the Securities Act. Each holder of this
Warrant or the Preferred Stock issuable hereunder will cause any proposed
transferee of the Warrant or Preferred Stock to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Section 2.


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(b)          Each certificate
representing (i) this Warrant, (ii) the Preferred Stock, (iii) shares of the
Company’s Common Stock issued upon conversion of the Preferred Stock and (iv)
any other securities issued in respect to the Preferred Stock or Common Stock
issued upon conversion of the Preferred Stock upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of this Section 2 or unless such
securities have been registered under the Securities Act or sold under Rule
144) be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under applicable state
securities laws):


THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.


                    (c)          The
Holder of this Warrant and each person to whom this Warrant is subsequently
transferred represents and warrants to the Company (by acceptance of such
transfer) that it will not transfer the Warrant (or securities issuable upon
exercise hereof unless a registration statement under the Securities Act was in
effect with respect to such securities at the time of
issuance thereof) except pursuant to (i) an effective registration statement
under the Securities Act, (ii) Rule 144 under the Securities Act (or any other
rule under the Securities Act relating to the disposition of securities), or
(iii) an opinion of counsel, reasonably satisfactory to counsel for the
Company, that an exemption from such registration is available. Notwithstanding
the foregoing provisions of this paragraph, no such registration statement or
opinion of counsel shall be necessary for a transfer by the Holder to any
person and or entity deemed an affiliate of Holder within the  meaning of Rule 144 promulgated under the
Securities Act, provided that such affiliate is an “accredited investor” within
the meaning of Rule 501 of Regulation D promulgated under the Securities Act.


          3.          Shares
to be Fully Paid; Reservation of Shares. The Company covenants and agrees
that all shares of Preferred Stock which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive
rights of any shareholder and free of all taxes, liens and charges with respect
to the issue thereof. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved, for the purpose of
issue or transfer upon exercise of the subscription rights evidenced by this
Warrant, a sufficient number of shares of authorized but unissued Preferred
Stock, or other securities and property, when and as required to provide for
the exercise of the rights represented by this Warrant. The Company will take
all such action as may be necessary to assure that such shares of Preferred
Stock may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of any domestic securities exchange upon
which the Preferred Stock may be listed. The Company will not take any action
which would result in any adjustment of the Stock Purchase Price (as defined in
Section 4 hereof) (i) if the total number of shares of Preferred Stock issuable
after such action upon exercise of all outstanding warrants, together with all
shares of Preferred Stock then outstanding and all shares of Preferred Stock
then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of
shares of Preferred Stock then authorized by the Company’s Certificate of
Incorporation, or (ii) if the total number of shares of Common Stock issuable
after such action upon the conversion of all such shares of Preferred Stock
together with all shares of Common Stock then outstanding and then issuable
upon exercise of all options and upon the conversion of all convertible
securities then outstanding would exceed the total number of shares of Common
Stock then authorized by the Company’s Articles of Incorporation.


          4.          Adjustment
of Stock Purchase Price Number of Shares. The Stock Purchase Price and the
number of shares purchasable upon the exercise of this Warrant shall be subject
to adjustment from time to time upon the occurrence of certain events described
in this Section 4. Upon each adjustment of the Stock Purchase Price, the Holder
of this Warrant shall thereafter be entitled to purchase, at the Stock Purchase
Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to


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such adjustment by the number
of shares purchasable pursuant hereto immediately prior to such adjustment, and
dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.


                    4.1          Subdivision
or Combination of Stock. In case the Company shall at any time subdivide
its outstanding shares of Preferred Stock into a greater number of shares, the
Stock Purchase Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares of
Preferred Stock of the Company shall be combined into a smaller number of
shares, the Stock Purchase Price in effect immediately prior to such
combination shall be proportionately increased.


                    4.2          Dividends
in Preferred Stock, Other Stock, Property, Reclassification. If at any time
or from time to time the holders of Preferred Stock (or any shares of stock or
other securities at the time receivable upon the exercise of this Warrant)
shall have received or become entitled to receive, without payment therefor,


                                   (a)          Preferred
Stock, or any shares of stock or other securities whether or not such
securities are at any time directly or indirectly convertible into or
exchangeable for Preferred Stock, or any rights or options to subscribe for,
purchase or otherwise acquire any of the foregoing by way of dividend or other
distribution, or


                                   (b)          any
cash paid or payable otherwise than as a cash dividend, or


                                   (c)          Preferred
Stock or other or additional stock or other securities or property (including
cash) by way of spinoff, split-up, reclassification, combination of shares or
similar corporate rearrangement, (other than shares of Preferred Stock issued
as a stock split, adjustments in respect of which shall be covered by the terms
of Section 4.1 above),


Then and in each such case,
the Holder hereof shall, upon the exercise of this Warrant, be entitled to
receive, in addition to the number of shares of Preferred Stock receivable
thereupon, and without payment of any additional consideration therefore, the amount
of stock and other securities and property (including cash in the cases
referred to in clauses (b) and (c) above) which such Holder would hold on the
date of such exercise had he been the holder of record of such Preferred Stock
as of the date on which holders of Preferred Stock received or became entitled
to receive such shares and/or all other additional stock and other securities
and property.


                    4.3          Reorganization,
Reclassification, Consolidation, Merger or Sale. If any capital reorganization of the capital stock of the
Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Preferred Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Preferred Stock (such capital reorganization, merger,
consolidation, or sale being a “Corporate Event”), then, as a condition of such
Corporate Event, lawful and adequate provisions shall be made whereby the
holder hereof shall thereafter have the right to purchase and receive (in lieu
of the shares of the Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Preferred
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby; provided,
however, in the event that 1) the consideration to be received pursuant to
such Corporate Event for each share of Preferred Stock is in excess of the
Stock Purchase Price effective at the time of the Corporate Event, 2) the
consideration to be received in such Corporate Event is cash or shares that are
of a publicly traded company listed on a national market or exchange, which,
after the ninetieth (90) day following the close of such Corporate Event, may
be sold freely without any restrictions other than those of Rule 144 or 145,
and 3) the Company’s shareholders own less than 50% of the voting securities of
the surviving entity (collectively, a “Qualified Corporate Event”), then this
Warrant shall be deemed exercised in accordance with the provisions of section
1(b) upon the closing of the Qualified Corporate Event. In any such case,
appropriate provision shall be made with respect to the rights and interests of
the holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets


4







thereafter deliverable upon the exercise hereof. The
Company will not effect any such consolidation, merger or sale unless, prior to
the consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or the corporation purchasing such assets
shall assume by written instrument, executed and mailed or delivered to the
registered Holder hereof at the last address of such Holder appearing on the
books of the Company, the obligation to deliver to such Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase.


                    4.4     
     Sale
or Issuance Below Purchase Price. The shares of Preferred Stock issuable
under this Warrant shall be subject to the antidilution provisions as described
in the Company’s Certificate of incorporation as currently in effect.


                    4.5          Notice
of Adjustment. Upon any adjustment of the Stock Purchase Price, and/or any
increase or decrease in the number of shares purchasable upon the exercise of
this Warrant the Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company. The notice, which
may be substantially in the form of Exhibit “A” attached hereto, shall be
signed by the Company’s chief financial officer and shall state the Stock
Purchase Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares purchasable at such price upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.


                    4.6          Other
Notices. If at any time:


                                  (a)          the
Company shall declare any cash dividend upon its Preferred Stock;


                                  (b)          the
Company shall declare any dividend upon its Preferred Stock payable in stock or
make any special dividend or other distribution to the holders of its Preferred
Stock;


                                  (c)          the
Company shall offer for subscription pro rata to the holders of its Preferred
Stock any additional shares of stock of any class or other rights;


                                  (d)          there
shall be any reclassification of the capital stock of the Company, or any
Corporate Event;


                                  (e)          there
shall be a voluntary or involuntary dissolution, liquidation or winding-up of
the Company; or


                                  (f)          the
Company shall take or propose to take any other action, notice of which is
actually provided to holders of the Preferred Stock;


then, in any one or more of said cases, the Company
shall give, by first class mail, postage prepaid, addressed to the holder of
this Warrant at the address of such holder as shown on the books of the
Company, (i) at least 20 day’s prior written notice or, if less, the actual
number of days’ prior written notice of such event given to the Company’s
stockholders, but in no event less than 10 days of the date on which the books
of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action and (ii) in the
case of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, or other action, at least 20 day’s
written notice or, if less, the actual number of days’ prior written notice of
such event given to the Company’s stockholders, but in no event less than 10 days of the date when the same
shall take place. Any notice given in accordance with the foregoing clause (i)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action as the case may
be.


5








                    4.7          Certain
Events.  If any change in the outstanding Preferred Stock of the Company or
any other event occurs as to which the other provisions of this Section 4 are
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with the essential
intent and principles of such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares available
under the Warrant, the Stock Purchase Price and/or the application of such
provisions, in accordance with such essential intent and principles, so as to protect such purchase rights as
aforesaid. The adjustment shall
be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.


          5.          Issue
Tax.  The issuance of certificates for shares of Preferred Stock upon the
exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax in respect thereof; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.


          6.          Closing
of Books.  The Company will at no
time close its transfer books against the transfer of any Warrant or of any
shares of Preferred Stock issued or issuable upon the exercise of any warrant
in any manner which interferes with the timely exercise of this Warrant.


          7.          No
Voting or Dividend Rights; Limitation of Liability.  Nothing contained in
this Warrant shall be construed as conferring upon the Holder hereof the right
to vote or to consent as a shareholder in respect of meetings of shareholders
for the election of directors of the Company or any other matters or any rights
whatsoever as a shareholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented
hereby or the shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised. No provisions hereof, in the absence of
affirmative action by the holder to purchase shares of Preferred Stock, and no
mere enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of such Holder for the Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.


          8.          Intentionally
Omitted.


          9.          Registration
Rights.  The Holder hereof shall be entitled, with respect to the shares of
Preferred Stock issued upon exercise hereof or the shares of Common Stock or
other securities issued upon conversion of such Preferred Stock as the case may
be, to all of the piggyback registration rights set forth in Section 2.3 of the
Restated Investor Rights Agreement dated as of August 9, 2000 (“Investor Rights
Agreement”) and to be made a party to that agreement. The company shall take such
action as may be reasonably necessary to assure that the granting of such
registration rights to the Holder does not violate the provisions of such
agreement or any of the Company’s charter documents or rights of prior Grantees
of registration rights.


          10.        Rights
and Obligations Survive Exercise of Warrant.  The rights and obligations of the
Company, of the Holder of this Warrant and of the holder of shares of Preferred
Stock issued upon exercise of this Warrant, contained in Sections 6 and 9 shall
survive the exercise of this Warrant.


          11.        Modification
and Waiver.  This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.


          12.        Notices.
   Any notice, request or other document required or permitted to be given or
delivered to the holder hereof or the Company shall be deemed to have been
given (i) upon receipt if delivered personally or by courier (ii) upon
confirmation of receipt if by telecopy or (iii) three business days after
deposit in the US mail, with


6









postage prepaid and certified or registered, to each
such holder at its address as shown on the books of the Company or to the Company
at the address indicated therefor in the first paragraph of this Warrant.


          13.        Binding
Effect on Successors.   This Warrant shall be binding upon any corporation
succeeding the Company by merger, consolidation or acquisition of all or substantially
all of the Company’s assets. All of the obligations of the Company relating to
the Preferred Stock issuable upon the exercise of this Warrant shall survive
the exercise and termination of this Warrant. All of the covenants and
agreements of the Company shall inure to the benefit of the successors and
assign of the holder hereof.


          14.        Descriptive
Headings and Governing Law.   The descriptive headings of the several sections
and paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of California.


         15.        Lost
Warrants or Stock Certificates.   The Company represents and warrants to the
Holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of any Warrant or stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company at its expense will make and deliver a new Warrant or
stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.


          16.        Fractional
Shares.  No fractional shares shall be issued upon exercise of this Warrant.
The Company shall, in lieu of issuing any fractional share, pay the holder
entitled to such fraction a sum in cash equal to such fraction multiplied by
the then effective Stock Purchase Price.


          17.        Representations
of Holder. With respect to this Warrant, Holder represents and warrants to
the Company as follows:


                    17.1  
        Experience.
  It is experienced in evaluating and investing in companies engaged in
businesses similar to that of the Company; it
understands that investment in the Warrant involves substantial risks; it has
made detailed inquiries concerning the Company, its business and services, its
officers and its personnel; the officers of the Company have made available to
Holder any and all written information it has requested; the officers of the
Company have answered to Holder’s satisfaction all inquiries made by it; in
making this investment it has relied upon information made available to it by
the Company; and it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of investment in
the Company and it is able to bear the economic risk of that investment.


                    17.2          Investment.
  It is acquiring the Warrant for investment for its own account and not with a
view to, or for resale in connection with, any distribution thereof. It
understands that the Warrant, the shares of Preferred Stock issuable upon
exercise thereof and the shares of Common Stock issuable upon conversion of
the Preferred Stock, have not been registered under the Securities Act of 1933,
as amended, nor qualified under applicable state securities laws.


                    17.3          Rule
144.  It acknowledges that the Warrant, the Preferred Stock and the Common
Stock must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. It has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act.


                    17.4          Access
to Data.  It has had an opportunity to discuss the Company’s business,
management and financial affairs with the Company’s management and has had the
opportunity to inspect the Company’s facilities.


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            17.5       
   Accredited
Investor.  Holder represents that it is an “accredited investor” within the
meaning of Rule 501, Regulation D of the Securities Act of 1933, as amended.


                    17.6          Market
Standoff Agreement.  It agrees that in connection with the initial
registration of the Company’s securities that, upon the request of the Company
or the underwriters managing any new written public offering of the Company’s
securities, not to sell, make any short sale of, loan, grant an option for the
purchase of, or otherwise dispose of any Registerable Securities (as defined in the Investor Rights Agreement) other than those
included in the registration without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time as may be
requested by the Company or such managing underwriters (not to exceed 180 days)
from the effective date of such registration, provided that the Company’s
officers, directors, and its shareholders who own at least five percent (5%) of
the Company’s voting equity are subject to the same restrictions.


          18.        Additional
Representations and Covenants of the Company.  The Company hereby
represents, warrants and agrees as follows:


                    18.1          Corporate
Power.  The Company has all requisite corporate power and corporate
authority to issue this Warrant and to carry out and perform its obligations
hereunder.


                    18.2          Authorization.
  All corporate action on the part of the Company, its directors and shareholders
necessary for the authorization, execution, delivery and performance by the
Company of this has been taken. This Warrant is a valid and binding obligation
of the Company, enforceable in accordance with its terms.


                    18.3          Offering.
  Subject in part to the truth and accuracy of Holder’s representations set forth
in Section 17 hereof, the offer, issuance and sale of the Warrant is, and the
issuance of Preferred Stock upon exercise of the Warrant and the issuance of
Common Stock upon conversion of the Preferred Stock will be exempt from the
registration requirements of the Securities Act, and are exempt from the
qualification requirements of any applicable state securities laws; and neither
the Company nor anyone acting on its behalf will take any action hereafter that
would cause the loss of such exemptions.


                    18.4          Stock
Issuance.  Upon exercise of the Warrant, the Company will use its best
efforts to cause stock certificates representing the shares of Preferred Stock
purchased pursuant to the exercise to be issued in the individual names of
Holder, its nominees or assignees, as appropriate at the time of such exercise.
Upon conversion of the shares of Preferred Stock to shares of Common Stock, the
Company will issue the Common Stock in the individual names of Holder, its
nominees or assignees, as appropriate.


                    18.5          Certificate
and By-Laws.   The Company has provided Holder with true and complete copies
of the Company’s Articles or Certificate of Incorporation, By-Laws, and each
Certificate of Determination or other charter document setting, forth any
rights, preferences and privileges of Company’s capital stock, each as amended
and in effect on the date of issuance of this Warrant.



                    18.6          Conversion
of Preferred Stock.  As of the date hereof, each share of the Preferred
Stock is convertible into one share of the Common Stock.



                    18.7          Financial
and Other Reports.  From time to time up to the earlier of the Expiration
Date or the complete exercise of this Warrant, the Company shall furnish to
Holder (i) within 90 days after the close of each fiscal year of the Company an
audited balance sheet and statement of changes in financial position at and as
of the end of such fiscal year, together with an audited statement of income
for such fiscal year; (ii) within 45 days after the close of each fiscal
quarter of the Company, an unaudited balance sheet and statement of cash flows
at and as of the end of such quarter, together with an unaudited statement of
income for such quarter, and (iii) promptly after sending, making available, or
filing, copies of all reports, proxy statements, and financial statements that
the Company sends or makes available to its shareholders and all registration
statements and reports that the Company files with the SEC or any other
governmental or regulatory authority.


8









IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed by its officers, thereunto duly authorized this 5th
day of July, 2001.


VASCULAR INNOVATIONS, INC.


	
   

  	
   

  	
   

  
	
  By: 

  	/s/ Bernard Hausen 
  	
  

  
	
   

  	
  


  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
  


  	
   

  



9









	
   

  	
   

  	
   

  
	
  

  	
   

  	
   

  
	


Cardica, Inc. • 171 Jefferson
  Drive, Menlo Park CA

  

Tel (650) 326-5600 •
  Fax (650) 326-5655

   	
   

  
	
   

  	
   

  



EXHIBIT D


                    Reference
is hereby made to that certain Warrant dated July 5, 2001 issued by CARDICA,
INC., formerly VASCULAR INNOVATIONS, INC., a Delaware corporation (the
“Company”), to VENTURE LENDING & LEASING III, LLC, a Delaware limited
liability company (the “Holder”).


                    Notice
is hereby given pursuant to Section 4.5 of the Warrant that the following
adjustment(s) have been made to the Warrant: [describe adjustments, setting
forth details regarding method of calculation and facts upon which calculation
is based.


          This
certifies that the Holder is entitled to purchase from the Company the
following:


	
   

  	
  1)

  	
  85,714 shares at $2.80 per share

  
	
   

  	
   

  	
   

  
	
   

  	
  2)

  	
  28,571 shares at $2.80 per share

  
	
   

  	
   

  	
   

  
	
   

  	
  3)

  	
  10,714 shares at $2.80 per share

  



The Stock Purchase Price and the number of shares
purchasable under the Warrant remain subject to adjustment its provided in
Section 4 of the Warrant.


          Executed
this 27th day of June, 2003





  


	
   

  	
   

  	
   

  
	
  CARDICA, INC. formerly
  VASCULAR INNOVATIONS, INC.



  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	

  
	
   

  	
   

  	
  


  
	
   

  	
  Name:

  	
  BERNARD HAUSEN

  
	
   

  	
   

  	
  


  
	
   

  	
  Title:

  	
  PRESIDENT & CEO